Sunday, March 13, 2016

US rig count at a record low while US oil stores at a record high, & global rigs for February


well, we've finally done it:

March 11 2016 rig count

never before in the history of the US oil and gas industry was there so little drilling going on as there was in the week just ended...the graph above, from an article on this week's rig count at Zero Hedge, shows the total count of rotary drilling rigs running in the US over the past 41 years of Baker Hughes' Excel formatted records; showing that, over that span, we hit a new record low for drilling this own scan of the static Baker Hughes typewritten records revealed the that rig count was at least twice today's count in the previous recorded decade going back to 1968, which closed the year with an average of 1569 rigs active in the US, and the highly respected Oil & Gas Journal says this may be the lowest rig count since the infancy of US oil and gas industry in the mid-19th century, ie, back to "the early part of the Pennsylvania oil boom" in the 1860s...

this has been a long time you know, we've been tracking the Baker Hughes rig count since late 2014 as the best available metric on how much drilling, and how much hence visible environmental damage, was being done by the oil and gas industry, as expensive and disruptive fracking extraction techniques were slowly being pressured by low prices brought on by easy to extract crude supplies from the OPEC countries....9 of the rigs that had been running last week were shut down this week, leaving 480 rigs still working; that eclipsed the previous record low rig count of 488 that had been set on Apr. 23, 1999, and was down by three-fourths from the recent high of 1920 rigs that were drilling on Dec. 5th, 2014, a week after the OPEC meeting that opened the spigots and crashed the oil markets...the all time record high U.S. rig count was set on December 28, 1981 at 4,530, when all the drilling being done was with conventional vertical drilling, which you can also see on the chart above...6 of the rigs pulled out this week had been drilling for oil, leaving 386 oil rigs still working, while a net of 3 rigs which had been targeting natural gas were also pulled out, leaving just 94 gas rigs still active...those numbers were down from the 866 oil rigs and 257 gas drilling rigs that were deployed on March 13th of last year, 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... 

obviously, oil & gas prices that have remained well below what companies needed to break even in most areas of the US have been responsible for this pullback in the graph above, we can see two distinct recent periods where the count of drilling rigs active in the US exceeded 2000; the first, in the span between 2006 and 2008, was driven by excessively high prices for natural gas...our long term gas price chart indicates that natural gas prices spiked to over $14 per mmBTU in late 2005, and stayed above $6 per mmBTU throughout the next few years, to spike again over $13 in 2008....most of that period saw more than 1400 active rigs drilling for natural gas each week, and the count of working natural gas rigs subsequently peaked at 1606 rigs on August 28 2008 and again on September 12th of that year...the excess supply of gas brought on by that drilling drove the price of natural gas to below $3 mmBTU by early 2009, and as a result of those low prices, many drillers quit and the gas rig count fell to 665 by midsummer of that year...a return to natural gas prices over $5 brought on the fracking boom of 2010, and then oversupply once again drove natural gas prices below $2 during the mild winter of early 2012, which subsequently knocked the gas drilling rig count back to as low as 413 later that year...with natural gas prices seldom above $4 since, drilling for gas has slowed gradually since, and fell from 162 rigs at the end of 2015 as natural gas prices hit new lows almost every week this should be instructive that the natural gas rig count was over 1600 eight year ago, just as the oil rig count was over 1600 in 2014, and that the natural gas rig count done nothing but gone down since..

deployment of rigs drilling for oil has responded to the price of oil in a similar manner...the chart below, from the same Zero Hedge article cited previously, shows the recent oil rig count in blue superimposed over a chart of what the price of the US benchmark WTI oil was 3 months earlier; the correlation between the price of oil and the number of oil rigs deployed 3 months later is pretty the hard to read metrics on the side of the graph, it shows that the then current price of oil was at $38.63 a barrel up, more than 40% from the lows hit in January... oil prices closed this week at $38.50 a barrel, up more than 7% from last weeks closing price of $35.92...a number of drillers who have left wells uncompleted recently have already said they'd be back to complete those wells if oil hits $40 a barrel again...

March 11 2016 oil rig count vs WTI price

The Latest Oil Stats from the EIA

despite the record low oilfield activity, output from those fields was virtually unchanged this week, while imports of crude fell from the 2 year high we saw last week, but not enough to keep our glut from increasing again, as the amount of crude we added to storage rose by another 3.9 million barrels to yet another record high...this week's Energy Information Administration data showed that our field production of crude oil rose by 1,000 barrels per day, from 9,077,000 barrels per day during the week ending February 26th to 9,078,000 barrels per day during the week ending March 4th...that was still 3.1% below the 9,366,000 barrels per day we produced during the first week of March last year, and, except for the prior week, the lowest our oil production has been since November 2014...

at the same time, our imports of crude oil fell by 244,000 barrels per day from the previous week's two year high, but we still imported oil at the rate of 8,048,000 barrels per day during the week ending March 4th, down from 8,292,000 barrels per day during the week ending February 26th...those imports were 18.5% higher than the 6,793,000 barrels per day we were importing during the first week of March last year...however, since our oil imports are too volatile on a weekly basis for such a comparison to give us a good sense of the year over year change, the weekly Petroleum Status Report (62 pp pdf) reports a 4 week moving average of imports, which showed our oil imports have now averaged over 8.0 million barrels per day over the last 4 weeks, 12.5% above the same four-week period last year... 

with the newly added domestic supply thus down a bit from what we added last week, refineries continued to pick up the pace, as they processed 15,911,000 barrels per day during the week ending March 4th, 59,000 barrels per day more than the previous week’s average, as the US refinery utilization rate rose to 89.1%, up from the 88.3% refinery utilization rate during the week ending February 26th...during the same week a year ago, refineries were operating at 87.8% of capacity, and they were processing 15,300,000 barrels of crude oil per day, so despite being in the process of switching over to summer blends of fuels, our refineries are 4.0% ahead of where they were last year at this time...

with more crude being refined, our refinery production of gasoline rose by 255,000 barrels per day to 9,580,000 barrels per day during week ending March 4th, up from 9,335,000 barrels per day output during week ending February 26th, and 4.5% more than the 9,165,000 barrel per day gasoline production we saw during the week ending March 6th last year.... meanwhile, our output of distillate fuels (ie, diesel fuel and heat oil) fell by 57,000 barrels per day to 4,744,000 barrels per day during week ending the 4th, which was also down by 56,000 barrels per day from our distillates production of 4,800,000 barrels per day during the same week of 2015...

however, even with the increase in gasoline production, as well as a 111,000 barrel per day increase in gasoline imports, there was an even larger increase of 290,000 barrels per day in demand for that gasoline, and as a result we saw another drop of our gasoline stores, as our gasoline stockpiles fell by 4,526,000 barrels from last week to 250,463,000 barrels as of March 4th...those stores were still 4.4% higher than the 239,873,000 barrels of gasoline that we had stored at the same time last year, which were at the time the highest in years, and thus still well above the average range of gasoline stores for the beginning of March….at the same time, our distillate fuel inventories also fell, decreasing by 1,119,000 barrels to a total of 162,478,000 barrels as of March 4th.....but because of the seasonably mild weather, that was a smaller drawdown for heating than normal for this time of year, and our stocks of distillates remained above the upper limit of the average range for this time of year, measuring 29.5% greater than the 125,503,000 barrels of distillates we had stored during the same week last year.. 

so while we didn't have any new records for stored gasoline or any other refined products, our high level of imports still left an excess crude in the Gulf Coast states over what was refined, and left crude in the Midwest as coastal refineries processed a result, our stocks of crude oil in storage, not counting what's in the government's Strategic Petroleum Reserve, rose once again to a new record of 521,861,000 barrels as of March 4th, up by another 3,880,000 barrels from the record 517,981,000 barrels we had stored at the end of the prior week, and 16.3% higher than the then record of 448,886,000 barrels of oil we had stored in the same week of 2015, which itself was 21.3% higher than the 370,002,000 barrels we had stored at the end of the same week of 2014...we've now increased our inventories of crude oil by 39.3 million barrels over the last 8 weeks, setting consecutive new records for oil stored in the US in each of the last 4 of them...

Details on this week's US rig count

as we noted earlier, this week's total rig count was down 9 rigs to 480, with rigs drilling for oil down 6 to 386, and rigs drilling for natural gas down 3 to 94...of those net totals, Baker Hughes also reported that two platforms in the Gulf of Mexico were set up and started drilling during the week ending March 11th, so the Gulf rig count is now back up to 26, which is still down from 46 working in the Gulf and down from a total of 48 drilling offshore as of March 13th a year ago...there was also a rig set up on an inland lake in Louisiana, so there are now 3 rigs drilling through inland waters, all in Louisiana, down from the 8 that were set up on inland waters a year earlier... a net of 14 horizontal drilling rigs were stacked this week, cutting the count of active horizontal rigs down to 375, which was also down from the 849 horizontal rigs that were in use the same week last year, and down from the recent record of 1372 horizontal frackers that were drilling on November 21st of addition, 3 vertical rigs were also taken out of service, leaving 55, down from the 166 vertical rigs that were drilling last year at this time...however, 8 directional rigs were redeployed, bringing the directional rig count back up to 50, which was still down from the 110 directional rigs that were in use at the end of the same week a year ago...

of the major shale basins, the large Permian basin of west Texas and eastern New Mexico once again saw the largest decrease, as they were down 6 rigs to 152 rigs as of March 11th, which was down from the 311 rigs deployed in the region a year addition, the Eagle Ford of southern Texas was down 3 rigs to 43 this week, which was down from the 146 rigs that were working the Eagle Ford a year earlier, and the Granite Wash of the Oklahoma-Texas panhandle region was down 2 rigs to 8 this week, and down from 26 rigs in the basin a year ago...single rigs were also pulled out of the Utica shale of Ohio and the Williston basin of western North Dakota, which left 11 in the Utica, down from 33 a year ago, and left 32 in the Williston, down from 104 a year ago...meanwhile, an additional rig was added in the Mississippian of southwest Kansas, bringing the count there up to 8, down from 42 a year earlier, while 3 rigs were added in the Marcellus shale of the northern Appalachians, which is now back up to 31, but still down from the 63 rigs that were working there last March 13th...

not surprisingly, the state count tables showed that Texas saw the largest decrease in active rigs, as they were down 12 rigs to 215, which was down from the 512 rigs working the state the same time last year...Oklahoma also got rid of 3 rigs, leaving 67, down from 134 active rigs a year earlier...corresponding with the basin losses, single rigs were also pulled out of Ohio and North Dakota, leaving Ohio with 11 rigs still drilling, down from 31 rigs a year earlier, and leaving North Dakota with 32 rigs, down from 101 rigs a year earlier...a rig was also pulled out of Kentucky, which now has just 1 rig remaining, down from 2 rigs a year ago...on the other hand, both Pennsylvania and Louisiana saw 3 rigs added this week; that brought Pennsylvania back up to 19 rigs, still down from the year ago count of 47, and brought Louisiana, where the Gulf rigs were allocated, back up to 49 rigs, still down from 93 rigs a year earlier...two rigs were also added in Kansas, where they now have 9 drilling, down from 14 a year earlier, and single rigs were added in California, Mississippi and Utah...that left California with 7 rigs, down from 14 a year ago, left Mississippi with 2 rigs, down from 4 rigs a year ago, and made for the only active rig still working in Utah, which had 8 working the state last year at this time...

International Rig Count for February

coincidentally, this week also saw the monthly release of the global rig count for February, so we should be able to get an idea how the record low US rig count compares with what's going on elsewhere....unlike the weekly count, the monthly Baker Hughes international count presents an average of the number of rigs running in each country for the month, rather than the total of those drilling at month end...February saw an average of 1,761 rigs drilling for oil and natural gas around the globe, which was down from 1,891 rigs that were drilling globally in January, and down from the 2,986 rigs that were deployed globally in February of last year...once again, the lion's share of the 130 rigs that were pulled out worldwide came from the US, where the February count was down 122 from January's 532 rigs, and down from the 1348 rigs that were active in the US in February of 2015...but despite even lower prices for product than in the US, Canadian drillers still added 19 rigs for the month and averaged 211 in February, still down from the 363 drilling rigs that were deployed in Canada in February last year..

the Middle East saw rigs pulled out for only the second time in the last 7 months, as the region was down 3 rigs to 404, which was also down from the 415 rigs deployed in the Middle East a year earlier...on net, those reductions came from offshore platforms, as the region's offshore rig count fell from 55 in January to 50 in February, which was still up from 48 offshore platforms working in the Middle East a year ago...the big pullback in Middle East drilling was concentrated in Egypt, where they idled 7 rigs and hence had 35 remaining active, which was also down from 43 rigs in Egypt a year earlier...Qatar shut down 3 rigs; they now have 6 active, down from 10 a year earlier...and the Pakistanis also idled two rigs, and now have 21 active, down from 23 both last week and a year ago...the Saudis, on the other hand, added 4 rigs to bring their total active drilling rig count up to 128, up from the 124 rigs that were drilling in the Kingdom both last week and last February...the Kuwaitis also deployed an additional three rigs and averaged 43 rigs in February, which was still down from the 51 rigs they had deployed in February a year ago...

meanwhile, the Latin American countries reduced their rig count by 6 to 237 rigs, after idling 27 rigs in January, 14 rigs in December, 10 rigs in November and 27 rigs in October, as that regional count is now down from a total of 355 rigs, which included 72 offshore rigs, that were working in February of 2015....once again, Argentina saw the largest drilling pullback, as they were down by 7 rigs to 65, which was down from the 106 rigs that were in use in Argentina a year ago...Mexican drillers pulled out 4 rigs, leaving 39, which was down from the 63 rigs that were drilling in Mexico last February...on the other hand, Ecuador added 3 rigs and now have 4 active, which is still down from the 19 rigs that were drilling in Ecuador a year ago, and Venezuela added 2 rigs and now have 69 working, again down from the 72 rigs that were working in Venezuela a year earlier...

elsewhere, the Asia-Pacific region had 182 drilling rigs working in February, down from 193 rigs in January. and down from 240 last February...the largest decrease in the region was in Australia, where they reduced their 13 rigs to 9, which was down from the 17 rigs the Australians were running a year ago...Thailand shut down 2 rigs, as did China offshore...that left Thailand with 16 rigs, the same as they had in February last year, and left 25 platforms drilling off the shore of China, down from 40 a year earlier...India added 2 rigs, and they now have 99, which is still down from they 108 they had deployed last the same time, the rig count in Europe was down by 1 to 107 in January, which was down from 133 rigs working Europe a year ago, as the Dutch idled two rigs, leaving 2, which was down from 6 rigs working in the Netherlands a year ago...lastly, there were 6 rigs pulled out of Africa in February, as their rig count fell to 88, which was down from 132 rigs working in Africa a year earlier...Nigeria saw 3 of its rigs shut down, leaving them 6, which was down from 17 rigs last February, and Angola saw 2 rigs removed, leaving 8, which was down from 15 rigs working Angola a year ago...note that Iranian, Russian, and Chinese rig counts are not included in Baker Hughes international data, although China's offshore area is included in the Asian totals here...   

since the US rig count has fallen to an all time low due to the lower prices, it’s an opportune time to compare the historical US rig count to that of the Saudis....the graphic below, from petroleum reservoir consultant Dwayne Purvis writing about the Saudi’s production capabilities at, does just that, as it superimposes a graph of the Saudi rig count on top of one of the US rig count, going back to the depression year of 2009….the number of rigs drilling for oil in the US is indicated on the left margin and is shown in blue, while the number of rigs drilling for oil in Saudi Arabia is indicated on the right margin and is shown in green…we can see the US oil rig count quickly rose from under 200 to over 1300 as oil prices rose and the Fed’s monetary policy provided cheap and easy credit to US drillers, while Saudi drilling stayed relatively unchanged, with an average of about 66 rigs deployed yearly until 2012…with slightly higher prices in 2013 and 2014, the Saudis increased their drilling to include over 100 rigs, while the US drillers added rigs slowly and peaked at 1609 in October of 2014…then the US rig count nosedived as oil prices fell from over $100 a barrel in mid-2014 to $40 in January of 2015, steadied briefly as oil prices recovered to $60 in the spring of last year, and then fell steadily as oil tanked to below $30 a barrel earlier this year…meanwhile, Saudi drilling didn’t miss a beat; in fact, they’ve actually increased drilling as prices fell, and the 128 rigs they had deployed in February was only one rig away from the Saudi record high of 129 rigs they were running in December…

March 10 2016 February US vs Saudi rig count


Court rejects appeal of 2014 Broadview Heights suit - Drilling - Ohio - Last week, the eighth appellate court of Ohio ruled against Mothers Against Drilling in Our Neighborhoods (MADION) in a class action lawsuit brought by Broadview Heights residents in 2014.The lawsuit was filed with the assistance of the Community Environmental Legal Defense Fund(CELDF) against the State of Ohio and two corporations seeking to drill for oil and gas within the City. In the filing, MADION asserted the people have a community right to local, democratic self-government to protect their health, safety, and welfare.The people of Broadview Heights exercised that right in November 2012, adopting a CELDF-drafted Community Bill of Rights banning fracking with 67% of the vote. The lawsuit was filed to enforce their Community Bill of Rights.The court, however, was not moved by the will of the people, and affirmed the decision of a lower court, which recognized the corporate claimed “right” to bring industrial drilling and fracking into residential neighborhoods against the will of the people of that community.Tish O’Dell, member of MADION and President of the OHCRN, stated, “The court affirmed the corporate claimed ‘right’ to use Broadview Heights as resource colony for the benefit of a few people, living far removed from the harms – people who hide behind the corporate shield, and, with permits in hand, site harmful projects for the sake of profits. We, the People of Broadview Heights, are being told that our will, expressed through a democratic vote, is meaningless in Cuyahoga County. We are being told to watch the toxins be injected and emitted into our neighborhoods and then WAIT. Wait for the harm to start surfacing in our community and in our children.”

