Sunday, January 17, 2016

new low oil prices and how they're set, Ohio HB 422, Canada adds 98 oil rigs, gasoline storage records, et al

as the price of oil has continued to fall over the past several weeks, i've been expecting and waiting for the price of oil to stabilize, maybe even rise a bit, such that the ongoing drop in the price of oil would at least stop making headlines...but once again, that was not to be this week, when the news from the market started with stories of oil hitting new 11 year lows on Monday, only to see those stories later eclipsed by headlines that oil prices had hit a 12 year low...after closing last week at $33.55 a barrel, US crude prices started falling right out of the gate on Monday, dropping well below last week's lows to close at $31.41 at the end of the day....then on Tuesday, prices dropped below $30 a barrel for the first time since 2003, before recovering and closing at $30.44...US oil prices then inched up to $30.48 a barrel on Wednesday, even with EIA reports of rising production and inventories, and rose to $31.20 on Thursday, at which time it momentarily seemed that oil prices had found the bottom at $30 a barrel and were starting to stabilize...but word that sanctions would soon be lifted on Iran oil overwhelmed the markets on Friday, when oil crashed through $30 and closed at $29.43, a closing price for US oil not seen since November 2003...and those frackers who thought they'd be able to export themselves out of this hole by selling their oil at a higher prices overseas are out of luck, because the global price for oil was falling midweek even as US prices were steadying, after which the international benchmark Brent oil price fell 6.3% on Friday to close the week at $28.94 a barrel, 48 cents a barrel below the US price....

once again, we'll include an oil price chart, this time for just the past three months, so you can see how dramatic the price drop has been over that span...the graph below, from the same NASDAQ site we’ve sourced graphs from previously, shows the New York Mercantile Exchange prices per barrel over the last 3 months for the February contract of the US benchmark oil, West Texas Intermediate (WTI), when it's stored at or contracted to be delivered to the oil depot in Cushing can see that except for that midweek spurt, oil prices have been nothing but down since new year’s eve, when they closed at $37.04 a barrel…

January 16th, 2016 crude oil

while we've got that chart up, we'll look at a few other things that it shows us...on the top, we have CLG 16 or CL 1, identifiers of the oil contract being traded, with CL the exchange symbol for us WTI oil and 1 being the first or front month contract, the contract price for which is typically quoted when the financial press talks about the price of oil; next to that, we have the trading volume: 899566, which is the number of contracts that changed hands on Friday, the most recent day on the chart...likewise, across the bottom, we have red and green bars for each trading day of the last 3 months, which graphically show the number of contracts that traded each day, with red indicating trading on a day when the price for this oil contract was down, and green representing trading on a day when the price for this oil contract was up, as indicated by 1000000 and 2000000 on the margin, indicating trading volume of 1 million or 2 million, here's the thing; each of those contracts represents the a trade of 1000 barrels of oil, meaning that on Friday, when 899,566 contracts changed hands, the rights to 899,566,000 barrels of oil were traded; similarly, when 1,289,527 contracts changed hands on Thursday,1,289,527,000 barrels of oil were traded...hence, since nearly 6 million contracts for February oil were traded at the NYMEX this week, that represents net trades of electronic contracts that had claim to 6 billion barrels of oil...that sounds like a lot of oil, and it is; if you've been paying close attention to the EIA stats we review most every week, total US oil production has been running at about 9.2 million barrels per day; that means daily oil trading for just this one oil contract in New York has been more than 100 times the amount of oil we produce daily over the past week...likewise, the amount of oil that we've had stored at Cushing and various other depots around the country has been running between 450 million and 480 million barrels over the past several months; that means daily oil trading for just this one contract in New York has typically been for more than twice the quantity of oil that exists anywhere above ground in the entire country...but while one contract may be swapped electronically several times a day, no physical oil ever changes hands in this strictly financial market, which is where oil prices are actually set; when a fracker starts to drill, he'll typically hedge by selling his future output through such an exchange, just as the price the refinery pays for oil is set by this market...and this is just one contract at one main exchange; there are dozens of less active contracts and less active exchanges, including those in Europe, where similar volumes of oil contracts are whatever we might say about the oil companies, they are at least getting their hands dirty while making a living off of the dirty oil products we use; at the same time, there are these other bottom feeders at market monitors in New York who do nothing but swap electronic oil, who nonetheless still manage to get very rich between the time the oil comes out of the ground and the time it's delivered to a refinery to make the products that we use...

Ohio House Bill 422

on January 7th, Democratic State Representatives John Patterson of Jefferson, Michael O’Brien of Warren, and Sean O'Brien of Bazetta in Trumbull County introduced Ohio House Bill 422 a bill to require recording and notification of leases for injection wells, to revise the procedures and requirements governing permits for such wells and to establish an additional fees and requirements governing ground water monitoring related to such injection wells....i first heard about this bill when an article from the Star Beacon crossed one of my feed readers on Friday, and am looking into it for the first time today... the full text is embedded here and it's 44 pages of cross-referenced sections and referrals to other parts of the Ohio revised code they're apparently attempting to amend, a bit too much legalese for me to decipher, so for now we'll have to make due with what i've read about it in a few articles from small town Ohio newspaper addition to the regulations put forth in the summary, this bill includes a ban on any future long term storage of brine or oil waste in tanks underground; that's apparently in response to the spill of over 2000 gallons of waste oil into a wetlands in Vienna township, near the intersection of Route 82 and Route 11, this spring; recall that waste leaked from a tank all winter and was not discovered until the snow melted, when a neighbor's pond full of dead fish, turtles and muskrats was exposed....another provision would mandate GPS devices on all brine trucks; this is in order to monitor the brine waste from cradle to grave, from where it's produced to where it's injected, and thus to prevent diversions of it like we saw when Lupo was dumping his drilling waste into a tributary of the Mahoning River in order to save on injection tipping fees...this bill also calls for a 2,000 foot minimum set back requirement for putting an injection well near a residential dwelling, and real time monitoring of seismic activity at such well sites so the ODNR can stop injection at the first signs of earthquakes, before they become large enough to cause this bill seems to include a number of common sense measures currently missing from fracking friendly Ohio law...but how they figure on getting it through a GOP legislature that is so beholden to oil interests they won't even pass Kasich's small oil & gas severance tax is beyond me...

This Week's US and Canadian Rig Counts

you'd never know that oil was trading at half the price most frackers need to break even looking at this week's rig count data from Baker Hughes...despite the fact that US and international oil prices that have been below $37 a barrel since the beginning of the year, only one of the rigs that was drilling for oil last week was removed this week; as of January 15th, there were still 515 rigs drilling for oil in the US, down from 516 last week, while there remained 135 rigs drilling for natural gas, down 13 from a week ago...that left a total of 650 rigs active going into this weekend, down from 664 rigs working last weekend, and down from 1676 rigs as of January 16th last year, when there were 1366 oil rigs and 310 gas rigs deployed...oil rigs had hit their fracking era high at 1609 on October 10, 2014, while the recent high for gas drilling rigs was the 356 that were deployed on November 11th of that same year... 

and while it may look like American frackers are simply a few cards short of a full deck, Canadian drillers appear to be dumber than a frozen mukluk, cause they added a total 69 rigs this week, after adding 83 rigs last week...the Canadians now have 227 rigs deployed, up from just 83 as of December 31st, with their oil rigs up by 98 to 110 over the past two weeks and their gas rigs up 46 to 117...the price of heavy Canadian oil goes from $80 a barrel in 2014 to as low as $8.35 a barrel on Tuesday of this week and they add over 150 rigs?  help me...

back in the US, one of the rigs pulled out this week had been drilling in the Gulf of Mexico, as was one that had been working on an inland lake in southern Louisiana...the Gulf now has 26 rigs, down from 53 a year ago, while only one rig remains on inland waters, down from 12 last year at this time...a net 8 of the 14 rigs removed were designed for horizontal drilling, leaving the count of horizontal rigs down at 511, which was down from the 1253 horizontal rigs that were in use the same week last year....4 vertical drilling rigs were also taken out of service, leaving 77, down from the 270 vertical rigs that were deployed last year at this time...and 2 directional rigs were also removed, leaving 62, down from the 153 directional rigs in use a year ago...

of the major shale basins, the Permian of west Texas took the biggest hit, as 7 rigs were removed from that basin, leaving 202 still active, down from last year's 487...both the DJ-Niobrara chalk of the Rockies front range and the Eagle Ford of south Texas had three rigs shut down; for the Niobrara, that left 19, down from 54 a year ago, while 68 remained in the Eagle Ford, down from 185 last year at this time…two more rigs were pulled out of the Williston in North Dakota, which now has 47, down from 165 a year ago, while both the Utica of Ohio and the Barnett of the Dallas area of Texas saw single rig reductions...the Utica now has 13 rigs remaining, down from 49 a year earlier, while the Barnett has 5 left, down from 25 rigs as of the 16th of January last year...basins seeing rigs increase included the Granite Wash of the Oklahoma-Texas panhandle region, which added 2 rigs; they're now back up to 14, but still down from 43 a year ago...three basins saw additions of a single rig: the Cana Woodford of Oklahoma, the Mississippian centered in southwest Kansas, and the Marcellus of the northern Appalachian region; the Cana Woodford now has 37 rigs, down from last year's 41, the Mississippian has 12 rigs active, down from last year's 68, and the Marcellus has 38 rigs, still down from 75 in the same week of 2015....

the Baker Hughes state count tables show that Texas had 301 rigs still working, 7 fewer than last week and down from 766 in the same week last year; Louisiana saw 5 rigs removed this week, leaving 54, down from 107 a year ago...New Mexico, North Dakota, Illinois and Colorado each had two of their working rigs stacked; that leaves New Mexico with 32 rigs, down from 92 last year, North Dakota with 47, down from 156 rigs a year earlier, leaves Illinois with no rigs working, down from 1 last year, and Colorado with 20 rigs, down from 64 on the same weekend of 2015...Ohio, Idaho and Wyoming were all down 1 rig; Ohio now has 13 rigs still drilling, down from 48 a year ago, Idaho now has none, and had none a year ago, while Wyoming has 15 rigs, down from 47 a year ago....states adding rigs this week include Oklahoma, where they added 4 and now have 87 actively drilling, still down from 201 a year earlier, and Alabama, California, Kansas, Pennsylvania, and Kentucky, who all added a single rig...Alabama now has 2 rigs working, down from 7 a year ago; California has 8, down from 18 rigs last year at this time, Kansas has 12, down from last year's 24, Pennsylvania has 26 rigs still drilling, down from 51 a year ago, and Kentucky has just the rig they added this week, their first in a while, but unchanged from the solitary Kentucky drilling rig that was working on January 16th of last year...

This Week's Oil Stats from the EIA

this week's reports from the US Energy Information Administration showed yet another small increase in our production of crude oil, a large jump in our oil imports, and a modest drop in refining of that crude, ending the week with a small increase in crude in storage and large increase in the amount of refined products that were neither consumed or exported and thus had to be added to our stored surplus...our field production of crude oil increased by 8,000 barrels per day to 9,227,000 barrels per day in the week ending January 8th, up from 9,219,000 barrels per day during the week ending January 1st, and our highest output in any week since the 3rd week of August...that's now the 5th week in row that we've seen our oil output increase, and US oil wells are now producing more than 100,000 barrels per day, or 1.2% more than the 9,121,000 barrels per day average they produced during September, despite drop in rigs and the fact that most recently completed horizontal wells are not even being fracked due to low oil prices...

meanwhile, our imports of crude oil increased by 678,000 barrels per day from last week to 8,188,000 barrels per day during the week ending January 8th, up from 7,510,000 barrels per day during the week ending January 1st....that's 9.3% more than the 7,492,000 we imported in the same week of January last year, and marks the 3rd time in the last 6 weeks that our imports have topped the 8 million barrel per day level, a mark which had only been hit on 4 prior occasions since October 2013...since imports are notoriously volatile week to week, the EIA's weekly Petroleum Status Report (62 pp pdf) reports a four-week moving average of oil imports, which indicates our crude oil imports averaged over 7.7 million barrels per day over the last 4 weeks, 4.1% above the same four-week period last year... 

at the same time, the amount of that crude used by our refineries fell by 194,000 barrels per day to an average of 16,423,000 barrels per day during the week ending January 8th, as the US refinery utilization rate fell to 91.2%, down from 92.5% last week and down from a utilization rate as high as 94.5% at the end of November, as they're in a normal seasonal slowdown...however, they still managed to process 3.3% more crude this week than the 15,893,000 barrels per day they used the same week a year ago, when the refinery utilization rate was 91.0%....however, even with less crude input than last week, refinery production of gasoline rose from 8,766,000 barrels per day during the week ending January 1st to 8,820,000 barrels per day in the week ending January the same time, refinery production of distillate fuels (diesel fuel and heat oil) decreased by 216,000 barrels per day from the week ending the 1st to 4,760,000 barrels per day in the week ending January 8th...but for both gasoline and distillates, that production was more than we could use or export, as our end of the week gasoline in storage rose by 8,438,000 barrels to 240,434,000 barrels, which when combined with the 10,576,000 barrels of surplus gasoline we had to store last week made for the largest two week increase in gasoline inventories on record...while that  240,434,000 barrels of gasoline was only a fraction more than the 240,334,000 barrels we had stored on January 9th last year, last year's inventories set a record for the most gasoline stored at the 2nd weekend in January, which we have now broken...and while they didn't set a record, our distillate fuel inventories also increased, rising by 6,136,000 barrels to 165,554,000 barrels, up 3.8% from the 159,418,000 barrels we had stored on January 1st…that was 18.4% more than the 139,851,000 barrels of distillates we had stored last January 9th, putting current distillate fuel supplies above the upper limit of the average range for this time of year...

even with this week's big jump in imports, however, the EIA says our stocks of crude oil in storage, not counting what's in the government's Strategic Petroleum Reserve, barely rose at all, increasing by just 234,000 barrels to 482,558,000 barrels as of January 8th, up from 482,324,000 barrels on January we've noted before when there was such a large discrepancy between oil supplied and oil used, these totals left the "adjustment" on line 13 of the U.S. Petroleum Balance Sheet for the Week Ending 1/8/2016, which is Table 1 in the EIA's weekly Petroleum Status Report (pdf), at -459,000 barrels of oil per day, barrels of oil that were unaccounted for, which is the largest we've seen yet, and which we rather suspect will show up in storage someplace over the next few weeks....nonetheless, the 482,558,000 barrels we have stored as of this report is still 24.4% higher than the 387,782,000 barrels we had stored the same week last year (when, btw, we had an adjustment of +369,000 barrels per day, ie, more than we should have had), and obviously the most we had stored any time in January in the 80 years of EIA record keeping, which had never seen more than 400 million barrels stored before last year... 


Feds gathering info for EA on oil/gas leasing in Wayne - The federal government has taken its next step in a process that could result in oil and gas drilling on the Wayne National Forest in southeast Ohio, though any drilling on federal land in Athens County is unlikely for at least a few years. In a news release issued earlier this week, the federal Bureau of Land Management (BLM) announced that it’s now preparing an environmental assessment (EA) “to consider whether or not to lease parcels for the purpose of oil and gas exploration and development.” Parcels under consideration, as a result of the BLM receiving “dozens of Expressions of Interest from industry operators,” total 18,800 acres on the Wayne National Forest in Washington and Monroe counties, the news release said. While the BLM and U.S. Forest Service previously said that 3,150 acres in Athens and Perry counties, and another 9,975 acres in Lawrence County, also were being considered for oil and gas leasing, the current EA is limited to the listed acreage in the national forest’s Marietta Unit, far to the northeast of Athens. That’s an area with active oil and gas development, via horizontal hydraulic fracturing (fracking), whereas the Athens and Lawrence county areas so far have seen little or none of that sort of drilling.

Appeals court in fracking case should stand up for basic rights | Letters | On Wednesday, Jan. 6, the Eighth District Court of Appeals in Cleveland considered a suit brought against the state of Ohio by Mothers Against Drilling in Our Neighborhood (MADION) intended to uphold a popular vote in their city of Broadview Heights to prevent further fracking in the city. In its 13 square miles Broadview Heights already has 90 wells. As readers may know, Broadview Heights was sued over the anti-fracking law and bill of rights, which were approved by voters. It lost in court, at least in part, because the city lawyers failed to make an appropriate defense of the law. MADION was denied the opportunity to intervene in the case. So they sued. In Wednesday’s case, the state of Ohio and Bass Energy made the same argument that Bass Energy made in winning their previous case, namely that state law preempts local law. Representing MADION, attorney Terry Lodge argued that inalienable rights, claimed at any level, cannot be overturned by any law, federal or state, making the question of preemption irrelevant. The three judges must decide if the rights claimed qualify as inalienable rights. The right claimed is the right to local community self-government, in this case to protect citizens’ health and safety by preventing further drilling in Broadview Heights. The court will decide whether to recognize the right of communities to take local action to protect from pollution the air they breathe and the water they use. A 4-3 Ohio Supreme Court decision last February prohibited Munroe Falls, a suburb of Akron, from using local zoning laws to impose limits to oil and gas drilling in their city, but this is the first time an Ohio court has been asked to consider this matter as a question of the fundamental right to local self-government.

Laying down the law Bill would regulate fracking industry – Star Beacon — After months in the making, state representatives have introduced a bill they expect will help fracking business grow in the state, while strengthening environmental regulations. State Reps. John Patterson, D-Jefferson, and Sean O'Brien, D-Bazetta, co-sponsors of Ohio House Bill 422, are calling it a "win-win-win." "What we're trying to do is strike a balance between economic progress and environmental preservation," Patterson said. The 44-page bill contains several key provisions, including a ban on any future permanent vault storage of brine. A Kleese Development Associates-owned brine well in Trumbull County, O'Brien's district, was the origin of an early 2015 spill that put Vienna Township residents' drinking water in danger. "KDA was overstimulating a well," O'Brien said, and adverse weather conditions kept the leakage invisible for some time. "(We're) taking some of the mistakes that were made; some of the lessons that were learned, and incorporating them into this bill.  HB 422 also calls for engineering oversight on any new injection wells, "so we know they're safe, we know they're uniform," Patterson said. "There's no such requirement now." Another provision would mandate GPS devices on all brine trucks. The bill also would establish a new Ohio Department of Natural Resources fund to pay for ground and surface water monitoring measures at fracking sites, to signal leakage early on — dumpers would contribute 5 cents per brine barrel into the fund, Patterson said — and ensures future injection wells aren't built near homes, waterways or 100-year flood plains."From cradle to grave, we are monitoring the brine from where it's produced to where it's injected," Patterson said. "We know where it is at all times."

OH Dem House Members Introduce Bill to Restrict Injection Wells | Marcellus Drilling News - Three Democrat members of the Ohio State House of Representatives have just introduced a new bill, HB 422, that will clamp down on injection wells in the state, creating new hoops and regulations for injection wells. Reps. Sean O’Brien (D-Bazetta), Mike O’Brien (D-Warren) and John Patterson (D-Jefferson) want to ban injection wells in hundred-year flood plains, require GPS trackers in brine-hauling trucks, require dye be used when injecting fluids and several other measures. The Dems say they’ve worked with both the industry and environmentalist wackos in crafting the bill. We have a full copy of the bill as introduced, below. One of the provisions is that you can’t have an injection well within 2,000 feet of a…stream, river, watercourse, water well, pond, lake, other body of water (mud puddles?), railroad tracks, or the traveled portion of a public street, road, or highway. That pretty much covers it all. You just can’t have an injection well, period…

Can Ohio avoid North Dakota's fracking problems? - While our states certainly differ with respect to geography, number of towns and population, will we be spared the same social and environmental problems as horizontal fracking operations expand here? The biggest environmental cost of fracking is that each oil well wastes an average of 5-to-6 million gallons of freshwater during its lifetime. It comes from groundwater aquifers, reservoirs and other local sources. Until oil can be drunk, this is a terrible trade on a mostly saltwater planet containing only 3.5 percent freshwater. Of that 3.5 percent, almost 69 percent is tied up in glaciers, ice caps and permanent snow cover and a little over 30 percent is underground. In California, the water table has measurably dropped and caused massive sinkholes. In parched Oklahoma and Texas, thousands of fracking wells have accelerated the aquifer’s decline. In North Dakota and elsewhere, drinking water wells have been permanently contaminated, streams polluted and pastures ruined by deliberate and accidental brine spills. Their Department of Health reports over 10,000 environmental incidents since drilling began in 2006, defined as spills onto the ground or into the water or air. Most spills are not just minor puddles. The highest volume so far was a 3 million gallon brine spill near Williston, N.D. in January that beat an earlier 800,000 gallon spill near Dickenson, N.D. Ohio has already found one operator guilty of disposing used brine 33 times in one year into a storm sewer that enters the Mahoning River near Youngstown. How many other undetected spills have and will continue to occur?  With inadequate pipelines to transport it within and from North Dakota, over 25 percent of the natural gas is just being wasted — flared off while the more lucrative oil is shipped away. In the Dakota Badlands, most of the Bighorn sheep that were restocked to re-establish the population have been killed by tanker trucks on their now ever-busy highways. In Ohio, that could translate to more road killed deer and other wildlife. Bored, off-duty workers have been caught poaching fish, deer, bison and other game in the Dakotas, a scenario that could be repeated here with our fish and game. Sex crimes, bar fights, illegal drugs, DUI and numerous traffic problems keep understaffed small town law enforcement officers overwhelmed. Several railroad derailments leading to explosions and tremendous fires have resulted in loss of lives and homes as this highly volatile oil variety is transported across Canada and the U.S. to refineries. Ohio needs to diligently check all railroad lines used to transport oil. The AFL-CIO reports that North Dakota has four times as many job-related fatalities as second-place Wyoming, another giant oil producing state.

Pennsylvania DEP issues revised drilling rules -— The Pennsylvania Department of Environmental Protection announced some new regulations in the oil and gas industry to protect the public’s health, safety and the environment. The rules will impact both the conventional and unconventional oil and gas industries. The rules referred to as Chapter 78 are for conventional wells; the rules referred to as the Chapter 78a are designated for unconventional or shale wells. The amendments to the oil and gas regulations will impact five areas, including water resources; adding public resource considerations; protecting the public’s health and safety; addressing landowner concerns; and improving data management. Well drillers will have to address potential impacts to public resources during the well permitting process. The permit applicant will have to identify the potentially impacted public resources and notify the public resources agency.. If the well is within 1,000 feet of a water well, surface water intake, reservoir or other water supply extraction point used by a water purveyor (unconventional wells only), then notifications have to be made as well. Well operators must identify active and inactive wells within 1,000 feet of the vertical and horizontal wellbore prior to hydraulic fracturing. The identification process requires operators to review the department’s orphan and abandoned well database, review farm line maps, and submit a questionnaire to landowners whose property lies within the area of review prior to drilling in cases where hydraulic fracturing activities are anticipated at the well site. Other databases and historical sources must also be consulted.

