the wild swings in oil prices that we saw last week continued into early this week, fed by rumors and relatively small changes in the weekly metrics, with really no fundamental change to drive the gyrations...after jumping more than 17% on Thursday and Friday of last week due to the unwinding of wrong sided bets that oil prices would fall, US oil prices rose another 8.8% on Monday to close the day at $49.20 a barrel...then on Tuesday, after a rumor that OPEC was "willing to talk" to other oil producers proved to be unfounded, oil prices fell nearly 7.8% to close at $45.41...prices then rose slowly over Wednesday and Thursday to $46.75 a barrel, despite reports of higher oil inventories, before falling back to $46.05 on Friday, a drop attributed to an improving vote count on lifting Iran sanctions and a Chinese loan to Venezuela...
the latest EIA reports did show a larger than usual drop in oil production, which when coupled with a large jump in imports and lower refinery throughput, led to the aforementioned increase in oil inventories...US field production of crude oil fell nearly 1.3%, from 9,337,000 barrels per day in the week ending August 21st to 9,218,000 barrels per day in the week ending August 28th...while that leaves us almost 4.1% below the modern record production of 9,610,000 barrels per day in the first week of June this year, it was still 6.8% higher than our 8,630,000 barrels per day production during the last week of August last year, a level high enough at the time to contribute to the growing global glut that precipitated the drop in oil prices...more than offsetting that production decrease, our imports of crude oil rose by 656,000 barrels per day to 7,855,000 barrels per day in the week ending August 28, enough to bring the 4 week average of imports carried in the weekly Petroleum Status Report (62 pp pdf) up to 7.7 million barrels per day, which is now 0.2% above the same four-week period last year...
although the Whiting Indiana refinery was restarted this past week, it wasn't operating during the last week in August covered by this Wednesday's report, so reported total US refinery usage of crude oil continued to slide, falling for the 4th week in a row, from 16,658,000 barrels per day as of last week's report to 16,389,000 barrels per day in the last week of August covered here...so from four weeks ago, when we reported that our refineries were using oil at a record pace of 17,075,000 barrels a day, US refinery throughput of crude has dropped by over 4%, while our refinery utilization rate has dropped from 96.1% of capacity to 92.8% of operable capacity in the week reported on here...still, that should be temporary, as refinery usage should increase with Whiting back online...Midwest gasoline prices fell 38 cents a gallon on the announcement that they'd again be producing...
with gasoline prices now lower than $2 a gallon in some parts of the country, Americans are replacing their gas-stingy compact cars and hybrids with pickup trucks and SUVs at a record pace...according to this week's report on light vehicle sales for August from Wards Automotive, light vehicles were selling at a 17.72 million annual rate in August, the highest monthly rate of auto sales since July 2005....moreover, August was the fourth consecutive month the seasonally adjusted annual rate of U.S. light-vehicle sales topped the 17 million-unit mark, the first time that’s happened since 2000...breaking out the unadjusted details on August vehicle sales, we find that 725,012 units sold were light domestic trucks, 8.7% higher than the year ago period (which included Labor Day weekend), while 496,097 were US built automobiles, down 6.6% from a year ago...another 174,485 units of August sales were imported cars, down 7.3% from last year, while imported light truck sales rose by 30.3% to 173,613 units...hence, 57.3% of August light vehicle sales were built on a truck frame....the domestic ratios from Ward's are consistent with the Commerce Department's Full Report on Manufacturers' Shipments, Inventories and Orders for July, which indicated that manufacturers shipped light trucks and utility vehicles worth $14,670 million in July, a 9.5% increase, vs just $8,998 million worth of automobiles, 0.2% lower than June...the commerce department data also shows shipments of heavy duty trucks valued at $3,206 million, up 22.1% from a year ago...also note that a much larger proportion of the auto sales are now the larger CUVs, or crossover utility vehicles, which are station wagon type SUVs built on an automobile platform...
with refinery throughput down more than crude oil production and oil imports higher, there was nothing else to do with the surplus glut of crude than to store it for usage later...in the week ending August 28th, our commercial crude oil inventories in storage rose to 455,428,000 barrels, up more than 1% from the 450,761,000 barrels we had stored as of August 21st...that means our crude oil in storage is now 26.7% higher than the 359,570,000 barrels we had stored the last week of August last year, and of course the highest for this time of years in the 80 years that such records have been kept...we should note, though, that these weekly changes in the quantity of oil we have stored, which are widely watched by oil traders and hence move prices almost every week, are really a function of volatile weekly imports...with the largest oil tankers now hauling 2,000,000 or more barrels of oil, that means unloading two extra VLCCs in the same week would almost certainly mean that our imports and hence our inventories would rise for that week...so the oil traders who sit by their screens waiting for the weekly EIA inventory report would really be better informed if they got a ringside seat at the source of that action, at the deepwater Louisiana Offshore Oil Port (LOOP) off the coast of Louisiana in the Gulf of Mexico, where those VLCCs would be unloading....
we're finally starting to see some impact from the lower oil prices on the number of oil rigs the frackers have been operating....for the week ending September 4th, Baker Hughes reported that 13 fewer oil rigs were operating than in the prior week, as rigs drilling for oil fell from 675 to 662 and rigs drilling for gas were unchanged at 202, down from 1584 oil rigs and 340 gas rigs a year ago...3 offshore rigs were added this week, after 8 offshore platforms had been idled in the 3 prior weeks, bringing the offshore count back up to 33, down from 65 a year earlier...a net of 13 horizontal rigs were stacked this week, bringing the fracking rig total down to 672, down from 1333 a year ago....there were also 5 less vertical rigs operating, leaving 120, down from last years 368, while 5 directional rigs were added, bringing that total to 85, down from 224 directional rigs operating during the same week last year...
while last week saw rigs added in Texas while the big cutback was in Louisiana, this week those changes were reversed, as drillers in the South having been moving rigs around like chickens in a barnyard...11 rigs were pulled out of Texas oil fields this week, including 4 that had been operating in the Eagle Ford, 2 that had been fracking the Permian basin, and likely the 2 from the Granite Wash, since Oklahoma added a rig this week...that left Texas with 375 active rigs, down from 907 in the first week of September last year, with rigs in the Eagle Ford at 93, down from 202, rigs in the Granite Wash at 15, down from last year's 68, while 253 rigs were still working in the Permian, down from 563 a year earlier...meanwhile, 4 rigs were added in Louisiana, which now has 75, including 31 offshore, down from 117 last year, and since the Haynesville shale count was down 2 to 29, it's a fair guess those were pulled from the Texas side of the basin...Oklahoma's count, meanwhile was up 1 to 106, which was down from 213 a year ago, as a rig was added in the Arkoma Woodford while one was pulled from the Cana Woodford, which at 39 rigs, up from 37 last year, remains the only shale play to have seen increased activity from a year ago...
the only other shale basins to see changes this week were the Williston, down 1 rig to 72 and down from 192 a year ago, and the Utica, which was also down 1 to 19, and down from 43 a year ago...as a result of those changes, the North Dakota rig count was down 1 to 71 while Ohio rig count was down 1 to 18...the other states that saw changes in their rig counts this week were Alaska, which was down 1 rig to 12, but up from 7 rigs a year ago, Colorado, which was down 2 rigs to 34 and down from 74 a year ago, Kansas, also down 2 rigs to 11, and down from 23 last year, and New Mexico, which was down 2 rigs to 48 and down by half from 96 a year ago...the only other state to see a rig added this week was California, where there are now 14 rigs active, down from 46 the same week a year ago...
we're gonna wrap this up this week with two charts that show the recent history of oil and gas prices and the number of rigs drilling for each as a result of those prices...the first graph immediately below, is from a Yahoo finance article at midweek, so it's missing the Friday data which we have just reviewed, so you can imagine that if you'd like, but we're looking at it for the longer term trends here...on the graph below, the count of active oil rigs since August 2007 is shown in blue and is noted by the numbers on the left margin, while the track of the oil price per barrel is shown in yellow as indicated on the right margin....we can see that before the recession, and before fracking for oil really got serious, the oil rig count had topped 400 in late 2008, less than half of today's count, before the recession and attendant collapse of oil prices from $145 to $30 caused drillers to pull more than half their rigs out of the fields...the number of rigs drilling for oil then increased steadily, from a low of 179 in June of 2009 till they topped 1400 in June of 2012, and stayed in that range until early 2014, when additional oil rigs were added until the peak of 1609 rigs was reached on October 10th...but notice that both times oil prices collapsed, in 2008 and again last year, it took several months before drillers started pulling their rigs in earnest....so since it's only been a little over 2 months into this new downturn in oil prices, we may just be seeing the first signs of an oil rig pullback..
the 2nd graph we have below comes from the Natural Gas Weekly Update from the EIA (Energy Information Administration), a summary which is useful reading by itself...the metrics aren't as clear as i'd like, but there's a lot of information packed into that small graph, which like the one above, shows the number of rigs drilling for natural gas and the benchmark price for that gas for each week going back to the beginning of 2007, with the gas rig count again shown on the left margin and the oil prices shown on the right...there are 3 colored bands across the graph, representing the number of each type of rig drilling for gas in any given week...the width of the green band represents the number of conventional vertical rigs drilling for gas weekly; the width of the brown band indicates the number of horizontal rigs drilling thru shale for fracking, while the blue band represents the number of directional rigs drilling diagonally into a gas field...as a result of the way they're stacked on the graph, then, the top of the green colored band is in effect the total rig count for each week, while the price of natural gas over that span is shown by the track of the heavy black graph's path...
so here we see that the big bust of the natural gas market occurred with the onset of the recession, when gas prices dropped from near $13.50 per mmBTU in the spring of 2008 to $3.00 per MMBTU by the summer of 2009...but note once again that the total gas rig count continued to rise through much of 2008, reaching a peak with 1,606 rigs drilling for natural gas in the last week of August 2008, only to see that count follow the price down to hit 665 gas rigs by July 17, 2009, when the rig count start rising again...then gas drillers, mostly frackers in the Marcellus and the Haynesville, continued to overproduce even in the face of falling prices until natural gas prices collapsed to near $2 per mmBTU in early 2012....gas rigs then began a slow decline that we could say lasts until this day...so it's taken years for natural gas drillers to wash out; oil drillers could just be in the first innings of their losing game....and although it's not entirely clear on this graph, natural gas prices have recently broken out of their 3 month trading range, between $2.75 and $2.95 per mmBTU, that had persisted since June, and for the last two weeks have seen the benchmark gas price stay in a $2.65 to $2.70 per mmBTU range...if that persists, we'd expect to see more attrition in the gas patch as well...
Gates Mills voters to again decide on proposal to control drilling in village - cleveland.com — Voters will again be faced with a proposal in November that would give residents more control over fracking in the village. The charter amendment would require voters to sign off on, or reject, any new lease or renewal of an existing lease of village property for deep-well horizontal fracking. Charles Belson, a council candidate, and several other residents circulated petitions to have the amendment placed on the November ballot. They gathered 70 valid signatures, about 10 more than required. Last November, voters overwhelmingly rejected a bill of rights that would have prohibited any additional oil and gas wells, including less-invasive vertical wells from being drilled in the village. Gates Mills is already home to more than 40 vertical wells. Residents formed a group and petitioned for the bill of rights after Mayor Shawn Riley announced plans in January 2014 to form a land trust to control fracking in the village. Riley hoped that by pooling all village-owned property and land owned by people willing to participate in the trust, the group could have bargaining power when confronted by drillers. Horizontally drilled wells require hundreds of acres of contiguous land; if the owners of the majority of the property needed for the well agree to the drilling, oil and gas companies can pool the rest of the land they need.. Riley said he expects horizontal wells in Gates Mills within the next decade. The village is one of several Northeast Ohio communities, including Broadview Heights and Munroe Falls, that have attempted to adopt policies that would give municipalities more control over drilling, since the state has exclusive authority over where and when companies can drill.
Fracking foes say Ohio elections chief exceeds his authority (AP) — Residents in three Ohio counties where Secretary of State Jon Husted (HYOO’-sted) invalidated anti-fracking ballot issues this fall are arguing that voters, not the elections chief, should decide the substance of such issues. In a filing Tuesday, residents in Fulton, Medina (meh-DY’-nuh) and Athens counties tell the Ohio Supreme Court that Husted was supposed to decide the validity of their petitions, not the merits of the “community rights county charters” they proposed. Husted’s office says his action was “fully rooted in Ohio law.” The charters call for restricting development projects related to the gas-drilling technique of hydraulic fracturing, or fracking. County commissioners and others filed protests saying the charters would leave counties without an authorized form of government. Husted’s ruling said the proposals improperly sought to circumvent state law.
