Sunday, July 22, 2018

EIA projects a 10 year low for pre-winter natural gas supplies; oil imports at 16 mo high after biggest jump in 18 months; distillate supplies at a 14 year seasonal low, et al

oil prices ended lower for the third week in a row, mostly due to a big selloff on Monday....after falling $2.84, or 3.8% to $71.01 a barrel last week on the resumption of Libyan oil exports, US crude for August fell another $2.95, or 4.2% to $68.06 a barrel on Monday, as oil traders cut their bets on a supply shortage and reports of rising output from the US and OPEC more than offset concerns about supply disruptions...that selloff continued Tuesday morning, with oil down another $1.03 to $67.03 early, before it reversed in the afternoon and ended up 2 cents for the day at $68.08 s barrel, as news of a new production outage in Libya served as a reminder that supplies remained tight...US oil prices then rose 68 cents to $68.76 a barrel on Wednesday, as the weekly EIA report showed strong demand for gasoline and distillates, overshadowing a surprise build of U.S. crude inventories...oil prices ended higher again on Thursday, after Saudi Arabia’s OPEC governor issued a statement to OPEC that Saudi crude exports would be lower next month in an effort to avoid oversupplying the market, with US crude closing up 70 cents at $69.46 a barrel...then on Friday, as trading in August oil contracts expired, they finished the week with a $1 increase to end at $70.46 a barrel, after Mr Trump said he's "not thrilled" about the Fed's plan to raise interest rates, which spooked the markets and sent the US dollar lower, thus making oil higher priced in dollar terms...however, even after rising four days in a row to it's highest level all week, that August oil contract still ended the week down 55 cents, or 0.8% from last Friday’s finish for a third consecutive weekly loss...meanwhile, US crude for September, which will be quoted as the price of oil next week, rose just 2 cents on Friday to $68.26 a barrel, to finish the week down $1.69, or 2.4%, on far more robust trading than was seen in the expiring August contract...at the same time, Brent crude for September, the international benchmark price, ended the week with a loss of $2.16, or 2.9%, at $73.07 barrel, having dropped $3.49, or 4.5%, on Monday..

natural gas prices, meanwhile, were little changed this week, ending just a half cent higher at $2.757 per mmBTU for the week, despite an addition to natural gas in storage that was much smaller than analysts had expected....the natural gas storage report for week ending July 13th from the EIA indicated that natural gas in storage in the US rose by 46 billion cubic feet to 2,249 billion cubic feet over the week, which left our gas supplies 710 billion cubic feet, or 24.0% below the 2,959 billion cubic feet that were in storage on July 14th of last year, and 519 billion cubic feet, or 19.2% below the five-year average of 2,784 billion cubic feet of natural gas that are typically in storage after the second week of July...the forecast from the S&P Global Platts' survey of analysts was for an addition of 59 billion cubic feet to gas in underground storage, so this 46 billion cubic feet increase was somewhat lower than what had been expected, and also quite a bit lower than the 62 billion cubic foot average of weekly surplus natural gas that has typically been added to storage during the second week of July over the past 5 years...as we've been pointing out each week that natural gas additions to storage fall short, it's becoming practically impossible for natural gas supplies to be restored to a normal level before the next heating season's withdrawals begin, and now the EIA has also admitted as much, as they are now forecasting a 10 year low for natural gas supplies going into this coming winter...the best way to explain their forecast is with the graph they used, so we'll include that here now...

July 20 2018 EIA forecast for nat gas going into winter

the above graph comes from this week's Natural Gas Weekly Update by the EIA, and it shows the weekly quantity of natural gas in storage in billions of cubic feet in the lower 48 states from the beginning of 2018 as a dark brown line, the average of natural gas in storage over the prior 5 years as a heavy grey line, and the range of natural gas in storage over the past five years for any given time of year as a grey shaded background behind those graphs…thus the shaded grey area also shows us the normal range of natural gas in storage as supplies fluctuate from season to season, with natural gas in storage underground normally building to a maximum by the end of October, falling through the winter, and usually bottoming out at the end of March, depending of course on the demand for heating during any given spring ....you might recall thatwe burnt 11.5% of the natural gas we had stored in one weekat the beginning of this year, an unheard of record withdrawal, and hence the dark brown graph for this year's suppplies started out at the bottom of the normal range...then, with the cool April this year, natural gas was still being used for heating three weeks into April, so supplies of gas were actually falling a bit the first three weeks of the normal injection season...then, as we showed from the EIA report of two weeks ago, even though US natural gas production was up 10% for the first half of this year, consumption of natural gas has been up 11%, leaving that much less surplus to be injected into storage each week...thus we arrive at July 13th with 2,303 billion cubic feet in storage, as shown on the graph above, precariously close to the record low levels of gas supplies we carried through 2014, a year when the polar vortex winter had dropped our April 1st supplies to below one million cubic feet for the first time on record...thus, given what we have stored now, the current rate of natural gas production, and the current rate of consumption, the EIA projects that our natural gas supplies will only rise to 3,470 billion cubic feet by October 31st, which would be 365 billion cubic feet lower than the five-year average for that date, and the lowest start to the heating season since October 2008, when natural gas inventories ended the month at 3,412 billion cubic feet...in a normal winter, that wouldn't be a problem, but should a winter like 2014 repeat, spot shortages of natural gas in the states with the least storage or the most unseasonable demand are not out of the question...you can get more details on projected natural gas prices and the weather forecasts that accompany this natural gas storage outlook in this week's Natural Gas Weekly Update...

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering the week ending July 13th, showed that due to a big increase in our oil imports, a drop in our oil exports, and a cutback in our oil refining, we had a surplus of oil to add to our commercial crude supplies for the thirteenth time in the past twenty-five weeks...our imports of crude oil rose by an average of 1,635,000 barrels per day to a 16 month high of 9,066,000 barrels per day, the biggest jump in 18 months, after falling by an average of 1,624,000 barrels per day the prior week, while our exports of crude oil fell by an average of 566,000 barrels per day to an average of 1,461,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 7,605,000 barrels of per day during the week ending July 6th, 2,201,000 barrels per day more than the net of our imports minus exports during the prior week and the highest since August 2017...at the same time, field production of crude oil from US wells was reported to be at a record high of 11,000,000 barrels per day, an increase of 100,000 barrels per day from the previous week, which means that our daily supply of oil from our net imports and from wells totaled an average of 18,606,000 barrels per day during the reporting week... 

at the same time, US oil refineries were using 17,239,000 barrels of crude per day during the week ending July 13th, 413,000 barrels per day less than they used during the prior week, while at the same time 834,000 barrels of oil per day were reportedly being added to the oil that's in storage in the US....hence, this week's crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports and from oilfield production was 532,000 more barrels per day than what was added to storage plus what refineries reported they used during the week...to account for that disparity, the EIA needed to insert a (-532,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the data for the supply of oil and the consumption of it balance out, essentially a fudge factor that is labeled in their footnotes as "unaccounted for crude oil"... (for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer)... 

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports rose to an average of 8,477,000 barrels per day, which was 8.1% more than the 7,841,000 barrel per day average we imported over the same four-week period last year....as we've mentioned before, the four week average of oil imports is more representative than the volatile weekly totals, which may temporarily get skewed by the the number of 2 million barrel VLCCs that unload in any given week, the size of the various other tankers that unload during the week, and the berthing schedule or the weather at the major import ports...the 834,000 barrel per day increase in our total crude inventories was all added to our commercially available stocks of crude oil, as the amount of oil in our Strategic Petroleum Reserve remained unchanged....this week's crude oil production was reported 100,000 barrels per day higher on a 50,000 barrel per day increase in output from Alaska, despite a lack of change in posted production figures for the lower 48 states, because the EIA has recently decided to round the weekly oil production estimates to the nearest 100,000 barrels per day to reflect their inability to accurately model oil output from all the wells in the lower 48 states, and the Alaska increase was enough to cause an increase in the rounded total....US crude oil production for the week ending July 14th 2017 was reported at 9,429,000 barrels per day, so this week's rounded oil production figure is roughly 16.7% above that of a year ago, and 30.5% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...

US oil refineries were operating at 94.3% of their capacity in using 17,652,000 barrels of crude per day during the week ending July 13th, down from 96.7% of capacity the prior week, but still a refinery capacity utilization rate above historical norms...similarly, the 17,239,000 barrels of oil that were refined this week was still at a seasonal high, more than any previous 2nd week of July, despite the 413,000 barrel per day drop in throughput from the prior week....however, this week's refinery throughput was only 0.7% higher than the 17,119,000 barrels of crude per day that were being processed during the week ending July 14th a year ago, when US refineries were operating at 94.0% of capacity....

with the drop in amount of oil being refined this week, gasoline output from our refineries fell by a similar quantity, decreasing by 407,000 barrels per day to 10,292,000 barrels per day during the week ending July 13th, after our refineries' gasoline output had increased by 388,000 barrels per day during the week ending July 6th...but even after this week's decrease, our gasoline production during the week was still 1.9% more than the 10,096,000 barrels of gasoline that were being produced daily during the week ending July 14th of last year...at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 268,000 barrels per day to 5,174,000 barrels per day, after falling by 21,000 barrels per day the prior week...however, this week's distillates production was still near the 2014 seasonal high for mid July, and 4.6% higher than the 4,945,000 barrels of distillates per day that were being produced during the week ending July 14th, 2017...

with the drop in our gasoline production, our supply of gasoline in storage at the end of the week fell by 3,165,000 barrels to 235,832,000 barrels by July 13th, the twelfth decrease in 19 weeks, but just the 13th decrease in 36 weeks, as gasoline inventories, as usual, were being built up over the winter months....our supplies of gasoline also fell this week because the amount of gasoline supplied to US markets rose by 433,000 barrels per day to 9,708,000 barrels per day, and because our imports of gasoline fell by 196,000 barrels per day to 657,000 barrels per day, while our exports of gasoline fell by 452,000 barrels per day to 734,000 barrels per day....but even after this week's decrease, our gasoline inventories were still 2.0% higher than last July 14th's level of 231,211,000 barrels, and roughly 8.8% above the 10 year average of our gasoline supplies for this time of the year...    

similarly, with our distillates production also much lower, our supplies of distillate fuels decreased by 371,000 barrels to 121,311,000 barrels during the week ending July 13th, in just the 2nd decrease in 8 weeks...that was as the amount of distillates supplied to US markets, a proxy for our domestic consumption, rose by 336,000 barrels per day to 4,141,000 barrels per day, after decreasing by 321,000 barrels per day the prior week, and as our exports of distillates rose by 74,000 barrels per day to 1,226,000 barrels per day, after falling by 258,000 barrels per day the previous week, while our imports of distillates rose by 36,000 barrels per day to 140,000 barrels per day...however, since our distillate supplies had shrunk by 14,452,000 barrels over the six weeks to May 18th on the way to falling to a 13 year seasonal low, this week's drop meant our distillate supplies for the week ending July 13th were thus at a 14 year low for the time of year, 19.9% below the 151,416,000 barrels that we had stored on July 14th, 2017, and roughly 15.9% lower than the 10 year average of distillates stocks for this time of the year...    

since our distillate supplies have now slipped to a seasonal 14 year low for the second week of July, we'll include a graph showing how they got here...

July 18 2018 distillate supplies as of July 13

the above graph came from a weekly emailed package of oil graphs from John Kemp of Reuters, which is also available as a pdf here, and it shows US distillate fuels inventories in thousands of barrels by "day of the year" for the past ten years, with the past ten year's range of our distillates supplies on any given day of the year shown in the light blue shaded area, and the running median of our distillates inventory, or the midpoint of the 10 year daily range, traced by the blue dashes over each day of the year...this graph also shows the number of thousands of barrels of distillates we had stored at the end of each week in 2017 traced by a yellow line, and our year to date distillates supplies for each week of 2018 traced in red...we can clearly see within the light blue shaded area that there is a seasonality to distillates supplies, as they're normally built up during the spring and summer when refineries are running flat out, and then drawn down and consumed during the winter months, when demand for heating oil is greatest...however, this year, when supplies of distillates should have been increasing during April and May - days 91 to 151 above - as they normally do, they were falling instead, largely because we had been exporting our distillates production at a record pace...so even as our refineries have started producing distillates at a record pace in the weeks since, and as we slowly started adding back to our supplies, our increases over the past 8 weeks have not kept up with the pace of inventory increase we'd normally see at this time of year....hence we come to July 13th with our distillate supplies at the lowest level in mid-July since July 16th, 2004, which as John headlines is "the lowest seasonal level in more than a decade"....and like the decline in natural gas supplies, this drop in distillate inventories all came about over recent months, because if we follow the yellow graph line for 2017 back to the beginning of that year, we can see that our distillates supplies had hit a wintertime high of 170,746,000 barrels on February 3rd, 2017, and they've been falling almost continuously since...

finally, with our oil production at a record high and our oil imports at a 16 month high while our refineries were pulling back from their recent record pace, our commercial supplies of crude oil increased for the 14th time in 2018 and for the 20th time in the past year, as our commercial crude supplies rose by 5,836,000 barrels during the week, from 405,248,000 barrels on July 6th to 411,084,000 barrels on July 13th...however, after falling most of last year, our oil inventories as of July 13th were still 16.2% below the 490,623,000 barrels of oil we had stored on July 14th of 2017, 15.9% below the 488,830,000 barrels of oil that we had in storage on July 15th of 2016, and 4.8% below the 431,836,000 barrels of oil we had in storage on July 17th of 2015, when the US glut of oil had already risen above the nearly stable supply levels of under 400 million barrels during the prior years...   

This Week's Rig Count

US drilling activity decreased for the fourth time in six weeks during the week ending July 20th, following 11 consecutive weeks of increases, as the steady increases in drilling for oil we saw with higher oil prices the first half of this year has now stalled...Baker Hughes reported that the total count of active rotary rigs running in the US decreased by 8 rigs to 1046 rigs over the week ending on Friday, which was still 96 more rigs than the 950 rigs that were in use as of the July 21st report of 2017, but was down from the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began their attempt to flood the global oil market... 

the count of rigs drilling for oil fell by 5 rigs to 858 rigs this week, which was still 94 more oil rigs than were running a year ago, while it was still well below the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the number of drilling rigs targeting natural gas formations decreased by 2 rigs to 187 rigs this week, which was just one more rig than the 186 natural gas rigs that were drilling a year ago, and way down from the modern high of 1,606 natural gas rigs that were deployed on August 29th, 2008...in addition, one of the two drilling rigs that were considered to be "miscellaneous" was also shut down this week, which still shows as an increase from the zero such "miscellaneous" rigs in use a year ago....

two of the platforms which had been operating in the Gulf of Mexico were shut down this week, leaving 17 still drilling offshore, which was 6 fewer than the 23 platforms that were deployed in the Gulf of Mexico a year ago...since there is no other offshore activity in other US waters at this time, nor was there a year ago, those Gulf of Mexico rig totals are identical to the total national offshore count...

the count of active horizontal drilling rigs fell by 8 rigs to 922 horizontal rigs this week, which was still 119 more horizontal rigs than the 803 horizontal rigs that were in use in the US on July 21st of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...in addition, the directional rig count decreased by 1 rig to 67 directional rigs this week, which was also down from the 75 directional rigs that were in use during the same week of last year...on the other hand, the vertical rig count increased by 1 rig to 57 vertical rigs this week, which was still down from the 72 vertical rigs that were operating on July 21st of 2017...

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows the weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of July 20th, the second column shows the change in the number of working rigs between last week's count (July 13th) and this week's (July 20th) count, the third column shows last week's July 13th active rig count, the 4th column shows the change between the number of rigs running on Friday and those of the equivalent weekend report of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was on Friday the 21st of July, 2017...       

July 20 2018 rig count summary

as you can see, pullbacks in drilling activity in Texas and Oklahoma by themselves accounted for this week's rig count decrease, with New Mexico showing a corresponding 4 rig increase; however, where the Texas and Oklahoma decreases were is not apparent in the basin count....for Texas, we can check the Texas Oil and Gas District counts, which shows a net decrease of 6 rigs in the 2 core Permian basin districts, and a 2 rig increase in fringe Permian areas...so by that, we'd judge that Texas saw a net decrease of 4 rigs in the Permian basin, while 4 Permian rigs were simultaneously deployed on the New Mexican side of the state line...then including the single rig decrease in the Barnett around Dallas-Ft Worth would account for the state's minus 5 total...meanwhile, Oklahoma's count decreased by 3 despite the 2 rig increase in the core Cana Woodford basin because the Arkoma-Woodford was down a rig and 3 Granite Wash shutdowns appear to have been on the Oklahoma side of the Texas panhandle border...the Granite Wash rig count, by the way, included a natural gas rig startup and 4 oil rig shutdowns...but natural gas drilling was still down by 2 rigs despite that increase and the increase of a natural gas rig in Ohio's Utica, because natural gas rigs were simultaneously shut down in the Marcellus of West Virginia, the Barnett of Texas, the Arkoma-Woodford of Oklahoma, and one "other" basin that Baker Hughes does not name...we should also note that outside of the major producing states shown above, Nevada also saw a rig shut down this week, leaving just one rig operating in the state, which is still more than a year ago, when there was no activity state-wide...

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Rig Count Drops in Ohio Utica as Production Rises – The rig count across eastern Ohio’s Utica shale dropped to 16 during the week ended July 14, down from 18 recorded the previous week, according to the Ohio Department of Natural Resources.Permitting activity was also light in the Utica, as just one permit for a single horizontal well was issued during the week. Ascent Resources Utica LLC, based in Oklahoma City, secured a permit for a new horizontal well in Jefferson County.As of July 14, there are 2,483 permits issued for horizontal wells across the Utica in eastern Ohio. Of that number, 2,372 wells are drilled and 1,929 wells are in production.There were no new horizontal well permits for wells in the northern tier of the Utica play, which includes Mahoning, Trumbull and Columbiana counties.There were no new permits issued in neighboring Lawrence and Mercer counties in western Pennsylvania, according to the Pennsylvania Department of Environmental Protection.  However, natural gas output from the Utica and Marcellus shale plays in the Appalachian Basin continues to rise, according to the U.S. Energy Information Administration’s drilling productivity report. The EIA estimates that natural gas production in August from wells in the Utica and Marcellus should increase at a rate of 328 million cubic feet per day compared to July. Oil production should also increase by 4,000 barrels per day compared to the same period.

Utica Shale production report released for Ohio – During the first quarter of 2018, Ohio's horizontal shale wells produced 3,942,251 barrels of oil and 531,291,017 Mcf (531 billion cubic feet) of natural gas, according to the figures released today by the Ohio Department of Natural Resources.Natural gas production from the first quarter of 2018 showed a 42.85 percent increase over the first quarter of 2017, while oil production decreased by 3.6 percent for the same period. ODNR reports 3,942,251 bbl barrels of oil were produced during the first quarter of 2018, down from 4,090,500 bbl in 2017. The natural gas production was 531,291,017 mcf, up 42.85 percent from 371,921,659 mcf a year ago. The ODNR quarterly report lists 1,949 horizontal shale wells, 1,909 of which reported oil and natural gas production during the quarter. Of the wells reporting oil and natural gas results:

  • • The average amount of oil produced was 2,066 barrels.
  • • The average amount of natural gas produced was 278,454 Mcf.
  • • The average number of third quarter days in production was 86.

All horizontal production reports can be accessed at oilandgas.ohiodnr.gov/production. Ohio law does not require the separate reporting of Natural Gas Liquids or condensate. Oil and gas reporting totals listed on the report include NGLs and condensate.

Natural-gas production keeps growing in eastern Ohio, despite low prices - Natural-gas production from shale deposits in eastern Ohio is surging, helped by the increase in pipelines in the area that get the gas to markets, and by greater efficiency by producers. Production from the Utica shale region jumped 43 percent from the first three months of 2018 from the same period of 2017, with production totaling 531.3 million cubic feet, according to Ohio Department of Natural Resources data released this week. The jump follows a 38 percent increase in production in the final three months of 2017. The jump in production comes even as prices for natural gas remain low. "There are more and more advances in technology and efficiencies," said Jackie Stewart, state director of Energy In Depth, a research and education organization financed by the oil and gas industry. "That's really the name of the game." At the same time, producers are learning more about the region and where the best resources are, Stewart said. "There is some good data and core sampling," she said. "There is a better handle of the geography." When the Utica was first being developed, the region didn't have the pipeline capacity to handle the growing production. In the several years since, the pipeline system in the region has expanded as demand for gas has grown. Power companies are depending more on gas to generate electricity, and more gas-fired power plants are being developed in the state to use that gas. Last month, the Ohio Power Siting Board approved construction of a natural-gas plant in Cadiz in eastern Ohio. Construction by Harrison Power is expected to start in October, with operation to begin by June 2021. It is the 10th natural-gas power plant approved by the board in the past five years. Also, Thai chemical company PTT Global Chemical is considering building a similar plant in Belmont County in eastern Ohio. Those plants will depend more on natural-gas liquids being produced in the Utica.

Fracking opponents blast Loudonville's sale of water to Cabot - - A dozen foes of the Cabot Gas & Oil drilling projects in the area assailed Mayor Steve Stricklen and members of Loudonville Village Council on their appearance of support for the company at the council meeting Monday.The focal point of the comments was the village's sale of water to the company, which is drilling a horizontal deep well in northern Green Township and which has sited two other projects, one at U.S. 30 and Ohio 511 in Vermillion Township and the other south of Jeromesville in Mohican Township.Village Administrator Curt Young confirmed that to date the village has sold 650,000 gallons of water to Cabot, earning $4,358 in sales revenue. As with all water customers, Cabot is paying 0.65 cents per gallon of water, the highest amount the village will sell water for in its tiered billing process.Asked by resident Dee Hinkle if the village could refuse sale of water to Cabot, Council Member Traci Cooper said "we can't discriminate on who we sell water to. If we sell to one entity, we have to sell to all."The opponents to the drilling projects disagreed. "You could require a buyer to disclose how they will use the water, and refuse service for fracking projects," Annette McCormick said."My fear is that they will take the waste from this water, which is contaminated by chemicals used in the fracking process, and pour it in to Charles Mill Lake," Shelly Hootman of Jeromesville said. Stricklen said "the village's water supply would be monitored closely, and if the inventory gets critically low, we can halt sales, but it will have to be all sales." Young said the village's treats 10 to 12 million gallons of water a month, "so I seriously doubt if our levels will get critically low." "You don't know," Teresa Clark said. "Estimates are that it takes 4-7 million gallons to drill a well, and supplemental water is needed for ongoing fracking operations."

Evacuation Lifted in Ohio After Chemical Spill from OFS Truck --Local authorities in Northeast Ohio were forced to evacuate about 75 residents and more than 20 homes for a few hours on Monday after hydrochloric acid leaked from an oilfield services (OFS) semitruck.   A rusty valve is thought to be the cause of the leak, authorities said. A passerby called authorities around 7:30 a.m. on Monday after a vapor plume was spotted. Firefighters responded and called in a hazardous materials team at Predator Trucking Co. on U.S. Route 422 in Girard, about five miles north of Youngstown. Part of the road was closed, but reopened later in the morning when the evacuation was lifted.Ohio Environmental Protection Agency spokesman Anthony Chenault confirmed that the truck is owned by Texas-based ProFrac Services, which has operated in the Appalachian Basin for about two years. While authorities estimated that more than 2,000 gallons leaked from the truck, Chenault said regulators don’t expect to have an actual number until later this week. There were no injuries.  Chenault said firefighters and the hazardous materials team contained the release with sand dikes. An environmental contractor was still at the site cleaning the spill on Tuesday. The acid is used commonly during well stimulation. It’s highly corrosive and mixed with water to dissolve contaminants such as scale and rust to clear the well and help oil and natural gas flow.