Gas-to-liquids (GTL) technologies: A remedy for low natural gas prices in the marcellus shale  -- The energy industry continues to be astounded by the superabundance of the Marcellus shale, a band of natural gas-rich Devonian shale that stretches across the eastern Appalachian basin. The Marcellus, which produced little gas 10 years ago, currently accounts for about 20% of the nation’s output. The result has been cheap energy prices, spectacular job growth and renewed prosperity for regional economies. But the Marcellus is threatened by its own success. Its extraordinary productivity, combined with the lack of an adequate pipeline infrastructure to move the gas to other regions of the country, is exerting strong downward pressure on prices. Lower gas prices are making it less attractive for producers to drill wells, and in some cases are forcing them to temporarily shut in new production. .But there is a silver lining to this picture. The discrepancy between the spot prices at the Marcellus and the Henry Hub is creating an arbitrage opportunity in the form of gas-to-liquids (GTL) technologies that can convert gas into products such as high quality gasoline, methanol, or diluent. The opportunity to convert low-value gas into high-value products allows exploration and production companies to protect their investments by monetizing undervalued fossil fuel resources. This also allows the nation to protect the economic viability of a region with potential as a net natural gas exporter. GTL technologies also can benefit the Marcellus in another way. Much of the gas in the Marcellus is wet gas. While dry gas consists mostly of methane, wet gas includes natural gas liquids (NGLs) such as propane, butane, and ethane that can be extracted and sold separately. Energy companies can sell propane into regional markets and transport butane to refineries via truck or rail, but the shale revolution has created a glut of ethane, which can only be stripped out through an expensive deep refrigeration process that is often not justified by current low ethane prices.

For Europe, Marcellus ethane is in the 'pipeline' - - Next month, the first shipment of Marcellus Shale ethane will set sail from Marcus Hook to Norway, launching a new export trade for the Delaware River port that is being hailed as a boost to the gas industry, local maritime interests, and European manufacturing. Sunoco Logistics Partners L.P. has committed $2.5 billion to the Mariner East pipeline network to transport ethane and other liquid fuels, such as propane and butane, across Pennsylvania from the Marcellus fields to that Marcus Hook terminal, erected on the site of a former oil refinery. The 300-mile system, now undergoing testing, will begin its first deliveries of ethane in the coming weeks, Sunoco says. European chemical producer INEOS has spent $1 billion to complete the link between Marcus Hook and Europe by creating a "virtual pipeline" of 575-foot tankers to ferry ethane across the Atlantic to petrochemical plants in Norway and Scotland. "The start of ethane shipments on Mariner East 1 represents the next phase of the project and a re-orienting of the Marcellus and Utica Shale resources to benefit Pennsylvanians directly, through local use, while strengthening the state's economy through access to other markets, both domestic and international," Sunoco Logistics spokesman Jeffrey P. Shields said. Natural-gas liquids are to petrochemical manufacturing as wheat is to baking. In that sense, the Marcellus and Utica Shales in Pennsylvania, West Virginia, and Ohio are metaphorical amber waves of ethane.

Rockefeller Price Gouging Returns to Petroleum Industry -- Next time you fill your gas tank, the price will likely be inflated by a few pennies per gallon because the sightless sheriffs at the Federal Energy Regulatory Commission, or FERC, have ignored a return of the 19th century price-gouging techniques made infamous by John D. Rockefeller. Unless FERC acts, everyone soon will have their pockets picked as pipeline charges are illegally jacked up, by as much as 500 percent, or about 25 cents per gallon, FERC records show. In this case, the price gouging is by pipeline shippers with rights to transport refined petroleum. They resell those rights at a huge markup and get kickbacks. The Supreme Court in 1959 reminded us that the Interstate Commerce Act makes it “unlawful for a common carrier to grant rebates to individual shippers by any device whatsoever or to discriminate in favor of any shipper directly or indirectly.” Illegal fees for transporting refined petroleum products in interstate commerce can result in criminal charges and up to two years behind bars upon conviction. But instead of seeking civil damages and criminal prosecution, FERC is holding a one-day technical conference on Jan. 26 that may institutionalize price gouging rather than stop it.

Banning Fracking Isn’t Enough: How We Fight to Stop Pipelines, Compressor Stations and Gas Plants - [Editor’s note: Hundreds of climate activists and renewable energy advocates gathered for aState of the Climate rally and march outside of Gov. Cuomo’s State of the State address in Albany Wednesday. Here below are the prepared remarks from Sandra Steingraber’s speech. Shortly after, from the top of a stairway in the Capitol building, fracking infrastructure opponents unscrolled a 40-foot petition, bearing 1,000 signatures, that urgently calls on the governor to oppose the storage of dangerous, explosive LPG (propane and butane) in abandoned salt caverns under the shores of Seneca Lake. Like methane, propane and butane are the products of fracking. Along with the petition scroll, the group also delivered more than 500 letters to Gov. Cuomo’s office.]

Columbia plans pipeline project in Virginia, West Virginia  — Columbia Gas Transmission has filed an application with the Federal Energy Regulatory Commission for a natural gas pipeline project in West Virginia and Virginia. Parent companies Columbia Pipeline Group Inc. and Columbia Pipeline Partners LP said Friday that Columbia Gas is proposing to construct and operate two compressor stations, replace 26 miles of pipeline along existing corridors and built 2.9 miles of new pipeline in the two states. If it receives regulatory approval, construction on the $850 million WB Xpress Project would begin in 2017 and start deliveries in the second half of 2018. The companies also say in a news release that FERC has approved an application for the construction of five miles of new pipeline, modifications to existing compression facilities in Kanawha County and safety technology enhancements.

Track record plagues Kinder Morgan in pipeline operations - As residents in South Carolina, Georgia and northeast Florida join the debate over Kinder Morgan’s proposal to construct the 360-mile Palmetto Pipeline through their states, they may want to consider the company’s track record when it comes to promoting its pipeline plans in other states. Its most recent misstep comes as it is proposing a similar pipeline, called the Northeast Energy Direct (NED) natural gas pipeline, which would run through several Northeastern states.This month, the town of Nassau, N.Y., located 15 miles southeast of Albany, is preparing to investigate allegations of misconduct by individuals affiliated with the proposed pipeline and the impact on local properties, including town land and rights-of-way.According to Nassau Town Supervisor David Fleming, residents have complained about alleged trespassing by pipeline representatives. Residents have said that company employees passed themselves off as working for the town and have identified themselves as members of law enforcement, Fleming said.“Nassau is seriously concerned about the potential impacts on town property and our roadways from the construction of this pipeline and more so since this private corporation may be attempting to utilize public property without advance disclosure or consent,” Fleming told a reporter with the Times Union in Albany. In Pittsfield, Mass., another city that would be impacted by the pipeline, physician Joseph L. Pfeifer was supported by more than 20 other physicians in an opinion piece published in the Berkshire Eagle in September which raised health concerns and challenged a “disingenuous attempt” by Kinder-Morgan to cast the NED pipeline in a favorable light.

Tugboats at Sabine Pass ready for LNG exports - Four dedicated tugboats waited seven years to do their job. At Cheniere Energy’s $15 billion Sabine Pass LNG Terminal on the Texas-Louisiana border, the tugboats are stationed to ensure safe and timely escorts by crews trained to berth LNG vessels. But the shale revolution left the tugboats useless. Shale gas drillers started producing enough natural gas for the country, and imports were no longer needed. Cheniere was able to avoid financial losses on its import facilities because space was reserved by customers even if they didn’t use it. Chevron Corp. and Total SA are contracted to pay approximately $5 billion over 20 years to keep the tugboats, including crew members, and the Sabine Pass import terminal operating. Now, the tugboats prepare for a job they never expected: escorting ships that carry exports. The United States now produces about 80 billion cubic feet of its own gas every day. The country is set to become a net exporter next year. Cheniere plans to build at least five liquefaction facilities, a risky bet with gas prices in Asia and the United States near multi-year lows. But Cheniere is paid a capacity registration fee at its terminals regardless of the price of gas and could be well-placed to expand if the energy industry rises out of the continued slump.

The Impact And Reach Of U.S. Natural Gas -- A couple of data points from the U.S. Energy Information Administration (EIA) that help illustrate the impact of the natural gas portion of the American energy revolution. First, EIA reports that wholesale electricity prices at major trading hubs, on a monthly average for on-peak hours, were down 27 percent to 37 percent across the U.S. in 2015 compared to 2014. The reason for the decrease, EIA says, is lower natural gas prices. EIA’s chart: Another EIA chart, showing electrical generation by power source: EIA: Low natural gas prices in 2015 made natural gas-fired generation more competitive with coal-fired generation than it had been in the past. During April, July, August, September, and October, more electricity was generated from natural gas-fired generators than from coal-fired generators (data for November and December are not yet available). … As the average capacity factor for coal-fired generators declined modestly in 2015, the capacity factors for natural gas-fired generators increased, especially for combined-cycle plants. On average, natural gas combined-cycle units across the country operated at capacity factor rates consistently 5%-11% higher each month than either of the past two years.Recently, EIA reported that 2015 natural gas spot prices at the national benchmark Henry Hub averaged $2.61 per million Btu (MMBtu), the lowest annual average since 1999. Interestingly, declining prices did not result in lower production, EIA says: Despite declining prices, total natural gas production, measured in terms of dry gas volume, averaged an estimated 74.9 billion cubic feet per day (Bcf/d) in 2015, 6.3% greater than in 2014. This increase occurred even as the number of natural gas-directed drilling rigs decreased. As of December 18, there were 168 natural gas-directed rigs in operation, only about half the number of rigs at the beginning of 2015.

Here's the Big Problem With Those Low Gas Prices Obama Is So Happy About -- In his State of the Union address this week, President Barack Obama gave an approving nod to the price of oil, which is now the lowest it has been in more than a decade. "Gas under two bucks a gallon ain't bad, either," he said. For motorists, that logic is unassailable. But depending on where in the country you live, the low oil price could come back to haunt you in unexpected ways. According to new federal data, half a dozen states with prominent oil drilling industries have taken heavy blows to their budgets. That could prompt a sweep of spending reductions and cuts to education, poverty programs, and other social services. "It could be hugely problematic for some of these states," said Michael Leachman, director of state fiscal research at the Center on Budget and Policy Priorities.  The data show a steep drop in revenue from severance taxes, which natural resource companies pay to states when they extract oil, coal, or natural gas. When oil prices drop, oil production drops next, followed by severance tax revenue. And for states such as Alaska, Wyoming, and North Dakota, which draw a majority of their income from severance taxes, that means the budget can quickly implode. Now, policymakers in those states are scrambling to make up the shortfall in other ways and decide which state programs could face the chopping block.

Energy jobs struggle through oil downturn - The oil bust is more severe than any downturn in 45 years, according to the Houston Chronicle. Roughly 70,000 energy jobs have been lost so far and oil prices fell below $31 a barrel Monday. U.S. Crude fell to $30.98 a barrel on the New York Mercantile Exchange in morning trading. It was the sixth-straight day of losses in 2016. Brent fell to $31.33 on the ICE Futures Europe. Crude prices have fallen further and for a longer time than the 1986 oil bust. Oil prices have yet to reach its floor, and some analysts predict oil could hit $20 a barrel.With the dropping price of oil, consumers may benefit from lower gasoline prices. However, jobs may be lost as energy companies struggle through hard times.The Railroad Commission of Texas issued 727 original drilling permits in December 2015.The number is in stark contrast to permits issued last year. In December 2014, the Commission issued 1,506 permits. The Midland district leads the state with 275 permits to drill oil or gas wells.Total well completions for 2015 are 19,503; down from 29,554 listed in 2014.  According to Baker Hughes, there were 308 active rigs in Texas, which represents 46 percent of all active rigs in the United States.

Goodrich Petroleum among recent energy companies delisted from New York Stock Exchange - Goodrich Petroleum Corp., a Houston-based oil and gas producer, is the latest victim of low oil prices. The price of WTI slipped below $30 yesterday, and an impending rebound doesn’t seem likely. The company noted in a press release Goodrich it was removed from the New York Stock Exchange for “abnormally low price levels,” closing at only 16 cents on Wednesday. The stock has traded below $1 per share since July. The company will not appeal the delisting and anticipates its common stock will begin trade through Over the Counter Markets under the symbol GDPM. The company was warned in September of last year of the possible delisting. Goodrich is the largest company operating in the Tuscaloosa Marine Shale, located across Louisiana through parts of Mississippi. The emerging shale play is less economical for producers due to the early stages of development coupled with geological challenges, including varying degrees of clay and silt and inconsistent results. Most companies operating in the TMS have opted to focus on development in other areas to minimize risk in this potentially oil-rich, yet unproven formation. Goodrich also owns assets in the Eagle Ford Shale in South Texas as well as the Haynesville Shale in parts of Texas and Louisiana. Since the price of oil began its drastic drop near the close of 2014, around 40 oil and gas companies have filed for bankruptcy protection, 36 of those filing in 2015. Goodrich joins SandRidge Energy Inc, removed from the NYSE earlier this week when its stock price remained below $1 for over seven months. The Oklahoma-based producer announced Wednesday it will eliminate 226 jobs in its home state.

‘A millennium’s worth of earthquakes’: Fracking’s devastating impact on the the American west: -Oklahomans don’t blink when they hear warnings about tornadoes, drought or ice-storms. Earthquakes, however, catch their attention.   Increasingly tied to tremors shaking the west, fracking for natural gas is creating alarm and division around western states that until recently enjoyed a boom in jobs and revenue. In Oklahoma, seismologists have warned that significant temblors last week could signal a larger, more dangerous earthquake to come in a state where drilling is destabilizing the bedrock.Last Wednesday night two earthquakes, measuring 4.7 and 4.8 on the Richter scale, struck rural northern Oklahoma, beneath a major oil and gas producing area. The state historically experiences two shakes a year registering above level three. According to the National Earthquake Information Center (NEIC), which is based in Colorado, in 2014 Oklahoma experienced 585 such quakes. In 2015 there were 842. “That’s almost a millennium’s worth of earthquakes in two years,” George Choy, a seismologist at the center, told the Guardian on Friday. “When you see that you suspect something is going on.” Choy added: “Even a magnitude four in the right place could cause great damage. The industry in Oklahoma is producing a tremendous amount of wastewater, more than 200 million barrels a month, which is on the way to a trillion a year. Water is finding its way to underground faults and there is always the possibility of a big earthquake. We are concerned."

String Of Small Earthquakes Shake Near Fairview - - - A string of small earthquakes shook near Fairview, Oklahoma, Monday morning. At 3:04 a.m., a 2.7 magnitude earthquake was recorded 16 miles northwest of Fairview, and 38 miles east of Woodward. It was about three miles deep. At 7:12 a.m., a 2.9 magnitude earthquake was recorded 18 miles northwest of Fairview, and 37 miles east of Woodward. It was about five miles deep. At 8:16 a.m., a 3.0 magnitude earthquake was recorded 18 miles northwest of Fairview, and 36 miles east of Woodward. It was about three miles deep. At 9:18 a.m., a 3.2 magnitude earthquake was recorded 18 miles northwest of Fairview, and 38 miles east of Woodward. It was about three miles deep. Meanwhile, a 2.7 magnitude earthquake was recorded at 2:48 a.m., two miles southeast of Crescent, and eight miles west, northwest of Guthrie. No injuries or damage were immediately reported following these earthquakes.

Is A Massive Earthquake Inevitable In Oklahoma? -- When Americans speak of “the big one,” they’re talking about the potential for a super-massive earthquake that could essentially destroy most of quake-prone California. Now some scientists believe something similar could happen in the once geologically placid Oklahoma. Oklahoma was shaken late Wednesday night by two of the strongest earthquakes to hit the state in recent years, the latest in a series of temblors that many researchers believe are caused by the burial of wastes from oil and gas drilling in the state. The quakes struck 30 seconds apart and had magnitudes of 4.7 and 4.8 on the Richter scale. While considered light, both were centered directly beneath a region in northwestern part of the state near Fairview, Oklahoma, that produces significant amounts of oil and gas. The second temblor was the fourth-largest ever recorded in Oklahoma. These and other recent earthquakes could be precursors to a much larger, more damaging event, according to some scientists. The frequency of earthquakes in Oklahoma has been rising for nearly a decade. Before 2008 there were fewer than two earthquakes in Oklahoma each year, on average. By 2010 the state had only three quakes with a magnitude of 3 or more, meaning their shaking is barely felt on the surface. In 2015, the number of such temblors had grown to 907. Geologists say the reason is the way oil companies dispose of drilling waste. The water they use in drilling can’t be reused, so it must be discarded, usually injected deep below ground level. This water makes underlying rocks slippery, causing them to shift against one another, which sets off earthquakes.The quakes have become something of a political issue in Oklahoma. Gov. Mary Fallin, who said she felt Wednesday night’s temblors, continued to express confidence in the Oklahoma Corporation Commission, which she said is the agency best suited to address the growing problem. But critics say the agency isn’t acting quickly enough. One who has been demanding more action is Democratic state representative Cory Williams, who said he believes the state Legislature needs to step in, though he adds that he doubts it will. “Absent a catastrophic loss of life or property, there will be zero reaction from the Oklahoma House or Senate,” he said. “They don’t want to touch it.”

Oklahoma Residents Sue Energy Companies Over Earthquake Damage -  Oklahoma has been hit by swarms of earthquakes over the last few years, and some residents have had enough. This week, a group of 14 homeowners in Edmond, Oklahoma filed a lawsuit against 12 energy companies, claiming that the companies’ fracking operations have contributed to this uptick in earthquakes. Specifically, the lawsuit targets the companies’ wastewater disposal wells, claiming that the injection of fracking wastewater into these wells “caused or contributed” to earthquakes and constituted an “ultrahazardous activity.”   In the lawsuit, filed in Oklahoma County court, the residents focus on two earthquakes — of 4.3 and 4.2 magnitude — that struck Edmond on December 29 and January 1. The plaintiffs say they suffered damage from the earthquakes, and that the energy companies were “negligent, careless, and reckless” in their treatment of the earthquake risks surrounding wastewater injection.  “As a direct and proximate result of defendants’ negligence, plaintiffs have suffered and will continue to suffer severe and permanent damage to their persons and property,” the lawsuit states. This damage includes “cracked and broken interior and exterior walls” and “movement of the foundations beneath their dwellings.” These damages have taken a toll on the residents psyches, too, causing “mental and emotional anguish, fear, and worry.” These earthquakes have also spurred other lawsuits in the state. The Oklahoma Supreme Court ruled last year that people could sue oil companies for damages claimed to be caused by earthquakes. That was good news for Sandra Ladra, who sued Tulsa-based oil and gas company New Dominion LLC for damages related to a November 2011 earthquake. The Oklahoma Supreme Court ruling means that her case can proceed. And another lawsuit seeks class-action status for residents affected by earthquakes in multiple Oklahoma counties.

Oklahoma Residents Sue 12 ‘Reckless’ Fracking Companies for Earthquake Damage -- Oklahoma has seen a dramatic uptick in earthquakes in recent years, and some residents refuse to sit idly by. On Monday, 14 residents of Edmond, Oklahoma filed a lawsuit against 12 energy companies, claiming their fracking operations contributed to a string of earthquakes that hit central Oklahoma in recent weeks. The plaintiffs are specifically targeting the companies wastewater disposal wells, alleging that the injection of fracking wastewater into these wells “caused or contributed” to earthquakes and constituted an “ultrahazardous activity.” The companies named in the lawsuit are Devon Energy Production, Grayhorse Operating, Marjo Operating Mid-Continent, New Dominion, Northport Production, Pedestal Oil, Rainbo Service, R.C. Taylor Operating, Special Energy, Sundance Energy, TNT Operating and White Operating.  Citing “reckless disregard for the consequences to others,” the plaintiffs argue in the lawsuit that the companies “injected large volumes of drilling waste in disposal wells located near the cities of Edmond and Oklahoma City, in the vicinity of the plaintiffs’ properties, under conditions that defendants knew or should have known would result in an increased likelihood that earthquakes or other adverse environmental impacts would occur, thereby unreasonably endangering the health, safety and welfare of persons and property, including plaintiffs and others. “The use of disposal wells by defendants created conditions which, among other things, are the proximate cause of unnatural and unprecedented earthquakes that continue unabated, increasing in both frequency and magnitude within Oklahoma County and elsewhere in the state of Oklahoma, which have damaged plaintiffs and others and threaten to do so in the future.”

Fire crews are battling an oil rig fire in Oklahoma — Firefighters in Oklahoma are battling a fire on an oil rig. Authorities say the oil rig is about 6 miles east of Chickasha. Video of Wednesday’s blaze showed a large plume of thick black smoke rising from the rig. The Oklahoma Department of Transportation says nearby roads are closed because of the smoke. Department spokesman Cody Boyd says the road may remain closed for several hours. The owner of the site, Continental Resources, said in a statement to KWTV that all employees have been accounted for and are safe and that the cause of the fire is unknown. A Continental spokeswoman did not immediately return a phone call from The Associated Press for additional comment. Chickasha is about 45 miles southwest of Oklahoma City.

Crews Responded To Large Fracking Operation Fire In Grady County - Crews responded to a large fracking operation fire just east of Chickasha late Wednesday afternoon. The Grady County Fire Department responded to HWY 62 and 39, about six miles east of Chickasha after the reported fire. Upon arrival, crews reported numerous trucks on fire. According to a diagram News 9 received from the University of Kansas, the frack pumps caught fire and all of the trucks connected by metal piping are on fire. All 22 trucks are said to costs about $1 million each. Crews reported explosions as the fire fuels but it is contained in the area. The Oklahoma Department of Transportation said all lanes at SH 39 and County Road 2910 in Grady County, and all lanes from County Road 2940 west of HWY 62 were shut down due to the fire. The roadways were reopened about 9:45 p.m. There was also reports of heavy amounts of smoke crossing the highway. "I really don't know what caused it. They were in the process of fracking a well and that's where it all started," Grady County fire spokesman Buddy Myers said.

Fracking fire damage totals almost $50 million | - The raging fire sent flames and thick black smoke into the sky. It broke out around 4 p.m. Wednesday afternoon at a Continental Resources oil field site just east of Chickasha.  On Thursday – the devastating damage was clear. The Grady County Fire Chief tell us 22 different truck/trailer combinations were completely destroyed – each one valued at $1.8 million dollars. Despite that, the fire chief tells us it could have been much worse.“Yesterday, when we arrived on the scene, the first thing we did is figured out what hazardous chemicals might be there, what might happen if they mixed with water, what might happen if they mixed together, what catastrophic event would we have if we made a mistake like that,” said Grady County Fire Chief Buddy Meyers. Chief Meyers says they took an offensive approach to keep the fire away from the worst chemicals. “Some of these chemicals, if they mixed with water, if they caught on fire, if they mixed with each other, could’ve caused on explosion. Well, the evacuation distance was one half mile away,” said Meyers.Despite the heavy damage, a lot was saved. “About $50 million worth of other equipment. We saved the chemicals. We saved the trucks that are transporting the chemicals. We saved the tank battery, saved the well head. We saved the crane.” And, lives were spared not only because of the fire fighting but the emergency plans in place for the oil field crews.

