Sunday, November 22, 2015

gas prices tank again; oil output steady despite the 65% drop in drilling

while last week saw oil prices crash, this week it was the benchmark price for natural gas that took a nosedive, with most of the drop coming at the end of the week, when prices fell 5.8% in the Friday trading session alone...the current contract price for natural gas had closed last week at $2.361 per mmBTU and was priced as high as $2.371 per mmBTU at the close on Tuesday, but slipped back to close at $2.347 per mmBTU on Wednesday, ahead of the Weekly Natural Gas Storage Report from the EIA, released as usual on Thursday...that report showed that gas producers had added 15 billion cubic feet of gas to storage to bring the total stored in the lower 48 to an even 4,000 billion cubic feet, a new record high for the amount of natural gas in storage in the even though traders had expected around 23 billion cubic feet to be added to storage this week, they sold off gas contracts on Thursday afternoon, when prices fell to $2.276 per mmBTU, after which prices fell steadily on Friday to close the week at $2.145 per mmBTU, capping the largest weekly decline in natural gas prices since January...once again, so we can visualize how those prices relate to recent prices for the fuel, we'll include a graph that tracks the daily closing price of the current natural gas contract on the NY Mercantile Exchange over the past 2 years:

November 21 2015 natural gas prices

the above graph shows the two year track of the current contract price for a million British thermal units (mmBTU) of natural gas at or contracted to be delivered to the Louisiana interstate natural gas pipeline interconnection known as the Henry Hub, which has become the benchmark for setting natural gas prices across the US... natural gas prices are also occasionally quoted in mcfs, or units of a thousand cubic feet, where an mcf = 1.028 x mmBTU = million BTU, a small enough difference that some use the metrics interchangeably...we can see from the chart above that even though US natural gas has not been impacted by an OPEC induced global glut like oil, the price of this commodity has followed a similar trajectory, and like oil is now selling for half of what it was selling for a year ago...certainly, this year's warm fall weather has had an impact, as normally gas supplies are being drawn down by the second week in November, instead of being added to like they were this week...but overproduction by US frackers continues to be a large part of the pricing story, as prices for natural gas have fallen from a peak near $13.50 per MMBtu in 2008 to below $2.15 per mmBTU now, more than an 80% decline, as gas production has expanded...high prices brought the frackers into the Haynesville and Marcellus shale plays early on, but even as they're no longer profitable at these prices, they continue to produce surplus gas, just to keep the cash flowing to cover the interest payments on their debts...

The Latest Oil Stats from the EIA

the latest oil patch data from the US Energy Information Administration indicated that production of oil from US wells was virtually unchanged, but oil imports dropped significantly and consumption of oil by refineries rose, so there was relatively little oil leftover to be added to our already burgeoning glut of oil in storage...our field production of crude oil slipped to 9,182,000 barrels per day in the week ending November 13th, a decrease of just 3,000 barrels per day from the production rate of 9,185,000 barrels per day during the prior week...while was 2.0% greater than our production of 9,004,000 barrels per day during the 2nd week of November last year, it was still 4.4% below the modern weekly record production of 9,610,000 barrels per day that was set in the first week of June this year...over the past ten weeks, the output of crude oil from US wells has stayed in a narrow range between 9,096,000 barrels per day, which we saw 3 times, and the 9,185,000 barrels per day we saw last week..

however, in the week ending the 13th, US imports of crude oil fell to 6,968,000 barrels per day, a drop of 409,000 barrels per day from the 7,377,000 barrels per day we imported during the week ending November 6th and the least crude we've imported in one week since June 19th, when we imported 6,765,000 bpd...this week's imports were hence 8.8% lower than our 7,638,000 barrels per day imports of the same week a year ago, a reversal of last week's imports increase, which were 7.3% more than the same week last year...that volatility is why we check the weekly Petroleum Status Report (62 pp pdf) for the 4 week average of our imports, where we find that average imports have been running at 7.1 million barrels a day, just 0.1% less than the same 4 week period last fact, our imports have only fallen below 7 million barrels a day 7 times so far in 2015, not much change from the 6 times that imports were that low in 2014...

meanwhile, US refineries were using 16,076,000 barrels per day during the second week of November, up from the 15,939,000 barrels per day they took in during the prior week, which puts their crude consumption a bit more than 1.0% ahead of last year's pace...their production of gasoline, which jumped by 156,000 barrels per day last week, fell back by 135,000 barrels per day this week to 9,558,000 barrels per day, while their output of distillate fuels, which was off a bit last week, jumped by 159,000 barrels per day to 5,032,000 barrels per day for this week...with regular fall maintenance wrapping up, the refinery utilization rate topped 90% for the first time in 8 weeks, as it rose from 89.5% last week to 90.3% in the week ending November 13th...that was, however, still below the 91.2% of refinery capacity utilization in the second week of November last week...with higher production, our week ending supplies of gasoline jumped by more than a million barrels, from 213,245,000 barrels as of November 6th to 214,254,000 barrels as of November 13th, 4.7% more than the 204,599,000 barrels of gasoline we had stored as of November 7th last year, and the most gasoline we had stored any week in November in the 16 years of the EIA gasoline storage records...

nonetheless, even with the big drop in oil imports and the increase in refinery throughput, there was again still more oil supplied this week than could be used, so it had to be put into storage; our inventory of crude oil in storage, not counting what's in the government's Strategic Petroleum Reserve, rose for the 8th week in a row, increasing by 252,000 barrels to 487,286,000 barrels on November 13th, up from 487,034,000 barrels on November 6th...that means we've added more than 33.3 million barrels to our stores in just the last 8 weeks, and now have 106.2 million barrels, or 27.8% more oil in storage than the 381,078,000 barrels we had stored at the end of the second week of November a year goes without saying that that's 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... 

This Week's Rig Counts

the number of active drilling rigs working in the US fell again in the week ending November 20th, with rigs drilling for oil accounting for all those removed....Baker Hughes reported that the total active rig count fell by 10 to 757, as their count of active oil rigs fell by 10 to 564 while their count of active gas rigs was unchanged at 193, down from the 1574 oil rigs and 355 gas rigs that were in use on November 21st of 2014....6 of the rigs that were idled this week had been drilling on land in the lower 48, while one rig was removed from an inland lake in Louisiana, and 3 rigs that had been working in the Gulf of Mexico off Louisiana were also shut down...that leaves us with 725 land based rigs in use, down from the 1864 land rigs that were being worked the same week last year, 2 rigs drilling on inland lakes, down from 12 inland waters rigs a year ago, and 30 rigs working the Gulf of Mexico, down from 51 in the Gulf and a total of 53 offshore during the same week of 2014...

horizontal drillers cut the most rigs this week, as the net count for active horizontal rigs was down by 6 to 581, which was down from the 1372 horizontal rigs that were operating in the same week last vertical rig was also removed from the field, dropping that count to 107, well down from the 352 vertical rigs that were drilling a year ago...and the count of directional rigs fell also, down by 3 to 69, also down from the 205 directional rigs that were deployed last year at this time... 

variances in the major shale basins included the removal of 4 rigs from the Permian basin of west Texas, which still is the most active basin with 225 rigs still drilling, down from 565 in the same week last year...3 more rigs were taken down in the Mississippian lime of the Kansas Oklahoma border region, where they now have just 9, down from 75 a year ago...single rig reductions were seen in the DJ-Niobrara basin of the Rockies front range, the Utica of Ohio, and the Arkoma Woodford of Oklahoma...those cuts left the Niobrara with 27 rigs, down from last year's 58, the Utica with 20 rigs, down from last year's 49, and the Arkoma Woodford with 9, up from 6 rigs a year ago, and the only major basin to see a year over year increase in the number of active rigs...

basins seeing rigs added this week included the Barnett shale of the Dallas-Ft Worth area, where they added 2 and now have 8, which is still down from last year's 25, the Eagle Ford of south Texas, where they also added 2, bringing the count up to 75, but again down from 209 rigs in the same week last year, the Cana Woodford of Oklahoma, where adding 1 brought their count to 33, whereas last year at this time they had 42 active rigs, and the Haynesville of the Texas-Louisiana border region, where they now have 28 rigs running, which is down from 39 a year earlier...

the Baker Hughes state count tables show that two states got rid of 4 rigs this week: Oklahoma, which now has 81, down from the year ago 214, and Louisiana, where all the Gulf of Mexico rigs are located, and which now has 65 rigs running, down from last year's addition, 3 rigs were pulled from both Colorado and Wyoming; the former is now down to 29 from 70 a year earlier, and the latter is now down to 21 from the year ago 60...West Virginia drillers idled two rigs, leaving the state with 14, down from last year's 32, while Ohio frackers shut down 1 rig, leaving 19, which is down from last year's 45....meanwhile, Texas added 4 rigs as 6 of their oil districts saw added rigs and 3 saw reductions, leaving Texas with 342 active rigs, down from 906 a year ago...Pennsylvania drillers also added two rigs, apparently not targeting the Marcellus, which brings the Pennsylvania rig count back up to 30, down from 56 in the same week last year...and finally, North Dakota drillers put another rig back on, bringing the state count up to 63, which was still down from 177 rigs that were drilling in North Dakota on November 21st of 2014...

since our domestic production of crude oil has held pretty steady over the last dozen weeks while the oil rig count has dropped 11 of those 12 weeks, we'll wrap this up today by including a graph that shows both metrics... the graph below, which comes from Bloomberg via Zero Hedge, includes the US oil rig count and US crude production over the last 4 and a half years on the same graph; our crude oil production in thousands of barrels per day is in dark blue and it's demarcated on a logarithmic scale by the first column of figures on the right, while the US rig count is tracked in red and that count is shown in the farthest right column on can see that the two tracked each other well for several years, such that many analysts came to believe that our output of oil was dependent on continuous drilling...but that's clearly not the case so far; as the count of rigs drilling for oil has now fallen by nearly two thirds, from 1609 rigs as of October 10th last year to 564 presently, yet our output of oil has held steadily above the level that we were producing when drilling was at its peak...moreover, a lot of the wells that have been drilled over the past year have yet to be fracked, as that initial rush of production following fracking is being held off the market while producers wait for higher oil prices....this week we learned that there are 1000 oil wells in the Bakken shale have been drilled but not fracked, as producers wait for higher prices; earlier this year, it was reported there were 1,400 such "drilled but uncompleted wells" in the Eagle Ford; other basins likely have similar counts of wells held back....with that kind of future oil production already sitting on the sidelines waiting for higher prices, a change in the number of rigs drilling today or even next year will barely make a dent in our output...

November 21 2015 rig count vs production


Deal in works on profit guarantees for Ohio plants of AEP, FirstEnergy? -- A decision is near in the several-year push by Ohio electricity utilities to obtain profit guarantees for some power plants, leading to fevered speculation about how utility regulators will rule and questions about whether a negotiated settlement is possible. Opponents say this is a bailout for utility companies, money that would be used to prop up unprofitable plants that are bad for the environment. The utilities — American Electric Power and FirstEnergy — have argued that the plants are needed to keep the electricity grid reliable, such as at times when electricity use spikes. The companies say these plants otherwise might close. For the utilities, the best chance of success might be in reaching a settlement with some of the leading opponents. This possibility has led to speculation this week that a deal or deals might be in the works. And yet, several of the most-vocal opponents, such as the Sierra Club and Dynegy, say they are not part of any talks, which indicates there is little possibility of a broad-based accord. “Settlement talks? There’s nothing to talk about,” said Robert Flexon, CEO for Dynegy, the Houston-based power-plant operator that has several Ohio plants that compete with AEP’s and FirstEnergy’s. Meanwhile, Akron-based FirstEnergy is “working very hard to reach a settlement as soon as we can,” said company spokesman Doug Colafella.

Application pending for new injection in Athens County -- An application for drilling of a new injection well in Rome Twp. is under consideration by the Ohio Division of Oil and Gas Resources Management. D.T. Atha Inc. of Albany filed the application this summer, and last week published legal notices that any public comments and objections must be received by the division within 15 calendar days of the final notice, which was published this past Saturday. The notices state that the average injection is estimated to be 2,500 barrels per day. The well would be located off Route 144. If approved it would be Atha's second injection well in Rome Twp. A permit for the first well — which involved converting a production well into an injection well — was approved by the state in 2013. Prior to approval, local residents and the Athens County Commissioners had asked the state to hold a formal public hearing on the application. The division opted instead to have an informal open house in Athens, which drew protestors. If the current application is approved, it would become the ninth injection well in Athens County. Injection wells are used to dispose of brine and other waste from oil and gas wells, including fracking waste. Members of the Athens County Fracking Action Network have announced there will be a local event held as part of a National Day of Action, a day that is intended to "shine light on the numerous problems associated with toxic fracking waste and its disposal."

Painesville protesters raise awareness about fracking for National Day of Action - Several local organizations conducted a mock trial dramatization to protest toxic fracking waste and related manmade earthquakes. They gathered Nov. 17 at 53 E. Erie St. in Painesville for the National Day of Action. “Our National Day of Action shows solidarity among groups in different states, said Theresa Mills, director of the Ohio field office of the Center for Health, Environment and Justice. “This day we will stand together in unity to say enough, no more toxic waste disposal in our communities, no more manmade earthquakes.” The dramatization identified the issues surrounding fracking, such as the negative toxic chemical effects and the role of the state government.  “We have no local control,” Frack-free Lake County Coordinator Dan Philipps said.

County group launching anti-frackwater campaign - Star Beacon -- Ashtabula County Water Watch, an all-volunteer grassroots environmental group, is preparing an educational campaign on the potential dangers of hydraulic fracturing wastewater, or brine, called “Brine Ain’t Fine.” The campaign kicks off today, in conjunction with a “National Day of Action” organized by several national anti-fracking groups, and ACWW is seeking more volunteers to inform the local community about frackwater’s hazards. Though brine is classified as saltwater — making it OK to dump into more than a dozen county Class II injection wells, or to spread on county roads as a dust suppressant — fracking chemicals in the brine solution are often radioactive or carcinogenic, as watchdog groups have found. Stephanie Blessing, an ACWW coordinator who also farms organic vegetables in Jefferson, said with the county government and municipalities’ recent concerted effort to stand up against the proliferation of injection wells — calling for a moratorium on new wells until local regulatory control is restored — now is the time to start a community discussion and spread awareness. Blessing is a West Virginia transplant who helped organize Kentucky communities against mountaintop removal and coal mining in the state. The oil and gas industry is “the same monster,” she said. “There’s a lot of misinformation out there and it’s hard to learn what is real and what is not real,” she said. “If there is something toxic and radioactive, then I would want to know whether or not my crops were essentially absorbing any of that. I’d want to put up barriers along the road.”

Injection wells spark local protests - Around 40 protesters waived anti-fracking signs Tuesday at U.S. Rt. 50 highway drivers, with many honking in support, as part of a national day of action meant to call awareness to the oil and gas horizontal hydraulic fracturing industry. The protesters were gathered at the rest area off the highway near Torch and Coolville in southeast Athens County, about 500 yards away from the K&H fracking waste injection well site up a nearby hill and beyond the trees. Frances Spencer, from Coolville, said that she attended the day of action not only to raise awareness but to “get rid of them, if we can,” referring to the two K&H injection wells on the site. “I’m older, and the impact of all this taking place, it might not affect me but what about the next generation? The little ones? I’m worried about the little kids,” she said. “What are they going to have to live with if we don’t fight this and get rid of it?”

Local activists have protests at Trumbull County oil-and-gas-waste disposal sites  — Members of the environmental group Frackfree Mahoning Valley traveled to several Trumbull County locations Tuesday to call attention to the dangers of waste from hydraulic fracturing and disposal of its wastewater. At the Sodom Hutchings Road headquarters of Kleese Development Associates, they railed against environmental damage done when oil field wastes escape from holding tanks and flow into wetlands, ponds and streams. At the state Route 169 Weathersfield Township oilfield disposal site of American Water Management, they protested the danger posed by earthquakes caused by injecting oil field waste deep underground. The Ohio Department of Natural Resources has stopped injection operations at both sites — in Weathersfield because of small earthquakes in 2014 and in Vienna because of the spill that occurred there in March. State officials said last week KDA’s spill may have been caused by failure of the company to construct the type of containment pad with a liner that was called for in the plans KDA submitted to the Ohio Department of Natural Resources. Geologist and Frackfree Mahoning Valley member Susie Beiersdorfer said that news makes her concerned about the injection wells KDA is still operating along U.S. Route 422 in Warren Township. “When we get a chance, we’re going to see if the Warren Township site has a liner,” she said.

