in what appears to have been a counterattack against OPEC in the ongoing war to control world oil markets, the Obama administration approved the export of ultralight oil originating from US oil shale wells early this week, the first time we've allowed oil exports of any kind in 40 years....these exports will be of the many grades of oil known as condensates, as they are gaseous when trapped in rock underground, but they condense into a liquid when brought to the surface, and they're so plentiful in the shale fields that they've typically been priced about $10 lower than regular crude... the ruling will benefit domestic shale gas & oil producers hurt by lower crude prices by giving them a market for a product which is in surplus in the US at the higher international prices...the Commerce Department's US Bureau of Industry and Security is getting around the ban against oil exports by ruling these condensates are a refined product because they're distilled and separated into grades by heating, a process which often takes place in the field...the 40 year old law allows for refined products like diesel and gasoline to be exported, but export sales of unrefined crude oil have previously been limited to Canada...more than 12% of daily U.S. crude production might qualify as condensates, although exactly what is a condensate is a matter of debate even among oil companies, with different refiners specifying a different API gravity, the measure of how light an oil is relative to water...most condensates are often about as light and volatile as gasoline, and hence they account for the explosive nature of Bakken crude currently being shipped by rail, so we can assume the same issues will make overseas shipping of these grades of oil difficult and dangerous...since they usually can't be refined into gasoline, most condensates have been used in the US as chemical industry feedstocks...condensates are also currently used by Canadian oil companies to dilute tar sands bitumen before shipping, so it seems that by allowing their exports overseas, we'll in fact be raising the relative price Canadian oil producers pay for condensates, which will make shipping tar sands oil even more expensive than it otherwise would have been....one estimate puts our current national condensate output at around 1.45 million barrels a day, with only about a third of that coming from gas wells....Citigroup analysts expect that this export rule change will boost crude sold overseas by around 1 million barrels a day by the end of 2015, which would be a little more than 1% of the ~90 million barrels a day of worldwide oil overproduction, so hence Brent and other international grades of crude oil fell sharply in price on the news...
US oil prices remained volatile but trended down this week, with some intraday price gyrations greater than $3 a barrel...the near term contract started up on Monday on reports of factional fighting in Libya that resulted in 1.8 million barrels of crude oil burning at dockside, but fell back in the afternoon to close at $53.58 a barrel...prices rose a bit again on Tuesday with the news of the US exports initiative but fell back on Wednesday to close the year at 53.57, and then fell further on Friday to end the week at $52.64...the gyrations in prices for natural gas were even more extreme, rising slightly from last week to $3.05 mmBTU on Monday, then hitting $3.20 on Tuesday on forecasts of a period of below normal temperatures for the eastern two thirds of the US, before closing the day at $3.09...the near term contract for gas then fell most of Wednesday to close the year at $2.91, and traded as low as $2.88 mmBTU on Thursday before rising on Friday and closing the week at $3.003, off less than a half a cent for the week...we'll include a 3 week price chart for the current oil contract below, to cover the time since we last posted an oil price chart, and so you can get an idea of how oil prices move over time...this graph shows the path of oil prices since December 15th, which each line representing the range of oil prices for a 4 hour period during the trading day...the red bars represent 4 hour periods when oil prices fell, while the green bars represent 4 hour periods when oil prices rose...the colored portion of each bar represents the opening and closing prices for the period, while the thin lines extending above and below the colored bars represents the range of prices over the entire 4 hour period...the original source of this chart is interactive, such that all those prices are viewable to the penny as you scroll across the chart...you'll also note at the top that the chart can be changed to view prices every 5 minutes, or up to once a day...
3 week oil price chart:
the major news of interest to this group is that an already approved and ready to be developed liquefied natural gas export terminal has been put on hold due to lower global prices for oil, which tentative Asian buyers of LNG are switching to...the Excelerate export plant at Lavaca Bay, Texas had planned to ship 8 million tons of LNG annually to Asian customers starting in 2018, but their prospective customers are now opting for oil products for their energy needs, as falling prices made them competitive with LNG...if the current low prices for oil continues, problems of this nature may also encumber the thirteen other planned U.S. LNG projects, none of which have signed up enough international buyers to reach a final investment decision...the ultralight oils now approved for export might also compete with LNG, since about 80% of natural gas plant liquids are in forms ethane or propane...otherwise, it was a slow week for news from the oil patch...early indications from the major energy companies indicate that they're planning to cut 'investments" by around 25% in the coming year, but hard budgets for the coming year aren't expected to be released for a few weeks...and of course, a lot still depends on where oil prices stabilize...energy consultants at Wood Mackenzie suggest that if oil prices average around $60 a barrel this year, the top 40 oil companies would need to cut their total spending by $170 billion, or 37%, to keep from going farther into debt...
in a holiday-delayed release of the count of active drilling rigs for the week ending December 26th, we learned that 35 less rigs were running during that week than the week before, as 37 oil drilling rigs shut down, while two more gas rigs were started, with all of those land based drilling rigs, as the offshore rig count was uncharged...1840 rigs were in operation, down from 1875 in the week ending December 19th, but that was still 83 more rigs than the 1757 rigs that were operating during the last week of December last year...the Canadian rig count took a monstrous hit, with 135 or 35% of the rigs running on December 19th being shut down by the 26th, leaving just 256 rigs in operation in Canada at week end...we're going to include here below the Baker Hughes graph of just the operating US land rigs over the past two years, since the offshore rigs aren’t particularly relevant to fracking…as you can see the count of land-based drilling rigs in operation has fallen quite rapidly since OPEC announced their open spigot strategy at the end of November, but even so they’ve only dropped to the level of operation seen in March, and are still far more active than they were last, data for which is represented by the grey bars at the bottom of the graph
land based rigs in use:
we're going to start the links this week by calling your attention to an amazing post from "No Fracking Way"...following this introductory paragraph, Richard Averett, one of the bloggers on that site, finishes his annual list of oil and gas industry related incidents, which include injuries and fatalities, explosions, derailments, oil and fracking wastewater spills, and wildlife and fish kills, with a link to each story...combined with his earlier list published in May, he has enumerated nearly 250 such incidents over the past year...as he notes in his footnote, The next time some gashole says that fracking: 1. Is safe 2. Never hurt anybody’s water/air/lungs/epidermis 3. Won’t contaminate the water/ air/ you/ your cat....show them this list.
Spill Baby Spill ! Kill Baby Kill ! – 2014 in Fraccidents and Frackastrophes - We ended the first installment of “Spill Baby Spill the Year in Frackastophes” way back in May. It’s been a big year for Fraccidents and Frackastrophes since then, and Fractavist Extraordinaire Richard Averett has brought the list up to date, one fracking mess at a time. Fracking has become America’s deadliest form of energy, a bigger body count in a month than coal in a year. Fracking produces more radioactive HAZMAT material in a few days than the US nuclear industry does in a year. Sandra Steingraber’s group published a compendium of fracking health risks and the Physicians Scientists & Engineers for Healthy Energy did a statistical analysis of health studies, which were released simultaneously the week before Governor Cuomo’s announcement to ban fracking in New York. We here at No Fracking Way, The Dory, The Bill, The Wendy, Sheik Yerbouti – aka “Richard Averett” and Joe Tex, wish you and yours a very Happy unFracked New Year! And remember the Chevron Promise: “If the fracking well explodes, the pizzas on us !” (linked list of over 200 events)
Ohio Oil and Gas Association’s Tom Stewart retiring to give industry fresh start at Statehouse - Tom Stewart is giving up his perch atop the state's top oil and gas trade group out of frustration that Ohio politics has gotten too personal. Stewart announced his retirement last week from the Ohio Oil and Gas Association, a group he has led for 23 years. The retirement comes at a pivotal point for the industry with major issues, especially a severance tax on drilling, still unresolved. It's that issue and other policy battles at the Statehouse that helped spur Stewart, who turns 64 next month, to hand over the reins to 35-year-old Shawn Bennett. Stewart and his association have clashed with Ohio. Gov John Kasich over how high the severance tax should be, with Stewart worrying a higher tax could cause oil and gas producers to go elsewhere. Kasich has said the current severance tax is " a complete and total ripoff."
Injection well meeting draws crowd, opponents express concerns - More than 100 people attended a meeting the Athens County Commissioners hosted Tuesday to give people an opportunity to comment on a proposed injection well in Troy Twp. More than 30 people took that opportunity, expressing their opposition to the well. K&H Partners, a West Virginia company, has applied to the Ohio Division of Oil and Gas Resources Management — part of the Ohio Department of Natural Resources — for a permit to drill the company’s third injection well in Troy Twp. Injection wells are used to dispose of waste, including brine and fracking waste, from oil and gas wells. The county commissioners were asked by the Athens County Fracking Action Network (ACFAN) and residents of Troy Twp. to hold a public meeting on the K&H Partners application. A recording of the comments made at Tuesday’s meeting, which was held at the Federal Valley Resource Center in Stewart, will be sent to the Ohio Division of Oil and Gas Resources Management along with a request that a formal public hearing be held, according to County Commission President Lenny Eliason.
Dozens testify against proposed frack-waste well in eastern Athens County: Not one of 35 community members who spoke Tuesday evening during a public meeting about a proposed Torch area fracking waste injection well said he or she favors it. The eastern Athens County well has been proposed by K&H Partners of West Virginia, the same company that operates two other injection wells in the same area. Called by the Athens County Commissioners, the meeting occurred within the two-week comment period set by the Ohio Department of Natural Resources. The agency, by statute, has sole regulatory authority over oil and gas drilling and related activities (such as injection wells) in the state of Ohio. However, attendees at the meeting – held at a former school building in Stewart – did not hold out much hope that their comments will have any impact on ODNR's decision on approving the well. "It is important that local government be listened to at the state level," Athens County Commissioner Lenny Eliason told the standing-room-only crowd of over 120 people at the Federal Valley Resource Center. "When they ignore us, that's a problem."
