Sunday, January 10, 2016

the Keystone NAFTA lawsuit, more Oklahoma frackquakes, an 11 year low for oil, global rig counts, et al

after all of our warnings about the investor-state dispute settlement (ISDS) provisions of the TPP, we should have seen this coming: on Wednesday, TransCanada announced that it is filing a series of claims under those same provisions of NAFTA (the North American Free Trade Agreement) against the United States for our denial of their application to build the Keystone XL pipeline, arguing that the denial was arbitrary, politically motivated, and unjustified...the first part of Transcanada's action is against Obama, arguing that his decision to kill the pipeline exceeded his power under the Constitution...then, under the NAFTA's ISDS provisions, Transcanada will be seeking $15 billion in compensation for the trouble we've put them through over the past 7 years... they will not, however, be seeking damages for the profits they might have earned had the pipeline been built, something they could have done under ISDS provisions, and something they still might do after the TPP passes...whatever they get, it’ll come out of our tax dollars…

so it appears these trade treaty provisions that we have been pushing on the rest of the world are going to come around and bite us in the behind...you should recall that the ISDS provisions of these trade agreements grant any international corporation or investor the right to be compensated should a state, local or national law interfere with their potential profits...such a case would not be adjudicated by our own courts, but by a tribunal of corporate trade judges in a supra-national court set up under the World Trade Organization's Investor Dispute Settlement Body....the judgment of this WTO body can't be challenged in our own courts; the extra-legal provisions of such treaties were already endorsed by the US Supreme Court over a year ago...what's ironic is that these ISDS provisions are specifically designed to protect the interests of US multinationals doing business with our trade partners...we've been using our position as the largest economy and largest consumer to force these provisions on the rest of the world...we've set it up so that if another country wants to do business with us, the top consumer in the world, then they have to sign these treaties to give our corporations control of their laws...such provisions of NAFTA have already been used against Canada: Lone Pine Resources Inc, an American fracker, has sued Quebec for lost profits due to Quebec's moratorium on fracking under the St. Lawrence River...now these same provisions we designed are being used against us...understand, this action wont force the Keystone XL pipeline to be built; it will just force us to pay Transcanada for their expenses in the attempt, plus interest and penalties according to whatever provisions of ISDS they are citing..

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the week's most interesting confluence of oilfield stories again comes out of Oklahoma, the most seismically active area on the entire planet...i'm sure you'll recall that Oklahoma went from a seismically quiet state with an average of less than two magnitude 3 earthquakes per year before 2009, to 109 magnitude 3 earthquakes in 2013, to 585 quakes of that magnitude in 2014, and to over 2 per day throughout 2015, when they set a record with 881 magnitude 3 earthquakes for the year, which was more earthquakes of that size than the rest of the continental US combined had in 2015...the U.S. Geological Survey says most if not all of those earthquakes were man-made - induced by pressure built up underground from injecting oil field waste water down into deep wells, a fact that the Oklahoma department of Energy and the Environment finally accepted earlier this year...

so Monday of this past week, after experiencing a dozen earthquakes large enough to be felt in an area north of Oklahoma city in less than a week, including a pair of magnitude 4.2 quakes, the Oklahoma Corporation Commission, the state’s regulator of the industry, ordered that several injection well operations, including 5 that were operating within 10 miles of the epicenter of that recent earthquake activity near Edmond, an Oklahoma City suburb, reduce their wastewater disposal volumes by between 25% to  50%...now, you'd think slowing down the waste water injection that was causing the ground to shift under your feet would be a no-brainer, but one Oklahoma fracking company, SandRidge Energy, was openly defiant of the state's edict, while Greenpeace reported that the other oil and gas companies were simply ignoring all Oklahoma regulations that had been put in place to relieve environmental damage from fracking and injection wells....thus, with the situation underground becoming more precarious by the hour, it did not take long for the earth to notice that it was being put under undue pressure from those frackers above, and starting with a 4.8 quake on Wednesday, the earth unleashed a series of 32 earthquakes over the next day, including 3 earthquakes greater than magnitude 4.0, with a pair of them, of magnitude 4.7 and 4.8, just 30 seconds apart, in a swarm of 30 quakes over 19 hours, the largest of which were felt from Illinois to Texas and Mississippi...as of the latest report on Friday, Oklahoma had felt 70 earthquakes in this current swarm, and geologists are predicting even stronger quakes for the state in the near future, possibly as large as a magnitude 6.0, and possibly threatening the word's largest oil tank farm in Cushing, where 60 million barrels of US commercial crude are stored in tanks that weren't built to withstand earthquakes...the problem now, however, is that if there are serious damages, there will be no one left to go after, no one left to collect from...the aforementioned SandRidge Energy is out of cash and was delisted from the New York Stock Exchange two days ago, just about the same time the swarm of earthquakes was peaking under their feet in Oklahoma...we wouldn't be surprised if they soon joined the 40 frackers who have already declared bankruptcy over the past year..

New 11 Year Lows for Oil Prices

oil prices nosedived again this past week, while natural gas prices continued to soar on forecasts of colder weather and the prospect of exports, and at $2.47 per mmBTU, they're up nearly 35% from their mid-December lows....meanwhile, after closing at $37.04 a barrel on New Year's Eve, US crude prices spurted to $38 a barrel early Monday after religious tensions flared up in the Middle East...however, after rising by $1.35 early, the price of U.S. crude fell back on reports of slower factory activity in China and elsewhere and ended the day down 28 cents at $36.76 a barrel...reports of record amounts of crude oil in storage at Cushing, OK, where US crude is priced at, continued to weigh on prices Tuesday, when oil closed at $35.97; then, after EIA weekly reports showed that our total crude and product stocks rose by 7.3 million barrels the prior week, and is now 164 million barrels above the year earlier level; WTI fell $2 a barrel to close at $33.97, the lowest price since 2004...that price weakness persisted the rest of the week as US oil prices fell to close at $33.27 a barrel on Thursday and then finished the week at $33.16 a barrel on Friday afternoon ...

i've been trying unsuccessfully to find a dynamic graph that shows both the widely quoted NYMEX (New York mercantile exchange) front month contract price for delivery of WTI crude and the long term price history for that contract...however i did find an interactive graph from Forex Capital Markets that apparently shows their current offmarket trading price for WTI on a long term chart that goes back to 1990, and i've taken a picture of that to include below...here you can see that US oil prices are now below those of 2009, when they fell below $35 a barrel at the depth of the global financial crisis, when demand for oil collapsed because everyone thought the world was coming to an end....we're now comparing today's prices to those of 2004, when oil started out priced at $29.84 a barrel and rose to a high of $43.81 a barrel by November...for prices before that, you can go to the trading economics site, click on "all", and mouse across the graph, which brings up the price at the beginning of each month...btw, this type of graph is called a candlestick, as it shows the opening and closing price for each month as a solid "candle", with green for months when prices rose and red for when price fell....the faint thin grey line "wicks" extending from the top or bottom of each candle represent trading prices during the month that were outside of the range of the opening and closing price...

January 8 2016 oil prices

while the US crude price has been falling over the past couple weeks, the international benchmark of Brent oil has been falling slower, leading once again to a small premium price for Brent; for instance, Brent was a $37.22 a barrel at the close on Monday, vs US prices of $36.76 a barrel; by Wednesday's close Brent had fallen to $34.23 a barrel, while US prices closed at $33.97, and Brent ended the week at $33.55 a barrel, still 39 cents higher than the official US closing price of $33.16...these benchmark prices typically represent the highest prices oil is selling for; for instance, on Monday the Saudis cut their prices to Europe to below $30, to undercut the Russian price and head of any European-Iranian trading...by Wednesday, the average daily basket price of crudes produced by the 13 members of OPEC fell to $29.71 a barrel, down from $31.21 the previous day; by the end of the week, OPEC had slashed its price by another $2 to $27.85 a barrel; at the same time, Canadian heavy crude oil had fallen below $20 a barrel, a record low...if you're interested, you can now buy tar sands crude at less than 50 cents a gallon, it's cheaper than water, even though it’s much harder to extract...

This Week's Oil Stats from the EIA

this week's reports  from the US Energy Information Administration were for the week ending January 1st and showed another small increase output of oil from US wells, a sizable drop in the amount of oil we imported, a modest decrease in the oil used by US refineries, and a seasonally large drop in our oil in storage...however, there was an unexpectedly large increase in the amount of refined products that were neither consumed or exported and thus had to be added to our stored surplus, which led to the drop in oil prices we just discussed...

for the week ending January 1st, our imports of crude oil fell by 382,000 barrels per day to a 7,510,000 barrels per day pace, which was 2.1% lower than the 7,668,000 barrels per day we imported during the week ending January 2nd of 2015...however, since the number of oil tankers unloaded in any given week makes imports fairly volatile week to week, the EIA's weekly Petroleum Status Report (62 pp pdf) reports a four-week moving average of oil imports, which have now averaged about 7.8 million barrels per day over the last 4 weeks, 5.9% above the same four-week period last year...meanwhile, our field production of crude oil rose by 17,000 barrels per day, from 9,202,000 barrels per day in the week ending December 25th to 9,219,000 barrels per day with this report; that's the highest level of output from US wells since the 3rd week of August this year, and nearly 1.0% more than the 9,132,000 barrels per day than we produced in the week ending January 2nd of last year, a time when almost three times as many oil wells were being drilled as today...

the amount of that crude used by our refineries fell by 65,000 barrels per day during the same week, from a December record average of 16,682,000 barrels per day during the week ending December 25th to an average of 16,617,000 barrels per day during the week ending January 1st...although down from last week as our refinery utilization rate slipped from 92.6% to 92.5%, that was still 1.2% more than our refineries took in during the same week last year, and also an all time high for any week including New Year's day...our gasoline production, which surged to 9,921,000 barrels per day last week, fell back to 8,766,000 barrels per day in the week ending January 1st, while our output of distillate fuels (ie, diesel fuel and heat oil) rose by 50,000 barrels per day to 4,976,000 barrels per day...the large output of gasoline we saw last week, which we opined had seemed to have disappeared in last week's stats, reappeared as inventories this week, as our end of the week gasoline in storage rose by 10,576,000 barrels to 231,996,000 barrels, which has to be some kind of record for a one week jump...although that was less than the 237,163,000 barrels of gasoline we had stored in the same week a year ago, it was well into the upper half of the average range of gasoline stored at this time of year...likewise, our distillate fuel inventories also increased, rising by 6,308,000 barrels to 159,418,000 barrels, up from 153,110,000 barrels on December 25th…that was 16.4% higher than last January 2nd's 136,926,000 barrels, also putting distillate fuel supplies well into the upper half of their normal range for this time of year...

this week, which included year end inventory taxing time for Texas and Louisiana, it seems like some of that excess crude disappeared, however, as.our end of the week stocks of crude oil in storage, not counting what's in the government's Strategic Petroleum Reserve, fell by 5,085,000 barrels to 482,324,000 barrels on January 1st, down from 487,409,000 barrels on December 25th...that was still up by 27.5%, or nearly a 100 million from the 382,393,000 barrels we had stored at the beginning of 2015, and the most we had stored at the beginning of any year in the 80 years of EIA record keeping, which had never seen more than 400 million barrels stored before this year...

Latest US Rig Counts

it appears that lower prices have finally caught up with the US frackers, because this week they retired the most rigs they've retired in one week since March 20th, and shut down the largest percentage of their active rigs since March 6th, when they shut down 75 of the 1276 that were active back then...the weekly rig count data from Baker Hughes indicated that the number of drilling rigs working in the US fell by 34 to 664 from December 31st to January 8th, with rigs drilling for oil down by 320 to 516 and rigs drilling for gas down by 14 to 148...that's down from a total of 1,750 drilling rigs that were deployed on January 9th last year, when there were 1421 rigs drilling for oil and 329 rigs drilling for gas, and represented the lowest rig count since 1999...oil rigs hit their fracking era high at 1609 on October 10, 2014, while the recent high for gas drilling rigs was at 356 and occurred on November 11th of that same year... 

two more drilling rigs were added in the Gulf of Mexico during the week, so the Gulf count is now up to 27, which is still down from 53 working in the Gulf and a total of 54 drilling offshore as of January 8th a year ago...there was also a rig set up on an inland lake in Southern Louisiana, where there are now 2 rigs drilling, down from the 12 that were set up on inland waters a year earlier... a net of 30 horizontal rigs were stacked this week, cutting the count of horizontal rigs down to 519, which was also down from the 1301 horizontal rigs that were in use the same week last year...in addition, 8 vertical rigs were also taken out of service, leaving 81, down from 288 last year at this time...however, 4 new directional rigs were set up, bringing the directional rig count up to 64, which was nonetheless still down from the 161 directional rigs that were in use on January 8th of last year...

all major shale basins except the Ardmore Woodford and the Arkoma Woodford, both of Oklahoma, saw rig reductions this week; the Ardmore Woodford added a rig and was up to 3, down from 6 a year ago, while the Arkoma Woodford was unchanged at 8, up from 6 rigs a year ago...the Barnett shale of the Dallas area was down 1 rig to 6, and down from 24 a year ago; Oklahoma's Cana Woodford was down 2 rigs to 36, and down from 45 a year earlier; the DJ-Niobrara chalk of the Rockies front ranges was down 1 rig to 22, which was down from 56 rigs a year ago; the Eagle Ford of south Texas was down 5 rigs to 71 this week, which was down from 197 rigs last year at this time; the Fayetteville of Arkansas saw its last rig stacked; the entire basin, which had 10 rigs working it a year ago, is now quiet...the Granite Wash of the Oklahoma-Texas panhandle region was down 3 rigs to 12 this week,and down from 50 rigs a year ago; the Haynesville of Louisiana was down 2 rigs to 23, which was down from 43 rigs a year earlier; the Marcellus of the northern Appalachian area was down 4 rigs to 37, which was down from 77 rigs a year ago; the Mississippian of southwest Kansas and bordering states was down 1 rig to 11 and way down from 69 rigs a year ago; the large Permian basin of west Texas and eastern New Mexico was down 8 rigs to 209, which was down from 502 rigs working last year at this time; the Utica was down 1 rig to 14, which was down from last year's 48, and lastly the Williston of North Dakota was down 4 rigs to 49, which was down from 171 rigs working there a year earlier..

of the major oil and gas producing states. only Louisiana saw an increase of 1 rig, bringing them up to 59, which was still down from 108 a year ago...alphabetically, Alaska saw two rigs idled, leaving 9, down from 11 a year ago; Arkansas saw it's only remaining rig pulled; at zero, they're down from 13 rigs last year at this time; Colorado got rid of 2 rigs, leaving 22, down from 65 a year ago; Kansas had 1 rig pulled out, leaving 11,which was down from 26 a year earlier; New Mexico was down 4 rigs to 34, down from 95 a year earlier; North Dakota was also down 4; at 49 rigs they're down from 162 rigs last year at this time; Oklahoma was also down 4 rigs; at 83 they're down from last year's count of 206....in addition, Pennsylvania was down 2 rigs to 25, which was down from 51 a year ago, Texas was down 13 rigs to 308, which was down from 810 last year; West Virginia was down 3 rigs to 12, which was down from 28 last year at this time, and Wyoming saw 1 rig pulled, leaving 16, down from the 51 that were drilling in Wyoming on January 9th of 2015...however, California's rig count was unchanged at 7, down from 22 a year ago, Ohio's count remained unchanged at 14, down from 47 a year earlier, and the Utah count was unchanged at 3, down from 18 on January 9th of 2015....outside of the major oil producers, Nebraska added 2 rigs this week; they now have 3, which is up from the 2 rigs working that state at the beginning of 2015...

Global Rig Counts

this week also saw the monthly release of the global rig count for December, which unlike the weekly count, is an average of the number of rigs running in each country for the month, rather than the month end total...December saw an average of 1,969 rigs drilling for oil and natural gas around the globe, which was down from  2,047 rigs drilling in November and down from the 3,570 rigs that were in use in December of last year...the lions share of the rigs that were pulled during the month came from the US, which saw 46 fewer rigs in December, and saw their total rig count average drop from 1882 last December to 714 with this report...in addition, the Canadians saw a net reduction of 18 rigs from November, and with an average of 160 rigs deployed during the month, they were down from the 375 rigs in use in Canada in December of last year...

the Middle East saw an increase in drilling activity for the 5th month in a row, although their active rig count only rose by 3 this time, from 419 in November to 422 in December, with 55 of those active drilling offshore in the Gulf region, down from 59 offshore in November, but up from 45 offshore a year ago, as the total active rig count the Middle East is up from the 403 rigs being used in the region in December a year ago....most of the region's changes in December were minor; the Saudis added 2 rigs to bring their total active drilling rig count up to 129, up from the 119 rigs that were drilling in the Kingdom last year in December...Pakistan also added two rigs; they now have 23 rigs working, up from 19 a year ago...meanwhile, Abu Dhabi in the United Arab Emirates pulled out three rigs; they're now down to 49, which was still up from 36 a year earlier…

meanwhile, the Latin American countries saw a reduction 14 rigs, after idling 10 rigs in November and 27 rigs in October, as the region averaged 270 rigs in December, including 57 offshore, down from a total of 369 rigs, including 82 offshore rigs, in December of 2014....Argentina saw the largest pullback, as they were down 10 rigs to 91, which was down from 113 rigs that were in use in Argentina a year ago...Colombia idled 3 rigs; they're now running just 12, down from 46 in December of last year...Mexico saw the largest increase in drilling among Latin American countries, as they added 4 rigs and now have 42 working, which is still down from the 72 rigs they had deployed a year ago at this time...

elsewhere, the Asia-Pacific region had 198 drilling rigs working in December, down from 208 in November and down from 255 last December...the largest change in the region was in India, where they reduced their 105 rigs to 100, which was down from 114 rigs a year ago, while China idled 3 offshore rigs, leaving 25, down from the 36 offshore rigs the Chinese were running a year earlier...the total count of rigs drilling in Africa was up by 1 to 91, which was down from the 138 rigs that were working on the continent in December a year earlier...Angola, up 2 rigs to 11, was the only African nation with a rig variance greater than 1, as Angolans were still down from 14 rigs a year ago...lastly, the rig count in Europe rose by 6 in December to 114, which was down from 148 rig working Europe a year ago, as Norway and Germany both added 3 rigs each...the Norwegians now have 17, up from 14 both last week and a year ago, while the Germans are running 6 rigs, up from 3 both last week and a year ago...note that Iran, Russia, and China are not included in Baker Hughes international data, although China's offshore area, with an average of 25 rigs active in December, is... 

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Reports warn Ohio's energy sector about risks from climate change - Ohio energy leaders are not especially worried about future climate change impacts on their operations, despite an unusually warm 2015 and two recent studies suggesting that extreme weather events could cause significant problems for the state by mid-century.One study by researchers at Climate Central and ICF International gave Ohio a D- grade for its preparedness to deal with anticipated climate change impacts, ranking it in the bottom ten among U.S. states. That research was presented on December 15 at the American Geophysical Union fall meeting in San Francisco. Power plants can be particularly vulnerable to increasing temperatures from climate change, according to the second study, which came out this week in Nature Climate Change. The Climate Central report is the first nationwide analysis of each state’s preparedness for extreme weather events that are driven by climate change. “We looked mostly at extreme weather events and how that could change in the future with climate change,” explained Rita Yu of Climate Central. “We assessed the magnitude of that for the state as a whole.” “For Ohio in particular, we looked at extreme heat, flooding and drought,” Yu said. “For each of these hazards we looked at the climate science.” The severity of summer droughts for Ohio could increase by 50 percent by 2050, her research team found. At the same time, it reported, heavy run-off events that lead to flooding could increase by 25 percent. “Then we looked at whether the state agencies are doing anything about the hazards we looked at,” Yu said. In Ohio’s case, the answer is not much at all, she noted. “There’s no state-level adaptation planning,”

Rosebud idling most Pennsylvania mines, 429 miners out of work (AP) — Rosebud Mining Co. is idling most of its Pennsylvania coal mines, putting 429 miners temporarily out of work. Jim Barker, vice president of the Kittanning-based company tells the Indiana Gazette (http://bit.ly/1OJEFqO) he hopes the workers will be called back in February. Barker blames the temporary shutdown on unseasonably warm weather in November and December, which decreased demand for coal at power plants it supplies. Rosebud operates 20 underground Pennsylvania coal mines, and only a few are staying open for maintenance projects during the furlough. Barker says the mines have to cut production until cold weather increases the demand for coal.

The World’s Largest Coal Producer Is Halting Approvals For New Coal Mines - China, the largest coal producer in the world, won’t be approving new mines for the next three years as it grapples with alarming pollution and pursues other energy sources, including nuclear plants.  The country announced the move last week, according to the state-run Xinhua News Agency. This ban on new mines is unprecedented, published reports note, though mines have been closed in the past and will to be shut down in the coming year. The halting of licenses coincides with a slower Chinese economy, which affects energy demand, but also with heavy air pollution in Beijing and nearby towns. Early last month millions of Chinese went through the country’s first red alert for air pollution, only to experience a second one a week later. Visibility in the streets was an issue, and residents — many of whom use expensive air purifiers in their homes — were urged to stay indoors.  The recent announcement is yet another sign that China, the largest coal producer and consumer in the world, is increasingly distancing from its largest energy source. It also emboldens promises made at the recent Paris summit on climate change. Some 64 percent of Chinese energy comes from coal, but according to Chinese media, the country said it will reduce its consumption by about 2 percent in 2016.  Such change, though it appears small, is a major turn for a growing economy that exponentially increased its coal use over the past 15 years. What’s more, studies suggest that coal use in China declined in 2014 and may have peaked in 2013. In turn, the government said it will add millions of kilowatts of wind and solar power in the next five years, while also approving an unspecified number of nuclear plants in the coastal region.

Consol plans Utica gas well at Pittsburgh airport - Consol Energy Inc. will drill a test well into the deeper Utica shale from one of its Marcellus gas well pads on Pittsburgh International Airport property. The Cecil-based natural gas and coal producer said Tuesday it received approval from Findlay zoning officials to replace one of the 12 Marcellus wells it planned for Pad 4 at the airport with a Utica well. No date has been set for drilling. Like other several other major shale producers, Consol is getting huge results from a few new wells tapping the dry Utica layer, which runs beneath the Marcellus and can produce large amounts of gas with few related liquids. Consol is fracking a Utica well in Greene County and finished wells in Monroe County, Ohio, and in Westmoreland County. The wells will help company officials map the geographic extent of the productive part of the rock layer. Because of persistently low prices, Consol has halted its drilling program while it fracks wells in its inventory, though drilling from an existing well pad can be done more cheaply.

Christiana wants to replace impact fee to severance tax - State Rep. Jim Christiana last week said he wants to eliminate Pennsylvania’s impact fee on natural gas drilling and replace it with a severance tax, a proposal that is garnering mixed reactions from local stakeholders. Christiana, R-15, Beaver, said his proposed legislation would include an initial 3 percent severance tax starting on July 1. The tax would be tied to the price of natural gas, however, meaning it could increase to as much as 5 percent according to market conditions. Christiana’s proposal would abolish the impact fee that has been used in Pennsylvania since 2012. Last year, the impact fee distributed $223.5 million across the state. In contrast, Gov. Tom Wolf previously touted a plan that would have kept the impact fee while also adding a 3.5 percent severance tax and a charge of 4.7 cents per thousand cubic feet. Jack Manning, president of the Beaver County Chamber of Commerce, said Tuesday he reacted positively when he heard about Christiana’s proposal. For starters, Manning said Wolf’s proposal of 4.7 cents per thousand cubic feet is “way out of line with the market and onerous beyond belief.” “What Jim seems to be proposing from what I know is very reasonable and puts us in line with other gas-producing states,” Manning said

No fracking pits allowed under new DEP regs for oil and gas industry - The Pennsylvania Department of Environmental Protection on Wednesday made available thousands of pages of documents outlining new rules for the oil and gas industry. Among the trove of public documents are increased regulations for unconventional drillers, which apply to companies extracting natural resources from the Marcellus Shale. All of it can be found here. Some of the biggest changes include “a prohibition on all pits,” such as the pits used for drill cuttings and flowback fluids. A driller that still wants to use a centralized impoundment will need a residual waste permit, in addition to DEP permits. Regulators say the changes are necessary after a number of cases in which pits and impoundments were found to be leaking.