Ohio should enact moratorium on fracking waste: Letter to the Editor | -- The under-reported part of the fracking story in Ohio is the tremendous amount of toxic and radioactive waste this practice is creating. Billions of gallons of this waste — much of which is from out of state — are being pumped into the ground beneath our feet in more than 200 Class II injection wells across the state, two of which are in Lake County, two in Geauga County, 19 in Ashtabula County, 22 in Trumbull County and 17 in Portage County. This practice has already caused numerous earthquakes in Youngstown and other areas. And now the state of Ohio even allows toxic and radioactive frack waste to be spread on landfills.  We are only at the beginning of fracking here, as Ohio is expected to eventually have 30,000 fracked deep shale wells. Geologists tell us everything underground moves, and frack waste will be no exception. Shouldn't Ohio at least enact a moratorium on frack waste until we can really be assured it will not cause irreparable harm to the health and safety of Ohioans?
Ron Prosek, Mentor  (NB: i have added a comment to this LTE)

Feds schedule meetings to discuss possible fracking leases in Wayne National Forest -- The federal government will hold three meetings this week concerning the possibility of opening Wayne National Forest to fracking.  Oil and gas companies have formally expressed interest to the U.S. Bureau of Land Management in hydraulically fracturing about 31,900 acres of the Wayne.  The bureau is reviewing those requests to see if the federal government owns the mineral rights beneath those sections of the forest, and it plans to assess potential environmental risks.  Four years ago, oil and gas companies told the bureau they wanted to drill for oil and gas beneath the Wayne. Environmental groups and local residents were outraged, and, eventually, the bureau pulled the proposal.  The areas that oil and gas companies have proposed for drilling are similar to the ones proposed in 2011.  Oil and gas companies filed documents called “expressions of interest” with the Bureau of Land Management as a first step to opening the Wayne to fracking. The companies’ requests cover land in the forests’ Athens, Ironton and Marietta ranger districts.

Anti-Frackers protest Wayne National Forest, other drilling projects - People gathered Tuesday at a protest of fracking in Athens County are concerned not only about plans to drill for oil and natural gas in the Wayne National Forest, but projects as well in Athens and neighboring Meigs County.They gathered near a drilling site in the Torch-Coolville area, part of what was billed as a national day of action against the fracking process used to extract natural gas and oil.About four dozen people fear more of what they believe the process already has done to their neighborhoods."We know that once our aquifer is polluted," said demonstrator Bob Berardi of Meigs County, "our property values are worthless, our communities will disintegrate, everything we've worked for will be destroyed.""It is a well-regulated, long-understood process," says Mike Chadsey of the Ohio Oil and Gas Association, "and as long as you've done everything right, it's a safe process."The protest was held in the shadow of a drilling platform built just in recent months-one a demonstrator said she's concerned already is affecting the area where she lives.

Foes challenge proposed fracking in national forest in Ohio - SFGate (AP) — Opponents are pushing back as a federal agency again considers requests to open Wayne National Forest in southeastern Ohio to oil and gas drilling.The Buckeye Forest Council, Sierra Club, Athens County Fracking Action Networks and other advocacy groups have called for the U.S. Bureau of Land Management to conduct a "full-scale environmental report" before allowing drilling beneath about 31,900 acres of the forest through hydraulic fracturing, or fracking. The bureau is reviewing whether the government owns mineral rights beneath those forest sections and assessing potential environmental risks. The last of a series of public meetings this week discussing industry interest and leasing is scheduled for Thursday. Companies indicated an interest in drilling in the forest in 2011, but the bureau dropped the proposal due to concern over environmental impacts.

Environmental groups protested potential fracking in the Wayne National Forest at public meeting - A public meeting about leasing land in the Wayne National Forest for oil and gas development was cut short Wednesday night after protesters with Appalachia Resist took the floor while an official from the U.S. Bureau of Land Management addressed the crowd.The meeting, hosted by the federal agency, came after the announcement that the agency is considering about 31,900 acres of land in Wayne National Forest for oil and gas purposes, including land in Athens County. The bureau will perform environmental assessments to determine the impact of using the land for hydraulic fracturing, or fracking. The meeting began with officials from the bureau speaking with people about leasing land in the forest and allowing people to ask questions. During the meeting, members of environmental groups began speaking out against fracking in the national forest. Members of Appalachia Resist, a group of Athens and Meigs County residents who oppose fracking and injection wells, were present at the meeting. Crissa Cummings, who helped plan the protest, said planning took about three weeks. “We all work full time and have families,” she said, which limited their planning time to four meetings. The Buckeye Forest Council, an Ohio environmental organization, also helped support the group. Teresa Mills, the fracking coordinator for the council, said she works with community and grassroots groups and gives them information to help their cause.

Protesters Shut Down Athens Meeting on Fracking in Wayne National Forest - Opponents are pushing back as a federal agency again considers requests to open Wayne National Forest in southeastern Ohio to oil and gas drilling. According to the Athens Messenger, protesters shut down a meeting in Athens concerning the possible lease of federal oil and gas rights in the Wayne National Forest. The meeting at the Athens Community Center was shut down an hour early Wednesday as opponents to leasing began chanting against drilling on the Wayne while supporters chanted for more jobs. The Buckeye Forest Council, Sierra Club, Athens County Fracking Action Networks and other advocacy groups have called for the U.S. Bureau of Land Management to conduct a “full-scale environmental report” before allowing drilling beneath about 31,900 acres of the forest through hydraulic fracturing, or fracking. The bureau is reviewing whether the government owns mineral rights beneath those forest sections and assessing potential environmental risks. The last of a series of public meetings this week discussing industry interest and leasing is scheduled for Thursday. Companies indicated an interest in drilling in the forest in 2011, but the bureau dropped the proposal due to concern over environmental impacts.

Ohio's Utica Shale development grows by $5.7 billion or 20.4 percent since last spring | Ohio’s Utica Shale has seen an additional $5.7 billion in investment or a 20.4 percent increase since last spring, a Columbus law firm says in a new report. The shale industry has invested $33.7 billion in Ohio, according to the report from Bricker & Eckler LLP, which tracks the industry. Ohio’s shale development is growing despite low commodity prices and a natural gas glut that have hurt some drilling companies. The biggest factors in Ohio’s Utica Shale boom are continuing development of needed infrastructure including pipelines and natural gas-processing plants, plus development of new natural gas-fired power plants that will generate electricity, said attorney Matt Warnock, partner and co-chair of Bricker & Eckler’s oil and gas industry group. “The infrastructure continues to get built out,” he said. Major interstate pipelines are being added and natural gas processing plants are being expanded, he said. The report looks largely at what are called midstream and downstream development, not the actual leasing and drilling of wells, he said. Many of those big-dollar projects in eastern Ohio are continuing, despite the economic downturn, he said. The report lists 162 projects, of which 16 are new since last spring’s report.

Our states can’t afford to delay pipeline projects - Opinion - The Canton Repository - While we are currently enjoying the last days of the fall season here in the Midwest, we should not forget that winter looms ahead. Record cold spells this past winter drove up demand for natural gas and electricity across the United States. In the last decade, demand for natural gas has skyrocketed. Recent technological advancements have made new sources of natural gas readily available to Midwest customers, helping to make Ohio the eighth and Michigan the ninth largest consumers of natural gas in the United States. This has driven the need for a direct pipeline to new natural gas sources. The fact is, existing pipeline infrastructure has failed to keep up with the growth and demand. Our regions and our businesses need a direct link to the abundant natural gas reserves in the Utica and Marcellus shale fields. Despite representing varying business interests in two different states, our organizations recognize the need for more natural gas supplies. We know that having a steady supply of energy is an important part of our region’s productivity, no matter what economic sector we’re involved in. That’s why we’ve come together with a variety of other trade associations, business and union groups to support the responsible expansion of critical energy infrastructure across Michigan, Ohio, Pennsylvania and West Virginia. As part of the Coalition for the Expansion of Pipeline Infrastructure (CEPI), we strongly embrace the idea that we must invest in safe and reliable pipeline technology. Construction of pipelines will boost our economies, provide more stable prices for consumers, increase efficiency and help our utilities provide better service. Lower energy costs will also help attract new business to our states and create jobs.

Group Strives for tougher regulations on oil and gas drilling - A small group of local residents met Nov. 9 with officials from Earthworks of Washington D. C. to discuss and record their opinions regarding the lack of regulations for methane and other chemicals involved with the gas and oil industry.  Alan Septoff, Earthworks strategic communications director, Melanie Houston, director of Water Policy & Environmental Health for the Ohio Environmental Council, and Nadia Steinzor, eastern program coordinator and Earthworks representative for Carroll County, presented information, statistics, and showed a video using a special infra red camera that recorded day and night time emissions from gas and oil drilling sights and operations in Texas, Colorado and Ohio.  The video showed heavy emissions the industry claims do not exist, according to Steinzor. The federal Environmental Protection Agency (EPA) wants to reduce emissions of methane and other chemicals used in or produced by gas and oil exploration. Houston said in 2013, the oil and gas industry leaked more than 7.3 million tons of methane into the air. She said the newly proposed amendments would call for oil and gas developers to limit methane emissions on newly installed or modified equipment, such as natural gas compressors, pumps, controls and fracking oil and gas wells.  This includes equipment related to the production, gathering, processing, and transmission of natural gas.  The industry is also responsible for providing the largest industrial source of volatile organic compounds (VOCs).  “These chemicals cause ground-level ozone or smog and has been proven to lead to lung and heart problems and premature death, according to Steinzor. “What is omitted are regulations for storage vessels, compressors at well sites and monthly inspections.  No citizen complaints system is in place and won’t be. They must address existing sources,” said Houston. Unfortunately, these rules won’t affect already existing pipes and equipment which account for 90 percent of emissions.  It also does not apply for pipes used in distribution that bring natural gas to homes and businesses, according to Houston.

The Double Standard of Oil and Gas Vs. Clean Energy Development in Ohio: Do Lawmakers Really Care About Your Property Rights? - Natural Resources Defense Council - Just last year, the Ohio General Assembly delivered a one-two-punch to the state's growing clean energy industry with dual bills: SB 310 imposed a two-year freeze on energy efficiency and renewable energy requirements, and HB 483 nearly tripled the setback distance for wind turbines from property lines. These bills dealt a devastating blow to renewable energy development in Ohio, but for wind in particular; the setback requirement has effectively halted future commercial-scale wind development in the state. Lawmakers opposed to wind claim the new setback law protects private property rights. But is this concern real, or merely a justification for a coordinated effort to undermine Ohio's wind industry?  When you look closely, it appears to be the latter. One key example of the state's double-standard when it comes to energy development and property rights is Ohio's "unitization" program. It allows fossil fuel developers to gain control over a common pool of oil or natural gas, giving them an upper hand over even unwillinglandowners to access (and frack) these resources beneath their land. Some form of unitization is allowed in 39 other states. Unfortunately, it would appear that Ohio's lawmakers are bending over backwards to accommodate this practice for the oil and gas industry. About a year after the state effectively zoned out wind turbines, the House passed new legislation (HB 8) broadening the already-permissive unitization program. No such favors are being done for wind companies. It's even difficult to get legislation passed--HB 190--that would give local counties the power to decide for themselves how far wind turbines should be set back from property lines.

Ohio scientist to test water before fracking - As the shale gas boom was making its way into Ohio in 2012, University of Cincinnati scientist Amy Townsend-Small began testing private water wells in Carroll County, the epicenter of the Utica Shale.   Her project, which includes samples of more than 100 wells, is one of the few sustained efforts in the nation to evaluate drinking water quality before, during and after gas drilling. Although it likely will be another year before Townsend-Small releases the results, her work offers a template for other communities worried about how drilling, fracking and producing unconventional natural gas might contaminate groundwater supply.  Most residents test their water only after they suspect it has been polluted; few have the resources or foresight to conduct baseline testing prior to the drilling. The tests cost hundreds of dollars, “so it's not something everybody can afford to do regularly,” said Townsend-Small, an assistant professor in the geology department. Once her sampling results are published, the data points won't be matched with specific locations — in order to protect residents' privacy and to avoid affecting property values. Townsend-Small's team offers free water testing about four times a year to interested landowners in and around Carroll County. She uses drilling reports the industry files with Ohio regulators to determine which water samples were taken near active gas wells. Each sample is tested for methane, the main component of natural gas.

Company wants to draw water from Ohio River for fracking - Shale development company PennEnergy Resources LLC, based in Findlay Township, received approval last month from Freedom Council to construct one or more water pipelines through the borough. That would allow the company to bring water from the Ohio River to fracking operations in Beaver County, company and government representatives said. “They want to supply water instead of trucking it,” New Sewickley Township Manager Walter Beighey Jr. said. The water would help operations in New Sewickley and Daugherty townships, as well as Economy, said PennEnergy Chairman and CEO Richard Weber. In New Sewickley, one well pad is already active and another on Zeigler Road could produce natural gas in the next few weeks, Weber said. Another fracking site known as B5 on Mellon Road in the township just had a big drill rig arrive last week, Beighey said. That well pad belongs to PennEnergy, and it currently has a pipeline being built to it that would move gas to a compressor station, Weber said. Compressor stations help pump extracted natural gas to other locations. Freedom officials hailed the project’s benefits to the borough. Council President John Kaercher noted promised improvements to Eighth Street, including repaving. “That’s the easiest way for them to get from point A to point B,” Kaercher said of the proposed water line. “They want to get a supply line out there so they can have a constant draw of water.” Weber said a water pipeline would also help the company reduce costs.

Real Estate Value Impacts From Fracking - In this article, we discuss the following six points to consider before concluding that fracking will inevitability lead to adverse impacts on home prices, values and mortgage lending:

  • First, economic factors that can enhance prices and values in fracking areas must be carefully weighed against environmental concerns that could create potential negative impacts;
  • Second, the oil and gas industry and federal, state and local governments are developing programs, policies and regulations to decrease the risks of environmental contamination to respond to groundwater and well water contamination concerns, and to mitigate potential adverse impacts of fracking on home prices and values;
  • Third, the real estate appraisal profession has developed well-established methods for determining the impact of those risks and the effectiveness of industry and government responses on prices and values;
  • Fourth, the few fracking impact studies published to date have weaknesses and limitations, and are only an opening round in what will be a long process of understanding the effects of fracking on the single-family real estate market;
  • Fifth, past studies related to oil field groundwater contamination and methane leaks show that real estate impacts, when they do occur, typically are temporary and can be eliminated by careful environmental and policy responses;
  • Sixth and finally, mortgage lenders and real estate appraisers will be able to deal effectively with the additional risks for the security of mortgage loans extended to borrowers in communities and regions where fracking is taking place.

Fracking chemicals led to Leetsdale warehouse fire, evacuations; 4 hurt - A fire at the Leetsdale Industrial Park that reached three alarms and prompted a hazmat response and local evacuations Tuesday morning is now being reported as mostly under control.Sky 4 video showed large flames and thick smoke coming from a building owned by Lubrizol Corporation, which said the fire started when employees were mixing chemicals used in fracking in a production tank. "We were working with a chemical, an oxidizer, that had an adverse reaction," said plant manager Ed Michalowski. "We don't know the full details of it yet. We're still doing some investigation."  VIDEO: Sky 4 over large fire in Leetsdale Industrial Park The fire just northwest of Pittsburgh was reported shortly after 10 a.m. Flames shot from the roof, and dark gray smoke could be seen for miles. The mobile unit from Allegheny County Emergency Services responded, along with a hazmat team. Emergency Services Chief Alvin Henderson Jr. said people from approximately 72 nearby homes were sent to Quaker Valley High School's gymnasium during the evacuation. "We did an announcement, and we did a door by door knock to make sure that if there were any elderly residents there, that we got everybody out,"

Evacuation lifted after fire at fracking chemical warehouse - — Workers at a warehouse were pouring hydraulic fracturing chemicals into a production tank Tuesday when a fire started, forcing residents from more than 70 nearby homes for several hours and injuring several people, emergency and company officials said. Hazardous materials crews moved people living near the warehouse in Leetsdale to a high school gymnasium as a precaution. The people were allowed to return after crews announced the fire was largely under control Tuesday afternoon. The fire was at Lubrizol Corp.'s Oilfield Chemistry site about 15 miles northwest of Pittsburgh. Thecompany and Allegheny County Emergency Services chief Alvin Henderson said three employees were injured. One had a burned hand and two inhaled fumes, Henderson said. Several firefighters were being evaluated for inhaling fumes. None of the injuries was deemed life-threatening, Henderson and the company said. The fire was reported Tuesday morning. Flames shot from the roof, and dark gray smoke could be seen for miles as two buildings burned and firefighters tried to keep six others from burning.