Ohio should follow the example of New York and Quebec to ban fracking -- On Dec. 17, New York Gov. Andrew Cuomo declared that the state of New York would prohibit fracking statewide, after announcing the results of a state-commissioned scientific review of the health impacts of oil and gas development. "Would I let my child play in a school field near [fracking]?" asked the New York Health Commissioner. "The answer is no." Gov. Cuomo said: "If you wouldn't want your children to live near fracking, no one's children should have to." They went on to state that the risks of fracking outweigh the benefits. A ban was also enacted in Quebec, Canada after an environmental review came to a similar conclusion. These developments should encourage concerned Ohio residents. As yet, Ohio has not commissioned a scientific study on fracking. Ohio's regulations of the oil and gas industry are among the weakest in the country and some critical regulations have never been written. The chief of the ODNR Division of Oil and Gas can waive many of the regulations that do exist at will, and regularly does so. Radioactive fracking fluid and drill cuttings are virtually unregulated in Ohio. That has made Ohio the fracking waste dumping ground of choice for neighboring states. Ohio is accepting waste that is classified as radioactive in Pennsylvania and West Virginia for disposal in landfills that are not equipped to contain or monitor it.
3 Reasons Why New York's Fracking Ban Changes Everything - New York is officially frack free. Here are three reasons why New York's fracking ban changes everything.
1) It's not about climate change -- Despite natural gas' lower carbon dioxide emissions rate (about 30% less than oil and half that of coal), critics believe its carbon-intensive extraction process, as well as methane leakages during exploration and production, make natural gas as messy as any other fossil fuel. But those claims are hard to quantify, and Governor Cuomo turned an environmental debate into a public health debate. The basis for banning fracking came in the form of a 184-page New York State Department of Health report. The paper focuses on air impacts on respiratory health, water contamination, potential earthquakes, and even boomtown community impacts like increased traffic and overstrained medical care.
2) Anti-frackers aren't only anarchists. Environmental activists aren't exactly mainstream -- but this latest ruling is evidence that Governor Cuomo and other politicians are increasingly interested in their message. The New York decision didn't happen overnight. Demonstrators protested at events around the states. Celebrities like Sean Lennon and Yoko Ono even sang their dissent. In November, a Pew Research center survey found that more Americans oppose increased fracking (47%) than favor it (41%).
3) It's not about the money. For New York, fracking natural gas represents an enormous energy and economic opportunity. But since the state has never received big tax boosts from natural gas, it won't miss them now. That's a major reason why natural gas companies in other states enjoy a "home court advantage" to environmental activists, but it won't help energy companies in the Empire State.
A Report From the Frontlines in the War Against Fracking -- A mixture of emotions is running through the Finger Lakes region of New York in the wake of Governor Cuomo’s announcement on Wednesday, December 17 to ban hydraulic fracturing (“fracking”) in the state. Residents are relieved to be protected from the health risks and environmental damage produced from fracking. Nevertheless, they are continuing their struggle to oppose the Texas-based Crestwood corporation’s project to store volatile gases extracted from other states, such as Pennsylvania, in salt caverns along the shores of Seneca Lake, which provides drinking water for approximately 100,000 people. Crestwood is seeking to make the Seneca Lake location a hub in its broader infrastructure that supports fracking. Since October of this year, wave after wave of residents comprising the group We Are Seneca Lake (WASL) have practiced non-violent civil disobedience at the gates of the Crestwood facility protesting the Federal Energy Regulatory Commission’s (FERC) decision permitting the storage of methane in the salt mines. A proposal to store liquefied petroleum gas (LPG) is currently before the state Department of Environmental Conservation (DEC). The momentum of the uprising has only grown since then. During the week of November 17-21 there were 48 arrests as activists blocked the gates every day. The day before Governor Cuomo’s announcement banning fracking, there was a massive blockade leading to 41 arrests, most of whom were local educators. And when Governor Cuomo made his announcement last Wednesday, Seneca Lake Defenders were dancing to the joyous jams performed by the Ithaca-based Sim Redmond band before their arrests. All told, there have been over 160 arrests this fall in front of the gates of the Crestwood facility.
State should thoroughly investigate proposal for Seneca Lake gas storage facility - - Buffalo News: The battle under way over the underground storage of propane in the Finger Lakes wine country is playing out as a small-scale version of New York State’s hydrofracking standoff. As with the drilling technique known as hydrofracking, state officials should continue taking their time in weighing the issues. The stakes are too high to rush to a decision. Here’s what is brewing: a plan to store tens of millions of gallons of liquefied petroleum gas, and up to 2 billion cubic feet of natural gas, in salt caverns thousands of feet below the ground around Seneca Lake. To environmentalists, the lake’s pristine image would be irreparably damaged by underground gas storage, harming the promise of tourism and the growing wine industry. Underground gas storage is not new. Crestwood is already permitted to store more than 1 billion cubic feet of natural gas in salt caverns near Watkins Glen, where the company owns the U.S. Salt plant. But the potential risks are enormous. If the project proceeds and something goes wrong, the results could be catastrophic. Critics say a leak could contaminate Seneca Lake, which provides the area with drinking water. Even without an accident, the inevitable industrial equipment and increased truck and rail traffic will mar the lake’s beauty at a time the region is trying to shed its reputation for cheap wines.
Time to Stop Pennsylvania Fracking: Ban in New York Creates New Momentum -- Last week, New York Governor Cuomo announced that his state would ban fracking, due in large part to concerns about impacts on public health. But right across the border in Pennsylvania, one of the fastest-moving shale booms in the country still proceeds at breakneck speed. While Governor-elect Tom Wolf campaigned on promises to tax shale gas extraction, evidence continued to grow that Pennsylvania has struggled to police the drilling industry or even keep tabs on its activities. A scathing report issued in July by State Auditor General Eugene DePasquale found that record-keeping was “egregiously poor,” and environmental regulators do “not have the infrastructure in place to meet the continuing demands placed upon the agency by expanded shale gas development.” For the past several years, Pennsylvania has had a history of lax regulation of the shale rush and its impacts on drinking water. For example, in 2011, the state made national headlines for allowing shale wastewater laced with toxic and radioactive materials to be discharged after incomplete treatment into rivers and streams that were not capable of fully diluting the waste, according to internalEPA documents. Even now, toxic waste from the fracking industry is only tracked via industry self-reporting, which a Pittsburgh Post-Gazette investigation found has led to major gaps in tracking and reporting.
Reliable alternative to water could ease economic, environmental issues for gas drillers -- Some regulators and researchers see it as the shale gas industry's version of the Holy Grail. Finding a viable alternative to the millions of gallons of water that companies use during hydraulic fracturing could remove some of the industry's most serious environmental challenges. “There's a potential for a radical reduction in a lot of impacts and issues if we found a reliable alternative to water,” said Scott Perry, deputy secretary for oil and gas management at the state Department of Environmental Protection. Several companies are field-testing new technologies that use high-pressure carbon dioxide, propane or butane instead of water to break apart shale and lodge sand in the fissures to free the trapped gas. An ongoing National Energy Technology Lab study at the University of Texas is looking at the best ways to stabilize foams for fracking with carbon dioxide, nitrogen or gas liquids. The goal is not just to eliminate the potential environmental concerns of drawing fresh water from rivers and disposing of water that could be tainted with high levels of salts, dissolved solids or leftover fracking chemicals; shale companies want to squeeze more gas from each well to fight depressed prices. “From a productivity perspective, water creates all kinds of problems downhole that carbon dioxide does not,” said Mark Weise, business development director for energy services at Connecticut-based Praxair Inc., the largest industrial gases company in the Americas. The company in September started selling its DryFrac system that uses liquid carbon dioxide.
Interior secretary criticizes fracking bans - Interior Secretary Sally Jewell criticized local and state bans on hydraulic fracturing, saying they create confusion for the oil and natural gas industries. Jewell, who oversees the federal government’s various public land agencies, also said fracking bans often come as a result of what she sees as bad scientific decisions that incorrectly find safety or health problems associated with fracking, radio station KQED reported. “I would say that is the wrong way to go,” Jewell told KQED Friday about local fracking bans. “I think it’s going to be very difficult for industry to figure out what the rules are if different counties have different rules.” Jewell said local and statewide bans on fracking often stem from fears about the controversial practice, in which drillers pump fluids into wells at high pressure to break shale and extract more oil or gas.
Obama's interior secretary says fracking bans are 'wrong way to go' - President Obama’s Secretary of the Interior, Sally Jewell, says recent local and statewide bans on fracking are the “wrong way to go” and based on a misunderstanding of science. Jewell, who is the government’s chief custodian of federal land and a former petroleum engineer, was speaking with San Francisco public radio station, KQED. From KQED: “There is a lot of misinformation about fracking,” Jewell said. “I think that localized efforts or statewide efforts in many cases don’t understand the science behind it and I think there needs to be more science.” “These are very troubling comments,” said Kassie Siegel, who directs the Climate Law Institute at the Center for Biological Diversity.“In essence Secretary Jewell seems to be saying that communities around the country, the Governor and Public Health Commissioner of New York, and the over 600,000 people who wrote to the Interior Department urging her to adopt a ban on fracking, don’t understand the science and are just acting out of an irrational fear of fracking,” Siegel said. “It’s insulting, and quite simply wrong.” Jewell’s comments come two weeks after New York announced a statewide ban on fracking. Officials there cited possible public health and environmental concerns, however they said the science around the issue has yet to be settled.Gov.-elect Tom Wolf called New York’s decision “unfortunate.” He hopes to enact a new tax on gas drillers and use the revenue to fund his priorities, including public education.