County group plans to bring charter proposal back in November  - The Athens County Bill of Rights Committee is preparing to launch a petition drive March 15 to put a charter proposal before voters on the November General Election ballot. The ACBORC was unable to get a charter proposal last year on the November 2015 ballot after a decision by the Ohio Supreme Court, but with that decision in hand and alterations to the proposal made, the group plans to try again this year. Last week they mailed a postcard to last year’s petition signers informing them of the upcoming effort. The postcard states that a “new and improved charter petition for November 2016 will be ready to sign” this coming Tuesday, which is Ohio’s Primary Election day. “You signed our Charter petition last year, but your right to vote was denied by Jon Husted, Ohio Secretary of State,” the card states. “The Ohio Supreme Court denied Husted’s objections, but also declared the charter petition to be incomplete.” The ACBORC’s charter did not and does not propose to alter the structure of Athens County government with regard to officeholders or duties, but does seek to assert local control over regulation of oil and gas hydraulic fracturing and other activities related to oil and gas development (including waste injection wells). “Meanwhile, 600,000 gallons of toxic fracking wastes are being dumped in Athens County every day!” the note card warns.

Ohio's oil, natural gas production increases in 4Q - During the fourth quarter of 2015, Ohio’s horizontal shale wells produced 6,249,116 barrels of oil and 303 billion cubic feet of natural gas, according to figures released today by the Ohio Department of Natural Resources.  The production totals for the fourth quarter of 2015 increased over the third quarter of 2015 with oil production increasing by 10 percent and gas increasing by almost 25 percent.  Quarterly production in 2015 also shows a fourth quarter horizontal shale well production increase of more than 75 percent for oil and 80 percent for gas from 2014’s fourth quarter totals. The ODNR quarterly report lists 1,265 wells, 1,230 of which reported production. Thirty-five wells reported no production.

Utica Drives Ohio Oil, NatGas Production to New Records - Ohio's horizontal Utica and Marcellus shale wells continued to set records in the fourth quarter, when operators reported producing 303 Bcf of natural gas and more than 6.2 million bbl of oil, according to data released Wednesday by the Ohio Department of Natural Resources (ODNR). Gas production was up by 25% from 3Q2015, while oil production rose 10% over the same period (see Shale Daily, Dec. 3, 2015). For the year, shale drillers nearly reached 1 Tcf of gas production at 953.9 Bcf. ODNR’s RIck Simmers, chief of the Division of Oil and Gas Resources Management, told an industry conference in Pittsburgh earlier this year that the state expected operators to exceed 1 Tcf in 2015 (see Shale Daily, Jan. 27). Fourth quarter production still increased significantly from the same period in 2014, when ODNR reported 3.5 million bbl of oil and 164.8 Bcf of gas (see Shale Daily, Feb. 26, 2015). Ohio law does not require the separate reporting of natural gas liquids; those totals are included in oil volumes. The state said 1,230 horizontal wells reported production in the fourth quarter. Another 35 wells listed showed no production. The average amount of oil produced by each well during the quarter was 5,081 bbl, while the average amount of gas was 245.9 MMcf. At the end of last week, ODNR records showed that 2,140 Utica wells had been permitted to date and 1,613 had been drilled. Forty-four Marcellus wells were permitted and 29 had been drilled.

Ohio Fracking Wells Double Production in 2015 - With the growth in hydraulic fracturing in Ohio to tap gas and oil hidden deep underground in the Utica Shale formation, the Buckeye state now has 1230 wells in production.  They pumped out 22 million barrels of oil last year, twice as much as in 2014.   Natural gas added up to 950 billion cubic feet, or 110% of the 2014 totals.   The increase comes despite very low oil and gas prices.  ODNR spokesman Eric Heis says the number of applications for drilling permits has been slowing. “Production has gone up because more wells have been drilled. That does not mean production has gone up as much as it has the past few years.  With prices, you see a slowdown in the industry.”   Ohio’s severance tax on the oil and gas produced also rose from $6 million dollars in 2014 to $21 million last year.   Governor Kasich wants to raise the tax rate, arguing it's one of the lowest in the country.  Heis says what money does come in goes to help fund ODNR. “That money helps fund the oil and gas department including the inspectors, vehicles for the department to get out every few weeks.”   Along with gas production, the amount of wastewater pumped back underground is also up.  Most of the wastes pumped into injection wells in Ohio used to come from out of state but last year 55% was produced from Ohio’s own fracking wells.  The highest producing gas well was in Guernsey County and Belmont County had the top oil well.  

Injections of wastewater rise in Ohio despite lull in fracking - Columbus Dispatch --The amount of fracking wastewater pumped underground in Ohio increased by more than 15 percent last year, even as shale drilling has slowed nationwide, according to new numbers from the Ohio Department of Natural Resources. Ohio took in nearly 29 million barrels of fracking wastewater in 2015, according to a Dispatch analysis of department data. That is about 4 million more barrels than in 2014.  Ohio, which is situated to accept wastewater from states that don’t allow injection waste wells, has more than 200 injection wells. Fewer than 10 have been approved in Pennsylvania, where much of the fracking boom in this part of the country has taken place. West Virginia has about 60.  That means about 13 million barrels a year comes from Pennsylvania and West Virginia, according to the Natural Resources data. Ohio typically takes more fracking wastewater from outside Ohio than inside. But last year, about 55 percent of the fracking wastewater that ended up in Ohio injection wells came from Ohio, the Dispatch analysis shows. Wastewater generally travels in tanker trucks on Ohio’s highways until it reaches injection well sites, which are primarily in eastern and southeastern Ohio. Athens County, for example, took more than 4 million barrels of fracking wastewater in 2015, an increase of 1.1 million barrels, or nearly 40 percent.

Fracking waste may be impacting politics and science - Did you know that in the past year the Portage County Commissioners, the Portage County Township Association, the Portage County Health Department, Ohio Township Association, the Ohio Farm Bureau, various grassroots groups and many concerned individuals have sent requests to the ODNR and Ohio Governor John Kasich to stop injecting hydraulic fracking waste into injection wells in Ohio until further study can be made regarding the effect on our groundwater?None of these requests have been acknowledged, but then again, one must consider the several million dollars in campaign contributions gas and oil have contributed to state candidates, political committees and parties in just Ohio.Picture the immense size of the Ohio State football field. Imagine it has sides 12.5 feet tall. Fill it with chemical and radiological waste 185 times and that is how much waste fluid was injected into our aquifers under high pressure in 2014.There were 134 football fields full injected in 2013 and 118 in 2012. There will be much more this year.These are statistics for the entire state of Ohio.Portage County took 89,293,680 gallons of frack waste in 2015. Trumbull, Ashtabula and Athens counties are much bigger dumping grounds than Portage. They are really getting hammered.What is in this fluid you may ask and so may our first responders, the people at the front line of hazard response. Guess what, we don’t get to know, it’s gas and oil’s ” proprietary” secret. Oil and gas got a pass on that one, in fact, they are exempt from seven major federal environmental laws, including the Safe Drinking Act of 1974.

Truck overturns, spills fracking wastewater that taints reservoir - Columbus Dispatch - A truck hauling drilling wastewater overturned in eastern Ohio early this morning, sending thousands of gallons of toxic water into a nearby creek and contaminating a reservoir in Barnesville in Belmont County. The truck crashed along a curve just after 3 a.m. today, said Barnesville Fire Chief Bob Smith. The driver, Hiley Wogan of Chesterhill, Ohio, was flown by helicopter to a hospital in Columbus, Smith said. About 5,000 gallons of drilling wastewater spilled into a field, then a creek and finally into one of Barnesville's three reservoirs. Smith said the reservoir is closed while the Ohio Environmental Protection Agency tests the water. James Lee, an EPA spokesman, said the agency is investigating the spill. Smith said the truck is owned by ECM, a brine hauling company with a location in Cambridge, Ohio, not far from Barnesville.

Drinking water reservoir contaminated by oil and gas wastewater in Ohio -- Earlier this week a truck carrying oil and gas wastewater overturned in the small Ohio town of Barnesville. It spilled 5,000 gallons of wastewater into a stream only a few hundreds yards from where the stream runs into a drinking water reservoir. The accident happened around 3 a.m. one morning. According to news reports, the Ohio EPA is testing water in the reservoir to determine the level of contamination. It's been reported that the oil and gas operator says the wastewater was produced water from a producing well, rather than fracking wastewater. Both, however, can contain materials quite toxic to human health, including radioactive materials, heavy metals, and hydrocarbons. Fortunately, Barnesville has other reservoirs to supply its immediate drinking water needs. There were no other vehicles involved. Photos from the scene show the extent of the rollover, so one has to wonder if it was driver error or a safety problem with the truck.  Oil and gas wastewater can be very toxic. This accident illustrates why we need much stronger regulations for how oil and gas waste, whether it is production waste or fracking waste, is handled, transported, stored and disposed. It should not be transported near a drinking water reservoir at all, and should be in trucks with safe drivers and safe mechanics. Dangerous oil and gas waste should not be exempt from our federal hazardous waste regulations, or from any truck safety regulations.

Coast Guard's decision on barging seems like bad news for everybody - A U.S. Coast Guard decision regarding the barging of oil-and-gas industry fracking waste has drawn criticism both from those who support the barging and those who oppose it. Since 2012, a Texas-based company has been seeking official approval to barge deep-shale drilling waste to an off-loading facility in Meigs County on the Ohio River. But the company has been stymied by the U.S. Army Corps of Engineers expressly forbidding such barging, leading the company to approach the U.S. Coast Guard for a rule change. At issue are two different types of fracking waste, one known as legacy fluid, which is associated with traditional oil and gas wells, and the other is what the Coast Guard calls shale gas extraction waste water (SGEWW), which comes from the new deep-shale, horizontal hydraulic fracturing wells. GreenHunter Resources Inc., of Texas, has argued that it has had approval to barge "oil-field waste" from the Coast Guard and handle "legacy waste" at its offloading terminal. This, the company says, means that it's allowed to do so with the wastewater from horizontal hydraulic fracturing operations. This would distinguish it from waste materials from the shale gas extraction wastewater (SGEWW) on which the Coast Guard has not yet made a determination and the Army Corps has explicitly forbidden. Environmentalist opponents, however, say SGEWW and fracking wastes are one and the same. The company's Mills Hunter Facility off-loading complex, once it has been built along the Ohio River in Meigs County near Portland, company officials have said, would double the injection capacity at the company’s Meigs facility from 14,500 42-gallon barrels per day to about 30,000. Complicating matters further, however, is that last Tuesday GreenHunter issued a statement that it and its various subsidiary companies have filed for Chapter 11 bankruptcy. It remains to be seen how this will affect the company’s frack waste barging proposal. So far, both GreenHunter and its bankruptcy attorney have declined comment. Meanwhile, in a decision the week prior to that, the Coast Guard announced it was withdrawing a proposal for new rules regarding the shipping of fracking wastewater by barge on the Ohio River, and instead would review each application individually.

Michigan grants permit to drill oil well on church land: (AP) — The state’s environmental agency has granted a permit to drill an exploratory oil well on church property in suburban Detroit. The Michigan Department of Environmental Quality is allowing Traverse City-based Jordan Development to drill at Word of Faith International Christian Center in Southfield. The decision comes after a Feb. 17 meeting in Southfield that attracted about 1,000 supporters and opponents. The city opposed the drilling. Some residents say it will lower property values, increase emissions and pose a risk of contamination. The church says money that comes from the project would be used for good works. The DEQ says it will monitor the drilling to ensure that oil and gas regulations are followed and that there are no impacts to groundwater.

As EPA Struggles With Fracking Pollution Data, Polluters Safely Settle Lawsuits - Before Cabot Oil and Gas Corporation fracked inside the property of Frederick and Debra Roth, the couple’s groundwater had always been clean.  Their water had no visible gases, malodors or off-tastes, according to court documents, and the Roths knew that. Part of the deal was that Cabot would test their groundwater before drilling began, monitor it, disclose test ,results and most importantly, promise not to disturb the couple’s lifestyle. Otherwise, the contract said according to court documents, Cabot would take “all steps necessary” to return everything back to normal. But in August of 2010, five months after fracking began, the Roths noticed a disturbing change. Their water was brown, cloudy, and started to smell. Event the toilets that used the polluted water showed yellow and pink staining. Mistrusting their groundwater, the Roths, who lived outside rural Springville, Pennsylvania, stopped drinking the water, and filed a lawsuit that the company promptly challenged.  “In most of these cases the company says the contamination is pre-existing … that it’s naturally occurring,” said Tate Kunkle, who represented the Roths but can’t comment directly on the case because the settlement reached in 2013 precludes him and his clients from doing so. “The biggest problem when you get these cases is to link the precise [polluting] avenue,” he added in an interview with ThinkProgress.

Fracked Families Win $4.24 Million Suit Against Frackers -- A federal jury awarded two Dimock Twp. couples $4.24 million today after finding Cabot Oil & Gas responsible for contaminating their well water. The verdict comes following 8.5 hours of deliberations over two days. The decision following the 14-day trial is a huge victory for Nolen Scott Ely, his wife, Monica-Marta Ely and Raymond and Victoria Hubert, who pursued the case for six years after rejecting a settlement offer in 2012. The Ely family received $2.75 million. The Hubert family received $1.49 million. The Elys and Huberts alleged Cabot was negligent in drilling two natural gas wells near the Susquehanna County homes, which contaminated their wells with high levels of methane. Cabot maintained the methane was naturally occurring.

Pennsylvania families win $4.2 million damages in fracking lawsuit | Reuters: A federal jury ruled on Thursday that Cabot Oil & Gas Co must pay more than $4.2 million in damages to two families in northeastern Pennsylvania who said the company's fracking operations contaminated their ground water. Six jurors in federal court in Scranton awarded $1.3 million each to Scott Ely and Monica Marta-Ely, a married couple in Dimock. Each of their three children received an award of $50,000. A second couple, Ray and Victoria Hubert, also of Dimock, about 32 miles (50 km) south of Binghamton, New York, each received $720,000, and their daughter Hope was awarded $50,000. The families had no immediate reaction but were seen thanking jurors after the verdict in the U.S. District Court of the Middle District of Pennsylvania, which came after 13 days of testimony. Cabot had no immediate comment but spokesman George Stark said the company was preparing a statement. The Elys and Huberts were the last of more than 40 families who had sued Cabot. They alleged that their water was contaminated with methane gas after the company began using the process of hydraulic fracturing, or fracking, to extract gas from underground shale formations near Dimock in 2008. The other families settled with the company in 2012.

Jury Awards Two Dimock Couples $4.2 Million After Finding Cabot Oil & Gas Negligent in Fracking Contamination Case --A federal jury awarded two Dimock Township couples $4.24 million today after finding Cabot Oil & Gas responsible for contaminating their well water. The decision, following the 14-day trial and 8.5 hours of deliberation over two days, is a huge victory for the families. “Congratulations to the Ely and Hubert families for winning in federal court today against Cabot Oil & Gas for poisoning their water from drilling and fracking operations,” Mark Ruffalo, on behalf of Americans Against Fracking, said.  The Dimock case dates back to 2009 when 44 plaintiffs brought a lawsuit against the company. In the five years since initiating litigation, the Elys and Huberts were the only plaintiffs remaining on the case as the vast majority had settled with the company. The Ely’s were awarded $2.6 million and their three children $50,000 each. The Huberts were awarded $1.4 million, with another family member awarded $50,000. “$4.2 million will not bring back drinkable well water to the long-suffering families of Dimock, Pennsylvania,” Sandra Steingraber, PhD, science advisor for Americans Against Fracking, told EcoWatch. “No amount of money can do that. Once groundwater is polluted, it’s polluted forevermore. But what this important jury decision does do is strip away the mirage of omnipotence that Cabot and other gas companies operate behind. Fracking poisons water. That’s what the science shows. The frackers will be held responsible. That’s what this court decision shows.” A NPR StateImpact report, prior to the trial, said that Cabot Oil & Gas had already accumulated more than 130 drilling violations at its Dimock wells, yet insisted that methane migration in Dimock’s water is naturally occurring. The company is currently banned from drilling in a 9-mile area of Dimock but is trying to lift the ban.

