Sunday, April 10, 2016

US oil supplies fall for first time in 8 weeks, oil & products glut still at a record high, US & global rig counts, et al

US oil prices rose more than 10% over the last three days of this week after the EIA reported that US crude oil supplies fell for the first time in 8 weeks, and after the on again / off again OPEC - Russian oil production freeze that's been driving the markets the past two months appeared to be back on again...oil prices had been sliding since mid-March as oil traders realized that the prior 50% run-up in prices had been driven by a short squeeze, wherein traders who had contracted to sell oil they didn't own were forced to buy oil to cover their contracts, and that virtually no one else was buying oil in the interim....prices then collapsed to a one month low at $36.79 a barrel last Friday after Bloomberg released a 5-hour long interview with Saudi Crown Prince Mohammed bin Salman, in which he said that the Saudis would only freeze their production if Iran did so too, something Iran had adamantly refused to do...oil prices then opened the week lower and fell to close at $35.70 a barrel on Monday, after Iranian Oil Minister Bijan Zanganeh again rejected the Saudi proposal while announcing that Iranian oil exports had risen by 250,000 barrels a day to 2 million barrels per day in March...oil prices then stabilized on Tuesday, rising slightly to close at $35.89 a barrel, after an API report that US oil inventories had fallen by 4.3 million barrels...oil prices then jumped on Wednesday after the EIA confirmed that oil inventories had indeed fallen by the most in any week since January, and after Reuters reported that Nawal Al-Fuzaia, the Kuwaiti governor at OPEC, said there were "positive indications an agreement on freezing production" would be reached when OPEC meets with Russia at Doha on April 17th, and hence oil closed the day at $37.75 a barrel...reports of a jump in Iraqi exports weighed on prices a bit on Thursday, as oil slipped to $37.26 a barrel, but the combination of another record low in drilling activity and a shutdown of the Keystone crude pipeline to Cushing due to a rupture in South Dakota drove prices 6% higher on Friday to close the week at $39.58 a barrel...for a picture of those changes, we'll include a graph of oil prices over the last month, which should cover the time elapsed since we last included an oil price graph in these synopses...

April 9 2016 oil prices

again, the above graph shows the daily closing contract price per barrel for May delivery of the US benchmark oil, West Texas Intermediate (WTI), as traded on the New York Mercantile Exchange over the last month...the last time we showed an oil price graph it was for the April contract, and prices for this May future trading at that time were then higher, so this graph is not directly comparable to those showing prices for contracts from prior months...nonetheless, the oil price quotes you'll see in media articles or on sidebar graphics are always for the current front month that's actively traded at that time….and with futures prices now much higher, once a month you’ll see the oil price jump a few bucks just because the current contract rolled over to the next month the case of Brent, the international benchmark, current price quotes are for the June delivery contract, which closed the week at $41.94 a barrel...

The Latest Oil Stats from the EIA

this week's oil data from the US Energy Information Administration showed that our oil inventories fell for the first time in 8 weeks, as our imports of oil also fell to their lowest in 8 weeks, and refiners used more crude than they had in any prior week this year...Wednesday's report showed that our imports of crude oil fell by 494,000 barrels per day to average 7,254,000 barrels per day during the week ending April 1st, down from the average of  7,748,000 barrels per day we were importing during the week ending March 25th...while that was 11.7% less than the 8,217,000 barrels of oil per day we imported during the week ending April 3rd a year ago, oil imports are typically volatile week to week as 2 million barrel VLCC tankers arrive and are offloaded irregularly, so the EIA's weekly Petroleum Status Report (62 pp pdf) reports imports as a 4 week moving average...that metric showed that the 4 week average of our imports was still at the 7.8 million barrel per day level, which was 2.1% above the same four-week period last year... 

at the same time, production of crude oil from US wells slipped for the 10th time in the past 11 weeks, as few new wells are being completed to make up for those being depleted...our field production of crude oil fell by another 14,000 barrels per day, from an average of 9,022,000 barrels per day during the week ending March 25th to an average of 9,008,000 barrels per day during the week ending April 1st...that's now 4.2% below the 9,404,000 barrels per day we were producing during the same week last year, but that nominal 14,000 bpd drop this week obviously had little impact on overall supply when compared to the 494,000 barrel per day drop in imports...

meanwhile, U.S. refineries’ crude oil inputs averaged 16,433,000 barrels of per day barrels during the week ending April 1st, which was 199,000 barrels per day more than the 16,234,000 barrels of crude per day they processed during the week ending March 25, which itself was 414,000 barrels per day more than they were taking in a week earlier, as the US refinery utilization rate rose to 91.4% during the week from 90.4% of capacity the prior week...that was up 3.1% from the 15,929,000 barrels per day US refineries used during the week ending April 3rd last year, the highest refinery throughput for any week in April in our history, and the only the second time in history that US refiners took in more than 16 million barrels of crude per day in any week in with refineries running at a seasonally record pace, and with our imports of oil down by 1,130,000 barrels per day from the 33 month high hit two weeks ago, oil had to be drawn out of storage to meet the demand, and hence our stocks of crude oil in storage, not counting what's in the government's Strategic Petroleum Reserve, fell by 4,937,000 barrels to end the week at 529,897,000 barrels…still, that’s more oil than we ever had in storage previously, save for the last two weeks, and despite the drop, our oil inventories are still 9.9% higher than the 482,393,000 barrels we had stored on April 3rd last year, and 38.0% more than the 384,122,000 barrels we had stored on April 4th of 2014...we'll include what is effectively a 7 year graphic of our oil supplies here so you can all see what that drop looks like as it relates to the recent record highs:

April 6 2016 oil inventory for April 1

in the graph above, copied from page 10 of the EIA's weekly Petroleum Status Report (62 pp pdf), the blue line shows the recent track of US oil inventories over the period from June 2014 to April 1st, 2016, while the grey shaded area represents the range of US oil inventories as reported weekly by the EIA over the prior 5 years for any given time of year, basically showing us the normal range of US oil inventories as they fluctuated from season to season over the 5 years prior to the two years shown by the blue line....we can see that crude oil inventories typically rise in the winter and fall through the summer, but that beginning in early 2015 our inventories topped 400 million barrels for the first time and have only been drawn down modestly since...note that the increase in the grey wedge on the right now includes the record oil inventories that we were setting last year at this time (ie, it includes the image of the blue line, or the early 2015 record inventories) which we have recently been exceeding by 10% to 20% each's for that reason that we're now comparing current inventories to those of two years ago, when inventories were in a more normal range...despite the 4,937,000 barrel drop this week, we still have more than 48.8 million more barrels of oil in storage than we had stored just 12 weeks ago...

with more oil being refined this week, our refinery production of gasoline rose for the 1st time in 3 weeks, increasing by 187,000 barrels per day to 9,617,000 barrels per day during week ending April 1st, from our gasoline output of 9,430,000 barrels per day during week ending March 25th...that was 5.2% more than the 9,143,000 barrels of gasoline per day we were producing during the same week last year, and our year to date totals are now running well ahead of last years pace.....however, our refinery output of distillate fuels (ie, diesel fuel and heat oil) slipped by 89,000 barrels per day to 4,838,000 barrels per day during week ending April 1st, which put our distillates production 3.2% below the 4,838,000 barrels per day we produced during the same week of 2015...   

the increase in gasoline production, when combined with a 155,000 barrel per day jump to 617,000 barrels per day in our gasoline imports and a 20,000 barrel per day drop in gasoline consumed to 9,224,000 barrels per day meant that we had a bunch of surplus gasoline left over at the end of the week, and hence our gasoline inventories rose by 1,438,000 barrels, from 242,560,000 barrels last week to 243,998,000 barrels as of April 1st...that was 6.1% more than the 229,945,000 barrels of gasoline we had stored on April 3rd last year, and 15.9% more than the 210,436,000 barrels of gasoline we had stored on April 4th 2014, as the EIA says gasoline inventories are now "well above the upper limit of the average range for this time of year"...our distillate fuel inventories also rose, despite the lower production, increasing by 1,799,000 barrels to 162,984,000 barrels as of April 1st....those too were "above the upper limit of the average range for this time of year", as distillate inventories are now 28.4% higher than the 126,924,000 barrels we had stored at the same time last order to see what those gasoline and distillate stocks look like compared to recent history, we'll include the graphs for both, taken from pages 12 and 14 of the EIA's weekly Petroleum Status Report (pdf) respectively...

April 6 2016 gasoline inventory for April 1

like the oil inventories graph we included earlier, the blue line above shows the recent track of US gasoline inventories over the period from June 2014 to April 1st, 2016, while the grey shaded area represents the range of US gasoline inventories as reported weekly by the EIA over the prior 5 years for any given time of year, thus showing us the normal range of US gasoline inventories as they fluctuate from season to season, falling during the driving season every summer and rising in winter...note that gasoline inventories started setting new records late in 2014, and hence the recent inventory records are now well above the records established a year ago for this time of year...nonetheless, our gasoline stocks are so much above the normal (grey) range right now that the EIA characterizes them as "well above the upper limit of the average range for this time of year"...

likewise, for the distillate inventories graph below, the blue line shows the recent track of US distillate inventories over the period from June 2014 to April 1st, 2016, while the grey shaded area represents the range of distillate inventories as reported weekly by the EIA over the prior 5 years for the same time of year...unlike oil and gasoline, however, distillate inventories peak in late summer, and fall through the winter as heat oil is consumed from those this graph we can see that up until last summer, distillate inventories had been in the lower half of the average range for time time of year, and even below the average range early in the period...however, with the mild fall and winter, less distillates than normal were used, supplies grew rapidly, and distillate inventories are now too classified as "above the upper limit of the average range for this time of year".

April 6 2016 distillates inventory for April 1

in like manner, our inventories of jet fuel and residual fuel oil are both "well above the upper limit of the average range for this time of year" and our inventories of propane/propylene are "above the upper limit of the average range for this time of year", having stayed above the 5 year average for almost 2 years in a row now...similar graphs for each of those refinery products can be found on pages 16 to 20 of the EIA's weekly Petroleum Status Report (pdf) ...the point is that we don't just have a glut of oil in storage, we have a glut of all the major products made from oil...and if we add them all together, which the EIA also does each week, we find our total inventories of oil and oil products rose by 1,130,000 barrels to a new record of 1,357,005,000 barrels this week, up from the total oil & products supplies of 1,355,875,000 barrels that we had stored as of March 25th...and like it's composite products, that total is 11.3% higher than the 1,219,347,000 barrels of everything we had stored last April 3rd, and 30.2% higher than the 1,042,458 barrels of oil & products we had stored 2 years ago...

This Week's Drilling Activity

as we mentioned earlier, we once again set another new record low for the number of rotary drilling rigs running in the US, as Baker Hughes reported that the total rig count fell by another 7 rigs to 443 rigs as of April 8th, which was down from the 988 drilling rigs that were active a year earlier, and down from the recent high of 1929 active rigs seen on November 21st of 2014, the week before the OPEC meeting that opened the global oil spigots...this is now the 5th week in a row that US drilling activity has further quieted to a new low; as we first eclipsed the Apr. 23, 1999 record low rig count of 488 on March 11th, when the count of active rigs fell to 480...this week's report showed that the count of rigs drilling for oil fell by 8 to 354, which was down from 802 a year earlier, and down from the recent high of 1609 working oil rigs that was set on October 10, 2014, while the count of drilling rigs targeting natural gas rose by 1 to 89, which was still down from the 225 rigs drilling for natural gas a year ago, and down from the recent high of 1,606 natural gas rigs that was set on August 29th, 2008... 

the offshore rig count fell by 1, as the drilling platform that started work offshore of California two weeks ago has apparently been shut back down, leaving a total of 25 offshore rigs still running, with 24 in the Gulf of Mexico and one horizontal rig drilling to frack under the Cook Inlet in Alaska...that's down from the 31 that were active in the Gulf of Mexico and a total of 33 that were working offshore on April 10th of 2015...

a net of 5 horizontal rigs were pulled out this week, dropping the count of horizontal rigs to 341, which was down from the 770 horizontal rigs that were in use a year earlier, and down from the recent record of 1372 horizontal rigs that were drilling on November 21st of 2014; hence there are now less than a quarter of the horizontal frackers active now than were active before OPEC opened their oil the same time, 5 more vertical rigs were also stacked, leaving 50 still running, which was down from the 128 vertical rigs that were in use at the end of the same week a year earlier...on the other hand, a net of 3 directional rigs were added, bringing the directional rig count back up to 52, which was still down from the 90 directional rigs that were in use the same week last year...  

of the major shale basins, the Permian basin of west Texas and eastern New Mexico saw 3 rigs removed, leaving 142, which was down from the 264 rigs working the Permian last April 10th...the Haynesville of Arkansas, the Barnett of the Dallas - Ft Worth area, and the Williston of North Dakota each saw 2 rigs pulled out this week; those shutdowns left the Haynesville with 12 rigs working, down from 27 a year earlier, left the Barnett with 4 rigs, down from 6 both last week and from a year earlier, and left the Williston with 27 rigs, down from 89 a year earlier...however, 2 rigs were added in both the Cana Woodford of Oklahoma and the Utica shale of Ohio; that brought the Cana Woodford total up to 32, still down from 38 a year earlier, and brought the number of rigs drilling the Utica back up to 12, still down from 28 a year ago at this time...lastly, a single rig was added to the Eagle Ford of south Texas for the 2nd week in a row; they now have 43, which is still way down from the 125 rigs working there a year earlier...

the state count tables showed that Texas again saw the largest drilling rig decrease, as they saw 7 rigs idled this week, leaving 197 rigs still working there, which is down from the 427 rigs that were working in Texas on April 10th last year…North Dakota saw 2 rigs pulled out, leaving 27, which was down from the 88 that were drilling in North Dakota a year earlier...then Alaska, California, Kansas and Mississippi all saw 1 rig removed this week; that left Alaska with 8 rigs, down from 13 a year earlier, it left California with just 4 rigs working, down from 15 a year earlier, left Kansas with 5 rigs active, down from the 13 rigs working there the same week last year, and left Mississippi with 1 rig still active, down from 4 rigs a year ago...meanwhile, both Ohio and Oklahoma each added two rigs; that brought the Ohio rig count back up to 12, down from 26 last year at this time, and brought the Oklahoma rig count up to 63, which was still down from 124 a year earlier...lastly, both New Mexico and Alabama added as single rig this week; that brought New Mexico’s activity up to 17 rigs, which was still way down from the 47 rigs deployed there a year earlier, and brought Alabama back up to 2 rigs, the same number as they had last year at this time...

International Rig Count for March

the past week also saw the monthly release of the international rig count for March, which unlike the weekly count, is an average of the number of rigs running in each country for the month, rather than the total of those drilling at month end....Baker Hughes reported that an average of 1,551 rigs were drilling for oil and natural gas around the globe in March, which was down from 1,761 rigs drilling globally in February and down from the 2,557 rigs that were deployed globally in March of last year...once again, most of the 210 rigs that were pulled out worldwide had been drilling in North America, where the average number of rigs deployed fell from 714 in February to 566 in March...the US averaged 478 active rigs during the month, down from 532 in February, and down from 1,110  in March of last year, while the Canadian average deployment was 88 rigs, down from 211 in February, and down from the 196 rigs that were working in Canada a year ago at this time...thawing frost may be a problem for Canadian drillers at this time of year, especially with the El Nino weather...

the Middle East saw rigs pulled out for the 3rd month in a row, after a run of 5 monthly increases, as the region was down by 7 rigs to a March average of 397, which was also down from the 407 rigs deployed in the Middle East a year earlier...the entirety of the net regional cutback was in rigs that had been working offshore, as the offshore count fell from 50 in February to 43 in March, which was also down from 52 offshore in March a year ago, while the Middle East's land based rig count was unchanged from February at 354 and down just 1 rig from last March's average of 355 land based rotary rigs running....Egypt accounted for 4 of the net rigs removed from the region, as they were were down to 31 rigs in March from 35 in February, and down from the 41 rigs that were drilling in Egypt a year earlier...Kuwait idled two rigs; that left them with 41 still active, which was down from 53 a year earlier...the Saudis pulled out just 1 rig to reduce their total active drilling rig count up to 127, which was still up from the 125 rigs that were drilling in Saudi Arabia last March, while other single rig losses were seen in Oman, Iraq and Israel....Pakistan was the only country in the Middle East to see a drilling increase in March, as they added 3 rigs, bringing their total count up to 24, which was also up 3 rigs from the 21 they had deployed a year ago at this time...

meanwhile, the Latin American countries pulled out another 19 rigs, after idling 6 rigs in February and 27 in January, as the region averaged 218 rigs in March, including 40 offshore, down from the total of 351 rigs, which included 67 offshore rigs, that were active in Latin America in March of 2015....Mexico saw the largest pullback, as they were down 12 rigs to 27, which was down from 68 rigs that were in use in Mexico a year ago...Brazil idled 7 rigs and were hence down to just 28 active, from the 44 deployed in Brazil in March last year...and Colombia cut another 3 rigs and are now running just 4 rigs, down from 31 a year ago and a high of 48 in November of 2014....meanwhile, Argentina, which had cut their active rig count from 101 to 65 over the prior three months, added 3 rigs in March, which brought them back up to 68, which was still down from the 112 rigs they had deployed last March...also, Venezuela added 2 rigs and now have 71 active, up from 62 in March of 2015...

elsewhere, the Asia-Pacific region had 183 drilling rigs working in March, up from 182 rigs working in February, but still down from the 233 rigs working the region a year earlier...India had the largest drilling increase in the region, as they added 4 rigs to average 103 in March, which was nonetheless still down from the 110 they had deployed a year earlier...meanwhile, both the the Thais and Malaysia idled 2 rigs; that left Thailand with 14 rigs active, down from 19 a year earlier, and left Malaysia with 3 rigs, down from 8 rigs a year earlier...countries in Africa also added 3 rigs, as their count rose from 88 rigs in February to 91 rigs in March, which was still down from the 125 rigs working the African continent last year at this time...both Angola and Nigeria added two rigs; Angola thus averaged 54 active rigs in March, the same as they had deployed a year earlier, while Nigeria averaged 8 active rigs, down from 13 a year earlier...lastly, the rig count in Europe fell by 11 to  96 in March, which was down from the 135 rigs working in Europe a year ago at this time...Polish drillers idled 3 rigs and now have just 4 running, down from 7 in February and in March a year ago...Germans shut down 2 rigs, but still had 5 working, which was up from 4 in March a year earlier...and Bulgaria idled the only 2 rigs they had active, they are now at zero, same as they were a year the same time, 2 rigs were added offshore in the United Kingdom, bringing the offshore UK rig count back up to 9, which was still down from 19 rigs a year ago....note that Iran, Russia, and China rig counts are not included in Baker Hughes international data, although China's offshore area, with an average of 26 rigs active in March, is included in the Asian totals here...  


