Sunday, November 29, 2015

oil & oil products glut increases again, & why the frackers aint bankrupt yet..

it seemed like a slow week in the fracking patch, but when it's a holiday week like this one was, it's hard to tell if it was really slow, or if whatever news that might have come out just wasn't being written up because all the reporters cut out in the middle of the week...even the regular Friday release of the rig count data was relegated to Wednesday, so we only have 5 days of news on that, although we did manage to notch the largest drop in the total rig count in the past 7 weeks over that short span....there was certainly plenty of oil & gas related news in the conflict zones of the Ukraine and the Middle East, such as our NATO ally Turkey's shooting down a Russian jet after Russia had taken out a convey of ISIS oil tankers that were delivering stolen oil to Bilal Erdogan, the son of Turkey's president, but since that kind of news is outside of the purview of our focus on fracking in these letters, we'll just relegate the stories on all of that to the links we'll just catch up on an old issue i've been meaning to get back to while we're waiting for the semi-annual OPEC meeting next Friday, and cover what little new fracking patch data we do have for this week..

two months ago, when explaining the oil industry's debt service needs and cash flow, we forecast that most of the fracker's banks lines of credit would be cut off when their economically recoverable reserves were reevaluated at current oil prices in their October semi-annual review by the banks, and because, for the most past, their cash flow couldn't pay the 11% interest being demanded for new energy bonds, most would be forced in bankruptcy by Thanksgiving....well, Thanksgiving has come and gone, and most of the frackers are still up and running, and continuing to lose money hand over fist, like we saw when we reviewed their third quarter results two weeks what did i get wrong, and why are these unprofitable enterprises still afloat?  

basically, what i hadn't counted on was that the banks would step in and bail the insolvent frackers out, putting themselves at risk for their losses....the first inkling we had about what was going down was in an October Financial Times article (paywalled, but transcribed here) which reported that "the covenants on 72 out of the 74 loans to the oil and gas sector had recently been modified,” obviously suggesting that without such modifications, the original terms of the loans would have probably called for immediate repayment or default, likely because the value of the oil reserves on which the loans had been made was now half what it was when credit was first extended, or as the FT put it "banks are quietly relaxing the borrowing conditions, to avoid the embarrassment of seeing loans it has made go into default."

of course, these risky loans have not escaped the attention of the bank a review earlier this month of loans made by federally regulated institutions, federal regulators gave a negative classification to $372.6 billion out of $3.9 trillion of the loans reviewed, specifically citing worry about oil and gas loans that received the three most negative ratings of "substandard," "doubtful," and "loss" ....the press release from the Fed on the problem, titled Review Notes High Credit Risk and Weaknesses Related to Leveraged Lending and Oil and Gas, was typical Fedspeak obfuscation,  with warnings to the banks veiled in language like "structural deficiencies found in loan underwriting...warrant continued attention", noting an increase in weakness among credits related to oil and gas exploration, production, and energy services following the decline in energy prices since mid-2014...and just this week, the chairman of the Federal Deposit Insurance Corp warned that "[bank] Loan portfolios in regions that depend on oil and gas revenue are increasingly at risk due to the significant decline in energy prices,”...these statements might seem like pablum compared to the political rhetoric we're used to, but considering the sources, who normally take a 'speak no evil' approach to their charges, they are clear messages to the banks making those loans, as the Wall Street Journal says, "Bankers likely will have to answer questions about these topics when their examiners come to visit in the coming months"....simply put, we've just been through a financial crisis on the back of housing loans going bad, and no one in authority wants to see another banking crisis on their watch...

The Latest Oil Stats from the EIA

the weekly oil patch data published on Wednesday by the US Energy Information Administration indicated crude oil imports increased significantly, wellhead production of oil was down a bit, refineries consumed more of that production and those imports than last week, but we still had a nearly million more barrels of crude leftover at the end of the week to add to our accumulating glut of oil in the week ending November 20th, our volatile imports of crude oil rose by 365,000 barrels per day to 7,333,000 barrels per day, just about reversing last week's drop to a five month low of 6,968,000 barrels per day...but this week's imports were still 1.9% below the 7,473,000 barrels per day we imported in the 3rd week of November last year, and brought our 4 week average of imports up to 7.2 million barrels a day, still just 0.1% less than the same 4 week period last year...

on the other hand, our field production of crude oil slipped to 9,165,000 barrels per day in this weeks report, a decrease of 17,000 barrels per day from the production rate of 9,182,000 barrels per day during the week ending November 13th...this week's output was just 1.0% more than our production of 9,077,000 barrels per day during the 3rd  week of November last year, and it's now 4.6% below the modern weekly record production of 9,610,000 barrels per day that was set in the first week of June this year...however, over the past eleven weeks, the output of crude oil from US wells has held steady in a narrow range, fluctuating less than 1%, between 9,096,000 barrels per day and 9,185,000 barrels per day...

meanwhile, refineries continued to ramp up following their fall maintenance downtime, as crude oil used by US refineries jumped by another 304,000 barrels per day to 16,380,000 barrels per day during the third week of November, which is now more than a million barrels a day crude than they were processing 5 weeks earlier...this week's crude oil refinery inputs were also 2.7% above last year's pace, and if this year follows the season pattern, they'll continue at this level or higher till year end, as the refinery utilization rate rose to 92.0% from 90.3% a week earlier....oddly, though, both production of gasoline and production of distillate fuels fell, with gasoline output down 14,000 barrels per day to 9,544,000 barrels per day, and output of distillates down 9,000 barrels per day to 5,023,000 barrels per day...however, production of kerosene type jet fuels rose by 58,000 barrels per day to 1,648,000 barrels per day and production of propane/propylene feedstocks rose 40,000 barrels per day to 1,668,000 barrels per day..

however, it now appears that since refineries are running flat out again, they're producing way more products than are being used or exported...our week ending supplies of gasoline jumped by 2,478,000 barrels to 216,732,000 barrels as of November 20th, more than 10 million barrels above the year ago 206,424,000 barrels, and well above the upper limit of the average range for this time of year...stockpiles of propane/propylene rose by 1,733,000 barrels to 106,202,000 barrels, a new record high that's almost twice the 58,372,000 barrels of propane/propylene inventories we had stored in the 3rd week of November two years ago...distillate fuel inventories (ie, diesel fuel and heat oil) were also up by more than a million barrels, rising from 140,318,000 barrels last week to 141,364,000 barrels with this report, and are now in the upper half of the average range for this time of year...and inventories of kerosene type jet fuels rose by 655,000 barrels to 37,216,000 barrels, but are still the only major refined product in the lower half of the average range for November, as the weekly Petroleum Status Report (62 pp pdf) tells us that over the last four weeks, jet fuel products supplied were up 4.1% compared to the same four week last year...

and finally, even with the increase in refinery throughput to above normal levels, the increase in our oil imports left us with nearly a million more barrels of crude oil sloshing around the country than we could use, meaning we also had to find space to store more of that...hence our inventory of crude oil in storage, not counting what's in the government's Strategic Petroleum Reserve, rose for the 9th week in a row, increasing from 487,286,000 barrels on November 13th to 488,247,000 barrels on November 20th, which is 105.2 million more barrels, or 27.5% more oil in storage, than the 381,078,000 barrels we had stored at the end of the third week of November a year ago, which at the time was an all time high for we now have the most oil we ever had stored anytime in November in the 80 years of EIA record keeping, which had never seen more than 400 million barrels stored before this year, adding nearly 34.3 million barrels to our stores in the last 9 weeks, and we're closing in on the all time inventory record of 490,912,000 barrels set on April 24th this spring...

This Week's Rig Counts

as we mentioned in opening, active drilling rigs fell by the most since the week ending October 9th in this holiday shortened week that also saw oil and gas rigs both reduced in the same week for the first time since then....Baker Hughes reported that the total active rig count fell by 13 to 744, with their count of active oil rigs down by 9 to 555 and their count of active gas rigs down by 4 to 189; in 4th week of November a year ago, there were a total of 1572 oil rigs, 344 gas rigs, and one miscellaneous rig in use in the US...12 of the 13 rigs that were pulled this week were land based, while one was removed from an inland lake in southern Louisiana, where only 1 remains, down from 12 rigs on inland waters a year ago...Gulf of Mexico rigs were unchanged this week at 30, down from 52 a year earlier...

horizontal drillers took another big hit this week, as the net count for active horizontal rigs was down by 12 to 569, which was down from the 1371 horizontal rigs that were operating on the 26th of November last year...the number of directional rigs was reduced by 3 to 66, which was down from the 194 directional rigs that were deployed at this time last year..but two additional vertical rigs were started up, bringing the count of the conventional wells being drilled up to 109, which was still well down from the 352 vertical rigs that were working a year earlier..

of the major shale basins, the Permian of west Texas again saw the largest reduction, with 4 rigs pulled, leaving them with 221, which was down from 566 in the same week last year...the Eagle Ford of South Texas saw 2 rigs idled this week, leaving them with 73, which was down from 209 a year ago at this time...single rig additions were also made in five other major basins: the Barnett shale of the Dallas-Ft Worth area, the DJ-Niobrara chalk of the Rockies front range, the Granite Wash of the Oklahoma-Texas panhandle region, the Marcellus of Pennsylvania, and the Williston of North Dakota...those cuts left the Barnett with 7 rigs, down from 25 a year earlier, the Niobrara with 26 rigs, down from 62 a year earlier, the Granite Wash with 12, down from 59 rigs year ago, the Marcellus with 42, down from 82 a year earlier, and the Williston with 62, down from the 191 rigs that were drilling into that basin during the last week of November last addition to those basins removing rigs, the Mississippian lime of the Kansas Oklahoma border saw 3 rigs added this week; they now have 12, which is still down from 74 last year at this time..

the state rig count tables shows Texas with the greatest reduction, down by 6 rigs to 336, which is down from 901 rigs working Texas fields a year ago...not included in the major basin counts, three rigs that had been deployed in drilling into shallow shale plays in Illinois were also removed, leaving Illinois frack free, and rig free for the first time this year...there were several states that saw only one rig removed: Alaska, California, Colorado, Louisiana, North Dakota, Pennsylvania, and Wyoming...those reductions left Alaska, the only state to see a year over year increase, with 12 rigs, up from 9 rigs a year ago, California with 9 rigs, down from 42 a year ago, Colorado with 28, down from 72 rigs a year ago, Louisiana with 64, down from last year's 110, North Dakota with 62 rigs, down from last year's 180, Pennsylvania with 29 rigs, down from last year's 56, and Wyoming with 20, down from last year's 60...states seeing drilling rig increases were New Mexico, where they were up 2 to 40 active rigs, but still down from 99 a year earlier, and Oklahoma, where they added 1 rig and were up to 82, but were still down from the 214 rigs working Oklahoma in the last week of November a year ago...btw, Oklahoma is now the most seismically active place on earth, as their year to date earthquake count has now topped 5,000...apparently they don't know when to quit...


Nexus Gas takes next step to proceed with pipeline across northern Ohio - The company behind the proposed Nexus Pipeline across northern Ohio has filed paperwork to begin the official federal review of the $2 billion project. Texas-based Nexus Gas Transmission LLC on Friday asked the Federal Energy Regulatory Commission (FERC) to begin an environmental review of the 255-mile natural gas pipeline. The company had earlier filed preliminary paperwork. The company is seeking what’s called a certificate of public convenience and necessity from the federal agency that oversees interstate pipelines. FERC must now evaluate all potential environmental impacts, as well as the company’s plans to address and minimize them. The federal agency is expected to issue its final ruling in late 2016. The company called the filing “a significant milestone” in its announcement late Friday.flic Its filing with the federal agency includes responses to comments filed by pipeline opponents as well as a full evaluation of alternative routes and potential impacts of the pipeline, which will be 36 inches in diameter. The pipeline would run through northern Stark, southern Summit, the northeast corner of Wayne and across Medina County. It would run from eastern Ohio to Defiance in northwest Ohio and into Michigan. Connections could then carry the natural gas into Ontario.

Frack Foes Fear Release of Radium in Wayne National Forest - - Opponents of natural gas fracking in the 241,000-acre Wayne National Forest believe the process will release radioactive radium and other hazardous materials, while those in favor said drillers need to operate in the woodland so mineral owners can realize their properties' profit potential.The forest covers much of Monroe County, home of two notable fracking-related accidents last year. Environmentalists fear the dangers of fracking, in addition to risks associated with the pipelines needed to transport the natural gas, oil and liquids derived from the wells. Now, the Columbus-based Buckeye Forest Council hopes to prevent the U.S. Bureau of Land Management from allowing fracking in the wildlife area. "It took 350 million years for radium and its daughter elements to become isolated from the surface of the earth so that our carbon-based life forms could even develop,"  Radium is one of the radioactive materials found naturally in the Marcellus and Utica shale that fracking can activate, along with uranium and plutonium. Although these elements are generally in very small quantities, they are often present in fracking waste such as drill cuttings and briny wastewater.

Citizens at Athens BLM/Wayne forest meeting frustrated by inability to present testimony --There was a lot of shouting at the fracking-related event at the Athens Community Center yesterday (Nov. 18). Citizens were expressing their opinions about a proposal by the federal government's Bureau of Land Management to lease about 31,000 acres of the Wayne National Forest for drilling by the oil and gas industry. The great majority of the people in the large room where the Forest Service held the event were shouting to express their opposition to the proposal. None of the shouting done by either side was directed against anyone personally. It was simply the kind of more-or-less orchestrated shouting done at peaceful demonstrations.  Therefore, I believe that the violent behavior of one Forest Service officer who stood near me was entirely unjustified and outrageous. I witnessed this man behaving aggressively, pushing people and wielding a stick. He looked ready to beat people severely. Other people had to hold him back. . I am discussing the same incident described in the letter by Carl Edward Smith III. After the Forest Service officials decided to close down their event, a number of people gathered in the hallways or in other rooms. I talked with some people about the incident involving the violent Forest Service officer, and I talked about the drilling proposal with others (both pro-fracking and anti-fracking). I also listened to several discussions between people on both sides of the issue. Despite their passionate feelings, everyone was self-controlled and civil. Some citizens who had taken part in the orchestrated shouting of "No!" to the fracking proposal told me that they and many others had already spent four years speaking quietly in meetings, writing letters and submitting petitions to officials of the Wayne National Forest, the Ohio Department of Natural Resources, etc. But the officials had simply refused to listen or respond.

Commissioners to ask for public hearing on proposed injection well - The state will be asked by the Athens County Commissioners to hold a public hearing on a pending injection well application. D.T. Atha Inc. of Albany filed the application with the state this summer, but a recently published legal advertisement triggered the start of a 15-day period in which objections can be filed with the Ohio Division of Oil and Gas Resources Management (part of the Ohio Department of Natural Resources). The injection well would be located off Route 144 at the eastern end of Rome Twp. Injection wells are used to dispose of brine and other waste, including fracking waste, from oil and gas production wells. The request that the commissioners ask for a public hearing came from Heather Cantino, a member of the Athens County Fracking Action Network, although residents of Rome and Troy Twps. were there to lend support. The commissioners have requested public hearings on past injection well applications, but without success — something pointed out by Troy Twp. resident Felicia Mettler, who lives near a K&H Partners injection well. She asked if there is something more the commissioners can do to get a public hearing on the Atha well. Mettler talked about the past contamination of drinking water by the chemical C8 that came from a DuPont plant. “That was one chemical. How many chemicals are used that are being put down in the ground with these injections wells? We don’t know,” Mettler said.

