Sunday, March 27, 2016

a 33 month high for oil imports, another all time high for oil supplies, & another all time low for drilling..

the reality of the crude oil glut finally caught up with the oil price rally that had been driven by rumors of an OPEC meeting with Russia this week, as oil prices fell about 5% in their first weekly loss since mid-February, with almost the entirety of that drop occurring on Wednesday, after the EIA release of the weekly oil data, which showed a near record addition to our already record crude stockpiles...while US oil for April delivery had closed last week at $39.44 a barrel, last Friday was the last day of trading for that April contract, and hence all oil price quotes this week were for the higher priced May contract, which had closed last week at $41.14...last week's rally for that new contract continued on Monday, which saw the now widely quoted price for US crude close at $ 41.52 a barrel...prices then slipped to close at $41.45 a barrel on Tuesday before crashing back to $39.79 a barrel on Wednesday, after the EIA report showed we added 9.4 million more barrels to our already record oil oversupply, more than triple what oil traders were expecting...US crude prices continued falling on Thursday, dropping below $38.40 a barrel on Thursday morning, before the release of the weekly rig count data from Baker Hughes showed another large drop in oil drilling activity, which drove the price back up to end Thursday and the trading week at $39.46 a barrel...

This Week's EIA data, and a look at our oil production

this week’s big oil inventory increase was largely due to a jump in our imports of crude, which surged to a 33 month high, while while our refining was undergoing a modest slowdown....this week's Energy Information Administration data indicated that our imports of crude oil rose to an average of 8,384,000 barrels per day during the week ending March 18th, the most oil we've imported in any week since the second week of July in 2013...those imports were 691,000 barrels per day higher than the average of 7,693,000 barrels per day we imported during the week ending March 11th and 13.4% more than the average of 7,392,000 barrels per day we were importing during the 3rd week of March last year...over the last 4 weeks, our oil imports have now averaged 8.1 million barrels per day, 11.6% more than we were importing during the same four-week period of last year...

at the same time, our field production of crude oil was averaging 9,038,000 barrels per day during the week ending March 18th, 30,000 barrels per day less than the 9,068,000 barrels per day we were producing domestically during the week ending March 11th...that's now 4.1% lower than the 9,422,000 barrels per day we were producing during the week ending March 20th last year, and the lowest our oil production has been since the 2nd week of November in  2014, before the Thanksgiving OPEC meeting that set the oil price collapse in motion....still, our current production of over 9 million barrels per day is still almost double the 4.6 million barrel per day average that we saw during the last 4 months of 2008, before fracking production really kicked in...a couple graphs from the recent EIA blog posts published daily under the heading of "Today in Energy" helps put our current production of oil in perspective...the first one, below, comes from the EIA blog post titled "Wells drilled since start of 2014 provided nearly half of Lower 48 oil production in 2015", which was published on Tuesday of this week..

March 26 2016 oil production by welll age

the bar graph above shows our average total crude oil production annually in millions of barrels per day since 2003, with the size of each bar graphically indicating that production...then, within each year-bar, the amount of each year's production that came from new wells, under two years old, is indicated by the beige coloration,  the amount of that year's production that came from 2 to 4 year old wells is indicated by the light brown coloration, and the amount of the given year's production that came from wells older than four years is indicated by the dark we can see that an increasing percentage of our production has been coming from those newer wells each year, even as the production from older wells held steady...also note that the 2014 and 2015 production from wells two to four years old is considerably less than what those wells yielded when they were newer, ie, when those wells were in the beige portion of 2012 and 2013...the next graph we'll look at, which comes from the EIA blog post titled "Hydraulic fracturing accounts for about half of current U.S. crude oil production", published on March 15th, goes a long way to explain that...

March 26 2016 oil production from fracked and conventional wells

like the first graph, this graph shows our average total crude oil production annually in millions of barrels per day since 2000, with the size of each bar graphically indicating that production; however, instead of by age, each bar is divided into production from fracked wells, in light blue, and production from conventional wells, in dark blue...i'm sure no one is surprised that fracked wells accounted for very little of our production before 2008, and that such fracked wells accounted for more than half of our production in the year just ended...but reflect on that fact when remembering what we saw in the first graph, that recent production from wells two to four years old has been considerably less than what those wells were yielding when they were new...this aggregate data is clear evidence of the rapid depletion of oil wells drilled into shale and fracked, wherein they get that large burst of production during the first few months, but that fracked well production typically falls by 80% after two years have passed, and continues to fall annually from there..for a picture of that, we'll include an old graphic from a report from the North.Dakota Dept of Resources (pdf), which shows the production over time from a typical well in the Bakken shale, which is still the most productive oil field in the should be pretty obvious what the graph below says about the light blue portions of the graph above, and the future output of the new 2015 wells on the first graph when they're two to four years old... 

returning to our synopsis of EIA data, even with this week's large jump in crude oil imports, refining of that crude slowed for the 1st time in 5 weeks, as U.S. crude oil refinery inputs averaged 15,820,000 barrels per day during the week ending March 18th, down by 176,000 barrels per day from the prior week, as the US refinery utilization rate slipped to 88.4%, down from 89.0% during the week of March 11th, a slowdown not unexpected at this time of year, when some refineries are still switching over to summer blends...nonetheless, we still refined 1.9% more crude than the 15,530,000 barrels per day we refined during the week ending March 20th last year, even though we were using less than the 89.0% of refinery capacity that was in use a year ago..

with less oil being refined, our refinery production of gasoline fell by 332,000 barrels per day to 9,683,000 barrels per day during week ending March 18th, down from the seven month high of 10,015,000 barrels per day of gasoline output we saw during week ending the 11th...still, this week's gasoline output was 7.3% higher than the 9,024,000 barrels per day of gasoline we were producing during week ending March 20th last year, which itself was already above the average range for gasoline production at this time of year...meanwhile, our refinery output of distillate fuels (ie, diesel fuel and heat oil) also fell slightly, decreasing by 39,000 barrels per day to 4,781,000 barrels per day during week ending the 11th, which was still 10,000 barrels per day higher than our distillates production during the same week of 2015...  

with the decrease in gasoline production, combined with a 301,000 barrel per day drop to 415,000 barrels per day in our gasoline imports, gasoline needed to be withdrawn from storage to meet the demand, even though that demand fell from 9,458,000 barrels per day during the week ending March 11th to 9,411,000 barrels per day in this reporting week, and thus we saw another drop of our gasoline stores, as our gasoline inventories fell by 4,642,000 barrels, from 249,716,000 barrels last week to 245,074,000 barrels as of March 18th...but this weeks stores were still 5.0% higher than the 233,386,000 barrels of gasoline that we had stored at the end of the same week last year, which were at the time the highest for that week since 1990, and thus our gasoline stores are still well above the average range of for the third week of March…however, our distillate fuel inventories rose despite lower production, increasing by 1,119,000 barrels to a total of 162,260,000 barrels as of March 18th, as the week saw an unseasonable 497,000 barrel per day drop in demand for distillates...with the ongoing warm winter, our stocks of distillates thus remained well above the upper limit of the average range for this time of year, measuring 28.9% greater than the 125,849,000 barrels of distillates we had stored during the same week last year..  

finally, after combining the large jump in imports with the downturn in refining, we once again ended the week with even more excess crude in the country than the record level that we had last week, as our total inventories of crude oil in storage, not counting what's in the government's Strategic Petroleum Reserve, rose by 9,357,000 barrels, increasing from 523,178,000 barrels on March 11th to 532,535,000 barrels on March 18th...thus our glut of crude remained 14.1% higher than the then record glut of 466,678,000 barrels in the same week last year, and roughly 39.2% above the 382,471,000 barrels of oil we had stored at the end of the 3rd week of March two years ago, in what could be considered a more normal level of oil supplies for this time of year...we've now increased our inventories of crude oil by nearly 50.0 million barrels over the last 10 weeks, setting new records for the amount oil we had in storage in the US in each of the last six of them....below, we'll include the most recent 20 years of the long term graph that accompanies the EIA data page for the Weekly U.S. Ending Stocks of Crude Oil, so you can see how this glut oil oil in storage has built up over the past year and a half...notice how our supplies started running up at the same time oil prices collapsed at the end of 2014, paused seasonally last summer as refineries were running at a record pace, and have since resumed their surge since the autumn of this past year:

March 23 2016 nventoriess of crude oil 2

This Week's Rig Count

in addition to the record high in crude oil inventory, this week again saw another all time record low in drilling activity in the US, beating the record that we saw last week by better than two and a half percent.....Baker Hughes reported that their total count of active rigs drilling in the US fell by 12 to 464 as of March 25th, as rigs targeting oil fell by 15 to 372, while the natural gas rig count rose by 3 to 92, even though natural gas prices have been stuck below $2 per mmBTU for the past month and a half, due to the gas glut buildup after a mild winter....those net rig totals were down from the 813 oil rigs, 233 natural gas rigs, and 2 miscellaneous rigs that were in use a year earlier, and well off the records of 1609 working oil rigs set on October 10, 2014 and the recent gas rig record of 1,606 that was set on August 29th, 2008...  

nonetheless, there was still an oil platform that started drilling offshore from California this week, which brought the total number of rigs deployed offshore up to 28, with the other 27 of those in the Gulf of Mexico...meanwhile, a net of 10 horizontal rigs were removed nationally, leaving the count of horizontal rigs at 359, which was down from the 812 horizontal rigs that were in use on March 27th of 2015, and down from the recent record of 1372 horizontal rigs that were drilling on November 21st of the same time, 5 vertical rigs were also stacked, leaving 53 still running, which was down from the 144 vertical rigs that were in use at the end of the same week a year earlier...on the other hand, a net of 3 directional rigs were added, bringing the directional rig count back up to 52, which was still down from the 92 directional rigs that were in use the same week last year...

of the major shale basins, the large Permian basin of west Texas and eastern New Mexico was down 5 rigs to 147, which was down from the 290 rigs working the Permian basin on March 27th last year...the Eagle Ford of southern Texas also got rid of four rigs, which left the Eagle Ford with 41 rigs, down from 137 a year addition, the Cana Woodford of Oklahoma saw 3 rigs stacked, leaving 31, which was down from 40 last year at this time...then both the Ardmore Woodford, also in Oklahoma, and the Marcellus of the northern Appalachians, were both down by a single rig; that left the Ardmore Woodford with one rig remaining, down from 4 a year earlier, and left the Marcellus with 30 rigs, down from the 70 that were deployed there a year earlier...meanwhile, 2 rigs were added in the Barnett shale of the Dallas-Ft Worth area, where there are now 6 rigs working, the same as were working there a year earlier...

the state count tables showed that Texas had the largest net drilling decrease, as they saw 8 fewer rigs working this week than last and now have 209 rigs deployed, which is down from the 462 rigs that were working in Texas on March 27th last year…at the same time, 3 rigs were pulled out of Oklahoma, where 63 rigs remain, down from 133 a year earlier...2 rigs were also stacked in Alaska, where they now have 10, down from 12 last year at this time...meanwhile, Kansas, Pennsylvania, and Kentucky each saw one rig pulled out....that left Kansas with 7 rigs, down from 13 a year earlier, left Pennsylvania with 18 rigs, down from 51 a year earlier, and left Kentucky peaceful and quiet with no rigs drilling, down from the 2 rigs that were working in the Bluegrass state last year at this time...states adding rigs this week included Louisiana, where the addition of two rigs brought their count back up to 51, which was still down from 72 a year earlier, New Mexico, where 1 rig was added, which brought their count back up to 14, still down from 51 last March 27th, and Illinois, where the single rig they added is a lone driller, just like there was just 1 rig working in Illinois at the same time last year...


Ohio Regulators Near Decisions On FirstEnergy, AEP Rate Deals | WOSU Radio: Ohio utility regulators are nearing decisions on two proposed energy deals that have sparked fierce debate among consumer, business and environmental advocates. The power purchase agreements proposed separately by Akron-based FirstEnergy and Columbus-based AEP have been the subject of television ad wars, email-writing campaigns, apps and web sites and mountains of written testimony. They ask regulators to permit rate increases over eight years to subsidize certain aging coal-fired and nuclear plants and guarantee profits. Critics call the rate plans bailouts that flout Ohio's decision to deregulate its electricity market and force power companies to compete on an open market. The companies and their allies argue the proposals protect jobs and aid the expensive transition to cleaner energy. Decisions by the Public Utilities Commission of Ohio could come later this month.

SEC investigating large Ohio oil and gas supplier for foreign corruption - Columbus Business First -  A large oil and gas supplier based in Ohio is under investigation by federal regulators looking into whether it may have run afoul of securities laws governing international operations. Federal regulators are investigating Fairmount Santrol, based near Cleveland, under the Foreign Corrupt Practices Act. Enacted in 1977, the act prohibits publicly traded American companies from paying bribes to foreign officials for help getting or keeping business. Sanctions for violating the act "can be significant," the Securities and Exchange Commission says. The $828.7 million company is one of the world's biggest providers of sand-based proppant used in hydraulic fracturing, or fracking, operations. It operates across the world, including in Argentina, Canada, China, Denmark and the United Arab Emirates. A Fairmount Santrol spokeswoman said the company is cooperating with the investigation and strictly forbids "any such conduct." The company's training helps provide safeguards "against the risk we face in those countries that are customary for large companies like Fairmount with international operations," spokeswoman Kristin Lewis said in a statement. The Chesterland-based company disclosed the information in a regulatory filing. The SEC told the company of its investigation in December. In the filing, Fairmount Santrol said it had earlier brought in outside lawyers to investigate the undisclosed focus of the investigation and deemed no further action was necessary. "We cannot predict what, if any, further action the SEC may take regarding its investigation, and cannot provide an estimate of the potential costs of the SEC’s investigation or any possible fines, penalties or other remedial actions that might result, if any, at this time," the filing said.

Pro-fracking writer ignored essential dangers of drilling: Tish O'Dell, Mothers Against Drilling in Our Neighborhoods - -Guest columnist Tish O'Dell, co-founder of Mothers Against Drillin in Our Neighborhoods, argues the dangers of drilling. This is in response to guest columnist Jackie Stewart, from Energy In Depth, "Ohio anti-fracking activists miss the mark on climate change, methane regulations," published last month. Industry lobbyists representing one of the wealthiest industries on the planet use every form of media available to propagandize: millions of dollars spent on TV and radio advertising, the purchase of elected officials through campaign contributions who speak on their behalf, full color glossy mailers and print advertisements – and, of course, print media. All to convince us – we, the people – that shale gas drilling and fracking is environmentally safe and an economic benefit for all. Ms. Stewart quotes research and cites statistics on how good for the environment shale gas really is. She ignores the research that reveals otherwise (e.g. Robert W. Howarth, of Cornell University, in 2011 published research showing "...the footprint of shale gas is at least 20 percent greater and perhaps more than twice as great [as coal] on the 20-year horizon").How convenient. When an oil and gas industry lobbyist cites research extolling the safety and benefits of shale gas, it may generate some questions from discerning readers. For example, why is it that the only people working so hard to convince us fracking is safe are those who financially or politically benefit from fracking? And why does the oil and gas industry ensure that before over taking communities with fracking and its waste, they find it necessary that state legislatures first pass laws stripping local communities of their authority to prohibit or regulate it, and keeping secret the "safe" chemicals used in the process? It happened here in Ohio in 2004 with HB 278. It's happening today in Florida with SB 318. Similar bills, stripping communities of any say over what the industry does in their cities and neighborhoods (while smiling propagandists promise the creation of jobs), were passed in Colorado, Pennsylvania, New Mexico, West Virginia, California, Texas and more. They are even exporting this preemption law to other countries, like England, because it has worked so well to protect the industry here.

Ky. Senators want radioactive waste study - Kentucky state senators on Tuesday rallied around a bill that seeks to make sure the state is protected from radioactive waste produced during oil and gas drilling.The Senate's Natural Resources and Energy Committee unanimously approved its version of House Bill 563, sending it to the floor for a vote. "There is a distrust of government out there by some citizens," said Rep. Cluster Howard, a Democrat whose district includes an Estill County landfill where state officials say dangerous radioactive waste was dumped last year. "This will ensure that we know we are on top of this." The Kentucky House of Representatives previously voted 97-0 to approve the bill, which calls for the energy and health cabinets to take a fresh look at state regulations to see whether any changes should be made to modernize the handling of this type of waste from the oil and gas industry. Kentucky Division of Waste Management officials on Feb. 25 confirmed that radioactive waste from rock, brine and mud from drilling in fracking zones in Ohio, Pennsylvania or West Virginia was brought into Kentucky against state law. Officials said some also went to the Green Valley landfill in Greenup County, and that they are looking to see if any other landfills might have been sent the waste. That intensity level is nearly 400 times as high as the U.S. Environmental Protection Agency generally sees as safe. State officials say they believe the Green Valley landfill accepted less risky but still illegal waste.