Toxins found in fracking fluids and wastewater, study shows: Yale News -- In an analysis of more than 1,000 chemicals in fluids used in and created by hydraulic fracturing (fracking), Yale School of Public Health researchers found that many of the substances have been linked to reproductive and developmental health problems, and the majority had undetermined toxicity due to insufficient information. Further exposure and epidemiological studies are urgently needed to evaluate potential threats to human health from chemicals found in fracking fluids and wastewater created by fracking, said the research team in their paper, published Jan. 6 in the Journal of Exposure Science and Environmental and Epidemiology. The research team evaluated available data on 1,021 chemicals used in fracking, a process that recovers oil and natural gas from deep within the ground by using a mixture of hydraulic-fracturing fluids that can contain hundreds of chemicals. The process creates significant amounts of wastewater and fractures the bedrock, posing a potential threat to both surface water and underground aquifers that supply drinking water, note the researchers. While they lacked definitive information on the toxicity of the majority of the chemicals, the team members analyzed 240 substances and concluded that 157 of them — chemicals such as arsenic, benzene, cadmium, lead, formaldehyde, chlorine, and mercury — were associated with either developmental or reproductive toxicity. Of these, 67 chemicals were of particular concern because they had an existing federal health-based standard or guideline, said the scientists, adding that data on whether levels of chemicals exceeded the guidelines were too limited to assess.

Fracking Fluid Contains A Stew Of Known Toxic Chemicals -- And That May Not Be The Worst Of It: Arsenic, benzene, formaldehyde, lead and mercury are among more than 200 toxins found in fracking fluids and wastewater that may pose serious risks to reproductive and developmental health, according to a paper published on Wednesday. And that list may just be just the tip of the iceberg, said Nicole Deziel, an environmental health expert at the Yale School of Public Health and senior author of the new study. Many more chemicals known to be used in fracking could pose similar risks, yet remain unstudied, Deziel said. Other substances involved in oil and natural gas production remain undisclosed by fracking companies. In their study, Deziel and her team investigated more than 1,000 chemicals used in and created by the controversial drilling process, which shoots a mix of pressurized water, sand and chemicals into shale rock to unlock hydrocarbon reserves. The U.S. Environmental Protection Agency used the same list in its assessment of the available science, which found no evidence that fracking has led to widespread, systemic contamination of drinking water. For most of the chemicals, insufficient information thwarted the researchers' efforts to determine potential toxicity. "That's not really surprising," said Deziel. "There are thousands of chemicals in commerce that people are routinely exposed to and for which we have limited data."   Of the 240 chemicals for which the Yale team did have adequate data, they found that 157 were associated with some kind of reproductive or developmental problem, such as adverse birth outcomes, derailed brain development or infertility.

Another reason fracking sucks: Study links fracking to even more health problems - Another day, another study linking fracking to health problems.” A new study from the Yale School of Public Health links the chemicals used in fracking with potential reproductive and developmental problems. This isn’t exactly new — we’ve known for some time that fracking is connected with lowered sperm counts, as well as premature births and a host of other health issues. This particular study, however, raises concerns about wastewater in particular, which the researchers found is even more toxic than the chemicals used in fracking. The New Haven Register reports: But, in addition to the natural gas, wastewater surfaces, which contains leftover chemicals that were pumped down as well as other potentially harmful substances such as lead and arsenic. “What comes back up is actually more toxic than chemicals that went down,” Deziel said. Researchers analyzed public data available on 1,021 chemicals that are used in fracking with the main goal of identifying the most toxic chemicals used in the process. And the most toxic chemicals used have links to reproductive and developmental health problems. Sounds like exactly the thing we should be relying on as we move toward a clean energy future, right? It’s a terrible idea — fracking emits methane, which has 25 times the impact of carbon on climate change over a 100-year period. That is Not Good, and yet, President Obama made natural gas a central tenant of his Clean Power Plan to lower greenhouse gas emissions. As my colleague Ben Adler pointed out, this “could encourage utilities to switch from coal to gas instead of to renewables, even though gas might not be better for the climate over its whole life cycle.” Plus there’s the whole reproductive health thing, like the Yale study found. Oh, and the earthquake thing. And the exploding tap water thing. And the cancer thing. The list, unfortunately, goes on.

Its Own Scientists Question EPA Claim Fracking Is Safe for Drinking Water --- A landmark study by the U.S. Environmental Protection Agency that concluded fracking causes no widespread harm to drinking water is coming under fire — this time, from the agency’s own science advisers. The EPA’s preliminary findings released in June were seen as a vindication of the method used to unlock oil and gas from dense underground rock. A repudiation of the results could reignite the debate over the need for more regulation. Members of the EPA Science Advisory Board, which reviews major studies by the agency, says the main conclusion — that there’s no evidence fracking has led to “widespread, systemic impacts on drinking water” — requires clarification, said David Dzombak, a Carnegie Mellon University environmental engineering professor leading the review, via email. The panel Dzombak heads will release its initial recommendations later this month. “Major findings are ambiguous or are inconsistent with the observations/data presented in the body of the report,” the 31 scientists on the panel said in December, in a response to the study.

EPA Scientists Call Foul on Fracking Study, Say Findings ‘Inconsistent With Data Presented’ -  The U.S. Environmental Protection Agency’s (EPA) advisors are calling foul on the agency’s highly controversial study that determined hydraulic fracturing, or fracking, has not led to “widespread, systemic impacts on drinking water resources in the U.S.” This specific conclusion is being called into question by members of the EPA Science Advisory Board, which reviews the agency’s major studies, Bloomberg reported. The EPA’s conclusion requires clarification, David Dzombak, a Carnegie Mellon University environmental engineering professor who is leading the review, told Bloomberg. A panel headed by Dzombak will release its initial recommendations later this month. “Major findings are ambiguous or are inconsistent with the observations/data presented in the body of the report,” the 31 scientists on the panel said in December 2015. Possible changes to the report could spell trouble for the oil and gas industry that recently celebrated the ending of a 40-year-old crude oil export ban in December 2015. According to Bloomberg, “a repudiation of the results could reignite the debate over the need for more regulation.” The controversial drilling process has spurred a boom in U.S. oil and gas production and driven down gas prices across the country.  However, the report’s misleading and widely reported conclusion—“there is no evidence fracking has led to widespread, systemic impacts on drinking water resources”—has not only downplayed fracking’s effects on drinking water resources, it was also seen by many in the pro-drilling camp as the EPA’s thumbs up to the drilling industry. For instance, a Forbes writer summed up the study with this headline: EPA Fracking Study: Drilling Wins

A blistering report that claimed fracking was safe is now being disputed by its own scientists - An Environmental Protection Agency report released in June on the impacts of fracking on water quality is now being called into question — by none other than the agency's own scientists.   The report initially did not find "widespread, systemic impacts" on drinking water resources close to fracking sites. But the EPA's Science Advisory Board responded in December, after the report was released, that "major findings are ambiguous or inconsistent with the observations/data presented in this report," according to Bloomberg. The controversy rests on one key aspect of the report's findings. It states that the "...number of identified cases [of contaminated wells], however, was small compared to the number of hydraulically fractured wells." While this may be accurate, the report goes on to admit that insufficient long-term data on pre and post fracking water quality could have limited their results, and may not explicitly point to the "rarity of effects on drinking water resources."It's this paucity of information that gives some of the reviewing scientists pause: "I do not think that the document’s authors have gone far enough to emphasize how preliminary these key conclusions are and how limited the factual bases are for their judgments," James Bruckner, a member of the Science Advisory Board, told Bloomberg. Members of the Science Advisory Board, as well as environmental advocates, are also pushing the EPA to include more detailed analysis of the severity of alleged instances of contamination near drilling sites.  Though the Board's recommendations aren't binding, the EPA will "evaluate" possible changes to the report, according to Bloomberg.

Fracking wars heat back up - EPA’s independent Science Advisory Board tugged fracking back into the limelight with a draft report yesterday criticizing the agency for an “inconsistent” finding on fracking risks. Recall that oil and gas companies hailed EPA’s June report, which found that fracking poses no “widespread, systemic” risk to drinking water, as validation that the popular extraction method posed no risk to public health. The agency responded by vowing to consider its independent advisers’ recommendations before finalizing the report sometime this year, but an EPA spokeswoman also stood by the agency’s contextualizing of fracking-water impacts as relatively minor: “EPA’s assessment cites examples where hydraulic fracturing has impacted drinking water resources,” the agency told ME. “However, based on available data, the number of cases is small compared to the number of hydraulically fractured wells.”  Katie Brown, spokeswoman for the Independent Petroleum Association of America-backed Energy in Depth project, said the EPA advisers’ draft report is “concerning, to say the least. [The advisory board's] members are asking EPA to alter scientific findings based on what they admit are ‘outliers.'”  Recall that former EPA chief Lisa Jackson testified before Congress in May 2011 that she was “not aware of any proven case where the fracking process itself has affected water.” Even if the final version of the agency’s study materially alters its headline finding of no broad threat from fracking, it is not expected to offer any specific edicts on stricter regulations.

Industry challenges to be addressed at Marcellus-Utica Midstream Conference - As Marcellus and Utica shale continues to emerge as some of the most prolific gas fields in the world, many challenges lie ahead for the midstream market. Those challenges will be addressed at the Marcellus-Utica Midstream Conference & Exhibition. The event will be held January 26-28 at the David L. Lawrence Convention Center in Pittsburgh. The region’s top companies will come together for an in-depth look at midstream activity throughout the Appalachian plays. Attendees can hear the latest production estimates, learn about midstream projects planned and listen to forecasts on commodity prices. The conference will feature 19 keynote speakers and more than 150 exhibitors.Don Raikes, senior vice president of Dominion Transmission, will be one of the keynote speakers. He will speak about evolving markets and how the Marcellus and Utica shale plays have changed.  “I think that we have probably one of the best and most diverse programs that’s we’ve had for Marcellus-Utica Midstream since we’ve started,” said Paul Hart, editor of Midstream Business.

Moratorium on fracking waste is approved in Wheatfield  — The Town Board voted Monday in favor of a six-month moratorium on the storage or application of waste from hydraulic fracturing on any land or road in the town. Asked whether any such material has been used in Wheatfield, Town Attorney Matthew E. Brooks said, “No, and we don’t want any, either.” Some municipalities have used water from fracking to melt ice because of its salinity, Brooks said. Hydraulic fracturing, or fracking, has been barred in New York State by the Department of Environmental Conservation. The fracking process uses high-pressure water and chemicals to push oil and natural gas out of crevices in underground rock, and has resulted in an energy boom in several states, including Pennsylvania.  The Federal Energy Regulatory Commission has the final say on whether and where the pipeline and associated facilities will be built.

Vermont utility regulator won't reconsider gas line project — Vermont’s utility regulating Public Service Board is sticking with its approval of a plan to build a 41-mile natural gas pipeline from Chittenden County to Middlebury despite a 78 percent increase in cost from what was approved in 2013. In a ruling issued Friday, the board said the Vermont Gas Systems has agreed to limit the potential increase in costs to ratepayers to 12.2 percent. When the board first approved the project in 2013 its cost was estimated at $86.6 million. The price has since ballooned to $153.6 million. Vermont Gas says the decision means the project will be able to deliver clean energy to thousands of customers. Opponent Sandy Levine of the Conservation Law Foundation says it’s disappointing Vermonters will be saddled with high costs and pollution for decades.

Pipeline leak spills saltwater and oil in Stark County - 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.

Rosenberg: Gas pipeline at odds with state's energy goals (AP) — Senate President Stan Rosenberg is asking federal energy regulators to take into consideration Massachusetts efforts to reduce greenhouse gases as they review a proposed natural gas pipeline. In a letter to Federal Energy Regulatory Commission Chairman Norman Bay, Rosenberg said he’s concerned that the planned natural gas pipeline through southern New Hampshire and western Massachusetts by Kinder Morgan Inc. could set back those efforts. Rosenberg pointed to the state’s 2008 Global Warming Solutions Act, which calls for reducing greenhouse gas emissions between 10 percent and 25 percent below 1990 levels by 2020. In the letter, Rosenberg said the state is instead trying to increase the availability of solar power, off-shore wind turbines, hydropower and other technologies to meet future energy demand. FERC is currently accepting public comment on the project.

West Virginia receives $18 million from fracking leases; no royalties yet - — West Virginia has brought in $18 million by leasing the right to drill for oil and natural gas deep below state wildlife management areas and waterways, including beneath the Ohio River. But as natural gas prices stay low, no companies with the state leases have begun extracting gas, as far as state Department of Commerce officials know. As a result, officials say they have received up-front checks, but no royalties from the unearthing of resources from the deep shale deposits, a process generally known as hydraulic fracturing, or fracking. The department first put horizontal drilling opportunities out to bid in the fall of 2014 and has since struck leases in the northern counties of Marshall, Tyler and Wetzel. They include parts of wildlife management areas at Conaway Run Lake, The Jug, Underwood, Burches Run Lake and Lewis Wetzel; Fish Creek and Middle Island Creek; and a few miles of the Ohio River. Given the uncertainty about natural gas prices, West Virginia Commerce Secretary Keith Burdette said the state is treating the leases as one-time cash that will bolster the parks system and wildlife programs, hopefully creating more revenue sources through the improvements. Under state and federal requirements, about $5.4 million has to be doled out to state Division of Natural Resources projects, and $12.6 million must go back into wildlife management.

West Virginia still waiting for fracking royalties - West Virginia has received $18 million so far from leases granted by state officials to drill for oil and natural gas below state wildlife management areas and waterways, including beneath the Ohio River. But as natural gas prices stay low, state officials say they've only received up-front checks so far, and no royalties for unearthing the resources from the deep shale deposits. No companies with state leases have begun extracting gas, as far as state Department of Commerce officials know. The department first put the deep, horizontal drilling leases out to bid in fall 2014. Commerce Secretary Keith Burdette says much of the money will go back into wildlife management programs. Some will fund parks projects, ranging from upgrades at cabins to campground improvements.

It’s Warm Outside – But Natural Gas Demand Has Some Underlying Growth This Winter -- The mild winter in the U.S. thus far has created a balancing nightmare for the natural gas market. A freakishly warm December has meant below-average withdrawals and contributed to a record storage surplus over last winter’s levels. Not surprisingly, natural gas futures prices have been struggling under the weight of this surplus. However, a closer look at gas consumption over the past few weeks shows some underlying demand strength despite the warm weather. Today we take a closer look at where gas demand is coming from. At the end of December 2015 in If I Could Turn Back Production, we examined the extent of the current storage surplus and presented several scenarios for how the market could balance in 2016 – including a few involving higher demand from a colder than normal January and February. With production remaining steady around 73 Bcf/d last fall, it became clear that it would take robust demand to keep the storage surplus from growing and prices from collapsing. However, that winter demand is highly dependent on cold weather, which drives residential and commercial heating demand. Trouble is, the winter was largely a no show until recent days. Let’s look at just how mild it has been. A good way to quantify the impact of winter weather on gas demand is to look at heating degree days (HDDs), which measure heating demand for every outdoor degree below 65 degrees Fahrenheit (see Under the Weather for more on how Degree Days are calculated).  Natural gas fundamental analysts look at HDD data in the winter to understand the relationship between cold weather and the resulting demand and storage withdrawals.  The lower the HDDs, the lower the demand and storage withdrawals in the winter; and the higher the HDDs, the higher the demand and withdrawals. 

EIA: 2015 natural gas spot prices average cheapest since 1999 - Fuel Fix: — Warm weather and strong production in 2015 drove down natural gas prices to their lowest average since 1999, according to a government analysis released Tuesday. Natural gas spot prices at the nation’s central gas-trading Henry Hub in Louisiana averaged $2.61 per million British thermal unit through 2015, the lowest annual average level since the turn of the century, according to the U.S. Energy Information Administration. Spot prices value physical gas, as opposed to the more often cited futures contracts that price natural gas to be delivered at a later date. Spot prices at Henry Hub opened relatively low last year and proceeded to fall. Natural gas became even cheaper when U.S. inventories rose to record levels during the summer. Gas is injected into storage during the warmer months so it can be drawn during the colder winter months to meet heating demand. But the draws from inventories mostly failed to materialize in 2015, and when temperatures stayed warm in the early winter, prices collapsed. Daily spot prices fell below $2 per million British thermal unit for the first time since 2012. The U.S. has several different physical markets for natural gas, each of which serve demand in a different region. Louisiana’s Henry Hub is considered the benchmark and is the delivery point for the next-month futures contract most often traded, but consumers in the Northeast are also impacted by a few other important markets. Prices between the hubs can vary because shipping constraints make it hard to even out spikes in demand that can happen during cold weather.

Natural Gas Stockpiles Shrink, Ends 2015 Down 19% -  The U.S. Energy Department's weekly inventory release showed a larger-than-expected decrease in natural gas supplies. Following the bullish inventory news, plus forecasts for colder temperatures ahead, natural gas prices experienced sharp gains. Despite the boost, the commodity is still languishing near its lowest level in years, ending 2015 down 19%. With production remaining plentiful and expected to outpace demand for most of 2016, the commodity is likely to stay depressed for a while.  The Weekly Natural Gas Storage Report - brought out by the Energy Information Administration (EIA) every Thursday since 2002 - includes updates on natural gas market prices, the latest storage level estimates, recent weather data and other market activities or events. The Analysis of the Data Stockpiles held in underground storage in the lower 48 states fell by 58 billion cubic feet (Bcf) for the week ended Dec 25, 2015, above analyst expectations for a draw of 54 Bcf as per the analysts surveyed by The Wall Street Journal. The decrease exceeded last year's drop of 26 Bcf but was lower than the 5-year (2010-2014) average shrinkage of 98 Bcf for the reported week.

Natural Gas Prices Traded below the 50-Day Moving Average - Market Realist: Natural gas prices have rebounded from the historic low of $1.7 per MMBtu (British thermal units in millions) since December 2015. Short covering and bargain buying pushed natural gas prices higher. However, long-term oversupply concerns are dragging gas prices lately. The cold winter weather forecast could push natural gas prices higher. Gas prices could see resistance at $3 per MMBtu. Prices tested this mark back in April 2015. On the other hand, record inventory and weak demand could push natural gas prices lower. The next support for natural gas prices is seen at $1.6 per MMBtu. Prices hit this level in 1995.Raymond James—the financial services firm—stated that natural gas prices could average around $2 per MMBtu in 2016. The previous forecast was around $2.4 per MMBtu for the same period. Many banks and financial services firms have lately downgraded their oil and gas price forecast for 2016 and 2017. However, the EIA1estimates that gas prices could average around $2.9 per MMBtu in 2016. We could see a downward revision in the next EIA STEO (Short-Term Energy Outlook) report in the January 2016 edition.

Emails: U.S. Government Facilitated LNG Business Deals Before Terminals Got Required Federal Permits | Steve Horn -- Emails and documents obtained by DeSmog reveal that the U.S. Department of Trade has actively promoted and facilitated  business deals for the liquefied natural gas (LNG) industry and export terminal owners, even before some of the terminals have the federal regulatory agency permits needed to open for business.  This release of the documents coincides with the imminent opening of the first ever LNG export terminal in the U.S. hydraulic fracturing ("fracking") era, owned by Cheniere.   The documents came via an open records request filed by DeSmog with the Port of Lake Charles. The request centered around the Memorandum of Understanding (MOU) the Port signed with the Panama Canal Authority in January 2015.  The records offer an inside glimpse of how -- as the U.S. Federal Energy Regulatory Commission (FERC) and U.S. Department of Energy (DOE) weigh environmental and energy policy concerns before handing out LNG export permits -- other federal agencies have proceeded as if the permits are a fait accompli.   They also further raise the specter that, as some have highlighted, FERC and DOE merely serve as rubber-stamp regulatory agencies in service to powerful industrial interests. Further, they demonstrate how pivotal the proposed and nearly operational Panama Canal expansion project is for the LNG shipping industry moving forward.

Northern Michigan company implements new technology to produce oil - Traverse City oil company, Core Energy, has begun implementing CO2 Enhanced Oil Recovery in Otsego County. The technology uses Carbon Dioxide to extract oil from fields that were otherwise depleted. Core Energy's President and CEO Bob Mannes says the process is expected to not only benefit the local economy, but also help the environment."We are taking CO2 that would otherwise be vented into the atmosphere and we are injecting the CO2 a mile underground into an oil field," said Mannes.Specifically, the 840-acre oil field in Bagley Township just south of Gaylord, where they began the process in December. The field was done producing oil through conventional drilling until Core Energy added it to the eight other oil fields in northern Michigan they're using CO2 Enhanced Oil Recovery to extract oil from. "At the pressure and temperature of this reservoir, this type of oil becomes immiscible to CO2," said Mannes. "The CO2 turns to liquid and it mixes with the oil which will change the viscosity, allow the oil to flow to the reservoir easier." "This is not fracking; this is beneficial to the environment and it's great economically and impacts the entire state," Cole said. "This is a win-win win across-the-board, it's very exciting."

Stunning Drone Footage Of The Midwest Flooding Wreaking Havoc On The US Oil Industry - After the first deadly winter storm this season, now come the floods: the near-record water level across the U.S. Midwest has disrupted everything from oil to agriculture, forcing pipelines, terminals and grain elevators to close. This is the worst flood in the region since May 2011, and is just shy of the worst flood of breaking 30-year records.  According to Bloomberg, the floods have killed at least 20 people and shut hundreds of roads across Missouri and Illinois, according to AccuWeather Inc. Rain-swollen rivers will set records in the Mississippi River basin through much of January. Fifty miles (80 kilometers) of the Illinois River remain closed, according to the U.S. Coast Guard, as well as five miles of the Mississippi River.  Additionally, the Coast Guard issued a high-water safety advisory for 566 miles of Mississippi River between Caruthersville, Missouri, and Natchez, Mississippi. It also instituted high-water towing limitations near Morgan City, Louisiana, for vessels heading south that are 600 feet or shorter, it said in a statement.  The impact of the flood has hit farmers, with hog producers in southern Illinois calling other farmers, hoping to find extra barn space to relocate pigs. In one case, an overflowing creek took out electricity and made roads impassable, causing 2,000 pigs to drown. But the flood's most adverse economic impact may be on oil,  which may see an even greater increase in stockpiles as a result, pushing the price of oil even lower.As Bloomberg adds, so far the biggest oil shutdown involves Enbridge Inc.’s Ozark pipeline, which was booked to carry about 200,000 barrels a day this month to Wood River, Illinois, from Cushing, Oklahoma. The outage of the section under the Mississippi River may further add to stockpiles at Cushing that reached a record high last week.

2015 another record year for quakes in Oklahoma - A 4.2 magnitude earthquake Tuesday near Edmond capped off a record year of earthquakes in the state. Now, 2016 is off to a shaky start. Just before 6 a.m Friday, the Oklahoma Geological Survey recorded a 4.2 magnitude quake near north Oklahoma City. OGS Director Jeremy Boak said he expects the trend to continue, but to what extent remains to be seen. “We had 881 M3.0+ earthquakes for the year … With 480 in January to June, this means we had about 20 percent fewer of these earthquakes in the second half. On the other hand, we had 14 and 15 M4.0+ earthquakes in the same periods for the year, for a total of 29, more than twice last year’s total. Because the overall numbers are small, this is probably not statistically important, but it will have felt so to those near these earthquakes.” In 2014, the state recorded 585 quakes of magnitude 3 or larger, compared with only 100 in 2013, according to federal earthquake data. California, by comparison, had fewer than one-third that number. That put Oklahoma at the top of the list for most seismically active state outside of Alaska and Hawaii, a dubious distinction it maintained in 2015. Geologists have linked the earthquake proliferation to disposal wells used to jettison byproducts of the fracking process. Disposal wells in the Arbuckle formation receive a large portion of the wastewater, but the Oklahoma Corporation Commission has been monitoring those sites heavily and has implemented restrictions to limit capacity and usage. “I do expect a decrease this year, but could not hope to estimate how much,” Boak said. “I suspect it will have to be substantial to reduce the pressure on the Corporation Commission.”