Local Groups Work to Stop Injection Wells - WOUB - After driving by Coolville, Ohio, on Route 50, a driver might decide to pull off at the rest stop right before Torch. To some passing through, the junction might appear to be simply a very busy spot for truck traffic. To residents of Torch, however, that truck traffic has a different meaning.The K&H Partners injection well sits across the street from the rest stop. Huge, tall, green tanks stand atop a hill as receptacles–ready to accept the toxic waste water from hydraulic fracturing. The site has inspired the creation of several opposition groups, including Torch Can Do.  Felicia Mettler is a member of Torch Can Do. Felicia describes herself as a stay-at-home mom. She has never taken an interest in activism, but after learning more about the injection site and fracking in general, Felicia decided to take a stand, which she has never regretted.  “I’m beyond angry, I’m scared, I’m aggravated, that our lawmakers who we have put in place to keep us healthy and keep us safe are not doing their job.” Felicia said while she stood on the road so that she would not be trespassing on K&H’s property. The K&H Partners has the largest injection well complex in Ohio. The recent approval of another site moved one activist group, the Athens County Fracking Action Network, to head to court. The group’s appeal of ODNR’s injection well license was rejected. ODNR said the sites are strictly regulated for Ohioans safety. Felicia, however, disagrees. Torch Can Do thinks the state should not allow fracking or injection wells anywhere in the state.“Why are you so afraid to protect us? Why are you so afraid to put these laws and regulations in place? That’s my question. And are we not important? Do we matter? Because that’s how we feel. These communities that are facing these which are very small communities feel like we are expendable. We don’t matter,” Felicia said.

Utica Shale drilling downturn to cost Ohioans lost royalty money and state tax income, expert says - The downturn in shale drilling will likely be costly for Ohio landowners hoping to cash in on Utica Shale royalties, says an energy researcher. The drilling slowdown and low commodity prices are projected to cost Ohio landowners $6.5 billion in lost income over the next five years, said Maria Cortez of Houston-based Wood Mackenzie, an energy research company. Cortez, speaking Wednesday at the Canton Chamber of Commerce’s daylong Utica Upstream conference, said the downturn will also cost the state of Ohio about $665 million in lost tax income over the five years. Those losses could reach $12 billion for landowners and $2 billion for the state of Ohio over the next nine years, she told the audience of 110 people at the Pro Football Hall of Fame. Cortez also predicted an increase in drilling companies acquiring one another through late 2017 when prices are expected to rise. In addition, she expects companies to develop more joint ventures to share costs in the Utica Shale. The Utica Shale in Ohio and the Marcellus Shale in West Virginia and Pennsylvania produce about one-third of all natural gas in the United States and will play an important role in exporting liquefied natural gas to other countries, she said. Those areas are “the OPEC of natural gas liquids” but increased prices are still likely 18 months away, she said. She said the Marcellus Shale should exceed 30 billion cubic feet per day by 2020, while the Utica Shale will double to 9 billion cubic feet per day in that time.

Tough year ahead for drillers - Canton Repository --This will be a difficult year for the oil and gas industry as drillers face bankruptcy and rig counts drop in the face of growing production from shale wells. The current challenges and future prospects of the industry were topics at the Utica Upstream conference held Wednesday at the Pro Football Hall of Fame.  Low prices for oil and natural gas, brought on by the shale-drilling boom, have made it less economical to drill new wells. As of last week, only 12 rigs were drilling Ohio’s Utica Shale, according to state statistics.Maria Cortez, a Houston-based analyst with Wood Mackenzie, an international research and consulting firm, said the Utica needs about 11 rigs to keep production at current levels and the rig count will likely hit bottom this summer.Wood Mackenzie estimates there are between 150 and 250 Utica wells that have been drilled but still need to be fracked, and companies are likely to complete that inventory before starting to drill new wells, Cortez said.The total cost of Utica wells has been rising to about $10 million per well in southeastern Ohio, but the wells are longer, produce more natural gas and liquids and actually cost less per foot, Cortez said.Natural gas prices currently stand near $2 per thousand cubic feet. Very few wells are economical below that threshold, Cortez said.“For the (Utica) play to be really competitive, we need $3 gas,” and prices should reach that point by year’s end, she said.An advantage the Utica has over the Marcellus is that the Utica has liquids, while the Marcellus produces only dry gas. If the oil price rebounds to above $50 a barrel, liquid-producing parts of the Utica could compete with the Marcellus, but that’s not likely to happen before the end of the year, Cortez said.

Groups call for more transparency in sharing Utica shale benefits and risks -Since 2011, shale gas drilling has been a way of life for some eastern Ohio communities, with residents acutely aware of both the benefits and drawbacks. But as production declines, are those perceptions changing? Organizers of a 2014 survey hope to find out. Following up on the Ohio Shale Country Listening Project, which anonymously questioned 773 people from five Ohio counties about the long-term impact of natural gas extraction, survey creators will interview citizens who provided the project with detailed answers about hydraulic fracturing’s effect on the local economy as well as their quality of life. With assistance from a research director at the University of London, the involved groups are also planning a peer-reviewed paper on Ohio’s fracking industry. The paper, set for publication this summer, will include the original survey and be framed to reach an international audience. Further data is needed to drill down into a local gas and oil boom that has not been well-received by all, surveyors said. The listening project — conducted over a four-month period in 2014 by the Ohio Organizing Collaborative with support from the Ohio Environmental Council, FracTracker and an area trade union — found that 43 percent of respondents had a negative view of regional shale development. Concerned residents, most of them from heavily drilled Carroll County about 90 miles south of Cleveland, worried about traffic accidents, water contamination and insufficient economic protection once shale growth entered an inevitable bust cycle.

DIGGING DEEPER INTO THE OHIO VALLEY SHALE: EPA Is Moving on Methane, Fracking Opposition Mounts -  The U.S. Environmental Protection Agency believes methane - the main component of natural gas - can be 25 times more harmful to the environment than carbon dioxide when it leaks into the atmosphere, while a new Gallup poll shows more than half of Americans now oppose fracking. Though many believe Obama's Clean Power Plan unfairly targets the coal industry by declaring that carbon dioxide emissions from power plants must be 32 percent below 2005 levels by the year 2030, administration officials want to cut methane emissions from the oil and natural gas industry 45 percent by 2025. Now, EPA Administrator Gina McCarthy is asking companies to meet the "Methane Challenge." "The voluntary Methane Challenge program is one important part of our overarching strategy to reduce methane emissions, and complements regulatory efforts that will help the United States meet the Obama Administration's goal of reducing methane emissions by 40 to 45 percent by 2025," McCarthy said. In December 2014, an unknown amount of methane leaked into the atmosphere over a 10-day period when the wellhead blew off at a Magnum Hunter operation in Monroe County. Moreover, processing plants, compressor stations and well sites throughout the Upper Ohio Valley often feature flare systems that can release methane into the air. However, the product is significantly more harmful to the environment if it is released without burning, such as in a vent or leak. The program will provide partner companies with a platform to make company-wide commitments to cut emissions from sources within their operations by implementing a suite of best management practices within five years.

Evidence of hormone-affecting chemicals found near wastewater injection well, researchers warn - Researchers working with the U.S. Geological Survey say they found evidence of chemicals that could cause hormonal changes in animals in a stream near a West Virginia facility that disposes of gas drilling wastewater in a deep underground well. Their study, set to be published online Wednesday in the peer-reviewed journal Science of the Total Environment, did not trace specific chemicals from the facility near Fayetteville or note any environmental damage. Instead, the study's authors said water samples taken near and downstream from the injection well indicated the presence of substances that could affect endocrine activity, while samples taken upstream and away from the facility did not. “It is absolutely a call for more in-depth analysis” at the facility and other sites, said lead author Susan Nagel, an associate professor in the Department of Obstetrics, Gynecology and Women's Health at the University of Missouri. Nagel's research has focused on substances that affect hormones and the endocrine system, and previous work linked chemicals used in fracking fluid to such issues. The study did not include the name of the facility, but the West Virginia Department of Environmental Protection identified it as the Danny Webb facility. The owner could not be reached.

A Fracking Well In West Virginia Is Leaking Chemicals That Can Affect Fertility -  Dangerous levels of chemicals that can harm fertility flow downstream from a West Virginia fracking wastewater disposal facility, federal and academic researchers reported on Wednesday. The finding raises questions about safety of similar deep disposal sites nationwide, several independent scientists said. The contamination near Fayetteville, West Virginia, flows from a brook called Wolf Creek a few miles upstream of a New River drinking water treatment facility for 11,300 people. The disposal site, which includes a deep waste well, several holding ponds, and storage tanks, sits on a hillside above the creek, and has been the site of a fight over its permit, revoked in 2014 and then renewed by the West Virginia Department of Environmental Protection in August. “I wouldn’t drink out of Wolf Creek,” University of Missouri toxicologist Susan Nagel, a study author, told BuzzFeed News. It’s unclear whether the contamination has reached residents’ drinking water, but that should be tested, Nagel said. U.S. Geological Survey scientists invited Nagel, an expert on “endocrine disrupting” chemicals linked to switched genders in fish, lowered fertility in mice, and hyperactivity in children, to test water upstream and downstream of the fracking waste site. “We found levels of these endocrine disrupting chemicals high enough to threaten health,” Nagel said.

Study: Water problems near W. Va. fracking disposal site - --Researchers found high levels of endocrine disruption activity in the water near or downstream from the wastewater site in Fayetteville, West Virginia. The study, published today in the journal Science of the Total Environment, adds to evidence that some chemicals in hydraulic fracturing waste are hormone-mimickers or blockers and are leaching out of wastewater disposal wells and into nearby water, potentially impacting fish and human health.  Along with water, the injections contain sand and a mix of chemicals—some of which have been linked to cancer, hormone impacts, and reproductive problems. It’s estimated that every well produces more than one million gallons of wastewater, which is eventually pumped into disposal wells. There are an estimated 36,000 fracking disposal sites in the U.S. and little testing has been done on nearby surface water, said lead author Christopher Kassotis, a postdoctoral fellow at Duke University.Kassotis and other university and federal researchers collected water upstream, downstream and around a wastewater facility that has a disposal well, holding ponds and storage tanks—all used to house excess wastewater from drilling. There is a small stream flowing through the site, which flows into Wolf Creek. Wolf Creek flows into the New River, which is used for some people’s drinking water.Samples near the site and downstream had “considerably higher” activity for a number of hormones, including estrogen, androgen and thyroid receptors, than reference samples in the watershed far from any disposal sites.

Where is uproar over radioactive waste? - It's been over a month, now, since we first learned that the Blue Ridge Landfill in Estill County had become the dumping grounds for illegally imported radioactive fracking waste...and so far, things seem to be business as usual. When the land men showed up last year, looking to lease our mineral rights for fracking, one of my first concerns was that my home would become convenient disposal for the huge quantities of poisonous water and sludge generated by the oil and gas industry.  And now, in the county where I grew up, and possibly across this beautiful state, it already has. Despite hundreds of folks from our community in Estill County and beyond showing up to demand accountability and answers, both have been in mighty short supply.  It's no secret among the locals that trucks creep in and out of the dump at all hours of the night, and I grew up hearing a lot of speculation as to what they were burying in there. And then, suddenly, it wasn't speculation anymore.  At least 2,000 tons of concentrated radioactive tailings from out-of-state oil and gas fracking operations (something we've been fighting to keep out of our own foothills) had slipped in "under the radar" and been dumped loose from the containers it was brought here in -- and no one seems to even know just exactly where, let alone have a plan for recovery. No one seems to know, either, how much of that loose radioactive particulate matter may have become airborne during the time the dumpings occurred (several months, July through November of last year); how much of it may have drifted across the road to the frighteningly close middle and high schools.  I attended that middle school the year it opened, and you sure can smell the dump from there.  When we smell something, it means we're breathing in its particles.

A Big Slowdown In Pennsylvania Fracking (podcast) A steady drop in natural gas prices has forced energy companies drilling in Pennsylvania to layoff workers and shut down operations. For the drilling hotspot Marcellus Shale, that means a big change to the local economy. Reid Frazier from the Allegheny Front at WESA in Pittsburgh reports.

Natgas Storage Spreads Are Back, Alright! - A few years ago, natural gas storage was one of the hottest segments of midstream infrastructure development.   But along came shale, then oversupply, then depressed prices.  The forward curve flattened out, killing off new storage development projects and putting a lot of financial pressure on those companies that own or lease storage capacity.  But recently things have shifted, at least part of the way back to the good ole days.  The summer/winter spread currently sits at $0.63/MMBtu (April 7, 2016), the highest level since 2012, and up significantly from the past years average of around $0.30/MMBtu.  Midstream companies with available storage should be able to lock in higher prices compared to past years.  In today’s blog, we look at the situation now facing natural gas storage operators and show how recent shifts in the market may affect their returns.

‘Fractivists’ Increase Pressure on Hillary Clinton and Bernie Sanders in New York -  A nasty row that erupted between Hillary Clinton and Bernie Sanders over oil and gas industry donors last week is catapulting the issue of climate change into the race for the Democratic presidential nomination as it moves to New York, where an army of activists upstate is driven by opposition to drilling.Mrs. Clinton has moved steadily left on the issue, under pressure from Mr. Sanders and his progressive allies, but she continues to come under assault, posing new challenges for her as the race moves to more liberal Northeastern states.Last week, her mask of composure slipped when she angrily replied to a Greenpeace activist in Purchase, N.Y., “I am so sick of the Sanders campaign lying about me.”Climate change is a powerful issue for voters in the Democratic base almost everywhere. But it has especially inspired grass-roots progressives in upstate New York, who fought — and won — a yearslong battle against fracking for natural gas.Even after Gov. Andrew M. Cuomo banned fracking statewide in 2014, many activists — who call themselves fractivists — remain on the front lines of climate fights, and many are skeptical about Mrs. Clinton because of views she held in the Obama administration and earlier, as a New York senator from 2001 to 2008.

How Much Money Has Hillary Clinton’s Campaign Taken From the Fossil Fuel Industry? – (Democracy Now video) According to a new report by Greenpeace, Hillary Clinton’s presidential campaign and the super PAC supporting her have received $138,400 from fossil fuel lobbyists and $1,327,210 from bundlers, totaling more than $4.5 million from lobbyists, bundlers and large donors connected the fossil fuel industry. Clinton maintains that she’s received only about $330,000 from individuals who work for fossil fuel companies—about 0.2 percent of the total raised by her campaign. We speak with Charlie Cray, research specialist for Greenpeace and lead researcher on the fossil fuel lobbyists’ contributions to the Clinton campaign, as well as Eva Resnick-Day, a democracy organizer for Greenpeace who confronted Clinton at a rally. Watch here:

Oil pipeline opponents say local bans will derail project: (AP) — Environmental groups are citing a provision in a 107-year-old transportation law in trying to derail an oil pipeline project from upstate New York to New Jersey. Daniel Raichel, a lawyer for the Natural Resources Defense Council, says the New York Transportation Corporations Law of 1909 gives villages and cities veto power over oil pipelines through their borders. Since five communities in the Hudson Valley have passed resolutions opposing the Pilgrim Pipeline project, the environmental groups say further state review is a waste of resources. The project calls for one pipeline carrying crude oil from the Port of Albany to New Jersey refineries, and another carrying refined petroleum north. Pilgrim spokesman Paul Nathanson says the state review was proceeding according to environmental laws. The state Department of Environmental Conservation and Thruway Authority had no comment.

TPP Would Fuel Climate Chaos and Empower Corporate Polluters --Many pundits were caught off-guard by the transpartisan fury over America’s trade policy rocking the presidential primary season. But it’s no surprise to me. I grew up in a working class family in Kenosha, Wisconsin. So I know why Americans have had enough of shiny promises, job-killing trade deals and Wall Street bailouts that propel ordinary people into an economic nose dive.Hard working Americans of all political stripes recognize when the rules have been rigged against them, because they live day-to-day with the results. No doubt revolutionary change is an appealing alternative. Since the North American Free Trade (NAFTA) and World Trade Organization agreements in the mid-1990s, America has lost more than five million manufacturing jobs net. Millions of service sector jobs also have been offshored.  Pacts like the recently-signed Trans-Pacific Partnership (TPP), currently sidelined without sufficient congressional support for passage, contain thousands of pages of enforceable rules that would fuel climate chaos and empower corporate polluters to challenge environmental laws across the globe.And if the TPP were approved, the Department of Energy would be required to automatically approve all natural gas exports to the 11 other TPP countries, eliminating our government’s ability to make decisions about our energy future and incentivizing a boom in dangerous fracking. The extreme secrecy of TPP negotiations allowed the Obama administration to claim it was the greenest deal ever. But when the TPP text was finally disclosed late last year, environmental groups that the White House claimed supported it, such as NRDC and Defenders of Wildlife, joined the Sierra Club, Greenpeace, and scores of others in opposition.