Eco-groups urge Obama to halt oil, gas leases on federal lands - -- From a press release today:  Call to Obama Administration: Keep Our Oil and Gas in the Ground -- Environmental groups today called on President Obama to order a review of the climate change implications of the federal oil and gas program and a halt to new oil and gas leases on American public lands. The call comes as the Obama Administration has leased millions of acres of U.S. public lands to oil and gas companies, opening the door for extensive drilling and fracking of some of the nation’s most treasured landscapes. Thirty-four million acres of public lands are now under the control of the oil and gas industry.  “It’s unbelievable that our government keeps leasing public land to dirty energy companies while turning a blind eye to the climate implications—it’s time to get the government out of the oil and gas business and return public lands to the people.”  This development is responsible for massive amounts of carbon pollution from methane leaks and oil and gas burning. Estimates indicate 4% of all U.S. global warming pollution from U.S. energy sources comes from public lands drilling and fracking, although a comprehensive review of the climate impacts of public lands oil and gas has yet to be undertaken.   “By taking into account the significant impacts of drilling and fracking on our natural heritage, the reality is that the costs to our lands, waters and climate are way too high. Until those costs are known, publicly owned oil and gas must remain in the ground.” In the letter today, the groups echoed the President’s own call to keep fossil fuels in the ground and his State of the Union remarks that America needs to change the way its oil and coal are managed to “better reflect the costs they impose on taxpayers and the planet.”

Solar energy industry now employs more than O&G extraction -- The solar energy industry now employs more workers than the oil and gas extraction sector, reports CNN Money. Over the past five years, the number of domestic jobs in the solar industry has more than doubled. According to the Solar Foundation, a nonprofit group not funded by the industry, there were 35,000 jobs added to the sector last year, up 20 percent from 2014. Meanwhile, the oil and gas industry continues to suffer from stubbornly low oil prices and growing stockpiles. CNN reports that in 2015, nearly 17,000 oil and gas exploration and production jobs were eliminated. Earlier this week the benchmark price for West Texas Intermediate crude dipped to a 12-year low just above $30 per barrel. Total, there are approximately 209,000 workers in the solar industry, more than oil and gas extraction, and nearly three times the amount working in the coal industry. According to the Bureau of Labor Statistics, there were 184,500 workers employed in the oil and gas extraction sector as of December 2015. CNN also notes that wages paid to solar employees are rising. Across the U.S. in 2015, wages increased by about 2.5 percent. Wages in the solar industry, however, are up 5 percent from the year prior. Solar installers, on average, earn about $21 an hour. A variety of factors, such as tax credits and technological advances, have been steadily driving up both commercial and consumer demand. According to one solar company owner, the industry is “a good place to go now if you’re looking for a career change.”

Cheap Oil Hits Housing In North Dakota, Texas, & Others - Low crude oil prices since the second half of 2014 have created a boon for consumers as the cost to fill up at the pump has plunged. The extra cash in the pockets of millions of motorists is often likened to an unexpected tax cut, which could help stimulate the economy.  Leaving aside the true extent of such a stimulus, which is debatable, there is a flip side to that coin. The collapse in crude oil prices is a huge blow to areas where oil extraction and associated industries are the bread and butter of the economy. As petro-economies suffer from the bust in crude prices, the effects are showing up in the housing market. Take North Dakota, for example, which was on the front lines of the oil boom between 2011 and 2014.   The economy is smaller and thus more dependent on the oil boom than other places, such as Texas. The state saw an influx of new workers over the past few years, looking for work in in the prolific Bakken Shale. A housing shortage quickly emerged, pushing up prices. With the inability to house all of the new people, rent spiked, as did hotel rates. The overflow led to a proliferation of “man camps.”  Now the boom has reversed. The state’s rig count is down to 53 as of January 13, about one-third of the level from one year ago. Drilling is quickly drying up and production is falling."The jobs are leaving, and if an area gets depopulated, they can't take the houses with them and that's dangerous for the housing market," as per CNN Money. New home sales were down by 6.3 percent in North Dakota between January and October of 2015 compared to a year earlier. Housing prices have not crashed yet, but there tends to be a bit of a lag with housing prices. JP Ackerman of HouseCanary says that it typically takes 15 to 24 months before house prices start to show the negative effects of an oil downturn.

House speaker wants outside audit on Sandpiper pipeline project emails — Minnesota House Speaker Kurt Daudt has asked the legislative auditor to do a separate investigation of Minnesota Pollution Control Agency activity on the Sandpiper oil pipeline project. Daudt says news reports on an agency employee’s seemingly slanted emails to groups fighting the project raise bigger doubts about impartiality about the regulatory review for Enbridge Energy’s proposed pipeline to carry crude oil from North Dakota to Wisconsin. The state Capitol’s top Republican wrote Legislative Auditor Jim Nobles on Friday to seek a review beyond the one Gov. Mark Dayton says his administration will conduct. Nobles said his office would begin a preliminary review before deciding on a full investigation. Daudt says the public and lawmakers need to know if state resources were misused, if information was improperly disseminated and whether the Sandpiper and other projects are getting a fair shake.

N.D. oil trains shift route back to northeast Mpls. tracks, BNSF reports -  Most of the North Dakota crude oil trains crossing Minnesota no longer pass through west metro suburbs and downtown Minneapolis, according to a railroad route update. BNSF Railway, the largest Bakken oil hauler, notified Minnesota officials in December that it has shifted crude-by-rail traffic back to its usual route via Detroit Lakes, St. Cloud, Anoka and northeast Minneapolis. The shift had been expected. BNSF spokeswoman Amy McBeth said Friday that with the end of construction season, traffic is back to more traditional routes. Over the summer, as BNSF worked on a $326 million system upgrade in Minnesota, it shifted most oil trains — about 11 to 23 per week — to tracks through Willmar, Dassel, Delano, Wayzata and St. Louis Park. This sent trains through the downtown, past Target Field and across Nicollet Island, worrying some local and state officials, including Gov. Mark Dayton. The downtown oil train traffic tapered off in October, and now has returned to the usual level of 0-3 per week, BNSF reported. Although the report says those trains are “westbound to Willmar,” McBeth said they could be going in either direction. Overall, the report said, 28 to 48 oil trains pass through Minnesota each week, unchanged since last spring. Each train carries 1 million gallons of Bakken crude oil or more. After leaving Minneapolis, most oil trains pass through St. Paul and into Wisconsin bound for East Coast oil refineries.

ND lawmakers react to Keystone XL Pipeline lawsuits -- Last week, the company that proposed the construction of the Keystone XL Pipeline, TransCanada, filed legal challenges to the United States’ rejection of the project. One of the lawsuits will seek more than $15 billion in damages. Suffice it to say, North Dakota state representatives aligned themselves with TransCanada’s reasons for filing the suits, placing the blame solely on the Obama Administration. In a statement, Sen. John Hoeven said, “Unfortunately, the president’s arbitrary decision to turn down the Keystone XL pipeline means we do not have this important energy infrastructure project under construction, or the jobs and other benefits that go with it…” He added, “The president denied the Keystone XL pipeline permit, even though Congress approved it on a bipartisan basis, all six states along the route approved it and the American people overwhelmingly support it.” Congressman Kevin Cramer shared similar sentiments. In a statement, he said, “The President’s short-sighted decision to reject construction of the Keystone XL Pipeline cost us a vital energy infrastructure project which would have created thousands of jobs and billions of dollar in economic benefits throughout the country.” He continued, “Unfortunately, given Canada’s recent track record in suing the United States, I am afraid the American taxpayer will be left holding the bag for billions in penalties because of President Obama’s extreme environmental agenda.”

Pipeline leak spills saltwater and oil in North Dakota - State officials are monitoring the cleanup of a pipeline leak that spilled saltwater and oil in Stark County. The Health Department says an estimated 5,880 gallons of saltwater and 420 gallons of oil were released at a site operated by C12 Energy North Dakota LLC. It happened Monday about half a mile north of Dickinson. Officials say it does not appear any surface water was impacted. Officials with the Health Department and the state Oil and Gas Division are at the scene.

Regulators to give written reason for cutting oilfield fines — North Dakota regulators say they will provide written justification if fines and other sanctions are lowered against companies that violate the state’s oil and gas laws. Department of Mineral Resources Director Lynn Helms says he was directed by the state Industrial Commission on Monday to provide the documentation. Regulators have been publicly criticized for easing penalties as much as 90 percent against companies involved in spills and other oilfield violations. Regulators say it promotes cooperation. The Industrial Commission that includes Gov. Jack Dalrymple met behind doors with attorneys for more than 90 minutes Monday, discussing six cases against companies that are facing sanctions. No action was taken.

Company drills in wrong area; forfeits North Dakota oil - (AP) — North Dakota regulators ordered a Denver company to forfeit crude oil that was obtained from an area where it did not hold a lease. The North Dakota Industrial Commission on Monday ordered Gadeco LLC to forfeit the 800 barrels of oil. Proceeds from the sale of the oil will go into the state's general fund. State Mineral Resources Director Lynn Helms says the company drilled into an area in Williams County in error. He says the company spent more than $8 million drilling the well, which is now plugged. Helms says it's the first time such an incident has happened in North Dakota.

North Dakota oil output rises slightly in November — North Dakota’s Department of Mineral Resources says the state’s oil production increased by about 5,200 barrels a day in November, while natural gas production rose to a record level. The agency says the state produced an average of 1.17 million barrels of oil daily in November. The November production was about 51,200 barrels per day less than the record set in December 2014. North Dakota also produced 1.66 million cubic feet of natural gas in November, beating the previous record set in July. The November tally is the latest figure available because oil production numbers typically lag at least two months. There were 49 drill rigs operating in North Dakota’s oil patch on Friday. That’s down 15 rigs from November.

North Dakota Oil Output Defies Calls For A Decline  |  Rigzone --North Dakota's oil production once again defied expectations for a decline in November, even seeing a slight uptick for the second consecutive month, as unusually warm weather helped offset the deepening decline in fracking activity. Production in the second-largest U.S. oil producing state rose by 5,000 barrels per day (bpd) to 1.18 million barrels, monthly data from the Department of Mineral Resources showed. Last month, it also rose 5,000 bpd. Output in North Dakota's Bakken shale fields has generally outpaced expectations even as oil prices have plunged to about $30 a barrel this week from over $100 in mid-2014. Despite repeated forecasts for a decline, even from the U.S. government itself, output has remained surprisingly resilient. Last October, the U.S. Energy Information Administration forecast that Bakken output would slide by 23,000 bpd to 1.16 million bpd. "Looking at the weather, we had relatively few days where there was too much wind and (there was) no precipitation in November. It was a very dry month, and it was not a cold month," Lynn Helms, director of the state's Department of Mineral Resources, told reporters on a conference call on Friday.

Fewer Bakken rigs, fewer oil worker deaths -- Oil worker deaths in the Bakken were down in 2015, but officials can’t say why just yet, reports The Bismarck Tribune. According to data collected from the Occupational Safety and Health Administration, there were three oil and gas-related worker deaths in 2015 compared to the seven in 2014 and 10 the year before that. Eric Brooks, director of OSHA’s Bismarck area office, told The Tribune that he anticipates that within a year, it will become more apparent whether or not the decrease is due to improved safety or fewer workers. Over the past few years, overall workplace injuries have been declining steadily. As reported by The Tribune, North Dakota Workforce Safety and Insurance noted that although workforce injuries were higher than normal in previous year, the injuries sustained in the oilfield have never been disproportionate to the number of workers. In a statement, WSI Director Bryan Klipfel said, “As the workforce has declined out in the oil patch, [this agency] has seen a corresponding drop in the number of injured worker claims. There are fewer workers, so there are proportionally fewer injuries.” He added that more experienced workers are typically retained the longest throughout the slump, which makes for a more safe work environment.

EIA Updates Oil Severance Taxes For Six US States -- EIA updates oil severance taxes for Alaska, Texas, North Dakota, Wyoming, Oklahoma, and West Virginia. No surprises. No surprises, but Alaska is in a heap of trouble based on the graphs. Look at the last seven quarters for Alaska -- all of 2014 and the first three quarters of 2015: the state received no revenue from the oil and gas industry in two of the last three quarters; and, in a third quarter (3Q14) almost nothing. Note the huge spike in 2Q14 preceded and followed by very low numbers. One can say the weather turns better in 2Q14 but that would also be true in 3Q14 and that was one of the worst quarters. The trend is a disaster; the volatility is terrifying.  Alaska taking action: Alaska Gov. Bill Walker announced a hiring freeze and limits on travel by state employees [January 5, 2016] as part of an effort to control a growing $3.5 billion budget gap. He had previously proposed Alaska's first state income tax in 35 years.

Deal averts Montana coal mine shutdown — A central Montana coal mine reached an agreement Monday with environmentalists and state regulators that is intended to avoid a major shutdown as a declining coal market leaves the future of some mining companies in doubt. The deal comes after a state review panel rejected an expansion permit granted to the Bull Mountain Mine in 2013, threatening to halt most operations if the dispute could not be resolved. The panel said a Montana agency failed to consider the mine’s long-term potential to contaminate nearby water supplies. The agreement gives state regulators six months to look again at the effects from the underground mine. Mine owner Signal Peak Energy cut about 20 percent of its workforce last month, citing a poor market that is hammering companies across the United States, including in the nation’s largest coal-producing region. Montana and Wyoming combined produce almost half the coal in the U.S. “We’re trying to meet their interests in ensuring ongoing production and not having further layoffs, and also meet our interest in assuring water resources are fully protected for people living in the area,” said attorney Shiloh Hernandez, who represents the Montana Environmental Information Center. The Montana Board of Environmental Review still must approve the deal and will consider it Tuesday. The agreement allows expansion development work to proceed, which is scheduled to begin in March.

1,000 People Attend Hearing on Proposal for Nation’s Largest Oil-by-Rail Terminal  - The people—a lot of people—have spoken loud and clear against the proposal to build the nation’s largest oil-by-rail terminal at the Port of Vancouver in Washington. After 10 hours of testimony with more than 1,000 people in attendance last week, Washington’s Energy Council had to hold a second hearing to accommodate the overflow testimony. And now with Congress lifting the crude oil export ban, stopping this massive shipping terminal takes on added importance. Tesoro Savage would ship almost half as much crude oil as the Keystone XL pipeline, but on trains. Tesoro would offload the trains onto large oil tanker ships to sail over the notorious Columbia River bar to the Pacific Ocean. Washington’s Gov. Jay Inslee will make the final decision on the oil proposal, after a recommendation from his energy council. In a normally quiet area of southwest Washington an unprecedented cross section of local businesses, labor leaders, conservation groups, tribal nations, physicians and even the city governments of Vancouver and Portland are taking a stand to protect the region. Here are many of the diverse voices opposing Tesoro’s oil-by-rail project:

Proposed terminal at Grays Harbor won't handle Bakken crude oil — The new owner of a Grays Harbor biodiesel facility has dropped plans to handle crude oil as it pursues an expansion project at the Port of Grays Harbor on Washington’s coast. Iowa-based biofuel producer Renewable Energy Group wants to expand its existing facility to handle bulk liquids, but it said crude oil won’t be in its future plans, according to written comments it made to state and local regulators last year. The project was one of three crude oil terminals proposed at the Port of Grays Harbor that would bring crude oil by train from the Bakken region of North Dakota and Montana, where it would be stored and loaded onto tankers or barges. “We at REG are happy to be producing lower carbon, renewable fuel at Grays Harbor and look forward to building relationships with all local and regional stakeholders,” company spokesman Anthony Hulen said in an email Wednesday.

Experts to study food safety of oilfield wastewater - More farmers in drought-stricken California are using oilfield wastewater to irrigate, and a new panel on Tuesday began taking one of the state’s deepest looks yet at the safety of using the chemical-laced water on food crops. In the fourth year of California’s drought, at least five oilfields in the state are now passing along their leftover production fluid to water districts for irrigation, for recharging underground water supplies, and other uses, experts said. Chevron and the California offshoot of Occidental Petroleum are among the oil companies supplying oilfield wastewater for irrigating tens of thousands of acres in California. Almond, pistachio and citrus growers are the main farmers already using such water. California’s aging oilfields require intensive drilling methods and generate lots of wastewater. In Central California’s San Joaquin Valley, a center of the state’s agriculture and oil businesses, oil companies in 2013 produced 150 million barrels of oil — and nearly 2 billion barrels of wastewater. Central California leads the country in food production. It’s also the main oil-producing base in California, the country’s No. 3 oil-and-gas producing state. For farmers in California’s drought, the question is “where’s the water going to come from if you want to maintain agriculture,”

Porter Ranch Methane Leak Spreads Across LA’s San Fernando Valley - It now looks like the catastrophic Porter Ranch gas leak, which has spewed more than 83,000 metric tons of noxious methane for nearly three months, has spread across Los Angeles’s San Fernando Valley. On Wednesday, Los Angeles City Councilman Mitchell Englander called on the Southern California Gas Co. to extend residential relocation assistance to residents in Granada Hills, Chatsworth and Northridge who live near the Aliso Canyon gas leak above Porter Ranch. These residents reported symptoms related to the exposure of natural gas such as nausea, vomiting, headaches and respiratory problems. This latest development compounds with a new analysis from Home Energy Efficiency Team (HEET). The Cambridge-based nonprofit sent Boston University Professor Nathan Phillips and Bob Ackley of Gas Safety to take methane measurements around the San Fernando Valley for several days and their findings were disturbing. As the Los Angeles Daily News wrote, “the researchers recorded elevated levels of the main ingredient in natural gas—10 miles away from the nation’s largest gas leak.” “It’s not just in Porter Ranch, it’s going all the way across the [San Fernando] Valley,” Ackley told Inside Climate News. According to HEET, the researchers drove a high precision GIS-enabled natural gas analyzer down the roads around the gas leak to create a comprehensive map of the leak around San Fernando Valley. The red on the map indicates where they drove and the levels of methane they found is shown by the height of the peaks.

Stopping natural gas leak near Los Angeles is a complex fix — A tricky fix is in the works to plug a massive gas leak from an underground storage well that has sickened residents of a Los Angeles neighborhood for 11 weeks. Gas company workers are drilling a relief well to intercept a leaking pipe from a natural gas storage field a mile and a half underground. The work could be completed by the end of February. The leak detected Oct. 23 was in one of 115 wells where Southern California Gas Co., a division of San Diego-based Sempra Energy, stores natural gas in a vacant oil field beneath the Santa Susana Mountains above Porter Ranch. The company injects the fuel when demand is low and pumps it out during colder weather or when it’s needed to fire up natural gas-fueled power plants. It is the largest natural gas storage facility west of the Mississippi River and can provide energy to all of Southern California for a month. The leak was initially believed to be minor and coming from the top of the head, but was probably about 500 feet underground. Pressure averaging 2,700 pounds per square inch prevented plugging the pipe with a mud and brine solution, spraying an oily mist at one point. The relief well will target the pipe more than a mile below the leak. If successful, mud and brine will be used to plug the leaking well. Because it’s difficult to hit such a tiny target a mile and a half underground, or in case the muddy solution doesn’t stop the leak, the company plans to begin drilling a second relief well later this month.

Regulators probing whether fracking was connected to Aliso Canyon gas well leak: State regulators are investigating whether the controversial drilling practice of hydraulic fracturing, or fracking, contributed to the massive natural gas leak near Porter Ranch. Fracking at Aliso Canyon had not been widely reported, though it is common at California’s underground gas storage facilities. More than two months after Southern California Gas Co. detected a leak at its Aliso Canyon field, observers are searching for reasons the well may have failed. Some environmentalists are drawing attention to fracking, while experts caution that such a rupture is unlikely.   The leaking well’s maintenance records don’t indicate that it was fracked, according to a review of the file released by the state Division of Oil, Gas & Geothermal Resources. But at least one nearby well in Aliso Canyon was fracked, the records show. Called “well stimulation,” fracking is used by natural gas operators to increase production from underground reserves. A state-commissioned report found that Aliso Canyon was a major producer of hydraulically fractured gas, compared to California’s other natural gas storage facilities. Collectively, about a third of the gas stored in these state reservoirs is derived from fracking, according to the 2015 report by the California Council on Science and Technology. “Obviously, fracking these old wells raises some real concerns about dangers to well integrity — fracking can cause casing to fail,” said Patrick Sullivan, spokesman for the Center for Biological Diversity.

The Company Behind LA’s Methane Disaster Knew Its Well Was Leaking 24 Years Ago -- Last fall, a 7-inch injection well pipe ruptured 500 feet below the surface of Los Angeles, after ferrying natural gas for six decades. The resulting methane leak is now being called one of the largest environmental disasters since the BP oil spill, has pushed thousands of people out of their homes, and has quickly become the single biggest contributor to climate change-causing greenhouse gas emissions in California. But it's not the first time this well sprang a leak—and Southern California Gas Company (SoCalGas), which owns and operates the well, knew it.  Over the past three months, engineers have had a terrifically difficult time plugging the leak. Normally in the case of a methane leak, a column of fluid would be pumped down into the well, to stem its tide. But with this particular well, that hasn’t been working. Instead, workers must drill down to the base of the well, 8,000 feet underground, creating a relief well to relieve the incredibly high pressure of the leak. Only then can the leak be repaired safely. So who’s to blame for a leak that cannot be stopped? Aging natural gas equipment may have contributed. According to documents filed with the California Division of Oil, Gas & Geothermal Resources, this particular well, referred to as Standard Sesnon 25, was originally drilled in 1953, and showed signs of leakage 24 years ago, in 1992. Inspectors reported that they could hear the leak through borehole microphones. . The regulatory decision filing shows that SoCalGas was granted $898,000 per year (in addition to the regular fund of about $3 million per year for repairs) to replace 5 percent of its safety valves at Aliso Canyon. According to EDF, these extra funds weren’t used as they should have been—to prevent a leak of this magnitude.

California’s Gas Leak Disaster Signals a State of Emergency for Us All - Dave Dayen - If you drive down Porter Ranch Boulevard you would have little sense of why this Los Angeles suburb has made national news. There isn’t a lot of foot traffic, but that’s a function of being a southern California bedroom community with no town square where everyone has to drive to reach anything. But the library and the YMCA are packed. Traffic flows robustly along the avenues.  . The smell kind of sneaks up on you, kind of like if you stand too long outside a Shell station. It’s not particularly pungent, or at least wasn’t on the windy day I visited. But after about an hour or so in Porter Ranch, I did feel a slight headache coming on.  Despite Gov. Jerry Brown issuing a state of emergency for Porter Ranch due to the massive Aliso Canyon gas leak, which has been ongoing since October with no end in sight, life mostly goes on. And this actually upends some long-held assumptions about environmental justice, particularly the idea corporate polluters only prey on the weakest, most vulnerable communities. If a wealthy Los Angeles suburb like Porter Ranch cannot rouse action, there’s little hope for the rest of us.