Drilling-Crazy Oklahoma Has Its 12th Earthquake In Less Than A Week: — The state commission that regulates Oklahoma's oil and natural gas industry ordered some injection well operators to reduce wastewater disposal volumes on Monday after at least a dozen earthquakes hit an area north of Oklahoma City in less than a week. The Oklahoma Corporation Commission said it was implementing a plan that affects five wastewater injection wells operating within 10 miles of the center of earthquake activity near Edmond, a northeast suburb of Oklahoma City. Among the recent quakes to hit the area was a 4.2 magnitude temblor on New Year's Day that caused minor damage but no injuries. Oklahoma's energy regulator declared in November that the state now has more earthquakes than anywhere else in the world, which scientists have linked to wastewater injections, a long-used method to dispose of the chemical-laced byproduct of oil and gas production. A recent study by the U.S. Geological Survey traced wastewater injection methods to the 1920s in Oklahoma and tied the rise in quakes in the past 100 years to industrial activities, such as oil and natural gas production. About 1.5 billion barrels of wastewater was disposed underground in Oklahoma last year, according to statistics released by the governor's office.

12 Earthquakes Hit Frack-Happy Oklahoma in Less Than a Week -- After the Oklahoma City area was hit by at least a dozen earthquakes in less than a week, the Oklahoma Corporation Commission, which regulates the state’s oil and gas industry, ordered Monday that several injection well operators reduce wastewater disposal volumes. The commission’s plan addresses five wastewater injection wells operating within 10 miles of the center of the earthquake activity near Edmond, a suburb outside of Oklahoma City. The plan calls for one well, located 3.5 miles from the epicenter, to reduce its disposal volume by 50 percent, with four more wells reducing their volumes by 25 percent.  However, one Oklahoma oil company is defying the state regulator’s request that it shut down six wastewater disposal wells—located more than 100 miles northwest of Oklahoma City—used as part of the company’s fracking operations. According to the The Wall Street Journal: Sandridge Energy Inc., which has complied with similar requests in the past, said this time it won’t stop using its wastewater disposal wells … The Oklahoma Corporation Commission, which regulates energy companies, is working on legal action to modify Sandridge’s permits in order to force it to abandon the wells, said Matt Skinner, a spokesman for the agency … Sandridge may be reluctant to shut down the wells because it needs every bit of revenue it can generate at this point,  . Even if Sandridge continues to pump all the oil and gas it can, the company could run out of cash in 2016, he said. On New Year’s Day, a 4.2-magnitude earthquake struck near Edmond. On Monday, at least three earthquakes were recorded in the Stillwater area, the largest of which had a magnitude of 3.2, according to the U.S. Geological Survey.

Oklahoma oil, gas regulators order changes after earthquakes — The state commission that regulates Oklahoma’s oil and natural gas industry ordered some injection well operators to reduce wastewater disposal volumes on Monday after at least a dozen earthquakes hit an area north of Oklahoma City in less than a week. The Oklahoma Corporation Commission said it was implementing a plan that affects five wastewater injection wells operating within 10 miles of the center of earthquake activity near Edmond, a northeast suburb of Oklahoma City. Among the recent quakes to hit the area was a 4.2 magnitude temblor on New Year’s Day that caused minor damage but no injuries. “We are working with researchers on the entire area of the state involved in the latest seismic activity to plot out where we should go from here,” Oil and Gas Conservation Division Director Tim Baker said, adding that responding to the swarm of earthquakes in the region was an ongoing process. Oklahoma has become one of the most earthquake-prone areas in the world, with the number of quakes magnitude 3.0 or greater skyrocketing from a few dozen in 2012 to more than 800 in 2015. Many of the earthquakes are occurring in swarms in areas where injection wells pump salty wastewater — a byproduct of oil and gas production — deep into the earth.

Oil Companies Putting US Environment ‘On Shaky Ground’ With Fracking: – Oil companies are endangering the lands across the United States with their fracking activities, the Center For Biological Diversity Climate Media Director Patrick Sullivan told Sputnik. "The more oil companies frack, the more contaminated wastewater they produce, and that dangerous waste is polluting our water and putting large parts of our country on shaky ground," Sullivan said. On Monday, the Oklahoma Corporation Commission announced it would regulate five wastewater injection wells by limiting the amount of wastewater injected during the fracking process. Oklahoma has recently been hit with numerous earthquakes, many of which have been attributed to the fracking practice’s injection of wastewater into the earth. The method has been heavily criticized for the associated environmental risks and its potential to trigger tremors. Sullivan stated that the slowness of Oklahoma regulators to address the impact of fracking on the country’s lands displays a disturbing influence of the oil and gas industry over the state’s officials. "Oil industry-earthquakes are wreaking havoc, and both state and federal regulators are doing very little to protect people and property from this inevitable result of fracking and oil production," Sullivan concluded.

Oklahoma Fracking Company Defies Plan To Reduce Earthquakes - An Oklahoma fracking company said Tuesday that it will not comply with a request to reduce the amount of water it discards into underground wells, setting up a legal battle.  The state has been hit with a significant, unprecedented rise in earthquakes that has been tied to the increase in hydraulic fracturing and wastewater disposal. In an effort to address the issue, the Oklahoma Corporation Commission, which oversees oil and gas production in the state, has been regularly issuing directives to natural gas companies to reduce the volume of water injected into the ground. In December, a directive in the Medford, Oklahoma area directed SandRidge Energy to completely stop injecting water into four wells, and restricted volumes in nearly two dozen others. Now, the company is saying there isn’t sufficient evidence that wastewater injection wells are triggering earthquakes, and it will not comply with the voluntary measures. In turn, the OCC will file an application to the agency’s commissioners — a group of three elected officials who have judicial authority — to legally change SandRidge’s allowable levels.The issue is, what does the data suggest in terms of potential risk of induced seismicity?  “We have had 100 percent compliance with the plans that we have issued up until now,” Matt Skinner, a spokesman for the commission, told ThinkProgress. Skinner said staff has been working closely with partners, particularly at the Oklahoma Geological Survey, to make decisions using the best data available.

Oil, Gas Companies Ignoring Oklahoma Fracking Controls - Greenpeace USA: Oil and gas companies operating in the US state of Oklahoma will not follow regulations put in place to help ease environmental damages from fracking, Greenpeace USA Researcher Jesse Coleman told Sputnik Tuesday. On Monday, the Oklahoma Corporation Commission announced it would regulate five wastewater injection wells by limiting the amount of wastewater injected during the fracking process. Oklahoma has recently been hit with numerous earthquakes, many of which have been attributed to the fracking practice’s injection of wastewater into the ground. The method has been heavily criticized for the associated environmental risks in addition to its potential to trigger tremors. Coleman noted that some oil and gas companies have already broken their promise to make the required wastewater reductions. He explained there is no link between reducing wastewater and stopping damaging earthquakes. "It is now time for Governor Mary Fallin and the state of Oklahoma to choose protecting Oklahomans over protecting industry profits," Coleman asserted. On Tuesday, Oklahoma advocacy group Stop Fracking Oklahoma founder Kelley McDonald told Sputnik that the oil and gas companies will only follow the fracking mandates if they are forced to by possible penalties and criminal prosecution.

The Morning Brew: Oklahomans rattled by large earthquakes - It's Thursday, and the central plains are shaking. Here's the latest on Oklahoma earthquakes and other goings-on.  The earth unleashed a string of earthquakes Wednesday and Thursday, including a 4.8-magnitude temblor that has tied for the second largest earthquake since 2011.  "Since 2011"-- that's significant. That's because between 1975 and 2008, the state registered zero to three earthquakes a year at 3.0-magnitude or above.  Since 2009, quakes of this magnitude have smashed records each year, becoming a regular fixture in the state's natural disaster menagerie. There were 20 in 2009, 35 in 2010, 64 in 2011, 35 in 2012, 109 in 2013 and 585 in 2014. Along came 2015 and another earthquake record obliterated: 857 earthquakes. According to this report, that means Oklahoma had more 3.0-magnitude earthquakes in 2015 than every state in the U.S., combined - if you exclude Alaska. A 4.7-magnitude quake that struck near Medford Nov. 30 held the previous record for second-biggest since 2011.  So many quakes hit the Sooner state Wednesday and Thursday it's become difficult to keep up. That's why we have the following earthquake map.

3 earthquakes of magnitude 4.0 or more hit northwest Oklahoma — Three earthquakes capable of causing moderate damage rocked northwestern Oklahoma overnight, but there were no immediate reports of significant damage or injuries. The U.S. Geological Survey reports a magnitude 4.7 quake hit just before 10:30 p.m. Wednesday about 20 miles northwest of Fairview and a magnitude 4.8 quake struck about a half mile away less than a minute later. A magnitude 4.0 quake was recorded in the area just after 2:30 a.m. Thursday. Oklahoma’s earthquakes have been linked to injecting wastewater underground from oil and gas production. Regulators have ordered a reduction in volume or the closure of some wells. Fairview police and Major County Sheriff’s Department officials say there were no reports of damage or injuries. Hundreds of people reporting feeling the quakes in Kansas and Oklahoma. There were also reports to the USGS that the quake was felt hundreds of miles away in Arkansas, Illinois, Iowa, Mississippi, Missouri, Nebraska, Texas and Wisconsin.

Magnitude 4.7 and 4.8 Earthquakes Shake Oklahoma 30 Seconds Apart; 30 Quakes Reported in 19 Hours - A pair of moderate earthquakes shook northwest Oklahoma late Wednesday night, part of a swarm of Sooner State temblors that has produced more than two dozen quakes in less than 24 hours. A 4.7-magnitude tremor was followed 30 seconds later by another 4.8-magnitude quake centered in a sparsely populated area about 20 miles northwest of Fairview, Oklahoma, about 97 miles northwest of Oklahoma City. The quakes struck at depths of 2.1 and 3.7 miles below the surface. The twin earthquakes occurred at 10:27 p.m. CST Wednesday night and were felt from central Kansas to southern Oklahoma and the eastern Texas panhandle, including in Wichita, Kansas, and the Oklahoma City metropolitan area.  There were no reported injuries in either Majors or Woods Counties, near the epicenter of the twin quakes, according to newsok.com. The 4.8-magnitude quake was the strongest in the Sooner State since the November 2011 swarm that included the state's strongest on record, a 5.6-magnitude temblor in Prague on Nov. 6, 2011. It was the fourth strongest quake on record in Oklahoma, according to the Oklahoma Geological Survey (OGS). This was one of 30 separate earthquakes of magnitude 2.5 or greater reported in Oklahoma within a 19-hour span from Wednesday evening through early Thursday afternoon. Twenty-seven of those, including the two strongest quakes mentioned above, were clustered in southern Woods County. Two others were reported in the far northern Oklahoma City metropolitan area east-northeast of Edmond, and a third occurred around midday Thursday near Perry in north-central Oklahoma.

32 Oklahoma quakes in 24-hour period could foretell stronger temblor, experts say -  A rash of 32 earthquakes that shook the state Wednesday night and Thursday increases the likelihood that Oklahoma will experience a higher-magnitude quake, Jeremy Boak, director of the Oklahoma Geological Survey, said Thursday. Two large earthquakes — one that tied for fourth largest in state history — struck near a town in northwestern Oklahoma less than a minute apart Wednesday night and were followed by 30 smaller quakes through Thursday evening. "This little burst has been quite remarkable," Boak said. "Having four magnitude 4s in one day is highly unusual. It's up there in that northern center. So it's quite isolated from the ones we had earlier this year and the tail end of last year. But it's definitely of concern." The United States Geological Survey reported a 4.4-magnitude earthquake about 20 miles northwest of Fairview at 10:27 p.m. Wednesday, followed 30 seconds later by a 4.8 quake less than a mile away. The two temblors were about 3.5 miles deep. The first quake on Wednesday night was initially estimated to be 4.7 in magnitude but was later revised to a 4.4. Seven smaller earthquakes — still 2.5 magnitude or greater — had occurred earlier in the day Wednesday. The third largest in the overnight swarm was a 4.0-magnitude quake at 2:37 a.m. Thursday about 17 miles northwest of Fairview. It was recorded about 3 miles deep. Another 4.0-magnitude quake recorded at about 2 p.m. in the same area. About 9 minutes after the first Fairview seismicity of Wednesday night — the 4.4- and 4.8-magnitude quakes — a 3.4 struck about 20 miles south of Alva, according to the agency. Another 12 minutes later saw a 3.4 occur about 18 miles northwest of Fairview.

U.S. oil 'strippers' maneuver to keep pumping amid crude slump – U.S. “stripper well” operators, the nation’s smallest oil producers seen as most likely to succumb to the crude price slump, are hanging in tough, reducing the chances of near-term production cuts needed to rebalance the domestic oil market. The conventional wisdom is that “strippers” would be the first to fold in the face of oil’s slide below $40 given their tiny size – some may pump as little as few hundred dollars’ worth of oil a day – limited access to capital and high costs compared with bigger, more efficient shale producers. Yet interviews with executives and experts show those smallest, often family-owned, businesses are also among the most resourceful, keeping the oil flowing even as prices near 11-year lows and a growing number of their wells lose money. While hopes for a rebound are fading, “strippers” are doing everything they can to keep their “nodding donkey” pumps working so they can hold on to land leases that give them access to oil reserves. “The small operators of the stripper wells are pretty resilient,” says Mike Cantrell, head of the National Stripper Well Association. “They’ve always made it through and will still make it through.” Stripper wells pump no more than 15 barrels of oil per day but together over 400,000 wells scattered across the nation’s oilfields produce over a tenth of U.S. oil output, enough to affect the market supply-demand balance and prices.

Next goal: Reclaim unused well pads - When falling prices caused natural gas development to start dropping off in places like western Colorado after peaking in 2008, in some cases it ended up in companies doing little or no drilling on well pads they’d already built. How to ensure such pads are reclaimed through reseeding and other measures is part of a stepped-up focus by the Colorado Oil and Gas Conservation Commission. It comes as COGCC Commissioner Richard Alward, a Grand Junction ecologist and consultant whose work includes oil and gas reclamation, continues to call for an update of the agency’s reclamation rules. A new report by commission staff finds that of some 98,000 wells under the agency’s jurisdiction, about 45,000 are eligible for final reclamation, and 58 percent of those have passed final reclamation inspection. That leaves 18,685 locations that the agency plans to focus on inspecting, including about 12,000 sites with wells that either were dry from the start, or produced before being plugged. The nearly 6,800 remaining sites are what the commission calls abandoned locations — sites where companies planned to drill wells but never drilled them. “The number of Wells eligible for final reclamation that have not yet passed a final reclamation inspection has increased substantially since 2009,” the commission says in its new report. It cites a number of factors, such as an increase in requests by surface owners to waive reclamation requirements that may conflict with their desired uses for the land, and more requests by companies to abandon locations they no longer plan to use. Addressing these requests is time-consuming, and staff have to prioritize them with other inspections, such as ones based on citizen complaints, the report notes. But it has added four full-time reclamation inspectors to address the backlog since 2014.

North Dakota rigs slip below 60 for first time since 2009 - The number of drill rigs in North Dakota slid below 60 on Monday for the first time since 2009 as crude prices tumble and companies focus on richer portions of the state’s oil patch. State Department of Mineral Resources data show 59 rigs were operating Monday in western North Dakota’s oil-producing region, down from 171 rigs on the same day last year and 192 in 2012. North Dakota, the nation’s No. 2 oil producer behind Texas, produced about 1.1 million barrels of oil daily in October, which was about 60,000 barrels per day less than the record set in December 2014. October production is the latest available; data typically lags about two months. State and industry officials said North Dakota should be able to maintain oil production at the current level if the number of drill rigs stays above 50. “As long as we can keep those rigs and completions at today’s level, we’ll be able to maintain that production,” said Ron Ness, president of the North Dakota Petroleum Council. There are more than 13,100 active oil wells in North Dakota, a number that has nearly tripled since 2010. Almost all of the new wells are targeting rich Bakken and Three Forks formations in the western part of the state. North Dakota sweet crude was fetching $37 a barrel on Monday, about $25 less than the price a year ago.

Tribes, North Dakota fail to reach deal on oil tax agreement — Tribal officials on North Dakota’s oil-rich Fort Berthold Reservation said Thursday they won’t sign off on a revenue sharing agreement with the state because of a new law that shaves the overall oil tax rate following the fall in crude prices. The Legislature in April passed the measure, which also abolishes some price-based incentives. Three Affiliated Tribes officials said they’re not happy with the tax cut because more money is needed to pay for oversight, road repairs and other consequences of oil development. Tribal leaders have threatened since the law was passed to pull out of the oil tax revenue-sharing agreement that has raised more than $1.5 billion for the state and the tribes since 2008. The tax cut takes effect New Year’s Day. “(The tribes) take no formal action at this time concerning the oil and gas tax agreement while negotiations with the governor’s office continue,” Three Affiliated Tribes Chairman Mark Fox said in a statement.

County objects to any lowered fine in large pipeline spill  — The Williams County Commission has gone on record as opposing a reduction of a $2.4 million fine levied against a Texas company for the largest pipeline spill in North Dakota history. State regulators are considering easing the record fine levied in June against pipeline owner Summit Midstream Partners. Regulators routinely settle on fines, saying it promotes cooperation with proper cleanup and diligence against future spills. Alison Ritter, a spokeswoman for the state Department of Mineral Resources, told The Associated Press recently that the state and the company are “actively negotiating a settlement.” The 3 million-gallon spill of saltwater and oil was discovered in early January near Williston. Saltwater is a byproduct of oil production. Regulators believe the ruptured pipeline had been leaking unnoticed for three months. Officials said it primarily contaminated Blacktail Creek but also flowed into the Little Muddy and Missouri rivers. The Williams County Commission has directed its attorney to write a letter to the state objecting to any lowered fine, the Williston Herald reported. “When we have a spill of this magnitude, it behooves us to give the state notice that no, we don’t believe the penalty should be lower in this situation,”

North Dakota approves crude oil pipeline beneath big lake — North Dakota regulators have approved a crude oil pipeline that will be built 100 feet beneath the lake bed of Lake Sakakawea, the largest of the six reservoirs on the Missouri River. The three-member Public Service Commission unanimously approved Sacagawea Pipeline Co.’s plan on Tuesday. The company is developing the 70-mile-long, pipeline to move crude from Mountrail County to a rail facility in neighboring McKenzie County. The company estimates the cost of the project at $125 million. The timeline for the project is uncertain. The U.S. Army Corps of Engineers still must sign off on the project.

State regulators again approve Keystone XL oil pipeline =— State regulators have again approved the portion of the embattled Keystone XL oil pipeline that would go through South Dakota. The Public Utilities Commission’s decision Tuesday still requires TransCanada Corp. to get a presidential permit for the project. President Barack Obama blocked the pipeline in November. But an attorney for the company has said TransCanada remains committed to the project, which could be revived under the next president. The state authorized the pipeline in 2010, but permits must be revisited if construction doesn’t start within four years. The commission voted to accept the company’s guarantee that it can complete the project while meeting the conditions of the 2010 approval. The pipeline would transport oil from Canada to Nebraska, where it would connect with existing pipelines headed to the Gulf Coast.

TransCanada Announces It Will Sue U.S. Over Keystone XL Denial -  TransCanada, the company behind the Keystone XL pipeline, announced Wednesday it is filing a claim under the North American Free Trade Agreement (NAFTA), saying that the project’s permit denial was “arbitrary and unjustified.” TransCanada is seeking $15 billion in costs and damages due to the denial, and has also filed a separate lawsuit against the U.S. in federal court.  Under NAFTA, companies can sue governments that put investments at risk through regulation. If it proceeds, the case will go in front of an international tribunal. (A U.S. company sued Montreal in 2013 over a fracking ban, using the same rationale). The tribunal cannot overturn the permit denial, but it can force payment of damages.   A NAFTA challenge had been previously identified as a potential legal recourse for the company.  In the notice to submit a claim for arbitration, TransCanada notes that two previous pipelines, carrying oil from the same tar sands region across the U.S. border, were both approved. This, TransCanada claims, suggests that the denial was political in nature, which is prohibited under NAFTA. “Environmental activists … turned opposition to the Keystone XL Pipeline into a litmus test for politicians—including U.S. President Barack Obama — to prove their environmental credentials. The activists’ strategy succeeded,” TransCanada states in its filings. “Stated simply, the delay and the ultimate decision to deny the permit were politically-driven, directly contrary to the findings of the Administration’s own studies, and not based on the merits of Keystone’s application. The Administration’s actions violated U.S. obligations under the North American Free Trade Agreement (“NAFTA”).”

TransCanada Sues Obama Administration; Says Keystone Pipeline Rejection Was Unconstitutional -- On November 6, Obama was delighted to take his place in the pantheon of progressive, liberal Warren Buffett apparatchiks when he proudly announced that the Keystone XL pipeline, which had been delayed for years, had finally been rejected. Exactly two months later, Obama's "mission accomplished" banner has just led to a big slap on the face of the former constitutional expert, and could carry a multi-billion dollar chage after late this afternoon, TransCanada filed a lawsuit in Federal court in Houston, suing the U.S. government and claiming the Obama acted unconstitutionally when he rejected the Keystone XL, while also seeking $15 billion alleging the pipeline denial was "arbitrary and unjustified."The company's lawsuit in federal court in Houston does not seek legal damages but wants the permit denial invalidated and seeks a ruling that no future president can block construction.According to Reuters, in filing the NAFTA claim, TransCanada said it "had every reason to expect its application would be granted" as it had met the same criteria the U.S. State Department used when approving other similar cross-border pipelines.

Keystone: TransCanada Challenges Project Rejection  — The Canadian company that proposed the Keystone XL oil pipeline filed a lawsuit over the U.S. government’s rejection of the project and announced it plans to file a second legal challenge that will seek more than $15 billion in damages.TransCanada filed a federal lawsuit Wednesday in Houston alleging President Barack Obama’s decision in November to kill the pipeline exceeded his power under the U.S. Constitution.The company also announced the same day that it will submit a separate petition seeking the billions in damages, alleging the U.S. breached its obligations under the North American Free Trade Agreement.In November, Obama quashed the pipeline, declaring it would have undercut U.S. efforts to clinch a global climate change deal at the center of his environmental legacy. The president said he agreed with a State Department conclusion that Keystone wouldn’t advance U.S. national interests.“TransCanada has been unjustly deprived of the value of its multi-billion dollar investment by the U.S. Administration’s action,” TransCanada said in a statement. “As the administration candidly admitted, its decision was not based on the merits of the project. Rather, the denial was a symbolic gesture based on speculation about the (false) perceptions of the international community regarding the administration’s leadership on climate change.”  In its lawsuit, TransCanada alleges Obama’s decision exceeded his powers as president and infringed upon Congress’ power under the Constitution to regulate interstate and international commerce.  TransCanada said it plans to submit a separate petition that alleges the U.S. breached four articles under NAFTA — which governs trade between the U.S., Canada and Mexico — that provide financial protections for all Canadian investors.

TransCanada launches $15-billion free trade challenge over Keystone XL denial -- TransCanada Corp. has launched a free-trade agreement challenge claiming US$15 billion in damages and filed a constitutional lawsuit against the United States government over its rejection of the Keystone XL pipeline. The Calgary-based energy transportation company announced Wednesday it had filed a lawsuit in Houston, claiming that President Barack Obama’s “decision to deny construction of Keystone XL exceeded his power under the U.S. Constitution.” In addition, the pipeline company said it intends to file a request for arbitration claiming US$15 billion under the North American Free Trade Agreement, arguing that the basis for the denial was “arbitrary and unjustified.” “The NAFTA claim asserts that TransCanada had every reason to expect its application would be granted as the application met the same criteria the U.S. State Department applied when approving applications to construct other similar cross-border pipelines — including the existing Keystone pipeline, which was approved in under two years, in contrast with the seven years the administration took to make a decision on Keystone XL,” TransCanada said in a news release.

TransCanada to file 2 legal challenges to Keystone rejection - The Canadian company that proposed the Keystone XL oil pipeline has filed a lawsuit over the U.S. government’s rejection of the project and announced it plans to file a second legal challenge that will seek more than $15 billion in damages. TransCanada filed a federal lawsuit in Houston on Wednesday alleging President Barack Obama’s decision in November to kill the pipeline exceeded his power under the U.S. Constitution. The company also announced it will submit a separate petition seeking the billions in damages, alleging the U.S. breached its obligations under the North American Free Trade Agreement. In November, Obama quashed the pipeline, declaring it would have undercut U.S. efforts to clinch a global climate change deal at the center of his environmental legacy. The president said he agreed with a State Department conclusion that Keystone wouldn’t advance U.S. national interests. “TransCanada has been unjustly deprived of the value of its multi-billion dollar investment by the U.S. Administration’s action,” TransCanada said in a statement. “As the administration candidly admitted, its decision was not based on the merits of the project. Rather, the denial was a symbolic gesture based on speculation about the (false) perceptions of the international community regarding the administration’s leadership on climate change.” In its lawsuit, TransCanada alleges Obama’s decision exceeded his powers as president and infringed upon Congress’ power under the Constitution to regulate interstate and international commerce. The White House and the State Department both declined to comment on the lawsuit or the NAFTA challenge.