Fracking poses potential threat to drinking water in Morgantown -- Morgantown’s drinking water faces a threatening levels of a chemical byproduct from fracking that can cause cancer, experts say. By itself, bromide, a salt compound that is naturally occurring and also found in discharges from fracking and mining, is of little concern. But when mixed with chlorine, a chemical commonly used to make water safe for drinking, it can become carcinogenic, according to Dr. Alan Ducatman, a professor of public health at West Virginia University. "Can two things together be more dangerous than either thing alone? The answer is yes," Ducatman said.  If people are exposed to the compound produced by combining bromide and chlorine, a mixture known as trihalomethane, for prolonged periods of time, Ducatman and other experts say it can cause cancer even at relatively low amounts. Since testing began in 2009, the Monongahela River, which is Morgantown’s main source of drinking water, has tested positive for elevated levels of bromide a number of times,  The increased levels of bromide seem to be coming from wastewater produced during the fracking process, Ziemkiewics said. "If the cement job in fracking pipelines has cracks, fluid and gases can start leaking out and get into shallow groundwater (sources) where a lot of wells are located that supply drinking water," . The West Virginia Department of Environmental Protection has issued permits to several natural gas companies to build fracking sites along the Mon River,  According to the Morgantown Utility Board, there are currently 342 active Marcellus wells located within the Mon River watershed.  However, one fracking site is of particular concern to Morgantown officials. That is Northeast Natural Energy’s fracking operation, which is taking place in the Morgantown Industrial Park just above the Mon River in Westover. The drilling itself happens as close as 1,500 feet from the city’s water intake system, Glass said. "It doesn’t seem like the best location for (a fracking site),"

Value of utility property grows in WV - Assessed value of all property owned by public utilities in the state grew by $530 million to $10.04 billion in the past year, as Marcellus Shale counties continued to see major investments while southern coalfield counties suffered severe losses, according to a report Tuesday to the Board of Public Works. “The Marcellus counties are getting richer, and the southern coal counties are getting poorer,” Jeff Amburgey, director of the state Department of Revenue’s Property Tax Division, told the board. The value of pipelines for transportation of natural gas jumped more than 10 percent, to $1.88 billion, while the value of property owned by electric power companies increased 6.5 percent to $5.01 billion, despite the ongoing shuttering of coal-fired power plants, he said. Overall, that will mean about a $12 million increase in property tax collections statewide in 2016, he said. Natural gas-producing counties continued to see a boom in investments in 2015 despite a downturn in natural gas prices, with utility property valuations up 36 percent in Doddridge County, 16 percent each in Ritchie and Tyler counties, and 9 percent in Taylor County.

Application filed for new pipeline in Hudson Valley -- A pipeline company has filed a permit application to build two underground oil pipelines running 178 miles between Albany and Linden, New Jersey. Pilgrim Pipeline Holdings said Wednesday that most of the pipeline will follow rights of way along the Thruway in the Hudson Valley. One pipeline would carry crude oil south to refineries and the other would carry refined products such as heating oil and gasoline north. The permit application is before the state Thruway Authority. A formal environmental review will include public comment. The company says the pipeline would be a safer way to transport crude oil that is now shipped by rail and Hudson River barge from the Port of Albany. The project has drawn opposition from local groups and municipalities in New York and New Jersey.

Kinder Morgan files federal application to build Northeast Energy Direct pipeline -- The future of the proposed Northeast Energy Direct pipeline is now officially in the hands of the Federal Energy Regulatory Commission. Officials with Tennessee Gas Pipeline Co. LLC, a subsidiary of Kinder Morgan, filed their application with the federal commission today for permission to build the high-pressure natural gas transmission line, according to a news release from the company. While the application has been filed, it was unavailable to view on the FERC website as of this afternoon. The approximately $5 billion project will expand the company’s existing pipeline system in Pennsylvania, New York and New England, and connect it to low-cost natural gas supplies from northern Pennsylvania to New York and New England markets, according to the news release. “The NED Project is a transformative project for the northeast United States,” Kimberly S. Watson, Kinder Morgan East Region Natural Gas Pipelines president, said in a statement.The proposed Northeast Energy Direct pipeline would carry fracked natural gas from shale gas fields in Pennsylvania through upstate New York, parts of northern Massachusetts and into southern New Hampshire before going to a distribution hub in eastern Massachusetts. The route would cross about 70 miles of southern New Hampshire, including the local towns of Fitzwilliam, Richmond, Rindge, Troy and Winchester, and would carry up to 1.3 billion cubic feet of natural gas per day.

Fracking moratorium comes closer to fruition — A two-year moratorium on hydraulic fracturing — commonly known as fracking — in Lee County came one step closer to reality Monday evening as the Lee County Board of Commissioners voted in favor of it after a heated exchange involving two board members. Following a public hearing, the commissioners voted 5-2 on the first reading of the moratorium, with commissioners Andre Knecht and Kirk Smith voting against. Passing the ordinance requires a second reading and vote, but no public hearing. The second reading now is scheduled for the board’s Dec. 7 meeting. Of the nearly two dozen people in attendance, five spoke in favor of the moratorium while three were in opposition. The people who spoke for the moratorium — under which the commissioners intend to research the effects of fracking — primarily questioned the effects to property and public services in Lee County, while moratorium opponents urged the commissioners to listen to experts and state law. The N.C. legislature passed a bill in September prohibiting local governments from passing ordinances related to fracking, and this moratorium covers the practice, as well as all other oil and gas extraction activities. The moratorium would violate that law, according to its opponents, and Knecht said he was concerned that Lee County would face unknown repercussions from the decision. In addition to Lee County, the counties of Anson, Chatham, Rockingham and Stokes, as well as the city of Walnut Cove, have passed moratoriums; Bakersville and Creedmoor have banned the practice altogether.

Health concerns discussed during first fracking summit hosted by environmental group: Many of the chemicals used in fracking can cause health problems, and those chemicals can remain a secret under trade laws, health experts said Tuesday during a regional summit on the unconventional oil extraction method. Health experts appearing at the Florida Fracking Summit outlined the potential risks to people who live or work near fracking sites. Adrienne Hollis, an attorney with Earthjustice, said about 75 percent of the chemicals used in the practice can cause skin, respiratory or digestive problems. Half of the chemicals, she said, could lead to problems affecting the brain, nervous system or immune system. Hollis said since trade secret laws often prohibit the disclosure of chemicals, it's difficult to know how the combination of chemicals impacts a person's health. "It's very hard to treat public health issues and stop them if you don't know what the exposure is, what the chemicals are and what combination is," she said. "This should not be proprietary information. We have the right to know." The impact of fracking was at the center of discussions during the inaugural summit, as environmentalists outlined the potential risks unconventional oil extraction techniques could have on the environment and public health.

Fracking bill draws complaints about how far it goes to block local governments: A bill to regulate hydraulic fracturing triggered concerns Tuesday about how far it goes to limit local governments that want to create their own drilling rules. The legislation passed its first committee, but not before questions about provisions that void local ordinances passed this year to regulate oil and gas drilling. Opponents said more than 50 communities across the state have passed resolutions asking for a statewide ban on fracking. Some local governments, including Bonita Springs, have passed their own local bans. Those local laws would be void if Rodrigues' bill were to become law. "I think if we have counties and cities that are putting forth resolutions on this issue, I think it's a little arrogant as legislators to push forward a law that they have explicitly addressed to us they have a concern with," said Rep. Clovis Watson, Jr., an Alachua Democrat and a retired city manager. "As someone who has worked with municipalities for 30 years before I was here in a Legislature, I understand the importance of local control and these pre-eminence laws cause heartache, if you will, for local people." The state House agriculture and natural resources subcommittee voted 9-4, with the committee's four Democrats voting against it, to approve the measure (HB 191) that would increase penalties, creates a chemical disclosure registry and requires drillers to get permits before they can begin hydraulic fracturing in Florida. The proposal, sponsored by Rep. Ray Rodrigues, R-Estero, also prohibits cities and counties from creating their own permitting process for drilling. Zoning ordinances in place before Jan. 1, 2015, would not be impacted.

Editorial: Boost rail safety before luck runs out - When it comes to rail safety, we shouldn’t have to count on luck. The derailment upriver more than a week ago could have been much, much worse. Frankly, it was bad enough. A derailed BNSF Railway freight train dumped as much as 20,000 gallons of ethanol in Mississippi River backwaters near Alma. There was no explosion. So far, no significant environmental damage has been reported. But we shouldn’t have to rely on luck. Consider these quotes: From Stephen Schiffli, Buffalo County’s director of emergency management: “We dodged a bullet. It should be a wake-up call.” From Alma Fire Chief Tom Brakke: “It could have been a whole lot worse.” From Sarah Feinberg, head of the Federal Railroad Administration, who toured the site Thursday: “This is probably a great example of an incident where we feel like we got really lucky.” We’re foolish to continue counting on luck. It’s time Congress and the state of Wisconsin take up legislation to improve safety measures, training and transparency for the rail industry and its growing shipment of potentially hazardous cargo.

Speed rules didn’t apply to train in ethanol spill— The train that derailed earlier this month in Wisconsin and spilled 20,000 gallons of ethanol into the Mississippi River didn’t have a sufficient number of cars carrying flammable liquids to meet lower federal speed requirements The government set the new requirements this year in response to safety concerns about transporting crude oil by rail. According to railroad shipping documents, the train had 15 tank cars loaded with ethanol, five fewer than would trigger speed restrictions set by federal regulators. Because it didn’t meet that threshold, the train was permitted to operate at 55 mph. Some lawmakers, environmentalists and community groups have criticized the speed limits in U.S. Department of Transportation’s rules, announced in May, because they only apply to trains that meet the department’s definition of high-hazard flammable trains. The train that derailed on Nov. 7 near Alma, Wis., did not. Under the new rules, trains with 20 or more tank cars carrying flammable liquids in a continuous block or 35 cars dispersed throughout the train are held to 50 mph. They’re restricted to 40 mph within a 10-mile radius of 46 high-threat urban areas designated by the U.S. Department of Homeland Security. The Wisconsin train originated in Minneapolis and was bound for Kansas City, Kan., according to shipping documents. Both cities are high-threat urban areas, and BNSF voluntarily set a lower speed limit of 35 mph, compared with the federal government’s 40 mph, in those cities.

Oil Producers Hungry for Deals Drool Over West Texas 'Tiramisu'  |  Rigzone -- The worst oil market in decades would be hard to spot in West Texas, where two-lane county roads are still jammed with trucks and energy companies are on the prowl for deals. The Permian Basin, the biggest of the shale-oil regions that ignited the U.S. energy boom, is also the only one where production is increasing even as drillers idle more than half the rigs in the country during the longest price slump since the 1980s. That’s drawn the interest of companies from Exxon Mobil Corp. to Anadarko Petroleum Corp. that have hunted for assets in the hot, arid flatland that spans an area the size of Syria. Anadarko’s bid for Apache Corp. was seen driven by Apache’s vast holdings in the Permian. Rising output from the region has helped buoy U.S. production after OPEC’s decision to pump more oil to maintain market share sent crude prices into a tailspin. “We’re already seeing a lot of people that are targeting the Permian,” Allen Gilmer, chief executive officer of Austin- based Drilling Info Inc., said in an interview in Houston. “If you were to look for the most stable area today to go do anything, it’s got to be there. Today you might even argue it’s more stable than Saudi Arabia.” Exxon, the largest publicly traded energy company in the world, bought 48,000 acres in the Permian in two deals in August and is meeting with small, closely held producers to discuss additional purchases and joint ventures. Anadarko made an unsolicited, all-stock offer to purchase Apache, which has one of the largest Permian positions with 3.2 million acres, before withdrawing it, Anadarko CEO Al Walker said last week.

Coalition irrigates cotton with recycled water from Texas oil, gas industry --- Houston firm Energy Water Solutions announced earlier this month the completion of a six-month project to irrigate a cotton crop in Pecos, Texas, with recycled produced water from oil and natural gas activity in the Delaware Basin. A coalition of partners teamed up to work on the project, including the Texas Railroad Commission, Texas A&M AgriLife Research, Anadarko Petroleum Corporation, Gibson Energy and Energy Water Solutions. The Texas Railroad Commission granted a permit to Energy Water Solutions that allowed produced water to be used at the AgriLife Research station. “I have always said that the only thing more important to the economic future of Texas than oil and gas is water,” said David Porter, Chairman of the Railroad Commission. The produced water used in the research was provided by Anadarko, which owns and operates oil and natural gas wells in the Delaware Basin. The produced water was stored and recycled onsite at the research station. Gibson Energy provided the storage for both the produced water and the recycled water used in the field. EWS used patented technology to recycle the water to a standard suitable for growing cotton.

It’s Official: Oklahoma Experiences More Earthquakes Than Anywhere Else in the World -- It’s official: Oklahoma now has more earthquakes than anywhere else in the world, according to a spokesman from the Oklahoma Corporation Commission (OCC), which oversees the Sooner State’s oil and gas industry.  Several earthquakes have struck Oklahoma in just these past four days. As Oklahoma Corporation Commission spokesman Matt Skinner said about the state’s increased seismic activity, “We’ve got an earthquake issue.”  “We have had 15 [earthquakes] in Medford since 5 o’clock Saturday morning,”  “OCC has developed areas of interest, where earthquake clusters have occurred. A cluster is two earthquakes within a half mile of each other, with one measuring at least magnitude 3.2. Originally, they were three-mile circles, then six-mile circles. The circles grew in number and now encompass a very large area of Oklahoma—about 9,000 square miles in all, [Skinner] said,” reported the Enid News. Scientists have linked this never-ending spate of tremors to the state’s drilling boom. The Oklahoma Geological Survey concluded that the injection of wastewater byproducts into deep underground disposal wells from fracking operations has triggered the seismic activity in Oklahoma.  As EcoWatch reported two months ago, Oklahoma went from two earthquakes a year before 2009 to two a day. This year, roughly 700 earthquakes of magnitude 3 or higher has shook the state, compared to 20 in 2009.

Strong Earthquake Rattles Oklahoma, Felt in 7 Other States - A 4.7 magnitude earthquake struck northern Oklahoma Thursday night, followed by two more. Kansas and other neighboring states also felt the quakes miles away.  Oklahoma City’s KOCO 5 News reports that the first and strongest earthquake was Oklahoma’s largest since 2011. According to Reuters, the U.S. Geological Survey (USGS) said the 1:42 a.m. quake’s epicenter was centered 8 miles southwest of Cherokee, Oklahoma, with a depth of 3.8 miles. KOCO 5 News reported that there were two additional Cherokee quakes on Thursday: a 3.1 magnitude earthquake at 3:46 a.m. and a 3.7 magnitude earthquake at 6:03 a.m.  While there have been no reports of significant damage, both Oklahoma and Kansas have seen repeated seismic activity over the past decade, especially in recent years. The frequent temblors have been tied to the states’ drilling booms. The Oklahoma Geological Survey concluded that the injection of wastewater byproducts into deep underground disposal wells from fracking operations has awakened the state’s dormant fault lines. Oklahoma now has more earthquakes than anywhere else in the world, a spokesperson from the Oklahoma Corporation Commission reported.

Disposal wells targeted after 4.7 earthquake in Oklahoma — The Oklahoma Corporation Commission says it’s working to have two disposal wells shut down and volume reduced at 23 others after a magnitude 4.7 earthquake rattled northern Oklahoma and southern Kansas early Thursday. The commission’s oil and gas division released a plan calling for changes to oil and gas wastewater disposal wells in the area near the towns of Cherokee and Carmen. According to the National Earthquake Information Center, the quake occurred at 1:42 a.m. Thursday and was centered about 8 miles southwest of Cherokee. There were no immediate reports of major damage or injuries from the quake, which was felt more than 300 miles away. Two other earthquakes were reported later Thursday: a 3.1-magnitude temblor at 3:46 a.m. and a 3.7-magnitude quake at 6:03 a.m.

Local economy impact of fracking -- Fracking has driven an oil and natural gas boom in the US over the past decade. This column examines the impact these mining activities have had on local and regional economies. US counties enjoy significant economic benefits, including increased wages and new job creation. These effects grow as the geographic radius is extended to include neighbouring areas in the region. The results suggest that the fracking boom provided some insulation for these areas during the Great Recession, and lowered national unemployment by as much as 0.5%.

Oil Theft Soars as Downturn Casts U.S. Roughnecks Out of Work - “This is like a drug organization,” said Mike Peters, global security manager of San Antonio-based Lewis Energy Group, who recounted the heist at a Texas legislative hearing. “You’ve got your mules that go out to steal the oil in trucks, you’ve got the next level of organization that’s actually taking the oil in, and you’ve got a gathering site -- it’s always a criminal organization that’s involved with this.” From raw crude sucked from wells to expensive machinery that disappears out the back door, drillers from Texas to Colorado are struggling to stop theft that has only worsened amid the industry’s biggest slowdown in a generation. Losses reached almost $1 billion in 2013 and likely have grown since, according to estimates from the Energy Security Council, an industry trade group in Houston. The situation has been fostered by idled trucks, abandoned drilling sites and tens of thousands of lost jobs. “You’ve got unemployed oilfield workers that unfortunately are resorting to stealing,” said John Chamberlain, executive director of the Energy Security Council. In Texas, unemployment insurance claims from energy workers more than doubled over the past year to about 110,000, according to the Workforce Commission. In North Dakota, average weekly wages in the Bakken oil patch decreased nearly 10 percent in the first quarter of 2015, compared with the previous quarter, according to the Federal Reserve Bank of Minneapolis. With dismissals hitting every corner of the industry, security guards hired during boom times are receiving pink slips. That’s leaving sites unprotected.