Court appeal related to injection well will be filed - The Athens County Fracking Action Network filed notice Tuesday that it will be appealing to Franklin County Common Pleas Court a recent decision by the Ohio Oil & Gas Commission related to a Troy Twp. injection well. The Ohio Division of Oil & Gas Resources Management issued a permit on March 18 that allowed K&H Partners to proceed with drilling its third well in Troy Twp. ACFAN appealed that decision to the Oil & Gas Commission. Earlier this month, the commission dismissed the appeal, ruling that it lacked jurisdiction to hear the case. While ACFAN asserts that the permit issued by the state was an injection well permit, the state and K&H argued that it was a drilling permit that is not appealable to the commission and that separate permission would be needed for K&H to start injections (which has since been given). The commission agreed with the state and K&H and dismissed the appeal. ACFAN will ask Franklin County Common Pleas Court to overturn the commission’s decision and order the commission to hold a hearing on the permit appeal.

Eco-group working to make invisible air pollution from Ohio's Utica Shale visible to everyone — Peter Dronkers of Earthworks makes invisible air pollution from shale drilling visible to everyone. The viewfinder of Dronkers’ special infrared gas-recording camera shows billowing clouds or wispy leaks. What appears in the videos as wind-blown plumes of smoke are really pollutants that are invisible to the naked eye. Earthworks, a national environmental group based in Washington, D.C., quietly came into Ohio during the summer with its camera to determine if shale drilling, natural gas processing and transportation are fouling the air and sickening Ohio residents. The $100,000 optical gas imaging thermographer camera can detect up to 20 different gases that environmentalists say could pose a health threat to those living in Ohio’s Utica Shale, the region in eastern Ohio with natural gas and liquids. Earthworks initially posted eight Ohio videos to YouTube. It returned recently to film seven additional Ohio sites that will be posted soon. The group has been recording emissions from shale sites in Ohio and six other states. Such emissions increase the likelihood that air pollution problems will be found, said Nadia Steinzor of Earthworks’ Citizens Empowerment Project. Her group and the Ohio Environmental Council are pushing a new grass-roots effort to determine how big a threat shale drilling and related emissions are to neighbors in Ohio.

Sharp Production Increases in 2014 Boosted Value of Ohio Oil/Gas - The combined value of all Ohio oil and natural gas production in 2014 was more than $3.1 billion, up nearly 132% from the prior year, according to an annual mineral industries report released late Friday by the Ohio Department of Natural Resources' (ODNR) Division of Geological Survey. The report, which provides basic and economic information about the state's extraction industries, also offered an updated analysis of oil and gas production last year, reaffirming that Utica Shale development continues to drive significant increases (see Shale Daily, March 24). The geological survey said the dollar value of Ohio crude was about $1.2 billion in 2014, up 57% from the prior year. The average price for oil produced in the state last year was $79.92/bbl. The dollar value of Ohio natural gas was $1.9 billion, up 229% from 2013. The report said Ohio's average natural gas price last year was $3.78/Mcf. Based on estimates from ODNR's Division of Oil & Gas Resources Management, the report said 715 oil and gas wells were drilled in the state last year. Wells were drilled in 38 of Ohio's 88 counties, demonstrating that conventional producers remain active outside a 12-county region in Eastern Ohio where shale producers have been most active. Ohio's Utica-Point Pleasant interval was the most actively drilled in 2014, accounting for 73% of all wells drilled, followed by the Clinton Sandstone, a long-time vertical target that accounted for 13% of all wells drilled. A total of 605 productive development wells were recorded in the state during 2014, most of which were located in Harrison County, where shale drillers reported 121 productive wells. Carroll and Guernsey counties reported 93 and 59 producing development wells, respectively, in a hotbed for Utica drilling to round out the top three counties for producing wells.

Ohio's fracking boom hits speed bump - — When shale oil-and-gas investment hit eastern Ohio three years ago, the results could be measured in steaks and Shiner Bock beer.  At least that’s the way they saw it at the Forum restaurant, a hangout for out-of-town oil-and-gas workers just off I-70. In the evenings, the bar at the front of the house was filled with customers from Texas and Louisiana, and they tended to order from the pricier part of the menu.  The bottom fell out in the fall, when the Organization of Petroleum Exporting Countries, the world’s largest oil cartel, decided not to cut back on production, which pushed prices even lower. This was an attempt by Saudi Arabia and other OPEC members to put pressure on North American producers, said Juan Pablo Fuentes, an economist for Moody’s Analytics. “OPEC has been the producer that increases output when prices go up and decreases output when prices are low,” he said. “They decided this time around that they don’t want to continue losing market share.” It’s a move that has rocked markets around the world. In Ohio, officials issued two drilling permits in the Utica in 2010, and then saw the figures skyrocket, hitting a peak of 712 permits last year, according to the Ohio Department of Natural Resources. The activity clearly has taken a step back this year, with 441 permits issued as of last week. The decline is a result of a pullback by companies such as Chesapeake Energy, the largest producer operating in the state, which had 190 new drilling permits last year and only 98 so far this year. A reduction in permits is going hand in hand with a reduction in drilling. Energy companies had 19 rigs drilling new wells in the state last week, down from a recent peak of 47 in January, according to oilfield-services firm Baker Hughes. As rigs go idle, workers get laid off, including those who work for outside companies that serve the rigs.

Fairer oil and gas tax - Toledo Blade Editorial - A panel of state lawmakers recently compiled a lengthy report on what to do about Ohio’s ludicrously inadequate, antiquated severance tax on oil and natural gas production. The study’s proposals can be reduced to a single, predictable recommendation: Don’t do anything.  That’s hardly surprising; the Republican-controlled General Assembly’s slavish adherence to the dictates of Statehouse fossil-fuel lobbies, and its appreciation of their campaign contributions, are well established. But when GOP Gov. John Kasich — no one’s idea of a red-hot tax-and-spender — calls the legislature’s inaction on the severance tax “disappointing,” Ohioans may want to pay closer attention.  Ohio’s boom in hydraulic fracturing, or fracking, in recent years has greatly increased oil and gas exploration in eastern and southern parts of the state. But the severance tax and related fees that Ohio charges producers remain absurdly low relative to those imposed by other states: 20 cents per barrel of oil and 3 cents per 1,000 cubic feet of natural gas.  The legislative report acknowledges that “Ohio’s total tax burden on the oil and gas industry is lower than or as low as every other state with a severance tax.” But while it concedes the need to “update Ohio’s severance tax to make it comparative with other shale-play states across the nation,” it provides no timetable for doing so.  Ohio’s current severance tax does not generate enough revenue to support effective state regulation of the drilling industry, or to enable local communities to make the upgrades in essential services — roads, public safety, environmental protection — needed to cope with the effects of fracking. Nor does it provide taxpayers with a fair return from extraction of the state’s nonrenewable natural resources.

Can Northeast Become A Net Gas Supplier To The U.S. In 2015? -- A highly anticipated event in the U.S. natural gas market is when the Northeast region crosses the line from being a net gas taker from, to becoming a net gas supplier to, the rest of the country. Ever since the Marcellus and Utica shale began ramping up, Northeast production has been on a course to eclipse regional demand. RBN predicted 2015 would be the tipping point when the supply-demand balance would finally reverse on an annual average basis, marking a new phase for Northeast prices and for the U.S. gas market as a whole. We’ve seen that despite capitulating oil prices, capital budget cuts and lower rig counts, Northeast production has continued to reach new highs in 2015 – beating the record again this past Sunday (November 22,2015) at 20.3 Bcf/d according to Genscape. But regional demand also has been at record high levels. Today with less than two months left in the year, we determine whether the Northeast region will – or already has - crossed the threshold to net supplier in 2015.

Pennsylvania safety seminar puts focus on Bakken crude - Emergency responders from four counties gathered in Hempfield on Saturday to learn how to better respond to rail incidents, particularly those involving Bakken crude oil. The highly flammable crude is transported from the Bakken Formation, an area encompassing parts of Canada, Montana and North Dakota, to oil refineries, some of which are on the East Coast. There’s been an increase nationally in crude oil transport by train, said Bill Wright, an adjunct instructor with the Pennsylvania State Fire Academy, who conducted the free training. The 28 first responders at the Hempfield Emergency Response Center learned about Bakken crude’s properties, how it behaves and how to handle it, Wright said. Although the number of rail incidents involving crude in Pennsylvania has been low, there have been significant numbers in West Virginia and Canada, he said.

EPA Finding on Fracking's Water Pollution Disputed by Its Own Scientists -- An Environmental Protection Agency panel of independent scientific advisers has challenged core conclusions of a major study the agency issued in June that minimized the potential risks to drinking water from hydraulic fracturing. The panel, known as the Science Advisory Board (SAB), particularly criticized the EPA's central finding that fracking has not led to "to widespread, systemic impacts on drinking water resources in the United States." The oil and gas industry has seized on the conclusion to argue that broad concerns about fracking's impact on drinking water are overblown. The SAB's 30 members, from academia, industry and federal agencies, said this and other conclusions drawn in the executive summary were ambiguous or inconsistent "with the observations/data presented in the body of the report." "Of particular concern is the statement of no widespread, systemic impacts on drinking-water resources," the SAB wrote in a preliminary report. "Neither the system of interest nor the definitions of widespread, systemic or impact are clear and it is not clear how this statement reflects the uncertainties and data limitations described in the Report's chapters." The panel said that the EPA erred by not focusing more on the local consequences of hydraulic fracturing. "Potential impacts on drinking-water resources are site specific, and the importance of local impacts needs more emphasis in the Report. While national-level generalizations are desirable, these generalizations must be cautiously made...A conclusion made for one site may not apply to another site."

Fracking Companies Have Been Getting Worse About Disclosing The Chemicals They Use - Want to know what chemicals energy companies use in their hydraulic fracking operations? Turns out it’s getting harder and harder to answer that question. According to a new study published in the journal Energy Policy, fracking companies have become less forthcoming since 2013 about the chemicals used in their operations, citing “the use of proprietary compounds” as grounds for limiting their disclosure.  The study, written by Harvard University researchers Kate Konschnik and Archana Dayalas as a follow-up to a similar analysis conducted in 2013, looked at more than 96,000 disclosures made between March 2011 and April 2015 on FracFocus, a hydraulic fracturing chemical registry. According to Inside Climate News, FracFocus was launched in 2011 as a tool for collecting voluntary disclosures from oil and gas companies, and was later adopted by more than 20 states in order to fulfill their chemical disclosure regulations.  But FracFocus’ ability to act as a proxy for state’s chemical disclosure regulations has been under fire for years.That criticism set off a slew of improvements at FracFocus. In 2015, the site announced plans to improve its accuracy and access, pledging to reduce the amount of information withheld under the guise of “trade secrets.”  Konschnik told Inside Climate News that some of the improvements FracFocus has made — especially the ability to download data in bulk, which makes large-scale analysis of fracking wells easier — have been “huge.” But the new study still found a 16.5 percent withholding rate in forms filed between 2013 and April 2015, compared to 11 percent between 2011 and 2013.

Massachusetts residents dig in against pipeline — The anti-pipeline crowd at the Yachnin family’s home was warmed by more than the hardwood logs burning in the fireplace when David Yachnin announced the state Attorney General’s comments from earlier in the day. AG Maura Healey, citing an energy study her office commissioned last summer and released Wednesday said Massachusetts doesn’t need natural gas pipelines to meet electricity needs through 2030. “I can’t tell you how huge a win this is for us,” Yachnin told the 65 neighbors and fellow opponents of the Kinder Morgan natural gas pipeline. About 4.3 miles of the line’s 400-mile length, from fracking gas fields in Pennsylvania, and piped underground through New York, Massachusetts and into New Hampshire is proposed to run through Andover, much of it parallel to power lines. The report’s findings and Healey’s backing will have weight when and if the pipeline ends up challenged in court, especially with the federal regulatory agency that will decide the project’s fate. “The only thing the FERC listens to is the court, and this is our court,” Yachnin said of the AG’s office, which represents the public in utility cases. Federal Energy Regulatory Commission (FERC) is reviewing the Kinder Morgan pipeline and whose approval the Texas company needs for the pipeline to be built.

Offshore drilling on town agenda - The Town of Swansboro will be the next Eastern North Carolina community to consider taking a stand against drilling off of the state’s coast. A draft resolution of offshore drilling opposition is on the agenda of tonight’s regular meeting of the Board of Commissioners. The meeting begins at 6 p.m. in the community room at the Swansboro Town Hall. If approved, the Town of Swansboro would stand “opposed to offshore oil and gas development and drilling and related seismic blasting activities off of the North Carolina coast.”To date, a number of coastal communities in the area have joined other municipalities in the state in going on the record against offshore drilling and/or seismic testing activities. In Onslow County, the towns of Holly Ridge and Surf City have adopted resolutions. In Carteret County, Emerald Isle, Morehead City and Beaufort have adopted resolutions opposing offshore drilling; and Atlantic Beach councilmen agreed to a resolution to be formally adopted this month. The Carteret County Chamber of Commerce and Tourism Development Authority have also taken a stance against it. Last week, Carteret County commissioners took action counter to what other coastal communities have done and adopted a resolution supporting Gov. Pat McCrory and his leadership as chairman of the Outer Continental Shelf Governors Coalition.

Fracking politics at work — or not — in Tallahassee -- Fracking is in the news in Florida. This may seem odd, as Florida is not anywhere near being a large oil-producing state. Fracking is in the forefront in Florida because a growing number of its citizens are becoming informed of its threats and its dangers and they want to stop it before it is too late. Hydraulic fracturing and acid well stimulation are techniques for breaking up oil- and gas-laden shale and limestone deposits in dried up wells or potential new wells to stimulate fossil fuel production. The process is fraught with risk of methane leaks, water contamination, earthquakes and poison residues but is used to squeeze more oil out of wells. So where are the ban-fracking bills? They are there in Tallahassee, several senators and representatives have sponsored them, but they may never be voted on. The problem is that the Florida House Speaker Steve Crisafulli and Senate President Andy Gardiner or possibly Senate President-elect Joe Negron have not put them into committee. Until they do so, a huge percentage of the Florida population will not have a chance to have their wishes represented in Tallahassee. Sources close to the legislative workings have said that Gov. Rick Scott would veto any ban-fracking bill if it were to pass, but that should not stop the democratic process. Something is wrong with our system if two individuals have the power to arbitrarily prevent a bill supported by a large proportion of our voters from even being considered in our Legislature.

Hydraulic Fracturing Knocking On Illinois' Doorstep: Hydraulic fracturing and natural gas development, well under way in Ohio and Pennsylvania, may soon come to Illinois, the latest state to experience an energy rush. Brad Richards, vice president of the Illinois Oil and Gas Association, said southern Illinois is in the midst of an oil and natural gas lease boom. In places like Wayne, Hamilton and Saline counties, there have been tens of millions, perhaps even a hundred million or more spent to acquire these leases, Richards said in a report on WUIS Radio, an NPR affiliate in Springfield, Ill. The leases are being bought up in the hope that companies could soon start developing shale formations. The formations are part of a large basin that straddles the Illinois, Kentucky and Indiana borders, said to hold up to 87 trillion cubic feet of natural gas, according to the Gas Research Institute, which funded a 1994 assessment of the region with the Illinois Basin Consortium. The extension of fracking into yet another state comes at a time when the price of natural gas has been declining. Natural gas on the New York Mercantile Exchange fell four cents in Tuesday trading to $2.18 for every 1,000 cubic feet. The price is now at less than half its 52-week high of $5.13.