The Challenge of LNG/Gas Specification Compatibility - As if the international market for liquefied natural gas weren’t complicated enough, add the facts that 1) the LNG shipped from various export terminals differs in chemical composition, and 2) the specifications for the natural gas consumed by various countries around the world differ too. In other words, you can’t assume that the heating value and other important characteristics of the super-cooled gas in the LNG shipped from exporting country A will align with the gas specs enforced in importing country B. That’s a big deal to LNG exporters and traders who would like to be able to ship their LNG to wherever it would make the most money, but who need to consider a lot more. Today, we look into the increasing significance of LNG/gas spec differences as the old rules of the LNG market break down.  We’ve been giving increasing attention to the international LNG market, mostly because the first liquefaction/LNG export facilities in the Lower 48 states are coming online (Train 1 at Cheniere Energy’s Sabine Pass is already up and running, and Train 2 is nearing completion) and because natural gas flows to these facilities are starting to affect U.S. gas markets.  Our Drill Down report LNG Is a Battlefield provided a big-picture view of things, and our Begin the Sabine and Commencing Countdown, Engines On series described the pipeline infrastructure feeding Sabine Pass and the initial gas flows to the liquefaction/LNG export facility

NYMEX May gas futures settle 10.7 cents higher to eclipse $2 mark - The NYMEX May natural gas futures contract jumped 10.7 cents to $2.018/MMBtu Thursday, marking the first time a prompt-month contract has settled above the $2 mark since February 10. Amid some cooler-than-normal forecasts for April, the market shrugged off a bearish storage report. US natural gas storage volumes rose 12 Bcf to 2.48 Tcf for the week ended April 1, according to the US Energy Information Administration. That set a record high for this time of year, breaking the previous high of 2.474 Tcf set in 2012. The storage data was also bearish compared with the five-year average of a 19-Bcf withdrawal, according to EIA data."However, this may not be enough of a shock to offset the late-season heating demand due to the current forecast for colder-than-normal temperatures," said Timothy Evans, energy futures specialist with Citi Futures. "Prices may be able to absorb the bearish storage surprises and still test higher." Evans said cool forecasts point to a supportive net withdrawal from storage for both the weeks ending April 8 and April 15, but that may also be followed by warmer-than-normal conditions in the 11- to 15-day period. The National Weather Service's latest eight- to 14-day forecast showed a higher likelihood of above-normal temperatures in most of the eastern and central US, with below-normal temperatures in most of the US Southwest.

US gas demand rises 8.6% from Friday on colder Northeast temperatures - Total US natural gas demand jumped to 73.3 Bcf Monday, up 5.8 Bcf or 8.6% compared with Friday, as colder temperatures in the Northeast prompted a spike in residential and commercial demand, according to Bentek data. Total Northeast demand dipped to a 14-week low Friday of 13.8 Bcf as mild weather across the region saw temperatures rise to nearly 60 degrees Fahrenheit on average. A cold front entered the region Saturday, pushing temperatures down to the mid- to low 40s, as much as 9 degrees F below normal by Sunday. Northeast demand rose in response to the colder weather, with residential and commercial consumption spiking Monday to 11.8 Bcf from 5.7 Bcf Friday.The colder weather prompted storage withdrawals over the weekend as well as a jump in imports of Canadian gas. Implied withdrawals totaled 1.4 Bcf on Sunday and remained elevated Monday at 1.0 Bcf. Imports of Canadian gas, meanwhile, jumped Sunday to 1.3 Bcf, up 74% day on day, before edging higher still to 1.4 Bcf on Monday. Temperatures in the Northeast are expected to remain cooler through midweek, with highs in the mid-30s to low 40s F through Wednesday, keeping gas demand across the region elevated.

Why Natural Gas Prices Could Double From Here - – Art Berman - Natural gas prices should double over the next year. Over-supply plus a warm 2015-2016 winter have resulted in low gas prices. That is about to change because supply is decreasing (Figure 1). Total supply–dry gas production plus net imports–has been declining since October 2015* because gas production is flat, imports are decreasing and exports are increasing. Shale gas production has stopped growing and conventional gas has been declining for the past 15 years. As a result, the supply surplus that has existed since December 2014 is disappearing and will move into deficit by November 2016 according to data in the EIA March STEO (Short Term Energy Outlook). During the last supply deficit from December 2012 to November 2014, Henry Hub spot prices averaged $4.05 per mmBtu. Prices averaged $1.99 per mmBtu in the first quarter of 2016 so it is reasonable that prices may double during the next period of deficit. EIA forecasts that gas prices will increase to $3.31 by the end of 2017 but that is overly conservative because it assumes an immediate and improbable return to production growth once the supply deficit and higher prices are established. Production companies are in financial distress and are unlikely to return to gas drilling at the $2.75 price that EIA forecasts for November 2016. The oil-field service industry is in disarray and is probably unable to reassemble drilling and fracking crews and equipment in less than 6 to 12 months after demand resumes. There are currently on 92 rigs drilling for gas. That is 150 rigs less than the previous record-low set in 1992 (Figure 2). Production cannot be maintained at this level despite unrealistic faith in drilling efficiency and spare capacity from uncompleted wells.

The St. James Crude Hub Continues to Develop - The St. James, LA crude trading hub provides feedstock to 2.6 MMb/d of regional refining capacity as well as refineries in the Midwest. St. James is also an important distribution hub for crude from North Dakota, South Texas, the Gulf of Mexico and onshore Louisiana as well as imports arriving at the Louisiana Offshore Oil Port (LOOP). Crude storage and midstream infrastructure at St. James has been expanding in recent years as the trading hub handles larger volumes of domestic production. Today we begin a new series looking at infrastructure and crude pricing at St. James. St. James is located on the Mississippi River 60 miles upriver from New Orleans and about 60 miles Northwest of the Clovelly, LA landing point for crude imported through LOOP. We have previously discussed the offshore LOOP terminal (see Thrown For a LOOP) that is the only deep water port on the Gulf Coast capable of unloading million barrel plus cargoes from very large crude carriers (VLCCs) and ultra large crude carriers (ULCCs – up to 3 MMBbl). We have recently looked at the potential for LOOP to develop export capabilities (see The Great Beyond).  The map in Figure #1 shows the central position that St. James occupies in the Eastern Gulf Coast crude oil refining and distribution system. We will get to the inbound and outbound pipeline systems and refinery connections in a minute. Being on the Mississippi River means that St. James can also accommodate barge or tanker (up to Aframax size – about 750 MBbl) receipts or loadings and receive crude delivered from the Midwest via inland waterways. In the past 5 years midstream companies have built out rail unloading facilities at St. James that receive domestic crude – particularly from North Dakota (see Back to the Delta). The Louisiana hub has also been used as a transit point to ship surplus supplies of U.S. ultra light crude (condensate) from the Eagle Ford basin in South Texas to Canada via the Capline pipeline for use as a diluent in heavy Western Canadian oil sands (see Plains Trains and Diluent Deals). More recently St. James has been a receipt point for condensate delivered by barge down the Ohio River and Mississippi from the Marcellus and Utica (see Give a Little Bit).

Huge Fire Erupts at ExxonMobil Refinery Near Houston - An enormous fire erupted an ExxonMobil refinery in Texas on Thursday. The Baytown refinery caught fire, leading to huge black plumes of smoke into the air, visible from downtown Houston.  According to Reuters, the fire erupted at a lube oil hydrotreating unit, which removes sulfur from oil, a 20,000 barrel-per-day section of the refinery that produces diesel fuel. The fire was extinguished Thursday afternoon and ExxonMobil stated that no injuries were reported. Exxon also said that the oil refinery’s operations were not disrupted. The Exxon refinery produces 560,500 barrels of refined product per day, enough to rank it as the second largest refinery in the United States. Almost as soon as the fire in the ExxonMobil refinery was extinguished, we got reports of a fire in a refinery belonging to LyondellBasell Industries. CNBC reported that the fire occured in the coker unit of the refinery that can process over 263,000 barrels per day.

23.5M acres off Texas up for oil, gas leases in August: (AP) — The federal government will offer 23.5 million acres off of Texas for oil and gas leases in August. The Bureau of Ocean Energy Management says that’s all the available waterbottom in the western Gulf of Mexico. Spokesman John Filostrat (FIL-oh-strat) says the agency has not chosen a date or location. Last August marked the smallest sale ever for the western Gulf. Five companies bid on 33 tracts for a total of $22.7 million in high bids. Each tract drew one bid. A sale last month for central and eastern tracts was the central region’s fourth-lowest since regional sales began in 1983. Nobody bid on tracts in the eastern Gulf. Industry lobbyist Randall Luthi blamed the low sales on both low oil and gas prices and uncertainty over possible future regulations.

NETL National Energy Technology Laboratory : Project Captures First-Ever Comprehensive Hydraulic Fracturing Research Data from 1.5 Miles Underground -- The U.S. Department of Energy's National Energy Technology Laboratory (NETL), working with the Gas Technology Institute, Laredo Petroleum, and other industry partners, has collected what is possibly the world's most comprehensive hydraulic-fracturing research dataset in unconventional shale. This data - which will be made publicly available - provides a first-ever look at how induced underground fractures spread within horizontal wellbores. It will be used to help reduce potential environmental impacts, improve efficiency, and demonstrate safe and reliable operations of hydraulic fracturing. Hydraulic fracturing is a complex process with many variables affecting exactly where fractures propagate, their dimensions, and their ability to enhance production of hydrocarbons. Since the fractures are underground, they are never seen and operators have had to rely on various indirect measurements to infer their dimensions. Insights and understanding gained from this project will change that. Current fracturing operations are inefficient in several aspects. By improving the design and execution of hydraulic fracturing, the number of future wells drilled can be reduced along with the amount of water and energy needed in hydraulic fracturing operations. A smaller environmental footprint can result. At a test site in the Permian Basin of Texas, 11 new 10,000-foot-long horizontal wells were drilled and stimulated in the upper and middle Wolfcamp formations, and approximately 600 feet of unique core was obtained by drilling a one-of-a-kind core well through created hydraulic fractures. The process allowed researchers to obtain phenomenal quality core samples. Based on a first look at the core, the research team predicts that the fundamental understanding of hydraulic fracture propagation, modeling, and effectiveness is about to undergo a game-changing alteration. The data acquired at the site will help producers understand fracture connectivity and conductivity while identifying drainage patterns across multiple rock formations.

Seismic Report Links Earthquakes to Fracking | Alternet: Officially linking a controversial natural gas-drilling method to earthquakes for the first time, the U.S. Geological Survey released a groundbreaking report documenting links between fracking and skyrocketing seismic activity. Released on Monday, the agency's "2016 One-Year Seismic Hazard Forecast" contains no explicit reference to hydraulic fracturing, but the allusion to the process is unmistakable. "Earthquake rates have recently increased markedly in multiple areas of the Central and Eastern United States (CEUS), especially since 2010, and scientific studies have linked the majority of this increased activity to wastewater injection in deep disposal wells," the 58-page report states. "Such changes have caused concern to many, including residents, business owners, engineers, and public officials responsible for mitigating or responding to the effects of these earthquakes on nearby populations," it continues. These "induced earthquakes," as the report calls them, "create seismic hazard to buildings, bridges, pipelines, and other important structures and are a concern for about 7.9 million people living in the vicinity of these events." Colloquially known as "fracking," hydraulic fracturing extracts natural gas by pumping millions of gallons of a high-pressure slurry comprised of water, sand and chemicals to break apart shale deep in the Earth. In lawsuits from Arkansas to California, its opponents have long alleged that the technique caused "thousands of quakes" near drilling areas. Monday's report corroborates many of these allegations with several examples of earthquakes that rocked areas located near injection wells.

Another View: Quaking in our boots over fracking: “Drilling is Making Oklahoma as Quake Prone as California,” one headline blared. “Fracking fallout: 7.9 million at risk of man-made earthquakes,” read another. To some opponents of the drilling techniques that have unlocked massive stores of U.S. oil and natural gas, reports of fracking-related earthquakes are yet more evidence that drilling must end. In fact, as with many of fracking’s risks, its potential to induce seismic activity along otherwise relatively quiet fault lines is serious - but probably manageable. It justifies regulating the industry, not shutting it down. This week’s big news came from the U.S. Geological Survey (USGS), which released a startling earthquake hazard map with a big, red blob over Oklahoma. For the first time, the government’s earthquake monitor incorporated human-induced tremors into a one-year hazard projection. The resulting map showed that some parts of the country with a lot of fracking rival California’s tectonically active Bay Area in the severity of the projected hazard. This should come as no surprise to anyone living in affected areas. Most of the quakes are small, but parts of Oklahoma felt a 5.1 magnitude earthquake in early February. So, is fracking causing earthquakes across large swaths of the country? As best as scientists can figure, only in an indirect way. Small earthquakes are possible when drillers inject fluid into rock formations to fracture them and let oil and gas escape. A study released this week attributed many tremors detected on the surface in Western Canada to this process. But fracking per se does not seem to be the big problem in the United States. Rather, scientists point to how drillers dispose of the wastewater that flows out of their wells. Some of this is sent back into the ground in separate wastewater injection wells. This process puts pressure on the subterranean geology and can result in noticeable shifts.

Several earthquakes recorded in Oklahoma: (AP) — The U.S. Geological Survey has recorded several small to moderate earthquakes in Oklahoma, including a magnitude 4.0 quake. The temblor was recorded at 5:27 p.m. Thursday, 1 mile north of Luther — or 25 miles northeast of Oklahoma City. The Logan County Sheriff’s Office says no injuries or damage are reported. The quake is one of seven recorded since shortly after midnight. The others range in magnitude from 2.7 to 3.6. The number of magnitude 3.0 or greater earthquakes has skyrocketed in Oklahoma, from a few dozen in 2012 to more than 900 last year and scientists have linked the increase to the underground disposal of wastewater from oil-and-gas production. State regulators are asking oil and gas companies to reduce their wastewater disposal operations.

Are You One of the 7 Million Americans Threatened by Man-Made Earthquakes? - Believe it or not, even if you occupy the middle of the country, you could be facing a future filled with damaging earthquakes, too. But that’s not because volatile tectonic plates are sliding back and forth and crashing against each other to create massive cracks in the continent’s surface. It’s because oil and gas operations are sending enormous volumes of wastewater deep underground, where they can push the earth’s crust further downward, increase pressure against already existing fault lines and cause a great big rumble that will knock down your china cabinet– or worse. A new study by the U.S. Geological Survey (USGS) assesses the risk of earthquakes or seismic activity caused by humans. The agency particularly looked at earthquakes triggered when wastewater from oil and gas operations is injected underground, as it is during the “fracking” or hydraulic fracturing occurring in the energy fields east of the Rocky Mountains and west of the Mississippi River. What they found has sent shockwaves across news outlets, social media sites and of course, the households in the paths of these operations: “The report shows that approximately 7 million people live and work in areas of the central and eastern U.S. (CEUS) with potential for damaging shaking from induced seismicity.” “The chance of damage from all types of earthquakes is similar to that of natural earthquakes in high-hazard areas of California,” warns the USGS.

Colorado Republican Senate Candidate: Fracking Doesn’t Cause Earthquakes; God Does! -- The U.S. Geological Survey said this week that the link between fracking and earthquakes is stronger than ever.Fluid injection is a controversial tactic tied to hydraulic fracturing, the drilling technique known as “fracking” that has dramatically increased U.S. oil and gas production. When oil and gas is pumped out of the ground, salty water often flows out with it. This water is typically injected back under high pressure into disposal wells — a practice that the geological agency has said can induce earthquakes. So if you’re a Colorado Republican hoping to win a seat in the U.S. Senate, what do you do? You already know the answer because I said “Republican.”

Colorado House Defeats Local Control Fracking Bill « CBS Denver: – Colorado’s House on Monday defeated a bill to reassert local government control over the siting of oil and gas drilling, with some Democrats joining Republicans in deciding it isn’t the time to add to regulatory confusion while the state Supreme Court considers if such powers are legal. The bill, co-sponsored by Democratic Reps. Mike Foote of Lafayette and Su Ryden of Aurora, became a platform for another debate on state-versus-local authority over an energy industry whose operations increasingly affect urban and suburban communities along Colorado’s Front Range. Foote and Rep. Tracy Kraft-Tharp of Arvada offered an amendment they said would limit municipalities’ authority over fracking to the use of their noise, traffic and visual impact ordinances. Under the current system, Foote said, local governments are quickly sued by energy companies for trying to use that authority. Opponents said local input already is outlined under the 2015 findings of a fracking task force convened by Gov. John Hickenlooper. They insisted the commission already considers local impacts in siting rigs. And they said it wasn’t time for the bill because the state Supreme Court is considering the legality of a 2012 voter-approved fracking ban in Longmont.

6 Colorado Teenagers File Appeal in Fracking and Climate Lawsuit -- Six youth plaintiffs on Monday appealed Denver District Court Judge Eric Elliff’s adverse decision to their fracking and climate change lawsuit. In his decision, Judge Elliff affirmed the Colorado Oil and Gas Conservation Commission’s order to deny the fracking petition brought by the young plaintiffs, determining that the commission is required to “strike a balance between the regulation of oil and gas operations and protecting public health, the environment and wildlife resources.”  “Our health and safety are on the line,” said Xiuhtezcatl Roske-Martinez, 15-year-old plaintiff and youth director of Earth Guardians. “For the future of all Coloradans, it was imperative for us to file this appeal. It’s a preposterous idea that the commission need to strike a balance between regulation of oil and gas operations and protecting the health of Coloradans. The commission’s priority should be the health and safety of us, the people. Right now, our government is putting their profits above our futures and that needs to stop.

Study Fracking Elements Found in Sources of Drinking Water  - A Stanford University report has confirmed that toxic fracking chemicals ended up in a Wyoming town's source of drinking water, and suggests common industry practices may have widespread impacts. The study examined sites near the town of Pavillion, Wyo., and found evidence of fluids dumped that contain diesel fuel, high chemical concentrations in unlined pits and inadequate barriers to protect groundwater. Stanford University visiting scholar Dominic DiGiulio, the report's lead author, says the findings should be a wake-up call. "In the Rocky Mountain area of the United States, water is a precious resource, and I think we need to protect those resources for future use," he says. "And the concern about hydraulic fracturing is that it's not clear whether those resources are being protected." Hydraulic fracturing became the only industry legally allowed to inject toxic chemicals into underground sources of drinking water when Congress exempted it from the Safe Drinking Water Act in 2005. Concerns about fracking have rocked the U.S. political landscape and communities around the country. In a draft report last year, the Environmental Protection Agency announced that fracking posed no serious threats to drinking water, but recently the agency's own advisory board challenged those conclusions and said the impacts at Pavillion, and sites in Pennsylvania and Texas, deserve more attention.

