oil markets, and most of those who write about them, were in a state of suspended animation most of this past week as they awaited results from the meeting of major global oil producers this weekend in Doha Qatar, where a freeze of oil production at current or at January levels is on the table...oil ministers and other officials of the members of OPEC, except for war-torn Libya and Iran, are participating, while non-OPEC oil producers Russia, Mexico, Azerbaijan, Oman, and Bahrain will also attend...several other large oil producers, including Canada, Norway and Brazil, won't be involved, with Norway declining to participate and releasing their invitation just this week...rumors and news of such a get together of OPEC and non OPEC oil producers has been a major factor in driving the price of oil higher over the past two months, as oil prices have typically jumped on reported comments by one of the participants favorable to such a freeze, while prices have fallen when official comments suggesting that it wont work out are reported on...the well publicized secret meeting between Saudi oil minister Ali al-Naimi and Russian energy minister Alexander Novak in Qatar on February 16th that started this ball rolling came less than a week after oil prices bounced off a 13 year low near $26 a barrel back on February 11th...
the upcoming meeting continued to influence oil prices early this week as well, as the front month contract price for US oil rose from last week's closing price of $39.58 a barrel to close Monday at $40.36 a barrel, then jumped nearly 5% to close at a 4 month high of $42.17 a barrel on Tuesday on headlines of a Russian-Saudi agreement for a "Production Freeze" ...however, as the EIA report of a larger than expected inventory buildup reminded oil traders that the oil glut is still with us, oil prices fell back to close at $41.76 a barrel on Wednesday...that, plus uncertainly on the Doha outcome weighed on prices the rest of the week, as oil closed at $41.50 a barrel and then $40.36 a barrel on Friday, ending the week at the same price as Monday's close...
writing this late Saturday afternoon, i had intended to speculate about what might happen at this Doha meeting, and what the possible outcomes and their effects might be...but i realized that since Doha is 7 hours ahead of us, what i write about it may already be moot by the time you read this...in fact, if you google "Doha OPEC" later this morning, you'll probably learn more about the results and their expected impact that i could guess at before the fact...suffice it to say that a large part of the recent oil price rally is based on the thinking that an agreement to freeze production would be reached, and that any breakup of the Doha meeting that doesn't at least put that forward will be bearish for prices...but on the other hand, since Russia, the Saudis, and most of the major producers save Iran are already producing flat out, an agreement to freeze at current levels won't do much to alleviate the glut that those current levels of production have already produced..
The Latest Oil Reports from the EIA and a Look at our Declining Oil Output
in a reversal of last week's oil patch activity, US refinery oil inputs dropped back to a more seasonal level this week while our oil imports returned to the same elevated level that we've seen all year, and hence the week again showed a large surplus of unused crude added to inventories, thus setting yet another record for US oil stores... Wednesday's reports from the US Energy Information Administration showed that our imports of crude oil averaged 7,940,000 barrels per day during the week ending April 8th, up by 686,000 barrels per day from the average of 7,254,000 barrels per day we imported during the week ending April 1st...that was 11.1% more than the 7,148,000 barrels of oil per day we imported during the week ending April 10th a year ago, and the EIA's weekly Petroleum Status Report (62 pp pdf) reports that the 4 week moving average of our oil imports was still at the 7.8 million barrel per day level, which was 4.1% above the same four-week period last year...
at the same time, production of crude oil from US wells fell for the 11th time in the past 12 weeks, dropping by 31,000 barrels per day, from an average of 9,008,000 barrels per day during the week ending April 1st to an average of 8,977,000 barrels per day during the week ending April 8th, marking the first time our oil output has dropped below 9 million barrels per day since October 31st 2014...our oil production was hence down 4.3% from the 9,384,000 barrel per day level of the same week a year ago, and down 6.6% from the recent weekly record of 9,610,000 of oil production set in the week ending June 5th last year...we're going to take a closer look at that recent oil production history, starting with a graph that comes from this week's OilPrice Intelligence Report from oilprice.com...
as marked, the above graph shows our oil production in thousands of barrels a day since the beginning of 2014 to the current weekly report (for the week ending April 8th)….but notice there are two parts to that graph; the first part, in blue, shows the confirmed monthly figures up to and including January of this year, the remainder, in yellow, shows the weekly estimates of production since the beginning of February…the weekly data, which we report on, are just estimates extrapolated from a small sampling of reports, whereas once all the data is in, the EIA logs it as a monthly report, again as barrels per day of production, which supersedes the previously published weekly data...the confirmed monthly data, which you can sort of glean from the graph, indicates that our oil production peaked at 9,694,000 barrels per day during April of last year, dipped to 9,315,000 barrels per day in June, and then gradually moved up to 9,452,000 barrels per day in September, before beginning the slide that continues to this day...
the reason we want to look at this today is a report from the International Energy Agency (IEA), a Paris based energy think tank set up by the rich oil consuming nations, that projects that global oil markets will “move close to balance” in the second half of the year as US shale production drops...now, most estimates over the past year have put the global oversupply of oil at between 2.1 million and 2.6 million barrels per day, and it strikes me as unrealistic to think that US production could drop by that much by the end of this year...looking at US oil prices over the past year, we see it wasn't until August that oil prices fell below $50, and it wasn't until November that prices started their dive to below $40, where they've been most of 2016, during which time shale well completions virtually halted...our confirmed December production averaged 9,235,000 barrels per day, while our unconfirmed production averaged 9,043,000 during March, a decrease of not even 2.1% over the three months that oil was priced below $40 a barrel and oil field activity was at a near standstill...at that rate of decrease, our oil production would still be at 8,485,000 barrels per day by next December, certainly not enough of a decrease, even from the peak, to reduce a global oversupply of more than 2 million barrels per day anytime this year...remember, fracked shale wells see their largest depletion during the first few months of operation, and output tails off only slowly for years thereafter...therefore, once new wells are no longer part of the mix, the depletion rate for US production will slow....yet the IEA says it's the crash of US production, not a freeze from the Doha talks, that will lead to a rebalancing of global oil supply...
as we mentioned earlier, refinery processing of crude oil fell back by the most yet this year, after establishing early April highs last week...US refineries used 15,941,000 barrels of oil per day during the week ending April 8th, 492,000 barrels per day less than the average of 16,433,000 barrels per day they processed during the week ending April 1st, as the US refinery utilization rate fell to 89.2% of operable capacity last week, down from a 91.4% capacity utilization rate during the week ending the 1st...while the prior week's oil processing was 3.1% ahead of the year earlier pace, this week we were processing 1.7% less than the 16,212,000 barrels per day that US refineries had used during the week ending April 10th 2015...