Roads open, evacuation ended after Weathersfield chemical leak -- Route 422 and Tibbets Wick Road are open to traffic again. However, it could take four to five hours to clean up a chemical spill that forced an evacuation in Weathersfield Township.  People who were evacuated from their homes in the area at around 7:30 a.m. Monday were allowed to return at around 11 a.m. Fire Cheif Ken Boring tells 21 News that 23 homes, the McDonalds, and Scenna Family Restaurant were evacuated after hydrochloric acid was found leaking from a tank at Predator Trucking North State Street.However, it is now known that the truck that was leaking is not owned by Predator Trucking, it is owned by Pro Frac, a company operating out of Texas.According to Pro Frac's website, they have been operating in the Marcellus and Utica Shale areas since October 2016. Traffic was blocked off on Route 422 from Tibbets Wick Road to the Golf Dome as Hazmat worked to contain the leak using sandbags. Boring says about 1,000 gallons of acid leaked from a corroded valve on the 5,000-gallon tank. Cleanup crews from Cleveland and Pittsburgh have been dispatched to the scene. It's expected to take four to five hours to clean up the spill, according to the chief. According to the EPA, hydrochloric acid is corrosive to the eyes, skin, and mucous membranes. Acute inhalation exposure may cause coughing, hoarseness, inflammation, and ulceration of the respiratory tract, chest pain, and pulmonary edema in humans.  Acute oral exposure may cause corrosion of the mucous membranes, esophagus, and stomach, with nausea, vomiting, and diarrhea reported in humans. Dermal contact may produce severe burns, ulceration, and scarring.

Oil and Gas Wastewater Wells Disproportionately Located in Lower Income Communities in Ohio -  Hydraulic fracturing or “fracking” wells used to procure natural gas produce large amounts of wastewater, which may contain toxic and radioactive compounds. The wastewater per well, ranging from 2 million to14 million liters, is most commonly injected underground where it has the potential to contaminate water supplies used by people and animals.   A new study in Ohio led by researchers at the Yale School of Public Health finds that these oil and gas waste disposal wells are disproportionately located in communities that have lower per capita incomes and lower population density compared to areas without these waste sites, after controlling for other sociodemographic and geographic variables.  Specifically, the odds of a census block group containing an injection well were 16 percent lower for each $10,000 increase in median income, and 97 percent lower per 1,000 people/mi2 increase. Race, age, education and voter turnout were not significant predictors of injection well presence. “Our findings suggest a pattern of environmental inequity and are consistent with findings from a Texas study reporting a greater proportion of disposal wells in high poverty block groups,” said Assistant Professor Nicole Deziel, Ph.D., the paper’s senior author. “Further research is needed to determine whether residents in census blocks with injection wells face increased risk of chemical exposures or adverse health outcomes.”  Our findings suggest a pattern of environmental inequity. Potential pathways of water contamination include spills at the surface during the transport or initial injection of the wastewater or underground leakage. In the United States, there is a significant history of disproportionate placement of hazardous facilities, particularly waste disposal facilities, in communities with a lower average income and a higher proportion of minority residents; however, little is known about the characteristics of populations living near injection wells used in fracking. The findings are published in the journal Environmental Health Perspectives.

The Surprising Way Fracking's Microbes Could Illuminate Heart Health - The heart is one of the most studied, yet mysterious, organs of our body. The rise in cardiovascular disease means that it’s received endless scrutiny, its arteries and veins extensively mapped out. But we still don’t quite understand how it works, and why or how heart disease occurs.Researchers have found an unexpected place for inspiration: the inside of hydraulically fractured—or fracked—oil and gas fissures within rocks..“What we learn about these fracking microbes could have the potential to help answer questions about human health—including how plaque forms in our arteries when we have cardiovascular disease,” according to Mikayla Borton, Ohio State University environmental scientist and lead author of a recent study about microbe survival.It’s becoming increasingly clear that microbe interactions have a serious role in the formation of the microbes that dwell deep in the gut, where their network either keeps people well or makes them sick. “The microbes found in the fracking mines have parallels with microbes found in other protein-rich ecosystems, including the human gut, and soil,” Borton explained in a press release. A microbiome contains the genes of all of a person’s microbes, just as a liver is packed with all of a person’s liver cells. “It’s really important to know what these organisms can do—to grasp their (genetic) potential and metabolic interactions — and figure out what impact that might have on the ecosystem,” Borton said.

ESC takes steps to sell land back to authority - The Jefferson County Educational Service Center took formal steps at its July meeting to sell land, intended for use for a new office building, back to the Jefferson County Port Authority. The ESC had spent 2016 working on plans and obtaining acreage in the Jefferson County Industrial Park for a planned two-story, 10,000-square-foot building. The property cost $38,500. The building would have been the headquarters of the ESC, the Virtual Learning Academy and the Jefferson Health Plan. The funding plan didn’t hold, indicated ESC Governing Board President Larry George. The Jefferson County Port Authority has the repurchase on its agenda for its July meeting, scheduled for Friday afternoon. ESC Superintendent Chuck Kokiko offered an update on site visits that take place before the opening of the upcoming school year. He said an implementation plan for the Ohio Department of Education was submitted with the final report due in August. The site visits include checking on school occupancy and food permits more than 10 days ahead of the opening of the school year. Kokiko offered an update on the Utica Shale Academy and the Mahoning Unlimited Classroom.  The shale academy graduated 18 students and served its first year as a dropout recovery school, meaning the majority of students are facing obstacles to graduation. He noted the school had 70 students on average last year and added a welding program at the New Castle School of Trades in East Liverpool.  Kokiko said the online schools are facing new struggles with recording student hours in the wake of the ECOT failure. He said the state and auditors are evolving the rules for attendance hours. Students need 420 hours of instruction that have to be documented. If not, the school received reduced funding. He noted the Mahoning Unlimited Classroom was unable to document hours for all 160 students and is receiving funding for only 80 and faces a significant budget reduction.

CNX Cancels Plans for Pipeline to Gather Natural Gas from Deep Utica Test Pad -- CNX Resources Corp. has stopped construction and canceled plans for a pipeline that would have served a multi-well pad in Indiana County, PA, where the company was testing a deep Utica Shale well to delineate the formation in the western part of the state.The company told the Pennsylvania Department of Environmental Protection (DEP) in May that it no longer intends to build and operate the Marchand 3 Pipeline to gather gas from the pad, raising questions about the test well in the area, which is near other prolific deep Utica wells, but still further north of successes in Westmoreland, Greene and Washington counties.In late March a DEP inspection of the Marchand pipeline construction revealed that earth disturbance activities had caused sediment laden water from unstabilized construction areas to escape erosion and sediment controls, leading to a discharge into what are state-designated high quality waters. CNX agreed to pay a $250,000 fine and has corrected the violations. The company has focused on building its Utica program in Ohio and Pennsylvania in recent years, while the Marcellus Shale has anchored sales volumes. CNX has applied completion designs from its Ohio Utica program and other lessons from newer wells in Pennsylvania to delineate the deep, dry Utica core in the southwest part of the state, where it’s been increasingly focused on stacked pay potential.

Environmental groups pressure Allegheny County officials to crack down harder on polluters - More than 50 protesters gathered outside the Allegheny County Courthouse on Friday to pressure county officials to crack down harder on air polluters. The group unraveled a scroll of complaints made through Carnegie Mellon University’s ‘Smell Pittsburgh’ app collected from September 2016 through June. It wrapped around the courthouse fountain nearly twice. Rita Botts, of Squirrel Hill, held a sign that said, “Mr. Fitzgerald: If we can’t survive in this air, then how can Amazon?” “I think the county is willing to use taxpayer funds to subsidize Amazon coming to our area, but not air quality,” Botts said. The protesters did not want the county to encourage new sources of pollution. The Shenango Coke Works plant on Neville Island was demolished earlier this year. The group is asking DTE Energy to develop the site into a solar energy farm, and wants Allegheny County Chief Executive Rich Fitzgerald to support the effort. “We’re asking Fitzgerald not to provide financial incentives to another polluter on the site,” said Angelo Taranto, co-founder of Allegheny County Clean Air Now. The group plans to attend the county’s Board of Health meetings starting Wednesday until they read all of the more than 11,000 complaints made through the app from September 2016 through June of this year, said Mark Dixon, a local environmental activist and filmmaker. With public comments at those meetings limited to three minutes, it could take a while. “It could take nine years to give less than two years of complaints,” Dixon said. On Monday, two organizations sued the county over its health department’s plans to use more than $10 million from the Clean Air Fund and Title V Fund on a project to renovate its office space in Lawrenceville. In April, an American Lung Association report ranked Pittsburgh is the nation’s 10th-worst region for short-term particle pollution. 

Water Contamination May Well be Widespread Due to Drilling & Fracking - A State College-based fracking company recently paid $159,000 to settle water contamination claims brought by a group of families in Butler County. Rex Energy revealed the settlements in bankruptcy documents filed this month. The documents were part of the company’s Chapter 11 bankruptcy, which it filed in May. In its “Statement of Financial Affairs,” the company listed the settlements, of between $11,750 and $27,125, which were paid out on April 17. The settlements went to eight families in the Woodlands, a section of Connoquenessing Township, who began complaining about their water quality in early 2011, shortly after Rex began drilling gas wells near their homes. Several sued Rex. One couple, Janet and Fred McIntyre, claimed in their lawsuit that they experienced severe “vomiting, headaches, and diarrhea,” and said their water “had a strong smell and bad taste, as well as an oily sheen” shortly after Rex began operating in the neighborhood. Federal and state regulators did not think Rex Energy’s activities were the cause of the problem. Both the Department of Environmental Protection and the U.S. EPA examined water tests from before and after drilling, and concluded that oil and gas activities hadn’t damaged the water supplies. But the residents still complained. For a time, Rex provided them with water, but the company stopped in 2012. Many of the families buy their own water or receive it from a local church that runs a “water-drive” for the local community. John Stolz, an environmental microbiologist at Duquesne University, tested the water at 150 households in the Woodlands. He found 50 families had “significant changes” either in water quality or quantity since drilling began there. He was retained by the families that sued Rex as an expert witness, but the case never went to court. He said the water in the Woodlands is still bad. “It hasn’t changed–they’re still dependent on the volunteer water drive,” he said. “The other families that weren’t part of the case of course didn’t get any compensation whatsoever.”

ETP Mariner Liquids Pipe Racks Up More Pennsylvania Violations (Reuters) - Pennsylvania environmental regulators this week issued another notice of violation to Energy Transfer Partners LP's Sunoco Mariner East 2 natural gas liquids pipeline for spilling drilling fluid in a wetland.It was the 65th notice of violation the Pennsylvania Department of Environmental Protection (DEP) issued the project since construction began in February 2017.As with other recent notices of violations, the DEP said ETP must provide a report describing how it will clean the spill, among other things, before it will allow the company to restart drilling at the site.Pipeline companies use horizontal drilling to cross under obstacles like highways and rivers.Those work stoppages, among other things, have significantly slowed progress on the $2.5 billion Mariner East 2 project, which ETP had planned to complete in the third quarter of 2017 but now expects to put in service in the third quarter of 2018. Those delays have forced some gas producers, like Range Resources Corp, to find another home for their liquids.The Mariner East project transports liquids from the Marcellus and Utica shale fields in western Pennsylvania to customers in the state and elsewhere, including international exports from ETP's Marcus Hook complex near Philadelphia.The latest notice of violation was for a spill of about 3,500 gallons of drilling fluid into a wetland associated with horizontal drilling on July 11 in Jackson Township in Cambria County about 70 miles (110 km) east of Pittsburgh.Analysts have noted the state was citing ETP for some spills as small as 1 gallon likely due to increased scrutiny the Mariner project has received as it racks up a large volume of permit violations. Overall, the company has reported 111 spills into waters in the state and 91 spills in upland regions, according to the DEP, which included some of the same spills on both waters and upland reports.

New Mariner East troubles: Spill in western Pa., exposed pipeline outside Philadelphia -- Sunoco is facing more challenges to its troubled Mariner East pipelines with a major spill of drilling fluids into a Cambria County wetland and the exposure of a section of the existing Mariner East 1 line in Chester County near Philadelphia. The company spilled about 3,500 gallons of drilling fluid into a wetland in Jackson Township, Cambria County during construction of Mariner East 2, according to the Department of Environmental Protection, which said it was informed of the incident on July 11. The spill prompted the DEP on Monday to issue its 65th notice of violation to Sunoco since it began building the natural gas liquids pipeline in February 2017. On Wednesday, the DEP issued yet another violation for a spill of only three ounces in Washington County.The new line’s continuing technical problems have led to three forced shutdowns, but Sunoco says it will begin operating by the end of September, thanks to the redeployment of an older line that will be temporarily used in sections of Delaware and Chester counties where the new pipe is unfinished.In Chester County, Mariner East 1 was recently exposed in a residential area of Uwchlan Township, renewing concerns about public safety and raising questions about why the pipeline hasn’t been re-buried almost three weeks after its operator, Sunoco, reported it to the Public Utility Commission.The 1930s-era pipeline, which carries natural gas liquids, was exposed in a creek at least 18 days ago, but township officials knew nothing about it until they were informed on Tuesday by the owner of the land where it’s exposed, said Mayme Baumann, a township supervisor. The township engineer found the exposed section in a creek that runs through the Marchwood neighborhood, and confirmed that the pipeline is Mariner East 1, Baumann said. The section, of about four feet, is “visibly corroded,” she said.

Mama Bears' arrests signal new frustration of Delco pipeline protesters   -- Members of the Middletown Coalition for Community Safety were arrested and charged with trespassing during a protest on July 10. Members of the coalition say these “Mama Bears” are mothers and grandmothers who are fed up with a lack of response from state and local officials over their concerns about the Mariner East 2 pipeline. Allyson Galloway remembers the first time she heard about the pipeline running across the street from her home in Middletown Township. “To me, it seemed akin to living close to a gas station,” she said. “At least, that’s what we thought at the time.” That was before she and her neighbors caught wind of Mariner East 2, another planned pipeline along the same route that would carry 675,000 barrels a day of propane and other highly volatile gas liquids. Before they became amateur experts in pipeline safety. Before their organization into the Middletown Coalition for Community Safety. Before more than two years of attending meetings with politicians locally and in Harrisburg. And before two members of the coalition, part of a subset of mothers and grandmothers calling themselves “Mama Bear Brigade,” were arrested July 10 during a sit-in at a pipeline construction site a few yards from her front door. Members of the group, frustrated with what they call a lack of transparency from Gov. Wolf and Sunoco Logistics, the pipeline’s operator, say the demonstration is a turning point for their activism, one borne out of frustration. It represents a shift for them, they say, to a more active approach to having their voices heard. 

Hydrocarbon Hypocrisy - Governor Andrew Cuomo and activist/actress Cynthia Nixon, opponents in September’s New York gubernatorial primary, don’t agree on much—but they are hell on hydrocarbons. Cuomo has outlawed natural-gas hydraulic fracturing, or fracking, in the Empire State, while Nixon wants to ban fracked gas from even entering the state. Never mind that the revolutionary energy-extraction method has over the past decade transformed America from a net hydrocarbon importer to the world’s leading energy producer. Both candidates promise to block new gas pipelines in New York, too.The two arrived at their identical positions from opposite directions. Nixon is a provocateur, not a policy macher. Her views are as otherworldly as her prescriptions. Cuomo, meanwhile, is unencumbered by ideals. His positions are calibrated for maximum political benefit—he polled for almost two years before imposing his fracking ban, for example.Cuomo knows that hydrocarbons fuel our civilization. They certainly power New York, an energy-gobbling giant; it leads American states in commercial consumption of natural gas and is near the top in most other categories as well. But because of Cuomo’s ban, the state produces virtually no natural gas, despite vast hydrocarbon reserves in the Marcellus Shale formation, located in the state’s needlessly impoverished Southern Tier. Neither Cuomo nor Nixon proposes substantive energy alternatives. Like all New Yorkers, the governor, a two-term Democrat, and Nixon, of Sex and the City fame, rely heavily on hydrocarbons themselves. Cuomo flits about the state in a helicopter, and he commands a massive, natural-gas-heated government complex in Albany. And what would Sex and the City have been without the energy-sucking bright lights of Broadway? (Nixon’s NoHo building uses gas heat—small beer, to be sure, but shouldn’t prohibitionists be held to a higher standard?)

Ethane is about to crack in Appalachia. Now it needs a market - The United States has been in the throes of a shale boom and bust for over a decade. The rocks are loaded with natural gas liquids — ethane, propane and other chemical cousins that are mingled in the more common methane heating gas. These more complex hydrocarbons are raw materials for a host of chemical and plastic products that are seeding dreams of a manufacturing renaissance in economically downcast Appalachia that would have been unimaginable 10 years ago. Like parents of prodigies amazed at their children's unexpected gifts, many in the three-state region have been counting blessings in advance. The Mid-Atlantic Technology, Research & Innovation Center (MATRIC) in South Charleston, W.Va., has published an estimate that a full exploitation of Marcellus and Utica resources could in time create 25,000 jobs in chemical and plastics manufacturing. "Ethane is to the chemical industry what flour is to bakers," said Steven Hedrick, MATRIC's chief executive, at an energy conference last month. "Allow yourself to be inspired by what is about to happen in Appalachia." "The shale gas is very wet and rich and very low-cost," says Robinson, president of PLG Consulting, whose research work includes the Appalachian gas resources. In some parts of the region, the natural gas contains up to 65 percent ethane and other gas liquids, and 40 percent is common, Robinson said, creating a fertile building block for plastic products.   But today, just a small part of the region's potential ethane production moves by pipeline to Philadelphia, Canada and the Gulf Coast because there's little else to do with it. "There's a lot of trapped ethane in that region that needs a home," Robinson said. Now the first home is under construction by Shell Chemicals along the Ohio River in Beaver County, Pa., 30 miles northwest of Pittsburgh. Shell's steam cracking plant will break ethane apart and reconstitute it as ethylene gas. Three production units will then link ethylene molecules to create polyethylene plastic pellets, a ubiquitous component of packaging and housewares products. Through the same process, propane winds up as polypropylene fibers and resins, turned into carpets and high-performance plastics. Ohio hopes the next cracker is on its turf. In March, Gov. John Kasich (R) announced a stepped-up investment commitment by Thailand's PTT Global Chemical and South Korea-based Daelim Industrial Co. Ltd. for a proposed cracking plant in Belmont County, in the heart of Utica's "wet" shale gas area. Kasich said he is hoping for a go decision by the end of this year on a project that could be worth up to $10 billion.

Feds Say Land Shift Likely Caused Explosion, Pipeline Still at Risk - A natural gas pipeline explosion that occurred last month in Marshall County was likely caused by land subsidence, or movement, according to federal regulators. In a notice of proposed safety order, issued to TransCanada Corp. this week, the Pipeline and Hazardous Materials Safety Administration (PHMSA) said shifting land likely triggered the explosion of the Leach Xpress pipeline. "The preliminary investigation suggests that the failure was the result of land subsidence causing stress on a girth weld," PHMSA said. The explosion occurred during the early hours of June 7 near Moundsville, West Virginia. No injuries or damage to private property were reported, but a fireball burned for several hours after an 83-foot section of the pipeline burst into flames, releasing more than $430,000 worth of natural gas. TransCanada’s own incident report released this week states the pipeline failed due to a landslide, but not one caused by heavy rainfall. The full federal investigation is still ongoing, but PHMSA’s proposed safety order states TransCanada should conduct extra surveillance and analysis on a 50-mile section of the pipeline that is buried in terrain geologically similar to where the explosion took place.TransCanada is the parent company of Columbia Gas Transmission LLC, which operates the 130-mile pipeline that runs from Majorsville, West Virginia to Crawford, Ohio. The pipeline went into operation in January and was not running at full capacity when the explosion occurred.In the order, the federal safety agency also said it identified six other locations where similar geography could cause the pipeline to fail. It outlines a series of additional corrective actions the company should undertake. TransCanada has 30 days to review the order and request consultation with PHMSA regarding the proposed suggestions.

Report: Pipeline That Exploded in Marshall County Remains At Risk — The federal agency in charge of investigating a recent pipeline explosion has notified its owner that six other areas on the same pipeline have issues that could cause another catastrophic event if they are not repaired. The Pipeline and Hazardous Materials Safety Administration issued July 9 a 13-step Notice of Proposed Safety Order to lower the risk of future explosions like the one that occurred June 7 on Nixon Ridge. The notice gives companies an opportunity to respond to a proposed correction plan before finalizing an order, which then makes the steps involved mandatory. PHMSA Eastern Region Director Robert Burrough sent the notice to TransCanada Corp. and its subsidiary, Columbia Gas Transmission LLC, which owns the 130-mile Leach Express pipeline. Burrough said in the notice that completing the steps outlined in the notice is necessary for the safety of the people and property near the 36-inch gas transmission line. “It appears that the continued operation of the Affected Segment, without corrective measures, poses a pipeline integrity risk to public safety, property, and the environment,” Burrough wrote.  TransCanada did not return a call seeking comment by presstime. Several people who live or own property near the site of the June explosion declined to comment.  TransCanada filed an incident report June 27 with the PHMSA regarding the June 7 explosion. In it, the company said it had sent the damaged pipeline to a metallurgy lab, but it had not determined the cause of the pipeline’s failure as of the time of the report.PHMSA said its preliminary findings suggest the failure was the result of land subsidence that caused stress on a girth weld. However, it also said the investigation is ongoing and the cause of the failure remains unknown. PMHSA’s preliminary findings indicated that the Leach Express pipeline was operating at approximately 86 percent to 89 percent of its maximum capacity of gas when the failure was reported around 4:55 a.m. June 7. That’s when a drop in pressure was discovered by a gas controller. The section of the pipeline was manually closed down by 5:20 a.m.In its incident report, TransCanada said $437,250 worth of natural gas was burned off in a fireball that could be seen as far as 50 miles away. Because Nixon Ridge — about 7 miles south of Moundsville — is isolated, no fatalities, injuries or property damage were reported as a result of the blast. Damage was limited to about 1,100 feet around the site.However, the company did say in the report that the property damage, not including the loss of the gas, came to $10 million. The Leach Express pipeline runs approximately 130 miles between Majorsville, Pennsylvania, to Crawford, Ohio.