Study finds fracking can pollute underground drinking water. Also discovers that sky is blue ... A Stanford University study shows that fracking can pollute underground drinking water. Using publicly available data and reports, researchers found organic compounds used in hydraulic fracturing were migrating into groundwater from unlined pits. The findings came from a case study of Pavillion, a small Wyoming town with a population of 231. For the first time, research showed, the fracking operations near the town had polluted underground sources of drinking water, making it unsafe to use. The study found that chemicals in Pavillion’s water were also the same substances companies used in local fracking operations. Faulty cement barriers placed around the steel casing inside an oil or gas well created the potential for fracking chemicals to seep underground, and tests of groundwater showed dangerous concentrations of diesel-related compounds such as benzene.Fields have been in operation near the town since the 1960s, with more than 180 oil and gas wells, some now plugged and abandoned. In 2008, the residents of Pavillion complained of a foul taste and odor in their drinking water and questioned whether it was related to physical ailments. The Environmental Protection Agency conducted testing, and in 2011, a preliminary report was issued linking shallow fracking to toxic compounds in aquifers. The EPA report was heavily criticized by the oil and gas industry and regulators, and the environmental watchdog agency never finalized its findings. Instead, it turned them over the state of Wyoming, which released a series of reports without firm conclusions. Wyoming has no plans to take further action on them.  Meanwhile, the federal Agency for Toxic Substances and Disease Registry told area residents to avoid bathing, cooking or drinking with water from their taps.

Ex-EPA scientist publishes Wyoming fracking study that agency abandoned -- In late 2011, the Environmental Protection Agency published a draft report on an investigation of groundwater contamination near Pavillion, Wyoming, where fracking had jump-started an oil and natural gas field that includes the Wind River Reservation. It's an unusual geologic setting, with little separation between the drinking water aquifer and the rocks being fracked for gas. Add poorly sealed gas wells, the draft report concluded, and you get fracking contamination that appeared to have reached the drinking water aquifer. Controversy ensued, and the EPA withdrew from the investigation before the report was ever finalized, giving the state of Wyoming control. One of the EPA scientists leading the investigation, Dominic DiGiulio, subsequently took a job at Stanford University. Along with Stanford colleague Rob Jackson, DiGiulio has tabulated all the EPA data that was sitting in scientific limbo—DiGiulio even went as far as using a Freedom of Information Act request to access EPA data from a couple of water samples that weren’t published. All that data now has a home in the form of a paper published in Environmental Science & Technology. The end result? The researchers stand by the EPA team’s original conclusions. During the investigation, the EPA drilled a pair of sampling wells between 200 and 300 meters deep—roughly the depth of the deepest water well in the area and the shallowest fracking activities. They were hoping for insight that couldn’t necessarily be gleaned from sampling shallower water wells alone, where an array of possible contamination sources can confuse things. As before, the researchers argue that samples from these wells indicate the presence of the chemical-laced water that's pumped down gas wells to hydraulically fracture rock, releasing the gas it holds.

EPA approves fracking chemicals despite lack of health tests - As fracking for gas and oil exploded across the landscape, federal law enabled chemical makers to win approval of fracking and drilling chemicals by EPA with no health testing and sweeping confidentiality claims that deny citizens even the most basic information on the chemicals’ identity, according to a two-year investigation by the nonprofit Partnership for Policy Integrity (PFPI).  More than 17 million Americans in the contiguous 48 states live within one mile of an active oil or natural gas well where these chemicals may be used.[1] Toxic Secrets:  Companies Exploit Weak US Chemical Rules to Hide Fracking Risks was based on a first-ever study of EPA’s health assessments and regulatory determinations for 105 fracking and drilling chemicals reviewed under the Toxic Substances Control Act’s (TSCA) New Chemicals program between 2009 and 2014.  Partnership for Policy Integrity (PFPI) received the records under a Freedom of Information Act (FOIA) request and separately obtained manufacturers’ submissions for most of the 105 chemicals from EPA’s public docket.  Passed in 1976, TSCA is supposed to protect the public from chemical risks in part by requiring review and regulation of new chemicals before they are used commercially. However, the investigation found that:

  • ·         Health studies were available in the public docket in only 2 percent of cases (2 of 99 cases). 
  • ·         EPA requested health studies in only five cases, despite expressing health concerns in 88 cases, including irritation to skin, eyes and mucous membranes; lung effects; neurotoxicity; kidney toxicity; and developmental toxicity. TSCA does not mandate health testing before a fracking chemical is put into widespread use.
  • ·         EPA approved almost all of these chemicals for manufacture, and the agency subsequently received notice that 37 of 70 chemicals expected to be produced at higher volumes (more than 22,000 pounds to millions of pounds per year) were, in fact, manufactured. The agency approved all of the 33 chemicals companies expected to be produced at lower volumes (limited to 22,000 pounds per year or less).

Fracking Wells Can Cut Their Toxic Chemical Use - Scientific American: When oil and gas companies extract fuel from the earth via fracking, they routinely add biocides such as glutaraldehyde to the high-pressure water they use to fracture rock formations deep underground. These compounds are a preemptive strike against microbes that produce hydrogen sulfide, which can corrode pipelines. New research, however, calls into question the across-the-board addition of toxic biocides to water used in fracking. Jason Gaspar and Pedro Alvarez at Rice University and colleagues, including scientists at energy firm Statoil, performed numerous tests at fracking sites in the Bakken Shale Formation in the north-central U.S. and in Canada. There, they found that H2S might be formed in fracking wells by geochemical reactions, rather than microbes (Environ. Sci. Technol. Lett.2016,  DOI:10.1021/acs.estlett.6b00075). At the Bakken sites, the team found, temperatures at the depths that the biocide-laden water is injected run about 120 °C, too hot for sulfogenic microbes to survive. In addition, DNA tests of injected water samples showed no evidence of microbes, and sulfur isotope analysis indicated that H2S recovered from the samples was produced abiotically. The researchers suggest that the H2S might instead have been produced via the reaction of underground calcium sulfate anhydrite with methane. H2S problems at other, cooler sites, such as the Marcellus shale formation in the eastern U.S., may still be caused by bacteria.

IUB threatens Dakota Access with fines over possible construction linked to Bakken pipeline : With allegations of construction projects related to the Bakken pipeline beginning in several areas of the state, the Iowa Utilities Board issued orders Thursday that may result in the company that proposed the pipeline, Dakota Access, being given hefty fines by the board. The pipeline, which would extend approximately 346 miles through Iowa as part of a 1,168-mile project to carry oil from the Bakken area near Stanley, N.D., to an oil transfer station near Patoka, Ill., was approved by the board on March 10 with several requirements attached that needed to be met before Dakota Access would be allowed to start construction. On March 23, the IUB received an email from Linda Murken, an Ames resident and member of the League of Women Voters, which is part of the The Bakken Pipeline Resistance Coalition, that expressed concern over an electrical substation being built in Story County that was on the same land where Dakota Access planned on building a pumping station for the pipeline. According to the land deal between Dakota Access and Consumer’s Energy, the property was deeded over to Consumer’s Energy for $10, “And other valuable consideration.”  After Murken filed her concerns with the IUB, several other people from around the state started reporting similar findings along the proposed path of the pipeline. Due to the allegations, and several other complaints filed with the IUB against Dakota Access, the board held a meeting Thursday to address the possible construction activity. Following that meeting, the IUB issued an order which reads, “The board finds that these public allegations of potential violation of the board’s order must be investigated and resolved. If Dakota Access is found to have violated the board’s order, the board may levy against Dakota Access a civil penalty in an amount not to exceed $100,000 for each violation. Each day that the violation continues constitutes a separate offense, up to a maximum of $200,000 for a related series of violations.”

TransCanada says spill forces shut down of Keystone pipeline: (AP) — TransCanada Corp. says the Keystone pipeline will likely remain shut down for the rest of the week while officials investigate an apparent oil spill in southeastern South Dakota. Oil was discovered on a 300-square-foot area in a ditch near a Freeman-area pump station. About 100 workers are at the site removing soil and determining the location of the leak. A company spokesman says crews have found no pipeline damage. TransCanada hasn’t released the amount of oil or speculated on cleanup costs. TransCanada says it has found no significant harm to the environment. State environmental officials are monitoring the cleanup. The Keystone pipeline runs from Alberta, Canada, to refineries in Illinois and Oklahoma, passing through the eastern Dakotas, Nebraska, Kansas and Missouri. Freeman is about 40 miles southwest of Sioux Falls.

Keystone XL’s Older Pipeline Twin Spills Oil In South Dakota -   Pipeline operator TransCanada shut down a section of its Keystone pipeline Sunday after about 187 gallons of crude oil spilled from the line in South Dakota, an accident that environmental groups say highlights the dangers of shipping oil by pipeline. So far, TransCanada has said that “no significant impact to the environment has been observed” and that the company “immediately began efforts to shut down the pipeline” when it received the report of the spill. The company also said it has notified landowners in the region.  The Keystone pipeline ships about 500,000 barrels of oil a day from Alberta, Canada to refineries in Illinois and Texas. The section of pipe running from Alberta to Cushing, Oklahoma has been shut down and will remain closed until Friday at the earliest, but the bottom portion of the pipeline — which runs from Cushing to Texas — is still up and running.  Environmental groups said Monday that the older Keystone’s spill drives home the threat that Keystone XL would have posed to the environment. They also pointed out that the Keystone pipeline, which was approved by President George W. Bush in 2008, leaked oil 12 times in its first year of operation alone. On average, pipelines spill oil more often than trains — the other major form of oil transport — but oil train spills are often more catastrophic, as the trains have the potential to explode. An oil train derailment and explosion in 2013 in Lac-Mégantic, Quebec killed 47 people and completely destroyed a town square.

TransCanada: 16,800 gallons of oil leaked in South Dakota: — TransCanada estimates that about 16,800 gallons of oil leaked into a field in South Dakota as part of a spill that has shut the Keystone pipeline down while officials investigate. The company says it reported the 400-barrel estimate Thursday to the National Response Centre and the Pipeline and Hazardous Materials Administration. It says the estimate is based on the excavation of soil to expose more than 100 feet of pipe and takes into account factors including oil observed in the soil and the potential area affected. TransCanada hasn’t yet said what caused the leak, which was reported Saturday. The company has told customers the pipeline will remain closed until early next week. About 100 workers are at the site, which is approximately 4 miles from the Freeman pump station in Hutchinson County, said TransCanada spokesman Mark Cooper. He said specialists at the site affirm that the leak is being controlled and there is no significant environmental impact and no threat to public safety. The pipeline runs from Alberta, Canada, to refineries in Illinois and Cushing, Oklahoma, passing through the eastern Dakotas, Nebraska, Kansas and Missouri. The Keystone pipeline can handle 550,000 barrels, or about 23 million gallons, daily. It’s part of a pipeline system that also would have included the Keystone XL pipeline had President Barack Obama not rejected that project last November.

Keystone Pipeline Leak Is Thousands Of Gallons Worse Than First Reported - Nearly a week after pipeline operator TransCanada shut down a section of its Keystone line over an oil leak, the company reported Thursday thousands of gallons of oil were spilled, not less than 200 as it first said. Based on soil excavations, TransCanada said about 16,800 gallons of oil leaked onto a field in South Dakota, the Associated Press reported. After the leak was discovered Saturday and the line was shut, TransCanada said about 187 gallons of crude oil had spilled, an accident that environmental groups said shows the dangers of shipping oil by pipeline. Though the spill is larger than first thought, it poses no significant environmental effects or threats to public safety, the AP said. The company behind the rejected Keystone XL line has yet to reveal what caused the leak, but it said the spill is being controlled, and reported the new estimates to the National Response Center and the Pipeline and Hazardous Materials Administration. The pipeline is part of the existing Keystone network that the proposed Keystone XL pipeline would have expanded. It runs from Alberta, Canada, to refineries in Illinois and Oklahoma via the Dakotas, Nebraska, Kansas, and Missouri. TransCanada said the pipeline won’t be fully operational until early next week. So far some 100 workers are at the site, located about four miles from Hutchinson County.  Misreported leak volumes often occur following oil spills as companies investigate accidents and discover oil seeped deeper in the ground or waterways than they first thought. Revised figures are at times much larger than first reported. In 2014, for instance, an oil spill in North Dakota was first reported to have caused a loss of 750 barrels of oil, a figure that climbed to about 20,600 barrels once the soil was further investigated.

California Members Urge Continued Offshore Fracking Moratorium - This week, Reps. Lois Capps (CA-24), Sam Farr (CA-20), and Jared Huffman (CA-02) sent a  letter urging the Federal Bureau of Ocean Energy Management (BOEM) and the Bureau of Safety and Environmental Enforcement (BSEE) to maintain the current moratorium on offshore fracking along the California coast. The members note that a complete environmental impact analysis must be completed to show that there are no substantial threats of these well stimulation activities before the activity could be resumed. In January, BOEM and BSEE settled a lawsuit originated by the Santa Barbara-based Environmental Defense Center resulting in a required temporary moratorium on offshore fracking along the California coast until a comprehensive environmental review of the practices could be carried out. A draft environmental assessment was published in February, which proposed allowing the resumption of the use of techniques commonly referred to as offshore fracking, however, a complete review has not yet been completed. The letter sent by the California members highlights insufficiencies present in the environmental assessment and urges BSEE and BOEM to continue their examination of the threats associated with these practices. In addition, the letter questions the broader need for these practices to be continued given the potential for these practices to exacerbate climate change and the negative effects of this on California. 'In Santa Barbara, we know all too well how much harm oil extraction can do to our coast,' Capps said. 'That is why my colleagues and I are urging federal officials to maintain the moratorium on these controversial techniques until they are proven to be safe.' 'Offshore fracking poses a serious threat to coastal economies and the millions of jobs that depend on a healthy marine environment,' Rep. Farr said. 'California has already banned all forms of drilling along our coast. The Department of Interior should follow our lead by developing similar protections further out in federal waters.'

Groundbreaking fracking effort, plus first new oil production in years, on tap in Cook Inlet | Alaska Dispatch News - BlueCrest Energy expects to begin producing oil from Cook Inlet in the coming weeks, marking the first time in more than a decade that oil has flowed from a new field in the basin. The project is also noteworthy because the Texas-based company plans to conduct the area’s first large-scale fracking operation, using the same efforts that have helped turn the Lower 48 into an energy powerhouse. Benjamin Johnson, chief executive of BlueCrest Energy, said the company will produce oil from its Cosmopolitan prospect by April 15 using an old exploration well.  More oil will flow after new wells are drilled starting this summer, he said. The wells will be fracked — injected with water, sand and chemicals to fracture the rock formation and enhance oil production — after the company imports a powerful new drilling rig that can drill long-distance horizontal wells from shore.The $77 million rig was commissioned by the company with help from a $30 million loan from the Alaska Industrial Development and Export Authority. BlueCrest Rig No. 1 is being shipped in pieces, taking 115 truckloads to move the rig and related equipment from Texas to the West Coast so it can be hauled on ships to Alaska. Fifteen stories tall, it won’t be reassembled and ready to drill until the end of June, Johnson said. Constructed by rig builder Oderco in Liberty, Texas, the rig will be the most powerful in the state because of its drilling and lifting strength. The rig will drill wells more than 4 miles long from BlueCrest’s site 6 miles north of Anchor Point, where the company has also built a processing facility. “There’s never been any wells like this (in the Inlet), the long horizontal well with the huge multistage frack,” said Johnson, who decades ago helped develop the giant Kuparuk oil field for Arco Alaska Inc., the former big producer on the North Slope and the Kenai Peninsula.

Analyst Sees Oil, Gas Companies Adopting Novel EOR Technologies -  Rigzone - Tertiary methods such as thermal enhanced oil recovery (EOR), steam-assisted gravity drainage (SAGD), gas injection and chemical injection can help boost the North American thermal EOR market, according to a recent Frost & Sullivan report "North American Thermal Enhanced Oil Recovery Market".  California’s heavy oil production and exploration frontiers such as Canada’s oil sands have created an expansive market for thermal EOR in North America. Frost & Sullivan reports that oil production from thermal EOR in North America was 2.53 million barrels per day in 2013, and expects to reach 4.64 million barrels per day in 2020. SAGD is expected to be the highest revenue contributor, followed by steam injection. Other thermal EOR methods are still nascent, Frost & Sullivan said in a Feb. 9 press statement.  Thermal EOR in particular will find application in areas where oil is viscous and heavy; it currently accounts for 55 percent of the total EOR market in North America, said Mahesh Radhakrishnan, Frost & Sullivan energy and environment research analyst and author of the report. Nearly 80 percent of oil sands can only be extracted through the SAGD method, which is more expensive versus other thermal EOR methods.  “Though there will be a boost in SAGD application, the capital expenditure (CAPEX) and operational expenditure (OPEX) involved in the project make this technique prohibitively expensive,” said Radhakrishnan. “As OPEX accounts for more than 80 percent of the project cost, SAGD will be unfeasible if the oil costs less than $50/barrel.”

As US Shale Drillers Suffer, Even The Bankrupt Keep Pumping Oil  -- As oil prices nosedived by two-thirds since 2014, a belief took hold in global energy markets that for prices to recover, many U.S. shale producers would first have to falter to allow markets to rebalance. With U.S. oil prices now trading below $40 a barrel, the corporate casualties are already mounting. More than 50 North American oil and gas producers have entered bankruptcy since early 2015, according to a Reuters review of regulatory filings and other data. While those firms account for only about 1 percent of U.S. output, based on the analysis, that count is expected to rise. Consultant Deloitte says a third of shale producers face bankruptcy risks this year. But a Reuters analysis has found that bankruptcies are so far having little effect on U.S. oil production, and a tendency among distressed drillers to keep their oil wells gushing belies the notion that deepening financial distress will prompt a sudden output decline or oil price rebound. Texas-based Magnum Hunter Resources, the second-largest producer among publicly-traded companies that have filed for bankruptcy. It filed for creditor protection last December, but even as the debt-laden driller scrambled to avoid that outcome, its oil and gas production rose by nearly a third between mid-2014 and late 2015. Once in Chapter 11, its CEO Gary Evans said the bankruptcy, which injected new funds to ensure it would stay operational, could help to "position Magnum Hunter as a market leader."