Report on 2015 California refinery blast to be unveiled -- Investigators from the U.S. Chemical Safety Board are expected to discuss that near-hit and other safety issues today as they present a report on the Feb. 18, 2015 blast that injured four contractors and coated neighboring homes and cars with white ash. ExxonMobil sold the refinery to New Jersey-based PBF Energy Inc. in September, but continued repairs have delayed the deal. California workplace regulators issued $566,000 in fines last summer for health and safety violations related to the blast. The plant is located in a densely populated area of the city of Torrance, about 20 miles southwest of Los Angeles. A state investigation by the California Occupational Health and Safety Administration — also known as Cal OHSA — blamed the blast on a vapor that leaked from a fluid catalytic cracker unit into an electrostatic precipitator. The fluid catalytic cracker unit refines gasoline and is critical to producing California-grade fuel. Management knew the leak posed a hazard but didn’t correct the problem and had had problems with the FCC unit for as long as nine years, Cal OHSA said.Debris from scaffolding went flying during the explosion and could have caused a “potentially catastrophic release of extremely toxic modified HF into the neighboring community,” the U.S. Chemical Safety Board said in a statement. Residents have formed a watchdog group to pressure the refinery over its use of modified hydrofluoric acid, which is used as a catalyst to make higher-octane fuels, since last year’s incident. “A piece of equipment was sent flying out and it landed just feet from a tankful of modified hydrofluoric acid. Even though the explosion didn’t cause a release, it was just because of dumb luck,”

Editorial: WSJ on Obama’s endorsement of a new pipeline -- TransCanada took Uncle Sam to court last week to reclaim some of the damage done by the Obama Administration’s multiyear, drawn-out rejection of the Keystone XL pipeline. It may not come up in the litigation, but someone should point out that the same Obama Administration that rejected Keystone seems to have no problem supporting a new oil pipeline project in Africa.That was the story last week out of Kenya, where U.S. Ambassador Robert Godec told Kenya’s energy minister that Washington would help Nairobi raise $18 billion to finance its PowerAfrika project. The pipeline would stretch from Kenya’s Rift Valley to Lamu on the coast. “Kenya needs $18 billion worth of financing,” Mr. Godec said, according to a dispatch in, “so one of the questions we are discussing is how we can work together with the private sector and governments to raise that sum, to find ways to make certain that this financing becomes available.”Has Mr. Godec checked with Secretary of State John Kerry, or, perhaps more important, anti-oil Democratic financier Tom Steyer? Kenya and Northeast Africa could certainly use the investment and jobs that would come from the oil project. Then again, so could the United States. What’s with the double standard on pipelines?

Oil Industry to Feds: Enough Already With the Regulations - These should be happy days for the U.S. oil and gas industry. The United States leads the world in oil and gas production, providing a level of global energy stability unthinkable just a few years ago. As the Wall Street Journal reported, “Monday’s decline illustrates how political unrest in the Persian Gulf, the world’s largest oil-producing region, is no longer a sure-fire source of price gains at a time when there is close to a record amount of crude available in storage and continued robust production in the U.S.” But despite record production levels by API member companies, industry officials are increasingly frustrated by the growing roster of federal regulations that govern their operations. Jack Gerard, president of the American Petroleum Industry, detailed API's complaints at a Washington event Tuesday to release the group’s annual report.  Not surprisingly, the frustration is felt most acutely in the Western states, where the federal government owns much of the land. The API report compares oil and gas development in energy-rich Utah, where 67 percent of the land is under federal control, with that of Pennsylvania, which has a similar political climate and history of energy production, but where only 2 percent of the land is under federal control: Utah’s production increased to only 434.6 million cubic feet, barely 1 percent, while Pennsylvania’s production increased more than twenty-fold to 4,174.4 million cubic feet. The stark difference between the trajectory of energy production in Utah and Pennsylvania is not a result of geologic science but of federal energy policy.  The federal government’s permitting process is much more cumbersome than that of the states. For example, API notes that the state of Colorado on average takes fewer than four weeks to issue a drilling permit, whereas “it took an average of 236 days just to submit all the required paperwork required by [the Bureau of Land Management’s] permit application, and an additional 11 weeks to issue a decision on the permit.”

U.S. exports first freely traded oil in 40 years -  The ink is barely dry on legislation to lift a 40-year-old ban on exporting U.S. crude and energy companies already are jockeying to ship American oil overseas. Two tankers filled with freely traded U.S. oil have pulled out of Texas ports in the past two weeks, with more shipments expected. The first American oil sales abroad are flowing to Europe but, in the longer term, Latin America and Asia could become natural markets, according to industry experts. U.S. oil sales to foreign buyers have been quick to start after President Barack Obama signed the bill that abolished the crude export ban less than a month ago. Big energy infrastructure companies including Plains All American Pipeline and Enterprise Product Partners LP have spent the past five years pouring billions of dollars into building new pipelines, oil storage tanks and dock space at ports. The first freely traded cargo of U.S. oil was shipped from Corpus Christi, Texas, on New Year’s Eve. ConocoPhillips pumped the oil from around Karnes County, Texas, 60 miles south of San Antonio. From there it will travel about 5,000 miles to Bavaria in Germany. A second cargo of U.S. oil shipped from Enterprise’s Houston terminal at the start of the year is sailing to Marseilles, France. From there it will move by pipeline to a refinery in Switzerland.

Reuters Predicts Minimal Decrease In Shale Production Month-Over-Month -- If this turns out to be accurate -- that US shale production falls 120,000 bopd month-over-month -- as reported by Reuters/Rigzone -- that's trivial. Even if the entire decrease was due to the Bakken/North Dakota, it wouldn't be remarkable. If the 120,000 bopd is spread across the Bakken, the Eagle Ford, and the Permian (not to include the half-dozen other shale plays, the decrease is exceedingly trivial -- considering.  Reuters/Rigzone is reporting: U.S. shale oil production is expected to fall for a seventh month in a row in February, declining at about the same rate as the month before as drillers manage to eke out a few more barrels from each new well, U.S. data showed on Monday.   Total output was set to decline by 116,000 bpd to 4.8 million bpd in February compared with January, a U.S. Energy Information Administration's (EIA) drilling productivity report said. Production was estimated to have fallen by about the same margin in January, despite some expectations that the decline rate would begin to quicken as companies slash spending.  If true, the decline would take U.S. shale output to 638,000 bpd below the March 2015 peak, a far slower drop than many analysts had expected just a few months ago.  Shale firms' resilience in the face of crashing crude oil markets has added to the selloff, pushing prices to near 13-year lows this week.  Bakken production from North Dakota and Montana was set to fall 24,000 bpd, while production from the Eagle Ford in South Texas was expected to fall 72,000 bpd. But some regions were still growing, 18 months into the oil slump.  Production was forecast to rise by 5,000 bpd in the Permian Basin in West Texas and eastern New Mexico, the data showed.

The “Hanging in There” Game for Oil Producers --The latest EIA report shows the US Production rate steady and holding at the 9.2 million barrels per day. And although there have been some anecdotal reports out of Canada at the start of the year on this recent down leg in oil prices, that this has triggered them to shut down production, that at these prices it makes no sense to continue operations; the rest of the beleaguered producers in the oil space are continuing to operate and hold on throwing more bad money after bad money. Was the Business Case for $40 oil? These producers arent getting it, these producers didnt get into the business for $40 oil, these projects were started when the floor for WTI was $90 a barrel, with the extreme lows of a solid 5-year timeframe in the low $80s per barrel for oil. No business plan had a model with 16 months of average oil prices in the $45 barrel range. It might just take oil prices going to $25 a barrel for hands to be forced, so somebody will finally make the call, and pull the plug on some of these operations.It seems everyone is on the hopium alternative reality trip that oil prices will recover at the back of 2016, and if they can just stay in business until then, then they can survive. But they aren`t getting it, the only way prices move higher by enough magnitude where they could actually survive, is if enough US production goes offline permanently, i.e., people go out of business – namely these same beleaguered producers who didnt get into the business for $45 oil. Thus the Catch – 22 that none of these firms are getting is that sure prices may rise in the future, but not until you go out of business.  You are the problem, taking US Production from 5 million barrels per day to 9.5 million is what is currently unsupportable in the market. The market will not clear and rationalize until you get out of the business for good. This isnt a have your cake and eat it too moment. Oil prices don`t recover until you go out of business, so you are just delaying the inevitable. I cannot believe how stupid people are in the oil industry, 9.2 million barrels per day of US Production is just too much given the last 16 month`s pricing environment in oil markets. US Production needs to drop fast, stop looking around at your neighbor to stop producing, if you got into the business the last 5 years, prices are not recovering until you leave for good.

Rig Count: Capitulation? - Art Berman - After last week’s moderate drop in rig count, the amount of horizontal oil rigs seems to implode this week. The U.S. land rig count was down 37 this week and the land horizontal rig count was down 30. Is this capitulation? Hard to say but it's the biggest drop since March 2015. And, the Fayetteville Shale play officially bit the dust this week with zero rigs for the first time since the play began in 2005. The tight oil horizontal rig count was down by 20 and the key Bakken-Eagle Ford-Permian HRZ rig count was down by 14. The Bakken lost 3 rigs, the Eagle Ford, 4, and the Permian, 7. Shale gas lost 8 HRZ rigs. The Haynesville lost 2, the Marcellus, 6, the Utica 1, the Fayetteville, 1. The Woodford and Barnett each gained 1 rig.

Drilling slump saps U.S. diesel demand -  El Nino and the warm winter weather are being blamed for the weak demand for distillate fuel oil in the United States, but the slump in oil production is probably having a bigger impact. The oil industry was the fastest-growing customer for middle distillates like diesel between 2009 and 2014, according to the U.S. Energy Information Administration (EIA). The oil industry itself accounted for 20 percent of all the increase in diesel consumption during the five-year drilling boom. Businesses engaged in oil drilling, pipelines and refining consumed 2.1 billion gallons of diesel in 2014, the most recent data available, up from just 760 million gallons in 2009. By 2014, oil producers accounted for 3.5 percent of all distillate fuel oil sales in the United States, up from 1.4 percent in 2009. Drilling rigs and the massive pumps employed for hydraulic fracturing all use high-horsepower engines which run 24 hours per day and consume prodigious quantities of fuel. The heavy trucks used to haul drill pipe, frac sand and water to well sites, and carry away crude before the well is hooked up to gathering pipelines, are all diesel powered. And since many oil fields are in remote rural areas with little or no electricity supply from the main power grid, most of the electricity used for heating and lighting also comes from diesel generators. So as the number of active drilling rigs and crews rose five-fold from around 300 in 2009 to more than 1500 in 2014, diesel consumption surged as well. Direct diesel sales to customers in the oil industry rose from 50,000 barrels per day to almost 140,000 barrels per day (bpd). For comparison, in 2014, around 2.5 million bpd of distillate was were sold as road fuel, while 250,000 bpd were sold to residential customers, 240,000 bpd to the railroads and 200,000 bpd to farms.

Zombies: Shrinking Cash Flow And Rising Debt Turn Some E&Ps Into The Walking Dead. From waves of reanimated corpses feeding on unfortunate strangers trapped in a western Pennsylvania farmhouse in Night of the Living Dead to the hordes stalking the beleaguered survivors in the current smash TV hit The Walking Dead, zombies have captivated audiences. But real life zombie companies aren’t as entertaining.  The dramatic and sustained plunge in hydrocarbon prices since mid-2014 has ravaged the finances of oil and gas producers to the extent that some observers have labeled the weakest of these “zombie” companies. These cannot sustain themselves on current pretax cash flow and look to be shuffling slowly toward their ultimate demise. Today we take a walk through the living dead to uncover the zombies. To identify the walking dead, we first screened the income statements and balance sheets of over 50 U.S. independent E&P companies. Within that universe we looked for companies with an Interest Coverage ratio (defined as earnings before interest, taxes, depreciation, amortization, and exploration expense or EBITDA divided by Interest) below 3 times, and a Debt to Capital ratio above 75% based on 3Q/15 financial results. Having these metrics makes it difficult or impossible for companies to access traditional capital markets to remedy their financial issues.  To determine each company’s ability to replace production, we estimated normalized 2016 cash flow (excluding non-recurring items) based on 3Q/15 results and compared it with “maintenance capital”, the level of investment needed to replace 2015 production. We estimated maintenance capital by multiplying estimated 2016 finding and development costs per barrel of oil equivalent (boe) by 2015 production volumes.  We estimated 2016 finding and development costs by taking average 2014 finding and development costs of about $19/boe and reduced that number by 25% for 2015 and another 25% for 2016 based on the level of cost reductions we have seen in the industry, and rounded the result to $11/boe. The twelve companies that met our interest coverage and debt metrics and are unable to replace production from estimated 2016 cash flow made our list of zombies (see Table 1). 

Energy Industry to Face a $100 billion-plus Cash-flow Gap in 2016, Says AlixPartners Study — The year 2016 will likely be another year of low oil prices and deteriorating energy-industry revenues and profits, turning it into a watershed for the already-troubled industry, including for the more than 130 publicly-traded exploration & production (E &P) companies operating in North America which are predicted to post a combined negative net cash flow (operating cash minus interest payments and currently-planned capital expenditures) of more than$100 billion in 2016. That’s according to a new study released today by AlixPartners, the global business-advisory firm. This dramatic funding gap underscores the critical and immediate need the entire industry—from E &P companies (including integrated majors) to oilfield services and equipment (OFSE) companies to midstream companies to refiners and beyond—faces, globally, to generate cash. That’s because while companies can go a long time without profits, they can survive only a short time without cash, the lifeblood needed by any type of company to pay its bills. And, even for companies that have cash cushions, weathering this severe industry downturn intact is not assured. The study says industry profits for the past year as measured by earnings before interest and taxes (EBIT) will likely be down 20% to 30%, and it finds that the industry’s overall return on capital employed (ROCE) today is only about 3%, a far cry from the 20% returns of a decade ago. In order to produce cash and make it through this downturn intact, says to the study, companies in the industry need to adopt “lights-on,” zero-based operating and staffing budgets to reflect the realities of much lower activity levels today, budgets which should include:

Delayed oil projects total nears $400bn -- Energy groups have shelved nearly $400bn of spending on new oil and gas projects since the crude price collapse, pushing back millions of barrels a day in future output from areas including the Gulf of Mexico, Africa and Kazakhstan. In an authoritative study published on Thursday, the energy consultancy Wood Mackenzie says development of some 68 major projects, or 27bn barrels of oil equivalent in reserves, has been put back as companies scramble to curtail costs and protect dividend payouts. The latest figures show that the amount of deferred capital spending on projects awaiting approval has almost doubled since June, from $200bn to $380bn, with 2.9m barrels a day of liquids production — equivalent to Kuwait’s crude output — now not due to come on stream until early in the next decade. The savage new year sell-off in Brent crude, which has tumbled more than 70 per cent from its summer 2014 peak of $115 to about $30 a barrel — close to 12-year lows — has lent renewed urgency to cost-cutting. US crude erased gains on Wednesday after a weekly petroleum report showed that stocks at Cushing, a key delivery point, had climbed to a record high. “Company budgets have shrunk drastically and investors are favouring those delivering severe capex cuts,” the Wood Mac report says. “As a result, there is a growing backlog of deferred greenfield and incremental developments that require significant investment.”High In what the consultancy describes as a “bleak” outlook for the “vast majority” of such fields — many of which are high-cost deepwater projects — only a handful of projects are likely to get the go-ahead this year, while billions of dollars more spending is expected to be postponed.

2016 brings more pain to U.S. shale companies as crude sinks | Reuters: Pain is quickly growing more acute in the new year at beleaguered U.S. shale companies as a global supply glut sinks crude further to 11-year lows, putting added financial stress on the most heavily indebted. Debt and equity investors have all but given up on the exploration and production sector as oil prices tumble lower. In the last year, the SIG index of oil companies fell 42 percent, compared with a 0.6 percent decline in the Standard & Poor's 500 index.  SandRidge Energy, a once high-flying Oklahoma-based shale company backed by billionaire investors Leon Cooperman and Canada's Prem Watsa, was delisted by the New York Stock Exchange on Wednesday. The stock last traded on the NYSE for less than 20 cents a share. Though companies ended 2015 with enough cash on hand to cover interest payments for well into next year, they cannot afford to drill new wells. The gloomier outlook is expected to prod more of them to restructure and give up on trying to ride out a downdraft showing no signs of abating soon. Oil CLc1 is down 10 percent since Dec. 31 to $33 a barrel, falling away from the crucial $50 to $60 level that many shale companies need for long-term survival. "You are going to see a lot more bankruptcies and restructurings this year," said Bill Costello, an energy analyst at Westwood Holdings Group Inc. "This year is going to be much worse for companies with weak balance sheets." He believes Penn Virginia Corp, Midstates Petroleum Company Inc, Ultra Petroleum Corp, GoodRich Petroleum and Resolute Energy Corp, all small producers, will have to restructure. Representatives for those companies did not comment.

Crude at $10 Already a Reality for Canadian Oil-Sands Miners - Think oil in the $20s is bad? In Canada they’d be happy to sell it for $10. Canadian oil sands producers are feeling pain as bitumen -- the thick, sticky substance at the center of the heated debate over TransCanada Corp.’s Keystone XL pipeline -- hit a low of $8.35 on Tuesday, down from as much as $80 less than two years ago. Producers are all losing money at current prices, First Energy Capital’s Martin King said Tuesday at a conference in Calgary. Which doesn’t mean they’ll stop. Since most of the spending for bitumen extraction comes upfront, and thus is a sunk cost, production will continue and grow.  Bitumen is another victim of a global glut of petroleum, which has sunk U.S. benchmark prices into the $20s from more than $100 only 18 months ago. It’s cheaper than most other types of crude, because it has to be diluted with more-expensive lighter petroleum, and then transported thousands of miles from Alberta to refineries in the U.S. For much of the past decade, oil companies fought environmentalists to get the pipeline approved so they could blend more of the tar-like petroleum and feed it to an oil-starved world.  Environmentalists are hoping oil economics finish off what their pipeline protests started.

4.5-magnitude earthquake reported in Alberta fracking zone: — The federal government reported an earthquake Tuesday in an area of northwestern Alberta where fracking for energy development is common. Natural Resources Canada says the earthquake was “lightly felt” this morning in Fox Creek. No damage has been reported. The earthquake registered 4.5 on the Richter scale at about 11:30 Tuesday morning, which would make it the strongest quake reported to the Alberta Energy Regulator in a year. According to the Richter Scale, quakes of that magnitude are considered “light.” They’re likely to be felt by most people in the area and may cause noticeable shaking and rattling of indoor objects. The regulator’s website says a quake of that intensity is strong enough to require the responsible energy company to stop fracking. Concerns about seismic activity in the Fox Creek area began in December 2014, when a series of 18 earthquakes between 2.7 and 3.7 in magnitude rumbled the area. In January 2015, several events were recorded between magnitudes of 2.4 and 4.4. The regulator responded in February by imposing a new set of rules for the so-called Duvernay play near the town. “The order comes after several seismic events — possibly related to hydraulic fracturing — were recorded in the Fox Creek area,” the regulator said in a press release at the time. Before starting to frack, companies must consider the likelihood of resulting earthquakes.

Was Canada’s Latest Earthquake the Largest Fracking Quake in the World?  -- A 4.8-magnitude earthquake has indefinitely closed fracking operations in northern Alberta, an area that has experienced a spate of tremors in recent months.  While it is too soon to tell if the temblor was triggered by fracking, if fracking is indeed the culprit, Canada will once again set a world record for the largest earthquake triggered by the controversial drilling process.  The earthquake was reported Tuesday at 11:27 a.m. approximately 30 kilometres west of Fox Creek, Alberta.  Alberta Energy Regulator (AER) has ordered the shutdown of the site operated by multinational energy company Repsol Oil & Gas, CBC News reported. The regulator automatically shuts down a fracking site when any seismic activity registers above a 4.0. “The company has ceased operations … and they will not be allowed to resume operations until we have approved their plans,” AER spokeswoman Carrie Rosa said. A statement from Repsol confirmed that Tuesday’s earthquake occurred during fracking operations. “Repsol immediately shut down operations and reported the event to the AER and other local authorities,” the statement said.“The company is investigating the event, which includes reviewing and analyzing available geological and geophysical data, as well as the onsite seismic monitoring data. Operations will not resume at this location until a full assessment of the event has been completed and approval has been received from the AER.”

Scientists agree fracking can cause earthquakes, but how is still a mystery: A record-breaking earthquake this week in the middle of an Alberta oilfield heavily subject to hydraulic fracking is one of a growing number of such events across the continent, scientists say. But while the amount of research on "induced seismic activity" is growing, the link between fracking and quaking is still a mystery. "If we look at tens of thousands of wells that have been stimulated with hydraulic fracking in Western Canada, less than half a per cent are associated with induced earthquake activity," said David Eaton, a University of Calgary geophysicist. "What are the factors that make it prevalent in some areas and entirely absent in most other areas?" On Tuesday, an earthquake variously reported as measuring between 4.2 and 4.8 on the Richter scale shook pictures on the walls of homes in Fox Creek, a community in the centre of the Duvernay oil and gas field. The quake was the latest — and largest — of hundreds of similar shakers around the community since 2013. Fracking involves pumping high-pressure fluids underground to create tiny cracks in rock and release natural gas or oil held inside. Scientists agree that fracking or injecting waste water into wells can cause earthquakes. "Among the earth science community, I don't think there's any doubt," said Arthur McGarr of the United States Geological Survey. "The scientists are all on the same page." But many questions still have to be answered. Experts need to sort out when fracking is the cause of earthquakes and when they're caused by waste water pumped into deep aquifers. "Waste-water disposal, at least in the U.S., has been the primary cause of earthquakes," said McGarr. "In Canada, it's not clear that things work the same way. That's still a debated question."

Fox Creek fracking operation closed indefinitely after earthquake - Edmonton - CBC News: A hydraulic fracturing operation near Fox Creek, Alta., has been shut down after an earthquake hit the area Tuesday. The magnitude 4.8 quake was reported at 11:27 a.m., says Alberta Energy Regulator, which ordered the shutdown of the Repsol Oil & Gas site 35 kilometres north of Fox Creek. Carrie Rosa, spokeswoman for the regulator, says "the company has ceased operations … and they will not be allowed to resume operations until we have approved their plans." Rosa added the company is working with the energy regulator to ensure all environmental and safety rules are followed. In a statement, Repsol confirmed the seismic event and said the company was conducting hydraulic fracturing operations at the time it happened. "Repsol immediately shut down operations and reported the event to the AER and other local authorities," the statement said. "The company is investigating the event, which includes reviewing and analyzing available geological and geophysical data, as well as the onsite seismic monitoring data. Operations will not resume at this location until a full assessment of the event has been completed and approval has been received from the AER."

Canada’s Frack Quakes: Will Fracking Cause The BIG ONE? -- One earthquake is recorded on average each day in a western Canadian region where companies extract oil by fracking, according to statistics published by the Canadian province’s energy regulatory agency.The Alberta Energy Regulator (AER) said Friday that in the last year alone, there were 363 tremors in and around Fox Creek, a small town of 2,000 inhabitants located 260 kilometers (160 miles) northwest of Edmonton.Some days, seismic activity is higher, such as on September 11, 2015, when a record 18 earthquakes were felt.On Tuesday, a 4.8-magnitude quake on the Richter scale was recorded 30 kilometers west of Fox Creek, where Spanish firm Repsol SA is injecting liquids at high pressure into subterranean rocks to create fissures and extract oil and gas—the process known as fracking.Repsol confirmed it had been conducting fracking operations “at the time of the event.”The technology is widely used in Canada and the United States, helping to keep down energy costs. But some European countries ban it.The AER has not confirmed a link between Tuesday’s small quake and fracking in the region. Spokeswoman Carrie Rosa told AFP the agency is investigating.Meanwhile, Repsol has halted operations and is awaiting an AER go-ahead before resuming fracking—which is required for all seismic events of 4.0 or higher under new rules.