Will Ohio communities be allowed to zone out fracking? - The recent debate over Ohio cities and counties’ efforts to ban or regulate oil and gas drilling, fracking and/or waste disposal has mainly involved proposed community bill of rights that assert an innate right of local citizens to pass laws to protect their environment. So far, those efforts haven’t had much luck with Ohio courts, including the highest one, the Supreme Court. However, the Supreme Court is currently considering a case involving a different question – whether traditional zoning can dictate where oil and gas activities can go, just as it does with other industrial, commercial and residential activities. This case, if it goes against the industry, could be the lifeline that municipalities in Ohio have been seeking when it comes to asserting some control over oil and gas activities within their borders. The industry, however – in this case, specifically Beck Energy Corp. of Ravenna, Ohio – hopes for a different outcome. Beck, the lead plaintiff in a landmark Ohio case involving local oil and gas regulations, Morrison (Munroe Falls) vs. Beck Energy, is seeking an order from the Ohio Supreme Court stating that the small northeast Ohio city cannot use its zoning ordinance “to prohibit drilling for oil and gas in 99.06 percent of the city’s territory.” Beck wants the Supreme Court to vacate a stop-work order that Munroe Falls issued on June 18 based on its zoning ordinance because it “contravenes the permit issued by the Ohio Department of Natural Resources under Revised Code Chapter 1509, which expressly allows Beck Energy to drill a new oil and gas well in Munroe Falls.” Last February in the Ohio Supreme Court, Beck Energy prevailed in a case that Munroe Falls had brought against the company, ruling 4-3 in an appeal of a lower-court decision that ORC Chapter 1509 expressly reserves regulation of oil and gas activities to the ODNR.
Protesters voice opposition to fracking decision at Husted event - More than two dozen people protested outside a downtown venue where Republican Secretary of State Jon Husted was speaking Wednesday, voicing further opposition to his decision last month barring several fracking-related charter proposals from appearing on ballots in three counties. Several of the protesters also displayed signs and interrupted Husted's interview inside the building following the Columbus Metropolitan Club event, chanting "Let the People Vote" over reporters' questions.Husted invalidated charter proposals in Athens, Fulton and Medina counties that were related to oil and gas exploration, including horizontal hydraulic fracturing, or fracking. Husted said the issues were an attempt to circumvent state law, which places oil and gas regulations with the Ohio Department of Natural Resources. The latter has already been upheld by the Ohio Supreme Court. "Allowing these proposals to proceed will only serve as a false promise that wastes taxpayers' time and money and will eventually end in sending the charters to certain deaths in the courts." Husted said Wednesday that groups that want to change the state law and regulatory setup should pursue legislative action or the citizen initiative process to take the issue to a statewide vote. But protesters Wednesday disagreed, at times chanting loud enough from outside to be heard while Husted was speaking inside. Tish O'Dell, a community organizer with the Community Environmental Legal Defense Fund, called Husted's action on the local charter issues a violation of residents' constitutional rights. "They collected all the signatures that they needed," she said. "They had enough signatures. The form of the petition was correct, everything was correct, and he thinks he can make this decision to keep this off the ballot."
Big state groups come out against charter/bills of rights in Athens and two other counties | Local News | athensnews.com: The big guns came out Friday against charter/community bill of rights petitions in three Ohio counties, including Athens. With the deadline grows near for the Ohio Supreme Court to make a decision on whether local communities can fend off oil and gas development, everybody, it seems, wanted his or her voice heard. The main respondent is Secretary of State Jon Husted. The relators – aka complainants – are 10 members of issue campaign committees in Athens, Medina and Fulton counties who submitted petitions to form charter governments in their respective counties. The proposals included “bills of rights” allowing the counties to regulate or ban oil and gas fracking and other drilling activities. In the Aug. 19 complaint for a court order overturning Husted’s decision, the complainants argued that Husted overstepped his authority in upholding the protests against the county charter petitions. Friday afternoon, several statewide groups filed amicus briefs in support of Husted’s petitions. Each one argued, among other things, that Husted has solid authority to reject county charter petitions if the law they propose already has been ruled illegal by state courts. Some got more specific, with the Ohio Farm Bureau arguing that the proposed charters threaten the agricultural way of life. The groups include:
- • The Ohio Chamber of Commerce
- • County Commissioners Association of Ohio
- • Affiliated Construction Trades of Ohio (a union group)
- • The American Petroleum Institute
- • The Athens-Meigs Farm Bureau
- • The Fulton County Farm Bureau
- • The Medina County Farm Bureau
- • The Ohio Farm Bureau Federation
- • The Ohio Gas Association
- • The Ohio Oil and Gas Association
Youngstown officials file complaint to get anti-fracking charter amendment on ballot - Youngstown Vindicator - In a filing with the Ohio Supreme Court, city officials contend the Mahoning County Board of Elections acted “illegally” by refusing to place an anti-fracking citizen-initiative on Youngstown’s Nov. 3 ballot. The city filed the complaint Friday with the Ohio Supreme Court asking it to compel the board and the Ohio Secretary of State’s Office to place the proposal back on the ballot. The filing caught the board of elections chairman and FrackFree Mahoning Valley, the group that supported the proposal, off-guard. “It’s not a surprise a lawsuit was filed, but we thought the FrackFree people would initiate it,” said board Chairman Mark Munroe. “It was a surprise the city initiated the lawsuit.” Susie Beiersdorfer, a FrackFree member, said, “I’m pretty speechless, but it’s the right thing to do with a charter amendment and home rule, so I applaud the city.” The board of elections unanimously voted Wednesday to keep the charter-amendment proposal off the ballot with its members saying it did so largely based on a Feb. 17 decision by the Ohio Supreme Court. That decision says the state constitution’s home-rule amendment doesn’t grant local governments the power to regulate oil and gas operations in their limits, and that Ohio law gives the state government – specifically the Department of Natural Resources – the exclusive authority to regulate oil and gas wells. City Law Director Martin S. Hume said the filing of the complaint for a writ of mandamus was not an endorsement of the content of the proposal. Rather, the complaint seeks to vindicate the proposition that citizens should have the right to petition the government in accordance with Youngstown’s home-rule charter and the federal and state constitutions, he said.
City Asks Ohio Supreme Court to Order Anti-Fracking Proposal Back on Ballot - City officials in Youngstown, OH, have asked the state Supreme Court to reverse a county board of elections vote that would prevent a referendum to ban oil and gas development within city limits from appearing on the November ballot. The city filed the complaint last week after the Mahoning County Board of Elections voted unanimously not to certify a grassroots petition that would ask voters to amend Youngstown's charter to prohibit any kind of oil and gas activity (see Shale Daily, Aug. 27). FrackFree Mahoning Valley, which circulated the petition was not a part of the city's decision. Similar proposals were rejected by city voters in 2013 and 2014. Through its law director, the city has asked the Ohio Supreme Court to order the charter amendment proposal back on the ballot. In its decision, the board of elections cited an Ohio Supreme Court ruling that found municipalities could not prohibit oil and gas development in a way that conflicts with the state's regulatory authority (see Shale Daily,Feb. 17). Last week, board chairman Mark Munroe told NGI's Shale Daily that he expected a legal challenge against the vote, but said it would likely come from the citizens that circulated the petition. Prior to the board's vote, however, the Youngstown City Council had voted to send the charter proposal to the board for certification. Councilman Mike Ray said the council received a legal opinion from city law director Martin Hume to move the petition to the county. Ohio Secretary of State Jon Husted has invalidated similar petitions in Athens, Fulton and Medina counties that he said were an attempt to circumvent state law and legal precedent (see Shale Daily, Aug. 14). Youngstown officials said Husted's decision does not apply to the city because it was made at the county level.
Decision on anti-fracking charter vote likely imminent - A decision on a complaint before the Ohio Supreme Court involving whether voters in Athens County and two other Ohio counties will have an opportunity to vote on anti-fracking charters this November should come soon. Even though the Supreme Court agreed to an accelerated briefing schedule on the case, both sides in the legal dispute so far have been beating the deadlines for filing requested briefs. That’s fortunate for charter supporters. In order to be placed on the ballots in each of the involved counties – Athens, Medina and Fulton – the Supreme Court would need to make a favorable decision before Sept. 19 at the very latest, since that’s when military and overseas voting begins, according to Joshua Eck, press secretary for Secretary of State Jon Husted. “Obviously, the earlier this can be resolved, the better for the boards of elections, but the elections officials will obviously do whatever needs to be done, pending a resolution in the case.” In the expedited case before the Supreme Court, representatives of committees in the three counties are asking the high court to order Husted to dismiss protests against the measures and allow them to make the general election ballots in the three counties. In a decision Aug. 13, the secretary of state rejected petitions for the charter/bill of rights proposals in Athens, Medina and Fulton counties, finding that the provisions in each of the charters relating to oil and gas development represented an attempt to circumvent state law in a manner Ohio courts (including the Supreme Court in Morrison vs. Beck Energy) already have found to violate the state constitution.
Londonderry, Smith townships are Ohio oil, natural gas hot spots - Two townships are the current hot spots for natural gas and oil production in Ohio. Guernsey County's Londonderry Township is the home of the Top 5 oil-producing wells in Ohio. All five wells are owned and operated by American Energy Utica (now Ascent Resources), an Aubrey McClendon company. The Caston well is No. 1 with 56,150 barrels of oil in 2Q 2015. It was also the No. 1 well in Ohio for daily oil production with 617 barrels per day. For natural gas, the No. 1 township is Belmont County's Smith Township. That's where you will find the Top 5 Ohio wells for natural gas. All five wells are owned and operated by Pennsylvania-based RiceEnergy. Its Gold Digger well is No. 1 with 1,547,649 Mc. Its daily production is also No. 1 in Ohio with 17,007 Mcf.
Planned cracker plant could create thousands of jobs in Ohio - Ohio is on the cusp of breaking ground for a new $5.7 billion ethane cracker in the eastern part of the state, Columbus Business First reports. The announcement for the new cracker came Thursday from Gov. John Kasich, who assisted Thai company PTT Global Chemical Public Company Ltd.in planning the $100 million expenditure for the facility’s engineering and design. The crackerplant would extract ethane from natural gas and “crack” it into ethylene, a petrochemical component. Cracker plants like the one planned for Belmont County are expensive undertakings, but often yield a long lifespan and employ many high-skilled workers like engineers and lab techs. Calling the funding a “milestone” in the project, PTT CEO Supattanapong Punmeechaow said the company was drawn to Ohio’s ample supply of skilled workers. The company has contracted with Bechtel Enterprises Holdings Inc. and Fluor Corp. for engineering and cost estimates. John Minor, president of economic development group JobsOhio, said the plant will stimulate hundreds of direct jobs and thousands of indirect jobs, including construction jobs as the facility is developed.
Utica and Marcellus activity, August 23-29 -- The Pennsylvania Department of Environmental Resources might have approved 27 new oil and gas leases between August 23 and 29, but hundreds of oil and gas well owners throughout the state reportedly fell short of their responsibilities. This is the first year the DEP has required well owners to submit reports that indicate if a well is structurally sound or at risk for leaks or decay. The new requirement apparently caught some well owners off-guard– the Pittsburgh Post-Gazette reportedyesterday that 450 of the 5,600 well owners throughout Pennsylvania failed to submit the reports.“It’s a pretty horrible compliance rate,” said DEP Deputy Secretary for Oil and Gas Management Scott Perry. Over in Ohio, an anti-frackers’ lawsuit continues against Secretary of State Jon Husted, who is accused of wrongfully invalidating ballot measures that sought to limit oil and gas development. According to the Ohio Department of Natural Resources, 21 newly-granted oil and gas permits bumped the Utica Shale formation’s total permit count up to 1,996 on August 29. The formation’s total for drilled horizontal wells sits at 1,586. The ODNR reported no new permits for that same week. According to its Cumulative Permitting Activity log, 44 horizontal permits have been granted for the Ohio Marcellus formation, while 29 horizontal wells have been drilled. The Pennsylvania Department of Environmental Protection reported 30 new oil and gas permits throughout the state; three were renewals, the rest were new. Elk County topped other areas with 10 new permits split between Seneca Resources Corp and William H. Brawand.