Jury awards last Dimock plaintiffs $4.2 million over water well contamination: A federal jury on Thursday found Cabot Oil and Gas Corp. responsible for contaminating two Susquehanna County water wells through its natural gas drilling operations and awarded the families a total of $4.24 million. The Ely and Hubert families of Dimock Township were the last plaintiffs in a high-profile case that began in 2009 and originally included 44 of the rural town’s residents, who claimed shoddy Cabot wells drilled early in the Marcellus Shale gas boom allowed methane and other constituents to migrate into their drinking water. Cabot maintains that anything tainting the water supplies is there naturally or comes from sources other than its operations. The jury awarded Nolen Scott Ely and Monica Marta-Ely each $1.3 million plus $50,000 for each of their three children. The jury awarded Ray and Victoria Hubert each $720,000 plus $50,000 for their daughter. The trial in the U.S. District Court for the Middle District of Pennsylvania started on Feb. 22 and stretched into a third week. The jury of four men and four women deliberated for about 8 hours on Wednesday afternoon and Thursday morning before reaching the verdict. In a statement, Cabot said it is surprised by the verdict because the plaintiffs lacked evidence to support their nuisance claims. Cabot’s attorneys indicated in court on Thursday that they will move to set aside the verdict because they said the plaintiffs’ attorney repeatedly mentioned excluded evidence and acted in other ways that prejudiced the jury against the company. Cabot’s attorney Jeremy Mercer described it as a calculated effort “to throw skunks into the jury box.”

Will water contamination verdict have broader implications? -- Opponents of natural gas drilling say the decision of a federal jury Thursday will have wide-ranging impacts. For more than two weeks, two families from Dimock Township have been trying to prove Cabot Oil & Gas negatively impacted their water. Jurors decided Thursday that Cabot was negligent in its gas drilling operations in Susquehanna County. The jury awarded the two families a total of $4.24 million. "I'm just so, at a loss for words!" Scott Ely said outside the federal courthouse in Scranton.His supporters are thrilled that a federal jury found the company cause a nuisance. "This is going to send shock waves to Harrisburg," Craig Stevens of Silver Lake Township said. The Ely family and Ray Hubert's family first filed their civil lawsuit in 2009. At that time, dozens of other families also claimed damages but most settled with Cabot as the years progressed. "They made a bad deal! They were under a lot of pressure and made a bad deal and it's very regrettable because at the outset, I represented all of them," attorney Leslie Lewis said. Several of the families who settled with Cabot were in the courthouse for the verdict. Because of the settlements they made with Cabot, they couldn't comment in public. Scott Ely says this is also a "win" for them. "I was trying to be their voice," Scott Ely said. "I hope this goes worldwide, goes viral to show what these industries are doing to us," gas drilling opponent Vera Scroggins of Brackney said. Now that the jury has spoken, gas drilling opponents want this to be a wake-up call to state regulators. "I'm taking this message to Harrisburg tomorrow in person," Stevens said. "I'm going to demand a meeting with the governor and I'm going to tell him this had to happen in federal court, you should be embarrassed of yourself!"

The Latest: Gas driller to appeal $4.24 million verdict -  One of the largest gas drillers in Pennsylvania says it will appeal a $4.24 million jury verdict that found the company polluted the well water of two families. Houston-based based Cabot Oil & Gas Corp. said Thursday the jury’s verdict “disregards overwhelming scientific and factual evidence” that it conducted itself properly in the small village of Dimock. The verdict comes at the end of a long-running federal lawsuit pitting homeowners against Cabot. Dimock was the scene of the most highly publicized case of methane contamination to emerge from the early days of Pennsylvania’s natural-gas drilling boom. State regulators blamed faulty gas wells drilled by Cabot for leaking combustible methane into Dimock’s groundwater. Cabot claimed the methane was naturally occurring.

The Greek tragedy of the billionaire who fracked up Pa.: Fracking – the controversial technique of drilling for  natural gas and oil – claimed some new victims in Pennsylvania yesterday: A once-majestic stand of maple trees that the Holleran family of Susquehanna County has been working to produce maple syrup since the 1950s. A big pipeline firm, the Williams Companies, successfully used the right of eminent domain to win the right to clear the Hollerans' stand of trees to make way for a new pipeline intended to carry to natural gas fracked from the Marcellus Shale to large urban markets. According to StateImpact PA, at least three U.S. Marshals armed with semi-automatic weapons and pistols and wearing bulletproof vests were there to protect the pipeline workers from about 20 peaceful protesters carrying signs that read “No Eminent Domain for Corporate Gain” and “Sap Lines Not Pipelines.” It was just one more way that the fracking boom has ripped Pennsylvania – and Pennsylvanians – apart since its gold-rush mentality swept through big chunks of the northern and western corners of the commonwealth about a decade ago. It was right around the moment that the first chainsaw was cutting into maple bark when a newsflash swept through the business world and beyond: Aubrey McClendon -- the ostentatious Oklahoma billionaire who was also essentially the godfather of our Pennsylvania fracking explosion, enmeshed in controversy until his final hours – had died under murky circumstances.

The Noxious Legacy of Fracking King Aubrey McClendon - WHEN FRACKING BILLIONAIRE Aubrey McClendon died after crashing his Chevy Tahoe into a bridge last week, the federal investigation into his alleged bid-rigging came to an end. At his memorial in Oklahoma City today, his friends and family will remember him as a “swashbuckling innovator” and a loyal friend, but his most enduring legacy may be his role in convincing policymakers and the public that natural gas could be an environmental boon and a solution to global warming. More than any other individual, McClendon personified the excesses of the fracking boom, gobbling up land so quickly and spinning the boom’s story so effectively that regulators, environmentalists, and even Wall Street struggled to keep pace. McClendon was not only the founder of Chesapeake Energy, the most important fracking company in the technique’s history, but he also co-founded one of the gas industry’s most important lobbying arms, America’s Natural Gas Alliance. In creating both, McClendon became an architect of the energy market’s reorientation around a product whose climate-warming emissions rival those of coal. “His desire for ‘more’ … was the driving force in the rapid development of U.S. shale resources,” Wall Street Journal reporter Russell Gold wrote in his book, The Boom. “McClendon wasn’t a mere participant in the great shale land grab. He created it.”

America’s Biggest Fracking Gashole Was Killed by Exploding Gas Bomb - Aubrey McClendon’s SUV was powered by compressed natural gas – which exploded into fireball when he attempted a high speed single car frack job of a concrete bridge abutment. Literally hoisted by his own fracking petard.  Shoulda been driving a Tesla, huh ? Ain’t Karma a bitch ?

EIA’s March 2016 DPR Natural Gas Revisions Defy Previous Production Declines -- The monthly Energy Information Administration (EIA) Drilling Productivity Report (DPR) provides a leading indication of expected crude and natural gas production from seven leading shale basins across the U.S. The latest DPR released earlier this week (March 7, 2016) included a massive 2.5 Bcf/d upward revision to the shale gas production forecast for March. The upward revisions fly in the face of expectations of production declines at recent 17-year low prices. But they also validate daily pipeline flow data showing actual production climbing to a new daily record in February 2016 and continuing to stay robust. Today we break down the latest DPR data, what the revisions mean and consider implications for the market. We’ve been following the DPR carefully since it was first published in 2013 (see Higher and Higher). Since then it has become an industry bellwether for shale basin production trends. The report takes lagged EIA production estimates, well production data from individual states as well as rig counts, and other data sources to produce a forecast for oil and gas production volumes from the seven major U.S. shale plays: Bakken, Eagle Ford, Haynesville, Marcellus, Niobrara, Permian and Utica. Unlike many other production forecasts, the DPR’s methodology is designed to capture the net impact of both the changing decline rates of existing wells (producing longer than 30 days) and the changing productivity of new wells . We provided a detailed explanation of the DPR’s model inputs, methodology, assumptions and risks in our blog series “Every Rig You Take.” The report’s bottom line is that if the monthly change in rig productivity in a shale basin is enough to offset monthly volume declines from older declining wells, then the DPR forecasts a rise in production and if the decline in volume from existing wells is the larger of the two, the DPR shows a decline in production.

The Challenges of Making LNG the Go-to Bunker Fuel - In January 2015 new international regulations came into force that reduced the permitted sulfur content in ships “bunker” fuel in Northern European and North American coastal regions. So far, international shipping companies and cruise lines have been responding to these rules primarily by switching to marine gasoil (MGO), burning lower-sulfur fuel oil, or sticking with higher-sulfur fuel oil and adding “scrubbers” to capture most of the sulfur being emitted by their ships’ engines. More recently, though, some of the shipping sector’s biggest players have unveiled plans to boost the use of liquefied natural gas (LNG) as a bunker fuel, figuring that LNG bunkering will not only help them meet existing regulations but the tougher rules likely to be implemented over the next few years. Today, we begin a short series on the opportunities and challenges associated with shifting ships from fuel oil to LNG.  Besides death and taxes, another certainty in today’s world is that the rules governing emissions from fossil-fired power plants, industrial boilers, and engines of just about every size and type will be tightened, and then tightened again. The same holds true, of course, for fuels used in ship engines (known as bunkers).

Constitution Pipeline project delayed for lack of NY permit (AP) — A proposed 124-mile pipeline to deliver low-cost gas from Pennsylvania’s shale gas fields to New York and New England has been delayed for lack of a state water quality permit. Constitution Pipeline Company says Thursday it’s changing its projected start of service from the fourth quarter of 2016 to the second half of 2017. The company says it won’t be able to complete tree-clearing before the end of March, as required to avoid harm to nesting birds.  The company has completed tree-felling along the Pennsylvania leg of the project. But work can’t begin in New York until state regulators issue a water quality certification. Environmental groups and some local residents are lobbying Gov. Andrew Cuomo to deny the permit, saying the pipeline will pose human health and environmental risks.

Bill McKibben Arrested + 56 Others in Ongoing Campaign Against Proposed Gas Storage at Seneca Lake - Sandra Steingraber - The fight over the fate of the Finger Lakes received national attention today when best-selling author, environmentalist and founder of, Bill McKibben, joined the opposition. McKibben, 55, was arrested this morning with 56 area residents as part of an ongoing civil disobedience campaign against proposed gas storage in Seneca Lake’s abandoned salt caverns. This is a developing story, but at this time all arrestees have been released except for McKibben who is still in custody at the Schuyler County sheriff’s department. Organized by the direct action group, We Are Seneca Lake, the protesters formed a human blockade on the driveway of the gas storage and transportation company, Crestwood Midstream. During the blockade, which began shortly after sunrise, the protesters blocked all traffic entering and leaving the facility. In a public statement to fellow blockaders, McKibben thanked We Are Seneca Lake for serving as a “curtain raiser” for the larger global movement to break free from fossil fuels that is now unfolding in frontline communities all over the planet. “Today and every day there are places like this where people are standing up … This place is so important because it’s one of the places where people are understanding that it’s not just carbon dioxide we are fighting, it’s also methane, that there are two greenhouse gases and they are both spurring this incredible heating that we are seeing,” McKibben said. “… If we can hold off the fossil fuel industry for just a few more years, this stuff will never be built again.”

The Latest: Trump says fracking approval can help him win NY - GOP presidential front-runner Donald Trump says he thinks he can win New York, despite Democrats' significant voter registration advantage, because he's in favor of a practice called fracking. Trump tells an audience in New Orleans on Friday night that "New York has been let down" because its governor, Andrew Cuomo, will not allow hydraulic fracturing to release natural gas. He says that, had Cuomo made a different decision, the state would have been able to lower taxes and pay off its debt. He points to Pennsylvania, which allows the natural gas extraction process, saying: "They took those beautiful, beautiful natural resources. They took 'em out." He says that in Pennsylvania, people drive around in Cadillacs. He then pivoted to a Cadillac-sponsored event being held on one of his golf courses.

From Seneca Lake to China Via S Jersey – NJ LPG Export Terminal Planned --The Bill reports on a new fracking scheme to export America’s natural gas reserves to Brazil and China via tankers across from the Philadelphia airport. The Bill connects the rail lines all the way back to Watkins Glenn.  And $hillary’s push to ship America’s gas reserves overseas.  “I have been tracking the redevelopment of the former Dupont gunpowder plant in Paulsboro, Gloucester Co., NJ for about a year. It struck me as odd and suspicious because the plans of the new owners, Fortress Investment Group, an affiliate of a hedge fund, were shrouded in secrecy: The massive 1,800 acre site is directly across the Delaware River from the Philly Int’l airport, and had been owned by BP and used as a storage “tank farm” for decades, before being abandonded, and contaminated, about 10 years ago. The answer comes in today’s Marcellus Drilling News. It is to be an LPG export facility as an alternative to the ones now on the Gulf Coast.

Keystone Pipeline Operator TransCanada in Takeover Talks - WSJ - TransCanada Corp., the company behind the controversial Keystone XL oil pipeline project, is in takeover talks with Columbia Pipeline Group Inc., a U.S. natural-gas pipeline operator with a market value of about $9 billion. The companies could reach a deal in the coming weeks, according to people familiar with the matter. Details of the possible deal—including the role of Columbia Pipeline Partners LP, a publicly traded affiliate of Columbia Pipeline Group—couldn’t be learned. The negotiations could still break down, the people cautioned. With a typical takeover premium, a deal could value Columbia Pipeline Group at about $10 billion. The company also carries a debt load of nearly $3 billion. Houston-based Columbia Pipeline Group owns about 15,000 miles of gas pipelines from New York to the Gulf of Mexico, together with one of the country’s biggest underground storage systems and related gathering and processing assets. Most of its assets overlay the Marcellus and Utica shale formations in Pennsylvania, West Virginia and Ohio. It had profit of $307.1 million last year, up about 15%. Revenue declined slightly to $1.33 billion. The company was spun off from NiSource Inc., a natural-gas utility operating in seven Eastern states, in the middle of last year. Shares of both Columbia Pipeline Group and Columbia Pipeline Partners have fallen sharply since then as the slump in energy prices undercut oil and gas output and thus demand for pipeline capacity.

Pipeline investors hit by US court ruling - A judge has allowed a US oil and gas company to abandon pipeline contracts while in bankruptcy, in a first-of-its-kind decision that has rattled investors in energy infrastructure. Sabine Oil & Gas, a shale energy producer under Chapter 11 bankruptcy protection, sought permission to break contracts with two pipeline companies so it could pursue better deals and save as much as $115m. On Tuesday a judge ruled in its favour. “The court defers to the business judgment of the debtors to reject the agreements,” Judge Shelley Chapman said at a hearing in US bankruptcy court in Manhattan. The decision has important implications for the midstream energy sector, which gathers, processes, transports and stores oil and gas. Income-hungry investors had flocked to midstream companies on the belief that their generous payouts were backed by long-term, immutable contracts with customers. As they suffer low gas and oil prices, bankrupt producers are challenging these contracts in court. Some midstream companies have warned of “counterparty risk” in reference to their less creditworthy customers. After the ruling, investors dumped shares and units of pipeline companies and partnerships, with Kinder Morgan down 5.3 per cent, Plains All American off 5.9 per cent and Williams Companies dropping 9.4 per cent. However, it would be hard to draw broad precedents from any single case, lawyers and analysts said. “While this is an important decision, it’s one of those decisions that is state specific, fact specific and play specific,” said David Karp, partner at Schulte Roth & Zabel, a law firm, who is not involved with the case. “There are many other agreements out there that this decision will not cover.”

The Sabine Slam: Court Decision Threatens Midstream Sector -- A federal bankruptcy judge ruled that Sabine Oil & Gas could withdraw from its contract obligations with pipeline companies to ship a certain volume of oil and gas through their pipelines. The court decision may seem arcane, but it could have major ramifications for both producers and midstream companies. Under the contracts, a company like Sabine Oil & Gas promises to ship a certain volume of hydrocarbons through the pipeline at a set fee. If they fail to do so, they still have to pay the pipeline company for the use of the pipeline capacity. Sabine Oil & Gas, a struggling producer, says that it can no longer ship enough volume to meet the contractual agreement and it wanted to be let out of the contract. The company went to a bankruptcy judge in Manhattan, who ruled in Sabine’s favor. The pipeline contracts are very attractive to investors in midstream companies, who love the secure and stable revenue streams that such arrangements offer. The ruling could lead to a lot of uncertainty for the midstream sector. The Alerian MLP Index, an index fund that tracks pipeline companies, fell by more than 6 percent on March 8. Still, the judge ruled that Texas law was not clear enough to make the ruling binding.That likely means more litigation will be forthcoming. “One could see this ruling as something favorable for producers, but it’s something that’s going to play out further in the courts,” Ed Longanecker, president of the Texas Independent Producers and Royalty Owners Association, told The Wall Street Journal.  More and more oil and gas producers are falling into bankruptcy, and even for those that avoid such a fate, meeting obligations with pipeline companies is becoming more difficult.The cloudy legality around how to get out of these contracts is creating uncertainty not just for drillers, but also for pipeline companies. The latest decision on Sabine Oil & Gas will do little to remove that uncertainty.