Early report says Texas oil, gas production up from last year -- Texas produced 72,849,838 barrels of crude oil and 620,188,919 Mcf (thousand cubic feet) of total gas in September, according to a preliminary report by the Railroad Commission of Texas. The Commission regulates the oil and gas industry in Texas. Preliminary figures are based on production volumes reported by operators and will be updated as final corrected reports are received. Preliminary production numbers are up from a year ago, when Texas reported 65,824,450 barrels of crude oil and 595,603,581 MCF of total gas production. Preliminary September 2015 crude oil production averaged 2,428,328 barrels daily, compared to the 2,194,148 barrels daily average from a year ago. Total gas production averaged 20,672,964 Mcf a day, up from the 19,853,453 Mcf daily average in September 2014. Texas production in September came from 181,179 oil wells and 95,834 gas wells.

Oil Jobs Lost: 250,000 And Counting, Texas Likely To See Massive Layoffs Soon --Crude oil just capped off a third straight week of declines, as WTI nears the $40 per barrel threshold. Goldman Sachs is once again raising the possibility of oil dipping into the $20s per barrel. That spells more pain for the energy sector. Many companies have already slashed spending and culled their payrolls, but the total number of job losses continues to climb. According to Graves & Co., an industry consultant, oil and gas companies have laid off more than 250,000 workers around the world, a tally that will rise if oil prices remain in the dumps.“I was surprised it’s gotten this far,” Graves & Co.’s John Graves told Bloomberg in an interview. In an eye-catching statistic that highlights who exactly is bearing the brunt of the downturn, Graves says that oilfield service companies account for 79 percent of the job losses.Still, upstream E&P companies are also being substantially squeezed by another plunge in oil prices. According to an analysis by the Texas Alliance of Energy Producers, a new round of layoffs could be underway in Texas, for example. The Texas Alliance predicted that the first drop in oil prices last year would lead to 40,000 to 50,000 layoffs in Texas. But the renewed drop since the end of the summer could force many more cuts. Right now, the group is putting a conservative estimate at 56,000 job cuts so far, but they say the real tally is probably higher.

Despite oil bust, Texas prepares more students for oil jobs — The oil industry is mired in its latest bust, with thousands of jobs evaporating like flares flaming out over natural gas wells. But in Texas, education officials are preparing more young people for the oil patch, showing the state’s unshakeable commitment to the energy sector despite the employment uncertainties. The Houston school district is planning to expand its Energy Institute High School to around 1,000 students by 2017 and inaugurate a new 110,000 square-foot, $37 million facility. The three-year-old institute is the nation’s only high school fully specializing in oil and energy careers. In the oil-rich Permian Basin, two Midland high schools have begun “petroleum academies.” And state officials have approved vocational classes in oil production, authorizing all schools districts across Texas to teach them. “We are in this downturn, but as a society we have a responsibility to not let that affect our workforce and to keep ahead of the game,” said Energy Institute principal Lori Lambropoulos. Other oil and gas states, including North Dakota, Louisiana and Wyoming, offer technical training for high school students interested in the oil industry, but Texas’ program is more extensive, despite questions about whether there will be jobs in the near future for its graduates.

FRACKING: An Exercise in Reality Denial & Myth Creation  — Top state oil and gas officials have said it repeatedly: There is no credible link between fracking and groundwater contamination.Yet a WFAA investigation reveals the state’s own records reflecting a significant concern about a water well explosion in Palo Pinto County last year.And now, a neighboring water well is so contaminated with fracking related chemicals that the state says it poses a potential explosive threat.But what is the state doing about it?    That’s what Richard and Stella Singleton would like to know. They have lived and raised a family on their Palo Pinto County ranch for 24 years. Like many rural Texans, they rely on water from their well for bathing, cooking, and for their animals to drink.But all of that changed, they say, after Fairway Resources fracked an oil and gas well just a few hundred yards from their house in the summer of 2013.By December of that year, the Singletons said their well water started to smell like rotten eggs. Fumes filled their home. Then their water began to burn their skin. State inspectors came out to run tests. WFAA obtained documents related to the investigation through the Texas Public Information Act. Not only did those tests find excessive levels of methane in their water, but also but chlorides and the cancer-causing chemical benzene.  Oil and gas regulators with the Texas Railroad Commission issued a report saying the Singletons’ well water contained chemicals that may pose “adverse health effects” and an “explosion hazard.” The state’s solution? “Vent your water well” and consider “installing a well water aeration system,” documents show.

Oklahoma Leads The World In Seismic Activity As 2015 Quake Count Tops 5,000 -- With geologists having confirmed the link between fracking and earthquakes in Oklahoma (and energy executives trying to get those geologists fired), the news this week that The Sooner State leads the world in seismic activity will likely see more uproar from residents.. and more lobbying dollars spent to 'calm' the politicians. As KFOR reports, this year, more than 5,000 earthquakes have been recorded and experts say earthquakes in Oklahoma will likely increase in magnitude over time warning that it's only a matter of time before the state gets a big one that will change life for those of living there. "It's unclear exactly how high we might go, and the predictions are upper 5-6 range for most things that I've seen," Todd Halihan, a researcher from OSU, told KFOR NewsChannel4,   "Underneath any of these urban areas, whether it's Stillwater, Cushing, Oklahoma City, Guthrie, these cities are not built to seismic standards. They're not in L.A." Halihan said. "We have a lot of buildings that were built with earthquakes not even on the radar screen, so we would expect probably a fair bit of damage,"

U.S. oil company shakes up quake plans after Oklahoma temblors -- Reuters: Phillips 66 has overhauled how it plans for earthquakes, a sign U.S. energy companies are starting to react to rising seismicity around the world's largest crude hub in Cushing, Oklahoma. The changes include new protocols for inspecting the health of crude tanks, potentially halting operations after temblors, and monitoring quake alerts. The revisions, fully implemented in 2015 and first detailed to Reuters this past week, appear to mark the most significant acknowledgement by a major energy company that its seismic procedures were recently updated. They also come as some researchers say tougher standards for energy infrastructure such as pipelines and tanks could be needed to handle an uptick in quakes since 2009 in Oklahoma. Scientists have tied a sharp increase in the intensity and frequency of quakes in Oklahoma to the disposal of saltwater, a normal byproduct of oil and gas extraction work, into deep wells. A 4.7 magnitude quake struck in Oklahoma on Thursday, the strongest temblor there since 2011. About a month earlier, a 4.5 magnitude quake hit near Cushing. Regulators responded by calling for nearby disposal wells to shut or curb intakes. Phillips, a refiner, has 167,000 barrels per day of pipeline capacity and 700,000 barrels of storage tanks at Cushing, home to about 57 million barrels of crude and a nexus for U.S. supply, according to a 2015 investor presentation.

USGS: Magnitude 6.0 quake possible - — The factors are aligned for Oklahoma to have another damaging earthquake, magnitude 5.7 to 6.0, but exactly when it could happen is unclear. U.S. Geological Survey research geophysicist Daniel McNamara said the fault orientation in Oklahoma is optimal for producing earthquakes. There are several as­­pects of earthquakes, and determining the next possible large one, which includes data like size, the fault system, orientation and alignment. “Faults that are aligned in a particular optimal orientation — which if you know compass directions, would be N45E — so not directly north or east but halfway between. So that orientation is optimal for producing earthquakes in Oklahoma,” McNamara said. “Many of the fault systems are of that orientation.” McNamara said the 5.6 magnitude earthquake that shook Prague in 2011 was of such fault orientation. “So we look at the orientation and the size of the fault to see if the size of the fault is large enough to produce a big earthquake and if the orientation is optimal,” he said. McNamara said USGS cannot predict exactly when another large quake will occur, but the factors are there. “I would say there are numerous fault systems in Oklahoma that are producing magnitude 4s that could rupture into a larger earthquake, very similar to what happened in 2011 in Prague,” he said. “There are at least 13 fault systems that have the same type of behavior as Prague ...”

Colorado oil and gas spill report for Nov. 23 -- The following spills were reported to the Colorado Oil and Gas Conservation Commission in the past two weeks.

  • WHITING OIL & GAS CORP., reported Nov. 9 that a valve failed on a pipeline near New Raymer. Between one and five barrels spilled.
  • DCP MIDSTREAM LP, reported Nov. 9 that a landowner was contacted about a pipeline leak near Johnstown. An unknown amount of condensate spilled.
  • NOBLE ENERGY INC., reported Nov. 10 that an oil line developed a leak near LaSalle. Between one and five barrels of oil spilled.
  • EXTRACTION OIL & GAS LLC, reported Nov. 13 that a valve was left open and overflowing while draining water off of a tank near Fort Collins. Less than 100 barrels of oil and between five and 100 barrels of produced water were spilled.
  • PDC ENERGY INC., reported Nov. 13 that fluid was found discharging to the surface of a well near Gill. Between one and five barrels of oil and produced water spilled.
  • NOBLE ENERGY INC., reported Nov. 18 that a water vault was discovered to have a leak during plugging and abandonment near Kersey. And unknown amount of produced water spilled.

US to cancel lease on land sacred to Blackfoot Indian tribes — The Interior Department plans to cancel a long-suspended oil and gas drilling lease near Glacier National Park that’s on land considered sacred to the Blackfoot tribes of the U.S. and Canada, according to court documents filed Monday. Tribal leaders said such a move would make up for a wrong done to them in 1982, when the government issued the lease without consulting the tribes. But the legal maneuvering in the case might not be over: The law firm representing the lease owner, Solenex LLC of Baton Rouge, Louisiana, indicated it would challenge any attempt to cancel the lease. Government attorneys said the lease was improperly sold more than three decades ago, in part because an environmental study did not consider the impact of drilling on the tribes. The U.S. Forest Service and Bureau of Land Management “failed to fully consider the effects of oil and gas development on cultural resources, including religious values and activities,” the attorneys wrote. The 6,200-acre lease is in northwestern Montana’s Badger Two-Medicine area, which is the site of the creation story for the Blackfoot tribes of southern Canada and the Blackfeet Nation of Montana. It is just west of the Blackfeet Indian Reservation. The lease could be canceled as early as Dec. 11.

North Dakota eyes science for oilfield brine cleanup — A half-century after it held saltwater and other oil-drilling waste, an abandoned pit near the Little Missouri River in western North Dakota was dug out and filled with fresh soil this week with hopes that the site will someday be capable of producing vegetation again. The reclamation, which involved the removal of some 6,900 tons of salt-tainted soil, came in the eleventh hour, workers say, as one more bout with heavy spring rains could have caused river erosion to eat into the briny pit near Medora, potentially threatening water supplies for several communities downstream. The 5,000-square-foot pit is one of only six so-called legacy sites targeted under new state legislation that sets aside $1.5 million over the next two years to restore land impacted from oil booms past and where companies no longer are legally responsible. The work near Medora, which was ranked as a top priority by the state, will use at least a third of the appropriation, regulators say. “We have to find a way to do it better, faster and cheaper,” said Alison Ritter, a spokeswoman for the state Department of Mineral Resources, which regulates oil and gas development in the state. That’s where the state’s two biggest universities come in: Money from a portion of a tax on North Dakota oil production is funding competing research to develop a method of restoring such sites without the use of expensive mechanized excavation. The focus is on remediating land ruined by saltwater, a byproduct of oil production that can be many times saltier than seawater. When land is spoiled by briny drilling waste, the traditional fix is to dig up and haul away the tainted soil and re-cover the land with good dirt.

North Dakota 'man camps' battle pending ban in oil capital -– Providers of temporary housing for North Dakota’s oilfield workers are fighting a plan by the state’s energy capital to evict their “man camps,” fearing it could set an example for others and add to the sector’s woes caused by a global commodity slump. Earlier this month, the Williston City Commission voted 3-2 in favor of an ordinance that would deny “man camps” occupancy permit extensions beyond July 2016. Should the ordinance pass in a final vote on Nov. 24, which appears likely, it would mark the first time since the U.S. shale boom began in 2008 that a community has evicted a “man camp,” though other communities in Texas and North Dakota have blocked their arrival or expansion. Williston leaders say it is time for oilfield workers to plant permanent roots or use existing hotels for extended stays and point out to abundant new permanent housing in this city with an estimated population of about 31,000. “The man camp industry should understand we allowed them to come here on a temporary basis,”

October, 2015, Bakken Oil Production Remains Flat Month-Over-Month -- November 25, 2015 - The Director's Cut comes out about the middle of the month. When it comes out, the data is for the month prior to the previous month; in other words, the "November 15th" Director's Cut was for September data. So this caught me by surprise. Platts Bentek reported today that October production from both the Eagle Ford and the Bakken remained flat. October production. Oil production from key shale formations in North Dakota and Texas remained relatively flat in October versus September, according to Platts Bentek. Oil production from the Eagle Ford shale basin in Texas continued flat streak in October, increasing only 6000 barrels per day (b/d), or less than 1%, versus the previous month, the latest analysis showed.    The average oil production from the South Texas, Eagle Ford basin in October was 1.5 million barrels per day. On a year-over-year basis, that is up close to 65,000 incremental barrels per day, or about 5% higher than October 2014.  The average crude oil production from the North Dakota section of the Bakken in October was 1.2 million b/d, or about 13,000 b/d from year ago levels.  "Much like the Eagle Ford, producers in the Bakken shale are also consistently looking to reduce costs to hold production steady," said Yahya. "In September 2014, 77% of the total wells drilled in the basin were drilled in the core counties (McKenzie, Dunn, Williams and Mountrail) and that metric has since risen to 92% in October 2015.   The price of oil out of the Bakken formation at Williston, North Dakota, was up 11% between January and October, with an average price of $46.85/b for the first 10 months of 2015, according to the Platts Bakken assessment.  Platts Bakken, however, is down 40% when compared to last year's corresponding month. The wellhead assessment has ranged between $33.35/b and $59.32/b since the beginning of January.

US Oil From Fracking More Volatile, Widespread Than Previously Believed -  The millions of barrels of oil pumped from shale rock around the country, in Colorado, Texas and other states, not just North Dakota, are full of unpredictable and flammable gases that make the crude difficult to move and process into fuel.After a series of fiery train derailments in the past year, federal investigators in May identified the “ultralight” oil traveling by rail from North Dakota’s Bakken Shale as an “imminent hazard,” meaning it significantly inflicts risk of death and injury to people and the environment, because of what they called its unusually flammable nature. Now, energy experts say the high levels of gas in North Dakota’s Bakken crude are present also in oil pumped from many shale formations, including the Niobrara Shale in Colorado and the Eagle Ford Shale and Permian Basin in Texas, the Wall Street Journal reported. U.S. oil production has risen in the past few years at levels not seen since the 1970s, boosted by applying new drilling techniques like hydraulic fracturing to plentiful shale formations to extract so-called tight or light oil. The U.S. Energy Information Administration expects American oil production to rise by 48 percent from 2012 to 2020, with tight oil accounting for 81 percent of that increase.Until the recent boom, much of the oil U.S. refiners processed was dirty and heavy. Now, the crude can be so light and gassy that it froths over refinery units like champagne, and refiners must invest in new equipment to process more of the oil.  The increased supply has lowered the price of the new oil by $10 or more than the level of traditional crude, so energy companies are keen to ship their oil abroad, where buyers would be willing to pay more. Though there’s a decades-old ban on crude exports, federal officials recently gave two companies permission to export oil that’s been minimally processed.