with less oil being refined, refinery production of gasoline fell to average 9,568,000 barrels per day during week ending April 8th, down from our gasoline output average of 9,617,000 barrels per day during week ending April 1st...that output of gasoline was still up more than 3.4% from the 9,249,000 barrels of gasoline per day that we produced during the same week last year, a time when gasoline output was unusually depressed....at the same time, our refineries' output of distillate fuels (diesel fuel and heat oil) fell by 54,000 barrels per day to 4,784,000 barrels per day during week ending the 8th, which was also 211,000 barrels per day, or 4.2% lower than our distillates production during the same week of 2015...
our lower production of gasoline, combined with a 101,000 barrel per day decrease in our imports of gasoline and an extraordinary 409,000 barrel per day increase in our demand for gasoline (see last metric) meant that gasoline had to be withdrawn from storage to meet that demand, and hence our gasoline inventories fell to 239,761,000 barrels by April 8th, down from the 243,998,000 barrels of gasoline we had stored as of April 1st...but this weeks stores were still 5.2% higher than the 227,873,000 barrels of gasoline that we had stored at the end of the same week last year, which were at the time the highest for the second weekend in April since 1993, and thus our gasoline stores are still well above the average range of their normal level for this time of year…at the same time, our distillate fuel inventories rose despite that lower production, increasing by 505,000 barrels to a total of 163,489,000 barrels as of April 8th...thus our stocks of distillates also remained well above the upper limit of the average range for this time of year, measuring 26.8% greater than the 128,941,000 barrels of distillates we had stored during the same week last year..
finally, with the increase in imports and the slowdown in refining, we ended up with 6,634,000 more barrels of unused crude oil left over at the end of the week, and hence our stocks of crude oil in storage, not counting what's in the government's Strategic Petroleum Reserve, rose once again to a new record of 536,531,000 barrels as of April 8th, up from the 529,897,000 barrels of oil we had stored on April 1st...that was 10.9% higher than the then record of 483,687,000 barrels of oil we had stored as of April 10th, 2015, and 36.1% higher than the 394,135,000 barrels of oil we had stored on April 11th of 2014....we've now increased our inventories of crude oil by by nearly 54 million barrels over the last 13 weeks, setting new records for the amount oil we had in storage in the US in 8 of the last 9 of them...
This Week's Rig Count
for the sixth week in a row, we once again slowed to another all time low for drilling activity in the US, as Baker Hughes reported that their total count of active rigs drilling in the US fell by 3 rigs to 440 rigs as of April 15th, which was down from the 954 rigs that were deployed on April 17th of 2015, and down from the recent high of 1929 rigs that were working on November 21st of 2014... the count of rigs drilling for oil fell by 3 to 351, which was down from 734 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 was unchanged at 89, off the record low by 1, down from the 217 natural gas rigs that were deployed a year ago, and down from the recent natural gas rig high of 1,606 that was set on August 29th, 2008...
three drilling rigs were started up in the Gulf of Mexico during the week, so the active Gulf platform count is now back up to 27, which is barely down from the 32 working in the Gulf and a total of 33 drilling offshore as of April 17th a year ago...at the same time, one of the rigs drilling through inland lakes in Louisiana was removed, so there are now 3 rigs remaining on inland waters, down from the 4 rigs that were set up on inland waters a year earlier... a net of 6 horizontal rigs were stacked this week, cutting the count of horizontal rigs down to 335, which was also down from the 741 horizontal rigs that were in use the same week last year, and down from the recent record of 1372 horizontal rigs that were drilling on November 21st of 2014...at the same time, a single directional rig was also stacked, leaving 51 directional rigs still running, which was down from the 91 directional rigs that were in use at the end of the same week a year earlier...meanwhile, a net of 4 vertical rigs were added, bringing the vertical rig count back up to 54, which was still down from the 122 vertical rigs that were in use on April 17th of last year...
of the major shale basins, only the Cana Woodford of Oklahoma shut down as many as 2 rigs, as their active count fell to 30 rigs, down from 40 a year earlier...at the same time, the Arkoma Woodford of Oklahoma, the Eagle Ford of south Texas, the Marcellus of the northern Appalachians, the Mississippian of the southwest Kansas are, the Permian of west Texas and the Williston of North Dakota each saw one rig idled this week...those shutdowns left the Arkoma Woodford with 3 rigs, down from 6 a year earlier, left the Eagle Ford with 42 rigs, down from 123 a year earlier, left the Marcellus with 28 rigs, down from the 69 working there last year at this time, left the Mississippian with 4 rigs, down from 31 a year ago, left the Permian with 141 rigs, down from 258 rigs a year earlier, and left the Williston with 26 rigs, down from the 84 rigs working there a year earlier...meanwhile, only the Barnett shale of the Dallas area saw a single rig added; they now have 5 rigs actively drilling there, which is still down from the 6 rigs that were in use there a year ago...
the Baker Hughes state count tables indicate that Texas got rid of a net 3 rigs, still leaving 194 still drilling in the state as of April 15th, down from the 412 rigs that were deployed in Texas a year earlier...then Alabama, Alaska, North Dakota, Pennsylvania, and Wyoming each saw one rig removed...that left Alabama with 1 rig, down from 2 rigs on April 17th of 2015, left Alaska with 7 rigs, down from 12 a year earlier, left North Dakota, with 26 rigs, down from 83 a year earlier, left Pennsylvania with 16 rigs still drilling, down from 48 a year ago, and left Wyoming with 8 active rigs, down from the 23 rigs working the state a year earlier....at the same time, New Mexico added 2 rigs, bringing their count up to 19, which was still well down from the 49 rigs working New Mexico last year at this time...also, Kansas, Kentucky, Louisiana and Mississippi all saw a single additional rig set up...that brought Kansas up to 6 rigs, still down from 11 last year at this time, brought Kentucky up to 2 rigs, the same as they had deployed a year earlier, brought Louisiana up to 48 rigs, still down from last year's 72, and brought Mississippi up to 2 rigs, down from 4 rigs a year earlier...