Judge: No proof gas drilling tainted well water - (AP) - A federal judge has ruled against nine southern New York homeowners who claimed their drinking water was contaminated by a nearby natural gas well. U.S. District Judge Charles Siragusa in Rochester decided the homeowners had failed to prove the silt and methane that befouled their water was caused by one of two gas wells drilled a half mile from their homes in 2010. The decision was filed on Dec. 17. The homeowners had sought $2 billion in damages from Denver-based Anschutz Exploration Corp. Bonnie Todd of Horseheads, one of the homeowners, said Monday she was unaware a decision had been made. New York City personal injury law firm Napoli Bern Ripka Shkolnik, which represented the homeowners, didn't immediately return a call seeking comment. Nor did a spokesman for Anschutz. The wells drilled in the Trenton-Black River sandstone formation in Chemung County, near the Pennsylvania border, weren't hydraulically fractured, or fracked, a technology that injects a well with chemically treated water and sand to fracture shale and release trapped gas. The Cuomo administration announced a decision earlier this month to ban shale gas development using high-volume fracking, citing a lack of definitive studies of potential health risks. According to court documents, Joseph Yarosz of the Department of Environmental Conservation inspected the two Anschutz wells in the town of Big Flats more than 50 times during construction. He testified in his deposition that Anschutz complied with all permit conditions.
Fracking ban: New York decision puts pressure on California - California’s movement to ban fracking and other dangerous oil extraction techniques just got a huge boost from the other side of the country. Gov. Andrew Cuomo has announced a fracking ban in New York . Cuomo’s decision follows a report from the state’s Department of Health that found fracking poses an unacceptable public health risk. That ratchets up pressure on Gov. Jerry Brown to extend the same health and environmental protections to Californians. Instead, Brown has allowed a disturbing expansion of fracking and drilling, leaving California communities to fend for themselves against the powerful oil industry. As Brown enters his last term, he should take a cue from Cuomo and listen to his constituents who want him to protect California’s health, water and air by changing course on fracking, which blasts huge volumes of water mixed with toxic chemicals into the earth to shatter rock formations and release oil and gas. Facing the threat of increased oil development, communities are taking actions to protect themselves. Santa Cruz and Mendocino counties and the city of Beverly Hills have passed measures to ban fracking and similar oil extraction techniques. In November San Benito County voters approved a fracking ban with a 59 percent majority, despite a $2 million opposition campaign by the oil industry.
Good Times Run Out for Sand Producers - WSJ -- “This isn’t our first rodeo” has become a catchphrase among oil-industry executives who are laying off workers and dialing back spending in the wake of tumbling crude-oil prices. But for many sand producers, this is their first time on the bucking bronco that is the cyclical energy business—and not all of them are ready for the wild ride, industry analysts say. Sand companies’ biggest customers used to be golf courses and glass manufacturers, but the oil boom brought energy clients to their door and now roughly 60% of business is tied to fracking, according to PacWest Consulting Partners, which forecasts sand demand. Now that oil prices have fallen, many fracking companies are retrenching—and that is bad news for sand producers. Earlier this fall PacWest projected sand use would grow by 20% each year in 2015 and 2016. But following the plunge in oil prices, PacWest now expects sand demand to stay flat. Meanwhile, new sand mines could add another 10% on top of the existing pile, creating a glut and pushing down prices, Global oil prices have plunged 50% since June, as the surging supply—thanks to fracking—collided with lackluster world-wide demand for fuel this fall. With their revenue threatened, oil drillers and fracking companies are under tremendous pressureto dial down their spending and the companies they buy sand from will be easy targets, said Karen Nickerson, an energy analyst at Moody’s . “They’re going to push on who they can,” she said. “Sitting on your hands and waiting isn’t what the veterans do,” Mr. Sheridan said. “There are a lot of wide-eyed people out there right now in the industry.”
XTO Energy to pay $5 million for fracking violations — ExxonMobil subsidiary XTO Energy, Inc. will pony up about $3 million to restore eight West Virginia sites where the company illegally filled wetlands and polluted the water during fracking operations. The company will also pay a civil penalty of $2.3 million for violating the Clean Water Act, with impacts along more than a mile of stream and 3.38 acres of wetlands. Under a court-approved settlement (subject to final review) XTO will also implement a comprehensive plan to comply with federal and state water protection laws at the company’s West Virginia oil and gas extraction facilities that use horizontal drilling methods. The settlement resolves alleged violations of state law asserted by the West Virginia Department of Environmental Protection (WVDEP). The state of West Virginia is a co-plaintiff in the settlement and will receive half of the $2.3 million civil penalty. “American communities expect EPA and our state partners to make sure energy development is done responsibly,” said Cynthia Giles, assistant administrator of EPA’s Office of Enforcement and Compliance Assurance. “This case will help to protect clean water in West Virginia, and support a level playing field for energy developers that play by the rules.”
Spill Baby Spill ! Kill Baby Kill ! – 2014 in Fraccidents and Frackastrophes - We ended the first installment of “Spill Baby Spill the Year in Frackastophes” way back in May. It’s been a big year for Fraccidents and Frackastrophes since then, and Fractavist Extraordinaire Richard Averett has brought the list up to date, one fracking mess at a time. Fracking has becomeAmerica’s deadliest form of energy, a bigger body count in a month than coal in a year. Fracking produces more radioactive HAZMAT material in a few days than the US nuclear industry does in a year. Sandra Steingraber’s group published a compendium of fracking health risks and the Physicians Scientists & Engineers for Healthy Energy did a statistical analysis of health studies, which were released simultaneously the week before Governor Cuomo’s announcement to ban fracking in New York. We here at No Fracking Way, The Dory, The Bill, The Wendy, Sheik Yerbouti – aka “Richard Averett” and Joe Tex, wish you and yours a very Happy unFracked New Year ! And remember the Chevron Promise: “If the fracking well explodes, the pizzas on us !”
NC set to lift fracking moratorium, but prospects for drilling remain iffy -- After four years of heated debate, North Carolina stands on the cusp of lifting its fracking moratorium and opening the state’s woodlands and meadows to shale gas exploration. The state legislature, which convenes next month, is expected to let energy developers start pulling drilling permits as early as April, and no later than autumn. But the imminent end of the moratorium is arriving on an anticlimactic note. Despite a sustained effort by the Republican-led legislature to turn North Carolina into an energy-producing state, the prospects for energy exploration here remain iffy.Falling energy prices globally, coupled with high startup costs in a state with no history of drilling, make North Carolina a long shot for shale gas exploration. Even the most ardent boosters of fracking acknowledge that North Carolina is destined to remain a low priority for the energy industry for an indefinite time.“It is pulling teeth to get anyone to look at North Carolina and to allocate resources,” said Nicholas Spiro, an independent energy developer focusing on North Carolina. “You’ll see some interest, but I don’t think you’ll see any more than you currently see. You’ve got a lot of pontification, a lot of talking.”
Central Ky. residents worry over pipeline's possible use - — Residents and local officials are seeking answers about a plan to reuse an existing Kentucky pipeline to transport highly flammable liquids to the Gulf of Mexico. Federal regulators are considering the proposal to repurpose a 1,000-mile pipeline owned by Kinder-Morgan Energy Partners and MarkWest that runs from Ohio to the Gulf Coast. The pipeline would convert from carrying oil and natural gas to natural gas liquids. The pipeline traverses 18 counties in Kentucky, including 20 miles in Boyle County, the Advocate-Messenger in Danville reported (http://bit.ly/1xrDfYM). A recent plan to build a new natural gas liquids pipeline through more than a dozen counties in central Kentucky was canceled in April after its backers lost a court battle over eminent domain rights. The companies behind that project, called the Bluegrass Pipeline, said they were halting it because the market had changed. Natural gas liquids are the substances left over when natural gas is harvested from hydraulic fracturing. They are made up of ethane, butane, propane, methane and various solid chemicals.
Texas towns test oil and gas supremacy on fracking - — A Texas hamlet shaken by its first recorded earthquake last year and hundreds since then is among communities now taking steps to challenge the oil and gas industry’s traditional supremacy over the right to frack. Reno Mayor Lyndamyrth Stokes said spooked residents started calling last November: “I heard a boom, then crack! The whole house shook. What was that?” one caller asked. The U.S. Geological Survey confirmed that Reno, a community about 50 miles west of Dallas, had its first earthquake. Seismologists have looked into whether the tremors are being caused by disposal wells on the outskirts of Reno, where millions of gallons of water produced by hydraulic fracturing are injected every day. Reno took the first step toward what Stokes believes will be an outright ban by passing a law in April limiting disposal well activity to operators who can prove the injections won’t cause earthquakes. Reno and other cities are taking their lead from Denton, a university town north of Dallas where the state’s first ban on fracking within city limits takes effect Tuesday. The Denton ban has become a “proxy for this big war between people who want to stop fracking and people who want to see it happen,” said Michael Webber, deputy director of the Energy Institute at the University of Texas at Austin. It also has become a referendum on Texas cities’ rights to halt drilling. Property rights are a part of Texas’ cultural fabric, but the desire to develop hydrocarbons is strong in a state that leads the nation in oil and gas development. Furthermore, under state law, property rights are separate from mineral rights, making it possible to own one but not the other. Cities in other states have tried to stop fracking, with varying success. Courts in Pennsylvania and New York have ruled in favor of allowing cities some control over drilling. But in Colorado, courts ruled against one city’s attempted ban.