US Under Attack from Canada -- TransCanada, the company behind the Keystone XL pipeline, announced Wednesday it is filing a claim under the North American Free Trade Agreement (NAFTA), saying that the project’s permit denial was “arbitrary and unjustified.” TransCanada is seeking $15 billion in costs and damages due to the denial, and has also filed a separate lawsuit against the U.S. in federal court.   Under NAFTA, companies can sue governments that put investments at risk through regulation. If it proceeds, the case will go in front of an international tribunal. (A U.S. company sued Montreal in 2013 over a fracking ban, using the same rationale). The tribunal cannot overturn the permit denial, but it can force payment of damages.  A NAFTA challenge had been previously identified as a potential legal recourse for the company.  In the notice to submit a claim for arbitration, TransCanada notes that two previous pipelines, carrying oil from the same tar sands region across the U.S. border, were both approved. This, TransCanada claims, suggests that the denial was political in nature, which is prohibited under NAFTA.  “Environmental activists … turned opposition to the Keystone XL Pipeline into a litmus test for politicians—including U.S. President Barack Obama — to prove their environmental credentials. The activists’ strategy succeeded,” TransCanada states in its filings. “Stated simply, the delay and the ultimate decision to deny the permit were politically-driven, directly contrary to the findings of the Administration’s own studies, and not based on the merits of Keystone’s application. The Administration’s actions violated U.S. obligations under the North American Free Trade Agreement (“NAFTA”).”

TransCanada Sues the US for Rejecting Keystone XL; Will This Be the New Normal Under TPP? - On Wednesday, TransCanada Corporation filed a lawsuit in US federal court alleging President Obama's rejection of the Keystone XL pipeline exceeded his power under the US Constitution. TransCanada also filed legal action under the North American Free Trade Agreement, or NAFTA, claiming the pipeline permit denial was "arbitrary and unjustified." It's seeking $15 billion as part of its NAFTA claim. TransCanada's lawsuit comes just days before President Obama's final State of the Union address, where he's anticipated to tout his controversial Trans-Pacific Partnership, or TPP, deal. The secretive trade pact between the United States and 11 Pacific Rim nations could govern up to 40 percent of the world's economy. After TransCanada announced its lawsuit on Wednesday, the group Friends of the Earth released a statement saying, "This is why Friends of the Earth opposes the Trans-Pacific Partnership and other trade agreements, which allow companies and investors to challenge sovereign government decisions to protect public health and the environment." For more, we're joined by Lori Wallach, the director of Public Citizen's Global Trade Watch.

ARCO counter-sues Montana residents in ongoing legal battle — An oil company has counter-sued residents of Opportunity and Crackerville who are seeking further cleanup of a mine smelter site than is required by federal regulators. The Montana Standard reports that the Atlantic Richfield Co. filed a federal lawsuit naming 97 residents, claiming their long legal fight for cleanup of smelter waste contamination will interfere with cleanup plans approved by the Environmental Protection Agency. The residents filed a lawsuit against ARCO in 2008 claiming negligence, public nuisance, trespass, liability for an abnormally dangerous activity, constructive fraud, unjust enrichment, and wrongful occupation of real property. They sought damages for the cost of restoring their properties to their original uncontaminated state. The Montana Supreme Court reinstated the claims in September and returned the case to court after ARCO sought summary judgment in 2013. ARCO argues federal law prohibits private claims that interfere with cleanup being done under EPA supervision.

Pollution-control employee investigated over seemingly biased e-mails on Sandpiper oil pipeline - Gov. Mark Dayton on Wednesday said state regulatory officials will investigate a pollution-control employee who sent at least two e-mails regarding the proposed Sandpiper oil pipeline that the governor called unprofessional. The Minnesota Pollution Control Agency (MPCA) is looking into actions by Scott Lucas, a pollution-control employee in its Brainerd office, who made seemingly critical statements in e-mails on the proposed crude-oil pipeline.The Sandpiper is a $2.6 billion project that would span 600 miles, transporting North Dakota crude oil across remote areas in northern Minnesota to a terminal in Clearbrook, and then to Superior, Wis.   Enbridge, the company behind the project, had hoped to start work on the project this year, but the Minnesota Court of Appeals in September ruled that a full environmental-impact statement must be conducted, delaying the approval process.  In one e-mail, Lucas sent a message including a link to an environmental report regarding another pipeline, saying it “could be a very useful tool for us to use when making our case against Sandpiper in this area of the state.” The e-mails were first reported by the Pioneer Press. “Somebody in that position who’s playing an advocacy role with advocate organizations has really crossed the line of what their professional responsibilities are,” Dayton said Wednesday. “If they’re going to get into political advocacy, they should resign their position and run for the Legislature or go to work for one of the organizations that oppose the pipeline.”It’s unclear whether the employee has played a prominent role during the regulatory approval process, said Dayton, who supports the project.

The Shale Defaults Begin Here: Banks Quietly Shrink These 25 Companies' Credit Facilities - Everyone knows that at $35/barrel oil, virtually every US shale company is cash flow negative and is therefore burning through cash and other forms of liquidity such as bank revolvers and term loans, just as everyone knows that should oil remain at these prices, the US shale sector is facing an avalanche of defaults.What is less known is who will be the next round of companies to default.One good place to get an answer is to find which companies' bankers are quietly tightening the liquidity noose (because they don't want to be stuck holding worthless assets in bankruptcy or for whatever other reason), by quietly reducing the borrowing base on existing credit facilities.It is these companies which find themselves inside this toxic feedback loop of declining liquidity, which forces them to utilize assets even faster, thus even further shrinking the borrowing base against which their banks have lent them money, that will be at the forefront of the epic bankruptcy wave that is waiting to be unleashed across the US, leading to tens of billions of defaults junk bonds over the next 12-18 months.So, without further ado here are 25 deeply distressed companies, whose banks we found have quietly shrunk the borrowing base of their credit facilities anywhere from 6% in the case of Black Ridge Oil and Gas to a whopping 51% for soon to be insolvent New Source Energy Partners.

Lower oil prices are bad news for pollution cleanup - Prices at the pump these days are good for drivers — and not so good for Washington’s more than 5,000 contaminated sites in need of cleanup. Much of the money to clean toxic zones and prevent new ones from forming comes from a voter-approved state tax on petroleum products and other “hazardous substances.” But lower oil prices combined with state lawmakers’ demands to spread tax revenue around have left a shortfall of more than $40 million for cleanups. “That has really thrown a wrench in the port’s work,” said Alex Smith, director of environmental programs for the Port of Olympia, one agency hoping for cleanup money. The Port of Olympia had been slated for a grant of more than $6 million as it tries to figure out how to remove sediment tainted with dioxin from beneath Budd Inlet. A byproduct of industrial processes and of burning all kinds of substances, dioxin can work its way up the food chain from dirt-dwelling critters to humans, Smith said. Even with help from anyone else who might share liability, the port could still come up short on a cleanup expected to top $50 million and perhaps reach $100 million, she said. Those price tags include the expense of removing Swantown Marina, dredging the dirt beneath it and replacing the marina.

This Can't Be Good News -- Alaska Pipeline In Danger Of "Freezing" Up -- Platts is reporting:Trans-Alaska Pipeline System operators are taking new steps to keep North Slope crude oil warm enough to flow through the 800-mile pipeline during cold months of the Alaskan winter. In 2011, a mid-winter disruption in operations almost resulted in oil congealing into sludge, to a point where the pipeline would be difficult to restart. Since then, operators have been adding heat during the winter by recirculating oil through pipe loops at pump stations. In 2015 they added a plug-in heating unit at a remote gate valve in Interior Alaska, where winter temperatures drop below minus 60 degrees Fahrenheit. The pipeline company is battling a gradual, long-term cooling of the oil temperature as production from the North Slope drops and as lower volumes reduce natural mechanisms that previously warmed the oil, such as the friction of fluids against pipe walls. During winter, oil that now enters the pipeline at 104 degrees on the North Slope drops to 40 degrees by the time it reaches the Valdez Marine Terminal in southern Alaska.  TAPS, built in 1977, now operates at about 25% of its 2 million b/d design capacity.

U.S. Light Crude Sails Overseas After 40 Years - Following the lifting of the four-decade long U.S. oil export ban last month, the first crude tanker departed from Texas for export last week. The light crude that was loaded in the tanker by ConocoPhillips COP and NuStar Energy LP NS was pumped from South Texas-based Eagle Ford Shale. ConocoPhillips − located in Houston, TX − is a major global exploration and production (E&P) company. NuStar Energy is a master limited partnership (MLP) that engages in the transportation and storage of crude oil as well as refined products in the U.S., the Netherlands Antilles, Canada, Mexico, and the U.K.As per NuStar, Switzerland-based crude trading player Vitol Group - which also has interests in the refineries − will purchase the crude cargo. Vitol Group is also expected to be the buyer of the second light oil cargo that may be exported from Houston this week. It is to be noted that Enterprise Products Partners LP EPD is loading the tanker, for second U.S. crude export, in Houston. The tanker will carry 600,000 barrels of the commodity.Last month, the 40-year-long U.S. crude export ban was lifted after President Barack Obama signed the legislation. The departure of the first oil tanker from the U.S. put an end to the trade halt since mid 1970.Will U.S. Crude Export impact Oil Price?The oil market is already oversupplied, resulting in weak crude prices since mid 2014.

Union Pacific could move 1 million gallons of oil through region weekly - Trains operating on Union Pacific Railroad lines through Lewis and Thurston counties could be carrying 1 million gallons of Bakken crude oil weekly, according to a notification issued in early December and highlighted by Lewis County Emergency Management last week. The rail line previously didn’t report transporting that much oil per train. The notification by Union Pacific is required by a U.S. Department of Transportation emergency order. The order calls for rail lines to issue public notices in each state where it operates trains carrying 1 million gallons or more of oil from the Bakken oil fields in Montana and North Dakota. According to its notification released Dec. 9, Union Pacific began running the trains in November. Union Pacific lines expect no more than one train per week carrying 1 million gallons of oil or more to pass through Lewis and Thurston counties. Most trains are enroute to the Portland-Vancouver area. Union Pacific issued a notification in June 2014, stating the company did not transport enough Bakken crude oil to meet the threshold at that time. Burlington Northern Santa Fe’s last notification was released in September, stating it was transporting an estimated 10 to 18 trains carrying 1 million gallons or more of Bakken oil through Thurston and Lewis counties.

List of 36 Oil & Gas Companies that Filed for Bankruptcy in 2015 - Whew. Dodged a bullet–this year. Haynes and Boone, LLP is an international corporate law firm with offices in Texas, New York, California, Colorado, Washington, D.C., Shanghai and Mexico City. Their HQ is in Texas. The firm has a sizable Bankruptcy and Energy practices. Unfortunately those two practices are increasingly becoming one, and the firm says they’re adding lawyers to the Bankruptcy practice. Last week Haynes and Boone issued their very first Oil Patch Bankruptcy Monitor (full copy below), a report that details the rising tide of 2015 exploration and production company Chapter 11 filings. The report lists 36 bankruptcies in 2015 totaling about $13 billion in cumulative secured and unsecured debt. With fear and trepidation we reviewed the list–and found that none of the companies listed have major, nor even minor, operations in the Marcellus/Utica. However, that may not remain the case… As we’ve warned, some industry observers believe, based on their own statements, that Magnum Hunter Resources (MHR) will soon declare bankruptcy (see Dire Straits: Magnum Hunter Tells SEC Heading for Bankruptcy). Please don’t misunderstand us! We’re not “pulling for” nor cheering a potential MHR bankruptcy. We’re grieving it. We hope it doesn’t happen. But hope doesn’t change the circumstances–and you need to be aware of those circumstances and what may be coming. In the meantime, here’s a roundup of the the 36 companies that have already filed for bankruptcy:

Swift Energy becomes 40th North American driller in bankruptcy – Swift Energy Co. has become the latest U.S. shale driller to succumb to the brutal downturn in crude prices, seeking Chapter 11 bankruptcy.  The Houston driller filed paperwork on Thursday to become the 40th North American oil producer prodded into bankruptcy court as crude exporters Russia and Saudi Arabia keep prices depressed by pumping crude all-out, jockeying for a bigger corner of the global oil market. It was the 20th driller headquartered in Texas to file for bankruptcy in the past year. Swift Energy, founded in 1979 by Aubrey Earl Swift, had trimmed 60 percent of its capital budget, cut 20 percent of its workforce and reduced its office space to cope with the 68-percent slide in U.S. crude prices over the past 19 months. But like several small rivals, Swift is running out of financial levers to pull.  In a restructuring deal subject to bankruptcy court approval, Swift has agreed with its creditors to convert its senior debt to equity. Company officials were not immediately available for comment on Saturday. Swift, which pumps oil in the Eagle Ford Shale in South Texas and in Louisiana fields, listed about $1 billion in assets and $1.35 billion in debt. The company’s third-quarter revenues sank 55 percent from the same period the prior year, and it posted a $354.6 million net loss from July to September, mostly because it had to write down the value of its oil and gas properties. In November, lenders cut $45 million from Swift’s $375 million borrowing base. The company said it has 228 employees.

Oil on the export market: Good or bad? -  The U.S. once again is an oil exporting country. Somewhere in the bowels of of the monstrous $1.1 trillion spending bill Congress rammed through Dec. 18 can be found approval for the U.S. to flip the “on” switch to the oil spigot for global customers. The first shipments likely are on the water now, or they will be soon. What it means to consumers, who have had little to cling to in a stubbornly moribund economy, is unclear. The U.S. Energy Information Administration did a study how exporting U.S. oil might affect U.S. motorists, who have grown accustomed, once again, to paying $2 or less per gallon to fuel their cars and trucks. The EIA study predicted little or no change in the price of gas for U.S. consumers. Of course, the report had the usual caveats that delved into markets, production and other unpredictable scenarios. In other words, their guess is as good as ours. And, since it’s the government, let’s assume it’s not as good. We do know the energy industry has been sagging. The fracking boom of recent years brought prices down and pushed the U.S. into potential position of world dominance in terms of oil and gas production, creating a real possibility of the ever-elusive “energy independence.”

Oil exports could bolster Eagle Ford - eventually - The first oil exports from the United States left the Port of Corpus Christi on Thursday afternoon aboard the “Theo T” tanker heading for Europe just weeks after Congress repealed the nearly 40-year-old export ban. The exports — using Eagle Ford oil pumped by ConocoPhillips and transported by NuStar Energy — mark a momentous change in the midst of one of the worst price crunches in the history of the industry. As of Thursday, the American benchmark West Texas Intermediate was hovering around $37.50 a barrel — down $15 from a year ago and more than $60 from Dec. 31, 2013. But the lifting of the ban could spell some relief for Eagle Ford producers as their oil is closer to export points than American-produced crude in North Dakota’s Bakken shale,   “It’s not going to be something that’s going to happen overnight. But it will impact the shale in the long term and allow us to continue to drill and add jobs in the Eagle Ford.” As for the first exports leaving Corpus Christi, NuStar Energy communications assistant Molly Haerer said in an email that “NuStar has invested heavily in the Port of Corpus Christi and the Eagle Ford to be in a position to load large cargoes of crude for export. We like the Port of Corpus Christi because it is largely less congested than the port in Houston.” Garcia echoed that message, saying that midstream pipeline companies have pumped billions of dollars into projects in order to take advantage of export possibilities. The region is still seeing an inflow of money as well.

Yesterday (All My Exports Seemed So Far Away) – The Brent/WTI Spread in 2016 and Beyond -- Following the news that regulations restricting the export of U.S. crude had been lifted, West Texas Intermediate (WTI) crude rallied to a slight premium over its international counterpart Brent for 6 days at the end of December 2015 – apparently leveling the playing field between the two rival light sweet grades. Is this the green light for a surge in U.S. crude exports? Not hardly.  In fact, it is the other way around. Prices for WTI need to be well below Brent for exports to make economic sense and – according to the futures market – that is not happening anytime soon. Today we conclude our analysis of the Brent/WTI price relationship with a look forward to 2016. In Part 1 of this 2 part series we reviewed the historic price relationship between West Texas Intermediate (WTI) crude – the U.S. benchmark – and its international counterpart Brent. Between 1989 and the end of 2005, Brent and WTI traded within a pretty narrow range of each other with Brent typically at a discount to WTI that averaged $1.55/Bbl over that 17 year period. Between 2006 and 2010 the relationship was far more volatile - in the run up to - and aftermath of – the financial crisis in 2008 - as crude prices increased to nearly $150/Bbl and retreated to $34/Bbl in less than 6-months. Over the past 5-years since 2010 – the period covering the shale oil era – Brent has mostly traded at a premium to WTI that at times reached $30/Bbl.  Landlocked U.S. light crude supplies piled up in inventory that weighed on prices and kept WTI at a discount to Brent averaging $6.50/Bbl in 2014. But falling oil prices worldwide – under pressure from a rising supply surplus– squeezed the Brent/WTI spread further to the $3/Bbl level in the fall of 2015. During the week before Christmas 2015 the passage of Congressional legislation lifting export restrictions led to a rally in WTI prices to top Brent by 20 cents/Bbl on Christmas Eve. This time we look forward to the Brent/WTI relationship in 2016 and beyond with the help of forward curves and then discuss other influences – including prices for Gulf Coast Benchmark Light Louisiana Sweet (LLS) and the Houston market for WTI.

Where U.S. Crude Would Move Next If the Economics Were Right -- The race to load the first freely exported U.S. crude cargo was won by NuStar’s Corpus Christi terminal, edging out Enterprise’s Houston terminal, as the Theo T set sail for Italy on New Year’s Eve with Eagle Ford crude and condensate on board. Midstream companies are now set to fiercely compete, not just for bragging rights but for terminal fees, as more U.S. crude heads overseas. But where exactly will that crude go? With oil prices tracking below $40/Bbl and narrow differentials prevailing between U.S. and overseas crudes, breaking into new markets will be tough. Today we outline which markets are most likely to absorb U.S. crude supply.  The public rush to be the first to load a cargo has created high expectations for future U.S. crude exports. But as we said earlier this week, current narrow price differentials between U.S. benchmark West Texas Intermediate (WTI) and international marker Brent suggest limited exports will occur in the short term based on economics (see Yesterday – All My Exports Seemed So Far Away). Another expectation that is likely overblown is the idea that exports of light shale crude will take off because U.S. refineries are not configured to process these grades and only did so in recent years because they were made so cheap by the export constraint.

Obama's Oily Christmas Gift: Faster Pipeline Approvals - Steve Horn -- Just over a week before the U.S. signed the Paris climate agreement at the conclusion of the COP21 United Nations summit, President Barack Obama signed a bill into law with a provision that expedites permitting of oil and gas pipelines in the United States.   The legal and conceptual framework for the fast-tracking provision on pipeline permitting arose during the fight over TransCanada's Keystone XL tar sands pipeline. President Barack Obama initially codified that concept via Executive Order 13604 -- signed the same day as he signed an Executive Order to fast-track construction of Keystone XL's southern leg -- and this provision "builds on the permit streamlining project launched by" Obama according to corporate law firm Holland & Knight.  That 60-page streamlining provision falls on page 1,141 of the broader 1,301-page FAST (Fixing America's Surface Transportation) Act (H.R. 22 and S. 1647), known in policy wonk circles as the highway bill. The provision is located in a section titled, "Federal Permitting Improvement." Explaining what types of projects the provision cover, the bill reads,..any activity in the United States that requires authorization or environmental review by a Federal agency involving construction of infrastructure for renewable or conventional energy production, electricity transmission, surface transportation, aviation, ports and waterways, water resource projects, broadband, pipelines, manufacturing, or any other sector as determined by a majority vote of the Council that is subject to [the National Environmental Policy Act] NEPA [and] is likely to require a total investment of more than $200,000,000.

Despite protests, oil industry has thrived under Obama energy agenda - -- The nation's biggest fossil-fuel trade group will deliver its annual state-of-the-industry report today. It's sure to include a whack at President Barack Obama -- even though oil and gas have flourished on his watch. U.S. oil production has surged 82 percent to near-record levels in the past seven years and natural gas is up by nearly one-quarter. Instead of shutting down the hydraulic fracturing process that has unlocked natural gas from dense rock formations, Obama has promoted the fuel as a stepping stone to a greener, renewable future. The administration has also permitted drilling in the Arctic Ocean over the objections of environmentalists and opened the door to a new generation of oil and gas drilling in Atlantic waters hugging the East Coast. Obama also signed, with reservations, a measure to lift a 40-year-old ban on the export of most U.S. crude. "Given an administration that was so committed to combating climate change, they have coexisted pretty peacefully with the industry, despite all the protestations," said David Goldwyn, a consultant who for two years served as the State Department's top energy diplomat under Obama. "And the best metric is just look at the production." That hasn't stopped the American Petroleum Institute from taking aim at Obama in its annual addresses on the industry -- such as the one API president, Jack Gerard, is scheduled to deliver in Washington. The Obama administration's approach to fossil fuels -- including his endorsement of natural gas in State of the Union addresses and in a landmark climate change speech in 2013 -- has drawn anger from some environmentalists. "From day one of the administration and accelerating into the present, this administration and this White House has viewed the natural gas and oil bonanza in this country as an economic opportunity, and they have ridden it and ridden it hard,"

Oil drives our Israel policy: New government documents reveal a very different history of America and the Middle East - Salon.com: The role of the United States in the Arab-Israeli conflict is an inextri­cable part of history in this region. Confronting that role is indispens­able to understanding both U.S. policy in the conflict and its course. A knowledge of the foundation of U.S. policy in the Middle East in the postwar years is indispensable to an understanding of current U.S. policies in the Middle East in which oil, Palestine, and Israel play such significant roles. The record of U.S. policy from 1945 to 1949 challenges fundamental assumptions about U.S. understanding and involvement in the struggle over Palestine that continue to dominate mainstream interpretations of U.S. policy in the Middle East. Coming to grips with the U.S. record and its frequently mythified depiction of the struggle over Palestine is criti­cal. Those engaged in the creation of the Common Archive, a project of Zochrot, the Israeli NGO, in which Israelis and Palestinians have joined to reconstruct the history of Palestinian villages destroyed by Israel in 1948, clearly understand the importance of this record. Palestinian historians have long written about this history, and Israel’s “New His­torians” have confirmed it in their challenge to the dominant Israeli narrative of the war of 1948.

Charter Rights at Issue in Fracking Supreme Court Case - An Alberta woman's landmark eight-year battle over fracking regulation, water contamination and Charter rights will take centre stage in the Supreme Court of Canada Tuesday. Jessica Ernst claims fracking contaminated the water supply at her homestead near Rosebud, about 110 kilometres east of Calgary. She is seeking $33 million in damages. Ernst is also taking on the agency that regulates the energy industry in Alberta, claiming it has denied her the right to raise her concerns effectively and is shielded by unconstitutional legislation that bar citizens from suing it for wrongdoing. The B.C. Civil Liberties Association, the Canadian Civil Liberties Association and the David Asper Centre for Constitutional Law at the University of Toronto have intervened in support of Ernst's position and the lawsuit could change the way the controversial technology of hydraulic fracturing is regulated in Canada. Ernst's lawyers hope the Supreme Court will eventually rule that the Alberta Energy Regulator violated the Charter of Rights and Freedoms by limiting her ability to communicate with the agency. Such a decision would punt Ernst's case back into Alberta's courts where it can continue its slow course. Ernst considers the regulator the most at fault in her famous and multi-pronged lawsuit.

Statoil to conduct CCS feasibility studies in North Sea fields - The Norwegian government has asked oil and gas firm Statoil to conduct new studies on carbon storage on the Norwegian continental shelf, the firm said on Monday. Some 195 nations agreed last month in Paris to limit rising temperatures. Carbon capture and storage (CCS), which captures carbon dioxide and stores it underground so it won’t slip into the atmosphere, is seen as an important tool to achieve that. The Norwegian oil major, which is involved in four large-scale CCS projects, was the only tender for the contract, worth 35 million Norwegian crowns ($3.96 million). “We’re moving from pure research and development, out-of-the-lab and into the physical deployment of this, we’re excited about that,” Stephen Bull, senior vice president of wind power and CCS for Statoil said. The feasibility studies will be carried out at three locations in the Norwegian sector of the North Sea and the work will be completed by June 1, Statoil said in a statement. “The results from the storage studies, together with feasibility studies within CO2 capture and CO2 transport, will form the basis for a decision by the Norwegian government on further progress for full-scale CCS in Norway,” Statoil said.