TransCanada's blast-damaged Leach natgas pipe returns to service (Reuters) - TransCanada Corp’s Columbia Gas Transmission said the section of its Leach Xpress natural gas pipeline damaged in a blast in West Virginia in early June returned to service on July 15, boosting gas output in the Appalachian region. Production in the region was expected to rise to 28.7 billion cubic feet per day on Monday from 28.1 bcfd on Friday, according to Thomson Reuters data. Before the June 7 blast, output in the region was about 27.5 bcfd. One billion cubic feet of gas can fuel about 5 million U.S. homes for a day. The Leach shutdown forced producers using the line to find other pipes to ship gas out of the Marcellus and Utica shale regions of Pennsylvania, West Virginia and Ohio. But traders noted that overall output was little changed after the blast as producers, such as Range Resources Corp and Southwestern Energy Co, found other pipes to ship their gas. Alternative pipelines include Dominion Energy Inc’s transmission system, Energy Transfer Partners LP’s Rover, Tallgrass Energy LP’s Rockies Express, Enbridge Inc’s Texas Eastern Transmission and Kinder Morgan Inc’s Tennessee Gas, according to analysts at S&P Global Platts. The 1.5-bcfd Leach pipeline in West Virginia and Ohio, whichentered full service at the start of 2018, transportsMarcellus and Utica shale gas to consumers in the U.S. Midwestand Gulf Coast. Last week, Columbia said it expected to return the damaged section of pipe on July 15 after gaining approval from the U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA). PHMSA gave Columbia 30 days to respond to a list of corrective actions the agency proposed to improve the safety of the Leach pipe. Those actions included mechanical and metallurgical testing and enhanced surveillance and monitoring, according to the federal report, made available on Thursday. Since the blast, Columbia has identified six other points along the pipeline that PHMSA said are “areas of concern” based on soil conditions and steep slopes or indications of slips.

Pipelines, Birds and Coal Ash: A Look at Environmental Coverage Inside Appalachia (podcast) The Atlantic Coast Pipeline (ACP) and the Mountain Valley Pipeline (MVP) are two major interstate projects to move  gas from the Utica and Marcellus shale formations to market, to another line that runs up and down the eastern seaboard, and to export terminals on the East Coast. Pipelines are considered the safest way to transport natural gas, crude oil, gasoline and other volatile substances that would otherwise have to be taken by rail or truck, which pose a far greater safety risk.The projects will create jobs through 2019. According to WorkForce West Virginia, as of July 2018, 2,745 people have been hired in West Virginia in the past year within the sectors of oil and gas pipeline, related structures construction, and support activities for oil and gas operations.But some landowners are concerned that the pipelines could damage the environment and upend their way of life. Environmental and citizen groups have brought half a dozen lawsuits collectively against both projects. Most challenge the legality of water quality permits issued on both the state and federal level. In late June, the 4th U.S. Circuit Court of Appeals halted some construction of the Mountain Valley pipeline in West Virginia, finding that the pipeline developer’s own documents showed the company could not complete construction quickly enough to comply with a federal water quality permit.Earlier this year, some protestors in Virginia and West Virginia took more extreme measures by sitting in trees to prevent construction crews from tearing down trees to build the Mountain Valley pipeline.   We’ll talk with Virginia journalist, Mason Adams, who’s covered the tensions among protesters, law enforcement officials and the pipeline company this spring, as pipeline protesters began scaling trees to block the Mountain Valley pipeline.

Pipeline explosion in W.Va. cited by opponents of Mountain Valley Pipeline   - An explosion of a natural gas pipeline in West Virginia was triggered by the same conditions — steep slopes prone to landslides — that exist along the route of the Mountain Valley Pipeline, a conservation group is warning. Work on the Mountain Valley project, which is cutting a swath through the mountains of Southwest Virginia, should be suspended pending a review of the potential danger of a similar explosion, the Indian Creek Watershed Association wrote in a request filed Tuesday with the Federal Energy Regulatory Commission. On June 7, the newly constructed Leach Xpress pipeline in Marshall County, West Virginia, ruptured and exploded into a ball of flames that could be seen for miles. A preliminary investigation by federal officials found that dirt and rocks from a landslide exerted pressure on the 36-inch diameter buried pipe, causing a weld to give way, according to a filing from the West Virginia-based watershed association. “The similarities of terrain — particularly the prevalence of steep slopes and landslide-prone areas along MVP’s 300-mile route through West Virginia and Virginia — make the Leach XPress explosion yet another wake-up call about the dangers of MVP’s selected route,” the request stated. Although pipeline opponents have been raising environmental concerns about erosion from construction sites in recent months, they say it’s time to address issues of public safety before the project begins to ship natural gas at high pressure by year’s end. “It’s an accident waiting to happen,”

US FERC chair sees plan on LNG permitting in days; LaFleur hopes for middle ground on pipes — US Federal Energy Regulatory Commission Chairman Kevin McIntyre said Tuesday that a formal agreement is likely "in the coming days" with other agencies to streamline permitting and trim LNG project review timelines. His comments come as industry and lawmakers have aired concerns that staff shortfalls at FERC could slow reviews even as US LNG export terminal developers are racing to line up offtake agreements and trade tensions are adding to their worries. "In just the last few days we have made truly significant strides in reforming the permitting process with our federal partners, eliminating duplicative efforts and instituting a streamlined procedure that will significantly reduce our LNG permitting timelines," McIntyre said in a podcast released by the commission. "The details are still being hammered out, but we expect to have a formalized agreement in place in the coming days." He denied a news report that FERC had told developers there would be delays of 12 to 18 months in LNG application reviews, saying FERC has issued no such letters. While he did not release details of the upcoming process changes, he said FERC is working with the departments of Energy and Transportation to improve coordination, in line with the administration's memorandum of understanding encouraging one federal decision on permits. FERC is also taking a hard look at its own processes to find efficiencies, he said, and is working to hire more LNG engineers and to farm more out to third-party contractors. Pushing back on the notion that FERC has been slow to release environmental review schedules for projects, he said FERC will not issue schedules until it has all the needed facts and has implemented its improved processes. "FERC staff is very cognizant of the financial market impacts of its LNG project schedules," McIntyre said. The timing can be affected by such factors as project complexity, completeness of initial applications, and timeliness of response to requests, and FERC does not give preference for one project over another, he said. With FERC soon faced with an even split of two Democrats and two Republicans, once Commissioner Robert Powelson leaves the agency in mid-August, it may also be experiencing pressure to act quickly on major policy questions before it, such as electric grid resiliency, review of the 1999 natural gas pipeline certificate policy and implementation of the Public Utility Regulatory Policies Act.

Pipeline Builders Abuse Eminent Domain – WSJ - Across the country activists are speaking out against the use of eminent domain to construct natural-gas pipelines. Some have climbed trees and refused to come down. The agency in charge of approving these pipelines—the Federal Energy Regulatory Commission, or FERC—is reconsidering how eminent domain, by which the government legally expropriates private property for public purposes, is used. While we stand with those who stand for individual rights—and enjoy a good tree-climb—protests like these can only go so far. The U.S. is a country of laws, and if a court rules that eminent domain can be used to construct a pipeline, then Americans must respect that ruling. But judges haven’t actually issued many such rulings. Right now FERC presides over a system that strips property owners of their rights without courts getting involved. When FERC approves the use of eminent domain to build a pipeline, landowners have the right to appeal to a federal court only after they have asked the agency to reconsider its decision and had their request denied. But FERC has developed the habit of granting these requests so that it can draw out the time it spends “thinking” about them. While FERC dawdles, the pipeline companies use eminent domain to snatch thousands of landowners’ properties free from judicial review. Furthermore, FERC’s approval comes with eminent domain authority, allowing pipeline companies to seize property before seeking other necessary approvals. In one instance, a company seized part of a Pennsylvania family’s property to build a FERC-authorized pipeline only to have the project fall apart when officials in New York refused to grant a permit to build another part of the pipeline. The taking, which also involved cutting down more than 500 of the family’s trees, was ultimately for nothing. As rotten as these procedural shenanigans are, FERC is guilty of a more consequential deception. Under current law, the agency can approve a pipeline without telling property owners that decisions will be effectively unreviewable unless they file an immediate appeal. When states have behaved this way, federal courts have deemed it unconstitutional. Yet FERC continues to harm eminent-domain victims by failing to inform them how to protect their rights. No one’s property should be taken without a real chance at judicial review. Property owners who go to court don’t always win, but some do. Property owners in both Pennsylvania and Texas have persuaded state judges to reject pipeline-related property seizures in recent years. Perhaps property owners who’ve been subject to eminent domain expropriations by FERC-approved pipelines would find similar success. The agency should afford them the chance to find out.

US pipeline builders brace for higher costs after Plains loses steel tariff case — US oil and natural gas pipeline builders are bracing for higher costs and potential delays after Plains All American lost its bid for an exemption from US steel tariffs for its 585,000 b/d Cactus II crude pipeline. Cactus II is one of three major oil pipelines starting up in the second half of 2019 that are expected to relieve a botteneck currently holding back Permian production and depressing Midland wellhead prices. It was the first major energy project to receive a ruling since the 25% steel and aluminum tariffs took effect. Plains said the $1.1 billion project would "move forward as planned," but did not say whether the decision altered the Q3 2019 in-service target. The Commerce Department's Bureau of Industry and Security recommended denying Plains' request for relief from the 25% steel tariff after determining that 26-inch steel pipe needed for the project is produced in the US "in a sufficient and reasonably available amount and of a satisfactory quality." Matthew Borman, deputy assistant secretary of export administration, denied the exclusion request July 13, according to a document made public Monday. In March, Commerce said companies would be allowed to seek exemptions if the steel or aluminum products are found not to be made in the US in satisfactory quality or "in a sufficient and reasonably available amount." Plains said it was unfair to enact tariffs on steel orders placed months earlier. It bought steel pipe from a Greek mill in late 2017, and tariffs were announced in March. "Collecting a tariff on steel pipe orders for projects like this constitutes a tax on the construction of critical US energy infrastructure, which is a significant unintended consequence of current trade policy and risks US energy security and American jobs," a Plains spokesman said in a statement. "We are reviewing our options to challenge this decision." Plains had argued that while some US mills make 26-inch pipe, none use the "high-frequency welded" manufacturing technique the company requires.

It's Time to Stop Investing in New Oil and Gas Pipelines - Last week the now-former head of the Environmental Protection Agency, Scott Pruitt, resigned amid a series of ethical breaches, including his cozy relationship with fossil fuel lobbyists. Government ethics experts said Pruitt’s connection to lobbyists working for the Canadian energy company Enbridge, at the time when the EPA approved expansion of an Enbridge pipeline, raised red flags. So-called environmental regulators like Scott Pruitt certainly can’t be trusted to uphold environmental laws.   Last month Minnesota regulators approved Line 3, another controversial Enbridge pipeline that would cross lakes on Ojibwe treaty lands, affecting indigenous wild rice harvest, hunting and fishing. Following the news, Honor the Earth Executive Director and activist Winona LaDuke said “They have gotten their Standing Rock. We will do everything that is needed to stop this pipeline.” Resistance to pipelines like Line 3 is growing because pipeline spills are so common—much more common than you would think. Indigenous and environmental groups will continue to resist new pipelines because spills jeopardize land and livelihoods, especially when the pipeline crosses ecologically and culturally important places. Since 1986 there have been over 8,000 "significant" oil and gas spills reported by the Pipeline and Hazardous Materials Safety Administration (PHMSA) of the U.S. Department of Transportation. That's equivalent to a major spill every two day for the past 32 years. “Significant” spills have a very specific definition—they either caused a fire, left someone injured, involved a large volume of oil or gas release or resulted in over $50,000 in damages. PHMSA classifies over 1,500 of these incidents as "serious," meaning the spill resulted in a fatality or injury requiring in-patient hospitalization. Our interactive U.S. Climate Justice Map visualizes these spills alongside other data and stories. New pipelines are also being resisted because they make no sense in the context of climate change. Take the now iconic Keystone XL, a pipeline that would carry tar sands, some of the most carbon-intensive oil. According to a 2015 study funded by the Department of Energy, Canadian tar sands emits 18 percent more greenhouse gases when processed into gasoline compared to conventional crude.  In November of last year TransCanada’s existing Keystone pipeline spilled 9,700 barrels of crude oil in rural South Dakota making it the 7th largest oil spill in the US since 2010.

Pence family's failed gas stations cost taxpayers $20M+ (AP) — Vice President Mike Pence turns nostalgic when he talks about growing up in small-town Columbus, Indiana, where his father helped build a Midwestern empire of more than 200 gas stations that provided an upbringing on the "front row of the American dream."The collapse of Kiel Bros. Oil Co. in 2004 was widely publicized. Less known is that the state of Indiana — and, to a smaller extent, Kentucky and Illinois — are still on the hook for millions of dollars to clean up more than 85 contaminated sites across the three states, including underground tanks that leaked toxic chemicals into soil, streams and wells.Indiana alone has spent at least $21 million on the cleanup thus far, or an average of about $500,000 per site, according to an analysis of records by The Associated Press. And the work is nowhere near complete. The federal government, meanwhile, plans to clean up a plume of cancer-causing solvent discovered beneath a former Kiel Bros. station that threatens drinking water near the Pence family's hometown. To assess the pollution costs, the AP reviewed thousands of pages of court documents, tax statements, business filings and federal financial disclosures, as well as federal and state environmental records for Indiana, Kentucky and Illinois. The total financial impact isn't clear because Indiana officials have yet to release cost figures for 12 contaminated areas. Other records are incomplete, redacted or missing.The public cleanup of more than 25 former Kiel Bros. sites in Kentucky and Illinois — where officials have done a better job keeping costs down — has been much less expensive, totaling about $1.7 million, according to an analysis of records obtained under each state's public records law.Kiel Bros. has paid for only a fraction of the overall effort. In court documents , the company cited payment of $8.8 million in "indemnity and defense costs," but also noted that $5 million of that amount came from the states.

Minnesota Pipeline Replacement Threatens a Repeat of ‘Standing Rock’ -- Weeks after Minnesota regulators approved the replacement of an oil pipeline that crosses the state, Native American and environmental groups are starting to oppose the project with a similar playbook to a failed effort to stop the Dakota Access pipeline. Winona LaDuke, who lives 30 miles from the pipeline’s route on the White Earth reservation of the Ojibwe tribe, said three small protest camps have sprung up. To draw more protesters, she is planning a public campaign that includes a concert with the Indigo Girls in Duluth later this month, followed by a ride on horseback along the pipeline’s route. “All of us were at Standing Rock,” the site of the Dakota Access pipeline protests, said Ms. LaDuke, a co-founder of Honor the Earth, a Native American environmental group. “They’re a long ways from getting a pipe.” But the fight against the Enbridge Inc. pipeline known as Line 3 is different from efforts to stop the $3.8 billion Dakota Access one. The Line 3 project, which would carry crude oil from Alberta, Canada, across Minnesota to a terminal in Wisconsin on Lake Superior, is a replacement of a pipeline built in the 1960s. Enbridge said the existing pipeline requires as many as 900 repairs over six years. It has reduced capacity on the current line to 390,000 barrels a day, from 760,000 barrels a day, out of safety concerns. Opponents are focused on stopping the replacement, but many want the existing line shut as well. At the end of June, Minnesota utility regulators approved the project, which will diverge from the old route. Dan Lipschultz, a state utility commissioner, said the existing “highly corroded” line poses a danger to the environment and culturally sensitive areas. Supporters say they believe the new pipeline will be safer. “Our view is that we need this thing to be built to safely provide steady, reliable product downstream to the refineries,” said Bob Schoneberger, CEO of United Piping Inc., a pipeline contractor in Duluth that hopes to work on the project. Mr. Schoneberger started a group called Minnesotans for Line 3 that he said has several hundred supporters.

U.S. refinery capacity virtually unchanged between 2017 and 2018 - As of January 1, 2018, U.S. operable atmospheric crude distillation capacity totaled 18.6 million barrels per calendar day (b/cd), a slight decrease of 0.1% since the beginning of 2017 according to EIA’s annual Refinery Capacity Report.  .The Refinery Capacity Report also includes information about secondary units—downstream refinery units that are used to process the products coming from the atmospheric crude distillation unit into ultra-low sulfur diesel and gasoline, as well as other products. Secondary refining capacity, including thermal cracking (coking), catalytic hydrocracking, and hydrotreating and desulfurization, increased slightly, up 1% from year-ago levels. These downstream capacity increases are primarily the result of changing processes that can increase refinery throughput rather than building new refining units. The number of operating refineries decreased from 141 on January 1, 2017, to 135 on January 1, 2018, largely reflecting classification changes in EIA’s survey: four refineries previously considered separate in survey data were merged into two, and two refineries were reclassified from idle to shut down. Consequently, the decrease in number of operating refineries does not necessarily represent a meaningful change in U.S. refinery operating capacity.  Record refinery runs have helped accommodate increases in U.S. crude oil production, which averaged 9.4 million barrels per day (b/d) in 2017, an increase of 4.0 million b/d from the level in 2009. Gross crude oil inputs to refineries averaged 16.6 million b/d in 2017 compared with 14.3 million b/d in 2009. Over that period, operable refinery crude distillation capacity increased 945,000 b/cd, and utilization rose from 83% in 2009 to 91% in 2017, resulting in the 2.3 million b/d increase in gross crude oil inputs. Over the same period, U.S. crude oil imports decreased by 1.1 million b/d, and U.S. crude oil exports increased by 1.1 million b/d.

Texas fractionation capacity beyond the Mont Belvieu Hub, part 5. -- Mont Belvieu may be the epicenter of NGL storage, fractionation and distribution along the Gulf Coast, but the rest of Texas offers almost half as much fractionation capacity — about 1 MMb/d of it — and a good bit of storage and pipeline connectivity too. These are particularly important facts in the summer of 2018, when demand for fractionation services in Mont Belvieu is at or near an all-time high and increasing volumes of NGLs are headed toward the hub. So what else has the Lone Star State got on the fractionation and NGL storage front? And are these assets experiencing the same strong demand as their counterparts in Mont Belvieu? Today, we continue our review of fractionators and key NGL-related infrastructure. With 2.1 MMb/d of existing fractionation capacity, more than 250 MMbbl of salt-cavern storage, a spaghetti bowl of incoming and outgoing pipelines, and ethane and LPG export terminals nearby, Mont Belvieu is the undisputed king to NGLs.  And Mont Belvieu keeps growing; another 465 Mb/d of fractionators are under development and scheduled to come online over the next couple of years. But NGL production has been rising fast, and so has the need for more fractionation capacity — the mixed NGLs that come out of gas processing plants aren’t of use to anyone until they are fractionated into purity products (ethane, propane, normal butane, isobutane and natural gasoline). The problem is, new fractionators in Mont Belvieu haven’t been coming online as quickly as the need for them. Until recently, producers had been reluctant to commit to building new fractionation capacity, so existing plants have been running flat out to keep pace.

Houston company plans massive offshore terminal to export Permian oil - As more of the nation’s oil production flows to the Texas Gulf Coast, one Houston firm aims to build a massive offshore terminal to ship much of the nation’s record crude volumes overseas.  Enterprise Products Partners said Tuesday it plans to construct an oil export terminal and dock miles off the Texas coastline that can accommodate the world’s largest crude-carrying vessels. Energy analysts estimated the project cost at $1 billion to $2 billion. Putting the terminal out to sea solves a critical problem for very large crude carriers, or VLCCs, more of which have been heading to Texas since the recent widening of the Panama Canal. Despite ongoing dredging efforts, water depths at Texas ports aren’t deep enough for these giant ships to fill to capacity. So Enterprise plans to build pipelines to run about 80 miles from its Houston-area network to the offshore terminal where the water is naturally deeper.The project could be years in the making. Enterprise expects the state and federal permitting processes alone to take roughly a year before it can commence construction.The plans come as rising U.S. oil production outpaces relatively stagnant domestic consumption, requiring more of the oil to be shipped overseas to developing markets in Asia and elsewhere.With Houston known as the world’s energy capital for its dealmaking and a cluster of corporate headquarters, the city is increasingly becoming the destination for much of the oil itself. Buoyed by West Texas’ booming Permian Basin, Enterprise believes the nation’s already record-high crude production will grow by another one-third from 2018 to 2022 to more than 13 million barrels a day, with most of that new oil leaving the country via the Gulf Coast. Pipelines are sending much of the crude to refining and port hubs near Houston and Corpus Christi.

Houston To Overtake Cushing As Key Hub - Houston is emerging as one of the great oil hubs in the world, and pretty soon it will be outfitted with an oil futures contract, which could cement its position.Intercontinental Exchange Inc. (ICE) announced plans to launch an oil futures with physical delivery in Houston, and the contract could launch as soon as this quarter, subject to regulatory review. “The Houston delivery point has become the pricing center for U.S. crude oil production and exports, and the new flat price futures contract is designed to serve hedging and trading opportunities in this growing market,” ICE said in a statement.Houston is now the “central delivery point for U.S. crude,” with proximity to upstream production in Texas, abundant refining and storage capacity along the Gulf Coast, and coastal facilities that have allowed a crude oil export boom over the past two years. The ICE Permian WTI futures contract will provide price discovery, settlement and delivery at Magellan Midstream Partners, L.P.’s terminal in East Houston, ICE said.“The recent price divergence between Cushing-based WTI and Brent is a reminder that although Cushing is a marker for local crude fundamentals in the midcontinent, it diverges for pricing waterborne U.S. crude,” Jeff Barbuto, Vice President of Oil Markets at ICE, said in a statement.For decades, Cushing, Oklahoma has served as the main delivery point for U.S. crude. Cushing is often referred to as the “pipeline crossroads of the world,” and was the designated point of delivery for the WTI contract on the New York Mercantile Exchange. Cushing also has the ability to store around 90 million barrels of crude oil, and indeed, the weekly change in inventory figures have become a closely watched metric since the market downturn began in 2014, with specific emphasis on Cushing’s figures. But the explosion of production from the Permian basin, and especially the lifting of the crude oil export ban by the U.S. Congress a few years ago, has undercut the importance of Cushing as an oil hub. West Texas oil can be funneled to the Gulf Coast and either refined or exported, all without the need to be routed through or stored in Cushing.

Texas set to pass Iraq, Iran as world's third-largest oil producer | TheHill: Texas's oil industry is set to surpass Iraq and Iran to become the third-largest oil producing region in the world, behind only Russia and Saudi Arabia. CNN Money reports that HSBC Bank predicted in a recent report that the state's explosive growth in oil production over the last two years could result in Texas passing the two Organization of the Petroleum Exporting Countries (OPEC) members as oil prices rise around the world."It's remarkable. The [Permian Basin oil field] is nothing less than a blessing for the global economy," Bob McNally, president of Rapidan Energy Group, told CNN. The surge in production comes just two years after the oil fields in Texas were seeing much lower production levels at the tail end of the Obama administration, according to CNN."In 2014, it was amazing. 2016 was down in the dumps. Two years later, it's back to crazy," Texas railroad commissioner Ryan Sitton told the news network.Production cutbacks in Russia and OPEC nations have also led to a rise in U.S. oil prices, a boon for the economy as companies in Texas struggle to find qualified workers and the infrastructure required to support the surge."To say there's a shortage of bodies is an understatement," Jeff Bush, president of CSI Recruiting president, told CNN. He said lower production under the Obama administration had left companies struggling to adjust to the economic boom in time."These service companies took it on the chin the last few years. They're trying to make hay while the sun shines, but you can't do that if you don't have people," he said. "Right now, everything's an issue: Water, sand, buildings, transportation. You name it," Sitton added.