Moscow on the Brazos - Paul Krugman - OK, not really. But falling oil prices will have very different effects on different regions of the United States, with those states that have benefited most from the shale boom hurt a lot even as most Americans gain. The big losers will be in the Dakotas and Nebraska, but that whole region has a population not much bigger than that of Brooklyn. The big enchilada is Texas; so how big a deal will the oil slump be there? Pretty big. If you look at the BEA regional data, you learn that mining output nationally is up a lot — 39 percent between 2007 and 2013 — but that this is still fairly small change on a national basis, 0.7 percent of 2007 GDP. However, more than half the mining growth took place in Texas, which was only 8 percent of the national economy. So in Texas mining directly contributed 4.7 percent to GDP; if we use a multiplier of 1.5, which is what the best research suggests, we conclude that the shale boom added 7 percent to Texas’s growth — and what shale giveth, shale may now take away. We’re not talking real disaster here. I mean, it’s not as if Texas is a one-party state with a culture of corruption and crony capitalism. Oh, wait. But seriously, we surely aren’t looking at a Russia-style crisis. We could, however, be looking at a situation in which Texas is sliding into recession even as the rest of the country is doing fairly well. That is, after all, what happened after the 1985 oil price collapse:
ND oil and gas industry expected to face hurdles in 2015 - With oil prices slipping to their lowest point in more than five years, new state regulations slated to take effect and lawmakers proposing major investments in oil country, 2015 is shaping up to be a critical year for the oil and gas industry in North Dakota. Continued lower oil prices will make some drilling activity less profitable in emerging and mature oil plays, but prices are expected to remain high enough in 2015 to support new drilling in the major shale areas in North Dakota and Texas, the U.S. Energy Information Administration said in its short-term energy outlook Dec. 9. The outlook forecasts average spot prices of $68 per barrel for Brent crude and $63 per barrel for West Texas Intermediate crude in 2015, with lower prices early in the year, the EIA said, citing “high uncertainty” in the price outlook. Helms is optimistic prices will recover, calling the recent decline “a blip.” Ness said the industry doesn’t see it that way, noting most analysts are predicting the price slump could last eight to 16 months or even one to two years as U.S. supply stays strong, global demand remains weak and OPEC continues to challenge U.S. production. “We don’t know what the new normal for oil prices is going to be,” he said. “We’re in an energy war.” North Dakota light sweet crude oil has dropped below $40 a barrel. And while some barrels are hedged, “by and large, we’re probably taking $60 less a barrel than we were six months ago,” Ness said.
Oil price drop could lead to shutdown at North Dakota rigs - Falling oil prices could halt drilling at several rigs in North Dakota, the state’s top oil regulator has warned. The price of sweet crude hit $66.25 per barrel on Wednesday, InForum reports, which is a 20 percent drop from July. This has meant good news for drivers, with average regular unleaded gas prices in Minnesota dropping below $3 a gallon this week, but the outlook is less positive for oil producers. The number of operational rigs in North Dakota on Wednesday stood at 190, down 13 percent from the all-time high of 218 at the end of May, according to the state’s Department of Mineral Resource’s most recent figures, but the department’s director, Lynn Helms, said drilling could stop at another 10 rigs because of the prices. “We have three counties that right now are below breakeven,” he told the Minot Daily News. “It would not be economically viable to drill wells in those counties.” “It puts eight to 10 rigs at risk. It’s impossible to predict when those rigs could go out of service. We’re at 190 today, so it’s less than a 10 percent impact,” he told the paper.
Plunging Oil Prices Trigger Economic Downturn in Fracking Boom Town - When fracking and horizontal drilling made the oil embedded in North Dakota‘s underground Bakken shale formation accessible for extraction, it touched off something akin to a gold rush in the state. Oil production has grown 600 percent in the last decade. Small towns, called “man camps,” have sprouted with growing populations of oil field workers, bringing both increased economic activity and employment and increased crime and social problems such as sexual assaults. But plummeting oil prices have the potential to upend all that in ways that are hard to predict. Williston, North Dakota, which is in the heart of the boom, grew from 13,000 to more than double today, which meant major invests in housing and infrastructure. The city is currently $300 million in debt and four years behind in paying off that debt, and plunging oil prices could impact its ability to do so. Williston Mayor Howard Krug talked to Peter O’Dowd of NPR’s Here and Now about the challenges his town faces.
In North Dakota, a Tale of Oil, Corruption and Death - On the reservation, where identity is deeply connected to the land, conservationists have been more vocal than elsewhere in North Dakota, and they have denounced their leadership’s oversight of the oil industry for mirroring the state’s pro-business posture.“The mentality comes from the state: less regulation, more profit,” said Joletta Birdbear, a former postmaster. “They’re only concerned about the immediate dollars and not about the long-term costs to our land and the future generations of our people.”But if critics of North Dakota’s elected officials viewed them as too close to the oil industry, critics here had more pointed concerns. Their leader was part of the industry, seeking and getting contracts from oil companies that operated under his watch.“I have no problem with the government making profit for the people, but when they make a profit for themselves and not the people, that’s another story, you know?” Ms. Hudson said.Most of the 14,169 enrolled tribal members, about half of whom live on the reservation, do not receive significant oil royalties. The tribal government does, along with hundreds of millions in oil tax revenue, and many here appreciate the potential benefits for the reservation itself.But so far, apart from a significant rise in jobs, which often go to transient workers, many see deterioration rather than improvement in their standard of living. They endure intense truck traffic, degraded roads, increased crime, strained services and the pollution from spills, flares and illegal dumping.
South Dakota Could Trump Obama In Blocking Keystone - Much has been told about Nebraska's lengthy approval process for the Keystone XL pipeline, which would bring crude oil from Canada to be processed at refineries in Texas, Louisiana, and Alabama. Far less has been written about the role of South Dakota, population 845,000, which might hammer the final nail in the pipeline's coffin. South Dakota approved the pipeline in 2010, but the construction permit expired in June 2014. Getting a new one is neither automatic nor easy. TransCanada, the potential builder of the pipeline, has applied to South Dakota to renew the permit. But over 40 groups and individuals have filed petitions with South Dakota's Public Utility Commission to broaden the approval process to matters that were not considered in 2010. The goal of most groups is to stall the Mount Rushmore State's approval of Keystone XL so that even if the new Congress were to pass a bill authorizing construction, and President Obama or a future president were to sign it, the pipeline could not be built. These groups include the Standing Rock Sioux Indian Tribe, the Rosebud Sioux Tribe, Boettcher Organics, and the Sierra Club, as well as a number of independent individuals. At a December 9 meeting of the PUC, they were granted "party status" in TransCanada's application for approval of the pipeline's construction. "Party status" means that an entity, such as a municipality, governmental agency, nonprofit organization or person can cross-examine witnesses and request documents from TransCanada.
Race to Build on River Could Block Pacific Oil Route— Here in southern Washington, some environmental groups are quietly pushing a builder to move even faster with a $1.3 billion real estate project along the Columbia River that includes office buildings, shops and towers with 3,300 apartments. The reason is oil. Two miles west of the 32-acre project, called the Waterfront, one of the biggest proposed oil terminals in the country is going through an environmental review, with plans to transfer North Dakota crude from rail cars to barges. Up to four trains, carrying 360,000 barrels of oil, would pass every day through this city’s downtown, only a few hundred feet from the Waterfront’s towers, westbound from the Bakken shale oil fields.. “We have a very large project that is directly pitted against the oil terminal,” said Brett VandenHeuvel, the executive director of Columbia Riverkeeper, a watchdog group for the river, and an opponent of the oil terminal.The result is a sort of race to the crossing: If the Waterfront can get its bricks and mortar in the ground before the terminal is approved — possibly late next year, with litigation likely to follow — more people would be living and working near the oil-train line. This year, 19 trains of Bakken oil — a mile long, 100 cars each — moved through Washington each week, according to theWashington Department of Ecology, a number that could grow to 137 a week by 2020 if all the proposed oil facilities, including Vancouver’s, are approved. From British Columbia south through Oregon, four coal terminals and three coal terminal expansions, two oil pipelines, 11 oil-by-rail facilities and six natural gas pipelines have been proposed since 2012, according to a recent report by the Sightline Institute, an environmental research and advocacy group in Seattle.
OilPrice Intelligence Report: Money Worries For Energy's Future: U.S. Natural gas prices dropped by 29% in the last month, owing to milder than expected winter temperatures, and they are expected to remain lower for some time. This will lead to yet more consumer savings on electricity and heating bills as natural gas accounts for 26% of U.S. electricity generation. This comes at a time when falling oil prices have already impacted gasoline prices at the pump in favor of consumers. Natural gas prices are notoriously volatile and, given that one fifth of U.S. gas production comes from associated gas found while drilling for oil, the expected slowdown of drilling in the US shale scene in 2015 may drive natural gas prices up as associated gas levels drop in turn. The U.S. Department of energy has a released a report stating that U.S. oil reserves grew by 7.26 million barrels, contrary to the expected 1.8 million barrel decline that had been forecast. Gasoline reserves were up by 4.1 million barrels, over six times the expected amount, with refiners breaking records of 9.92 million barrels per day processed. In order to achieve this, refineries operated at a rate of 93.5% utilization. On top of this, crude imports rose from 7.1 million barrels the previous week to 8.3 million barrels. Crude oil and gasoline inventories are 5% and 3% higher, respectively, than this time last year. The increase in imports comes as part of Saudi Arabia’s shock and awe tactics that are aimed at leveraging more expensive North American shale oil out of the market. Thus far, it appears that the decision not cut production and thus flood the United States with cheap oil may be working.
Frack Boom Goes Bust! - From Boom to Bust in less than a decade – job well done! This is why we are hearing everyone else under the sun being blamed for bursting the shale bubble – because the industry has NEVER taken responsibility for any problems that they are responsible for – at any time or place – and this is no exception. Like all the other lies and misinformation generated by the petroleum industry, they will need to manufacture their own “proof” since none exists in the “real world” (that the rest of us reside in). So enjoy the show – it should be spectacular! Thousands of recently highly paid workers have been laid off after the oil price plummeted 50 percent in 2014. At least four American oil-producing states are already facing budget problems due to decreasing oil revenues. The price plunge has affected petroleum production in all oil-extracting countries, including the US. Currently cheap fuel is still believed to be providing an overall boost to the US economy, as consumers can spend less on gasoline and more on shopping and services. But for the American energy sector the future looks less bright. It’s effecting places like Alaska, Louisiana, Oklahoma and Texas, the New York Times reports. US oil experts recall the 1980s oil price downturn, accompanied by economic disasters around the globe and arguably becoming one of the causes of the fall of the Soviet Union. Some experts are positive and say America’s oil-producing states won’t suffer too much because they “diversified their economies.”