The Death Of The Canadian Oil Dream, A Firsthand Account -- We’ve spent quite a bit of time over the past 12 months documenting the trainwreck that is Alberta’s economy. Most recently, we brought you "This Is Canada's Depression: Surging Crime, Soaring Suicides, Overwhelmed Food Banks" and "For Canadian Repo Men, Business Has Never Been Better", but you can review the story in its entirety by revisiting the following posts:

In short, Alberta is at the center of Canada’s oil patch and has suffered mightily in the wake of crude's seemingly inexorable decline. Going into last year, Alberta expected its economy to grow at a nearly 3% clip. That forecast was reduced to 0.6% in March and further to -0.6% in the latest fiscal update. Oil and gas investment has fallen by a third while rig activity has been cut in half.The fallout is dramatic. Food bank usage in Alberta is up sharply and so, unfortunately, is property crime in places like Calgary where vacancy rates in the downtown area are at their highest levels since 2010. Suicide rates are on the rise as well while the outlook for unemployment continues to darken with each passing month of “lower for longer” oil prices.Below, find excerpts from an excellent account of the malaise penned by Jason ‎Markusoff who writes about Alberta, lives in Calgary, and has spent 12 years reporting for the city's largest newspapers.

Fracking test explosions allowed without planning permission - BBC News: The government is set to remove another obstacle to the exploration for shale gas deposits in the UK. Fracking firms will no longer need planning permission to drill exploratory boreholes and set underground explosive charges. The government says the same safety rules for oil and gas exploration will apply - and the use of explosives will be limited to avoid nuisance. But critics say it will rob local people of a say and cause disruption. Shale gas exploration using explosives to create shock waves to build up a map of rock forms is already in use in some parts of the country. The industry says it uses other techniques - such as "thumper trucks" - to create shock waves more often than explosive charges. A spokesman for industry body United Kingdom Onshore Oil and Gas said: "This simply brings the onshore oil and gas industry in line with water companies and other industries which drill dozens of boreholes a year and perform subsurface monitoring, including seismic surveys, as a matter of course, with no lasting impact on the environment and hardly anyone noticing."But anti-fracking campaigners said the changes would give local people less control over what is happening in their area. Kathryn McWhirter, of Frack Free Balcombe, said her main objection was that new planning rules would pave the way for full scale fracking. "It is a foot in the door. It is the beginning of 'permission creep,'" she told the BBC News website.

Householders affected by floods face insurance double-whammy if they live nearby planned fracking sites --  As householders across the UK continue the great flood clean-up, many are battling with insurance companies. Some are discovering that they now face an insurance “double whammy” – especially if they live in one of the areas covered by the new fracking licences announced by the Government before Christmas. Many of the UK’s best known insurance companies will not insure against fracking-related damage, an investigation by The Independent on Sunday and the campaign group Spinwatch has found.This could include contamination caused by polluted water from a fracking site being spread during exceptional flood events and could also include groundwater contamination from underground fracking operations. Companies representing two thirds of the UK insurance market will not insure against damage caused as a result of fracking, or else have exemptions covering potential pollution of water from the controversial technique. This means tens of thousands of people will find it difficult to insure themselves against fracking-related damage to their property or land. One in five of the 150 new fracking sites announced have been designated as having a significant risk of flooding and some flooded over the past month. Top domestic insurers were approached by a test consumer saying they lived within five miles of a proposed fracking well in Ryedale, North Yorkshire, where Third Energy has applied to frack. The application could be decided by North Yorkshire County Councillors next month, as the council is under pressure from the Government to fast-track shale gas exploitation.

BP to axe 1 in 5 North Sea jobs as oil giant cuts 4,000 staff worldwide -- BP is cutting one in five jobs at its North Sea operations as the oil price threatens to fall below $30 a barrel. The British oil and gas group is laying off 600 people in Scotland in a cost-cutting drive that will involve 4,000 employees axed worldwide. The redundancies are taking place against the backdrop of a slumping oil price, which has hit industry profits and forced producers to shelve projects around the world worth hundreds of billions of dollars. The North Sea cuts will affect oil rig workers as well as office-based staff and agency workers on long-term contracts, but there are no plans to close any oil rigs, BP said. The Unite trade union said the crisis gripping the British oil and gas sector was “far from over”. Unite’s regional officer, John Boland, said: “It is deeply worrying that we are now seeing a super-major making deep cuts to its workforce across the UK. We need an emergency convention of all the industry stakeholders – government, employers and trade unions – to tackle this crisis so we have a safe and sustainable industry for the next generation.”

BP to slash thousands more jobs in face of oil downturn | Reuters: British oil and gas company BP announced plans on Tuesday to slash 5 percent of its global workforce in the face of a continued slump in oil prices. It said it aims to reduce its global oil production, or upstream, headcount by 4,000 to 20,000 as it undergoes a $3.5 billion restructuring program. BP said its headcount totaled around 80,000 at the end of 2015. With crude oil prices at 12-year lows of around $32 a barrel, the world's biggest oil and gas producers are set to continue aggressively slashing spending this year as they face their longest period of investment cuts in decades. "We want to simplify (our) structure and reduce costs without compromising safety. Globally, we expect the headcount in upstream to be below 20,000 by the end of the year," a company spokesman said. In the North Sea, he said BP planned to reduce headcount by 600 people over the next two years with most cuts likely in 2016.  Oil companies including Royal Dutch Shell and Chevron have already slashed tens of thousands jobs globally to deal with a near 75 percent drop in oil prices since June 2014 that has seen earnings collapse.  BP, which must also pay $20 billion in fines to resolve the deadly 2010 Gulf of Mexico spill, announced in October plans for a third round of spending cuts and said it would limit capital spending, or capex, to $17-19 billion a year through to 2017. The company, which has already sold over $50 billion of assets in recent years in order to cover the spill costs, said it expected an additional $3-5 billion of divestments in 2016.

Norwegians See Decrease In Production In 2016 -- Platts is reporting: The Norwegian Petroleum Directorate highlighted huge challenges facing the oil and gas industry in its annual forecasts Thursday, predicting total capital expenditure on the shelf would fall another 10% in 2016 to $15.3 billion as oil output contracted.  That downward adjustment followed the 17% plunge in total spend last year to $16.98 from record investment levels in 2013 and 2014 of around $20.4 billion.  The Stavanger-based directorate said more falls were to come, with spending declining in the next few years towards $13.6 billion.  The NPD said oil output was also expected to fall in 2016 to 89 million cubic meters (1.53 million b/d), despite an upward blip last year thanks to new fields such as Lundin Petroleum's Edvard Grieg. [The conversion factor appears to be 58.1699.] In round numbers, the Norwegians have been producing around, but never quite reaching, 2 million bopd, although their production has been decreasing.

Norway's Black Gold Fields Are A Sea Of Red - A Real-Time Map Of Crude Carnage --Norway is in trouble. As we have detailed previously (here, here, here, and here), the world's largest sovereign wealth fund has begun liquidating assets (after its largest quarterly loss) as the nation faces recessionary fears (key data deterioration as oil stays lower for longer) with expectations building (despite denials by the central bank) that ZIRP (or even NIRP) is coming. Why? Simple - as the following real-time map shows - every one of Norway's oil fields are currently underwater!  As we explained previously, while the slump in oil has pressured the krone and thus helped the country preserve some semblance of export competitiveness, the fact that i) everyone else is easing, and ii) global demand and trade are in the doldrums, serves as a kind of counterweight, leading directly to a situation wherein the currency, in Bloomberg’s words, “just can’t get weak enough.”  Here’s more, via Bloomberg:With oil prices still wobbling around $50, Norway is in danger of a recession that could drive its benchmark interest rates, already at a record low, to zero.That’s what economists at Svenska Handelsbanken AB in Oslo say as they warn that “recessionary risks are significant.” The central bank in September cut rates to 0.75 percent and signaled more than a 50 percent chance for a third reduction since the drop in oil prices accelerated, about a year ago. Handelsbanken sees three cuts next year, bringing the benchmark to zero by the end of 2016. “The Norwegian economy will now experience a deeper downturn than during the financial crisis, with output expected to stay below its potential for longer than it did last time,”

BHP Billiton books $7.2 billion writedown US shale assets: Top global miner BHP Billiton said on Friday it would book a $7.2 billion writedown on the value of its U.S. shale assets, reflecting a slump in oil and gas prices and a bleak near-term outlook. The hefty impairment is the third spawned by BHP's badly timed push into U.S. shale in 2011, when it spent $20.6 billion, including assumed debt, on two acquisitions at a time when oil and gas prices were much higher than they are now. "Oil and gas markets have been significantly weaker than the industry expected," BHP Chief Executive Andrew Mackenzie said in a statement. In the wake of the collapse in oil prices over the past year, BHP has sharply cut its operating costs and capital spending at its U.S. onshore operations, reducing the number of rigs from 26 to five. BHP said it has cut its oil price assumptions for the short to medium term and lowered its medium and long-term gas price assumptions, leading to the impairments on its U.S. onshore assets. The writedowns will take the carrying value of the business down to about $12 billion, excluding deferred tax liabilities of about $4 billion.

World's Largest Miner Books Massive $7.2 Billion Writedown On US Shale "Assets" -- Late last month, Freeport McMoRan co-founder and executive chairman James R. Moffett was shown the door. Moffett, known as the “last of the old-time wildcatters”, was a legend in the industry but made a fatal mistake in 2013: he paid $2.1 billion for McMoRan Exploration Co (an oil-and-gas company the parent company had separated from in the 1990s), and $6.9 billion for Plains Plains Exploration & Production. As WSJ put it, “the deals in part were a bet that oil prices would remain high.” Well, they didn’t, and the gamble ended up increasing the combined entity’s debt fivefold and Carl Icahn is now pushing Freeport to dump the “high cost” assets. Freeport wasn’t the only mining giant to make an ill-timed bet on US oil and gas assets. BHP Billiton, the world’s largest miner, spent $20 billion buying US assets in 2011, making it the largest overseas investor in US shale. Now, as “lower for longer” turns to “lower for longer-er”, the company is set to take a huge writedown on its US onshore portfolio. How huge, you ask? $7.2 billion huge (or $4.9 billion after taxes) on assets the company was carrying at just over $20 billion. The company now values its US assets at $16 billion. “While we have made significant progress, the dramatic fall in prices has led to the disappointing write down announced today,” CEO Andrew Mackenzie said. “However, we remain confident in the long-term outlook and the quality of our acreage. We are well positioned to respond to a recovery.” Mackenzie went on to say the company would cut the number of rigs operating in the US from 26 to just 5 by the end of the quarter. "In addition to the purchase costs, BHP has committed more than $15bn of capital investment [to the US assets]", FT notes, underscoring just how expensive a bet this truly was. "The impairments announced on Friday mean BHP has now written off almost $13bn on the deals."

Oil Goes Nonlinear - by Paul Krugman - When oil prices began their big plunge, it was widely assumed that the economic effects would be positive. Some of us were a bit skeptical. But maybe not skeptical enough: taking a global view, there’s a pretty good case that the oil plunge is having a distinctly negative impact. Why? Well, think about why we used to believe that oil price declines were expansionary. Part of the answer was that they reduced inflation, freeing central banks to loosen monetary policy — not a relevant issue at a time when inflation is below target almost everywhere. Beyond that, however, the usual view was that falling oil prices tended to redistribute income away from agents with low marginal propensities to spend toward agents with high marginal propensities to spend. Oil-rich Middle Eastern nations and Texas billionaires, so the story went, were sitting on huge piles of wealth, were therefore unlikely to face liquidity constraints, and could and would smooth out fluctuations in their income. Now, part of the reason this logic doesn’t work the way it used to is that the rise of fracking means that there is a lot of investment spending closely tied to oil prices — investment spending that has relatively short lead times and will therefore fall quickly. A 10 or 20 percent decline in the price might work in the conventional way. But a 70 percent decline has really drastic effects on producers; they become more, not less, likely to be liquidity-constrained than consumers. Saudi Arabia is forced into drastic austerity policies; highly indebted fracking companies find themselves facing balance-sheet crises.  Or to put it differently:  really big declines set in motion a process of forced deleveraging among producers that can be a significant drag on the world economy, especially with the whole advanced world still in or near a liquidity trap.

European banks and oil price exposure - Izabella Kaminska -- Fascinating what a few months of sub $90 per barrel oil prices can do to the dialogue about the respective merits of cheap energy. So, whilst three months ago it was all about “trillions in stimulus from cheap oil!!“, today it’s “$50 oil changes everything!” and ARGHH “energy defaults may be the new subprime!”. As FT Alphaville warned at the start of December: If it is true that the commodity ecosystem is collapsing, then it is also true that all dependent industries are at risk. On that basis, those analysts who say that low prices will be a boon for many western economies that depend on oil imports, all miss that none of this necessarily guarantees increased demand. Margins may be temporarily improved for intermediaries, manufacturers and retailers, but if we end up heading towards a price war on all fronts, all we get is a deflationary spiral that threatens contracts, salaries and debt. That’s not to say we concur with the commentary that this is the new subprime. Unlike that debt crisis, this time round the risk and its interconnection with the wider economy is much better understood. No-one, after all, was marketing shale energy bonds as risk-free play for asset managers. Nor were they marketing EM debt as a sure bet that comes without currency exposure of any sort. That does not diminish the pain that will be suffered by exposed parties. But it does change the nature of the potential systemic implications. A much bigger concern, as David Keohane has pointed out on Thursday, is the volume of so-called commodity-related dark-debt in the market. We ourselves have described some aspects of this as dark inventory in the past, and always worried about the systemic implications. This, we would think, is the real stuff to worry about because it’s poorly understood how much of it has found itself on institutional balance sheets by means of collateral-funded shadow banking routes. Also, it’s unclear if asset managers understand that the stocks and bonds of high-profile commodity traders they loaded up on may also include complex shadow-bank credit exposures. In any case here’s a table from RBC Capital mapping out the exposure that is at least currently understood for the European banking system:

Stratfor: Who Wins and Who Loses in a World of Cheap Oil - Oil prices hit their lowest level since summer 2004 this week, continuing the rapid tumble that began in June 2014. The global benchmark, Brent crude oil, closed trading Jan. 8 at $33.37 per barrel, closing out the lowest week of prices in more than a decade. A number of factors contributed to the drop. The Chinese economy and financial markets performed poorly this week, sparking fears that a slowdown will dampen demand. In the major markets of Europe and North America, a mild winter has lowered seasonal consumption of natural gas and heating oil. On the supply side, Iranian oil will soon be back on the global market, and OPEC signaled that it would continue to supply high volumes of oil. The United States, too, has managed to produce a significant amount of oil, despite increased financial pressure on many U.S. producers. All of this may well push prices into the $20 to $30 per barrel range. Oil is the most geopolitically important commodity, and the ongoing structural shift in oil markets has produced clear-cut winners and losers. Between 2011 and 2014, major oil producers became accustomed to prices above $100 per barrel and set their budgets accordingly. For many of them, the past 18 months have been a period of slow attrition. And with no end in sight for low oil prices, their problems are going to only multiply. Each nation, though, has its own particular level of tolerance, and the following guidance highlights the key break points to monitor.

U.S. Oil Prices Drop Below $32 a Barrel - WSJ: —U.S. oil prices dropped below $32 a barrel Monday for the first time since 2003 on a stronger dollar and continued concerns about Chinese demand. Prices slumped to 12-year lows this month as the global glut of crude that has weighed on oil prices for more than a year continues to persist. Production outpaces demand globally, even though producers have already cut billions in spending and sharply reduced new drilling. Ongoing turmoil in Chinese markets has fueled concerns about an economic slowdown in China, the No. 2 oil consumer. The Shanghai Composite Index fell 5.3% Monday, after falling 10% last week. “The global glut issue has been around for a while. Right now, it is the fear of a Chinese slowdown that is spooking the market,” . A stronger dollar is also weighing on commodity prices, by making dollar-traded raw materials like oil more expensive to foreign buyers. The WSJ Dollar Index, which tracks the greenback against a basket of other currencies, recently rose 0.2%. Light, sweet crude for February delivery recently fell $1.42, or 4.3%, to $31.74 a barrel on the New York Mercantile Exchange, on track for the lowest settlement since December 2003.

Oil Seen Heading to $20 by Morgan Stanley on Dollar Strength -- A rapid appreciation of the U.S. dollar may send Brent oil to as low as $20 a barrel, according to Morgan Stanley. Oil is particularly leveraged to the dollar and may fall between 10 to 25 percent if the currency gains 5 percent, Morgan Stanley analysts including Adam Longson said in a research note dated Jan. 11. A global glut may have pushed oil prices under $60 a barrel, but the difference between $35 and $55 is primarily the U.S. dollar, according to the report. “Given the continued U.S. dollar appreciation, $20-$25 oil price scenarios are possible simply due to currency,” the analysts wrote in the report. “The U.S. dollar and non-fundamental factors continue to drive oil prices.” Brent crude capped its third annual decline in 2015 and has already lost more than 11 percent so far this year. The Organization of Petroleum Exporting Countries effectively abandoned output limits in December, potentially worsening a global glut, while U.S. stockpiles remain about 100 million barrels above the five-year average. Oil tumbled last week on volatility in Chinese markets after the country sought to quell losses in equities and stabilize its currency. A 3.2 percent increase in the U.S. dollar -- as implied by a possible 15 percent yuan devaluation -- may drive crude in the high $20s, Morgan Stanley said. If other currencies move as well, the shift by both the dollar and oil could be even greater, according to the report.

Oil Tumbles To 11 Year Lows After Another Bank Joins "$20 Crude" Bandwagon -- Another algo-induced stop-run has tried and failed to maintain its gains this morning as Morgan Stanley becomes the latest (after Goldman) to join the "oil in the $20s is possible" bandwagon. Despite hopeful bullishness from Andy Hall who sees production destruction leading (an industry that couldn’t function at $50 certainly can't function with prices below $40) inevityably leading to higher prices, Morgan Stanley warns, "in an oversupplied market, there is no intrinsic value for crude oil. The only guide posts are that the ceiling is set by producer hedging while the floor is set by investor and consumer appetite to buy. As a result, non-fundamental factors, such as the USD, are arguably more important price drivers."  The "Ma" bounce has failed...Just as we predicted a year ago... ...because while equities are pricing in an unsustainable 23x in foward energy P/E, another market, that of interest rate forwards, is implying oil plunging down to $35! As a reminder, oil is among other things, a function of rate differentials or said simpler, USD strength, strength which appears is not going anywhere. And as the following calculation from Cornerstone implies, should the EURUSD tumble to parity which is what Draghi's desire seems to be, it would suggest a 22% plunge in oil from here, implying a $35.5 price of oil one year from now.  Morgan Stanley has now come to the realization that Material USD Appreciation Could Bring New Lows for Oil Oil in the $20s is possible, but not for the reasons often cited. … In an oversupplied market, there is no intrinsic value for crude oil. The only guide posts are that the ceiling is set by producer hedging while the floor is set by investor and consumer appetite to buy. As a result, non-fundamental factors, such as the USD, were arguably more important price drivers in 2015. In fact, when we assess the >30% decline in oil since early Nov, much of it is attributable to the appreciation in the trade-weighted USD (not the DXY). With the oil market likely to remain oversupplied throughout 2016, we see no reason for this trading paradigm to change.

Oil tumbles nearly 5 percent to new lows; analysts warn of $20s | Reuters: A brutal new year selloff in oil markets deepened on Monday, with prices plunging as much as 5 percent to new 12-year lows as further ructions in the Chinese stock market threatened to knock crude into the $20s. Morgan Stanley warned that a further devaluation of the yuan could send oil prices spiraling lower still, extending the year's nearly 15 percent slide. While China's ructions are spooking traders over the outlook for demand from the world's No. 2 consumer, drillers in the United States say they are focused are keeping their wells running as long as possible, despite the slump, executives told a Goldman Sachs conference last week. Brent crude futures fell $1.75 to $31.80 a barrel by 11:34 a.m. EDT, their lowest since April 2004. U.S. West Texas Intermediate (WTI) crude futures dropped $1.50 to $31.66 a barrel, the lowest since December 2003. The markets are positioned in a way where "traders are afraid to be long," . "The firm push for normalization with Iran has taken the last shred of geopolitical risk out of traders' minds."

Oil prices near $30 as selling continues -- The brutal sell-off that has hammered oil prices since the turn of the year continued on Tuesday with Brent crude slipping towards $30 a barrel, leading to further job cuts and fears that the rout has further to run. As traders bet on lower prices, Brent crude fell by more than 3 per cent to $30.43 a barrel, extending losses over the first seven trading sessions of 2016 to 17.3 per cent. On the other side of the Atlantic, West Texas Intermediate, the US oil benchmark, also dropped as much as 4 per cent to $30.08 — a fresh 12-year low. “Oil continues to trade as if 2016 was the year of the Bear rather than Monkey,” said analysts at Citi. As prices fell BP announced it will cut 4,000 jobs across its exploration and production business globally, including 600 at its North Sea operations, as the energy industry’s biggest players struggle to shore up revenues. “Oil markets have ‎begun 2016 poorly. An exceptionally warm start to the winter . . . has worsened the existing supply glut,” said analysts at Energy Aspects, a consultancy. “Meanwhile, rising macro concerns, due to the rout in Chinese stock markets and slowing US growth, are adding fuel to the fire.” Concerns about China’s economy, whose growth led a surge in global oil demand over the past decade, has added to concerns about a persistent supply glut that has pushed oil prices down by 70 per cent over the past 18 months.

Oil plunges to $30, Dallas Fed President Sucker-Punches any Leftover Oil Bulls -- You’d expect at least some artificial optimism when the president of the Dallas Fed talks about oil. You’d expect some droplets of hope for that crucial industry in Texas. But when Dallas Fed President Robert Kaplan spoke on Monday, there was none, not for 2016, and most likely not for 2017 either, and maybe not even for 2018.The wide-ranging speech included a blunt section on oil, the dismal future of the price of oil, the global and US causes for its continued collapse, and what it might mean for the Texas oil industry: “more bankruptcies, mergers and restructurings….” The oil price plunge since mid-2014, with its vicious ups and downs, was bad enough. But since the OPEC meeting in December, he said, “the overall tone in the oil and gas sector has soured, as expectations have decidedly shifted to an ‘even lower for even longer’ price outlook.” So how low is “even lower?”  He didn’t say. But here is what is happening right now, just hours after Kaplan got through speaking. On Monday during the day and in late trading, WTI plunged through the $32-level, through the $31-level, and hit $30.53 a barrel, as I’m writing this, down another 7.1%: This $30.53 a barrel is within a hair of the Financial Crisis closing low on Tuesday, December 23, 2008, of $30.28 a barrel. Oil had plummeted for days as traders had been checking out for the holidays. Practically no one wanted to buy oil. But on Christmas Eve, oil rose to $32.94. It was the first day of a V-shaped recovery. And on Friday, December 26, 2008, oil soared and closed at $37.58 a barrel.