Report: Oil and Gas Production Is Making People Sick in Rural Texas - Reeves County, population 14,732, sits atop the Permian Basin and has been the site of some of the most frenzied hydraulic fracturing in the state. Though the fracking boom started in 2011, it didn’t reach the Franklins’ 10-acre plot of land until early 2017. That year, four wells were drilled nearby, some within a half-mile of their home. In the spring, Sue’s nose started bleeding and she began having breathing problems.Sue takes allergy medicine and uses nasal spray to help her breathe, as recommended by her doctor. Jim said he started experiencing “debilitating” headaches and respiratory problems around the same time from exposure to the emissions, which can include volatile chemicals like methane. “Now every morning we get up coughing and hacking… It makes us sick. We’ve both missed days of work because of being sick,” Jim said.  The Franklins are one of five case studies included in a new report by two environmental advocacy groups on the health dangers faced by people who live near active oil and gas operations. Earthworks and Clean Air Task Force conclude that concentrated energy development activity in rural America is inundating nearby communities with greenhouse gases and volatile chemicals, making people sick and spurring climate change. One other Texan (a military veteran in frack-happy Karnes County) is featured in the report, along with people in rural areas of Utah, Pennsylvania and Ohio. Air pollution in Texas’ population centers is well-documented. But thanks to oil and gas development in broad swaths of sparsely populated areas across the state, the people who live in some small communities are also gasping for breath, said Alan Septoff, an Earthworks spokesperson. “There’s a general impression that air pollution is a problem in urban areas, that there’s dirty air in urban areas and clean air in rural areas,” he said. “But the oil and gas industry turns rural areas into urban areas in terms of air pollution.”

Lotteries, Shippers And Trends In Midland Price Differentials --Since early this year, the Midland crude differential has continued to widen, trading one day last week at a discount of $15.75/bbl to West Texas Intermediate (WTI) at Cushing, the widest spread since August 2014 before settling back to $11.25/bbl on Monday. The wide price differential is a result of fast-growing production in the Permian and bottlenecked takeaway pipelines. But the trajectory of this increasing price spread has been anything but smooth. Lately, we have seen a blip in the price differentials right around the 19th or 20th of the month. In each of the last three months, for a short-lived 24 to 48 hours, the Midland-Cushing price differential has narrowed by $2/bbl or more as Permian shippers have gone on feeding frenzies. Today, we look at these brief upticks in pricing and the pipeline and trader mechanics behind them. As we discussed in our All Dressed Up With No Where to Go series, Midland crude prices have taken an increasingly steep dive since the start of February 2018. After averaging a meager $0.34/bbl discount to WTI at Cushing in 2017, the Midland discount to WTI has increased to as much as $15.75/bbl in recent days and has averaged $12.80/bbl since the start of July 2018. But in the last few months, as pipelines have been consistently full, we’ve seen brief spikes in the Midland-Cushing differential around the middle of the month in April, May and June.

Union Pacific positions to move Permian crude in tank cars: executive - A shortage of pipeline takeaway capacity from the Permian Basin in West Texas is creating opportunities for Union Pacific to move crude oil in tank cars, a railroad official said Thursday. "The [Permian] is an interesting place and we're definitely seeing some reduction in crude production due to the lack of pipelines," Chief Marketing Officer Beth Whited said on an earnings webcast. "We have some capacity in our network and expect to see some results in the third and fourth quarter." UP officials did not respond to queries on their targeted volumes. Loading terminals in Texas and New Mexico have a capacity of 300,000 b/d. But roughly 100,000 b/d of that capacity can be used to load crude as those facilities serve the needs for frac sands, Bernstein said in a report last month. Frac sands is used extensively by shale producers that utilize the hydraulic fracking process. A fast pace of growth in the Permian -- currently projected to reach 3.690 million b/d by S&P Global Platts Analytics to be 3.5 million b/d -- has resulted in producers seeking alternate market access like railorads and trucks to move their barrels from that land-locked basin to the US Gulf Coast. In the Western Canadian Sedimentary Basin -- another land-locked basin -- Canadian Pacific Railway sees the "potential" to double the volume of crude it hauls to refineries in the US Midwest and the US East Coast by 2019, as it hires more staff and adds additional locomotives, Chief Marketing Officer John Brooks said in an earnings call Wednesday. The railroad moved 20,000 car loads, or roughly 134,000 b/d, by operating 60 units trains each month in the second quarter, Brooks said. But CP now sees a potential to increase that run rate to some 266,000 b/d by late 2018 or early 2019, Brooks said, as no new pipelines get built out of the WCSB and oil sands producers still add new production. A rail car can typically move about 600 barrels and in the first quarter CP moved 17,000 cars.

Permian region natural gas prices fall as production continues to grow - The natural gas spot price spread between the Permian Basin, as priced at the Waha Hub in western Texas, and the U.S. national benchmark Henry Hub in Louisiana has grown considerably in the past year. Natural gas prices at Waha are nearly a dollar per million British thermal units (MMBtu) lower than Henry Hub prices. This spread widened as the ability to transport the increased natural gas production in the Permian Basin in western Texas and southeastern New Mexico was constrained by existing pipeline capacity.  Based on estimates in EIA’s most recent Drilling Productivity Report, production of natural gas in the Permian Basin averaged 10.4 billion cubic feet per day (Bcf/d) in June 2018, which was 2.1 Bcf/d more than in June 2017. Much of this increase in production is associated natural gas, or natural gas produced as a byproduct of the increase in oil production from oil-directed rigs. As a result, the increase in natural gas production closely correlated with the increase in crude oil production in the Permian Basin, which averaged 3.3 million barrels per day (b/d) in June 2018, up 0.9 million b/d from the June 2017 level.   The widening price differential between Waha and Henry Hub indicates pipeline capacity is already somewhat constrained.  Producers may flare or vent the natural gas, although these disposal methods are regulated in Texas and New Mexico. Both states allow flaring from wells during drilling and immediately after completion. However, after a certain amount of time, producers can only flare natural gas after receiving exemptions from a state agency. If natural gas production continues to grow, and natural gas prices continue to fall, some producers in the area may cease oil production to avoid producing associated natural gas. Two pipelines—Comanche Trail and Pecos Trail—were completed in 2017 to export Permian natural gas to Mexico. Although these pipelines have a combined takeaway capacity of 2.6 Bcf/d, they are not expected to see significant flows until late 2018 or early 2019 when downstream pipeline infrastructure in Mexico enters service. The only other project expected to come online in 2018 is the combined expansion of the North Texas Pipeline and resumption of service on the Old Ocean Pipeline, which collectively will increase pipeline capacity out of the Permian by 0.15 Bcf/d.

Cooler Weather Helps Drag Down Natural Gas Futures as Production Keeping Bears in Control - Natural gas futures continued their recent slide Tuesday as strong production and cooler weather trends conspired to help drag down prices. In the spot market, more volatility in Southern California and retreating prices in the Northeast headlined a day of generally small adjustments; the NGI National Spot Gas Average gave back a penny to finish at $2.74/MMBtu. The August Nymex futures contract settled at $2.740 Tuesday, down 1.9 cents, after marking out a higher high ($2.788) and a lower low ($2.731) versus the previous day’s action. September dropped 2.3 cents to $2.707, while January settled at $2.968, down 2.1 cents on the day. The latest guidance issued on Tuesday showed slightly above-average cooling load overall the next two weeks but with “decent cooler risks” for the last week of July, and weather patterns appear unlikely to produce the kind of record-level demand that has been needed to drive prices higher this summer, according to Bespoke Weather Services. Prices initially climbed “on indications that production has declined more than expected from recent highs,” Bespoke said. “However, production still remained high enough that when combined with looser burns the last couple of days and especially significantly cooler medium- and long-range weather trends natural gas prices were forced to reverse, moving steadily lower through much of the morning before finding a low midday.” The Energy Information Administration (EIA) released its latest Drilling Productivity Report (DPR) this week and is forecasting month/month (m/m) production growth from the United States’ seven most prolific onshore oil and gas plays to continue in August. Total gas production production in August for seven key regions -- the Anadarko, Appalachian and Permian basins, and the Bakken, Eagle Ford, Haynesville and Niobrara formations -- is expected to reach 70.53 Bcf/d, compared to 69.47 Bcf/d in July, according to EIA. Total oil production from the same plays is forecast to increase to 7.47 million b/d from 7.33 million b/d in July.

Similar Themes from Forecasts Overnight as August Natural Gas Seen Near Even -August natural gas futures were set to open Wednesday near even at around $2.746/MMBtu as forecasters noted generally minor adjustments to the weather outlook overnight. The major weather models overnight carried a mix of changes but maintained the overall pattern of “mostly comfortable” temperatures sweeping through the Midwest and east-central United States over the next two weeks, according to NatGasWeather.“We continue to look toward the last couple days of July into early August for the next opportunity for more intimidating heat to return across the east-central U.S., which more data would still need to come on board with if the markets are to believe it,” the firm said.   “...To our view, today will be an interesting day to see if prices are able to hold recent support” before Thursday’s Energy Information Administration (EIA) storage report, “where deficits are likely to increase slightly to near 525 Bcf as it’s favored to come in just under the five-year average of 62 Bcf. To illustrate how strong production has become, the same weather pattern last year would have resulted in a build nearly 30 Bcf lighter” than the injection expected in the report.   Radiant Solutions reported similar themes in both its six- to 10-day and 11-15 day forecasts Wednesday.The six- to 10-day period trended “only slightly cooler in the Rockies. Otherwise, anomalous heat remains favored from the West toward Texas, where the more intense heat is focused in the early half and only fading slightly in intensity late,” Radiant said. “A pair of disturbances deepen a trough over the Great Lakes as the period progresses, with the feature helping to pull down a cooler Canadian air mass toward the Midwest during the second half of the period.” In the 11-15 day period, “near normal temperatures are expected in the Eastern Half, while aboves remain the favored solution from the West toward Texas,” the firm said.

Excess natural gas keeps pricing for Oklahoma producers discounted - Power producers across the nation continue to add natural gas generation to their fleets, the U.S. Energy Information Administration reports. Locally, Oklahoma Gas and Electric recently spent about $400 million to upgrade its Mustang power plant in Oklahoma City to include 462-megawatts of new generating capacity supplied by seven natural gas-fired turbines. You can't burn natural gas fast enough to help Oklahoma producers, it seems.Despite the fuel's increased use to generate electricity and an exponential growth in exports, a growing supply of gas continues to outpace demand and market pricing for it remains under $3 per thousand cubic feet. The catalyst behind that growth is new, "associated gas" production from shale wells, particularly ones targeting oil that are being drilled in the Permian Basin.Associated gas from wells in Oklahoma's SCOOP and STACK fields also are a contributor, as are production increases involving natural gas wells being completed in the Utica and Marcellus shale fields in Ohio and Pennsylvania.On the demand side, the U.S. Energy Information Administration reports the nation:

  • • Exported about 3.2 trillion cubic feet of natural gas in 2017, about double what it exported in 2013.
  • • Is expected to use natural gas to generate 37 percent of the electricity needed to power homes and businesses domestically during this summer's cooling season of June, July and August, nearing a record percentage that previously was set in 2016.
  • • Is expected to export about 10 billion cubic feet per day of natural gas and natural gas liquids this year, and will export about 13 billion cubic feet per day of the product in 2019.

The myth of clean natural gas -- Natural gas in particular has gotten wide attention, in part because it is much more carbon-efficient than coal when burned to produce electricity. The slogan was that it could serve as a "bridge fuel" between dirty coal and clean renewables — and thus fight climate change, at least relative to continuing reliance on coal.It's increasingly clear, however, that natural gas is already nearly past its point of maximum usefulness. It should simply be phased out as soon as possible — as soon as coal is gone, it should be next on the chopping block, if not right beside.  The first and biggest problem with natural gas is leaks. The fuel is largely composed of methane, and the smaller greenhouse gas footprint of the fuel relies on all that methane actually getting burned. If there are leaks at the wellhead, or the pipelines, or at the power plant, it cuts into the climate change benefit very quickly, because methane is tremendously effective at capturing heat. Measured over 20 years, a given quantity of methane captures about 86 times as much heat as the same amount of carbon dioxide.  It turns out there are a ton of such leaks. Comprehensive leak data hasn't been assembled, largely because the energy industry — and now the United States government, but I repeat myself — doesn't want it to be. However, it's a fairly simple procedure to fly a plane over the big drilling fields, test for methane concentrations, figure out a reasonable model of gas dispersal, and calculate a leak rate. Lo and behold, a recent study found (yet again) that leaks are so bad they basically cancel out the climate advantages of natural gas compared to coal (though natural gas still produces fewer poisonous fumes and heavy metals).

Minn. Supreme Court allows pipeline protesters to use climate 'necessity defense' - Climate change protesters are claiming victory in their effort to present an unusual "necessity defense" against felony charges stemming from efforts to shut down oil pipelines.The Minnesota Supreme Court declined Wednesday to review a ruling by the Minnesota Court of Appeals that backed the protesters, who will still face an uphill legal battle when their case goes to trial this fall.  Emily Johnston and Annette Klapstein acknowledge turning the emergency shut-off valves on two pipelines in 2016 in Clearwater County of northwestern Minnesota as part of a coordinated nationwide action. Eleven activists were charged in all. The Court of Appeals ruled in April the two Seattle-area women can argue that they believe the threat of climate change from Canadian tar sands crude is so imminent that they were justified.

Colorado to accelerate cleanup of ‘orphaned’ oil, gas wells (AP) — Colorado's governor ordered state regulators on Wednesday to accelerate the cleanup of inactive oil and gas wells whose owners have walked away.Gov. John Hickenlooper also told regulators to study whether the state requires companies to post a big enough bond before they start drilling. The bonds are designed to cover the cost of plugging inactive wells and cleaning up the sites if the company fails to do it.Colorado has about 260 wells considered "orphans" because no owner can be found, or the owner is unwilling or unable to deal with them. About 110 other oil and gas sites without wells on them are also orphaned.Hickenlooper, a Democrat, said that number will increase because some energy companies go out of business and previously unknown orphaned wells are being discovered.He signed an executive order directing the Colorado Oil and Gas Conservation Commission to categorize each orphaned well and site as high, medium or low priority and aim to clean up the high and medium priority sites by July 2023.The priority will be based on how many people live nearby, the environmental impacts of the site, how many spills the site has had and other factors.Hickenlooper told the commission to produce the list by Aug. 1 and update it yearly. Newly added sites should be cleaned up within two years if they are high or medium priority, he said. Hickenlooper said it could cost around $25 million to plug and clean up the known orphaned wells and sites.

The Colorado valley at stake in Trump's oil boom - Ten thousand feet up, it’s possible to see the whole North Fork Valley from Dan Stucker’s plane. As the aircraft glides over sloping mesas with snow-dusted mountains, the land below resembles a vintage pioneer landscape.If President Donald Trump has his way, a new feature could arrive on this vista: oil and gas pumps. His administration is opening vast stretches of public land to energy companies, and among the forests and fields under Stucker’s plane, up to 95 percent of the valley could be available to drillers.The administration’s new policies would bring sweeping changes to this Rocky Mountain landscape, facilitated by a growing bond between federal officials and the oil and gas industry. Emails and other communications between government employees obtained by E&E News reveal directives and orders by Trump officials to shelve environmental policies to speed energy development. In one instance, Interior Secretary Ryan Zinke courted oil and gas drillers in private by assuring them that changes to federal land policy would make their companies more profitable. Documents show that some career employees in the Bureau of Land Management questioned whether drillers were being penalized adequately for major violations of environmental regulations. Interior Department staffers also pushed back on efforts by political appointees to put federal land up for auction before scientific assessments on the potential damage drilling could inflict on wildlife were finished.  At other times, federal officials voiced concern that Trump’s drilling goals were more aggressive than oil industry wishes. One federal official was asked whether it would be possible to rejigger data to make it look like the government would sell more leases because she was worried about how companies’ lack of interest in drilling would look to administration bigwigs, according to an email E&E News obtained.  These policies will set the nation on a future course of reliance on fossil fuels that cause climate change, more air and water pollution in rural areas, and new threats to endangered species. In return, the government charges oil companies as little as $2 per acre to lease the land for drilling.

Groups sue North Dakota over oil refinery near national park  — Three environmental groups are suing North Dakota over an air quality permit that allows construction of an $800 million oil refinery about 3 miles (5 kilometers) from Theodore Roosevelt National Park.  National Parks Conservation Association, the Environmental Law and Policy Center and the Dakota Resource Council filed the lawsuit in state court on Thursday, asserting that the state erred when it concluded the proposed Davis Refinery wouldn’t be a major source of pollution and wouldn’t negatively impact the park. The lawsuit asks a judge to declare the permit invalid and send the case back to North Dakota’s Health Department for further review.  “We must protect the air quality in the national park, which visitors and surrounding community members breathe, and on which the stunning views and fragile ecosystems depend,” said Stephanie Kodish, clean air program director for National Parks Conservation Association. “This polluting oil refinery betrays the conservation values of the park’s namesake.”  The 30,000-acre (12,000-hectare) park is named for the former U.S. president who ranched in the region in the 1880s and is revered for his advocacy of land and wildlife conservation. It’s a rugged and breathtaking area of hills, ridges, buttes and bluffs where millions of years of erosion have exposed colorful sedimentary rock layers, and is home to a variety of wildlife including prairie dogs, wild horses and bison. The park is the state’s top tourist attraction, drawing more than 700,000 visitors annually. Meridian Energy Group is developing the refinery to initially process about 27,500 barrels of oil daily, with room for expansion. The company maintains that the plant with modern technology will be “the cleanest refinery on the planet.” The lawsuit comes about two weeks after the Environmental Law and Policy Center and the Dakota Resource Council filed a separate complaint with North Dakota regulators requesting a study of the refinery’s location. The Public Service Commission is reviewing the complaint. The refinery also will need state water and wastewater permits, but it can begin building before receiving them. O’Clair said that, in light of the lawsuit, the company would be proceeding at its own risk.

ND oilfields set three new state records —North Dakota's daily oil production in My broke the previous all-time high set in 2014, but that wasn't the only new record set. As oil production hit 1.24 million barrels per day in May, natural gas production hit almost 2.32 billion cubic feet per day, with producing wells at 14,755 for the month — all new state records. Lynn Helms, director of the state Department of Mineral Resources, said Friday that May's numbers "really shattered the old record" set in December 2014, by about 17,000 daily barrels, or about a 1.4 percent increase. North Dakota's gas production in May also surpassed 70 billion cubic feet — a first in state history for a month, according to Helms. But for the first time since October 2017, state gas production missed its flaring goal of 85 percent gas capture, notching 83 percent, which Helms said was largely due to the Robinson Lake gas plant in Mountrail County being down in May for maintenance and upgrades. "We're seeing natural gas increase at twice the pace of oil production, in terms of a percentage increase, and back in 2014, that wasn't the case," Helms said. "Today when you see a 1.6 percent increase in oil, you're seeing twice that in gas production increases, and so it's really straining the infrastructure." Justin Kringstad, director of the North Dakota Pipeline Authority, also noted natural gas capacity and processing were strained by production growth. "It has narrowed from what it was in the previous months, but again, just challenges out there keeping up with this increasing drilling activity, new wells coming online, has been proving challenging for the industry as well, as once you get them connected, the network today just simply doesn't have enough capacity to handle all that gas," he said. 

Tribal Chairman Sends Ominous 4-Word Letter to Keystone XL Pipeline Developer - The hotly contested Keystone XL Pipeline set to bring crude oil from Canada into the U.S. is chugging along. Developer TransCanada is preparing for construction in Montana and South Dakota, and the company decided it would give the Cheyenne River Sioux Tribe a heads up in a letter on Wednesday. On Thursday, Tribal Chairman Harold Frazier offered just four ominous words in response.  “We will be waiting.”  Native American tribes in the Midwest have been opposing the 1,179-mile long pipeline since 2008, and they’re not letting up. They nearly won the fight in 2015, when former President Barack Obama rejected a key permit. Then Trump came along and reversed that decision.  Opponents worry what an oil spill could mean for their water, their land, and their health. And they have reason to worry. Keystone XL’s sister pipeline, Keystone, suffered a spill last year in South Dakota.Anyway, TransCanada wants to begin construction in Montana and South Dakota come 2019, so it’s getting ready. That means delivering construction materials and clearing out trees and plants to lay the groundwork for pipe installation. The project is still wrapped up in the courts, though. Tribes arechallenging its approval, and landowners are arguing to keep their land, so it’s not a done deal. That’s not stopping the company from doing what it can, though.

Zinke’s Real Estate Deal With Halliburton Chair to Be Investigated -- The Department of Interior's (DOI) inspector general wrote to Congressional Democrats Wednesday saying the office had opened an investigation into a real estate deal involving Interior Sec. Ryan Zinke and Halliburton Chair David Lesar, POLITICO reported."You expressed special concern about the reported funding by a top executive at Halliburton and assuring decisions that affect the nation's welfare are not compromised by individual self enrichment," Deputy Inspector General Mary Kendall wrote to Democratic Representative Raúl Grijalva of Arizona, the ranking member of the House Natural Resources Committee, and other Democrats, POLITICO reported. "My office opened an investigation into this matter on July 16."The investigation will asses whether the deal, uncovered last month, violated conflict of interest law.In June, POLITICO reported that a foundation started by Zinke and currently run by his wife granted a real-estate development backed by Lesar permission to build a parking lot on land originally donated to the foundation for a Veteran's Peace Park that has yet to be built. The development, in the Zinke's hometown of Whitefish, Montana, could increase the value of the land owned by their foundation."Secretary Zinke doesn't seem to take his responsibility to the public seriously," Grijalva said in a statement reported by POLITICO. "He's turned it into the Ryan Zinke show, which is more about waving his own flag above the building and doing personal business deals with his friends instead of protecting public lands and improving our environmental quality. This formal investigation is one of many he's managed to pile up in his short and undistinguished tenure, and I join my Democratic colleagues in seeking the transparency and accountability that Republicans have so far not provided." The DOI investigation comes little over a week after the U.S. Office of Special Counsel started a case file on whether Zinke violated the Hatch Act when he tweeted a picture of himself wearing socks embroidered with Trump's face and "Make America Great Again" campaign slogan, CNN reported.

US unconventional oil production seen rising 143,000 b/d in August to 7.470 million b/d — US unconventional oil production is projected to rise 143,000 b/d in August to 7.470 million b/d, the US Energy Information Administration said, the second-highest month-to-month growth increase since the agency has kept such records.  The EIA predicted an all-time high 144,000 b/d jump in output only a few months ago in a build from May to June. The agency said in its latest Drilling Productivity Report released Monday domestic unconventional natural gas production is forecasted to increase by 1.066 Bcf/d to 70.532 Bcf/d, a record-high and nearly twice the volume produced at end-2013 of around 36.5 Bcf/d.Moreover, Permian Basin drilled but uncompleted (DUC) wells rose 164 in June to 3,368, one of the largest recent monthly well builds. By comparison, the DUC build in was 169 in May and 133 in April.Total US DUCs rose by 193 on month to 7,943 in June.But the EIA said its DUC and production figures are sketchy since information is difficult to obtain now as little specific data is provided by E&Ps or midstream providers. "We may overestimate production due to constraints" in oil and gas takeaway capacity, EIA analyst Jozef Lieskovsky said. "We have watched [well completions] filings coming in and they are disappointing over the last few weeks.  Lieskovsky and other industry sources are confident more information will be forthcoming during the round of second-quarter conference calls in the next several weeks. Until then, all eyes are on the Permian Basin of West Texas and southeast New Mexico, which EIA sees as far outdistancing other shale basins in unconventional oil production growth during August - up 73,000 b/d to 3.406 million b/d. Production in the Eagle Ford Shale of South Texas is forecasted to grow 35,000 b/d in August to 1.436 million b/d, while the Bakken Shale of North Dakota and Montana is pegged to grow 15,000 b/d to 1.297 million b/d. The Anadarko Basin of Oklahoma and the Texas Panhandle, is predicted to grow 10,000 b/d to 559,000 b/d, while the Niobrara Shale in Colorado and Wyoming is pegged to increase by 6,000 b/d to 611,000 b/d. The Appalachian Basin in Pennsylvania, Ohio and West Virginia is forecast at 4,000 b/d of oil growth in August to 118,000 b/d. The Haynesville Shale, in northeast Louisiana and east Texas, is targeted to remain flat in oil output in August at 43,000 b/d. The Appalachian and Haynesville plays are largely natural gas-prone basins with small crude outputs.