This Senate race shows how climate action is gaining support in the Midwest - Grist -- As election endorsements have been pouring in, one in particular caught your correspondent’s eye: The League of Conservation Voters is backing former Ohio Gov. Ted Strickland (D) in his U.S. Senate race. Strickland hasn’t always been a friend to the environment in the past, so will he be going forward? LCV thinks so, and the group isn’t alone. Progressive and green activists in Ohio think so too. The reasons they give suggest not so much a personal transformation as a cultural one. Strickland’s evolution is emblematic of changes in the energy economy and Midwestern climate politics. Strickland represented Ohio in the U.S. House for a dozen years in the ’90s and the aughts, and LCV gave him a 77 percent rating for that time. That’s certainly respectable, but it’s lower than the 90 percent–range scores typical of leading congressional climate hawks. Strickland repeatedly voted against higher fuel economy standards for automobiles. He also voted against reducing subsidies for coal and logging, and for George W. Bush’s 2005 energy bill that contained a host of pro–fossil fuel provisions, including the “Halliburton loophole” that exempts fracking from the Safe Drinking Water Act. But he also cast pro-environment votes on controversial issues, such as voting against allowing more offshore drilling and against drilling in the Arctic National Wildlife Refuge. As Roll Call notes, Strickland’s LCV score gradually rose over the course of his six terms in the House.
Chesapeake Forced To Pledge Entire Company As Collateral To Preserve Existing Credit Facility As we enter the critical spring borrowing base redetermination season, which as we previewed previously is the biggest threat to near-insolvent energy companies whose banks may, and in many cases will, decide their assets are worth far less and as a result dramtically cut their revolver availability, one of the biggest question marks was how generous would the banks of troubled gas giant Chesapeake be, whose $4 billion credit facility is one of the few things keeping the company still afloat. We got the answer earlier today when the company announced it had succeeded in maintaining its entire $4 billion borrowing base and as a result would not suffer an imminent liquidity crunch. From the release: Chesapeake Energy Corporation today announced it has amended its $4.0 billion secured revolving credit facility agreement maturing in 2019 with its bank syndicate group. Key attributes include:
- Borrowing base reaffirmed at $4.0 billion, consistent with current availability
- Next scheduled redetermination of borrowing base postponed until June 2017
- Senior secured leverage ratio covenant relief granted until September 2017
- Interest coverage ratio covenant reduced to 0.65x through March 2017
Following the recent redetermination review by its bank syndicate group,Chesapeake's senior secured revolving credit facility borrowing base was reaffirmed at $4.0 billion, consistent with current availability.
Court says protected area does not extend below parks | Great Lakes Echo: Citizens have no legal right to vote on whether to approve leases for drilling for oil and gas under city-owned parks and cemeteries, the Michigan Court of Appeals has ruled. A three-judge panel unanimously rejected a challenge by the nonprofit Don’t Drill the Hills Inc. to a decision by Rochester Hills to lease underground oil and gas rights to one company and to allow another company to relocate an oil pipeline. City attorney John Staran said the decision is significant to local governments across Michigan because the court found a lease is not a “sale” of parkland that would trigger a public vote. “The court applied common sense and the plain and ordinary meaning to ‘park’ and ‘open space,’” Staran said. “Park means park. Not the sky above and the subterranean minerals that are not part of the park.” But Don’t Drill the Hills argued that the proper legal interpretation of “park” shouldn’t be limited to the surface. “The park is the whole real estate parcel, and they’re saying a park is just the surface. If you extract this natural resource, which is then sold for a profit, then a portion of the property is gone because mineral rights are property,”
A Pipeline Built In The 50s Still Runs Underneath The Great Lakes, And People Want It Out - When Line 5 was built to transport oil and gas underneath the water strait that separates Lake Michigan from Lake Huron, it was considered a feat of modern construction. It not only was over-engineered and designed for the cold, underwater environment, it was considered convenient, too, as it eliminated tanker traffic on the Great Lakes and reduced the risk of an oil spill. But all that was more than 60 years ago, way before Enbridge, the line operator, suffered the largest inland oil spill in U.S. history after one of its pipelines ruptured in Michigan in 2010. Since then, attitudes towards Enbridge and its aging Line 5 have eroded and now, a campaign to shut the line down is in full force. Just on Wednesday, some two dozen groups that include environmental organizations and tribes called on Michigan Gov. Rick Snyder to shut the line on the basis of eight alleged easement violations. One presumed violation is the company’s failure to meet the pipeline’s wall thickness requirement due to corrosion and manufacturing defects. Closing the line that travels under the Straits of Mackinac, groups said, is urgent. “Such action is needed to address the unacceptably high risk of a catastrophic oil spill in the Great Lakes that would devastate our public drinking waters, our economy, and our Pure Michigan way of life,” the Oil & Water Don’t Mix campaign said in the letter. It also claimed Enbridge lacks proper emergency response plans. Built in 1953, Line 5 is a 30-inch-diameter pipeline that travels through Michigan’s upper and lower peninsulas as it runs some 645 miles from Wisconsin to Canada. Thirty percent of the light crude oil it carries stays in Michigan, according to Enbridge, and some 85 percent of homes in northern Michigan are heated with its gas. The line, which carries about 23 million gallons of oil and natural gas liquids daily, is located right in the middle of Lake Michigan and Lake Huron, both important water sources for cities like Chicago and Detroit. Oil transportation largely relies on trains and pipelines. Out of those two, pipelines spill more often than trains. In the U.S., pipelines spilled three times as much crude oil as trains over the period of 2004 to 2012, according to an International Energy Agency study. And last year, the Pipeline and Hazardous Materials Safety Administration reported 314 “significant” incidents causing damages of more than $305 million, and 10 fatalities.
Startup arms shale royalty owners against mineral buyers: – Since the start of the shale boom in the United States, landowners have asked themselves the question, “What is the shale revolution worth to me?” An answer to this essential question has been out of reach for the typical landowner—not anymore. ShaleCast.com, a new startup, is a a simple-to-use website that forecasts the income and production potential for each well on a royalty owner’s property. For the first time ever, mineral owners get free access to the kinds of data and forecasts only available to the operators who produce their minerals. “Our goal is to modernize mineral ownership so owners can manage their mineral assets more like their stock portfolios. So they can see the impact of commodity price swings and production forecasts on their pocketbook immediately,” said Benjamin Hall, CEO of ShaleCast. “The thought of having an asset of this size and importance and not knowing its value would be incomprehensible in most other industries. No one sells a used car without a Blue Book value or puts a home on the market without comparables from their neighborhood, but every day that’s what landowners who sell their minerals do,” Hall added. Billions of dollars from lease bonuses, royalty payments and mineral purchases have been made to landowners infusing communities with revenue and providing a boost to local businesses. Despite the current environment of low oil and gas prices, mineral investors continue to look for discounted minerals buys; this is when an uninformed mineral owner is most susceptible to making a bad financial decision.