$4.2 Million Fracking Verdict Sparks More Suits --Toxics Law Reporter— A recent jury verdict and $4.2 million award in favor of two Pennsylvania families who alleged fracking operations contaminated their well water is likely to trigger the filing of more suits, sources tell Bloomberg BNA.  A jury March 10 found Cabot Oil & Gas acted negligently in drilling fracking wells in Dimock, Pa., which created a private nuisance and significantly harmed the plaintiffs in their use and enjoyment of the property. A number of other families involved in the litigation settled before trial for a total amount less than what was awarded here.  It is one of the first fracking nuisance verdicts finding for plaintiffs but is not unprecedented. A Texas jury awarded $2.9 million in 2014 to a family who alleged contamination from fracking operations caused them a variety of personal injuries, in Parr v. Aruba Petroleum Inc., Tex. County Ct., No. CC-11-01650-E, 4/22/14. In this case, however, no personal injury allegations were put before the jury. Counsel for the plaintiffs, Leslie Lewis, a solo practitioner in New York, declined to speculate whether the case will have an impact on further litigation. “I have no idea what the future will bring regarding other cases and future verdicts; this case was a particular fact pattern, with shoddy operations occurring early in the so-called ‘gas boom’ years,” Lewis told Bloomberg  “This case was about gas drilling operations, not necessarily hydraulic fracturing,” Lewis said. “This is maybe the second nuisance verdict in the U.S.; the only other I am aware of is the Parr case, which is under appeal. Presently, I do not know how many other cases are out there and where.”“Seeing plaintiffs prevail here, even on limited claims and with debatable evidence, suggests that lawyers for plaintiffs will be emboldened to pursue many more cases. Whether those cases translate to more verdicts will depend on the specific facts of each situation,”

Opponents question climate benefits, morality of natural gas - - An interfaith group of religious organizations held a rally at the state Capitol Monday, calling on Governor Tom Wolf to halt natural gas development. About 50 people attended the event and asked the governor for what they called a “moral-torium” on unconventional gas development and related infrastructure, such as pipelines.“We are calling on our legislators to listen to science and protect public health,” says Rev. Dr. Leah Schade of the United in Christ Lutheran Church in Lewisburg. “This is one area where science and religion are actually in agreement.” She pointed to climate-damaging methane emissions and water contamination from the drilling boom.At the same time, the House Democratic Policy Committee was meeting in another part of the Capitol to discuss whether the state should be incentivizing the use of natural gas.“There’s a difference between whether natural gas production is good and whether it should be incentivized by the state,” says Rep. Greg Vitali (D- Delaware), who hosted the hearing. The hearing’s panelists included members of the Wolf administration in the Department of Environmental Protection (DEP) and Department of Community and Economic Development (DCED), as well as climate scientists and representatives from environmental groups. Vitali invited UGI and the gas trade group, the Marcellus Shale Coalition to testify, but he says both declined.

Think Globally Arrested Locally  — They came here to get arrested.  Nearly 60 protesters blocked the driveway of a storage plant for natural gas on March 7. Its owners want to expand the facility, which the opponents say would endanger nearby Seneca Lake. But their concerns were global, as well. “There’s a climate emergency happening,” one of the protesters, Coby Schultz, said. “It’s a life-or-death struggle.” The demonstration here was part of a wave of actions across the nation that combines traditional not-in-my-backyard protests against fossil-fuel projects with an overarching concern about climate change. Activists have been energized by successes on several fronts, including the decision last week by President Obama to block offshore drilling along the Atlantic Seaboard; his decision in November to reject the Keystone XL pipeline; and the Paris climate agreement. Bound together through social media, networks of far-flung activists are opposing virtually all new oil, gas and coal infrastructure projects — a process that has been called “Keystone-ization.”  As the climate evangelist Bill McKibben put it in a Twitter post after Paris negotiators agreed on a goal of limiting global temperature increases: “We’re damn well going to hold them to it. Every pipeline, every mine.” Regulators almost always approve such projects, though often with modifications, said Donald F. Santa Jr., chief executive of the Interstate Natural Gas Association of America. Still, the protests are having some impact. The engineering consultants Black and Veatch recently published a report that said the most significant barrier to building new pipeline capacity was “delay from opposition groups.”

Global Shale Gas Market Poised to Surge from USD 63.0 Billion in 2014 to USD 105.0 Billion by 2020 – MarketResearchStore.Com - -- -- Zion Research has released a new report titled “Shale Gas Market by Technology (Horizontal Drilling, Hydraulic Fracturing, and Water Usage Issue) for Power Generation, Residential, Industrial, Commercial, Transportation and Other Applications: Global Industry Perspective, Comprehensive Analysis, and Forecast, 2014-2020.” According to the report, the global demand for shale gas was valued at USD 63 billion in 2014 is expected to reach USD 105 billion in 2020, growing at a CAGR of around 9% between 2015 and 2020. In terms of volume, the global shale gas market stood at around 10.0 trillion cubic feet in 2014. Shale gas is a carbon-friendly and low-cost alternative to conventional fuels. Considerable deposits of shale gas are being found throughout the world. Shale gas is poised to provide a rising proportion of the global energy needs. Shale gas is also referred as natural gas and is extracted from shale. The main driving factor for shale gas industry is rapidly growing demand worldwide. U.S. government is highly focused on shale gas production in order to lower down reliance on crude oil as source of energy. However, high cost involved in the production in comparison with traditional sources would limit growth of this industry. However, ongoing research & development and technological advancements in the field of shale gas are estimated to bring down cost of production.

Anti-Drilling Protesters Shout, Disrupt Oil, Gas Lease Sale - ABC News: Protesters opposed to drilling in the Gulf of Mexico disrupted an oil and gas lease sale Wednesday, chanting and waving signs as government officials read bids from companies for the right to explore and develop fossil fuels offshore. Government officials said afterward that the sale — for tracts in the central and eastern regions of the Gulf — raised a total of $156 million in the central region but no bids were made for the eastern region. The $156 million was the fourth lowest total for sales in the central region — traditionally the Gulf's most active territory — since sales started back in 1983, officials said. Oil and gas companies have been struggling with low prices. Government officials called the sale results respectable but said the price of oil and gas is influencing companies, which are slowing down on capital investments. "I think industry is proceeding cautiously," said Janice Schneider, assistant secretary at the Department of Interior. Schneider said the protesters did not hold up the sale, she had no concerns about the demonstrations and that everyone has the right to express themselves. About 150 protesters, holding signs that said "No new leases" or "No Drill, No Spill," marched into the room where the sale was held Wednesday, staying until it was over. As a government official read aloud the bids from a microphone, the protesters chanted "What's the solution to pollution? Keep it in the ground!" The audience of mostly oil and gas company employees and executives in suits looked on, sometimes pulling out their phones to take videos or photos of the protesters. The Bureau of Ocean Energy Management offered about 45 million acres for exploration and development. Companies submitted bids in advance to the agency, which announced the results at the sale held at the Superdome.

Transportation Fuel/Heating Oil Pipelines To The East Coast. -  The East Coast consumes more than 200 million gallons of gasoline, diesel, heating oil and jet fuel a day, but produces only one-fifth of that total, most of it at New Jersey and Pennsylvania refineries. To keep the region’s cars, trucks, trains and airplanes moving (and many of its homes and businesses heated) huge volumes of fuels need to be delivered from elsewhere, mostly via two pipelines from the Gulf Coast and the rest by ship—some from Gulf and other U.S. ports and some from overseas. Today, we continue our examination of the infrastructure that moves gasoline, diesel, heating oil and jet fuel to the nation’s largest fuel-consuming region with a look at four major pipelines. The aim of this series is to describe the logistics involved in moving refined petroleum products like gasoline, diesel, heating and jet fuel (which we have dubbed GDHJ) to the East Coast from their primary production region—the Gulf Coast, also known as Petroleum Administration for Defense District (PADD) 3.  As we said in Episode 1 of our series, PADD 3 produces about 7.5 MMb/d of GDHJ (the equivalent of 315 million gallons), but consumes only one-third of that (about 2.5 MMb/d). In sharp contrast, PADD 1 produces about 1 MMb/d of these fuels, but consumes five times that amount (about 5 MMb/d). According to the U.S. Energy Information Administration (EIA) about 2.8 MMb/d of GDHJ is moved, on average, from PADD 3 to PADD 1, accounting for nearly three-fifths (58%) of the East Coast’s total consumption of transportation fuels. Of that 2.8 MMb/d PADD 3-to-PADD 1 transfers, 82% (2.3 MMb/d) is moved by the two primary refined products pipelines between and through the two regions: Colonial Pipeline and Plantation Pipe Line. Given their significance, let’s zero in on these two pipelines first.

Slow Train Coming – Crude By Rail To Northwest Refineries Still Resilient -- Most of the crude by rail  (CBR) shipments to 4 refineries in Washington State are ex-North Dakota from where rail freight costs are over $10/Bbl. Bakken crude from North Dakota competes at Washington refineries with Alaska North Slope (ANS) shipped down from Valdez, AK. Back in 2012 ANS prices were more than $20/Bbl higher than Bakken crude – easily covering the rail cost. In 2016 so far the ANS premium to Bakken has averaged well below the $10/Bbl freight cost making CBR shipments uneconomic. But as we discuss today - Northwest refiners are still shipping significant volumes of crude from North Dakota. This is Part 6 in our series updating the sorry state of the CBR business in North America in 2016 compared to its heyday a few years back. In Part 1 of this series we noted CBR declines in response to narrower spreads between U.S. domestic crude benchmark WTI and international equivalent Brent. The lower spreads reduce the incentive to move crude from inland basins to coastal refineries by rail because the latter is a more expensive transport option compared to pipelines. As we discussed in Part 2 – looking at the epicenter of the CBR boom in North Dakota – the slower than expected decline in rail shipments is mostly because committed shippers and refiners continue to use rail infrastructure that they invested in (and made take-or-pay commitments to) and because some routes do not have pipeline access (East Coast and West Coast). In Part 3 we looked at CBR traffic out of the Niobrara shale region in the Rockies. Midstream companies continue the build out and expansion of rail terminals as well as new pipelines in this region even though production has leveled off. In Part 4 we looked at the fate of CBR load terminals in Western Canada that are “overbuilt and underutilized”. In Part 5 we turned to CBR market destinations – beginning with the East Coast. This time we begin a two-part look at CBR unloading on the West Coast.

Nebraska measure aimed at controlling fracking waste - Advocacy group Bold Nebraska, which helped take on the Keystone XL pipeline, declared victory after state leaders passed a measure to control oil and gas waste. The Nebraska Legislature passed bill LB-1082 on a vote of 48-0-1 to enact stronger provisions governing the waste associated with hydraulic fracturing, a drilling practice more commonly known as fracking. Bold Nebraska Director Jane Kleeb said the passage came as a result of pressure from citizens concerned about waste disposal in the state. "Wastewater injection wells are the result other states' reckless fracking practices and should be banned," she said in a statement. In January, Oklahoma Gov. Mary Fallin approved $1.38 million in one-time costs to support earthquake research. The U.S. Geological Survey found evidence to suggest seismic activity in the state may be tied to the disposal of wastewater from the oil and gas industry in underground wells. Two minor tremors were recorded by the USGS in Oklahoma in the last 24 hours. Nebraska lawmakers in floor debates in early March said, meanwhile, that up to 10,000 barrels of wastewater from Colorado were among those slated for deposit in the state's Sioux County, along the border with Wyoming. State leaders said it was a water quality concern given the proximity to the Sandhills area, home to the primary source of water in Nebraska.

Erin Brockovich on Oklahoma Earthquakes: ‘It’s Fracking, Let’s Just Be Honest’ -- Erin Brockovich is speaking out on Oklahoma’s alarming earthquake activity and she’s not afraid to tie the state’s seismicity to a certain industry. In an interview with Oklahoma’s News9, the prominent environmental activist and consumer advocate explained she’s aware that the injection of mass quantities of fracking wastewater in disposal wells is triggering the tremors, as geologists haveconfirmed. But Brockovich added, “It’s fracking, let’s just be honest.”  Oklahoma experiences more earthquakes than anywhere in the world. Before 2009, Oklahoma had two earthquakes of magnitude 3.0 or greater each year, but now there are two a day. A 5.1 magnitude earthquake that shook northwest Oklahoma two weeks ago was the third-strongest ever recorded in the state, the U.S. Geological Survey (USGS) said. And, within the past 24 hours, seven earthquakes rattled the city of Edmond in central Oklahoma. Brockovich told News9 that many citizens have been concerned about structural damage to their homes and have called on her to help protect their health, property and legal rights.“These people you know, they have rights and their homes are being damaged and structural damage and its cause by a man-made condition,” Brockovich said. Blaming a lack of regulation, Brockovich said that Oklahomans should review policies, legislation, rules, and regulations. “There’s a lack of enforcement. There’s a whole lot of information that can go out there that can help this community speak up and stand up for themselves,” she said.

The big bust in the oil fields - — He’d borrowed from banks and investors and retirement funds, all in a frenzied mission to drill for oil and gas, and by the time Terry Swift realized he’d gone too far, this was his debt: $1.349 billion.  His company, founded by his father almost 40 years earlier, had plunged into bankruptcy and laid off 25 percent of its staff. Its shares had been pulled from the New York Stock Exchange. . “Maybe we were wrong to believe there wouldn’t be a bust this bad,” Swift, 60, said, as the Tahoe rumbled south of San Antonio. “It didn’t even feel risky.”  Swift’s miscalculation has made his company, Swift Energy, a casualty of the greatest wave of financial defaults since America’s subprime mortgage crisis ravaged the U.S. economy.  This new wave of bad loans isn’t the same magnitude of the housing bust, but it reflects similar behaviors. Borrowers feasted on what Bloomberg estimates was $237 billion of easy money without scrutinizing whether the loans could endure a drastic downturn. The consequences are far-reaching: The U.S. oil industry, having grown into a giant on par with Saudi Arabia’s, is shrinking, with the biggest collapse in investment in energy in 25 years. More than 140,000 have lost energy jobs. Banks are bracing for tens of billions of dollars of defaults, and economists and lawyers predict the financial wreckage will accelerate this year.  South Texas, along with North Dakota, had been the testing grounds for the industry’s ambitions, a place where shale oil and gas companies had taken on billions in loans to support more drilling and fracking. The strategy was to gather up drilling sites at turbo-speed and later slow down and reap the benefits. But then, oil prices plunged and stayed down. They’ve fallen 60 percent from two years ago.

Groups want freeze on oil waste dumping into water reserves - (AP) — Environmental groups sought a freeze Wednesday on permits to dump oil field waste into the country's underground water reserves, alleging that lax federal oversight was threatening potential drinking water supplies. Groups including the Natural Resources Defense Council and Clean Water Action formally petitioned the U.S. Environmental Protection Agency for the moratorium. The agency would review the petition, said an EPA spokeswoman, Margot Perez-Sullivan.  The request follows news reports and federal and state investigations that detailed California's failures in enforcing laws meant to protect natural reserves of water that might one day be needed for drinking and irrigation. Oil regulators in California, the country's third-biggest oil-producing state, acknowledged last year that they had allowed oil field waste to contaminate some federally protected drinking water supplies.   The environmental groups said they had found 4,679 instances nationwide in which the EPA has authorized oil field wastewater and other material to be injected into naturally occurring underground water supplies, which are otherwise off-limits to dumping. Regulators are supposed to allow oil companies to inject only into water reserves, or aquifers, whose water is naturally too briny or otherwise unlikely to be used for drinking. The environmental groups say regulators have been too loose in granting such permits. For example, two-thirds of permits approved by the federal agency lacked documentation on the original water quality of an underground source, the groups claimed.