US Crude Oil Output Hits 11 Million bpd For First Time Ever (Reuters) - U.S. crude oil production last week hit 11 million barrels per day (bpd) for the first time in the nation's history, the Energy Department said on Wednesday, as the ongoing boom in shale production continues to drive output. The gains represent a rapid increase in output, as the data, if confirmed by monthly figures, puts the United States as the second largest producer of crude oil, just behind Russia, which was producing 11.2 million bpd in early July, according to sources. "Eleven million would have made us the biggest producer in the world; but actually Russian production in June was above 11 million. So, this is kind of like the space race," said Sandy Fielden, director of research in commodities and energy at Morningstar. The United States has added nearly 1 million bpd in production since November, thanks to rapid increases in shale drilling. "I don't think production is plateauing at 11. It's fully expected to grow beyond 11 - we won't be topping out there," said Scott Shelton, a broker at ICAP in Durham, North Carolina. Crude inventories increased 5.8 million barrels in the week to July 13, compared with analysts' expectations for a decrease of 3.6 million barrels. Crude futures edged down on the data. U.S. crude was down 55 cents to $67.51 a barrel, while Brent dropped 39 cents to $71.77 a barrel. The benchmarks have gained steadily since bottoming out below $30 a barrel in early 2016; U.S. crude is up nearly 12 percent this year. Weekly production figures from the U.S. Energy Information Administration are notorious for revisions, as monthly data, released on a lag, shows U.S. production at 10.5 million bpd as of April. In the last several weeks, the EIA has rounded off U.S. production to the nearest hundred thousand barrels, so that figure had been stuck at 10.9 million bpd for over a month. This report comes amidst worries that infrastructure bottlenecks, which make it difficult for producers to get their oil to market, could soon start curtailing output. 

Record Oil Output Does Not End US Import Dependence - In the first week of July, US net imports of petroleum products fell to just 1.67 million barrels per day, the lowest weekly total on record in at least three decades. The decline of net imports comes as the US has ramped up oil production in the last few years, which affects the net import figure in two ways. A steady increase in exports also pushes down the net import figure, Oil Price reported. Crude oil exports hit a high of 3 million bpd in the third week of June. However, the net import figure has been falling for years and a large part of that is the fact that the US has been scaling up exports of refined products, including gasoline, distillate fuel oil and propane, among others. This trend dates back longer than the recent rally in crude exports. In 2005, weekly net imports peaked, routinely topping 13 million bbd. This figure has currently plunged to less than 2 million bpd. While the US may not need oil and refined product imports as in the past, but the US is still completely enmeshed with the global market. In fact, as output of oil and refined products dramatically increased over the past few years, the volume of trade also rose sharply. When adding imports and exports, the total US trade in petroleum products hit 10.8 million bpd in June, the highest monthly total since 2005, dating back to when the US import dependence peaked.

The U.S. and Canada Are Preparing for a New Standing Rock Over the Trans Mountain Tar Sands Pipeline --In British Columbia’s southern interior, on unceded land of the Secwepemc Nation, Kanahus Manuel stands alongside a 7-by-12-foot “tiny house” mounted on a trailer. Her uncle screws a two-by-four into a floor panel while her brother-in-law paints a mural on the exterior walls depicting a moose, birds, forests, and rivers — images of the terrain through which the Trans Mountain pipeline expansion will pass, if it can get through the Tiny House Warriors’ roving blockade. The project would place a new pipeline alongside the existing Trans Mountain line, tripling the system’s capacity to 890,000 barrels of tar sands bitumen flowing daily from Alberta through British Columbia to an endpoint outside Vancouver. On May 29, the Canadian government announced that it would nationalize the Trans Mountain pipeline to assure the expansion would be built, putting up 4.5 billion Canadian dollars ($3.5 billion) to acquire the pipeline and other assets from the Texas-based energy giant Kinder Morgan. The purchase has dramatically raised the stakes of the fight for both the administration of Prime Minister Justin Trudeau and pipeline opponents like Manuel. Should construction begin as scheduled in August, the Tiny House Warriors expect waves of allies from Indigenous nations inside Canada and beyond to join them as they wheel 10 of the houses into the pipeline’s path. Near the pipeline’s terminus outside Vancouver, members of the Tsleil-Waututh Nation have constructed a traditional “watch house” from which to monitor the progress of construction.  Resistance to the pipeline is already escalating: On July 3, seven pipeline opponents rappelled from Vancouver’s Ironworkers Memorial Bridge in a daylong blockade of tanker traffic associated with the existing Trans Mountain line. Last week, the Tiny House Warriors wheeled the homes into a provincial park that sits on the site of a historic village near Clearwater, British Columbia, in an assertion of their title to the land. On Saturday, the Royal Canadian Mounted Police singled out and arrested Manuel, whose livestream of the incident has garnered more than 500,000 views on Facebook.

Canada LNG Exports -- Both West and East -- Facing Global Cost Pressures, Says CERI - Formidable cost obstacles confront British Columbia (BC) plans to break into global liquefied natural gas (LNG) markets, while Nova Scotia export proposals face even higher hurdles, according to the Canadian Energy Research Institute (CERI).Supply costs exceed Asian and European spot market prices, a CERI study released Thursday said. The Competitive Analysis of Canadian LNG offers a sobering 125-page statistical portrait of the outlook for projects on the northern Pacific and Atlantic coasts.Even in long-term contracts that formerly placed high premiums on internationally traded gas, reductions of energy value indexes now make overseas export projects depend on oil price increases to make LNG from Canada profitable, CERI researchers said.CERI, an industry and government-supported independent agency, painted its Canadian LNG portrait with economic modeling. No inside knowledge is revealed about projects that lately aroused BC and Alberta industry optimism by attracting Asian participation and awarding construction contracts ahead of a final investment decision, LNG Canada and the associated Coastal GasLink pipeline.In CERI’s model as of May, the cost of landing LNG from BC and Alberta tight gas and shale formations on the benchmark Asian spot market in Japan would have been US$8.35/MMBtu -- or US80 cents more than the going price at the time. Export projects on Canada’s east coast would sink far deeper into the red because bans against tapping unconventional gas with horizontal drilling and hydraulic fracturing in Nova Scotia, New Brunswick and Quebec eliminated potential nearby supplies, said CERI.

TransCanada celebrates Mexico pipeline start-up - TransCanada Corp. announced earlier this week that its Topolobampo natural gas pipeline in northern Mexico is complete and has been placed into service. The approximately $1.2 billion, 348-mile (560-kilometer) 30-inch diameter pipeline extends from El Encino in Chihuahua state to Topolobampo, located near the city of Los Mochis in Sinaloa state, according to a TransCanada press release. The Topolobampo Pipeline can deliver up to 670 million cubic feet of natural gas per day to markets in Chihuahua and Sinaloa, the company noted. Moreover, the company added that Topolobampo serves as an upstream interconnection with its Mazatlan Pipeline to form a combined 540-mile (870-kilometer) gas pipeline system in northwestern Mexico. “The completion of the Topolobampo and Mazatlan pipeline system is an important milestone for TransCanada as we continued to expand our portfolio to deliver natural gas to serve Mexico’s electric generation needs,” Robert Jones, president of TransCanada Mexico, said in a written statement. “We are developing the infrastructure to feed new power plants and convert existing fuel oil and diesel power plants, thereby reducing both the cost of electricity and greenhouse gas emissions. We are proud of the way we overcame technical challenges and completed this difficult project safely.” According to TransCanada, the pipeline route’s geography made constructing Topolobampo particularly challenging. The pipeline crosses the Tarahumara mountain range near Chihuahua’s famed Copper Canyon, and TransCanada pointed out that it used novel techniques such as a raised bore to cross “extreme steep cliff faces.” Moreover, the company said that construction called for the use of air cranes to transport pipes to remote locations. Nearly 3,500 employees and contractors worked on the Topolobampo project, which TransCanada noted was one of the first projects in Mexico to include federal government-led Indigenous consultations with impacted communities. The Topolobampo-Mazatlan system represents more than one-quarter of the gas pipeline mileage that TransCanada either operates or is building in Mexico. 

TransCanada pipeline in Mexico expected to help displace fuel oil with US gas — TransCanada said Monday its 670 MMcf/d Topolobampo Pipeline has begun commercial service, part of an effort to move more US natural gas to northwest Mexico to serve power generation demand. The $1.2 billion project, which provides the upstream interconnection with the company's Mazatlan Pipeline, is expected to reduce fuel oil consumption in the power markets in the Mexican states of Sinaloa and Sonora.While TransCanada is focused on its significant pipeline interests in its home country and the eastern US, it also has been seeking to leverage its footprint in Mexico to take advantage of the shifting market dynamics resulting from energy reforms there. Mexico continues to be a major importer of US LNG, but that demand will decrease over time as other pipeline projects in the country come online."We are developing the infrastructure to feed new power plants and convert existing fuel oil and diesel power plants, thereby reducing both the cost of electricity and greenhouse gas emissions," Robert Jones, president of TransCanada's Mexico unit, said in a statement.The project involved the construction of approximately 348 miles of 30-inch diameter pipeline from El Encino, near the city of Chihuahua, to Topolobampo, near the city of Los Mochis, Sinaloa. Combined, the Topolobampo and Mazatlan pipelines form a system that adds over 540 miles of energy infrastructure that provide natural gas to power plants and industrial and urban markets in Mexico.Data from TransCanada Mexico show that Topolobampo Pipeline began taking intermittent receipts of gas on June 18, and since July 2 flows have increased to an average of 65 MMcf/d. Supply gas for the Topolobampo Pipeline is coming from interconnections with the Tarahumara pipeline in Chihuahua, which is itself taking gas from Oneok's Roadrunner pipeline in West Texas. Topolobampo Pipeline also delivers gas to interconnection systems in Sinaloa, which supply IEnova's 510 MMcf/d Guaymas-El Oro pipeline that serves the Mexican state of Sonora. While near-term utilizations are expected to be well below capacity, Topolobampo Pipeline remains a much needed outlet for Permian Basin associated gas production, which is itself nearing takeaway capacity constraints.

EIA's Big Bullish Storage Miss Shakes Up Natural Gas Market Lulled by Production - A bullish surprise from the Energy Information Administration’s (EIA) weekly natural gas inventory report served up a clear reminder that even as production growth has dominated the market’s thinking as of late, it hasn’t made a dent in storage deficits -- yet. EIA reported a 46 Bcf injection into Lower 48 gas stocks for the week ended July 13, roughly 10 Bcf below consensus estimates based on major surveys. The build also fell below the five-year average 62 Bcf injection. Last year, EIA recorded a 31 Bcf build for the period. With Thursday’s report marking the second straight week that injections have lagged the five-year average by a wide margin, the bears -- firmly in control heading into the session largely because of surging production -- seemed to concede that they had gone too far given the risks posed by large inventory deficits. The number, released at 10:30 a.m. ET, immediately sparked a rally for the prompt month, with prices popping to $2.750-2.760 after languishing down around $2.710 earlier in the morning. By 11 a.m. ET, the August Nymex futures contract was trading around $2.770, up about a nickel from Wednesday’s settle. Prior to the report, surveys showed the market looking for a build closer to 55 Bcf. A Bloomberg survey of traders and analysts had produced a median 56 Bcf build, with a range of 44 Bcf to 65 Bcf. Intercontinental Exchange EIA Financial Weekly Index futures had settled Wednesday at an injection of 54 Bcf. Bespoke Weather Services said this week’s figure came in “a whopping 15 Bcf below our expectation. This indicates that there was significantly more holiday in the print last week than expected, and that the natural gas market is materially tighter” than previously thought. 

Analysis: Bullish build in US gas storage leads to price gains as deficit widens — Despite a drop in gas-fired power demand, natural gas storage inventories increased at a much lower volume than the market expected last week, which expanded the deficit to historical levels and provided uplift to prompt-month futures for the first time in weeks.  US natural gas in storage increased by 46 Bcf to 2.249 Tcf for the week ended July 13, the US Energy Information Administration reported Thursday morning. The build was much less than an S&P Global Platts' survey of analysts calling for a 59 Bcf addition. The injection was more than the 31 Bcf build reported during the corresponding week in 2017 but below the five-year average addition of 62 Bcf, according to EIA data. As a result, stocks were 710 Bcf, or 24%, less than the year-ago level of 2.959 Tcf and 535 Bcf, or 19%, less than the five-year average of 2.784 Tcf. The injection was smaller than the 51 Bcf build reported the week prior, even though cooler weather prompted a drop in gas-fired power demand by 1.1 Bcf/d, according to data from Platts Analytics. However, this was somewhat offset by a 400 MMcf/d drop in Canadian imports and a 200 MMcf/d dip in domestic production. The report featured net withdrawals in two of the EIA's five storage regions, including a 5 Bcf pull in the South Central region and a 1 Bcf draw from the Pacific. NYMEX August Henry Hub natural gas futures climbed 5 cents to $2.77/MMBtu following the storage announcement. Prompt month futures have dipped steadily for the past several weeks. The gas market has been in a downturn since mid-to-late June, whereby much of the 2018 strip is approaching or is at year-to-date lows. However, from a fundamental perspective, the market is trending more bullish. The week ending July 20 looks to feature an even smaller build of only 36 Bcf, according to Platts Analytics. Searing temperatures across the Northeast, Southeast and especially in Texas boosted power burn by 2.5 Bcf/d from the week prior. On Tuesday, power burn struck a year-to-date high of 40.3 Bcf/d. Also, with relatively hot weather forecasts spanning the remainder of the month, it is likely that total July power burn will top the current record of 36.6 Bcf/d realized during July 2016. It is currently averaging 37.3 Bcf/d month to date, according to Platts Analytics, which is 3.3 Bcf/d more than last July. Texas alone makes up 400 MMcf/d of the increase.

End-of-season natural gas storage inventories are forecast to be the lowest since 2008 - The U.S. Energy Information Administration’s (EIA) Short-Term Energy Outlook (STEO) forecasts working natural gas inventories on October 31 will be 3,470 billion cubic feet (Bcf), 365 Bcf (10%) lower than the five-year average and 346 Bcf (9%) lower than last year’s level. This forecast inventory level would be the lowest end-of-October storage level since 2008, when inventories ended the month at 3,412 Bcf. The natural gas storage refill season is traditionally April 1—October 31, when natural gas is typically put into underground storage facilities to prepare for increased winter demand for space heating, particularly in the residential and commercial sectors—although injections into storage often occur in the first few weeks of November.  Current New York Mercantile Exchange (Nymex) winter strip futures prices—the average price for November through March futures contracts—for this coming winter have remained relatively unchanged since January 2018 and are similar to the last 3 years’ winter strip futures prices in July. The winter strip price can reflect expectations of meeting peak winter demand based on factors such as natural gas inventories heading into the winter or production expectations. Because inventories are forecast to remain lower than the five-year average, which would put upward pressure on the futures price, other factors are contributing to downward pressure on winter-strip prices:

  • Expectations of continued production growth: The STEO forecasts total U.S. dry natural gas production for November 2018–March 2019 will average about 84 Bcf per day (Bcf/d), up 6 Bcf/d from the winter period last year.
  • Expectations of average injection levels for the remainder of the refill season: Net injections reported since April 27 have generally followed the five-year average, with the forecasted end-of-season level 3% lower than the five-year minimum.

A key uncertainty for end-of-season inventory levels is weather-driven demand from the electric power sector. Natural gas demand for electricity generation tends to peak in the summer months with demand for air conditioning. The current temperature outlook for August–October is for above-normal temperatures throughout the Lower 48 states. The STEO is currently forecasting natural gas use in the electric power sector for August–October to average about 31 Bcf/d, up 2 Bcf/d from last year for the same time period. While production is largely forecasted to keep up with growing sector demand and exports, more extreme weather could lead to higher demand for natural gas-fired generation and, subsequently, a lower inventory level by October 31.

Senate to consider bill boosting U.S. LNG exports to Europe, taking aim at Russian gas- Two days after President Donald Trump's controversial summit with Russian President Vladimir Putin, some Senate Republicans are looking to hit Russia where it hurts - it's energy sector. Sen. John Barrasso, R-Wyo., introduced legislation Wednesday calling for the Department of Energy to speed up approval of LNG exports to Europe, where Russia has long had a strangle hold on natural gas supplies. Likewise, the bill would authorize U.S. sanctions on Russian energy projects, including the planned Nordstream 2 pipeline, which would run across the Baltic Sea from Russia to Germany."It is in the national security interests of our country to help our allies reduce their dependence on Russian energy," Barrasso said on the senate floor. ""Where those countries don't see it for themselves, we need to show them how important it is for their own security." With Republicans anxious to prove their anti-Russian bonafides, Congress is expected to consider in the weeks ahead numerous pieces of legislation designed to punish Russia for its meddling in the 2016 presidential election.That follows a summit in Helsinki Monday in which Trump, standing alongside Putin, said the Russian president had made a "strong and powerful" case that his country had not interfered in the election. He also questioned unanimous consensus among U.S. intelligence officials that Russia had in fact interfered - a statement the president attempted to walk back Tuesday. Under the legislation, U.S. Permanent Representative to NATO Kay Bailey Hutchinson, the former Texas senator, would be directed to encourage members of the North Atlantic Treaty Organization to work with the United States to "achieve energy security for its members and partners in Europe and Eurasia."

Not dead yet: Home of Brent crude gets new lease of life (Reuters) - Oil giant BP’s Eastern Trough Area Project off the coast of Scotland wasn’t supposed to be viable beyond 2018. But government and industry working together have given ETAP a new lease of life that is being closely watched by countries and companies eyeing other ageing projects around the world. When ETAP was launched 20 years ago today, some experts predicted the UK sector of the North Sea would cease most production by 2030. Government efforts to keep producers in the basin, home to the Brent crude that underpins the price benchmark, gained urgency with the 2014 oil price crash. Cheaper oil also forced the industry to upgrade technology and find more efficiencies. From original plans to stop production at ETAP, BP decided to invest $1 billion in 2015. “One has to take stock of the potential going forward and make an intervention that allows for the right investment to extend life,” Ariel Flores, BP’s North Sea Chief, told Reuters. “We’ve done that on ETAP.” ETAP’s example shows how efforts to extend the production in the North Sea are succeeding, providing lessons for producers in other fields near exhaustion such as those in the Gulf of Mexico and southeast Asia. ETAP produces around 37,000 barrels per day of oil now against as much as 217,000 bpd in 2000. But BP production in the entirety of the North Sea is set to double in 2020 to 200,000 bpd from 2014 as fields such as Clair Ridge west of Shetland islands come on line, Flores said. “There are a number of fields in the central North Sea area waiting for final investment decisions (FIDs). And for some of those, the potential host is ETAP,” Flores said. Long-established oil giants such as BP, Royal Dutch Shell and Total as well as smaller, nimbler North Sea-focused producers such as Enquest and Premier Oil are all finding business opportunities in the area. 

Ireland To Move All Its Oil Reserves Out Of The UK As Brexit Nears -- The Irish government is expected to agree this week on a plan to move all of the Republic’s oil reserves out of the UK as Ireland steps up its preparations for Brexit, Ireland’s Sunday Independent reported.Under the plan, seen as one of the most significant Brexit decisions for Ireland so far, Ireland will transfer the nearly 200,000 tons of oil out of British refineries and back into Ireland or other EU member states, as the UK is preparing to leave the European Union bloc.According to Sunday Independent, the oil would be moved out of the UK “for national security reasons.”“We pay for storage there so that will have serious implications for UK refineries who have stored our oil for almost two decades,” a senior Irish government source told Sunday Independent.Ireland has 1.5 million tons of oil reserves. Some 500,000 tons of those reserves are stored in other countries, including the UK, the Netherlands, Denmark, and Spain. The remaining 1 million tons are held at ports along Ireland’s coasts.Under the EU’s Oil Stocks Directive, EU countries must keep emergency stocks of crude oil and/or petroleum products equal to at least 90 days of net imports or 61 days of consumption, whichever is higher.According to reports, one of Ireland’s options for moving the oil reserves out of the UK could be physically moving the oil via tankers. An alternative is also being considered—to make trade deals in which the ownership of UK oil in other EU member state is transferred to Ireland, without the need to physically move the oil.While it is studying  where to keep its oil reserves after Brexit, Ireland could become the first country in the world to quit fossil fuel investments completely, after the Fossil Fuel Divestment bill was passed by the country’s lower house, the Dáil Éireann, last week.

Why Is Venezuela Still Sending Subsidized Oil To Cuba? -- In the past, oil has accounted for 96 percent of Venezuela's exports and over 40 percent of government revenues. Now, as the nation’s economy continues to crumble amid sanctions, political strife, and low oil prices, Venezuela’s all-important oil production is plummeting. In fact, last month’s production was the lowest in 30 years at 1.5 million barrels a day. In desperation, the struggling administration has even begun to shut downproduction proactively as their terminal storage meets maximum capacity and the government faces major bottlenecks at storage facilities and ports.  As oil production and exports drop, the Venezuelan government has even less money to buy essentials like food, medicines, and other basic goods--a well-established crisis growing worse all the time. The International Monetary Fund (IMF) has said that the brutal economic crisis underway in Venezuela is one of the worst in modern history. The nation’s once powerful economy has plummeted 45 percent in the last five years, and the IMF projects that it will shrink 15 percent in 2018 alone. Out-of-control inflation rates will reach 13,800 percent. However, in the middle of the chaos -- a collapsing regime, widespread hunger, medical shortages -- there is one holdover from the socialist platform that autocratic President Nicolas Maduro has refused to lapse on. Despite the crisis on his own soil, Maduro continues to grant generous oil subsidies to Cuba. The small island nation, not without its own economic issues, has been dependent on cheap Venezuelan oil since the 1990s. After the fall of the Soviet Union, comrade Cuba was in economic shambles. It was at this point that they turned to Venezuela reduced-rate crude oil, in exchange for sending skilled laborers across the Caribbean. Now, as Venezuela sinks deeper and deeper into an extreme economic depression, few could have predicted that they would still be making good on that decade-old agreement with Cuba--even the Cubans themselves have been scrambling for new sources of cheap crude.