Shale gas violations down as DEP steps up inspections -- Pennsylvania oil and gas producers pinched by the lowest prices in years are not catching any breaks from state regulators. The Department of Environmental Protection’s oil and gas office conducted 1,700 more inspections during the first seven months of the year, an 11 percent increase over the same period in 2014, according to department data. A boost in office staff last year and a big slowdown in drilling because of low prices have given inspectors time to eyeball more wells and related records. New wells require more inspections during drilling and fracking. “A big reason is the decline in drilling,” said Scott Perry, the deputy DEP secretary who oversees the oil and gas office and its staff of 227, up from 202 early last year. “They’re getting back to older wells.” The results of the increased scrutiny are mixed. Shale gas operations had only 205 violations through July, the department’s online compliance reports show. That’s down from 283 through the same period last year, despite a nearly 16 percent increase in inspections to 8,100. On the other side, the department is finding more violations in the lower-profile conventional oil and gas industry, whose more plentiful wells are generally older, shallower and less productive than those tapping the Marcellus and other shale layers. The DEP reported 1,552 violations by those operations through July, a 25 percent increase from last year.
Media Matters: How Gasland Changed the Debate -- Social scientists have long argued documentary films are powerful tools for social change.But a University of Iowa sociologist and his co-researchers are the first to use the Internet and social media to systematically show how a documentary film shaped public perception and ultimately led to municipal bans on hydraulic fracking.By measuring an uptick in online searches as well as social media chatter and mass media coverage, Ion Bogdan Vasi, corresponding author of a new study, demonstrated how local screenings of Gasland—a 2010 American documentary that focused on communities affected by natural gas drilling—affected the public debate on hydraulic fracking. Additionally, Vasi and his collaborators demonstrated how local screenings were linked to an increase in anti-fracking mobilizations that, in turn, influenced the passage of local bans on fracking.“There are few studies that describe the effect of documentaries on collective behaviors and social movement campaigns,” says Vasi, an associate professor with a joint appointment in the Department of Sociology in the College of Liberal Arts and Sciences and the Department of Management and Organizations in the Tippie College of Business at the UI. “They used anecdotal evidence but not rigorous research.”The study, “‘No Fracking Way!’ Documentary Film, Discursive Opportunity and Local Opposition against Hydraulic Fracturing in the United States, 2010-2013,” was published online Sept. 2 and will appear in the October print issue of the American Sociological Review.
Penn State’s Frackademics to Brainwash Freshman -- By making incoming freshman read about fracking’s rosy scenario. From a fracking apologist. And nothing else about fracking – in order to supply more Penn State Frackademics for the future. Only from Penn State, the university that made pedophilia a varsity sport! http://pennstatereads.psu.edu “An all-campus read means that all incoming freshman (7,000 of them at Penn State) participate in a reading program, are assigned read a common book that speaks to a Great Issue of Our Time, and engage in campus discussions about the book when they first arrive on campus. Typically, the author then comes to campus, gives a lecture, meets with students, and guest teaches in classes.” As the one book all freshman must read. All 7,000 of them. No, I am not making this up. All frosh must drink the same flavor Kool Aide. The one with that slightly tart taste of toluene. And diesel oil, methane, arsenic, barium, what-have-you. Read the fracking book, it’s all not in there.
Big cities scramble to be prepared for an oil train disaster — They rumble past schools, homes and businesses in dozens of cities around the country — 100-car trains loaded with crude oil from the Upper Midwest. While railroads have long carried hazardous materials through congested urban areas, cities are now scrambling to formulate emergency plans and to train firefighters amid the latest safety threat: a fiftyfold increase in crude shipments that critics say has put millions of people living or working near the tracks at heightened risk of derailment, fire and explosion. After a series of fiery crashes, The Associated Press conducted a survey of nearly a dozen big cities that, collectively, see thousands of tank cars each week, revealing a patchwork of preparedness. Some have plans specifically for oil trains; others do not. Some fire departments have trained for an oil train disaster; others say they’re planning on it. Some cities are sitting on huge quantities of fire-suppressing foam, others report much smaller stockpiles. The AP surveyed emergency management departments in Chicago; Philadelphia; Seattle; Cleveland; Minneapolis; Milwaukee; Pittsburgh; New Orleans; Sacramento, California; Newark, New Jersey; and Buffalo, New York. The responses show emergency planning remains a work in progress even as crude has become one of the nation’s most common hazardous materials transported by rail. Railroads carried some 500,000 carloads last year, up from 9,500 in 2008. “There could be a huge loss of life if we have a derailment, spill and fire next to a heavily populated area or event,” said Wayne Senter, executive director of the Washington state association of fire chiefs. “That’s what keeps us up at night.”
Big Rail's little cousins find boon in U.S. oil-by-rail bust – Amid the rolling mountains surrounding this quiet town in southwest New York state, tucked away on miles-long stretches of underused rail tracks, hundreds of idle oil tank cars attest to the extent of fallout from oil’s rout. The oil tank cars – a year ago sought-after to haul crude from North Dakota to New Jersey – now stand idle as a result of two converging trends: the reversal in U.S. shale oil production and the completion of new pipelines. They show how the pain from the slump in the oil-by-rail industry has spread far and wide. Big rail lines, such as Berkshire Hathaway-owned BNSF Railways or Union Pacific are losing what used to be their fastest-growing source of new traffic; refiners such as PBF Energy are left with millions of dollars worth of unused rolling stock; and leasing firms such as Trinity Industries and Greenbrier Companies Inc have seen monthly rates fall to a third of peaks above $2000 per car. There is one winner, though. Short-line railroads from Utah to Pennsylvania are making millions of dollars every month by providing refiners, producers and traders a place to park their unused tank cars. Outside this town of 14,000, along sidings that once helped ship vast volumes of coal, lumber and other raw materials during the region’s industrial heyday, the Western New York and Pennsylvania Railroad is now collecting fees for about 800 cars. “They’ve been here for about five months, and we hear rumors more are coming,”
Boat Crash Causes 120,000 Gallons Of Oil To Spill Into The Mississippi River - More than 120,000 gallons of oil spilled into the Mississippi River Wednesday evening after two tow boats collided, causing damage to a barge.The spill, which occurred near Columbus, Kentucky, prompted the Coast Guard to shut down the section of the Mississippi River from mile marker 938 to 922. “We are working diligently to try to restore our marine transportation system,” Coast Guard spokesperson Lt. Takila Powell said. “We understand that it is vital.”The substance that spilled into the river was “clarified slurry oil,” which is heavier than typical crude oil. To move the oil, Powell told the AP, it needs to be heated. “How this type of product typically would react is that when it reaches the water that is of a lower temperature, it would solidify and sink,” she said Thursday. “But one of the things that we will be doing tomorrow is trying to determine where that oil has migrated to, to try to determine whether or not it has moved down the river or if it’s still in the vicinity of where the collision occurred.”Some of the oil has been cleaned up from the site, and clean-up crews have put a boom around the barge to make sure no additional oil leaks into the river. Officials say that the spill won’t have an effect on water supplies, because wells provide the water in the region. So far, there haven’t been any reports of fish kills.
After the Frack: Bright Lights in the Middle of Nowhere - The humming sound was deafening. Standing in the driveway of the Brothers’ home it was 50 decibels, but as we walked toward the edge of the road, the sound meter jumped to 85 decibels. The creator of this offensively loud humming noise was the compressor station located just across the road. It ran night and day, 24/7, and had invaded Frank and Theresa Brothers’ home just a year ago. Unfortunately, compressor stations are a necessary component of an oil and gas pipeline system. They help move gas and liquids from one part of the pipeline system to another. Noise pollution is only one of the many types of pollution that people living around oil and gas exploration areas have to deal with. And even after the fracking vehicles move on, remnants like compressor stations remain as constant reminders that the landscape around them has changed forever. Light and air pollution also often linger around along with the noise long after the oil and gas wells have been sucked dry. Humans aren’t the only ones affected by this. Long before drilling rigs, fracking trucks, and compressor stations enter neighborhoods, the wildlife in the area already begins to feel the impact of preliminary exploration work. If the animals’ habitats haven’t already been fragmented by the oil and gas exploration activity, their homes are certainly changed once the drilling operations start in earnest. Scientists have already established that shale development operations cause light, noise, and air pollution, but not much is known about the specific biological impacts of these operations.In a 2014 report that appeared in Frontiers in Ecology and Environment, a team of ecologists and biologists examined thousands of studies to determine knowledge gaps in estimating ecological threats to plants and wildlife in shale development regions. The researchers found that “surprisingly little research has focused on the biotic impacts of shale development.”
The Texas Energy Revolt - --- Today, state lawmakers, the oil and gas industry and national environmental groups have become acutely aware of Denton, home to two universities, 277 gas wells and now, thanks to a ragtag group of local activists, Texas’ first ban on fracking. Thrust into the saga is George P. Bush, who in January will take the helm of the Texas General Land Office, an otherwise obscure office that manages mineral rights on millions of acres of state-owned property. In his first political office, Jeb’s eldest son, George W.’s nephew and one of George H.W.’s “little brown ones,” will inherit one of two major lawsuits filed against Denton, home to a sliver of that mineral portfolio. “ We don’t need a patchwork approach to drilling regulations across the state,” Bush, a former energy investment consultant, told the Texas Tribune in July as the anti-fracking campaign gained steam. It appears to be his only public statement on the issue. Bush’s role in the dispute—however peripheral—only brightens the spotlight on Denton, and it forces him and others to choose between two interests Texans hold dear: petroleum and local control. McMullen’s group—Frack Free Denton—convinced nearly 59 percent of Denton voters to approve a fracking ban on November 4, after knocking on doors, staging puppet shows and performing song-and-dance numbers. The movement had help from Earthworks, a national environmental group, but its opponents—backed by the oil and gas lobby—raised more than $700,000 to spend on mailers and television ads and a high-profile public relations and polling firm. That was more than 10 times what Frack Free Denton collected.
Drillers Unleash ‘Super-Size’ Natural Gas Output - WSJ: The U.S. may have far more natural gas than anyone imagined, all reachable at a profit even with today’s bargain-basement prices. Experimental wells in Louisiana by explorers including Comstock Resources Inc. CRK 19.28 % and Chesapeake Energy Inc. CHK 0.54 % are proving highly lucrative thanks to modern drilling techniques and the sheer volume of fossil fuels that can be coaxed out of the ground. The trick is applying supersize versions of the horizontal-drilling and fracking techniques that worked successfully elsewhere to an area that hasn’t seen this approach yet. The gains come from extending the lateral portions of wells by thousands of feet and pumping them full of enormous volumes of sand, chemicals and water to flush out more hydrocarbons.The field produces 8% of the nation’s natural gas, making it the second largest after the giant Marcellus Shale in the Northeast. Because it is located in Louisiana, near several interstate pipelines, potential export facilities and industrial consumers, an increase in gas production in the Haynesville has an outsize impact on gas prices across the entire country. The cost of natural gas matters because the fuel increasingly powers the U.S. economy and is critical to the Obama administration’s push to reduce carbon emissions in electricity generation. American gas consumption has risen at a 2.4% annual growth rate for the past decade, while demand for coal has fallen by 2.7% and oil by less than 1%, according to the federal Energy Information Administration. Gas now is used to generate about 30% of U.S. electricity and heat nearly half of all American homes. Domestic natural gas is abundant and inexpensive, largely due to the newer drilling and extraction techniques that came into widespread use a decade ago.In August, Comstock officials told investors that it could get a 30% return on its new wells even with gas at $2.50 a million BTUs. The Frisco, Texas-based company plans to drill more wells in Louisiana’s Haynesville than it will in the oily Eagle Ford Shale in South Texas.