Shale Oil and Crude Oil Production Generate Similar Levels of Greenhouse Gas Emissions: The U.S. Department of Energy's Argonne National Laboratory this week released a pair of studies on the efficiency of shale oil production excavation. The reports show that shale oil production generates greenhouse gas emissions at levels similar to traditional crude oil production. The research, which was conducted in collaboration with Stanford University and the University of California, Davis, analyzed the Eagle Ford shale formation, also called a play, in Texas and the Bakken play mainly in North Dakota. These plays are shale formations with low permeability and must be hydraulically fractured to produce oil and gas. Eagle Ford and Bakken are the second and third largest oil producing shale formation regions in the United States, during the last three years. Together, Bakken and Eagle Ford in 2014 accounted for 54 percent of oil production and 19 percent of gas production among the top seven production regions. "These two studies have concluded that the net greenhouse gas intensity of production is similar to conventional production." Both studies showed that after taking into consideration flaring and venting of natural gas, the greenhouse gas emissions associated with shale/tight oil production are similar to those generated at conventional crude oil reserves. This emission intensity stays consistent during the lifespan of extraction at the oil play. This contradicts an earlier estimate that the Bakken play might produce greenhouse gas emissions 20 percent higher more than for crude oil production.

New Colorado oil, gas rules could affect very few sites -- New rules intended to ease tensions over oil and gas drilling near Colorado communities might have only limited impact, affecting as few as 1 percent of future sites, an analysis by state regulators shows. The two proposed rules would give local governments a consulting role when energy companies want to put big facilities near homes, schools and businesses. Regulators would have more authority over such facilities, which would include sites with multiple wells or storage tanks. The Colorado Oil and Gas Conservation Commission, which regulates drilling, drew up the proposals and will hold hearings on them Monday and Tuesday in Denver. The rules were designed to address conflicts that arise when Colorado’s growing cities and oilfields expand into each other. Residents complain of around-the-clock noise and lights from nearby drilling rigs, and they worry about spills and air pollution. But only 13 drilling and storage sites approved over the past two years — 0.8 percent of the total — were in areas that would be covered by the new rules, the commission’s cost-benefit analysis said. And one of those facilities wouldn’t be considered a large site and wouldn’t be subject to the regulations.

More study, same result on fracking - The Denver Post Editorial -One of the stock charges used by those who campaign to ban hydraulic fracturing in oil and gas drilling is that it endangers groundwater supplies. And yet the pile of studies largely refuting this fear-mongering keeps growing by the year. In the past month alone, two major studies — one by Yale University and the other by Colorado State University — reached similar conclusions about two different centers of drilling, the first in northeastern Pennsylvania and the second in northeastern Colorado, mainly in Weld County. The Yale-led study — the largest of its kind, according to a university press release — found "no evidence that trace contamination of organic compounds in drinking water wells near the Marcellus Shale" resulted from underground migration of the chemicals. When the researchers did find "low levels of organic compounds" near a natural gas well, it was caused by "surface releases" — in other words, spills and accidents above ground that can be readily addressed and treated. And the study found no dangerous level of any compound, based on federal or state exposure standards. The CSU study also found "no evidence of water-based contaminants seeping into drinking water," the university said. And while researchers detected non-toxic methane seepage in 2 percent of the wells, they concluded that it likely stemmed from "compromised well casings."

Colorado oil and gas spill report for Nov. 15 - The following spills were reported to the Colorado Oil and Gas Conservation Commission in the past two weeks.

  • NOBLE ENERGY INC, reported Nov. 3 that a flowline that developed a leak was discovered during plugging and abandonment near New Raymer. Between one and five barrels of oil spilled.
  • DCP MIDSTREAM LP, reported Nov. 3 that a manual drain valve on an unstabilized condensate tank remained open, overfilling the produced water sump and filling the secondary containment of the sump near Evans. Between five and 100 barrels of condensate spilled.
  • KERR MCGEE OIL & GAS ONSHORE LP, reported on Nov. 3 that petroleum hydrocarbon impacted groundwater was encountered beneath the produced water sump during deconstruction activities near Platteville. An unknown amount of oil, condensate and produced water spilled.
  • NOBLE ENERGY INC., reported on Nov. 4 that impacts were discovered by the oil and produced water lines running from a tank battery to the separator near LaSalle. Between one and five barrels of oil and produced water spilled.
  • BILL BARRETT CORP., reported Nov. 6 that a flowline leak was discovered during pressure testing near Kersey. Between five and 10 barrels of oil and between one and five barrels of produced water spilled.
  • 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 contacted about a pipeline leak near Johnstown. An unknown amount of condensate spilled.
  • NOBLE ENERGY INC., reported Nov. 10 that the oil line developed a leak near LaSalle. Between one and five barrels of oil spilled.

Bloomberg Reporting North Dakota Crude Oil Production Down 12% -- In a Bloomberg/Rigzone article linked earlier today, this was reported: Oil production in the Permian is forecast by the government to rise 0.6 percent in December to 2.02 million barrels a day, even as drillers have idled 59 percent of the rigs there in the past year. Output in rival shale fields like the Bakken and Eagle Ford has fallen 12% and 25%, respectively, as drillers pulled out after oil prices crashed last year. From the monthly Director's Cut posting North Dakota crude oil production:

  • September, 2015:  1,162,253 (preliminary)
  • August, 2015: 1,187,631 (final, revised)
  • July, 2015: 1,206,996 (final, revised) 
  • June, 2015: 1,211,328 (final)(second highest; highest was December, 2014)
  • May, 2015: 1,202,615 (final)
  • December, 2014: revised, 1,227,483 bopd (preliminary - 1,227,344 bopd - preliminary, new all-time high)
Doing the math:
  • the all-time high: 1,227,483 bopd, back in December, 2014
  • the most recent figure: 1,162,253 (preliminary)
  • 1,227,483 - 1,162,253 = 65,230 / 1,227,483 = 5.3%
Disclaimer: I often make simple arithmetic errors, and often make factual and typographical errors, but that 12% decrease reported by Bloomberg seemed on the high side.  For the record, 88% of 1,227,483 = 1,080,185 bopd.

At Seeking Alpha: 1,000 Bakken Wells Waiting To Be Fracked -- November 14, 2015 -- From Seeking AlphaThe number of oil wells in North Dakota that have been drilled but not fracked surpassed 1,000 for the first time in September, as producers wait for prices to recover before turning them on.  As a result, more than 8% of oil wells in North Dakota now are sitting idle, harming the industry's ability to grow production; daily output in the state fell 2% in September to ~1.16M bbl/day.  The backlog is "sending a definite signal to the market that oil and gas operators are not willing to do a lot of drilling or hydraulic fracturing or production at these low prices," says Lynn Helms, director of the state's Department of Mineral Resources, who figures the backlog is not likely to be worked off until next year at least, and only if oil prices rise..  For more of September, 2015, data, click here.

Evidence Of Communication Between TFH Wells -- While looking up this well for other reasons I happened across this little gem, which is another pixel in the Bakken mosaic, helping me to better understand the Bakken. 9564, SI/NC, Statoil, Skarston 1-12 XE 1H, Banks, no production data, I post the following -- a small excerpt -- from the file report on this well: As a measured depth of 20,411', April 4, 2015, the decision was made to stop and circulate out gas while transferring mud and increasing the mud weight. The decision was then made to continue to circulate off bottom while preparation could be made to switch the drilling fluid to oil-based mud. The oil-based mud was then increased to 12 ppg. It was found that even with 12 ppg oil-based mud, the shut in casing pressure (SICP) continued to increase while the well was shut in. It was then decided that the mud weight should be increased further to near 14.2 ppg. This process took several days to complete. It was later discovered that the unidentified mineral was in fact, ceramic proppant. This is sometimes used as frac sand, or in conduction with quartz sand. It was also later confirmed, that there was in fact communication with an adjacent well that had been recently completed.  It was believed that this communication between wells was causing the increased pressure and fluid gains. This adjacent well was the Statoil Johnston 7-6-3TFH. The mud weight was increased to 14.2 ppg....after drilling resumed, the pressure increased, and fluid gains were seen. The decision was then made to shut the well in and circulate bottoms up. This yielded a trip gas of 4,602 units, and a large flare ....

Pipelines now outpacing trucks for gathering Bakken oil – More oil is now gathered by pipeline than truck in western North Dakota, taking pressure off Oil Patch communities faced with congestion, traffic fatalities and dust.  New figures from the North Dakota Pipeline Authority show that for the first time in several years, more oil is leaving well sites by pipeline, and that trend is expected to continue, Director Justin Kringstad said. “We’ve seen some significant progress in the major counties in western North Dakota getting crude off the roadways and into gathering pipeline systems,” Kringstad said. An estimated 441,644 barrels of oil left well sites by truck each day in April, while 725,743 barrels per day were transported by gathering pipelines to either a transmission pipeline or a rail-loading terminal, Kringstad said, using the most recent figures available. All counties saw a reduction in oil truck traffic in 2015, with the exception of McKenzie County, which still had an average of 892 oil truckloads each day in April.

One dead and three injured in PG&E natural gas line explosion southwest of Bakersfield -  One person died and three others were sent to the hospital with second- and third-degree burns Friday afternoon after a natural gas line explosion sent flames hundreds of feet into the air near Houghton and Wible roads southwest of Bakersfield. Flames from the ruptured line could clearly be seen from the top of the City of Bakersfield’s 18th Street parking structure in downtown Bakersfield, at least 10 miles from the blast. “A third party, more than likely a farmer, hit the line with a piece of heavy equipment,” Kern County Fire Department Capt. Tom Ellison said. “The operator of that vehicle was killed.” Witness Marla Proffitt, who supplied dramatic video of the flames from the passenger seat of a pickup, said the fire was such that it “heated the interior of our truck, and the roar was louder than a jet engine. “Unfortunately the vehicle and house (near the blast) were all but gone and a hay barn also was burning,” Proffitt said in a text. “I don’t see how anyone still in the house could’ve survived once the flames got there.” The push of gas and flames threw trees into the air, she said.

Capital Destruction Rages Beneath S&P 500 Tranquility -- Wolf Richter -- Monday, junk bonds languished after a brutal uninterrupted selloff that had lasted eight trading days. Tuesday and Wednesday, junk bonds rallied. But on Thursday, energy junk bonds got broadly hammered, and Chesapeake Energy saw its $11.6 billion in junk bonds collapse on heavy volume, while its Credit Default Swaps (CDS) — which investors buy to protect against defaults — jumped to the highest level ever, signaling that the company is distressed far beyond its credit rating (BB, two notches into junk), and that a big downgrade is due. Its shares plunged 10% to $5.40, a 13-year low.   Chesapeake’s 6.5% notes due 2017 plunged 10 points to around 70 cents on the dollar, yielding about 30%, according to LCD. A months ago, they were still trading at 96.5 cents on the dollar, yielding 8.7%. Its 5.75% notes due 2023 plunged six points to about 42 cents on the dollar, down from 71 a month ago. Its $1.5 billion of floating-rate notes due 2019 fell about 4 points to 47. Its 5.375% unsecured notes due 2021 dropped the most, down 9 points to 41 cents on the dollar. Picking up energy junk bonds for cents on the dollar – that “lifetime opportunity” hedge funds have been promoting – has been a bloody trade. And now investors fear the worst. The company is staggering under a mountain of debt, most of it dating from the days of former CEO Aubrey McClendon. It’s burning borrowed cash like there’s no tomorrow, a strategy McClendon had perfected. And its assets are dissipating into thin air: it has already written off $15.4 billion over the past three quarters, with more write-offs to come!

Oil Majors’ Dividends Survive Plunge in Oil Prices - The world’s biggest energy companies have doubled down on their promise to protect dividends, despite a precipitous drop in profits this year, driven by a steep decline in oil prices. In the first nine months of the year, the four oil companies known as the supermajors— Royal Dutch Shell PLC, Exxon Mobil Corp. , Chevron Corp. and BP PLC—have seen their collective earnings fall by more than 70% from a year earlier. Over the same period, they have handed out nearly $28 billion to their shareholders, a roughly 10% increase from the 2014 period. “The dividends and payouts to shareholders have no reason to be as volatile as the oil price,” said Patrick Pouyanné, chief executive of France’s Total SA, the world’s fourth-largest oil company by production, at a conference in Abu Dhabi this week. He added that it would be a “terrible mistake” to remove dividends and a sign that “we aren’t good at our business.” Oil prices are currently trading slightly above $40 a barrel—their lowest levels since August—and more investment banks, energy companies and analysts don’t see the price rising above $60 a barrel until 2017. The International Energy Agency said Tuesday oil prices would slowly rise to $80 a barrel by 2020, but also outlined a scenario in which they stayed at $50 a barrel. This has raised questions on a potential cash crunch at oil companies, a problem the firms acknowledge and say they are taking steps to address. The companies say they retain robust balance sheets that give them flexibility to raise more funds to help cover costs when needed.

Junk-rated and oil and gas loans worry U.S. bank regulators | Reuters: Banks' exposure to junk-rated companies and the oil and gas sector remains high, according to an annual report on loan quality by U.S. bank regulators released Thursday. The regulators gave a negative classification to $372.6 billion out of $3.9 trillion in loans impacted by the review, or 9.5 percent of the loans. Classified loans increased 9.4 percent from a year earlier. While regulators cited progress by banks in improving underwriting practices, they complained in a press release with the report of "persistent structural deficiencies found in loan underwriting." The report could be an early sign of a shift in the credit cycle toward more conservative lending because of stress among some borrowers. Criticism of loan quality in last year's report focused on loans to junk-rated companies. This year's report added worry about oil and gas loans. So called "classified" oil and gas loans - ones that received the three most negative ratings of "substandard," "doubtful," and "loss" - surged to 15 percent from just 3.6 percent a year ago. "Aggressive acquisition and exploration strategies from 2010 through 2014 led to increases in leverage, making many borrowers more susceptible to a protracted decline in commodity prices," the release stated. The review could force banks to scale back loans to energy companies. In September the Office of the Comptroller of the Currency, which conducted the review with the Federal Reserve Board and the Federal Deposit Insurance Corporation, met with banks over the impact of fallen commodity prices on the ability of borrowers to repay loans.

Weekly Natural Gas Storage Report - EIA: Working gas in storage was 4,000 Bcf as of Friday, November 13, 2015, according to EIA estimates. This represents a net increase of 15 Bcf from the previous week. Stocks were 404 Bcf higher than last year at this time and 207 Bcf above the five-year average of 3,793 Bcf. At 4,000 Bcf, total working gas is above the five-year historical range.

Natural Gas Tumbles After Stockpiles Hit New Record - WSJ: Natural gas prices sank Thursday afternoon as record high stockpiles and the chance they’ll keep growing led traders to shrug off a brief rally from a smaller-than-expected weekly surplus. Natural gas storage levels reached an unprecedented 4 trillion cubic feet last week, the U.S. Energy Information Administration said late Thursday morning. And weather--though it is not as mild as once expected--is warm enough that many analysts are expecting stockpile additions to continue for at least another week, two weeks beyond what is normal, said John Saucer, vice president of research and analysis at Mobius Risk Group in Houston. “The trend is down and people are looking to sell rallies,” said Scott Gettleman, an independent trader in New York. “Mild weather, big inventories, we’re just setting up for lower.” Prices for the front-month December contract settled down 7.1 cents, or 3%, at $2.276 a million British thermal units on the New York Mercantile Exchange. It is the largest one-day percentage decline since gas sank to a three-year low on Oct. 26. It has lost 4.6% over a three-session losing streak. Prices had seen small gains immediately after the EIA’s data release. It showed producers added 15 billion cubic feet of natural gas to storage in the week ended Nov. 13, 2 bcf less than the average forecast from analysts and traders surveyed by The Wall Street Journal. Because storage levels are high, traders have been reluctant to send more gas to storage and are instead selling it immediately on the spot market, said Aaron Calder, senior market analyst at energy-consulting firm Gelber & Associates in Houston. Physical gas for next-day delivery at the Henry Hub in Louisiana averaged $2.1463/mmBtu Thursday, more than 13 cents below the futures settlement.

Natural Gas Prices Down on Record Stock, Mild Weather -  The U.S. Energy Department's latest weekly inventory release showed an increase in natural gas storage by 15 billion cubic feet. This was below the market expectation of around 23 billion cubic feet but pushed natural gas storage levels to a record 4 trillion cubic feet. As a result, natural gas prices are still averaging less than half of what it did some five to six years ago. With production remaining plentiful and expected to outpace demand for the most of 2015, this fuel is likely to stay depressed for a while.Stockpiles held in underground storage in the lower 48 states rose by 15 billion cubic feet (Bcf) for the week ended Nov 13, 2015, below the guided range (of 17–21 Bcf gain) as per the analysts surveyed by Platts, the energy information arm of McGraw-Hill Financial Inc. However, the increase – the 33rd successive weekly injection – was more than both last year’s build of 11.2 Bcf and the 5-year (2010–2014) average addition of 5.5 Bcf for the reported week. Following last week’s climb, the current storage level – at 4.000 trillion cubic feet (Tcf) – is up 404 Bcf (11.2%) from last year and 207 Bcf (5.5%) above the five-year average. Moreover, with this addition, natural gas inventories are now in the record territory, getting past the previous highest level of 3.985 Tcf set last week. From a peak of about $13.50 per MMBtu in 2008 to just above $2.2 now – sinking in between to a 10-year low of under $2 in 2012 – the plummeting value of natural gas represents a decline of around 80% over seven years. In the absence of major production cuts, we do not expect much upside in gas prices in the near term. Things were made worse by expectations of soft heating demand with forecasts of higher temperatures across certain regions of the U.S. in the short term.