Marginal producers of oil? - Yves Smith adds her thoughts on possibilities of the market price decline for oil: When the Saudis announced their intention not to support oil prices when they were sliding towards $90 and plunged quickly through that level, we deemed the move to be a masterstroke. It served to damage both economic and political enemies. On the economic front, the casualties would include renewables, Canadian tar sands, and the US shale gas industry. On the geopolitical front, the casualties would include Iran, Syria, Russia…. and the US.…The Saudi “pump, baby, pump” strategy is tantamount to OPEC abandoning its cartel role. From Anatole Kaletsky in Reuters: The U.S. shale revolution is perhaps the strongest argument for a return to competitive pricing instead of the OPEC-dominated monopoly regimes of 1974-85 and 2005-14. Although shale oil is relatively costly, production can be turned on and off much more easily – and cheaply – than from conventional oilfields. This means that shale prospectors should now be the “swing producers” in global oil markets instead of the Saudis. In a truly competitive market, the Saudis and other low-cost producers would always be pumping at maximum output, while shale shuts off when demand is weak and ramps up when demand is strong. This competitive logic suggests that marginal costs of U.S. shale oil, generally estimated at $40 to $50, should in the future be a ceiling for global oil prices, not a floor. The Saudi determination to hold its position and force adjustment onto higher-cost producers makes this Kaletsky scenario seem more likely than it did when he wrote it.
Falling oil prices both good and bad for manufacturers - For manufacturers, the recent tumble in oil prices is a mixed bag, a report released Friday suggests. On one hand, a steep decline in the cost of oil leads to lower expenses. But on the other, business may suffer because of lower spending by oil and chemical companies on big-ticket items like computers and new machinery. The monthly report by the Institute for Supply Management, a not-for-profit educational association, shows that the manufacturing sector expanded for the nineteenth consecutive month. Meanwhile, the overall economy has expanded for the sixty-seventh month in a row. The report, based on data collected from U.S. supply chain executives, concludes that 11 of the 18 manufacturing sectors grew during December. Brad Holcomb, the chair of the Institute for Supply Management, said the December report marked a strong showing leading into 2015. It’s “quite solid and a good way to put 2014 in the drawer,” he told Fortune. The report’s findings come as a barrel of crude oil closed down 1% for $52.69 a barrel Friday, the lowest finish is more than five years. Prices have fallen nearly 50% since their peak in 2014. Comments from manufacturing executives in the report show the dual impact of the decline. They also highlight the complexity of their business beyond the uni-dimensional view that low fuel prices are always good for business.
Here Is Citi "Explaining" In 2006 Why Soaring Oil Prices Don't Impact Consumption - "We have heard constantly that oil will slow consumption down as it eats into disposable income. But it remains a conundrum to many that consumption has remained robust, despite oil prices remaining high. What’s going on? We don’t see a conundrum. As we wrote about in September (The Global Investigator, Is Oil Relevant for Equities, September 2 2005), in the plutonomy countries, the rich are such a massive part of the economy, that their relative insensitivity to rising oil prices makes US$60 oil something of an irrelevance. For the poorest in society, high gas and petrol prices are a problem. But while they are many in number, they are few in spending power, and their economic influence is just not important enough to offset the economic confidence, well-being and spending of the rich."
High-cost oil production not worthwhile - FT.com: When the oil world’s most important man says anything, people pay attention. But the usually aloof Ali al-Naimi, Saudi Arabia’s oil minister, took market observers by surprise last week when he did something he would never normally do — talk the market down. Rather than instil calm as the price of oil fell to a five and a half year low of around $60 a barrel, Mr Naimi’s forceful and at times bellicose comments only gave those betting on lower prices encouragement to keep selling. Opec, led by its largest producer and effective leader Saudi Arabia, would not be cutting output to bolster prices, said Mr Naimi, reaffirming the cartel’s decision at its November meeting to keep its output target at 30m barrels a day. But he did not stop there. His comments, in a series of interviews, went beyond any official remarks. Mr Naimi said: cutting production was no longer in the interest of Opec producers; the price of oil may never reach $100 a barrel again; even if non-Opec producers come to an agreement on cuts, the cartel would not now change tack; high-cost producers may try and hold out but the financing would sooner or later dry up. Game on Whether his words were simply “bravado” or articulation of a well-thought out strategy to remove some high-cost production off the market, they represent an attempt to regain control of a situation that many industry participants say has caught Saudi Arabia by surprise. And the message is simple. Those energy companies and financiers invested in any high-cost production, from US shale plays to output from Brazil’s deepwater fields, need to realise it is not worth the bother. A person briefed by Saudi officials said the country’s national oil company has been told to prepare for at least two years of lower oil prices, something that kingdom’s finance minister on Thursday also alluded to.
Sub-$55 Oil Has U.S. Drillers Idling Most Rigs in 2 Years - U.S. oil drillers idled the most rigs since 2012 as prices slide below $55 a barrel to the lowest level in five years and a fight for market share with OPEC intensifies. Rigs targeting oil declined by 37 to 1,499 in the week ended Dec. 26, the lowest since April, Baker Hughes Inc. (BHI) said on its website yesterday, extending the three-week decline to 76. Those drilling for natural gas increased by two to 340, the Houston-based field services company said. U.S. oil output has surged to the highest in three decades even as the Organization of Petroleum Exporting Countries resists cutting production to defend market share, exacerbating an oversupply that Qatar estimates at 2 million barrels a day. Crude has slumped by almost 50 percent this year prompting U.S. producers including Continental Resources Inc. and ConocoPhillips to plan spending cuts. “We should see the rig count going down at least through the end of the first quarter as a reaction to the low oil prices,” said James Williams, an economist at WTRG Economics, an energy-research firm in London, Arkansas, before the report. “By midyear, we should see measurable impacts on production.” The total rig count, which includes one miscellaneous rig, dropped 35 to 1,840, an eight-month low. Benchmark Brent crude and the U.S. West Texas Intermediate crude futures are both trading near five-year lows. WTI fell 48 cents to $53.13 a barrel in electronic trading on the New York Mercantile Exchange at 10:25 a.m. London time. Brent dropped 71 cents to $57.17.
Oil price crash claims first U.S. LNG project casualty - (Reuters) – Excelerate Energy’s Texan liquefied natural gas terminal plan has become the first victim of an oil price slump threatening the economics of U.S. LNG export projects.A halving in the oil price since June has upended assumptions by developers that cheap U.S. LNG would muscle into high-value Asian energy markets, which relied on oil prices staying high to make the U.S. supply affordable.The floating 8 million tonne per annum (mtpa) export plant moored at Lavaca Bay, Texas advanced by Houston-based Excelerate has been put on hold, according to regulatory filings obtained by Reuters.The project was initially due to begin exports in 2018.Excelerate’s move bodes ill for thirteen other U.S. LNG projects, which have also not signed up enough international buyers, to reach a final investment decision (FID). Only Cheniere’s Sabine Pass and Sempra’s Cameron LNG projects have hit that milestone.Back when LNG and crude oil prices were riding high in February, Excelerate, founded by Oklahoma billionaire George Kaiser, applied for permits to build the facility. Eleven months on, its submission to the U.S. Federal Energy Regulatory Commission on Dec. 23 said that uncertainty generated by a steep decrease in oil prices has forced it to conduct a “strategic reconsideration of the economic value of the project” and to suspend all activities until April 1, 2015.“Due to the recent global market conditions, the company has determined that, at this time, this project no longer meets the financial criteria necessary in order for us to move forward with the capital investment,”
Supply, demand and the price of oil -A few weeks ago I offered some calculations suggesting that lower demand for oil might account for about $20/barrel of the dramatic decline in the price of oil since last summer. Here I point to some other evidence consistent with that conclusion. Last week the IMF’s Rabah Arezki and Olivier Blanchard produced a very useful assessment of the role of supply and demand in the recent oil price decline. They note for example that the IEA’s current estimate of world oil demand growth for 2014:Q3 is 800,000 barrels/day below what the organization had been anticipating as of last June. The suddenness of this shift suggests that economic weakness in Europe, Japan, and China made a contribution. In the case of the United States, some of the long-run demand response to the price run-up of the 2000s is still underway, as seen for example in the continuing improvements in fuel economy of new cars sold in the U.S. But Steve Kopits calls attention to Don Pickrell’s documentation of some important long-term trends in U.S. demand as well. The American population is aging, and older people drive less. In addition, people who don’t have jobs don’t drive as much. Much of the decline in the U.S. labor force participation rate seems due to long-run developments that were in evidence well before the Great Recession. Another contributing factor to an excess supply of oil was a return of Libyan production between July and October. But the latest estimates are that some of this was lost again last month. And this weekend Libya’s largest oil port was attacked, raising the possibility that more of the country’s exports will again be disrupted. But the biggest factor in producing an excess supply of oil has been the success of the U.S. shale oil production. U.S. inventories are well above what’s expected for this time of year. At what price would supply and demand be back in balance? I won’t even make an attempt to predict short-run developments for the wild cards like Libya, Iraq, and China. But in principle, the U.S. supply situation should be simpler. At current prices, some of the higher-cost producers will be forced out. It should be a textbook problem of finding the point on the marginal cost curve at which there’s an incentive for the marginal producer to meet desired demand;
Oil companies seen cutting spending 25 pct in 2015 due to falling crude (Reuters) - Plunging oil prices will prompt energy companies to cut investments in new projects by 25 percent or more in 2015, analysts said over the past week, as firms try to stay cash-flow positive and keep debt in check. With oil prices down more than 40 percent since June, some companies, including ConocoPhillips, have slashed spending by 20 percent. But because crude prices have yet to stabilize, other companies are waiting to draw up budgets. "Many are buying time on 2015 capex and production guidance while hoping for a stable baseline to plan from," Capitol One Securities said in a note to clients. "We think cuts of 25 percent or more versus a year ago are on the way and won't be unusual." true Whiting Petroleum Corp said on Monday it will not release its 2015 capital spending plan until February, citing volatile oil prices. Budgets from Chevron Corp and Exxon Mobil Corp are also due out in early 2015, along with comprehensive spending surveys from industry analysts at Cowen and Barclays. The spending reductions, once announced, are likely to be the biggest in years. But the U.S. government still expects output to be the highest in decades as productivity for new wells rises. Investment bank Simmons expects average U.S. oil production growth of about 900,000 barrels per day (bpd) next year, up from around 9 million bpd in November. Bernstein Research said if benchmark Brent crude oil was at $80 per barrel, then global exploration and production spending would fall 20 percent to $640 billion.If Brent were at $65 a barrel, then spending would fall by 30 percent. Bernstein added that a decline of 35 percent in North American capex would be likely if benchmark West Texas Intermediate (WTI), which trades at a discount to Brent, averages $65 a barrel. WTI is currently around $56. Wood Mackenzie said the top 40 oil companies would collectively need to slash spending $170 billion, or 37 percent, to keep net debt flat if global oil were at $60 a barrel.