Productivity gains in U.S. shale oil -- Horizontal fracturing of tight hydrocarbon-bearing formations was responsible for a phenomenal resurgence in U.S. oil production, which rose more than 4 million barrels per day from 2010 levels before peaking in April of last year. Only 1/4 of the drilling rigs that were active in the U.S. shale oil producing counties in November 2014 were still on the job this February. Despite this massive cutback in capital spending, total U.S. crude oil production had fallen only 400,000 barrels a day (a 4.5% drop) as of December. The reason that U.S. oil production has not fallen more is remarkable efficiency gains. Occidental Petroleum described a series of measures they have taken that have reduced the time it takes to complete a well by up to 50%, which could enable it to drill the same number of wells each month using half the number of rigs. Other innovations are allowing much more oil to be produced from each completed well. Decker, Flaaen, and Tito (2016) note that the average new well in the Bakken produced 200 barrels/day in 2007. Last year the number was 400 b/d. However, it remains true as ever that production from an average new well will have fallen off by half within a year of operation. Drillers have also been able to get deep cost discounts from the companies that sell to them as a result of the market bust. These along with the productivity gains have significantly lowered the price of oil at which the producers would be able to cover their costs (including capital costs). A survey by the Federal Reserve Bank of Kansas City asked operators (primarily working in the Niobrara Shale) what oil price would be needed in order for drilling to be profitable in their area. The median response was $60 a barrel, down significantly from the $79 estimate of a year earlier, but still far above current prices. Many analysts expect a third to a half of U.S. oil companies to file for bankruptcy in 2016.

Oil glut up close: How Cushing copes with full crude tanks | Reuters: From the air above this small Oklahoma town, the 300 steel oil storage tanks that dot the landscape appear filled to the brim, their floating lids bobbing atop more than 65 millions of barrels of oil. There may be no better place to witness what a world awash in crude looks like, and the 9 square-mile (23.3 square km)complex seems to bear out oil traders' fears that the industry is running out of space to contain a historic supply glut that has hammered prices. Such worries make weekly estimates of Cushing stockpiles from the Energy Information Administration one of the hottest market indicators. These inventories peaked in mid-March and have edged lower since then. Some traders reckon they are unlikely to exceed those records for years as refiners rumble back from seasonal maintenance and demand rises. Others warn the stockpile could rise again. Up close, from a 24-hour bunker that controls a quarter of tank space here, the ‘pipeline crossroads of the world’, reveals its secret - there is some spare room left. On March 24, the day after U.S. government data showed Cushing’s tanks held a near-record 66.23 million barrels of crude, Mike Moeller, manager at Enbridge, explained how the largest Cushing operator uses every last inch of usable space. Operators and technicians make it possible by moving a half-million barrels per day in internal pipelines that link the major pipelines and tanks of its 20 million barrel terminal.Every day, up to 6 million barrels of oil flows through Cushing's 13 major pipelines in or out of steel tanks – some the size of a football field - towering above the prairie otherwise studded with ranches and nondescript residential neighborhoods. The U.S. government estimates their operational limits at around 83 percent of their ‘shell,’ or design, capacity.

U.S. Oil Production to Drop to 5 Million Barrels Per Day over Next 12 Months (Video) - With the amazing drop in Oil Rigs just over the last two months, the pain for U.S. Oil Producers is just getting started, expect U.S. Oil Production to start dropping off a cliff. We delve into the Oil Data metrics as to why April, May and June are strong months to be invested from the long side in the Oil Market - the seasonally strong part of the market from a demand perspective.

Low Gas Prices Drove Down Transit Use, So Why Can’t You Find a Seat on the Train? - Transit ridership declined for the first time in five years during 2015, likely due to low gasoline prices, but subways and commuter trains were as crowded as ever. How can this be? There are more free seats on the bus. Americans took about 150 million fewer bus rides last year, but boarded trains in slightly higher numbers than in 2014, when transit use reached the highest level since 1958, according to new data from the American Public Transportation Association. The average price of a gallon of gasoline fell 27% in 2015 from a year earlier. A breakdown of the 10.6 billion transit trips taken last year shows bus ridership fell 2.8%, and train usage, including rides on subways, light-rail systems and commuter trains, rose a slight 0.2% last year from 2014. The rail increase was the smallest gain since ridership declined in 2009. The figures do not include Amtrak ridership or intercity buses. “We were all surprised how quickly people changed habits with low fuel prices,” said Joseph Schwieterman, a professor at DePaul University who studies urban transportation economics. “Cheap gas encourages people to jump behind the wheel.”

House Republicans Say Oil Spill Prevention Rule Should Be Easier On Oil Companies -  Almost five years after the 2010 Deepwater Horizon spill sent millions of barrels of oil gushing into the Gulf of Mexico, the Obama administration announced a set of new offshore drilling rules that it hoped would prevent another massive oil spill. Now, as those rules appear to be racing towards finalization, House Republicans are asking the administration to revise the rules to lessen the burden on the oil industry. In a letter sent to the Office of Information and Regulatory Affairs (OIRA) last Friday, Reps. Rob Bishop (R-UT) and Ken Calvert (R-CA) expressed concern that the new rules could be so burdensome to the oil industry that they might “severely limit both existing and future safe energy development in our nation’s outer Continental Shelf.” They also worry that without a clear regulatory path toward permit approval, oil companies might be “unable to move forward on approving multi-billion dollar investments to develop our nation’s offshore energy resources.” The proposed regulations, first introduced by the Department of the Interior and the Bureau of Safety and Environmental Enforcement (BSEE) in April of last year, would require oil and gas companies to perform regular tests and maintenance on their blowout preventers, a piece of equipment that seals and controls oil and gas wells. The new rules would also require blowout preventers to undergo a third party review every year, and an additional detailed inspection every five years. Both Bishop, who is chairman of the House Natural Resources Committee, and Calvert, who is chairman of the House Subcommittee on Interior, Environment, and Related Agencies, wrote that the rules -- which they say set arbitrary limits on drilling not born out by science -- could staunch economic growth in the Gulf area and hinder the United States' ability to produce its own fuel.

$hillary’s Top Fund Raiser is a Frack Lobbyist! --Who got her fracking friends a fracking monopoly on Israel’s offshore gas field – from her pal Bibi Netanyahu ! Oy vey ! Such a fracking steal ! FTI Consulting subsidiary FTI Government Affairs and a top-level campaign finance bundler for Hillary Clinton’s presidential run, lobbied throughout 2014 and 2015 for offshore drilling off the coast of Israel on behalf of Noble Energy. The finding by DeSmog comes days after an irritated Clinton told an activist for Greenpeace USA, that she was “so sick of the Sanders campaign lying about me” with regards to her coziness to lobbyists and fossil fuel campaign cash. Dunn, according to his FTI biography, formerly worked for the Bill Clinton White House as the point man for the “business community’s support of President Clinton’s economic and trade agenda.”The lobbying disclosure forms confirm that Dunn lobbied the White House and State Department on developments in the Eastern Mediterranean, which is where Noble’s top energy assets offshore in Israel sit. Noble recently faced a major setback in Israel with the Supreme Court ruling that the contractual agreement the company landed with the Israeli government was illegal and akin to a monopoly. The court gave the company and Israel up to a year to negotiate a new deal.

US to try to block Halliburton from buying rival | (AP) — The Justice Department is expected to sue this week to stop Halliburton from acquiring Baker Hughes, according to a person familiar with the matter. The person spoke on condition of anonymity Tuesday because the lawsuit had not yet been announced. Halliburton and Baker Hughes help oil and natural companies by doing much of the actual drilling work for them. They announced in November 2014 that they planned to combine in a $35 billion deal that would create a bigger rival to Schlumberger Ltd., the world’s largest oilfield-services provider. The deal came together as the global oversupply of oil was beginning to cause a collapse in prices. The glut has slowed demand for drilling services and crushed the stock price of both companies.

GE's Oil Unit Seen Finding `Missing Piece' With Baker Hughes - Rigzone - General Electric Co. could become one of the top players in the oil services and equipment industry if it decides to bid for Baker Hughes Inc. A Justice Department lawsuit filed this week against Halliburton Co. to stop the merger of the world’s second- and third-largest oilfield service companies could soon put Baker Hughes back in play, with GE seen as the most likely bidder. Halliburton and Baker Hughes have said they plan to contest the government’s case, which could delay the timing of any future takeover offers. In December, GE was said to be exploring bids for various assets Halliburton was marketing in an attempt to secure antitrust approval for the deal. "This is one way you could really accelerate yourself in the oil and gas industry," . "Buy Baker to fill in the gap and all of a sudden, you’re one of the more dominant oil service companies out there." GE has expanded its oil and gas business in recent years through more than $10 billion in acquisitions, making it the company’s fourth-largest division. Yet, within the world of oilfield services and equipment manufacturing, the company ranks 11th, according to Tulsa, Oklahoma-based consultant Spears & Associates. Among GE’s four largest business units in the oilfield sector, none rank larger than third for market share. A large acquisition would vault GE into the top tier. "If they buy Baker Hughes, they’re immediately in the top 3,"  Oil and gas has become central to GE as Chief Executive Officer Jeffrey Immelt focuses operations on industrial manufacturing. He is selling the bulk of GE’s finance arm and its home-appliances unit while expanding divisions making drilling equipment, gas turbines and jet engines.

Mexico's proven oil reserves down a whopping 21 percent: (AP) — Mexico’s government oil commission says the country’s proven oil and gas reserves dropped by a startling 21 percent in 2015. The commission said Thursday that combined oil and gas reserves amounted to 10.24 billion barrels of crude equivalent at the end of 2015, compared to 13 billion barrels at the end of 2014. Mexico’s state-owned oil company has been thrown into crisis by the drop in world oil prices. The drop in revenue and temporary cash-flow problems have led the company to cut back on exploration.

Is the Tar Sands Boom About to Go Bust? -- It’s a small simple chart which has a huge significance for Canada and the climate. According to a Bloomberg analysis of recent industry data, two decades of expansion in the dirty tar sands of Alberta is set to come to an end in 2018. They conclude “no projects currently under construction are set to be completed that year or beyond.” Due to the collapse in the oil price, the tar sands producers are seriously struggling. There is too large a gap between the high cost of production of the tar sands and the current price of oil for many to invest over the long term. It is worth remembering that the crisis in the tar sands comes at a time when there is growing public pressure to build a clean energy future that does not hitch Canada’s economy to the destructive boom and bust cycle of oil. This concern can be seen in the growing opposition by front line communities across the country to new tar sands infrastructure such as pipelines and for support for building a safer, renewable energy economy. For the industry, these concerns would be easier to dismiss if it sat on a cushion of high oil prices. But the cushion has burst. Because of the oil price plunge, some half a million barrels a day of planned production capacity has been cancelled or put on hold over the last eighteen months.

Regulators allow Repsol to resume fracking after Alberta quake | Reuters: Regulators have given Repsol Oil and Gas Canada the green light to resume hydraulic fracking at a remote well in Alberta nearly three months after the region was rocked by an earthquake linked to the fracking, the company said on Thursday. The company, a unit of Spanish energy firm Repsol S.A., said in a statement that it had received Alberta Energy Regulator's approval to conduct modified flowback operations with reduced rates of pressure at the well. Repsol had suspended operations after a 4.8 magnitude quake on Jan. 12 occurred 18 km (11 miles) north of the town of Fox Creek. It was the largest earthquake in the area in more than a year. The company was conducting hydraulic fracturing at the time at its site 30 km from Fox Creek. An investigation by the Alberta Energy Regulator concluded with "high confidence" that the quake had been caused by fracking, the regulatory agency's spokesman Riley Bender said by telephone. The renewed work will begin after spring breakup, the period between April and July when the ground in Alberta thaws, and will last one to three weeks, Repsol said.

Fracking site shut down in Taranaki - Todd Energy have shut down one of their large multi-welled fracking sites in Taranaki. After nearly two years of construction, drilling, fracking and flaring at the Mangahewa-E site in Taranaki, they have closed it down and walked away.Fracking site shut down in Taranaki (with our help?) Todd Energy have shut down one of their large multi-welled fracking sites in Taranaki. After nearly two years of construction, drilling, fracking and flaring at the Mangahewa-E site in Taranaki, they have closed it down and walked away. ‘Mothballed’ is how Todd Energy representatives put it at a community information meeting in Tikorangi this week. Todd have been having a lot of problems getting gas out of the Mangahewa field sometimes producing saline fluid and little else and while Todd Energy have reported wanting to reduce the need for Hydraulic Fracturing (fracking), they have been ramping it up. Just this year, Todd have notified residents in Tikorangi of 24 separate fracking procedures and that’s just at one well pad. (Mangahewa-C) Over the same period, Frack Free Kapiti have been calling on the Todd family to stop fracking New Zealand. We have erected a large notice near the Todd’s beach property asking the public to ‘Tell the Todd’s to Stop Fracking New Zealand’. Frack Free Kapiti are pleased that one of the fracking sites has been closed down and we think the Todd family are getting the message that kiwis know fracking is not good for our environment, for our communities, or for our future.

The Six Indigenous Women at the Heart of Fracking Resistance in Argentina: These six Mapuche women have taken the risk of putting their bodies on the line to stop the drilling rigs from further endangering their community. Aboriginal women are central to the continent-wide resistance against extractivism, and the story of these women from the Campo Maripe community in the Argentine Patagonia is a solid example of their ongoing contribution, and the importance of indigenous resistance for social movements worldwide. Early one morning in March 2015, the lamgen Chela ('sister' in Mapuche language) says goodbye, gives me some jars of jam for my mother, and a message as I leave: "I know I don't know her, but say hello to your mom for me okay."A few months after my visit, on July 28th, I would come across in social media the image of Chela chained to a rig. The first thing that comes to mind when I see her face in the picture is her nice gesture that morning, the gift and words for another woman she doesn't even know: "I know I don't know her, but say hello to your mom for me okay." Chela is chained to a fracking rig with two other women from the community. Three Mapuche women chained to a US-owned machine on Indigenous territory seized by the Argentine state in an alliance enabled by capitalism, advancing with a renewed strength, and validated at all government levels, over the corpse of dead treaties: The first of them, International Labor Organization Convention 169, ratified by Argentina in 2000; second, a national law for the survey of aboriginal lands which governments past and present insist on ignoring the results of, as they prove the ancestral presence of the community on this land; finally, a significant achievement in 2014 -- the government of the province, after more than a decade without granting any legal statuses, legally recognizes Campo Maripe as a Mapuche community. Nonetheless, as mentioned above, it refuses to validate the land survey. The members of this community have never been consulted on what happens on their land. The extraction activity is illegal, but perfectly possible.

Shell Pulls Out Of Arctic-Focused Exploration Licensing Round In Norway  (Reuters) - Oil major Royal Dutch Shell has pulled its application from Norway's Arctic-focused oil licensing round, the firm said on Monday, in a blow to the Nordic country's ambitions to explore for oil and gas in its northern offshore areas. "The decision is part of an optimisation of Shell's global portfolio following the acquisition of BG and a persistently low oil price," the company's Norwegian unit said in a statement. "Norway remains one of our core areas." In December the Norwegian oil ministry said Shell was among the companies that had applied for drilling permissions in the so-called 23rd round, a licensing round set to move the search for hydrocarbons closer to the country's border with Russia. As recently as last month, the head of Shell's business in Norway had told Reuters the firm had hoped that it could begin drilling in 2017 if it won licenses in the 23rd licensing round. The Norwegian oil and energy minister said Shell's decision had no implication for the conduct of the licensing round. The awards would still be announced before July, he said. "We have many other competent companies that are competing hard for our promising, new exploration areas,"

National Oilwell Varco Signals "Massive" Layoffs In Norway -- WSJ -- Background: Norway has bigger problems than $40 oil. The Wall Street Journal is reporting that National Oilwell Varco Signals Further Mass Layoffs in Norway; the Oil Industry subcontractor blames reduced investment and equipment sales: — National Oilwell Varco said Monday that it would continue slashing jobs in Norway, after laying off 2,400 workers—half of its local staff—last year, as sinking oil-sector investment continues to hammer major industry subcontractors.  The company blamed its continued downsizing on deteriorating market conditions, with reduced investment and weak equipment sales. Over the past year, National Oilwell Varco has shed 1,800 permanent jobs and 600 contractors in Norway amid weaker activity in the North Sea. The company said about 500 offshore rigs and drillships are active globally, and about 300 units are retired so far, with more retirements expected, and no rapid rebound expected.

Indian state-owned refiners now allowed to make spot crude purchases – Platts - The Indian cabinet on Wednesday gave state-owned refiners the freedom to formulate their own crude import policies, meaning they will now be allowed to make spot purchases, a government press release said. The government said spot purchases needed be adopted to compete effectively in the market. The previous tender policy had certain limitations, it said. Developing their own policies would help oil companies adopt a dynamic, flexible policy for crude procurement, eventually benefiting consumers, the press release said. While the press release did not give any details, the refiners earlier mentioned the possibility of either setting up their own trading desks or joint trading desks initially for spot purchases. India's state-owned refiners typically bought 80% of their total crude requirements through term contracts and rest through tenders but stepped up their tender purchases last year when crude prices nose-dived.

Kuwait in deal to import 2.5 million tons of liquefied gas (AP) — Kuwait’s state oil company has signed deals to import 2.5 million tons of liquefied gas per year into the country to help power electricity plants during its scorching summer. The state-run Kuwait News Agency reported Thursday that the deals involve BP PLC, Royal Dutch Shell PLC and Qatargas. It offered no financial terms for the deal, though the state-run Qatar News Agency said Qatargas’ agreement called for it to offer a half a million tons a year for four years. KUNA said Kuwait needed the natural gas for summer time, when electricity use spikes from air conditioners. It said oil-rich Kuwait would be able to rely on its domestic production for the winter months.