Feds, groups reach tentative deal over oil lease emissions (AP) — Environmental groups and the U.S. government reached a tentative agreement to end a dispute over greenhouse gas emissions from federal oil and gas leases in Montana. Attorneys for the Department of Justice and the environmentalists filed notice in federal court Friday that they have a settlement in principle over a lawsuit that pushes the government to examine the effects on climate change when leasing public lands for energy drilling. They hope to finalize the deal within the month. The groups say the government should require companies to use technology that would reduce climate-changing methane emissions as a condition of their leases. Better oversight and technology use could cut 40 percent of the methane now lost due to leaking pipes, venting excess gas and exhaust from drilling, processing and transporting the oil and gas, according to the Montana Environmental Information Center, WildEarth Guardians and Earthworks’ Oil and Gas Accountability Project. Justice Department attorneys argued that the lawsuit should be dismissed because the groups had not shown evidence that greenhouse gas emissions from federal lease sales caused them harm. The environmental groups entered into settlement negotiations with government attorneys after the 9th U.S. Circuit Court of Appeals last year reversed a ruling that dismissed the case. U.S. District Judge Sam Haddon had ruled that future drilling emissions would be too small to make a significant contribution to global greenhouse gas levels.

Cramer – BLM Comment Period Extension on Proposed Methane Rule Falls Short -- Congressman Kevin Cramer announced today the United States Bureau of Land Management (BLM) has extended the public comment period until April 22 for the recently proposed Waste Prevention rule, which changes the regulation of methane emissions from oil and natural gas production on federal and tribal lands across the country.  The proposed rule was released on Jan. 22 and provided the public 60 days to comment from the date it appeared in the Federal Register on Feb. 8. “This extension, which falls far short of what’s needed, allows stakeholders some additional time to analyze the impact the proposed regulation will have and provide informed comments,” said Cramer.  “These regulations have nothing to do with protecting the environment and everything to do with shutting down the oil and gas industry.  This BLM rule in particular is duplicative of EPA and State regulations.  Plus, let’s not forget the oil and gas industry already has a natural incentive to capture methane – essentially natural gas – and sell it in the marketplace.  Federal agency data even shows methane emissions have been reduced at the same time natural gas production has increased.  The BLM and other federal agencies can do more by approving rights-of-way for additional pipelines in a timely manner.” On March 17, 2016, Cramer led a letter with 13 of his House colleagues urging the BLM to extend the comment period for a minimum of 60 additional days.  View the letter here.

Bill McKibben:  Global Warming’s Terrifying New Chemistry --  Our leaders thought fracking would save our climate. They were wrong. Very wrong. -- In February, Harvard researchers published an explosive paper in Geophysical Research Letters. Using satellite data and ground observations, they concluded that the nation as a whole is leaking methane in massive quantities. Between 2002 and 2014, the data showed that US methane emissions increased by more than 30%, accounting for 30-60% of an enormous spike in methane in the entire planet’s atmosphere. To the extent our leaders have cared about climate change, they’ve fixed on CO2. Partly as a result, coal-fired power plants have begun to close across the country. They’ve been replaced mostly with ones that burn natural gas, which is primarily composed of methane. Because burning natural gas releases significantly less carbon dioxide than burning coal, CO2 emissions have begun to trend slowly downward, allowing politicians to take a bow. But this new Harvard data, which comes on the heels of other aerial surveys showing big methane leakage, suggests that our new natural-gas infrastructure has been bleeding methane into the atmosphere in record quantities. And molecule for molecule, this unburned methane is much, much more efficient at trapping heat than carbon dioxide. The EPA insisted this wasn’t happening, that methane was on the decline just like CO2. But it turns out, as some scientists have been insisting for years, the EPA was wrong. Really wrong. This error is the rough equivalent of the New York Stock Exchange announcing tomorrow that the Dow Jones isn’t really at 17,000: Its computer program has been making a mistake, and your index fund actually stands at 11,000. These leaks are big enough to wipe out a large share of the gains from the Obama administration’s work on climate change—all those closed coal mines and fuel-efficient cars. In fact, it’s even possible that America’s contribution to global warming increased during the Obama years. The methane story is utterly at odds with what we’ve been telling ourselves, not to mention what we’ve been telling the rest of the planet. It undercuts the promises we made at the climate talks in Paris. It’s a disaster—and one that seems set to spread.

Official: North Dakota communities lacking natural gas at disadvantage (AP) — An economic development official says the lack of natural gas service is hampering scores of communities in the state. Economic Development Association of North Dakota President Connie Ova Communities says communities that lack natural gas are at an economic disadvantage. Public Service Commission Chairwoman Julie Fedorchak says there are 368 North Dakota communities without natural gas service, compared with 89 communities that have it.  Fedorchak says extending natural gas pipelines can cost about $1 million a mile. North Dakota lawmakers last year defeated a bill that would have allowed tax incentives to extend natural gas infrastructure. Lawmakers decided to study the issue instead. Propane companies argued that the state should not provide the incentives and that the extension of natural gas infrastructure should be driven by the market.

The Forgotten Shale Boom Towns -- US economic growth may not be at the same level it was in the halcyon days of the 80’s and 90’s, but compared to the rest of the world, the US is a model of economic performance. Without the economic outperformance of shale oil and gas from the Bakken to the Marcellus, the US would be in much worse shape than it is today. Unfortunately, shale oil has been largely betrayed by an ungrateful Washington DC, which has hammered the idea of increased fossil fuel production, and done precious little to help shale oil producers make the necessary changes to their business model to adapt to lower oil prices. North Dakota, and Williston in particular, reflect this reality. Williston boomed as shale oil production became mainstream, going from a town of 12,000 to a town of more than 40,000 at its peak. Today the situation In Williston is very different and much less rosy. Williston’s place at the heart of a new American gold rush, with virtually no unemployment and household incomes above $80K a year, set the stage for renewed optimism after the 2008 Recession. The change in North Dakota’s economy was so remarkable that, for what might be the first time ever, last year Hollywood actually made a scripted (and underrated) TV series about oil. Reflecting enormous irony, that series was cancelled at the end of its first season.  Today the picture in Williston is much different. The town’s population is back down to 31,000, while layoffs are common across the oil patch which is leading to severe distress for many related service businesses like hotels and restaurants. The bust is also putting enormous pressure on North Dakota’s budget. Some experts suggest that North Dakota is the quintessential boom-bust story. With little in the way of economic infrastructure in much of the Bakken region before the boom, there is little to support the region now after the bust. In that regard, many of the businesses that have opened in the area may have little prospect of ever recouping the capital they put into opening up shop if they haven’t done so already.

Boom or Bust, Courts Remain Busy in North Dakota Oil Patch - The Bakken oil boom was in full throttle when a North Dakota couple leased rights to water on their property so it could be used in hydraulic fracturing, the process of extracting sweet crude from the ground. Then, energy prices began to plummet.  The result, Jeffery and Shelley Schmidt say, is they were stiffed on about $90,000 in royalty payments and left on the hook to subcontractors for about $180,000. The Schmidts have filed a lawsuit in state court in an effort to recoup their losses.It’s a scenario that has become common in western North Dakota in the last year. While the number of oil rigs operating in North Dakota has plummeted to its lowest figure in nine years, the legal action is booming — with most of it shifting from lease and title complaints to larger contract disputes involving major investors and small claims by individuals.“People say that everything has slowed down,” said Carolyn Probst, clerk of courts for northwestern North Dakota, which includes the oil patch. “Well, the oil may have, but our caseload has not.”Last year brought a record-setting 9,305 civil cases to the district, including a 32 percent increase in small claims actions from the previous year. The number of civil cases in many of those counties are already on pace to equal last year’s stack.  About 90 percent of attorney Josh Swanson’s cases are based in energy counties — despite the fact he’s in Fargo, about six hours from the heart of oil country.  Companies that were once willing to let some time go on collecting accounts receivable for services are now filing well liens on a daily basis and trying to collect their money before the debtor goes insolvent,” Swanson said. “It’s all about everyone trying to get paid and working out deals to stay in operation.”

Wells drilled since start of 2014 provided nearly half of Lower 48 oil production in 2015 - (EIA) U.S. crude oil production from the Lower 48 states from new wells (drilled since the start of 2014) made up 48% of total U.S. crude oil production in 2015, up from 22% in 2007. Production from new wells has grown as advances in horizontal drilling and completion techniques led to growth in oil production from low-permeability tight reservoirs. In 2015, production from tight formations—which include, but are not limited to, shale plays—accounted for more than 4 million barrels per day (b/d), or 50% of total U.S. oil production.  U.S. oil production from tight formations increased from 0.5 million b/d in 2009 to 4.6 million b/d in May 2015, at which point decreasing oil prices contributed to declines in oil production. As of December 2015, oil production from tight formations was 8% lower than the level in May. More than 80% of oil production from tight formations originates from the Eagle Ford, Bakken, and Permian regions.  Horizontal wells drilled into tight formations tend to have very high initial production rates, but they also have steep initial decline rates. With steep decline rates, constant drilling and development of new wells is necessary to maintain or increase production levels. Rig counts and the productivity of newly drilled wells, which are tracked in EIA's Drilling Productivity Report, are two key indicators of future oil production. Future production can also be affected by the current inventory of drilled but not yet completed wells and the potential for recompleting and refracturing existing wells that may increase production from already-producing wells without drilling new wells. The U.S. oil-directed rig count totaled nearly 1,600 rigs in the fall of 2014. However, the decline in oil prices over the past 18 months has reduced drilling activity, with just 413 rigs operating as of February 19, 2016.

Fracking now fuels half of U.S. oil output - Mar. 24, 2016: The rise of fracking has reshaped the global energy landscape. It recently hit a new milestone in the U.S. Fracking now accounts for more than half of all U.S. oil output, according to the Energy Information Administration. It's a stunning feat considering fracking made up less than 2% of American oil production in 2000. Hydraulic fracturing technology, more commonly known as "fracking," paved the way for drilling into America's enormous shale deposits. It has fueled a dramatic boom in U.S. oil production. Back in 2000, there were just 23,000 fracking wells pumping about 102,000 barrels of oil a day. Now there are 300,000 fracking wells, churning out 4.3 million barrels per day. Fracking "has allowed the United States to increase its oil production faster than at any time in its history," the EIA said in recent report. U.S. output has nearly doubled over the past decade and America only trails Saudi Arabia and Russia globally. That surge in American crude is one of the main reasons why there is a global glut in oil that keeps getting worse. The excess supply caused oil prices to peak in mid-2014 and crash as much as 75% since then. "Prices are where they are because shale has been so phenomenally successful. It's changed the whole pricing paradigm,"

Half of continental U.S. oil production comes from new wells: About half of the oil produced in the continental United States last year came from wells drilled after January 2014, according to the U.S. Energy Information Administration. The data provides insight into the importance of short-cycle shale production and advances in oil industry technologies.  Many companies are targeting short-cycle investments, lower-cost projects that take months, rather than years, to come online.  Chevron plans to focus on short-cycle shale fields in the Permian basin, rather than costly deepwater projects. Though shale wells can be costly themselves, there are fewer risks involved, and companies can reap benefits more quickly. With a large number of short-cycle wells, the EIA expects average U.S. production to fall 7.4 percent in 2016 – about 700,000 barrels a day. Despite an increase in shale oil production during the past few years, individual wells have steep decline rates, losing nearly 70 percent of initial production in the first year. “Constant drilling and development of new wells is necessary to maintain or increase production levels,” the EIA said. “Oil production from new wells has so far been able to keep U.S. crude production from falling significantly below its level in late 2014.” With the U.S. rig count down 76 percent since late 2014, oil production will have a tough time keeping up recent levels. The EIA expects U.S. oil production to decline through 2017.

U.S. petroleum product exports continue to increase - (EIA) Total U.S. petroleum product exports continued to increase in 2015, up 467,000 barrels per day (b/d) from 2014 to 4.3 million b/d, driven by increased exports of distillate fuel, motor gasoline, and propane. Mexico and countries in Central and South America continue to be major recipients of U.S. petroleum product exports.  Exports of distillate fuel oil represent the largest component of U.S. petroleum product exports, and averaged 1.19 million b/d in 2015, an increase of 85,000 b/d from 2014. The United States exported distillate fuel to 88 different countries in 2015. The top destination for U.S. distillate exports was Mexico, averaging 143,000 b/d in 2015, an increase of 15,000 b/d from the previous year. Distillate exports to Central and South America averaged 595,000 b/d in 2015, up 10,000 b/d from the previous year. Chile was the region's largest single importer of U.S. distillate in 2015, averaging 101,000 b/d.  As continued high U.S. refinery runs and a warmer-than-normal heating season combined to push U.S. distillate inventories above the five-year average and combined to push prices lower, exports of distillate to Western Europe also increased. In the third and fourth quarters of 2015, distillate exports to Western Europe increased year-over-year by 80,000 b/d and 136,000 b/d, respectively. Increased U.S. exports contributed to high distillate inventories in the major refining and petroleum hubs of Amsterdam and Rotterdam in the Netherlands, and Antwerp in Belgium, collectively known as the ARA.

Coming to the Oil Patch: Bad Loans to Outnumber the Good - WSJ: Bad loans are likely to outnumber good ones soon in the U.S. oil patch, an indication of the pressure on energy companies and their lenders from the crash in prices. The number of energy loans labeled as “classified,” or in danger of default, is on course to extend above 50% this year at several major banks, including Wells Fargo and Comerica Inc., CMA 0.54 % according to bankers and others in the industry. In response, several major banks are reducing their exposure to the energy sector by attempting to sell off souring loans, declining to renew them or clamping down on the ability of oil and gas companies to tap credit lines for cash, according to more than a dozen bankers, lawyers and others familiar with the plans. The pullback is curtailing the flow of money to companies struggling to survive a prolonged stretch of low prices, likely quickening the path to bankruptcy for some firms. Fifty-one North American oil-and-gas producers have already filed for bankruptcy since the start of 2015, cases totaling $17.4 billion in cumulative debt, according to law firm Haynes and Boone LLP. That trails the number from September 2008 to December 2009 during the global financial crisis, when there were 62 filings, but is expected to grow: About 175 companies are at high risk of not being able to meet loan covenants, according to Deloitte LLP. “This has the makings of a gigantic funding crisis” for energy companies, said William Snyder, head of Deloitte’s U.S. restructuring unit. If oil prices, which closed at $39.79 a barrel Wednesday, remain at around $40 a barrel this year, “that’s fairly catastrophic.”

Alaska budget deficit just jumped $300M because of low oil prices, Walker administration says -- Alaska’s already massive budget deficit has jumped another $300 million thanks to low oil prices, Gov. Bill Walker’s administration said Monday. The state’s unrestricted revenue forecast for the current fiscal year, which ends June 30, dropped to $1.3 billion from an earlier projection of $1.6 billion, according to a new preliminary forecast by the revenue department released Monday morning. The exact drop is about 17 percent, the department said, and it’s based on sustained low oil prices. The revised forecast means the expected deficit for the state’s $5.4 billion budget is now $4.1 billion, up from a previously projected $3.8 billion. That means current revenue can cover only about 25 percent of the existing state budget. The picture for the following year is even worse, with the forecast revised downward to $1.2 billion from a previous $1.8 billion projection. Walker, in a news conference at the Capitol on Monday, said the diminished flow of oil revenue underscores the need for lawmakers to pass his financial plan.  Under the plan, the state would pay for government largely based on an annual $3.3 billion stream of revenue from a restructured Alaska Permanent Fund, instead of from oil revenue. Alaska’s oil revenues have crashed as prices dropped to $39 a barrel last week from more than $100 two years ago. “We have reached a point in our state’s history that we need to be looking beyond oil a bit,” Walker said. “We have that opportunity now. And you’re not going to do it by sitting back with a Ouija board hoping the price of oil’s going to go to $110, $147. It just isn’t going to work.”

Bondholders suffer $150bn oil price hit - Investors have suffered losses of at least $150bn in the value of oil and gas company bonds, as the slump in crude prices since the summer of 2014 has fuelled fears of a wave of defaults in the US and emerging markets. The 300 largest global oil and gas companies have also seen $2.3tn sliced from their stock market value over the same period, a 39 per cent slide since oil began its decline, an analysis by the Financial Times has found. The losses show how intense the financial strain on oil producers from falling crude prices remains, in spite of the partial recovery in prices since January. Oil is still down about 65 per cent from its June 2014 peak. Banks have also been increasing their provisions for energy-related losses on their lending. With several banks having loans to the industry equivalent to more than 40 per cent of their equity, lenders have tightened loan agreements with oil producers, and capital markets remain closed to the lowest rated groups. More than $150bn has been shaved off the value of 1,278 actively traded bonds denominated in dollars, euros, sterling and yen since Brent crude hit almost $116 a barrel in June 2014. Borrowing by oil and gas companies has soared over the past decade. Their total debt, including loans, almost tripled from $1.1tn in 2006 to $3tn in 2014, according to the Bank for International Settlements. The borrowers with the steepest increase in debts relative to their assets included US independent production companies caught up in the country’s shale boom, and national oil companies from emerging economies including Pemex of Mexico, Petrobras of Brazil and CNPC of China. Cheaper oil can act as a stimulus to global growth, by redistributing real incomes from producing countries to consumers, who are often seen as more likely to spend the gains they make. However, Hyun Song Shin, chief economist of the BIS, said weak oil prices had also added to volatility in equity and bond markets. 