Study: Fracking wastewater wells more likely located near communities of color and poverty – During the years that community health researcher Jill Johnston lived and worked in San Antonio, Texas was experiencing an explosion of fracking. She and the community partners she worked with on environmental health issues had a strong hunch that most of the fracking wastewater wells were being located near communities of color. So, they decided to dig a little deeper and quantify the pattern. The results of that effort were published this month in the American Journal of Public Health. It turns out that Johnston and her colleagues were right — the study found that fracking wastewater disposal wells in southern Texas are disproportionately permitted in areas with higher proportions of people of color and people living in poverty. It’s a pattern that many researchers and advocates describe as “environmental injustice.” Environmental justice, according to the U.S. Environmental Protection Agency, is the “fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies.” “Those who are profiting off all the oil and gas extraction in the Eagle Ford Shale (in south Texas) are very different communities from the people who bear the externalities of fracking,” Johnston told me. “Who’s getting the benefits and who’s getting left with the waste and the potential negative consequences?”

Oklahoma Earthquakes Continue To Haunt the Oil and Gas Industry --  The fracking industry got another shot of bad news on March 4, when Oklahoma regulators leaked word that a clampdown on oil and gas wastewater disposal would begin soon. The new actions are the latest attempt to quell a spate of earthquake activity in the state, which has been linked to the practice of injecting massive quantities of fracking wastewater deep underground, in addition to wastewater from conventional drilling sites. The numbers that link oil and gas wastewater disposal rates to earthquakes in Oklahoma are fairly straightforward. Wastewater disposal volumes rose 81 percent over the past six years, while earthquakes increased from an average of twice yearly to the current rate of twice daily. The problem consists of making a direct connection between specific disposal wells and earthquakes. However, the U.S. Geological Survey has collected enough data to assert confidently that there is “a strong connection in many locations between the deep injection of fluids and increased earthquake rates.” Apparently the pileup of evidence finally convinced the OCC (Oklahoma Corporation Commission) to act last spring and summer, when it began asking companies in some parts of the state to trim their wastewater injection rates and to shorten their disposal depths. Most agreed, with the exception of Sandridge Energy.

Oklahoma wants cuts to fracking wastewater injection to curb earthquakes - Technology & Science - CBC News: State regulators on Monday asked oil and natural gas producers in central Oklahoma to decrease their wastewater disposal operations to try to temper the sharp increase in the number and severity of earthquakes in the energy-rich state.  The proposal released by the Oklahoma Corporation Commission covers more than 400 wells across 6,000 square miles (16,000 square kilometres), and it comes less than a month after the commission issued a similar plan covering nearly 250 wells in northwestern Oklahoma. Oklahoma has about 3,800 disposal wells statewide. The commission wants the central Oklahoma cuts to be phased in over the next two months, and it plans to review the efficacy of the adjustments in about six months. Commission spokesman Matt Skinner said disposal volumes are about 970,160 barrels a day in the region, and regulators want to get that number down to 724,000 barrels a day, which is about a 25 per cent cut from current levels. A barrel equals 42 gallons. Skyrocketing earthquakes The number of earthquakes with a magnitude 3.0 or greater has skyrocketed in Oklahoma, from a few dozen in 2012 to more than 900 last year. Last month, a 5.1-magnitude temblor hit the state — the third-largest ever recorded in the state. Scientists have linked the quakes to the underground disposal of wastewater from oil-and-gas production.

Oklahoma regulators release plan to reduce temblors: (AP) — State regulators are asking oil and gas producers in central Oklahoma to restrict wastewater disposal operations to help temper a sharp increase in the number and severity of earthquakes. Monday’s request covers more than 400 wells across 5,200 square miles. It comes after a similar directive in February covering nearly 250 wells in northwestern Oklahoma. Scientists blame wastewater disposal volumes for increased seismicity. The Oklahoma Corporation Commission says the new cuts should reduce disposal volumes by 40 percent from 2014 levels. The number of earthquakes with a magnitude 3.0 or greater has skyrocketed in Oklahoma, from a few dozen in 2012 to more than 900 last year. A 5.1-magnitude quake hit northwestern Oklahoma Feb. 13, days before the commission’s earlier directive, which had been in the works since October.

Oklahoma Takes Action On Fracking-Related Earthquakes — But It's Too Late, Critics Say - More than five years after Oklahoma first experienced a startling increase in earthquakes linked to the disposal of huge volumes of wastewater created by hydraulic fracturing for oil, the state continues to shake and the number of strong quakes is increasing. In 2009, there were 20 quakes of magnitude 3.0 or higher, according to the U.S. Geological Survey. Last year, there were 890. In 2009, no quake measured 4.0 or greater. Last year, 30 did. Yet even as many Oklahomans track seismic data on their smartphones and struggle to sleep through the long, rumbling nights, there has been one notable location where people rarely seemed rattled. That is here, in the state capital, where the oil industry holds so much sway that for decades drill rigs have extracted crude from directly beneath the Capitol building. A Democratic state lawmaker, Cory Williams, said in an interview: “They own the place.” Now, however, after quakes have shaken the homes of some top elected officials — and those of the worried constituents who vote for them — the state is taking new steps to address the problem, even as critics say it is too little, too late. Last month, the Oklahoma Corporation Commission, the agency that regulates the oil and gas industry, asked oil producers operating in the northwest part of the state to reduce by 40 percent the amount of wastewater they dispose of deep underground.  Jeff Hickman, a Republican who represents Fairview, sponsored a bill that clarifies that the commission has the power to take enforcement actions — not just to politely ask the industry to change. And late in January, Gov. Mary Fallin, a Republican who only last summer acknowledged the connection between earthquakes and oil production, announced that she would direct $1.4 million in emergency funds to the commission and to the Oklahoma Geological Survey to hire more staff and improve technology and monitoring equipment.

Oklahoma Puts Limits on Oil and Gas Wells to Fight Quakes - Facing a six-year barrage of increasingly large earthquakes, Oklahoma regulators are effectively ordering the state’s powerful oil-and-gas industry to substantially cut back the underground disposal of industry wastes that have caused the tremors across the state. On Monday, the state Corporation Commission asked well operators in a Connecticut-size patch of central Oklahoma to reduce by 40 percent the amount of oil and gas wastes they are injecting deep into the earth. The directive covers 411 injection wells in a rough circle that includes Oklahoma City and points northeast. It follows a February request that imposed a 40 percent cutback on injection wells in a similar-size region of northwest Oklahoma. The actions significantly increase the effort to rein in the quakes, which the commission has long tried to reduce one well or a handful of wells at a time. But they are an equally notable challenge to the industry, which will most likely be able to make the cutbacks only by reducing oil and gas production. ... Although critics contend that earthquakes have caused millions of dollars of damage, Oklahoma’s political leaders have long been reluctant to impose restrictions on an industry that dominates the state’s economy. Until last spring, Gov. Mary Fallin, a Republican, maintained that the cause of the tremors was unclear, and the state Legislature refused to consider legislation addressing the issue. Ms. Fallin abandoned her position as the number of quakes rapidly increased. But the political leadership was not jolted into action until January, after a series of small earthquakes damaged homes and interrupted power in Edmond, an Oklahoma City suburb home to many in the state’s political and financial elite. ...

New Mexico orders company to clean oil disposal site spill  - (AP) — New Mexico regulators have accused a Texas company of trespassing and causing a spill at a disposal site used by the oil and gas industry. The State Land Office delivered a letter Wednesday to Midland, Texas-based Siana Operating ordering it to obtain an entry permit to remediate damage at the waste-water injection well it operates on state trust land in Lea County. The letter also threatened “any and all criminal and civil actions available” if requirements are not met. The company’s lease to use the facility had expired, the agency said. Separately, the state Oil Conservation Division issued an emergency order late Wednesday for Siana to temporarily shut off all of its wells, both for oil production and water disposal, until a hearing can be held on possible violations. State records list the company as an operator for at least 11 drilling locations. A Siana representative said the company was aware of the problem and was still considering its response.

Iowa regulators approve Bakken pipeline permit (AP) — The last state permit needed for a pipeline that will carry a half-million barrels of crude oil daily from North Dakota to Illinois was approved Thursday by Iowa utilities regulators, who also gave the Texas-based company authority to use eminent domain for land that property owners are unwilling to voluntarily provide. The Iowa Utilities Board voted unanimously to approve a hazardous pipeline permit for the so-called Bakken pipeline, 346 miles of which will cross through 18 Iowa counties and 1,300 parcels of land. “We weighed the public benefits of the proposed hazardous liquid pipeline project against the public and private costs and other detriments as established by the evidence on the record,” board member Elizabeth Jacobs said. “Together we weighed all the issues presented by the parties and found the issues of safety, economic benefits, environmental factors and landowners’ rights to merit the most significant weight in reaching our decision.” The board had to decide whether the pipeline met the requirements of Iowa law, which authorizes approval of a permit only if it “will promote the public convenience and necessity.” Individual landowners and a coalition of environmental and property rights groups spoke out against the project, which drew 3,700 letters of protest to the board, voicing concerns about pipeline leaks that could harm farmland, rivers and streams. Farmers also opposed the pipeline, complaining it will decrease land values, disrupt productivity of farmland and damage timber areas. Owners of 296 parcels of land have refused to sign easements allowing the pipe to go through their property. The board’s approval means Dakota Access may now proceed with condemnation proceedings using eminent domain authority to force them to cooperate.

Iowa Just Approved An Oil Pipeline That Will Cut Through Four States -  An oil line that would cut through four Midwestern states and 50 counties — using, at times, eminent domain to do so — got the last state permit it needed Thursday. Now, only one federal permit remains for the Bakken Pipeline’s construction to happen.  n After more than a year of review, the Iowa Utilities Board gave the green-light to the Bakken Pipeline, allowing the developer, Dakota Access, to build across 346 miles of mostly privately-owned Iowa farmland. North Dakota, South Dakota, and Illinois have already awarded the right-of-way to this mega-infrastructure that will transport at least 450,000 barrels of crude oil per day from the oil-rich Bakken region in North Dakota to a market hub in Patoka, Illinois. “We weighed the public benefit of the proposed … project against the private and public costs, and other determinations as established on the record,” said Boardmember Libby Jacobs. The board looked into safety, economic benefits, environmental concerns and landowners’ rights, too, she added before the three-member board unanimously approved the project.  The Iowa Sierra Club and the Private Property Rights Coalition said they will appeal the decision. Landowners dispute that Dakota Access provides a public benefit that warrants eminent domain powers.   Puntenney said about 250 Iowa landowners are holding out.  But the 1,168-mile long Bakken Pipeline, a piece of infrastructure comparable in length to the rejected Keystone XL, also crosses federal wetlands and waterways like the Mississippi River and the Missouri River — the longest river in North America. Hence, the Army Corps of Engineers has to issue a permit as well. That will happen once agencies assess possible harms to the environment, officials said. For the past several months three Army Corps of Engineers districts have been working on this verification, as they’ve received public comments.

Bakken pipeline approved in Iowa, but fight not over -- Thousands of construction workers could start work this spring on the Bakken oil pipeline through Iowa, but a statewide coalition of environmentalists, community activists and property owners is vowing to do everything possible to stop the project. The Iowa Utilities Board voted 3-0 on Thursday to approve a state permit for the underground pipeline, which will run diagonally for 346 miles across 18 Iowa counties. The project is proposed by Dakota Access LLC., a unit of Dallas-based Energy Transfer Partners. The massive pipeline project has deeply divided Iowans from many walks of life, from those who welcome it as a potential economic benefit to those who deride it as an environmental threat and a violation of private property rights. The board took about seven minutes to issue its decision. It came after 18 public informational meetings, 12 days of public hearings, and weeks of deliberations over the past year and a half. In the process, the board received more than 8,000 public comments and compiled more than 3,500 pages of transcripts.

North Dakota oil production drops by 30.6K barrels daily in January -(AP) — North Dakota’s Department of Mineral Resources says the state’s oil production decreased by about 30,600 barrels a day in January.The agency says the state produced an average of 1.12 million barrels of oil daily in January. The January production was about 105,380 barrels per day less than the record set in December 2014. North Dakota also produced 1.63 billion cubic feet of natural gas per day in January, down from 1.67 billion cubic feet daily in December. The January tally is the latest figure available because oil production numbers typically lag at least two months. There were 33 drill rigs operating in North Dakota’s oil patch on Friday — the lowest number since March 2007.

Is It All Over Now? Producers Lose Their Appetite For Bakken Crude Output -  For the past, year many shale oil producers have defied the expectations of many and kept output at or near to record levels in the face of falling oil prices and much tougher economics. Improvements in productivity, cost cutting and a concentration on “sweet spot” wells that generate high initial production (IP) rates have all helped cash strapped producers survive. But with oil prices so far in 2016 stuck in the $35/Bbl and lower range and with the worldwide crude storage glut still weighing on the market – producers are finally pulling back. Today we look at how increased pressure on North Dakota producers is putting the brakes on Bakken crude production. In December 2015, crude production in North Dakota Bakken fell by 2.5% to 1,152 Mb/d (from 1,182 Mb/d in November). That December output is down 6% from the record 1,227 Mb/d produced a year earlier in December 2014. . A number of signs point to the decline in production continuing during the rest of 2016 unless there is an extended oil price recovery. For a start, the number of new permits to drill wells in North Dakota is at a seven year low – indicating a low appetite for drilling (more on that in a minute). Second, there were 1183 inactive wells in the state in December - about 30% above normal for this time of year. The operators have essentially abandoned these inactive wells – usually because they are losing money. Many of these inactive wells are older and had very low production rates - less than 35 b/d. . A third indicator of declining producer interest in the Bakken is the large number of producing wells in North Dakota currently being transferred (sold) by one operator to another – 697 wells as of February 17, 2016 according to Helms. Some large producers such as Occidental Petroleum that is selling 346 wells - are leaving the North Dakota Bakken oil patch altogether. Others that are staying in the Bakken have sold off wells to other operators to raise cash – including Whiting Petroleum Corp (the largest Bakken producer – selling 331 wells) and EOG Resources, grandfather of the crude-by-rail phenomenon.

Wyoming pulls permits for abandoned experimental methane wells (AP) — Wyoming officials have revoked state permits for hundreds of abandoned coal-bed methane wells that were part of an experiment some hoped would reverse a bust in coal-bed methane. The 413 wells in Campbell County now are a long list of wells the state plans to plug and clean up over several years. The Wyoming Department of Environmental Quality pulled the permits Friday. Patriot Energy, which held the permits, and High Plains Gas, which bought the Patriot wells in 2014, no longer are in business and don’t have working phone numbers.

Idaho House approves oil and gas regulation bill: (AP) — The Idaho House on Monday approved legislation aimed at speeding up natural gas and oil production by changing the industry’s deadlines and decision-making process. Senate Bill 1339 would make the Idaho Department of Lands responsible for initial oil and gas decisions, while allowing the Oil and Gas Conservation Commission to oversee and reverse such decisions. It would also institute tighter deadlines for oil and gas industry appeals. Democratic Rep. Ilana Rubel, of Boise, says lawmakers have been inundated with letters from constituents in opposition of the bill. She argues that the new legislation would unfairly restricts public input because it reduces the public comment period on new drill projects from 15 to 10 days. The measure passed the body in a 50-19 vote. It now heads to Gov. C.L. “Butch” Otter’s desk for his signature.

FERC Denies Jordan Cove LNG Export Terminal and Pacific Connector Pipeline -- On Friday, the Federal Energy Regulatory Commission (FERC) rejected the proposal for the Jordan Cove LNG Export Terminal and Pacific Connector Pipeline because its public interest value did not outweigh the project’s adverse effects “We find the generalized allegations of need proffered by Pacific Connector do not outweigh the potential for adverse impact on landowners and communities,” FERC said, adding that “the record does not support a finding that the public benefits of the Pacific Connector Pipeline outweigh the adverse effects on landowners.” This is a huge victory for groups that have been fighting this project, including the Sierra Club, which intervened by filing a formal request calling for the Jordan Cove terminal and Pacific Connector pipeline to be rejected. “This historic victory is the result of over a decade of hard work by Oregonians and their allies across the environmental movement committed to protecting their communities from this dangerous proposal,” Sierra Club executive director Michael Brune said.