OilPrice Intelligence Report: Bearish Sentiment Takes Complete Hold Of Oil Markets -- The extreme pessimism in crude oil markets continues. WTI and Brent have set new lows almost every day of 2016, now trading in the low $30s per barrel. Crude is down 15 percent on the year. The same gloominess surrounding oversupply has not changed. What is different this time are new worries over the Chinese economy. The Shanghai Composite has crashed by more than 5 percent in a single day multiple times in the past week and a half, and is off by 20 percent since late December. Fortunately, the index stabilized on January 12, closing out the trading day pretty much flat. But the turmoil in China’s stock market is far from over. At the same time, China’s currency is under pressure. The combined effect of a slowing economy with a weaker currency could do significant damage to China’s oil demand, which is why oil markets are so alarmed. China’s stock market is a fraction of the size of its western counterparts, but the Chinese economy is so intertwined with so many trading partners that when China sneezes, much of the world will catch a cold. The WSJ published a nice analysis of the far-reaching of effects that China’s current economic situation is having – pushing down currencies around the world, depressing commodity prices, and slowing global trade. In other words, China’s turmoil raises the possibility of economic contagion.  With that backdrop in mind, crude oil has declined rapidly, and a price with a 2-handle is no longer a remote possibility. Goldman Sachs made the largest splash last year when it predicted $20 oil, but now other investment banks – including Morgan Stanley and Citigroup – are jumping on board with the bearish predictions. Unlike some of its peers, Morgan Stanley pinned much of the decline in recent months on the strong U.S. dollar. According to Wolfe Research, around one-third of U.S. oil and gas producers could be forced into bankruptcy by mid-2017 if oil prices remain low.

U.S. Oil Settles Above $30 a Barrel, After Dipping Below for First Time Since 2003 - WSJ - U. S. . oil prices briefly tumbled below $30 a barrel on Tuesday, underscoring the global economy’s difficulty with absorbing a relentless flood of crude supplies. The magnitude of the oil rout, now in its 19th month, has defied the forecasts of industry experts and Wall Street prognosticators who underestimated the ability of both big state-controlled producers and smaller private-sector energy firms to weather the historic slide in prices. The benchmark U.S. oil contract has dropped from $40 a barrel to $30 in just one month, and the pace of the selloff has rattled stock, bond and currency markets from Moscow to Riyadh to New York. Oil is down more than 70% since last trading in the triple digits, back in June 2014. Despite that fall, the steady supply in the oil markets has changed very little emboldening traders to push prices still lower. The amount of crude being stored is around record highs. Big exporters such as Saudi Arabia have kept pumping at a rapid clip even in the face of low prices. Meanwhile, U.S. producers are finding new ways to maintain their own output even as they cut costs. “We just really haven’t seen production (fall) in the U.S. and that’s what we need to see for oil to stop going down,”  Producers “pushed the technology and they really squeezed the most out of... these rigs.” Oil jumped back over $30 after dipping as low as $29.93 a barrel during intraday trading. U. S. oil’s losing streak hit a seventh session, the longest since its fall from above $100 began in the summer of 2014.

Tumbling oil trades below $30 a barrel for first time in 12 years - Oil fell briefly below the widely watched $30-per-barrel level on Tuesday, extending a selloff that has sliced almost 20 percent off prices this year amid deepening concerns about fragile Chinese demand and the absence of output restraint. Prices settled down 3 percent, a seventh straight daily decline for oil. Traders have all but given up attempting to predict where the new-year rout will end, with momentum-driven dealing and overwhelmingly bearish sentiment engulfing the market. Some analysts warned of $20 a barrel; Standard Chartered said fund selling may not relent until it reaches $10. By Tuesday, the crash had become almost self-fulfilling, with speculators too afraid to buy for fear of being burned by another false bottom. The slide appeared to first accelerate when it broke below the $32 area around 9 a.m. EDT (1400 GMT). The $30 mark is both a psychological and financial threshold. In recent days, traders have poured money into $30 put options for expiration in February and March. Hedging activity usually picks up as oil prices near big a options level, as buyers and sellers defend their interests. More than 15,000 contracts traded on Tuesday and 18,000 contracts traded on Monday for the February contract, more than doubling Friday's volumes.

WTI Slides After API Reports Massive Build In Gasoline & Distillate Inventories With the seasonally drawdown-prone December completed, we begin seasonally build-prone January with expectations for a 2mm barrel build. However, according to API, both total and Cushing inventory levels tumbled (-3.9mm and 300k respectively). Great news - so why is crude tumbling? Simple - massive builds in end-products again with Gasoline up a massive 7mm barrels and Distillates up 3.6mm barrels. Having ramped off sub-$30 levels after NYMEX closed, and lifted by the Iran-US news, WTI is sliding back rapidly. The largest 2-week Gasoline inventory build ever...

WTI Crude Crashes To "2" Handle After EIA Cuts Demand, Increases Production Forecast --In yet another hit for the energy complex, EIA just cut their global oil demand forecast to 95.19 million barrels a day this year (down from 95.22 million in December’s outlook). The energy agency also increased its forecast for global production to 95.93 million barrels a day (up from 95.79 million last month). This pressured WTI Crude back off a brief bounce and pushed it to a "2" handle at $29.97 for the first time since December 2003. Despite a short-term bounce after Jeff Gundlach suggested today would be a short-term bottom in crude, Jeffrey Gundlach, the widely followed investor who runs DoubleLine Capital and was prescient in his call for lower oil prices last year, said oil has hit a short-term bottom on Tuesday.As oil prices per barrel flirt with the $30-mark, Gundlach told Reuters:"Fundamentals are lousy but the technicals call for a short term bottom today."

Oil keeps falling. And falling. How low can it go? - — The price of oil keeps falling. And falling. And falling. It has to stop somewhere, right? Even after trending down for a year and a half, U.S. crude has fallen another 17 percent since the start of the year and is now probing depths not seen since 2003. “All you can do is forecast direction, and the direction of price is still down,” . On Tuesday the price fell another 3 percent to $30.51 a barrel in morning trading, its lowest level in 12 years. Oil had sold for roughly $100 a barrel for nearly four years before beginning to fall in the summer of 2014. Many now say oil could drop into the $20 range. The price of crude is down because global supplies are high at a time when demand for it is not growing very fast. The price decline, already more dramatic and long-lasting than most expected, deepened in recent days because economic turmoil in China is expected to cut demand for oil even further. Lower crude prices are leading to lower prices for gasoline, diesel, jet fuel and heating oil, giving drivers, shippers, and many businesses a big break on fuel costs. The national average retail price of gasoline is $1.96 a gallon. On Tuesday the Energy Department lowered its expectations for crude oil and most fuels for this year and next. The department now expects U.S. crude to average $38.54 a barrel in 2016.

Crude Curve Collapses - Market Sees Sub-$50 Oil Through 2021 -- The crude curve has just collapsed, especially since the rebound after China’s Golden Week reprieve ended around October 15. As Alhambra's Jeff Snider notes, the entire futures curve is under $50, an upsetting commentary on everything from US "demand" to long-term implications and especially those that are derived from economists’ somehow continued insistence that this is all just "transitory."

Forget $20 Oil: StanChart Says "Prices Could Fall As Low As $10 A Barrel" -- A little over a year ago, Paul Hodges was roundly mocked when in December 2014 he made a drastic call that "Oil May Drop To $25 On Chinese Demand Plunge, Supply Glut, Ageing Boomers." After oil got as close as 40 cents away from the dreaded 2-handle, Paul had the last laugh. But the bigger point is that not only is $20 oil not a shocker any more, it is largely expected and could be indeed welcomed, as first Goldman, then practically everyone else has now admitted it is just a matter of time before oil trades to levels not seen since the 20th century. So, perhaps to make a name for himself, the head of commodity research at Standard Chartered, Paul Horsnell decided to lower the bar into even more dramatic territory, and overnight suggested that oil prices could drop as low as $10 a barrel."Given that no fundamental relationship is currently driving the oil market towards any equilibrium, prices are being moved almost entirely by financial flows caused by fluctuations in other asset prices, including the USD and equity markets,” Horsnell said. "We think prices could fall as low as $10/bbl before most of the money managers in the market conceded that matters had gone too far."When does he see oil bottoming? "in extreme case, price floor may be set when entire market believes oil has undershot." So with a new, and even lower bogey, that means that an upper, or even lower $20-print in oil will be the shocker so many bottom hunters are looking for, but instead after this expectations reset, oil may have to indeed drop another $10 before the BTFD algos can finally make some money.

As oil plunges, energy companies cut jobs, postpone projects — The world’s biggest oil companies are slashing jobs and backing off major investments as the price of crude falls to new lows — and there may be more pain to come. Companies like BP, which said Tuesday it is cutting 4,000 jobs, are slimming down to cope with the slump in oil, whose price has plummeted to its lowest level in 12 years and is not expected to recover significantly for months, possibly years. California-based Chevron said last fall that it would eliminate 7,000 jobs, while rival Shell announced 6,500 layoffs. And it’s not even the big producers that will be affected most, but the numerous companies that do business with them, such as drilling contractors and equipment suppliers. While plummeting oil prices have been great news for motorists, airlines and other businesses that rely heavily on fuel, some 95,000 jobs were lost in the energy sector by U.S.-based companies in 2015, according to the consulting firm Challenger, Gray & Christmas. That was up from 14,000 the year before. Energy companies expanded as oil topped $100 a barrel in 2008 and stayed there during the early part of this decade, but prices have plunged over the past two years because of high supply and weakening demand The start of a new year hasn’t helped matters, with Brent crude, the benchmark for internationally produced oil, slipping below $31 a barrel on Tuesday, a drop of about 20 percent drop since Jan. 1 and the lowest since 2004.

Oil Plunge Sparks Bankruptcy Concerns - WSJ: Crude-oil prices plunged more than 5% on Monday to trade near $30 a barrel, making the specter of bankruptcy ever more likely for a significant chunk of the U.S. oil industry. Three major investment banks— Morgan Stanley, Goldman Sachs Group Inc. and Citigroup —now expect the price of oil to crash through the $30 threshold and into $20 territory in short order as a result of China’s slowdown, the U.S. dollar’s appreciation and the fact that drillers from Houston to Riyadh won’t quit pumping despite the oil glut. As many as a third of American oil-and-gas producers could tip toward bankruptcy and restructuring by mid-2017, according to Wolfe Research. Survival, for some, would be possible if oil rebounded to at least $50, according to analysts. The benchmark price of U.S. crude settled at $31.41 a barrel, setting a 12-year low. More than 30 small companies that collectively owe in excess of $13 billion have already filed for bankruptcy protection so far during this downturn, according to law firm Haynes & Boone.  Morgan Stanley issued a report this week describing an environment “worse than 1986” for energy prices and producers, referring to the last big oil bust that lasted for years. The current downturn is now deeper and longer than each of the five oil price crashes since 1970, said Martijn Rats, an analyst at the bank. Together, North American oil-and-gas producers are losing nearly $2 billion every week at current prices, according to a forthcoming report from AlixPartners, a consulting firm, that is set to be published later this week. “Many are going to have huge problems,” American producers are expected to cut their budgets by 51% to $89.6 billion from 2014, a reduction that exceeds the worst years of the 1980s, according to Cowen & Co. There is no relief in sight: The oil glut is expected to continue well into 2017, according to several banks, analysts and industry executives.

Brent below US$30 a barrel as US oil stockpiles grow - - Brent crude oil fell below US$30 a barrel for the first time in nearly 12 years on Wednesday (Jan 13) as an increase in US crude and fuel inventories added to the global oversupply. In London, Brent North Sea crude for February, the European benchmark for oil, fell 55 cents to US$30.31 a barrel, its lowest level since February 2004 and below the WTI price. Earlier Brent sank to US$29.96, its lowest level since April 2004. US benchmark West Texas Intermediate (WTI) for delivery in February pared earlier gains to close up a scant four cents at US$30.48 a barrel on the New York Mercantile Exchange. The US government's weekly inventories report on Wednesday snapped attempts by the benchmark contracts to rebound. The report showed a build in US commercial crude-oil stockpiles of 200,000 barrels in the week ending Jan 8. More significant was an 8.2 million barrel surge in gasoline inventories, and a 6.1 million barrel surge in distillate stocks, suggesting very sluggish consumption in the country. The report painted "a very bearish picture" of the market, said Bob Yawger, director of the futures division of Mizuho Securities USA. "Crude oil numbers ... are only 7.6 million (barrels) below their all-time record of 490.1 million," he said. Yawger also noted that crude-oil storage at the key Cushing hub was at an all-time record and nearing the terminal's maximum capacity, while gasoline's increase by 19 million barrels in the past two weeks was the biggest two-week build in history.

Crude Crashes On Biggest 2-Week Gasoline Inventory Build On Record - Confirming API data overnight, DOE reports that while total inventories of crude rose less than expected (+234k vs +2.1mm exp.) Gasoline and Distillates saw a massive build once again. Gasoline invenrtories rose 8.44mm barrels (following last week's 10.6mm record build) is thebiggest 2-week inventory build in history. Crude has crashed back from overenight "China is buying oil" demand hopes.


This is the biggest 2-week gasoline inventory build in history.  And crude is reacting how it should...

$10 oil: Crazy or the real floor beneath the oil crash? - Jan. 13, 2016: It's gotten so bad in the oil world that investment banks are practically falling over themselves to predict just how low crude will go. Oil prices crashed below $30 a barrel on Tuesday for the first time since December 2003. It's also a stunning 72% plunge from levels just 18 months ago. Few Wall Street firms saw the oil glut that has caused prices to collapse coming. Goldman Sachs infamously predicted in 2008 that an oil shortage would cause the commodity to skyrocket to $200 a barrel. But doom-and-gloom is all the rage now -- and price estimates keep falling. Just this week Morgan Stanley warned that the super-strong U.S. dollar could drive crude oil to $20 a barrel. Not to be outdone, Royal Bank of Scotland said $16 is on the horizon, comparing the current market mood to the days before the implosion of Lehman Brothers in 2008. Standard Chartered doesn't think those dire predictions are dark enough. The British bank said in a new research report that oil prices could collapse to as low as $10 a barrel -- a level unseen since November 2001. To put that in context, average U.S. gas prices slipped to $1.12 a gallon back then. American drivers are already cheering a steep decline in gas prices below $2 a gallon in recent weeks.

Jack Kemp's Weekly Energy Tweets -- January 13, 2016; Gasoline Demand Has Plummeted  - With regard to Jack Kemp's weekly energy tweets, we will start with gasoline demand and refer you back to this link. Shocking! Not only is current US gasoline demand significantly below demand for gasoline one year ago; the current demand is even below the ten-year median, a period in which the ObamaCare economy was mostly in need of “critical care.”  This has severe recession written all over it, unless things change dramatically over the next few months. It's very possible the combination of what is going on in the oil and gas industry and ObamaCare going into full implementation this year will create the perfect storm. And it won't be pretty.   From Jack Kemp:

  • US distillate demand (diesel fuel) has dropped off the chart (okay, almost):
  • Meanwhile, gasoline stocks have soared:
  • And look at this, US refineries processed a seasonal record -- and almost an all-time record --16.4 million bopd, up over a half-million bopd compared with 2015:
  • US distillate stocks soared 6.1 million bopd, close to a 10-year seasonal max set in 2011:

I really don't want to post all these graphs, but they are so incredibly amazing I don't want to lose them. So, I'm posting them for the archives. And if the graphs above don't get your attention, maybe this one will, the one that shows that US total refined product stocks rose almost 10 million bbls last week (I didn't mark the graph, hopefully you can spot the red line):

EIA Report Shows No Sign Yet of U.S. Production Cuts - The EIA report came out on Wednesday and the first thing that I look for, and really the only data point that matters for meaningful progress towards the market rebalancing is has U.S. Production started to decline. Well it hasn`t as last week we were at 9.219 million barrels per day, and this week we got 9.227 barrels per day, and this is slightly more than a year ago where we had 9.192 million barrels per day. Thus we are treading water for about a year at this 9.2 million barrels per day level, but that just isn`t going to cut it considering the drop in spot prices of crude oil. These guys are literally brain dead, even cars at auction have a reserve price. Apparently crude oil has no reserve price, they will sell it for $5 at this rate. At some point this data metric is going to drop like a rock, but it isnt this week. The next thing I look at is crude inventories and they seem to be stabilizing, probably because of the oil exporting ban being lifted to some extent. But I am still expecting some 10 million barrel weekly builds around maintenance season, as we had several 10 million type weekly builds last year around this time. We are basically flat for the week at 482.6 million barrels in storage, with Cushing at 64 million barrels in storage, and the gulf coast at 236.6 million barrels in storage, down about three million barrels on the week due to increased exports I am guessing as refinery inputs were nothing to write home about down about 200,000 barrels per day from the previous week at 8.562 from 8.775.The most striking part of the report was the build in products for the second week in a row, not sure what is going on here. But these builds seem a little odd, I cannot place my finger on it, but gasoline stocks have round tripped to 240.4 which matches where they were a year ago at 240.3 which looks like a double top on the charts. Of course gasoline prices are much lower this time around at 1.128 this year and 1.323 this time last year, almost a 20 cent difference and nearly the exact same level of stocks. Gasoline demand has dropped versus last year but this is a noisy number and I am not reading too much into this data point right now as we were at 8.159 for the first week, this week we did 8.500 million barrels per day of gasoline demand, and this time last year we were at 8.875 million barrels per day on average for the week.

OilPrice Intelligence Report: Oil Sinks Below $30 As Traders Fear Tidal Wave Of Iranian Oil: Oil prices briefly dipped below $30 per barrel this week as the depressed market continues. Market watchers seemed to be competing with each other to see who could publish the lowest prediction for oil prices, with Standard Chartered raising the possibility of $10 oil. It wasn’t too long ago that sub-$30 oil sounded ridiculous, so nobody can predict where the true bottom will be. The only thing that everyone knows is that today’s prices are unsustainably low since a large portion of global oil production is not profitable right now. The big question is when we will hit bottom. The ongoing crash in oil markets led to Wood Mackenzie’s much-publicized figure that $380 billion worth of oil projects have been cancelled since 2014. The totality of cancellations will result in nearly 3 million barrels of oil production that will not come online over the next decade. The markets have yet to grasp the ramifications of such massive cut backs, but the world could find itself dearly short of supply in the coming years given the dramatic pullback in exploration. For now, everyone is focused on the near-term. Bond prices for embattled energy companies are rapidly deteriorating. The Wall Street Journal reported that bonds for WPX Energy and Oasis Petroleum plummeted on Thursday, with each losing about 12 percent of their value. Oasis’ bonds with a 2019 maturity date are trading at just 53 cents on the dollar while WPX’s bonds maturing in 2023 are trading at just 65.5 cents on the dollar. Cheniere Energy  was set to ship the first LNG cargo from U.S. shores this month, but the company has hit a snag. The Sabine Pass export terminal will delay that inaugural shipment until February or March over “instrumentation issues.” The setback is a minor one for an $18 billion facility.

No, Goldman Is Not Calling For An "Oil Bull Market": Here Is What It Really Said And Why It's Bad News For Banks - There has been some confusion overnight whether Goldman, in a note released overnight, is calling for a new "bull market" in oil and commodities in general. Goldman did not call for a bull market.  While Goldman has long been one of the bigger bears on commodities in general, and oil in particular, earlier today, the firm's energy analyst Jefferie Currie released a note that offered a faint glimmer of hope for oil bulls. This is what he said: In oil, most of the demand improvement to lower prices occurred in 2015, and non-US supply reductions have been extremely modest, while in the US supply is only down about 150,000 b/d yoy as of year-end. In metals, supply has yet to materially come off as it is simply too easy to store excess output. What this suggests is that the key theme for 2016 will be real fundamental adjustments that can rebalance markets to create the birth of a new bull market, which we still see happening in late 2016. Ok so new "bull market"... eventually... maybe. For now, however, Currie explains why $20 oil is not the firm's base case yet: "while the surplus in oil continues to pressure oil timespreads wider and reversed the WTI-Brent spread as European surpluses are moved to the US Gulf Coast where spare storage exists, we still aren’t adopting the $20/bbl scenario as our baseline forecast since balances have not deteriorated further following our mid-December update."

Oil Prices Plunge 5% As Traders Fear A Wave Of Iranian Oil - WTI and Brent hit fresh lows on Friday over persistent fears of oversupply. The latest thing to drag down oil is the prospect of Iran quickly returning some significant volumes of oil to the market. That is because “Implementation Day,” the day that Iran fulfills all necessary requirements stemming from the historic nuclear agreement reach last year, is expected imminently. U.S. Secretary of State said on Wednesday that the achievement would be reached “within the next coming days.” The IAEA is expected to issue a report as soon as today that will affirm Iran’s compliance.  That means the sanctions on Iran could be lifted as soon as next week, and as such, Iran could quickly bring back some oil production and exports. Iran has promised to ramp up oil exports by 500,000 barrels per day almost immediately. Iranian officials have also said that within a year of the removal of sanctions, it could bring back 1 million barrels per day. At the same time, Iran has dialed back the ambition in recent weeks, saying that it will only produce as much as global demand justifies.  For now, oil markets are taking in the news and expecting more price pressure. WTI and Brent dropped nearly five percent during intraday trading on January 15.

U.S. Oil-Rig Count Falls By 1 - WSJ: The U.S. oil-rig count fell by 1 to 515 in the latest week, according to Baker Hughes Inc., BHI -3.11 % extending a recent streak of declines. The number of U.S. oil-drilling rigs, viewed as a proxy for activity in the oil industry, has fallen sharply since oil prices began to fall. But it hasn’t fallen enough to relieve the global glut of crude. There are now about 68% fewer rigs from a peak of 1,609 in October 2014. According to Baker Hughes, the number of gas rigs declined in the latest week by 13 to 135. The U.S. offshore-rig count was 26 in the latest week, down one from the previous week and down 28 from a year earlier. Oil prices tumbled below $30 a barrel on Friday, with daily losses rivaling their biggest of the winter as flailing Chinese markets and the soon-coming increase of Iranian exports adds to concerns that the global glut will linger. U.S. crude oil prices recently fell 5.99% to $29.33 a barrel.

Eagle Ford rig count falls as oil prices dip below $30 per barrel - With crude oil prices falling to 12-year lows, new drilling activity is slowing down in the Eagle Ford and other shale basins across the United States. West Texas Intermediate crude oil plunged below $30 per barrel on Friday morning, while new figures from the Baker Hughes Rig Count show that new drilling fell to 68 rigs in the Eagle Ford. At the same time last year, there were 185 active rigs in the vast oil-rich region just south of San Antonio. The drop in rig counts is representative of the struggles that the oil and gas industry have endured of late — including the Eagle Ford Shale, which has been a major economic generator for not only several counties south of San Antonio, but for the Alamo City as well. Baker Hughes reported losses also for other important shale basins in Texas and the United States. In the Permian Basin of West Texas, new drilling fell to 202 rigs from last week's number of 209. Across the Lone Star State, new drilling went down from 308 to 301 rigs in a week. Nationwide, there are now only 650 active rigs in the United States. The supply glut and low oil prices are expected to remain in place for at least the first six months of 2016. The U.S. Energy Information Administration reports that the Eagle Ford is expected to produce 72,000 fewer barrels of oil per day, but national crude oil inventories remain at 80 year highs.

