new driving mileage record, oil production up, oil inventories down, other stats

a report from the Department of Transportation this week indicated that Americans put 283.7 billion miles on their vehicles in July, 4.2% more than they did last July...on a seasonally adjusted basis, that was 0.8% more miles than we drove in June, and the 12 month average thus set another new record for any 12 month period in US history...prior to this year, our miles driven had stayed below the previous peak for 85 months, but with lower gas prices starting last fall, we broke out of the downward trend in January and have been setting records for miles driven ever since...

also this week, an Energy Information Administration report showed that US gasoline sales had surged 5% in July, the fastest growth in US gasoline consumption in a decade...note that the reason that our gasoline consumption is rising faster than our miles driven is that we're buying and driving larger vehicles; recall that just 3 weeks ago, we reported on car sales for August, which showed that 57.3% of August light vehicle sales were built on a truck frame...those big vehicles typically use nearly 40 percent more fuel to cover the same mileage than smaller passenger cars...

other than that, i haven't seen any news out of the ordinary enough this week that would be worth exploring any further than what the links below provide, nor do i have any particular insights to share, so today we'll just review the weekly oil stats from the EIA and the rig count data from Baker Hughes and wrap it up...

Current EIA Reports

this week's report showed that US field production of crude oil rose for the first time in 8 weeks, from 9,117,000 barrels per day during the week ending September 11th to 9,136,000 barrels per day for the week ending September 18th...putting that production into perspective, that's about 4.9% below the modern record production of 9,610,000 barrels per day that was set in the first week of June this year, a bit more than 3% above our production rate of 8,867,000 barrels per day in the 3rd week of September a year ago, and roughly 64.4% higher than our 5,556,000 barrel per day production of 5 years ago...to help you visualize how our output of oil has changed, we'll include a copy of the EIA graph that accompanies the production data that we cite every week, from which we have excised the not particularly relevant period between 1990 and 2003 so the graph would better fit on the page…

field production of crude oil as of 9/18:

from that graph we can see how our domestic production of crude generally declined from the 90s till it bottomed out over the 2006 to 2008 span, before it started rising as hydraulic fracking technology, which had been used earlier in shale gas basins, was extended to be used in oil bearing shale...then, from the period starting in 2012, US production of crude began to increase exponentially, as fracking activity spread across several basins, fed by low interest rates and high oil prices...also note that although the number of active oil drilling rigs started to decrease late last year, it wasn't until June that our oil production seriously turned down..

our other main source of oil supply is from imports, which have remained stubbornly high over the past two years even as US oil production had been rising....in the week ending September 18th, our imports of crude oil were little changed, falling from 7,189,000 barrels per day in the week ending September 11th to 7,176,000 barrels per day in this week's report...while that's 4.5% higher than the same week a year ago, weekly oil imports are volatile, so we check the 4 week average of imports carried in the weekly Petroleum Status Report (62 pp pdf), which indicates U.S. crude oil imports averaged 7.4 million barrels per day over the last 4 weeks, 2.0% below the same 4 weeks last year...

so, with oil imports down a bit and oil production up a bit, domestic supplies of crude were little changed this week...however, refinery operations slowed from last week, as they typically do once the summer driving peak is past, as U.S. crude oil refinery inputs averaged 16,203,000 barrels per day in the week ending September 18, down from 16,513,000 barrels per day in the prior week...the refinery utilization rate dropped to 90.9%, from 93.1% of capacity last week, with no news as to why; that kind of drop is typical for the end of September and the beginning of October, however, so perhaps they're downshifting refinery operations a bit early this year...

users still took oil out of storage this week, however, although less so than last week...in the week ending September 18th, our commercial crude oil inventories in storage fell to 453,969,000 barrels, down from the 455,894,000 barrels we had stored as of the 11th...however, that still leaves us with 26.8% more oil in storage than the 357,998,000 barrels of oil that we had stored in the same week last year, and it’s also the most oil stored in the 3rd week in September in the 80 years that such records have been kept, which had never seen more than 400 million barrels stored before this year...we made a copy of the EIA graph that accompanies the inventory data too, so we can all get a look at what that looks like historically...and like we did above, we have excised the period between 1990 and 2003 so the graph would better fit on the page…(full graph here)

inventories of crude oil as of 9/18:

here we can see that our oil inventories (excluding the Strategic Petroleum Reserve) had remained in the same range, somewhat below 400 million barrels, over the entire past three decades, only gradually approaching that 400 million barrel mark in 2013, before suddenly spiking at the end of January of this year...what we see on this chart also belies the analysis of Reuters energy analyst Jack Kemp, who has been claiming that inventories are tighter than they look, because much more of our inventory is now in transit in railcars, pipelines and barges, or in in situ storage in the oil fields, than it was previous to widespread fracking...it's clear from both the chart and from the weekly data that our inventories spiked during the same weeks when oil prices fell the most, leaving contracts for oil to be delivered in the future at a price somewhat higher than the spot price, setting up the contango trade we've talked about previously, wherein speculators bought oil on the cheap and paid for its storage, and simultaneously entered into a contract to sell it back at a higher price in the future...if there had been a structural change in the amount of oil stored occurring, it would have happened gradually over a period of several years, not in a quick spike when oil prices fell...

Latest Rig Counts

oilfield drilling activity slowed again this week, but not by as much as it had in the past four weeks, as the total active rig count fell by just 4 to 838 rigs for the week ending September 25th...Baker Hughes reported that rigs drilling for oil in the US decreased from 644 last week to 640 this week, that rigs drilling for gas fell from 198 to 197, and drillers added one miscellaneous rig for the first time in two months....active oil rigs are still above the 5 year low of 628 which they fell to on June 26th, but down 952 from the year ago count of 1592 and down 969 from the high of 1609 hit on October 10th of last year, while active gas rigs are down from 338 a year ago and down by 159 from the recent peak of 356 gas rigs that were operating during the week of November 11th, 2014....

there were two drilling operations started in the Gulf of Mexico this week, so the Gulf rig count is up to 31, and with rigs off Alaska and California, the offshore count is up to 33, but that's still down from 62 in the same week last year....horizontal drillers took a big hit this week, as the net count for that type of rig was down 11 to 629, and down from 1347 horizontal rigs in the same week last year...active vertical rigs, on the other hand, increased by 4 to  123, which was still well off the 373 vertical rigs that were drilling a year ago...and directional rigs increased also, up by 3 to 86, but are still down from the 211 directional rigs that were deployed last year at this time..

the major shale basins saw an even greater reduction in rigs; both the Permian and Eagle Ford shale of Texas, as well as the Haynesville shale of the Louisiana-Texas border, each saw 3 rigs stacked...in addition, single rigs were shut down in the Ardmore Woodford of Oklahoma, the Barnett shale of the Dallas Fort Worth region, the Fayetteville of Arkansas, the Granite Wash of the Oklahoma-Texas border and the Williston of North Dakota...those decreases left the Permian with 250 rigs, down from 556 a year ago, the Eagle Ford with 85, down from 207 a year earlier, the Haynesville with 26, down from 46 a year ago, the Ardmore Woodford with 4, down from 5 last year, the Barnett shale with 6, down from 22 a year ago, the Fayetteville with 3, down from 9 a year ago, the Granite Wash with 12, down from 66 a year ago, and the Williston with 67, down from 198 a year ago...

even with all the rigs removed from Texas shale plays, the state rig count only fell by 2 to 363, as apparently most of the vertical and directional rigs added were in that state...that number was still down by 534 rigs from the 897 rigs that were active in Texas on the 4th weekend of September last year...other states that saw less rigs this week corresponded with the basin decreases; Arkansas was down a rig to 3, and down from 12 rigs a year ago, North Dakota was down 1 rig to 66 and down from 189 a year ago, and the Oklahoma rig count was also down by 1 to 105, which was down from 213 rigs a year earlier...the only state to see an increase in active rigs was New Mexico, which was up 1 rig to 50 this week, but down from 101 rigs a year earlier...net rigs counts for all other states remained unchanged this week, although as we've noted previously, that does not preclude that rigs may have been stacked in one area of a state and started up in another....

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Ohio has 1,591 drilled Utica wells, 1,009 producing Utica wells - Drilling - Ohio: Ohio has approved 2,013 Utica Shale drilling permits, as of Sept. 19. That total includes 1,591 drilled Uitca wells and 1,009 producing Utica wells. Ohio has 22 drilling rigs at work. Fifteen new permits were approved: four in Belmont County, four in Guernsey County, five in Harrison County and two in Noble County.

Ohioans deserve to get fair fracking tax - Columbus Dispatch  -- It’s been three years since Gov. John Kasich started pleading with state legislators and drillers to come up with a reasonable severance tax. It’s been three months since Senate President Keith Faber said he and his colleagues couldn’t come up with one in time to be included in the biennial budget, but promised they were setting a “ hard deadline” of Oct. 1 by which a legislative study commission would come up with a plan. It is now less than three weeks until that deadline. One small problem: It since has come out that the budget language to create the study group doesn’t technically take effect until Sept. 30 — just one day before the Oct. 1 deadline. Most Ohioans surely are weary of seeing lawmakers cater to drillers, many of whom are based out of state and make big political contributions. Residents of Ohio, like those in other states with higher “fracking” taxes, deserve better compensation for nonrenewable natural resources being extracted. Kasich wants this money to go toward further income-tax reduction for state residents, not pad state coffers or fund government bloat. But the legislature has resisted, either offering nothing or, in the case of an earlier House proposal, an amount Kasich saw as so “puny” that he called it a “big, fat joke.” Meanwhile, the 4.5 percent (natural gas and liquids) to 6.5 percent (oil and gas) tax proposed by Kasich has been judged fair by independent analyses.  The oil and gas industry has predictably launched a counterattack, hoping to keep the sweet deal it has in Ohio. In addition to lobbying and writing checks to legislators, the American Petroleum Institute several months ago ran a radio advertising campaign repeating its claims that increasing taxes on fracking would kill the industry in Ohio. Drillers will go where the oil is and won’t be chased off by a modest increase in severance taxes.

Ohio lawmakers will miss promised deadline on fracking tax report -   – Ohio lawmakers said this week they won't meet a self-imposed Oct. 1 deadline to hammer out recommendations on an oil and gas severance tax deal, as they need more time for negotiations. The impasse is the latest delay in a years-long effort to tap into a potentially lucrative source of revenue to pay for income-tax cuts and funding to local governments in eastern Ohio, where drilling activity is ramping up.  In June, House and Senate leaders held a rare joint news conference to announce that a legislative study committee would work over the summer to reach a compromise agreement on raising taxes on fracking activity.  Senate President Keith Faber, a Mercer County Republican, told reporters that Oct. 1 was a "hard deadline" to compile recommendations on a compromise between industry groups, which oppose any severance tax increase, and Gov. John Kasich's administration, which has called for a major tax hike. At the time, Faber disputed that sending the issue to a study group was "just a stalling tactic."