Black swans and barrels: Thinking about oil -- With the intensity of ancient seers examining runes, policy makers, analysts, and economists watch every squiggle of movement in the oil markets, scrutinizing rig counts and poring over the footnotes in annual reports to glean portents of the future. With crude oil now hanging in there around $36—a significant jump from January-February when it lingered below $30—there is a sense that the price of crude is recovering. That makes sense—but it could still be wrong. The track record of oil-price predictions is not great, even among specialists. Very few people—possibly none—saw the run-up to $107.95 per barrel in June 2014 and the dive to less than $30 for much of February 2016. In the past, falling oil prices were seen as a net benefit for the global economy, and stock values therefore rose when prices fell. Cheap oil is a form of consumer stimulus; the rule of thumb has been that every fall in price of $10 per barrel boosts GDP growth by 0.25 percent or more. Importers benefit a little more than exporters suffer. This time, though, the market is seeing trouble in the form of a slowdown in China (a huge importer) and other developing markets, and generally unexciting global economic conditions. And this slump seems worse than usual for exporters. Russia and Saudi Arabia are both cutting public spending, for example, and diminished oil sales are another blow to struggling Brazil and Venezuela. Also, oil companies have cut back on investment sharply, with almost $400 billion in projects set aside. That has knock-on effects in terms of manufacturing. Finally, because energy companies are a major factor in equities, when they suffer, so do other stocks.

Low oil paradox: Why economy has not gained from big drop - Reality is proving unkind to economic forecasters. After the global oil price began dropping — it has fallen almost 70 per cent since late 2014 — the International Monetary Fund predicted a “shot in the arm” for the global economy. The world would rebound from its post-crisis torpor in 2016, the theory ran, with advanced economies picking up the baton for growth from emerging markets. But none of this has proved accurate. Christine Lagarde, head of the IMF, warned this week that growth had been “too low for too long”. Hopes that cheaper oil would recreate lost dynamism in Europe, China, the US and Japan have been dashed. Only India stands out as a happy exception. Less than 12 months ago expectations were high, with predictions of global growth of 3.5 per cent for 2016. But the landscape has deteriorated so rapidly, according to Citi, that at 2.5 per cent — the rate now forecast — the world economy is only just hovering above the threshold of a recession, generally defined as sub 2 per cent global growth. Profits are under pressure, with European companies expected to show the lowest growth in earnings since 2009. The US and Japan have failed to achieve a strong and sustained economic upswing. China’s growth is slowing, perhaps faster than official figures suggest. None of this was supposed to happen. Economists had predicted with great confidence two effects from cheap oil. There would first be a huge transfer of resources from oil producers to consumers, both within and between countries. At the same time, the gains would outweigh any losses.  The IMF initially calculated that every $20 per barrel fall in the oil price would increase global gross domestic product by 0.5 per cent, rising to 1.2 per cent if there were associated improvements in confidence.

The Narrative Has Changed: Goldman "Explains" That Higher Oil Prices Are Better For The Economy -- Back in late 2014 and early 2015, this website soundly mocked any and every economist that suggested that plunging oil prices - in a globalized economy where oil has been financialized beyond recognition and impacts every asset class, the stock market, global trade flows, and international diplomacy - is "unambiguously good."  It wasn't and it took a dramatic escalation in activist central banking to preserve market stability after collapsing oil prices dragged down energy stocks, and have led to a surge in bankruptcies, a US manufacturing recession, whose contagion is slowly spreading to the services sector. Which, however, meant that now that lower oil prices have been exposed as "unambiguously bad" for the global economy, it was time for a "very serious economist" to take the lead in explaining just why it is higher oil prices that are good for the economy. Over the weekend, Goldman did just that, when its economist David Mericle, wrote a note titled "Cheap Oil and the US Economy: Too Much of a Good Thing ." In it, he first does a mea culpa, one which soon every other economist will have no choice but to parrot, because it is now critical for the broader public to "understand" why higher gas prices - which even economists realize are critical to push the overall market higher - are "good for them."  Here's Goldman, proudly blazing a trail in this exciting narrative shift: When oil prices first began to decline in mid-2014, most observers expected a boost to US and global growth as the windfall from lower energy prices raised consumer spending. But as oil prices continued to fall sharply to levels below the breakeven points of many US producers, the cost side of the growth ledger quickly became apparent. The response of US producers was swift, with energy sector capital spending falling to half its initial level, while the boost to consumption has seemingly been more gradual. Taken together, this has meant that the collapse in oil prices has had a disappointing and possibly even negative effect on the US economy. With oil prices now rebounding from their January lows, we revisit the impact of oil prices on the US economy and assess the outlook under various price scenarios with the help of rich new detail on the production cost schedules of domestic producers.

Trump sparks worries for US oil industry - Financial Times - Donald Trump is stoking anxiety in the US oil industry as it watches Republicans head towards nominating a presidential candidate who has offered the sector little affection and few concrete policy proposals. US oil companies are already being crushed by low crude prices and their woes are being compounded by the spectre of a usually steadfast ally — the Republican party — becoming a vehicle for Mr Trump’s unpredictable candidacy. The real estate mogul has alarmed the industry with the few statements he has made on oil and gas — including repeated attacks on Ted Cruz, his main challenger, for taking millions of dollars of campaign donations from “big oil”. But executives and lobbyists say they are equally worried about the uncertainty stemming from the void left by Mr Trump’s apparent lack of policies. “We don’t really know where he is on a lot of different issues because he doesn’t really give specifics on a lot of different issues,” says Doug Flanders, policy director at the Colorado Oil & Gas Association, a trade group in a state where the shale energy revolution took off. Similar concerns are voiced privately in a variety of sectors, but they are acute in oil and gas because the industry’s environmental impact and role in energy supply leave it uniquely vulnerable to government regulation.

Crude Loses Key Technical Support As BNP Sees Oil "Revisiting The Year's Lows" -- The early exuberance in oil has faded today as WTI tumble to fresh one-month lows... ...crucially losing the key 40-week moving average once again as the downtrend looks set to continue. With BNP Paribas warning that WTI is set to revisit the lows of the year: Ahead of a producer gathering in Doha on 17 April aiming to freeze output, recent comments by Saudi Arabia indicate that the Kingdom’s participation is conditional on that of other producers, including Iran. That effectively puts a nail in the coffin of the Feb-Mar oil price rally. Iran will not accept a freeze of its output until such time that lost market share, due to US and EU sanctions, is reclaimed. In the meantime, key non-OPEC producers like Russia are posting new record highs in output. A production freeze from Russia will not help tighten global oil balances. Global oil balances will witness sizeable implied inventory builds in H1’16, suggesting that the price of oil can easily revisit the lows seen earlier this year. The time for redeterminations looms large over a sector that has been bid up once again on hope that this time it's different. It's not.. and the glut only got bigger during this short-squeeze.

Oil slips to one-month low on unexpected U.S. demand drop | Reuters: Oil slipped to a one-month low on Tuesday after a surprise fall in gasoline demand in the United States, the world's largest oil consumer, and doubts whether oil producers can agree an output freeze to dampen a global supply glut. U.S. gasoline demand, one of the strongest pillars supporting oil consumption, fell in January for the first time in 14 months, U.S. Energy Information Administration data showed. The world's largest oil producers are due to meet in Doha on April 17 to negotiate an output freeze, but a jump in Russian oil production to a 30-year high in March has cast doubt over the chances of an output cap being agreed. Brent crude, the global oil price benchmark, was down 31 cents at $37.38 a barrel at 0800 GMT, its lowest since March 4. U.S. futures fell by 41 cents to $35.29, also a one-month low. "The market was surprised by two figures: Russian production at a 30-year high and U.S. gasoline demand dropping for the first time in 14 months," said Frank Klumpp, oil analyst at Stuttgart-based Landesbank Baden-Wuerttemberg. "As long as most speculative money is long-positioned, there is more room for closing positions and falling prices."

Crude Spikes After Biggest Inventory Draw In 2016 -- WTI's 'mysterious' spike into the NYMEX close extended after hours (almost as if someone knew something). Inventories drewdown 4.6mm barrels according to API (drastically less than the expected 2.85mm build). This is the biggest weekly draw since Jan 1. Cushing was expected to see a build of 100k (after 2 weeks of draws) but saw a considerably larger one at+620k. Distillates inventories built as Gasoline drewdown very modestly. API:

  • Crude -4.3mm
  • Cushing +620k
  • Gasoline -116k
  • Distillates +2.7mm

Ending the 7 straight weekly build streak...

Oil prices are jumping on a possible OPEC deal to freeze output -- Oil prices jumped on Tuesday night after an awful start to the month.  Prices plunged last week after Saudi Arabia's Prince Mohammad bin Salman hinted that the country would only participate in output freezes if Iran also played ball.  But now OPEC is hinting that an agreement on a freeze can be reached whether Iran agrees or not. The Kuwaiti governor for the Organization of the Petroleum Exporting Countries (OPEC), Nawal Al-Fuzaia, said there were "positive indications an agreement [on a price freeze] will be reached," according to Reuters. This was apparently enough optimism for oil investors, and both West Texas Intermediate (WTI) crude oil and Brent oil rose on the announcement.  Major oil producers are due to meet in Qatar on April 17 to discuss curbing output. However Iran has said that it still expects its production to reach four million barrels a day by this time next year. (WTI) crude oil jumped 2.76% at OPEC's optimism, climbing to to $36.88 as of 8:45 am GMT:

Crude Jumps After DOE Confirms Biggest Oil Inventory Draw Since January; Cushing, Gasoline, Distillates Rise -- Following yesterday's API data, which showed the biggest draw of 2016 with a 4.6 million reduction in oil inventories, everyone was keenly looking forward to today's DOE data. Moments ago the DOE indeed confirmed the API data, reporting that in the past week oil inventories declined by 4.949MM, more than the API print, down from last week's 2.3MM and well below the expected 2.850MM increase. This was the largest draw since the first week of January. However, while in the recent past the crude builds were offset be declines in gasoline and distillate reductions, this time it was a mirror image, as first Gasoline rose by 1.438MM, above the -1.1MM draw, while Distillate increased by 1.799MM, above the -850K draw expected. This happened even as Refinery utilization rose 1.0% W/W, above the 0.35% expected, operating at a 91.4% of capacity in the past week. As a result Cushing holdings rose by 0.3MM, rising to 66.3MM barrels and once again approaching its operational capacity.  Some more headlines from the report:

  • CRUDE OIL STOCK EX SPR -0.9% APR 1 WK, +9.8% Y/Y

U.S. Oil Production Continues to Drop in Latest EIA Report (Video) -- We had nearly a 5 Million drawdown in Oil Inventories during what is technically still the building season for Oil Stocks.

Oil steady as Iraqi exports up, offsetting U.S. inventories drop - (Reuters) - Oil steadied at around $40 per barrel on Thursday as a surprise fall in U.S. inventories the previous day was offset by an increase in exports from Iraq, underlining global oversupply. Brent futures were at $39.60 at 1009 GMT, down 15 cents from the last close. U.S. crude futures were at $37.59 per barrel, down 16 cents from their last close. Oil exports from Iraq's southern ports have risen to an average of 3.494 million barrels per day (bpd) in April, an official from the state-run South Oil Company said on Thursday. This was above the 3.286 million bpd average for March. U.S. crude inventories fell 4.9 million barrels in the week to April 1, compared with analysts' expectations for an increase of 3.2 million barrels, according to data from the Energy Information Administration on Wednesday."We are in the aftermath of yesterday's (EIA) data, but if you zoom out there's still oversupply and record inventories," said Hans van Cleef, senior energy economist at ABN Amro in Amsterdam. "Production numbers from places like Iran and Iraq are in focus with people looking to see how it translates into the overall supply picture." In Europe, North Sea oil field maintenance expected next month lent support to Brent futures, which are priced off North Sea supplies. The over 4 percent slide in the dollar since the beginning of the year is also supporting oil, traders said, as it makes imports of dollar-denominated fuels cheaper for countries using other currencies, boosting demand.

OilPrice Intelligence Report: Oil Stages Comeback On Bullish EIA Data - Oil prices increased from the mid-$30s per barrel this week, with Brent once again rising above $40 per barrel and WTI sitting near $39 per barrel at the end of the week. Prices bounced around, trading down on growing pessimism surrounding the Doha meeting on April 17, but receiving a boost from the latest EIA figures. EIA data looks bullish. The U.S. saw oil production fall by 14,000 barrels last week. The U.S. oil industry has posted consistent declines in recent months, and while the weekly data from the EIA is sometimes inaccurate, the best guess is that the U.S. is producing 9.008 million barrels per day right now. While it could take weeks or months to know conclusively, the U.S. could be about to drop below the key threshold of 9 million barrels per day in oil production. Also, oil storage levels dropped last week for the first time in two months. Inventories fell by 4.9 million barrels to 529.9 million barrels and while that is down just a bit from the previous week’s record high, the oil markets grew optimistic that the drawdown finally marked an inflection point. If the U.S. posts a few more weeks of drawdowns, oil prices will likely firm up as the data will be pointing much more confidently towards the supply/demand situation reaching a balance. In other words, the data is showing more decisive signs that the global supply overhang will narrow and potentially disappear towards the end of this year.

Oil ends sharply higher after unexpected U.S. inventory drop - The U.S. oil benchmark scored its biggest one-day jump in three weeks Wednesday after weekly government data showed a large and unexpected fall in U.S. crude inventories and an increase in demand by refineries. On the New York Mercantile Exchange, light, sweet crude futures for delivery in May advanced $1.86, or 5.2%, to close at $37.75 a barrel. The jump was the biggest since March 16.   June Brent crude on London’s ICE Futures exchange rose $1.97, or 5.2%, to finish at $39.84 a barrel. The Energy Information Administration said oil inventories fell by 4.9 million barrels in the week ended April 1. Analysts surveyed by oil data firm Platts had forecast an inventory rise of 2.9 million barrels. Oil futures, however, had already found support after closely watched data from the American Petroleum Institute, an industry trade group, late Tuesday reportedly showed a 4.1 million barrel drop. The decline was the biggest for this week of the year since at least 1997, according to Bespoke Investment Group. In addition, the data showed U.S. refineries used over 16.4 million barrels a day on average, up 199,000 barrels from a week earlier. Refiners operated at 91.4% of operable capacity last week, the data showed. The refinery data, in particular, cheered market bulls, said Robert Yawger, director of energy futures at Mizuho Securities. Capacity utilization has risen strongly for two weeks in a row, and at above 90% is fueling ideas that refiners may be wrapping up their traditional spring “turnaround season” a bit early in anticipation of strong gasoline demand this summer, he said. Oil futures had previously found support on revived hopes that key global producers may agree to a production freeze later this month despite an escalating tussle between Iran and Saudi Arabia over the issue. Prices rose after Kuwait, a heavyweight in the Organization of the Petroleum Exporting Countries, expressed confidence that players within and outside the bloc will move ahead with the proposal to limit crude output.

Why the US Crude Oil Inventory Fell for the First Time in 8 Weeks - The EIA (U.S. Energy Information Administration) released its weekly petroleum status report on April 6, 2016. It reported that the US crude oil inventory fell by 4.9 MMbbls (million barrels) to 529.9 MMbbls for the week ending April 1, 2016. Market surveys from Platt’s to Reuters estimated that the US crude oil inventory could have risen between 2.9 MMbbls and 3.2 MMbbls for the same period. The unexpected decline in the US crude oil inventory supported crude oil prices on April 1, 2016. To find out more about crude oil prices, read the previous part of the series. The US crude oil inventory fell due to the rise in the refinery demand and drop in US crude oil imports.  The EIA divides the US into five storage regions—East Coast, Midwest, Gulf Coast, Rocky Mountain, and West Coast. In the Gulf Coast region, crude oil inventories fell to 277.5 MMbbls from 281.9 MMbbls for the week ending April 1, 2016—compared to the previous week. In contrast, the Midwest crude oil inventories rose to 155.6 MMbbls from 154.8 MMbbls for the same period. Crude oil stocks fell marginally by 0.8 MMbbls to 55.2 MMbbls in the West Coast region for the same period. The East Coast crude oil stocks fell to 17.8 MMbbls from 18.5 MMbbls for the same period. The Rocky Mountain region’s crude oil stocks were flat at 23.7 MMbbls for the same period. The rise and fall in US crude oil stocks impact storage costs. To learn more, read Crude Oil Storage Costs Rose 9 Times, US Crude Tests New Limits and Record US Crude Oil Inventory Led to a New Storage Space. The total US crude oil inventory hit an all-time high of 534.8 MMbbls for the week ending March 25, 2016. US crude oil inventories are also 9.8% more than the same period in 2015. They’re also 100 MMbbls more than the five-year average crude oil inventory. Record US crude oil inventories could put pressure on crude oil prices.

US oil ends 1.3 pct lower on Cushing data, high Iraq exports: U.S. oil prices fell over 1 percent on Thursday after industry data suggested a key pipeline shutdown had not reduced crude flows to the U.S. storage base by as much as expected. Market intelligence firm Genscape reported a build of 255,804 barrels at the Cushing, Oklahoma delivery hub for U.S. crude futures during the week to Tuesday, traders who saw the data said. The build came despite TransCanada having shut since Saturday its 590,000 barrels per day (bpd) Keystone crude pipeline that moves crude to Cushing and Illinois. Genscape did note a 481,485-barrel decline at Cushing in the five days to Tuesday, apparently due to the Keystone shutdown that was caused by a potential leak, traders said. But that wasn't enough to offset total inflows for the week. "I guess people were expecting even more impact from the Keystone closure," said a trader.Brent futures were down 36 cents, or 1 percent, at $39.47. U.S. crude futures fell 49 cents, or 1.3 percent, to $37.26 per barrel.    Higher Iraqi oil exports also underlined the global oversupply situation despite a positive U.S. government report on Wednesday on U.S. crude supply-demand that drove prices up by 5 percent. U.S. crude inventories fell 4.9 million barrels in the week to April 1, compared with analysts' expectations for an increase of 3.2 million barrels, according to data from the Energy Information Administration on Wednesday.