Could The Tide Be Turning Against North American Natural Gas? -- A lot of hope has been pinned on liquefied natural gas (LNG) exports as an outlet for surging North American gas supply. But a couple of events the past week show that getting LNG exports off the ground may be more difficult than most observers have predicted. The biggest potential setback came in western Canada, where it appears that the newly-elected Canadian federal government is making a move to limit offshore shipments of petroleum.Local press reported that new Prime Minister Justin Trudeau has directed the country's Transport Ministry to impose a ban on crude oil tankers for the northern coast of British Columbia. With the directive now expected to be formalized with other government departments including fisheries, natural resources and environment. That's a tough development for oil export projects like the planned Northern Gateway pipeline which was supposed to carry heavy oil to the British Columbia coast for export -- but now appears likely to fall by the wayside. The anti-tanker directive also calls into question planned LNG developments on Canada's west coast. A number of plans are on the books for LNG export terminals here, from firms like Shell and Petronas. But the ban on oil tankers raises the issue of whether LNG vessels might also come under scrutiny -- and potential restrictions -- from the government. At the same time, another government has also rejected coastal LNG -- on the other side of the continent, in the state of New York.  New York's governor Andrew Cuomo said last Thursday that his government is rejecting a proposed LNG terminal off the coast of Long Island with the state saying that security risks and possible damage to fisheries and offshore wind developments make the project unacceptable. All of which suggests that sentiment (as well as economics) may be turning against North American LNG; an important factor to consider as we assess the future for natural gas prices in this key market.

BP Could Get A Huge Tax Break On Its Oil Spill Fine -  When the Justice Department announced a $20 billion settlement with BP over the Gulf of Mexico oil spill, it called the amount “historic.” It did not mention, though, that BP would likely be able to write off a large portion of the settlement — saving $5 billion in taxes.  On Wednesday, a group of 53 House Representatives sent a letter to Attorney General Loretta Lynch, urging her to make sure the deal’s final language closes this loophole. The agreement is currently in a public comment period.  “The ‘gross negligence’ that led to perhaps the worst environmental disaster in US history should not be an opportunity to game the tax code,” the legislators, led by Rep. Raul Grijalva (AZ), write. “Challenging fiscal choices may lie ahead, and every dollar we lose in revenue is a dollar cut from much needed programs, raised from another source, or added to the national debt.” According to the letter, only the $5.5 billion in fines levied under the Clean Water Act are not able to be deducted. The remaining $15.3 billion could be, which the group estimates would save BP $5 billion on its tax bill.

Another Blow For Alaska -- - Seeking Alpha is reporting:

  • Statoil says it is exiting its Alaskan operations and closing its office in Anchorage, saying its leases in the Chukchi Sea are no longer competitive within its global portfolio
  • the decision means STO will exit 16 operated leases and its stake in 50 leases operated by ConocoPhillips
  • it follows Shell's September decision to pull out of controversial drilling off Alaska's Arctic cost after failing to find sufficient signs of oil and gas to make further exploration worthwhile

Statoil announces it will exit Alaska offshore exploration — A second major oil company has abandoned plans to drill in the Arctic Ocean off the northwest coast of Alaska. Statoil announced Tuesday it is giving up 16 of its company-operated leases in the Chukchi Sea. The Norwegian company also is abandoning its stake in 50 Chukchi leases operated by ConocoPhillips. The company on its website said the leases, purchased at a federal lease sale in 2008, no longer made financial sense. “Solid work has been carried out, but given the current outlook we could not support continued efforts to mature these opportunities,” said Tim Dodson, executive vice president for exploration. The leases are set to expire in 2020. The company will close its Anchorage office. The move was not a surprise. Statoil hasn’t drilled any exploratory wells in the Chukchi and the decision comes after Royal Dutch Shell PLC similarly bowed out of exploration in the U.S. Arctic after drilling the only recent exploratory well in the region. Environmental groups contend that tapping into the vast underwater reserves, estimated by the U.S. Geological Survey at 26 billion barrels of conventionally recoverable oil, will accelerate global warming, which is blamed for melting Arctic sea ice and shrinking habitat for polar bears and walrus.

Big oil writes off $US38 billion in assets in September quarter, Energy Information Administration says - The world's big listed oil companies have taken another nasty hit, writing down the value of their assets by $US38 billion in the September quarter. The US Energy Information Administration (EIA) said the oil price driven write-downs were the largest since 2008 at the depth of the global financial crisis. The EIA study of the balance sheets of 46 global and US upstream oil producers showed the lower prices had also contributed to a 33 per cent decline in cash flows despite increased production over the quarter. Royal Dutch Shell led the way with $US8 billion in impairment charges on ditching its Canadian oil sands projects and reducing its proved reserves by 418 million barrels. Other big players suffering the pain include the US shale oil driller Chesapeake Energy, which wrote off $US4 billion on its acreages in August and Whiting Petroleum which took an $US870 million hit over its takeover of Kodiak Oil and Gas just nine months earlier. While not included in the EIA survey, Australian energy producers also racked up heavy impairment charges for the quarter. AGL wrote off $600 million on upstream gas assets in the Hunter Valley, Cooper Basin and Queensland's Moranbah district in July and was followed by Origin Energy $337 million write-down a few weeks later. Among the smaller players, Beach Energy announced a $789 million write-down in value of assets in the Cooper Basin and Egypt in August — a heavy impost for a company with a market capitalisation of around $750 million — while AWE wrote off $158 million on the same day.

U.S. Thirst for Oil Straining International Water Supplies -- Rising energy demand is straining freshwater supplies globally, especially in the developing world, and U.S. oil demand is disproportionately responsible for that strain, a new study says. Global freshwater resources are a critical climate issue because global warming could threaten drinking water supplies for billions of people worldwide, as droughts become more severe, seas rise and precipitation patterns change across the globe. Fossil fuel production is a major freshwater consumer. In the U.S., for example, most new oil and gas wells use millions of gallons of water each. Much oil and gas development is taking place in drought-stricken and arid regions suffering from water scarcity like the Colorado River Basin, a major source of water for Los Angeles, Phoenix and Las Vegas. The study by the University of Southampton in the UK, published Monday in the Proceedings of the National Academy of Sciences, found that petroleum is responsible for most of the global demand for water when it comes to energy production. About 56 percent of all the petroleum sector’s freshwater consumption is international, straining other countries’ water supplies. In other words, oil the U.S. imports from the arid Middle East strains the freshwater supplies of Saudi Arabia and other countries, outsourcing not just oil production but water stress as well.

Oil Demand In The U.S. Can Stress Water Supplies In Countries Thousands Of Miles Away - That’s according to a new study published in the Proceedings of the National Academy of Sciences, which looked at how demand for oil, natural gas, and electricity affected water supplies around the world. It found that a country’s demand for natural gas and electricity tends to result in water resources being taken from the country itself — so, for instance, the water needed to frack a gas well in North Dakota is likely to come from the United States. But oil is different, the study found, because it’s much more likely to have an international water footprint. So when a country like the U.S. imports water from countries like Saudi Arabia, that demand can put a strain on that country’s — and, in some cases, surrounding countries’ — water supplies.   “Our analyses demonstrate that the US petroleum sector is reliant on economic activity in countries/regions of the world that are exposed to significant pressures on renewable freshwater resources (e.g., India, Pakistan) and where it may be difficult to implement the necessary market reforms to safeguard freshwater resources,” the authors write in the study. Worldwide, about 56 percent of the oil sector’s water needs come from countries outside of where demand for that oil originates. In the U.S., about 73 percent of all the water associated with the country’s oil demand comes from international sources. That’s a significant percentage, especially compared to China, where 22 percent of the oil sector’s water needs come from international sources. Most of the water associated with U.S. demand comes from western, southern, and eastern Asia, along with northern Africa — which makes sense, as Climate Central points out, since those regions are the source of much of the country’s oil imports.

Oil industry layoffs climb past 200,000 - Petro Global News: Barely a year and half since oil prices began tumbling, layoffs in the energy industry have already climbed above 200,000. According to Forbes, data collected by Continental Resources shows that layoffs in the oil and gas industry have shot past 200,000 globally, with the service sector bearing the brunt of those cuts. Houston-based Schlumberger has cut about 20,000 jobs since the downturn as upstreams continue to slash spends and put projects on the back burner. Schlumberger chairman and CEO Paal Kibsgaard said in April that, while he expects U.S. onshore drilling to bounce back, a recovery is likely to “fall well short of reaching previous levels, hence extending the period of pricing weakness.” Houston-based Baker Hughes will see its layoff tally rise to 13,000 this year while its pending merger target Halliburton will shed a total of 18,00 jobs, Forbes said. Weatherford International plans to cut another 3,000 jobs by the end of 2015 after laying off 10,000 workers earlier this year. The company is also planning to shut down and consolidate 60operating facilities across North America by the end of the year, in addition to the planned shutdown of seven manufacturing facilities. The transportation sector hasn’t been spared from the layoff pain. Calgary-based TransCanada said in September that it will cut about twenty percent of its senior leadership positions this year and will evaluate the need for further staff cuts.

Enbridge cuts 5 percent of workforce in Canada and U.S. - Canada’s largest pipeline company Enbridge Inc cut 5 percent of its workforce on Monday, a company spokesman said, as low crude prices continued to drag on the North American oil and gas industry. Enbridge spokesman Graham White said the reductions were made across Canada and the United States and represented about 500 employees at all levels and 100 unfilled positions. He said the reductions had nothing to do with the Canadian government’s announcement on Friday that it plans to ban tankers along British Columbia’s northern coast, where Enbridge’s long-delayed Northern Gateway pipeline terminates. “All decisions were made prior to that announcement and Northern Gateway was not impacted by the reductions,” White added. The layoffs at Enbridge follow tens of thousands of other job cuts across the Canadian oil and gas industry as a result of the prolonged slump in global crude prices. Producers have been hardest hit but service providers including pipeline companies are also feeling the pinch. “While Enbridge is more resilient to commodity price downturns than others, we’re not immune,” the company said in a statement, adding it was making the cuts to remain competitive. Rival pipeline company TransCanada Corp is also preparing for more job cuts this week, although a spokesman declined to provide more details until all managers, employees and contractors are notified. TransCanada announced in October that is was eliminating about 20 percent of its directors as slumping oil prices continued to take its on customers.

OPEC Menaced by US Shale Hits Canada Harder in Price Fight - Rigzone: OPEC took a swing at U.S. shale and knocked down Canada.Threatened by surging production from North America, the Organization of Petroleum Exporting Countries has been pumping above its quota for 17 months as it seeks to take market share from higher-cost regions. The resulting 60 percent price crash is hitting Alberta harder than Texas. Canadian producers are struggling to cut the cost of extracting bitumen from the oil sands, and their other wells are failing to match the efficiency gains of U.S. rivals. While output keeps rising in the Permian Basin, the largest U.S. shale play, companies are slowing output from wells in Alberta and have shelved 18 oil- sands projects during the downturn. “OPEC wants to hinder shale from its strong growth trajectory but there are higher-cost producers, such as in the oil sands of Canada, that are in the line of fire,” said Peter Pulikkan, an analyst at BI in New York. “Shale will eventually be impacted but it’s not the first on the list.” In a policy shift a year ago, the 12-nation cartel decided against propping up oil prices, keeping its output target at 30 million barrels a day even as the supply glut worsened. It has exceeded that ceiling since June 2014 and pumped 32.2 million barrels a day in October. In Alberta, high extraction costs and oil price discounts relative to global benchmarks are poised to continue crimping output. Production, excluding bitumen extraction, dropped about 13 percent this year through July, That compares with a roughly 19 percent increase in output from Permian wells over the same period.

Canada says oil pipeline reviews proceed despite process revision – Canada’s environmental review of existing applications for crude oil pipeline projects is continuing despite the new Liberal government’s plans to make the assessment process more robust, Natural Resources Minister Jim Carr said on Wednesday. “They have not stopped. The process continues,” he told reporters on a conference call. “There will be a transition as we amend the ways in which the National Energy Board goes about the process of evaluating these projects, and we will announce those changes as soon as we can, but the process continues.” The Liberal government’s pledge to toughen up the environmental review process for oil pipelines had raised the question of whether existing applications would have to be resubmitted. Key projects are TransCanada Corp’s application for the Energy East pipeline to take oil from Alberta and Saskatchewan to the East Coast, and the expansion of Kinder Morgan Inc’s Trans Mountain Pipeline to the Pacific.

Keystone XL developer ‘committed’ to completing project — The developer of the Keystone XL pipeline remains committed to completing the final leg of the project even though President Barack Obama denied the Canadian company’s request for a federal permit, a spokesman said Wednesday. TransCanada’s announcement came as the company withdrew its application for route approval through Nebraska. Even before Obama rejected the permit Nov. 6, Nebraska had been a major roadblock because of lawsuits filed by landowners and environmental groups. Company officials were scheduled to meet with the Nebraska Public Service Commission on Thursday to discuss the application process. “Although we are withdrawing the application at this time, we are reserving the right to reapply to the (Nebraska Public Service Commission) at a later date and remain committed to completing the final leg of the Keystone Pipeline system,” TransCanada spokesman Mark Cooper said in a statement, noting that the company was still considering what to do next. The pipeline is likely to factor into the 2016 presidential election, because all of the leading Republican candidates who support the project as a job creator and Democratic hopefuls oppose it because of environmental concerns. The pipeline was projected to carry 800,000 barrels a day of crude from Canada and North Dakota to Nebraska, where existing pipelines would bring the oil to Gulf Coast refineries.

Why the oil sands no longer make economic sense - Lost in the political fallout from President Barack Obama’s decision to once and for all reject Keystone XL is the fact that there is no longer an economic context for the pipeline. For that matter, the same can be said for any of the other proposed pipelines that would service the planned massive expansion of production from Alberta’s oil sands. Whether it’s Shell’s decision to scrap its 80,000 barrel a day Carmon Creek project or earlier industry decisions to abandon the Pierre River and Joslyn North mines, the very projects that were going to supply all these new pipelines are being cancelled left and right. At today’s oil prices they no longer make any commercial sense. Western Canadian Select, the price benchmark for the bulk of oil sands production, is trading at $30 (U.S.) a barrel. That gives the oil sands the dubious distinction of being the lowest-priced oil in the world with one of the highest cost structures.  The key reason that Mr. Obama rejected the pipeline is that the U.S. market no longer needs Alberta’s oil sands. Thanks to the shale revolution which has doubled U.S. oil production over the past decade, the security of Canadian oil supply no longer has the same cachet as it once did in the U.S. market. In fact, the explosive growth in U.S. domestic production from fracking shale formations in the Bakken, Eagle Ford and the Permian Basin has spurred the American oil industry to actively lobby the Obama administration to remove the export ban that was imposed after the OPEC oil shocks. But it’s not just the U.S. that doesn’t need the oil sands’ bitumen. Even if Alberta’s landlocked fuel could get to tidewater, it’s no more needed in foreign markets than it is in the U.S. market. Even world oil prices like Brent no longer justify any expansion of the resource. Worse yet, they signal the need for contraction.

Ban looms on crude tankers off northern BC - Canadian Prime Minister Justin Trudeau appears ready to fulfill a campaign promise to ban crude oil tankers off northern British Columbia in a move that would throw the proposed Northern Gateway Pipeline into question. The $6.5 billion, 1,177-km twin pipeline proposed by Enbridge Corp. would carry blended bitumen from Alberta to a terminal at Kitimat, BC, and return diluent to Alberta. Trudeau, whose Liberal party won a pivotal election Oct. 19, has asked new Transport Minister Marc Garneau to make the crude-oil tanker ban a priority, according to press reports.  As a potential link between the Canadian oil sands and global trade, the Northern Gateway proposal gained importance when US President Barack Obama on Nov. 6 rejected TransCanada Corp.’s application for the border crossing of the Keystone XL project, which would have increased pipeline capacity between Alberta and the US Gulf Coast (OGJ Online, Nov. 6, 2015). TransCanada also has proposed a project called Energy East, which would link the oil sands with eastern Canadian provinces and the Atlantic.