Oil Strengthens as Libya Conflict Offers Relief From Glut - Oil advanced for the first time in three days amid speculation that an escalating conflict in Libya may pare a global surplus that’s driven crude into a bear market. Brent futures rose 1.3 percent in London. Fires have been extinguished at three of six tanks at Es Sider, Libya’s largest oil port, which were set ablaze after an attack by militants, said National Oil Corp. spokesman Mohamed Elharari. Algerian Energy Minister Youcef Yousfi called on the Organization of Petroleum Exporting Countries to cut output to boost prices, the Associated Press reported. Oil plunged 46 percent this year, set for the biggest annual drop since 2008, as OPEC resisted supply cuts to defend market share in response to the highest U.S. production in three decades. Libya pumped 580,000 barrels a day in November, down from about 1.59 million at the end of 2010, according to data compiled by Bloomberg. Trading was below average amid Christmas and New Year holidays. “The main development over Christmas has been the attack on the Es Sider terminal in Libya and the fire that followed on the tank farm,”
How Increased Inefficiency Explains Falling Oil Prices - Gail the Actuary - Since about 2001, several sectors of the economy have become increasingly inefficient, in the sense that it takes more resources to produce a given output, such as 1000 barrels of oil. I believe that this growing inefficiency explains both slowing world economic growth and the sharp recent drop in prices of many commodities, including oil. The mechanism at work is what I would call the crowding out effect. As more resources are required for the increasingly inefficient sectors of the economy, fewer resources are available to the rest of the economy. As a result, wages stagnate or decline. Central banks find it necessary lower interest rates, to keep the economy going. Unfortunately, with stagnant or lower wages, consumers find that goods from the increasingly inefficiently sectors are increasingly unaffordable, especially if prices rise to cover the resource requirements of these inefficient sectors. For most periods in the past, commodities prices have stayed close to the cost of production (at least for the “marginal producer”). What we seem to be seeing recently is a drop in price to what consumers can afford for some of these increasingly unaffordable sectors. Unless this situation can be turned around quickly, the whole system risks collapse.
If Prices Keep Falling, OPEC Must Act To Restore ‘Fair’ Rate Of $70-$80 - The consensus among many Arab OPEC producers is that, one way or another, the worldwide price of oil will stabilize then rise again during 2015, settling between $70 and $80 per barrel by the end of the year, probably without intervention from the cartel’s leadership. Reuters interviewed several OPEC representatives during the week ending Dec. 28, some from what it called “core [Persian] Gulf” oil countries, who said a return to stronger global economic growth should increase demand for oil, particularly in China and Europe. “The general thinking is that prices can’t collapse, prices can touch $60 or a bit lower for some months then come back to an acceptable level which is $80 a barrel, but probably after eight months to a year," one Gulf oil source told the news service. A separate Gulf OPEC source told Reuters, “We have to wait and see. We don’t see $100 for next year unless there is a sudden supply disruption. But average of $70 to $80 dollars for next year – yes.” Nor do any of these delegates want a return to oil averaging $100 a barrel very soon. They say that would only turn this year’s precipitous drop in oil prices into a boom-and-bust cycle by encouraging excessive oil production by high-cost non-OPEC producers such as those in North America, who lately have been relying on hydraulic fracturing, or fracking, for their oil boom. Instead, these Arab OPEC members see prices settling at a “fair” price around $10 or $20 per barrel above the current rate, which has been hovering around $60 per barrel. Many observers believe that shale oil extracted through fracking isn’t profitable at such a low price.
Oil prices fall more than $1, dropping to five-year lows (Reuters) - Crude oil prices on tumbled on Monday, with global grades settling down more than $1 a barrel after an early rally fizzled and prices fell to their lowest levels since May 2009. News of further damage Libya's oil infrastructure prompted the early rally that was quickly erased as pervasive fears of global oversupply trumped concerns about output curtailment from the OPEC producer. Phil Flynn of Price Futures Group said the rally may have triggered sell stops. Then once the Brent dropped below $54, a previous low, more stops may have been triggered. true "It just shows you that the market is very heavy," Flynn said. Global benchmark Brent crude LCOc1 settled down $1.57 at $57.88. U.S. crude settled down $1.12 at $53.61 a barrel, following Brent downward. The rally followed by the steep drop showed the market's fears about oversupply are not going away, “Every time the market tries to pick itself up, it’s just another wave of selling,” Oil tanks at Es Sider in Libya have been on fire for days after a rocket hit one of them, officials said. The OPEC member nation is producing 128,000 barrels a day, an official said, down from the 1.6 million it produced prior to Muammar Gaddafi's ouster in 2011. .
Low Oil Prices Drive US Rig Count Down -- The number of drilling rigs in the United States fell for the third consecutive week in December, indicating that lower prices and therefore lower profits are causing producers to cut costs, according to Baker Hughes, a leading American oil-field services company. Onshore US drilling rigs fell by 37 to 1,499 in the week ending Dec. 26. Ten rigs were dropped in the previous week and 29 went out of service the week before that. This period saw the greatest drop since the worldwide price of oil began to fall six months ago, according to the Baker Hughes report issued Dec. 29. And it was the largest number of rigs idled since 2012. As a result, “the rig count is falling because oil prices are falling,” . “The margins just aren’t there.” Part of the reason for the fall is a global surfeit of oil caused in large part by the boom in US oil production employing hydraulic fracturing, or fracking. As a result, some analysts expect a lull in production to keep prices from falling even further. “We should see the rig count going down at least through the end of the first quarter as a reaction to the low oil prices,” “By mid-year, we should see measurable impacts on production.”
US Drilling Rig Count Tumbles to 2-Year Low - Baker Hughes -- Among the first indications we expect to see that the falling cost of crude oil is putting economic pressure on oil producers is a drop in the number of rigs that are being employed. In the week ended December 26, the number of oil rigs poking holes in the ground fell by 37, compared with the total just one week earlier. The total number of rigs drilling for oil in the United States last week came in at 1,499, compared with 1,536 a week ago and 1,382 a year ago. Including 341 other rigs mostly drilling for natural gas, there are a total of 1,840 working rigs in the nation, down 35 week-over-week, but up 83 year-over-year. The data come from the latest Baker Hughes Inc. (NYSE: BHI) North American Rotary Rig Count. The year-over-year growth underlines the impact of the falling price of crude: the average price of a barrel of West Texas Intermediate (WTI) crude in December 2013 was $97.63. By June 2014 the price had risen to $105.79, and by November the price had dropped to an average of $75.79. That number very likely will tumble by about another $10 a barrel in December. The two states losing the most rigs were California (-17) and Texas (-16). North Dakota lost three, while Oklahoma gained four. In the three biggest producing basins, rig counts fell slightly: the Permian Basin of west Texas lost three rigs to bring its total down to 536; the Eagle Ford Basin in south Texas lost two rigs and now has 204 working; and the Williston Basin (Bakken) has 179 working rigs, down two from the prior week.
US Oil Rigs Are Shutting Down Like Crazy - The number of US oil rigs in operation keeps tumbling. The latest Baker Hughes rig count data showed that the total number of US rigs in operation — which includes both oil and gas rigs — fell by 35 last week, to 1,840 from 1,875. This report is usually released on Friday afternoons, but was released on Monday due to last week's Christmas holiday. This is down from 1,920 for the week ended December 5. Oil rigs in use fell by 37 last week, while gas rigs actually rose by 2. For the week ending December 12, the number of oil rigs in use fell by 27, which at that time was the single biggest weekly decline in two years. The following week, the number of rigs in use fell by 18. The drop in oil rigs on Monday also comes alongside two discouraging pieces of news for the oil industry. The price of West Texas Intermediate oil is crashing again, touching $53 a barrel for the first time since May 2009 and declining more than 3% on the day. Additionally, manufacturing data from the Dallas Fed showed that business leaders in Texas are growing concerned about the drop in the price of oil. As one Texas business executive said, the drop in crude oil prices was, "going to make things ugly ... quickly." And according to Monday's report, Texas saw 16 rigs shut down last week. In Canada, the number of rigs in use also continues to crater, which rigs in use falling by a staggering 135 last week to 256, which is below the same point a year ago. Canada's production, however, is more seasonal than the US.