Oil plunges below $29 on prospects of more Iran crude, China worries - Oil prices crashed 6 percent on Friday to close below $30 a barrel for the first time in 12 years, resuming this year's breathtaking rout as Chinese stock markets fell further and traders braced for an imminent rise in Iran's exports. After closing higher for the first time in eight sessions on Thursday, U.S. and Brent crude futures plumbed new lows, taking this year's losses to more than 20 percent, the worst two-week decline since the 2008 financial crisis. The slump was not over yet, some analysts warned, as the lifting of sanctions on Iran opens the door to a wave of new oil. The International Atomic Energy Agency (IAEA) is expected on Saturday to issue its report on Iran's compliance with an agreement to curb its nuclear program, potentially triggering the lifting of Western sanctions. Shares in China, the world's No. 2 oil consumer, tumbled on Friday, with the Shanghai index ending down 3.5 percent to its lowest close since December 2014 and the yuan weakening sharply offshore. Adding to fuel demand concerns, U.S. data showed retail sales fell and industrial production weakened in December. Brent  settled down $1.94, or 6.3 percent, at $28.94 a barrel, sticking below the pivotal $30 a barrel mark after briefly dipping below that level in the previous two days. It fell as far as $28.82, the lowest since February 2004.

Credit-Market Fear Gauge Soars as Oil Price Triggers Global Rout - The cost to protect against defaults by North American companies soared to a three-year high Friday as concerns over a deepening plunge in oil prices triggered a global rout in equities. The risk premium on the Markit CDX North American High Yield Index, a credit-default swaps benchmark tied to the debt of 100 speculative-grade companies, jumped 30.8 basis points to 557.7 basis point at 1:30 p.m. in New York, the highest since November 2012. A similar measure for investment-grade debt rose 6.5 basis points to 110.5 basis points, a three-year high. “Stocks are selling off, high yield is selling off, emerging-market debt is selling off, investment-grade bonds are selling off,” said Keith Bachman, the head of U.S. high yield at Aberdeen Asset Management Inc. in Philadelphia. “The higher spreads that we are seeing are reflective of the risk-off environment that we are in. Even though investment-grade credit is safer than high-yield credit, risk premiums are adjusting across the whole spectrum.” Oil fell to a new 12-year low below $30 a barrel in New York and the Bloomberg Commodity Index plunged to the lowest level since 1991. Stocks fell around the world as the Dow Jones Industrial Average sank more than 300 points. European stocks were poised to enter a bear market and the Shanghai Composite Index wiped out gains from an unprecedented state-rescue campaign. The carnage in commodities has lowered demand for the debt of the riskiest companies, with the extra interest investors demand to hold U.S. high-yield energy bonds over government debt rising to the highest level on record. Investors pulled $2.1 billion from U.S. high-yield funds this past week after withdrawing $809.1 billion the week earlier, according to data provider Lipper.

Meet Manifa (And Other Giant Oil Projects) That Will Add To The Global Oil Glut - World oil consumption is more than 90 million barrels a day. Between 2009 and 2014 oil was traded for about 110 dollars a barrel; now oil is changing hands for 32 dollars a barrel. Roughly a 7-billion-dollar cash flow a day is vanishing from the global market.  Norway’s sovereign wealth fund that has accumulated a stake of 4.5 billion dollars in Apple over the past years, will turn from an Apple buyer into an Apple seller.  The China Development Bank (a Chinese policy bank) has poured nearly 50 billion dollars into Venezuela in return for oil, with the country now collapsing under the Chinese debt, having no other choice but to drill for more oil.  These are just some of the challenges the world is facing in 2016 as oil prices are heading towards 20 dollars a barrel. Speculators and manipulators were able to manipulate the oil price to more than 120 dollars a barrel,  with the production cost being roughly between 20 and 80 dollars. With a huge profit margin the world was digging for more and more liquid gold.   Kashagan: Shell, Total S.A., Exxon Mobil and China National Petroleum Corporation are now stuck with a 50-billion-worth project in the Caspian Sea, called Kashagan. The project is full of problems and delays, but is expected to add 300.000 barrels of oil a day to the global oil glut the coming year. Manifa: While the media attention was directed to the shale oil boom in the US, the Saudis created a giant offshore oil project called Manifa. With one single project Manifa added 1 million barrels a day to the world oil glut. Manifa will expand its capacity the coming year, adding a further 500 million barrels a day to world markets.

Arthur Berman: Why The Price Of Oil Must Rise -Geologist Arthur Berman explains why today's low oil prices are not here to stay, something investors and consumers alike should be very aware of. The crazy-low prices we're currently experiencing are due to an oversupply created by geopolitics and (historic) easy credit, not by sustainable economics. And when the worm turns, we are more likely than not to experience a sudden supply shortfall, jolting prices viciously higher. This will be a situation not soon resolved, as the lag time for new production to come on-line will be much longer than the world wants: We started this conversation with your important observation that we’re only talking about a million or million and a half barrels a day of oversupply. So we could go from over-supply to deficit pretty quickly, because we’re not investing in finding that additional couple of million barrels a day that we need to be discovering. So we’re deferring major, major investments. We’re not just deferring exploration; we’re deferring development of proven reserves. Capital cuts across the world represent 20 billion barrels of development of known proven reserves. And so we will get to a point, and we will, we most certainly will, where suddenly everybody wakes up and says “Oh my God we don’t have enough oil! We’re now half million barrels a day low." And what will happen? The price will shoot up. That’s the way commodity markets work. And everybody will say “Whoopee! Let’s get back to drilling big time." Well there’s a big lag. There’s a huge time lag between when the price responds and people actually get around to drilling and they actually start bringing the oil onto the market and it becomes available as supply, because they’ve been asleep at the wheel for you know for how many months or years. And so you know you can’t just turn a valve and all of a sudden everything is okay again  Click the play button below to listen to Chris' interview with Arthur Berman (56m:07s)

Russia Breaking Wall St Oil Price Monopoly - Russia has just taken significant steps that will break the present Wall Street oil price monopoly, at least for a huge part of the world oil market. The move is part of a longer-term strategy of decoupling Russia’s economy and especially its very significant export of oil, from the US dollar, today the Achilles Heel of the Russian economy. Later in November the Russian Energy Ministry has announced that it will begin test-trading of a new Russian oil benchmark. While this might sound like small beer to many, it’s huge. If successful, and there is no reason why it won’t be, the Russian crude oil benchmark futures contract traded on Russian exchanges, will price oil in rubles and no longer in US dollars. It is part of a de-dollarization move that Russia, China and a growing number of other countries have quietly begun. The setting of an oil benchmark price is at the heart of the method used by major Wall Street banks to control world oil prices. Oil is the world’s largest commodity in dollar terms. Today, the price of Russian crude oil is referenced to what is called the Brent price. The problem is that the Brent field, along with other major North Sea oil fields is in major decline, meaning that Wall Street can use a vanishing benchmark to leverage control over vastly larger oil volumes. The other problem is that the Brent contract is controlled essentially by Wall Street and the derivatives manipulations of banks like Goldman Sachs, Morgan Stanley, JP MorganChase and Citibank.

Plunging Oil Prices – A Recipe for More War?  - Michael Klare - As 2015 drew to a close, many in the global energy industry were praying that the price of oil would bounce back from the abyss, restoring the petroleum-centric world of the past half-century.  All evidence, however, points to a continuing depression in oil prices in 2016 — one that may, in fact, stretch into the 2020s and beyond.  Given the centrality of oil (and oil revenues) in the global power equation, this is bound to translate into a profound shakeup in the political order, with petroleum-producing states from Saudi Arabia to Russia losing both prominence and geopolitical clout. To put things in perspective, it was not so long ago — in June 2014, to be exact — that Brent crude, the global benchmark for oil, was selling at $115 per barrel.  Energy analysts then generally assumed that the price of oil would remain well over $100 deep into the future, and might gradually rise to even more stratospheric levels.  Such predictions inspired the giant energy companies to invest hundreds of billions of dollars in what were then termed “unconventional” reserves: Arctic oil, Canadian tar sands, deep offshore reserves, and dense shale formations.  As of this moment, however, Brent crude is selling at $33 per barrel, one-third of its price 18 months ago and way below the break-even price for most unconventional “tough oil” endeavors. Worse yet, in one scenario recently offered by the International Energy Agency (IEA), prices might not again reach the $50 to $60 range until the 2020s, or make it back to $85 until 2040. The current rout in oil prices has obvious implications for the giant oil firms and all the ancillary businesses — equipment suppliers, drill-rig operators, shipping companies, caterers, and so on — that depend on them for their existence. It also threatens a profound shift in the geopolitical fortunes of the major energy-producing countries. Many of them, including Nigeria, Saudi Arabia, Russia, and Venezuela, are already experiencing economic and political turmoil as a result. (Think of this, for instance, as a boon for the terrorist group Boko Haram as Nigeria shudders under the weight of those falling prices.) The longer such price levels persist, the more devastating the consequences are likely to be.

U.S. Church Puts 5 Banks From Israel on a Blacklist -- The pension board of the United Methodist Church — one of the largest Protestant denominations in the United States, with more than seven million members — has placed five Israeli banks on a list of companies that it will not invest in for human rights reasons, the board said in a statement on Tuesday. It appeared to be the first time that a pension fund of a large American church had taken such a step regarding the Israeli banks, which help finance settlement construction in what most of the world considers illegally occupied Palestinian territories. Palestinian advocates, both in and outside the church, described the step as an important advance in the Boycott, Divest and Sanction campaign, or B.D.S., an international effort to pressure Israel economically over the Palestinian issue. Others within the church, however, called those claims misleading, noting that the church remains invested in other Israeli companies and that members had overwhelmingly opposed divestment resolutions. There was no immediate comment from Israeli officials. Nonetheless, the inclusion of Israeli banks on what is essentially a blacklist compiled by the pension board of a large American church, appears bound to upset the Israeli government, which devotes considerable effort to combating resolutions by academic institutions, businesses and church organizations to divest from Israeli companies over the issue of Israeli settlements and the occupation of Palestinian lands held since the 1967 war.

Does The U.S. Have A Middle East Strategy Going Forward? - Senior-level sources in numerous Middle Eastern governments have privately expressed bewilderment at recent and current U.S. government strategies and policies toward the region. But a closer examination of U.S. policies, now almost entirely dictated by the Obama White House, shows no cohesive national goals or policies exist, but rather an ad hoc set of actions and reactions, which are largely dictated either by ideological positions, ignorance, whim, or perceived expedience. This is unique in U.S. history. In short, the consistent pattern of policies developed over the past century has now been broken up, apart from some of the physical consistencies of legacy military deployments and basing, and by some trade and weapons program commitments. Even there, military deployments have contracted substantially in the past few years, and new U.S. defense systems sales to the region have been lost to suppliers from France, Russia, the People’s Republic of China (PRC), Germany, Pakistan, and others.  In the 18 months until January 2016, the U.S. missed possibly $12- to $15-billion in sales of defense and energy systems in the Middle East, and a range of major new defense acquisitions from non-U.S. suppliers are under consideration by Middle Eastern states. At the same time, some of the U.S.’ major traditional allies in the region — Israel, Egypt, and Saudi Arabia, in particular — have felt compelled, for their own survival, to turn their back on Washington because of a perception of a divergence in values and goals. Most U.S. policy officials — especially in Defense — insist that U.S. commitments and strategies in the region have not changed, but the actions and policies dictated directly by the Barack Obama White House, and mirrored at Secretary of State level, have proven antithetical to most states in the greater Middle East, with the exception of Turkey and Qatar. Some regional states, such as Oman, are concerned; others, such as Ethiopia and Djibouti, are now left feeling strategically abandoned.

Oil's Sum of All Fears -  You should be pretty scared right now. Even a cursory glance at the news, or 30 seconds of listening to a presidential candidate, will inform you that terrorism is rampant, the Middle East is unraveling and that we're all basically done for. Yet there you are, selling oil at $30 a barrel. The geopolitical risk premium, an omnipresent if mercurial figure in the oil market over the past decade or so, has vanished. Consider that the past three months have witnessed the terrorist attacks in Paris, a Russian jet being downed by Turkey, the burning of Saudi Arabia's embassy in Tehran, Islamic State targeting Libyan oil tanks, and Venezuela entering a post-election political standoff.In response, oil has tumbled by a defiantly insouciant one-third. Even Tuesday's news that some U.S. Navy sailors were being held in Iran barely registered (they have since been released).This lack of fear is, well, alarming. The chief exhibit here isn't oil's spot price but the futures curve: Geopolitical risk has vanished along the Brent oil futures curve. In October, Brent crude futures for this year averaged $53 and change. Now, they don't average above $50 a barrel until 2020. The oil market isn't merely saying there's no risk to supply now; it isn't pricing in a problem right through the next president's first term.Betting on a quiescent five years in the Middle East hasn't been a good wager for most of my lifetime, and the odds look even longer than usual now, as the U.S. stands back and Iran and Saudi Arabia face off. Meanwhile, low oil prices are deterring investment pretty much everywhere else.Oil rotary rigs in operation haven't collapsed in the Middle East but have everywhere else All else equal, that means the market share of Middle Eastern producers should increase. In its latest short-term outlook, released on Tuesday, the Energy Information Administration projected non-OPEC supply to fall this year for the first time since 2008. With OPEC's own effective spare capacity thin, the risk of a supply shock is rising.

Can ISIS Actually Gain Power Over Libya's Oil? - As it turns out, Syria was merely a springboard for a much larger ISIS plan—replenishing terrorist coffers by taking over oil assets in war-torn Libya. The terror group has largely taken control of the Libyan city of Sirte and its hundreds of miles of coastline, and has ransacked two key oil terminals in an attempt to wrest control from fragile Libyan officials, ISIS is banking on taking over these oil facilities, and is now reportedly recruiting its own oil and gas engineers.Libyan crude should be an easier target than Iraqi oil, which has remained largely out of ISIS reach. If ISIS succeeds, it will have more revenues and more power. Reeling from warring parallel ''governments'' in a seething civil war, Libya is in no position to stop ISIS from filling the void.Libyan oil officials say ISIS has ravaged oilfields south of Sirte, clashing with guards at key oil terminals, shelling storage facilities, and setting oil tanks on fire. All that's left to do now is take over this part of the business in earnest.Last week, ISIS targeted two of Libya's largest export terminals—Es Sider and Ras Lanuf, which handle 80 percent of Libya's oil reserves. Combined, they have the capacity to ship 500,000 barrels today, barring civil war and terrorist hindrances. For the past year, these two export terminals have been closed down, but ISIS has plans to reopen them—eventually. After several days of clashes with ISIS and the death of at least 18 guards, Libya's National Oil Corporation has regained shaky control over the terminals and scrambled to empty the storage tanks at Ras Lanuf as a precaution. Meanwhile, fires have been put out at both terminals.

Bahrain, Oman cut gas subsidies as oil hits 12-year low — Bahrain and Oman are reducing government subsidies on gasoline, becoming the latest Gulf Arab countries to try to cut back on spending and offset the effect of oil prices, which have fallen to their lowest level since 2003. On Tuesday, gas prices at the pump rose by up to 60 percent in Bahrain, climbing to $1.25 per gallon (125 fils per liter) for regular gasoline and $1.60 per gallon (165 fils per liter) for premium fuel. Hundreds of people lined up at gas stations a day earlier to fill their cars before the higher prices went into effect. The tiny island-nation in the Persian Gulf ended subsidies on meat and poultry in October, increasing consumer prices between three and four-fold. Bahrain plans to make further cuts in electricity and water subsidies in March. Meanwhile, Oman said it would reduce gasoline subsidies starting Friday, with prices set to rise by 33 percent for premium fuel and 23 percent for regular fuel. The moves come as crude prices closed Monday at $31.41 a barrel on the New York Mercantile Exchange — the lowest in 12 years. The dip in global oil prices has cut into the revenues of oil-exporting countries, including many Gulf Arab states where citizens have become accustomed to generous government subsidies and state handouts. To reduce their growing budget deficits, the United Arab Emirates and Saudi Arabia reduced fuel subsidies last year. Kuwait’s parliament said Tuesday that it, too, is planning to study subsidy reform.

Iraq and the Kurds Are Going Broke - Iraqi and American officials leading the military campaign against the Islamic State now have to wrestle with a challenge that has the potential to change battlefield fortunes: the slumping price of oil. The semi-autonomous Kurdistan Regional Government in northern Iraq, an oil-producing region, has racked up $18 billion in debt, which has imperiled its ability to pay state workers and security forces. This is especially worrisome since Kurdish security forces have been instrumental in rolling back the Islamic State’s advances. The government in Baghdad, meanwhile, is scrambling to avoid a budget shortfall this year. Iraqi officials last year obtained a $1.7 billion loan from the World Bank and reached an agreement with the International Monetary Fund that will allow it to obtain additional loans. Baghdad is seeking to renegotiate with international energy companies new terms for oil contracts, which have become less advantageous for Iraq as the price of oil has crashed. And it is seeking a $2.7 billion loan from the United States to acquire military equipment. Iraq’s budget problems have rightly alarmed officials in Washington. While there is little appetite to bankroll a country where so much American money has been wasted and pilfered since the ill-conceived 2003 invasion, Iraq’s economic problems must be addressed. If they are to worsen, more Iraqis will almost certainly join the tide of refugees leaving the Middle East and the government will have a harder time rebuilding areas that Iraqi security forces have wrested back from Islamic State control.

Calling home the petrodollars! -- Izabella Kaminska - While the world contends with the consequences of shrinking petrodollar flows, Emad Mostaque at consultancy Ecstrat provides an interesting take on the potential benefits of such reversals for petro sovereign Saudi Arabia..As Mostaque explains, to-date Saudi Arabia’s rulers have supported a social contract with the populace wherein the state offers a level of employment surety through the public sector and benefits, while almost all of the private sector workers are foreigners without settlement rights: This worked when populations were smaller or when oil prices were high, but the burden of state spending became increasingly onerous in the wake of the Arab Spring, since which many budgets have doubled as a variety of spending increases were passed as a palliative measure to ensure that an alternative social contract based on democracy and a constitutional monarchy, could be avoided. A large part of this has also been due to rapid increases in military spending, something we have discussed the rationale for elsewhere.Indeed, the reality in the Gulf states has been that there is no representation of the people precisely as there is no taxation, with the governments adopting a paternalistic approach to their citizens.An unfortunate side effect of this system is that the state bureaucracy in these nations is notoriously inefficient as the correct incentive structures simply do not exist. As a consequence, Saudi domestic markets have never really served as a proper tool for capital allocation. They exist primarily, says Mostaque, for wealth redistribution and entertainment. Rules which require local majority ownership, for example, have always ensured an advantage for key Saudi families with large amounts of influence, allowing them to become immensely wealthy without directly participating in the oil business.But this set-up may be moving into reverse, says Mostaque. He views the Saudi prince’s comments in *that* Aramco Economist interview as hinting very strongly that Saudi will not only accelerate its economic diversification plan — with a goal of $100bn in non-oil revenue in five years — but also inject dormant assets into state funds with a view to raising Islamic bonds for development.

Oil Bust Could End Dollar Domination -  There is an overriding belief that the U.S. dollar can hold onto its status as the world’s king reserve currency simply because of petro dollars. But in recent years, a serious threat to this system has developed—and the risk of the dollar being dethroned is very real. The U.S. dollar has reigned supreme since the end of WWII, when the Bretton Woods system gave it is initial power. With Bretton Woods’collapse in 1971, oil became its new saviour and kingmaker as the U.S. dollar became the prime currency for crude oil transactions. In 1973, the U.S. made a pact with the Saudi King to conduct all crude oil trades in U.S. dollars—in return for U.S. protection of its oil fields. Because of world hunger for crude, the demand for U.S. dollars experienced a similar, sustained hunger. The major producers of crude oil had an abundance of dollars, which was recycled back into the system to purchase dollar-denominated assets. The consumers pay for crude oil in dollars; hence, they always have to keep a steady reserve of dollars, thereby maintaining a high demand for the the currency. This is now under threat, and history risks being repeated. The Bretton Woods system failed due to the over valuation of the dollar as spending increased over the war in Vietnam war and America’s Great Society programs.The argument that the U.S. dollar is a flawed currency is gaining ground. According to commodity guru Jim Rogers, this is illustrated by a string of Quantitative Easings by the U.S. Fed, an ultra-low interest rate policy and ever-increasing U.S. debt. Demand for the U.S. dollar has remained high despite this because of the world’s reliance on it to fund crude oil purchases. But this paints a false picture. Over the past few years, countries such as China, Russia, Iran, and Brazile, Russia, India, and China, and South Africa (the BRICS nations) have begun to pose a challenge to the current system, forming pacts to transact oil in local currencies, bypassing the petro-dollar.

The oil crash could bring a radical new change to Saudi Arabia's investment fund - (Reuters) - Saudi Arabia plans to create a new sovereign fund to manage part of its oil wealth and diversify its investments, and has asked investment banks and consultancies to submit proposals for the project, according to people familiar with the matter. Plunging oil prices have strained Saudi Arabia's finances. The kingdom's state budget deficit is at a record high and net foreign assets dived more than $100 billion in 15 months. The new fund could change the way tens of billions of dollars are invested and affect some of the world's leading asset managers, particularly in the United States, where the bulk of Saudi Arabia's foreign assets are managed. "Keeping the foreign reserves at a good level is necessary to maintain a solid financial position and support the riyal," said one of the sources. Another source said the Saudi government sent out a "request for proposal" to banks and consultants late last year, seeking ideas on how to structure a new fund. The sources asked not to be identified because the plans are confidential. They said the Saudi government did not tell them the size of the planned new fund. One source said the fund would focus on investing in businesses outside the energy industry, such industrials, chemicals, maritime and transportation. The sources stressed that no final decisions had been made, and a range of options were being studied. The sources said managers of the planned fund may be able to invest directly in companies rather than channelling investments through foreign asset managers. This could maximize returns.

Saudi Arabia Steps Up War of Words With Iran - WSJ -- Saudi Arabia on Saturday accused Iran of not acting like a nation state and said it is considering further measures against its regional rival, as tensions between the two countries escalated further over the kingdom’s execution of a dissident Shiite cleric. “Iran has to make a decision whether it is a nation state or a revolution. If it’s a nation state, it should act like one,” Saudi Foreign Minister Adel al-Jubeir said following an emergency meeting in Riyadh with his Gulf Arab counterparts to discuss the crisis with Iran. “Sectarianism wasn’t heard of in the region before the Iranian revolution.” “We are looking at additional measures to be taken against Iran if it continues with its current policies,” he said. The foreign ministers of the Gulf Cooperation Council—a six-country bloc comprising Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Bahrain and Oman—met amid concerns that the spat between Sunni Saudi Arabia and Shiite Iran may lead to serious repercussions for other conflicts in the region.

"Death To Saudi Arabia": Thousands Of Iranians Pour Into The Streets In Anti-Saudi Protests -- It’s now been nearly a week since Saudi Arabia set the Muslim world on fire (both figuratively and literally) by executing prominent Shiite cleric Nimr al-Nimr. The Sheikh was a leading figure in the 2011 anti-government protests staged in the kingdom’s Eastern Province and when the House of Saud moved to silence a dissident voice once in for all last Saturday, demonstrators poured into the streets from Bahrain to Pakistan to decry the execution.  In the six days since his death, Saudi Arabia and its allies have been busy cutting all ties (both diplomatic and commercial) with Iran. “Enough is enough”, was the message from Riyadh after protesters firebombed the Saudi embassy in Tehran last Saturday. Now, with tensions running higher than ever, the feud threatens to derail a fragile peace “process” in Syria on the way to plunging the region into an all-out sectarian shooting war. Each side accuses the other of being a state sponsor of terror and each side blames the other for fomenting sectarian discord. Needless to say, it’s difficult to look past the fact that Saudi Arabia’s promotion of Wahhabism is almost unquestionably to blame for the rise of extremist elements throughout the Islamic World. At the very least, Riyadh’s contention that Iran promotes sectarian strife is an egregious case of the pot calling the kettle black.In any event, Iranians are in no mood to forgive and forget. "Iranians held mass protests on Friday across the Islamic Republic, angered by Saudi Arabia's execution of a Shiite cleric that has enflamed regional tensions between the Mideast rivals," AP reports, adding that "after Friday prayers in Tehran, thousands of worshippers joined the rally, carrying pictures of al-Nimr and chanting "Death to Al Saud," referencing the kingdom's royal family." They also chanted "down with the US" and "death to Israel." Below, find the visuals which underscore the fact that the sense of outrage is palpable - to say the least.