Ohio injection well program gets high marks from U.S. EPA, some areas need improvement -- Results of a federal review of Ohio’s injection well program led to a U.S. Environmental Agency official describing it as a “good quality program.” Tinka Hyde, director of the Water Division in EPA’s Region 5, made the comment in a cover letter to Richard Simmers, chief of the Ohio Division of Oil and Gas Resources (part of the Ohio Department of Natural Resources). The EPA issued a final report on Sept. 8 of a review of Ohio’s Class II injection well program. Class II injection wells are used to dispose of fluids brought to the surface in the process of production of oil and natural gas. Concerns have been raised by environmental groups and others about chemicals used to “frack” oil and gas wells. As part of the review, the EPA examined files from 29 injection wells, including two K&H Partners injections wells in Athens County’s Troy Twp. and the Ginsburg well on Ladd Ridge Road, east of Albany. The previous review was in 2009. “EPA found that Ohio runs a good quality program for Class II wells, and is administering the program in accordance with (EPA) approval,” Hyde wrote. “The program is strong in several areas, including permitting, inspections and resolving violations found during inspections.” Hyde wrote that Ohio has invested “significant new resources in the program” and described Ohio as “a leader in terms of addressing seismic potential during the review of permit applications and well operations.” Hyde wrote that Ohio should improve its program by:

• • Identifying operator reporting gaps or inaccuracies and taking enforcement action for violations of reporting requirements.
• • Escalating enforcement for recalcitrant and repeat violators. (EPA found instances where operators repeated violations or where the same operating violations were noted in successive inspection reports at a well site, without documentation of ODNR compliance or enforcement action, according to the report.)

Thousands of petroleum leak investigations backlogged in Ohio — More than 35,000 petroleum leaks have been reported in Ohio since the state began monitoring underground storage tanks in the mid-1980s, and about 12 percent of them are still in need of cleanup years or even decades later. Ohio has a current backlog of about 4,300 active cases, according to the Ohio Bureau of Underground Storage Tank Regulations. Most of them involve vacant properties — an old gas station or abandoned factory — where an owner can’t be tracked down to take responsibility for the testing, cleanup and monitoring of a suspected or confirmed leak. “We do not have a responsible party to address those situations,” said Verne Ord, BUSTR assistant bureau chief. It could be because the company has gone out of business, declared bankruptcy or the owner may have died, he said. In some cases they simply can’t afford the cleanup. Without someone to take responsibility, the case sits open, sometimes for decades. Nearly three quarters of the 48 active cases in Clark County involve leaks detected between 1988 and 1999. “If you’ve got one that’s that old, it’s been either a really bad petroleum release that’s taken years to remedy, or we don’t have a viable, responsible party,” Ord said. About half of Champaign County’s 23 open cases have been open longer than 15 years and about half involve non-viable owners.

Government and Gas Industry Team Up Against Local Fracking Ban Initiatives in Ohio - Last week the Supreme Court of Ohio upheld the Ohio Secretary of State’s decision to remove from this November’s ballot, measures by Medina, Fulton, and Athens counties that would have banned hydraulic fracturing and related infrastructure projects. However, in a separate ruling, the court allowed the city of Youngstown to proceed with an anti-fracking charter amendment and ordered it be placed on the November 3 ballot.  Secretary of State Jon Husted had removed the county ballot measures in August, claiming “unfettered authority” even though all three initiatives had gathered sufficient signatures. The court did not agree with Husted’s argument that there was “nothing to materially limit the scope of [his] legal review of the petitions.” It’s ruling against the initiatives was based on a technicality. Terry Lodge, a lawyer for the petitioners, told Earth Island Journal “we don't agree that the [initiatives] are in any way deficient.”  According to Lodge, the argument that local initiatives that challenge state preemption should not be allowed a vote, never stood a chance in court. “The only role of governmental regulation over initiative petitions,” Lodge said, “is to verify that the signatures were collected on the proper forms, that they were properly verified by the circulator, and that the form in which the petition wording was circulated was proper. The county boards of election and the Secretary of State may not indulge an inquiry into whether, if passed, something might be ruled illegal.” The oil and gas industry played a key role too. Rather than rely on the state attorney general for legal representation — as state actors most often do — Husted brought on the private law firm, Bricker & Eckler LLP, to defend his August decision. Bricker & Eckler is not just any law firm; it’s the firm that represents the very company — Spectra Energy — that is trying to build a massive, hotly contested, natural gas pipeline which two of the local bans would have blocked. The proposed NEXUS pipeline would traverse Northern Ohio en route to exporting gas to Ontario and thence international markets.

Community hears about proposed methane regulations -- richlandsource.com: The public was invited to give its input on input on the Environmental Protection Agency’s recent draft proposal to reduce national methane emissions during an informational session. The event was held Thursday evening in the community room at the North End Community Improvement Collaborative.The meeting was put together by Bill Baker, organizer for Frack Free Ohio, in collaboration with Sierra Club, the Ohio Environmental Council, and Moms Clean Air Force.. The purpose of the session was to educate locals on the new EPA draft proposal for methane regulations, which are targeted at the oil and gas industry, as well as hydraulic fracturing operations. “Frack Free Ohio’s mission is not just to protest against fossil fuel development but also to teach people about alternatives,” Baker said. “And until we really look at how much pollution’s being created, we’re not going to really look at the alternatives and the other solutions.” Presenters during the meeting included Laura Burns, Ohio organizer of Moms Clean Air Force; Cheryl Johncox, of Sierra Club; Melanie Houston, of the Ohio Environmental Council; and Mansfield City Councilman Don Bryant.

Youngstowners yet again can reject fracking issue - Youngstown Vindicator --A ruling by the Ohio Supreme Court that will result in the anti-fracking charter amendment appearing on the November ballot in Youngstown does not change this fact: The amendment will be unconstitutional even if it is approved by the voters.  Indeed, it’s a big “if,” given that Youngstown residents have rejected the ban on fracking four times – twice in 2014 and twice in 2013. Last November, the so-called Community Bill of Rights was summarily dismissed by a vote of 7,231 to 5,268. In the May 2014 primary, the charter amendment went down to defeat 3,674 to 3,100.  So, what was the Supreme Court ruling about? It had nothing to do with the merits or constitutionality of the anti-fracking proposal. Rather, the justices were acting on a motion filed by the city of Youngstown to order the Mahoning County Board of Elections to place the constitutional amendment issue on the Nov. 3 general-election ballot. The board had voted 4-0 not to certify the citizen-initiative amendment, thus preventing it from being included on the ballot. The city, led by Mayor John A. McNally and Law Director Martin Hume, argued in its motion for a writ of mandamus that the board of elections had acted illegally and had violated the constitutional separation of powers. The Supreme Court agreed, saying the elections officials do not have the authority “to sit as arbiters of the legality or constitutionality of a ballot measure’s substantive terms. “An unconstitutional amendment may be a proper item for referendum or initiative,” the court ruled. “Such an amendment becomes void and unenforceable only when declared unconstitutional by a court of competent jurisdiction.” Let there be no doubt about how a court of competent jurisdiction will rule if the Community Bill of Rights is passed by the voters and then challenged in court. After all, the Ohio Supreme Court already has ruled in another case that only the Ohio Department of Natural Resources has authority over oil and gas drilling in the state.

Judge tosses landowners' lawsuit against fracking opponents (AP) — A judge has dismissed a lawsuit that landowners filed against people and groups who oppose fracking in a western Pennsylvania township. Natural gas drilling has been delayed in Middlesex, Butler County while some of the rural community’s 800 residents challenge a zoning ordinance that would allow drilling in 90 percent of the rural township. Dewey Homes and Investment Properties and 12 landowners sued the drilling opponents, seeking damages for royalties they’ve been unable to collect from gas drilling companies who have leases to drill on their land. But the residents and environmental groups challenged that litigation as a strategic lawsuit against public participation, or SLAPP suit, meant to silence their opposition and free-speech rights. An attorney for the landowners hasn’t said whether he’ll appeal Thursday’s ruling, which dismissed the lawsuit for not being specific enough.

Two Marcellus pipeline projects move forward -- Two large pipeline projects aimed at alleviating a glut of natural gas coming from the Marcellus shale moved ahead in the federal permitting process this week. Houston-based Columbia Pipeline Group said its proposal to build the $2 billion, 165-mile Mountaineer Xpress in West Virginia entered a pre-filing phase before the Federal Energy Regulatory Commission. Moving from Marshall County to Wayne County along the state’s western border with the Ohio River, the pipeline would connect processing points and other lines, “providing producers in the Marcellus and Utica shale areas new transportation options to move gas out of the capacity-constrained supply basin and into the interstate market,” the company said. Columbia has started reaching out to landowners in the project’s path and, pending the FERC’s approval, will start construction in the fall of 2017 with hopes to start moving 2.7 billion cubic feet of gas per day a year later. On the northeastern end of the Marcellus, a venture led by six midstream and utility companies applied to the FERC for permits to move ahead with construction of the PennEast Pipeline. The $1 billion, 118-mile system of 36-inch pipes would move gas from shale fields north of Wilkes Barre to New Jersey and the Philadelphia suburbs.

Book details railroad tracks for responders -- In 1987, rescuers had to evacuate the entire borough of Confluence when 27 tank railcars derailed in the heart of town. Two decades later, a similar scene unfolded: a CSX freight train derailed in February 2007 on the outskirts of the same town, leaving behind twisted railcars, scattered coal and ripped tracks. Both incidents happened before thousands of gallons of crude oil and ethanol from fracking ventures in North Dakota were routinely hauled through the county by rail. Responders aren’t waiting for another derailment to prepare, according to training officer Joel Landis with the Somerset County Hazmat Team. Landis helped land federal funding to organize a project to help responders prepare for railroad emergencies. The Somerset County department of emergency services secured a Hazardous Materials Emergency Preparedness grant funding through the state’s Emergency Management Agency. The result of the 10-month collaboration is a book that details tracks to help responders quickly — and uniformly — identify street access points. The book, distributed to eight volunteer fire companies, covers the CSX Keystone section of railroad that runs from Confluence to Fairhope in Somerset County. The line runs from Cumberland, Maryland, west to Connellsville, Fayette County, along a former Baltimore and Ohio Railroad line.

Proposed W.Va. pipeline accepted for pre-application review (AP) — The Federal Energy Regulatory Commission will review a proposed $2 billion natural gas pipeline in West Virginia before the developer formally submits an application. The commission notified Columbia Gas Transmission, LLC last week that it accepted the Mountaineer Xpress Project for the pre-filing review process. Parent companies Columbia Pipeline Group, Inc. and Columbia Pipeline Partners LP said Wednesday that an application will be filed with the federal commission in April 2016. If the pipeline is approved, construction would begin in the fall of 2017. The pipeline would run about 165 miles from Marshall County to Wayne County. The companies say in a news release that the pipeline would give producers in the Marcellus and Utica shale areas new options to transport gas into the interstate market.

Halliburton to pay $18.3 mln overtime wages -U.S. Labor Dept (Reuters) – Halliburton Co will pay $18.3 million to more than 1,000 oil and gas workers it improperly exempted from overtime pay, the U.S. Department of Labor said on Tuesday, the latest development in a nationwide probe into wage practices in the industry. The department said Halliburton improperly identified workers in 28 job categories as exempt from overtime pay under the Fair Labor Standards Act, the U.S. law governing wages and working hours. The company said it had begun paying the overtime and was cooperating with the Labor Department. The settlement is one of the largest for the Labor Department in recent years in an overtime case. Under the law, employees are entitled to mandatory overtime pay only if they earn less than $455 weekly or have few or no management duties. The Obama administration recently proposed more than doubling the income threshold, rankling business groups and Republican officials. The Labor Department said Halliburton automatically exempted all salaried workers from overtime without considering their income or job duties.