Big petroleum projects in Argentina face tiny challenge: a lizard (AFP) - A tiny but critically endangered lizard found in Argentina's extensive Vaca Muerta petroleum field could pose a major challenge to companies planning multimillion-dollar investments in the area. The lizard, whose scientific name is Liolaemus cuyumhue, was discovered in an area known as Bajo de Anelo, in the western province of Neuquen. "We have classified this lizard as critically endangered," warned Luciano Avila, a herpetologist, or reptile specialist. The species was identified just a year ago in Bajo de Anelo, an area of tectonic subsidence -- sinking of the Earth's crust -- within the Vaca Muerta field. The lizard is "one step away from being in danger of extinction if no measures are taken to protect its environment,"  The tiny tan lizard lives in dunes and can bury itself and move under the surface "as if swimming through the sand," Avila said. It survives on insects. But its habitat, he said, is being disturbed by oil companies' fracking activities -- the hydraulic fracturing of shale deposits to extract oil or gas. Petroleum companies have big plans for the area, saying they want to invest more than $3 billion over the next 20 years. But to Avila, Bajo de Anelo is a "spectacular area" and a hotspot of biodiversity, with "many lizards that are unique to these environments." He would like to see more research done on the lizards and their environment, with the government establishing permanent safe areas for their continued survival. 

Angola data: Crude oil exports down further in May — Angola's oil exports fell further in May, as the African oil producer struggles to arrest declines at some of its ageing deepwater oil fields, finance ministry data showed Tuesday. But there could be a recovery in the country's oil production with the start up of Total's 230,000 b/d Kaombo field beginning production next month. Angola exported 1,425,269 b/d of crude oil in May from 1,534,750 b/d in April, and down 13% from the 2017 average export volume of 1,632,766 b/d, according to ministry data. The country exported a total of 44,183,339 barrels of crude in May at an average price of $70.71/b, compared with 46,042,507 barrels at an average price of $65.50/b in April, the ministry added. Export volumes last year fell 6% from 2016 levels of 1,730,070 b/d after exports in 2015 rose to a five-year high of 1,767,410 b/d. Trading sources expect exports in June to fall further as technical problems persist at some its fields. Last week, the Angolan oil minister reported to OPEC that output in June averaged 1.45 million b/d in June compared to 1.49 million b/d the previous month. The fall in exports in the past year reflects a similar trend in Angolan oil production, owing to technical and operational problems, especially at its offshore fields, as well as a lack of upstream investment. Production peaked at around 1.9 million b/d in 2008. 

S.Korea LNG imports set to ease from record as power firms guzzle less gas (Reuters) - South Korean imports of liquefied natural gas are set to ease from record levels racked up in the first-half of the year, with appetite for the fuel from utilities seen fading as a raft of nuclear power stations come back online. The country’s imports of the commodity jumped nearly 16 percent year-on-year to a record 22.7 million tonnes in the first six months of 2018, according to customs data in mid-July, boosted by demand from power firms as around half the nation’s 24 nuclear plants were shut for maintenance. But with an average of only six reactors expected to be offline over the rest of the year, analysts say shipments of LNG into the world’s No.3 importer of the fuel are likely to decline. “(LNG) demand in the second-half won’t be as strong as in the first-half because nuclear run rates will rise,” said Yang Ji-hae, an analyst at Samsung Securities. South Korea mainly consumes natural gas for heating and cooking, although it has been pushing to use the fuel more in power generation as it looks to switch away from coal and nuclear. Gas power generation made up 29.1 percent of the country’s overall electricity output in January-May, up from 20.4 percent last year, according to Reuters calculations based on data from Korea Electric Power Corp. That compares to the share of nuclear power at 20.8 percent, down from typical levels of around 30 percent. 

China gasoil exports build surplus, hold Asia cash spread to multi-year lows (Reuters) - China’s record-breaking gasoil exports have built a surplus of the fuel in Asia, sending the region’s gasoil cash differentials to Singapore assessment prices to multi-year lows, with no sign the glut is set to subside through the third quarter. Cash differentials for Asia’s benchmark 10 parts-per-million (ppm) grade, gasoil containing 0.001 percent sulphur, sank to a discount of 25 cents a barrel to Singapore prices on July 2, the lowest since Reuters started tracking the grade in late 2011. The differential GO10-SIN-DIF has held near that level since then, although narrowing slightly. “Singapore 10 ppm gasoil usually trades at a premium but is now trading at a discount as it is very bearish,” said a Singapore-based veteran trader of middle distillates. “The bearishness is more a result of supplies coming from China and sellers having few outlets as the Asia-Latin America trade flow is shut,” the trader said. China’s diesel exports have been surging as refiners there have been running at record rates. China’s March gasoil exports reached 2.4 million tonnes, surpassing an earlier record of 2 million tonnes in November 2017. Between January and May, China exported about 8.5 million tonnes of diesel, 6.5 times higher than in 2015 and up 27 percent versus 2017 over the same periods. The rising gasoil supplies have prompted refiners to search for new markets, with Sinopec Tianjin Refinery shipping a parcel to Australia last month for the first time. “Yield shifts towards gasoil/diesel are becoming observable in the latest rounds of data,” said Eugene Lindell of the JBC Energy Research Team, a consultancy firm based in Vienna. The shift towards middle distillates - caused by price incentives over other fuels - could also mean higher exports including from South Korea and India, Lindell said. The recovery in crude oil prices has weighed heavily on most fuels, although middles distillates gasoil and jet fuel have fared better than products such as gasoline and naphtha. India exported 8.8 million tonnes of gasoil over January-April versus 8.4 million tonnes for the same period last year. South Korea exported 71.6 million barrels (9.5 million tonnes) for the first five months this year, down 1.4 percent during the same period last year, according to data from state-run Korea National Oil Corp.

Analysis: China's crude import growth slips into the red, may fall further  — The pace of growth in China's crude imports may slow in H2 as a cocktail of lower runs at independent refiners, potential delays in the start up of some refineries and higher inventories curb the appetite for cargoes by Asia's largest oil consumer. The first signs of feeble interest in cargoes were visible in the June data, which showed imports falling 4.9% to a six-month low of 4.35 million mt, or 8.39 million b/d, marking the first year-on-year drop in 2018, data from the General Administration of Customs showed. "We think crude imports in H2 2018 will likely ease to an average of 9.01 million b/d, from 9.08 million b/d seen in H1 2018," S&P Global Platts Analytics' senior analyst Zhuwei Wang said. Wang attributed the expected slowdown in crude oil import growth in H2 to a variety of factors. While Zhejiang Petrochemical will likely delay the start of trial runs until Q1 2019, Hengli Petrochemical might be fully commissioned only in early 2019. This will curb the potential for higher crude imports in H2 2018, he said. Even the start of the 100,000 b/d primary capacity expansion of PetroChina's Huabei refinery in Q4, and the restart of operations at Fuhaichuang Petroleum and Petrochemical's 4 million mt/year condensate splitter in Q3 are unlikely to support crude imports, as they would only be able to do trial runs this year. "In addition, crude inventories piled up at both state oil companies and independent refineries in H1 2018, which will likely incentivize destocking in Q3, and cut the appetite for higher crude imports in July and August," Wang added.  Monthly crude imports by China were lower than June 2018 levels only in December 2017, which saw inflows of 7.97 million b/d, customs data showed. The fall in June inflows was in line with expectations.

De-Dollarization: Chinese Refiner Replaces US Imports With Iranian Crude - An independent Chinese refiner has suspended crude oil purchases from the United States and has now turned to Iran as one of its sources of crude, media reports cited an official from the refiner, Dongming Petrochemical Group, as saying.  The source said Beijing is planning to slap tariffs on US crude oil imports and replace them with West African and Middle Eastern crude, including crude from Iran, Oil Price reported. China has already said that it will not comply with US sanctions against Iran and it seems to be the only country for now in a position to do this. US crude oil exports to China reached 400,000 barrels per day at the beginning of this month, but now Beijing is planning to impose a 25% tariff on these as part of its retaliation for Trump’s latest round of tariffs on $34 billion worth of Chinese goods. The retaliation began with tariffs on 545 US goods worth another $34 billion, but Reuters reports that oil tariffs will be announced at a later date. Energy analysts seem to believe that these oil tariffs are more or less a certainty, and now expect a reshuffle of crude oil imports to Asia. With China turning to Iran for its crude, US oil could start flowing in greater amounts to another leading importer in the region, South Korea.“If China retaliates with tariffs on US crude, that could improve South Korea’s terms of buying US crude ... because the US would need a market to sell to,” an analyst from the Korea Energy Economic Institute said. Meanwhile, South Korea’s Embassy in Iran this weekend rejected media reports that the country had suspended oil purchases from Iran under pressure from the United States. The US has pressed South Korea and some other nations to cut down its purchase of Iranian oil to zero or face so-called secondary sanctions. The deadline is Nov. 4 when the 180-day grace period ends.

U.S. Expects China to Buy Even More Iranian Oil After Sanctions  - There is one big hitch in U.S. plans to stem buying of Iranian oil: China.  Some in Washington now expect that China will vacuum up much of the Iranian oil that other nations won’t buy because of the threat of U.S. sanctions, according to a senior U.S. government energy official.  China buying extra Iranian oil could dull the economic impact of those sanctions. It could also bring Iran closer to China at a time of elevated tensions between Washington and Beijing over trade.In May, President Donald Trump pulled the U.S. out of the 2015 Iran nuclear deal and vowed to reimpose sanctions on Tehran.  Oil prices jumped sharply higher in reaction and if China does take spare Iranian crude that could add to pressure currently pushing crude lower, traders say.In anticipation of sanctions, foreign oil companies are already exiting Iran and international banks have declined to finance oil trades. While the European Union doesn’t back renewed sanctions, countries including Greece and Turkey, are winding down their purchases. But China, already the largest buyer of Iranian oil, is gearing up to take more, said the senior official. Tehran is currently in negotiations with Chinese companies to ensure that, according to an Iranian oil official involved in those talks.“We don’t have any problem selling our oil” to China, the Iranian official said.The White House referred calls to the U.S. National Security Council, which didn’t respond to emails seeking comment.  China’s Foreign Ministry and the country’s two biggest oil companies, China National Petroleum Corp. and China Petrochemical Corp., didn’t respond to requests for comment. In the past Beijing has decried the U.S.’s resort to unilateral “long-arm” sanctions in international dealings.Having initially indicated the goal was to reduce Iranian exports to zero, the U.S. government has tempered its expectations. Last week, U.S. Secretary of State Mike Pompeo said the U.S. would consider Iran sanctions relief for a “handful” of countries. South Korea, India and a handful of other countries had a waiver to buy Iranian oil during the last round of sanctions. But Washington has also said that it will pursue Chinese companies with U.S. connections if they violate Iran sanctions.“It is our intent to enforce sanctions on Iran related oil against everybody including China,” U.S. Treasury Secretary Steven Mnuchin told the House Financial Services Committee last week.

Russia to invest $50bn in Iran’s oil & gas - report — Moscow and Tehran are expanding economic cooperation, with Russia planning multi-billion dollar investments in Iran's energy sector. The move comes as major Western firms are pulling out of Iran amid the threat of US sanctions. “Russia is ready to invest $50 billion in Iran’s oil and gas sectors,” Senior Adviser for International Affairs of the Supreme Leader of the Islamic Republic Ali Akbar Velayati was cited as saying by the Financial Times.Velayati met with Russian President Vladimir Putin last week in Moscow. The sides focused on Russian-Iranian cooperation as well as the situation in the region. According to the Kremlin, they reaffirmed their commitment to the Joint Comprehensive Plan of Action on Iran’s Nuclear Deal (JCPOA). An unnamed official from the Russian government confirmed Russia’s $50-billion investment plans to the Financial Times. A Russian oil company has signed an agreement with Iran worth $4 billion, Velayati said, without specifying the name of the company. He added that the deal “will be implemented soon.” Russian energy giants Rosneft and Gazprom are also in talks with the oil ministry of Iran to potentially sign deals worth up to $10 billion, according to an Iranian official. Earlier this year, an agreement was inked by a local Iranian company, Dana Energy, in a consortium led by Russia’s Zarubezhneft, with the National Iranian Oil Company (NIOC). They seek to redevelop the Aban and West Paydar oilfields, with a total capital expenditure estimated at around  $740 million.Russia’s Energy Minister Alexander Novak said on Friday that Moscow was studying all legal implications of a possible deal with Tehran, under which Russia would provide goods to Iran in exchange for oil.Meanwhile, the European Union fears that billions of dollars' worth of trade could be jeopardized as a result of Washington's new sanctions on Iran.

European Governments Explore Financial Channels for Iran —The French, British and German governments have told Iran they are exploring activating accounts for the Iranian central bank with their national central banks in a bid to open a financial channel to keep alive the Iranian nuclear deal, according to several European officials. The move is the first concrete sign that Europe could deliver on its promise to take steps to sustain the Iranian nuclear deal, setting European governments squarely against the Trump administration’s Iran sanctions policy aimed at isolating Tehran economically.Following the U.S. withdrawal from the deal in May, Iran has said it would stop complying with the nuclear deal unless it continues to receive the economic benefits of the 2015 agreement. That deal saw most international sanctions on Tehran lifted in exchange for strict but temporary restrictions on Iran’s nuclear work. Officials involved in discussions said the option of central banks activating Iranian central bank accounts—or reactivating some which have been dormant for years—is one of several that European governments are actively exploring. The three European governments laid out their plans to Iran during discussions earlier this month among foreign ministers and senior officials in Vienna. Officials said they are still trying to iron out details. Other European governments, including Austria and Sweden, have also said they would consider doing likewise, the officials said.However, officials stressed that while discussions have started with central banks, they haven’t yet received buy-in. European central bank officials have said there is reluctance to forge financial links with Iran as the U.S. prepares to reimpose sanctions.

Zanganeh: OPEC Members Not Allowed to Pump Above Target - Iran’s Oil Minister Bijan Namdar Zanganeh in a letter told his Saudi Arabian counterpart that last month’s OPEC supply pact does not give member countries the right to raise oil production above their targets. OPEC agreed with Russia and other oil-producing allies last month to raise output from July, with Saudi Arabia pledging a “measurable” supply boost but giving no specific numbers, Reuters reported. “Member countries committed themselves to reach a production adjustment conformity level of 100%, as of July 1, 2018,” the letter said. “However, the aforesaid decision neither warrants member countries the right to exceed their production level above the allocated production level decided ... nor the right to redistribute the unfulfilled production adjustment commitments among member countries.” Zanganeh’s letter comes after Falih, who chairs a joint committee of OPEC and non-OPEC members for monitoring production compliance, wrote to OPEC last week saying that individual conformity levels will no longer be reported. Zanganeh’s comments underline the still-simmering tensions after OPEC’s meeting last month. Saudi Arabia said the deal allowed countries able to produce more to meet the group’s overall conformity level, meaning some members, such as itself, are to make up for shortfalls elsewhere.

US Treasury Secretary: Washington to Consider Waivers on Iran Sanctions --The US in certain cases will consider waivers for countries that need more time to wind down imports of oil from Iran as it seeks to avoid disrupting global oil markets while reimposing sanctions against Tehran, US treasury secretary Steven Mnuchin said. “We want people to reduce oil purchases to zero, but in certain cases, if people can’t do that overnight, we’ll consider exceptions,” Mnuchin told reporters on Friday, clarifying some US officials’ comments that there would be no exemptions. Mnuchin’s comments were embargoed for release on Monday as other US officials were expected to begin talks in India this week on cutbacks in Iranian oil supplies. Mnuchin spoke to reporters while en route from Mexico, where he was part of a high-level US delegation led by Secretary of State Mike Pompeo to meet Mexico’s next president, Andres Manuel Lopez Obrador. The Trump administration is pushing countries to cut all imports of Iranian oil from November when the US reimposes sanctions against Tehran. Trump withdrew from the multi-national 2015 Iran nuclear deal against the advice of allies in Europe and elsewhere. A delegation from the US State Department and US Treasury are expected for talks in Delhi this week to discuss Iran sanctions, according to Indian officials. The US crude oil exports to India hit a record in June as Indian refiners moved to replace supplies from Iran and Venezuela. Andrew Lipow, president of Lipow Oil Associates in Houston, said India was expected to ask the US to ensure adequate global oil supplies as Washington presses countries to cut back on Iran oil. “That might include pressure to release oil from the Strategic Petroleum Reserve, which the administration indicated they were considering on Friday,” 

Saudi oil exports slip below 7 million b/d after refinery restarts — Saudi Arabia's crude oil exports fell below 7 million b/d to a seven-month low in May after the restart of a major refinery absorbed higher crude output from OPEC's biggest producer during the month. Saudi crude oil exports in May fell by 328,000 b/d month on month to 6.98 million b/d, the lowest since October, according to data from the Riyadh-based Joint Organizations Data Initiative. The lower May export figure came as overall crude production rose 160,000 b/d month on month to 10.03 million b/d. At the same time, crude used for the refining rector jumped by 403,000 b/d, or 18%, after the Satorp refinery -- a 400,000 b/d joint venture between Saudi Aramco and Total in Jubail -- returned from a maintenance shutdown in the first quarter. The plant, which was expected to restart in April, said last week it had shipped RBOB (reformulated blendstock) gasoline to the US the first time. Crude used directly to fuel power generation plants, which rises seasonally due to higher summer demand for air conditioning, also rose in May, according to the data. So-called "direct burn" crude was 24,000 b/d higher month on month at 412,000 b/d, the highest since last September. Combined, Saudi Arabia's domestic crude use rose to 3.02 million b/d in May, up from 2.588 in April but below the May 2017 total of 3.12 million b/d. The data covered the month before OPEC's meeting late June saw the producer group, Russia and other allies agree to a 1 million b/d output boost to ease expected market tightness before US sanctions crimp Iran's exports from next month. 

U.S. and Allies Consider Possible Oil-Reserve Release -  U.S. and Western officials are considering an eventual emergency release of stockpiled oil if new supplies can’t prevent another sharp rise in prices, according to people familiar with the matter. The Trump administration is actively assessing whether to dip into the country’s emergency oil stocks while it simultaneously pushes other countries to boost their output, according to people familiar with the matter. The discussions are part of a broader effort to ensure oil markets remain well supplied amid a host of production disruptions around the world, and rising global demand. Any draw down of the so-called Strategic Petroleum Reserve isn’t imminent, according to people familiar with the matter. Such releases have been rare, and typically only as a last resort. The current discussions about such a move—while preliminary—-underscore growing worry among consuming nations over supplies. OPEC and Russia have committed to pumping more crude to ease markets, but a host of global production constraints—and rising demand—have raised questions about whether that new oil will be enough. Some senior Trump advisers are strongly opposed to the idea, and the administration is primarily concerned with keeping its options open, according to people familiar with the matter. Meanwhile, Fatih Birol, director of the International Energy Agency, a group that advises industrialized nations on energy policy and coordinates emergency oil releases globally, told a private dinner last month that a release was an option if supply outages worsen, according to people at the dinner. A few months back, a release of strategic oil reserves sounded far-fetched. In the past, such a move has been a last-ditch option, often triggered by war. There have been just three IEA-coordinated releases—the most recent was in 2011 at the height of the Arab Spring.

U.S. SPR oil release would be a mistake: Kemp (Reuters) - The United States is considering releasing crude stocks from the SPR, possibly in conjunction with its partners in the International Energy Agency (IEA), according to news reports, to prevent a sharp rise in oil prices.“The Trump administration is actively assessing whether to dip into the country’s emergency oil stocks while it simultaneously pushes other countries to boost output,” the Wall Street Journal reported on July 13.Releasing crude oil from the U.S. Strategic Petroleum Reserve (SPR) in response to a rise in prices resulting from the reimposition of sanctions on Iran would be a mistake and ultimately self-defeating. The SPR has sufficient crude to offset any loss of exports from Iran for many months, especially if stock releases are combined with increased oil production by Saudi Arabia and other members of OPEC. The statutes governing the operation of the SPR grant the U.S. president broad discretion to order a drawdown, and any order is unlikely to be constrained by Congress or the courts. But the SPR was established to deal with short-term interruptions of crude supplies and is not suited to managing long-term changes in the supply situation. In particular, if the purpose is to relieve upward pressure on prices, it would blunt the signal needed to help the market adapt to sanctions. If the SPR release succeeded in holding down prices, it would discourage the rise in production needed to replace lost Iranian barrels, while allowing rapid consumption growth to remain unchecked. Deploying the SPR to manage a loss of Iranian oil supplies would ultimately prove self-defeating, and deplete the reserve if pursued for any length of time. Like a buffer-stock management system, which can even out short-term shifts in supply and demand, but not enduring ones, the SPR is best employed to deal with short-term supply interruptions, not long-term changes.

Wood Mackenzie: Global oil demand could peak by 2036 - Global oil demand could peak within 20 years driven by a rapid shift towards electric vehicles (EVs). That is the conclusion of one of the world's most influential oil consultancies, Wood Mackenzie, which last recently warned its clients oil demand could begin to decline much earlier than many of oil majors expect. In comments reported by the FT, Ed Rawle, Wood Mackenzie's head of crude oil research, revealed the company had reappraised its projections for lone term oil demand and is now predicting oil consumption will peak around 2036. The projections are the centrepiece of the company's flagship long term energy outlook briefing, which was distributed to clients in May but was reported on for the first time by the FT today. The report provides further evidence of how the oil industry is starting to plan for a potential peak in oil demand. "A lot of our clients recognise that peak demand is real," Rawle was quoted as saying. "It's just a question of when it arrives." However, Wood Mackenzie's 2036 date for peak oil demand is significantly earlier than the date included in many oil majors' base case scenario planning and investment plans. As such it is likely to further fuel fears that oil and gas companies could end up creating a 'carbon bubble' whereby they invest in assets that become overvalued and stranded. Some oil majors have started to acknowledge a peak in oil demand could come by the 2030s or even earlier, if demand for EVs accelerates. However, others maintain oil demand will continue to rise throughout much of the first half of the century, breaking carbon budgets and making the goals of the Paris Agreement on climate change unattainable in the process.

Hedge funds quiet before oil-price plunge (Reuters) - Hedge fund managers made few adjustments to their positions in the petroleum complex in the week ending on July 10, as the market remained calm - before oil prices plunged the following day. Hedge funds and other money managers raised their net long position in the six most important futures and options contracts linked to petroleum prices by just 6 million barrels in the seven days to July 10. Net length increased for the third week running but the rise was much smaller than in the week ending July 3 (+47 million barrels) or June 26 (+36 million) indicating the recent wave of position-building was largely complete. Portfolio managers cut net long positions in Brent (-10 million barrels) while adding them in NYMEX and ICE WTI (+1 million), U.S. gasoline (+6 million), U.S. heating oil (+5 million) and European gasoil (+4 million). The previous position-building in WTI ran out of steam, with fund managers adding just 1 million barrels of net long positions, compared with 41 million and 75 million in the two prior weeks. While crude contracts continued to come under selling pressure, funds started or continued to add slightly to bullish positions in refined fuels (https://tmsnrt.rs/2KZZ67a) .   The very limited position changes in the week to July 10 suggest most fund managers had completed adjusting their positions after a bout of profit-taking on crude and fuels that began in late April. But Brent positions have declined in 10 out of the last 13 weeks, and with no new buying in WTI, the gentle downward pressure on prices and calendar spreads finally turned into a torrent just one day later. 