Following their “civilized” allies: Saudi jets bomb health facility in northern Yemen -- From PressTV : New Saudi airstrikes have struck a health center operated by charity health organization Doctors Without Borders, also known by its French abbreviation MSF, in northern Yemen, killing at least four people and wounding several others, according to local reports.  The medical facility, located in the Razeh district of Sa’ada Province, was bombed on Sunday, Yemeni media report said. The reports said that at least 15 others were also injured in the deadly airstrikes, which sent shockwaves through the neighborhood. The Paris-based medical humanitarian organization strongly denounced the strike, describing it as part of a "worrying pattern" of attacks on medical facilities....She noted that the organization constantly shares the coordinates of its facilities with those warring sides fighting in the impoverished Arab nation. “All warring parties are regularly informed of the GPS coordinates of the medical sites where MSF works,” said Ayora, adding, “There is no way that anyone with the capacity to carry out an air strike or launch a rocket would not have known” the functioning health facility. Ayora concluded by saying that civilians were bearing the brunt of the ongoing war on Yemen. “Once more it is civilians that bear the brunt of this war.

April Fool's or Biggest IPO Ever? Floating Saudi Aramco -- Of all the darndest things I've heard during the start of the year when there was no lack of them, the idea of Saudi Arabia's state oil company Aramco listing its shares takes the cake. Certainly the timing is bad given that oil prices have dropped precipitously. Hovering around $100-something in mid 2014, the price of a barrel has fallen to about a third of that. Still, desperate times may call for desperate measures. To help close a yawning fiscal deficit, Saudi Arabia may resort to an IPO despite naysayers thinking this is some kind of prank:  When one financial adviser heard about Saudi Arabia’s plans to list a company larger than the economies of most nations, he had to pull over his car because he was laughing so hard. Saudi Arabian Oil Co., or Aramco, the world’s largest oil producer, said Friday it’s considering an initial public offering. It confirmed an interview with Deputy Crown Prince Mohammad bin Salman published in the Economist Thursday. The news was greeted with incredulity in the financial industry, according to interviews with a half dozen bankers who do business in the Middle East. They asked not to be identified to protect their business interests.For one thing, Aramco’s inner workings are opaque, making its true value a mystery. Then there’s the timing. The price of crude oil is near its lowest level in more than a decade. Discussions with Aramco about selling assets in the past had been about much smaller parts of the business, five of the people said. An initial public offering of the entire enterprise had only ever been discussed as a joke, one of the people said. Even if (a) oil prices have fallen by a huge amount and (b) any flotation will only see a few shares listed of subsidiaries and not the parent company, the sheer size of Aramco is something to reckon with. Given its massive proven oil reserves, some valuation models predict it will easily be the biggest initial public offering of all time. At the top of the range, astounding implied market capitalization figures of $7-10 trillion are being touted:

Several Blasts Rock Aramco Oil Facilities : A number of blasts hit Baqiq industrial city in the Southern Saudi province of Jizan where the kingdom's giant Aramco oil facilities is located. The local residents of Al-Sharqiya region where the Baqiq industrial city and the Aramco oil facilities are located confirmed huge explosions near the huge oil facilities, the Arabic-language media outlets reported on Tuesday. Baqiq industrial city belongs to Aramco oil company which itself is Saudi Arabia's biggest economic enterprise. The oilfields of Aramco, including Qawareh oilfield, are located in Shiite-populated Eastern Saudi Arabia. Aramco oil facilities have come under repeated missile attacks by the Yemeni army and popular forces in the last several months. The Yemeni forces targeted the oil company in Jizan with Qaher-I ballistic missiles twice from mid to late December. "The missile precisely hit Aramco oil company on Monday night," the Arabic-language media outlets quoted an unnamed Yemeni army official as saying after the second December attack. He reiterated that the missile attack came in retaliation for the Saudi-led aggressors' violation of the UN-sponsored ceasefire. The two attacks were launched on December 21 and 29, but the multi-trillion-dollar company has come under attack, at least, two times more in the last several months. Qaher-I is an updated version of a Russian-made surface-to-surface missile.

Saudi riyal forwards crash through key 1000 level to hit record low | Reuters: The Saudi Arabian riyal hit a record low in the forwards market on Tuesday, breaching the key 1000-point mark as a fresh slip in oil prices raised fears that the kingdom will eventually scrap or loosen its currency peg to the U.S. dollar. One-year dollar/riyal forwards - contracts used by counterparties to lock in a future exchange rate - climbed as high as 1020 points in very volatile trade. This topped their previous record of 850 points hit during a bout of speculation against the riyal in 1999, according to Thomson Reuters data. The move has come despite comments from Saudi Arabia's central bank governor on Monday that recent volatility in the forwards market is due to speculation based on unrealistic expectations. He restated policy makers' commitment to the peg. "Forwards are moving higher on speculation that Saudi Arabia may soon have to either abandon, or at the very least loosen its currency's peg to the dollar, as its reserves will dramatically fall if oil prices continue to slide further," said a currency trader at a major Gulf bank. The riyal is pegged in the spot market at 3.75 to the dollar. Some banks and funds use the forwards market to hedge against the risk that the peg might eventually be broken. Persistently low oil prices have raised fears that the world's top oil exporter may have to run down its foreign assets - still totaling $628 billion at the end of December - at a much faster rate than the $100 billion used in 2015 to cover a record state budget deficit, forecast for this year to be 326 billion riyals.

Last Days Of The House Of Saud -- While the Saud family enjoys the last few moments of its dictatorship, the decapitation of the leader of the opposition, Nimr al-Nimr, deprives half of the Saudi population of all hope. In one year, the new king of Saudi Arabia, Salman, 25th son of the founder of the dynasty, has managed to consolidate his personal authority to the detriment of other branches of his family, including the clan of Prince Bandar ben Sultan and that of the old King Abdallah. However, we don’t know what Washington has promised the losers in order to dissuade them from making attempts to regain their lost power. In any case, certain anonymous letters published in the British Press lead us to believe that they have not abandoned their ambitions. Forced by his brothers to nominate Prince Mohamad ben Nayef as heir, King Salman quickly isolated him and restricted his powers to the advantage of his own son, Prince Mohammed ben Salman, whose reckless and brutal nature is not restrained by the family Council, which no longer meets. De facto, he and his father govern alone, as autocrats with no counter-power, in a country which has never elected a Parliament, and where political parties are forbidden. So we have seen Prince Mohammed ben Salman take over presidency of the Council for Economic Affairs and Development, force a new direction on the Ben Laden Group, and seize control of Aramco. Each time, the goal is to distance his cousins from power and place liegemen at the head of the kingdom’s major companies.

War Between Saudi Arabia And Iran Could Send Oil Prices To $250 -- The rift between Saudi Arabia and Iran has quickly ballooned into the worst conflict in decades between the two countries. The back-and-forth escalation quickly turned the simmering tension into an overt struggle for power in the Middle East. First, the execution of a prominent Shiite cleric prompted protestors to set fire to the Saudi embassy in Tehran. Saudi Arabia cut off diplomatic relations and kicked out Iranian diplomatic personnel. Tehran banned Saudi goods from entering Iran. Worst of all, Iran blames Saudi Arabia for an airstrike that landed near its embassy in Yemen. Saudi Arabia’s Sunni allies in the Arabian Peninsula largely followed suit by downgrading diplomatic ties with Iran. However, recognizing the dire implications of a major conflict in the region, most of Saudi Arabia’s Gulf State allies did not go as far as to entirely sever diplomatic relations, as Saudi Arabia did. Bahrain, the one nation most closely allied with Riyadh, was the only one to take such a step. Many of them are concerned about a descent to further instability. Nations like Kuwait and Qatar have trade links with Iran, plus Shiite populations of their own. Crucially, Qatar also shares a maritime border with Iran as well as access to massive natural gas reserves in the Persian Gulf. These countries are trying to split the difference between the two belligerent nations in the Middle East. But what if the current “Cold War” between Saudi Arabia and Iran turned hot? Dr. Hossein Askari, a professor at The George Washington University, told Oil & Gas 360 that a war between the two countries could lead to supply disruptions, with predictable impacts on prices. “If there is a war confronting Iran and Saudi Arabia, oil could overnight go to above $250, but decline [back] down to the $100 level,” said Askari. “If they attack each other’s loading facilities, then we could see oil spike to over $500 and stay around there for some time depending on the extent of the damage.”

Iran fills heavy water nuclear reactor core with cement: Fars | Reuters: Iran has removed the core of its Arak heavy water nuclear reactor and filled it with cement as required under a nuclear deal signed with world powers last year, the semi-official Fars news agency said on Monday, citing an informed Iranian source. Any such move, reducing the plant's ability to produce plutonium, might signal imminent implementation of the nuclear deal and clear the way for Tehran to receive relief from economic sanctions. Separately, the European Union's foreign policy chief said that EU nuclear-related sanctions on Iran could be lifted soon. "I can tell you that my expectation is that this day could come rather soon. The implementation of the agreements is proceeding well," Federica Mogherini said during a visit to Prague. The fate of the reactor in central Iran was one of the toughest sticking points in the long nuclear negotiations that led to an agreement in July between Iran and six world powers, known as the Joint Comprehensive Plan of Action (JCPOA). Under the deal's terms, Iran accepted that the Arak reactor would be reconfigured so it could not yield fissile plutonium usable in a nuclear bomb.

Kerry says Iran may be 'days away' from satisfying nuke deal — Secretary of State John Kerry said Thursday that Iran may be “days away” from complying with last summer’s nuclear deal, a step that would compel the U.S. and other Western nations to immediately suspend many sanctions on the Islamic republic. The landmark could usher in a new phase in the budding U.S.-Iranian rapprochement. Kerry told reporters he spoke earlier in the day with Iran’s Foreign Minister Mohammad Javad Zarif, who made it clear that the Iranians intend to satisfy their nuclear obligations “as rapidly as possible.” The Obama administration, Kerry said, is “prepared to move on that day” on the nuclear-related sanctions on Iranian oil, banking and commerce that it promised to end as part of the July agreement. “We are days away from implementation if all goes well,” Kerry said. Speaking just hours after a House committee advanced a bill that could interfere with the administration’s plans, Kerry said the nuclear accord already has delivered significant results. Iran shipped out most of its stockpile of enriched uranium overseas last week, extending the time period it would need to develop a bomb to about nine months, from as little as the two months it needed before the deal. “Iran literally shipped out its capacity, currently, to build a nuclear weapon,” he said, adding that “in the next days, with the completion of their tasks, we will meet our target of being more than a year of breakout time.”

US, Iran forge new relationship as nuke deal advances — For diplomats from countries without diplomatic relations, Secretary of State John Kerry and Iranian Foreign Minister Mohammad Javad Zarif sure are doing a lot of diplomacy. As Iran races to satisfy the terms of last summer’s nuclear deal and the U.S. prepares to suspend sanctions on Tehran as early as Friday, Kerry is talking to Zarif more than any other foreign leader. Those talks included several emergency calls Tuesday to secure the release of 10 U.S. sailors after Iran detained them in the Persian Gulf. Since the beginning of the year, Kerry and Zarif have spoken by phone at least 11 times, according to the State Department. They’ve focused on nuclear matters, Iran’s worsening rivalry with Saudi Arabia and peace efforts in Syria. By contrast, America’s top diplomat has talked to Saudi Foreign Minister Adel al-Jubeir only twice. He has consulted once each with Saudi Deputy Crown Prince Mohammed bin Salman, Jordan’s King Abdullah and the foreign ministers of Britain, Egypt, France, Germany, Russia and the European Union. Kerry left Washington Wednesday evening to meet al-Jubeir in London. He may extend the trip to see Zarif, too, elsewhere in Europe.

The Woman Shaping Iran’s Oil Future -  Raised in a pistachio-farming family in tradition-minded southern Iran, Hassanzadeh, 31, earned her law degree and Ph.D. in the U.K. on scholarships. She literally wrote the book on Iran’s natural gas industry since the 1979 Islamic revolution—it was published last year by Oxford University Press. She has returned to Iran to head a consulting firm, Energy Pioneers, based in Tehran and London, that’s at the vanguard of Iran’s all-out push to lure back foreign investors after the expected lifting of sanctions in coming months. Iran is counting on Western technology and hoping to raise $100 billion in overseas financing to double its oil and gas production in the next five years. Hassanzadeh is building a business by parlaying a deep knowledge of Iran’s energy resources, close ties to government technocrats and industry leaders in Tehran, and high-level contacts at major oil companies, law firms, and investment houses in the West. Her clients are impatient. “Foreign companies should open offices in Tehran immediately and buy shares in local companies who can be their agents and help with management,” says one of Hassanzadeh’s dinner companions, B.M. Hazrati. He’s the managing director of Arsa International Construction and head of a contractors’ trade group. “Unfortunately, they’re still looking at us like it’s 15 years ago.” Despite her age, she cultivated a wide network of industry players in Europe during her years at the Oxford Institute for Energy Studies. Some of these contacts may have skirted U.S. law by merely discussing business with an Iranian, so Hassanzadeh names no names as she shares what she’s learned: Significant Western involvement in Iran’s oil sector is at least 18 to 24 months away, maybe much more. Prospective partners don’t trust the project information they’re getting out of Tehran, she says, and the big banks and investment funds “still need a clear green light” from the U.S. Department of the Treasury before committing money to Iran. “For them, Iranian stability is still questioned,”

ENCORE! - Iran: Lifting the veil on Tehran's cultural life - France 24 - mini-documentary - Long considered the country of ayatollahs and suspected nuclear weapons, Iran is now moving towards reengaging with the West after years of sanctions. In the first of a two-part series, FRANCE 24's culture show Encore! visits the country's capital, Tehran, to find out what it means for the world of culture. From rocker King Raam to director Ali Raffi, Iranian artists tell us about their country – minus the clich├ęs – and discuss the continuing censorship of their work. Click here to watch part two of our special series on Iran.

US says waiting for IAEA to verify Iran nuke compliance — The White House says it’s not ready to suspend economic sanctions against Iran because its compliance with the nuclear deal hasn’t been verified. White House spokesman Josh Earnest says Iran is making important progress toward curbing its nuclear program. He says it’s possible the Islamic Republic has already completed all the necessary steps. But Earnest says Iran won’t get any sanctions relief until the International Atomic Energy Agency has independently verified that all steps have been completed. He says the U.S. wants to make sure Iran doesn’t “cut any corners.” U.S. officials earlier in the week had said that “implementation day” for the Iran nuclear deal could occur within days. Iran will receive billions of dollars in economic sanctions relief in exchange for pulling back its nuclear program.

Western-imposed sanctions against Tehran to be lifted Saturday – Iranian FM - International sanctions against Iran are due to be lifted Saturday, according to Tehran’s Foreign Minister Mohammad Javad Zarif. The move will take effect when the International Atomic Energy Agency has issued its final report concerning Iran’s nuclear program. Trends Iran tensionThe International Atomic Energy Agency (IAEA) is expected to release a final report in the Austrian capital of Vienna, which will confirm that Iran has stuck to its end of the bargain in regard to honoring the nuclear deal, which was struck between Tehran and six world powers last year. "Today with the release of the IAEA chief's report the nuclear deal will be implemented, after which a joint statement will be made to announce the beginning of the deal," Zarif was quoted as saying by state news agency ISNA, as cited by Reuters. The nuclear deal, which was signed on July 14, 2015, saw Iran agree to shrink its atomic program. In return, the US, EU and UN said they would lift sanctions that have hampered Tehran’s economic growth."Today is a good day for the Iranian people as sanctions will be lifted today," the ISNA cited Zarif as saying. The Iranian foreign minister is also due to meet US Secretary of State John Kerry later Saturday. Oil majors Total and Shell have already sent senior executives to Tehran ahead of the expected lifting of sanctions, Iran’s Mehr news agency reports. They are set to meet with officials from Iranian state oil companies on Sunday.

India wants to pay Iran for oil in rupees -- India’s media reported on Sunday that the country is trying to encourage refiners to settle all outstanding payments to Iran over past oil purchases in rupees. The reported plan flies in the face of an earlier announcement by officials in Tehran that the Islamic Republic wants New Delhi to make settle all unpaid money for oil purchases in euros only. The Press Trust of India (PTI) has quoted a senior government official as saying that the country’s Finance Ministry plans to exempt payments to Iran from hefty withholding tax if Tehran approves to receive full payment for oil it sells to India in rupees. With sanctions against Tehran blocking payment channels, 45 percent of the oil India imports from Iran are settled in rupees since January 2012. The remaining gets accumulated and cleared as and when easing of sanctions opens payment window. In June last year, Iran agreed to receiving all of the payment in rupees but wanted waiver of 40 percent withholding tax, the PTI added. India’s Finance Ministry will issue the required waiver, the PTI has quoted the senior government official as saying. "Iran may no longer be keen on taking payments in rupee when the option of getting payment in hard tradable currencies like US dollar and Euro is on the verge of opening, the PTI warned. Indian refineries should pay some $6.5 billion in outstanding oil dues that have been frozen in bank accounts as a result of sanctions against Iran. Iran said in late December 2015 that it wants India to pay outstanding oil dues in euros, stressing that it needs the euros to pay the installments for the loans it has received for its infrastructure projects. India has already started the proceedings to make the outstanding payments to Iran in several installments each valuing at several hundred million dollars. Yaqoubi-Miab emphasized that once the sanctions are lifted, a large share of the cash for Iran that has been frozen in Indian accounts will be transferred to government accounts in Tehran, Shana reported. He said Iran wants its assets that have been frozen in Indian accounts to be transferred to Iran immediately after the removal of the sanctions.

China Imports Record Crude as Price Crash Accelerates Buying - China imported a record amount of crude last year as oil’s lowest annual average price in more than a decade spurred stockpiling and boosted demand from independent refiners. The world’s largest energy consumer increased imports last year by 8.8 percent to a record 334 million metric tons, or about 6.7 million barrels a day, according to preliminary data released by the Beijing-based General Administration of Customs on Wednesday. Inbound shipments in December jumped to 33.19 million tons, while oil product exports rose to 4.32 million metric tons, both also records.China has exploited a plunge in crude prices by easing rules to allow private refiners, known as teapots, to import crude and by boosting shipments to fill emergency stockpiles. The nation’s overseas purchases may rise to 370 million metric tons this year, surpassing estimated U.S. imports of about 363 million tons, according to Li Li, a research director with ICIS China, an industry researcher. “China’s crude appetite will continue to be driven by a boom in teapot imports this year and the filling of strategic reserve sites amid multi-year low prices,” Li Li said by phone from Guangzhou. “In the meantime, U.S. dependency on oil imports will gradually decline with higher domestic output.” China may start four additional strategic petroleum reserves this year as part of a plan to stockpile enough oil to cover 100 days worth of net imports by 2020 and thirteen independent refiners have been granted import quotas totaling a combined 55 million tons, or 18 percent of the nation’s annual imports. The nation’s crude imports last month was equivalent to 7.85 million barrels a day, 6 percent higher than the previous record of 7.4 million in April, Bloomberg calculations show.

China’s crude oil price exposure --Izabella Kaminska - We don’t think of China as an oil producer. And yet, it very much is.China’s oil production in 2014 amounted to about 4.2 mbpd in 2014, according to BP statistics — equal to that of Canada’s production at 4.2 mbpd in 2014 and nearly double that of Nigeria’s at 2.4 mbpd.Then, of course, there’s the mark-to-market value of China’s strategic petroleum reserve, which the country has been building up for years. We don’t know the actual size of the SPR because the numbers are not public, but oil experts say it stands close to 100m barrels, with a sizeable portion of the reserve built up during the $80-$100 per barrel price era.One reason we tend to overlook China’s production prowess is linked to its net importing status. Last year, for example, China imported 6.2m barrels per day, making it a clear net beneficiary of lower oil prices.  And yet, there have been significant repercussions for its domestic oil sector. No better indication of the stress is this week’s adjustment of China’s retail oil product pricing mechanism, which saw the National Development and Reform Commission (NDRC) introduce a $40 per barrel floor price for the crude valuation it bases its domestic retail gasoil and gasoline prices on. Until now the floor was set at $80 per barrel, with product price cuts passing on most of the global energy price decline at a cost to domestic refiners.

Tanker Rates Tumble As Last Pillar Of Strength In Oil Market Crashes -- If there was one silver-lining in the oil complex, it was the demand for VLCCs (as huge floating storage facilities or as China scooped up 'cheap' oil to refill their reserves) which drove tanker rates to record highs. Now, as Bloomberg notes so eloquently, it appears the party is over! Daily rates for benchmark Saudi Arabia-Japan VLCC cargoes have crashed 53% year-to-date to $50,955 (as it appears China's record crude imports have ceased). In fact the rate crashed 12% today for the 12th straight daily decline from over $100,000 just a month ago... China has exploited a plunge in crude prices by easing rules to allow private refiners, known as teapots, to import crude and by boosting shipments to fill emergency stockpiles. The nation’s overseas purchases may rise to 370 million metric tons this year, surpassing estimated U.S. imports of about 363 million tons, according to Li Li, a research director with ICIS China, an industry researcher.  But given the crash in tanker rates - and implicitly demand - that "boom" appears to be over. Shipbroker analysts blame fewer January cargoes and oil companies using their own vessels for shipment as the main reasons for the dramatic decline. China imported a record amount of crude last year as oil’s lowest annual average price in more than a decade spurred stockpiling and boosted demand from independent refiners. China's crude imports last month was equivalent to 7.85 million barrels a day, 6 percent higher than the previous record of 7.4 million in April, Bloomberg calculations show.

China’s Hunger for Commodities Wanes, and Pain Spreads Among Producers - Chile is expanding its largest open-pit copper mine below the northern desert to dig up 1.7 billion additional tons of minerals, even as metal prices plummet around the globe.India is building railroad lines that crisscross the country to connect underused coal mines with growing urban populations, threatening to dump more resources into an already glutted market.Australia is increasing natural gas production by roughly 150 percent over the next four years, as energy companies build half a dozen export terminals to serve dwindling demand.Across the commodities landscape, this worrisome mismatch mainly traces back to the same source: China.  For years, China voraciously gobbled up all manner of metals, crops and fuels as its economy rapidly expanded. Countries and companies, fueled by cheap debt, aggressively broadened their operations, betting that China’s appetite would grow unabated.Now everything has changed. China’s economy is slumping. American companies, struggling to pay their debts as interest rates rise, must keep producing. All the excess is crushing prices, hurting commodity-dependent economies across emerging markets like Brazil and Venezuela and developed countries like Australia and Canada.

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