UT must end worst practices of fracking - The very first well drilled on University of Texas-owned land in west Texas, Santa Rita No. 1 started producing way back in 1923. It didn’t just produce oil, but it also brought up salt water from deep underground. The salt wastewater was stored in surface ponds, which leaked into the surrounding environment and onto lands that had once been used for grazing livestock. By the 1960s, 11 square miles — more than 7,000 acres — of the former pastureland had been rendered barren. That one well was the first of thousands drilled on millions of acres of West Texas land set aside by the state government as a form of an endowment to provide revenue for revenue for the University of Texas and Texas A&M systems. Today, nearly a century after the first well was drilled, oil and gas production continues on land owned by the University of Texas. According to a new report by the Environment Texas Research and Policy Center and Frontier Group, fracking of as many as 4,132 on university-owned land in recent years has consumed enormous quantities of water, introduced vast amounts of toxic chemicals into the environment, and threatened land that is valuable to the environment and wildlife. At least 6 billion gallons of water were used on university lands amid a historic drought in which Texans were asked to scale back water use. Increasing demand for water by oil and gas companies has harmed farmers and local communities. For example, water withdrawals by drilling companies caused drinking water wells in the town of Barnhart to dry up in 2013 and 2014. Approximately, 275 million pounds of chemicals were pumped deep underground, including 92.5 million pounds of hydrochloric acid and 8.5 million pounds of methanol, which is suspected to cause birth defects. Some of those chemicals come back up to the surface, creating toxic waste. And some of them stay underground, where they can contaminate our drinking water. Either way, they’re a danger to the Texas environment.

Silicosis: another fracking field hazard that leaves scars -- What is America’s most dangerous occupation? It’s oil and gas extraction, according to a 2014 report (based on 2012 data) published by the National Council for Occupational Safety and Health (COSH).The industry’s fatality rate is now 24.2 deaths for every 100,000 full time workers vs. 3.2 deaths per 100,000 overall rate for U.S. workers. Many factors contribute to its dangerous reputation, though one is garnering lots of attention these days – the results of which happen while working unprotected around frac sand. The composition of frac sand is 99 percent crystalline silica (silica). Inhaling its dust can lead to silicosis, which causes inflammation and scarring in the lungs. If it sounds bad, it’s because it is. Once lungs succumb to silicosis, they can’t take in as much oxygen. This leads to a host of symptoms, such as becoming easily winded and fatigued. The side effects can be difficult to manage and result in a lower quality of life and premature death. Silicosis is a cumulative disease caused by breathing in silica dust, usually over longer time periods. However, according to The National Institute for Occupational Safety and Health (NIOSH), the amount inhaled and the time length of respiration greatly determines the progression of the disease. There are three classified types of silicosis that take time and amount of inhaled toxic dust into account. The most common is the chronic or classic type, in which the onset takes an average of 10-20 years. The accelerated type occurs along a shorter timeline and appears within 5-10 years. Lastly, there’s acute silicosis, characterized by rapid onset of symptoms in as little as a few months to a few years. It’s usually deadly.

How one US state went from two quakes a year to 585 - Located in the middle of the country, far from any major fault lines, Oklahoma experienced 585 earthquakes of a magnitude of 3.0 or greater in 2014. That's more than three times as many as the 180 which hit California last year."It's completely unprecedented," said George Choy, a seismologist at the US Geological Survey.As of last month, Oklahoma has already experienced more than 600 quakes strong enough to rattle windows and rock cars. The biggest was a 4.5-magnitude quake that hit the small town of Crescent. The fracking process has unlocked massive amounts of oil and gas in Oklahoma and other states over the past decade. But along with the oil and gas comes plenty of that brackish water, which is disposed of by injecting it into separate wells that are dug as deep as a mile (less than two kilometers) below ground. The unnatural addition of the water can change pressure along fault lines, causing slips that make the earth shake, said Choy of the US Geological Survey. There is debate among scientists over how large of a fault could be reawakened, and how hard that fault might shake. One camp believes Oklahoma won't see bigger than a 4.0 to 5.0-magnitude earthquake, which would be enough to break windows and knock things off shelves. Others believe a 7.0-magnitude earthquake could come about, which would be strong enough to topple buildings. "What's at risk is that when you put water into the ground, it's never going to come back out. You're putting it in places it has never been before," Choy told AFP. "The bigger the volume, the greater the area will be affected. And we don't know what the long-term effect will be."

Fracking Increases Oklahoma Earthquakes from Two a Year to Two a Day -- Earthquakes continue to rattle the frack-happy state of Oklahoma. The Sooner State has jumped from two earthquakes a year to roughly two a day, with scientists once again pinning the recent uptick on fracking. Scientists have identified that the injection of wastewater byproducts into deep underground disposal wells from fracking operations are very likely triggering the major increase of seismic activity in the central U.S. state.  Oklahoma, which is not near any major fault lines, has felt 585 earthquakes that were a 3.0-magnitude or greater in 2014—three times the 180 quakes felt by California last year, the AFP reported. Last month alone, Oklahoma experienced more than 600 quakes that could shake homes and cars, with the town of Crescent hit hardest with a 4.5 whammy, the AFP said. “It’s completely unprecedented,” George Choy, a seismologist at the U.S. Geological Survey (USGS), told AFP about the spate of recent tremors.  “What’s at risk is that when you put water into the ground, it’s never going to come back out. You’re putting it in places it has never been before,” Choy told AFP.  Oklahoma has about 4,500 disposal wells. Last week, the state’s public utilities commission shut two wells and slowed the disposal volume of three more, a local news station reported, after a series of earthquakes, including a 4.1, hit the city of Cushing, which holds one of the largest crude oil storage facilities in the world.

Oklahoma agency reveals new well plans in the Cushing area — The Oklahoma Corporation Commission says it is imposing new operating guidelines for oil and gas wastewater disposal wells in an area of north-central Oklahoma that has experienced frequent earthquakes. The commission says the plans were developed following an analysis of disposal well and seismicity data in the Cushing area. Officials say the guidelines will change the operation of certain oil and gas wastewater disposal wells in the area and may be altered as more data becomes available. The plan calls for two disposal wells to cease operations entirely and for three others to reduce their disposal volumes. The Oklahoma Geological Survey has said it is likely that many recent earthquakes in the state have been being triggered by the injection of wastewater from oil and natural gas drilling operations.

Exclusive: In clash with pope's climate call, U.S. Church leases drilling rights | Reuters: Casting the fight against climate change as an urgent moral duty, Pope Francis in June urged the world to phase out highly-polluting fossil fuels. Yet in the heart of U.S. oil country several dioceses and other Catholic institutions are leasing out drilling rights to oil and gas companies to bolster their finances, Reuters has found. And in one archdiocese -- Oklahoma City -- Church officials have signed three new oil and gas leases since Francis's missive on the environment, leasing documents show. On Francis' first visit to the United States this week, the business dealings suggest that some leaders of the U.S. Catholic Church are practicing a different approach to the environment than the pontiff is preaching. Catholic institutions are not forbidden from dealing with or investing in the energy industry. The United States Conference of Catholic Bishops' (USCCB) guidelines on ethical investing warn Catholics and Catholic institutions against investing in companies related to abortion, contraception, pornography, tobacco, and war, but do not suggest avoiding energy stocks, and do not address the ownership of energy production interests. A Reuters review of county documents found 235 oil and gas leasing deals signed by Catholic Church authorities in Texas and Oklahoma with energy and land firms since 2010, covering 56 counties across the two states. None of the Texas leases in the review were signed after the pope's encyclical.

How the Oil & Gas Industry Turned Colorado From Blue to Red - If money is speech, then it stands to reason that a very small number of very wealthy people can effectively drown out the voices of the multitude on issues they determine worthy of a shout via their checkbooks. Currently in Colorado, the issues where this money/speech is reaching the highest decibels are oil and gas extraction, aka fracking, and education issues such as the 2013 battle over Amendment 66 and the ongoing push by some for a school voucher system or other form of school choice. Even before the Supreme Court’s controversial “Citizens United” ruling, campaign finance laws had blurred the lines between dollars and words. It never seemed to matter that polls have long shown nearly 80 percent of us disagree with this notion that money is simply an extension of the voice we use to express our views and should therefore be unlimited. For decades, all that has really mattered is that the elected officials who could fix this broken system are the primary beneficiaries of its democratic shortcomings. Hence, money still talks and in Colorado, more loudly than in most places. To understand how a handful of wealthy, influential individuals, along with the oil and gas industry and a few key political operatives, have managed to play puppeteer over our state government and even the electorate is quite complicated. That’s why we’ve included seven full pages of what I refer to as “influence maps” at the end of this article.

New Fracking Report Reveals Network of Deceit -   Greenpeace has teamed up with a Colorado newspaper, the Boulder Weekly, to rip the thin veneer of academic cred away from the fracking industry’s PR blitz in the state. According to the report, entitled Frackademia, the lobbying effort pivoted on industry-funded research conducted at the University of Colorado, Boulder Leeds School of Business. Greenpeace itself was marked as a “Big Green Radical” in a separate oil and gas industry lobbying effort last year meant to undermine the credibility of several high-profile environmental groups, but apparently name-calling is not a particularly effective tactic against the organization. In Colorado, local communities face an uphill climb when it comes to banning fracking, an oil and gas drilling method that involves pumping millions of gallons of chemical brine underground at high pressure. The oil and gas industry has successfully taken cities to court over local fracking bans, and cash-strapped communities are an uneven match with the industry’s legal teams. High court decisions in Ohio and New Mexico have also cast a long shadow of doubt over the legal authority of local communities to restrict state-regulated energy sector activities. Zoning also factors into the fracking fight in Pennsylvania. In that state, one result of former Gov. Tom “wardrobe malfunction” Corbett’s ties to the fossil fuel industry was an attempt to impose statewide zoning regulations in support of fracking. The Pennsylvania Supreme Court ruled against the new zoning scheme in 2013, and it also affirmed the right of local communities to impose fracking bans under their zoning powers. Pennsylvania’s new governor, Tom Wolf, reinstated a ban on fracking in state parks and forests when he took office in January, and under his tenure the state is cracking down on drilling violations. But he seems to have taken a statewide ban off the table, at least for now.

US panel: Cancel drilling lease near Glacier National Park — A federal panel recommended Monday that the U.S. government cancel a long-suspended drilling lease on land near Montana’s Glacier National Park that is considered sacred to Native American tribes. The recommendation by the Advisory Council on Historic Preservation comes as Baton Rouge, Louisiana-based Solenex is suing the U.S. government to lift the decades-old suspension on the lease in the Badger-Two Medicine area of the Lewis and Clark National Forest. The development would be so damaging to the area “that the Blackfeet Tribe’s ability to practice their religious and cultural traditions in this area as a living part of their community life and development would be lost,” the council said in its recommendation. Even the company’s plans to reduce the effects of drilling wouldn’t be enough to counter the damage that would be done, it said. The council recommended revoking Solenex’s suspended permit to drill, canceling the lease and ensuring that future mineral development does not occur. The advisory council’s recommendation is the first of a multi-step process to either cancel the lease or proceed with drilling. The council analyzed the effects of drilling on the historic and cultural value of the land, and its recommendations will be considered by the U.S. Forest Service and the U.S. Bureau of Land Management, which will make the final decision.