Oil Mystery Solved? Interest-Rate Effect Upends Usual Growth Benefit - One of the economy’s big puzzles is why lower oil prices have done so little to help economic growth. The correlation between oil and stocks is now strongly positive. The opposite should be true since cheaper oil is a tax cut for oil-importing countries like the U.S. Three economists at the International Monetary Fund have advanced an intriguing theory: lower oil prices drive down actual and expected inflation, which would ordinarily also pull down interest rates. But in most big economies, interest rates are already at or near zero, and can’t go any lower. Thus, as expected inflation falls but nominal interest rates don’t, real interest rates (nominal rates minus inflation) rise, “very possibly stifling any increase in output and employment.”  For the same reason, if central banks are worried about deflation, they won’t respond to higher oil prices by raising rates. Thus, perversely, higher oil prices “can be expansionary by lowering the real interest rate.” Last year’s market action buttresses the theory. As oil prices sank, nominal bond yields remained stable but real bond yields rose. Thus, expected inflation—the difference—shrank. This year, as oil prices rebounded, real yields have edged lower. In theory, a one-off movement in the price of oil should not produce a lasting change in the rate of inflation. Yet both surveys of the public and trading in inflation-indexed bonds show a strong correlation between far-off expected inflation and movements in oil. This could reflect market dynamics. But it may also reflect a diminished faith in central banks’ ability to offset the disinflationary impact of lower commodity prices. 

The Atlantic Won’t See Drilling Anytime Soon, But It Could Still See Harmful, Noisy Blasting - Put away your party hats, Atlantic whale-watchers. Despite the recent announcement that the waters off southeastern United States are closed to drilling, applications to send massive sonic booms throughout the region are still being considered. The practice is called seismic airgun testing, and it is used to determine oil and gas resources below the sea floor using loud noises that can travel up to 2,500 miles underwater — potentially disrupting whales, fish, turtles, and invertebrates such as scallops and crabs. “There’s a potential for these species to be impacted for months on end,” Ingrid Biedron, a marine scientist with Oceana, told ThinkProgress. Right now, there are eight applications to conduct seismic testing making their way through the federal permitting process. The National Marine Fisheries Service, part of NOAA, is currently considering issuing Incidental Harassment Authorizations. There will be a 30-day public comment period on the IHAs before they go back to the Bureau of Ocean Energy Management, which will decide whether to approve the permits. There’s a potential for these species to be impacted for months on end The IHA specifically looks at impacts to marine mammals, Biedron said. BOEM is required to consult with the NMFS and other agencies — such as the Department of Defense and NASA — on other impacts to fish habitats and other federal programs. But each permit application is considered separately. “Cumulative impacts aren’t being considered,” Biedron said.

Dreaded 'stealth' supply becomes reality as U.S. drillers turn on 'ducks' | Reuters: A dreaded scenario for U.S. oil bulls might just be becoming a reality. Some U.S. shale oil producers, including Oasis Petroleum and Pioneer Natural Resources Co are activating drilled but uncompleted wells (DUCs) in a reversal in strategy that threatens to bring more crude to a saturated market and dampen any sustained rebound in prices. When oil prices started their long slide in mid-2014, many producers kept drilling wells, but halted expensive fracking work that brings them online, waiting for prices to bounce back. But now, with crude futures hovering near multi-year lows and many doubting recent modest gains that brought oil prices near $40 a barrel can hold, the backlog of DUCs is already shrinking in some areas. In key shale areas such as Eagle Ford or Wolfcamp and Bone Spring in Texas such backlog has fallen by as much as a third over the past six months, according to data compiled by Alex Beeker, a researcher at Wood Mackenzie. "If the number of DUCs brought online is surprising to the upside, that means U.S. production won't decline as quickly as people expect," said Michael Wittner, global head of oil research at Societe Generale. "More output is bearish.” In the Wolfcamp, Bone Spring and Eagle Ford, the combined backlog of excessive wells remains around 600, Beeker estimates. About 660 wells could be the equivalent of between 100,000 and 300,000 barrels per day of potential new supply, according to Ed Longanecker, president of Texas Independent Producers and Royalty Owners Association (TIPRO).

"A Dreaded Scenario For Oil Bulls Is Becoming A Reality" Reuters Warns: U.S. Production Is Coming Back On Line -- One month ago, as we pounded the table on the biggest threat to the fundamental case for oil, namely that even a modest rebound in oil prices could unleash another round of production by the "marginal", US shale oil producers, we warned that a rebound in the price of oil as modest as $40 per barrel, could be sufficient to get drillers to resume production. As noted in late February, among the companies prepared to flip the on switch at a moment's notice are Continental Resources led by billionaire wildcatter Harold Hamm, which said it is prepared to increase capital spending if U.S. crude reaches the low- to mid-$40s range, allowing it to boost 2017 production by more than 10 percent, chief financial official John Hart said last week. Then there is rival Whiting Petroleum which may have stopped fracking new wells, added it but would "consider completing some of these wells" if oil reached $40 to $45 a barrel, Chairman and CEO Jim Volker told analysts. Less than a year ago, when the company was still in spending mode, Volker said it might deploy more rigs if U.S. crude hit $70." Then there was EOG Chairman Bill Thomas who did not say what price would spur EOG to boost output this year, but said it had a "premium inventory" of 3,200 well locations that can yield returns of 30 percent or more with oil at $40, and so on, and so on. The reason for the plunging breakeven price? The same one we suggested on February 3: surging, rapid efficiency improvement which "have turned U.S. shale, initially seen by rivals as a marginal, high cost sector, into a major player - and a thorn in the side of big OPEC producers."

Drillers Can't Replace Lost Output as $100 Oil Inheritance Spent -- For oil companies, the legacy of $100 crude is starting to run dry. A wave of projects approved at the start of the decade, when oil traded near $100 a barrel, has bolstered output for many producers, keeping cash flowing even as prices plummeted. Now, that production boon is fading. In 2016, for the first time in years, drillers will add less oil from new fields than they lose to natural decline in old ones. About 3 million barrels a day will come from new projects this year, compared with 3.3 million lost from established fields, according to Oslo-based Rystad Energy AS. By 2017, the decline will outstrip new output by 1.2 million barrels as investment cuts made during the oil rout start to take effect. That trend is expected to worsen. “There will be some effect in 2018 and a very strong effect in 2020,” said Per Magnus Nysveen, Rystad’s head of analysis, adding that the market will re-balance this year. “Global demand and supply will balance very quickly because we’re seeing extended decline from producing fields.” A lot of the new production is from deepwater fields that oil majors chose not to abandon after making initial investments, Nysveen said in a phone interview. Royal Dutch Shell Plc is scheduled to start the Stones project in the Gulf of Mexico’s deepest oil field this year after approving it in May 2013. Benchmark Brent crude averaged $103 a barrel that month compared with about $41 on Monday. Stones will add about 50,000 barrels a day to Gulf of Mexico output at a peak rate, according to Shell. Two other deepwater projects, run by Noble Energy Inc. and Freeport-McMoran Inc., are due to commence this year, the U.S. Energy Information Administration said in a Feb. 18 report.

Emerald Oil Files For Chapter 11 -- March 23, 2016; Buy High; Sell Low? -- Bizjournal is reportingEmerald Oil Inc. said it's filed voluntary Chapter 11 petitions in the U.S. Bankruptcy Court for the District of Delaware. Its oil and gas operations are located in the Williston Basin of North Dakota and Montana.   Prior to the bankruptcy filing, Emerald said it reached a deal with Latium Enterprises Inc. of England to sell "substantially all of Emerald's assets" and to serve as a "stalking horse" in the bankruptcy process. "The plan we are announcing today will provide for continuity in Emerald's current and future business operations. This process is the only path going forward and should enable the business to execute a turnaround in the current low oil price environment.  Importantly, Emerald's plan and the Latium transaction would allow the business to continue to operate and would provide a sound path for potential recovery for company stakeholders," said McAndrew Rudisill, president and CEO of Emerald, in a statement.  More here:  Emerald has obtained $20 million in post-petition debtor in possession financing to maintain operations during the restructuring. Prior to the Chapter 11 filing, Emerald executed a non-binding term sheet with privately-held Latium Enterprises under which Latium has proposed to purchase substantially all of Emerald’s assets and will serve as a “stalking horse” in a sale process under section 363 of the Bankruptcy Code. Shares of EOX are at $1.37 within a 52-week range of $0.39 – $19.00.    As of December 31, 2014, the company controlled the rights to mineral leases covering approximately 122,000 net acres.

U.S. Mining Losses Last Year Wipe Out Profits From Past Eight Years - The U.S. mining industry—a sector that includes oil drillers—lost more money last year than it made in the previous eight. Mining corporations with assets of $50 million or more recorded a collective $227 billion after-tax loss last year, according to Commerce Department data released Monday. That loss essentially wipes out all the profits the industry had made since 2007.  A crash in oil prices last year caused significant losses for what had been anupstart domestic energy industry propelled by petroleum reserves accessed via hydraulic fracturing, or fracking. Crude oil prices fell from above $100 a barrel in the middle of 2014 to less than $40 by the end of last year.  That meant many of those new wells were suddenly operating at a loss. What’s more, other types of mining operations were stung by falling commodity prices tied to weak demand from China and other parts of the globe.  Mining revenues also fell sharply, down 38% in the fourth quarter from a year earlier.  A faltering global economy also stung the manufacturing sector, though the industry remained profitable. The sector recorded a $510 billion annual profit, down from $609 billion in 2014. But manufacturing revenue declined 7.8% in the fourth quarter from a year earlier. Falling revenues suggest weaker global demand for U.S.-made goods. That’s likely a symptom of a stronger dollar making American products relatively more expensive overseas.

In One Year The US Mining Industry Lost More Money Than It Made In The Prior Eight - For anyone still looking for context to the biggest ever collapse in commodity prices in history, one far sharper and now longer than that in the deflationary aftermath of the Lehman failure, look no further than the chart below: as the WSJ notes, the U.S. mining industry, a sector which includes oil drillers, lost more money last year than it made in the previous eight. Mining corporations with assets of $50 million or more recorded a collective $227 billion after-tax loss last year, according to Commerce Department data released Monday. That one year loss wipes out all the profits the industry had made since 2007, or almost a full decade worth of profits, gone in 12 months. It wasn't just shale drillers: other types of mining operations were stung by falling commodity prices tied to weak demand from China and other parts of the globe. Mining revenues also fell sharply, down 38% in the fourth quarter from a year earlier. The faltering global economy also stung the manufacturing sector: as the WSJ notes, manufacturing revenue declined 7.8% in the fourth quarter from a year earlier, meaning dropping global demand for U.S.-made goods, which is nowhere more obvious than in Caterpillar's impploding retail sales.

OilPrice Intelligence Report: Despite High Debt Levels Energy Investors Remain Undaunted -- The number of energy loans that are in danger of default could jump above 50 percent this year, according to The Wall Street Journal, presenting some problems for several major banks. Lenders are starting to back away from new loans, declining to renew credit, and selling off bad debt. That could slash the available credit lines for some struggling oil and gas producers this year, potentially raising some liquidity pressure on E&P companies. An estimated 51 oil and gas companies have fallen into bankruptcy since early 2015. The periodic credit redetermination period is coming up, which could result in credit lines offered to energy companies being reduced by 20 to 30 percent. The total debt in the entire oil and gas sector hit $3 trillion in 2014, or about three times higher than 2006 levels.  Despite posting record losses in potentially seeing credit lines cut, several oil companies have returned to the equity markets, where they are still being welcomed with open arms. Reuters reports that at least 15 oil companies have announced new offerings in 2016 in 2016, with minimal damage to their share prices. The companies surveyed have outperformed an oil and producers index by 3 percent on average. But another way of looking at that statistic is that only well-positioned companies have issued new stock. Companies like Pioneer Natural Resources, Callon Petroleum Co, and Oasis Petroleum have performed better than some of their peers since announcing new stock offerings. Shareholders seem willing to provide companies with new cash infusions. “People would rather they have money in their pocket and survive,” Irene Haas, analyst at Wunderlich Securities, told Reuters. “They’ll worry about dilution later.” U.S. oil and gas exploration companies have issued a combined $10 billion in new equity this year.

U.S. on track for record summer gasoline demand: Kemp | Reuters: The United States will probably consume a record amount of gasoline in 2016, passing the previous peak set in 2007, and the prospect is helping lift crude oil prices. Recent data indicates the country is on track for its biggest-ever driving season this summer, which will keep refineries running flat-out turning crude into the motor fuel. A rapid expansion in U.S. gasoline consumption has coupled with strong demand growth in India and China, falling crude output in the United States, and hedge funds turning bullish, to send crude and fuel prices surging. U.S. motorists consumed 9.16 million barrels per day (bpd) of gasoline in 2015, just 125,000 bpd short of the record 9.29 million bpd set in 2007. The U.S. Energy Information Administration (EIA) is still forecasting consumption in 2016 will remain slightly below the 2007 peak. On Feb. 23, the EIA published a commentary titled “Motor gasoline expected to remain below 2007 peak despite increase in travel”. But the agency has been revising its estimates higher in response to the extraordinary strength in demand exhibited in recent high-frequency data. In December 2015, the EIA predicted gasoline consumption would rise by just 10,000 bpd in 2016. By January, it had upped its forecast increase to 70,000 bpd and in March, the agency raised the number to 90,000 bpd (“Short-Term Energy Outlook”, EIA, December 2015 to March 2016 editions).  The upward revisions come amid statistics showing gasoline demand already running at record levels.

As NASA releases climate “bombshell”, more questions raised over fracking’s climatic impact -  According to data released by NASA, the temperature record for February has been broken by an “unprecedented” amount. The scientists have found that February was 1.35C warmer than average. “We are in a kind of climate emergency now,” Stefan Rahmstorf, from Germany’s Potsdam Institute of Climate Impact Research, told the media. “It’s completely unprecedented.” There are those within the oil industry that argue that due to climate change we should transition away from dirty coal and oil to gas as soon as possible. They argue that gas – much of it from fracking – is the cleanest fossil fuel, which can act as a so-called “bridge” between the dirtier fossil fuels and cleaner renewables. I and many others have long argued that this is a flawed argument for a multitude of reasons, not least that fracking has large emissions of methane, one of the most potent greenhouse gases. I have also pointed out that fracking continues our reliance on fossil fuels generally, just at a time when we should be de-investing from fossils.  For example, just last month I blogged that: “Fracking has long been linked with the emissions of methane too.” I reported on new academic  research published by Harvard University in the journal Geophysical Research Letters which concluded “that US methane emissions have increased by more than 30% over the 2002–2014 period.” This methane spike has coincided with the fracking boom across the US. Well now respected environmental journalist Geffrey Lean, writing in the Independent, reports on another down-side of the fracking boom: The rise of carbon-intensive infrastructure and industries which all have a climatic impact. He reports “fracking is set to lead to a sharp rise in emissions of climate changing greenhouse gases, newly undermining industry and government claims that shale gas is a relatively clean fuel that can help combat global warming, an authoritative new study reveals.”

How the refineries came to own our air pollution regulators - "Regulatory capture" is the term for what happens when an agency overseeing an industry begins to see things the industry's way. Consider the most recent illustration: the South Coast Air Quality Management District board and the refinery industry. The refineries are among the worst-polluting facilities in the Southland, which has the dirtiest air in the United States. But that didn't stop the board from rejecting a clean-air plan worked out by its staff over 37 months and substituting a plan made public that very morning, developed by the Western States Petroleum Assn., a refinery lobbying group. Given a chance to reconsider its action at a meeting earlier this month, the board voted to stand pat. At the same meeting it fired its executive officer, Barry Wallerstein, who had supported the staff proposal. . California Air Resources Board's executive officer, Richard Corey, says the clean-air program would be so lax it might well violate state and federal regulations. State Senate President Pro Tem Kevin de León (D-Los Angeles) has launched an effort to remake the board so its pollution-tolerant majority can be outvoted. On Wednesday, the Sierra Club and three other environmental organizations sued in state court to force the board to reverse its vote. In response, the board majority and its industry overlords have offered some of the most fatuous defenses heard from a public body in years. Board member Mike Antonovich, a Los Angeles County supervisor, informed me in an emailed statement that the AQMD board "is not simply a rubber stamp for District staff." That's true, but it doesn't explain why it should be a rubber stamp for the refinery industry.