Ky. awaits answers on fracking waste - The illegal shipment into Kentucky of radioactive waste from oil and gas fracking operations and the illegal dumping of the out-of-state waste in at least two Kentucky landfills is so far producing more questions than answers. One question, raised by Anya Litvak’s recent reporting in the Pittsburgh Post-Gazette, is why Kentucky regulators failed to respond proactively to block shipments in mid-2015 when notified by West Virginia regulators of plans to truck the waste from a Fairmont, W. Va. processor to Kentucky. An official with the Radiation Health Branch of the Cabinet for Health and Family Services informed a West Virginia official that Kentucky law strictly forbids importation of such waste. But the shipments came to Kentucky anyway. There apparently was no follow up on Kentucky’s end until January, when the Division of Waste Management in the Cabinet for Energy and Environment was tipped off and confirmed that radioactive fracking leftovers had ended up in landfills in Estill and Greenup counties. The public didn’t learn of the illegal dumping until late February. Since then environmental officials have cited the two landfills for accepting the material and Attorney General Andy Beshear has launched an investigation.
Ky. slow to act on radioactive waste dumping - The tip arrived in a phone call from a West Virginia bureaucrat to a staffer in the Kentucky Cabinet for Health and Family Services - radioactive oil-and-gas drilling waste was headed our way. Kentucky Energy and Environment Cabinet officials were notified that same day, July 21, 2015, according to emails obtained by the Courier-Journal under West Virginia's open records law. But it took the Energy Cabinet seven months to alert Kentucky landfill operators to be on the lookout for illegal shipments of radioactive drilling waste and that they should not accept any it. The Health Cabinet waited another three weeks - until March 4, two days after the Courier-Journal first reported the dumping - to order the company alleged to have quietly brought the waste into Kentucky to stop, and for landfills to stop accepting it. By then, from July through November, state officials claim, more than 1,000 cubic yards of the waste from fracking operations in Ohio, Pennsylvania and West Virginia had made its way to Blue Ridge Landfill in Estill County, hauled in by Advanced TENORM Services of West Liberty, the records show.There, state officials feared that landfill workers, customers and maybe students at two nearby schools, might have been exposed to dangerous levels of radiation, the emails show. Later, state officials found out, even more radioactive waste had also been sent to the Green Valley Landfill in Greenup County, though they've said it wasn't as "hot" as the concentrated waste sent to the Estill dump.
Amidst Fracking Pollution, A West Virginia Town Fights For A Fracking Waste Ban - The smell of gas surrounding the northern streets of Lochgelly, West Virginia, was so pungent that Brad Keenan could taste it as he was driving home with his windows up that evening in 2004. He called 911 and the gas company, thinking a punctured gas line was to blame, but the smell and the evacuation it prompted came from something few knew existed in town: fracking waste. At least two open pits holding fracking wastewater were responsible for the smell that got homes evacuated and forced some businesses and a daycare center to temporarily close, according to interviews and published reports. Wolf Creek, a major waterway traversing his 140-acre property, is polluted. Twelve years have passed since the emergency evacuation put a little-known, state-permitted fracking disposal site under the county’s spotlight, yet things haven’t improved. The company is still marred in controversy. Locals worry about confirmed fracking chemicals in Wolf Creek as it connects to the water supply. And last year, the state renewed Danny E. Webb Construction’s permit to continue disposing fracking waste in underground injection wells, also known as brine disposal wells. The feud in Fayette county is now likely to intensify with two companies facing officials who, in the coming months, will defend in federal court an ordinance approved in January that banned fracking waste disposal. Hearings were set for this month, but habitual court delays are already being reported. One argument officials have raised against fracking waste in Fayette is that zoning laws don’t even allow traditional landfills.
Bernie Sanders Proposes National Ban on Fracking - ABC News: Bernie Sanders has a new addition to his campaign speech. Speaking to crowds around New York state and Pennsylvania in the last week, the progressive Democratic candidate has ratcheted up his focus on environmental issues, specifically talking at length about his opposition to fracking. Last fall, Sanders introduced during sweeping legislation to ban the extract of any fossil fuels on federal lands, but in Binghamton, New York on Monday, the Vermont senator went even further, proposing a national ban on the controversial natural shale gas extraction technology. “In my view, if we are serious about safe and clean drinking water, if we are serious about clean air,” he said. “If we are serious about combating climate change, we need to put an end to fracking not only in New York and Vermont, but all over this country.” Last year, after a significant activist movement, New York prohibited fracking despite the state’s large shale gas resources. The issue works in Sanders favors in two ways, as both a way to contrast his record with his primary opponent as well as highlight recent successes of grassroots organization. “I want to applaud you for standing up to Governor [Andrew] Cuomo,” Sanders told his fans in upstate New York. “What may have been considered unrealistic or pie in the sky just a few years ago has now been achieved in New York because you made it happen.” The senator has argued that his policy agenda would only be achievable through increased grassroots activism and political involvement. In Binghamton, Sanders was introduced by one of the nation’s leading frack-tivists, filmmaker Josh Foxx, who made a name for himself with his politically-charged documentary about fracking called "GasLand." Foxx argued that there was only one candidate who genuinely opposed the practice.
Sanders: ‘No Fracking Anywhere’: Another day, another TV ad from Sen. Bernie Sanders, this time with a focus on fracking – a hot topic in New York not that long ago, which galvanized a group of advocates (AKA, the fracktvists), many of whom remain active in politics and are now Sanders supporters. The ad maintains Sanders is the only presidential candidate who would ban the controversial natural gas drilling technique “everywhere.” He focused on this issue while appearing earlier today for a campaign event in Binghamton in New York’s Southern Tier, which was ground zero in the fracking debate. “The growing body of evidence tells us that fracking is a danger to our water supply, our most precious resource,” Sanders told some 5,000 supporters who packed the Veterans Memorial Arena to hear him speak. “It is a danger to the air we breathe. It has resulted in more earthquakes. It is highly explosive. And it is contributing to climate change.” Sanders’ home state of Vermont has adopted a fracking ban, as has New York – after more than five years of heated debate and foot-dragging by the Cuomo administration. In Binghamton, Sanders applauded Cuomo for finally coming down on the side of the fracktivist community against big oil, but he also said that if we are “serious” about combatting climate change and protecting the environment, then federal officials will ban fracking across the nation. Sanders noted that his primary opponent, Hillary Clinton, promoted fracking overseas while she was serving as secretary of state in the Obama administration. Sanders and his supporters have been pressuring Clinton for her campaign cash ties to big oil
Democratic Debate Brings Fiercest Exchange Yet on Climate Change, Fracking - During last night’s Democratic debate at the Brooklyn Navy Yard, a site that was flooded by Hurricane Sandy, presidential candidates Bernie Sanders and Hillary Clinton displayed the fiercest exchange around climate change yet. “The movement has pushed climate change to the forefront of this presidential election,” said Yong Jung Cho, spokesperson for 350 Action. “From the 400,000 people in the streets of New York City at the People’s Climate March and a statewide ban on fracking in New York, to young people across the country asking candidates over 130 questions on climate over the course of the election, tonight’s debate was proof that organizing works.” Next Tuesday’s highly anticipated primary in New York, one of the only states with a ban on fracking, will be pivotal in defining each candidate’s climate platforms. Earlier this year, the Porter Ranch disaster just miles outside of Los Angeles shined a harsh spotlight on the dangers of existing natural gas infrastructure and intensified concerns around the impact fracking has on communities and the climate. During her tenure as Sec. of State, Hillary Clinton traveled abroad selling fracking to the world, though she recently expressed her support for the statewide ban on fracking New York. Just yesterday, Clinton introduced a new platform that speaks to the widespread issue of environmental injustice. Across the country, fracking has disproportionate impacts on low-income communities and communities of color. The latest research on fracking affirms that methane emissions from the fracking are significantly more potent than carbon dioxide. Activists are concerned that Clinton’s referral to natural gas as a “bridge fuel” is inconsistent with how serious of a problem she considers climate change.