Oil company officials laud findings on crude oil volatility - Preliminary research and comments by several federal agencies on the volatility of crude oil from North Dakota shows that Bakken crude has been unfairly singled out in safety discussions, oil industry representatives said Tuesday. The makeup of crude oil from the Bakken formation has been at the forefront because of several fiery train derailments, including one in December 2013 outside Casselton that created a huge fireball and several explosions. Some regulators have said that Bakken crude is more flammable than other crude oils. American Petroleum Industry spokeswoman Beth Treseder told oil company officials who were in Fargo for the North Dakota Petroleum Council’s annual meeting that several agencies appear to debunk that notion. She cited comments last week by National Transportation Safety Board Chairman Christopher Hart, who said volatility is not a significant issue. “If it derails and the product is released, our accident experience has shown that the biggest contributor to a large explosion or fire is how much product is released rather than that volatility of the product,” Hart told Fargo radio station KFGO. Treseder said findings by the Department of Transportation, Department of Energy and Federal Railroad Administration seem to point to the same conclusion. She said DOT officials told federal lawmakers that the vapor pressure of Bakken crude was “not outside the norm” for light crude oils.

Contractors tapped for Midwest oil pipeline  — Two Wisconsin companies, including Michels Pipeline Construction, which has a field office in Cedar Rapids, have been selected to build portions of the proposed Dakota Access Pipeline. The yet-to-be-approved $3.78 billion, 1,134-mile Dakota Access Pipeline would transport domestically produced light sweet crude oil from the Bakken and Three Forks production areas in North Dakota to Patoka, Ill, where it could be shipped to the Gulf Coast and other destinations. Brownsville, Wis.-based Michels Pipeline will construct portions of pipeline in Iowa, South Dakota and North Dakota totaling 380 miles, according to a news release from Dallas-based Dakota Access Pipeline LLC. Eau Claire, Wis.-based Precision Pipeline will build pipeline segments in Iowa and Illinois totaling 476 miles. “Michels has a strong tradition of corporate social responsibility,” said Robert Osborn, senior vice president, in a news release. “A big part of that commitment is safety, quality workmanship and environmental stewardship. Another characteristic of our commitment is to sourcing locally whenever we can on a project.”  Michels Pipeline and Precision expect to collectively employ up to 4,000 people per state. As part of the pipeline’s agreement with the contractors, the companies would use 100 percent union labor with 50 percent coming from local union halls.

North Dakota set to extend deadline for gas flaring rules -- North Dakota is poised to give the energy industry up to two extra years to curb the amount of natural gas burned off at oil wells, a move that would ease worries pipeline construction delays make it impossible to meet aggressive flaring standards. Governor Jack Dalrymple and the two other members of the North Dakota Industrial Commission (NDIC), who spent months last year finalizing the rules, will mull oil companies’ request for the extension at their Thursday meeting. “These were lofty goals, but things have changed a bit and we’ve got to take that into consideration,” Doug Goehring, an NDIC member and the state’s agriculture commissioner, said in an interview. “We’re probably going to have to extend the deadline.” Goehring, who said low commodity prices will influence his vote, has an outsized influence over oil regulation due to his seat on the NDIC. Environmentalists oppose any extension and note the volume of gas flared in the state continues to rise as more oil wells are drilled, despite the best intentions of existing regulations.

New CBR Loading Facility Almost Ready To Start Shipping -- Palermo, ND -- September 21, 2015  On my most recent trip back to the Bakken -- just a week or so ago -- I was surprised at all the activity and all the projects still underway. Many of the projects were just breaking ground. I was surprised because the East Coast media has said the Bakken is dead. Maybe. And RBN Energy regularly reports that CBR is a dying industry. Maybe. But this is not a maybe. This is real. Another CBR loading facility is about ready to put out the sign: "Open For Business." KXNET is reporting: A new rail loading facility is on track to start shipping Bakken crude to the coast this winter. The Phillips 66 terminal near Palermo will be moving by train about 150-thousand barrels of oil a week starting out.The facility was built with expansion in mind and at full operation, the terminal could load two 110-car trains every day.  Linking into the Palermo BNSF mainline, the Phillips 66 rail loading facility will streamline the company's Bakken presence. Color me confused. I thought the Bakken was dying. I thought CBR was dead.  I can't recall the last time I had to update the "CBR Page." Palermo, ND, is about 10 miles east of Stanley, ND, right on the BNSF rail and just a half-mile or so north of I-98. 

West Coast to get Bakken oil via rail indefinitely: regulator (Reuters) – North Dakota’s Bakken crude oil should continue to travel to the U.S. West Coast via rail for the foreseeable future, the state’s pipeline regulator said on Tuesday. The use of pipe to transport oil out of the No. 2 U.S. crude producing state continues to climb, nearly reaching parity with rail this month. Yet with no pipelines planned across the Rockies, the two oil trains that leave North Dakota each day for Washington state should continue to chug along, Justin Kringstad, director of the state’s pipeline authority, said at the North Dakota Petroleum Council’s annual meeting. . “The West Coast will be serviced by rail for the foreseeable future,” he said

The Bakken is not special - analysis - Speaking at the annual North Dakota Petroleum Council meeting, Scott McNally dissected the Bakken’s potential in the global energy market and its ability to swing the market. The verdict? Despite being the number two producer in the U.S., the Bakken isn’t all that special. McNally, a graduate research assistant at Harvard University and fellow for the Center on Global Energy Policy at Columbia University, addressed the current downturn, price sensitivity, production and the Bakken’s potential, as well as the nation’s, to become a swing producer. Nine years ago, he said, North Dakota’s oil production sat around 120,000 barrels of oil per day. Fast forward to the current slump, which has lasted longer than predicted, or wanted, of which the effects are obvious: layoffs, cancelled contracts, acquisitions, and the list goes on. One fact remains, though: the proven resiliency of U.S. shale production in light of the persistent oil price slump and global oversupply. Posing the question of whether or not the U.S. will become the new swing producer, thus dictating the global market,, McNally said, “Probably not.” According to Baker Hughes, the U.S. rig count tallied in at 644 on Tuesday. About a year ago, there were roughly 1,931 rigs active nation-wide. Despite the dramatic drop, production has continued to climb. From 2005 to 2009, the natural gas market witnessed similar activity. Gas prices fell by about half, but production continued to climb. He commented that this is amazingly similar to what is happening with oil right now. Due to increased efficiencies in drilling rigs, the same number of wells are being drilled with half the number of rigs.

A Spinoff Goes to Heck, after Just 10 Months - Occidental Petroleum made a sweet deal on November 30, a masterpiece of Wall Street engineering. And just about every investor that touched it is now getting their hands burned off. Oxy was the big player in the miraculous scam of the Monterey Shale formation in California, which had been hyped for years as the largest reserves of oil in the US. Any studies that showed that this oil wasn’t recoverable with todays’ technologies due to the geological mess underground in earthquake land were shunted aside. The EIA finally conceded that point in May 2014 and slashed the delusional estimates of the reserves by 96%. California isn’t exactly the easiest place for fracking in the US. When the EIA finally acknowledged reality, Oxy was the biggest loser. Six months later, after the dust had sort of settled, Oxy exited in a grand manner by spinning off 80.5% of its California dream to Oxy shareholders. Shares started “regular way” trading under the ticker CRC on December 1, 2014. Energy spinoffs were hot in 2013 and 2014. Hedge funds clamored for them. They’d buy a big stake in the parent company and push the board to do a spinoff that entailed loading the spinoff up with debt to fund a fat special dividend back to the parent. The scheme was supposed to temporarily jack up the price of the parent company’s stock. “Unlocking value,” it’s called. Wall Street made sure that there were enough unwitting or yield-desperate buyers for the debt. Hedge funds got their way, made their money, and the lucky ones bailed out. Then came reality.

U.S. Shale Drillers Are Drowning in Debt -  As much as 400,000 barrels a day of oil production is at risk as U.S. shale companies like Samson Resources Co. run out of money and are forced to slow drilling. Total debt for half of the companies in a Bloomberg index of more than 60 producers has risen to a level that represents 40 percent of their enterprise value. It’s a sign of distress that shows equity values falling in the face of oil’s crash, The companies facing high debt loads, which include Encana Corp. and Chesapeake Energy Corp., produced 1.1 million barrels of oil a day in the second quarter of this year, according to data compiled by Bloomberg. If more companies file for bankruptcy as Samson did Wednesday, or embrace the kinds of draconian cuts needed to survive, output could fall by 200,000 to 400,000 barrels, Thummel said. A loss of that much crude would be the steepest U.S. decline since 1989, about the amount of oil from Oklahoma, the sixth-largest producing state, which pumped 356,000 barrels a day in June, government data show. “We are going to see a major response because these financially challenged companies won’t be able to produce as much as they did in the past,” he said. As companies run low on cash, they may be forced to idle drilling rigs, confront bankruptcy or seek more expensive financing and sell assets. In the past year, U.S. oil producers used 83 percent of their operating cash flow to pay for debt service, according to the U.S. Energy Information Administration. A year ago, it was less than 60 percent.

Plunging oil prices put question mark over $1.5tn of projects - FT.com: Plunging oil prices have rendered more than a trillion dollars of future spending on energy projects uneconomic, according to a study that suggests that the impact on industry operators is worsening. A report published Monday says $1.5tn of potential investment globally — including in North America’s shale-producing heartlands — is “out of the money” at current oil prices close to $50 a barrel and unlikely to go ahead. Industry operators expect capital spending on new projects to decline by between 20 and 30 per cent on average in the wake of the price slide, says Wood Mackenzie, the energy consultancy. It calculates that $220bn of investment has been cut so far, about $20bn more than it estimated two months ago and much of it the result of projects being deferred. Such a decline in spending means that the price crash since last summer — the result of weaker Chinese demand, record US production and Saudi Arabia’s decision not to cut output — could resemble the savage downturn of the mid-1980s. After a brief recovery in the spring, oil prices spiralled lower in July. Brent crude — the global benchmark — fell to its lowest point in more than six years during August’s wider market turmoil. It now stands at $47.47 a barrel, down from $115 in June last year. Just half a dozen new projects will be approved this year, says the Wood Mac report, and 10 or 11 in 2016, compared with an annual average of 50 to 60.  “Deep cuts” in North America account for more than half of a 45 per cent fall in capital spending across the Americas. “The flexibility to rapidly dial back investment in unconventionals at low prices has provided a competitive advantage for the US independents with the bigger positions,” the study says.

Samson’s weakness is a cautionary tale - FT.com: In mid September, Samson Resources, an exploration and production company valued at more than $7bn when a group led by KKR bought it in 2011, joined the ranks of energy companies filing for bankruptcy protection. The statistics make for grim reading. September is not yet over but August saw the highest ratio of distressed issuers in the US bond market in four years. Some 41 per cent of all oil and gas loans are distressed. Seventy energy companies have already defaulted this year, or a quarter of all such borrowers — of which 40 are in the US. Distress, which was at record lows for years, is about to increase dramatically, spreading from energy to mining and metals (the two sectors comprise 20 per cent of one standard high-yield index) and beyond. The Federal Reserve may have chosen not to raise rates but that has not given the financial markets the expected reprieve — as has been the case in previous bouts of the game of chicken between the financial markets and the Fed. The credit markets are in disarray and the cost of money is rising for cash strapped borrowers, while the usual relief rally in the stock market has failed to materialise. Ironically, even as the Fed says the economy is healing, (despite the fact that economic growth continues to bounce between 2 per cent and 2.5 per cent) the benign effect of almost zero rates is no longer enough to support either the debt or equity market. Asset price inflation has come to an end without any real sign of a robust recovery that would give investors a new and better reason to buy shares or high-yield debt. The risk on/risk off template seems to have been permanently switched to off mode. The combination of a higher cost of capital and the continuing plunge in oil prices suggests that despite the drop, there is more downside to come. “Even August’s devastation has not restored reasonable value to the vast majority of high-yield bonds,” noted research from the LCD arm of Standard & Poor’s.