“Supersize” Fracking Could Keep Natural Gas Prices Low For Years - As natural gas drillers turn to “supersize” fracking, natural gas supplies could be abundant and cheap for a long-time to come. That is how the Wall Street Journal phrases what is going on in the natural gas industry, where gas exploration companies continue to innovate the same drilling techniques that sparked the original shale gas revolution. By now we have all heard about fracking and horizontal drilling. But companies continue to expand these techniques and fine tune them. Now, according to Wall Street Journal, a few companies in Louisiana have begun using “supersize” versions of horizontal drilling. Comstock Resources and Chesapeake Energy, among others, have enjoyed huge successes by extending the lateral portions of horizontal wells far beyond what has been done in the past, adding thousands of feet to their lengths. Then, they essentially do what they have done before, only on a larger scale. They pump these extra-long laterals with huge volumes of water, sand, and chemicals, fracturing a massive natural gas well. The practice allows a driller to produce much more gas from a single well. Still, it is too early to tell whether or not this will result in another shale revolution of sorts. The successful results have only been achieved in one section of Louisiana in the Haynesville shale. But if it can be replicated, the ramifications would be profound. “There’s a large likelihood that the United States will be enjoying very low gas prices for a very long time, maybe 20 years,”
Texas regulator clears oil and gas company of causing quakes (AP) — The regulatory agency overseeing Texas’ oil and gas industry has determined that a series of small earthquakes in North Texas likely wasn’t caused by drilling operations by an Exxon Mobil subsidiary. The preliminary findings mark the first decision by the Texas Railroad Commission since it was authorized last year to consider whether seismological activity was caused by injection wells, which store briny wastewater from hydraulic fracturing. The commission ordered hearings after a university study suggested two companies’ wells were responsible for quakes that shook Reno, Texas, in 2013 and 2014. Commission investigators concluded that a well where Exxon Mobil subsidiary XTO Energy pumps millions of gallons of the wastewater likely didn’t cause the quakes, but also said there wasn’t enough evidence to demonstrate the earthquakes were naturally occurring. Parties have 15 days to respond.. The report was released Monday, a day before a new law took effect barring Texas cities and towns from banning hydraulic fracturing, or fracking, and limiting local authority to restrict other oil and gas operations. Reno Mayor Lynda Stokes, whose city passed an ordinance banning injection wells, said she wasn’t surprised by the commission’s findings and wasn’t sure what legal recourse was available. “They’ve pretty much given industry free reign to roll over us,”
Eagle Ford continues to pull billions in investments - These days, petroleum prices are a calamity at best, but according to a new projected capital analysis, energy companies will spend $20 billion in the Eagle Ford Shale this year. The new projections come from a recent study from research firm Wood Mackenzie. Last week, the firm stated that even with severe reductions in activity, the Eagle Ford remains resilient and continues to draw more investments than any other shale play in the nation. Other regions— such as the northern Bakken/Three Forks and the neighboring Permian Basin— are projected to see far less spending. According to a recent San Antonio Express News report, The Bakken region can expect 12.8 billion in new spending while the Permian’s Wolfcamp formation can expect $12.5 billion. “The big players in the Eagle Ford are some of the most stable companies in U.S. onshore markets,” Wood Mackenzie analyst Jeremy Sherby said. “Overall, Eagle Ford production growth is not dependent on the smaller, more financially vulnerable companies.”
West Texas Fracker Uses Toilet Water To Cut Cost -- It is no secret that fracking companies across the U.S. have been turning over every rock in the supply chain looking for ways to cut costs and improve efficiency. That’s what the business requires in a downturn. But now Pioneer Natural Resources seems to be going a step further in the name of price cuts and efficiency. The firm is finding an efficient, if somewhat unconventional, source of water for use in its fracking operations – the neighbors’ toilets. Pioneer recently signed an 11-year, $117 million deal with the city of Odessa, Texas giving Pioneer the rights to treated sewage from toilets, sinks, and showers across the city. The firm will start getting waste water deliveries by the end of the year. Of course, since the water is treated, it’s actually perfectly safe and would likely even be potable with, at most, a little more treatment. After all, most cities more or less run on the basis of using the same water over and over again. But Pioneer’s move is a clever one in that people don’t like to think about reusing waste water and this is a good way to get access to large quantities of water in the dry region. The Odessa-Pioneer deal actually makes a lot of sense given that Pioneer needs the water and places a high value on it in light of its economic usefulness. In contrast, Odessa city officials indicated that the treated water was mostly just used for irrigation, so diverting it to Pioneer makes more sense economically. In addition of course, by giving Pioneer access to waste water, the company can now avoid using the potable water it previously relied upon.
Shifting oilfield workforces: from Boomers to Millennials - According to the Permian Basin Oil & Gas Magazine, the 80’s oil crash is accountable for the 15 year age gap between the two most significant populations in the workforce. That gap represents more than mere numbers, it marks important attitude differences regarding work as well as actual job skills. It’s no secret that Baby Boomers and Millennials differ in their job expectations and values. Boomers value loyalty and a hard work ethic. They work long hours as easily as they butter a piece of toast. Loyalty feeds the work ethic as pensions were common back in the day. Millennials prefer flexibility and working less. This can be interpreted as laziness but that’s far from the truth. They’d rather spend their time participating in more communal activities. Oftentimes, Millennials appear less loyal to companies, however, with the invention of transportable 401Ks and pensions declining, it’s in their best interest to switch companies as needed to further their career. President and owner of Prima Consulting, Elaine Cullen, pointed out two major observable deficiencies in the youngest generation, first the lack of basic hand tool skills. She pointed out that this younger generation sometimes can’t distinguish a screwdriver from a hammer. Cullen said, “That’s a big issue when you are working in a skilled blue collar industry. Those are the tools of their trade,” as reported by Permian Basin Oil & Gas Magazine.
One Texas company claims even $15 per barrel is profitable - Texas-based oil giant Carson Energy may have figured out a means to completely scoff at even the lowest of oil prices. The industry can’t remove its gaze away from Carson. This week, the company released new analysis that shows rich Texas oil fields can be profitable at just $15 a barrel. “Many investors feel you have to be getting over $60 per barrel for oil to be profitable, but that’s only on expensive shale plays,” Michael Johnson of Carson Energy stated in a press release. “Carson operates in rich Texas blanket sands where it’s possible to make money when prices are as low as just $15 a barrel.” Investors are nervous at best with all the variables intruding on crude oil prices. However, many oil industry experts say this is often the best time to invest in new exploration and development. Wells and production are then in place when prices go back up, that is if a company can hold out that long. Experienced energy investors refer to this situation as one ripe for “double dipping.” An investor can benefit from very cheap drilling costs, and then have oil in production just as energy prices spike again. Such a payoff is inevitable. Demand, although sluggish, is increasing worldwide. “Once the extra supply of oil that’s on the market from expensive shale plays and tar sands has been used up, the global economy may find its way under-supplied and then it’s off to the races with high oil prices again,” Johnson said.
Kansas Geological Survey says earthquake problem continues -A reduction in the number of earthquakes rattling southern Kansas should not make anyone complacent about studying the problem, according to the head of the Kansas Geological Survey. Oil-waste regulations that seem to have contributed to lowering the number of earthquakes are set to expire Sept. 13. But Rex Buchanan said this week at a seminar that it doesn’t mean people should view it was a problem “that has gone away or is going away.” “I think we would be pretty short-sighted if we did look at this that way,” he said. “We’ve got to look at other places and we’ve got to be better prepared than we were last time.” The Kansas Corporation Commission approved regulations in March to limit the underground disposal of saltwater that comes up with the oil during drilling. Injecting that water back into the ground is considered a likely cause of increased earthquakes in Oklahoma and Kansas, The Wichita Eagle reported. The KCC staff is staff is currently drafting recommendations on how to proceed after the regulations expire. Kansas recorded 115 earthquakes so far this year, compared with 127 last year. Most of those quakes were felt before the reduction in wastewater injection, Buchanan said. Since then, the quakes have been less frequent and smaller. The reduction also could be attributed to a drop in oil production due to falling prices, he said, but that oilfield activity — and its resulting waste — eventually rebounds. The problem is compounded in Harper and Sumner counties, where wells produce about 16 barrels of wastewater for every barrel of oil, said Lynn Watney, senior scientific fellow with the geological survey. That wastewater is too salty to be responsibly disposed of above ground, Buchanan said.
Oil and gas spill report for Aug. 31 - The following spills were reported to the Colorado Oil and Gas Conservation Commission in the past two weeks.
- DCP Midstream LP, reported on Aug. 27 that groundwater was discovered while in the process of excavating a dry gas release outside of Roggen.
- Foundation Energy Management LLC, reported on Aug. 25 that an unknown amount of produced water was spilled outside of Raymer.
- Foundation Energy Management LLC, reported on Aug. 24 that between one and two barrels of oil was spilled, along with between five and 100 barrels of produced water outside of Briggsdale. The water tank overflowed, spilling about 10 total barrels due to a malfunction.
- PDC Energy Inc., reported on Aug. 24 that an unknown amount of oil and condensate was spilled outside of LaSalle. A historic release was discovered while installing flow lines for a new facility.
- Kerr McGee Oil & Gas Onshore LP, reported on Aug. 21 that an unknown amount of condensate and produced water was spilled outside of Platteville. Historical impacts were discovered following the removal of a produced water sump.
- Whiting Oil & Gas Corporation, reported on Aug. 21 that between five and 100 barrels of oil was spilled outside of Raymer.
- Kerr McGee Oil & Gas Onshore LP, reported on Aug. 20 that between five and 100 barrels of condensate was spilled, as well as less than 100 barrels of produced water. A release from a wellhead occurred when a tractor and implement struck and compromised the wellhead.
- Noble Energy Inc., reported on Aug. 19 that between one and five barrels of produced water was spilled outside Keenesburg.
- Noble Energy Inc., reported on Aug. 18 that a flowline leak was discovered during operations outside of LaSalle. Between one and five barrels of oil was spilled.
- Bonanza Creek Energy Operating Company LLC, reported on Aug. 17 that a separator rupture disc released about five barrels of oil during production outside of Kersey. Roughly three barrels of oil were release inside of containment.
Northeast Minneapolis neighbors surprised, angered by BNSF's rail expansion - A quiet street in northeast Minneapolis has been upended by BNSF Railway’s sudden plans to expand its tracks closer to houses there, simultaneously leveling a thick tree buffer that once shielded residents from the 92 trains — several carrying crude oil — that pass through every day. It has grown even more unsettling for some residents who returned home last week to find surveyor stakes in their yards, signifying where the railroad says garages, fences and trees are encroaching on its property. The railroad wants those residents, located near NE. Washington Street and Lowry Avenue, to enter into long-term agreements such as leases if they want to keep using the land. The abrupt development illustrates the power of the railroads, which are untethered from the local approval process that bogs down big projects. At least one homeowner is scrambling to obtain a land survey, but the railroad says it intends to press ahead to complete the project by year’s end. “They aggressively told us this is their land, they could do what they want,” said Kaline Sandven, whose signs warning strangers to keep out didn’t stop a crew from uprooting her cherry trees on Thursday. “They don’t need permits, they don’t need environmental studies. They don’t need to study the impact of the devaluation of our homes.”
BNSF: Court order could disrupt economy - BNSF Railway says a temporary court injunction against use of its new track through the La Crosse River marsh would damage the railroad and disrupt the economy of the northern part of the country. In documents filed this week, attorneys for BNSF challenge an order issued earlier this month by La Crosse County Circuit Judge Scott Horne, which allowed the railroad to continue construction of a second track through the marsh but restricted use of the track until legal challenges are settled in late September. That order would have “a serious impact on interstate rail transportation, with effects that will be felt by thousands of rail customers across the northern United States,” the railroad argues. BNSF says construction of the controversial 4-mile segment will be completed by the end of August, just in time for “fall peak” traffic season, when farmers ship their grain to market and retailers begin stocking up for the holidays. The La Crosse project is part of the railroad’s $6 billion in network improvements scheduled this year. BNSF says it is intended to solve a bottleneck created by the longest single-track segment between the Twin Cities and Savanna, Ill. A group of rail safety and environmental advocates led by La Crosse County Supervisor Maureen Freedland sued the Wisconsin Department of Natural Resources in March, claiming the agency granted BNSF wetland permits without adequate environmental review.
Letter to the editor: The North Dakota flaring conundrum - Flaring is a challenge in North Dakota. Bakken oil and gas production surged faster than pipelines and plants could be built. While trucks were an easy solution for oil, gas requires massive infrastructure. As a result, flaring increased and concerned many, including industry leaders. To answer the challenge, they proposed achievable goals based on expected investments in infrastructure, construction timetables and technological advancements. Today, the industry beats these goals, but a new economic environment has weakened the future outlook. Investment budgets are restricted in the new price environment and construction has eased slightly due to these market conditions and increased regulatory efforts, especially in local subdivisions. Timetables set in 2014 no longer apply in 2015. Strictly adhering to these goals in this economic environment will cause production to slow, widespread layoffs, significant negative impacts on local businesses, and substantial declines in tax revenues. North Dakota produced almost $2 billion of oil and gas in June of 2015. Flaring accounted for less than $25 million of this total. If it chooses not to adapt its targets, North Dakota will lose its golden goose ($24 billion annually) over a commodity that, though flared, makes up only 1.3 percent of total value of petroleum produced. To put this in comparison, it would be as if the median household ($51,939 of income) chose to quit working because it lost $685 along the way.