Crude falls sharply as rising output outweighs supply shocks from Norway, Libya; Brent $73.88/b, WTI $69.69/b — Crude futures fell sharply in European trading on Monday morning, as signals of rising output from the US and OPEC members offset a string of supply strains, including a strike at Norwegian oil fields and a kidnapping at the Sharara field in Libya.  At 1130 GMT, September ICE Brent was down $1.45 from Friday's settle at $73.88/b, while the August NYMEX crude price was down $1.32 to $69.69/b.That dip comes amid signals that overall supplies could rise, with the US heard to be mulling tapping into stockpiles over the summer months, alongside larger offers of crude from Saudi Arabia and higher Russian output.Reports over the weekend suggested that the Trump administration is considering releasing additional supplies to prevent price spikes, while Saudi Arabia was heard to be offering larger volumes to customers in Asia who have pulled back sharply on Iranian imports. Russian officials have also said they will bring 200,000 b/d of additional product back into the market for June as production cuts ease."Over the weekend there were a string of supply-side developments that would have been supportive," said Harry Tchilinguirian at BNP Paribas in London, from disruptions in Libya and Norway to longer-running supply threats including Iranian sanctions and the decline of Venezuelan output."However, all these elements are trumped by the fact that the US may be thinking of tapping into the US [Strategic Petroleum Reserve] over the summer, with the view of preventing any price spikes."Meanwhile, strikes on Norwegian oil and gas rigs by unions were expected to dramatically expand over the course of Monday, extending last week's strike of 669 workers on offshore rigs, over pay disputes. That closed the Knarr field, operated by Shell.That was not expected to have an immediate impact on output, but could eventually dent total output if the strike continues.Over the weekend, production at Libya's largest oil field dropped by almost half following a kidnapping of four workers, according to the state-owned National Oil Corporation. That was at the Sharara oil field in the country's southwest region, which as an output of about 340,000 b/d and is jointly controlled by Total, Repsol, Statoil and OMV. The field has been plagued by closures in recent years. That came on the heels of a force majeure declared at Libya's 90,000 b/d El-Feel oil field, which was only ended on Thursday.

Brent, WTI Prices Slide as Disruption Concerns Ease - Oil prices slipped on Monday as concerns about supply disruptions eased and Libyan ports reopened while traders eyed potential supply increases by Russia and other oil producers. But global supply remained tight with investors wary over the impact of production losses in several exporting countries, CNBC reported. Brent crude slid 30 cents at $75.03 a barrel. US light crude was down 50 cents at $70.51. Supply outages in Libya, a labor dispute in Norway and unrest in Iraq all helped push oil prices higher late last week, although prices still fell for a second straight week. Russia and other oil producers may raise output by 1 million barrels per day or more if shortages hit the market, Russian Energy Minister Alexander Novak told reporters on Friday. “If we need more than 1 million bpd, I do not rule out that we can quickly discuss it and make a quick decision.” Production at Libya’s giant Sharara Oilfield was expected to fall by at least 160,000 barrels per day after two staff were abducted in an attack by an unknown group, the National Oil Corporation said on Saturday. A Norwegian union for workers on offshore oil and gas drilling rigs on Monday stepped up a six-day strike that has hit oil output. Investors are also on edge over the impact of trade dispute between the United States and its big trading partners.

Crude Oil Prices Settle 4% Lower as Traders Cut Supply Shortage Bets - WTI crude oil prices settled sharply lower Monday, pressured by expectations for an increase in supplies after U.S. Treasury Secretary Steve Mnuchin said some crude importers may receive waivers to continue buying supplies from Iran. On the New York Mercantile Exchange crude futures for August delivery fell 4.2% to settle at $68.06 a barrel, while on London's Intercontinental Exchange, Brent fell 4.5% to trade at $71.92 a barrel. "We want people to reduce oil purchases to zero, but in certain cases if people can't do that overnight, we'll consider exceptions," Mnuchin told reporters on Friday, Reuters reported. The comments were not released until Monday morning. This somewhat softer outlook on restrictions of Iranian crude oil buyers comes as U.S. President Donald Trump has repeatedly called on OPEC to address the sharp uptick in oil prices, which rose earlier this month, to levels not seen since November 2016. With the drop in Iranian crude supplies likely to be less than many had anticipated, investors have lowered expectations for a shortage in global crude supplies. Expectations of increased crude supplies were heightened as Libyan ports reopened, while Iraq output reportedly soared in the first half of the July . Iraq crude exports jumped 6% to 4.05 million barrels a day (bpd) in the first half of July from 3.839 million bpd for the entire month of June, according to tanker tracking and data from port agents compiled by Bloomberg. The slump in oil prices comes as oil market observers were monitoring potential comments on oil markets at the meeting between President Donald Trump and Russian President Vladimir Putin on Monday. Putin hinted that the U.S. and Russia could work together in a constructive way to regulate the international energy markets as an extreme drop in prices was not in Russia's interest. That, however, did little to stem the plunge in oil prices, as attention shifted toward weekly U.S. petroleum inventory data from the American Petroleum Institute on Tuesday, and from the Energy Information Administration on Wednesday.

Is This The End Of The Oil Rally? - Oil prices were mostly flat at the start of trading on Tuesday, after having posted two of the worst single-day declines over the past week. The oil market has seen a sudden shift in sentiment compared to just a week ago. There are several reasons for this: The return of oil from Libya, the lifting of force majeure on a key oil stream in Nigeria, the anticipated return of oil from an outage in Canada, increased production from Saudi Arabia and the prospect of an SPR release from the U.S. Taken together, the oil market doesn’t seem as desperate for supply as it did a week ago. Saudi Arabia is offering extra volumes of oil to some buyers in Asia, according to Bloomberg, a sign that the Kingdom is going further to ensure the market is adequately supplied. It also suggests that Russia and Saudi Arabia are likely set to go beyond what was agreed to at the OPEC+ meeting, which called for an additional 1 mb/d of supply. Saudi Arabia also said that OPEC+ would no longer focus on country-specific output limits but instead would heed a collective target, a switch that would free Saudi Arabia to ramp up production.  Royal Dutch Shell lifted force majeure on Bonny Light in Nigeria following the repair of the Nembe Creek Trunkline. Bonny Light represents about 200,000-250,000 bpd, and Shell had put it under force majeure in May because of problems with the pipeline. The return of Bonny Light has helped ease concerns regarding global supplies.

Oil Prices Edge Up After Slumping More Than 4% Following Mnuchin's Comments– Oil prices rebounded on Tuesday after plunging more than 4% in the previous session as U.S. Treasury Secretary Steven Mnuchin said the U.S. is considering waivers on Iran sanctions for some crude importers. Crude Oil WTI Futures for September delivery were trading at $67.16 a barrel at 12:05AM ET (04:05 GMT), up 0.15%. Brent Oil Futures for September delivery, traded in London, were also up 0.5% at $72.18 per barrel. Mnuchin told reporters that the U.S. wants to avoid disrupting global oil markets and is considering waivers for countries that need more time to wind down imports of oil from Iran while reimposing sanctions against Tehran. President Donald Trump withdrew the U.S. from the 2015 Iran nuclear deal and restored sanctions on Tehran in May. "We want people to reduce oil purchases to zero, but in certain cases if people can't do that overnight, we'll consider exceptions," Mnuchin said. His comments contradicted some U.S. officials' comments earlier that said there would be no exemptions. Officials from the U.S. State Department and U.S. Treasury are expected for talks in Delhi this week to discuss Iran sanctions, according to Indian officials. Meanwhile, recent reports that Saudi Arabia offers more crude cargoes to Asian customers were also cited as headwind for oil prices. Meanwhile, U.S. President Donald Trump was reportedly considering tapping the nation’s emergency oil supply to tame rising fuel prices. U.S. West Texas Intermediate crude oil prices ended Monday's session down $2.95, or 4.2%, at $68.06.

Oil slips as focus turns to surplus from shortage - U.S. crude oil futures fell on Tuesday as worries over supply disruptions eased and the focus moved to increasing domestic production and potential damage to global growth from the U.S.-China trade dispute.  U.S. West Texas Intermediate crude (WTI) was 81 cents lower at $67.26 a barrel by 10:53 a.m. EDT [1453 GMT]. It lost 4.2 percent on Monday.Brent futures rose 9 cents to $71.93 a barrel, after earlier trading as low as $71.35 a barrel, its lowest since April 17. Brent fell 4.6 percent on Monday. “Fears of shortages, which pushed prices as high as $80 per barrel in early summer, are receding and concerns about looming surpluses growing,” The market is waiting for clear signals on supply, including whether the U.S. will release crude from its Strategic Petroleum Reserve and whether Libya’s oil production will rebound following military clashes in late June and early July, said Tariq Zahir, managing member at Tyche Capital in New York.“You really have to see how much Saudi is going to produce, along with Russia,” he said. Russian crude production could also ramp up, restoring 300,000 barrels per day (bpd) that were cut in an agreement with OPEC, he said.“I think we’re going to get to a more balanced market as we get to the fourth and first quarter of next year.”Oil prices have fallen by almost 10 percent over the last week as crude export terminals in Libya have reopened and exports from other OPEC countries and Russia have increased. Production from seven major U.S. shale oil formations is expected to rise by 143,000 bpd to a record 7.47 million bpd in August, the U.S. Energy Information Administration said on Monday. Output is expected to rise in all seven formations.

WTI Drops After Surprise Crude Build -- Oil prices rebounded to unchanged intraday on hopes that tonight's API data would show a notable draw and recover the momentum in energy markets. However, WTI dropped as API reported a surprised crude build of 629k (exp was a 4.1mm draw).“We’re expecting a fairly bullish report tonight, a significant decline in U.S. crude oil inventories again,” said John Kilduff, a partner at New York-based hedge fund Again Capital LLC. At the same time, we’re seeing “short-covering and profit-taking at the moment from the big sell-off.”API

  • Crude +629k (-4.1mm exp)
  • Cushing -1.34mm (-700k exp)
  • Gasoline +525k
  • Distillates +1.711mm

Following last week's massive crude draw (and distillates build), API reported a surprising 629k barrel build (massively missing the 4.1mm draw expected), and Gasoline and Distillates also saw builds... WTI traded flat around $68 heading into the API print then tumbled on the surprise crude build...

Oil Prices Drop as U.S. Crude Inventories Unexpectedly Rise - Oil prices declined on Wednesday after a slight increase in the previous session amid a surprise surge in US crude inventories reported last week. Crude Oil WTI Futures for September delivery fell 0.42% to $66.88 per barrel at 12:22AM ET (04:22 GMT), while Brent Oil Futures dropped 0.3% to $71.94 for one barrel. After rising to over $72 per barrel yesterday, Brent oil went back on the dropping track, as the American Petroleum Institute revealed a rise of over 600,000 barrels in US crude stockpiles last week. Meanwhile, Libya reopened its ports and started exporting oil again after the closures of its oil field. The country’s National Oil Corporation announced its force majeure on exports from Zawiya oil terminal on Tuesday, in a bid to boosting national production. The organisation’s Chairman Mustafa Sanalla said, “We have to prioritize local demand for fuel. For the time being all, Sharara production will go to the refinery.” Iran, the world’s fifth largest oil producer, filed a lawsuit at the International Court of Justice against sanctions imposed by the U.S. in May, alleging that they violated a 1955 bilateral treaty between the two countries. The Islamic country asked the sanctions to be lifted provisionally. On Monday, the US Treasury Secretary Steven Mnuchin said Washington might grant waivers to Iran oil purchases.

US Crude Oil Inventories Surge After Production Spikes, Exports Crash -  -- WTI was still trading lower after API reported last night's surprise crude build, and traded lower initially after DOE reported a massive surprise crude build. Additionally, US production hit 11mm b/d for the first time ever.As Bloomberg Intelligence's Senior Energy Analyst Vince Piazza notes, even as U.S. crude inventories drain, concerns persist over global growth amid trade tensions driven by geopolitics and an increase in OPEC quotas. Slowing demand for refined products, which is tied to higher crude prices and emerging-market struggles, has dampened optimism for U.S. refiners. ADOEPI

  • Crude +5.84mm (-4.2mm exp) - biggest build since April
  • Cushing -860k (-700k exp)
  • Gasoline -3.17mm
  • Distillates -371k

After last week's massive draw (and API's surprise build), this week saw a huge rebound in crude inventories But while US crude inventories surged, Cushing continues to draw down...Permian pipeline bottlenecks continue to pressure discounts... But production resumed its rise (after a 3-week stall) up 100k b/d, hitting 11mm b/d for the first in history...

Crude Edges Up as Fuel Supply Drop Outweighs Rising Crude Stocks (Bloomberg) -- Crude rose as investors assessed conflicting supply-and-demand signals in the world's biggest economy. Futures in New York wavered between gains and losses during the session before settling 1 percent higher on Wednesday. Gasoline held in U.S. storage tanks dropped by the most since May and fuel demand increased, according to data from the Energy Information Administration. Those factors overshadowed the biggest increase in American crude inventories since April. "This is what happens when you get the largest imports we've had during the year and the lowest exports we've had for three months,"said Rob Thummel, managing director at Tortoise, which manages $16 billion in energy-related assets. "The lone positive for the bulls is the gasoline draw was very strong. Obviously, gasoline demand seemed to bounce back this week." The surprise jump in U.S. crude inventories occurred against the backdrop of looming production increases from Saudi Arabia, Russia, Libya and other major sources. During a meeting in Vienna on Wednesday, OPEC and allied producers discussed how much individual nations plan to produce this month but didn't go so far as to formally share out a planned output increase across the cartel, according to people familiar with the matter. West Texas Intermediate crude for August delivery added 68 cents to settle at $68.76 a barrel on the New York Mercantile Exchange, the biggest gain in more than a week. Total volume traded was about 25 percent below the 100-day average. Brent for September settlement rose 74 cents to end the session at $72.90 on the London-based ICE Futures Europe exchange, and traded at a $5.15 premium to WTI for the same month. U.S. WTI hovered just above its 100-day moving average after London's Brent settled below that level on Monday for the first time since March. The EIA reported U.S. crude inventories rose by 5.84 million barrels last week, confounding most analysts in a Bloomberg survey who were forecasting a decline. Purchases of foreign oil jumped the most since the start of 2017, while crude exports slid for a third week, contributing to the inventory build. 

Proposed Law Would Allow U.S. to Sue OPEC for Manipulating Oil Market - Exasperated by high gasoline prices just ahead of the U.S. midterm elections, lawmakers in Congress are trying to make it easier for the United States to sue OPEC. And unlike previous failed efforts to go after the oil-exporting cartel, this time Congress will find a sympathetic ear in the White House. The bipartisan No Oil Producing and Exporting Cartels Act, or NOPEC bill, would tweak U.S. antitrust law to explicitly ban just the kind of collusive behavior that OPEC was created to engage in. The bill, a carbon copy of previous legislation, makes illegal any activity to restrain the production of oil or gas or set oil and gas prices and knocks away two legal defenses that in the past have shielded OPEC from U.S. antitrust measures.The NOPEC bill passed handily out of the House Judiciary Committee last month and could go to the floor this summer for a full vote. A different bill in the Senate seeks to rein in OPEC by opening the door to complaints at the World Trade Organization if the cartel jacks up prices by capping its oil output, part of a double-barreled effort to hold big oil producers’ feet to the fire. “The objective of this legislation is to tell OPEC once and for all that they can no longer collude to fix the price of oil,” said Brian Griffith, a spokesman for Rep. Steve Chabot, an Ohio Republican, who co-sponsored the bill. “If they do, they can be held accountable under our laws and in our courts.” Political anger at OPEC tends to rise alongside oil prices; the first effort to use antitrust law against the oil cartel came in the late 1970s after a pair of nasty energy shocks.    At the time, lower courts avoided the political hot potato by ruling, among other things, that other governments have sovereign immunity from the long arm of U.S. law. Now, rising oil prices are again stoking predictable anger in Washington — prompting the same legislative exercise. Crude has risen more than 60 percent since last summer, pushing up gasoline prices to close to $3 a gallon nationwide.

Putin suggests Russia and US could work together to regulate oil prices - Russian President Vladimir Putin suggested that Moscow and Washington could cooperate to soothe volatility in the oil market that has roiled the industry in recent years. Russia has partnered with OPEC and other producer nations since 2017 to manage nearly half of the world's oil supply. The countries took action after crude prices sank to 12-year lows in 2016, piling pressure on oil-dependent economies and bankrupting hundreds of U.S. energy companies. The United States, where drillers compete in a free market, is not part of the deal. U.S. laws prohibit companies from colluding to fix prices, and a bipartisan group of U.S. Congress members recently revived a push to punish OPEC for alleged price-fixing. Still, Putin suggested that some form of cooperation is possible during a press conference with U.S. President Donald Trump in Helskinki on Monday. "I think that we as a major oil and gas power, and the United States as a major oil and gas power as well, we could work together on regulation of international markets, because neither of us is actually interested in the plummeting of the prices," Putin said. "But nor are we interested in driving prices up because it will drain a lot of juices from all other sectors of the economy, so we do have space for cooperation here," he said. Trump has demanded that OPEC tame fuel costs, after a slow-and-steady rally accelerated this year. Led by Saudi Arabia and Russia, the two dozen producer nations last month agreed to hike output to offset falling output in Venezuela and looming U.S. sanctions on Iran, the world's fifth largest oil producer.

Oil prices mixed as producers adding more oil while U.S. gasoline stocks drop --  (Reuters) - Oil prices were mixed on Thursday as the market struggled to digest signs of strong gasoline demand in the United States, the world's biggest consumer of thefuel, with a statement from oil producers that they are putting more crude on the market.Brent crude futures fell 11 cents, or 0.2 percent,to $72.79 a barrel at 0401 GMT. West Texas Intermediate (WTI)crude futures CLc1 climbed 6 cents, or 0.1 percent, to $68.82.Both benchmarks rose by 1 percent on Wednesday after inventory data from the U.S. Energy Information Administration reported on Wednesday U.S. gasoline stockpiles fell along with supplies of distillate fuels. Motor fuel demand also rose fromthe week before and was up from a year earlier. However, the EIA also reported U.S. oil production reached arecord 11 million barrels per day (bpd). The United States has added nearly 1 million bpd in production since November, thanksto rapid increases in shale drilling. urn:newsml:reuters.com:*:nL1N1UE0QCAlso, a meeting of members of the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producer monitoring their supply pact reported on Wednesday that compliance with the agreement has declined, meaning more oil is available to the market.  The bullish tone sparked by the gasoline data is unlikely tolast, said Stephen Innes, head of trading APAC at brokerage OANDA. "With Russia quick to offer the President a supply olivebranch and Saudi Arabia mainly in his back pocket when it comesto increasing their supply, its challenging to see (the)gasoline numbers turning the bearish market's tide," he said.

Brent slips as focus returns to oversupply (Reuters) - Global benchmark Brent crude dipped on Thursday as concerns about mounting supply returned after a brief rally earlier in the session on comments that Saudi Arabia’s exports would fall in August. Crude prices fell from session highs reached after Saudi Arabia’s OPEC Governor Adeeb Al-Aama statement that the kingdom expects crude exports to drop by roughly 100,000 bpd in August as it limits excess production. Brent oil fell 32 cents, to settle at $72.58 per barrel, previously reaching a session high of $73.79. U.S. West Texas Intermediate (WTI) was 70 cents higher, or 1 percent, settling at $69.46. U.S. crude prices had reached a session high of $70.17 earlier in the session before paring gains. Crude prices pulled back from highs earlier in the session as traders cashed in on profits, said John Kilduff, a partner at Again Capital Management in New York. Prices, which had strengthened on news of Saudi Arabia’s planned export cuts, fell as the market’s focus returned to potential oversupply as Saudi Arabia, Russia and other major producers continue to lift output. OPEC and non-OPEC producers cut oil output in June by 20 percent more than agreed levels, compared to 47 percent in May, two sources familiar with the matter told Reuters on Wednesday. “Just because the Saudis are trying to temper the fallout, doesn’t change the fact that they are increasing production,” Kilduff said. Commodities, under pressure from a strong dollar and a new wave of trade tensions that stoked fears of damage to economies and commodities, also weighed on prices. Earlier in the trading day, the U.S. dollar hit its highest level against a basket of other currencies since July 2017, up half a percent on the day.

Oil prices contend with strengthening U.S. dollar: Kemp (Reuters) - The rising value of the U.S. dollar against most other major currencies is creating an additional headwind for oil prices, as it pushes up the local price of crude and fuels across much of Asia, Europe and Latin America. In trade-weighted terms, the dollar has risen to its highest since late 2016 and early 2017, and before that 2002/2003 (https://tmsnrt.rs/2LzLuvB). Adjusted for inflation, the dollar’s trade-weighted value is close to its highest since 2004, according to the broad exchange rate index compiled by the Federal Reserve (https://tmsnrt.rs/2LC7Zjh).The U.S. dollar has appreciated by more than 8 percent against China’s yuan since the end of March, in response to the worsening trade tensions between the two countries.China overtook the United States to become the world’s largest crude importer in 2017 and net imports of crude and fuels are now running at around 9 million barrels per day.Brent crude prices have risen nearly 9 percent this year in dollar terms but are up more than 13.5 percent in yuan as a result of the exchange-rate shift.China’s currency depreciation is partly driven by bilateral tensions as the country's authorities actively engineer or passively permit the exchange rate to act as a shock absorber (the practical effect is the same).But the U.S. dollar has also appreciated against every other major currency, including the euro, the Japanese yen, the British pound, the South Korean won and the Canadian dollar.The U.S. currency is also rising against most emerging-market currencies, including the Brazilian real, the Indian rupee and the Indonesian rupiah. In general, it is the U.S. dollar appreciating rather than other currencies depreciating, mostly as a result of strong economic growth in the United States, steadily rising interest rates and safe-haven capital flows. The result is that oil prices in most oil-consuming countries are now rising much faster than the international benchmark prices quoted in dollars.

Oil Regains Footing After Volatile Week -Oil prices held steady on Thursday and in early trading on Friday after a top Saudi official said that oil production would remain flat in July compared to June and that Saudi Arabia does not want to oversupply the market. Previous comments suggested that Saudi Arabia would ramp up to 10.8 million barrels per day (mb/d) in July, but instead the Saudis will keep output at 10.5 mb/d. U.S. oil production hit 11 mb/d last week, a new record high. A separate EIA report predicts that shale output will grow by another 143,000 bpd in August, compared to July. Gains will come from the Permian (+73,000 bpd), the Eagle Ford (+35,000 bpd), the Bakken (+15,000 bpd), plus smaller contributions from elsewhere. Meanwhile, the number of drilled but uncompleted wells (DUCs) increased by a massive 193 in June from a month earlier, most of which were concentrated in the Permian basin. The DUC backlog continues to swell as the Permian suffers from pipeline bottlenecks.  Two of Venezuela’s four oil upgraders are slated to go offline for maintenance in the next few weeks, according to Reuters. The upgraders process heavy oil from the Orinoco Belt into an exportable form of oil, and they have a combined 700,000 bpd of processing capacity. The maintenance for the two upgraders throw up another obstacle for Venezuela, which saw its total oil production fall to just 1.34 mb/d in June.  The Shia-majority in Southern Iraq have been protesting for two weeks, angry at corruption and an unemployment crisis. The protests have spread to other Iraqi cities, including Najaf, Amarah and even Baghdad. Most of Iraq’s oil wealth comes from Basra, but the majority of people in the south barely see any benefit.