USA Today Reports On Saudi Aramco - Shell Split; Saudi Aramco Now Owns Largest Refinery In US -- USA Today reports that Saudi Arabia now owns the largest refinery in the US. I track this story here. The report sheds more light on the background to this "breakup": Reuters reported that the relationship started to fray after Motiva announced a $10 billion expansion of the Port Arthur refinery, doubling its capacity to 603,000 barrels per day, making it America’s largest refinery. It produced gasoline, diesel and jet fuel. A leak shortly after the expansion was completed in 2012 led to ballooning costs, exacerbating tension between Shell and Aramco. A 2015 workers strike also sparked anger between the two companies.  The two companies signed a nonbinding letter of intent, a plan that would divide up Motiva’s refineries between them. The refineries have a combined capacity of 1.1 million barrels per day and are all located close to each other. The breakup will allow Saudi Aramco to take over the Port Arthur refinery and 26 distribution terminals, and Aramco will also hold onto the Motiva brand name. Shell will take over the other two refineries, Convent and Norco, both located in Louisiana. Shell said that it would operate the two refineries as one plant with a combined throughput of 500,000 barrels per day. This is obviously a different spin or emphasis than the one I suggested earlier: Saudi Aramco is in early stages of monetizing its assets. So we will see how this plays out. And there it is, at the end of the USA Today article: The split will hand the largest U.S. refinery to the state-owned Saudi oil company. The Wall Street Journal speculates that it could also pave the way for some sort of listing of Aramco’s assets in a public offering, something that Saudi officials have alluded to for several months. Few expect Aramco to list its upstream production assets in Saudi Arabia; downstream assets are much more likely to be offered up. This article fails to note what else Saudi Aramco got in the deal, which in some ways may be just as important, if not more important. Saudi Aramco also got:

  • the Motiva name
  • retain 26 distribution terminals
  • maintain an exclusive, long-term license to use the Shell brand for gasoline and diesel sales in Texas, the majority of the Mississippi Valley, the US southeast, and the US mid-Atlantic markets
In the short-term, Americans won't notice any difference, but it would not surprise me to see Motiva-branded service stations in the US.

US fracking revolution hits UK as first tanker loaded with American shale gas arrives in Europe | This is Money: The first tanker loaded with US shale gas has arrived in Europe, in a move predicted to transform British manufacturing.The Intrepid, a 180-metre vessel owned by chemicals giant Ineos, docked in Norway with 27,500 cubic metres of gas.Ineos will turn the ethane into plastics for cars, flooring and household products at its petrochemical refineries at Grangemouth in Scotland – which had been at risk of closure – and Rafnes. Jim Ratcliffe, the 52-year-old British billionaire who owns 60 per cent of Ineos, said: ‘Cheap shale gas should transform manufacturing in Britain because it brings down energy costs and provides cheap raw materials like ethane.’ Shale is cheaper and more abundant than North Sea gas. However, it is produced by a controversial process known as fracking where water and sand are pumped at high pressure underground to fracture rock. This releases previously unreachable pockets of gas. Ineos has invested £1.4billion in the project. At peak, both its Grangemouth and Rafnes refineries will receive one ship-load of ethane a week. 

US Gulf Coast distillate flows to Europe jump as arbitrage swings open -  A total of 1,320,000 mt of distillates have been loaded in the US Gulf Coast for discharge in Europe during March, Platts has estimated, based on data from cFlow, Platts trade flow software. The figure was about twice the level of the previous estimate, pointing to increased volumes of product loaded in recent weeks. "The US arb is open", a trader said, driven by "cheaper freight and raised ULSD diff in Europe". According to the estimate, 11 of the cargoes due to land in March are headed to the Northwest European market, while 18 have set sail towards the Mediterranean.In the physical diesel market, CIF NWE diesel cargoes were assessed at a $2.75/mt premium to front-month ICE low sulfur gasoil futures Friday, up $2.50/mt on the week and $2.50/mt higher month on month. In recent weeks, refinery maintenance, run cuts, and then-closed arbitrages from the US Gulf Coast and Asia have all contributed to more balanced fundamentals in the Northwest European diesel market, sources said. In the Mediterranean, CIF diesel cargoes were pegged at a $4.25/mt premium Friday, 50 cents/mt higher on the week and $2.25/mt up on the month. The Mediterranean market has seen healthy demand, particularly from Turkey, where a fire at the 220,000 b/d Izmit refinery brought Tupras, the owner, to the market as a buyer.

In Canada, a battle brews over pipelines, power lines -- With the current assumption that a crude export pipeline from Alberta to the US Gulf Coast is unlikely to ever be built, never has there been a better opportunity for Canada’s provinces to join hands and hasten efforts to open up oil export outlets along the country’s Pacific and Atlantic coasts.  A new issue is, however, brewing between Alberta and British Columbia that, instead of pulling the provinces together to optimize the value of the nation’s crude oil resources, is putting them at loggerheads. In early March, Alberta’s energy minister Margaret McCuaig-Boyd said that the province would not buy additional electricity from neighbor British Columbia unless the latter lends its support for an oil export pipeline through that province. “We’re not necessarily going to have that much demand for electricity if we can’t find someone to sell our products to.”  Neighbors wanting to talk about new power lines crossing provincial borders need to understand that the issue is tied to inter-jurisdictional product distribution infrastructure, like pipelines to carry bitumen to tidewater. These were not separate issues, Notley said. British Columbia has opposed Enbridge’s 525,000 b/d Northern Gateway and the Kinder Morgan-backed 890,000 b/d Trans Mountain pipeline expansions, primarily for environmental reasons. Now British Columbia has a project at risk: the fate of its recent final investment decision to build the 1,100 MW Site-C hydroelectric power project near Fort St John on the Peace River at a whopping cost of C$8.8 billion ($6.7 billion) and the laying of a new transmission line to supply power to northeast Alberta, which is home to oil sands producers.

By rejecting $1bn for a pipeline, a First Nation has put Trudeau's climate plan on trial -- Everything has a price. Everyone can be bought. We assume this principle is endemic to modern life — and that accepting it is most obvious to the impoverished. Except all over the world, people are defying it for a greater cause. That courage may be even more contagious. It has been in full supply in north-west Canada, where an oil giant is aiming to construct one of the country’s biggest fossil fuel developments: a pipeline to ship liquified natural gas (LNG) out of British Colombia. To export it overseas via tankers, Malaysian-owned Petronas must first win approval for a multi-billion dollar terminal on the coast. That happens to be at the mouth of Canada’s second-largest salmon river, on the traditional territory of the Lax Kw’alaams First Nation. One of the world’s longest un-dammed rivers, the Skeena abounds in the fish relied on by surrounding wildlife — and by First Nations and an entire regional economy. Last year, following our modern principle, Petronas offered the First Nation an offer they imagined couldn’t be refused: in exchange for their support, a whopping $1.15 billion in cash. But put to a vote, the Lax Kw’alaams resoundingly said “no” — every single community member. When Petronas made the offer, Lax Kw’alaams hereditary chief Yahaan says he believed the community — poor and with few employment prospects — might vote yes. “Opportunities like that don’t come to your door every day,” he says. “But I give my people credit for taking that bold step. They showed their love and their passion for the land and water. No amount of money can compare to the richness of the river and what it gives us.”

Steam Injection Fractures Caprock in Big Alberta Spill, Regulator Confirms -- Three years after an eruption of 10,000 barrels of melted bitumen contaminated the boreal forest and groundwater near Cold Lake, Alberta, the provincial energy regulator has now officially blamed hydraulic fracturing, or the pressurized injection of steam into the ground for fracturing nearby rock. The bitumen blowout occurred sometime between May and June 2013 at Canadian Natural Resources Ltd.'s Cold Lake project, an operation that uses steam injection to melt bitumen and bring it to the surface. In this case, the pressure from the steam cracked rock between different formations, allowing melted bitumen to find natural fractures and flow to the surface at five different locations, including under a lake. In some places, the bitumen erupted through fissures in the ground as long as 159 metres deep. The event, not the first of its kind as an earlier Tyee investigation revealed, killed wildlife and seeped nearly 20 barrels of bitumen a day into muskeg over a five-month period. In a lengthy report, the Alberta Energy Regulator concluded what experts had suggested all along -- that all five bitumen seeping events "were caused by excessive steam volumes, along with an open conduit (wellbore or natural fracture or fault) or hydraulically induced vertical fractures." According to the regulator, an independent third party expert panel that also reviewed the bitumen disaster found that the company, a major bitumen producer, had failed to properly account for geological faults and fractures in the region it was steaming.

A Glimpse Of Things To Come: Canadian Oil Company Liquidates Hours After Bank Demands Repayment --Until recently, the bulk of the attention on the insolvent North American oil and gas sector fell squarely on the US. That is starting to change for two reasons: first, Canada's regulator just ended the cute game (first profiled here) Canadian banks had been playing for years by reserving zero of their potential loan losses to the collapsing energy sector; second, slowly but surely Canadian oil and gas failures are starting to become a daily reality; failures such as that of Canadian junior oil and gas producer Terra Energy Corp which yesterday said it shut down production, ceased operations and announced the resignation of directors and officers on Monday, after its lender, Canadian Western Bank, demanded full repayment of its debt.  And that's all it takes: one simple debt acceleration, which has led to the shuttering of Terra, and which would send thousands of insolvent energy companies into bankruptcy overnight. For now, most such insolvent companies continue to exist as zombies, many of which can't even afford an interest payment, but which after the direct intervention of the Dallas Fed and the OCC (which as we exclusively reported bought the insolvent sector a brief reprieve when it demanded that banks not force debtors to repay) continue to exist as the Fed is terrified of the default tsunami that would be unleashed once the bankruptcies finally arrive, as they will. As for the now defunct Canadian junior, according to Reuters, Terra, which was producing around 3,600 barrels of oil equivalent per day from its operations in western Alberta and north-eastern British Columbia, said that at current low oil prices the cost of operating was more than its revenue. Oops.

‘Historic’ spending cuts putting future oil supply at risk, threatening spike in prices - An oil shock may be lurking around the corner as the price bust has hammered investment in future supply, according to the International Energy Agency. “Historic” investment cuts taking place now increase the possibility of oil-security surprises in the “not-too-distant” future, Neil Atkinson, head of the IEA’s Oil Industry and Markets Division, said in Singapore on Wednesday. About US$300 billion is needed to sustain the current level of production, and nations including the U.S., Canada, Brazil, and Mexico are facing difficulty in keeping up investments, he said. “We need a lot of investments just to stand still,” Atkinson said at the launch event of SIEW 2016. “There’s danger as we are reaching a point where we are barely investing upstream. If investment doesn’t resume in 2017 and 2018, we can see a spike in oil prices as oil supply can’t meet demand.” Companies from ConocoPhillips to Chevron Corp. and BP Plc have cancelled more than US$100 billion in investments, laid off tens of thousands of workers, slashed dividends and sold assets as oil sank below US$30 a barrel to a 12-year low. With crude rebounding since mid-February to near US$41, Atkinson said the worst may be over for prices as they have a floor “for the time being.” The Organization of Petroleum Exporting Countries and other producers including Russia plan to meet in Doha next month to discuss limiting output to reduce a global oversupply.

Major Production Projects Start Up Around The World  |  Rigzone -- Production start-ups have occurred all over the globe within the first few months of this year, with considerable increases in Europe, the Middle East and Africa. Several additional projects across the latter two regions are expected in the near future, and a variety of recent developments in East Asia are expected to ramp-up their outputs by year-end. In Europe, Total’s UK-operated Laggan-Tormore development in the West of Shetland area, will produce 90,000 barrels of oil equivalent per day (boepd). Despite its status as a “key component” of Total’s future production growth, the Laggan-Tormore project has been delayed numerous times, with output commencement initially expected at the end of 2014. Situated in 1,968 feet of water, the Laggan-Tormore gas and condensate fields feature an 86-mile tie-back of four subsea wells to an onshore Shetland gas plant, which has a capacity of 500 million cubic feet of gas per day (MMcf/d). Another European production start-up got underway in February at the Horse Hill-1 discovery in the UK’s Weald Basin. Oil flowed from the well at an initial rate in excess of 700 barrels of oil per day (bopd), in an approximate mix of 50:50 oil to water, before stabilizing to more than 463 bopd, in an approximate mix of over 99 percent oil and less than 1 percent water. Light, 40-degree API, sweet oil continued to flow naturally to surface at the Horse Hill-1 at a steady rate in excess of 456 bopd, and the first two tankers full with 348 barrels of oil from the site have already been sent to be refined. Brendan D’Souza, an oil and gas analyst at WH Ireland, said the results have been highly impressive and far exceed expectations. The Horse Hill discovery could lead to one of the most significant oil supplies found onshore UK, according to Schlumberger’s research. In August, the oilfield services firm calculated that 10.993 billion barrels of mean oil in place was imbedded within the 55 square miles of the PEDL137 and PEDL246 Horse Hill licenses.

West Lothian could home over 1000 fracking wells - Daily Record: West Lothian will be overrun by fracking companies unless the Scottish Government ban the practice. That was the message from Friends of the Earth Scotland during a meeting in Linlithgow Burgh Halls last week. The meeting came after it was revealed last year that up to nine shale gas companies have applied for fracking licences in West Lothian. There is currently a moratorium on granting licences in Scotland but companies including iGas, GDF Suez and Ineos want to exploit 19 blocks of shale-rich land under the likes of Bathgate and Linlithgow. And Dr Richard Dixon, Director of Friends of the Earth Scotland said: “Tourism, farming and fishing are going to suffer from the damage caused by fracking. “Ineos’ plans for the central belt of Scotland mean 1300 wells. You may have seen pictures from the States which show the landscape covered in a really ugly chess board thing. “That’s what Ineos want to bring to Scotland.” SNP MSP for Linlithgow, Fiona Hyslop, refused to rule out supporting fracking in the future but admitted she would need to be convinced. She said: “One of the things, in terms of where I stand, is that I am not convinced at all about fracking. “I’ve got serious concerns but I think it’s right that there’s a moratorium and I think it’s right that there’s evidence being put together. “Scotland doesn’t need this because our alternative energy resources are extensive. We should be champions of renewables rather than looking at carbon releases of other descriptions.”

Green Party of England and Wales : Greens urge government to rethink “reckless and unnecessary” fracking plans -- In a letter published today, local Greens are urging government ministers to halt their plans to remove decision-making powers from local authorities on new fracking sites. The proposals, leaked by the government in January, would see approval for fracking schemes made by the Government's Planning Inspectorate rather than local authorities. The move would prevent local communities from having any say as to whether fracking schemes go ahead in their local area. The proposals are part of a government move to create a shale gas industry within a decade, despite widespread public opposition and protest to fracking schemes. The government is expected to release its fracking strategy in the summer. . The plans being considered by ministers would allow government inspectors to overrule local decisions and impose fracking on local communities. Convenor of the Green Group of councillors Phelim Mac Cafferty, said: 'These proposals from the government are a blatant attack on democracy that removes the rights of councils to protect their local environment by opposing fracking. This is yet another naked power-grab by central government. 'In this week's budget we heard more of the Government's endless rhetoric about devolving power to local communities to make local decisions. Yet time and again their actions run counter to the rhetoric, as local authorities are stripped of powers and resources to effectively decide what happens in their areas. 'Just last week a report from NASA showed that global temperatures in February smashed previous records by an unprecedented amount [1]. This is a climate emergency, which needs an urgent response to bring about a more sustainable future. These proposals on fracking will take us down the wrong path, forcing us towards more exploitation of fossil fuels when we desperately need to be investing in renewable energies'.