Analysis forecasts derailment every other year if oil train terminal is built — A proposal to build the largest oil train terminal in the Pacific Northwest could result in a derailment every two years and an oil spill from a derailment once every 12, according to a draft analysis by a Washington state agency. The document, released Tuesday, indicates that most fire departments along the oil trains’ rail route are not prepared for a spill or fire that could accompany a derailment. Out of the 12 departments that responded to the survey request, only one indicated its firefighters are trained and equipped for such an incident. Further, only half the departments said they knew the locations of BNSF Railway’s specialized firefighting equipment closest to their jurisdiction. And while three-quarters of them reported having access to personal protective equipment, firefighting foam and foam applicators, only a quarter said they had access to oil spill containment booms. The draft environmental impact statement from the Energy Facility Site Evaluation Council said that BNSF would bring four oil trains a day to the Vancouver Energy facility at the Port of Vancouver, Wash., with the loaded trains mostly following the path of the Columbia River and the empty trains returning east via Tacoma, Auburn and Stampede Pass. With those four daily trains, carrying 100 or more cars each of either light crude from North Dakota or diluted heavy crude from western Canada, the agency forecast “a derailment incident might occur once every two years with a loaded train, and once every 20 months with an empty train.”

One Broken Pipe Is Leaking A Huge Amount Of Methane -- A gas storage site in Los Angeles has been leaking for more than a month, in what environmentalists say should be a “wake-up call” for regulators about the state’s aging gas infrastructure. The Aliso Canyon storage well, about 30 miles northwest of downtown, is releasing 50,000 kilograms of methane an hour, according to an estimate from the Environmental Defense Fund (EDF). The Southern California Gas Company discovered the leak on October 23 and has been unable to contain it.“This is sort of the worst case scenario,” EDF’s Tim O’Connor told ThinkProgress. His group estimates the storage well has lost about 2 percent of its gas.  Because natural gas is 80 percent methane, and methane is a potent greenhouse gas, the amount Aliso Canyon has leaked will have the impact of 2.6 to 2.9 million metric tons of carbon for the next 20 years. Put another way, every day the leak continues, it single-handedly accounts for 25 percent of California’s total methane emissions. A spokesperson for the company said it was impossible to determine how much gas had leaked at this time. “We are committed to — and we will — stop the flow of gas, and are working with some of the world’s best well management experts to seal the leak as quickly and as safely as possible,” Kristine Lloyd told ThinkProgress in an email. “We are unable to provide a specific timetable, but the relief well process could take several months. While the relief well is built, we will continue to try to stop the flow of gas by pumping fluids down the well.” “Longterm exposure of irritants in a very pungent form can have really deleterious effects,” O’Connor said. The storage well is also a former oil well, which means it could have benzene and other chemicals. The gas company has received hundreds of complaints, including nausea, dizziness, and nosebleeds from the smell.

LA County residents to speak on sick-making natural gas leak — Dozens of Los Angeles County residents who say an uncontrolled leak from a massive natural gas storage field is making them sick plan to speak at a county Board of Supervisors meeting Tuesday and demand a full investigation of the leak, its causes and possible solutions. The planned testimony comes as the leak near Porter Ranch has persisted for a month. Residents have complained of nausea, headaches and other maladies, but the company that operates the storage field — SoCalGas — has said it does not pose a serious health threat. The residents planning to testify Tuesday issued a statement saying the company has “misled the public about the health risks.” About 30 families in the area have been temporarily relocated because of the leak, officials said. Last week, California’s gas and oil regulator issued an emergency order requiring the company to provide a plan for stopping the flow. Representatives of the county’s fire, public health and planning departments are also expected to speak at the supervisors’ meeting.

Utility plans to mask awful odor from uncontrolled gas leak — A utility trying to stop a monthlong leak at a massive natural gas storage facility near a Los Angeles neighborhood said it planned to use a mist to mask the sickening stench as work continues — possibly for three more months — to plug the well. SoCalGas officials told county supervisors Tuesday that the substance is safe and would neutralize the rotten-egg smell that has led to more than 660 complaints by residents to the air board about nausea, headaches and dizziness. Porter Ranch residents attended the supervisors meeting to criticize the company’s delay in owning up to the leak that began Oct. 23 and said they are wary of claims the deodorizing mist is harmless and fear it could cause unknown chemical reactions. “We’re not your guinea pigs,” said Matt Pakucko, president of a group called Save Porter Ranch. So far, the leak has stumped the gas company, a division of Sempra Energy, which has tried unsuccessfully to pour liquid into a leaking well that goes a mile and a half underground. Plans were underway to drill a relief well that could take three more months to complete. The company has 115 wells at the site that pump natural gas into a vacant, underground oil field when demand is low and draw it out for use by customers and power plants when demand spikes. It is believed to be the largest natural gas storage facility in the West and is capable of supplying all of Southern California for more than a month.

Alaska completes $65 million buyout of TransCanada in LNG project -- The state on Tuesday completed the buyout of TransCanada’s interest in the Alaska LNG project, a $65 million expense that gives Alaska the same stake in the $55 billion effort as ExxonMobil, BP and ConocoPhillips. Gov. Bill Walker hailed the move as “historic,” calling the gas line project the best “get-well card” for a state facing a $3.5 billion deficit. “By gaining an equal seat at the negotiating table, we are taking control of our destiny and making significant progress in our effort to deliver Alaska gas to the global market,” he said in a press statement. First production of the pipeline-liquefied natural gas project is not scheduled until 2025, assuming the companies, and the state, agree to spend the billions of dollars that must be advanced to move the project in the coming years. Under terms established in 2014 under former Gov. Sean Parnell, TransCanada made upfront investments and held the state’s 25 percent stake in the proposed 800-mile pipeline and a gas treatment plant on the North Slope. In the recent special session called by Walker, the administration argued a buyout would produce up to $400 million more a year in revenue for Alaska, and give the state more of a say across the entirety of the project. Called a “gigaproject” because of its size, the effort includes other major facilities in which TransCanada did not hold an interest, such as the proposed liquefaction plant in Nikiski.

Independents win big acreages in state North Slope lease sale -- Some people in industry still have a lot of faith in the North Slope, even with crude oil prices skidding. Independent companies bid aggressively for acreage Dec. 18 in the state’s North Slope “area-wide” sale, acquiring acreage at rock-bottom prices. The bulk of the offers were rock-bottom bids but with the exception of two high bids by Denver-based Armstrong Oil and Gas on tracts near a discovery Armstrong plans to develop with Repsol. Armstrong beat out competing bids by ConocoPhillips, in fact. The Alaska Department of Natural Resources auctioned off 131 tracts on 186,400 acres with high bids totaling $9.51 million. Armstrong was the highest bidder in the sale, offering $1.92 million on two tracts near the Colville River, the area of the Repsol/Armstrong discovery. ConocoPhillips offered the only competing bids in the sale of $160,000 for those two tracts. Two other parts of the North Slope were put up for bid, the “foothills” area of the southern Slope and state offshore acreage in the Beaufort Sea, but drew no bids. About 2.2 million acres of 5.1 million acres in the state’s central North Slope area were up for bid, not including the southern foothills and Beaufort Sea state acreage where there were no bids.

Low Crude Prices Catch Up With the U.S. Oil Patch -- U.S. companies have stunned global rivals by continuing to produce oil—particularly from shale deposits—ever more cheaply as American crude prices plunged from over $100 a barrel in 2014. But the recent drop toward $40 a barrel and below puts even the most efficient operators in a bind.  “Forty-dollar to fifty-dollar oil prices don’t work in this business,”  The worst-case scenario most major producers have discussed in the past six weeks with investors involved a price of $50 a barrel. That is beginning to look optimistic as Saudi Arabia continues to produce near-record volumes and major exporters such as Iraq have increased output. Many oil executives, including BP PLC CEO Bob Dudley, expect prices to be “lower for longer.” The U.S. Energy Department is forecasting the price of oil will average around $50 a barrel next year.  Many companies that were hoping to weather low energy prices without new rounds of layoffs and salary cuts may be forced to slash those costs yet again.  “We’re really reaching the limit of what people can do,” . “Right now, you are down to the best areas, the best rigs, the best people. Any cuts from now on are bone rather than fat.”  Earlier this month, EOG Resources Inc., a Houston-based shale driller, said some of its most prolific wells would yield a rate of return above 40%, even with U.S. oil prices at $50 a barrel.  But break-even prices can exclude land costs, which for some companies amount to billions of dollars, and they don’t include the cost of using pipelines to transport crude, according to company financial statements and analyst reports.  In nearly all of its investor presentations this year, EOG has said it can turn a profit at prices at or below the prevailing oil price at the time of the presentation. Yet more than $6 billion in capital spending this year has produced nearly $4 billion in net losses over the past year for the company, which is an industry bellwether.

Energy Downturn Spreads Beyond the Oil Patch - WSJ: The prolonged slump in crude prices is rippling beyond the oil industry into areas of the North American economy that, until recently, had managed to avoid the worst of the downturn. With the crude-market decline in its 17th month and nearly a year after OPEC dealt prices a sharp blow by refusing to rein in output, lower profits and mounting losses are crimping budgets, spurring multiple rounds of job cuts and driving some energy companies to seek bankruptcy protection. Signs of that distress are spreading throughout once-booming oil-producing regions across North America. Sales of single-family homes in Houston fell 10% on the year in October, the first double-digit decline this year, according to the local association of real-estate agents. Restaurants in Texas and the Southwest have experienced a drop in revenue and customer traffic, industry tracker Black Box Intelligence said in a recent report. Chili’s Grill & Bar operator Brinker International blamed low oil prices for weak results in some states that rely heavily on the energy industry. “While we have been seeing pockets of softness within those regions for a while, the top-line challenges expanded during the quarter across Texas, Oklahoma, Arkansas, Louisiana,” Chief Executive Wyman Roberts said on a conference call last month.

Oil Workers Brace For Fresh Layoffs, As Industry Wrestles With ‘Lower For Longer’ Crude Prices - : Texas rigs haven’t gone completely silent. Some companies can still make a profit pumping oil out of West Texas wells. But the state’s recent boom came from shale plays, like the Eagle Ford in the south of the state. With producers earning less than $40 a barrel for crude, there’s simply no way to earn back what it costs to frack and drill such wells. “We’re seeing declines in population across these towns in south Texas,” says Ed Hirs, an energy economist at the University of Houston. For nearly eight years, high-paying jobs grew at a blistering pace across the region, long one of the poorest in the state. Now companies are shutting down operations, and those jobs are vanishing. “And until the price returns to a level above $75, $85, $95 a barrel,” Hirs says, “we won’t see a complete reemployment of everybody who’s left.” So people are leaving — not just south Texas, but the industry — in search of work. Some will come back when the price of oil recovers. But this is an industry where roughly 70 percent of the workforce is over age 50. That’s the legacy of weak hiring during the oil bust of the 1980s and 1990s. “I think this is going to be an acute problem in a couple of years’ time. I think it’s going to come bite us extremely hard,”  “Many of the people we’re losing today through the industry and that have been let go are the highest skilled and the highest remunerated and just happen to be the older people in the industry who we’ve relied on.”

Oil companies brace for big wave of debt defaults - Low oil prices are leaving many oil and gas companies with difficult debt loads, causing them to default at an extraordinary rate. On top of that, rating firm Moody’s forecasts the default rate will increase. “The energy sector remains the most troubled, accounting for almost a quarter of the 79 defaults so far this year,” said Sharon Ou, Moody’s Credit Policy Research senior credit officer. The strain on the oil patch comes after years of borrowing heavily at the start of the domestic energy renaissance. At the time, oil was hovering around $100 a barrel. But now, with West Texas Intermediate crude oil slightly above $40 a barrel, these companies are seeing their revenue dry up — and remain saddled with debt. Marc Lasry, the chief executive of distressed investing specialist Avenue Capital Group, said these energy companies boosted their borrowings to between $250 billion and $300 billion, compared with the $100 billion at the start of this year. The energy boom of the past decade was fueled by a wave of credit from U.S. banks that now say they expect more delinquencies and charge-offs from energy companies this year. Federal Reserve officials earlier in November noted an increase in weakness among credits related to oil and gas exploration, production, and energy services following the decline in energy prices since mid-2014. Among the major banks raising red flags about the health of the loans are Wells Fargo, Bank of America and JPMorgan Chase.  Some banks are renegotiating their credit lines to gas and oil companies, while others are cutting credit lines to oil and gas firms and are requiring more collateral to protect against the surge of defaults.

U.S Drillers’ Operating Loses Could Surge In 2016 -- With oil prices having fallen by nearly half over the last sixteen months, it is little wonder that oil companies found their balance sheets under pressure. From Exxon to Continental all oil companies have faced problems in maintaining their capital spending and more importantly, their profitability. In light of that, it is little wonder that oil companies pulled every lever they could to survive.  First of all, companies have been relying on production growth. Shale producers especially have done all they can to keep production as high as possible. The idea has been to offset the falling price per barrel with more barrels of output. Some firms, like Devon Energy, have been exceptionally successful with this strategy. The problem is that production growth is not sustainable for shale firms in the absence of large amounts of capital spending, which these firms cannot sustain at this point. The declining production curves are simply too great for oil companies to keep the oil flowing without significant new investment. Thus investors should be prepared to see production fall in 2016.  Secondly, cost cuts are also playing a big role at oil companies in sustaining profits. Oil companies in general are “sharpening their pencils” on cost cuts according to analysts. The supply chain crimp on prices across the entire oil vertical has been severe. From Haliburton to Frank’s International, every oilfield supplier has felt the pinch. This has motivated the supply chain to be more efficient in providing services and has let oil companies wring additional savings out of their businesses’. These double-digit savings have helped oil companies considerably in maintaining the bottom line, but it is starting to look like that trend may be waning. From Baker Hughes to mom & pop operations, the supply chain simply cannot do much more to help producers. That bodes ill for 2016 profits at oil producers.

TTIP talks: EU alleged to have given ExxonMobil access to confidential strategies --  The EU appears to have given the US oil company ExxonMobil access to confidential negotiating strategies considered too sensitive to be released to the European public during its negotiations with the US on the trade agreement TTIP, documents reveal. Officials also asked one oil refinery association for “concrete input” on the text of an energy chapter for the negotiations, as part of the EU’s bid to write unfettered imports of US crude oil and gas into the trade deal. The employers’ confederation BusinessEurope was even offered “contact points” with US negotiators in the State Department and Department of Energy, according to the cache of material which was released under access to documents laws. The US has banned fossil fuel exports for 40 years but the policy was relaxed towards Mexico in August. Previous leaks of TTIP documents have revealed the EU is pressing for a guarantee in the trade deal that the US will allow free export of oil and gas to Europe, alarming environmentalists who fear imports would impact on the EU’s climate change plans. It would cost $100bn to build the infrastructure necessary to export the US fossil fuels, according to industry estimates, also released in the freedom of information trawl. Campaigners said the documents and emails obtained by the Guardian showed an extraordinary and shocking relationship between the EU and industry over the fossil fuel push. “This is an extraordinary glimpse into the full degree of collusion between the European commission and multinational corporations seeking to use TTIP to increase US exports of fossil fuels,” said John Hilary, the director of War on Want. “The commission is allowing the oil majors to write the proposed energy chapter of TTIP in their favour.”