Clinton: Natural gas is a bridge fuel to be crossed 'quickly' - The Democratic presidential candidates are stepping up their fight over natural gas as they drill for votes in the frack-phobic state of New York ahead of Tuesday's primary. Hillary Clinton argued at last night's Democratic debate that supporting fracking during her years as secretary of State was necessary to help wean the world from coal power and to assist Europe in getting out from under Russian pressure. The subject of New York's own fracking ban never came up at the debate, but Sen. Bernie Sanders brought back attacks that Clinton fostered fracking in other countries, an issue he's highlighted to the delight of his green backers. "For economic and strategic reasons it was American policy to try to help countries get out from under the constant use of coal, building coal plants all the time," Clinton said. "So we did say natural gas is a bridge. We want to cross that bridge as quickly as possible ... in order to deal with climate change." In attacking what he sees as "incrementalism" in dealing with climate change, Sanders gave little credibility to the 195-nation Paris climate change agreement. "Of course the agreement is a step forward, but you know agreements and I know agreements, there's a lot of paper there," Sanders said. "We've got to get beyond paper right now." Clinton said she was "bewildered by how to respond," and the agreement "gives you the framework to actually take the action." Sanders called on Clinton to commit to supporting a carbon tax to facilitate a move to low-carbon economy. Clinton avoided the question with a long winded answer outlining how she supported Obama's carbon rules and the importance of getting the president's Supreme Court nominee approved.
Natural Gas Price Ticks Higher on Small Inventory Decrease - The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks decreased by 3 billion cubic feet for the week ending April 8. The five-year average for the week is an injection of around 22 billion cubic feet, and last year’s storage addition for the week totaled 101 billion cubic feet. Natural gas inventories rose by 12 billion cubic feet in the prior week. Natural gas futures for May delivery traded down about 2.8% in advance of the EIA’s report, at around $1.98 per million BTUs, and traded around $2.01 after the data release. Last Thursday natural gas closed at $2.02 per million BTUs. On Wednesday the contract posted its high for the past five trading days at $2.04. The 52-week range for natural gas is $1.73 to $3.17. One year ago the price for a million BTUs was around $2.95. The EIA expects the summer build in working natural gas inventories to total about 1.6 trillion. That represents a relatively small summer build because injections are expected to be limited by available storage capacity. Recent data show that natural gas storage facilities in most regions of the United States already hold 44% to 73% of their design capacity. The forecast build puts inventories at the end of October at a record high. Demand for natural gas is expected to be low over the whole country into the middle of next week. Stockpiles are about 63% above their levels of a year ago and about 52% above the five-year average.
U.S. natural gas production reaches record high in 2015 - Today in Energy - U.S. EIA - U.S. natural gas production reached a record high level of 79 billion cubic feet per day (Bcf/d) in 2015, an increase of 5% from the previous year, even as natural gas prices remained relatively low. Production from five states—Pennsylvania, Ohio, West Virginia, Oklahoma, and North Dakota—was responsible for most of this growth, offsetting declines in much of the rest of the United States. EIA uses three different concepts to measure natural gas production. Gross withdrawals are the full volume of compounds extracted at the wellhead, which includes all natural gas plant liquids and nonhydrocarbon gases after oil, lease condensate, and water have been removed. Marketed natural gas production, which is used in this analysis, excludes natural gas used for repressuring the well, vented and flared gas, and any nonhydrocarbon gases. Dry natural gas production equals marketed production minus natural gas plant liquids.Natural gas production from Pennsylvania, Ohio, West Virginia, Oklahoma, and North Dakota accounted for 35% of total U.S. natural gas production in 2015. In most cases, production in these states continued to increase in 2015, but at a slower pace than in the previous year. For instance, in Pennsylvania, the second-highest producing state, year-over-year natural gas production growth fell from 2.6 Bcf/d in 2014 to 1.5 Bcf/d in 2015. In contrast, natural gas production growth continued to increase in Ohio, with production increasing by 1.4 Bcf/d in 2015, 41% higher than production growth in 2014. Most of the increase in Ohio's natural gas production is from the relatively less-developed Utica Shale play. Production from the Utica Shale will likely grow in the future.
New gas-fired power plants are concentrated near major shale plays - In 2015, a combination of low natural gas prices, increases in gas-fired generation capacity, and coal power plant retirements led to a 19% annual increase in gas-fired power generation, with the gas share of total generation increasing from 28% in 2014 to 33% in 2015. The April 2016 Short-Term Energy Outlook forecasts that this year, for the first time, natural gas-fired generation will exceed coal generation in the United States on an annual basis. Growth in gas-fired generation capacity is expected to continue over the next several years as 18.7 gigawatts (GW) of capacity, completed in 2016 or currently under construction, comes online between 2016 and 2018. This represents a 4% increase over the gas-fired capacity level at the end of 2015. Many of these additions are concentrated around the prolific Marcellus and Utica shale region, largely located in Pennsylvania, West Virginia, and Ohio, which have been leading the growth in U.S. natural gas production over the past several years. Among the states in relatively close proximity to the Marcellus and Utica, Virginia will account for the largest cumulative additions of gas-fired capacity over the 2016-18 period, with 2.3 GW of gas-fired capacity under construction, followed by Ohio with 1.9 GW, Pennsylvania with 1.8 GW, and Massachusetts with 0.7 GW, according to EIA's Electric Power Monthly. Natural gas production from the Eagle Ford and Haynesville shale resources, located in Texas and Louisiana, has also grown, and there are notable levels of gas-fired capacity under construction in those areas. Texas has the second largest cumulative additions of gas-fired capacity, at 3.2 GW over the 2016-18 period, with neighboring Louisiana at 0.8 GW. In addition for the same period, Texas far exceeds the other states in planned gas-fired capacity with received and pending permits to construct 6.6 GW (cumulatively) over 2016-18.