Oil Prices Fall, Rig Count Drops, Oil Companies Employment to decline -- A few related articles on oil ... From Bloomberg: Oil Falls to 5-Year Low as Supply Glut Seen Lingering Oil fell to the lowest level in more than five years amid speculation that a global supply glut that’s driven crude into a bear market will continue through the first half of 2015....WTI for February delivery fell 96 cents, or 1.8 percent, to $53.77 a barrel at 12:25 p.m. on the New York Mercantile Exchange. Currently WTI is at $53.21, and Brent futures are at $57.79. From Bloomberg: Oil Rigs in U.S. Drop by 37 to Lowest Level Since April Rigs targeting oil declined by 37 to 1,499 in the week ended Dec. 26, Baker Hughes Inc. (BHI) said on its website today. The number of oil rigs has slipped by 76 in three weeks. ... The number of rigs targeting U.S. oil is down from a record 1,609 following a $55-a-barrel drop in global prices since June, threatening to slow the shale-drilling boom that’s propelled domestic production to the highest in three decades. ... While the U.S. rig count has dropped, domestic production continues to surge, with the yield from new wells in shale formations including North Dakota’s Bakken and Texas’s Eagle Ford projected to reach records next month, Energy Information Administration data show. And less exploration will lead to layoffs. From the WSJ: Oil Jobs Squeezed as Prices Plummet Tom Runiewicz, a U.S. industry economist at IHS Global Insight, forecasts companies providing support services to oil and gas companies could lose 40,000 jobs by the end of 2015, about 9% of the category’s total, if oil stays around $56 a barrel through the second quarter of next year. Equipment manufacturers could shed 5,000 to 6,000 jobs, or about 6% of total employment for such companies.There will be winners and losers with the decline in oil prices, however, since the US is a large net importer of oil (despite the myth reported by some in the media), overall the decline in oil prices should be a positive for the economy. .
WTI Hits $52 Handle As US Rig Count Tumbles To 8-Month Lows -- Just as T. Boone Pickens warned "watch the rig counts" last week, so the Baker Hughes rig countjust collapsed for the 3rd week in a row to 8-month lows. This is the fastest 3-week drop since mid-2009. Crude prices were already weak but the news has flushed WTI to a $52 handle (not seen in the front-month contract since May 2009) Graphs: Rig count is tumbling... Some context for the surge in US rig count... And while the drop in Canadian rig count sounds impressive - it's the worst since 2009 - it's much more seasonal WTI Hits A $52 handle!! And then there's this... Charts: bloomberg
Oil Trades Near Lowest Since ’09 With Supply at Year-End Record - Oil traded near the lowest since 2009 in New York and London amid speculation that U.S. crude inventories will stay at the highest for the time of year in at least three decades. Futures were little changed in New York, recouping a loss of 1.7 percent. U.S. stockpiles are projected to remain at 387.2 million barrels last week, the highest for the period in data going back to 1982, a Bloomberg News survey shows before government data tomorrow. U.S. oil drillers idled the most rigs since 2012, Baker Hughes Inc. said on its website yesterday. Oil has slumped 46 percent this year, set for the biggest annual decline since 2008, as the highest U.S. production in more than three decades contributed to a global surplus estimated by Qatar at 2 million barrels a day. Saudi Arabia, which is steering the Organization of Petroleum Exporting Countries to resist cutting output, has said it’s confident that prices will rebound as economic growth boosts demand. “Nowhere are signs of a rising crude glut more visible right now than in the U.S.,” . Global refinery runs will fall in the first quarter, “further highlighting the looming weakness in the global oil balance.” West Texas Intermediate for February delivery slid as much as 91 cents to $52.70 a barrel in electronic trading on theNew York Mercantile Exchange, the lowest since May 2009, and was at $53.56 at 11:52 a.m. London time. The contract decreased $1.12 to $53.61 yesterday, also the lowest close in 5 1/2 years. The volume of all futures traded was about 16 percent below the 100-day average for the time of day. Brent for February settlement fell as much as $1.14, or 2 percent, to $56.74 a barrel on the London-based ICE Futures Europe exchange, also the lowest since May 2009. It dropped $1.57 to $57.88 yesterday. The European benchmark crude traded at a premium of $4.27 to WTI.
Hedge Funds Surrender to Oil Rout as Bullish Bets Drop - Hedge funds finally pulled back from bets on higher oil prices as the market faced its worst year since 2008. Speculators reduced their net-long position in West Texas Intermediate crude for the first time in four weeks, cutting their holdings by 5 percent in the week ended Dec. 23, Commodity Futures Trading Commission data showed yesterday. Long wagers dropped the most since August. Prices tumbled today to the lowest level in more than five years as U.S. output climbed and the Organization of Petroleum Exporting Countries refused to make production cuts. The International Energy Agency and U.S. Energy Information Administration cut their estimates of 2015 global fuel consumption this month amid expectations for slower economic growth outside the U.S. “The weak physical fundamentals have weighed on the market,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone. “OPEC’s shift from a policy of supporting prices to one of protecting market share has also had a major impact.” WTI rose $1.19, or 2.1 percent, to $57.12 a barrel on the New York Mercantile Exchange during the CFTC report period. The U.S. benchmark grade dropped 85 cents, or 1.6 percent, to $53.27, the lowest settlement since May 1, 2009. Brent fell 57 cents to $57.33, bringing 2014 losses to 48 percent.
When BTFD Fails: Hedge Funds Say "Enough Is Enough", Start Covering Bullish Crude Bets - Having been trained well to BTFD in any and everything, after weeks of picking bottoms, clutching falling knives, and being run over, Bloomberg reports hedge funds finally pulled back from bets on higher oil prices - reducing their net-long position in WTI crude for the first time in four weeks, cutting their holdings by 5% in the week ended Dec. 23. “Traders just said enough is enough,” Phil Flynn, a senior market analyst at the Price Futures Group in Chicago, said by phone. "They were tired of trying to guess the bottom of the market and missing. We don’t have a bottom yet and there’s still a ways to go."
Oil-Bust Contagion Hits Hedge Funds, Supplier Layoffs Begin - Wolf Street: It started a few weeks ago. I’d hear from guys here or there in the oil patch who’d just been laid off. That contrasts with the prior anecdotes of hiring binges. A trickle of anecdotal evidence that something has changed, but not enough to pin down credible trends. Then suddenly, something happens – and it turns out that the trends might be worse and might be developing faster than imagined. Afterhours Monday, between the holidays during a shortened workweek when everyone was supposed be on vacation and when no one was supposed to pay attention, Civeo, which provides workforce accommodations for oil fields and mines in Canada, Australia, and the US announced its Initial 2015 Operating Guidance. And what it said about the oil industry was a doozie. So in its Initial 2015 Operating Guidance, Civeo said that the plunge in the price of oil and its projected persistence caused “major oil companies” to slash their 2015 capital budgets. Particularly hard hit were the development and expansion plans of oil-sands operators, a “major driver” of Civeo’s business in Canada.Just how bad is it in Canada? Baker Hughes’ latest rig count, released on Monday, shows that US drillers reduced their rigs that are drilling for oil by 37, to 1,499, while increasing gas rigs by 2 to 340. But in Canada, oil rigs plunged by half from 190 to 94; and gas rigs dropped by 19% from 201 to 162. The Canadians aren’t dilly-dallying around. According to Civeo, tar-sands operators have been just as aggressive as drillers in cutting operating costs and capital expenditures. Going into 2015, Civeo has about 35% to 40% of its lodge rooms contracted in Canada, “down from over 75%” a year ago. That’s down by about half!
Oil workers to pay for near 50% price fall - FT.com: Oil prices are on course for their largest annual slide since 2008, capping another dire year for commodities, as crude fell again on Tuesday to hover at close to half its level of six months ago. Brent’s 49 per cent plummet since June — alongside a near halving of iron ore prices and sharp drops in coal and copper — has also helped drag the Bloomberg Commodity index down 15.6 per cent in 2014 to a five-year low. While the international benchmark’s price plunge could prove a significant boon for the global economy, it has thrown big oil exporters such as Russia and Venezuela into disarray, and forced oil companies to re-examine their investment plans and look for ways to reduce costs. In a sign of how the oil majors are scrambling to make savings, BP, Royal Dutch Shell, Total and Chevron have all ordered sharp cuts in the rates paid to skilled contractors on projects in the UK North Sea. The groups are cutting up to 15 per cent of the pay of thousands of self-employed oil and gas workers in the region. US-based Chevron told employment agencies that it would reduce rates from January 1 “to better align with industry benchmarks and manage cost pressures”, while BP has decided to cut the wages of 450 workers by up to 15 per cent from the new year. It said it remained “firmly committed” to the North Sea, but added that “costs have been rising and we must respond to these toughening market conditions”. Another oil major is cutting UK contractor rates by 10 per cent. Shell has reduced rates in recent weeks, and oil services company Wood Group has announced pay cuts for 1,300 contractors.
Keystone XL Debate to Take Center Stage in New Congress - It looks like the Keystone XL pipeline will be making headlines again when Congress reconvenes next week—and three Democratic congressmen are getting a head start in laying down the gauntlet. When Senate approval of the pipeline was defeated by one vote in November, incoming Senate majority leader Mitch McConnell vowed to make approving the pipeline his first order of business when the new Senate with its Republican majority opened its session. And new chair of the Senate Energy and Natural Resources Committee Lisa Murkowski followed through, announced that Keystone XL will be her committee’s first item of business when it meets next week. On the other side of Congress, the House has voted in the past to approve the pipeline and appears poised to do so again—so quickly, in fact, that three Democrats sent a letter to Speaker John Boehner this week, urging that the House follow the full process of vetting a bill. Representatives Peter DeFazio of Oregon, Frank Pallone of New Jersey and Raul Grijalva of Arizona, ranking members of the three committees that have jurisdiction over the pipeline—Transportation and Infrastructure, Energy and Commerce, and Natural Resources—asked Boehner not to bypass the committee process to bring an immediate floor vote.