Energy prices dropped more than any other sector in 2015 --  Energy prices dropped 41 percent during 2015, outpacing all other commodities tracked by a widely followed index. The S&P Goldman Sachs Commodity Index tracks the prices of energy, industrial metals, grains and precious metals commodities. Among the four areas, energy prices dropped almost 20 percent more than any of the other sectors in 2015. According to the index, industrial metals prices dropped 24 percent, grains dropped 19 percent and precious metals dropped 11 percent.  Energy prices plummeted mostly due to the steep drop oil prices during 2015, prompting thousands of layoffs of U.S. energy workers as an oil glut caused wells to close. The price for West Texas Intermediate crude dropped nearly 30 percent and the price of Brent crude dropped about 33 percent, according to the index. Those two types of crude serve as the major benchmarks. While gasoline prices dropped this year, they didn't fall as much as oil prices because of the increased demand from consumers, the Energy Information Administration reported. Crude oil prices fell to 11-year lows in December and natural gas prices dropped to their lowest level in 16 years, according to federal statistics.

Stubborn oversupply through 2016 to curb crude price recovery: poll  -- Crude oil prices are unlikely to rally much in 2016 as subdued demand growth looks unable to absorb rising supply from the likes of Iran and Iraq, even though non-OPEC output is expected to moderate, a Reuters poll showed on Monday. The average 2016 price for benchmark North Sea Brent crude futures was forecast at $52.52 a barrel, $5.43 below the previous month’s poll, according to the survey of 20 analysts. This is the seventh consecutive monthly Reuters poll in which analysts have cut their price. In May, analysts forecast Brent to average $70.90 in 2016, but have been reducing their outlook ever since. Thirteen of the 18 respondents who participated in both the November poll and the most recent survey, conducted in December, cut their average 2016 price forecasts for Brent futures, which averaged $53.79 in 2015. Oil prices have been hovering around 11-year lows after falling to their lowest since mid-2004 in late December, as near-record-high production looks set to feed a global surplus.

The Oil Market - Anybody who tells you they know where the oil market is headed for 2016 is inexperienced, too stupid to realize there are far too many variables in play that are unknowable to predict with any accuracy their effects on other variables in the oil equation, talking their own respective books, just piling in with the recent herd mentality on the street, giving an opinion about as valid as the best paint color for a room, or like to see themselves on television talking about the hot market moving topic du jour. We have written extensively on the topic, have a lot of experience in the industry, were right regarding the direction, but frankly wrong about the timing of the inevitable market correction. I remember reading all the comments at the time of our analysis with reactions such as “Shale requires $80 a barrel oil prices”, or “OPEC needs $85 a barrel oil prices so oil can never go lower than $85 a barrel”, “Shale wells depletion rates mean…”, and “China is going to use so much oil that…”. I have to sit back now and smile when IHS, Goldman Sachs, and the IMF or any other oil analyst gives their predictions for the price of oil for the end of 2016. Just look at all the predictions at the start of 2015 for oil prices by year`s end!   Consequently if one starts with the premise that the price of oil is unpredictable for 2016, then what do we know? Where can we at least have a foothold for pretty reliable assumptions? Well let’s start with this, we know at some price oil operations will shut down. What price does oil need to go to before oil operations shut down? Moreover, that such money is lost that banks will not finance operations even if oil prices rise because they realize that this would just bring new production online only to have oil prices fall again, and they lose money all over again.

Oil prices could hit low point in first quarter - BP's Dudley  – The slump in global oil prices could hit bottom in early 2016 although prices are likely to remain low for the next couple of years, BP Chief Executive Officer Bob Dudley said. “A low point could be in the first quarter,” Dudley said in BBC radio interview broadcast on Saturday. Brent crude prices fell by 34 percent last year after shedding 48 percent in 2014. The plunge in global oil prices has pushed inflation close to or below zero in many countries, helping consumers but wrong-footing central banks. Dudley said a more natural balance between supply and demand could come back in the third and fourth quarter of this year, after which stock levels could start to wear off. “Prices are going to stay lower for longer, we have said it and I think we are in this for a couple of years. For sure, there is a boom-and-bust cycle here,” Dudley said. Dudley also said he did not agree with Bank of England Governor Mark Carney’s use of the term “stranded assets” to describe oil and gas reserves held by companies but which may prove unviable as the world moves to a low-carbon economy.

Why The U.S. Can't Be Called A "Swing Producer" - Arthur Berman -- Daniel Yergin and other experts say that U.S. tight oil is the swing oil producer of the world. They are wrong. It is preposterous to say that the world’s largest oil importer is also its swing producer. There are two types of oil producers in the world: those who have the will and the means to affect market prices, and those who react to them. In other words, the swing producer and everyone else. A swing producer must meet the following criteria:

  • A swing producer must be a net exporter of oil.
  • A swing producer must have enough daily production, spare capacity and reserves to influence market prices by balancing supply and demand through increasing or decreasing output.
  • A swing producer must be able to act authoritatively and quickly to increase or decrease output.
  • In the real world, a swing producer is a euphemism for a cartel. No single producer has enough oil leverage to balance the market and influence prices by itself. That includes Saudi Arabia, Russia, and the United States, the top 3 producers in the world. Obviously, it also includes U.S. tight oil.
  • A swing producer must have low production costs and have the financial reserves to withstand reduced cash flow when restricting or increasing supply is necessary to balance the market.

OPEC’s net exports for 2014 were 23 million barrels per day (mmbpd) (Figure 1). U.S. net exports were -7 mmbpd. In other words, the U.S. is a net importer of crude oil. A net importer of oil cannot be a swing producer.

2016: Oil Limits and the End of the Debt Supercycle - Gail Tverberg - What is ahead for 2016? Most people don’t realize how tightly the following are linked:

  1. Growth in debt
  2. Growth in the economy
  3. Growth in cheap-to-extract energy supplies
  4. Inflation in the cost of producing commodities
  5. Growth in asset prices, such as the price of shares of stock and of farmland
  6. Growth in wages of non-elite workers
  7. Population growth

It looks to me as though this linkage is about to cause a very substantial disruption to the economy, as oil limits, as well as other energy limits, cause a rapid shift from the benevolent version of the economic supercycle to the portion of the economic supercycle reflecting contraction. Many people have talked about Peak Oil, the Limits to Growth, and the Debt Supercycle without realizing that the underlying problem is really the same–the fact the we are reaching the limits of a finite world. There are actually a number of different kinds of limits to a finite world, all leading toward the rising cost of commodity production. I will discuss these in more detail later. In the past, the contraction phase of the supercycle seems to have been caused primarily by too high population relative to resources. This time, depleting fossil fuels–particularly oil–plays a major role. Other limits contributing to the end of the current debt supercycle include rising pollution and depletion of resources other than fossil fuels. The problem of reaching limits in a finite world manifests itself in an unexpected way: slowing wage growth for non-elite workers. Lower wages mean that these workers become less able to afford the output of the system. These problems first lead to commodity oversupply and very low commodity prices. Eventually these problems lead to falling asset prices and widespread debt defaults. These problems are the opposite of what many expect, namely oil shortages and high prices. This strange situation exists because the economy is a networked system. Feedback loops in a networked system don’t necessarily work in the way people expect.

Crude Oil Opens Above $38, Takes Out 1-Week Highs -- With hedge fund short positions near record highs and speculators at their least bullish in almost five years, oil prices have spurted higher in the early trading as the diplomatic gloves come off in The Middle East. Despite record levels of crude inventory around the world, WTI Crude is trading above $38, up over 3% from its $37.07 close on New Year's Eve.Algos ran the stops above last week's highs ($38.32) but for now prices are not as excited as many would have expected. But don't forget that while a "war premium" makes sense in the marginal production barrel sense, with inventories at their limits amid a record glut, unless this escalates even more, the physical demand/supply divergence remains vast... And of course, if oil prices are higher then US equity prices are higher because "lower oil prices are unequivocally good for America"... oh wait.  Source: Bloomberg

Oil Tumbles After Saudis Slash Prices To Europe -- "The Saudis are preparing for Iran’s return," said Mohamed Sadegh Memarian, who recently retired as the head of petroleum market analysis at Iran’s oil ministry, as they sharply cut the prices they charge for crude oil in Europe (to the biggest discount since Feb 2009). The move that will likely undercut Iran happens as sectarian tensions escalate between the rival Middle Eastern nations. As WSJ reports, the Saudi move appears to pave the way for a competition over European oil markets later this year when Iran is expected to increase its exports after the expected end of western sanctions over its nuclear program. As The Wall Street Journal reports, Italy and Spain relied on Iran for 13% and 16% of their oil imports before the European Union banned such purchases under sanctions related to its nuclear program in 2012. Although the country was replaced in the market by Saudi Arabia and other countries such as Russia, Tehran is counting on rekindling those ties when it resumes exports. Saudi Arabian Oil Co., or Saudi Aramco, the kingdom’s state-owned oil company,didn’t mention the conflict in its news release about the price cuts. Aramco prices are set every month at a discount or premium to various regional benchmark prices, which go up and down based on supply, demand and other factors considered by the market. On Tuesday, Aramco said it was deepening the discount for its light crude by $0.60 a barrel to Northwest Europe and by $0.20 a barrel in the Mediterranean for February delivery. Iranian oil professionals interpreted the move as a way to compete with Iran returning to the oil markets. The European Union is set to lift an embargo on Tehran as soon as next month.

Cushing crude oil storage at all-time high for week ending January 1 - Crude inventories at Cushing, OK, reached an all-time high for the week ending January 1, 2016, surpassing the previous all-time high set April 14, 2015, by nearly 347,000 bbls. West Texas Intermediate (WTI) prices fell $1.65/barrel to $36.60/barrel in the first two hours after the report in reaction to the growing Cushing supply. The most recent record high was due in part to increasingly favorable storage economics in connection with a widening 12-month price contango structure for WTI. In addition, year-end tax reduction strategies added incentive to move crude into storage tanks at Cushing. The April 2015 storage high was also reached when the WTI price was in a 12-month contango structure. Capacity utilization at Cushing is currently two percent below the all-time high set in March 2011. Since that time, close to 32mn bbls of storage capacity has been added to the storage hub. Seven operators at the Cushing tank farm are now above 80 percent capacity utilization, indicating that most of their storage volumes are likely merchant, or leased to others, rather than operational. Genscape considers 80 percent capacity utilization to be an operational maximum. These seven owners, representing 31.184mn bbls of operational capacity in total, have only 4.745mn bbls of available capacity. Four terminals are currently 70 to 80 percent full with only 6.302mn bbls of remaining capacity. The final five terminals that are still below 70 percent utilization represent just 32 percent of Cushing’s total capacity and have 9.473mn bbls of capacity available for storage. The available capacity amount does not account for operationally necessary empty space (for blending, pipeline operations, etc.) or contingency tank top space. At this time, three different companies are expanding their storage infrastructure at Cushing with a combined 1.93mn bbls of capacity under construction. All of these projects are expected to be online by the end of Q1 2016. Currently, 2.276mn bbls of storage capacity is in maintenance. Tanks returning from maintenance could add incremental space in the interim.

Oil Prices Fall, Even With Spat Between Two Big Producers — It turns out that thanks to a glut of crude, even tension between two big oil-producing countries isn’t enough to drive prices higher.Oil futures spiked briefly on Monday after the news that Saudi Arabia would cut diplomatic ties with Iran, a development that could be seen as a threat to oil supplies.Investors quickly discounted those fears, however. After rising by $1.35, the price of benchmark U.S. crude ended the day down 28 cents to $36.76 a barrel on the New York Mercantile Exchange. Brent crude, reflecting the price of international oils, dipped 6 cents to close at $37.22 a barrel in London.While oil markets were see-sawing, stock markets sagged on evidence that the global economy might be weaker than expected this year. The Dow Jones industrial average lost 276 points, or 1.6 percent, and was down 468 points earlier in the day.New reports indicated that manufacturing is continuing to struggle, with factory activity falling in December for the second straight month in the U.S. and the 10th straight month in China. Slow growth means that the current oversupply of oil could be more stubborn than expected.

WTI Plunges To $35 Handle As Loonie Hits 12 Year Low - WTI Crude prices just broke back to a $35 handle for the first time since mid-December as the combination of un-growth, Saudi price cuts, a rancorous OPEC, and production increases weigh on the world's most important commodity. At the same time, oil producers are getting hit with the Canadian Dollar plunging above 1.4000 to its lowest since 2003...And FX producers are getting battered...

API data show U.S. crude supplies dropped by 5.6 million barrels: sources - The American Petroleum Institute late Tuesday reported that crude supplies fell by 5.6 million barrels for the week ended Jan. 1, according to sources who reviewed the report. The more closely watched EIA report is due Wednesday. On average, analysts polled by Platts show expectations for an increase of 2.75 million barrels, but Citi Futures analysts expect a decline of between 2 million and 3 million barrels. Following the API data, February crude was at $36.13 a barrel in electronic trading, up from the $35.97 settlement on Nymex.

Crude Spikes Higher As API Reports Large Inventory Draw -- For the last week of December - typically a month when inventories are drawn down dramatically to avoid year-end tax-burdens - API reports a huge 5.6 million barrel inventory draw (massively bigger than expectations of a 488k build). It would appear, after 3 mixed weeks, that energy firms waited for the very last week to dump inventories into year-end (as seasonally occurs). Of course the transit of the first post-export-ban tanker may have also helped. While WTI spiked higher it is fading a little as Cushing reported a very large build of 1.4mm barrels (the 9th week in a row). Crude inventories dropped dramatically uin the last week of December (as is usual at this time of year)...However, there have now been 9 weeks of builds in Cushing inventory in a row (with today's 1.4mm build) as Genscape warned earlier that storage levels are getting extremely full. And after falling all day, Crude spiked higher on the news...but gave some back as traders remembered the seasonals....

Oil dives below US$35, lowest in 11 years, as US supply swells -- Crude oil prices plunged 6 per cent on Wednesday, diving below US$35 per barrel for the first time since 2004 as data showing a shockingly large build-up of US gasoline supplies fed fears that a global surplus was still growing. The sell-off, the biggest one-day drop for global benchmark Brent futures since the start of September, takes losses this year to more than 8 per cent, a descent stoked by worsening Chinese economic data, the world's No. 2 oil consumer, and a fierce row between Saudi Arabia and Iran that some say may be more bearish than bullish. The focus on Wednesday was US government data showing a 10.6 million-barrel surge in gasoline supplies, the biggest build since 1993, which some traders said signalled a slow-down in demand that could prolong the global glut. The figures overshadowed a 5.1 million-barrel fall in crude stocks. "Gasoline was the sole source of strength within the complex, and that looks to have ended," said John Kilduff, a partner at energy hedge fund Again Capital.Brent futures fell US$2.19 to settle at US$34.23 a barrel. Earlier, it fell to as low as US$34.13, its lowest level since the start of July 2004. US crude futures fell US$2.00 to settle at US$33.97 a barrel, its lowest close since February 2009. Traders shrugged off rising geopolitical risks, including an apparent North Korea nuclear test. Many reckoned that the row between Saudi Arabia and Iran posed little threat to oil shipments, but made an agreement on output even less likely.

Oil prices dips below $34 amid world economic turmoil: Oil prices sank to the lowest level in more than a decade Wednesday as traders grappled with a rash of worries about the global economic outlook. Prices were driven below $34 a barrel as the energy markets coped with a rougher economic outlook in China, another day of stock-market declines and North Korea's disputed claim of having tested a hydrogen bomb. The benchmark U.S. crude, West Texas Intermediate, fell $2 a barrel to close at $33.97, down 5.6.%, to the lowest price level since 2004, Bloomberg News reported. In Europe, Brent crude oil declined $2.19, or 6% to $34.23 a barrel. Oil prices came under pressure as the World Bank predicted China's troubles will spill over to emerging markets, which will face the decline in commodity prices. In addition to the economic concerns and geopolitical issues, the market remains overwhelmed with a global glut of oil. Saudi Arabia, the largest producer in the Organization of the Petroleum Exporting Countries, has refused to slash production. And many U.S. producers have kept oil wells flowing despite the crushing financial blow of low prices. Taken together, it's a formula for prolonged period of low prices. The only question is how low the floor goes. "U.S. oil production will likely need to resume its decline for the market to begin to anticipate a trough in prices,"

Jack Kemp's Weekly Energy Tweets -- January 6, 2016  -- US total crude and product stocks rose 7.3 million bbls last week and is now 164 million bbls above prior-year level; the graph is absolutely incredible: US commercial crude stocks fell 5.1 million bbls last week and are now 100 million bbls above prior-year level; the graph is almost identical
US gasoline stocks jump 10.6 million bbls last week but still 5.2 million bbls below prior-year level; comment: this is actually "bad news" as a tea leaf for reading the health of the economy
US gasoline consumption averaged just 9.0 million bopd over the last four weeks; much weaker than corresponding period prior-year; comment: this is actually "bad news" as a tea leaf for reading the health of the economy
US distillate consumption remained at lowest seasonal level for more than 10 years last week; comment: this is actually "bad news" as a tea leaf for reading the health of the economy
US distillate stocks rose 6.3 million bbls last week and are now 22.5 million (+16.4%) bbls over prior-year level.

US refineries processed a seasonal record 16.6 million bopd of crude last week up almost 200,000 bopd on prior year

WTI Crude Plunges To $34 Handle After Record Gasoline Inventory Build - Following last night's API-reported large draw in overall crude inventories (year-end and exports driven), DOE reports a 5.09mm draw (more than expectations of a 4.1mm draw but less than API's 5.6mm draw). However, Cushing inventories rose for the 9th week in a row (+917k) and more troubling for the future is gaoline inventories soared 10.58mm barrels (and distillates rose 6.31mm barrels). Crude prices already gave up their API gains and are tumbling back below $35 on this build news. DOE confirms API's reported large draw but Cushing continues to build for the 9th week in a row...The build in distillates means that primary product may be gettiung shipped away but there is no demand. So exporting oil from US helps with overall inventory decline, but massive build of gas, distillate shows clear production surplus And even more worrisome, Domestic Supply in lower 48 up 20,000 boe/d and HIGHER than a year ago. Crude jumped on the API news but gave it all up as growth fears rose overnight... As we continue to remind traders - December ALWAYS see notably drawdowns as firms lighten up inventories on their balance sheet ahead of year-end to reduce tax burdens...

Thats the Bottom in the Oil Market --  On Wednesday the oil market sold off to $33.77 on large product`s builds, China`s devaluation of its currency, and a substantial selloff in equities. Sure Oil can go a dollar below this low, but for all intents and purposes this is the bottom in the oil selloff that was predicted for the start of the year. This move down was as predictable a move as there is in financial markets, and we called this down move to start the year with a piece we issued in December. It took over 500k in futures contracts just to push oil futures below $34 a barrel on Wednesday, and trust me it wasn`t an easy task for those involved in the pushdown. They now are stuck with being far too short the market at a level they don`t even like being stuck short. At a time when US Production is about to drop off a cliff, and the Middle East is a ticking time bomb that is about to blow up any day now. Look for a major short squeeze in the oil market over the next month as the ramifications of $34 oil play out in the market.

Don't be fooled by year-end rise in U.S. gasoline stocks -  The 10.6 million barrel jump in U.S. gasoline stocks last week, reported by the Energy Information Administration on Wednesday, sent gasoline futures tumbling 4 percent and intensified the selloff in oil prices. Estimated gasoline consumption was also down 1.2 million barrels per day (bpd), over 13 percent, compared with the prior week, adding to market alarm about the health of fuel demand. But most of the increase in stockpiles and apparent drop in fuel consumption was likely due to year-end seasonal quirks rather a sign of slackening consumption. The latest data on gasoline consumption, production and stocks are for the week ending on Friday Jan. 1 and straddle year-end. In the previous five years, from 2010/11 to 2014/15, gasoline stocks increased by an average of more than 6 million barrels over the year end period, with increases ranging from 3.6 million to 8.1 million barrels. Estimated consumption declined by an average of around 500,000 bpd between the last week of the old year and the first week of the new, ranging from a decline of 34,000 bpd to as much as 805,000 bpd. The reported decline in consumption and increase in stockpiles last week was somewhat larger than usual but broadly in line with the seasonal pattern.Gasoline blending components accounted for 203 million barrels, more than 87 percent of the total gasoline stockpile reported last week, compared with just 29 million barrels of finished gasoline. Blending components also accounted for four-fifths of the increase in stocks last week, increasing by 8.9 million barrels, compared with an increase of just 1.6 million barrels in finished gasoline stockpiles. The rise in reported stocks was therefore really a rise in the amount of gasoline held by refiners and especially blenders prior to blending, and stocks of blending components typically increase sharply over year-end.

Brent crude oil breaks through $33 a barrel -- The international oil benchmark has touched a new 11-year low, falling below $33 a barrel. Brent crude oil fell 4 per cent in early hours of London trading to $32.88 a barrel. West Texas Intermediate, the US benchmark, traded as low as $32.77 a barrel, down 3.5 per cent. Brent only breached the $35 mark for the first time in 11 years on Wednesday, as a relentless rise in global production overshadowed geopolitical upheavals. Today’s move follows turmoil in Asian markets, after Chinese stocks fell 7 per cent to trigger a market-wide closure just 29 minutes into the trading session.

Oil Producers Have $100 Billion Wiped Out in Worst Start to Year - Crude’s plunge keeps piling on the bad news for oil producers, who are having the worst start to a year on record. More than $100 billion has been wiped off the 61-company Bloomberg World Oil & Gas Index this year as it plunged to the lowest since August 2004. It has dropped 5.6 percent, making it the worst opening to the year since the index started in 2003. Thailand’s PTT Pcl, Apache Corp. and China Petroleum & Chemical Corp. led the decline. Crude is hurtling down toward $30 a barrel as concerns increase over China’s economy, a supply glut persists and the world’s biggest oil-producing nations continue to pump at near-record levels. European and Asian shares dropped to three-month lows with U.S. stock futures as billionaire George Soros warned of a crisis. Goldman Sachs Group Inc. and Citigroup Inc. say oil may have further to fall. “It’s going from bad to worse very quickly,”  “Doubts over China’s demand have been added to already existing concerns over the surplus supply.” Royal Dutch Shell Plc, Europe’s biggest oil company, dropped as much as 5.7 percent and BG Group Plc, the company it’s seeking to buy, fell as much as 6.4 percent in London. Sinopec, Asia’s biggest refiner, plunged 7.6 percent in Hong Kong and PetroChina Co., the world’s second-biggest oil company by market value, lost 6.8 percent.

Natural Gas Prices Signaling Oil Bottom for Investors -- Everyone is trying to figure when the oil markets will bottom. Well lost in all the crazy action in markets globally is the nice resurgence off the bottom for natural gas prices. Natural Gas prices have essentially gone from $1.68 per MMBtu to $2.40 per MMBtu rather rapidly in the midst of a mild winter so far. The reason is that all those rig reductions are starting to affect the production of the commodity, less natural gas is coming to market relative to expectations.  The lag effect in all those rig declines is starting to show up in the natural gas production numbers, and although the cut in oil rigs hasn`t shown up yet in oil production in a meaningful way, it is just around the corner over the next three months by my calculation. We should start to experience some meaningful U.S. Oil Production cuts by late March and early April which will solidify the fact that the oil market had long sense bottomed in January of this year.

Global stocks, oil tumble as China economy concerns mount - Shares on major exchanges fell for a sixth straight day on Thursday and crude oil prices touched multi-year lows as investors fretted over the state of China's economy and its ability to stabilize its stock market. In a move that deepened concerns over China's economic health, the People's Bank of China set the yuan midpoint rate lower for an eighth consecutive day. The 0.5 percent decline was the biggest between daily fixings since August. China suspended a circuit breaker implemented at the start of 2016 that stopped trading for the day when the benchmark index fell 7 percent, a halt already triggered twice this week. Analysts and investors said the mechanism, put in place to avoid market volatility, may have backfired. "People see the weakness in China and in the overall equity market and think there's going to be an impact on corporations here in the United States," said Robert Pavlik, chief market strategist at Boston Private Wealth in New York. Rounding out its worst four-day start to a year in more than a century, the Dow Jones industrial average .DJI fell 392.41 points, or 2.32 percent, to 16,514.1.