Where there is oil money, crime follows - — The oil and gas industry sustains more than just the local economy in Eddy County, it is also inadvertently fuels crime rates in the area. Statistics show that crime rates have been steadily rising in Carlsbad and Eddy County since the beginning of the boom, causing some agencies to get creative with their resources and straining the resources of other departments. The marriage between an oil and gas economy and crime is much like a traditional marriage — one follows the other through poverty and prosperity. When times in the oil patch are good, expendable income draws those offering recreational drugs or darker entertainment such as prostitution. Now with oil dropping below $40 a barrel, officials said they won’t be surprised to see theft and burglaries skyrocket, a trend that’s already showing itself. And residents aren’t the only one’s being targeted. The oil and gas industry itself is beginning to measure the price of doing business in Southeast New Mexico, with the dollar amounts of stolen property in the millions.
Gas prices have plunged since Whiting Refinery fixed - Gas prices have plunged by more than 38 cents a gallon locally since the largest crude distillation unit at the BP Whiting Refinery was restarted last week, and they continue to fall. One industry observer said $2-a-gallon gas could be coming soon. Drivers could already buy gas for as little as $2.28 a gallon Tuesday at a Murphy USA Station at Morthland Drive and Frontage Road in Valparaiso. The average retail gas price in the Gary metropolitan area was $2.59 a gallon as of Tuesday afternoon, and it’s trending down, according to GasBuddy.com. The national average fell nearly 13 cents to an average of $2.47 a gallon Monday. “Nationally, gas prices saw their largest weekly drop of the year,” . “Prices moved lower in all but one state, Utah, with plunges at the pump throughout the Great Lakes as a result of BP’s Whiting, Ind., refinery coming back online. The national average now stands at its lowest point since April, a fitting way to close out the summer driving season with Labor Day approaching. “While oil prices rallied late last week, I don’t yet expect it to impact pump prices, as they still have some catching up to do with the drop in crude oil prices. Since June 30, oil prices have fallen 23 percent while retail gasoline prices have fallen about half that amount, so gasoline prices will move lower again this week.”
Gas-Price Drop Takes Americans’ Interest in Fuel Economy Down With It - With gasoline prices heading into Labor Day at the lowest level in more than a decade, Americans’ enthusiasm for fuel economy is waning. Google searches for “MPG,” shorthand for the fuel-economy measure miles per gallon, decreased 32% in the last week of August compared with two years earlier, according to the data from the technology giant. That nearly matches the 33% fall in the price for a gallon of regular gasoline during that time. The Google data shows a tie between movements in gasoline prices and interest in “MPG.” When gas prices edged up this spring from winter lows, as is typical for the season, fuel-economy searches rose, even though gasoline prices were down almost a dollar from a year earlier. Interest on the Internet appears to be translating to dealer lots. U.S. auto dealers sold nearly 600,000 more sport-utility vehicles and pickup trucks through August, compared with the first eight months of last year, and almost 168,000 fewer cars, according to researcher Autodata Corp. When gasoline prices held consistently above $3 a gallon for a four-year stretch between 2010 and last fall, Americans gravitated toward fuel-sipping cars. Small vehicles such as the Toyota Prius Hybrid and Ford Focus grew in popularity and automakers rolled out all-electric cars, such as the Chevrolet Volt and Nissan Leaf. Consumers’ preferences and better technology caused the average fuel economy of all cars sold in the U.S. to peak at 25.8 miles per gallon in August 2014, according to the University of Michigan Transportation Research Institute. In the year since, average fuel economy slipped by a half-mile per gallon. The “decline likely reflects the decreased price of gasoline in August, and the consequent increased sales of light trucks and SUVs,” said Michael Sivak, a Michigan researcher.
Majority of US shale firms pass up Q2 chance to hedge $60 crude -- With the benefit of hindsight, last quarter may have been the best chance for cash-strapped U.S. shale oil producers to ensure they would get at least $60 a barrel for the next year or two. Barely a third did so. According to a Reuters analysis of hedging disclosures by the 30 largest such firms, more than half of them did not expand their hedges during the three months ended June or had no hedges at all, exposing them to a plunge that wiped more than $20 off the price of oil in the following months. In total, 12 companies increased their outstanding oil options, swaps or other derivative hedging positions by 36 million barrels at the end of the second quarter compared with the end of the first quarter, according to the data. Another 14 companies ended the quarter with hedging positions reduced by a total 37 million barrels, mainly as a result of expiring past hedges, the data show. The remaining four companies did not hedge oil production at all. (Graphic: http://reut.rs/1KnrGZy ) As a whole, the group remains more vulnerable to tumbling spot market prices than a year ago, with a third fewer barrels hedged, the data show. “The general feeling among producers is that if you aren’t hedged today… (you are) not going to start tomorrow and lock in lower levels,” said Mike Corley, president of energy trading and risk consultancy Mercatus Energy, which advises energy producers, consumers and refiners. Producers buy a variety of financial options to secure a minimum price for crude and safeguard future production. Typically, market rallies, such as one in April, allow producers to lock in prices at a lower cost.
For commodity trading advisors, oil's downtrend has been a friend - – The nearly two-month-long slide in oil prices to 6-1/2 year-lows has been a boon to many so-called systematic funds, which trade based on technical signals or computer algorithms rather than fundamentals. While most market commentary has focused on the persistent glut in the global market caused by unrelenting OPEC output and surprisingly resilient U.S. shale production, these commodity trading advisors (CTAs) have ridden the downtrend to robust returns. It is too early to say how most of them fared on Thursday, as oil prices surged by more than 10 percent in the biggest one-day gain since the financial crisis. Interviews with five of the larger and best-performing CTAs also show that investors who opened or maintained short positions have reaped significant profits this year, despite a rally that began after the previous lows were hit in March. Several of those successful funds have paid no attention to fundamentals like an oversupply from resilient U.S. production or concerns about Chinese demand. Instead, these “systematic” funds have simply let their algorithms respond to price trends.
New U.S. oil data shows lower 2015 production: EIA | Reuters: The U.S. oil industry pumped less crude than initially estimated this year, according to new government data that offered the clearest look yet at the impact of drillers' retrenchment in response to collapsing prices. The downward supply revisions were "unambiguously" bullish for a global market awash with oil, said Credit Suisse global energy economist Jan Stuart, suggesting the oft-cited resilience of U.S. shale producers to lower crude prices might have been overstated. Oil prices surged by as much as $3 a barrel on Monday, with some traders citing the new data. The Energy Information Administration said its new survey-based output data showed the United States pumped a hair below 9.3 million barrels per day in June, down by 100,000 bpd from a revised May figure. The June figure was also nearly 250,000 bpd below what the EIA had estimated a few weeks ago, highlighting the steep reversal in output as a five-year boom sours and suggesting to some analysts that a global glut might ease sooner than expected. "If the downward trend in U.S. production continues, global markets should return to balance by early 2016," said veteran energy economist Philip K. Verleger. The EIA revised production data for the first five months of the year, based on an expanded monthly survey of operators that includes crude oil and lease condensate for the first time. As a result, output in the months of February, March and May was 80,000 bpd to 125,000 bpd lower than previously reported, according to a detailed breakdown.
U.S. tight oil production decline -- U.S. oil production has begun to drop in response to low oil prices, but not as dramatically as many had anticipated. Oil companies have cut back spending significantly in response to the fall in the price of oil. The number of rigs that are active in the main U.S. tight oil producing regions– the Permian and Eagle Ford in Texas, Bakken in North Dakota and Montana, and Niobrara in Wyoming and Colorado– is down 58% over the last 12 months. Nevertheless, U.S. tight oil production continued to climb through April. It has fallen since, but the EIA estimates that September production will only be down 7%, or about 360,000 barrels/day, from the peak in April. This is despite the fact that typically output from an existing well falls very quickly after it begins production. The EIA estimates that tight oil production from wells that have been in operation for 3 months or more has declined by 1.6 mb/d since April, as calculated by the sum of the EIA estimated monthly declines in legacy production from May to September. One would think that these decline rates from existing wells and the drop in the number of rigs drilling new wells would mean that production would have fallen much more dramatically. Why didn’t it? The answer is that there has been a phenomenal increase in productivity per rig. For example, the EIA estimates that operating a rig for a month in the Bakken would have led to a gross production increase of 388 barrels/day two years ago but can add 692 barrels today. A key factor in the productivity gains is that companies are finding ways to complete wells faster, so that more wells can be drilled each month from the same number of rigs. For example, The Barrel reports that Occidental Petroleum “has seen a 40% decrease in spud to rig release time in the Wolfcamp area of its Permian holdings from 43 days in 2014 to 26 days in March this year with a target of eventually reaching 16 days.” The modest drop in U.S. production has been enough to start to bring inventories down. U.S. crude oil stocks last week were down more than 30 million barrels from April. But that still leaves them way above normal.
U.S. Oil Production Nears Previous Peak -- Monthly Energy Review came out a couple of days ago. The data is in thousand barrels per day and the last data point is July 2015. US consumption of total liquids, or as the EIA calls it, petroleum products supplied, reached 20,000,000 barrels per day for the first time since February of 2008. Something I never noticed before, consumption started to drop in January 2008, seven months before the price, along with world production, started to drop in August 2008. This had to be a price driven decline. Could the current June and July increase in consumption be price driven also? US Production was down 96,000 barrels per day in July to 9,503,000 bpd. That is 190,000 bpd below the March level of 9,693,000 bpd. Here is what the last 50 years of US production looks like. The peak was in 1970 or 1971, depending on what you call the peak. In March 2015 we were still 351,000 barrels per day below the peak month of 10,044,000 bpd in November of 1970. But right now we are headed in the wrong way to break that record. In July we were 541,000 bpd from that record. Right now the 2015 average, January through July, is 9,534,000 bpd. That is 103,000 barrels per day below the 1970 average. But the 2015 average is likely to get smaller as the year plays out.
U.S. crude output cuts will only come if prices stay low – Goldman -- Further U.S. production cuts needed to rebalance oil markets will only happen if U.S. crude prices remain low, at around $45 a barrel, Goldman Sachs said late on Monday. U.S. oil dropped to around $48 on Tuesday morning, curbing 8 percent gains recorded the session before after the downward revision of U.S. output data by the U.S. Energy Information Administration (EIA). But Goldman said in a note that further, sustained U.S. output cuts would likely be necessary to rebalance oil markets by late 2016, which could happen at a price around its short-term U.S. crude forecast of $45 per barrel. Oil prices have lost around half their value since June 2014 as record global output increasingly clashed with slowing economic growth, especially in Asia. The Organization of the Petroleum Exporting Countries under leadership of Saudi Arabia has so far refused to cut production, instead keeping taps open in a bid for market share, but pressure by some of its members like Venezuela to reduce output has been rising in recent weeks.
Government Report Finds Economic Benefits of Oil Exports - WSJ: —A long-awaited study by the Obama administration concludes that lifting the nation’s four-decade ban on oil exports wouldn’t increase U.S. gasoline prices and could even help lower them, raising the stakes in the debate about whether to lift or relax the ban. The report, issued Tuesday by the U.S. Energy Information Administration, an analytic division of the Energy Department, is expected to provide momentum to efforts by the oil industry and its supporters in Congress eager to end the ban and tap higher-priced foreign buyers amid surging global supplies and a market rout that has dragged prices to six-year lows. The effort has gained traction in Washington this year, though such a change still faces hurdles before Congress ultimately would adopt it. More than a dozen oil companies—including Continental Resources Inc., ConocoPhillips and Marathon Oil Corp. —have been lobbying Congress for the past year, arguing that allowing unfettered domestic oil exports would eliminate market distortions, streamline U.S. petroleum production and stimulate the domestic economy. In response to industry requests, the administration already has taken some initial incremental steps in the past year to ease the growing glut of domestically produced oil, which is pumping at a rate of 9.3 million barrels a day—more than 70% higher than five years ago—with commercial crude stockpiles near all-time highs.