U.S. oil production continues to decline, and is now below its year-ago level - Today in Energy - (EIA): U.S. monthly crude oil production in December 2015 continued to decline, as oil production reached its lowest level since November 2014. Production also declined from year-ago levels for the first time in more than four years. This continued production decline is the result of lower crude prices, which have declined more than 70% since the summer of 2014. Crude oil production in December 2015 averaged 9.3 million barrels per day (b/d), down 166,000 b/d from December 2014 and the first year-over-year decline in U.S. monthly oil output since September 2011, according to the latest data from  EIA's Petroleum Supply Monthly report released at the end of February.  Domestic oil production has generally declined month to month since reaching a 44-year peak of almost 9.7 million b/d in April 2015. Even as production declined, output was still above levels from the same month a year earlier until EIA published production for December 2015. Most of the decline in oil production has occurred in states where a large portion of output comes from tight oil formations, including North Dakota, Texas, and New Mexico. Oil production from tight formations accounted for most of the increase in U.S. oil production during the past five years, and it is now making up most of the decline in output. EIA's Short-Term Energy Outlook forecasts U.S. oil production will continue to decline both on a month-to-month basis and from year-ago levels until the fourth quarter of 2017.

Contraction in U.S. Shale Pushes Oil to $40: Crude oil prices have rallied by more than 30 percent since early February and investors are growing more confident that a rebound is in order. Have oil prices finally turned a corner? The sudden wave of cautious optimism surrounding the direction of oil prices can be boiled down to the decline in U.S. oil production, a trend that is starting to pick up pace. While U.S. oil producers managed to stave off significant production declines in 2015, drillers are finally starting to capitulate with oil prices in the mid-$30s per barrel and below. The effects are starting to show up in the data. The EIA reported weekly estimates showing that U.S. production has now dropped below 9.1 million barrels per day (mb/d). That is a departure from the past few months - the U.S. saw little to no decline in output in the fourth quarter, as weekly figures pointed to a resilient rate of production that hovered between 9.1 and 9.2 mb/d. That trend continued into the early part of 2016 even though prices crashed below $30 per barrel. However, by the end of January, the EIA believes that U.S. oil production finally started to see output fall. Between January and the end of February, the U.S. lost over 150,000 barrels per day in production. The EIA's weekly figures are not as accurate as their retrospective monthly estimates, but since the monthly figures are published with several months of a lag, it could be a few more months before we get a more accurate picture of how fast output is falling.

DUC and cover | The Economist: NO ONE can deny that America’s shale-oil industry is having a hard time. In recent weeks it has suffered the indictment and subsequent death in a car crash of one of its pioneers, Aubrey McClendon; a shellacking from Hillary Clinton, who could become America’s next president; and a warning from Ali al-Naimi, Saudi Arabia’s oil minister, to cut costs, borrow money or face liquidation. The data illustrate the extent of its woes. Against that bleak backdrop, the mere hint this week that American oil prices were rebounding towards $40 a barrel, up from a low of less than $30 a barrel a month ago, must have felt like a get-out-of-jail-free card. With a chutzpah typical of the industry, some shale executives see $40 oil as the threshold above which they can resume drilling and make money again—even if America is still awash with record amounts of crude in storage. If they are right about that, it could change the entire dynamics of the oil market, quickly smoothing any upward or downward spike in prices. But it is not at all clear that they are. In theory, it is not hard for the frackers to increase production rapidly, once it becomes economical. Rig and drilling costs have fallen so fast that some wells could make money with prices around $40-45 a barrel, according to Rystad Energy, a consulting firm (see chart 2). Firms have laid off many workers, but with well-paid jobs hard to find elsewhere, it could be relatively easy to attract them back. In preparation for higher oil prices, producers from the Bakken field in North Dakota to the Permian and Eagle Ford in Texas have reported that they have hundreds of “drilled but uncompleted” ( DUC) wells. DUCs should be anathema to a self-respecting shaleman; they sink cash into the ground in the form of wells, but defer the all-important fracking that breaks open the shale rock and produces the oil. They could be a quick way to resume production, however. In late February Continental Resources and Whiting Petroleum, two big operators in the Bakken, said that above $40 a barrel they may begin fracking their rising inventory of DUCs. For most of the industry, however, the problem is not finding oil but finding cash. “No one is sitting on any excess capital,”

US shale industry’s best days are still ahead -- These days the oil market is a real street brawl. Filling up at the pump has turned into highway robbery. The average cost of a gallon of gasoline in the U.S. is below $1.80 — the lowest in almost a decade. Oil prices — hovering at $30 a barrel for the last few months — are wreaking havoc on producers around the world, but the pain has been particularly sharp here in the U.S. Many of our oil companies — the very companies that helped launch the shale revolution — are teetering on bankruptcy. Others that are somewhat better off are trying to maintain investor confidence by promising to more or less hibernate. For example, Whiting Petroleum and Continental Resources, the two largest producers in North Dakota’s prolific Bakken shale, have decided not to frack any new wells for the foreseeable future. Survival in this market means cutting investment until oil prices begin to rebound. Does this grim news mean that the gains of the shale revolution — increased U.S. energy security, stronger economic growth and a less powerful OPEC — will be lost? Far from it. It may be hard to see through the storm, but the U.S. shale industry’s best days are likely still ahead. Although Saudi Arabia still plays a central role in the global oil marketplace, America’s shale producers have broken OPEC’s ability to manipulate the market as it has since the 1970s. In 2008, U.S. crude oil production had fallen to only 5 million barrels a day, a drop of almost 50% from the peak production of 9.6 million in 1970 and down to the lowest level of domestic crude output in more than 60 years, going all the way back to 1946 (see chart above). But then the revolutionary drilling technologies of hydraulic fracturing and horizontal drilling sparked the great American shale revolution, and the abundance of domestic shale oil quickly reversed the 36-year decline in U.S. output in only seven years.

The oil industry will survive its wounds, but the pain isn’t over --  Two of the biggest names in the oil industry believe that the wounds inflicted by cratering crude prices will heal slowly, but the result will be a patient stronger in the broken places and better prepared for future growth. John Browne, former chief executive of UK major BP, and Mark Papa, ex-CEO of EOG Resources, one of the biggest US shale operators, said during the CERA conference in late February when the price lift comes, the industry will be changed in ways that prepare it for the coming decades, Browne said. “I think we’ll see a pretty fundamental restructuring” in the industry, said Papa, longtime EOG chief from its 1999 spinoff from now-defunct Enron until mid-2013. He is now a partner at private equity firm Riverstone Holdings. But in the next six to 12 months there may be a “decimation” of the industry, with many bankruptcies, he said. Of companies that survive, “a lot will be grievously wounded financially.” Management teams that do weather the storm will be more conservative, and as conditions improve they will not stretch their balance sheets even if oil gets to much higher levels, Papa said. They will also be very careful in making acquisitions of other companies. “Industry is going to act in a more mature fashion, particularly the independents,” he said, although he added “it will be interesting to see how majors respond to this.”

Chevron cuts spending budget again (AP) — Chevron is cutting its spending budget by nearly 40 percent for 2017 and 2018 as it deals with plunging oil prices, a bigger cut in spending than it previously expected. The oil and gas company said Tuesday that it expects to spend between $17 billion and $22 billion on drilling and other projects in 2017 and 2018, lower than the $20 billion to $24 billion range the company had expected in October. The company has a spending budget of $26.6 billion this year, down 24 percent from the year before. Several energy companies have announced plans to trim spending due to lower oil prices. Chevron Corp., based in San Ramon, California, has also cut jobs and sold some of its facilities and pipelines to raise cash.

Chevron Protects Dividend, Slashes Another 36% Off Spending --  Chevron continues to cut spending in order to keep its dividend. The California-based multinational just announced that it would cut its capex in 2017 and 2018 by another 36 percent, bringing annual spending down to between $17 and $22 billion. That is down from an October 2015 estimate, when Chevron said that it expected to spend $20 to $24 billion each year in 2017 and 2018. It is also sharply lower than the $26.6 billion Chevron is spending this year, which itself is a 25 percent reduction from last year’s levels. The severe cuts come as Chevron has had to take on debt in order to afford shareholder dividends, as the company has not generated enough cash flow to cover the payouts with oil prices as low as they are. Dividends cost the company $8 billion in 2015 alone. Chevron would need oil trading at $50 in order to cover the dividend with cash flow. This week is also notable for Chevron because the giant Gorgon LNG project in Australia is finally beginning operations. The $54 billion export facility has absorbed much of Chevron’s capital and attention, a project that has suffered from repeated delays and cost inflation. The total price tag is 45 percent higher than the original estimate. The bad news for Chevron is that the facility is set to export LNG into a market that is already oversupplied. Spot LNG cargoes have plunged by two-thirds over the past two years. For April delivery, LNG cargoes in East Asia have dropped to just $4.25 per million Btu (MMBtu). In early 2014, the same cargoes sold for over $17/MMBtu. Chevron will be insulated somewhat from these forces with contracts lined up for delivery under fixed prices. The long-term picture, the company believes, still looks strong. LNG export terminals can operate for decades. Nevertheless, the massive project is squeezing Chevron in the short-term, a time when it can least afford it. And with dividends untouchable, spending on exploration and production must be cut deeper.

Chevron shifts focus to Texas shale -- Chevron plans to focus on shorter-cycle investments in West Texas shale plays after its larger, long-term investments come into production this year. By the end of the decade, Chevron believes it can nearly triple its oil production in the Permian Basin by increasing its rig count from seven to 14. “Don’t be surprised if by the middle of the next decade 20 to 25 percent of our production is in this short-cycle shale and tight activity,”  The San Ramon-based oil company said it plans on doubling its spending in West Texas. Chevron has 1,300 drilling locations in the Permian that can turn a profit if oil reaches $40 per barrel. At $50, Chevron has 4,000 profitable locations. Chevron also has 5,500 profitable locations if oil sells at $60. Officials said the company will drill 175 wells this year with seven operated rigs and nine non-operated rigs. The company projects an output of 350,000 barrels a day by 2020 from the Permian Basin. Chevron currently produces 125,000 barrels a day from Permian shale. Increased efficiency has helped Chevron weather low oil prices. In the past year, Chevron said its cost to drill a horizontal well dropped to $7.1 million, a 40 percent drop. It now takes 20 days to drill a well, less than half the time it did before. Returns from the Permian Basin have increased by 30 percent. Though the company has become more efficient, it still plans to cut up to 25 percent of its upstream work force this year. That means about 4,000 jobs will be eliminated in 2016. Last year, Chevron slashed 3,000 jobs as oil prices neared 11-year lows.

Key Formula for Oil Executives’ Pay: Drill Baby Drill - WSJ: Markets have been waiting for U.S. energy producers to slash output during a period of depressed crude prices. But these companies have been paying their top executives to keep the oil flowing. Production and reserve growth are big components of the formulas that determine annual bonuses at many U.S. exploration and production companies. That meant energy executives took home tens of millions of dollars in bonuses for drilling in 2014, even though prices had begun to fall sharply in what would be the biggest oil bust in decades. The practice stems from Wall Street’s treatment of such companies’ shares as growth stocks, favoring future prospects over profitability. It has helped drive U.S. energy producers to spend more unearthing oil and gas than they make selling it, energy executives and analysts say. It has also helped fuel the drilling boom that lifted U.S. oil and natural-gas production 76% and 31%, respectively, from 2009 through 2015, pushing down prices for both commodities. “You want to know why most of the industry outspent cash flow last year trying to grow production?”  “That’s the way they’re paid.” Signs that oil production may finally be easing helped push up crude prices Friday to their highest levels of the year. Still, CEO pay and production are likely to remain a flash point for investors because few wells are profitable even at these higher crude prices. The persistence of U.S. production in the face of such economics has been one of the biggest puzzles in the energy market. Members of the Organization of the Petroleum Exporting Countries have increased production, betting that U.S. energy producers would curtail drilling or be forced out of business. But even as oil prices began their plunge in the second half of 2014, many companies kept drilling.

Upstream CAPEX Reductions -- March 11, 2016 From Woods Mckenzie: (graphic)  I think two interesting data points is the extent to which California Resources will quit drilling in California, and the fact that Whiting is not on the list (if it is, I missed it).

The $9.2 Billion Bet Against OPEC Dominance - The $9.2 billion investors paid to snap up new equity offerings from U.S. oil companies in 2016 proves those investors are indeed ready for more punishment. The amount is in line with the pace of such equity offerings in 2015 even as the mood in the oil markets has grown increasingly dour In June of last year I wrote: New investors in U.S. oil company shares must believe they are catching the bottom and will have a very profitable ride up from here. This demonstrates that OPEC's work is not done and accounts in part for the decision to leave production quotas unchanged. OPEC's next task is to convince those making new investments in oil that, rather than catching a bottom in oil prices, they have caught a falling knife.A lot of investors did end up catching a falling knife as oil careened downward from about $60 a barrel last summer to Friday's close of about $36. Investors this year may still find that the knife is falling, though it admittedly doesn't have as far to fall this time around. Still, it seems they misunderstand OPEC's strategy or believe that that strategy will fail. As I said in the same piece:  The cartel must dampen enthusiasm for investment for the long term if the organization's members are going to benefit. A crippled U.S. oil industry without friends in the investment world is the only way to assure that rising prices won't simply lead to a stampede back into U.S. shale deposits. It seems that the oil industry still has friends in the investment world and that OPEC's work is therefore not yet done. The big question then is: Will OPEC stay the course or relent with a production cut this year to raise prices?

EIA Forecasts Continued Crude Oil Production Decline Across US Shale In April, 2016 -- March 8, 2016  --From EIA: second-biggest US shale output drop is forecast for April, 2016 -- reported by Reuters --U.S. shale oil production in April is expected to chalk up the second-largest monthly decline on record, and the sixth straight monthly decrease.  Total output is expected to fall by 106,000 barrels per day to 4.87 million bpd. That would be the second largest monthly drop after a record 121,000 bpd-decline in January 2015, based on data dating back to 2007.  Production from the Bakken Formation in North Dakota is expected to fall 28,000 bpd, the fifth consecutive monthly drop, while output from the Eagle Ford Formation is forecast to drop 58,000 bpd, the ninth consecutive monthly slide.  Production from the Permian Basin in West Texas is expected to fall 4,000 bpd, the first decline since June. Oil production per rig rose to new records across the shale plays, jumping 6 bpd in the Bakken, 10 bpd in the Eagle Ford and 6 bpd in the Permian.  The biggest regional decline was expected to be in Eagle Ford, down 0.2 bcfd from March to 6.3 bcfd in April, the lowest level of output in the basin since April 2014.  In the Marcellus Formation, the biggest U.S. shale gas field, in Pennsylvania and West Virginia, April output was expected to decline by 0.1 bcfd from March to 17.3 bcfd. That would be the second monthly decline in a row and the biggest decline since July 2013.

On Fracking, Clinton And Sanders Give Vastly Different Answers - Democratic presidential candidates Hillary Clinton and Bernie Sanders gave vastly different answers on fracking at the CNN Democratic debate on Sunday, illustrating a key policy contrast between the two.The candidates were asked by University of Michigan student Sarah Bellaire about whether they support fracking, the controversial process of injecting high-pressure water, sand, and chemicals underground to crack shale rock and let gas flow out more easily. Clinton, who answered first, said she does — but only under certain conditions. Specifically, Clinton said that she would not support fracking when local communities don’t want it; when it causes pollution; and when fracking companies don’t disclose the chemicals they use. “By the time we get through all of my conditions, I do not think there will be many places in America where fracking will continue to take place,” she said, adding that some places with fracking are not sufficiently regulated. “We have to regulate everything that is currently underway, and we have to have a system in place that prevents further fracking unless conditions like the ones that I just mentions are met.”When asked the same question, however, Sanders had a different response.“My answer is a lot shorter. No. I do not support fracking,” he said to applause.  Sanders was then challenged by CNN debate moderator Anderson Cooper, who noted that many Democratic governors say that fracking can be done safely, and that it’s helping their economies. Cooper asked: “Are they wrong?”  “Yes,” he said, to more applause. Sanders also hit Clinton for her campaign contributions from fossil fuel interests.  Watch:

Hillary Clinton pivots on fracking - Hillary Clinton made a major left turn last Sunday night in her debate with Bernie Sanders.  The leading candidate for the Democratic nomination for President shifted her position on hydraulic fracturing. In answer to a question, Clinton outlined a set of conditions that would have to be met before she supported fracking, and then added this critical qualifier: “By the time we get through with my conditions, I do not think there will be many places in America where fracking will continue to take place.”   That is a policy shift from her earlier position outlined in a factsheet released last month, where she said “natural gas plays a critical role in reducing CO2 and other pollutants (and has)…yielded significant public health benefits.” Clinton may have been pulled to the left by Sanders who, in answer to the same question about whether he supported fracking, said simply, “no.”  It’s stunning that the technology that has led to the energy production resurgence in this country is so cavalierly dismissed by Sanders and Clinton.  Fracking has opened mammoth gas and oil reserves that were previously unreachable, guaranteeing energy stability and security for generations as well as creating a new economic force. The Energy Information Administration estimates that the United States will become a net exporter of LNG (liquefied natural gas) by the middle of next year, marking the first time since 1955 that we will export more than we import. The American Petroleum Institute says production from Marcellus reserves alone has risen from one billion cubic feet per day to 16 billion just in the last few years.  U.S. crude oil production increased 74 percent between 2008 and 2014. Most of the surge in gas production and about half of the oil comes from fracked wells.  In fact, there is so much gas and oil available here and around the world now that prices are hitting historic lows, keeping energy and gasoline bills down for consumers.