Oil down again to 12-year low; $30 handle looks more likely | Reuters: Oil prices fell for a fourth day on Thursday, lurching again to 12-year lows as new financial market tumult in China brought a $30 per barrel handle within view. Oil has fallen every day this year, losing nearly 10 percent in a sudden dive that makes last year's Goldman Sachs warning of sub-$30 crude seem not so outlandish after all. "Can we go down another $3 a barrel? In percent terms, that's another 10 percent and could happen in a matter of one or two days of trading," said Greg Sharenow, executive vice-president overseeing a $16 billion commodities portfolio for the Pacific Investment Management Company in Newport Beach, California. Global oil benchmark Brent and U.S. crude futures fell to nearly $32 a barrel on Thursday, their lowest since at least 2004, after another free fall in the Chinese stock market rattled investors already concerned by the world glut in oil. Although oil prices later bounced off the day's lows as some bearish traders took profits on short positions, few dealers were willing to call an end to the 18-month slump. "I wouldn't say it's a given right now that we will break below $30, but I think before the first quarter we will," said Doug King, fund manager in London for the $220 million Singapore-based Merchant Commodity Fund. "And the reason for that is you're not stopping enough production where it needs to be shut, like in the U.S."

OPEC Crude Oil Plunges Below $30 for First Time Since 2004  -- The price of crude sold by OPEC members slid below $30 a barrel, the lowest level in almost 12 years, as turmoil in Chinese markets deepened the global commodities rout.The daily basket price of crudes produced by the 13 members of the Organization of Petroleum Exporting Countries fell to $29.71 a barrel on Wednesday, down from $31.21 the previous day, the group said in an e-mailed statement. That’s the lowest level since February 2004, according to data compiled by Bloomberg.  Oil has slumped further this week as a selloff in Chinese markets added to concerns about the strength of the nation’s economy. WTI crude, the U.S. benchmark, has had its worst-ever start to the year, deepening the economic pain for OPEC’s weaker members such as Venezuela.  Saudi Arabia -- OPEC’s biggest producer -- has led the group for just over a year in a strategy to defend its market share and let prices fall in a bid to push higher-cost rivals such as U.S. shale oil explorers out of the market. The policy has proven costly and slow to bear fruits. While U.S. output has fallen 4.1 percent from its June peak of 9.6 million barrels a day, OPEC members lost about $500 billion in revenue last year, according to the International Energy Agency.  OPEC, which supplies around 40 percent of the world’s oil, left its strategy unchanged at its December meeting in Vienna, effectively abandoning any limits on its production. 

Oil rig count plummets to start 2016 - The number rigs drilling for oil in the U.S. plummeted by another 20 rigs during the first week of 2016 as the energy sector continues to struggle. West Texas’ seemingly resilient Permian Basin led the way with the loss of eight rigs, while southern Texas’ Eagle Ford shale dipped by five rigs, according to weekly data released by oil field services firm Baker Hughes. The sharp cutbacks starting the new year might represent the first sign of significant budget slashing for the new fiscal calendar, said Andy Lipow, president of Lipow Oil Associates in Houston. “The Permian tends to be more resilient, and we might be seeing the impact of producers cutting their new budgets,” Lipow said. The oil rig count now stands at 516 rigs, down 68 percent from when oil field rigs were operating at the peak of the U.S. oil boom in October 2014, when oil rigs totaled 1,609. The amount of rigs exploring for natural gas also sunk sharply by 14 down to just 148 rigs. The overall rig count is at it lowest point since 1999. Texas still counts 308 rigs, which is nearly half of the nation’s total of 664 rigs. Louisiana picked up one new rig and it was the only gainer in the country for the week. The holdouts, essentially, can no longer hold out, said Marshall Adkins, director of energy research at Raymond James in Houston. “The last bastions of resistance are being ferreted out by the low price of oil,” Adkins said. “It’s rapidly becoming a wasteland.” The price of oil also continued to sink Friday with the benchmark for U.S. oil settling at $33.16 a barrel, down 11 cents for the day and at its lowest settlement since 2004 on the New York Mercantile Exchange. “Below $50 the industry doesn’t work, and we’re well below $50,” Adkins said. “Oil prices have been a disaster. At these levels, you’re going to see everyone cut back.”

Baker Hughes: US Oil Rig Count Lowest Since 2010 As Drillers Step Up Cuts  (Reuters) - The U.S. oil rig count this week dropped to the lowest level in over five years as energy firms stepped up the rate of idling rigs after one of the worst years in almost 30 years for drilling, data showed on Friday. Drillers removed 20 oil rigs in the week ended Jan. 8, bringing the total rig count down to 516, the least since April 2010, oil services company Baker Hughes Inc said in its closely followed report. That was the seventh decrease in the past eight weeks and brings the total rig count down to about a third of the 1,421 oil rigs operating in same week a year ago. In 2015, drillers idled a total of 963 oil rigs, the first annual cut since 2002 and the biggest annual decline since at least 1988, according to Baker Hughes. Over the prior five years (2010-2014), producers added on average 216 oil rigs per year. In 2015, however, they cut on average 18 oil rigs per week. U.S. crude prices dropped 30 percent last year and 10 percent in the first week of the year to near 12-year lows around $33 a barrel on Friday on persistent global oversupply worries and a bleak demand outlook. "Daily fluctuations in oil prices do not have an immediate effect on rig count changes," "But persistently lower prices do effect the trend to reduce drilling activity over time," U.S. crude futures were trading at higher levels around $38 a barrel for the rest of 2016 and $43 for 2017, which some analysts have said could entice producers to return to drilling later this year.

If You Are An Oil Bull, Don't Look At These 2 Charts -- It's getting worse... faster! These two stunning overnight developments in crude oil prices should shock investors... First, OPEC - after its crude basket price dropped below $30 for the first time in 12 years -slashed its price overnight by $2 to $27.85 - the biggest single-day drop in history and lowest level since November 2003...  Is it any wonder the Saudis are trying to sell every national asset to subsidize this US Shale-crushing energy price? Second, even closer to home, Canadian heavy crude oil collapse below $20 - a record low!   As Bloomberg notes, The low prices may push more of the highest-cost output offline. Producers including Baytex Energy Corp. and Canadian Natural Resources Ltd. have shut in more than 35,000 barrels a day of heavy oil and bitumen production capacity, according to company presentations and a report on the Alberta government website. Current prices are “below shut-in levels,” said Tim Pickering, founder and chief investment officer of Auspice Capital Advisors Ltd. in Calgary. There’s no incentive to ship Canadian crude to the U.S. Gulf Coast and producers may start annual maintenance sooner than planned, he said. “We’re the last barrel produced and we’re the first barrel shut in.” So record inventory surge in gasoline, global storage at its limits, price-war in Europe, Saudis in panic cash-flow "whatever it takes" mode, borrowing bases being slashed, credit risk at record highs, and Canada now facing widespread shut-ins... but apart from that, the bottom must be close right?  Bonus Chart: Venezuela lowers its crude below crucial $30 level - Feb 2004 lows...

Is $20 Oil A Possibility? - The first trading week of 2016 was dominated by negative sentiment, mostly surrounding the stock market instability in China. China’s Shanghai Composite had to be shuttered twice this week because plummeting stocks triggered the “circuit breaker,” a mechanism that closes the markets to prevent panic selling. The composite capped off the dismal week with more stable trading; the composite was up 2 percent on Friday. Another concern is the value of the yuan. The currency has been under pressure from the slowing economy, but the weaker yuan is raising concerns about so many other emerging market currencies around the world, some of which may be forced to devalue in corresponding fashion with the yuan. The Chinese government has not exactly inspired confidence in a stable currency policy after repeatedly shifting its tone. "Market volatility this week suggests that nobody really knows what the policy is right now. Or if the government itself knows or is capable of implementing the policy even if there is one," DBS Bank wrote in a currency note on January 8. "The market's message was loud and clear that more clarity and less flip-flopping is needed going forward." The cracks in the Chinese stock market surpassed the geopolitical turmoil between Saudi Arabia and Iran in terms of the effect on oil prices. WTI and Brent slumped below $34 per barrel to close out the week, the lowest level in 12 years. The prices are so low that a growing number of oil producers will not even be able to turn a profit even at existing projects. Some oil sands projects in Canada are already looking to shut down.

Global oil, gas investments to fall to $522bn in 2016 | Arab News: With crude prices at 11-year lows, the world’s biggest oil and gas producers are facing their longest period of investment cuts in decades, but are expected to borrow more to preserve the dividends demanded by investors. At around $37 a barrel, crude prices are well below the $60 firms such as Total, Statoil and BP need to balance their books, a level that has already been sharply reduced over the past 18 months. International oil companies are once again being forced to cut spending, sell assets, shed jobs and delay projects as the oil slump shows no sign of recovery. US producers Chevron and ConocoPhillips have published plans to slash their 2016 budgets by a quarter. Royal Dutch Shell has also announced a further $5 billion in spending cuts if its planned takeover of BG Group goes ahead. Global oil and gas investments are expected to fall to their lowest in six years in 2016 to $522 billion, following a 22 percent fall to $595 billion in 2015, according to the Oslo-based consultancy Rystad Energy. “This will be the first time since the 1986 oil price downturn that we see two consecutive years of a decline in investments,” said Bjoernar Tonhaugen, vice president of oil and gas markets at Rystad Energy. The activities that survive will be those that offer the best returns.

Saudi Arabia says won't limit oil production, can meet customer demand  – Saudi Arabian Oil Minister Ali al-Naimi said the kingdom, the world’s top crude exporter, does not limit its output and has the capacity to meet additional demand, state television Al Ekhbariya reported on Wednesday. “The increase in production depends on … the demand of the customers. We meet our customers’ demand, there is no longer a limit to production, as long as there is demand, we have the ability to meet demand,” Naimi said. The Wall Street Journal, which reported the same comments as Al Ekhbariya, also quoted Naimi as saying Saudi Arabia’s oil policy was “reliable” and would not change. He has made similar comments in the past when asked about plans to boost production. On Monday, Saudi Arabia, its finances hit by low oil prices, announced plans to shrink a record state budget deficit with spending cuts, reforms to energy subsidies and a drive to raise revenues from taxes and privatisation. Saudi Arabia’s planned cuts in spending and energy subsidies signal the kingdom is bracing for a prolonged period of low oil prices which this month hit their lowest levels since 2004. “We expect – from now on – efficiency of energy consumption to increase, which means the energy consumed will be reduced,” Naimi said, in reference to the recent subsidy reforms.

OPEC December oil output slips, near record  – OPEC oil output fell in December, a Reuters survey found on Tuesday, led by lower supply from Iraq following a record-breaking month in November and smaller declines elsewhere in the producer group. The Organization of the Petroleum Exporting Countries is still pumping close to record amounts as Saudi Arabia and other big producers focus on market share, weighing on any recovery in oil prices from near 11-year lows. OPEC supply fell in December to 31.62 million barrels per day (bpd) from a revised 31.79 million in November, according to the survey, based on shipping data and information from sources at oil companies, OPEC and consultants. Oil prices have more than halved in 18 months and hit an 11-year low in the wake of OPEC’s Dec. 4 decision to keep its year-old policy of no output restraint. The current crisis between Saudi Arabia and Iran – expected to pump more oil as sanctions are lifted – makes cooperation over supply even less likely, analysts say. “There is certainly no chance of Saudi Arabia scaling back its oil supply to make space for Iranian oil,” said Carsten Fritsch, analyst at Commerzbank, adding the tensions still justify a risk premium on prices because they could escalate. “In other words, the existing oversupply may actually grow further in the short term.”

Iran says boosting oil exports depends on future demand - A rise in Iran’s crude oil exports once sanctions against it are lifted depends on future global oil demand and that should not further weaken oil prices, a senior Iranian oil official was quoted as saying. Oil prices are likely to come under further pressure this year, when international sanctions on Iran are due to be removed under a nuclear deal reached in July. Brent crude settled at $37.28 a barrel on Thursday. Iran has repeatedly said it plans to raise oil output by 500,000 barrels per day post sanctions, and another 500,000 bpd shortly after that, to reclaim its position as the Organization of the Petroleum Exporting Countries’ second-largest producer. “The decision on the amount of exports highly depends on the future condition of the market. We will raise our market quota steadily,” said Mohsen Qamsari, director general for international affairs of the National Iranian Oil Company (NIOC). “We will adjust our output to the global market’s demand,” he told Iran’s oil ministry news agency Shana on Saturday.

Is Iran a gas empire in the making? . Iran is wooing foreign investors to attract billions of dollars in gas infrastructure as global trade in gas products is expanding rapidly. With more than 34 trillion cubic meters under its belt, Iran owns the world’s largest natural gas reserves but its share of the global trade in gas is less than one percent. The country is in a race against time to embolden its footmark in the market as global interest in gas expands rapidly and the shale gas is tightening rivalry among producers. "Natural gas will be the main fuel in the next 20 to 30 years,” international affairs director at National Iranian Gas Co. Azizollah Ramezani has said. Iran has signed a raft of initial agreements with a number of neighbors in recent years but the plans have remained on the paper only as Western sanctions have curbed trade engagement with the Islamic Republic. Currently, Turkey is Iran’s biggest customer with 30 million cubic meters a day of imports under a 25-year deal signed before the West imposed sanctions on Tehran. Iran also exports gas to neighboring Armenia and Azerbaijan but the volumes are not significant. Exports to Iraq are to start this year to feed three power plants in Baghdad and Diyala through a pipeline. A separate pipeline will be built in the next two years to transfer gas to Basra in southern Iraq. With the much-anticipated lifting of sanctions, officials hope to attract $40 billion in the gas industry. The investment has to go to building new infrastructure and expanding the gas transfer network.

Kazakhstan’s $64 Billion Question: Will Oil Fund Disappear? - WSJ: Kazakhstan’s $64 billion oil fund could run out of money within six or seven years as slumping oil prices cut revenue and the government spends its savings, a central-bank official said. The so-called National Fund has fallen 17% from its peak of $77 billion in August 2014. The government is drawing as much as $9.5 billion a year from it for spending. Kazakh politicians and the central bank need to cut spending, boost tax collection and invest the fund in higher-yielding assets such as private equity, according to Berik Otemurat, chief executive of the National Investment Corp., a unit of the central bank created in 2012. “We are eating up the National Fund,” Mr. Otemurat said in an interview. “The money we have been lucky to accumulate is the only money we have to capitalize on. I think the government needs to focus on the National Fund’s investment management.” Mr. Otemurat’s unit was set up to manage the fund but hasn’t actually taken it over. Instead, it is investing $800 million of the central bank’s foreign-exchange reserves. Trillions of dollars of state savings in oil-rich nations from Kazakhstan to Saudi Arabia are under threat as governments that grew accustomed to high oil revenues scramble for cash. The International Monetary Fund is advising nations from Asia, Africa, Latin America and the Middle East to devise sovereign-asset and liability-management plans that will involve a combination of asset sales, budget cuts and domestic and international borrowing to stabilize public finances.

Saudi Arabia faces 'economic bomb' -- While the world's attention is focused on Saudi Arabia's latest flare up with Iran, many Saudis are concerned about the "economic bomb" at home. The government is slashing a plethora of perks for its citizens. The cash crunch is so dire that the Saudi government just hiked the price of gasoline by 50%. Saudis lined up at gas stations Monday to fill up before the higher prices kicked in. "They have announced cutbacks in subsidies that will hurt every single Saudi in their pocketbook," says Robert Jordan, a former U.S. ambassador to Saudi Arabia and author of "Desert Diplomat: Inside Saudi Arabia Following 9/11." Gas used to cost a mere 16 cents a liter in Saudi Arabia, one of the cheapest prices in the world. Many Saudis drive large SUVs and "have no concept of saving gas," says Jordan. Gas price hike is just the beginning The gas hike is just the beginning. Water and electricity prices are also going up, and the government is scaling back spending on roads, buildings and other infrastructure. Those cuts might sound normal for any government that is running low on cash. But it's especially problematic in Saudi Arabia because the vast majority of Saudis work in the public sector. About 75% of the Saudi government's budget comes from oil. The price of oil has crashed from over $100 a barrel in 2014 to around $36 currently. Most experts don't expect a rebound anytime soon.

Saudi Arabia Carries Out Largest Mass Execution In 25 Years After Beheadings Soar In 2015 - As we and others have documented extensively, Saudi Arabia’s promotion of Wahhabism makes the kingdom the number one state sponsor of terror almost by default (Erdogan’s support for ISIS notwithstanding). Despite the best efforts of quite a few commentators and analysts who this year have drawn attention to the fact that the ideology espoused and promulgated by the Saudis is really no different than that promoted by ISIS, the Western public is still largely in the dark - we know this because if the US electorate were truly in tune to what’s going on, voters would stage a popular revolt before they’d allow King Salman to parade into Washington in a fleet of Mercedes on the way to commandeering the entire Four Seasons for a two day stay.  As Kamel Daoud, a columnist for Quotidien d’Oran, and the author of “The Meursault Investigation” put it in a New York Times op-ed in November, Saudi Arabia is simply “an ISIS that made it.”

Even-Handed Beheadings in Saudi Arabia; Friends Must Be Friends  - Saudi Arabia executed 47 people today in the biggest mass execution since 1980. Those executed include Sheikh Nimr al-Nimr, a prominent Shi'ite Muslim cleric.  Some were beheaded, others shot. Saudi Arabia says there's nothing to be concerned about, the executions were "even-handed".Sheikh Nimr al-Nimr's crime was speaking out against the government. In order to get rid of al-Nimr, Saudi Arabia had to get rid of 46 others, mostly Al Qaeda or alleged Al Qaeda sympathizers.   As further proof of even-handedness, al-Nimr was not crucified for his alleged "mischief in the land."

Nimr al-Nimr execution: Former Iraq PM al-Maliki says death will 'topple Saudi regime' - The former prime minister of Iraq, Nuri al-Maliki, has said that the execution of the prominent Shi'ite cleric Sheikh Nimr al-Nimr by Saudi Arabia will be the downfall of the Gulf kingdom's government.  Mr al-Maliki, who was prime minister of Iraq between 2006 and 2014, said in a statement that his countrymen "strongly condemn these detestable sectarian practices and affirm that the crime of executing Sheikh al-Nimr will topple the Saudi regime as the crime of executing the martyr al-Sadr did to Saddam," referencing the death of another prominent cleric in Iraq in 1980. Hundreds of armoured vehicles were sent to Qatif in Saudi Arabia to contain protests in response to the execution, while demonstrators in Bahrain have been tear-gassed. large numbers of men and women gathering now in Qatif to protest Saudi execution of Sheikh Nimr. pic.twitter.com/ulDNguvX8x Several protests have taken place in majority Shia Qatif and in Bahrain, following the execution of Sheikh al-Nimr and 46 others for ‘terrorism offences’. Demonstrators carrying pictures of the Shi’ite cleric were involved in a clash with police in the Bahraini village of Abu-Saiba, where dozens were tear-gassed, according to witnesses.

EU warns of 'dangerous consequences' of Saudi cleric execution - (Reuters) - The European Union's foreign policy chief warned on Saturday that Saudi Arabia's execution of a prominent Shi'ite Muslim cleric risked "dangerous consequences" by further inflaming sectarian tensions in the region. The kingdom executed cleric Nimr al-Nimr on Saturday alongside dozens of al Qaeda members, signaling that it would not tolerate attacks, whether by Sunni jihadists or from its Shi'ite minority. EU foreign policy chief Federica Mogherini, reiterating the bloc's opposition to the death penalty and mass executions in particular, said Nimr's case raised serious concerns over freedom of expression and the respect of basic civil and political rights in Saudi Arabia. "This case has also the potential of inflaming further the sectarian tensions that already bring so much damage to the entire region, with dangerous consequences," she said, urging Saudi authorities to promote reconciliation between different communities in the country.

Iranian Protesters Ransack Saudi Embassy After Execution of Shiite Cleric -  Iranian protesters ransacked and set fire to the Saudi Embassy in Tehran on Saturday after Saudi Arabia executed an outspoken Shiite cleric who had criticized the kingdom’s treatment of its Shiite minority.The cleric, Sheikh Nimr al-Nimr, was among 47 men executed in Saudi Arabia on terrorism-related charges, drawing condemnation from Iran and its allies in the region, and sparking fears that sectarian tensions could rise across the Middle East.The executions coincided with increased attacks in Saudi Arabia by the jihadists of the Islamic State and an escalating rivalry between the Sunni monarchy and Shiite Iran that is playing out in conflicts in Syria, Yemen and elsewhere. Sheikh Nimr was an outspoken critic of the Saudi monarchy and was adopted as a symbolic leader by Shiite protesters in several Persian Gulf countries during the Arab Spring uprisings.Saudi officials said the mass execution, one of the largest in the kingdom in decades, was aimed at deterring violence against the state. But analysts said that the grouping of Sheikh Nimr with hardened jihadists was a warning to domestic dissidents that could ripple across the region. The execution of Sheikh Nimr is widely seen as part of the growing rivalry, and Shiite leaders in different countries — in Iran, in particular — condemned it. “It is clear that this barren and irresponsible policy will have consequences for those endorsing it, and the Saudi government will have to pay for pursuing this policy,”

Oil Spike Risk: Iran Police Use Water Cannon On Angry Protesters Near Saudi Consulate --Despite official pleas for “calm” following the death of prominent Shiite cleric Nimr al-Nimr, Iranians are in no mood to stand down.  Perhaps the Ayatollah's calls for "divine vengeance" have incited a riot or perhaps the Shiite world has simply had enough of the House of Saud, but whatever the case, crowds once again gathered outside the Saudi consulate in Mashhad on Sunday where riot police tried in vain to disperse the mob with water cannons just hours after angry protesters torched the Saudi embassy in Tehran. Below, find images from the scene which underscore just how precarious the situation has become in the wake of Saturday's executions in Saudi Arabia.

It's On: Saudis Sever Diplomatic Ties With Iran, Will Confront Iranian "Hostility" -- Earlier today, as Iranian police struggled to disperse protesters gathered outside the Saudi consulate in Mashhad, we said the following about the rapidly deteriorating situation: If crude needed an excuse to rally, then surely this is it as it now appears that in addition to the fact that Riyadh and Tehran are squaring off in Syria (where Iran is present and the Saudis fight by proxy) and Yemen (where the Saudis are present and the Iranians fight by proxy), the two countries are on the verge of a historic diplomatic crisis which has the potential to stoke sectarian violence across the Muslim world. Well sure enough, just hours later, Saudi Foreign Minister Adel Al-Ahmad Al-Jubeir announced that Riyadh has cut diplomatic ties with Tehran. The Saudis have demanded the Iran mission leave the country within 48 hours. Riyadh also claims Iran did not attempt to stop protesters from storming the consulate.

Saudi Default, Devaluation Odds Spike As Mid-East Careens Into Chaos - Saudi Arabia just doesn’t know when to quit.  The kingdom’s plan to deliberately suppress crude prices in an effort to bankrupt the US shale space and preserve market share has cost Riyadh dearly over the past 12 months. The country’s budget deficit for 2015 ballooned to some 15% of GDP as oil revenue collapsed. For 2016, the deficit is expected to come in at a still elevated 13% of economic output. The red ink has forced the Saudis to tap the SAMA reserve war chest as well the debt market.In a testament to how dire the situation has become, Riyadh also moved to cut subsidies on everything from fuel to electricity to water in order to buy some budget breathing room. The welfare state overhaul was necessary because the Saudis aren’t keen on i) dropping the riyal peg, or ii) rolling back the defense spending. As if the situation needed to get still more precarious, Riyadh went out and sparked a sectarian showdown over the weekend by executinga prominent Shiite cleric. The Sheikh’s death triggered protests in Iran (among other countries) and before you knew it, the Saudi embassy in Tehran was on fire. That prompted Riyadh to cut diplomatic ties with the Iranians and comments by Saudi Foreign Minister Adel Al-Ahmad Al-Jubeir seem to suggest that the kingdom may be on the verge of taking more steps to intervene militarily in the region in an effort to rollback Iran’s growing influence and stop the Shiite crescent from waxing. Of course war is costly and is generally accompanied by quite a bit of uncertainty. And if there’s anything the Saudis absolutely do not need right now, it’s more expenses and more geopolitical ambiguity. In a testament to just how unwelcome the events that unfolded over the weekend truly are, Saudi CDS is blowing out to six year wides...