Oil price crash prompts scramble for Caribbean storage tanks - Demand for crude storage in the Caribbean, one of the world’s most important oil hubs, is rising as producers and traders try to ride out the worst price crash in six years by holding onto more barrels or making blends that can be sold for premiums. The last time tanks in the logistically-important islands were this full, during the price collapse of 2009, companies started leasing vessels to use as floating storage. That is not yet happening now, but the only way to get tank space at the moment is to sublease it, said one tank broker with decades of experience. Since June, his firm alone has received requests to lease up to 7.5 million barrels of tankage in a region with some 100 million barrels of capacity. That is much more than in previous months, though no official statistics are available. Others signs also point to a shortage of tanks. Midstream players Buckeye Partners LP and NuStar Energy LP say they have basically run out of space. And some producers with terminals in the zone say now is a good time to put barrels into tanks and wait for U.S. crude prices to rise from $40-a-barrel doldrums. “All tanks are subscribed,” said the storage broker. Things have not looked this tight in six years. Crude inventories have been building up in recent months in most terminals, leaving limited space for subleasing, which could imply higher rents, he said.
Shell president: 'Oil will be required for a long time' - — The president of Shell Oil Co. said exploratory drilling off Alaska’s northwest coast is going well despite stormy weather last week that caused the company to halt operations for a few days. And in an interview Tuesday with The Associated Press Marvin Odum said he expects further protests against the company’s plans for Arctic drilling like the ones in Seattle and Portland where activists in kayaks tried to block Shell vessels. Arctic offshore drilling is bitterly opposed by environmental groups that say a spill cannot be cleaned in ice-choked waters and that industrial activity will harm polar bears, walrus and ice seals already harmed by diminished sea ice. In Seattle, Shell faced protests on the water by “kayaktivists” upset over the company staging equipment in the city. In Portland, Oregon, Greenpeace USA protesters hung from the St. Johns Bridge to delay a Shell support vessel, from heading to the Arctic. “I think the right assumptions for me to make are, it’s not going to go away,” Odum said. “We saw quite a bit of very public opposition when we were in the Pacific Northwest.” Odum said he’s “110 percent ready” to work with people who want to find ways to improve drilling.
Secretary Kerry Calls For Swift Action On Climate Change, Still Defends Arctic Drilling --In a recent interview with the Huffington Post, Secretary of State John Kerry defended the Obama administration’s decision to allow Shell to drill for oil in the Arctic, pushing back against claims that such a decision is at odds with the administration’s action on climate change. “These are leases that were granted some time ago prior to President Obama becoming president,” Kerry told Huffington Post reporter Sam Stein. “So the leases existed, and Shell and other companies are going to be drilling somewhere over the course of these next years, because we’re not going to suddenly be weaned from oil.” Moving to a de-carbonized economy, Kerry continued, could take up to 40 years. He noted that during that transition the United States would still be dependent on oil to meet some of its energy needs. “I’d rather have our supply come from an American-controlled source in that respect than somewhere else,” he said, adding that “in the long run, we have to wean ourselves from a carbon-based economy,” and that the country isn’t moving quickly enough toward a carbon-free economy. “We have to do it much faster than we are right now. I think the president understands that, I understand that. We’re advocating as powerfully as we can,” Kerry said.
U.S. lags behind Russia and other nations in the Arctic - U.S. lags behind Russia and other nations in the Arctic - As Barack Obama becomes the first sitting president to visit the Arctic next week, the U.S. is falling behind other nations in the critical region. The U.S. is sitting on the sidelines while Russia claims a huge part of the Arctic, with its vast energy and mineral resources, and China builds icebreakers to get in on the race for influence in the north. The U.S. hasn’t built a new heavy-class icebreaker in 40 years, and as oil drilling and vessel traffic increases off Alaska’s northern coast, the nation hasn’t developed a deepwater port within 900 miles. There’s a lot at stake: About 13 percent of the world’s undiscovered oil and 30 percent of its natural gas are thought to be in the Arctic, with a trillion dollars’ worth of minerals. Sea lanes are opening as ice melts because of global warming and shipping is on the rise, bringing opportunities but also the need for ports and emergency-response vessels for rescues. The Obama administration created an Arctic strategy and is working to put it in place, said Fran Ulmer, chairwoman of the U.S. Arctic Research Commission. But Arctic projects cost money, she said. “As other countries in the Arctic move forward with their plans to be better prepared for what is coming in the Arctic _ which is more human activity _ hopefully Congress will step up and fund some of the necessary infrastructure,” Ulmer said. Ulmer said she hopes Obama’s visit next week will “communicate to the rest of the United States how important the Arctic is.” Obama and Secretary of State John Kerry will be in Alaska talking about the impact of climate change, and Obama will visit the Arctic village of Kotzebue. In the meantime, Russia is wasting no time making its moves in the Arctic. This month, Russia staked a claim to a more than 460,000 square miles of Arctic territory, including the North Pole.
Canada synthetic crude spikes on Syncrude fire, Nexen pipelines | Reuters: Canadian light synthetic crude prices spiked higher on Monday after a weekend explosion and fire at the Syncrude oil sands project in northern Alberta halted production and regulators ordered pipeline shutdowns at a separate Nexen Energy site. Traders scrambled to secure temporarily short supply after a fire early Saturday morning at the 326,000 barrel per day (bpd) Syncrude facility, Canada's largest synthetic crude project, disrupted output. Canadian Oil Sands Ltd, the largest-interest owner in the Syncrude joint venture, did not give any estimate as to when production would resume. In a separate incident, CNOOC-owned subsidiary Nexen Energy said it was working to comply with a weekend order from the Alberta Energy Regulator to shut in 95 pipelines at its Long Lake oil sands facility, also in northern Alberta. Long Lake produces around 50,000 bpd of bitumen, which is upgraded on site into refinery-ready synthetic crude. Light synthetic crude from the oil sands for September delivery jumped to a one-month high of $1 per barrel below the West Texas Intermediate benchmark, according to Shorcan Energy brokers, rallying hard from $4.50 per barrel below WTI on Friday.
Forced Asset Sales Seen as Banks Squeeze Canada Oil Companies - It’s crunch time on asset sales for Canada’s struggling oil producers. Starting in earnest after Labor Day, oil and natural gas companies will begin the twice-yearly pilgrimage to their banks to discuss funding. It’s not going to be easy, with companies from Penn West Petroleum Ltd. to Athabasca Oil Co. under pressure to sell assets to keep the money flowing. With no relief from the price of oil, which has tumbled under $50 a barrel, companies are cutting more staff, reducing dividends and even selling hedging positions on commodities and currencies to boost cash flow. Banks will next likely force some producers to sell their best assets to avert bankruptcy, “The banks are going to tell these guys to sell their coveted assets,” “That means the strong companies get to lick their chops.” The oil slump has already made victims out of many of Canada’s fossil fuel producers which have cut thousands of jobs, most of them in Calgary. Banks approached struggling producers in the spring and told them to do what they could to strengthen their balance sheets and find ways to raise funds, “This time, they won’t be so friendly,” he said. Companies have so far been reluctant to sell. There were 14 pending and completed oil and gas deals worth $418 million in Canada’s oil patch in the third quarter, on pace for the the lowest quarterly value since at least 2003, according to data compiled by Bloomberg.
Interview - Canada oil industry says price drop makes new pipelines essential – Tumbling crude prices have made building new pipelines more important than ever for Canadian oil and gas producers because the fate of some projects hinges on shipping costs, the head of the industry’s main lobby group said on Wednesday. Canadian companies have long complained that the industry suffers major lost revenue because their oil, Western Canadian Select, is at times sold at a discount of up to $40 per barrel to Western Texas Intermediate crude. More recently Canadian heavy crude has been trading at a discount of $15 a barrel. The industry hopes new projects giving them expanded access to U.S. and Asian markets, such as TransCanada Corp’s Keystone XL pipeline and Enbridge Inc’s Northern Gateway project, would reduce this gap. Tim McMillan, president of the Canadian Association of Petroleum Producers, said the discount on Canadian crude takes an especially heavy toll with oil prices down by more than 50 percent since June 2014 to around $45 per barrel. Related “At $100 a barrel it was a big concern. At $45 a barrel, that is a far larger percentage (of revenue) and is likely the difference between profitable and unprofitable on many of the assets,” McMillan said in an interview. Environmentalists are pressuring U.S. and Canadian politicians to reject all new pipelines, in hope of stopping the expansion of northern Alberta’s oil sands. Oil sands require the consumption of vast amounts of water and fossil fuels to extract bitumen.
Fuel Ships Take 4,000-Mile Africa Detour as Oil Prices Plunge - -- Slumping oil prices are spurring 4,000-mile (6,400-kilometer) diversions of tankers filled with diesel and jet fuel as the price of ship fuel plunges, opening up trading opportunities. At least five tankers will deliver refined products to European ports in August and September, sailing around South Africa rather than using the normal shortcut through Egypt’s Suez Canal, ship tracking data show. The falling cost of fuel oil, used to power ships, has made longer voyages viable at a time when there are advantages for traders to keep cargoes at sea. Long-distance shipments between continents have increased this year, according to Torm A/S, world’s second-biggest publicly traded product-tanker owner. Plunging oil opens up new trades as product tankers take the long route to Europe Plunging oil opens up new trades as product tankers take the long route to Europe Brent crude futures plunged about 50 percent since August last year as OPEC nations kept pumping more than the market needs. Across oil markets, the rout triggered what traders call contango, a price pattern that lessens the need for speedy oil deliveries because future fuel prices are higher than immediate ones. “There’s massive demand to move oil products over very long distances,” “These shipments tell me that there are very good times ahead for product-tanker owners,” referring to ships that carry refined fuels like gasoline and diesel.
OPEC cracks, ready to talk with world producers - The stubborn drive of OPEC is finally weaning down as the crude cartel has stated that it’s ready to talk to other producers about crashing oil prices, according to a release from an OPEC publication on Monday. “Today’s continuing pressure on prices, brought about by higher crude production, coupled with market speculation, remains a cause for concern for OPEC and its members—indeed for all stakeholders in the industry,” the commentary in the latest OPEC Bulletin said. Petroleum prices haven’t seen such lows in a decade. The Organization of Petroleum Exporting Countries has kept production at all-time highs as strategy to abolish world competitors. Most notably, OPEC wanted to crush the shale boom in America. While the bulletin is titled “Cooperation holds the key to oil’s future,” there aren’t real details to how this would play out among oil producing nation. However, OPEC did state that the market “has to be a level playing field,” and that “OPEC will protect its own interests.” At no surprise, once OPEC announced of a potential deal, crude prices began to rebound on Monday. West Texas Intermediate crude prices rose $3.98—almost 9 percent— to $49.20 a barrel in New York. Brent crude—the international standard—was up $3.61 to $53.60. In addition, The U.S. Energy Department cut its expectations for U.S. oil production based on lower projected output in Texas. This information mixed with the news from OPEC has given the market a slight boost investors are rallying behind.
Oil jumps 8 percent, biggest three-day surge since 1990 -- Oil futures soared on Monday for a third consecutive day, rising more than 8 percent, as a downward revision of U.S. crude production data and OPEC's readiness to talk with other producers helped extend the biggest three-day price surge in 25 years. U.S. crude oil prices have skyrocketed more than $10 a barrel in three days, erasing the month's declines as a series of relatively small-scale supply disruptions and output risks prompted bearish traders to take profits on short positions, which had been near a record a week ago. On Monday, prices fell initially but reversed course mid-morning. The three-day gains were more than the 20 percent mark that often signals a bull market. Even so, few were prepared to call a definitive end to the slump. "Sharp gains over the past three trading sessions were driven by a combination of short covering and chart-readers again looking to call a bottom falsely," Citi said in a report, saying that prices may yet test new lows before year's end. Brent LCOc1 October futures rose $4.10, or 8.2 percent, to settle at $54.15 a barrel, with volumes relatively muted by a British public holiday.