Hillary Clinton's Pledge to Limit Fracking Falls on Unconvinced Ears - – Hillary Clinton’s vow to regulate oil and gas fracking almost out of existence was met with skepticism Monday, failing to convince either industry or environment groups that she would – or could – end the controversial drilling practice if she becomes president. The front-runner for the Democratic party nomination used a debate in Flint, Michigan on Sunday night to oppose fracking anywhere local communities were against it, wherever it polluted air or water, and whenever companies refused to disclose what chemicals they use in the process.“By the time we get through all of my conditions, I do not think there will be many places in America where fracking will continue to take place,” she said.  But supporters and opponents of fracking dismissed her position as campaign rhetoric that would collide with the limited powers of a president to control an activity largely regulated at the state level. Defenders of fracking said no president would try to put the brakes on a drilling technique that has flooded the U.S. with cheap oil and gas. “Secretary Clinton’s answer is essentially campaign hyperbole, and meant to appease her environmental constituency,” “In reality, it has little substance to it.” Green groups welcomed Clinton’s shift from her past support for fracking. But they also urged her to stop laying down conditions and caveats. As secretary of state, Clinton supported fracking as a way to reduce U.S. dependence on imported energy, and even led a push to spread shale extraction to allies in Europe to wean them off Russian gas.

How Hillary Clinton's Ignorant War On Fracking Could Cost Her The Presidency - Breitbart News -- The FrackNation page temporarily suspended by Facebook is back up and running.  This means that — thanks to the Streisand Effect — the anti-fracking activists who put pressure on Facebook to close it down have shot themselves in their sandalled feet. Suddenly the whole world knows about the Dimock water trial — and what a huge setback it has been for the cause of anti-capitalist, enviro-Nazi lunacy.  Indeed, it’s possible that this once obscure trial may yet come to be recognised as the case that cost Hillary Clinton the presidential election.  To understand why you first need to appreciate what a hot-button issue fracking is with the liberal base. Sen. Bernie Sanders (I-VT) is flat against it. So — she suddenly decided at Flint, Michigan at the weekend — is Hillary. Hillary Clinton, though, needed more time to outline three conditions in a more nuanced answer on fracking. She’s against it “when any locality or any state is against it,” “when the release of methane or contamination of water is present,” and “unless we can require that anybody who fracks has to tell us exactly what chemicals they are using.” While this tough anti-fracking line might have played well with liberal activists, it’s unlikely to win widespread popular support when Clinton goes to the country.

Hillary Will Never Admit Publicly That She Supports Fracking, But She's a Booster Behind Closed Doors- Hillary Clinton fielded a question about whether she supports fracking in Sunday’s Democratic presidential debate. Here’s her equivocal answer and a rebuttal: Bernie and Hillary #1DBBD13 from JFOX on VimeoYou will never hear her say on a debate stage “I support fracking, let’s frack more.” That’s because hundreds of families harmed by fracking have spoken out about water and air contamination. The anti-fracking movement is one the fastest growing grassroots movements in the country. The word "fracking" has become as politically toxic as the practice itself. Hillary Clinton can’t say she supports fracking, but she does. It’s on her website: see “Hillary Clinton Plan for Ensuring Safe and Responsible Natural Gas Production.” I’m wondering if Hillary’s team edited this or if they just copied and pasted the industry’s talking points directly:  Domestically produced natural gas can play an important role in the transition to a clean energy economy, creating good paying jobs and careers, lowering energy costs for American families and businesses, and reducing air pollution that disproportionately impacts low income communities and communities of color. Hillary Clinton has tried to distance herself from the large sums of money she takes from the fossil fuel industry, but their influence over her energy policy could not be more apparent: Natural gas can play an important role in the transition to a clean energy economy.

More heat than light in the US fracking debate - Fracking is an ugly term for a useful activity. Advances in hydraulic fracturing, to give the technique its proper name, sparked the US oil and gas boom of the past decade, bringing cheaper fuel, tens of thousands of well-paid jobs, and even a reduction in carbon dioxide emissions thanks to the switch from coal to gas for power generation. So it is troubling that the two contenders for the Democratic party’s nomination for president have been competing over which of them is more eager to bring fracking to an end.  Speaking in the candidates’ debate on Sunday evening, Hillary Clinton sketched out new requirements to be imposed on companies seeking to use hydraulic fracturing. Once those conditions were in place, she suggested, “I do not think there will be many places in America where fracking will continue.” Mr Sanders was quick to depict that as craven equivocation. “My answer is a lot shorter,” he said. “No, I do not support fracking.” Stopping fracking would be a great plan for rescuing Saudi Arabia. For the US, though, it would be disastrous. If elected, Mrs Clinton or Mr Sanders would not be able to ban hydraulic fracturing overnight. Oil and gas regulation in the US is mostly handled by the states, and attempts to extend federal authority would face challenges in the courts. The candidates’ comments are nevertheless concerning, because they reflect a denial of the realities of US energy production. More than half of all the oil and gas extracted in the US comes from wells in shale and similar rocks, which need to be fracked to be brought into production. Banning fracking would devastate the industry, send energy prices soaring, and make the US a much larger importer of both oil and gas. Neither candidate offered any worthwhile ideas about how to make good the harm that a fracking ban would do.

The EPA Will Limit Methane From Existing Oil And Gas Facilities - -- The EPA will limit methane emissions from existing oil and gas facilities — a huge move by the federal agency, announced in conjunction with President Obama’s meeting with Canadian Prime Minister Justin Trudeau on Thursday.  The new rule will help the two countries achieve their goal of cutting methane emissions from oil and gas to 40 percent to 45 percent below 2012 levels by 2025.  “The two leaders regard the Paris Agreement as a turning point in global efforts to combat climate change and anchor economic growth in clean development,” the White House said in a statement. “They resolve that the United States and Canada must and will play a leadership role internationally in the low carbon global economy over the coming decades.”  The EPA will start the formal process of developing the rule next month, while Canada expects to have a proposed rule in 2017.  Environmentalists have been calling for methane emissions reductions for years. A previously announced rule by the EPA covered only new oil and gas facilities — this new addition will greatly increase expected reductions from the sector.  Without it, by 2018, almost 90 percent of the methane emissions from the U.S. oil and gas sector would have come from infrastructure built before 2011, the Environmental Defense Fund had estimated.  The rise in fracking has dramatically increased methane emissions across the country. In fact, while natural gas is often touted as a clean energy source because it emits less carbon when burned than coal does, studies show that methane leaks have completely erased any climate benefit of transitioning to natural gas.  Methane is a potent greenhouse gas — which makes up 80 percent of natural gas. While it breaks down faster than carbon dioxide, it traps heat 25 times more effectively than CO2 over a 100-year period, and 34 times more effectively over a 20-year period.

Opposition Is Growing To Obama’s Sweeping Trade Deal -- 40 environmental groups have signed a letter urging Congress to reject the TransPacific Partnership.  It’s something that all the major presidential candidates — on both sides of the aisle — can agree on: The United States should not ratify the TransPacific Partnership trade agreement. Now, a group of environmental advocates is pressuring Congress to reject ratification of the 12-nation agreement, which they say would allow 9,000 companies operating on U.S. soil to sue the government for imposing environmental regulations.   Under the agreement’s investor-state dispute settlement clause, corporations can sue states for thwarting economic expectations. The clause, known as ISDS, allows companies to file claims for damages or lost revenue incurred by rejected permits or a changed regulatory landscape. The claims are heard by three-member tribunals, often made up of corporate lawyers, that operate independently. Handing foreign companies equal — or even slightly advantageous — ground against the U.S. government, in an extra-judicial tribunal system, is not as far-fetched as it sounds. TransCanada, the company that tried to build the Keystone XL pipeline, represents just one example of how the TPP would work. The company has filed a claim under NAFTA for $15 billion in damages, alleging that U.S. denial of the permit was “arbitrary and unjustified.”  The Keystone suit is really the tip of the iceberg in terms of what we could see if TPP were to pass through Congress.

Could This Lawsuit Be the Straw That Breaks the TPP’s Back? - In November 2015, just after President Obama finally stood up to the fossil fuel industry and rejected the TransCanada Corporation’s application for its tar sands pipeline through the United States, I issued a warning: In The Hill, I applauded the Obama decision and laid out the reasons why, under current trade and investment rules, TransCanada had grounds to sue the United States under the 1994 North American Free Trade Agreement (NAFTA).  I hardly need remind readers that NAFTA launched the modern era of corporate-biased investment rules, and serves as the model for the investment chapter in the TransPacific Partnership (TPP) that now awaits votes in the U.S. Congress. Lo and behold, TransCanada came to the same conclusion that I did.  They hired a giant corporate “K Street” law firm, Sidley Austin, and in January 2016, the fossil-fuel giant put the U.S. government on notice of a potential lawsuit under the investment chapter of NAFTA.  To get the U.S. government’s attention, they claimed to have suffered $15 billion in losses because of the rejection.  In TransCanada’s “notice of intent,” they argue that the United States has never before rejected a cross-border pipeline and that repeated studies by the U.S. State Department showed that the pipeline would not have a deleterious environmental impact on climate.  They conclude that the U.S. rejection of their pipeline, some seven years after their application, is a political decision and is not permitted under the NAFTA rules. It is vital that people pause and ponder:  TransCanada, in its legally justified yet totally outrageous reaction, is reminding us of the reality of the investment rules our governments, under heavy pressure from global corporations, have inserted into thousands of trade and investment agreements.   And, we need to contemplate the assault on democracy that these rules and the TransCanada complaint represent.

Wall St. vets battle BP in fallout over Canada refinery | Reuters: A legal battle between a team of former Wall Street oil traders and behemoth producer BP plc (BP.L) over a remote Canadian refinery sheds rare light on the murky world of crude trading. The first salvo in the previously unreported dispute was fired by BP in December. The oil company demanded, through arbitration, $110 million from the private equity-backed NARL Refining for its alleged failure to properly manage and maximize profits from the Come-by-Chance plant in Newfoundland. NARL filed a counter arbitration claim along with two lawsuits accusing BP - which is the refinery's sole supplier under a two-year contract - of providing varieties of crude that benefit its trading book but hurt the refinery's equipment and profits. The dispute could jeopardize the ongoing operation of the 115,000 barrel per day (bpd) refinery. It also exposes a rift in the rough-and-tumble global oil market, where disputes often are handled quietly to avoid compromising long-term relationships or revealing trading strategies. "Disagreements among parties in supply contracts are not uncommon, but we don't typically see these conflicts out in the open," said Ed Hirs, an energy economist at the University of Houston. "That's why these contracts call for disputes to go to arbitration, keeping it out of public view."

Pemex says it has lines of credit to pay 1,300 vendors: (AP) — Mexican state-run oil company Petroleos Mexicanos says it has obtained lines of credit allowing it to pay 85 percent of its vendors, more than 1,300 businesses. Pemex said in a statement Tuesday that at the close of 2015 it had debt of $8.4 billion of which it has paid about $1.1 billion. Company director Jose Antonio Gonzalez Anaya met with the heads of business organizations Monday, explaining that Pemex was experiencing a liquidity problem but was solvent. In February, Pemex announced it would slash spending 22 percent and cut unprofitable production 100,000 barrels per day. It will cut $5.5 billion from its 2016 budget because of low world oil prices. Mexico had estimated that the price of oil in 2016 would be $50, but it is now forecast at $25.

WTI Crude Spikes To $37, Brent Over $40 After Genscape Report -- Stocks are up thanks to another mindless spike in WTI Crude this morning after Genscape reported a smaller than expected build at Cushing. WTI spiked over $37 and Brent back above $40 on the news as Futures and ETF shorts cover.  WTI back above $37 for the first time since Jan 6th...Futures shorts covering in size... And Oil ETF Shorts have collapsed back to "norms"... Finally we are worried for Dennis Gartman's health as he has just $7 until potentially bad things happen: As he said on CNBC "we won't see crude above $44 again in my lifetime."

Oil at 2016 high above $40 per barrel after producer price support talk | Reuters: Global oil markets jumped more than 5 percent on Monday, with Brent hitting a 2016 peak above $40 a barrel, after Ecuador said it was holding a meeting of Latin American crude producers as OPEC sought a higher anchor price for oil. Technically-driven buying in crude and a commodities rally also boosted oil. Industry data showing a smaller-than-expected build in stockpiles at the Cushing, Oklahoma delivery hub for U.S. crude futures was another supportive factor. Oil has rallied more than 50 percent since hitting 12-year lows less than two months ago. The rally began after Russia and the Organization of the Petroleum Exporting Countries floated the idea of a production freeze to support prices in an oversupplied market. Ecuador's Foreign Minister Guillaume Long said his government will host a meeting in Quito on Friday with Venezuela, Colombia, Ecuador and Mexico "to reach consensus over oil, especially prices." Separately, major OPEC producers are talking about a new oil price equilibrium of around $50, New York-based consultancy PIRA told Reuters.

Why Oil Is Up 46% In 17 Trading Days - Forbes: Intervention has been the common theme we’ve discussed for the better part of the past two months. And this week, that theme is heating up. We’ve explained why oil at $30 has posed a threat to the global financial system and global economy. And we explained the parallels of the systemically threatening (current) oil price bust and the 2007-2008 housing bust. But we also noted the key differences, and why and how this “cheap oil” problem could be easily solved, unlike the housing bust.  The easy fix, as we’ve said is intervention. And as we’ve made this case, along the way, we’ve gotten signals that intervention was, indeed, coming. The Bank of Japan and the European Central Bank stepped in a little more than a month ago and, at least verbally, implying that they could outright buy oil (threatening that there were “no limits” to what they could buy as part of their QE programs). The seminal moment in the “oil bust crisis threat” was the day Chesapeake Energy, one of the largest producers of oil and natural gas, was reported to be exploring bankruptcy last month. The rumor was immediately denied by the company. But it was that moment, we think, that policy makers realized that Chesapeake could be another Lehman moment for global markets and the global economy. Days later, the Bank of Japan intervened in the currency markets. We argued that, given the timing and the coinciding bottom in oil, that the BOJ likely used the opportunity to buy oil (either directly or indirectly through ETFs, etc). Today, just 17 days later, oil printed over $38 today.  That’s 46% higher than it traded the day the BOJ intervened in the currency markets. Meanwhile, we’ve also argued that China could step in and be an outright buyer of oil, to stem the threat to the global financial system.  They stepped in and bought oil (and a host of commodities) in 2009.  Oil quickly doubled from $32, and went on to trade back to well over $100 again.

Oil Fundamentals Could Cause Oil Prices To Fall, Fast! -  Berman - Oil prices should fall, possibly hard, in coming weeks. That is because fundamentals do not support the present price. Prices should fall to around $30 once the empty nature of an OPEC-plus-Russia production freeze is understood. A return to the grim reality of over-supply and the weakness of the world economy could push prices well into the $20s. An OPEC-plus-Russia production cut would be a great step toward re-establishing oil-market balance. I believe that will happen later in 2016 but is not on the table today. In late February, Saudi oil minister Ali Al-Naimi stated categorically, “There is no sense in wasting our time in seeking production cuts. That will not happen.” Instead, Russia and Saudi Arabia have apparently agreed to a production freeze. This is meaningless theater but it helped lift oil prices 37 percent from just more than $26 in mid-February to almost $36 per barrel last week. That is a lot of added revenue for Saudi Arabia and Russia but it will do nothing to balance the over-supplied world oil market. The problem is that neither Saudi Arabia nor Russia has greatly increased production since the oil-price collapse began in 2014 (Figure 1). A freeze by those countries, therefore, will only ensure that the supply surplus will not get worse because of them. It is, moreover, doubtful that Saudi Arabia or Russia have the spare capacity to increase production much beyond present levels making the proposal of a freeze cynical rather than helpful.