Natural gas storage ends winter heating season at record high - Today in Energy - U.S. Energy Information Administration (EIA): Working natural gas inventories ended the winter heating season at 2,478 billion cubic feet (Bcf), exceeding the previous end-of-March record high of 2,473 Bcf, set in 2012, according to EIA's Weekly Natural Gas Storage Report. Inventory withdrawals during the traditional heating season (November through March) were relatively limited this year because of winter weather that was the warmest on record and continued high levels of domestic natural gas production. Heading into the winter heating season, inventories were at a record high of 4,009 Bcf on November 20, 2015. In the previous five winters, the total withdrawal from the end of October through the end of March averaged 2,176 Bcf. In the most recent winter, weekly withdrawals were often smaller than the five-year average level, and the total withdrawal was only 1,475 Bcf. EIA expects the summer build in working natural gas inventories will total about 1,600 Bcf. This amount would be a relatively small summer build, as injections are expected to be limited by available storage capacity. Recent data show that natural gas storage facilities in most regions of the United States already are at 44%-73% of their design capacity. The forecast build puts inventories at the end of October at a record high. EIA's Short-Term Energy Outlook (STEO) expects that this summer could be similar to the summer of 2012 in terms of natural gas storage and its impact on natural gas prices and consumption. In 2012, following a warm winter, end-of-March inventories were at record-high levels. Low natural gas prices at the time and high production levels led to record-high consumption of natural gas in the electric power sector, both for the summer and the year as a whole. In 2015, natural gas use by electric power generators broke the 2012 record, and STEO projects another record will be set for 2016.
U.S. Natural Gas Market Begins Injection Season with Record Storage Overhang -- U.S natural gas storage inventories ended the winter heating season at a record high for this time of year of 2,480 Bcf as of April 1, 2016. Yesterday (Thursday April 14) the Energy Information Administration (EIA) reported that U.S. natural gas storage fell a notch as of April 8 to 2,477 Bcf or 956 Bcf (63%) higher than the corresponding week last year. CME/NYMEX Henry Hub natural gas futures prices for May delivery closed at $1.970/MMBtu yesterday, 56 cents lower than last year at this time. Moreover the current 12-month strip is averaging $2.48, 32 cents lower than last year at this time. In today’s blog, we look at how inventories got here and implications for the summer market. This is our latest update examining the fundamental factors influencing the U.S. natural gas market – particularly the supply/demand balance. The last time we looked at the supply/demand balance was in early February (2016) in Hot Stuff. At that time, production was near record highs, the storage surplus was still growing rapidly and prices had not yet found a bottom. About a month later in early March, we revisited storage levels in Nat Gas Storage Limits. Now, with the traditional winter heating (withdrawal) season behind us as of March 31, it’s time to look at where inventories are heading into injection season and the supply/demand numbers driving the market.
Spinning Wheel – Prices for Natural Gas Liquids (NGLs) Headed Back Up! -- Prices headed up!! That’s something that you haven’t heard much lately. But big changes are just over the horizon for NGLs as new petrochemical plants and export projects come online. These projects will encounter a market environment far different than what was expected when they were being planned. Instead of an oversupplied market driving NGLs lower relative to crude oil and natural gas, the projects will confront a tight market, with NGL prices higher relative to the other hydrocarbons. In today’s blog we explain why what must go up must come down, and vice versa. In the first installment of Spinning Wheel we assessed the rapid descent of propane stocks since late November, in spite of the 2015-16 El Nino “winter of no winter”, as a result of extremely strong export volumes. The week before that we highlighted the inaugural waterborne ethane exports in Ethane: Boat On The Water!! First US Overseas Ethane Exports Ready To Set Sail. . Today, we are going to take a look at how increasing ethane exports and growing petrochemical demand will impact NGL prices.
US Senate leaders revive long-delayed energy bill — Leaders in the US Senate have agreed to resume debate on an energy bill intended to speed reviews of LNG export applications, expedite natural gas pipeline permitting and expand energy efficiency programs. Senate majority leader Mitch McConnell (R-Kentucky) late yesterday scheduled floor votes on the energy bill, which stalled earlier this year after Democrats blocked the bill over an unrelated issue. Republicans and Democrats reached a deal to schedule a final vote on the bill, which could occur as soon as today. The move pushes Congress closer to making its first major change to energy policy since 2007, before the US shale drilling boom drove an 85pc jump in crude production and a 40pc rise in gas production. Proponents say the bill will help the US take advantage of those resources while also supporting efficiency and conservation. The bill attempts to expedite the permitting of gas pipelines by giving the Federal Energy Regulatory Commission more authority to set deadlines for environmental reviews. Pipeline companies have complained new projects have faced delays because of an uncertain permitting process. The bill would require the US Energy Department to reach a decision on an application to export LNG within 45 days after environmental reviews are complete. Project developers could then ask a federal court to enforce that deadline, if the agency failed to act. The bill would reaffirm a policy that crude from the US Strategic Petroleum Reserve (SPR) should be sold only to cope with supply shortages, improve energy security or maintain or preserve the reserve's facilities. But lawmakers have shrugged off that policy repeatedly. Congress last year authorized the US energy secretary to sell 124mn bl of crude from the SPR to raise revenue for infrastructure spending and to fund the government. Those sales are required to occur from 2017-2026
Researchers fly over 8,000 well pads and find hundreds of methane leaks | PublicSource: As Pennsylvania’s natural gas production continues to expand, so does the possibility of potentially harmful methane emissions. A new study from scientists in the Environmental Defense Fund’s Oil and Gas program examined the most common sites for methane leaks at oil and gas pads nationwide. A team of researchers partnered with Gas Leaks Inc., a company that uses infrared technology to inspect well pads, to fly a helicopter over thousands of pads in seven regions in the United States. In total, the researchers flew over 8,000 pads in areas saturated by drilling, including North Dakota’s Bakken Shale and the Marcellus Shale in Southwestern Pennsylvania. The goal, according to a blog post from researchers involved, was to “better characterize the prevalence of ‘super emitters’” — the largest sources of the gas industry’s methane pollution. Results of the study, accepted on Tuesday in the Environmental Science and Technology journal, show that 90 percent of leaks from nearly 500 sources sprung from the vents and hatches, or doors, on gas tanks. The leaks were not a problem caused by old age, as emissions were more likely to be detected at newer wells. According to researchers, this is a clear indication that control systems already in place to prevent leaks are not up to par.