Hydraulic fracturing, foreign investment, free trade, Indigenous employment headline NT Cattlemen's Association conference - ABC  - Hundreds of cattle producers and industry delegates from across Australia have met in Alice Springs for the annual Northern Territory Cattlemen's Association conference. Those attending were able to hear from a wide range of guest speakers, covering topics of importance to the sector in 2016.   In a well-received presentation, energy law expert Dr Tina Hunter from the University of Aberdeen in Scotland told the conference that Australia was the only jurisdiction in the world without mandated gas well inspections. But Dr Hunter went on to say the moratorium on fracking, as proposed by the NT Labor Party should they win government, was not the answer. She said fracking exploration provided useful data which helped to develop a regulatory regime. "My concern with a moratorium, and I am against a moratorium, is because how do you get knowledge and build your scientific profile and get the necessary data if you can't undertake the activity that will give you the data," she said.

WA Government fails on fracking regulations: farmers and conservationists: CONSERVATIONISTS and landholders say the WA Government will go only part of the way towards properly regulating the controversial gas extraction method known as fracking. A Legislative Standing Committee on Environment report into hydraulic fracturing made 12 recommendations to the WA government on Thursday, including banning the use of dangerous chemicals and increasing fines for companies that commit offences. But the Government’s response to the 12 recommendations — 10 of which it accepted at least in part — has drawn criticism from WA Farmers, the Conservation Council WA and anti-fracking campaigners Lock the Gate Alliance. “As the Government is attempting to legislate on this very important issue, all recommendations of the Parliamentary Committee report must be included to safeguard farmers and freehold landowners when negotiating with the resources sector,” WA Farmers chief executive Stephen Brown said on Friday.

Record Loss For Petrobras As Political And Economic Crisis Worsen -- Petrobras reported a record loss for the fourth quarter, a horrendous performance that raises questions about the company’s ability to handle its mountain of debt. The state-owned Brazilian oil company announced that it lost more than 36 billion reais in the fourth quarter, or more than USD$10 billion, a 40 percent increase compared to the fourth quarter of 2014. The losses were all the more staggering because the previous year’s figures were inflated due to the massive corruption scandal, which continues to bedevil the company. The problem for Petrobras is that it has the world’s largest pile of debt, bigger than any other oil company. And that debt, much of which is priced in U.S. dollars, is becoming more expensive to service, particularly since the Brazilian real has depreciated significantly over the past year. As The Wall Street Journal notes, Petrobras’ debt has jumped to just about 800 billion reais, or about 10 percent higher than at the end of 2015, despite spending cuts.

Italy's Eni in broad restructuring to weather low oil price — Italian oil and gas company Eni has announced a broad restructuring plan to weather low oil prices. Eni announced Friday that it aims to sell 7 billion euros (nearly $8 billion) worth of assets by 2019, mostly by diluting stakes in recent discoveries, and make 3.5 billion euros in cost reductions through renegotiating contracts. CEO Claudio Descalzi said in a statement that the industry “is facing a very complex challenge, reducing costs to fulfill short-term constraints while enhancing long-term value.” Eni said it plans to reduce investments by a fifth, while it expects oil and gas production will grow by more than 3 percent annually over the next four years. The company will continue to make exploration one of its main focuses.

Iraq exports first natural gas shipment in its history - (AP) — Iraq on Sunday exported the first shipment of natural gas in its history, a key development for the OPEC member struggling to feed a cash-strapped economy amid an expensive fight against the Islamic State group. The move revives a long-sought ambition by Iraq to be a gas exporter, thanks to a joint venture with Anglo-Dutch Royal Dutch Shell PLC and Japan’s Mitsubishi Corp. Iraq first planned to begin exporting gas in the late 1970s, but that timeline was delayed by the Iraq-Iran war when Iraqi export ports were bombed. A Panama-flagged gas carrier sailed Sunday afternoon from Iraq’s southern port of Umm Qasr on the Persian Gulf with a cargo of about 10,000 standard cubic feet of gas in the form of condensates, Oil Ministry spokesman Assem Jihad said. Jihad wouldn’t reveal how much the cargo was worth or the buyer, but he added that the next cargo will be shipped by the end of this month. In November 2011, Iraq signed a $17 billion deal to form a joint venture to gather, process and market gas from three oil fields in the oil-rich province of Basra. The fields are the 17.8 billion-barrel Rumaila, the 4.1 billion barrel Zubair field and the 8.6 billion barrel West Qurna Stage 1. In the 25-year joint venture, called the Basra Gas Company, Iraq holds a 51-percent stake and Royal Dutch Shell has 44 percent, with the remaining 5 percent for Mitsubishi. According the International Energy Agency, Iraq has estimated natural gas reserves of 112 trillion cubic meters, making it the 11th largest in the world.

Is This The Most Intricate Oil Theft Operation Yet? - While Georgia has been caught up recently in a major pipeline competition, with Russia, Azerbaijan and Iran all making a play for the action in this small, strategically located energy-transit hub, some men in the central Georgian village of Ruisi have been busy with a pipeline project of their own. They lay a kilometer-long, underground pipeline to leach into the British Petroleum-operated, more than 800-kilometer-long Western Route Export Pipeline, which carries 100,000 barrels of oil daily from Azerbaijan’s Caspian Sea coast to Georgia’s Black Sea coast. Known as the Baku-Supsa pipeline for the terminals at both ends, the conduit was the first link in the country’s energy-export network. The suspects built their own terminal in Ruisi, about a 20-minute drive west of Joseph Stalin’s birthplace, Gori, and created a parallel world of shipping, processing and retailing the Caspian Sea oil. A police video showed rows of large tanks used to collect the stolen oil. A makeshift tap was installed on the body of the Baku-Supsa pipeline to turn off and on the flow into its new, mini- branch. From Ruisi, the oil was loaded onto trucks and camouflaged as vegetables – cabbage, to be exact, police said – and driven about 90 minutes east to the capital, Tbilisi. A makeshift refinery there then turned the cabbage-concealed crude into petroleum products.

Recent moves in oil prices -- Jim Hamilton - Today I discuss the factors that brought oil prices so far down and more recently back up.  World oil production was essentially stagnant for seven years beginning in 2005. Field production of crude oil averaged 73.9 million barrels a day in 2005 and averaged 74.7 mb/d in 2011. That plateau was followed by a dramatic surge in world production of 3.1 mb/d between January 2012 and January 2015. More than all of that increase can be accounted for arithmetically by the 3.2 mb/d increase in U.S. production, spurred by horizontal fracturing of shale formations. Net production outside the U.S. actually decreased 100,000 b/d during these 3 years, though far from uniformly across producing countries, with 800,000 b/d increases each from Iraq and Canada helping to offset production declines in places like Libya, Iran, and Mexico. U.S. production continued to rise in the first few months of last year, but fell almost 400,000 b/d between March and November to end the year about where it began. The EIA’s Drilling Productivity Report model predicts that field production from the major U.S. shale plays will have fallen another 400,000 b/d from November values by April. But despite the situation in the U.S., world production of crude oil increased another 1.1 mb/d in the first 11 months of 2015. Here the big story has been Iraq, whose production was up almost 1 mb/d even though ISIS continues to control large non-oil-producing sections of Iraq.  Saudi production was 400,000 b/d higher in November than in January, though that just leaves its current monthly production within the range we’ve been typically seeing over the last three years. .Another key factor keeping oil prices low has been Iran. The country claims to have increased production by 400,000 b/d since sanctions were lifted in January, and has plans for further increases. However, so far Iran has been encountering some logistical problems in selling the oil. It’s important to emphasize that it’s not just developments on the supply side that have been driving recent oil price movements. The graph below compares the prices of a number of commodities over the last 16 months, which share not only the same dramatic downward trend, but also all experienced price rallies in the spring of last year and again over the last 2 months. This is true not just for the dollar price of copper, silver, lumber, and cattle, but for the dollar price of a euro as well.The recent comovement between the dollar price of oil and the dollar price of the Chinese yuan is even more striking, as plots of the cumulative percent change (measured in 100 log points) in those two series since Sept 2014 demonstrate.

Oil Prices and the Global Economy: It’s Complicated: Oil prices have been persistently low for well over a year and a half now, but as the April 2016 World Economic Outlook will document, the widely anticipated “shot in the arm” for the global economy has yet to materialize. We argue that, paradoxically, global benefits from low prices will likely appear only after prices have recovered somewhat, and advanced economies have made more progress surmounting the current low interest rate environment. ... This outcome has puzzled many observers including us at the Fund, who had believed that oil-price declines would be a net plus for the world economy, obviously hurting exporters but delivering more-than-offsetting gains to importers. The key assumption behind that belief is a specific difference in saving behavior between oil importers and oil exporters: consumers in oil importing regions such as Europe have a higher marginal propensity to consume out of income than those in exporters such as Saudi Arabia. ... To address this question, the forthcoming April 2016 World Economic Outlook compares 2015 domestic demand growth in oil importers and oil exporters to what we expected in April 2015—after the first substantial decline in oil prices. The lion’s share of the downward revision for global demand comes from oil exporters—despite their relatively small share of global GDP (about 12 percent). But domestic demand in oil importers was also no better than we had forecast, despite a fall in oil prices that was bigger than anticipated. ...[...]Persistently low oil prices complicate the conduct of monetary policy, risking further inroads by unanchored inflation expectations. What is more, the current episode of historically low oil prices could ignite a variety of dislocations including corporate and sovereign defaults, dislocations that can feed back into already jittery financial markets. The possibility of such negative feedback loops makes demand support by the global community—along with a range of country-specific structural and financial-sector reforms—all the more urgent.

How Oil Price Volatility Explains These Uncertain Times -- The numbers say that these should be the best of times for America. The economy has been growing for five years. Unemployment is low. Inflation is almost nonexistent and gas is cheap. Yet, many Americans feel deeply uneasy about their future prospects. Uncertainty is the catchword of the moment. This uncertainty is contributing to growing pessimism and anger – discontent that is no doubt a factor in the unsettled state of the 2016 Presidential race. If times are good, why do so many Americans believe that it is the worst of times? Have we become a nation of neurotics or is something real going on?  !n 2013, prior to the beginning of the 2014 collapse in oil price, I proposed that turbulence in the oil markets was on the way. In a subsequent essay in early 2015, I suggested that this instability in the oil markets would lead to a period of turmoil in the stock market in the coming year or so.There was no magic behind correctly foreseeing what unfolded in the oil and stock markets over the last two years. Indeed, the path to connecting the dots started with an observation that many readers have probably already made themselves – namely, that oil prices seemed to have been notably changeable or volatile over the last decade or so.In the following essay, I describe how I used math tools to dig into oil price volatility – discovering a repeating pattern of instability in global oil markets that has ticked like clockwork for at least the last 15 years. The identification of this rhythm within the volatile price of oil has taken some of the guesswork out of forecasting what may be ahead. It is my contention that the world has not seen a phenomenon of this type previously and that its emergence marks the rise of a new dynamic with potential to shape our economic and political fate. The uncertainty that many of us feel thus may be far from nebulous, but a shared hunch that history’s engines are shifting gears.

How The Brent/WTI Crude Futures Relationship Got Trickier  -- In January 2016 the ICE futures Exchange changed the expiration calendar for its flagship Brent crude contract. The March 2016 contract expired on January 29, 2016 under new calendar rules that stipulate expiration one month and one day prior to delivery. This was done belatedly to reflect a change in the assessment of the physical Brent market that was implemented back in January 2012. On paper the change is just an overdue action by ICE to properly align the timing calendar for their popular futures contract with the underlying physical market. But in practice - as we suggest in today’s blog, the change has significant impacts on the calculation and analysis of the commonly utilized spread between ICE Brent (the international benchmark crude) and the U.S. equivalent West Texas Intermediate (WTI) crude futures contract traded on the CME/NYMEX.   Note that this blog is primarily educational – describing the mechanism and impact of the new ICE Brent contract expiration rules on the analysis of the Brent/WTI spread.

The Current Oil Price Rally Is Reaching Its Limits -- Oil prices have climbed by about 50 percent from their February lows, topping $40 per barrel. But the rally could be reaching its limits, at least temporarily, as persistent oversupply and the prospect of new shale production caps any potential price increase.  U.S. oil production has steadily lost ground over the past two quarters, with production falling more than a half million barrels per day since hitting a peak at nearly 9.7 million barrels per day (mb/d) in April 2015. American oil companies have gutted their budgets and have put off drilling plans, with many projecting absolute declines in 2016.  That has sparked a renewed sense of optimism among oil traders. Moreover, supply outages in places like Iraq and Nigeria have also knocked at least a quarter of a million barrels per day offline, an unexpected disruption that put upward pressure on prices in March. Geopolitical unrest still has the ability to influence prices, even while the world is awash in oil. More oil bulls are piling on in anticipation of the April OPEC meeting, on an unfounded belief that the production freeze may actually have any material impact on global oil supplies.  But while oil traders have found some reasons to believe that oil prices are rising, there are just as many, if not more, data points to backup bearish sentiment. Storage levels in the U.S. continue to set records, hitting 523 million barrels for the week ending on March 11. Until inventories start to deplete in a significant way, oil prices will face a lot of resistance trying to break above $40 per barrel. Iran also continues to add production, albeit at a slower-than-expected rate. In fact, the rally to $40 was largely driven by speculation. As short bets peaked and started to unwind, traders closed out positions at a rapid clip, helping to push prices up by $12 to $13 per barrel in less than two months. The trend continued last week as hedge funds and other major money managers increased their net-long positions on crude by another 17 percent. Short positions are now at their lowest levels since last June. 

OilPrice Intelligence Report: Oil Prices Struggle To Move Beyond $40: Oil prices have held gains in recent days after rising to $40 per barrel, but the rally has struggled to move beyond that threshold. Terrorist attacks in Brussels on March 22, which early reports say killed more than 30 people, have spooked the markets as investors moved assets to safe havens. Oil prices were flat in early trading on Tuesday. Not all OPEC members will attend Doha meeting. With much of the energy world holding its breath for the production freeze meeting in Doha in April, OPEC’s Secretary-General said that not all members will attend the summit. “I hear that about 15 countries are going to attend. Maybe some of our members will not attend. Some of non-OPEC members will not attend but 15 or 16 countries are major producers and are not a bad number,” Secretary-General Abdallah Salem el-Badri said on March 21 in Vienna. The meeting is expected to cover the details of the production freeze, which Iran has already said it will not adhere to. . Venezuela’s state-owned oil company PDVSA is slated to receive a shipment of U.S. crude oil, which will be delivered by PetroChina in early April, according to Reuters.. Separately, PDVSA is expected to purchase 8 million barrels of U.S. and Nigerian crude oil. The Venezuelan company has begun importing light oil to dilute its extra heavy oil, a necessary step to help process it. PDVSA could end up importing around 120,000 barrels per day in the second quarter.

The Oil and Gas Fire Sale: How Bad Will Losses to Banks and Investors Be? - Yves Smith - You can tell things are going a bit pear-shaped when single stories in the business press are so meaty as to warrant posts all on their own. Today’s example is a Financial Times story, Oil and gas: Debt fears flare up, which gives a grim update on the wreckage in the wake of the energy price collapse, and how the damage to lenders has only started to play out.   We’ve been warning for some time, first of the froth in the junk bond market, and its particularly high exposure to energy concerns, and then the correction last year. We were also one of the few to argue that the “cheap gas will prop up the economy” would be offset, and likely more than offset, by the losses of high-paying oil and shale gas jobs and the impact of direct (energy company) and indirect (real estate loans in oil boom areas) lending losses on banks and investors. We further stressed that the energy price rebound was not going to happen in a mere six months, as was the almost universal consensus in early 2015, because shale gas players had strong incentives to keep pumping until their money sources cut them off. Indeed, while we recognized that issue (identified by the Financial Times’ John Dizard) as a key driver that was widely ignored, if anything, we underestimated that an analogous set of imperatives – the need to fund national budgets – would also lead energy producing nations to maintain production levels even at what they would have recently regarded as depressed prices. But what is new, and important, about the Financial Times article, is its effort to put parameters on the severity of the slump and how bad the collateral damage might be, particularly to financial players. Even though Mr. Market is feeling his spring oats, let us not forget that back in January, one of the causes for concern was European banks. It was widely recognized that on top of existing bad loans, the Eurobanks collectively were sitting on an estimated additional $100 billion in energy-related losses. Indeed, the pink paper addresses that concern by mentioning how Crédit Agricole, with the second largest energy debt exposure on the Continent, had to reassure investors, telling them 84% of its book was investment grade. It’s also worth remembering that the recent oil rally is unlikely to be a harbinger of more price appreciation soon. Stockpiles and oversupply remain large. Even the generally upbeat OilPrice warned yesterday that the market was driven lately by sentiment more than fundamentals.  I strongly urge you to read the Financial Times account in full. Key points:

Crude Drops On Yuuge Inventory Build -- Overall crude inventories rose for the 6th week in a row according to API. Despite draws in Gasoline, Distillates, and Cushing; Crude inventories surged 8.8mm barrels - the 2nd biggest weekly build in a year.API, according to RTRS:

  • Crude +8.796mm
  • Cushing -1.37mm (confirming Genscape's data)
  • Gasoline -4.3mm
  • Distillates -391k

This was a big draw in Cushing but appears to be dominated by the surge in overall inventories...