EIA's Dire Oil Forecast: $34 Crude Due To Far More Resilient Production, Oversupply And Lower Demand -- Now that the massive USO-driven squeeze appears to be over (congratulations to whoever managed to sell equity and their secured lenders) the bad news can return. First, it was Goldman slamming the "unsustainable rally, and then just a few hours ago, the EIA released itslatest monthly short-term outlook report in which it brought even more bad news for long-suffering bulls who thought the pain was finally over. Instead, the pain is only just beginning, after the EIA revised its 2016 supply forecast higher as "production is more resilient to lower prices than previously expected" - why thank you desperate momentum chasing "investors" of other people's money, who can't wait for that secondary offering to repay JPMorgan's credit facility. The EIA also revised its forecast demand lower as a result of a decline in global economic growth. Yes, someone finally admitted that demand is lower. End result: a cut in forecast oil prices for 2016 and 2017 from $37 and $50 to just $34 and $40. Here is the summary, with the troubling parts highlighted: Global oil inventories are forecast to increase by an annual average of 1.6 million b/d in 2016 and by an additional 0.6 million b/d in 2017. These inventory builds are larger than previously expected, delaying the rebalancing of the oil market and contributing to lower forecast oil prices. Compared with last month’s STEO, EIA has revised forecast supply growth higher for 2016 and revised forecast demand growth lower for both 2016 and 2017. Higher 2016 supply in this month’s STEO is based on indications that production is more resilient to lower prices than previously expected. Notably, revisions to historical Russian data, which raised the baseline for Russian production, carry through much of the forecast. Additionally, lower expectations for global economic growth contributed to a reduction in the oil demand forecast.

Crude Chaos As Cushing Inventories Rise For 6th Straight Week -- Following Genscape's projection that Cushing inventories rose less than expected, various sources on Twitter report that API sees a 4mm build (in line with expectations of a 3.9mm build) after EIA's massive build of over 10.3mm barrels last week. Cushing saw a 692k build - the 6th week in a row but gasoliine and distilklates saw a draw. Crude sold off all day as the short-covering squeeze ended but as the data hit, WTI dipped, ripped, and dipped again... only to rally once more...  API:

  • Crude +4.4mm
  • Cushing +692k
  • Gasoline -2.1mm
  • Distillates -128k

Sixth weekly rise in Cushing Inventories..

OilPrice Intelligence Report: Oil Rally Stalls As Storage Concerns Spike - The EIA released its monthly Drilling Productivity Report, which projects that major U.S. shale basins will see production fall by 106,000 barrels per day in April, the sixth consecutive month of declines. It will also mark the second largest decline on record. All the major basins see output fall, including the Bakken, Eagle Ford, Niobrara and even the Permian basin, which has help up amid the collapse in prices. The bulk of the declines will come from the Eagle Ford (down 58,000 barrels per day), a trend that has become commonplace in recent months.  The solid production declines are raising hopes that the oil markets are slowly moving into balance. WTI bounced above $37 per barrel on Monday and Brent surpassed $40 per barrel, the highest prices since the beginning of the year. Oil prices have rallied by over 30 percent since early February. The price increase is starting to trickle down to the pump. Retail gasoline prices in the United States rose from $1.73 to $1.78 per gallon in the last week of February, the first full-week increase in over eight months.  The oil industry and its investors are hoping that the worst is over, but not everyone is convinced. “Only a real physical deficit can create a sustainable rally which is still months away should the behavioral shifts created by the low prices in January and February remain in place,” Goldman Sachs wrote in a new report.  China stepped up oil imports to take advantage of cheap oil while it lasts. There are some other forces at work as well that are pushing up imports. The Chinese government has decided not to cut retail fuel prices when oil falls below $40 per barrel, meaning that Chinese refiners can make more money selling within China than exporting. As a result, China’s exports of refined products are falling. At the same time, the government has granted more licenses to refiners, allowing the market to grow. That is increasing the demand for crude – resulting in higher imports. February imports jumped by 19 percent compared to January, pushing it over 8 million barrels per day, a new monthly record.

Crude Oil Price Rises on Big Gasoline Drawdown - The U.S. Energy Information Administration (EIA) released its latest weekly petroleum status report Wednesday morning. U.S. commercial crude inventories increased by 3.9 million barrels last week, maintaining a total U.S. commercial crude inventory of 521.9 million barrels. The commercial crude inventory stands at historically high levels for this time of year, according to the EIA. Tuesday evening the American Petroleum Institute (API) reported that crude inventories rose by 4.4 million barrels in the week ending March 2. For the same period, analysts had estimated an increase of 3.1 million barrels in crude inventories. API also reported gasoline supplies fell by 2.1 million barrels, compared with an analysts’ estimate that gasoline inventory fell by 1.5 million barrels. Total gasoline inventories decreased by 4.5 million barrels last week, according to the EIA, but remain well above the upper limit of the five-year average range. Total motor gasoline supplied (the agency’s measure of consumption) averaged over 9.3 million barrels a day for the past four weeks, up by 7% compared with the same period a year ago. West Texas Intermediate (WTI) crude oil rose above $38 briefly on Tuesday before settling at $36.50. Rising prices are almost entirely due to the decline in U.S. onshore production. The EIA reported earlier this week that shale oil production is expected to fall another 106,000 barrels per day in April, and the agency is forecasting average production of 8.7 million barrels a day for 2016, down from an estimated 9.4 million barrels a day in 2015. In February, U.S. production fell by 68,000 barrels a day in the major shale basins. Overall, including offshore, production fell by 80,000 barrels a day. The thing to watch here is offshore production.

U.S. crude hits three-month high on gasoline drawdown, OPEC speculation -- Oil prices rose as much as 5 percent on Wednesday, with U.S. crude hitting three-month highs after a big gasoline inventory drawdown amid improving demand overshadowed growing record high crude stockpiles. Speculation that top producers might agree soon to an output freeze also supported crude oil. Brent crude futures LCOc1 settled up $1.42, or about 4 percent, at $41.07 a barrel. U.S. crude futures CLc1 finished up $1.79, or 5 percent, at $38.29 a barrel after hitting a three-month high of $38.51. The U.S. Energy Information Administration said crude stockpiles rose 3.9 million barrels last week to reach nearly 522 million barrels, in its fourth week of building to record highs.[EIA/S] But gasoline inventories fell 4.5 million barrels, nearly triple forecasts, in the largest weekly draw in almost two years.U.S. gasoline demand over past four weeks was 7 percent higher than a year ago, the EIA said. "Gasoline is the star of the show today," said Matt Smith, director of commodity research at New York-headquartered energy data provider ClipperData. "Ongoing strength in demand has yielded a large draw to gasoline inventories despite a rebound in refinery runs." U.S. gasoline futures RBc1 hit six-month highs, rallying 6 percent. The crack spread for gasoline, a measure of profit margin refiners get for turning a barrel of crude into the motor fuel, scaled seven-month highs. Oil has gained about 50 percent from 12-year lows hit less than two months ago, since OPEC members Saudi Arabia, Qatar and Venezuela, along with non-OPEC exporter Russia, pledged to leave supply at January's levels if others cooperated.

Despite Record Cushing Inventory, Oil Jumps To $38 On Biggest Gasoline Draw In A Year - DOE's 3.88mm inventory build confirms API's print and is the 8th weekly rise in the last 9 for overall crude levels. Cushing also saw a build (690k) -- the 17th week of the last 18. But the market - for now - is focused on the 4.5mm barrel draw in gasoline inventories - the biggest in a year, as the seasonals pickup. Crude jumped on the news, seemingly ignoring the fact that Cushing inventories now stand at a record high 66.9mm barrels. Also notably, US production rose for the first time in 7 weeks.

EIA Inventory Report and Oil Market Analysis 3 9 2016 (Video) -- Gasoline demand is driving the oil complex higher, relatively strong gasoline numbers on the refinery input side and the gasoline demand side of the equation. Brent should test $44 a barrel pretty soon, unless something dramatically happens that is unforeseen as of today.

Worldwide, 550 Million "Missing Bbls" Of Crude Oil Unaccounted For -- March 9, 2016 -- This is also quite a story. Note: Missing barrels have been a feature of IEA statistics since the 1970s.  Over time, errors have occurred in both directions, and have ranged up to 1 million or even 2 million barrels per day.  Most of the time, the oil market ignores the miscellaneous to balance item, but it tends to become controversial when it becomes very large, either positive or negative.    Reuters is reporting: That leaves 550 million "missing barrels" unaccounted for, apparently produced but not consumed and not visible in the inventory statistics.   IEA data currently shows a miscellaneous to balance item of 0.5 million barrels per day in 2014 and 1.0 million barrels per day in 2015. As they say, all the gold in California is in a bank in the middle of Beverly Hills in somebody else's name. Meanwhile, all the banked oil in North Dakota is sitting in a DUC in the middle of the Bakken in some hedge fund's name. The Bakken is a brand new game.

The Curious Case Of The 550 Million Missing Barrels Of Crude Oil - Even as US crude oil inventories just hit a fresh record high for another week, both in Cushing and across all other regions, a more curious accumulation of excess oil inventory has emerged: according to the IEA, global oil production exceeded consumption by just over 1 billion barrels in 2014 and 2015. As Reuters reports, crude oil production exceeded consumption by an average of 0.9 million barrels per day in 2014 and 2.0 million bpd in 2015. Of this 1 billion barrels which the IEA believes was produced but not consumer, some 420 million are said to be stored on land in OECD member countries and another 75 million can be found stored at sea or in transit by tanker somewhere from the oil fields to the refineries. This means that as of this moment, about 550 million "missing barrels" are unaccounted for "apparently produced but not consumed and not visible in the inventory statistics." As Jack Kemp writes, like most "plugs", the missing barrels are recorded in the "miscellaneous to balance" line of the IEA's monthly Oil Market Report as the difference between production, consumption and reported stock changes. The miscellaneous item reflects errors in data from OECD countries, errors in the agency's estimates for supply and demand in non-OECD countries, and stockpile changes outside the OECD that go unrecorded. The current IEA data reveals that there is a miscellaneous to balance item of 0.5 million barrels per day in 2014 and 1.0 million barrels per day in 2015. This is not new: missing barrels have been a feature of IEA statistics since the 1970s, and as Reuters adds over time, errors have occurred in both directions, and have ranged up to 1 million or even 2 million barrels per day.

OilPrice Intelligence Report: Oil Prices Steady After Rising 40% in Recent Weeks: Oil prices have jumped around quite a bit this week. Investors are buoyed by the noticeable declines in U.S. oil production. Fresh EIA data also pushed oil prices up. Weekly production figures were flat, but gasoline stocks fell sharply, a sign that demand from U.S. motorists is strong. But the report was decidedly mixed – crude oil stocks continue to climb, hitting yet another record of 521 million barrels last week.  The Obama administration announced steps to address methane emissions from oil and gas wells on March 10, an effort that will also be taken up by Canada. The announcement was timed to correspond with the first visit to the U.S. by new Canadian Prime Minister Justin Trudeau. The initiative will seek to cut methane emissions by 40 to 45 percent below 2012 levels by 2025. It is important to note that the target is not new – the Obama administration has already announced such an objective. But the EPA will begin drawing up regulations on existing oil and gas wells, as opposed to just new wells drilled. It is unlikely that the agency will be able to complete the rule before the end of President Obama’s presidency, but the initiative would presumably be taken up if a Democrat wins the election. For Canada’s part, the effort will be a departure from the past. Former Conservative Prime Minister Stephen Harper was an ally of the energy industry and never sought to impose heavy regulation.

Oil price appears to have ‘bottomed out,’ energy agency says (AP) — The organization that represents major oil-consuming nations said Friday that signs of a market that has “bottomed out” are emerging. U.S. crude prices jumped to a high for the year. Brent crude, used as a global benchmark, hit a high for the year Tuesday and rose 1 percent Friday. Energy companies have been shutting down rigs and laying off thousands of workers as oil prices plunged to around $30 per barrel, from well over $100 per barrel just two years ago. A broad retreat by the energy sector played out again Friday on both fronts. The number of oil and natural gas rigs active in the U.S. fell for the 12th consecutive week, according to Baker Hughes on Friday, to 480. That’s the lowest level in decades, and perhaps the fewest since the earliest days of the oil drilling industry. And Texas driller Anadarko Petroleum Corp. said that it would cut 1,000 workers, 17 percent of its work force. The pain at Anadarko and other energy companies may finally be translating into a reduction of a massive and global oversupply of oil, the International Energy Agency said Friday. OPEC production tumbled by 90,000 barrels a day last month, the IEA said. U.S. production that had surged due to new drilling technology, is expected to fall by almost 530,000 barrels a day this year, according to the IEA.

Oil Rebounds After IEA Says Price "Bottomed" As Goldman Warns Of "Sharply Lower" Prices As Storage Fills -- In its latest monthly market report released early on Friday, the International Energy Agency forecast that oil prices may have bottomed as shrinking supplies outside OPEC and disruptions inside the group erode the global surplus. This comes just one month after it had a far gloomier assessment of oil prices, warned on excess supply, and asked if the market was witnessing a "false dawn." “There are signs that prices might have bottomed out,” the Paris-based adviser said. "For prices there may be light at the end of what has been a long, dark tunnel” as market forces are “working their magic and higher-cost producers are cutting output." It predicted that production outside the Organization of Petroleum Exporting Countries will decline by 750,000 barrels a day this year, or 150,000 barrels a day more than estimated last month, the agency said. Markets are also being supported by output losses in Iraq and Nigeria, and as Iran restores production more slowly than planned following the end of international sanctions, Bloomberg reports.As a reminder, on February 9, the IEA said "supply may exceed consumption by an average of 1.75 million barrels a day in the period, compared with an estimate of 1.5 million last month." Curious since then prices are far higher, and are now pushing into territory where even shale companies are considering resuming production.As shown in the chart below, oil prices have recovered 50 percent from the 12-year lows reached in early February when news of possible oil production cuts by OPEC unleashed a dramatic rally; instead all that was unveiled was a tentative production "freeze", one which may never happen as Iran has sternly refused to comply with the term. This “freeze” which caps Russian and Saudi production at already record high levels, while currently supporting prices, is unlikely to have a substantial impact on markets in the first half of the year, the IEA said.

US Rig Count Tumbles To Record (41-Year) Lows --In April 1999, the total US oil and gas rig count was 488, today, after dropping 9, the total rig count is 480- an all-time record low (since records began in 1975). Oil rigs dropped 3 to 386 (lowest Since Dec 09), the 12th weekly drop in a row (16th of 17 and 17th and 26th of the last 28 weeks). With production up last week, it remains to be seen when the rig count matters once again. A record low in total oil and gas rigs... (-6 in oil, -3 in gas)Oil rig counts continue to track a lagged oil price almost perfectly... Are we close? Charts: Bloomberg

US Rig Count Drops 9 This Week to All-Time Low of 480 - The number of rigs exploring for oil and natural gas in the U.S. declined by 9 this week to 480, a record low and another sign of the continuing economic woes in the oil and gas industry. The number of rigs seeking oil was at 386 while 94 explored for natural gas, Houston-based oilfield services company Baker Hughes Inc. said Friday. A year ago, 1,125 rigs were active. At the recent boom's height, the count had climbed to 1,931 in September 2014. But it has steadily fallen since then as oil prices plunged to about $30 per barrel, well below the $100 per barrel just two years ago. The rig count is seen as an important indicator of the strength and stability of energy prices and the health of the oil and gas industry. The U.S. rig count peaked at 4,530 in 1981 and bottomed at 488 in 1999. In the latest count, there were only 386 rigs in the U.S. looking for oil and 215 of those were in Texas,  "That is absolutely incredible," he said. "Here we are the big oil state and we only have 215 rigs working. That just shows you how hard the industry has contracted." Among the major oil- and gas-producing states, Texas lost 12 rigs, Oklahoma lost three, New Mexico lost two and North Dakota and Ohio lost one. Louisiana and Pennsylvania each gained three rigs, Kansas gained two and California and Utah each gained one. Alaska, Arkansas, Colorado, West Virginia and Wyoming all were unchanged. Houston — home to more than 5,000 energy-related firms and nicknamed the energy capital of the world — has taken an economic hit during this latest oil downturn. About 50,000 industry workers were laid off in 2015, and another 21,000 layoffs are projected for this year, Jankowski said. The drop in the rig count can be used to gauge the job losses across the country, said Ed Hirs, an energy economist with the University of Houston. "It's a marker because each rig generally employs about 100 workers. So you can take the diminished rig count, multiply by a 100 and you get an idea of the direct loss of jobs in the industry." Hirs said

US rig count hits all-time low in recorded data - Oil & Gas Journal - The overall weekly US rig count is now at its lowest point in Baker Hughes Inc. data that begins in the 1940s, and perhaps since the infancy of US oil and gas industry in the mid-19th century. BHI reported that the count lost 9 units to 480 during the week ended Mar. 11, officially falling beneath the previous recorded low of 488 on Apr. 23, 1999, reached during the nadir of the 1998-99 industry downturn. “While there is no consistent series for drilling activity before 1948, we think it likely that to find a lower level of activity would require going back to the 1860s, the early part of the Pennsylvania oil boom,” said Paul Hornsell, head of commodities research for Standard Chartered Bank, in a research note published last week (OGJ Online, Mar. 4, 2016). The inauspicious benchmark is the latest of many suffered by the industry since crude oil prices began their plunge from more than $100/bbl during summer 2014 to less than a third of that value at the beginning of 2016. The first extended rig-count dive commenced on Dec. 5, 2014 (OGJ Online, Dec. 5, 2014)—when 1,920 units operated in the US—and didn’t end until June 26, 2015, falling in 28-consecutive weeks while shedding a total of 1,061 units (OGJ Online, June 26, 2015). More recently, the count has fallen in 10 straight weeks to begin 2016, and has lost 405 units since its last increase on Aug. 21, 2015, the apex of a modest summer rebound (OGJ Online, Aug. 21, 2015). The latest total is almost a tenth of the highest-ever weekly US rig count of 4,530 recorded by BHI on Dec. 28, 1981.