Credit Crunch, More Defaults: Things Could Get Ugly for Oil Investors -- Private-equity firms may yet feel more pain from their oil and gas deals as the companies meet with lenders through the fall to review loans and determine how much debt they can continue to carry. The challenges are considerable: Regulators don’t like what they consider to be risky loans, the companies are running out of cash and can’t access the debt markets, and oil and gas prices remain stubbornly low. In some ways, the private-equity industry has become a victim of its own success: It has helped fuel the U.S. shale boom that in part led to the supply glut. But the prolonged oil downturn has stung such experienced investors as KKR and First Reserve Corp. with two high-profile bankruptcies this year in the form of Samson Resources Corp. and Sabine Oil and Gas Corp., respectively. More firms’ equity interests are at risk of being written down—or written off entirely. On the credit front, the widely anticipated wave of distressed debt opportunities has yet to hit, leaving many of the debt funds being raised waiting on the sidelines. Although the oil industry’s mess promises to yield more distress, investors can’t dive in without knowing where the bottom is. “I think we’ve only just begun to see the fallout from this crisis,” said the head of the energy practice at a large investment bank. The high-yield bond and second-lien loan markets aren’t nearly as welcoming as they were earlier this year and will no longer enable companies to raise new debt to pay down old one, said Joseph D’Angelo, partner at investment banking and advisory firm Carl Marks Advisors. Hedging programs that help lock in prices at which companies can sell their oil and gas production also are running out as 2015 comes to an end. And persistently low commodity prices led to at least one credit ratings firm to cut its price assumptions.

Oil drillers face shrinking credit lines as banks revalue assets - Oil producers in the U.S. are about to see their credit lines shrink, just when they need the money most. The latest round of twice-yearly re-evaluations is underway, and almost 80 percent of oil and natural gas producers will see a reduction in the maximum amount they can borrow, according to a survey. Companies’ credit lines will be cut by an average of 39 percent, the survey showed.“There’s going to be a reduction to the majority of these credit lines,” “It’ll make a lot of these companies reduce a bit more on spending.” In many cases, banks have first claim on assets in a bankruptcy, and the size of a loan is tied to how much an oil producer’s acreage is worth. To reduce their risk, lenders reduce credit lines when prices fall. That’s helped keep loans backed by oil and gas properties some of the safest bets around, even amid the worst oil crash in almost 30 years. At bottom, the math is pretty simple. The amount banks are willing to lend is based on two things: the size of a company’s reserves, and the price of crude. Multiply the number of barrels by the price, and that’s the value of a company’s oil prospects. In practice, it’s not that easy. Counting barrels trapped thousands of feet below the ground is by nature an uncertain business. And prices are always moving. Crude has declined 51 percent in New York over the past year. To protect themselves, banks underestimate both reserves and prices. First, they attribute very little value to wells that haven’t been drilled yet, unlike equity investors who see undeveloped properties as growth potential. Banks also don’t lend against every barrel credited to producing wells. And lastly, they assume oil will sell for less than market prices.

Wells Fargo has biggest energy exposure among large US banks-Raymond James - Wells Fargo & Co has the largest exposure to loans to energy companies among major U.S. lenders, a report from Raymond James said, amid concerns that banks may have to set aside more money to cover bad loans to the industry. The bank also topped the list with the biggest exposure to energy companies whose public debt was trading less than 35 percent of par, the brokerage said on Thursday. Wells Fargo was followed by Bank of America Corp, Citigroup Inc, Comerica Inc and BB&T Corp. Companies whose debt is trading 35 percent below par are generally seen as more distressed in comparison to those trading at 70-75 percent below par. U.S. accounting rules require that banks set aside money to cover losses on loans after the loan shows visible signs of deterioration.

Clinton would support end to oil export ban only with concessions  – Democratic presidential candidate Hillary Clinton said on Friday she would support lifting the 40-year-old U.S. ban on crude exports only if the measure included concessions from the oil and gas industry to move toward cleaner energy. Clinton said she had not yet seen any legislation on lifting the ban that included concessions from the fossil fuel industry, In the absence of that, “I don’t think the ban should be lifted,” Clinton told reporters. The U.S. House of Representatives is expected to pass a measure scrapping the trade restriction in coming weeks, after a panel in the chamber passed the bill on Thursday. Oil drillers say the ban needs to be repealed to keep the domestic energy boom alive. Opponents say lifting the ban could threaten jobs in oil refining and shipbuilding and harm the environment with more drilling. Clinton did not specify exactly what kind of concessions she wants from the oil and gas industry.

Clinton opposes construction of Keystone XL pipeline - — Hillary Rodham Clinton broke her longstanding silence over the construction of the Keystone XL pipeline, telling voters at a campaign stop in Iowa on Tuesday that she opposes the project assailed by environmentalists. The Democratic presidential candidate said the project had become an impediment to efforts to fight climate change. “I think it is imperative that we look at Keystone pipeline as what I believe it is, a distraction from the important work we have to do to combat climate change,” Clinton said. “And unfortunately, from my perspective, one that interferes with our ability to move forward to deal with the other issues. Therefore I oppose it. I oppose it.” The former secretary of state had previously said she shouldn’t take a position on the issue, saying she didn’t want to interfere with the Obama administration’s deliberations on allowing a project that would transport oil from Canada’s tar sands to refineries on the Gulf of Mexico. But she had expressed impatience in recent weeks over the drawn-out pipeline decision, which has been vigorously opposed by environmental activists and liberals who play a key role in the Democratic primaries. Clinton’s campaign events in New Hampshire and Maine last week were attended by  activists who held signs that read “I’m Ready for Hillary to say no KXL,” demanding she oppose the pipeline.

Why we must drill for oil in the arctic -- Some green campaigners seem to believe Shell boss Ben van Beurden would be happy dunking polar bears in thick, black crude oil if it helped make the planet even hotter. But van Beurden, the 57-year-old engineer who has run Royal Dutch Shell for nearly two years and has given the company the green light to drill in Arctic waters, believes his view of the world’s future is considerably more honest than that of many environmentalists. ‘The amount of energy we consume is going to double in the first half of the century so we will have to supply twice as much as we do today as an industry. Most renewables produce electricity, and electricity is just 20 per cent of the energy mix. Where is the other 80 per cent going to come from?’ says the Dutchman.The UN conference on climate change opens in Paris in December, and van Beurden has already signed his name to an open letter calling for the implementation of a proper widespread system of pricing carbon emissions to cut greenhouse gases — necessary if the world is to hit its target of limiting global temperature rise to two degrees Celsius above pre-industrial levels. ‘I do think we can see a path that will get us to a system which is carbon neutral,’ he says. ‘But I object to the notion that it is a simple thing to do — that the only thing required is for companies like ours, people like myself, to step off the hose because we are the ones blocking it.’ ‘I want to explain what we are doing, how we are acting, and to make them conscious of the fact that their quality of life is highly dependent on energy. It is a fact that, in the wider debate, is very, very easily forgotten.’ Van Beurden is adamant that exploring for oil in the Arctic is manageable, saying: ‘A very significant part of the world’s oil and gas production already comes out of the Arctic. We deal with very significant risks all the time, we mitigate them, we understand them. ‘Engineers have a can-do mentality, that’s why we enjoy the quality of life that we all take for granted.’

TransCanada says cutting 20 percent of senior management positions – Pipeline company TransCanada Corp will cut 20 percent of its senior management positions as a continuing slump in oil prices has necessitated cost reductions, with further staff cuts possible in the future, a company spokesman said on Thursday. The company behind the Keystone XL and Energy East pipeline projects said staff were informed Monday about the cuts, which would be implemented over the next several months. “We don’t have an exact number for reductions at the senior level as the process is continuing but when transitions out of the company and retirements are complete, we expect about a 20 per cent reduction in senior leadership positions,” spokesman James Millar said in a statement. “Falling oil prices and the current environment are having a profound impact on our customers and we must do all we can to drive down costs and pursue our projects more efficiently and strategically.” Millar said it would be up to the leaders of business units and other support areas to determine how many employees are affected. TransCanada laid off 185 people from its major projects division in June, joining several other Calgary-based energy companies, including Suncor Energy Inc and Penn West Petroleum, that had trimmed staffing levels in order to survive the oil price slump.

Oil prices edge up as U.S. drilling declines - Oil prices edged up in early trading in Asia on Monday as U.S. drilling slowed and analysts estimated that $1.5 trillion worth of planned American production was uneconomical at prices of $50 per barrel or lower. Crude oil prices have plunged almost 60 percent since June 2014, when soaring global production started to clash with slowing demand. This includes losses of more than a quarter since June this year as a sharp slowdown in China has sparked concerns over the health of the world economy. Analysts said the low prices were beginning to impact production as drillers slow down new projects, especially in cost-sensitive North America where drillers react fast to changing prices. U.S. energy firms cut oil rigs for a third week in a row last week, a sign that the latest crude market weakness was causing drillers to put on hold production plans, triggering a slight increase in prices on Monday. “The current rig count is pointing to U.S. production declining sequentially between 2Q15 and 4Q15 by 255,000 barrels per day at the observed path of the U.S. horizontal and vertical rig count across the Permian, Eagle Ford, Bakken and Niobrara shale plays,” Goldman Sachs said.

U.S. gasoline sales surge at fastest for over a decade – Gasoline sales to U.S. motorists rose by more than 5 percent in July compared with the same month a year before, according to the U.S. Energy Information Administration (EIA). Gasoline sales are rising at the fastest year-over-year rates for more than 14 years as demand surges.  Continued economic expansion, rising employment and cheaper fuel are putting a record volume of traffic on U.S. roads as well as encouraging motorists to upgrade to larger and more fuel hungry vehicles. Gasoline sales were up 5.1 percent in July 2015 compared with July 2014, according to the EIA’s Prime Supplier Report published on Tuesday. Sales for the first seven months as a whole were up 4.4 percent compared with 2014.  The Prime Supplier Report is based on a census of around 200 firms that produce, import or transport across state boundaries selected fuels and sell the products to local distributors, local retailers or end users. Prime Suppliers account for substantially all fuel delivered to local distributors, retailers and end users in the United States so the census provides a comprehensive picture of demand. Fuel consumption is being boosted by more traffic on the roads. Vehicle-miles traveled were up 3 percent in the first half of the year compared with 2014, according to the Federal Highway Administration. Motorists are also opting for larger vehicles. Car sales fell almost 3 percent in the first eight months of 2015 but sales of light trucks, which include sport utility vehicles, surged by 10 percent, according to WardsAuto. Light trucks typically use nearly 40 percent more fuel for the same journey, according to U.S. government statistics, so the changed sales mix is  boosting consumption.