US rig count drops to 443 this week, Texas loses 7: (AP) — The number of rigs exploring for oil and natural gas in the U.S. dropped by seven this week to 443, another all-time low amid depressed energy industry prices. A year ago, 988 rigs were active. Houston oilfield services company Baker Hughes Inc. said Friday 354 rigs sought oil and 89 explored for natural gas. Among major oil- and gas-producing states, Texas lost seven rigs and North Dakota two. Alaska, California and Kansas each dropped one. Ohio and Oklahoma gained two rigs apiece, while New Mexico was up one. Arkansas, Colorado, Louisiana, Pennsylvania, Utah, West Virginia and Wyoming were unchanged. The U.S. rig count peaked at 4,530 in 1981. The previous low of 488 set in 1999 was eclipsed March 11, and has continued to dip.

Oil posts 8% weekly gain on signs of fading U.S. output - Oil futures ended sharply higher Friday, boosted by expectations U.S. production will continue to decline, signs of solid underlying demand and some renewed optimism about the U.S. economy. On the New York Mercantile Exchange, West Texas Intermediate crude futures for delivery in May jumped $2.46, or 6.6%, to end at 39.72 a barrel. June Brent crudeon London’s ICE Futures exchange rose $2.51, or 6.4%, to close at $41.94 a barrel. Crude maintained gains after oil-field services firm Baker Hughes said the number of oil rigs fell for a third straight week. The number of rigs dropped to 354 from 362 a week earlier. Compared with the same time last year, the number of rigs has fallen by 406. Bullish traders have been cheered not only by data pointing to falling U.S. oil production, but also to expectations that U.S. producers won’t be able to quickly rebuild production even if crude continues to climb, said Phil Flynn, senior market analyst at Price Futures Group in Chicago. West Texas Intermediate, the U.S. benchmark, posted a weekly rise of 8%, while Brent, the global benchmark advanced 8.5%. Data earlier this week showed an unexpected drop in crude inventories and a strong rise in demand from refiners. A January plunge in oil futures did substantial damage to already fragile shale firms, Flynn said. Banks, meanwhile, have taken a painful hit on energy loans and likely won’t be eager to increase lending even as prices recover. That has helped quell fears that a rise in price would see producers quickly restart production in response, Flynn said.

Crude Surges Back To 2-Week Highs As Yellen Hope Trumps Iran Price Cuts - Only in the new normal of manic algos and goal-seeked short-squeezes could actual news thatIran is undercutting OPEC by slashing prices to maintain market share be out-followed by hopefulness driven by upbeat comment from Janet Yellen (because she has nailed everyting so far) and more chatter about a production freeze (which makes no sense whatsoever given the Iran news). For now, WTI is trading above $39.50 ahead of today's rig count data, back at 2-week highs. After yesterday's rollover collapse, everything is epically awesome once again... So the bad news... As Gulf News reports, Iran ratcheted up its offence in the oil market after breaking a pricing tradition, signalling it’s seeking to win market share at a time when rival producers are trying to forge a deal on freezing output.State-run National Iranian Oil Co. will sell the Forozan Blend crude for May to Asia below the level offered by rival Saudi Aramco for Arab Medium, the third month the Arabian Gulf state is giving the discount after setting it at a premium for almost seven years through February 2016, data compiled by Bloomberg show. NIOC will also sell the Iranian Light grade to Asian customers at 60 cents below Middle East benchmark prices, a company official said on Friday, asking not to be identified because of internal policy. While producers including Saudi Arabia, OPEC’s biggest member, and Russia are due to meet in Doha on April 17 to discuss a deal to freeze output in a step toward clearing a global glut, Iran is determined to regain market share lost over the past few years due to sanctions over its nuclear programme. To pry away customers relishing oil that is cheaper than mid-2014 levels by more than 50 per cent, the country is expected to focus on pricing and boosting supply.

Shocking Photo: Nearly 30 Oil Tankers in Traffic Jam Off Iraqi Coast -- Oil tankers are caught in a traffic jam near the Iraqi port of Basra, causing delays in loading. According to Reuters, around 30 very large crude carriers (VLCCs) are sitting in the Persian Gulf, and the backlog could cost ship owners more than $75,000 per day. Some could be waiting for weeks to reach the port. Check out this shocking satellite photo of the tanker traffic jam just off the coast of Iraq. The culprit is high oil production in Iraq. The port at Basra is struggling to load up all the oil tankers fast enough, forcing some to sit and wait. Iraq exported about 3.26 million barrels per day (mb/d) in March from its southern coast, which is up from just 2.5 mb/d in 2010. And the line of tankers appears to be growing. The gridlock is forcing up the cost of renting an oil tanker. That, combined with the shrinking capacity of available storage in China is pushing up tanker rates in Asia as well. Shipping data shows that VLCC rates have doubled from $37,250 per day to $74,700 per day. As of now, Reuters calculates that there are 27 VLCCs sitting in the Gulf near Basra, holding about 43 million barrels of oil, double the typical backlog. Some have been waiting for weeks. The current waiting time is 18 to 19 days, which is two to three times the normal wait of 5 to 10 days.

Iraq to probe claims of Unaoil corruption against top officials - BAGHDAD Iraqi Prime Minister Haider al-Abadi on Saturday directed the country's highest corruption watchdog to investigate claims of graft in the awarding of oil contracts by the OPEC exporter and urged the courts to prosecute. A joint report this week by Australia's Fairfax Media and the Huffington Post, citing hundreds of thousands of emails, linked energy services company Unaoil and several international oil companies to corrupt practices such as claims of bribery in countries including Iraq. "Prime Minister Haider al-Abadi directs the Integrity Commission to take legal measures and calls on the judiciary to open immediate legal proceedings concerning the grave newspaper reports," according to a statement from his office. Iraq, which relies on oil exports for most of its revenue, has been plagued by corruption and mismanagement for years, ranking 161 out of 168 on Transparency International's Corruption Perceptions Index in 2015. Graft continues to eat away at the government's resources as it struggles with high spending due to the costs of the war against jihadist group Islamic State, which seized a third of Iraq's territory in the north and west in 2014. Abadi has pledged to battle corruption and on Thursday proposed a cabinet reshuffle aimed at weakening patronage networks, but he faces resistance from politicians who fear reform would undermine their wealth and influence.

Iraq's PM orders probe into oil corruption allegations — Iraq’s prime minister on Saturday ordered an investigation into corruption allegations against senior oil officials following an expose into bribe-taking published in international media outlets. In a statement, Haider al-Abadi ordered “immediate” action by both the anti-corruption commission and the judiciary following reports published by the Huffington Post and Australia’s Fairfax media into large-scale bribe taking by Monaco-based Unaoil company. The report names four senior Iraqi officials as having received bribes from Unaoil between 2004 and 2012. They include former oil minister Abdul-Karim Elaibi and the outgoing higher education minister, Hussain al-Shahristani, who previously served as oil minister and deputy prime minister in charge of energy. The publications said they drew on information gleaned from hundreds of thousands of internal emails dated between 2002 and 2012 for their six-month investigation. The report said that Unaoil paid at least $25 million in bribes via middlemen to secure the support of powerful Iraqi officials, while complaining internally that they were “greedy.” The report also accused the company of bribing senior employees working for international oil companies in Iraq. Earlier Saturday, Hussain al-Shahristani denied he had been involved in any wrongdoing, calling on the two publications to hand over all the documents in their possession to the Iraqi government for the investigation.

"Production Freeze" Narrative Collapses In Two Days: Russian Oil Output Hits New Post-Soviet Record - How quickly the oil production freeze narrative has fallen apart. Indeed, it's been a tough two days for oil bulls holding on to hope that excess oil production will normalize in the near term and that the world's oil suppliers would somehow manage to curb oil production in the aftermath of the OPEC's November 2014 cartel collapse. First it was yesterday's Bloomberg story which cited the Saudi Deputy Crown Prince Mohammed bin Salman as s aying that the Saudis would not participate in an oil production freeze unless everyone including Iran which has made it  joined  "If all countries including Iran, Russia, Venezuela, OPEC countries and all main producers decide to freeze production, we will be among them." The second one came overnight. Recall that one month ago, just as Russia and Saudi Arabia were finalizing their "agreement" to freeze oil production which was the major catalyst for the oil surge from its 13 year lows hit in early February, we got the surprising news that far from throttling production, Russian crude and condensate production just set new post-Soviet daily record of 10.92 million barrels.

Iran Oil Minister Rejects Saudi Demand To Freeze Crude Production -- In the aftermath of Bloomberg's surprising Friday report, according to which Saudi Arabia flipflopped on its previous promise that it would freeze its oil output while allowing Iran to grow supply until it hit its pre-embargo peak, instead saying that it would only join the freeze curbe Iran - and all other OPEC member nations - also joined, crude tanked. Today, what little hope there may have been that Iran will suddenly change its mind and join the production freeze evaporated on Sunday when Iran's oil minister rejected a Saudi demand to stop throttling up its petroleum production. As the WSJ adds, this threatens what has become a farcical deal to "limit crude output and raise prices" when the major oil producers meet in Doha on April 17. The follows Zanganeh's admission that Iran's oil and condensates exports surpassed 2mm b/d, a trend Iran will certainly not want to imperil. As the WSJ notes, Zanganeh's remarks were his first comments since a report emerged last week that Saudi Arabia, the world's largest crude exporter, would limit its production only if Iran followed suit. The dueling positions by the Middle East's two biggest rivals for power and economic might have set off a scramble among other oil-producing nations to salvage a deal to freeze their output and stop growth in the world's petroleum supplies. Global oil production outpaces demand by almost two million barrels on any given day, sending prices to their lowest levels in over a decade. Ironically, in advance of the Doha meeting which many thought had a chance of reaching some agreement, other OPEC members had pushed their oil production to the limit, flooding the market with even more excess supply. Most will find it virtually impossible to throttle production back.

Saudis Retaliate To "Oil Freeze" Fallout: Ban Transport Of Iranian Crude In Territorial Waters - At first, when it announced the terms of its "oil freeze" agreement with Russia one month ago, Saudi Arabia seemed willing to grant Iran a temporary exemption from the supply freeze, at least until it recovers its pre-embargo production levels. That however changed on Friday when the country's Deputy Crown Prince Mohammed bin Salman, shocked Saudi Arabia's Arab allies in the Persian Gulf, telling Bloomberg his country would only join the freeze curbe Iran - and all other OPEC member nations - also joined. Following the Friday announcement, yesterday Iran's oil minister Zangadeh made it clear that the country rejects Saudi demands, and would continue ramping up production at will, in the process making the April 17 Doha meeting meaningless. And then, in a new and unexpected retaliation by Saudi Arabia for Iran's intransigence, moments ago the FT reported that Saudi Arabia has taken steps to slow Iran’s efforts at increasing oil exports, banning vessels that transport Iranian crude from entering their waters, according to traders and shipbrokers. More details from FT: Iranian vessels carrying the country’s crude are restricted from entering ports in Saudi Arabia and Bahrain, according to a circular sent by a shipping insurance company to its members in February. The notice said ships that have called to Iran as one of its last three ports of entry will also require approval from the Saudi and Bahraini authorities before entering their waters. Shipbrokers and traders have relayed the same messages since. Iranian oil executives have expressed their concern about the message circulating in the market, saying it is only adding to problems they face in selling their crude. Saudi Aramco, the state oil company, and The National Shipping Company of Saudi Arabia (Bahri) did not respond to requests for comment. It is not clear just how much of an impact this escalation will have because as shown in the map below, Saudi territorial waters are hardly a major factor in Gulf shipping lanes.

Saudi Arabia Tries to Slow Iran Oil Exports, Without Much Success -- Saudi Arabia has reportedly banned Iranian oil tankers from entering its waters in an effort to slow Iran’s oil exports. The FT reports that Iranian ships are restricted from entering Saudi ports, and Bahrain, a Saudi ally, has issued similar restrictions. Also, Iran has been unable to access some oil in storage at a facility in Egypt, which is partially owned by Saudi Arabia. The efforts may have had an impact, as even Iranian oil executives admit that they have been somewhat stymied. Oil sitting in floating storage off the coast of Iran has climbed by 10 percent this year to 50 million barrels.Before western sanctions Iran used to send oil by the SUMED pipeline across Egypt, allowing oil to move from the Red Sea to the Mediterranean Sea. The FT says that Saudi Arabia is blocking Iran from access to the pipeline, which would ease oil exports to Europe. On the diplomatic track, the two countries are also at odds over the pending OPEC production freeze deal. Several major OPEC members plus Russia are set to meet in Doha on April 17, but Iran has said that it will not abide by any freeze deal. Saudi Arabia said last week that it would only participate if Iran also signed up, raising doubts about the viability of the deal. Even with Saudi Arabia, the freeze would amount to little without Iran, since the participating countries have little scope for raising production. Meanwhile, despite the Saudi campaign to slow the growth of Iran’s oil exports, Iran is lifting exports. Iranian oil minister Bijan Zanganeh said on April 3 that Iran managed to increase oil and gas condensate exports by 250,000 barrels per day in March, allowing exports to surpass the 2 million-barrel-per-day mark.

Iran sticking to plan to regain its share of OPEC crude oil output: government - - Iran will not back down on its plans to regain its share of oil production within OPEC, the government said Tuesday ahead of a crucial meeting of global oil producers to decide whether to freeze crude output at January's levels to support prices. Government spokesman Mohammad Bagher Nobakht also called on other major producers to cut their output to make room for Iran. "We are determined to gain the share we previously had," Nobakht told a press briefing. Under restrictive international sanctions over its disputed nuclear program, Iran's crude production and exports fell from around 4 million b/d and 2.2 million-2.3 million b/d, respectively, to just under 3 million b/d and around 1 million b/d. Since mid-January with the implementation of a deal between Tehran and world powers, Iran has been increasing production to boost its exports. On Monday, Iranian oil minister Bijan Zanganeh said the country's oil and gas condensates exports have already exceeded 2 million b/d. Earlier, President Hassan Rouhani said condensate sales were around 200,000-300,000 b/d. "If anyone should reduce their share it's those who produced extra and took Iran's share for themselves," Nobakht said. "We are determined to regain our share within OPEC and will be pro-active. And we expect others who used this share to cut [their production]," he added

OPEC official: Oil production freeze deal likely to be reached: (AP) — Kuwait’s OPEC governor is saying members of the oil cartel and other producing countries likely will reach a deal later this month for a production freeze as crude prices sit below $40 a barrel. The state-run Kuwait News Agency quoted Nawal al-Fuzai on Tuesday as saying that oil ministers of OPEC nations and several non-OPEC nations showed interest in freezing production at the same rate of February, but that further negotiations are ongoing. Al-Fuzai says Iran remains a holdout on freezing production levels as it tries to recoup money lost to years of sanctions after its nuclear deal with world powers. Officials will meet April 17 in Qatar to negotiate a deal on the proposed freeze aimed at bolstering prices that have fallen from over $100 a barrel in 2014.

OilPrice Intelligence Report: Traders Lose Faith In OPEC Orchestrated Freeze -- Oil prices fell on Monday to one-month lows as the markets became more disillusioned with the prospects of a production freeze at the OPEC-Russia meeting in Doha on April 17. Saudi Arabia backtracked from its pledge to limit output, when the Deputy Crown Prince told Bloomberg that his country would participate only if Iran did as well.  With a massive war chest of cash reserves, the Saudi government has been able to muddle through the crash in oil prices. However, it is planning big changes for the economy in order to close its $98 billion budget deficit. Saudi Deputy Crown Prince Mohammed bin Salman told Bloomberg last week during a five-hour interview that the government was looking to raise $100 billion in non-oil revenue by the end of the decade, nearly triple today’s level. The government wants to trim subsidies, impose a value-added tax, as well as spin off parts of Saudi Aramco in an IPO. It also wants to create a $2 trillion sovereign wealth fund with the intention of diversifying the country’s income for the long haul. Iranian oil minister said that Iran increased oil and condensate exports by 250,000 barrels per day in March, allowing the OPEC member to top 2 million barrels per day in exports. Iran said that it would not participate in the OPEC freeze deal until it boosted exports to pre-sanctions levels, which would mean adding another 1 mb/d to its export total. Goodrich Petroleum announced on Friday plans to file for bankruptcy protection in the next few weeks. Goodrich came to an agreement with junior creditors for a debt-for-equity swap. The deal will result in $175 million in debt for 100 percent of the company. Senior creditors would be paid in full. The prepackaged bankruptcy could allow Goodrich to emerge from bankruptcy with its drilling operations largely unaffected.

Exclusive: Russia sees oil price of $45-$50 per barrel 'acceptable' as it prepares for freeze deal - sources | Reuters: Russia believes an oil price at $45-$50 per barrel is acceptable to allow the global oil market to balance, as it prepares to meet leading oil producers in Doha later this month, sources familiar with Russian plans said on Wednesday. Leading oil producers plan to meet in Doha on April 17 to cement a preliminary deal reached between Russia, Venezuela, Qatar and Saudi Arabia in February to freeze oil output at levels reached in January, to curb a surplus on the oil market. "Now there is discussion of how long production will be frozen and ways to monitor the agreement," one of the sources said. "The level of $45-50 (per barrel) is acceptable from the point of view of market balance: if prices go higher shale oil production could start to recover." A Russian Energy Ministry spokeswoman confirmed that the information provided by the sources was correct.