Editorial: Lifting crude-oil export ban would help Big Oil, hurt the rest of us -- In 1975, after the country was shaken by the Arab oil embargo, Congress passed a ban on exporting crude oil from the United States. The motivation was to promote domestic fuel production and efficiency and to decrease U.S. dependence on foreign resources. Forty years later, we’re still working toward these goals. And we’re also trying to slash greenhouse-gas emissions, which are aggravated by fossil fuel consumption. So it’s unclear why a movement to lift the crude export ban has been gaining ground in Washington, where it enjoyed a victory last month in the House. Now that the proposal is headed to the Senate, we urge Maine’s Susan Collins and Angus King to come out against it — and stand up for the well-being of their constituents and the environment. Who would gain if the United States once again allowed crude oil exports? U.S. oil companies, which are seeking access to the world market in order to make up for the damage done to their bottom line by falling oil prices. Repealing the ban would be a huge gift to these firms. But there would be serious downsides for everyone outside the industry. Lifting the ban would likely spur more well drilling, enabling the production of up to 3.3 million more barrels of oil per day for the next 20 years, according to a study commissioned by the pro-repeal Brookings Institution. If just a fraction of this additional oil were burned, greenhouse-gas emissions could rise by up to 22 million metric tons annually — the same amount of pollution caused by five average-sized coal power plants. This would fuel the climate crisis blamed for this year’s flooding in the Southeast and drought in the Southwest. Maine would see more Lyme disease-causing ticks, as well as more record summer heat and poor air-quality days — no boon to the many residents with lung conditions.

Propane -- The Next Big Story -- November 27, 2015  From crisis to glut in less than a year.  Jack Kemp is reporting: Liquefied petroleum gases (LPG) are the fastest-growing category of hydrocarbon exports from the United States, with volumes up almost four-fold since 2012.  Some data points:

  • US propane exports, 2012: 200,000 bbls
  • US propane exports, 2015: nearing one million bopd 
  • composition: a range of light hydrocarbons to include ethane, butane, and propane, among others; 
  • purpose: petrochemical feedstock to residential heating and cooking
  • rules: unlike crude oil, LPG is treated as a refined product and can be exported with few restrictions, a position the U.S. Department of Commerce confirmed in 2014
  • traditionally, most LPG has been marketed in neighbouring countries, including Canada, Mexico, Central America and the Caribbean
  • in 2012, neighbouring countries accounted for 55 percent of all LPG exports, rising to almost 80 percent if South America is included.
  • by 2015, however, the total share of LPG exports to other countries in the western hemisphere had dropped to just 53 percent
  • exports to Europe, Africa and especially Asia have surged and now account for nearly half of all the LPG shipped abroad
  • China has overtaken Canada and Mexico as the most important export market for U.S. LPG, taking more than 24 million barrels, almost 100,000 bpd, in the first eight months of 2015

Another Historic Day in the Battle to Stop the Tar Sands -- After a string of pipeline victories and over a decade of campaigning on at least three different continents, the Alberta government has finally put a limit to the tar sands. Today they announced they will cap its expansion and limit the tar sands monster to 100 megatons a year (equivalent to what projects already operating and those currently under construction would produce).  As momentous an occasion as it is when an oil jurisdiction actually puts limits on growth, 100 million tons of carbon a year at a time when science is demanding bold reductions is still far too much. While historic, the government’s cap needs to be viewed as a ceiling rather then a floor and a ceiling that we will need to work like crazy to ratchet down until it meets the science. On the good side what the current cap does mean is that the two-to-five fold expansion the tar sands industry had planned will not happen. It means the 2,270,820 barrels a day already approved will stay in the ground, the 1,890,850 barrels a day in the application process will never see the light of day and the 1,923,00 barrels a day disclosed and announced will go no further then that. That’s 6,084,670 barrels a day that the government helped stop today and 154.07 million tons of carbon a year that we will be keeping from getting poured into the atmosphere.

Eni set to begin Arctic oil exploration, even as others give up - - Eni will soon will start production in a field in the Barents Sea almost 300 miles north of the Arctic Circle, the northernmost offshore oil platform in the world, where output should eventually reach 100K bbl/day, WSJ reports.The huge cost of pushing ahead with such projects, amid the sharp fall in crude oil prices over the past 12 months, has prompted companies to ditch Arctic drilling plans, but for Eni, the $6B Goliat project was too far advanced to be called off.  Eni CEO Claudio Descalzi says the Barents Sea is "a completely different kind of Arctic than northern Alaska” because the former is free of ice and is near a populated area where oil companies have been exploring for two decades.

Eni Should Take A Page From Royal Dutch Shell Book: No energy company was expected to drill in the region, after Royal Dutch Shell and Statoil moved away from the Arctic drilling plan. However, the Italy based Eni has stated that it will open crude oil taps in the Arctic Ocean soon. The company is optimistic about its exploration plan in the Goliat platform, as it believes that unlike the northern Alaska region, where Shell started its operations, Barents Sea will be favorable for crude oil production. Eni plans to start pumping crude oil from an oilfield in the Goliat platform before the end of 2015. The field is expected to pump around 100,000 barrels per day (bpd) and is around 300 miles away from the Arctic Circle. The field is located in the Barents Sea, which according to the company CEO, Claudio Descalzi is ice-free and has a comparatively moderate climate. Eni has made a risky move by venturing into the Arctic region, in the wake of the prolonged decline in crude oil prices that has forced oil and gas companies to postpone or cancel new energy projects in the Arctic region. The energy company remains optimistic despite recording a $1 billion loss in its third-quarter of fiscal year 2015 (3QFY15), as it continues with its $6 billion Goliat project. The company’s oil exploration success in Egypt and Libya, when its rivals failed, has strengthened its belief that the operations in the Barents Sea will be beneficial for the company’s financial position.

Mexico’s Pemex to refine record low level of crude oil in 2015 – Mexico’s state oil company Pemex will process the lowest amount of crude this year in at least a quarter century, internal refining plan documents seen by Reuters show, as plant outages and other inefficiencies continue to batter margins. The decline is a double blow, as it means the national oil giant will likely struggle to compete in the upcoming liberalization of Mexico’s retail oil sector and the country will probably have to buy more gasoline from U.S. refiners, unless it can significantly improve operations. As Pemex processes less oil, the utilization rate of its six domestic refineries – the volume of crude processed divided by refinery capacity – could sink to as low as 63 percent this year, badly lagging peers in the United States, Brazil and Venezuela and making it one of the most inefficient refiners in the world. U.S. refiners next door, meanwhile, have in recent years been running more crude than ever before, and in some cases at the highest efficiency levels on record. Pemex estimates it will process about 1.091 million barrels per day (bpd) by the end of this year, which would mark its lowest level since at least 1990. The company is producing less fuel even though domestic demand for gasoline has steadily risen by nearly 80 percent over the past 25 years. Refining less crude will push down Pemex’s utilization rate by about a fifth to 63 percent compared with about 77 percent five years ago, according to data from Houston-based energy consultancy Wood Mackenzie. Utilization rates at refineries in the United States average 89 percent while in Latin America, excluding Mexico, they average about 81 percent, Wood Mackenzie said.

Mining company behind red centre fracking plan claims project is safe - Fracking can be safely carried out near a renowned tourist drawcard in Australia's red centre and some Aboriginal people support the project for the royalties it will bring, according to a mining company chief behind the controversial bid.Traditional owners of the Watarrka National Park, which includes the Kings Canyon gorge, on Tuesday expected to seek a meeting with Environment Minister Greg Hunt in Canberra, urging him to act quickly to protect the land.Lawyers acting for the group intend to file an emergency application for heritage protection for Watarrka, under the National Heritage List and other laws.The Northern Territory government is assessing an application by Palatine Energy to explore for shale oil and gas across more than 1000 square kilometres of the national park. It would include the contentious fracking technique, which opponents say can threaten water supplies.Traditional owners have no legal right to veto the application, which Environmental Defenders Office Northern Territory principal lawyer David Morris said risks damaging areas of environmental and spiritual importance."[Traditional owners] say Watarrka is a place of incredible significance … there's a huge number of dreamings that go through that site, stories from the creation time, and many of those stories revolve around water," he said."Watarrka is one of the few places in that desert area where you would always find water.

Fracking debate: Kings Canyon traditional owners seek emergency heritage listing - Northern Territory traditional owners have met with Federal Environment Minister Greg Hunt to ask for an emergency heritage listing for Watarrka National Park, where a mining company wanted to explore for oil. However, the NT Government has said oil and gas exploration permit applications for Watarrka National Park and the Coomalie Council Region would not be granted. Mining company Palatine Energy said it was "profoundly disappointed" with the announcement. The park, about 300 kilometres south-west of Alice Springs, features the tourist spot Kings Canyon and is visited by hundreds of thousands of people every year.Three traditional owners, who jointly manage the park, said the NT Government had ignored their formal requests to protect the park from an exploration bid by company Palatine Energy. David Morris from the NT's Environmental Defenders Office, which has helped traditional owners lodge their application, said it had been a "good meeting" with the Mr Hunt. "We met for about half an hour and it was a good meeting. He listened to the traditional owners," Mr Morris said. Traditional owner Julie Clyne said she wanted Mr Hunt to impose the emergency listing. "I travel from Kings Canyon, Watarrka. I come here today with a message to say no to mining and to fracking," Ms Clyne said. In a statement, the Central Land Council's (CLC) David Ross said the senior traditional owners of Watarrka had made it "very clear for a long time" that they opposed any mining exploration in the park and accused NT Chief Minister Adam Giles of making "unsubstantiated claims of divisions" among the traditional owners. "Today's emergency application for federal heritage protection of the park shows that traditional owners don't trust the Giles Government," Mr Ross said.

Fracking at Kings Canyon shot down by Northern Territory government -- The Northern Territory government has denied a mining permit to a company seeking to frack the Watarrka national park, which encompasses Kings Canyon in central Australia. The decision on an application first lodged about four years ago was announced on the same day traditional owners petitioned the federal environment minister to step in and protect the land under commonwealth legislation. David Tollner, the minister for mines and energy, said oil and gas permit applications for both Watarrka and the Coomalie council region would not be granted under the oil and gas guidelines announced by the NT government last week. “Government recently implemented these new measures, on top of its already robust regulations, to ensure onshore oil and gas activities can proceed alongside other land usages in a safe and sustainable manner,” Tollner said. “Both applications were assessed as not satisfying all of the recently announced criteria.”   Palatine energy applied four years ago to explore resource extraction in the Watarrka national park, and had indicated it would use the hydraulic fracturing process. Watarrka’s 105,200 hectares of land is under the custodianship of the Martutjarra-Luritja people and contains three Aboriginal living areas: Lila, Wanmarra and Ulpanyali. The park contains more than 600 species of plants and numerous native animals. It is culturally significant to Aboriginal people and continues to be a place of traditional observance, customs and ceremony.

Trends in oil production - World field production of crude oil increased 2.9 million barrels a day in the 12 months ended last July. That compares with a 3.6 mb/d increase over the entire nine years from Jan 2005 to Dec 2013.The biggest single factor is Iraq, where production is up almost 1.1 mb/d over the last year. Although ISIS has managed to bring cruelty to much of the rest of the world, so far they have not disrupted Iraqi oil production. The second biggest factor in the 2.9 mb/d gain was the United States, where production increased 0.6 mb/d July 2014 to July 2015, thanks to the tremendous success of shale oil, or production based on horizontal fracturing of tight geologic formations. But that is going to change. The EIA Drilling Productivity Report tabulates detailed summaries of drilling and production in the main U.S. counties that have been responsible for the shale oil revolution. One of the interesting statistics is their calculation of the change in “legacy” production. To get this, the EIA tabulates production in these counties coming from wells that had been in operation for two months or more as of August, and then looks at how much was being produced by these same wells in September. This calculation comes out to be a drop in production of those legacy wells of some 330,000 barrels per day between August and September. The EIA series for the change in legacy production each month is plotted below. If we were relying only on historical wells without drilling new ones, U.S. shale production would fall about a million barrels/day every three months. Production has not fallen as dramatically as many of us has anticipated thanks to remarkable ongoing gains in productivity. Even so, the EIA estimates that U.S. shale oil production will be half a million barrels a day lower in December than it had been in June.  And it will fall further. The five biggest pure players among U.S. shale oil producers could be EOG, Pioneer, Devon, Whiting, and Continental Resources. Between them, these companies may account for about a fifth of total U.S. shale oil production, and between them they have lost $25 billion so far in the first three quarters of 2015.  Eventually this adjustment will bring crude oil inventories back to more normal historical levels. But we’re not there yet.

Why "Supply & Demand" Doesn't Work For Oil -- Gail Tverberg The traditional understanding of supply and demand works in some limited cases–will a manufacturer make red dresses or blue dresses? The manufacturer’s choice doesn’t make much difference to the economic system as a whole, except perhaps in the amount of red and blue dye sold, so it is easy to accommodate.  A gradual switch in consumer preferences from beef to chicken is also fairly easy to accommodate within the system, as more chicken producers are added and the number of beef producers is reduced. The transition is generally helped by the fact that it takes fewer resources to produce a pound of chicken meat than a pound of beef, so that the spendable income of consumers tends to go farther. A gradual switch to higher-cost energy products, in a sense, works in the opposite direction to a switch from beef to chicken. Instead of taking fewer resources, it takes more resources, because we extracted the cheapest-to-extract energy products first. It takes more and more humans working in these industries to produce a given number of barrels of oil equivalent, or Btus of energy. The workers are becoming less efficient, but not because of any fault of their own. It is really the processes that are being used that are becoming less efficient–deeper wells, locations in the Arctic and other inhospitable climates, use of new procedures like hydraulic fracturing, use of chemicals for extraction that wouldn’t have been used in the past. The return on any kind of investment (human labor, US dollars of investment, steel invested, energy invested) is falling.  For a time, these increasing inefficiencies can be hidden from the system, and the prices of commodities can rise. At some point, however, the price rise becomes too great, and the system can no longer accommodate it. This is the situation we have been running into, most severely since mid-2014 for oil, but also for other commodities, dating back to 2011.

Hedge funds turn very bearish on U.S. crude – Hedge funds and other money managers had amassed short positions in U.S. crude oil amounting to 154 million barrels by last Tuesday according to data from the U.S. Commodity Futures Trading Commission (CFTC). Short positions have increased more than 70 percent since the middle of October and stand at the highest level since August, the CFTC showed in its latest commitments of traders report published on Friday. The number of hedge funds with reported short positions of at least 350,000 barrels in the main WTI contract on the New York Mercantile Exchange hit 69 last week, the largest number since April. The average hedge fund short position has increased from 1.6 million barrels in mid-October to as much as 2.2 million barrels last week. Since the start of the year, movements in the price of WTI futures prices have been closely correlated with the accumulation and liquidation of hedge fund short positions.  Recent lows in WTI in March and August coincided with a large concentration of hedge fund short positions (178 million and 157-163 million barrels respectively) and a large number of reported short traders (78 and 65-66). The large increase in short positions over the last five weeks confirms how bearish many hedge fund managers have become about the outlook for U.S. crude as stockpiles continue to increase and U.S. weather remains mild.

Hedge fund short positions and oil prices in 2015 -– U.S. oil prices have cycled between $40 and $60 per barrel since the start of 2015 and the rise and fall has corresponded with the accumulation and liquidation of hedge fund short positions. There have been at least three cycles in WTI prices and hedge fund positions in the main NYMEX light sweet crude contract since the turn of the year. The first cycle began at the start of the year and was completed by mid-May. Money managers increased their short position from 74 million barrels at the start of January to a peak of 178 million barrels on March 17 before reducing it to 53 million by May 12. Front-month WTI prices fell from $48 to a low of $43 in the middle of March before rebounding to around $60 in mid-May. The second cycle began in mid-May and lasted until the middle of October. Hedge funds increased their short positions from 53 million to 163 million in mid-August before cutting it to 90 million by mid-Oct. WTI prices swooned from nearly $60 to a low of $39 in late August before recovering to almost $50 in early October. The third cycle began in late October and appears to be unfinished. Hedge funds boosted short positions from 90 million to 154 million on November 17. Prices dropped from $47 to around $40 though they have since recovered slightly. The attached charts show the correspondence between the accumulation and liquidation of hedge fund short positions, as reported by the U.S. Commodity Futures Trading Commission, and NYMEX WTI prices since the start of 2015.