Bahrain, Sudan and UAE follow Saudis in diplomatic action against Iran - Bahrain and Sudan have quickly followed Saudi Arabia in severing diplomatic relations with Iran in the wake of a row over the execution of a leading Shia cleric by the Saudi authorities, which has provoked wide international condemnation. Bahrain, Saudi Arabia’s closest Gulf ally, said on Monday that Iranian diplomats had 48 hours to leave Manama, and its own diplomats would be leaving Tehran. Shortly afterwards, Sudan announced that it was expelling the Iranian ambassador to Khartoum and that all ties had been severed. Sudan has been distancing itself gradually from Tehran in recent months. The UAE is also downgrading its diplomatic representation to Iran, replacing its ambassador with a charg√© d’affaires, al-Hadath TV reported. The relatively modest step is likely to reflect the close trade ties between the two countries despite longstanding political tensions. . Over the weekend protesters set ablaze the Saudi embassy in Tehran and its consulate in another Iranian city, Mashhad. The attacks have been widely condemned inside Iran as an own goal, diverting attention from the execution of Sheikh Nimr al-Nimr and 46 others. The recent incidents have brought much embarrassment for the moderate administration of the president, Hassan Rouhani, and undermined his diplomatic apparatus. Internal critics say the unrest has shifted attention away from the executions in Saudi Arabia.

Iraq Says Mosque Bombings Were False Flag ISIS Attacks - Earlier today, in the course of documenting the Mid-East melee that’s set to unfold amid a worsening diplomatic crisis between Iran and Saudi Arabia, we noted that two Sunni mosques were attacked in Iraq on Sunday. “The attack on the Ammar bin Yasir mosque in central Hilla destroyed its dome and several walls,” Reuters reported. “Another mosque in Hilla's northern outskirts, al-Fath al-Mubeen, was also attacked,” sources said. The most obvious explanation for the attacks seemed to be that angry Shiites were retaliating for the execution of Sheikh Nimr al-Nimr, whose death triggered protests from Bahrain to Pakistan and now threatens to plunge the region into sectarian strife. Iraqi officials however, tell a different story. “An Iraqi official blamed the Islamic State group on Monday for the bombing of two Sunni mosques in a predominantly Shiite city in southern Iraq the previous night, saying the militant group seeks to stoke sectarian tensions,” AP reports. ISIS "did this to inflame sectarian strife in the country,” provincial security official Falah al-Khafaji contends.

Sunni v Shia Gas WarSunni Muslims and Shia Muslims have been enemies for over a thousand years. For the Saudis, the Syrian pipeline war is between two competing age-old vectors of Islam. Saudi Arabia, home to the sacred cities of Mecca and Medina, claims de facto supremacy in the Islamic world of Sunni Islam. The Saudi Sunni form is ultra-conservative Wahhabism, named for an 18th Century Bedouin Islamic fundamentalist or Salafist named Muhammad ibn Abd al-Wahha. The Taliban derive from Wahhabism with the aid of Saudi-financed religious instruction. All of the 9/11 bombers were Saudi Wahhabis. The Gulf Emirates and Kuwait also adhere to the Sunni Wahhabism of the Saudis, as does the Emir of Qatar. Iran on the other hand historically is the heart of the smaller branch of Islam, the Shi’ite. Iraq’s population is some 61% majority Shi’ite. Syria’s President, Bashar al-Assad is a member of a satellite of the Shi’ite branch known as Alawite. Some 23% of Turkey is also Alawite Muslim. To complicate the picture more, across a bridge from Saudi Arabia sits the tiny island country, Bahrain where as many as 75% of the population is Shi’ite but the ruling Al-Khalifa family is Sunni and firmly tied to Saudi Arabia. Moreover, the richest Saudi oil region is dominated by Shi’ite Muslims who work the oil installations of Ras Tanura.  These historic fault lines inside Islam which lay dormant, were brought into a state of open warfare with the launching of the US State Department and CIA’s Islamic Holy War, otherwise known as the Arab Spring.   Now if we map the resources of known natural gas reserves in the entire Persian Gulf region, the motives of the Saudi-led Qatar and UAE in financing with billions of dollars the opposition to Assad, including the Sunni ISIS, becomes clearer. Natural gas has become the favored “clean energy” source for the 21st Century and the EU is the world’s largest growth market for gas, a major reason Washington wants to break the Gazprom-EU supply dependency to weaken Russia and keep control over the EU via loyal proxies like Qatar.

Saudi-Iran split dashes chance of OPEC deal to curb oil glut - The collapse in relations between Saudi Arabia and Iran after the Saudi execution of a Shi’ite cleric puts an end to speculation that OPEC could somehow agree production curbs to lift the price of oil anytime soon. A Reuters survey of OPEC production showed on Tuesday that Saudi Arabia ended 2015 with its output at full tilt, with no sign of cutting supply to make room for Iran, which plans to ramp up its own output when international financial sanctions are lifted this year. According to the survey, compiled from shipping data, oil company figures and industry experts, Saudi production for December averaged 10.15 million barrels per day. That means it was above 10 million barrels per day for nine straight months, the longest period of sustained production above that threshold for decades. The determination by the world’s biggest exporter Saudi Arabia to defend its market share despite a global glut has helped drive oil prices to their lowest in 11 years. Meanwhile, the lifting of sanctions on Iran in line with a nuclear agreement is expected to provide the biggest increase in supply of 2016. The world is now producing 1.5 million barrels a day more than it is consuming, and Iran is promising to add another million bpd to supply over the next 12 months.

'We are not natural-born enemies of Iran,' Saudi U.N. envoy says | Reuters: Saudi Arabia said on Monday it would restore ties with Iran when Tehran stopped meddling in the affairs of other countries and pledged that Riyadh would continue to work "very hard" to support bids for peace in Syria and Yemen despite the spat. Saudi Arabia cut all ties with Iran on Sunday following the kingdom's execution of prominent Shi'ite cleric Nimr al-Nimr. Protesters in Iran and Iraq marched for a third day to denounce the execution. When asked what it would take for ties to be restored, Saudi U.N. Ambassador Abdallah Al-Mouallimi told reporters: "Very simple - Iran to cease and desist from interfering in the internal affairs of other countries, including our own." He added, "If they do so, we will of course have normal relations with Iran. We are not natural-born enemies of Iran." On Monday, Bahrain and Sudan cut all ties with Iran, following Riyadh's example. Saudi Foreign Minister Adel al-Jubeir told Reuters Riyadh would also halt air traffic and commercial relations between the rival powers. Jubeir blamed Iran's "aggressive policies" for the diplomatic action, alluding to years of tension that spilled over on Saturday night when Iranian protesters stormed the kingdom's embassy in Tehran. The United Arab Emirates (UAE), home to hundreds of thousands of Iranians, partially downgraded its relations but the other Gulf Arab countries - Kuwait, Qatar and Oman - stayed above the fray.

One Map That Explains the Dangerous Saudi-Iranian Conflict - The Kingdom of Saudi Arabia executed Shiite Muslim cleric Nimr al-Nimr on Saturday. Hours later, Iranian protestors set fire to the Saudi embassy in Tehran. On Sunday, the Saudi government, which considers itself the guardian of Sunni Islam, cut diplomatic ties with Iran, which is a Shiite Muslim theocracy.To explain what’s going on, the New York Times provided a primer on the difference between Sunni and Shiite Islam, informing us that “a schism emerged after the death of the Prophet Muhammad in 632” — i.e., 1,383 years ago. But to the degree that the current crisis has anything to do with religion, it’s much less about whether Abu Bakr or Ali was Muhammad’s rightful successor and much more about who’s going to control something more concrete right now: oil. In fact, much of the conflict can be explained by a fascinating map created by M.R. Izady, a cartographer and adjunct master professor at the U.S. Air Force Special Operations School/Joint Special Operations University in Florida. What the map shows is that, due to a peculiar correlation of religious history and anaerobic decomposition of plankton, almost all the Persian Gulf’s fossil fuels are located underneath Shiites. This is true even in Sunni Saudi Arabia, where the major oil fields are in the Eastern Province, which has a majority Shiite population. As a result, one of the Saudi royal family’s deepest fears is that one day Saudi Shiites will secede, with their oil, and ally with Shiite Iran.

The Geopolitics of Cheap Oil - FPIF: The market was supposed to save the planet. That, at least, was the argument of many economists grappling with the problem of climate change. As fossil fuels became scarcer, they pointed out, the price of oil and natural gas would go up. And then other options, like solar and wind, would become cheaper, particularly as investment flowed into that sector and drove down the cost of new technologies. And voila: The invisible hand would gradually turn down the global thermostat. It’s a ridiculous argument. For one, there’s no guarantee that the market would respond in a timely manner (i.e., before we’re under water). For another, oil and gas prices are as volatile and unpredictable as a Q-and-A session with Donald Trump. In 2008, for instance, oil hit a high of $145 a barrel. But that didn’t last long. And in 2015, despite all sorts of turmoil in the Middle East and in other oil-producing countries like Nigeria, the price of crude fell between 30 and 40 percent to its lowest levels in 11 years. That’s a bigger drop than the commodity price declines for metals, grains, and soybeans. Gas stations around the United States didn’t fully reflect this drop, but petrol prices still fell to an average of $2.40 a gallon, saving each driver more than $500 last year.  There are a number of reasons for the price drop, but it boils down to supply (more of it) and demand (less of it). The United States boosted oil production by 66 percent over the last five years, making it the largest oil and natural gas producer in the world in 2015. Other producers, like Saudi Arabia, also didn’t scale back, in part to stick it to a sanctions-hobbled Iran and snatch up its clients. Meanwhile, greater fuel efficiency and slower economic growth around the world (particularly in China) have reduced demand.

Why Are Republican Candidates Backing Saudi Arabia in Its Fight With Iran? -- Once upon a time, Republican leaders said the United States should push the Middle East toward democracy because Arab dictators were breeding Arab terrorists. Not anymore. In the party George W. Bush once ran, his fight-terrorism-with-democratization thesis has been largely orphaned. The new buzzword is “stability.” Donald Trump publicly bemoans the fall of Saddam Hussein and Muammar al-Qaddafi. Ted Cruz attacks the Obama administration for not doing more to keep Hosni Mubarak in power and urges it to emulate Egypt’s current dictator, General Abdel Fattah el-Sisi. Bush’s former vice president, Dick Cheney, insists that, “The Egyptian people are delighted that the military stepped in,” in a brutal coup d’√©tat. And W.’s own brother, Jeb, whose Super PAC has received donations from at least two lobbyists for Saudi Arabia, says the next president must “restore trust” and “work more closely” with America’s “important partner” in Riyadh.

Pressure Grows on Saudi Arabia to Ditch Dollar Peg - WSJ: The prolonged rout in oil has left Saudi Arabia’s long-standing peg of its currency to the dollar at its most vulnerable point in more than a decade. For almost 30 years, the kingdom has held the riyal at a fixed exchange rate and that has brought stability to government finances. Ninety percent of the government’s revenue comes from oil, which is priced in dollars. But fewer dollars are coming in now, straining a budget that is committed to generous subsidies and public-sector wages. Abandoning the peg would make those dollars stretch further when converted to a local riyal, because without the peg, the riyal would weaken. What’s more, to hold the peg, Saudi Arabia spends billions of its dollars buying riyals in foreign-exchange markets.With oil trading around $36 a barrel, some investors and Saudi Arabian businesses believe the government will succumb to the pressure and let the peg go—something long regarded as unthinkable. That is a minority view, but one that is growing in popularity. This week, the number of riyals that forward contracts can buy for a dollar in a year’s time surged to a 16-year high.

Iran may limit oil output to avoid price war: Official — Iran wants to avoid an oil price war with rival producers and only gradually lift exports once sanctions against it cease, a senior official said, in what would be a major shift away from planning to ship as much fuel as soon as possible. Iran, which has some of the world’s biggest petroleum reserves, has repeatedly urged fellow members within the Organization of the Petroleum Exporting Countries (OPEC) to make room for a supply jump from the Islamic Republic, pledging to ramp up exports as soon as sanctions on its oil industry are lifted under a nuclear deal with world powers. A move to limit export growth would be a major shift in Iran’s policies in an environment when most OPEC and non-OPEC producers are fighting for market share despite a growing global oil glut, which has already cut crude prices by two-thirds since 2014, hurting energy firms and oil-exporting nations. “We don’t want to start a sort of a price war,” Mr Mohsen Qamsari, director-general for international affairs of the National Iranian Oil Company (NIOC), told Reuters. “We will be more subtle in our approach and may gradually increase output. I have to say that there is no room to push prices down any further, given the level where they are.” He did not give any details on how much Iran would be prepared to moderate a rise in its shipments but said Iran would not offer further discounts to lure customers. Currently, Iran offers 90-day credit, free shipping and some discounts on crude prices to buyers in India.

Iraq offers to mediate between Saudi and Iran, fearing for ISIS campaign  (Reuters) - Iraq dispatched its foreign minister to Tehran on Wednesday with an offer to mediate in an escalating feud between Saudi Arabia and Iran, reflecting Baghdad's fears that new sectarian conflict could unravel its campaign against Islamic State. Sunni Saudi Arabia's execution of Shi'ite dissident Nimr al-Nimr on Saturday has inflamed sectarian anger across the Middle East, infuriating Iran, the region's main Shi'ite Muslim power. After demonstrators sacked the Saudi embassy in Iran, Riyadh and some of its allies cut off diplomatic ties with Tehran. Iraq, where a Shi'ite-led government is urgently trying to reach out to minority Sunnis as it seeks to retake territory controlled by Islamic State militants, is particularly vulnerable to any upsurge in anger between the Muslim sects. Powerful Iran-backed Shi'ite militia called on Iraqi Prime Minister Haidar al-Abadi -- a Shi'ite who has staked his credibility on efforts to reconcile with Sunnis -- to shut a Saudi embassy that reopened only last month after decades of strained ties. Thousands of Shi'ites rallied in central Baghdad on Wednesday chanting slogans against the Saudi ruling family. Abadi sent Foreign Minister Ibrahim al-Jaafari to Tehran to help defuse the crisis. Speaking with his Iranian counterpart Mohammad Javad Zarif, Jaafari said the row could have "wide-ranging repercussions". "We have solid relations with the Islamic Republic (Iran) ... and also we have relations with our Arab brothers and therefore we cannot stay silent in this crisis," Jaafari told the joint press conference in Tehran. There was no immediate reaction from Saudi Arabia to the Iraqi mediation offer.

The Real Reason Why Saudi Arabia Executed Sheikh Nimr  -- Saudi Arabia finally executed the elderly Shia cleric, Sheikh Nimr Baqir al-Nimr, even though many Muslim and other religious leaders as well as the United Nations and a number of political leaders had urged—at least privately—Saudi Arabia to commute the death sentence. Viewed in any logical light, this execution could not be in Saudi Arabia’s short- and long-term interests. But the execution can also be understood as a strategy to provoke Iran to respond in a way to justify a Saudi military attack against it.

How the Saudi king benefits from a cleric’s execution  - Oil prices are falling. America is far more energy independent than it was a decade ago. It is slowly moving toward a new diplomatic relationship with Iran, dissolving the glue holding the United States-Saudi relationship together. Many disgruntled Saudis support Islamic State, an organization that has sworn to take down the al-Saud monarchy. These destabilizing elements come as the al-Saud family faces succession issues. The current leader, King Salman bin Abdulaziz al-Saud, looks likely to be the final son of the country’s founder, Ibn al-Saud, to hold the office. Ibn al-Saud died in 1953. Salman has named a nephew as the crown prince, and his own son as second in line to the throne, which will bring an entirely new generation into power. There have been rumors of growing opposition to Salman, even of a possible coup. The execution of Nimr thus sends multiple signals within the kingdom. The most significant is a get-tough message to all, coupled with an assurance to the Iranians that Salman is firmly in control, and able to further prosecute the open-ended war in Yemen. The execution also appeases the Wahhabists Salman needs in his corner, and gives the government a new excuse to crack down on Shi’ite dissent. Shi’ites are estimated to make up 10-15 percent of Saudi Arabia’s population. The threat is real — Nimr is now a martyr with an international profile, and may prove more dangerous dead than alive. Nimr aside, the simultaneous execution of 43 al Qaeda members (three other Shi’ites were also executed) may have been a message to disgruntled Sunni youth returning from jihad that the king will not tolerate support for al Qaeda and Islamic State at home. The Saudi monarchy fears an Islamic revolution from within far more than any external military threat.

Fear And Loathing in the House of Saud: Riyadh was fully aware the beheading of respected Saudi Shi'ite cleric Nimr al-Nimr was a deliberate provocation bound to elicit a rash Iranian response. The Saudis calculated they could get away with it; after all they employ the best American PR machine petrodollars can buy, and are viscerally defended by the usual gaggle of nasty US neo-cons. In a post-Orwellian world "order" where war is peace and "moderate" jihadis get a free pass, a House of Saud oil hacienda cum beheading paradise — devoid of all civilized norms of political mediation and civil society participation — heads the UN Commission on Human Rights and fattens the US industrial-military complex to the tune of billions of dollars while merrily exporting demented Wahhabi/Salafi-jihadism from MENA (Middle East-Northern Africa) to Europe and from the Caucasus to East Asia. And yet major trouble looms. Erratic King Salman's move of appointing his son, the supremely arrogant and supremely ignorant Prince Mohammad bin Salman to number two in the line of succession has been contested even among Wahhabi hardliners. But don't count on petrodollar-controlled Arab media to tell the story. English-language TV network Al-Arabiyya, for instance, based in the Emirates, long financed by House of Saud members, and owned by the MBC conglomerate, was bought by none other than Prince Mohammad himself, who will also buy MBC. With oil at less than $40 a barrel, largely thanks to Saudi Arabia's oil war against both Iran and Russia, Riyadh's conventional wars are taking a terrible toll. The budget has collapsed and the House of Saud has been forced to raise taxes.

Saudi Arabia's defiant oil strategy may backfire on several fronts - Straits Times: Saudi Arabia's move to try to keep global oil prices low was intended to hurt its rivals - but experts now say its decision may be starting to backfire. As oil prices started dipping in 2014 due to record production in the United States and Canada, the Saudis decided to continue pumping more oil to defend their market share - and also to economically squeeze energy-dependent rivals such as Iran and Russia. The events of the past few days - beginning with Riyadh's execution of Shi'ite cleric Nimr al-Nimr - have led some to conclude that Saudi Arabia is a country under stress, and its decision to suppress oil prices has come under intense scrutiny. "The Saudis have to be careful how long they continue to follow their current strategy, which is akin to walking in a firepit covered in flammable oil," "The ability of the Saudi monarchy to provide extensive social welfare programmes for its population is closely tied over the long term to its ability to extract revenues from oil. Low oil prices undercut the ability of the Saudis to finance the social welfare system that their population has become accustomed to, and which in many ways limits the spread of dissent in the kingdom."Mr Heras said that although threats of widespread dissent are not an immediate challenge, cracks are starting to appear. Already there have been cutbacks in social welfare programmes. A steep cut in fuel subsidies has also sent pump prices in Saudi Arabia shooting up 40 per cent. Yet, at the last Opec meeting in December, Riyadh continued to push for the oil cartel to keep up production.

How Saudi Arabia Controls Its Own Media Coverage  - With Saudi Arabia making headline news once again, I thought it was a great time to take a look at the WikiLeaks Saudi Cables release which took place relatively quietly on June 19, 2015.  Thus far, 122,619 cables of the more than half a million cables and other documents from the Kingdom of Saudi Arabia Ministry of Foreign Affairs have been released,  most of them dating between 2010 and 2015, providing us with a rather intimate look at how the Saudi Royal Family (aka the Saudi dictatorship) functions.  Because of its oil producing capabilities, despite its flagrant disregard for human rights, it continues to be regarded as a key Middle East ally by the United States, the United Kingdom and much of the rest of the western world.  These documents help us to better understand how Saudi Arabia controls its image on the world's stage, the main thrust of this posting.  From the cables that have been released so far, there is a pattern to how Saudi Arabia and its Royal Family control coverage by the world's media.  Saudi Arabia has a strategy of co-opting Arab media using two main methods; neutralization and containment.  When the Kingdom receives negative coverage in the regional media, it seeks to neutralize it by having the media outlets that it controls refrain from publishing any news that reflects negatively on the Saudis.  When a more proactive approach is needed, the Saudis use the containment approach to put pressure on the media to either sing the Kingdom's praises or attack any party that criticizes them.  How can the Saudis gain such control over the media?  One method used by the Saudis is the purchasing of hundreds or thousands of subscriptions in targeted newspapers and other publications as shown on this document:

Iran claims Saudi strike hits embassy in Yemen - Iran has accused the Saudi-led coalition battling Shiite rebels in Yemen of hitting its embassy in the capital, Sanaa, in an overnight air strike. The accusation comes amid a dangerous rise in tensions between Iran and Saudi Arabia in recent days, following the kingdom's execution of a Shiite cleric and attacks on Saudi diplomatic posts in the Islamic Republic.  Analysts have feared the dispute could boil over into the proxy wars between the two Mideast rivals in Yemen and in Syria. Meanwhile, Saudi Arabia's eastern Shiite heartland prepared to hold a funeral service on Thursday night to honour the executed Shiite cleric, Nimr al-Nimr. That could spark further unrest, as witnesses in eastern Saudi towns have reported hearing gunfire overnight and armoured personnel carriers have been seen driving through neighbourhood streets. On Thursday afternoon, Iran's state-run news agency said a Saudi-led air strike the previous night hit the Iranian embassy in Sanaa, citing Iran's Foreign Ministry spokesman. However, an Associated Press reporter who reached the site just after the announcement saw no visible damage to the building.

Saudi foreign minister visits Pakistan as Iran tensions deepen: (Reuters) – Saudi Arabia’s foreign minister arrived in Pakistan on Thursday, where he will meet leaders of a government keen to defuse spiralling sectarian tension between the Sunni-majority kingdom and Shi’ite Iran. Saudi Arabia’s execution of a prominent Shi’ite cleric on Saturday has inflamed tension across the Middle East and infuriated Iran, Riyadh’s main rival in the region. Several of Saudi Arabia’s Sunni allies have broken diplomatic ties with Iran after demonstrators ransacked the Saudi embassy in Tehran. Pakistan, which has a large Shi’ite minority, has sought to avoid taking sides as Prime Minister Nawaz Sharif tries to stem sectarian violence at home and boost economic ties with both Saudi Arabia and Iran. Saudi Foreign Minister Adel al-Jubeir is due to meet Sharif, his foreign affairs adviser Sartaj Aziz, and army chief General Raheel Sharif later on Thursday. Pakistan’s foreign ministry said a joint news conference with Al-Jubeir set for Thursday had been cancelled, citing a delay in his arrival for the two-day visit. Aziz, Sharif’s foreign affairs adviser, said that Pakistan was a friend of both Saudi Arabia and Iran, and would seek to heal the rift between them during al-Jubeir’s visit. “Pakistan has called for resolution of differences through peaceful means in the larger interest of Muslim unity in these challenging times,” Aziz told parliament on Tuesday. The visit comes after Pakistan last month distanced itself from an anti-Islamic State coalition announced by Saudi Arabia, which had named Pakistan as a member.

Saudi Arabia and Iran are playing a winner-take-all game: How did the execution of a cleric escalate so quickly into a diplomatic crisis between two regional rivals that have been fighting a cold war for over a decade? Saudi leaders have been dismayed since July, when the United States and five other world powers reached an agreement with Iran to limit its nuclear program in exchange for lifting international sanctions. Under the deal, Iran will be allowed to re-enter the global financial system, increase its oil exports and access more than $100 billion in frozen assets. Saudi Arabia is worried that the nuclear deal will help Iran gain an edge in their ongoing regional rivalry. This series of proxy battles — in which the two rivals are backing competing factions in Iraq, Syria, Yemen, Lebanon and Bahrain — have shaped the Middle East since the United States invaded Iraq in 2003. While the conflict is partly rooted in the historical Sunni-Shi’ite schism within Islam, it is mainly a struggle for political dominance of the Middle East between Shi’ite-led Iran and Sunni-led Saudi Arabia. These proxy wars, which involve other powers aside from Iran and Saudi Arabia, are at the root of much of the destruction in the region over the past five years. They have cost hundreds of thousands of lives, especially in Syria, where where more than 250,000 have been killed since the March 2011 uprising against the regime of Bashar al-Assad. The Syrian war has also spurred the most severe refugee crisis since World War Two, with nearly 4.4 million Syriansforced to seek refuge in neighboring countries.  In late March, Saudi Arabia launched a war against Houthi rebels and their allies in Yemen. The Houthis, who belong to a sect of Shi’ite Islam called Zaydis, are allies of Iran. . As the war has dragged on, air strikes by Saudi Arabia and its Sunni allies caused most of the estimated 2600 civilian deaths.