Are The Saudis And Russians Deliberately Sabotaging Doha? - The actions and intentions of Saudi Arabia and Russia - the two largest oil-producing nations attending the Doha meeting on 17 April - have dashed all hopes of any fruitful outcome.The most important meeting of the last three decades, which has promised to forge new friendships and a new cartel, is turning out to be the biggest farce, even before the curtain is raised. All of this undermines the efforts of the smaller nations, which were hopeful of a production freeze from the meeting. Instead, we’re looking at Russia, whose oil production is now at a 30-year high after the nation produced 10.91 million barrels per day (bpd) in March, according to Reuters. In fact, these output figures are second only to the record 11.47 million bpd Russia produced in 1987. Saudi Arabia is also firmly back on its non-committal path, saying that it will go along with the production freeze if everyone else does, including Iran—of which there is no chance. Saudi Arabia’s deputy crown prince Mohammed bin Salman on 1 April toldBloomberg: "If all countries agree to freeze production, we’re ready. If there is anyone that decides to raise their production, then we will not reject any opportunity that knocks on our door.”  According to a report by Helima Croft, global head of commodity strategy at RBC Capital markets, the five nations shown on the chart below are at the maximum risk of a major crisis due to lower oil prices. The chart shows the oil price levels required by respective nations to survive. “Our ‘fragile five’ states…were already facing severe political and security challenges when oil prices were above $100/bbl and the situation has grown far more grim as these countries have struggled to fund their state apparatuses and provide essential services,” the Financial Post quoted Croft as saying.

Saudis Moving to Reduce Dependence on Oil Money - A top Saudi prince has announced new elements of a plan to reduce the kingdom’s heavy dependence on oil, amid a drop in world prices that has sent shock waves through the Saudi economy.The plans include publicly selling shares of the state oil giant, Saudi Aramco, and routing much of its worth into a public investment fund, said the prince, Mohammed bin Salman, in an interview with Bloomberg published Friday.The fund could become the world’s largest, he said, with more than $2 trillion in assets.“Undoubtedly, it will be the largest fund on earth,” said Prince Mohammed, who is second in line to the Saudi throne and has emerged as the country’s most powerful and dynamic official. “This will happen as soon as Aramco goes public.”Although less than 5 percent of Saudi Aramco would be sold, the prince said the national oil company would be transferred to a government fund, now relatively small, called the Public Investment Fund, giving it instant heft and potential financial firepower.Saudi Aramco is the world’s leading oil producing company. It has about 10 million barrels per day of output, or about 10 percent of global production, and reserves of about 160 billion barrels. The company also has large refining and petrochemical interests inside Saudi Arabia and internationally, including in the United States.

Biggest Ever Saudi Overhaul Targets $100 Billion of Revenue - The biggest economic shake-up since the founding of Saudi Arabia would accelerate subsidy cuts and impose more levies, a plan to spread the burden of lower crude prices among a population more accustomed to government largess. Outlining his vision in a five-hour interview with Bloomberg News last week, Deputy Crown Prince Mohammed bin Salman said the measures would raise at least an extra $100 billion a year by 2020, more than tripling non-oil income and balancing the budget. “It’s a large package of programs that aims to restructure some revenue-generating sectors,” the prince said at the royal compound in Riyadh. Non-oil income rose 35 percent last year to 163.5 billion riyals ($44 billion), according to preliminary budget data. It’s a radical shift for a country built on petrodollars since the first Saudi oil was discovered almost eight decades ago. Prince Mohammed, 30, and his top aides said the administration navigated plunging oil prices last year through a series of “quick fixes.” While there are no plans to tax incomes, his policies would bring the kingdom closer to the rest of the world, where governments rely on charges to fund spending. The prince said authorities are weighing measures that include more steps to restructure subsidies, imposing a value-added tax and a levy on energy and sugary drinks as well as luxury items. Another revenue-raising plan under discussion is a program similar to the U.S. Green Card system that targets expatriates in the kingdom. The strategy would complement a plan to sell a stake in Saudi Aramco on the stock exchange and create the world’s largest sovereign wealth fund, steps meant to make the kingdom more reliant on investment income than oil within 20 years. The $2 trillion fund would be big enough to buy the four largest publicly traded companies on the planet.

For The Saudis, The World Is Moving Fast; Watch For The Saudis To "Depeg" The Riyal From The US Dollar --- Some time ago, as an update to an earlier note, I posted:  June 22, 2015: long article in Atlantic Monthly. A lot of data. Bottom line, Saudi Arabia is likely to be a net oil importer by 2040. The linked article did not mention that Saudi Arabia has announced that the $109 billion solar program has been delayed for eight years. Saudi Arabia has a severe cash flow problem. They are betting they can cripple the US oil and gas industry. By the end of calendar year of 2016 we will know if Saudi Arabia was successful. Saudi's export data here. In around numbers, Saudi produces 10 million bbls of crude oil daily and exports 75% of it. I doubt Saudi Arabia will go from exporting 7.5 million bopd  to 0 bopd overnight. So when analysts suggest Saudi will be a net oil importer by 2040 suggests that soon, perhaps starting as early as 2020, we might start seeing a steady decline (albeit very slowly) of Saudi exports.  And that explains Saudi Arabia's recent announcement that they are looking to monetize their assets and looking to become a major midstream and major downstream player ... soon. I posted that as an introduction to link this article being posted by Forbes which suggests that Saudi's last weapon in the crude oil price war may be "unpegging" the Saudi riyal to the US dollar.

Saudi Arabia Seeks To Use Soverign Wealth To Become Black Swan Sanctuary - Saudi Arabia is working to create the world’s largest sovereign wealth fund so it might redirect the nation away from dependence on oil! What do the Saudi’s know? Will they have time before the bottom falls completely out of the oil market? We’ve reported here on the emergence of cold fusion as the ultimate Black Swan transformational technology. It seems our birdering reports have been noted in Saudi Arabia. Crown Prince Mohammed bin Salman has, in interviews with Bloomberg News, described the nations new vision for a $2+ trillion sovereign wealth fund. The purpose of the fund is to begin immediately to rapidly and shockingly wean the kingdom off oil. In the near term the prince said Saudi hopes to sell public shares in Aramco’s parent company and transform the oil giant into an industrial conglomerate. The IPO is to take place within months.  “What is left now is to diversify investments. So within 20 years, we will be an economy or state that doesn’t depend mainly on oil.”  King Salman’s 30-year-old son is intending to transform the world’s biggest and richest oil exporter into an entirely new nation/economy. He notes that as his strategy takes shape, the speed of change may shock the conservative Saudi society accustomed to decades of government handouts. A news report of 1 year ago proposed the notion that the Saudi Royal family was very aware and working on a ‘black swan’ scenario. At the time the Saudi Oil Minister Ali Al-Naimi was said to have asked the rhetorical question, “Is there a black swan that we don’t know about which will come by 2050 and we will have no demand for oil?” It seems the kingdom got the answer he expected!

Something Just Snapped In Saudi Money Markets -- Away from the headlines about The Panama Papers, global financial markets turmoiled quietly this week with a surge in equity and FX volatility and banks suffering more death blows. However, something happened in Saudi Arabia's banking system that was largely uncovered by anyone in the mainstream... overnight deposit rates exploded to their highest since the financial crisis in 2009... It is clear that that the stress in Saudi markets has spread from the forward derivatives markets to actual funding problems. This suggests one of the two main things: either Saudi banks are desperatly short of liquidity or Saudi banks do not trust one another and are charging considerably more to account for the suspected credit risk. Either way, not good. So what is going on behind the scenes in Saudi Arabia?

Who is Winning the “Great Balancing Game” Between Pakistan, India, Saudi Arabia, and Iran? - In the last month, there has been an outbreak of “warm hugs” and “historical brotherly love” from Pakistan to Saudi Arabia — at least in summits and statements.  Beyond the photo opportunities, the summits, which came within a week of each other, were more about a “Great Balancing Game”. Arch-rivals India and Pakistan are maneuvering for position amid shifting Middle Eastern and Asian conflicts in which Iran and Saudi Arabia are jockeying for political, diplomatic, and military supremacy. But who fared best in the “balancing”? And who, far from bolstering position, may have found that the outcome is the risk of isolation?  The priority which dictates Pakistan’s political engagement in the Middle East, other than religion, is its national security vis-à-vis India. There is a natural reluctance to bolster political ties with countries that enjoy strategic and defense partnerships with India.  However, this priority has been joined, if not overtaken, by the need to negotiate the tension between Saudi Arabia and Iran. With Riyadh expecting a show of support, Pakistan joined the 34-country Islamic alliance and participated in the Northern Thunder military exercise.  India is a rising economy in Asia with its huge market attracting global investment, but this industrialization can only be sustained with a secure energy base.  That is a motive for India’s broad political, economic, and strategic engagement with Iran, but New Delhi also wants to strengthen geo-strategic ties with Gulf countries, tap into their petro-industry, and loosen their historically strong political relations with Pakistan.  Locked in a political turf war in the Middle East with Saudi Arabia and its other Gulf allies, Tehran needs security and defense partners to consolidate its regional standing.  The current crises in the Middle East and Pakistan’s decision against involvement in the Saudi-led intervention in Yemen opened up space for Tehran to make inroads within Pakistani ranks. This in turn might push Saudi into a more conciliatory approach to the Islamic Republic.  Since the ascent of King Salman to the throne, Saudi Arabia has adopted an aggressive and pro-active foreign policy against Iran, trying to isolate Tehran in the region. The kingdom is also aware of its own economic difficulties and a pressing need to find new markets for its petro-exports.  India’s rapidly-industrializing economy, needing energy resources and investment, is an ideal opportunity. Getting a share in the Indian energy market would both meet Riyadh’s economic objectives and balance New Delhi’s strategic relationship with the Islamic Republic

Saudi Arabia executions reach record high as beheadings set to double this year - Saudi Arabia has already executed 82 people this year and is on course to behead twice as many prisoners as it did in 2015, according to new statistics compiled by a leading human rights organisation likely to raise fresh concerns about the UK’s close ties to the Kingdom. The British Government has been urged to do more to put pressure on its Gulf allies to halt the bloodshed in light of the figures, which would see the total death toll in Saudi Arabia reach a record high of more than 320 by the end of the year if the current rate is maintained. This would be more than double the 158 executions carried out by the Kingdom last year, which was in itself a dramatic rise on the 88 people it beheaded in 2014. The figures were compiled by the UK organisation Reprieve using a combination of official statements from the Saudi government and reliable local media reports.  Earlier this week, the Defence Secretary Michael Fallon paid a low-key visit to Saudi Arabia to “help strengthen the UK-Saudi defence relationship”, meeting Crown Prince Muhammad bin Naif bin Abdulaziz Al Saud, the minister of interior who is in charge of ordering executions. Days later, at least two more prisoners were beheaded. The Ministry of Defence (MoD) said he had “reiterated the importance of working together to deal with global threats, including countering the poisonous ideology of Daesh and regional instability”.

Amnesty highlights 'disturbing rise' in global executions - BBC News: A surge in the number of executions recorded worldwide saw more people put to death last year than at any point since 1989, Amnesty International says. At least 1,634 people were executed in 2015, a rise of more than 50% on the previous year, the group found in its review of the use of the death penalty. Iran, Pakistan and Saudi Arabia were responsible for 89% of the executions. The total does not include China, where Amnesty said thousands more were likely killed but records were kept secret. On the other hand, the group also noted that for the first time ever a majority of the world's countries had fully abolished the death penalty. Fiji, Madagascar, Congo-Brazzaville and Suriname changed their laws in 2015, while Mongolia also passed a new criminal code that will take effect later this year. Amnesty said China remained the world's top executioner. It estimated that thousands of people had been put to death and thousands of others sentenced to death in 2015. It added that there were signs that the number of executions in China had decreased in recent years but the secrecy around the death penalty made that impossible to confirm for certain. Iran executed at least 977 people in 2015 - the vast majority for drug-related crimes - compared with 743 the year before, according to Amnesty. Those put to death, the group found, included at least four people who were under 18 at the time of the crime for which they had been convicted. This, it said, violated international law.

Bought and Sold? John McCain’s Foundation Took $1 Million from Saudi Arabia: A new scandal has erupted involving US Senator John McCain of Arizona — his nonprofit organization, the McCain Institute for International Leadership, received a $1 million donation from the repressive government of Saudi Arabia in 2014. The news is likely to impact his closely contested US Senate race against Arizona Congresswoman Ann Kirkpatrick, a race that pollsters say is within the margin of error. The contribution came as President Obama attempted to negotiate the nuclear agreement with Iran, Saudi’s regional adversary, raising concerns that a foreign government influenced internal US policy.

Exclusive: 21 Generals Lead ISIS War the U.S. Denies Fighting - In the war against the self-proclaimed Islamic State, the U.S. military is notably short on soldiers, but apparently not on generals.  There are at least 12 U.S. generals in Iraq, a stunningly high number for a war that, if you believe the White House talking points, doesn’t involve American troops in combat. And that number is, if anything, a conservative estimate, not taking into account the flag officers running the U.S. air war, the admirals helping wage the war from the sea, or their superiors back at the Pentagon. At U.S. headquarters inside Baghdad’s fortified Green Zone, even majors and colonels frequently find themselves saluting superiors at a pace that outranks the Pentagon and certainly any normal military installation. With about 5,000 troops deployed to Iraq and Syria ISIS war, that means there’s a general for every 416 troops, give or take. To compare, there are some captains in the U.S. Army in charge of that many people. Moreover, many of those generals come with staffs and bureaucracy that some argue slows decision-making against an agile terror group. The Obama administration has frequently argued that the U.S. maintains a so-called light footprint in Iraq to reassure the American public that its military is not back in Iraq. Indeed, at times, the United States has not acknowledged where it has deployed troops until one of them died. But if the U.S. footprint is so small, why does the war demand so many generals?

How Saudi Arabia's war in Yemen has made al Qaeda stronger and richer: – Once driven to near irrelevance by the rise of Islamic State abroad and security crackdowns at home, al Qaeda in Yemen now openly rules a mini-state with a war chest swollen by an estimated $100 million in looted bank deposits and revenue from running the country’s third largest port. If Islamic State’s capital is the Syrian city of Raqqa, then al Qaeda’s is Mukalla, a southeastern Yemeni port city of 500,000 people. Al Qaeda fighters there have abolished taxes for local residents, operate speedboats manned by RPG-wielding fighters who impose fees on ship traffic, and make propaganda videos in which they boast about paving local roads and stocking hospitals. The economic empire was described by more than a dozen diplomats, Yemeni security officials, tribal leaders and residents of Mukalla. Its emergence is the most striking unintended consequence of the Saudi-led military intervention in Yemen. The campaign, backed by the United States, has helped Al Qaeda in the Arabian Peninsula (AQAP) to become stronger than at any time since it first emerged almost 20 years ago. Yemeni government officials and local traders estimated the group, as well as seizing the bank deposits, has extorted $1.4 million from the national oil company and earns up to $2 million every day in taxes on goods and fuel coming into the port.AQAP boasts 1,000 fighters in Mukalla alone, controls 600 km (373 miles) of coastline and is ingratiating itself with southern Yemenis, who have felt marginalised by the country’s northern elite for years. By adopting many of the tactics Islamic State uses to control its territory in Syria and Iraq, AQAP has expanded its own fiefdom. The danger is that the group, which organised the Charlie Hebdo magazine attack in Paris last year and has repeatedly tried to down U.S. airliners, may slowly indoctrinate the local population with its hardline ideology.

Facebook Groups Act as Weapons Bazaars for Militias - A terrorist hoping to buy an antiaircraft weapon in recent years needed to look no further than Facebook, which has been hosting sprawling online arms bazaars, offering weapons ranging from handguns and grenades to heavy machine guns and guided missiles. The Facebook posts suggest evidence of large-scale efforts to sell military weapons coveted by terrorists and militants. The weapons include many distributed by the United States to security forces and their proxies in the Middle East. These online bazaars, which violate Facebook’s recent ban on the private sales of weapons, have been appearing in regions where the Islamic State has its strongest presence. This week, after The New York Times provided Facebook with seven examples of suspicious groups, the company shut down six of them. The findings were based on a study by the private consultancy Armament Research Services about arms trafficking on social media in Libya, along with reporting by The Times on similar trafficking in Syria, Iraq and Yemen.

Iraqi Kurds Say Want Russian Oil Firms To Work On Their Land (Reuters) - Iraqi Kurdistan is keen to attract Russian oil companies to work on its territory, the Interfax news agency on Friday quoted the head of the Iraqi Kurds' representative office in Moscow as saying. The semi-autonomous region of Iraq is ready to take all necessary measures, including security ones, to ensure that Russian energy firms can work safely there, Aso Talabani told the agency. Gazprom Neft, the oil arm of state gas company Gazprom, is currently working on four projects in Iraq, of which three - Halabja, Shakal and Garmian - are located in Iraqi Kurdistan. The company is continuing to explore the Halabja and Shakal blocks and is extracting a small amount of oil at Garmian.

What China's slowing economic growth means for its oil balance in 2016: After picking up significantly last year, China's oil demand is expected to moderate in 2016 in line with the country's slowing economic growth, says Song Yen Ling, senior analyst at Platts China Oil Analytics. This video shares Platts China Oil Analytics' demand forecast and where overall oil product expansion will be coming from, as well as import expectations now that more and more independent refineries are getting access to imported crude.

Did Italy And Malta Actually Agree To Swap Oil Rights For Refugees? --As the Syrian refugee crisis reaches a critical impasse, both in terms of European security and refugee human rights, Brussels has found itself having to deny accusations of a secret pact between Malta and Italy to swap refugees for oil exploration rights. The Maltese opposition leader has claimed that Malta and Italy cut a secret deal in which Malta would surrender oil exploration rights in an offshore area disputed with Italy, while Italy would return the favor by picking up Malta’s share of migrant rescues at sea. In late March, the European Commission was forced to respond to the accusations as the Syrian refugee crisis has hit a fever pitch, denying the accusations; but it’s a complicated issue. Maltese opposition leader Simon Busuttil of the Nationalist Party, and a member of the European Parliament until 2013, accused the Maltese government late last year of allowing the Italian government to drill for oil in Maltese waters in a dubious oil-for-migrants swap. His accusations were boosted by the reporting of an Italian newspaper, Il Giornale, which claimed that Italian Prime Minister Matteo Renzi had agreed to the deal with Maltese Prime Minister Joseph Muscat.

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