Oil Prices Waver on Saudi Comments - WSJ: Oil prices wavered Monday as traders assessed the possibility that Saudi Arabia would cut oil production in an effort to boost prices. Robust output in the U.S., Saudi Arabia and elsewhere pushed the oil market into oversupply in mid-2014 and has kept prices near multiyear lows all year. Analysts say the global glut of crude will likely persist through at least the first half of 2016. Saudi Arabia’s official press agency Monday quoted the cabinet in a statement as saying it was ready to cooperate with countries within and outside the Organization of the Petroleum Exporting Countries to maintain the stability of the market. Some investors interpreted this as a sign that Saudi Arabia, the most influential member of OPEC, may push the oil cartel to curb its output and increase prices. OPEC has produced above its target of 30 million barrels a day for months. However, many analysts remain skeptical that OPEC will deviate from its strategy of keeping output high to defend its market share.

Oil rises on Middle East tensions, weaker U.S. dollar - Oil prices rose three percent on Tuesday as tensions in the Middle East escalated following the downing of a Russian fighter jet near the Syrian-Turkish border, and a weaker dollar provided an incentive for investors to buy more oil. Brent futures for January were trading at a near two-week high of $46.23 a barrel at 1420 GMT, a 3 percent or $1.40 gain on Monday’s close. West Texas Intermediate (WTI) crude was up 1.25 cents at $43 a barrel, also a near two-week high. “News of a military jet crashing in Syria is a reminder that there is still substantial risk in the Middle East,” said Bjarne Schieldrop, Olso-based chief commodities analyst at SEB. Turkey said it had downed a Russian fighter jet near the Syrian border, saying it had repeatedly violated its air space, one of the most serious publicly acknowledged clashes between a NATO member country and Russia for half a century. A weaker U.S. dollar, easing from an eight-month peak against a basket of currencies, also lent support, as some investors found it cheaper to buy the dollar-denominated commodity.

American Petroleum Institute (API) crude oil inventories rise 2.6 million bbls: American Petroleum Institute (API) crude oil inventory data result, for the week ended November 20 US crude stocks up 2.6 million barrels .... A larger than was expected build in oil stockpiles Stocks of crude at Cushing up 1.9 million barrels -  The API data is closely watched as a guide to the EIA data due Wednesday morning (US time). The consensus estimate for the EIA report is currently for a stock build of 1195K bbls

Crude Slides After API Reports Another Huge Inventory Build At Cushing - Following last week's modest inventory build, API reports another much larger-than-expected build in total crude inventories (+2.6mm barrels). This is the 9th weekly build in a row for total crude inventory but more worrisome is the 3rd weekly surge in Cushing inventories (+1.9mm build) as we warned previously, land storage fears are starting to rise.  Cushing and Total crude inventories surge...Charts: bloomberg

WTI Holds Losses After DOE Confirms Large Cushing Inventory Build Despite Crude Production Cut - Confirming API's data overnight, DOE reports a build in overall crude inventory (961k barrels - less than API) foro the 9th week in a row but more worryingly a significant build in Cushing inventories (+1.74mm barrels) for the 3rd week in a row. This 'bearish' shift is offset for now by the biggest drop in overall crude production in 7 weeks.Dramatically more than seasonally expected... And it's filling up...3mo highs As Crude production fell the most in 7 weeks... And the reaction is muted as WTi holds onto losses post-API... Charts: Bloomberg

Oil falls as spotlight returns to growing glut – Crude oil futures fell back towards $45 per barrel on Wednesday as the dollar gained and investor focus shifted back to a deep global supply glut. Brent was down 57 cents at $45.55 a barrel at 1554 GMT, having touched a low of $45.11. The benchmark hit its highest since Nov. 11 at $46.50 on Tuesday after Turkey shot down a Russian jet. It had risen for five consecutive days, its longest run of positive sessions since April. U.S. West Texas Intermediate (WTI) futures fell 37 cents to $42.50 a barrel, having gained $1.12 to $42.87 on Tuesday. Weekly data from the U.S. Department of Energy showed weekly crude oil stocks up 961,000 barrels versus a forecast rise of 1.2 million barrels, a slightly less bearish figure than expected. However gasoline stockpiles rose faster than expected and distillate inventories gained in the face of the forecast of a fall highlighting the scale of over-supply [EIA/S]. Despite the gains in recent sessions Brent is still down 8.2 percent this month and more than 20 percent this year, and analysts said there was unlikely to be any substantial recovery in the coming days.

U.S. oil drillers cut rigs for 12th week in last 13 - Baker Hughes -- U.S. energy firms cut oil rigs for a 12th week in the last 13, data for the holiday-shortened week showed on Wednesday, a sign drillers were still waiting for higher prices before returning to the well pad. Drillers removed nine oil rigs in the week ended Nov. 25, bringing the total rig count down to 555, the least since June 2010, oil services company Baker Hughes Inc said in its closely followed report. Baker Hughes issued the report two days earlier than usual due to the U.S. Thanksgiving Day holiday. That decrease brings the total rig count to about a third of the 1,572 oil rigs operating in same week a year ago. Since the end of the summer, drillers have cut 111 oil rigs. U.S. oil futures averaged $42 a barrel so far this week, up from $41 last week, but was down about 1 percent so far on Wednesday as the dollar gained and investors focused on a deep global supply glut. U.S. crude prices gained 20 cents after Baker Hughes issued the report, briefly pushing the front-month into positive territory, before quickly returning to near flat at $42.72 a barrel at 1:19 p.m. EST

Oil Prices Rise After Fall in Rig Count, Stockpile Data - WSJ: Oil prices rallied to small gains on Wednesday after data showing a decline in the number of working oil rigs and a stockpile addition smaller than expected. January crude closed up 17 cents, or 0.4%, higher to $43.04 a barrel on the New York Mercantile Exchange. Nymex oil had dipped as low as $41.72—losses of about 2%—in early trading. Brent, the global benchmark, rose 5 cents, or 0.1%, to $46.17 a barrel on ICE Futures Europe. Brent has now rallied for six-straight sessions, its longest winning streak since April and up 6% during that span. Oil prices rebounded into positive territory just after 1 p.m. when oil-service company Baker Hughes Inc. BHI -1.11 % reported the U.S. oil-rig count fell by nine in the most recent week, extending the drop reported a week earlier. The number of active U.S. oil-drilling rigs, viewed by some as a signal about trends in oil production, is down to 555, which is 54% lower than the peak in October 2014. It has fallen in 12 of the past 13 weeks.Prices had been on the rebound since the U.S. Energy Information Administration said crude-oil inventories rose by one million barrels last week. That was about in line with analysts’ expectations for a 1.1-million-barrel increase, but fell far short of the 2.6-million-barrel increase reported by industry group American Petroleum Institute. The API report had led to selling overnight and into the morning, brokers said.

Oil steadies on U.S. rig count drop, small crude build | Reuters: Crude futures erased early losses to settle steady on Wednesday after a smaller-than-expected supply build in the United States and drop in the number of U.S. rigs actively drilling for oil. Traders and investors also covered short positions before U.S. markets close for Thursday's Thanksgiving holiday, analysts said. "People did not want to be caught short ahead of the holiday with the global political tensions,"  "The combination of that and a drop in the rig count earlier helped push us higher.” On Tuesday, crude futures hit two-week highs after Turkey shot down a Russian warplane for alleged intrusion of its airspace, heightening political tensions in the Middle East. Benchmark Brent crude futures LCOc1 settled up 5 cents at $46.17 on Wednesday, after falling more than $1 to a session low of $45.03. U.S. crude's West Texas Intermediate (WTI) futures CLc1 finished the session 17 cents higher at 43.04 a barrel. WTI had also slipped more than $1 to an intraday low of $41.72. Trading volumes were light, typical of pre-holiday activity. Just over 360,000 lots of WTI futures were traded, versus Monday's volume above 500,000, Reuters data showed.

Oil prices fall more than 3% as dollar and oversupply continue to weigh - - Oil prices settled sharply lower Friday, pressured by a stronger dollar and the global oversupply of crude still clouding the outlook for the industry. Weak industrial data from China and a regulatory crackdown on Chinese stockbrokers also put pressure on the commodity, as fears about oil demand resurfaced. On the New York Mercantile Exchange, West Texas Intermediate futures fell $1.27, or 3.2% to $41.71 a barrel. Brent crude, the international oil benchmark, finished 1.6% lower at $45.46 a barrel on London’s ICE Futures Exchange. Trading volumes were thinner than usual as most financial markets were open for half a day. The dollar strengthened on Friday and pressured commodities such as oil, which are priced in the U.S. currency. The ICE Dollar Index DXY, which tracks the dollar against a basket of rival currencies, rose 0.2% to above 100 by midday Friday. Geopolitical tensions after Turkey shot down a Russian jet along the Syrian border pushed prices up this week, but there is little indication so far the turmoil in the Middle East is affecting oil supply. Over the week, WTI futures were down 0.6%.

How oil can get back to triple digits by 2017 -- After years of being too high, oil forecasts now appear too low. As supply rolls over we could see prices back at $100, with decade-high geopolitical risks shocking it higher.Spot, or immediate, prices are hard to model as demand is not linearly elastic, but dependent on hundreds of variables. Historical correlations also become irrelevant when sharp moves occur. Oil due for delivery in three to five years is easier to gauge. This should approximate the marginal cost of production for a given level of future global consumption. While spot prices are well off their lows, future oil is at levels last seen in the depths of the financial crisis when we were braced for a depression. The back end of the oil curve has effectively moved to partial-cycle costs, no longer incorporating full exploration costs. This mispricing has also dried up liquidity for future delivery, with major consumers unable to hedge at $60 even if they wanted to. Spare capacity is at multi-year lows but geopolitical risk is the highest it has been in a decade. Multiple Middle East and African nations are reconstituting their entire social order as the Arab Spring becomes an Arab Winter. Russia is becoming increasingly assertive and ideological extremism is spreading worldwide as economies stagnate. Daesh continues its rampage, declaring the Paris, Baghdad, Beirut and Sinai attacks as the first of a coming storm. Speculators, who remain negative, could easily be caught short by market or geopolitical surprises. For example, an OPEC cut at the start of December, despite being largely meaningless as Gulf production will subside seasonally, would cause a significant squeeze. We are at an intriguing time as oil has moved from overpricing to underpricing geopolitical and supply risk. The adjustment back is likely to be volatile and the chances of an upside shock to oil prices are growing.

Oil Deal of the Year: Mexico Set for $6B Hedging Windfall  |  Rigzone -- Mexico is set to get a record payout of at least $6 billion from its oil hedges this year, according to data compiled by Bloomberg. The Latin American country locks in oil sales as a shield against price declines through a series of financial deals with banks including Goldman Sachs Group Inc., JPMorgan Chase & Co. and Citigroup Inc. For 2015, Mexico guaranteed sales at almost $30 a barrel higher than average prices over the past year. The 2015 payment, due next month, is set to surpass the record from 2009, when the Mexican government said it received $5.1 billion after prices plunged with the global financial crisis. The country’s crude has fallen by almost half over the hedging period so far this year. Crude sales historically cover about a third of the government budget. "The windfall is huge,"  "This gives Mexico breathing space." The hedge, which runs from Dec. 1 to Nov. 30, covered 228 million barrels at $76.40 each for the Mexican oil basket, according to government documents and statements. With less than two weeks to the end of the program, the basket has averaged $46.61 a barrel over the period. The difference would result in a payment of around $6.8 billion, not including fees. The final figure could vary from the Bloomberg estimate as some details of the hedge aren’t public and oil prices will change over the next two weeks. The Mexican oil basket fell on Nov. 18 to $33.28 a barrel -- its lowest since December 2008.

Petrobras Lost 2.29M Barrels of Oil to Strike  (Reuters) – Brazil's state-run oil company Petroleo Brasileiro SA said on Monday it had been unable to produce 2.29 million barrels of oil and 48.4 million cubic meters of natural gas during a strike that began on Nov. 1. Petrobras, as the firm is known, said the majority of unions representing oil workers had voted to end the strike, thought to be the most disruptive in 20 years. The largest union FUP proposed ending the strike on Nov. 14 though some hold-out unions continued.

Petrobras rules out raising fresh capital for now - source – Indebted state-run oil company Petroleo Brasileiro SA has ruled out bolstering its capital in the short term, a source with direct knowledge of the company’s decision said on Monday. In a statement released later on Monday, Petrobras, as the company is known, denied media reports of talks for the Treasury to transfer hybrid securities to the company, which would then book the securities as equity until it sold new stock. Instead of raising capital, Petrobras has opted to look at other alternatives to improve its finances, said the source, who asked not to be named because he is not allowed to speak publicly. Finance Minister Joaquim Levy said on Friday that he did not see an immediate need to inject fresh capital into Petrobras, saying it had adequate resources to sustain its operations. Sources at the finance and planning ministries have told Reuters that there has been no discussions about a possible recapitalization, but acknowledged that the financial situation of the company is a cause of concern. Petrobras is struggling with a deepening cash crunch caused by over-ambitious expansion spending and as a massive corruption scandal undermines its ability to refinance more than $130 billion of debt.

Venezuela Sees Crude in Mid-$20s If OPEC Doesn't Take Action  |  Rigzone -- Oil prices may drop to as low as the mid- $20s a barrel unless OPEC takes action to stabilize the market, Venezuelan Oil Minister Eulogio Del Pino said. Venezuela is urging the Organization of Petroleum Exporting Countries to adopt an “equilibrium price” that covers the cost of new investment in production capacity, Del Pino told reporters Sunday in Tehran. Saudi Arabia and Qatar are considering his country’s proposal for an equilibrium price at $88 a barrel, he said. OPEC ministers plan to meet on Dec. 4 to assess the producer group’s output policy amid a global supply glut that has pushed down crude prices by 45 percent in the last 12 months. OPEC supplies about 40 percent of the world’s production and has exceeded its official output ceiling of 30 million barrels a day for 17 months as it defends its share of the market. “We cannot allow that the market continue controlling the price,” Del Pino said. “The principles of OPEC were to act on the price of the crude oil, and we need to go back to the principles of OPEC.” Informal Meeting Oil slumped Monday amid a broader commodity rout as the dollar gained, making commodities priced in the greenback more expensive. Brent for January settlement fell as much as 62 cents, or 1.4 percent, to $44.04 a barrel on the London-based ICE Futures Europe exchange. The West Texas Intermediate contract for the same month, the U.S. marker grade, lost as much as 2.2 percent to $40.96 a barrel.

Venezuela Accuses US Of "Industrial Espionage" To "Sabotage" The Oil Industry - The government of Venezuelan President Nicolas Maduro is investigating a report that the U.S. government has been spying on executives of the state-owned Petroleos de Venezuela, or PDVSA, over the past decade. “The oil industry is the backbone of the Venezuelan economy,”Maduro said on state television. “The U.S. empire for a long time … has intended to sabotage [Venezuela’s] oil industry and defeat the [Caracas] government in order to steal the oil.” He spoke Wednesday shortly after the news website The Intercept said it had documents from Edward Snowden, the former contractor for the U.S. National Security Agency (NSA), saying the agency had been spying on PDVSA’s senior executives. Snowden, who faces espionage charges himself for releasing secret NSA files in 2013, is now living in self-imposed exile in Russia. Among the allegations by The Intercept was that the NSA intercepted the calls and emails of Rafael Ramirez, who served as PDVSA’s president from 2004 to 2014 and was the country’s energy minister from 2002 to 2014. The Intercept report was based on an article dated March 2011 in an internal NSA newsletter that it said was obtained by Snowden. The article in the newsletter, SIDToday, said, “[T]he NSA had obtained access to vast amounts of Petróleos de Venezuela’s internal communications.” The Intercept report added, “This produced few emails from PDVSA’s leaders, but the 10,000 employee contact profiles included those of PDVSA’s then-president, Rafael Dario Ramírez, and former company vice president Luis Felipe Vierma Pérez.”  The report came about three weeks after The Wall Street Journal published an article saying Washington had begun “a series of wide-ranging investigations into whether Venezuela’s leaders used PDVSA to loot billions of dollars from the country through kickbacks and other schemes.”