Mexico's oil sector in a state of flux - Mexico’s energy relationship with the U.S. is undergoing radical changes as its oil production sags, its refineries produce too much high-sulfur fuel oil and too little gasoline and diesel, and its imports of U.S. natural gas and transportation fuels rise. Add to this already complicated story the Mexican government’s efforts to inject competition and private-sector participation into a national energy sector long-dominated by state-owned Petróleos Mexicanos (Pemex) and that company’s plan to swap light U.S. crude for heavy Mexican oil. In today’s blog, “With A Little Help From My Friends—Mexico’s Oil Sector in a State of Flux,” Housley Carr begins a look at the ongoing transformation of U.S.-Mexico hydrocarbon trade and what it may mean for U.S. players—and Pemex.  A number of RBN posts over the past couple of years have detailed the evolution of the U.S. –Mexican energy relationship. The most significant development to date has been a large increase in Mexican imports of U.S. natural gas – aided by new cross-border pipelines and Mexico’s build out of gas fired power generation assets. More recently we covered the existing and potential market for imports to Mexico of U.S. liquefied petroleum gas (LPG _ a mixture of propane and butane – mostly propane. But the energy trade traffic is not all in one direction. The U.S. is a significant importer of heavy Mexican crude that is refined by Gulf Coast refineries and we have described the battle for market share at those refineries between Pemex and rival Western Canadian oil sands producers. In the past year the U.S./Mexico crude oil relationship has gotten even more complex with the advent of crude oil swaps that we described in “Have Another Swap of Mexican Crude” and which were finally approved to begin in early November 2015 at a rate of 75 Mb/d.

Mexico's reforms aim to boost oil, gas sectors --Eager to boost oil and natural gas production, the government of Mexico is in the midst of a multi-year effort to introduce more private-sector involvement and competition. The hope is that a series of reforms will lead to more investment and—over time—a Mexican energy sector that more closely resembles that of Mexico’s amigos North of the Border. Today, we continue our look at the ongoing transformation of U.S.-Mexico hydrocarbon trade and what it may mean for energy companies on both sides of the Rio Grande.  Since 2010, U.S. crude oil production has risen by 71%--from 5.5 MMb/d in 2010 to an average of 9.4 MMb/d in the first eight months of 2015, according to the U.S. Energy Information Administration (EIA). U.S. natural gas marketed production is also up: from about 61 Bcf/d in 2010 to 79 Bcf/d, on average, in the January-through-August period in 2015, again according to EIA. Over the same period, however, oil and gas production at Petróleos Mexicanos (Pemex)—Mexico’s state-owned energy company and (since 1938) the only producer in that country—has slipped and stagnated. Pemex’s oil production averaged 2.6 MMb/d in 2010 (from a peak of 3.4 MMb/d in 2004, when its Cantarell field in the Gulf of Mexico was going great guns; see upper chart in Figure 1) and has fallen every year since; in the first nine months of 2015 it averaged 2.3 MMb/d.

Shale oil technology could unlock billions of barrels overseas - Adapting the technology that powered the shale oil boom in Texas to the deserts of Saudi Arabia and elsewhere could produce 141 billion barrels of crude, according to research firm IHS. Horizontal drilling and hydraulic fracturing, alongside other technological breakthroughs in recent years, could pump that much oil out of 170 older, largely unproductive fields around the world, from the Middle East to Russia to Latin America. Adapting the technology that powered the shale oil boom in Texas to the deserts of Saudi Arabia and elsewhere could produce 141 billion barrels of crude, according to research firm IHS. Horizontal drilling and hydraulic fracturing, alongside other technological breakthroughs in recent years, could pump that much oil out of 170 older, largely unproductive fields around the world, from the Middle East to Russia to Latin America.  In its initial assessment, IHS found the 96 percent of the oil that could be recovered from those fields would have to be released using hydraulic fracturing, a process of blasting water, sand and chemicals underground to crack open tough rock formations. And drilling horizontally would allow oil producers including Saudi Aramco, Russia’s Gazprom and Mexico’s Pemex to tap into thinner bands of rock that conventional, vertical drilling couldn’t reach. “Horizontal wells allow engineers to connect compartmentalized portions of the reservoir with one well instead of many vertical wells, which addresses cost and footprint considerations,” IHS upstream researcher Leta Smith said in a written statement.  But where would these technologies help the most? IHS says Iran, Russia, Mexico and China have the most potential. Nearly 70 billion barrels could be squeezed out of the Middle East, and 25 million out of Latin America

Report recommends higher fines for resource companies contravening fracking regulations - ABC News (Australian Broadcasting Corporation): Resource companies could face increased fines and be banned from using certain chemicals under recommendations contained in a wide-ranging West Australian report into the controversial process of hydraulic fracturing. The report, by an Upper House parliamentary committee, made 12 recommendations to beef up the regulation of the industry but conservationists say they do not go far enough. The committee spent two years conducting the public inquiry into the implications of the practice, known as fracking, which is used to extract unconventional gas. The process has faced strong opposition from communities in the Mid West and Kimberley which are concerned about its impact on the environment, groundwater and farming practices. Committee chairman Simon O'Brien said the recommendations tightened safeguards facing resource companies.The report recommends a range of changes including the establishment of an independent arbiter for gaining access to land, full public disclosure of chemicals used in the process and increasing the penalties facing resource companies for not adhering to regulations.

Brazil prosecutors say bribes paid in Petrobras Texas refinery deal - Brazilian police and prosecutors investigating corruption at Petroleo Brasileiro SA said on Monday they have evidence that bribes were paid as part of the state-run oil company's $1.2 billion purchase of Pasadena Refining Systems Inc in 2006. At a news conference announcing a new round of searches, seizures and arrests, federal prosecutor Carlos Fernando dos Santos Lima said the bribes related to the U.S. Gulf Coast-based refinery could lead to the cancellation of the purchase. After Monday's police operation, two were arrested and five brought in for questioning, prosecutors said, the latest twist in a nearly 20-month probe of price-fixing and political kickbacks at the company known as Petrobras. "This case is important because, who knows, we might be able to annul the sale or recover assets belonging to the Brazilian public," Lima told reporters in Curitiba, Brazil where the investigation is being run. The prosecutor did not say how a U.S.-based transaction could be canceled, but throughout the corruption prosecution, serious efforts have been made to return illegally diverted funds to the government or Petrobras. The prosecutor said Petrobras lost $792 million in the purchase of the 100,000-barrel-a-day refinery from Astra Oil, a unit of Belgian-controlled Astra Transcor Energy. He also alleged that Petrobras overpaid for the facility, claiming it was in terrible condition when acquired.

Future Of Brazil's Oil Industry In Serious Doubt -- Oil market analysts keep a close watch on the weekly and monthly production figures from the U.S. EIA, watching for a sign that a contraction in output will help to balance global supply and demand. Still, it is useful to pay attention to supply changes from outside the U.S. For example, in its November report, OPEC raises a few red flags on Brazil, where a deteriorating economy, a simmering corruption scandal, and a major pullback in the state-owned oil firm Petrobras, could all conspire to cut into Brazil’s oil output. Brazil is expected to increase oil production by 180,000 barrels per day in 2015, hitting 3.04 million barrels per day (mb/d). But 2016 is a different story. Petrobras has been embroiled in a corruption scandal since last year, which has cost the company tens of billions of dollars. Given that Petrobras was already the most indebted oil company in the world, major cut backs in spending were in order. OPEC sees Brazilian oil production plateauing as soon as next year. That is a pretty significant development considering the fact that, not too long ago, Petrobras thought output would continue rising rapidly through the rest of the decade. But Petrobras is slashing investment in its mature oil-producing assets in the Campos Basin, where much of Brazil’s output comes from. These large fields have steep decline rates, and the losses are starting to show up in the data. OPEC cites the Marlin field, a field that produced 240,000 barrels per day in 2014, but suffered a staggering decline in output this year, dropping 30 percent (although some of that is due to maintenance). Several other significant fields, including Roncador in the Campos Basin, have also posted declines recently, even though, again, Petrobras attributes the slump to maintenance.

Petrobras's Dangerous Debt Math: $24 Billion Owed in 24 Months -  The debt clock is ticking down at Brazil’s troubled oil giant, Petrobras. Next up: $24 billion of repayments over 24 months. That’s a towering hurdle for a company that hasn’t generated free cash flow for eight years and whose borrowing rates are soaring. Annual debt servicing costs have doubled to 20.3 billion reais ($5.4 billion) in the past three years.  The delicate task of managing the massive $128 billion mound of debt accumulated by Petroleo Brasileiro SA -- 84 percent of it in foreign currencies -- falls to the two banking veterans parachuted atop the company earlier this year, CEO Aldemir Bendine, 51, and Chief Financial Officer Ivan Monteiro, 55. The pair came from the state-controlled Banco de Brasil to contain the damage from the biggest corruption scandal in the country’s history. While prosecutors continue to grind away at years of suspicious dealings, Act II for the boys from the Bank of Brazil will further test their mettle. The challenge of Petrobras’s runaway debt, which has grown four-fold in five years, has been exacerbated by low oil prices, a weak currency and the Brazilian government’s own fiscal travails. “If you considered them to be totally independent and there were no chance of any kind of government support, I think the risk of default would certainly be there in a big way,”

IEA Says Record 3 Billion-Barrel Oil Stocks May Deepen Rout - Oil stockpiles have swollen to a record of almost 3 billion barrels because of strong production in OPEC and elsewhere, potentially deepening the rout in prices, according to the International Energy Agency. This “massive cushion has inflated” on record supplies from Iraq, Russia and Saudi Arabia, even as world fuel demand grows at the fastest pace in five years, the agency said. Still, the IEA predicts that supplies outside the Organization of Petroleum Exporting Countries will decline next year by the most since 1992 as low crude prices take their toll on the U.S. shale oil industry. “Brimming crude oil stocks” offer “an unprecedented buffer against geopolitical shocks or unexpected supply disruptions,” the Paris-based agency said in its monthly market report. With supplies of winter fuels also plentiful, “oil-market bears may choose not to hibernate.” Crude has dropped about 40 percent in the past year as OPEC defends its market share against rivals such as the U.S. shale industry, which is faltering only gradually despite the price collapse. Oil inventories are growing because supply growth still outpaces demand, the 12-member exporters group said in its monthly report Thursday. Total oil inventories in developed nations increased by 13.8 million barrels to about 3 billion in September, a month when they typically decline, according to the agency. The pace of gains slowed to 1.6 million barrels a day in the third quarter, from 2.3 million a day in the second, although growth remained “significantly above the historical average.” There are signs the some fuel-storage depots in the eastern hemisphere have been filled to capacity, it said.

The Stunning Visualization Of The World's 3 Billion Barrel Oil Glut -- While talk of record backlogs of supertankers and an unprecented 3 billion barrels of crude oil stock-piles sound impressive - and are weighing on crude prices - the following stunning image provides some context for just what this means... If the 3 billion barrels of crude oil gluttiness was put into tankers, the line would reach a stunning  530 kilometers... As we previously noted, via Bloomberg, Oil stockpiles have swollen to a record of almost 3 billion barrels because of strong production in OPEC and elsewhere, potentially deepening the rout in prices, according to the International Energy Agency. This “massive cushion has inflated” on record supplies from Iraq, Russia and Saudi Arabia, even as world fuel demand grows at the fastest pace in five years, the agency said. Still, the IEA predicts that supplies outside the Organization of Petroleum Exporting Countries will decline next year by the most since 1992 as low crude prices take their toll on the U.S. shale oil industry. “Brimming crude oil stocks” offer “an unprecedented buffer against geopolitical shocks or unexpected supply disruptions,” the Paris-based agency said in its monthly market report. With supplies of winter fuels also plentiful, “oil-market bears may choose not to hibernate.”Total oil inventories in developed nations increased by 13.8 million barrels to about 3 billion in September, a month when they typically decline,according to the agency.

Should we worry as oil stocks hit 3 billion barrels? - Commentators have seized on the 3 billion figure as a shorthand way to convey how oversupplied the oil market has become. Large round numbers exert a powerful pull on the imagination but shorn of context they are meaningless and apt to confuse rather than illuminate. The statistic is technically accurate but the way in which it is being employed by analysts and journalists is hugely misleading. It would be more helpful to report the change, which is 240 million barrels, or 9 percent, over the last year.The 3 billion barrels figure being widely quoted is actually for a relatively small subset of the total crude and products being stored. Global stocks of crude oil and refined products are probably at least double this figure, at more than 6 billion barrels. Oil producers, traders, pipeline operators and refiners held crude and products stocks in the OECD countries amounting to 2.989 billion barrels in September, according to the IEA (“Oil Market Report” Nov 2015). But the figure excludes government-controlled stocks in the OECD, private and government stocks in emerging markets, oil in transit by tanker, as well as all stocks held by wholesalers and end-users. OECD governments controlled a further 1.581 billion barrels of oil and refined products stocks as emergency reserves, taking total stocks on land in OECD countries to almost 4.6 billion barrels, according to the IEA. Developing countries tend to hold smaller stocks in private and government-controlled storage but they account for half of global oil demand and could easily be holding another 1 billion barrels of stocks.The impression is sometimes given that stocks are sitting idle waiting for an upturn in demand before being consumed, but holding large volumes of stock at all points in the supply chain is an operational necessity.

Beware Buying Crude: Oil Storage Is "Increasingly Full" -- If you follow geopolitics and the oil market (and really, you can’t follow the latter without following the former) you might be wondering whether the tragedy that took place in Paris last Friday may be enough to override the fundamentals for a while.  That is, if ever there were a catalyst that had a chance of bringing about a sustained rally in crude, surely the prospect of World War III starting in the Middle East is it.  Well, before you get any ideas about BTFD-ing via some nightmare of a triple leveraged crude ETF, you might want to consider that no matter how close we get to a global conflict in Syria, the world is simply awash in black gold and with more Iranian supply set to come online starting as early as Q1, the fundamental picture will likely overshadow all other concerns. Or at least that’s Citi’s take.  “The Paris tragedy may warrant some uptick in geopolitical premia but this is likely trumped by near-term negative impacts on European air travel and/or economic blowback, adding further weight to the market,” Chris Main writes, in a note out Tuesday.  As Main goes on to note, there simply isn’t much on-land storage left and once the Iranians are up and running at full capacity, the “problem” will only get worse. Consider the following: On-land storage is getting increasingly full, with Citi estimating around 47-m bbls of available ex-US commercial storage left. Oil in “quasi-storage”, which is oil on the water that is yet to be delivered but has not been earmarked for floating storage, is on the rise at ~100-m bbls of combined crude and oil products.

Tanker rate spike dents efforts to store oil glut at sea - Record high freight rates are creating more headaches for traders looking to house millions of barrels of unsold crude oil and who already face potential losses due to record high stocks. They have to decide on whether to use tankers for longer term storage until they can sell their cargoes, or dump them at even more discounted prices in order to keep wells running. This is expected to come at a bigger cost as rates for supertankers have soared – reaching their highest since 2008 at over $100,000 a day last month and currently around $70,000 a day. Some have already been caught out with extra oil, and had no choice but to keep it on vessels. Trade sources said the expensive freight meant this was not a money-making play – and is unlikely to become one any time soon. “They’re losing money, and they want to place the vessel as fast as possible,” said Eugene Lindell, senior crude market analyst with JBC. “It’s putting pressure on anyone who has to take a vessel out.” Booking a supertanker on a one-year time charter has also spiked to over $50,000 a day – double the rate last year – with the overall monthly cost of storing oil on a vessel estimated at just over $2 million.

Oil Prices Poised to Surge: Just last week, The Financial Times’ headline said it all: Oil Glut to Swamp Demand Until 2020. The report was based on the dire assessment of the International Energy Agency. Thanks to China’s slowing growth, said one of the group’s bureaucrats, “We are approaching the end of the single largest demand growth story in energy history.” But amid the hand-wringing, a new global oil player is coming in off the sidelines: India. And India could change the demand dynamic yet again for the oil industry — and ultimately, oil prices. India produces some of its own oil. But as the U.S. Energy Information Administration noted last year, the country is increasingly dependent on imported fossil fuels. The agency ranks India as the fourth largest consumer of oil imports behind the U.S., China and Japan. Other groups, using more updated data, rank India third. But as the Oxford Institute for Energy Studies recently noted, India’s oil demand broke out to even higher levels in a trend that started in December last year. By February, oil consumption rose to a record 3.91 million barrels a day, the second highest ever recorded in the country. The trend continues despite the removal of fuel subsidies and the imposition of excise taxes by the reformist Modi government. What’s going on? For one, Indians are learning to love cars. When many of us think of India’s transportation networks, we think of creaky overcrowded trains, millions of motorcycles and ubiquitous three-wheeled “auto rickshaws” on narrow streets. Cars weren’t really a significant economic factor in energy demand.Yet last month, passenger car sales rose 22%, the fastest pace in nearly five years. In fact, in that same half-decade period, car sales rose more than 33% to 2.6 million total passenger vehicles a year.