Vehicle Sales Forecast for September: Over 17 Million Annual Rate Again -  The automakers will report September vehicle sales on Thursday, Oct 1. Sales in August were at 17.7 million on a seasonally adjusted annual rate basis (SAAR), and it appears sales in September will be over 17 million SAAR again. Note:  There were 25 selling days in September, up from 24 in September 2014 (Also note: Labor Day was included in September this year).  Here are several forecasts: From WardsAuto: Forecast: U.S. Automakers to Record Best September in Ten Years A WardsAuto forecast calls for U.S. automakers to deliver 1.42 million light vehicles in September, an 11-year high for the month. The report puts the seasonally adjusted annual rate of sales for the month at 17.8 million units, slightly above last month’s 17.7 million SAAR and well ahead of the year-to-date SAAR through August (17.1 million). From J.D. Power: Labor Day Propels New-Vehicle Retail Sales’ Strongest Growth So Far in 2015  For the first time since 2012, Labor Day weekend falls in the industry’s September sales month instead of August. Labor Day weekend is traditionally the biggest new-vehicle sales weekend of the year, as consumers take advantage of the holiday and model year-end sales promotions, as well as the availability of the new model-year vehicles arriving in showrooms. [17.7 million SAAR] From Kelley Blue Book: Double-Digit New-Car Sales Growth Expected In September 2015, According To Kelley Blue Book  New-vehicle sales are expected to increase 12 percent year-over-year to a total of 1.39 million units in September 2015, resulting in an estimated 17.5 million seasonally adjusted annual rate (SAAR), according to Kelley Blue Book ...

DOT: Vehicle Miles Driven increased 4.2% year-over-year in July, Rolling 12 Months at All Time High -- The Department of Transportation (DOT) reported: Travel on all roads and streets changed by 4.2% (11.4 billion vehicle miles) for July 2015 as compared with July 2014.  Travel for the month is estimated to be 283.7 billion vehicle miles. The seasonally adjusted vehicle miles traveled for July 2015 is 264.4 billion miles, a 3.9% (9.9 billion vehicle miles) increase over July 2014. It also represents a 0.8% change (2.1 billion vehicle miles) compared with June 2015.  The following graph shows the rolling 12 month total vehicle miles driven to remove the seasonal factors. The rolling 12 month total is moving up - mostly due to lower gasoline prices - after moving sideways for several years.   Miles driven (rolling 12) had been below the previous peak for 85 months - an all time record - before reaching a new high for miles driven in January. The second graph shows the year-over-year change from the same month in the previous year. In July 2015, gasoline averaged of $2.88 per gallon according to the EIA. That was down significantly from July 2014 when prices averaged $3.69 per gallon. Gasoline prices aren't the only factor - demographics is also key. However, with lower gasoline prices, miles driven - on a rolling 12 month basis - is setting new highs each month.

Hedge funds no longer sure oil prices will fall further – Hedge funds continued to pare short positions in U.S. crude oil last week even as the previous short-covering rally ran out of steam. The unusual concentration of hedge fund short positions built up between June and August has been partially unwound, reducing some of the persistent selling pressure evident in the market during the third quarter. Speculators are not yet ready to bet heavily on a rebound in prices but the bearishness that dominated the market over the summer is dissipating. Hedge funds and other money managers reduced their gross short position in the main NYMEX U.S. crude futures and options contract by 14.5 million barrels in the week ended Sept. 15. Hedge funds have reduced their gross short position for five consecutive weeks by a total of more than 52 million barrels, according to the U.S. Commodity Futures Trading Commission. The gross short position has been cut by almost a third to 111 million barrels, down from a peak of 163 million in mid-August, though still almost double the 56 million barrels in the middle of June. The number of hedge funds with large short positions above the reporting threshold was unchanged at 59 but their average position was trimmed by almost 250,000 barrels, or 12 percent.

Oil Speculators Most Bullish in Two Months as OPEC Calls for $80 - Hedge funds slashed their bets on falling oil prices, leaving them the most bullish on U.S. crude futures in two months. Money managers’ net-long position in West Texas Intermediate rose by 14,821 contracts to 147,678 futures and options in the week ended Sept. 15, according to data from the Commodity Futures Trading Commission. That’s the highest level since July 7. In contrast, traders curbed their bullish positions in European benchmark Brent by the most in a month. The Organization of Petroleum Exporting Countries assumes crude prices will rise to $80 by 2020 as output falls elsewhere. U.S. production could sink by the most in 27 years in 2016 as the price rout extends a slump in drilling. Speculators closed out short positions two days before the Federal Reserve decided not to raise key U.S. interest rates. “The market’s not as oversupplied as we think it is,” OPEC assumes crude prices will rise by about $5 a year through 2020. Production from nations outside the group will be 58.2 million barrels a day in 2017, 1 million lower than previously forecast, according to an internal report. The impact of low prices is “most apparent on tight oil, which is more price reactive than other liquids sources,” according to the report.

Oil falls 2 percent as concern over demand bites (Reuters) – Crude oil prices fell as much as 2 percent on Tuesday on uncertainty over whether global demand will be enough to erode a sky-high surplus, ahead of a weekly survey of U.S. inventory levels. Volatility has picked up this week, as the outlook for crude has been muddied by data pointing to the market possibly having stabilized after losing more than half its value in a year, and the persistence of the highest global surplus in modern times. There is evidence that U.S. shale production is starting to feel the pinch of oil prices near six-year lows, which has prompted the International Energy Agency to issue more bullish forecasts for the market balance next year.  Capital Economics analyst Thomas Pew said there has been a loss of some half a million barrels of oil per day in U.S. production in the last couple of months alone. But uncertainty is running high over the outlook for demand in top consumers such as China, as well as the resilience of the U.S. economy following the Federal Reserve’s policy meeting last week

Brent recoups early losses, U.S. settles down 2 pct; eyes on inventories (Reuters) - Brent settled up on Tuesday, while U.S. crude finished down 2 percent but off its lows after a partial pipeline outage and bets of positive U.S. inventory data helped oil offset skittish sentiment in financial markets. Oil saw more support in post-settlement trade after industry group the American Petroleum Institute reported that U.S. crude inventories fell 3.7 million barrels last week. Stockpiles at the Cushing, Oklahoma delivery point for U.S. crude futures alone fell almost 500,000 barrels, it added. A Reuters poll projected that U.S. crude stocks fell by just around 500,000 barrels last week. Official inventory data from the U.S. government is due on Wednesday. Brent's front-month contract, November, settled up 16 cents, or 0.3 percent, at $49.08 a barrel. U.S. crude's October contract settled down 85 cents, or 1.8 percent, at $45.83 before expiring as the front month.

WTI Rises On Inventory Draw Despite Biggest Production Rise In 8 Weeks -- Following API's bigger than expected inventory draw, DOE confirmed a 1.925mm draw(more than expected) but the bigger story is likely that crude production rose 0.21% - the first rise in 8 weeks. Crude's initial reaction was dip but algos have morphed that into a rip now above $47. Inventories draw again... But production rose for the first time in 8 weeks... (notably though the rise was due to Alaska with 0% growth in The Lower 48)  And so for now the machines are focused on inventories and not production... Charts: Bloomberg

U.S. crude stockpiles fall more than expected last week - EIA -- U.S. crude oil stocks fell more than expected last week, while gasoline inventories increased and distillates drew down unexpectedly, data from the Energy Information Administration showed on Wednesday. Crude inventories fell 1.9 million barrels in the week to Sept. 18, the second straight weekly drawdown, compared with analysts’ expectations for a decrease of 533,000 barrels. The fall was smaller than the previous week’s 2.1-million barrel draw. U.S. crude imports fell 13,000 barrels per day last week with Gulf Coast imports dropping to second lowest weekly level since 1992. Crude stocks at the Cushing, Oklahoma, delivery hub for U.S. crude futures fell 462,000 barrels, EIA said. Crude futures extended gains in choppy trade after the bigger-than-expected drop, but pared gains later.

Jack Kemp's Weekly Crude Oil, Gasoline Tweets -- September 23, 2015  -- Jack Kemp's weekly tweets on gasoline demand and oil inventories:

• Record propane stocks show first weekly drawdown since March, residual fuel oil stocks little changed; graphs are incredible; huge records being set
• US distillate stocks fell -2.1 million bbl as refineries cut crude processing at the end of the driving season 
• US gasoline stocks stand at 23.87 days of consumption, +1.57 days over 10-yr seasonal avg and +0.39 days over 2014 
• US gasoline stocks rose +1.4 million bbl and are +8.4 million bbl over 2014 level and +7.0 million bbl over 10yr avg.  
• US gasoline consumption averaged 9.2 million b/d over the last four weeks, +270,000 b/d over 2014
• US refinery throughput edged down -310,000 b/d but at 16.2 million b/d is in line with 2014 and equal to 10-yr high
• US crude imports were unchanged from previous week and relatively subdued at 7.2 million b/d
• US commercial crude stocks fell -1.9 million bbl last week and have been basically flat since the start of August -- but still way above above; will move the 10-year average

One has to look at the graphs to see how the energy picture has really changed in the past year. The amount of crude oil being produced in this country is not simply setting new records; production will move the needle on 10-year averages.

Oil edges higher on U.S. GDP data but long-term outlook weak -- Oil prices edged up on Friday boosted by stronger than expected U.S. economic data though the longer-term outlook for energy markets remains weak due to a global oil supply glut and uncertainty over economic growth prospects in Asia. Globally traded Brent crude oil futures were at $48.62 per barrel by 1335 GMT, up 45 cents from their last close. U.S. West Texas Intermediate (WTI) futures were up 89 cents at $45.80 a barrel, having gained $1 earlier. The gains accelerated after U.S. government data showed the economy expanded at a annual pace of 3.9 percent in the second quarter, more than previously estimated, on stronger consumer spending and construction. Oil prices rose more than 25 percent in late August after a slowing rig count and reduction in U.S. crude stocks implied a tightening North American market and an easing of the global oil supply glut. But Brent is still down 24 percent so far in the third quarter, putting it on track for the second largest quarterly drop since 2008. Credit ratings agency Standard & Poor’s said that marginal production costs in places such as the United States were poised to fall due to improved drilling efficiencies, meaning production will not decline as steeply as expected.

U.S. Oil-Rig Count Falls to 640 - WSJ: The U.S. oil-rig count fell by four to 640 in the latest reporting week, extending a recent streak of declines, according to Baker Hughes Inc. BHI -1.33 % The number of U.S. oil-drilling rigs, which is viewed as a proxy for activity in the oil industry, has fallen sharply since oil prices started falling last year. After a six-week streak of modest growth, the rig count has now declined for four consecutive weeks. Crude oil prices rose 1% to $45.38. There are now about 60% fewer rigs working since a peak of 1,609 last October. According to Baker Hughes, the number of gas rigs fell by 1 to 197. The U.S. offshore rig count was 33 in the latest week, up two from last week but down 29 from a year ago. For all rigs, including natural gas, the week’s total was down four to 838.

U.S. oil drillers cut rigs for 4th week on weak crude-Baker Hughes (Reuters) – U.S. energy firms cut oil rigs for a fourth week in a row this week, data showed on Friday, a sign the continued weak prices were causing energy firms to reduce drilling plans. Drillers removed four oil rigs in the week ended Sept. 25, bringing the total rig count down to 640, the lowest since July, after cutting a total of 31 rigs over the three prior weeks, oil services company Baker Hughes Inc said in its closely followed report. That compared with 1,592 oil rigs in the same week a year ago and an all-time high of 1,609 in October 2014. Combined with the reduction in natural gas rigs, total U.S. rigs were at a 12-year low. Natural gas rigs were down one this week to 197, up just one from its lowest level since at least 1987, according to the Baker Hughes data. The reductions over the past few weeks have cut into the 47 oil rigs that energy firms added in July and August after some drillers followed through on plans to add rigs announced in May and June when U.S. crude futures averaged $60 a barrel. U.S. oil futures this week however were averaging $45 a barrel for a third week in a row, near the lowest levels for the year on continued lackluster global demand and lingering oversupply concerns.  In the country’s major shale basins, drillers this week cut three oil rigs in both the Permian in West Texas and eastern New Mexico and the Eagle Ford in South Texas and one in the Bakken in North Dakota and Montana. The Niobrara in Colorado and Wyoming remained unchanged.On Friday, U.S. crude prices were up about 1 percent, following gains in Wall Street stocks on stronger revised U.S. economic data.