Global debt defaults near milestone: Global debt markets are on the cusp of an unwelcome development with the number of companies defaulting on their obligations set to reach the century mark, driven largely by struggling US shale gas providers. Currently, 99 global companies have defaulted since the year began, the second greatest tally in more than a decade and only exceeded by the financial crisis which saw 222 defaults in 2009, according to Standard & Poor’s. US companies account for 62 of this year’s defaults. Investors have become increasingly concerned about the state of the credit market, reflecting how companies have borrowed heavily against the backdrop of low interest rates during the era of easy money. Since 2007, the proportion of corporate bonds S&P has rated speculative-grade, or junk, has climbed to about 50 per cent from 40 per cent. Now, as markets anticipate the Federal Reserve will lift interest rates for the first time in almost a decade, the rise in defaults suggests a number of companies are being challenged by a sluggish operating environment, declining revenues and heavy debt loads. A slide in oil and commodity prices has weighed on smaller energy producers, primarily in the US, as big Opec producers continue pumping crude to maintain market share. In the US, about three-fifths of defaults in 2015 have been among energy and natural resources businesses, including Midstates Petroleum, SandRidge Energy and Patriot Coal.

Introducing the New OPEC Member That Likes Lower Oil Prices - After defending the interests of oil-exporting nations for five decades, OPEC has made a surprising choice with its newest member: a country that consumes about twice as much crude as it pumps. QUICKTAKE Oil Prices Indonesia will rejoin the Organization of Petroleum Exporting Countries as its 13th nation next month, almost seven years after suspending its membership. The country says that as OPEC’s only Asian constituent it will provide a vital link to the region where demand is growing fastest. Still, saddled with an oil-import bill of about $13 billion last year, Indonesia makes an unlikely addition to the exporters’ club. “If you’re accepting net-oil importers into the organization, it speaks volumes about the marginalization of OPEC,” said Seth Kleinman, head of energy strategy at Citigroup Inc. Indonesia is “never going to cut” supply, he said. Official explanations that paint Indonesia as a conduit between producers and consumers don’t fully illuminate a move that’s fundamentally at odds with OPEC’s mission: why allow a country that will benefit from lower prices into a group set up to underpin prices?

Second Largest Producer Of Oil In Asia Pacific Is A Net Importer Of Oil -- Bloomberg/Rigzone is reporting that Indonesia is a) now ready to re-join OPEC after voluntarily leaving the organization many years ago; and b) hopes the price of oil stays low. Say what? Indonesia hopes the price of oil stays low, and yet Indonesian oil production is second only to ChinaIt turns out that Indonesia consumes twice as much oil as it produces: Indonesia is projected to produce 850,000 barrels a day this year, according to a Nov. 13 report from the International Energy Agency. That’s about 789,000 less than it consumed last year. Only Libya, Ecuador and Qatar produce less among OPEC’s member states.  In October 2014, Indonesia gave up on a target of restoring output to 1 million barrels a day. Crude output has dropped more than 50 percent since the mid-1990s as shifting regulations and complicated permits deter investments in new fields.Despite all the verbiage, I was unable to follow the reasoning why Indonesia returned to OPEC. So, now let's take a more in-depth look at Indonesia's energy situation, going from a net exporter to a net importer in s a very short period of time. Some data points from the EIA: Population -- 4th most populous nation in the world.  Energy requirements -- struggles to attract sufficient investment to meet growing domestic energy consumption because of inadequate infrastructure; and  a complex regulatory environment  Unique challenges -- Indonesia encompasses more than 17,000 islands, presenting

  • geographical challenges in matching energy supply in the eastern provinces with demand centers in Java and Sumatra; 
  • urbanization and demand in other areas of the country are rising at a faster pace than energy infrastructure development

And now we get to the real reason Indonesia is re-joining OPEC -- it needs to rebuild those ties with "old" friends to ensure adequate crude oil imports: After suspending its OPEC membership seven years ago, Indonesia is scheduled to rejoin the cartel by 2016 as the country attempts to secure more crude oil supplies for its swiftly rising demand and greater investment from Middle Eastern members in its downstream infrastructure projects.

Saudi money supply, loan data show economy slowing | Reuters: Saudi Arabian money supply and bank lending figures show the economy of the world's biggest oil exporter has started to slow as low global energy prices force the government to clamp down on spending. M3 money supply grew just 3.9 percent from a year earlier in October, the slowest expansion since November 2010, when Saudi Arabia was emerging from the global financial crisis, according to central bank data released late on Thursday. Annual growth in September 2015 was 8.5 percent. Growth in narrower measures of money supply, M1 and M2, also slowed sharply to multi-year lows. Growth in bank lending to the private sector fell to 5.0 percent, again the lowest rate since November 2010, from 7.1 percent. The government has until recent weeks been able to keep the economy growing strongly by boosting Saudi oil output; the October data suggest this strategy may have reached its limits. Facing a budget deficit of over $100 billion this year, Saudi finance officials have said they are trimming spending in some areas to economise, and the cut-backs have started to crimp money supply. "There have been hints of the government introducing a fiscal squeeze, and the data point to the impact of this,"

Saudi Arabia says ready to work with others to stabilize oil market --  Saudi Arabia’s cabinet said on Monday it was ready to cooperate with OPEC and non-OPEC countries to achieve market stability, repeating what Oil Minister Ali Naimi said in a speech last week. “The council (of ministers) … stressed the kingdom’s role in (achieving) the stability of the oil market and its continuous readiness and efforts to cooperate with all OPEC and non-OPEC countries to maintain the stability of the market and prices,” the cabinet said. Markets closely watch any comment from Saudi Arabia’s political leadership for signs of any shift in its decision not to defend oil prices by cutting output, seeking instead to recover market share taken by higher-cost rival production. Some other members of the Organisation of the Petroleum Exporting Countries, which will meet on Dec. 4, have pushed Riyadh to abandon this policy and work to bolster prices. The weekly cabinet meeting statement typically mentions energy policy only in the context of a major speech by Naimi. Its statement on Monday paraphrased a speech Naimi gave in Bahrain on Thursday.

OPEC officials question upbeat outlook ahead of policy meeting - (Reuters) - OPEC officials questioned an upbeat forecast from the group's researchers in a meeting ahead of next week's gathering of oil ministers, with some sceptical there will be a quick easing of the supply glut in 2016. The comments point to a less jubilant mood in the Organization of the Petroleum Exporting Countries, whose oil ministers meet to set policy on Dec. 4, than during their last meeting in June. Oil has fallen to $45 a barrel on oversupply concerns compared to $65 last time. "Market data is showing loads of uncertainties," said one source. OPEC's national representatives - officials representing the 12 member-countries - plus officials from OPEC's Vienna secretariat - met to discuss the market. The two-day meeting, called the Economic Commission Board, finished on Friday. A year ago, OPEC made its historic decision to refuse to prop up prices by cutting supply and focus on defending market share. The shift was led by Saudi Arabia, supported by other Gulf OPEC members. Doubts about the policy among less wealthy members are growing. OPEC's research team expects higher demand for the group's oil in 2016 as supply from rival producers declines, reducing the global supply glut. World oil demand is expected to rise by 1.25 million barrels per day. [OPEC/M] One of the differences in views, an OPEC delegate said, was around whether OPEC's demand forecast is too optimistic, while another non-Gulf delegate was downbeat about the outlook.

OPEC to stay the course despite fears of $20 oil – OPEC is determined to keep pumping oil vigorously despite the resulting financial strain even on the policy’s chief architect, Saudi Arabia, alarming weaker members who fear prices may slump further towards $20. Any policy U-turn would be possible only if large producers outside the exporters’ group, notably Russia, were to join coordinated output cuts. While Moscow may consult OPEC oil ministers before their six-monthly meeting next week, the chances of it helping to halt the price slide remain slim. “Unless non-OPEC say they are willing to help, I think there will be no change,” said a delegate from a major OPEC producer. “OPEC will not cut alone.” When the exporters’ group last met in Vienna in June, Saudi oil minister Ali al-Naimi and those from other wealthy Gulf states could barely hide their jubilation. OPEC’s historic decision in November 2014 – to pump more oil and defend its market share against surging rival suppliers – was working, they proclaimed as crude traded near $65 per barrel. Six months later, it has hit $45, down from as much as $115 in the middle of last year. Now some member states are talking about a return to twenty-dollar-oil, last seen at the turn of the millennium. They point to Iranian confidence that international sanctions on its economy will be lifted by the end of the year. “Iran is announcing its production is going to increase as soon as they lift the sanctions and we need to do something. We (OPEC) cannot allow going into a war of prices. We need to stabilize the market,” Venezuelan oil minister Eulogio del Pino said on Sunday. Asked how low prices could go next year if OPEC failed to change course, he said: “Mid-20s.”

Don’t expect Saudi Arabia to back down when OPEC meets - Despite a nearly 30% fall in oil prices since a June meeting, don’t expect the Organization of the Petroleum Exporting Countries’ top exporter, Saudi Arabia, to back down from its strategy of fighting for market share. Instead, on Dec. 4 in Vienna, members of the oil-producing group are likely to spend their final meeting of 2015 much like they’ve spent the entire year so far: complaining about low prices but doing nothing about them. “Saudi Arabia will say no change,” Brian Youngberg, senior energy analyst at Edward Jones, told MarketWatch. Any meaningful OPEC production cut would have to be spearheaded by heavyweight Saudi Arabia. But the Saudis have made it very clear in the past year that they don’t want to lose ground in the oil market, especially as U.S. shale oil output remains strong. At a Thanksgiving time meeting a year ago, the group also left the production ceiling unchanged at 30 million barrels a day, where it’s stood since 2012. “Smaller countries that are struggling will continue to plea for a change, but they have no say,” Youngberg said. And “Iran will reiterate its plans to bring production up in 2016 regardless of what OPEC says to do.”All of that, longer term, “could cause OPEC to splinter as each country has different agendas and priorities,”

Biggest Oil Buyers Pick Themselves as Winners From OPEC Meeting  |  Rigzone: -- Oil buyers in Asia are sure of one thing as OPEC prepares to meet: They’ll emerge as winners from the group’s rift over production. Members of the Organization of Petroleum Exporting Countries will gather Dec. 4 in Vienna, where Iran has said it will announce plans to boost production by 500,000 barrels a day. That may further lift the 12-member group’s output, which has exceeded its target for 17 months. The increase in volumes would exacerbate a global glut and benefit the biggest oil- consuming region’s refiners, which are seeking cheaper sources of crude. OPEC is forecast to stick with its strategy of defending market share by maintaining output and driving down higher-cost production elsewhere, according to analysts and traders surveyed by Bloomberg . That’ll leave members including Saudi Arabia free to continue pumping even amid calls from Iran to make room for its extra supply after international sanctions over its nuclear program are lifted. “This is probably the best time we’ve ever had as a buyer,”  “We are enjoying an overflow of oil.” OPEC has exceeded its output target of 30 million barrels a day since June 2014 as it pumps near record amounts of crude, boosted by increases from its biggest members, Saudi Arabia and Iraq.   Profits from turning crude into naphtha, which is used to produce gasoline as well as petrochemicals, surged to $9.42 a barrel this month, the highest level since at least May, data compiled by Bloomberg show. Purchasing costs for refiners have slumped. Japan, Asia’s second-biggest oil consumer, spent an average of $51.22 a barrel in September for supplies, down from $113.47 in January 2014, according to data from the nation’s Ministry of Finance.

Ukraine stops buying Russian gas, closes airspace - Tensions between Russia and Ukraine escalated Wednesday as Ukraine decided to stop buying Russian natural gas — hoping to rely on supplies from other countries — and closed its airspace to its eastern neighbor. Russia’s annexation of Crimea from Ukraine in March 2014 and its support for separatist rebels in the east has brought relations between the two countries to a post-Soviet low. Ukraine has since been trying to cut its dependence on Russian gas. Russia’s state-controlled gas company, Gazprom, said Wednesday that it stopped sending gas to Ukraine on Wednesday morning and will supply no more because Ukraine has not paid in advance for more deliveries. Ukraine said it was its own decision to stop buying gas from Russia after it was offered better prices from other European countries. Those other countries import gas from Russia but can pipe it back to Ukraine. The stoppage comes less than two months after the two countries signed an EU-brokered deal ensuring supplies through March. Under the deal, Russia lowered the price it charged Ukraine to the same level granted to neighboring countries, from $251 per 1,000 cubic meters to about $230. Gazprom CEO Alexei Miller on Wednesday warned Ukraine and Europe of possible gas disruptions following the cut-off. Russia uses Ukraine’s pipelines to transport a part of its gas deliveries to other European countries. Ukraine’s “refusal to buy Russian gas threatens a safe gas transit to Europe through Ukraine and gas supplies to Ukraine consumers in the coming winter,” Miller said.

Lithuania leads way in reducing Russia's clout in energy | Since last year, a floating gas terminal called Independence has protected thousands of Lithuanians from the risk of sudden cutoffs in gas supplies from Russia, a regional heavyweight that has long used its near monopoly on energy in Eastern Europe as a political weapon. “This terminal has brought a strong sense of self-confidence,”  The terminal for liquefied natural gas, which is the size of an aircraft carrier, is docked off the this coastal city, some 300 kilometers (190 miles) west of the capital, Vilnius. Because the liquefied gas can be transported by ship, Lithuania can bring in gas from any number of countries around the world. “It’s like a symbol of our free will to make our own decisions. It adds to the feeling that our country is stronger and more self-reliant now,” said Petraitis. Lithuania’s experience is being echoed across Eastern Europe, where most countries have been actively trying to reduce their dependence on Russian gas. Ukraine on Wednesday said it had stopped buying Russian gas, claiming it could get enough from other European countries.

Israeli Prime Minister pushes for control of Golan after oil discovery - Israel invaded and occupied the Syrian territory known as the 'Golan Heights' in 1967, and has maintained a military and civilian presence there ever since. But the Israeli claim on the territory has never been recognized by the international community. Now, according to some analysts, the Israeli government has a new reason to secure their illegal annexation of the Syrian land: oil. Last month Afek, an Israeli subsidiary of the U-S-based Genie Energy, announced the discovery of huge reserves of oil in the region. The company’s chief geologist in Israel, Yuval Bartov, said the reserves could potentially hold billions of barrels of oil. Afek’s license to do exploratory drilling was renewed by the Israeli government for two years in October, shortly after the finding of the oil reserves. But the land on which the oil is located is actually Syrian territory. And despite the Israeli government claim to the oil, and the licensing of ten experimental wells, analysts say the discovery of oil in Golan may re-ignite the conflict between Israel and Syria over the control of the Golan Heights.