Why Oil Production Is Increasing, Despite the Oil Glut - WTI closed at $42.93 yesterday, down 1.4% in the six intervening sessions. Meanwhile, Brent was at $45.83, down 9.3%. Both are sitting at two-month lows. The “culprit” was another anticipated rise in production, primarily in the U.S. Despite weekly declines in the number of working rigs in the American market (now at the lowest levels in some six years) and, as I noted in the last Oil & Energy Investor, rising cuts in capital commitments for new projects, the market surplus in oil is once again rising. Crude oil prices are languishing in the face of what is projected to be another build in U.S. production stockpiles. Given all that has been said about an oil glut, why is the production continuing? There are two overriding answers. First, as the surfeit of shale and tight oil production hit the market a year ago, and continued thereafter, developments in field technology advanced even quicker. When oil prices were north of $80 a barrel, operational costs were of little consequence. The primary reason for the current consistent surplus arises from the introduction of more efficient field operations, allowing cash-strapped companies to continue production even as the wellhead price (the producer’s revenue from the first exchange of oil, always lower than the resulting market price) went down. That set the stage for the second factor. Given that 80% or more of overall project expenses are front loaded (that is, spent before anything comes out of the ground), a company will want to recover investment by a resulting oil flow… even if that flow is feeding into an oversupplied and lower-priced market.  This need to sell what comes up is accentuated by the intensifying fiscal squeeze now under way. Most operators are carrying heavy debt. Previously in a higher-priced market companies would simply roll over that debt into new paper. Unfortunately, energy debt now occupies the most risky range of “junk bonds” (high-yield debt well below investment grade).

Oil Weakness Accelerates, Slams OPEC Export Price Below $40 For First Time Since Feb 2009 --  Overnight saw a significant ramp higher in crude prices as, presumably, the Paris attacks sparked further Mid-East tension fears and increased the war premium (as Japanese economic growth raises more demand conccerns). But that has all gone now as WTI Crude nears a $39 handle once again... And, for the first time since February 2009, OPEC Oil Basket price has traded with a $39 handle.  As Bloomberg notes, the daily OPEC Basket Price fell to $39.21 a barrel on Nov. 13,according to an e-mail on Monday from the organization’s secretariat in Vienna. The basket, an average of export grades from each of the group’s 12 members, typically trades below international oil futures as some OPEC nations pump denser or higher-sulfur crude that’s less profitable to refine.  Charts: bloomberg

Jack Kemp's Weekly Energy Tweets -- November 18, 2015:

  • California's gasoline demand growth slowed over the summer. Article at Reuters.
    US gasoline stocks are in line with long-term seasonal average when adjusted for increased consumption. [There are several story lines in that sentence.]
    US refined products stocks -- the line if off the graph -- were unchanged last week after 8 straight weeks of drawdowns.
    US commercial crude stocks were unchanged last week after seven weeks of large builds.The line is still almost off the chart.
    US refiners continued to return from maintenance with processing up another 137,000 bopd to 16.1 million bopd. The line is slightly above last's year line, which set the top for the past ten years.
    US propane market remains severely oversupplied with another counterseasonal build to a new record of 104 million bbls. The graph is incredibly staggering. Last year, propane stocks set a 10-year record at 80 million bbls; last week: 104 million bbls. The 10-year low was around 25 million bbls.
    Residual fuel oil stocks continue to climb and are now at the highest seasonal level for more than a decade (for this time of the year; stocks have been higher in the second quarter in the last decade.
    US distillate stocks were little changed last week either nationally or along the East Coast.
    Polar vortex could see temperatures plunge early in 2016. Times of Malta is reporting.
    Rhine River (Germany, Europe) water levels are at record low disrupting fuel shipments to central European markets.
    Platts is tweeting:Saudi Arabian crude oil exports were up 113,000 bopd to 7.11 million bopd; total ouptut fell to 10.226 million bopd fro 10.265 milion bopd.
    EIA is tweeting: US commercial crude oil inventories were up 300,000 bbls; refinery utilization at 90%.

Oil boosted by smaller than forecast U.S. stockpile growth – Oil prices gained on Wednesday after U.S. data showed a smaller than forecast build in crude inventories, but analysts said a global supply glut would keep prices under pressure. Brent crude futures were up 35 at $43.92 per barrel by 1549 GMT after settling 99 cents lower the day before. U.S. crude futures were up 28 cents at $40.95 a barrel. U.S. crude stocks nudged higher last week even as imports fell and refiners ran even harder, while gasoline stocks increased and distillate inventories fell, data from the Energy Information Administration showed on Wednesday. “The data was moderately bullish as crude stocks built less than expected, driven by increased refinery utilization, which generated a build in distillates and gasoline stocks,” said Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland. Crude inventories rose by 252,000 barrels to 487.3 million barrels in the last week, compared with analysts’ expectations for an increase of 1.9 million barrels. Eight straight weekly increases have boosted stockpiles to close to their modern-day record 490.9 million barrels in April. Despite the gains on Wednesday, most analysts expect prices to remain low for the rest of the year and into 2016 as production continues to outpace demand.

Oil down as US stockpiles edge up to near record highs - Oil fell to near three-month lows and U.S. crude futures slipped to below $40 a barrel before settling higher on Wednesday as short-covering lifted a market initially suppressed by worries about a global supply glut. U.S. crude inventories grew by 252,000 barrels last week, according to data from the Energy Information Administration (EIA) that came in below a 2 million-barrel build forecast by analysts in a Reuters poll. The smaller-than-expected stockpiles growth convinced some traders and investors to cover short positions in late trading, helping oil prices recover. Crude futures tumbled earlier after the EIA data showed the eighth straight week in builds leaving inventories at 487.3 million barrels, within a hair of the April record of 490.9 million. U.S. crude's West Texas Intermediate (WTI) futures settled up 8 cents at $40.75 a barrel, after hitting a session low at $39.91. The last time WTI traded below $40 was on Aug. 27. Brent settled up 57 cents, or 1.3 percent, at $44.14, helped by a relatively better outlook for the global crude benchmark versus WTI.

Crude Tumbles To $40 Handle After DOE Confirms Significant Cushing Inventory Build -- Following last night's API-reported surprise inventory draw (but major Cushing build), DOE reports a modest (as expected) inventory build (of 252k barrels) - the 8th week in a row. Most crucially, given rising fears of the fullness of land storage capabilities, is DOE confirmed a significant 1.495mm barrel inventory build at Cushing. Total crude produiction fell a tiny amount (after 3 weeks of rising). WTI Crude oscillated a little before timbling back to a $40 handle once again - erasing the API kneejerk gains.Another major inventory build at Cushing... And WTI erases the algo gains overnight... As we noted earlier, In short: "The US is the last place with significant onshore crude storage space left." Which leads directly to Citi's conclusion: "'Sell the rally' near-term as fundamentals remain very sloppy and inventory constraints are becoming increasingly more binding." Charts: Bloomberg

WTI Tumbles Back Below $40, Goldman Warns Risk Of "Sharp Leg Lower"- After an exuberantly-shaped recovery of hawkish fed minutes, WTI Crude (Dec contract) has tumbled back below $40 this morning following warnings from Goldmn Sachs of the potential for a "sharp leg lower" to $20 handle given expectations for warmer-than-normal weather this winter. As Goldman Sachs notes, Risks of a sharp leg lower remain elevated: Our forecasts reflect our belief that “financial stress” can solve the current market imbalances, by gradually reducing excess supply capacity as demand recovers. We believe however, that there are high risks that this may prove too slow an adjustment as inventories continue to accumulate. This is particularly the case in the oil market where storage utilization is nearing historically elevated levels. The risk of markets adjusting through “operational stress”, when a surplus breaches logistical capacity such that supply can no longer remain above demand, rather than financial stress, is now much greater. Mild winter weather over the coming months (a concerning risk given current El Niño conditions) could see weak heating demand in the US and Europe. If this materializes, it would likely be the trigger for adjustments through the physical market, pushing oil prices down to cash costs which we estimate are likely around $20/bbl (see New Oil Order: Too full for comfort, published October 25, 2015 for more details). As such a drop in spot prices to cash costs would force rapid adjustments, it would likely be followed by periods of stronger returns in both spot and roll returns, as historically has been the case (1986, 1988 and 1998). Charts: Bloomberg

Goldman eyes $20 oil as glut overwhelms storage sites - Telegraph: The world is running out of storage facilities for surging supplies of oil and may soon exhaust tanker space offshore, raising the chances of a violent plunge in crude prices over coming weeks, experts have warned. Goldman Sachs told clients that the increasing glut of oil on the global market has combined with mild weather from a freak El Nino this winter. The twin-effect could send prices plummeting to $20 a barrel, the so-called ‘cash cost’ that forces drillers to abandon production. “Risks of a sharp leg lower remain elevated,” it said. Oil has fallen from $110 a barrel early last year and is hovering near $40 for US crude, and $44 for Brent in Europe. The US investment bank said the overall glut in the commodity markets may take another twelve months to clear. It cited ‘red flag’ signals on the Shanghai Future Exchange over recent days. Copper contracts point to “imminent weakening” in China’s ‘old economy’ of heavy industry and construction, it said.The warnings came as OPEC producers and Russian companies fight a cut-throat battle for market share in Europe and Asia. Saudi Arabia is shipping crude to Poland and Sweden for the first time, poaching new customers in the Kremlin’s traditional backyard. Iraq is selling its low grade ‘Basra heavy’ crude on global markets for as little as $30 a barrel as the country runs out of operating cash and is forced to cut funding for anti-ISIS militias. Iraq is seeking a large rescue loan from the International Monetary Fund. “The drop in oil prices is a difficult test for us,” said premier Haider al-Abadi. It is estimated that at least 100m barrels are now being stored on tankers offshore, waiting for better prices. A queue of 39 vessels carrying 28m barrels is laid up outside the Texas port of Galveston, while the Iranians have a further 30m barrels offshore ready to sell as soon as sanctions are lifted.

Oil slides again as focus returns to heavy glut – Oil prices fell on Thursday, with U.S. crude dipping below $40 per barrel, retreating from early gains amid a persistent global glut of crude and refined fuel. Brent crude futures were down 20 cents at $43.94 a barrel by 1411 GMT. Rising U.S. stockpiles served as the most visible evidence of oversupply in oil markets. Goldman Sachs said on Thursday there remained a downside risk to oil prices “as storage utilization continues to climb.” The bank added that “we don’t believe that current prices present an appealing entry point.” “Ultimately the focus will return to the balance of demand relative to supply, and until inventory data provides evidence of a tighter supply, the path of least resistance will be lower,” CMC Markets chief market analyst Michael Hewson said. International benchmark Brent is down nearly 12 percent this month and 24 percent this year, having slumped from as high as $115 in 2014. Brent has not closed higher for two consecutive days since early October. U.S. crude last traded down 64 cents at $40.11, having touched $39.89, the lowest since August. The contract fell below $40 for the first time since August on Wednesday.

Oil trades near three-month low as excess supply takes toll – Brent crude oil futures gained some ground on Friday but remained near three-month lows as the pressure of a persistent supply glut limited optimism for a price recovery. Brent crude struggled to hold onto small gains as the overhang that has cut prices by more than 10 percent this month continued to weigh on the market. “The drivers that pushed prices lower are still there,” said Hamza Khan, head of commodity strategy at ING, pointing to the strong dollar and increasingly efficient U.S. shale operations in addition to the overhang of physical oil. “Any rally today is going to have a difficult time finding traction.” The front-month Brent crude contract was 20 cents higher at $44.38 a barrel at 0950 ET. The contract finished 4 cents higher on Thursday at $44.18. U.S. WTI crude traded 30 cents lower at $40.24 per barrel. Earlier in the day, it dipped to $39.88, a low since Aug. 27. The strength of the U.S. dollar, near seven-month highs, has a negative impact on crude prices, making oil and other commodities more expensive for holders of other currencies.

Oil Finds Some Support As WTI Hits $40 -- Oil prices continued to test a lower bound at $40 per barrel, but have so far resisted plunging much below that level. The story has been the same for the past few weeks: production in the U.S. is inching down, but slowly. Meanwhile, storage levels have climbed. This past week, crude inventories leveled off after several weeks of gains, perhaps portending a coming drawdown. Still, bearish sentiment persists.  Goldman Sachs published yet another bearish prediction for crude oil, once again raising the possibility that oil will drop as low as $20 per barrel. With storage levels near record levels not just in the U.S., but also around the world, there is not a lot of room on the upside for prices, while there increasingly seems to be room on the downside. The Wall Street Journal estimates that 37 oil and gas companies have filed for chapter 11 bankruptcy protection so far this year, as the financial storm from low crude prices overwhelms their ability to keep the lights on. The bankruptcy cases account for more than $13.1 billion in outstanding debt among the companies involved. Still, despite the wave of bankruptcies, the industry is not consolidating as fast as many previously anticipated, which appears to be delaying market adjustment. Mexico’s state-owned oil company Pemex announced that it would be willing to market oil and gas extracting from producers that win an upcoming auction in December. Mexico has opened up its energy sector and has held a few rounds auctioning off offshore tracts, but has not garnered as much interest as it would like. Pemex’s offer to market oil and gas for private producers could offer a degree of certainty to companies on the fence about bidding in the auction, providing some assurances about how to move product to market.

U.S. oil drillers cut rigs for 11th week in the last 12 – Baker Hughes -- U.S. energy firms cut oil rigs for an 11th week in the last 12 this week, data showed on Friday, a sign drillers were still waiting for higher prices before returning to the well pad en masse. Drillers removed 10 oil rigs in the week ended Nov. 20, bringing the total rig count down to 564, oil services company Baker Hughes Inc said in its closely followed report. That is about a third of the 1,574 oil rigs operating in same week a year ago. After cutting 103 oil rigs over the past two months, drillers added two rigs last week. U.S. oil futures averaged $41 a barrel so far this week, down from $43 last week, as crude inventories rose for the eighth consecutive week and were inching closer to record highs. Crude oil futures on Friday fell below $40 for a third day in a row to the lowest level since August as the pressure of a persistent supply glut limited optimism for a price recovery. The strength of the U.S. dollar, near seven-month highs, has a negative impact on crude prices, making oil and other commodities more expensive for holders of other currencies, analysts said. Energy traders noted the rate of weekly oil rig reductions since the start of September, about nine on average, was much lower than the 18 rigs cut on average since the number of rigs peaked at 1,609 in October 2014, due in part to expectations of slightly higher prices in the future.

Oil rig count resumes plunge, with Permian among hardest hit - Fuel Fix: The number of active oil rigs in the U.S. resumed its steep decline this week, falling by 10, oil field services company Baker Hughes said Friday. The total number of oil rigs still operating now stands at a five-year low of 564, less than half the 2014 high of 1,609 just over a year ago. The number of natural gas rigs stayed the same this week at 193. The rig count has fallen for nine of the last 10 weeks For most of 2015, Texas oil fields have led the pullback in rigs. But on Friday, Baker Hughes data showed that Texas gained three rigs in the last week, with losses coming in three other states. Wyoming and Colorado each shut down three rigs, and Oklahoma shut down four. Texas’ biggest oil and gas field, the Permian Basin in West Texas, idled five rigs last week, but gains elsewhere made up for that loss statewide. The oil rig count for the Permian stood at 219 Friday, Baker Hughes said.

US oil for December delivery settles at $40.39 a barrel, down 0.4%: U.S. crude held support at above $40 a barrel while Brent futures gained about 1 percent. A firmer dollar had weighed on oil earlier as commodities denominated in the greenback became less affordable to holders of other currencies such as the euro. U.S. crude futures had also struggled to stay above $40 as worries about large domestic oil stockpiles pressured the market's spot contract ahead of its expiry. Brent futures were up 40 cents, or 0.88 percent, at $44.57 a barrel.U.S. crude's West Texas Intermediate (WTI) futures for December delivery — which expired Friday —settled down 15 cents, or 0.4 percent, at $40.39 a barrel. "WTI couldn't convincingly push below $40 despite a few attempts today and that's what probably what led to the late support before contract expiry," "We've also hit technical oversold levels on both Brent and WTI, making the pre-weekend short-covering logical." Crude prices were supported as well by the latest weekly reading on the U.S. oil rig count, which showed a drop of 10 rigs this week. The data, compiled by industry firm Baker Hughes, is an indication of U.S. oil production in coming months. While WTI held above $40, its spot December contract reached a record discount, or contango, of nearly $2 a barrel to nearby January, showing traders' reluctance to bid oil up in the near term. On a continuation-basis, the front-month's discount, or contango, to the second month was the largest since late April.

Oil traders prepare for next big price drop in March 2016 - Oil traders are preparing for another downward turn in prices by March 2016, market data suggests, as what is expected to be an unusually warm winter dents demand just as Iran’s resurgent crude exports hit global markets after sanctions are ended. Crude futures have already lost around 60 percent of their value since mid-2014 as supply exceeds demand by roughly 0.7 million to 2.5 million barrels per day to create a glut that analysts say will last well into 2016. Goldman Sachs said that there was a substantial risk of a “sharp leg lower” in oil prices. “Mild winter weather over the coming months could see weak heating demand in the U.S. and Europe,” it said. This “would likely be the trigger for adjustments through the physical market, pushing oil prices down to cash costs, which we estimate are likely around $20 per barrel,” the bank added. A recent steep rise in March put option positions tied to a $35-per-barrel strike price in Brent and West Texas Intermediate (WTI) crude suggests traders agree with the bank and expect the major benchmarks to slump in coming months. For WTI, put positions at the $30 strike price have more than doubled since Nov. 10, but have stayed flat at a more modest level for Brent. This is in accord with a broadly held view that while oil prices in general will remain under pressure over the medium term, WTI prices may fall faster and further than Brent.