Why Did Oil Prices Just Jump By 27 Percent In 3 Days? - Oil prices have posted their strongest rally in years, jumping an astounding 27 percent in the last three trading days of August. While much of the recent price movement defies reason and is enormously magnified by speculative movements by traders to take and cover their bets on oil, still, there were a series of rumors, events, and fresh data that helped contribute to the spike. For example, on August 31, the oil markets woke up to the news that Russian President Vladimir Putin will meet his counterpart from Venezuela to discuss “possible mutual steps” to stabilize oil prices. The meeting will take place in China on September 3. Venezuelan President Nicolas Maduro has already called for an emergency meeting of OPEC, a call that has fallen on deaf ears, at least in the most important country of Saudi Arabia. It is still highly unlikely, but the one country that might be able to change the minds of Saudi oil officials is Russia. Again, even if Russia promised to cut back oil production to boost prices (which it has not shown a willingness to do), Saudi Arabia has little trust in Moscow to follow through on those promises. Similar understandings to cooperate in the past have fallen apart, making coordinated action unlikely. Moreover, it is not at all clear that Russia’s best move is to cut back on production. Sure, it wants higher oil prices, but selling less oil will arguably offset price gains. And the depreciation of the ruble has cushioned the blow of low oil prices – Gazprom just reported a 29 percent gain in net profit for the second quarter compared to a year earlier, largely due to a weaker ruble. So, Russia is eager for oil prices to rebound, but the Kremlin is not as desperate as Venezuela.
Why So Much Oil Price Volatility? Blame The Speculators --Oil prices crashed last week only to rebound at lightning speed. On August 28, oil prices surged 10 percent, the largest one-day gain in seven years. So, what happens next for oil prices? On the face of it, the crash and massive rebound makes little sense, with many oil market analysts undoubtedly left shaking their heads. But there is a logic to what unfolded, just not the logic of the physical market for crude. Oil prices, as if we needed a reminder, are largely driven by speculation. Why else would oil prices plummet by five percent, then spike by 10 percent just a few days later? Not much changed in terms of actual supply and demand of oil in the intervening days. Sure, Royal Dutch Shell declared force majeure on some oil shipments from Nigeria, as two pipelines had to be shut down. That could interrupt some oil supplies. But other than that, the physical market for crude didn’t see a whole lot of change in just a few days’ time. In financial markets, however, a lot changed. Last Monday, fears that the meltdown of China’s stock market would lead to global contagion sparked a worldwide sell off. Crude prices suffered a massive one-day fall. Several days later, on August 26, the EIA reported that oil storage levels declined by 5.4 million barrels for the week, the steepest drop in weeks. That stopped crude prices from sliding further. Then on August 27, the U.S. Department of Commerce reported surprisingly strong GDP figures – the U.S. economy expanded at an annualized rate of 3.7 percent, a huge upward revision from previous estimates. Oil prices shot up by more than 10 percent, the largest gain since 2008. But it wasn’t just the inventory data and the GDP figures, which are ostensibly linked to physical realities in the market. Lower inventories and higher GDP point to actual demand for oil moving higher.
Citi Slams Today's Historic Oil Surge: "Another False Start, Time To Fade The Rally" - Earlier today we were wondering how long it would take the big banks - many of whom are short the commodity - to jump in the path of the oil momentum train, and we didn't have long to wait for the answer. Just before the NYMEX close, Bank of America revised its year end and 2016 oil forecasts lower, from $58 and $62 to $55 for 2015 and $61 for 2016. But the real downgrade came moments ago from Citi's Ed Morse who, together with Goldman, has been bearish on oil for a good part of the past year, just slammed today's crude breakout and doubled down on his double-dead cat skepticism, when he released a report titled "Another False Start…Time to Fade the Rally" whose punchline is that "Citi foresees that WTI and Brent prices should post another fresh leg lower—perhaps making new 2015 lows—before year-end."
Oil Caps Biggest Three-Day Gain Since 1990 as OPEC Ready to Talk - Oil capped the biggest three-day gain in 25 years after OPEC said it’s ready to talk to other global producers to achieve ‘fair prices’ and the U.S. government reduced its crude output estimates. Crude traded in New York surged 27 percent in three days, the most since August 1990 when Iraq invaded Kuwait. Both West Texas Intermediate and Brent benchmarks have climbed more than 20 percent from their closing low on Aug. 24, meeting the common definition of a bull market. The Organization of Petroleum Exporting Countries, responsible for about 40 percent of the world’s supply, said in a monthly publication it’s willing to talk, “but this has to be on a level playing field.” Prices erased last week’s drop to a six-year low as the OPEC comments and signs that the U.S. shale boom is fading faster provided optimism that a global supply glut will evaporate sooner than estimated. A measure of oil-price fluctuations rose to a five-month high as traders sought protection from market swings. “The market turned around on two pieces of news,” "The EIA cut its U.S. output estimates and OPEC says its ready to talk to others about cutting output." WTI for October delivery surged $3.98, or 8.8 percent, to close at $49.20 a barrel on the New York Mercantile Exchange. It was the highest settlement since July 21. Prices slipped as much as $1.62 to $43.60 earlier. Volume was almost double the 100-day average. Brent for October settlement rose $4.10, or 8.2 percent, to end the session at $54.15 a barrel on the London-based ICE Futures Europe exchange. It was the highest close since July 24. Prices have climbed 26 percent in three days, also the most since August 1990. The European benchmark crude closed at a $4.95 premium to WTI.
OPEC magazine op-ed that fueled oil rally baffles insiders --– An OPEC publication written by the exporter group’s public relations team helped oil prices jump and prompted speculation over a possible shift in output policy – to the bafflement of some OPEC insiders. The commentary on Monday in the OPEC Bulletin, a magazine issued by OPEC’s Vienna headquarters, said downward pressure on prices due to higher production “remains a cause for concern” and OPEC “stands ready to talk to all other producers”. While the 799-word article helped add another 8 percent to oil’s three-day surge, by Tuesday it seemed clear there was no sign of a significant shift in OPEC policy or any indication of a fresh push to shore up markets, analysts and OPEC insiders said. A Gulf delegate said the Bulletin reflected genuine concern in the Organization of the Petroleum Exporting Countries about falling prices but it did not signal a policy shift or pending production cut. “I see it as a message sent to the market that we are willing to talk to non-OPEC, we are concerned about prices and we are not closing our eyes to what’s going on.” Another OPEC insider said: “I found it surprising,” referring to the jump in prices on Monday. “The Bulletin wasn’t saying anything new.”
Oil retreats more than $5 on weak data, eroding 25 percent rally - Oil prices plummeted on Tuesday, settling 8 percent lower, as weak Chinese data extended a roller-coaster run that knocked oil to its lowest in 6-1/2 years last week before frenzied short-covering fueled a 25 percent three-session surge. The past few weeks have been among the most volatile in the modern oil market's three-decade history, with prices plunging early last week as worries about China's economic strength sent shivers through risk markets, only to bounce back fiercely as bearish traders rushed to cash in short positions. Traders took flight on Tuesday after seeing China's official Purchasing Managers' Index (PMI) drop to 49.7 in August and U.S. manufacturing sector growth slow to its weakest pace in more than two years, reinforcing fears of slowing global growth and weaker fuel demand. "It was primarily the China fear factor," Carsten Fritsch at Commerzbank in Frankfurt told the Reuters Global Oil Forum. Some also wondered if the 25 percent three-day surge through Monday, the biggest since Iraq's invasion of Kuwait in 1990, was overdone given a persistent global supply glut. And an OPEC magazine commentary that some traders interpreted on Monday as signaling a possible subtle policy shift was nothing of the sort, OPEC insiders said.WTI Crude Crashes 8% - Biggest Plunge Since Nov 2014's OPEC Meeting - Surprise!!! Month-end window-dressing manipulation massacred... This is the biggest single-day drop since Nov 28 2014 - When OPEC stunned the world. Charts: Bloomberg
Oil market takes a walk on the wild side (again) – Crude oil prices have been on a rollercoaster over the last four trading sessions that has seen some of the highest volatility in a quarter of a century. The market is providing a brutal reminder of the extreme side of commodity pricing, leaving many analysts and traders struggling to identify a safe strategy. Front-month Brent crude futures rose by more than 10 percent on Thursday, 5 percent on Friday and 8 percent on Monday, before plunging by more than 8 percent on Tuesday. To put that in context, the percentage daily price movements were 4.6 standard deviations away from the mean on Thursday, 2.4 standard deviations on Friday, 3.7 on Monday and 3.8 on Tuesday. If price changes followed a normal distribution, a move of 3.5 standard deviations should occur only once every eight years and a move of greater than 4.5 standard deviations should happen once every six centuries.
Oil market displays its irrational side (Reuters) – U.S. crude prices jumped more than 27 percent in three trading days between Thursday and Monday, which should convince even the most die-hard believers the oil futures market is neither efficient nor rational. The rally has left traders, analysts and journalists struggling to make sense of the sudden change in direction after prices had fallen steadily for two months, hitting their lowest level since 2009. Possible explanations range from a bounce in global stock markets, pipeline problems in Nigeria, new data showing U.S. oil production falling, and an editorial published in OPEC’s monthly bulletin interpreted by some analysts as a call for a coordinated approach to cutting output (“Cooperation holds the key to oil’s future,” August 2015). But it should be obvious none of these factors, singly or in combination, is sufficient to explain an increase in the price of U.S. crude from $38 to $49 in the space of less than a week. Far more important was the unusually large concentration of short derivatives positions in U.S. crude still held by hedge funds betting prices would fall even further. Large concentrations of hedge fund long or short positions have often preceded a sharp reversal in prices, as happened in March this year, when an unusual concentration of short positions preceded a sharp $18 rally.
WTI Tumbles Back To $44 Handle After API Inventories Surge Most In 5 Months - After the worst day since last November's OPEC meeting, WTI crude is falling further tonight asAPI reported a huge 7.6 million barrel inventory build. This is the biggest build (compared to DOE data) since early April! and the reaction is more selling in WTI... Charts: Bloomberg
U.S. crude oil stocks rise as refinery runs fall, imports jump (Reuters) – U.S. crude oil stockpiles rose unexpectedly last week as refinery throughput fell for a fourth week and imports jumped, while gasoline stocks fell, data from the Energy Information Administration (EIA) showed on Wednesday. Crude inventories rose 4.7 million barrels to 455.4 million in the week to Aug. 28, the biggest one-week rise since April, compared with analysts’ expectations for stocks to remain unchanged. U.S. crude imports rose 656,000 barrels per day (bpd) to 7.4 million bpd. Crude stocks at the Cushing, Oklahoma, delivery point for the U.S. crude futures fell 388,000 barrels to 57.3 million barrels, EIA said. Analysts expect inventories at Cushing to rise this autumn as refiners shut for maintenance, potentially exceeding a record 62.2 million barrels reached this past spring. “While there is some seasonality to crude beginning to build at this time of the year, a four-plus-million-barrel build is bearish and larger than normal,”After seesawing ahead of the EIA report, U.S. crude futures extended losses and Brent turned lower after the data. U.S. October crude was down $1.22 at $44.19 a barrel at 11:05 a.m. EDT, having swung from $43.71 to $46.32. Refinery crude runs fell 269,000 bpd to 16.4 million bpd, EIA data showed. Refinery utilization rates fell 1.7 percentage points to 92.8 percent of capacity. Due to a series of unexpected outages and incidents, U.S. refinery output has fallen for four straight weeks, after reaching a record high over 17 million bpd in late July. Gasoline stocks fell 271,000 barrels, compared with analysts’ expectations in a Reuters poll for a 1.3 million-barrel drop.
Oil Triple Whammy: Inventory Build, Iran Nuke Deal Has Votes, & China Gives Venezuela $5 Billion Loan - Following last night's epic inventory build., according to API, DOE has reported a 4.7mmm barrel build but US crude production pluinged 1.4% (most since July). However, ths oil complexc has been hit by two other 'issues' this morning as Obama captures the votes he needs to confirm the Iran nuclear deal (guaranteeing more oil supply) andChina encumbers more Venezuelan oil ($5bn loan) allowing them to keep pumping at below-cost levels. The reaction for now is notable selling pressure...Charts: Bloomberg
Maintenance season need not mean higher U.S. crude stocks (Reuters) – U.S. crude oil stocks are set to rise in the next few months as the summer driving season ends and refineries enter the autumn turnaround season, according to many analysts and traders. Rising stocks will emphasize continuing oversupply in the oil market and are expected to put renewed downward pressure on crude oil prices before the end of the year. The problem with this argument is that there is no evidence that the end of the driving season and autumn refinery maintenance, events which happen every year, normally cause crude stocks to build. Between 2005 and 2014, stocks were generally flat between the middle of August and the middle of October, and fell between the middle of October and the end of December.U.S. commercial crude stocks are normally lowest in December and January, rising to a peak between April and June, and then falling back again during the summer and autumn (http://link.reuters.com/ceq55w). Between 2005 and 2014, crude stocks rose on average by around 38 million barrels between the start of January and the beginning of May. Stocks then typically fell by around 24 million barrels during the summer driving season between May and the start of September. Stocks then normally declined by another 6 million barrels between the start of September and the end of December.