Tanker market benefits from oil rout - FT.com: The daily earnings of supertankers on the benchmark Middle East to Japan route hit a six-year high in mid-December, in part due to China building up its strategic reserves on the back of low oil prices. According to aggregated data from the Baltic Exchange, daily earnings reached $97,489 on the Middle East to Japan route, the highest levels since 2008. Only six months ago, tanker rates were so low ship owners could not cover their daily operating expenses of up to $20,000. The rally in tanker rates is a welcome boost for an industry that has been ravaged in recent years. With oil prices dropping to below $60 a barrel for the first time since May 2009 — down almost 50 per cent in the last six months alone — China has moved to build up its strategic reserves. Between January and November this year, China imported 6m barrels a day on average, up 500,000 barrels on the same period last year, according to Argus Media, the energy data company. Relentless production from US shale oilfields has also had a transformational impact on the tanker market. US seaborne crude imports are down 43 per cent since 2006 and have fallen 9 per cent this year alone, according to Clarkson Research Services, the broking firm. Exports from the Middle East and west Africa have instead made their way to China and India, routes that are longer and more lucrative. The industry could receive a further boost in the coming months as the oil surplus grows. When there is a so-called “contango structure” — when prices for future delivery exceed spot prices — traders seek to buy oil for storage on tankers hoping to profit from future sales.
US allows more exports of ultralight oil - FT.com: The Obama administration will approve more exports of ultralight oil from the US shale drilling boom, bringing a measure of relief to domestic producers hurt by plummeting crude prices but potentially adding to ample supplies abroad. The US Bureau of Industry and Security said it will authorise more companies to sell oil condensate that has been processed through a basic distillation tower, giving them a green light for export without violating a four decade old US ban. As US oil output climbs and net imports decline, the future of the export ban has stoked intense debate among energy companies and policy makers. Crude refined into products such as petrol may be exported freely, but sales of unrefined crude oil are generally limited to Canada. The agency also published a list of answers to common questions about petroleum exports, providing guidelines for the first time on a matter that has been shrouded in confusion — although some experts said there remained considerable room for interpretation of the rules. A handful of companies including Enterprise Products Partners and Pioneer Natural Resources have already received private approval to export processed condensate, a type of ultralight oil, while energy and mining group BHP Billiton said it planned to pursue exports without a permit by relying on the terms of the earlier rulings. Other companies have been waiting for formal approvals, a number of which the bureau on Tuesday said it would grant. In its answers to questions, the bureau described the extent to which a hydrocarbon must be boiled in a distillation tower before it is no longer considered crude oil and thus eligible for export. However, experts said some answers were vague, leaving uncertainty for companies that have not received individual export approvals. The American Petroleum Institute, an oil industry lobby in Washington, said that while additional clarity on the issue of condensates was “helpful”, the guidelines did not address the statutory crude oil export ban. “The larger issue is crude exports, which remain restricted by 1970s-era policies that only limit our growth as an energy superpower,” it said.
U.S. Opening Door to More Oil Exports Seen Foiling OPEC Strategy - The Obama administration’s move to allow exports of ultralight crude without government approval may encourage shale drilling and thwart Saudi Arabia’s strategy to curb U.S. output, further weakening oil markets, according to Citigroup Inc. A type of crude known as condensate can be exported if it is run through a distillation tower, which separates the hydrocarbons that make up the oil, according to U.S. government guidelines published yesterday. That may boost supplies ready to be sold overseas to as much as 1 million barrels a day by the end of 2015, Citigroup analysts led by Ed Morse in New York said in an e-mailed report. Saudi Arabia led the Organization of Petroleum Exporting Countries to maintain its production quota at a meeting last month even as a shale boom boosted U.S. output to the highest in more than three decades. That prompted speculation OPEC was willing to let prices fall to force some companies with higher drilling costs to stop pumping. “U.S. producers are under the gun to reduce capital expenditures given lower prices,” Citigroup said in the report. “Now an export route provides a new lease on life that can further weaken crude oil markets and throw a monkey wrench into recent Saudi plans to cripple U.S. production.” Current U.S. export capacity is at about 200,000 barrels a day, which could be expanded to 500,000 a day by the middle of 2015, according to the bank.
US eases oil export ban in shot at Opec as crude price slumps - President Barack Obama has fired a shot at the Organisation of Petroleum Exporting Countries (Opec) in the war to control global oil markets by quietly sanctioning the easing of America's 40-year ban on exporting crude. The US government has reportedly told oil companies they can begin to export shipments of condensate - a high-grade crude produced as a by-product of gas - without going through the formal approval process. The move could signal that a full opening of the export ban, which has existed since the oil shock of the 1970s, is imminent. Brent crude fell sharply on the news, first reported by Reuters. The global benchmark opened down almost 2pc in London at $56.85 per barrel as it closes in on its biggest annual drop since the financial crisis in 2008. Brent has lost 50pc of its value since reaching its year-long high in June. The ending of America's self-imposed embargo on oil exports would mark a serious escalation in the unfolding oil price war with Opec led by Saudi Arabia. The kingdom has made it clear that it is willing to watch the price of oil fall lower in order to protect its share of the global market. Opec share has fallen to about a third of world supply, down from about half 20 years ago as the flood in shale oil drilling in the US and new supplies from Russia and South America have created a global glut. Meanwhile, the sharp fall in the value of oil is placing economies in major producing nations such as Venezuela and Russia under extreme strain.
Canadian Oil Surge to U.S. Gulf Puts Mexico on Defensive - A price war is brewing between Canada and Latin America over who will satisfy U.S. Gulf Coast refiners’ hunger for heavy oil. The new Seaway Twin pipeline will almost double the amount of heavy Canadian crude coming to Gulf terminals and plants to about 400,000 barrels a day starting in January. The shipments are growing even without the Keystone XL pipeline, which has been delayed for six years because of environmental opposition. The Canadian supply will square off against crudes from Mexico and Venezuela that have traditionally fed refineries along the Texas and Louisiana coasts. State-owned Petroleos Mexicanos widened its discount for U.S. buyers in December by the most since August 2013. Valero Energy Corp. and Marathon Petroleum Corp., which invested in special equipment to refine heavy crude, stand to gain the most from the Canadian supply. “Something’s going to have to give,” said Ed Morse, Citibank’s head of global commodities research in New York. “It’s going to have to be combination of Latin American countries exporting less into the U.S. or Canadian crude being re-exported and competing with crudes in other markets, particularly Europe.”New pipelines and rail terminals enabled more Canadian oil to head south to higher-value markets, partially offsetting a 48 percent collapse in global prices since June as the Organization of Petroleum Exporting Countries refused to cut production to counter a global glut. The discount of Western Canadian Select priced in Hardisty, Alberta, to Mexico’s Maya crude has narrowed this year by more than half to $11 a barrel. Heavy Canadian crude will cost the same in Houston as Maya arriving by tanker, including the cost of transportation, according to data compiled by Bloomberg.
Oil Falls to 5 1/2-Year Low as Russia, Iraq Boost Output - Oil dropped to the lowest in more than five and a half years amid growing supply from Russia and Iraq and signs of manufacturing weakness in Europe and China. Futures capped a sixth weekly loss in New York and London. Oil output in Russia and Iraq surged to the highest levels in decades in December, according to data from both countries’ governments. Euro-area factory output expanded less than initially estimated in December. A manufacturing gauge in China, the world’s second-largest oil consumer, fell to the weakest level in 18 months, government data showed yesterday. Prices slumped 46 percent in New York in 2014, the steepest drop in six years and second-worst since trading began in 1983, as U.S. producers and the Organization of Petroleum Exporting Countries ceded no ground in their battle for market share. OPEC pumped above its quota for a seventh month in December even as U.S. output expanded to the highest in more than three decades, according to data compiled by Bloomberg. Brent for February settlement dropped 91 cents, or 1.6 percent, to close at $56.42 a barrel on the London-based ICE Futures Europe. It’s the lowest settlement since April 30, 2009. Volume for all futures traded was 34 percent below the 100-day average. The European oil fell 48 percent last year, the second-biggest annual loss on record behind a 51 percent tumble in the 2008 financial crisis. Brent closed at a $3.73 premium to WTI.
The Cartel: How BP Got Insider Tips Through a Secret Chat Room - Halfway down a muddy, secluded road on marshland in suburban Essex sits Wharf Pool . A white sign with red lettering reads: “Private Syndicate: Strictly Members Only.” A metal gate, a barbed-wire fence and two CCTV cameras bar the way. An hour away by train, in London’s financial district, the lake’s owners ply their trade. Wharf Pool was purchased for about 250,000 pounds ($388,000) in 2012 by Richard Usher, the former JPMorgan trader at the center of a global investigation into corruption in the foreign-exchange market, and Andrew White, a currency trader at oil company BP. With revenue of almost $400 billion last year and operations in about 80 countries, BP trades large quantities of currency each day. Traders at the company regularly received valuable information from counterparts at some of the world’s biggest banks -- including tips about forthcoming trades, details of confidential client business and discussions of stop-losses, the trigger points for a flurry of buying or selling -- according to four traders with direct knowledge of the practice. Copies of messages sent to BP traders over the course of a year were provided to Bloomberg News by a person with access to the online conversations. The person, who redacted the names of banks sending the messages and dates of conversations, said they came from firms whose senior foreign-exchange traders belonged to a chat room called “The Cartel” that was set up by Usher and included dealers at JPMorgan, Citigroup Inc. (C), Barclays Plc and UBS Group AG. (UBSN) The information offered an insight into currency moves minutes, sometimes hours before they happened. The messages could drag the U.K.’s biggest energy company into a scandal that has enveloped 11 banks and led to more than 30 traders from London to Singapore losing or being suspended from their jobs. Last month six banks were fined $4.3 billion for passing along information about their clients and working together to rig foreign-exchange markets.