Russia says OPEC unlikely to cut output at December meet - agencies – Russian Energy Minister Alexander Novak said he does not expect the Organization of the Petroleum Exporting Countries to take steps to cut oil output at a meeting on Dec. 4, Russian news agencies Interfax and TASS reported. “I consider it unlikely, taking into account the position of the biggest producers,” TASS quoted Novak as saying. Novak also reiterated that Russia would not deliberately cut its own oil output. “We are not going, let’s put it like this, to lower oil production volumes,” Novak was quoted by TASS as saying. “In general we focus on the total amount laid out in the strategy (of energy sector development): around 525 million tonnes (10.5 billion cubic meters per day),” Novak said. He said earlier that Russian oil production was expected to rise to a post-Soviet record of 533 million tonnes (10.66 million barrels per day) this year after 526.7 million in 2014 but could fall by between 5 and 6 million tonnes in 2017 from the current level due to a rising tax bill.

Scant signs of Russia – OPEC output cut deal ahead of Vienna meeting – There is little likelihood Russia will work with OPEC on cutting oil output ahead of or on the sidelines of a meeting of the exporter group in Vienna next month, officials and industry insiders say. OPEC made a historic policy shift late last year, led by Saudi Arabia and backed by its Gulf allies, and refused to cut production to prop up sliding prices in order to defend market share. The group confirmed the strategy at a meeting in June. Organization of the Petroleum Exporting Countries ministers will meet on Dec. 4 to coordinate the group’s production, and a delegation from Russia, which accounts for about 12 percent of global oil output, may take part in a pre-meeting consultation once again. A source close to the consultations said that Venezuela, an OPEC member which has been a proponent of output cuts, is keen to organize a meeting with non-OPEC countries beforehand. “Russia’s stance has not changed: we will make no cuts in oil production,” the source said. Russia, which depends heavily on oil revenues for its budget, has so far staunchly resisted making cuts to production, in part because it is locked in a battle for market share and knows a cut could see it cede ground.

Large-scale MENA oil investment must continue to sustain industry: Naimi -  Arab oil producers will need about $700 billion in financing for petroleum sector projects over the next 10 years to assure the sustainability of the Middle East and North Africa region's key industrial sector, Saudi Arabia's oil minister said Thursday. Forecasting a continued rising trend in global oil demand to the tune of about 1 million b/d, despite the current market oversupply and sluggish world economic growth, Ali al-Naimi said annual depletion from producing fields was running at about 4 million b/d. He calculated that the petroleum industry would need to add 5 million b/d of new production every year to satisfy future demand. "This needs financial solutions at the Arab and international level. Investment should include all the phases of production and manufacturing," he said during a keynote speech at the Apicorp Energy Forum in Bahrain. In the context of the sustained slump in oil prices since mid-2014, which officials addressing the forum described as a financial and economic crisis for Arab countries, petroleum sector sustainability in the Middle East and North Africa region emerged as a key concern during a ministerial panel session.

Saudis Planning For A War Of Attrition In Europe With Russia's Oil Industry - Russia’s central bank recently warned about the growing financial risks to the Russian economy from Saudi Arabia encroaching upon its traditional export market for crude oil. Russia sends 70 percent of its oil to Europe, but Saudi Arabia has been making inroads in the European market amid the oil price downturn. The result is a heavier discount for Russia’s crude oil, the so-called Urals blend.Bloomberg reported that the Urals typically lands in Rotterdam, a major European destination, at a discount to Brent of around $2 or less. But the discount has widened to $3.50 lately due to increased competition from Saudi Arabia. “Oil supplies to Europe from Saudi Arabia are probably adversely affecting Urals prices,” the Russian central bank warned in a recent report.  Russian officials have accused Saudi Arabia of “dumping” its oil in Europe, a move that Rosneft chief Igor Sechin said would “backfire.” Russia’s economy has been battered by the collapse in crude prices, compounded by the screws of western sanctions. The Russian economy could shrink by 3.2 percent this year.  Oil exports account for around half of the revenue taken in by the Russian government. And for an economy so dependent on oil, it is no surprise that the plummeting crude oil price has led to a dramatic depreciation of the ruble, although over the past month the currency regained some lost ground. The weakening currency has pushed up inflation, which creates a conundrum for the Russian central bank. To stop the ruble from plunging further and to keep inflation from spiraling ever upwards, the Russian central bank took aggressive action by hiking interest rates to as high as 17 percent at the beginning of 2015. However, that has negatively impacted the economy. As the ruble stabilized, the bank dialed the interest rate back to 11 percent, where it stands today.

The Saudis Are Stumbling (And They May Take The Middle-East Down With Them) -- For the past eight decades Saudi Arabia has been careful. Using its vast oil wealth, it’s quietly spread its ultra-conservative brand of Islam throughout the Muslim world, secretly undermined secular regimes in its region, and prudently kept to the shadows while others did the fighting and dying.  Today that circumspect diplomacy is in ruins, and the House of Saud looks more vulnerable than it has since the country was founded in 1926. The kingdom’s first stumble was a strategic decision last fall to undermine competitors by scaling up its oil production and thus lowering the global price. They figured that if the price of a barrel of oil dropped from over $100 to around $80, it would strangle competitors that relied on more expensive sources and new technologies, including the U.S. fracking industry, companies exploring the Arctic, and emergent producers like Brazil. That, in turn, would allow Riyadh to reclaim its shrinking share of the energy market. There was also the added benefit that lower oil prices would damage oil-reliant countries that the Saudis didn’t like – including Russia, Venezuela, Ecuador, and Iran. In one sense it worked. The American fracking industry is scaling back, the exploitation of Canada’s tar sands has slowed, and many Arctic drillers have closed up shop. And indeed, countries like Venezuela, Ecuador, and Russia have taken serious economic hits. But it may have worked a little too well, particularly with China’s economic slowdown reducing demand and further depressing the price – a result that should have been entirely foreseeable but that the Saudis somehow missed. The price of oil dropped from $115 a barrel in June 2014 to around $44 today. While it costs less than $10 to produce a barrel of Saudi oil, the Saudis need a price between $95 and $105 to balance their budget. The country’s leaders, who figured that oil wouldn’t fall below $80 a barrel – and then only for a few months – are now burning through their foreign reserves to make up the difference.

Saudi facing 'a crisis in the next 3-5 years' if oil price remains low - Saudi Arabia faces a crisis in the next three to five years if oil prices remain low and the country still has big budget deficits and a rigid, pegged currency, participants in the Reuters Global Investment Outlook Summit said on Tuesday. During a panel discussion about emerging markets and China, investors also predicted a broadly stronger dollar in 2016, but they also doubted a systemic corporate debt crisis would develop in the developing world next year. That was especially the case with China, where three of the four participants saw annual growth averaging 6.5 percent, with the authorities fully capable of dealing with market wobbles and capital flight by "zombifying" - effectively freezing - the financial system. But its slowdown, with the knock-on effect for oil and commodities, is raising red flags elsewhere, investors reckon. Countries such as Brazil and Russia have let their currencies fall 20 to 30 percent against the dollar this year, but the risk lies in place where no such adjustment is occurring, they say.

US State Department approves Saudi Arabia arms sale - BBC News: The US State Department has approved the sale of $1.29 billion (£848.6m) worth of bombs to Saudi Arabia, as its military carries out air strikes in neighbouring Yemen. President Obama pledged to bolster military support for Saudi Arabia after tensions were strained following a US-brokered nuclear deal with Iran. The US Congress now has 30 days to stop the deal if it wishes to do so. Saudi Arabia is one of the biggest buyers of US weapons. The Saudi-led campaign against Iran-backed Houthi rebels in Yemen has drawn criticism, with several reports of civilian casualties on the ground. Washington has backed the campaign and Saudi Arabia - who is a central ally in the air assault against the so-called Islamic State group in Syria and Iraq.  US-Saudi ties are said to have been strained by Mr Obama's unwillingness to take military action against Syria's President Bashar al-Assad, and his support for a nuclear deal with Iran that the Saudis fear will ultimately allow Iran to acquire nuclear weapons.

Al-Naimi urges Arab states to boost energy cooperation — Petroleum and Mineral Resources Minister Ali Al-Naimi called for joint action among fellow Arab energy producers to increase trade, investments and partnerships. “The challenge which we are facing in the Arab world is representing our need for more joint action in the field of the oil and energy, and try to have more trade partnerships in between the states,” Al-Naimi said at conference on Bahrain. The minister delivered the speech at the seminar on ‘Future of Energy in the Middle East and North Africa’ in Manama. The seminar was organized by organized Arab Petroleum Investments Corporation (APICORP). Following is the text of the speech:

Iran to boost oil exports after sanctions are lifted (AP) — Iran says it will export an additional 500,000 barrels of oil a day in a bid to reclaim its market share after sanctions are lifted under a landmark nuclear deal. Oil Minister Bijan Zanganeh told reporters Tuesday that the increase is part of Iran’s plan to double its crude oil exports as sanctions are lifted, which officials expect to happen in early 2016. OPEC member Iran currently exports 1.3 million barrels of crude oil per day and hopes to get back to its pre-sanctions level of 2.2 million, last reached in 2012. Zanganeh says Iran will not concede its share of the market and does not fear a further decline in prices. Oil prices have plunged by more than half over the last year, to just over $40 a barrel.

Iraqi oil selling at $30 as OPEC readies for new battles - Iraq may increase oil output further in 2016, although less dramatically than this year, intensifying a battle for market share between OPEC members and non-OPEC rivals that has forced Baghdad to sell some crude grades for as little as $30 a barrel. Iraq’s output in 2015 has jumped almost 500,000 barrels per day (bpd), or 13 percent, according to the International Energy Agency (IEA). That has made Iraq the world’s fastest source of supply growth and a key driver of surging OPEC production. At most, that growth is likely to give way to a modest rise next year, easing downward pressure on prices that are close to a 2009 low. But a lifting of sanctions on Iran or an easing of violence in Libya could further boost OPEC supplies, without cutbacks by Saudi Arabia or other members. “Stable to limited growth in output from Iraq would give some potential for an uptick in prices – if it were not for Iran,” said Eugene Lindell, analyst at JBC Energy in Vienna. “Libya is another big wild card.” The southern fields produce most of Iraq’s oil. Located far from the fighting in other parts of the country, they have kept pumping and seen record exports, most recently in July, when 3.064 million bpd was sold abroad. Iraq plans to export 3.0-3.2 million bpd from the south in 2016, an Iraqi oil source told Reuters. He declined to forecast exports from Iraq’s north, which restarted in late 2014 and have grown to about 600,000 bpd, despite tension between Baghdad and the Kurdistan region.

Airstrikes hurt, but don't halt, IS oil smuggling operations — The United States and Russia are going after the Islamic State group’s oil industry, destroying refineries and hundreds of tanker trucks transporting oil from eastern Syria in a heavy bombardment in recent days aiming to break the extremists’ biggest source of income. The campaign already appears to be having some effect, with oil prices rising in areas of Syria that rely on crude smuggled out of IS areas. But experts say it will be difficult to cut off the militants’ trade completely since they are likely to switch to smaller, more elusive vehicles. Putting a total end to the industry would mean destroying the oil fields in Syria, but that would also bring hardship to millions in the population under IS rule and others who depend on the group’s oil, causing fuel shortages as winter sets in. Otherwise, taking the fields would require ground forces. Still, the campaign could hit hard on an industry that U.S. officials say generates more than half the revenue the Islamic State group uses to maintain its rule over its swath of territory across Syria and Iraq and pay its fighters.

Russian military says its bombing sharply cut IS oil incomes — The Russian military has destroyed numerous oil facilities and tankers controlled by the Islamic State group in Syria, sharply cutting its income, Russia’s defense minister said Friday. Sergei Shoigu reported to President Vladimir Putin Friday that Russian warplanes destroyed 15 oil refining and storage facilities in Syria and 525 trucks carrying oil during this week’s bombing blitz. He said this deprived the IS of $1.5 million in daily income from oil sales. Russia, which has conducted an air campaign in Syria since Sept. 30, sharply raised the intensity starting Tuesday following confirmation that the Russian plane in Egypt was downed by a bomb, which the Islamic State group said it had planted. The Russian leader has discussed cooperation on fighting the IS during his meetings with President Barack Obama and other Western leaders at the sidelines of the Group of 20 rich and developing nations in Turkey earlier this week. French President Francois Hollande is set to travel to Washington and Moscow next week for talks on joint military action against IS, and Putin already has ordered the military to cooperate with the French “like with allies.” Russian state TV on Friday showed Russian air force ground crew writing “For Ours!” and “For Paris!” on bombs being attached to Russian warplanes.  According to Shoigu, Russian warplanes have flown 522 sorties and destroyed over 800 targets over the last four days. Russian long-range bombers and navy ships have launched 101 cruise missiles in four days, including 18 fired by Russian navy ships from the Caspian Sea on Friday.

How Kurdistan bypassed Baghdad and sold oil on global markets -- Iraq’s semi-autonomous region of Kurdistan has for the first time detailed its secretive oil exports operations and said it plans to sell more, whether Baghdad likes it or not, as it needs money to survive and fight Islamic State. The region’s minister for natural resources, Ashti Hawrami, said that to avoid detection oil was often funneled through Israel, transferred directly between ships off the coast of Malta, and decoy ships used to make it harder for Baghdad to track. Kurdistan says it had been forced to bypass Baghdad and begin exporting oil directly because the latter refused to respect budgets in 2014 and 2015. The current and former Iraqi central governments have both said the Kurds have failed to respect deals to transfer agreed volumes of oil to Baghdad. Kurdistan is entitled to 17 percent of Iraqi’s overall budget, and argued it needed stable revenues to pay its bills, support over a million of refugees fleeing the war in Syria and Iraq finance its Peshmerga army fighting against Islamist militants. Kurdistan is exporting over 500,000 barrels per day (bpd) of oil – or every seventh barrel of OPEC’s second largest exporter – and believes that Baghdad has now accepted, at least in part, direct Kurdish exports going to as many as 10 countries.With new pipelines completed, the Kurdistan Regional Government (KRG) still needed to find buyers for its oil, effectively one large tanker every two days.Most customers were scared of touching it with Baghdad threatening to sue any buyer. Large oil companies – including Exxon Mobil and BP – have billions of dollars worth of joint projects with Baghdad. “The scale was huge. And it was a totally new game for us. Buyers wanted the KRG to lease its own crude cargo ships. We knew nothing about the shipping or sea transportation industry,” The KRG engaged a veteran oil trader, Murtaza Lakhani, who worked for Glencore in Iraq in the 2000s, to assist finding ships.

China slashes wholesale gas prices as it seeks to spur demand for cleaner fuel - – China announced a near 25 percent cut in wholesale prices of natural gas from Friday, the second reduction this year, as it seeks to boost flagging growth in demand for the cleaner-burning fuel. China’s energy giants have been forced to resell or renegotiate long-term global supplies as a cooling economy has hit gas demand in the world’s third-largest consumer, while an inflexible pricing policy also curbed consumption. Benchmark city-gate prices for non-residential users will be lowered by 0.70 yuan ($0.1097) per cubic meter from Nov. 20, the country’s top economic planner, the National Development & Reform Commission, said in a statement on its website on Wednesday. Besides cutting the benchmark prices, the agency also said it allowed a 20 percent upward float, but set no limit for a downward adjustment. Some market watchers had expected another cut in prices but not by as much, illustrating that the government wanted to send a strong price signal to boost demand, but the impact could be mixed for players in the market. “It should boost demand on the direct, large end users of especially domestic pipeline gas, and also benefits those with integrated value chains such as downstream assets in power plants and city distribution networks,” said Li Yao, CEO of Beijing-based consultancy SIA Energy.

India, not China, powering growth in fuel demand – China’s fuel usage tends to gather headlines as an indicator of the strength of global crude oil demand, and while this has been justified, the real growth action is happening over the Himalayas in India. India’s total demand for oil products is about one one-third of that in China, but the South Asian nation is powering up as China’s growth moderates. This isn’t entirely unexpected given that the slowdown in China’s economic growth is well known, as is the rotation towards a more service- and consumer-oriented economy from one reliant on heavy industry. India’s rapid gains in fuel consumption have seen it overtake Japan to become Asia’s second-largest crude oil importer behind China, and this growth trend appears likely to continue. India’s fuel demand in October grew at its fastest pace in almost 12 years, rising 17.5 percent from the same month a year earlier, according to data from the Petroleum Planning and Analysis Cell, a unit of the oil ministry. Total consumption of refined oil products was 15.2 million tonnes, which equates roughly to 3.6 million barrels per day (bpd). This is using a conservative conversion rate, the crude oil factor of 7.3 barrels per tonne, while the factors for the main products India consumes, diesel and gasoline, are 7.5 and 8.5, respectively. If the pace of fuel demand growth for the first seven months of India’s April to March fiscal year is maintained, it puts the nation on track for consumption of at least 3.6 million bpd for the 2015-16 year.  If this is achieved, it will mean that India’s fuel demand growth was 8.7 percent higher in 2015-16 over the prior year, equivalent to a gain of about 290,000 bpd.

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