Review faults EPA oversight of oil and gas wastewater - A federal review has faulted the U.S. Environmental Protection Agency for not taking sufficient steps to safeguard drinking water supplies from the wastewater generated by the oil and gas industries. The Government Accountability Office said in its report to members of Congress that the EPA has failed to adequately collect information from state and regional regulators about inspections or their enforcement actions to protect underground sources of drinking water. Auditors also found the EPA has not consistently carried out oversight of programs that regulate injection wells where oil and natural gas companies send streams of wastewater into the ground. “The most important thing is that finally the government investigators confirm that EPA does not have the adequate amount of information to safely oversee its programs and ensure that underground sources of drinking water are protected,” said John Noel, national oil and gas campaigns coordinator for the group Clean Water Action in Washington, D.C. “It confirms our suspicion that drinking water is not being protected at the highest levels.” An increase in U.S. oil and gas production since the 2000s has led to growing amounts of wastewater, and much of that water ends up routed back into aquifers through a type of injection wells called “class II” wells. The GAO said that as of 2013, there were more than 176,000 of these wells across the country, in states such as Pennsylvania, Virginia, Texas, Oklahoma, New Mexico and California. State agencies and EPA regional offices are supposed to report information to the EPA about their regulatory programs relating to the injection of oil and gas wastewater into aquifers. But GAO auditors found the federal agency “has not consistently conducted oversight activities necessary to assess whether state and EPA-managed programs are protecting underground sources of drinking water.”
Storage Operators at the St. James Crude Hub -- Two midstream operators have added at least 13 MMBbl of crude storage to the St. James hub during the past 8 years (NuStar and Plains All American). These companies have invested in the hub because of its proximity to the Gulf Coast and pipeline connectivity to refineries throughout the Eastern U.S. and as far northwest as Edmonton, Alberta. St. James has also been an active recipient of crude flowing east across the Gulf by barge and tanker from the Eagle Ford via Corpus Christi. These crude movements require terminal, storage and blending facilities. Today we describe crude storage facilities at St. James. In Part 1 of this series we discussed how the St. James, LA crude trading hub (located on the Mississippi River 60 miles upriver from New Orleans) provides feedstock to 2.6 MMb/d of regional refining capacity on the Eastern Gulf Coast as well as to refineries in the Midwest. St. James is also an important storage and distribution hub for crude produced in North Dakota, South Texas, the Gulf of Mexico and onshore Louisiana as well as imports arriving at the Louisiana Offshore Oil Port (LOOP). We detailed the 12 refineries that St. James supplies directly in the Gulf Coast region as well as pipeline connections bringing crude into and out of St. James. This time we detail the growth of storage capacity at St. James.
The Destructive Havoc That Fracking Has Caused To The Environment, By The Numbers - Since 2005, when the "Halliburton loophole" in the Energy Policy Act exempted fracking from parts of the Safe Drinking Water Act, the Clean Water Act, and other environmental laws, the oil and gas industry has drilled or permitted more than 100,000 fracking wells. A new report from Environment America adds up how much damage fracking has caused so far. The industry has used at least 239 billion gallons of water. "There's really no safe or sustainable way of dealing with fracking toxic waste." In states suffering from drought, that's water that might have used for drinking or farming. In Colorado, where almost all fracking wells are in areas of high water stress, oil and gas companies have at times paid as much as $3,300 for an acre-foot of water at auction, 100 times more than what a farmer might pay. Once the water is sucked back out of the well, it's toxic and can't be used for anything else. And there aren't any failsafe ways to store it. "We've seen that wastewater leak from retention ponds," says Rachel Richardson, director of Environment America’s Stop Drilling program and co-author of the report. "Sometimes it's been dumped directly into streams. It's escaped from faulty wells. And that's a huge risk to our drinking water. There's really no safe or sustainable way of dealing with fracking toxic waste."157 of the chemicals used in fracking are known to be toxic; another 781 might also be, but toxicity data isn't available. Since 2005, fracking has also damaged 679,000 acres of forest and rural landscape, a total area a little smaller than Yosemite. It's contributed to smog. In Oklahoma, it's made once-rare earthquakes an everyday occurrence (in 2015, the state had 907 quakes with a magnitude greater than 3.0 on the Richter scale.)
Fracking’s Total Environmental Impact Is Staggering, Report Finds The body of evidence is growing that fracking is not only bad for the global climate, it is also dangerous for local communities. And affected communities are growing in number. The report, released Thursday, details the sheer amount of water contamination, air pollution, climate impacts, and chemical use in fracking in the United States. “For the past decade, fracking has been a nightmare for our drinking water, our open spaces, and our climate,” Rachel Richardson, a co-author of the paper from Environment America, told ThinkProgress. Fracking, a form of extraction that injects large volumes of chemical-laced water into shale, releasing pockets of oil and gas, has been on the rise in the United States for the past decade, and the sheer numbers are staggering. Environment America reports that at least 239 billion gallons of water — an average of three million gallons per well — has been used for fracking. In 2014 alone, fracking created 15 billion gallons of wastewater. This water generally cannot be reused, and is often toxic. Fracking operators reinject the water underground, where it can leach into drinking water sources. The chemicals can include formaldehyde, benzene, and hydrochloric acid. Fracking is also bad news for the climate. Natural gas is 80 percent methane, which traps heat 86 times more effectively than CO2 over a 20-year period. Newly fracked wells released 2.4 million metric tons of methane in 2014 — equivalent to the annual greenhouse gas emissions of 22 coal-fired power plants. At this point, more than a thousand square miles of the country have been disturbed by fracking activity, the report says, with 137,000 fracking wells drilled or permitted across more than 20 states.