Why the US hides 700 million barrels of oil underground - Something important, and valuable, has been quietly hidden along America’s Gulf Coast. Across four secure sites in unassuming locations lies nearly 700 million barrels of oil – buried underground. A total of 60 subterranean caverns, carved into rock salt beneath the surface, constitute the United States’ massive “Strategic Petroleum Reserve” (SPR). The facility was set up 40 years ago and there are now many other huge oil stockpiles dotted around the world. In fact, a whole host of countries have poured billions of dollars into developing such facilities and more are on the way. But what are these reserves – and why would anyone want to bury oil back into the ground in the first place? The answer lies in the energy crisis of 1973. Arab oil exporters had cut off the West from their supplies in response to US support for Israel during the Yom Kippur War. The world was so dependent on oil from the Middle East that prices skyrocketed and petrol was soon being rationed at US filling stations. In some cases, it dried up completely. People feared that any petrol they had might be stolen and a few even took to protecting their cars with firearms (see photographs taken during the crisis, below).A couple of years later, the US began building its SPR, filling caverns full of crude oil. Were oil supplies to be severely disrupted in the future, now the US would have its own stores to tide them through a price spike and alleviate pressure on global markets. As a government website boasts, “The SPR's formidable size… makes it a significant deterrent to oil import cutoffs and a key tool of foreign policy.” It’s a neat, but expensive, idea. The current year’s budget for maintaining the  SPR is $200m.

This Is What Needs To Happen For Oil Prices To Stabilize -- To date, we have lost about 500,000 BOPD in the Lower 48. We will lose that again before the year is out. Pundits will claim otherwise, suggesting that oil in the 50’s or 60‘s will spur activity. But if that activity is in drilling, we won’t see any effect for a half a year or so. If it is in fracking drilled but uncompleted wells (“DUC’s”), that won’t mean much either over time. DUC’s have been the story of 2015 though they have had little effect on stopping the declines being put in. Back when the onslaught began, which I mark as Thanksgiving Day 2014—when OPEC declined to cut—Wall Street began talking of shale as being a switch; as in you can turn it on and off. Well, in the perspective of a remote offshore project and the 10 years that it takes to bear fruit, then the answer is yes. But shale is not a switch when it comes to controlling commodity prices, which are much more impatient. It took a full 6 to 7 months for the falling rig count to cast a shadow over production declines. And even then the initial declines were shallow, more of a cresting action really. So, going forward, we may have a new metric. That is, a sudden decline in rigs will take 6 to 9 months to show up in production in any meaningful way. We also still have a somewhat uneducated media that continues to shrug off its homework. We’re about a year into this bear market and oil has been covered to death on the financial news but it is still being misreported. As I mentioned above, the thought that $60 causes a switch to be thrown is wrong. Operators are battered and bruised. Sensible ones like EOG are holding onto their money. Others like Pioneer are thumping their chests claiming they can drill anywhere any time on their better prospects (but what company is going to claim holding mediocre acreage?). Full disclosure: I own stock in both, but should I stumble upon a few bucks (I run a frack company so these days I’m not counting on it) it would go to EOG. But, for the most part, very few operators are going to run headlong into a drilling program on a modest recovery. There is also the matter of their banks. They won’t let them. The shine is officially off shale in the debt markets. There are the private equity folks and other bottom feeders that are finding their way into the market but for the most part they are spending money on distressed assets, not new oil and gas wells.

How Much Are The World’s Giant Oil Fields Depleting? - The Joint Organizations Data Initiative (JODI) releases monthly oil supply-and-demand data for about 80 countries, which it gathers by directly surveying the countries. It is widely cited by analysts, especially for its figures on demand, imports and exports. The latest JODI data released Sunday showed that U.S. crude-oil production rose from 9.3 million barrels a day in June to 9.5 million barrels in July. But the EIA’s latest forecast called for July production to fall to 9.2 million barrels a day in July, continuing the trend of declining U.S. production as companies cut spending in the face of low prices. For the charts below I have used JODI data for all Non-OPEC nations except those that do not report to JODI.  For the USA, since the JODI data is obviously wrong for July, I simply carried forward the June data which also came directly from the EIA. And for OPEC I use the OPEC MOMR’s “secondary sources.” The data below is through July 2015 and is in thousand barrels per day. The below table, Giant Oil Fields of the World Data as of 2013 is from Art Berman. It was compiled by Mike Horn and Associates and is on the AAPG records. The Excel file that I received was far more extensive than the below. It contained the 738 largest oil fields and 1048 total oil and gas fields. I have shortened it to only fields above 5 billion barrels of oil, ultimate recovery estimate. Five fields above 5 billion barrels ultimate recovery are not included. Three because there was no data and Manifa and Khurais (Saudi Arabia), because of decades of being mothballed offline, I found their data to be inaccurate.   Horn and Associates calculated the decline, from first production, using three decline rates, 6.7 percent per year, 3.4 percent per year and 1.4 percent per year. Then they calculated the decline rate using an average of those three decline rates. The average of the three is the one used here when I calculated the remaining reserves from the original ultimate recovery estimate. The average of those three works out to be 3.83% decline per year. I think that number is very conservative.

OPEC focuses on rival mega projects, lives with shale swing output – After almost a year of painfully low oil prices, OPEC members are beginning to believe they are winning against upstart U.S. shale producers in a short-term market share contest. Yet insiders and experts say OPEC is looking for a longer-lasting impact on other high-cost production oil field plans, many in deep oceans, with bigger time scales, even if that means a period of cheap oil prices lasting for years. Privately, OPEC’s core Gulf members say they have resigned themselves to the idea that the U.S. shale industry’s high-tech flexibility means it will respond quickly when prices start rising again, making the United States the new swing producer in world oil, the role held for so long by Saudi Arabia. “The oil surplus is slowly being drawn from the market. U.S. oil production is expected to fall to less than 9 million barrels per day by the end of this year or early next year,” said an OPEC delegate from a Gulf oil producer. “But there is one point that no one is looking at which is the delay in the longer-term oil projects, these are 4-5 year projects. The postponement of these projects will impact the overall supply in the market.” The short investment cycle of U.S. shale, where it takes about few months before returns are seen, make it the most sensitive to oil price fluctuation — either way. Thus the spike in oil prices in June where U.S. crude was trading above $60 a barrel drew out more shale output but the price drop in August will reverse that, OPEC sources say.

Can The Saudi Economy Resist "Much Lower For Much Longer"? - The previous article in this series on Saudi oil policies asked what the Saudis planned to do as their encore in 2016 after sacrificing approximately $100 billion in crude oil export revenue in 2015 in pursuit of market share. This article provides the author’s answer: the Saudis must alter course, seek a consensus on prices and volumes with their fellow OPEC members, coordinate with Russia, and reduce output from 2015’s average (approx. 10.5 mmbbl/d) to signal their commitment. Why? Crude prices staying lower for longer will rapidly devastate the Saudi economy. In recent days, it seems the slogan “lower for longer” for crude prices has become “much lower for much longer.” September 11, Goldman Sachs revised downward its projection for average WTI and Brent per barrel prices in 2016 from $57 to $45 and $62 to $49.50 “on the expectation that OPEC production growth, resilient supply from outside the group and slowing demand expansion will prolong the glut.” Goldman also said prices could reach $20, albeit probably not for an extended period. At a recent conference in Alberta, Jeff Currie, Goldman’s head of commodity research, said low crude prices could persist for fifteen years and that Goldman’s long-term forecast is for $50 crude. Goldman’s projections both in terms of average 2016 prices and $20 as a possibility could prove optimistic. In a situation of oversupply, which prevails currently, when oil-dependent economies must earn dollars to pay for imports and the interest and principal on US$ loans, the price elasticity of supply is sharply negative. As excess crude oil production threatens to exceed crude storage capacity the price of each incremental barrel of crude presumably could approach $1 for US$ hungry producers. This is the kind of environment a September 14 Bloomberg article describes: intense competition between major oil exporting nations as Saudi Arabia fights to maintain its place as China’s chief crude supplier, and Iran, Russia, and Angola gird to compete fiercely for second place in this critical export market.

OPEC is winning battle to stimulate gasoline demand --  OPEC's bid to curb production of high-cost oil is taking time to produce results but the organisation is already making good progress on its other objective of stimulating fuel demand. In the first half of the year, gasoline deliveries into U.S. local markets jumped by 4.3 percent compared with the same period in 2014, according to the U.S. Energy Information Administration. The United States is the world's largest gasoline consumer and its gasoline demand accounts for 10 percent of all crude and condensates produced worldwide. In the first six months of 2015, U.S. gasoline consumption rose at the fastest rate since 1985 - another occasion on which the real price of oil halved over 12 months and stimulated demand (link.reuters.com/xux65w). U.S. gasoline sales have fallen or stagnated for the last decade as the high cost of fuel encouraged motorists to use their cars less and buy smaller and more fuel efficient vehicles. But the sharp drop in fuel prices since the middle of last year is stimulating demand again by encouraging more driving and motorists to purchase much bigger and heavier vehicles. According to the Federal Highway Administration, the volume of traffic on U.S. roads in the first half, measured in vehicle-miles travelled, was up 3.5 percent compared with 2014

Saudi Arabia Closed to Oil War III Refugees. - If you were a fleeing a oil and wars between warring Muslim factions, you might want to get the frack away from the people doing the fighting – fellow Muslims. The Saudis, who bankroll proxy groups in Syria and Iraq have closed their borders to their northern neighbors. While European countries are being lectured about their failure to take in enough refugees, Saudi Arabia – which has taken in precisely zero migrants – has 100,000 air conditioned tents that can house over 3 million people sitting empty. The sprawling network of high quality tents are located in the city of Mina , spreading across a 20 square km valley, and are only used for 5 days of the year by Hajj pilgrims. As the website Amusing Planet reports, “For the rest of the year, Mina remains pretty much deserted.”; The tents, which measure 8 meters by 8 meters, were permanently constructed by the Saudi government in the 1990’s and were upgraded in 1997 to be fire proof. They are divided into camps which include kitchen and bathroom facilities. The tents could provide shelter for almost all of the 4 million Syrian refugees that have been displaced by the country’s civil war, which was partly exacerbated by Saudi Arabia ’s role in funding and arming jihadist groups. However, as the Washington Post reports, wealthy Gulf Arab nations like Saudi Arabia, Qatar, Kuwait and others have taken in precisely zero Syrian refugees. Although Saudi Arabia claims it has taken in 500,000 Syrians since 2011, rights groups point out that these people are not allowed to register as migrants. Many of them are also legal immigrants who moved there for work. In comparison, Lebanon has accepted 1.3 million refugees – more than a quarter of its population.