Saudi Devaluation Odds Highest In 20 Years, Kingdom Now More Likely To Default Than Portugal -- On Monday, we brought you “Saudi Default, Devaluation Odds Spike As Mid-East Careens Into Chaos,” in which we outlined the jump in riyal forwards and widening of CDS spreads that Riyadh witnessed in the aftermath of the kingdom’s move to cut diplomatic ties with Iran.In short: the market is getting worried that Riyadh is about to careen into crisis. In the face of slumping crude, the Saudis are staring down double digit budget deficits and the prospect of having to once again tap debt markets in order to offset the SAMA burn and k eep the kingdom from having to implement further subsidy cuts. The open hostilities with Iran all but guarantee the war in Yemen will escalate (just today for instance, Tehran accused the Saudis of bombing the Iranian embassy in Sana’a) and that entails a further drain on the kingdom’s finances as the monarchy will be forced to fund a prolonged and intractable struggle with the Houthis.Additionally, the more tension there is between Riyadh and Tehran, the more fractious OPEC will become and with Iranian supply set to rise in the new year as international sanctions are lifted, this may well be one Mid-East conflict that drives oil prices lower rather than higher - especially if the SAR peg falls.

Fall, Fall, Al Saud ! Saudi Shiite protesters shout 'death' to ruling family - Firstpost: Shiite Muslim protesters in eastern Saudi Arabia called Friday for the "death" of the Sunni-majority kingdom's ruling Al-Saud family at a rally to honour executed Shiite cleric Nimr al-Nimr, a witness said. Protestors shout death to the Al Saud family/ ReutersThe demonstration capped a week of unrest in Nimr's hometown of Awamiya and uncertainty in the surrounding Shiite-dominated region of Qatif, after Nimr's execution last Saturday. "Death to the Saud family," protesters shouted, raising their arms in the air, according to the witness. "Fall, fall, Al-Saud", they added. Pictures of the protest showed what appeared to be hundreds of people, many of them clad in black. They held black flags and pictures of the executed sheikh, who was a driving force behind protests that began in 2011 among the kingdom's minority Shiite community. Those protests developed into a call for equality in the Sunni-dominated kingdom, where Shiites complain of marginalisation. Nimr and three other Shiites were among 47 people convicted of terrorism and executed, provoking anger among Shiites and concern in Western nations.Shiites protested in several Muslim countries and attacked Saudi diplomatic missions in the kingdom's regional rival, Iran. Saudi Arabia and some of its allies cut diplomatic ties with Iran in reaction, triggering a diplomatic crisis and raising sectarian tensions 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. For the Saudis, Nimr is a “terrorist,” but for the Shiite community he has now become a symbol of the oppression embodied by the Sunni Gulf monarchies. For those interested in a bit of background, here are some excerpts from The Atlantic: The State Department cable added Nimr was gaining popularity among young people. His stature grew in spring 2009, after Shia pilgrims clashed with security forces in Medina over access to holy sites; Nimr denounced the security forces, but then was forced to go into hiding to avoid arrest. By January 2010, the State Department reported in another cable that Nimr had returned home and was living under something like house arrest. The diplomat, who wrote that cable, judged that Nimr had overestimated his sway, gone too big, and as a result had lost his influence. A neighbor said that the government “chose not to pursue him further out of concern they would elevate his status.” The government changed its ignore-them-and-they’ll-go-away stance on Shia rabble-rousers once the Arab Spring began. In Bahrain, Shia protests threatened the stability of the regime, and the Sunni regimes of Saudi Arabia and the United Arab Emirates sent troops to help quell uprisings. But protests also spread from Bahrain into the kingdom. Nimr preached forcefully against the regime, and was rare in speaking up both in favor of the domestic protests and those in Bahrain

Saudi Arabia considers Aramco share sale - Saudi Arabia is considering listing shares in state-owned Saudi Aramco, the largest oil producer, in a move that would be likely to create the most valuable listed company in the world. Mohammed bin Salman, the kingdom’s deputy crown prince, said he was “enthusiastic” about launching an initial public offering of Saudi Aramco and a decision would be made “over the next few months”. His comments to The Economist came as the world’s largest oil-exporting nation struggles to contain a burgeoning deficit of nearly $98bn following the oil price’s spectacular 70 per cent collapse over the past 18 months. The Saudi government recently unveiled spending cuts for this year, subsidy reforms and called for privatisations to rein in its widening deficit. Its annual revenues — tied closely to the price of oil — are forecast by the International Monetary Fund to have plummeted 34.5 per cent last year. “I believe it is in the interest of the Saudi market, and it is in the interest of Aramco,” Prince Mohammed said. He said taking the group public would create “more transparency” and “counter corruption, if any, that may be circling around Aramco”. A full listing of the oil group could value it in the trillions of dollars. By contrast iPhone maker Apple, currently the world’s most valuable company, is worth $543bn.

As The Saudi Economy Implodes, A Fascinating Solution Emerges: The Aramco IPO -- Earlier today we reported that when it comes to Saudi Arabia, things are going from bad to abysmal, with the market is clearly aware of it. Saudi riyal forwards hit their highest level in almost two decades as oil plummeted: twelve-month forward contracts for the riyal climbed 260 points, and set for the steepest close since December 1996 on growing speculation the world’s biggest oil exporter may allow its currency to slide against the dollar for the first time since 1986 (incidentally, Bank of America's "Number One Black Swan Event For The Global Oil Market In 2016").  And then earlier today everything changed when Saudi Arabia's unveiled what may be a stunning Hail Mary: one which is great news for the suddenly liquidity challenged Saudi government, and is very bad news for the future price of oil. According to the Economist, Saudi Arabia is contemplating taking Saudi Aramco - arguably the world's most valuable company - public. To wit: SAUDI ARABIA is thinking about listing shares in Saudi Aramco, the state-owned company that is the world’s biggest oil producer and almost certainly the world’s most valuable company. Muhammad bin Salman, the kingdom’s deputy crown prince and power behind the throne of his father, King Salman, has told The Economist that a decision will be taken in the next few months. “Personally I’m enthusiastic about this step,” he said. “I believe it is in the interest of the Saudi market, and it is in the interest of Aramco.”

You’ve probably never heard of the world’s most valuable company - -- It’s Saudi Aramco—the world’s most important energy producer, controlling Saudi Arabia’s roughly 321 billion barrels of proven oil and gas reserves. The company could open itself up to outside investors in a share sale, according to deputy Crown Prince Muhammad bin Salman, who mentioned the matter to reporters from The Economist today (Jan. 7). “This is something that is being reviewed, and we believe a decision will be made over the next few months,” he said, according to a transcript of the interview. The seemingly offhand comment isn’t an ironclad pronouncement, of course. But it can’t help but get attention if only for the sheer size of the firm. Saudi Aramco would almost certainly become the world’s most highly valued company with a market capitalization north of $1 trillion. (Exxon Mobil has roughly 25 billion barrels of proven oil and gas reserves, and public markets have given it a value of about $320 billion. Aramco has more than 10 times as much oil.) While it’s impossible to say whether any share sale will materialize, the idea is being floated at an interesting moment. Saudi Arabia has led a risky OPEC production push over the last year that has tanked global oil prices in an effort to squeeze higher cost suppliers—such as US based shale gas producers—out of the business.  The move has been costly for Saudi Arabia, however, pushing its own oil revenues down sharply, and forcing it to eat into its currency reserves to preserve the riyals peg to the US dollar.

Saudi Arabia may launch IPO for Saudi Aramco - Saudi Arabia may launch an initial public offering for the world’s largest oil producer, Saudi Arabian Oil Co., according to a report. Deputy Crown Prince Mohammed bin Salman told The Economist that a decision will be made in the next few months. The crown prince is widely thought to hold considerable power in the monarchy and also heads the defense ministry. “I believe it is in the interest of the Saudi market, and it is in the interest of Aramco,” he said. Saudi Arabia is dealing with the economic punch declining oil prices have taken on the country. On Thursday pricing fell below $35 per barrel, its lowest point since 2004. There’s also rising tension between Saudi Arabia and Iran after the execution of a Shiite cleric and attacks on Saudi diplomatic posts in the Islamic Republic. Fadel Gheit, analyst for Oppenheimer & Co., said an Aramco IPO “makes a lot of sense.” Exxon Mobil Corp.’s market value is more than $300 billion, and Saudi Aramco produces three times as much oil, Gheit said. He figures Aramco could sell off a 20 percent minority interest and raise $200 billion.”That will fund their budget for a year,” he said.The Economist said that options under preliminary consideration for Saudi Aramco range from listing some of its petrochemical and other refining operations to selling shares in the parent company.

Saudi Aramco Confirms "World's Most Valuable Company" May Go Public --On Thursday we previewed the upcoming IPO of the world’s most valuable company: Saudi Aramco, Riyadh's state-owned crown jewel that’s the world’s most prolific crude producer. The move comes as Saudi Arabia burns through cash and takes on debt in a desperate attempt to plug a yawning budget hole created by the largely self-inflicted pain from "lower for longer" crude. Pressured by declining oil revenue, the cost of financing multiple regional proxy wars, and the necessity of maintaining costly subsidies for everyday Saudis, Riyadh is apparently resorting to what we called “a stunning Hail Mary”: privatization.On Friday, the kingdom confirmed it's mulling plans to sell a stake in the company.Here’s the official statement: Saudi Aramco confirms that it has been studying various options to allow broad public participation in its equity through the listing in the capital markets of an appropriate percentage of the Company’s shares and/or the listing of a bundle its downstream subsidiaries.Once the study of these various options is complete, the findings will be presented to the Company’s Board of Directors which will make its recommendations to the Saudi Aramco Supreme Council.This proposal is consistent with the broad and progressive direction pursued by the Kingdom for reforms, including privatization in various sectors of the Saudi economy and deregulation of markets, which the Company strongly supports. Saudi Aramco would like to emphasize that this process will strengthen the Company's focus on its long term vision of becoming the world’s leading energy and chemical enterprise. This includes prudently managing the Kingdom’s hydrocarbon resources, adding value across the value chain, reliably meeting its customers’ demand, and meeting its stakeholder and environmental commitments. As RBS notes, "Aramco has the largest known oil reserves at around 261bn barrels – almost 10 times more than Exxon Mobil."

How petrostates may solve their fiscal woes - Oil’s price decline has put the finance ministers of oil-exporting states from Abu Dhabi to Alaska in a bind. Reliant on oil royalties for revenue, their governments have long written budgets that need high oil prices to balance. Every major oil exporter, in fact, now has a “fiscal breakeven” oil price that is higher than the prevailing oil price, according to data from the International Monetary Fund.  What, then, is a petrostate to do about its finances? Maybe the most obvious option is fiscal austerity. All the spending and welfare schemes that these governments established during the oil boom have got to go. That, along with contemplating an initial offering of shares in Aramco, seems to be Saudi Arabia’s answer, at least for the moment. Facing a whopper of a fiscal deficit — some 15 percent of GDP — the monarchy is planning an austerity program that would wipe out most of the gap over the next two years. Yet oil exporters did not respond to the 1980 drop in oil prices with fiscal austerity — or not, at least, in so neat a pattern as the case study of Saudi Arabia would suggest. Across 20 oil-exporting countries, government consumption actually rose four percentage points as a share of GDP after oil prices collapsed. These governments’ shares of consumption had been, for the most part, slowly rising or stable throughout the 1970s. In real terms, government consumption rose 30 percent after 1980, despite no growth in real output. That’s a considerable increase in government spending, not austerity.

"Pray For Us": Libya Issues "Cry For Help" As ISIS Advances On Oil Fields “We are helpless and not being able to do anything against this deliberate destruction to the oil installations. NOC urges all faithful and honorable people of this homeland to hurry to rescue what is left from our resources before it is too late.” That’s from Libya’s National Oil Corp and as you might have guessed, it references the seizure of state oil assets by Islamic State, whose influence in the country has grown over the past year amid the power vacuum the West created by engineering the demise of Moammar Qaddafi. The latest attacks occurred in Es Sider, a large oil port that’s been closed for at least a year.  Seven guards were killed on Monday in suicide bombings while two more lost their lives on Tuesday as ISIS attacked checkpoints some 20 miles from the port. "Es Sider and Ras Lanuf, Libya's biggest oil ports, have been closed since December 2014," Reuters notes. "They are located between the city of Sirte, which is controlled by Islamic State, and the eastern city of Benghazi." ISIS also set fire to oil tanks holding hundreds of thousands of barrels of crude. "Four tanks in Es Sider caught fire on Tuesday, and a fifth one in Ras Lanuf the day before," Ali al-Hassi, a spokesman for the the Petroleum Facilities Guard told Bloomberg over the phone. Islamic State is pushing east from Sirte in an effort to seize control of the country's oil infrastructure, much as the group has done in Syria and Iraq. As Middle East Eye wrote last summer, "the desert region to the south of the oil ports has been strategically cleared in a series of attacks by IS militants on security personnel and oil fields, where employees have been killed and kidnapped, and vehicles and equipment seized."

Fires rage at Libyan oil ports after Islamic State attacks (Reuters) – Three days of Islamic State attacks on Libya’s biggest oil terminals have started fires that have spread to five massive oil storage tanks, a guards spokesman said on Wednesday. Ali al-Hassi said the Petroleum Facilities Guards were still in control of the neighboring ports of Es Sider and Ras Lanuf, where at least nine guards were killed and more than 40 injured near the ports’ perimeters on Monday and Tuesday. Hassi said guards had recovered bodies of 30 Islamic State fighters, and had captured two military tanks and other vehicles from the militants. He also said the guards had received air support from forces loyal to the General National Congress (GNC), the government that has controlled Tripoli since its rival, which was internationally recognized, moved to Bayda in the east in 2014. Firefighters were trying to control four fires at Es Sider and one at Ras Lanuf. Two were triggered by Islamic State shelling, and three more had caught fire, Hassi said. Mohamed al-Manfi, an oil official in eastern Libya, said each of the oil tanks was estimated to contain 420,000 to 460,000 barrels of oil.

Shocking: ISIS Attacks On Libyan Oil Facilities Visible from Space -  ISIS militants in Libya continue to attack key oil infrastructure in the country.  The two large oil export terminals at Es Sider and Ras Lanuf came under ISIS attacks on January 4-6. Some oil storage tanks exploded after suffering damage from machine gun fire. NASA just published some shocking photos that clearly show the smoke plumes from the oil storage tanks are visible by satellite. The smoke blew east and northeast, blanketing Libya’s Mediterranean Coast. News reports suggest that at least five oil storage tanks are burning, each thought to have the capacity to hold 420,000 to 460,000 barrels of oil. Four of them are located at Es Sider and one at Ras Lanuf. A spokesperson for the National Oil Company in Libya said that seven storage tanks were burning. The attacks came as the oil company issued a “cry for help” on its website, calling on the Libyan people “of this homeland to hurry to rescue what is left from our resources before it is too late.” Libya’s rival governing factions have taken steps to patch up their differences, signing a UN-backed power-sharing agreement in December. The attacks from ISIS threaten to inflict lasting damage on the heart of Libya’s economy: its oil infrastructure. Take a look at the stunning NASA images below:

OilPrice Intelligence Report: Middle East Tension Won’t Rescue Oil Prices: Middle East tensions often cause a spike in oil prices, so a sudden conflict between OPEC’s first and third largest oil producer unsurprisingly affected crude on January 4. At the same time, markets tend to react first, only to come to more realistic conclusions later. For now, the conflict has no real tangible effect on oil markets – there is little chance of a supply disruption, absent a more catastrophic escalation in the conflict. As such, oil prices quickly retraced their gains on January 4, closing out the day mostly back where they started. The conflict between Saudi Arabia and Iran almost certainly won’t erupt into a direct military confrontation. Instead, the conflict could play out in the world of oil. As a result, the effect on oil prices is, if anything, negative not positive. For example, Saudi Arabia just slashed its price for oil shipments heading to Europe, the region where Iran held significant market share before 2012 sanctions forced it out. Saudi Arabia is likely trying to box out Iran as it ramps up oil exports in the coming weeks and months when sanctions are removed. Saudi Aramco announced on January 5 that it would discount oil exports to Northwest Europe by $0.60 per barrel and by $0.20 for oil destined for the Mediterranean. The market share strategy also serves to outcompete Russia for the European market. Competition for market share will push down prices as more discounted crude floods the market.

Will Mideast Allies Drag Us Into War? - Patrick Buchanan -- The New Year’s execution by Saudi Arabia of the Shiite cleric Sheikh Nimr Baqir al-Nimr was adeliberate provocation. Its first purpose: Signal the new ruthlessness and resolve of the Saudi monarchy where the power behind the throne is the octogenarian King Salman’s son, the 30-year-old Defense Minister Mohammed bin Salman. Second, crystallize, widen and deepen a national-religious divide between Sunni and Shiite, Arab and Persian, Riyadh and Tehran. Third, rupture the rapprochement between Iran and the United States and abort the Iranian nuclear deal. The provocation succeeded in its near-term goal. An Iranian mob gutted and burned the Saudi embassy, causing diplomats to flee, and Riyadh to sever diplomatic ties.  From Baghdad to Bahrain, Shiites protested the execution of a cleric who, while a severe critic of Saudi despotism and a champion of Shiite rights, was not convicted of inciting revolution or terror.  In America, the reaction has been divided.The Wall Street Journal rushed, sword in hand, to the side of the Saudi royals: “The U.S. should make clear to Iran and Russia that it will defend the Kingdom from Iranian attempts to destabilize or invade.” The Washington Post was disgusted. In an editorial, “A Reckless Regime,” it called the execution risky, ruthless and unjustified. Yet there is a lesson here. Like every regime in the Middle East, the Saudis look out for their own national interests first. And their goals here are to first force us to choose between them and Iran, and then to conscript U.S. power on their side in the coming wars of the Middle East.  Thus the Saudis went AWOL from the battle against ISIS and al-Qaida in Iraq and Syria. Yet they persuaded us to help them crush the Houthi rebels in Yemen, though the Houthis never attacked us and would have exterminated al-Qaida.  Now that a Saudi coalition has driven the Houthis back toward their northern basecamp, ISIS and al-Qaida have moved into some of the vacated terrain. What kind of victory is that — for us?  In the economic realm, also, the Saudis are doing us no favors.

Enough Already! It's Time To Send The Despicable House Of Saud To The Dustbin Of History - David Stockman - The recent column by Pat Buchanan could not be more spot on. It slices through the misbegotten assumption that Saudi Arabia is our ally and that the safety and security of the citizens of Lincoln NE, Spokane WA and Springfield MA have anything to do with the religious and political machinations of Riyadh and its conflicts with Iran and the rest of the Shiite world. Nor is this only a recent development. In fact, for more than four decades Washington’s middle eastern policy has been dead wrong and increasingly counter-productive and destructive. The crisis provoked this past weekend by the 30-year old hot-headed Saudi prince, who is son of the King and heir to the throne, only clarified what has long been true. That is, Washington’s Mideast policy is predicated on the assumption that the answer to high oil prices and energy security is deployment of the Fifth Fleet to the Persian Gulf. And that an associated alliance with one of the most corrupt, despotic, avaricious and benighted tyrannies in the modern world is the lynch pin to regional stability and US national security. Nothing could be further from the truth. The House of Saud is a scourge on mankind that would have been eliminated decades ago, save for Imperial Washington’s deplorable coddling and massive transfer of arms and political support. At the same time, the answer to high oil prices is high oil prices. Could anything not be more obvious than today when crude oil is hovering around $35 per barrel notwithstanding a near state of war in the Persian Gulf? Here’s the thing. The planet was endowed by the geologic ages with a massive trove of stored energy in the form of buried hydrocarbons; and it is showered daily by even more energy in the form of the solar, tidal and wind systems which shroud the earth. The only issue is price, the shape and slope of the supply curve and the rate at which technological progress and human ingenuity drives down the real cost of extraction and conversion.

Don’t Blame Oil for Global Chaos - WSJ: Those who see a price recovery coming soon note that expensive projects to wring oil from Arctic waters or Canadian oil sands or the deepest Gulf of Mexico are being halted. Once halted, they won’t easily be restarted, so oil in the future will be undersupplied once today’s excess inventories are burned off and producers are done eking out revenue based on capital they’ve already spent. Those who argue “lower for longer” point to U.S. shale players, whose projects have shorter-time horizons and can ramp up quickly and set a natural cap on rising prices. Oil bears also note that most of the world’s reserves are controlled by revenue-hungry governments that aren’t eager to put potentially restive oil workers out of jobs just because the price is low. Take your pick of forecasts. Just don’t make the mistake of thinking today’s rampant geopolitical instabilities are caused by depressed oil. Vladimir Putin’s economy was hitting a wall, and Russia was turning to foreign adventures to boost its leader’s domestic popularity and justify opposition crackdowns, well before the price collapse. Oil was selling for $104 a barrel when Mr. Putin annexed Crimea in March 2014. The Arab Spring, progenitor of so many soured dreams from Egypt to Libya and Syria, came during a period of high and rising oil prices. Oil didn’t drop below $100 until July 31, 2014, when the region was already in flames. If anything, geopolitical causation now runs the other way. Markets once assumed that instability, particularly in the Middle East, meant rising oil prices. Now instability means falling oil prices. Saudi Arabia, which peak oil theorists insisted was on the verge of exhausting its major fields, recently tweaked production to a record-beating 10.5 million barrels a day, low prices be damned. The motive: Riyadh’s undeclared war against Iran and Iran’s ally-of-the-moment, Russia.

China, Oil, & Markets: It's All One Story -- Ilargi --If there’s one thing to take away from this year’s developments in markets and economies so far, it’s that they are all linked, they’re all part of the same thing. If you can’t see that, you’re not going to understand what’s happening. Looking at falling oil prices as a separate thread is not much use, and neither is doing the same with Chinese stocks, or the yuan, or the millions of Americans who are one paycheck away from poverty, for that matter. It’s all one story.  And the take-away from that, in turn, is that focusing too much on ‘narrow’ conditions in your particular part of the globe has only limited value. We’re very much all in this together. In the UK today, it matters very little what George Osborne says or does, or Mark Carney, because they don’t shape the future of the economy. The same goes for all finance ministers and central bank governors across the planet, Yellen, Draghi, Koruda, the lot: the influence they exert on their own economies, which was always limited from the start, is running into the boundaries imposed by global developments. Even if central bankers could ever have ‘lifted’ anything at all (a big question mark), their power to do so is rapidly diminishing. The constraints global developments place on their powers will now be exposed -even more. And of course they’ll try to deny and ignore that, as naked emperors are wont to do. And with the exposure of the limits to their abilities to make markets and economies do what they want, come the limitations of the mainstream financial press to make their long-promoted recovery narratives appear valid. Before we know it, we might have functioning markets back.

More bad news out of China means more bad news for oil prices - Quartz: Prices for Brent crude oil, the commodity’s international benchmark, just hit a new 11-year low and is trading below $35 a barrel. West Texas Intermediate, the US benchmark, is still above its financial crisis-era low, but it’s also below $35 a barrel. This is the first time both contracts have been under $35 at the same time since 2004. The trigger today? A soft reading of services activity in China’s economy. Since China is undergoing—or at least its government is trying to encourage—a shift from a manufacturing-driven economy to one built on consumer activity, Monday’s industrial activity numbers wrecked global markets but left oil prices more or less alone. But, as CNBC reported, financial firm Markit’s purchasing manager index for services hit 50.2, signaling that things are just barely expanding, sparking further worries. A Bloomberg story in September noted that some analysts dispute the notion that Chinese oil demand is under threat, but oil industry newswire Platts just put out a report that suggests the growth of that demand is becoming less robust. The growing rift between Iran and the Arab world that threatens to engulf the crucial Strait of Hormuz has led analysts to believe it’s increasingly unlikely that major exporters in the region will be able to reach an agreement to cut production, further pressuring prices. At the same time, US crude oil stockpiles are hovering near a new record. All this means $20 oil becomes less unthinkable by the day.

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