Rig Count Drops As US Crude Output Hit 11 Million Bpd -- Baker Hughes reported a decreased number of active oil and gas rigs in the United States on Friday. Oil and gas rigs decreased by 8 rigs, according to the report, with the number of active oil rigs falling by 5 to 858 this week, while the number of gas rigs dipped by 2, hitting 187.The oil and gas rig count now stands at 1,046—up 96 from this time last year, with the number of oil rigs accounting for 94 of that 96.Canada gained 14 oil and gas rigs for the week, 11 of which were gas rigs. Canada’s oil and gas rig count is now up just 5 year over year. Oil rigs are up by 24 year over year in Canada, while the number of gas rigs are down by 19. The biggest loser by basin this week was Granite Wash, which lost 3 rigs. The only basin to gain rigs this week were Cana Woodford (+2), and Utica (+1). The Permian basin, which saw neither an increase or a decrease this week, and Cana Woodford, saw the biggest increases year over year. Cana Woodford now has 12 more rigs than this time last year, while the Permian has 102 rigs more than this time last year.  WTI crude was trading down on Friday afternoon while Brent crude was trading up—widening the WTI discount to Brent. WTI was trading down 0.18% (-$0.12) at $68.12 at 12:34 pm EDT. Brent crude was trading up 0.25% (+$0.18) at $72.76 per barrel.Both benchmarks are trading significantly down week on week as the market treads carefully after OPEC committed to increasing production in order to more closely stick to its production cut agreement after months of under producing, and despite US production that this week, for the first time, hit a new psychologically important high of 11 million bpd, after hovering at 10.9 million bpd for multiple weeks. At 11 minutes after the hour, WTI was trading up 0.04% at $68.27, with Brent trading up 0.34% at $72.83.

Oil prices finish higher, but suffer third weekly decline in a row - Oil futures settled higher Friday, finding some support as Saudi Arabia said it expects to reduce exports in August, easing some concerns of coming oversupply in the market.Prices, however, logged a third straight weekly decline on renewed trade-war fears after President Donald Trump said he was ready to impose tariffs on all $505 billion worth of Chinese imports. August West Texas Intermediate crude, the U.S. benchmark, rose $1, or 1.4%, to settle at $70.46 a barrel on the New York Mercantile Exchange. It settled at its highest level in a week, but was still down 0.8% from last Friday’s finish for a third consecutive weekly loss. September WTI crude, which became the front-month contract at the session’s end, added 2 cents to finish at $68.26 a barrel. The global benchmark, September Brent crude,  settled at $73.07 a barrel, up 49 cents, or 0.7%, on ICE Futures Europe. It marked a weekly loss of about 3% and its third-weekly fall.  “Despite the recent weakness and volatility in the energy markets, the longer term trends do still favor the bulls, although the case for WTI is more favorable than Brent on the charts as the latter just hit fresh 3-month lows this week,” Oil saw little change after oil-field services firm Baker Hughes  said the number of U.S. oil rigs, a proxy for oil activity, fell by 5 this week to 858. The rig count is up 94 from a year ago, when there 764 rigs.

Mass protests in Iraq’s southern provinces -- Thousands took part in mass demonstrations in southern Iraq over the weekend against the intolerable economic conditions that prevail 15 years after the US-led war for regime change that toppled the regime of Saddam Hussein and collapsed the Iraqi state. Iraqi officials have desperately sought to quell the unprecedented protests through a combination of conciliatory rhetoric and state repression, with security forces injuring dozens and killing three demonstrators over the first week. The protests began in Basra City on July 8 when security forces fired on a demonstration of youth protesting lack of employment and essential services, including water and electricity. The Iraqi security forces killed one of the demonstrators, sparking widespread outrage in the community. The demonstrations have continued every day since, with crowds of hundreds of protesters blocking traffic, attempting to seize oil fields and storming and setting fire to government buildings, as well as those belonging to Shia political parties, whom many blame for the lack of any significant improvement in living standards since the fall of the Ba’athist regime. The protests erupting in the mainly Shiite South are directed against the Shiite-dominated, US-backed government. They are driven not by sectarian sentiments, but by class issues. Protesters are calling for an end to pervasive graft, unemployment, and grossly inadequate public services, all of which have become defining features of Iraqi society since the US invasion and occupation. In particular, regular power outages and a lack of clean drinking water make life miserable for the city’s mostly working-class inhabitants during the sweltering summer months. The unreliability of electricity in southern Iraq was exacerbated this year by a drought, which significantly reduced power production at the nation’s hydroelectric dams, and by Iran’s large reduction in the amount of electricity it provides to Iraq as a result of a dispute regarding payment. Basra Province is by far the country’s most oil-rich region. Its oil exports account for 95 percent of annual revenue for the Iraqi government, making its security a key priority for the regime.

Iraq Protesters Storm Airport, Oil Offices Amidst Energy Crisis; Foreign Companies Begin Evacuations - Widespread protests have gripped multiple Iraqi cities for a week in response to government corruption, rising unemployment, and an electricity shortage which has left residents suffocating in soaring summer temperatures. What began as anger over a continued failing infrastructure, however, has increasingly turned into political protests and clashes with police after May 12th parliamentary elections tainted by broad allegations of fraud failed to produce a new government.And now Iraq's top Shiite cleric, Grand Ayatollah Ali al-Sistani, has weighed in publicly on the side of the protesters, stating they are facing an "extreme lack of public services". Sistani's words were issued via live television broadcast during a significant escalation in the Shia hotbed of Najaf on Friday, where hundreds of protesters stormed the city's international airport, bringing air traffic to a halt. Video showed demonstrators rushing through security barriers while chanting demands, and multiple fires were lit just outside the terminal. Iraqi police appear to have held back, as the protesters numbers were significant — possibly into the thousands according to social media footage — and were able to block key access points to the airport. State TV reported that security was restored and operations resumed as normal by late Friday.  Though sporadic protests over the country's failing electricity grid have been ongoing throughout the summer, last weekend witnessed the first significant clashes with security forces in the southern city of Basra, resulting in an least one death. And this weekend's clashes appear to be escalating with at least two more deaths reported in Amara, the capital of the Maysan province on the border with Iran.

What’s behind Iraq’s Basra protests? -- The protests in Basra have been decades in the making and involve a complex set of factors. Over the last week demonstrators have taken to the streets of Basra, Iraq's third largest city, protesting unemployment and lack of services. The protests only intensified when Iraqi security forces killed one of the participants.   How Prime Minister Haider al-Abadi defuses the crisis will serve as a test for him, as he seeks re-election as a compromise candidate, and will only increase public pressure to expedite the process of forming a new government after the May elections.   To understand the latest protests one must read Peter Hartling's essay "Basra Dystopian City". My mother used to speak of Basra in its glory days in the 1960s as a thriving urban centre with grandiose homes known as shenasil with wooden facades and ornate hanging balconies overlooking the Shatt Al-Arab waterway.  My first trip to Basra as an adult was in 2004 and the city she described did not exist. I saw Hartling's dystopia, a city devastated by three wars, an uprising, and a decade of sanctions. How did a city once described as Edenbecome this way? Basra served as a frontline metropolis during the Iran-Iraq war, with Iranian offensives - particularly after 1986 - to seize the city, destroying much of its urban fabric. Basra was relatively unscathed during the 2003 invasion, but it suffered during the ensuing decade with rival militias fighting over the city, running kidnapping and extortion rackets, and served as a battleground between these militias and the Iraqi and US military in 2008.  Since then the discontent in Basra has been building up. Basra was one of the cities that took part in anti-government protests in the summer of 2015 over corruption in the government, unemployment, and lack of services, particularly salinity in the water, water shortages, and frequent power cuts. Those are the exact same demands articulated over the last week.

Iraq protests: Demonstrators blame ‘bad government, bad roads, bad weather, bad people -- “The people want an end to the parties,” chanted protesters, adapting a famous slogan of the Arab Spring, as they stormed the governor’s office and the international airport in the Shia holy city of Najaf.Part of the wave of demonstrations sweeping across central and southern Iraq, they demanded jobs, electricity, water and an end to the mass theft of Iraq’s oil wealth by the political parties.Beginning on 8 July, the protests are the biggest and most prolonged in a country where anti-government action has usually taken the form of armed insurgency.The demonstrations are taking place in the heartlands of the Shia majority, reflecting their outrage at living on top of some of the world’s largest oilfields, but seeing their families barely survive in squalor and poverty.The protests began in Basra, Iraq’s third largest city which is at the centre of 70 per cent of its oil production. A hand-written placard held up by one demonstrator neatly expresses popular frustration. It read:
“2,500,000 barrels daily
Price of each barrel = $70
2,500,000 x $70 = zero !!
Sorry Pythagoras, we are in Basra”

Iraqi police disperse protesters outside Zubair oilfield as unrest grows (Reuters) - Iraqi police wielded batons and rubber hoses to disperse about 250 protesters gathered at the main entrance to the Zubair oilfield near Basra on Tuesday as unrest across southern cities over poor basic services gathered pace. Iraqi policemen threw sand to put out the fire that the protesters had set ablaze, during a protest at the main entrance to the giant Zubair oilfield near Basra, Iraq July 17, 2018. REUTERS/Essam al-Sudani Since demonstrations began nine days ago, protesters have attacked government buildings, branches of political parties and powerful Shi’ite militias and stormed the international airport in the holy city of Najaf. Tensions focused attention on the performance of Prime Minister Haider al-Abadi, who is seeking a second term after May 12 parliamentary elections tainted by allegations of fraud that prompted a recount. In his weekly news conference on Tuesday, Abadi promised to work with protesters to fight corruption and said the government would improve services. Officials and industry sources said the protests have not affected output at Zubair, run by Italy’s Eni, and the other major oilfields including Rumaila developed by BP and West Qurna 2 managed by Lukoil. Many Iraqis believe their leaders do not share the country’s oil wealth. Some demonstrators said foreign laborers were robbing them of employment at oil companies. Three protesters have been killed in clashes with police, including one at West Qurna 2, and dozens wounded. Dozens of policemen were also injured. 

‘Desperate to find a way out’: Iran edges towards precipice - In the words of Mohammad, a graphic designer out of work for four months, life in Iran is “like being a fish in a rapidly shrinking puddle of water, under scorching sun in the middle of desert”.  On the surface the 28-year-old’s comments speak to the country’s grave environmental challenges: it is experiencing its worst drought in modern history, with water shortages and recurring electricity cuts that cut the internet, halt lifts and disrupt air conditioning in 40C heat. Authorities in Tehran are even considering to bringing working day forward, from 6am to 2pm, to help workers cope. But Mohammad, who relies on his father’s pension for survival, like a “leech feeding on blood” as he puts it, is not speaking about the environment. Instead he is referring to a wider crisis he says has created a sense of hopelessness permeating Iranian society, which few have seen on such a scale since the 1979 Islamic Revolution.  A combination of factors ranging from economic grievances and a lack of social and political freedoms to international pressure and sanctions has put the country under unprecedented pressure. Many Iranians would now agree with Mohammad that the country faces a pivotal moment.  “People are desperate to find a way out,” he says. “If it’s war, so it be, but quick; if it’s reaching an agreement, so it be, but quick; if it’s regime change, so it be, but quick.”  Weeks of sporadic protests across the country over water scarcity, unpaid salaries and currency depreciation, combined with mounting pressure from the Trump administration, which wants all countries to stop buying Iranian oil by 4 November, have piled pressure on Iran’s president, Hassan Rouhani. He is increasingly being seen as a lame duck as he proves unable to fight off hardliners and pursue his agenda. One pledge he has delivered on – the landmark 2015 nuclear deal – is unravelling after Donald Trump pulled the US out of the framework in May.

Throughout Middle East, the Web Is Being Walled Off - —In Egypt, the websites of the Huffington Post and Human Rights Watch aren’t available to most internet users. The Turkish government blocks more than 100,000 sites, including Wikipedia. In Saudi Arabia, a range of news sites linked to rivals Qatar and Iran are off limits. “My first thought was, ‘Welcome to China,’” said a banker in Cairo, recalling his attempt to access Mada Masr, Egypt’s leading independent news organization, which has been blocked since June 2017. He asked to have his name withheld for fear of government reprisal. In recent weeks, Egypt’s Parliament has moved to cement online censorship in law, including legislation passed on Monday that gives the government the right to block social-media users and accounts that engage in any of a number of vaguely-defined violations such as “incitement to break the law.” Authoritarian governments in the Middle East are increasingly adopting a version of China’s approach to online censorship, walling their citizens off from swaths of the internet and denying access to popular websites, often with the aid of Western technology. China has banned Facebook since 2009, two years before social media played an instrumental role in the uprisings of the Arab Spring. As a result, surfing the internet is often a more limited experience than people in the West are used to. Cairo, for example, has more than doubled the number of websites it blocks to an estimated 500 in the past year, according to watchdog groups. And the internet can differ considerably from place to place, depending on the priorities of people in power.“We’re starting to head toward a model where each country has its own version of the internet,”  Governments that see potential threats from the internet have long sought to spy on their citizens online, and Middle Eastern regimes have often cut off or slowed down the internet in times of stress. Egypt briefly shut down all internet access during the 2011 revolution that ousted former President Hosni Mubarak. Turkey has blocked and slowed social media repeatedly, including during the crackdown that followed the failed 2016 coup attempt. But as advanced technologies become more widely available on the open market, even countries without a large domestic tech industry are becoming increasingly sophisticated in targeting internet usage. Those technologies include deep packet inspection, which allows authorities to block, monitor, redirect and alter internet traffic, experts say.

Commandos Sans Frontières: The Global Growth of US Special Operations Forces - Early last month, at a tiny military post near the tumbledown town of Jamaame in Somalia, small arms fire began to ring out as mortar shells crashed down. As it happened, Staff Sergeant Alexander Conrad, a member of the U.S. Army’s Special Forces (also known as the Green Berets), was killed.  If the story sounds vaguely familiar — combat by U.S. commandos in African wars that America is technically not fighting — it should. Last December, Green Berets operating alongside local forces in Niger killed 11 Islamic State militants in a firefight. Two months earlier, in October, an ambush by an Islamic State terror group in that same country, where few Americans (including members of Congress) even knew U.S. special operators were stationed, left four U.S. soldiers dead — Green Berets among them. (The military firstdescribed that mission as providing “advice and assistance” to local forces, then as a “reconnaissance patrol” as part of a broader “train, advise, and assist” mission, before it was finally exposed as a kill or captureoperation.) Last May, a Navy SEAL was killed and two other U.S. personnel were wounded in a raid in Somalia that the Pentagon described as an “advise, assist, and accompany” mission. And a month earlier, a U.S. commando reportedly killed a member of the Lord’s Resistance Army (LRA), a brutal militia that has terrorized parts of Central Africa for decades. And there had been, as the New York Times noted in March, at least 10 other previously unreported attacks on American troops in West Africa between 2015 and 2017. Little wonder since, for at least five years, as Politicorecently reported, Green Berets, Navy SEALs, and other commandos, operating under a little-understood legal authority known as Section 127e, have been involved in reconnaissance and “direct action” combat raids with African special operators in Somalia, Cameroon, Kenya, Libya, Mali, Mauritania, Niger, and Tunisia. None of this should be surprising, since in Africa and across the rest of the planet America’s Special Operations forces (SOF) are regularly engaged in a wide-ranging set of missions including special reconnaissance and small-scale offensive actions, unconventional warfare, counterterrorism, hostage rescue, and security force assistance (that is, organizing, training, equipping, and advising foreign troops). And every day, almost everywhere, U.S. commandos are involved in various kinds of training.

It’s Official, “Israel” Is Now A Joint Russian-American Protectorate --Everything that the Western world previously assumed about “Israel’s” supposed “invincibility” has been exposed as a discredited propaganda operation that not even the US is capable of conducting anymore after the on-the-ground facts have disproven its very basis. Long thought of as the “Sparta” of Mideast affairs because of its military’s ability to punch well above its weight in regional conflicts and the efficient capabilities of its intelligence services in catalyzing the MENA-wide Yinon Plan of the so-called “Arab Spring”, “Israel” has now been exposed to have several glaring vulnerabilities that have put it in such a position of weakness vis-à-vis Iran that it’s now compelled to seek joint American and Russian assistance in ensuring its security. During the joint press conference in Helsinki, President Putin proclaimed his long-known desire to protect “Israeli” interests by telling the world that:“I would also like to note that after the terrorists are routed in southwest Syria, in the so-called ‘southern zone’, the situation in the Golan Heights should be brought into full conformity with the 1974 agreement on the disengagement of Israeli and Syrian forces. This will make it possible to bring tranquillity to the Golan Heights and restore the ceasefire between the Syrian Arab Republic and the State of Israel. The President devoted special attention to this issue today.”Trump took it even further by adding that: “We’ve worked with Israel long and hard for many years, many decades. I think that never has any country been closer than we are. President Putin also is helping Israel, and we both spoke with Bibi Netanyahu. And they would like to do certain things with respect to Syria, having to do with the safety of Israel. So, in that respect we absolutely would like to work in order to help Israel, and Israel will be working with us, so both countries would work jointly.

Israel carries out biggest air strikes on Gaza since 2014 war - Israel carried out air strikes against Gaza on Saturday, killing two teenagers and injuring a dozen more people, in what the Israel Defense Forces (IDF) are boasting was their largest bombardment of the tiny Palestinian enclave since the seven-week, 2014 Gaza War. Israeli Prime Minister Benjamin Netanyahu vowed Sunday that the IDF attacks would continue until all missile and “arson attacks” on Israel cease. The first named are small crude rockets built with pipes, the second are Molotov cocktails and flaming kites. Both are rudimentary and ineffective compared to the massive US-supplied arsenal deployed by the Israelis.  Going into a cabinet meeting, Netanyahu distanced himself from a ceasefire that Egypt and the UN’s Special Mediator for the Middle East had brokered late Saturday between Israel, Hamas, Gaza’s governing party, and Islamic Jihad, its Iranian-backed ally. Israel, he declared, would not agree “to a ceasefire that would allow the continuation of terrorism by incendiary kites and balloons …We are not prepared to accept any attacks against us.” “Whoever hurts us,” continued Netanyahu, “we will hit them with great strength. This is what we did yesterday. I hope that they got the message; if not, they will get it later.”

Gaza Escalation: 40 Israeli Airstrikes Overnight, Hamas Mortars, Fires In Southern Israel Tensions along the Israel-Gaza Strip border escalated dramatically on Saturday with an intense exchange of fire between Palestinian militants and Israeli security forces, including Israeli air force strikes inside Gaza, which reportedly targeted underground tunnels which Israel says are designed to launch attacks. The Israeli Defense Forces (IDF) cited 31 rockets fired from the Strip overnight to which Israel responded with airstrikes on 40 targets including Hamas' battalion headquarters, in a flare-up of hostilities officials are calling the biggest attack since Operation Protective Edge in 2014. Amazingly, however, no serious casualties were reported on either side, according to Bloomberg.   Hamas, for its part, claimed 15 sites struck withing Israel, saying in an official statement the rocket launches were meant to "force the enemy to stop the escalation." Both Hamas officials and Palestinian activists say Israeli security has deliberately targeted civilian protesters along the border fence which has left hundreds dead and wounded, which the United Nations is currently investigating.In response, Israel claims the civilian protesters are being deliberately used as human shields - including women and children - ordered by Hamas military officials to go to the front lines where they know they could be shot. Since March, Gaza officials have counted over 140 Gazans killed almost 2000 wounded by Israeli live fire. Israeli military statements further said the significant overnight airstrikes on Hamas positions were in response to a series of arson attacks as well as assaults on Israeli solders.

Israeli forces 'deliberately killed' Palestinian paramedic Razan An investigation conducted by Israeli human rights organisation B'Tselem has concluded that Israeli security forces deliberately shot and killed Palestinian paramedics Razan al-Najjar, contradicting the Israeli army's claims that it was an accident.On June 1, the 20-year-old al-Najjar was shot in the chest with the single bullet, exiting through her back, while she was trying to help wounded demonstrators in Gaza near the perimeter fence with Israel.B'Tselem's investigation found that a member of the Israeli security forces aimed and shot directly at her as al-Najjar stood some 25 metres away from the fence, "despite the fact that she posed no danger to him or anyone else and was wearing a medical uniform.""Contrary to the many versions offered by the [Israeli] military, the facts of the case lead to only one conclusion," Amit Gilutz, spokesperson for B'Tselem said.Rami Abu Jazar, 29, a volunteer paramedic from Khan Younis was with al-Najjar when she was fatally shot. In a testimony provided to B'Tselem, Jazar explained that around 6pm that day a group of paramedics approached the fence to evacuate two young men who had fainted due to tear gas inhalation. The paramedics wore medical vests and raised their hands above their heads "to set the soldiers at ease, to make them see we're paramedics," Abu Jazar said.

China in the Middle East: Behind Xi’s economic charm offensive --China, the world's second-largest consumer of crude, has stepped up its investment in the oil-rich Middle East with a pledge of more than $23bn in loans and millions more in aid. President Xi Jinping also wants talks on free trade areas and is putting forward an "oil and gas plus" investment model to representatives of 21 Arab nations at a forum in Beijing. He believes it's a model that can create jobs and helps safeguard China's future energy requirements.  Xi told Arab leaders that China would like to form a strategic partnership to become "the keeper of peace and stability in the Middle East ... and good friends that learn from each other."  The Middle East plays a vital role in the billion-dollar One Belt One Road Initiative, a megaproject that aims to link people in Asia, Africa and Europe via an ultramodern trade route. It is a reinvention of the ancient Silk Road for the modern age. Middle East countries currently provide more than half of China's crude oil imports and China is the largest trading partner with the region. Its goal is to double its Middle East trade to $600bn by 2020.  "This is part of a long-term plan of China to secure its resources for the future," s"Oil is very important; energy resources for China will be more and more crucial in the coming 10 years, 20 years, 30 years. So, they have already invested in other places like Africa and South America for other resources. But for the oil, the Middle East is the primary area, and the platform that they are conveniently using now is the Belt and Road."

China Just Doubled Oil Shipments To North Korea - After the recent visits of North Korean leader Kim Jong-un to China, Beijing has almost doubled the volume of crude oil pipeline shipments to North Korea, South Korea’s newspaper Chosun Ilbo reported on Thursday, citing a source in Beijing. The surge in Chinese shipments to North Korea is raising additional concerns that China could undermine the international sanctions against Kim’s regime.Pipeline volumes of between 30,000 tons to 40,000 tons are enough in the summer to keep the pipeline from China to North Korea unclogged, while this volume is around 80,000 tons in the winter, Chosun Ilbo’s source said. Although it’s summer, China has recently increased the oil flow to the winter levels, the source told the South Korean outlet.Under the latest United Nations Security Council sanctions regarding oil sales to North Korea from December 2017, North Korea is allowed to import a maximum aggregate amount of 500,000 barrels of all refined oil products for 12 months beginning on January 1, 2018. The sanctions also introduced a limit of 4 million barrels - or 525,000 tons - per a twelve-month period as of 22 December 2017 for the supply, sale, or transfer of crude oil to North Korea.If China sends 80,000 tons of oil to North Korea every month, this volume already brings the amount to 960,000 tons a year - above the 525,000 tons limit for a 12-month period in the sanctions, Chosun Ilbo argues.Citing a confidential U.S. report to the UN sanctions committee, the AFP reported last week that the United States asked the UN Security Council to impose an immediate stop to all shipments of refined oil products to North Korea, after finding that Kim Jong-un’s regime had vastly exceeded the UN-restricted quota for oil product imports.According to the U.S. report to the UN, North Korea received at least 759,793 barrels of oil products between January 1 and May 30, well above the 500,000-barrel annual quota.  The supplies have been made via ship-to-ship transfers with North Korean tankers that have called in port at least 89 times, the United States says. The United States also accused China and Russia for keeping oil sales to North Korea.