Wednesday, March 23, 2016 - Weekly petroleum statistics from EIA:

    • U.S. crude oil refinery inputs averaged over 15.8 million barrels per day during the week ending March 18, 2016, 176,000 barrels per day less than the previous week’s average.
    • Refineries operated at 88.4% of their operable capacity last week.
    • Gasoline production decreased last week, averaging 9.7 million barrels per day. Distillate fuel production decreased last week, averaging over 4.7 million barrels per day.
    • U.S. crude oil imports averaged 8.4 milli on barrels per day last week, up by 691,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 8.1 million barrels per day, 11.6% ab ove the same four-week period last year.
    • Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 415,000 barrels per day. Distillate fuel imports averaged 93,000 barrels per day last week.

Crude Oil Inventories Surge - Crude oil inventories surged by more than 9 million barrels this week, and that was more than triple what traders were expecting. While it is normal for crude oil stockpiles to rise at this time of year, the current pace of increase has been much more than normal. Total stockpiles are up at another multi-decade high and are currently more than 195 million barrels above the average for this time of year dating back to 1983. That’s 54% above average! To put the recent build in stockpiles into context, the chart below shows the rolling ten-week change in crude oil inventories since 1983. With this week’s build, total inventories have risen by 50 million barrels in the last ten weeks. For the current week of the year, the only year where stockpiles increased at a faster rate was last year, and the average ten-week rolling inventory change for this time of year is 14.6 million barrels.

Oil Pumps'n'Dumps As DOE Reports 2nd Biggest Inventory Build In A Year, Production Drops -- Following last night's API-reported yuuge build in crude of 8.8mm barrels (and draw in gasoline and Cushing - confirming Genscape's earlier report), DOE reports today an even bigger 9.36m barrel build - the 2nd biggest build in a year. Crude prices were confused as this massive build was offset by a drop in crude production to Nov 2014 lows and a big draw at Cushing... but for now Oil is extending losses. Finally we note that gasoline prices are now flat from January last year - DOE


U.S. Oil Takes Biggest Losses in a Month as Stockpiles Keep Growing - WSJ: Oil prices took some of their biggest losses of the last month on Wednesday as data showed U.S. stockpiles keep rising and production is holding strong, which thwarted recent bets that those trends may be winding down. Light, sweet crude for May delivery settled down $1.66, or 4%, at $39.79 a barrel on the New York Mercantile Exchange, the worst percentage loss since Feb. 23. Brent, the global benchmark, lost $1.32, or 3.2%, to $40.47 a barrel on ICE Futures Europe. Total commercial stocks of oil and refined fuels rose by 9.9 million barrels to 1.354 billion barrels as of Friday, the U.S. Energy Information Administration said. It is a record high, buoyed almost solely by crude, which added 9.4 million barrels for the week. That addition was more than three times the size of analysts’ expectations, and also outpaced industry estimates and a strong draw from gasoline stockpiles.The size of total combined stockpiles has taken on growing importance in recent weeks as traders around the world await the moment when high stockpiles start to decline. Both crude and refined fuel stockpiles have hit historic highs and they need to start falling before prices can rise substantially, according to several analysts. Total oil storage levels have now grown 10 out of the last 13 weeks, and the latest record dates back to 1990. Crude stocks alone hit 532 million barrels, a record of its own. In monthly data, which don’t line up exactly with the weekly data, inventories last exceeded 500 million barrels in 1930.  “Nothing’s really changed. The supply issue is going to continue to get worse.” Oil futures have spent more than a month going steadily upward, with total gains of more than 50%, their biggest rally in years. Much of that came from tightening markets in Europe, and talk of a coordinated output freeze from Russia, Saudi Arabia and some of the world’s other large exporters. But many traders have also been anticipating output cuts from U.S. producers, which have been slow to come despite prices being down about 35% from last year’s highs.

Scramble for oil storage extends, suggesting excess has room to run | Reuters: Trading houses are betting on oil markets remaining oversupplied for at least two more years even as crude prices stage a recovery driven by early signs of falling production. Traders such as Vitol, Gunvor and Glencore are looking to extend or lock in new leases on storage tanks for crude oil and refined products in key hubs as far out as the end of 2018, sources at storage firms and trading houses say. Storing oil in a heavily oversupplied market has been a cash cow for traders and oil companies in recent years as markets bet that future oil prices will be significantly higher than current ones, in what is known as contango. Ian Taylor, chief executive of top oil trader Vitol, said on Tuesday that "stocks of crude and products continue to build and these will weigh upon the market". Like other traders, Vitol has invested in recent years in storage, and last August acquired the other half of its VTTI storage subsidiary for $830 million. Oil prices have risen 30 percent since mid-February to around $40 per barrel, as global production shows signs of slowing, which has led to a significant narrowing of the crude contango despite a stock overhang of 300 million barrels. Crude oil has found more of a balance in recent weeks through supply disruptions in Iraq, Libya and Nigeria.  But refined oil products have not followed suit. Gasoline and blending components have been quietly building, squeezing the amount of storage left in Europe. U.S. gasoline stocks, when adjusted for current consumption, are just at the top of their 10-year range.

Oil Hits Critical Choke Point: Why "The Market Faces A Round Of Rapid Stockbuilds" -- One month ago, just as Cushing storage was rapidly approaching its operational capacity, we warned that Cushing (and increasingly all parts of PADD 2) is denying storage requests. We also said that overall PADD 2 inventories had risen to a new record high 155 million barrels...... hinting that it was just a matter of time before excess production would be shifted to other regions, most notably the Gulf Coast, or PADD 3. In the intervening month, this is precisely the dynamic we have observed, which culminated with today's weekly DOE announcement which saw not only a massive inventory build, one which surpassed the estimate threefold (surpassing yesterday's gargantuan API build in the process), but also has confirmed that oil storage is now shifting away from Cushing and PADD 2 to PADD 3 just as we expected, to wit:

  • PADD 1: East Coast +1.8
  • PADD 2: Midwest -0.1
  • PADD 3: Gulf Coast +9.0
  • PADD 4: Rocky Mount +0.1
  • PADD 5: West Coast -1.4

This confirms that the shift away from Midwestern storage to the Gulf Coast has begun in earnest, which was to be expected for a region that is already at operational capacity, even when netting out the excess oil that is being "exported" out of the US to Europe, Asia or Latin America. In fact, as shown in the chart below, with over 533 million barrels in storage, it is only a matter of time before oil overflows into swimming pools and household buckets.

Oil oversupply is getting worse despite recent price spike: The world is continuing to drown in an excess amount of oil and it’s getting worse. US oil stockpiles skyrocketed by 9.4 million barrels last week to 532.5 million barrels, according to figures released on Wednesday by the U.S. Energy Information Administration. Those levels are three times higher than analysts had expected. Last week crude climbed over $40 a barrel for the first time since early December. Prices have climbed under the assumption that major oil producers will freeze their output while US producers will cut back on drilling as low prices make their operations unsustainable. However, the latest EIA report shows that inventories continue to pile up in the short-term. “We are oversupplied. This price rally feels a little bit premature,” said Anthony Starkey, energy analysis manager at analytics firm Bentek Energy. Oil prices fell by 3% on Wednesday to $40.20 a barrel. The EIA said the US imported 8.4 million barrels of oil per day last week, up by nearly 700,000 barrels from the prior week.As US oil production has fallen, buyers continue to important an increasing amount of oil from over seas. Adding to the glut is Iran, which has promised to push up production by one million barrels per day in an attempt to earn back some of the market share it lost during several years of US economic sanctions.

Oil Drops To $40 Handle After IEA Warns Production Freeze Is "Meaningless" -- It appears The IEA has come to the same reasoning as we have been pointing out for weeks -"freezing" production at what is already the highest output levels ever is "meaningless." As Reuters reports, Saudi Arabia is the only country with the ability to increase output, a senior executive from the International Energy Agency (IEA) said on Wednesday. This reality check appears to have stalled crude's exuberant run as WTI pushed below overnight API "build" lows. As Reuters reports, a deal among some OPEC producers and Russia to freeze production is perhaps "meaningless" as Saudi Arabia is the only country with the ability to increase output, a senior executive from the International Energy Agency (IEA) said on Wednesday. Brent crude futures are up more than 50 percent from a 12-year low near $27 a barrel hit early this year, bouncing back after Russia and OPEC's Saudi Arabia, Venezuela and Qatar struck an agreement last month to keep output at January levels. Qatar has invited all 13 members of the Organization of the Petroleum Exporting Countries (OPEC) and major non-OPEC producers to Doha on April 17 for another round of talks to widen the production freeze deal. "Amongst the group of countries (participating in the meeting) that we're aware of, only Saudi Arabia has any ability to increase its production," said Neil Atkinson, head of the IEA's oil industry and markets division, at an industry event. "So a freeze on production is perhaps rather meaningless. It's more some kind of gesture which perhaps is aimed ... to build confidence that there will be stability in oil prices."

Why Oil Prices Are About To Plunge Again: 31 Million Barrels In Floating Storage Are Coming On Shore - One week ago, we wrote that as a result of the collapsing crude contango, oil tankers (such as the fully loaded Distya Akula which has been on anchor in the Suez Canal for one month unable to find a buyer for its cargo so it continues to wait) "will soon have to unload their cargo", in the process flooding the already oversupplied market with millions of barrels of crude oil, thus pushing the price of oil far lower. But how many millions of barrels, and how much lower will the price of oil go? For the answer we go to Deutsche Bank's Michael Huseh, who has done the calculations to get the answer. What he finds is that since the start of 2014, global floating storage inventory has ranged between 80 and 180 million barrels (Figure 1). According to estimates of the global VLCC fleet at the end of 2014, the potential storage capacity is implied to be 1169 million barrels. Adding Suezmax vessels would add 528 million barrels of capacity. After touching 186 million barrels in early March, inventories have begun to decline once more. Since the start of 2015, one can identify both periods when builds in floating storage have been associated with rising Brent prices, and also periods when draws in floating storage have been associated with falling Brent prices (Figure 2). Since the Arabian Gulf has represented much of the variability in floating storage inventory, one can also measure the incentives to add or withdraw from storage using Arabian Gulf tanker rates. South East Asia would be another valid candidate to measure economics, as floating storage inventories in that region have moved in a very similar fashion (Figure 3).

US rig count drops 12 this week to all-time low of 464  (AP) — The number of rigs exploring for oil and natural gas in the U.S. dropped 12 this week to 464, a record low amid continuing price woes in the energy industry. A year ago, 1,048 rigs were active. Houston-based oilfield services company Baker Hughes Inc. said Thursday 372 rigs sought oil and 92 explored for natural gas. Among major oil- and gas-producing states, Texas lost eight rigs, Oklahoma three, Alaska two and Kansas and Pennsylvania each dropped by one.   Louisiana gained two rigs and New Mexico one. Arkansas, California, Colorado, North Dakota, Ohio, Utah, West Virginia and Wyoming were unchanged. The U.S. rig count peaked at 4,530 in 1981. It previously bottomed out at 488 in 1999.

US Oil Rigs Resuming Slide, Drop By 15 In Past Week To New Record Low - After posting the smallest possible rebound in the past week, moments ago Baker Hughes reported that in the holiday shortened week (in which there was some extrapolation) the decline in US oil rigs has resumed, and as of this moment there were only 372 oil rigs operating in the US, down 15 in the past week, the lowest number in recent history. Offsetting the drop in oil rigs was a modest increase in nat gas rigs which rose by 3 in the past week; the result was that the drop in total US rigs was -12 to 464, a new record low in this 41 year-old series. Some further breakdown:


Oil has staged a modest rebound on this latest negative (for US GDP) news, pushing it to intraday high, over $1 higher than recent lows.

US oil closes at $39.46, ends week 5 pct lower: Oil prices pared losses on Thursday, but still posted their first weekly loss in over a month, pressured by record high U.S. stockpiles, weakening equity markets, and a strong dollar. The number of oil rigs operating in the United States fell by 15 in the previous week, oilfield services firm Baker Hughes reported Thursday. The rig count rose last week after 12 weeks of cuts. With crude futures losing as much as 6 percent since Tuesday's settlement — their biggest slide in two days since mid-February — analysts said the oil rally of the past five weeks that brought prices up from mid-$20 levels may be unraveling. U.S. government data on Wednesday showed crude stockpiles jumped 9.4 million barrels last week, three times more than forecast by analysts in a Reuters poll. A senior executive from the International Energy Agency, meanwhile, said a deal among a few OPEC producers and Russia to freeze production was likely to be "meaningless" as Saudi Arabia was the only one with the ability to raise output. U.S. crude futures settled down 33 cents, or 0.8 percent, at $39.46 a barrel. For the week, it lost about 5 percent, its first weekly loss since mid-February.

What Oil Production Freeze: Russia Just Revealed The Laughable Loophole In The OPEC "Agreement" -- The main catalyst that pushed the price of oil from a 13 year low in early February, when crude briefly traded in the mid-$20 to well over 50% higher less than one month later in one of the world's most furious short squeezes, was the recurring infatuation with the fabricated narrative that OPEC would if not cut production then, then at least freeze it.mWe mocked this, as recently as one month ago, when we wrote "About That "Oil Freeze": Russian Crude Production Sets New Post-Soviet Record In February" an article which was self-explanatory: ... according to calculations by Bloomberg's Julian Lee, Russian crude and condensate production just set new post-Soviet daily record of 10.92m bbl yesterday. He notes that the monthly estimate is based on daily data from Energy Ministry’s CDU-TEK for 1st 25 days, and applies the average rate over last week for final 4 days. And since this compares with a revised 10.91m b/d for January, it means that Russia took the production "freeze" seriously: by freezing at a new record high level of production. What was even more entertaining, is that the so-called "production freeze" came at a time when both Saudi Arabia and Russia, the two most important oil exporters in the world, were already producing crude at the highest recorded level - they couldn't produce more even if they wanted to. Then this so-called "freeze" took on a truly bizarre twist one week ago when we first heard what we thought at the time was a cruel rumor, namely that while OPEC production may indeed be frozen, there is absolutely no limitation on exports. In fact, the lower the domestic demand for oil, the greater (and in the case of Saudi Arabia and Russia, even more record) the exports would be:

Russia Can Technically Cut its Oil Output by 5%  - Rigzone -- Russian Deputy Energy Minister Kirill Molodtsov said on Thursday that it was "technically possible" to reduce the country's oil output by 5 percent.

Oil price war threatens US sense of energy security: Kemp - (Reuters) - The political economy of oil prices in the United States is complicated. The United States is the world's largest oil consumer and one of its biggest importers. But it is also a substantial producer with large oil and gas resources. And its oil is medium-cost, more expensive to produce than the large fields in the Middle East but cheaper than frontier areas like the Arctic. U.S. politicians tend to be happiest with mid-priced oil: not too expensive to upset motorists but not too cheap to threaten the survival of domestic production and increase dependence on imports. In the last century, the country has swung between confidence in its self-sufficiency and energy independence to extreme insecurity about its dependence on imported oil ("Oil scarcity ideology in U.S. national security policy", Stern, 2012). In recent years, the debate has been characterised by optimism, even complacency, about rising U.S. domestic production and falling reliance on imports, but that could easily change, as it has in the past. The shale revolution transformed America's sense of its energy security but it occurred thanks to high oil prices and a wave of technical innovation and entrepreneurship. The shale revolution had almost nothing to do with the political class, though politicians have been quick to claim the credit for an American success story. But just as rising prices and production banished concerns about import dependence, so falling prices and output could reawaken them if pushed too far ("Market madness: a century of oil panics, crises and crashes", Clayton, 2015). OIL IMPORTS RISING U.S. crude oil imports are rising for the first time for more than five years, a sign that Saudi Arabia is winning its war for market share against shale producers. In the week ending March 18, the United States imported nearly 8.4 million barrels per day of crude oil, according to the U.S. Energy Information Administration ( Weekly crude oil imports were the highest since July 2013 ("Weekly Petroleum Status Report", EIA, Mar 23).