US accuses Syria of buying oil from Isis -- The US on Wednesday accused Syria of buying oil from the Islamist militants of Isis and imposed sanctions on a Syrian businessman it claimed is at the centre of the trade. The US Treasury department also announced sanctions on Cypriot and Russian businessmen who they allege have helped Syria evade international sanctions, including Kirsan Ilyumzhinov, the head of the world chess federation. US officials have often claimed that the Syrian government purchases oil from Isis — allegations that were substantiated in a Financial Times investigation. Still, Wednesday’s announcement represents the most direct accusation yet by the administration about the links between the Syrian regime and Isis. The four individuals and six entities listed by the Treasury will have any assets in the US frozen and will be barred from doing business with US companies or individuals. The administration has been criticised for doing too little to go after Isis’s oil infrastructure. However, the sanctions follow three weeks of stepped up air strikes against oilfields and trucks used by smugglers to transport the oil. They were also announced the day before a visit to Moscow by French President François Hollande when he is expected to discuss international co-operation in the campaign against Isis, including efforts to damage the group’s finances.

Chief Of Russian Air Force Accuses Turkey Of Coordinated Ambush On Downed Jet -- By now everyone is aware of the Turkish side of the story of how a Russian Su-24 was downed by a Turkish F-16 on Tuesday morning, when it allegedly crossed into Turkish airspace for a grand total of 17 seconds, with Turkey supposedly warning the Russian bomber which had been targeting alleged jihadists in the region no less than "ten times." Turkey even produced an alleged recording of said warning, which Russia implied was faked as the surviving pilot made it very clear no actual warning had been received by the Russian warplane. So now that Russia has had three days to go through the evidence and assemble the pieces of what it thinks happened, here is the summary as presented earlier today by the Commander in Chief of the Russian air force, Viktor Bondarev, which however presents a very gloomy picture with dire consequences for the peaceful geopolitics of the middle east.  In summary, what Col. Gen. Bondarev said is that Turkey actively sought to ambush and bring down the Russian jet starting long before the actual missile was fired, which can be confirmed by the flight patterns of Turkish warplanes which had taken off well in advance, otherwise they would not have had enough time to reach the battlezone.

Top U.S. Air Defense Commander: Turkey's Shootdown of Russian Jet "Had to Be PRE-PLANNED" -- (video) Lt. General Tom McInerney is an expert on handling threats from fighter jets. McInerney served as: Commander of the North American Aerospace Defense Command (Norad) – the military agency responsible for protecting the United States and Canada from foreign jet attacks – for the Alaska region, Commander of the Alaskan Air Command, Commander of 11th Air Force in Alaska. In his role as Norad commander for Alaska, McInerney dealt with more Russian fighter jet incursions (which he calls “bear penetrations”) than anyone else in the world. So McInerney knows how to tell innocent from hostile incursions by foreign fighter jets, standard rules of engagement of foreign fighter jets, how to read radar tracks, and the other things he would need to know to form an informed opinion about the shootdown of a foreign jet. Yesterday, McInerney told Fox News – much to the surprise of the reporter interviewing him – that assuming the Turkish version of the flight path of the Russian jet is accurate, Russia wasn’t threatening Turkey, and that Turkey’s shoot down of the Russian jet “had to be pre-planned”, as the jet wasn’t in Turkish air space long enough for anything other than a premeditated attack to have brought it down:  McInerney is right … especially given that a U.S. official told Reuters that the Russian jet was inside of Syria when it was shot down:  The United States believes that the Russian jet shot down by Turkey on Tuesday was hit inside Syrian airspace after a brief incursion into Turkish airspace, a U.S. official told Reuters, speaking on condition of anonymity.

Russian Pilots Executed While Parachuting: Turkish Media -- If Putin was angry when Turkey shot down a Russian plane, which may or may not have crossed Turkish territory - reports on both sides are conflicting - he will be absolutely livid to learn that, according to Turkey's Dogan News, the Russian pilots who had parachuted in an attempt to save their lives after the plane was shot down, had been executed while parachuting down by local rebels, which considering the video released earlier belonged to the Free Syrian Army, are same "rebels" who are funded directly by the CIA.  Both Russian pilots shot dead while parachuting down says Dogan News Agency citing Turkmen opposition commander

Syrian Gas Pipeline War Phase III – Russia Blocks Turkish Gas Pipeline -- With Russia allied with Syria in the Pipelinestan Gas Wars, the TurkStream gas pipeline – from Russia to Europe – the deal died when the Turks shot down a Russian bomber, to help their allies in Syria – ISIS. A number of major bilateral trade and infrastructure deals between Turkey and Russia that could be affected by the incident, including the proposed construction of a gas pipeline between the two countries, as well as the Akkuyu nuclear power plant.Russia’s economy minister singled out the TurkStream gas project on Thursday, as he discussed plans to halt preparations for a free trade zone with Turkey, Reuters reported.  As one of Russia’s largest customers when it comes to energy — Turkey imports 55 percent of its natural gas from Russia and 30 percent of its oil – any damage to these infrastructure deals could be significant, according to one Turkish academic.“Turkey has close strategic ties with Russia in terms of energy relationship with Russia, so it may be that the Turkish Stream project as well as the nuclear energy project – which is going to be constructed by the Russians — could be affected,” .“Now all these projects are uncertain because of this incident,” he added. Although Kumbaroglu did not believe gas supplies would be affected in the short-term, he feared for the longer-term projects: “In the longer term those strategic projects may be affected and these projects are actually to the benefit of both countries.”

Meet The Man Who Funds ISIS: Bilal Erdogan, The Son Of Turkey's President -  Russia's Sergey Lavrov is not one foreign minister known to mince his words. Just earlier today, 24 hours after a Russian plane was brought down by the country whose president three years ago said "a short-term border violation can never be a pretext for an attack", had this to say: "We have serious doubts this was an unintended incident and believe this is a planned provocation" by Turkey. As Sputnik transcribes, according to a press release from Russia’s Ministry of Foreign Affairs, Lavrov pointed out that, "by shooting down a Russian plane on a counter-terrorist mission of the Russian Aerospace Force in Syria, and one that did not violate Turkey’s airspace, the Turkish government has in effect sided with ISIS." Others reaffirmed Lavrov's stance, such as retired French General Dominique Trinquand, who said that "Turkey is either not fighting ISIL at all or very little, and does not interfere with different types of smuggling that takes place on its border, be it oil, phosphate, cotton or people," he said.   And while we patiently dig to find who the on and offshore "commodity trading" middleman are, who cart away ISIS oil to European and other international markets in exchange for hundreds of millions of dollars, one name keeps popping up as the primary culprit of regional demand for the Islamic State's "terrorist oil" - that of Turkish president Recep Erdogan's son: Bilal Erdogan. The prime source of money feeding ISIS these days is sale of Iraqi oil from the Mosul region oilfields where they maintain a stronghold. The son of Erdogan it seems is the man who makes the export sales of ISIS-controlled oil possible.

Putin and Hollande go after Erdogan’s racket - RT - Turkish President Recep Tayyip “no excuse” Erdogan thought NATO and Russia by this time would be at each other’s – Cold War 2.0 – nuclear throats, while Washington had brushed off Hollande’s idea with a cascade of platitudes and distortions. And in less than 17 seconds, Prime Minister Ahmet “I ordered it myself” Davutoglu had authorized Turkey to shoot down a Russian Su-24 - only a few hours before Hollande met with President Obama. So everything seemed to be falling into place. No chance of a new détente between the Atlanticist powers and NATO. On the contrary. Erdogan was sure he had sabotaged for good the Hollande-Putin face-to-face meeting in Moscow. Not so fast, Sultan. In Moscow, Hollande and Putin confirmed that France and Russia will not be torn apart. The French leader declared: "What we agreed, and this is important, is to strike only terrorists and Daesh and to not strike forces that are fighting terrorism. We will exchange information about whom to hit and whom not to hit." Now that unveils a thrilling horizon. In the “to hit” section we already find Daesh and Jabhat al-Nusra, a.k.a. al-Qaeda in Syria, which the Vienna negotiations have already branded as terrorists. And considering that al-Nusra has gobbled up, co-opted or instrumentalized an array of Salafi outfits, “moderate” or otherwise, it won’t be hard for the Russians to convince the French these are all legitimate targets.

Will Low Oil Prices Increase Internal Instability In Conflict Countries? -- With over 1.6 million internally displaced in South Sudan, and another 600,000 refugees in neighboring countries, are oil price declines exacerbating humanitarian crises in oil-producing African countries, and can we expect further deterioration as a result of the recent price depression.  This is a worthwhile issue to explore given South Sudan’s overwhelming reliance on oil revenues to fill government coffers; a similar situation that can be duplicated throughout Africa with not only oil, but other commodities exports as well. But, do price changes really exacerbate these conflicts? The answer is: it depends.  One should not discount the myriad grievances present amongst the varying ethnic groups in South Sudan, but this research seems to be quite relevant given its oil exports and that much of the fighting and resulting population displacement have been localized in South Sudan’s oil producing regions in Unity, Jonglei, and Upper Nile. The conflict has significantly disrupted operations centered in these oil producing regions imposing significant strain on government revenues through forgone income from Nilepet and increasing risk to other overseas players in the sector which is dominated by China (in particular CNPC and Sinopec, India’s ONGC and Malaysia (Petronas), with marginal activity by France’s Total, Kuwait’s Kufpec, and Kuwaiti-Egyptian Tri-Ocean Energy.

Standing idly by while the Middle East unravels is not an option  - As much as we hope that if we ignore what is happening in the Middle East it won’t affect us – it will. As recent events show, neither Islamic State nor refugees are being contained within the region. Isis is disappointed that refugees are not moving to the territory it controls. Refugees are voting with their feet, fleeing the barrel bombings of Bashar al-Assad’s murderous regime, and seeking refuge outside the country. They seek stability and a normal environment in which to live – a future of hope, not Isis’s apocalyptic future. The attacks in Paris were designed to provoke retaliation against European Muslims, and consequently more recruits for its “caliphate”. For Isis wants to add greater credence to its claim that the west is at war with Islam. The UK cannot let this narrative succeed. Isis will continue to try to launch attacks against the UK whether or not we are involved in the air campaigns in Iraq and Syria. Grievances against Britain go back a century, and do not simply stem from the UK’s ill-advised participation in the 2003 Iraq war. That conflict tipped the regional balance of power in Iran’s favour. It triggered a geopolitical struggle between Iran, on the one hand, and Saudi and the Gulf States and Turkey, on the other, which led to their supporting different extreme sectarian actors across the region, turning local grievances over poor governance into regional proxy wars. A quarter of a million Syrians have been killed and half the country displaced from their homes. This will have an impact on the security of the region - and the UK - for decades .

OilPrice Intelligence Report: Iran Sweetens The Deal For Foreign Oil Companies: Iran is hosting a two-day conference on November 26 to attract international investment for its oil and gas sector. At the conference, Iran will lay out 50 potential oil and gas projects to interested parties. Iran is looking to attract at least $100 billion in investment, capital that it says will help it achieve production gains of over 1 million barrels per day. The Iranian government is eagerly preparing for the removal of international sanctions, which is expected within a few months. Since reaching a historic agreement with the P5+1 nations in July, Iran has since overhauled its contract program with international oil companies, sweetening the deals in order to woo companies. Each individual project will have tailor-made contracts, rather than a standard contract for all projects. The details could indeed attract more investment than Iran has seen in the past. For example, companies will be allowed to sell production abroad. That will allow companies to earn more if they produce more, a situation that didn’t exist in the past under fixed-payment schemes. The contract terms could last as long as 20 years, whereas prior contracts only lasted 7 years. Foreign companies will still have to partner with a local Iranian entity. The bidding process could begin in March 2016 and the Iranian government has signaled its intent to sign contracts within two years.

India's Petronet Near To Winning Better Gas Terms From Qatar Sources  (Reuters) - India's biggest gas importer Petronet LNG is close to renegotiating a major deal with its Qatari supplier Rasgas, lowering the cost of gas shipments and avoiding a $1.5 billion penalty fee for lifting less gas than agreed, two sources said. The renegotiation is another sign of how falling oil prices and a global gas glut are bringing producing giants such as Qatar to the negotiating table. Petronet, which has a 25-year contract with Rasgas to annually buy 7.5 million tonnes of liquefied natural gas (LNG) has reduced purchases by about a third this year due to high prices -- even though it is only allowed to take 10 percent less, making it liable for a $1.5 billion penalty. Petronet and Rasgas opened renegotiation proceedings during Qatari Emir Sheikh Tamim bin Hamad Al-Thani's visit to New Delhi in March. If India manages to renegotiate a deal with Qatar it would be Prime Minister Narendra Modi's biggest diplomatic win in the energy sector since coming to power last year. Indian oil minister Dharmendra Pradhan reinforced the need to renegotiate prices and quantity under the long term deal with Qatar during his visit to Doha this month.

Singapore oil borrowers seeking more slack to avoid bond defaults - Borrowers in Singapore, so far spared from a wave of defaults in the oil services industry, are starting to ask creditors to cut them some slack. Three companies including Dyna-Mac Holdings Ltd, part owned by Keppel Corp, this month are asking bond holders to alter certain debt limits or profit targets as contract delays wreck firms' earnings. The issuers are among 28 oil services firms listed in Singapore with more than S$1.8 billion of notes maturing next year. "If the oil markets remain depressed beyond 2016, you're going to see some problems," . "Some of the oil and gas players will probably have to restructure their bonds." The borrowing that helped build Singapore's biggest export industry is looking overstretched after the price of Brent crude slumped near US$40 and the island's economy grew just 0.1 per cent in the third quarter. Delivery deferrals and provisioning by yards are causing "cash flow issues," Maybank Kim Eng Securities wrote in a Nov 20 report. Money is certainly tighter for the 28 listed oil services firms. The median ratio of their operational earnings to interest expense, a measure of a company's ability to pay its debts, was 5.4 times in their latest filings, a steep drop from 12.5 times at the end of fiscal 2014, according to data compiled by Bloomberg.

Saudi Arabia Regains Lead In Oil Sold To China -- November 23, 2015 -- Some data points. It looks like China imports about 4 million bopd. It appears all of it comes from Russia and the Mideast. In October, shares of imports by county of crude oil into China (numbers round, conversion calculator here):

  • Saudia Arabia: 3.99 metric tons / month = 29 million bbls / month = 975,000 bopd
  • Angola: 3.62 million metric tons / month = 27 million bbls / month = 880,000 bopd
  • Russia: 3.41 million metric tons / month = 25 million bbls / month = 830,000 bopd
  • Oman: 2.84 million metric tons / month = 21 million bbls / month = 700,000 bopd
  • Iraq: 2.32 million metric tons / month = 17 million bbls / month = 570,000 bopd

In the linked article, Bloomberg says Saudi regained its lead over Russia in this metric (amount of crude oil sold to China); and that Angola, also, sold more oil to China than Russia in October, 2015. The most recent reporting period for US crude oil imports is still August, 2015 (a dynamic link), reported earlier.

Commodities Plunge To New 16 Year Low; Oil Slides On Venezuela Warning, Soaring Dollar -- As reported last night, ongoing concerns that China's economy is doing far worse than reported when the PBOC lowered its Yuan fixing below expected to the lowest level since August 31, pushed copper futures to a new low not seen since May 2009 while nickel dropped to the lowest level since 2003. A big catalyst for the ongoing collapse in the Bloomberg commodity index which just hit a fresh 16 year low, is the relentless surge in the dollar, with the DXY rising as high as 99.98 the highest since April, as a result of rising prospects for a December U.S. rake hike (odds are now at 70%, up from 36% a month ago) boosting currency differentials and flows into the USD, making commodities more expensive for buyers in other currencies. As Bloomberg also notes, a London Metal Exchange Index of six industrial metals has fallen for six weeks. Gold has dropped for five straight weeks, crude oil is on a three-week losing run. The Bloomberg Commodity Index is set for its worst year since the financial crisis, plunging 23 percent.