Oil: Why the worst is not necessarily over: IEA: While oil prices have "recovered remarkably" in recent weeks, this should not "be taken as a definitive sign that the worst is necessarily over," the International Energy Agency (IEA) warned Friday. "Even so, there are signs that prices might have bottomed out," the IEA said in its latest monthly report published on Friday echoing oil markets which have seen a recovery in recent weeks on the back of a weaker dollar which helps to fuel demand. "For prices there may be light at the end of what has been a long, dark tunnel, but we cannot be precisely sure when in 2017 the oil market will achieve the much-desired balance," the IEA cautioned. "It is clear that the current direction of travel is the correct one, although with a long way to go. Without an increase in demand expectations, high-cost oil suppliers will continue to bear the brunt of the market-clearing process." On Friday, benchmark Brent crude futures were trading at $40.81 a barrel (up from the $32.80 a barrel last month when the IEA published its report). U.S. crude was also higher, at $38.69 a barrel. At the start of the year, prices tumbled to around $26 a barrel as supply continued to outstrip demand. But there are signs that prices could have finally bottomed out, the IEA said. These included: "possible action by oil producers to control output; supply outages in Iraq, Nigeria and the United Arab Emirates; signs that non-OPEC supply is falling; no reduction in our forecast of oil demand growth; and recent weakness of the US dollar." The IEA maintained its forecast for global oil demand growth for 1.2 million barrels a day (mb/d) in 2016, unchanged from last month. It said there had been a "sharp deceleration in demand growth in the three months to March, particularly in the US and China.

Does This "Panic Index" Show A Major Crisis Coming In Oil And Gas? --  Little-reported but extremely critical data point for the oil and gas industry emerged yesterday. With insiders in the debt business saying that risk levels in the sector have risen to unprecedented levels. That came from major ratings service Moody’s. With the firm saying that one of its proprietary indexes of credit problems in the oil and gas sector has hit the highest mark ever seen. That’s the so-called “Oil and Gas Liquidity Stress Index”. A measure of the number of energy companies that are facing looming credit problems because of overextended debt. Moody’s said that its Stress Index rose to 27.2 percent as of this week. Marking the highest level ever seen in this key indicator. In fact, that level is now considerably worse than seen during the last recession. When the Stress Index topped out at 24.5 percent. Moody’s said that the big jump in the index comes after a significant number of downgrades to energy company credit during February. With the firm having its biggest month ever for lowered credit scores — with a total of 25 firms seeing downgrades to their debt. Those downgrades are largely affecting the exploration and production space. With 17 of the affected firms coming from the E&P sector. But Moody’s also said that oilfield services firms have been hit with lowered credit ratings.

Will Russia End Up Controlling 73% of Global Oil Supply? - Russia has played a master stroke in the current oil crisis by taking the lead in forming a new cartel, but it’s a move that could spell geopolitical disaster. The meeting between Russia, Qatar, Saudi Arabia and Venezuela on 16 February 2016 was the first step. During the next meeting in mid-March, which is with a larger group of participants, if Russia manages to build a consensus—however small—it will further strengthen its leadership position. Until the current oil crisis, Saudi Arabia called the crude oil price shots; however, its clout has been weakening in the aftermath of the massive price drop with the emergence of US shale. The smaller OPEC nations have been calling for a production cut to support prices, but the last OPEC meeting in December 2015 ended without any agreement.  Now, with Russia stepping in to negotiate with OPEC nations, a new picture is emerging. With its military might, Russia can assume de facto leadership of the oil-producing nations in the name of stabilizing oil prices. Saudi Arabia has been a long-time U.S. ally, but that, too, is changing. Charles W. Freeman Jr., a former U.S. ambassador to Riyadh, recently noted that “We've seen a long deterioration in the U.S.-Saudi relationship, and it started well before the Obama Administration.”

Saudi minister: We'll maintain our oil market share: Saudi Arabia will maintain its oil market share and the idea that it would cut production, while other countries increase it is "not a realistic one," Saudi Foreign Minister Adel al-Jubeir said on Saturday. "Our view is market forces determine the price of oil and we will maintain our market share and markets will recover," he told a group of journalists in Paris.

Why Saudi Arabia Has No Intention To End The Oil Glut - In the geopolitical and oligopolistic global oil market, purely financial supply and demand has often been a secondary force, acting when it is allowed to act. It is the strategic behavior of the producing titans, not their talk or the slow-motion supply-demand balance, which has the real power to move markets. That is the case in the last two years and remains the case in 2016. The behavior of Saudi Arabia since 2014 has demonstrated the intent to increase both capacity and supply, a pattern not yet mitigated despite a distracting news feed from OPEC and the kingdom.Figure 1 shows the rig counts in Saudi Arabia and the United States from 2009 to last week. (footnote: The U.S. count is oil-directed rigs while it is the total rig count in Saudi Arabia which produces mainly associated gas and exports none.) The data is shown on two different scales in such a way that the curves are equivalent during 2012 and 2013 as this was a relatively stable baseline with Saudi running 80 to 85 rigs, and 1300 to 1400 were drilling for oil in the US. What is most interesting are the actions since then. As the shale oil revolution had sustained momentum at prices near $100 /bbl, Saudi Arabia began the second most rapid rig count expansion in its history starting in late 2013. During 2014, while the potential for oversupply was clearly known and even as prices turned sharply down in the latter half of the year, Saudi continued ramping up its rig count. In late November 2014, the semi-annual OPEC meeting turned dissentious, and the group closed without even the pretense of a target production volume. Starting in November and continuing through March, the Saudi rig count grew in its third largest expansion in history, increasing 15 percent in four months. At the same time, U.S. rig count was falling. Slowly at first in 2014, the rig count responded modestly to reductions in price. After the November 2014 OPEC meeting, though, the U.S. rig count began its freefall, retracing the path of the 2008 downturn. The contrast shows boldly in Figure 1. As the U.S. imploded, Saudi Arabia was ramping up.

"I'll Go Full Power If There's No Agreement" - Kuwait Breaks OPEC Production Freeze - Back in late February, when crude prices had just hit a 13 year low, one catalyst unleashed a furious short-covering rally: a WSJ report which cited a delayed SkyNews interview with the UAE energy minister, according to which OPEC would freeze, if not cut production. Since then we learned, courtesy of the Saudi oil minister Al-Naimi himself, that the Saudis will never reduce output, however, in a utterly meaningless gesture, Saudi Arabia and Russia agreed to "freeze" production at levels which are already at maximum capacity and under one condition: that all other OPEC members join the freeze, with the possible exception of Iran which may be allowed to produce until it hits its pre-embargo export levels.  Of course, even said "freeze" is nothing but a stalling tactic employed by an OPEC member (Saudi Arabia), to give the impression that OPEC still exists as a production-throttling cartel when OPEC ceased to exist in that capacity in November 2014. However, while many had pretended to at least play along with the charade, today a core OPEC member effectively broke ranks when Kuwait said it would only  agree to an output freeze if all major producers take part including Iran. According to Reuters, Kuwait's  oil minister said on Tuesday that his country's participation in an output freeze would require all major oil producers, including Iran, to be on board.  "I'll go full power if there's no agreement. Every barrel I produce I'll sell," Anas al-Saleh told reporters in Kuwait City. And since Iran has made it very, very clear it will not join the production freeze at its current mothballed output, and will need at least 9-12 months before it regains its pre-embargo capacity levels, one can forget about a production freeze well into 2017 if not for ever since by then at least one if not more OPEC members will be bankrupt (they know who they are: they are the source of those "ALL CAPS" flashing read headlines every day). Putting Kuwait's production in context, Kuwait - the small Gulf state Saddam invaded 25 years ago - is currently producing 3 million barrels of oil per day. Incidentally, this is precisely how much the oil market is oversupplied each and every day, and why in addition to PADD1, 2 and 3 being almost full, and excess oil now being stored in ships, pipelines and trains, and re-exported to Europe, quite soon empty swimming pools will be full with the "black gold" as the algos continue to refuse to pay any attention to the constantly deteriorating fundamentals.

Oil meeting on output freeze unlikely without Iran progress: sources | Reuters: A meeting between oil producers to discuss a global pact on freezing production is unlikely to take place in Russia on March 20, sources familiar with the matter say, as OPEC member Iran is yet to say whether it would participate in such a deal. OPEC officials including Nigeria's oil minister have said a meeting would take place in Moscow on that date, potentially as the next step in widening an agreement to freeze output at January levels struck by OPEC members Saudi Arabia, Venezuela and Qatar plus non-member Russia last month. But the biggest roadblock to a wider deal, OPEC delegates say, is Iran. Tehran feels it should be exempt from the agreement as it wants to recover market share it lost under Western sanctions. Kuwait said on Tuesday it will commit to the deal - if all major producers including Iran do so. "They are not agreeing on the meeting. Why would the ministers meet again now? Iran says they will not do anything," said an OPEC source from a major producer. "Only if Iran agrees, things will change."

Exclusive: Saudi Arabia seeks $6-8 billion bank loan to shore up state coffers | Reuters: Saudi Arabia is seeking a bank loan of between $6 billion and $8 billion, sources familiar with the matter told Reuters, in what would be the first significant foreign borrowing by the kingdom's government for over a decade. Riyadh has asked lenders to submit proposals to extend it a five-year U.S. dollar loan of that size, with an option to increase it, the sources said, to help plug a record budget deficit caused by low oil prices. The sources declined to be named because the matter is not public. Calls to the Saudi finance ministry and central bank seeking comment on Wednesday were not answered. Last week, Reuters reported that Saudi Arabia had asked banks to discuss the idea of an international loan, but details such as the size and lifespan were not specified. The kingdom's budget deficit reached nearly $100 billion last year. The government is currently bridging the gap by drawing down its massive store of foreign assets and issuing domestic bonds. But the assets will only last a few more years at their current rate of decline, while the bond issues have started to strain liquidity in the banking system.   Analysts say sovereign borrowing by the six wealthy Gulf Arab oil exporters could total $20 billion or more in 2016 - a big shift from years past, when the region had a surfeit of funds and was lending to the rest of the world.  All of the six states have either launched borrowing programs in response to low oil prices or are laying plans to do so. With money becoming scarcer at home, Gulf companies are also expected to borrow more from abroad.

Hillary Clinton's State Department Armed Saudi Arabia to the Teeth - As Hillary Clinton emerges as the front-runner for the Democratic Party’s presidential candidate, she’s receiving increased scrutiny for her years as secretary of state — and in particular her hawkish foreign policy. Many critics are focusing especially on her long relationship with Saudi Arabia.  On Christmas Eve in 2011, Hillary Clinton and her closest aides celebrated a $29.4 billion sale of over 80 F-15 fighter jets, manufactured by U.S.-based Boeing Corporation, to Saudi Arabia. In a chain of enthusiastic emails, an aide exclaimed that it was “not a bad Christmas present.” These are the very fighter jets the Saudis have been using to bomb Yemen since March 2015. A year later, at least 2,800 Yemeni civilians have been killed, mostly by airstrikes — and there’s no end in sight. The indiscriminate Saudi strikes have killed journalists and ambulance drivers. They’ve hit the Chamber of Commerce, facilities supported by Médecins Sans Frontières (also known as Doctors Without Borders), a wedding hall, and a center for the blind. The attacks have also targeted ancient heritage sites in Yemen. International human rights organizations are saying that the Saudi-led strikes on Yemen may amount to war crimes.

The Coming Collapse Of Saudi Arabia - In September 2014, U.S. Secretary of State John Kerry flew to Saudi Arabia. He was there to meet with King Abdullah, the country’s ruler and one of the richest men in the world. Informed observers say Kerry and Abdullah drew up a plan at this meeting to destroy their common enemies: Russia and Iran. To carry out the attack, they wouldn’t use fighter jets, tanks and ground troops. They would use a much more powerful weapon… Oil. Oil is the world’s most traded commodity. Saudi Arabia is the world’s largest oil exporter. It has arguably more control over the price of oil than any other country does. Insiders say Saudi Arabia agreed to flood the oil market at this secret meeting. The purpose was to drive down the price of oil. This would hurt Russia’s and Iran’s economies. They both depend heavily on oil sales. They wanted to hurt Russia for supporting their regional foe, Syrian President Bashar al-Assad. They wanted to hurt Iran for the same reason. Iran is the Saudis’ fierce geopolitical rival in the region. Their strategy has had some success. As you can see in the chart below, the price of oil has plummeted over 70% since John Kerry’s secret meeting with King Abdullah in September 2014.By keeping the market saturated with oil, the Saudis are driving down the price. They hope to drive it down low enough and long enough to bankrupt the shale industry…since shale oil costs more than Saudi oil to produce. This would knock out a major competitor and let the Saudis regain lost market share. But economic warfare doesn’t always go according to plan. I think the Saudis made a colossal mistake… I think the Saudis have overplayed their hand...big time. Oil makes up 90% of Saudi government revenue. So the price drop has been very painful. They’re bleeding through their reserves. The market is putting more pressure on their currency peg than at any time in its history. The government is only staying afloat by draining its foreign exchange reserves. This threatens Saudi Arabia’s ability to support its currency peg. If the currency peg breaks—which is exactly what the current market expects—the riyal would be devalued. This would increase the cost of living for Saudis across the board. It would also increase social unrest.

Why the Arabs don’t want us in Syria - Robert Kennedy - In part because my father was murdered by an Arab, I’ve made an effort to understand the impact of U.S. policy in the Mideast and particularly the factors that sometimes motivate bloodthirsty responses from the Islamic world against our country. As we focus on the rise of the Islamic State and search for the source of the savagery that took so many innocent lives in Paris and San Bernardino, we might want to look beyond the convenient explanations of religion and ideology. Instead we should examine the more complex rationales of history and oil — and how they often point the finger of blame back at our own shores. America’s unsavory record of violent interventions in Syria — little-known to the American people yet well-known to Syrians — sowed fertile ground for the violent Islamic jihadism that now complicates any effective response by our government to address the challenge of ISIL. So long as the American public and policymakers are unaware of this past, further interventions are likely only to compound the crisis. Secretary of State John Kerry this week announced a “provisional” ceasefire in Syria. But since U.S. leverage and prestige within Syria is minimal — and the ceasefire doesn’t include key combatants such as Islamic State and al Nusra — it’s bound to be a shaky truce at best. Similarly President Obama’s stepped-up military intervention in Libya — U.S. airstrikes targeted an Islamic State training camp last week — is likely to strengthen rather than weaken the radicals. As the New York Times reported in a December 8, 2015, front-page story, Islamic State political leaders and strategic planners are working to provoke an American military intervention. They know from experience this will flood their ranks with volunteer fighters, drown the voices of moderation and unify the Islamic world against America. To understand this dynamic, we need to look at history from the Syrians’ perspective and particularly the seeds of the current conflict. Long before our 2003 occupation of Iraq triggered the Sunni uprising that has now morphed into the Islamic State, the CIA had nurtured violent jihadism as a Cold War weapon and freighted U.S./Syrian relationships with toxic baggage.

China Crude Oil Imports Hit Record 8 MMbopd In February  (Reuters) - China's February crude oil imports jumped 20 percent on year to their highest ever on a daily basis, as prices at their lowest in more than a decade drove buying from a group of new importers and state and commercial stockpiling. The world's second-largest oil consumer imported 31.80 million tonnes of crude last month, or a record 8.0 million barrels per day (bpd), data from China's General Administration of Customs showed on Tuesday. China's robust crude demand has been supported by independent refiners, also known as teapots, that have been receiving import quotas from Beijing over the past nine months. "This is the teapot effect," said Virendra Chauhan, an analyst at Energy Aspects in Singapore. "Higher teapot demand and stronger refining margins which encouraged higher refinery throughputs have contributed to increased imports," he said. On a daily basis, February's imports also jumped roughly 27 percent from 6.29 million bpd in January. Last week, Beijing-based consultancy SIA Energy said it expects China's 2016 crude imports to rise by 860,000 bpd, or nearly 13 percent, boosted by storage needs, robust gasoline demand and fuel exports. The country's top energy group state-owned China National Petroleum Corporation (CNPC) forecast in January that the China's net crude imports would rise 7.3 percent this year. China's imports reached a previous record of 7.81 million bpd in December, closing out 2015 with an average 6.71 million bpd, according to customs data for the full year. -

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