Senior Saudi royal urges leadership change for fear of monarchy collapse | Middle East Eye: A senior member of Saudi Arabia’s royal family has circulated a letter expressing fear that the monarchy may collapse unless the king is urgently replaced and the position of deputy crown prince scrapped, Middle East Eye can reveal. On 4 September, a grandson of the late King Abdulaziz Ibn Saud wrote a four-page letter calling on the royal family to hold an emergency meeting to address concerns that the House of Saud may be losing its grip on power. “We [have] got closer and closer to the fall of the state and the loss of power,” the letter read. “We appeal to all the sons of King Abdulaziz – from the eldest Prince Bandar to the youngest Prince Muqrin – to summon an emergency meeting with all the family to discuss the situation and do everything that is need to save the country.” The letter was signed “a descendant of the King Abdulaziz of the House of Saud”. MEE spoke to the letter’s author, who confirmed he is a grandson of Abdulaziz, but asked not to be named for fear of negative repercussions. The document has been carefully circulated among princes, using secure means of mobile communication, because royal family members are under surveillance by those in power, the letter’s author said.

OilPrice Intelligence Report: Iran Holding Up Its End Of The Bargain, So Far - The International Atomic Energy Agency (IAEA) says that Iran is on track with its obligations under the landmark nuclear agreement reached in July. The head of the IAEA, Yukiya Amano, confirmed that the agency’s inspectors were in Iran and had access to the Parchin military site as part of its investigation into Iran’s past nuclear activities. Amano says that Iranian officials cooperated and granted access to investigators. IAEA personnel have long been barred from the Parchin facility, where the international community believes Iran worked on nuclear weapons research and technology. Up until now, the outside world has only observed the facility via satellite. The announcement that Iran has given access to the IAEA puts Iran on course to meet its side of the nuclear deal reached with the P5+1 countries in July, a prerequisite to the removal of western sanctions. Also, with the deal free of attacks from the U.S. Congress, implementation is looking increasingly likely. The IAEA is set to release the results of its investigation by December 15 of this year, a pivotal event that will determine the next steps for Iranian sanctions. If removed, Iran could return a significant portion of its oil production capacity to market, adding to global supplies.

Iran Deal May Redefine The Middle East -- One month after the Iran nuclear deal was concluded, the Middle East is still reeling from profound shock. Long and well established alliances have led to bewildering changes, not only in the Mideast, but across the world. The stark difference is nowhere more strikingly revealed than in the media reports on the recent Iran nuclear deal. In a recent article on the front page of the Tehran Times, the author compared President Lincoln’s battle with a recalcitrant Congress for the passage of the 13th Amendment with Obama’s struggle with the Congressional leadership and hardliners for passage of the Iran nuke deal. Obama’s publicly stated view of the deal, similar to Iran’s, is that it is not just about weapons, but also about ending the thirty odd years of isolation and restoring Iran to its traditional place of power, leadership, and influence in the region.  There is widespread speculation about the visit of the new Saudi King to the U.S. to meet with President Obama, at a time when tensions between the two countries have seldom been higher. The Saudis’ bitter disappointment over the U.S./EU nuclear deal with Iran, their prime geopolitical rival, is no secret.  The nuke deal also led directly to a sudden military alliance between Israel and Saudi Arabia, once thought of as inconceivable. Along with that, the Saudis also promised, for the first time, exports of oil to Israel. But the real bombshell, reported in the Israeli press, was the Saudis offer to Israel to allow flyovers of Saudi territory in case an attack on Iran became necessary, supposedly in exchange for some form of peace agreement with the Palestinians.

The Parchin nuclear myth begins to unravel: For well over three years, heavy doses of propaganda have created a myth about a purported steel cylinder for testing explosives located on a site at Iran’s Parchin military testing reservation. Iran was refusing to allow the International Atomic Energy Agency (IAEA) to inspect the site while it sought to hide its past nuclear weapons-related work, according to that storyline. Now Iran has agreed to allow the IAEA to visit the site at Parchin and environmental samples have already been collected at the site. However, the politically charged tale of the bomb test chamber of Parchin is beginning to unravel. IAEA director general Yukiya Amano entered the building in which the explosives chamber had supposedly been located on Monday and announced afterward that he found “no equipment” in the building. That is surely a major story, in light of how much has been made of the alleged presence of the chamber at that location. But you may have missed that news, unless you happened to read the story by Jonathan Tirone of  Bloomberg Business News, who was the only journalist for a significant news outlet who chose to lead with the story in his coverage of Amano’s Monday visit.  But the full story of that mysterious chamber makes it clear that it was highly dubious from the start.

OilPrice Intelligence Report: “A Real Wake-Up Call” For The Oil Markets: Iran announced a decision to push back a key oil conference where it had planned to reveal new contracts for doing business in Iranian oil fields. The London conference, originally scheduled for December 2015, will instead be held in February 2016. The conference has already been postponed several times, but the decision to push it back another 2 months is intended to ensure that there is some clarity regarding western sanctions before the conference is held. For now, there is a decent chance that December will be a pivotal month for the removal of sanctions. The details of the new oil contracts will go a long way in determining how attractive Iran becomes as a new oil frontier for international companies. Iran has historically been a tough place to do business for foreign companies, but with Iranian oil production down more than 1 million barrels per day from its pre-sanctions level, the government has suggested that an overhaul of contracts would make investment much more attractive. Meanwhile, on September 25, China announced efforts to address climate change, as President Xi Jingping wraps up his trip to the U.S. this week. The initiative comes after the U.S. and China announced climate initiatives in November 2014, following months of backroom negotiations. The U.S. pledged to slash emissions by 26 to 28 percent by 2025, and China will see its emissions peak by 2030.   The announcement this week will put some meat on the bones for those targets. China unveiled a plan to launch a cap-and-trade program in 2017 in order to reduce greenhouse gas emissions from an array of industries. China has already put in place cap-and-trade plans at the regional level in several parts of the country, but the 2017 plan will cap emissions nation-wide.

The End Of Magical Thinking: Money Cannot Manufacture Resources ---Author Kurt Cobb writes frequently on energy and the environment and warns that our current economic policy suffers from a fatal degree of magical thinking: sufficient new resources will emerge if the price is high enough. As any fourth grader will tell you, a finite system will not yield unlimited resources.But that perspective is not shared by those controlling the printing presses. And so they print and print and print, yet remain flummoxed when supply (and increasingly, demand for that matter) does not increase the way they expect. Is this any way to run an economy? Or a finite planet for that matter?  Of course, a lot of people have been hearing the hype about the growth in production in the United States for crude oil. That has been happening, but it has been happening with very high cost oil. Now the prices are down and the industry is on its back. They are looking for ways to increase the amount of money they can get for that crude oil. One of those would be to sell this light tight oil, which is oversupplied in the United States to foreign refineries.  I am not sure that is going to help them much because the price of oil has gone down so low as compared to what their costs are. We have already seen a decline in U.S. output. The prognostication that we were going to be energy independent in oil, and that we were going to become the largest provider of oil to the world, I do not think are going to work out. It shows us that high priced oil leads to low priced oil, which also leads to economic slowdown. That is what we are seeing now. That is the equation that you and I wonder how people do not see that these things are connected, and yet they do not. people who run our central banks and run our government policy think that money manufactures resources. If we just put enough money out there, it will call forth the resources. There is a little bit of truth to that, because very cheap finance made it possible for us to lift this $100 barrel oil out of the shale formations of North Dakota, Texas, and other places. That is not endless, and the high price puts pressure on the economy. I think this is where we are going to have problems.

Global Oil Market Gets New Chinese Traders Hungry to Taste Crude - They long stood in the shadows of state-owned Chinese energy giants, small in size and clustered in an eastern province along the coast. Now, independent refiners are wielding growing clout in the global oil market. Shandong Dongming Petrochemical Group, the biggest of dozens of privately owned refiners known as “teapots,” illustrates how such processors may be coming into their own after years of depending on state-owned companies for oil. It began importing supply on its own this year after hiring two crude traders in Singapore, according to Shen Fan, a deputy general manager at Pacific Commerce Holdings Pte, its trading unit. China is widening access for teapots as part of its drive to encourage private investment in its energy industry. That may boost imports into the world’s  second-biggest oil user, helping counter a glut that’s cut benchmark prices by half in the past year. The small plants account for almost a third of the nation’s processing capacity, and if Shandong Dongming is a guide, may attract cargoes from Latin America to West Africa and Australia. “Crude demand from teapots is a shining light for producers in the oversupplied market we are in today,” Wu Kang, a Beijing-based analyst with industry consultant FGE, said by phone. “If China is a force on the demand side in the global oil market, teapots’ expanded imports is one of the factors driving this force.” The government has approved seven teapot operators to get a combined 35.3 million metric tons a year of overseas crude, or about 700,000 barrels a day, according to data compiled by Bloomberg. This may rise to as high as 40 million tons by 2016, according to ICIS China, a Shanghai-based commodity researcher. The plants are mainly found in Shandong, a province on the country’s eastern coast.

China Keeps Oil Prices From Falling As It Fills Its Strategic Reserves - WSI has released its winter weather outlook, amid a backdrop of a strong El Niño. For the peak of the bleak mid-winter, WSI projects warmer-than-average temperatures for the West Coast and Northwest, as well as for the Upper Midwest. Colder-than-average temperatures are projected for the rest of the US. What does this mean for energy? It leans modestly bullish for natural gas prices, given lower temperatures for the key heating regions of the East coast and Midwest. For the crude complex it is a bit more mixed; above-normal, damp conditions for the upper US should mean less inclement conditions and therefore more gasoline demand, although these inclement conditions could manifest themselves in the lower half of the US instead. A shift to natural gas-fired generation in the Northeast means an ongoing marginalized impact on heating oil demand. From a supply perspective, the prospect of lower temperatures in key producing regions could lead to freeze-offs for both oil and gas production. Switching focus to China, and much is being made of China’s ongoing staunch level of oil demand amid a slowing economy and stumbling stock market. This is leading to an increasing number of accusatory fingers pointing to strategic stockpiling and the filling of storage, as opposed to underlying product demand strength. We can affirm this view from the perspective of healthy imports. #ClipperData shows that waterborne imports into China continue to knock the socks off last year’s levels. Should imports keep up their pace for the rest of the month, they will be achieve their highest level since April, and imports overall will be up 14% year-to-date through the first three quarters of the year. Bargain-hunting? You betcha.

China Is Sitting on an Ocean of Diesel Fuel - Add diesel to the commodities flooding global markets from China. The nation exported a record volume of the fuel last month after already shipping unprecedented amounts of steel and aluminum overseas. The weakest economic growth since 1990 is sapping domestic demand for commodities, while refineries, mills and smelters grapple with excess capacity after years of expansion. “A lot of it has to do with slowing demand at a time when companies had plans for much a better demand environment, so capacities had been increased,”  . “As demand slows, that’s led to an overcapacity in the domestic market and producers have sought to export the surplus.” Exports of Chinese raw materials are exacerbating a global glut that drove prices to the lowest since the 2008 financial crisis and prompted steel and aluminum producers around the world to protest against the deluge. While diesel exports are principally a risk to Asian refiners, the additional shipments threaten to worsen a glut that already extends from Singapore to Europe and the U.S. Refining profits, or cracks, from making diesel in the Asian oil trading hub of Singapore have shrunk about 30 percent from a year ago as exports from China, India and the Middle East create an oversupply.