Oil’s Decline Takes Toll on Saudi Conglomerate -- Saudi Binladin Group struggles with massive debt as government cuts funding for megaprojects. A construction conglomerate at the center of Saudi Arabia’s petrodollar-fueled economic boom is teetering under billions of dollars of debt, bankers and financial advisers familiar with the matter said, showing the strain of cheap oil on the kingdom and its companies.  The Saudi Binladin Group was once among the biggest beneficiaries of Saudi Arabia’s massive spending at home, paid for by the kingdom’s growing oil wealth. But in the past half year, it has hit hard times.  An executive at one of SBG’s subsidiaries said the parent company hadn’t provided any funding to the unit for more than six months, triggering a funding crunch that has stalled longer-term plans. Several subcontractors and suppliers involved in Binladin projects also haven’t been paid for months, according to the bankers and advisers who know about the company’s finances.

Thanks To Fracking, OPEC’s Chickens Are Coming Home To Roost | Heartlander - Fracking has fundamentally altered the way oil and natural gas are produced. Rather than investing billions of dollars and five to 10 years in large offshore oil projects or drilling in the Arctic, oil companies are beginning to flock to shale oil fields, which can typically be drilled within 20 days and cost a few million dollars per well. Fracking costs substantially less time and money compared to the larger drilling projects oil companies have been investing in for decades, and as a result, the wheels on many of these larger projects have already started to fall off. Foreign producers are now failing to complete 80 percent of their megaprojects on time and without going over budget, which bodes poorly for nations that are highly dependent upon oil revenues. In an effort to drive many U.S. oil producers out of business, OPEC has chosen not to decrease its production, thereby allowing the market price of oil to continue to decline. OPEC hopes it can destroy its competition and then reinstitute its low-production policies to drive prices back up, but according to Daniel Yergin, a leading scholar on energy and geopolitics, this strategy will ultimately be unsuccessful. According to Yergin, “It is impossible for OPEC to knock out the U.S. shale industry though a war of attrition even if it wants to, and even if large numbers of frackers fall by the wayside over coming months. Mr. Yergin said groups with deep pockets such as Blackstone and Carlyle will take over the infrastructure when the distressed assets are cheap enough, and bide their time until the oil cycle turns. The management may change and the companies may change but the resources will still be there.” As oil prices begin to modestly recover and technological advancements continue to make shale oil less expensive to produce, oil prices will likely be tempered by shale drillers, who can bring new supplies to the market faster and cheaper than conventional oil producers. This is bad news for the many oil-exporting counties who would likely face the prospect of economic, financial, or social unrest if low oil prices persist, such as Algeria, Brazil, Ecuador, Nigeria, Russia, and Venezuela. The problem with OPEC’s brand of socialism is that oil money inevitably runs out; eventually, innovation always defeats despotism.

An Output Freeze Is Still The Big Red-Herring For Oil -  The way things are shaping up on the oil price panic barometer, 17 April is now a D-Day of sorts for the industry. It’s the day both OPEC and non-OPEC countries will (reportedly) sit down together in Doha, Qatar, to work towards an output freeze deal. OPEC President Qatar will host the meeting as a follow-up to a late February meeting that was attended by Qatar, Saudi Arabia, Russia and Venezuela—when the initial idea of an output freeze to January levels was bandied about, and that the idea is being “increasingly supported” by Saudi Arabia and Russia. “It is worth noting that the earlier Doha meeting of February 16 has changed the sentiment of the oil market and put a floor under the oil price. This has triggered a broad and intensive dialogue between all oil producers out of the conviction that current oil prices are not sustainable,” according to a Qatari Energy Ministry statement.But now that prices have somewhat rebounded to the $40 level—up 30 percent or so since last month when the output freeze was first brought up—what is everyone expecting from Doha? While the meeting scored a bit of a coup by winning a Saudi commitment to attend, there has been some undermining of things by Russian Energy Minister Alexandar Novak, who said yesterday that the meeting would only “probably” be held in April. The official line is that the supporters of the freeze are looking for commitments from more producers, both within OPEC and outside of OPEC. But those who have committed so far are doing so contingent on others committing as well. Venezuela—the hardest hit—is fully committed. Qatar has been lobbying for the freeze from the onset. Kuwait is committed. But Iraq, which represents the strongest supply growth among OPEC countries—is not keen on the idea, and Iran, fresh off sanctions, has said it would commit only after it reached a production level of 4 million barrels per day. That’s not going to be April.

OPEC's Badri Hopes For Positive Producer Meeting In April  Iran may join other oil producers planning to freeze production to support prices at a later date, OPEC's secretary general said on Monday, since the country is seeking to raise its exports. Producers from the Organization of the Petroleum Exporting Countries and non-members are due to meet on April 17 in Qatar discuss the output freeze. But Iran is seeking to increase exports, following the lifting of Western sanctions in January. "I hope the result of the meeting will be positive," Abdullah al-Badri said at a news conference in Vienna. "They are not objecting to the meeting but they have some conditions for the production and maybe in the future they will join the group," he said of Iran. The comments are a further sign that Iran's position will not derail a wider agreement on the output freeze. Gulf oil exporters including Saudi Arabia had previously maintained that all major producers should participate.

Saudi Arabia will freeze oil output without Iran, says Opec delegate -- Saudi Arabia is prepared to join an oil output freeze next month without Iran taking part, a senior Opec delegate said, making a deal among big producers more likely. Some of the world’s largest oil nations will meet in Doha on April 17 to discuss restraining output. The move follows a provisional agreement reached in February by Saudi Arabia, Russia, Qatar and Venezuela to keep production at January levels. “There is agreement from many countries to go along with a freeze,” said the delegate. “Why make it contingent on Iran?” Last month Gulf officials suggested any deal was conditional on Iran, Saudi Arabia’s Opec rival, taking part alongside other big producer countries. Iran has sought to increase production and exports after the lifting of sanctions against its oil industry in January. Iranian officials have shown no willingness to back any deal that would result in restricting its output. Questions have been raised among Gulf delegates about Iran’s ability to increase output, suggesting this could be one reason to proceed without it. “Despite all the bragging, we have yet to see what Iran can do,” said the delegate. Abdalla El-Badri, Opec secretary-general, said on Monday at a news conference in Vienna: “Maybe in the future [Iran] will join the group. They have some conditions about their production.” About 15 Opec and non-Opec countries — accounting for two-thirds of global oil output — supported an oil freeze, Mohammed Bin Saleh Al-Sada, Qatar’s energy minister, said last week. Some market analysts have said an oil freeze at January levels would have a limited impact on supply and demand balances because many producer countries are producing near record levels. But a provisional deal has helped to support prices and reverse negative market sentiment towards oil. Brent crude was at $41.72 in afternoon trading on Tuesday, up 54 per cent since a 2016 intraday low of $27.10 a barrel in January.

“Families Were Blown Up” — Scenes From a Saudi-Led Bombing in Yemen - WE SAW DEADLY airstrikes on a market last Ramadan, not far from here, but this attack was the deadliest. There was an earlier attempt to bomb this market over two months ago — you can still see the crater over there, where a dud missile is still buried. But this time, two explosions destroyed the marketplace at noon, when people usually buy their food and khat [a leaf that is a mild stimulant when chewed]. This was the only marketplace in the entire district and had recently become larger, especially after many storekeepers and retailers had to escape from neighboring areas, such as Haradh. People bought a wide range of food in this market; they used to buy and sell livestock, and even bought clothes. There was a big hangar where khat was sold. Around 12 p.m., the first airstrike hit that hangar. The second hit another hangar soon afterward, where a lot of food was sold. I was in my spot, selling sacks of flour. The market was bustling at the time, with a large number of people. There was a lot of noise coming from the electricity generators and motorcycles, so I heard no warplane. Usually they fly over Mastaba almost every day — you can hear now, this warplane circling overhead. At noon, when the first explosion took place, I nearly passed out, falling on the ground. The other explosion followed right after the first one. Then, all of a sudden, I found myself jumping to my feet and running ahead. I stopped when I got to the opposite side of the market, only to see bodies scattered all over the place. There were two big craters where the bombs hit — nearly full of ripped and charred bodies, and blood was everywhere. Survivors were in a frenzy; rescuers began to pile up the bodies, while the wounded were rushed to hospitals.

Brussels attacks: How Saudi Arabia's influence and a deal to get oil contracts sowed seeds of radicalism in Belgium --  There are many reasons why Belgium has become a hotbed of radical Islamism. Some of the answers may lie in the implanting of Saudi Salafist preachers in the country from the 1960s. Keen to secure oil contracts, Belgium’s King Baudouin made an offer to Saudi King Faisal, who had visited Brussels in 1967: Belgium would set up a mosque in the capital, and hire Gulf-trained clerics. At the time, Belgium was encouraging Moroccan and Turkish workers to come into the country as cheap labour. The deal between the two Kings would make the mosque their main place of worship.Brussels already had the perfect place. An oriental pavilion designed by Belgian architect Ernest Van Humbeek had been built in the capital’s Cinquantenaire park in 1879, but was falling into disuse. The 1967 deal gave the Saudis a 99-year, rent-free lease. The pavilion was refashioned by the Saudis, opening in 1978 as the Great Mosque of Brussels, as well as the seat of the Islamic and Cultural Centre of Belgium (ICC). Although the mosque was treated as the official voice of Muslims in Belgium, its radical Salafist teachings came from a very different tradition to the Islam of the new immigrants. Today, there are around 600,000 people of Moroccan and Turkish origin in Belgium, a country of 11 million. “The Moroccan community comes from mountainous regions and rift valleys, not the desert. They come from the Maliki school of Islam, and are a lot more tolerant and open than the Muslims from other regions like Saudi Arabia,” says George Dallemagne, a Belgian member of parliament for the centre-right CDH, an opposition party. “However, many of them were re-Islamified by the Salafist clerics and teachers from the Great Mosque. Some Moroccans were even given scholarships to study in Medina, in Saudi Arabia.”

Explosive Accusation: Belgium Had "Advance And Precise" Warning About Terrorist Attacks, Did Nothing -- In what, if true, is the most incendiary allegation of the day, Israel's Haaretz newspaper reports that Belgian security services and other Western intelligence agencies had "advance and precise intelligence warnings" regarding Tuesday’s bombings. According to the paper, "the security services knew, with a high degree of certainty, that attacks were planned in the very near future for the airport and, apparently, for the underground railway as well." Here is the full Haaretz report: The Belgian security services, as well as other Western intelligence agencies, had advance and precise intelligence warnings regarding the terrorist attacks in Belgium on Tuesday, Haaretz has learned. The security services knew, with a high degree of certainty, that attacks were planned in the very near future for the airport and, apparently, for the subway as well. Despite the advance warning, the intelligence and security preparedness in Brussels, where most of the European Union agencies are located, was limited in its scope and insufficient for the severity and immediacy of the alert. As far as is known, the attacks were planned by the headquarters of the Islamic State (ISIS) in Raqqa, Syria, which it has pronounced as the capital of its Islamic caliphate

REPORT: ISIS has trained 400 fighters to attack Europe - The Islamic State group has trained at least 400 fighters to target Europe in deadly waves of attacks, deploying interlocking terror cells like the ones that struck Brussels and Paris with orders to choose the time, place and method for maximum carnage, The Associated Press has learned. The network of agile and semiautonomous cells shows the reach of the extremist group in Europe even as it loses ground in Syria and Iraq. The officials, including European and Iraqi intelligence officials and a French lawmaker who follows the jihadi networks, described camps in Syria, Iraq and possibly the former Soviet bloc where attackers are trained to attack the West. Before being killed in a police raid, the ringleader of the Nov. 13 Paris attacks claimed to have entered Europe in a multinational group of 90 fighters, who scattered "more or less everywhere." But the biggest break yet in the Paris attacks investigation — the arrest on Friday of fugitive Salah Abdeslam— did not thwart the multipronged attack just four days later on the Belgian capital's airport and metro that left 31 people dead and an estimated 270 wounded. Three suicide bombers also died. Just as in Paris, Belgian authorities were searching for at least one fugitive in Tuesday's attacks — this time for a man seen on security footage in the airport with the two suicide attackers. The fear is that the man, whose identity Belgian officials say is not known, will find Abdeslam's path instructive. After fleeing Paris immediately after the November attacks, Abdeslam forged a new network back in his childhood neighborhood of Molenbeek, long known as a haven for jihadis, and renewed plotting

ISIS, oil & Turkey: What RT found in Syrian town liberated from jihadists by Kurds (EXCLUSIVE) - An RT Documentary crew filming in northern Syria has seen Islamic State (IS, ISIS/ISIL) documents abandoned by retreating terrorists and found by the Kurds that, along with captured IS recruits, provide a stunning insight into IS oil trade. Trends Islamic State, Syria unrest, Syria-TurkeyShortly after the outbreak of the Syrian war, IS became a game-changer in Iraq and, in particular, Syria. Beheadings on camera, mass killings, and enslavement, as well as apparent connections to the Paris and Brussels attacks had become synonymous with the terror group, giving it wide publicity. Running a viable militant organization with such remarkable capabilities would be impossible without some logistical and financial support from the outside. Turkey, which has been actively engaged in the Syrian war since the outset, has repeatedly denied claims that it is aiding IS. However, while Ankara insists that it is the jihadist group’s sworn enemy, facts on the ground often tell a different story.RT has spoken to several witnesses who were involved in Islamic State’s trade activities and accessed the terror group’s documents, which provide insight into how and where foreign militants enter Syria to join the terrorist “state.”The RT Documentary team did most of its filming in the town of Shaddadi, located in the Syrian province Hasakah, which has been partly overrun by IS jihadists. Following the liberation of Shaddadi, which is home to some 10,000 people, RT filmed Kurdish soldiers walking around what used to be the homes of IS fighters and examining piles documents that had been left behind. Some of the files seized at the scene turned out to be detailed invoices used by IS to calculate daily revenues from their oil fields and refineries, as well as the amount of oil extracted there. All the documents had Islamic State’s symbol at the top.

US Marines Enter Ground Combat in Iraq to Defend Oil Fields - Even as Pentagon officials have sought to emphasize their claims of ISIS being “on the run,” ever more US ground troops are being deployed into Iraq to try to cope with ISIS offensives, with the battle of Makhmur leading to the introduction of US Marines in front-line combat roles. Officials are trying to downplay the operation as “force protection” for Iraqi ground troops, who have been massing in the area in an effort to ultimately launch an attack on the ISIS-held city of Mosul, not far away. The explanation is unsatisfying for several reasons, but primarily because this “tactical assembly area” already includes thousands of Iraqi troops and Kurdish Peshmerga, and these are the same troops who are supposed to attack Mosul. Yet these troops are apparently unable to even hold Makhmur, let alone advance toward Mosul.The Makhmur District is also a key to holding oil fields around Kirkuk, and the ISIS offensive is seen by many analysts as part of an effort to ultimately regain control over those lucrative oil fields, and have been “outgunning” the thousands of Iraqi troops in the area. Whether they’re trying to save Iraqi ground troops who still can’t stand up to ISIS, or save oil fields, however, the latest escalation puts US troops even further in harm’s way, and has put the war even further afield from the “no boots on the ground” affair initially promised by the Obama Administration.

U.S. Indicts 7 Iranian Hackers For Cyber Attacks On Banks, New York Dam: (Reuters) - The Obama administration on Thursday announced the indictment of seven Iranian hackers for a coordinated campaign of cyber attacks on dozens of U.S. banks and a New York dam from 2011 to 2013, signaling an effort by officials to more publicly confront cyber crime waged on behalf of foreign nations. The indictment, filed in a federal court in New York City, described the suspects, who live in Iran, as "experienced computer hackers" believed to have been working on behalf of the Iranian government. The move marks the first time the U.S. government has charged individuals tied to a nation-state with attempting to disrupt critical infrastructure, a vulnerability that security researchers have grown increasingly concerned about in recent months. Separately, the U.S. Treasury Department blacklisted two Iranian companies on Thursday for supporting Iran's ballistic missile program and also sanctioned two British businessmen it said were helping an airline used by Iran's Revolutionary Guards. The charged hackers were identified as Ahmad Fathi, Hamid Firoozi, Amin Shokohi, Sadegh Ahmadzadegan, Omid Ghaffarinia, Sina Keissar and Nader Seidi, all citizens and residents of Iran. They are accused of conspiracy to commit computer hacking while employed by two Iran-based computer companies, ITSecTeam and Mersad Company. Firoozi is additionally charged with obtaining and abetting unauthorized access to a protected computer.