NYMEX-U.S. crude slips below $46 on unexpected build in crude stocks - U.S. crude futures dipped below $46 a barrel in early Asian trade on Thursday after a rise in U.S. crude stocks and a stronger dollar weighed on prices, although a rebound on Wall Street put a floor under prices. Public holidays in China and Hong Kong on Thursday are likely to keep markets subdued.
- * U.S. crude for October delivery fell 30 cents to $45.95 a barrel as of 0035 GMT, after settling 84 cents higher in the previous session
- * Brent crude oil for October delivery dropped 22 cents to $50.28 a barrel, having gained 94 cents in the previous session.
- * U.S. crude stocks saw an unexpected gain of 4.7 million barrels to 455.4 million in the week to Aug. 28, the biggest one-week rise since April, data from the U.S. Energy Information Administration showed on Wednesday. Analysts had expected inventories to remain unchanged.
- * Crude stocks at the Cushing, Oklahoma, delivery hub fell by 388,000 barrels, the Energy Information Administration data showed, while U.S. gasoline stocks fell by 271,000 barrels, compared with analysts’ expectations for a 1.3 million barrels drop.
- * U.S. President Barack Obama scored a major foreign policy victory on Wednesday after 34 senators said they would back the nuclear deal with Iran, protecting the pact from Republican disapproval in Congress.
- * Output by members of oil producers cartel OPEC fell from a record high to 31.71 million barrels per day in August after disruptions in Iraq halted supply growth, a Reuters survey found on Wednesday.
- * West African crude oil exports to Asia are set to fall to 1.68 million barrels per day (bpd) in September, their lowest since August 2014, shipping data and a survey of traders showed on Wednesday.
U.S. Oil Rig Count Falls to 662 in Latest Week - WSJ: The U.S. oil-rig count fell by 13 to 662 in the latest week, breaking six consecutive weeks of increases, according to Baker Hughes Inc. BHI -2.85 % The number of U.S. oil-drilling rigs, which is a proxy for activity in the oil industry, has fallen sharply since oil prices headed south last year. The rig count dropped for 29 straight weeks before climbing modestly in recent weeks. Despite recent increases, there are still about 59% fewer rigs working since a peak of 1,609 in October. According to Baker Hughes, gas rigs were unchanged at 202. The U.S. offshore rig count is 33 in the latest week, up three from last week and down 32 from a year earlier. For all rigs, including natural gas, the week’s total was down 13 to 864.
Oil rig count falls for the first time in 7 weeks - The US oil rig count fell by 13 to 662 this week, according to driller Baker Hughes. It was the biggest decline in the rig count in three months. The tally of oil rigs climbed by one last week, rising for the sixth straight period. It was also an increase for the eighth out of nine weeks. The total count of oil and gas rigs fell by 13 to 864. Oil prices have been volatile of late, tumbling below $40 per barrel two weeks ago, and then rebounding from that level in a strong three-day gain. After the release on Friday, West Texas Intermediate crude oil gained some ground and rallied, after being down 1%, to about $46.67 per barrel. Here's the latest chart of the oil rig count:
OilPrice Intelligence Report: Oil Prices Are Going Down - Here's Why: After bouncing around, oil prices finished off the week with just a bit less volatility than when it started the week. WTI stayed at around $46 per barrel as of midday on September 4, with Brent holding at $50 per barrel. Aside from supply and demand fundamentals in the oil markets, central bank policymaking is another major factor determining the trajectory of oil prices. The European Central Bank hinted that it might consider more monetary stimulus to help the stagnant European economy. Oil prices rose on the news. The markets, however, are waiting on a much more significant announcement from the Federal Reserve this month on whether or not the central bank will raise interest rates. This summer’s market turmoil – the Greek debt crisis and the meltdown in the Chinese stock markets – has dimmed the prospect of a rate increase. Moreover, the global economic unease may begin to reach American shores. On September 4, the U.S. government released data for the month of August, revealing that the U.S. economy added only 173,000 jobs, a mediocre performance that missed expectations. Although an economic slowdown is no doubt a negative for oil prices, the news could provide enough justification for the Fed to hold off on raising interest rates. A delay in a rate hike could push up WTI and Brent. Although a slew of Canadian oil sands projects have been cancelled due to incredibly low oil prices, several large projects were already underway before the downturn. With the costs of cancellation too high, these projects continue to move forward. When they come online – several of which are expected by 2017 – they could add another 500,000 barrels per day in production, potentially exacerbating the glut of supplies not just in terms of global supply, but more specifically in terms of the flow of oil from Canada. Canadian oil already trades at a discount to WTI, now at around $15 per barrel.
Saudi Arabia Just Cut Crude Selling Prices To The US, Europe And Asia --WTI Crude oil prices are in total panic buying mode this morning as the algos are fully in charge once again. WTI is up 5% this morning in a straight line since US equity markets opened (and USO went vertical). What is most ironic is that Saudi Aramco just slashed prices for crude oil to everyone around the world. As Bloomberg reports, Saudi Arabia, the world’s largest crude exporter, cut pricing for all October oil sales to the U.S. and Northwest Europe and reduced the premium on its main Light grade to Asia by 30 cents a barrel. State-owned Saudi Arabian Oil Co. cut its official selling price for October sales to Asia of Arab Light crude to 10 cents a barrel more than the regional benchmark, the company said in an e-mailed statement. The discount for Medium grade crude for buyers in Asia widened 50 cents to $1.30 a barrel less than the benchmark.
Qatar exports plunge over 40 pct in year (AFP) - Energy-rich Qatar's exports plunged more than 40 percent in value in the year up until July 2015, on the back of a slump in petrol and hydrocarbon sales, official figures showed Sunday. State news agency QNA, citing figures from the development planning and statistics ministry, said exports for July totalled 23.5 billion Qatari riyals ($6.5 billion, 5.8 billion euros). The figure represented a drop of around one percent on June, but a massive 41.7 percent fall compared to July 2014, QNA said. Petrol and hydrocarbon exports slumped by 40.5 percent to 15.6 billion riyals. The figures also showed that imports had risen by 13 percent month-on-month, and Qatar's biggest imports were helicopters, planes and cars. Japan was the top exporter to Qatar, with 4.3 billion riyals worth of products.
Fallout From Petrodollar Demise Continues As Qatar Borrows $4 Billion Amid Crude Slump -- Early last month in “Cash-Strapped Saudi Arabia Hopes To Continue War Against Shale With Fed's Blessing,” we noted the irony inherent in the fact that Saudi Arabia, whose effort to bankrupt the US shale space has blown a giant hole in the country’s fiscal account, was set to tap the debt market in an effort to offset a painful petrodollar reserve burn.“Saudi Arabia is returning to the bond market with a plan to raise $27bn by the end of the year, in the starkest sign yet of the strain lower oil prices are putting on the finances of the world’s largest oil exporter,” FT reported at the time. But Saudi Arabia’s “war” with the US shale space isn’t unfolding in a vacuum and now Qatar is looking to borrow to alleviate the financial strain. Here’s more from Bloomberg: Qatar issued 15 billion riyals ($4.1 billion) of bonds on 1 September as the country takes advantage of low borrowing costs to replenish funds eroded by the decline in oil prices. The sale, intended to boost the local capital market, was four times oversubscribed, central bank Governor Abdullah Bin Saoud Al Thani told reporters in Doha, without commenting on the bond’s duration or pricing. Qatar follows Saudi Arabia in raising money from local banks as the slump in oil prices buffets the finances of the Middle East’s largest oil and gas exporters. Saudi Arabia said it tapped local markets in June and August and has raised at least 35 billion riyals from local bond markets this year, the first time it has issued securities with a maturity of over 12 months since 2007. Qatar needs an oil price of $59.1 dollars a barrel to balance its budget, according to the IMF, and on 29 August said its trade surplus fell 56 in July. Crude dropped below $45 a barrel on 2 September.
Why The Great Petrodollar Unwind Could Be $2.5 Trillion Larger Than Anyone Thinks -- Last weekend, we explained why it really all comes down to the death of the petrodollar. China’s transition to a new currency regime was supposed to represent a move towards a greater role for the market in determining the exchange rate for the yuan. That’s not exactly what happened. As BNP’s Mole Hau hilariously described it last week, "whereas the daily fix was previously used to fix the spot rate, the PBoC now seemingly fixes the spot rate to determine the daily fix, [thus] the role of the market in determining the exchange rate has, if anything, been reduced in the short term." Of course a reduced role for the market means a greater role for the PBoC and that, in turn, means FX reserve liquidation or, more simply, the sale of US Treasurys on a massive scale. The liquidation of hundreds of billions in US paper made national headlines this week, as the world suddenly became aware of what it actually means when countries begin to draw down their FX reserves. But in order to truly comprehend what’s going on here, one needs to look at China’s UST liquidation in the context of the epochal shift that began to unfold 10 months ago. When it became clear late last year that Saudi Arabia was determined to use crude prices to bankrupt US shale producers and secure other "ancillary diplomatic benefits" (think leverage over Russia), it ushered in a new era for producing nations. Suddenly, the flow of petrodollars began to dry up as prices plummeted. These were dollars that for years had been recycled into USD assets in a virtuous loop for everyone involved. The demise of that system meant that the flow of exported petrodollar capital (i.e. USD recycling) suddenly turned negative for the first time in decades, as countries like Saudi Arabia looked to their stash of FX reserves to shore up their finances in the face of plunging crude. Of course the sustained downturn in oil prices did nothing to help the commodities complex more broadly and as commodity currencies plunged, the yuan’s dollar peg meant China’s export-driven economy was becoming less and less competitive. Cue the devaluation and subsequent FX market interventions.Crucially, for oil exporting nations, central bank official reserves likely underestimate the full scale of the reversal of oil exporters’ “petrodollar” accumulation. This is because a substantial part of their oil proceeds has previously been placed in sovereign wealth funds (SWFs), which are not reported as FX reserves
Mysterious Buying And Selling By China Distorts Mid-East Oil Price, Baffles Traders - Well, leave it to China - whose economic deceleration is in many ways behind the worldwide demand dearth and attendant global deflationary supply glut - to turn the existing supply/demand imbalance for the world’s most important (and financialized) commodity on its head leading to mass confusion among market participants. Apparently, two state-owned Chinese oil trading companies (Chinaoil, which is the trading arm of state-run China National Petroleum Corp. and Unipec, which is owned by Sinopec) have been busy monopolizing the Dubai spot market, as a bout of suspicious trading activity between the two has served to distort prices and confuse other traders. Chinaoil bought a record 72 out of the 78 cargoes traded in the Dubai cash market last month, "most of which", Bloomberg says, were purchased from Unipec. Here’s more: The record buying in Singapore was part of the market-on-close price assessment process run by Platts, a unit of McGraw Hill Financial Inc., where bids, offers and deals are reported by traders through e-mails, instant messages and phone conversations in a fixed period each day.These are used to create end-of-day price assessments for various commodities and form benchmarks for transactions globally. “Chinaoil and Unipec each have their own trading book and strategy,” “The Chinese government will not hinder free trading.”
China oil market reform paves way for new crude benchmark – China may launch a global crude oil futures contract as early as October to compete with the existing London Brent and the U.S. WTI benchmarks, three sources said, as it pushes ahead with reforms to open up its oil markets. The long-awaited crude contract would better reflect China’s growing importance in setting crude prices, as well as boost the use of the yuan in which it will be traded, although volatile global trading conditions and China’s recent interference in stock markets have raised some concerns. The Shanghai International Energy Exchange, also known as INE, circulated a draft of the futures contract to market participants last month, saying the launch could happen as early as October, the sources who saw the draft, told Reuters. China, the world’s second-biggest oil consumer, has already begun to loosen its grip on the physical oil sector this year by granting quotas for imported crude to privately-owned refiners for the first time, surprising market participants with the speed of reform. “The development of a futures market is closely linked to the physical market,” INE said in a statement issued to Reuters in response to questions about the new contract. “The more physical players participate, the better the liquidity of the futures market will be.”