Texas fracking numbers are mind-boggling, but what do they really mean? -- Environmental groups have analyzed the data and come up with a set of staggering numbers to illustrate the impact of fracking in Texas. Related Methane emissions underestimated by EPA, study says Fracking has done no widespread harm to drinking water, EPA says Ten billion pounds of chemicals — many of them carcinogenic — were injected underground as part of the drilling process. Texas fracking has used 120 billion gallons of water since 2005, while producing 15 billion gallons of wastewater in 2014. And at least 2.5 billion pounds of methane, which contributes to global warming, were released in 2014.There are phenomenally large numbers in the “Fracking by the Numbers” report from Environment Texas Research & Policy Center and the Frontier Group. The report’s subtitle, “The Damage to Our Water, Land and Climate from a Decade of Dirty Drilling,” tells you the groups’ stance against fracking. Luke Metzger, director of Environment Texas, said there was already awareness of the damage caused by fracking. But he said recent access to downloadable data allowed his group, part of the Environment America Research & Policy Center, to present a fuller understanding. He said this gives the public “an overall picture” of what fracking is doing and points to the need for more action “To protect the public and our environment, states should take action to ban fracking, or, failing that, to ensure that oil and gas companies are held to the highest level of environmental performance, transparency and accountability,” the study’s executive summary argues. The study focuses on Texas but also includes information from other states.
How Eagle Ford drilling prospects vary by location -- The oil price collapse has opened a wide rift between high quality “good” assets, breakeven “bad” assets, and ruinous “ugly” assets. The consequences will impact energy markets for decades to come. In our recently published Drill Down Report, we demonstrate the differences between good, bad and ugly wells by examining the diversity of production economics across the Eagle Ford basin and why producers have been zeroing in on the counties——and areas within those counties—where initial production (IP) rates are highest, and preferably where large volumes of associated natural gas and natural gas liquids can be found as well. Today we consider Eagle Ford counties in more depth—their IPs, their internal rates of return (IRRs), and the number of new-well permit applications in each county in the first quarter of 2016. As we discussed in our previous Good, Bad and Ugly blog, U.S. oil producers responded to the crude oil price collapse that started in mid-2014 by pulling in the reins on drilling activity. At first, the cutbacks came slowly—a lot of momentum had built up in the boom years, and more than a few prognosticators thought that lower prices were only a short-term phenomenon, so why cut drilling to the bone? But oil prices kept falling, and here we sit, with crude selling for about $40/Bbl and the rig count is now down to a paltry 354 rigs drilling for crude. The catch is that the rigs still drilling are anything but evenly distributed. They are tightly focused on the areas where producers can get the most bang for their buck – the core areas. In our latest RBN Drill Down Report, we show that—now more than ever—all production economics is local, and that it is only when we understand the rate of return (or profitability) of wells at a more granular level that we can begin to figure out when it makes sense to drill and complete wells (or not) in each of the counties within the Permian, the Bakken, the Eagle Ford and other major U.S. basins.
As Man-Made Earthquakes Thunder Through Oklahoma, Residents Get Innovative With the Law - Jackie Dill finds it nearly impossible to talk about her 1930s homestead without dissolving into tears. “We feel so helpless and hopeless,” says the 65-year-old, quietly sobbing with her husband, Jim, beside her. “I try to be a brave soul, but it rips my heart out. Last year was ungodly. I held my breath every day.” In Oklahoma, a stone or brick home might save you from a tornado. But it might kill you if there’s an earthquake—and the Dills, who live in the one-story stone-and-mortar farmhouse with their five dogs, have been overwhelmed with quakes. “Each year, it’s gotten worse,” Jackie says. “I counted 34 earthquakes in a single day last year. You know when it’s coming, because there’s a roar like thunder in the ground and the dogs start to howl. Then there’s a big bang and a drop.”The earthquakes have cracked her home’s foundation, walls, windows, sills and plumbing. A magnitude-4.4 quake last November buckled the rafters and split the front porch off the house, which is now sunken below the ground at one corner, she says. They do not have earthquake insurance and cannot afford the repairs. “Even if we had the resources, the house could just get hit again,” she says. The Oklahoma Independent Petroleum Association (OIPA), the industry’s largest trade group, has yet to acknowledge a direct link between energy companies’ practices and earthquakes, calling for further study of the issue. (OIPA did not return Newsweek's calls for comment.) Meanwhile, on March 28, the United States Geological Survey (USGS) published its annual seismic hazard forecast, which, for the first time, accounted for induced earthquakes. “ Wastewater disposal,” the agency wrote, “ was the primary cause for recent events in many areas of the [central and eastern U.S.].” “So we tolerate far more risk than we ever should.... We hate lawyers, but if our leaders aren’t doing enough to reduce seismic events, citizens have no recourse other than the courts at this point.”
US oil, gas leasing continues fall, unused leases hit high: BLM - Platts - The number of oil and natural gas leases on US and tribal lands continued to fall in fiscal 2015, while the number of approved yet unused drilling permits reaching a record high, Bureau of Land Management data showed Monday. The data, updated to include statistics through fiscal 2015, seems to back up frequent arguments from US producers that the Obama administration is doing little to promote drilling on federal lands amid the ongoing shale renaissance. But it also bolsters claims often made by administration that these same producers are often letting leases on federal lands remain idle or simply not interested in drilling on lands the government has opened for oil and gas development. Production from federal and tribal onshore leases accounted for 7% of total US oil production and 11% of total US natural gas production in fiscal 2015, BLM said. In fiscal 2015 industry bid on just 15% of the over 4 million acres of federal land BLM offered for lease and continued to produce on only 40% of the federal acres currently under lease, the agency said in a statement."At the end of the last fiscal year, there were 32.1 million acres of public land under lease -- an area the size of Alabama -- yet only 12.8 million acres were producing, an increase of 70,000 acres from the prior year," the BLM said. More precisely, the total number of producing leases on federal lands has fallen from 14.54 million in fiscal 2008 to 12.76 million in fiscal 2015 while the total number of wells spud each year on federal lands has fallen from 5,044 in fiscal 2008 to 1,621 in fiscal 2015.
The new climate rallying cry: keep it in the ground - Nobody said a word as the auctioneer took his place at the lectern, but the tension was deafening. Nearly 100 protesters had packed the room at Utah's Salt Palace Convention Center, mad as hell that the federal government was about to sell oil and gas leases for up to 45,000 acres of public land. Some of the activists held signs: "Our lands, our future," or, "Don't auction our climate." "OK, let's start the sale, ladies and gentlemen. The first parcel on there is No. 1266, it's up there in the upper corner if you want to follow along. It consists of 162-plus acres of it, located out in Juab County. And who will give me an opening bid of $2 to start? Two-dollar bid?" The protesters hadn't planned to disrupt the auction. But once the bidding got underway, they couldn’t help themselves. A few of them started chanting, and soon everyone joined in. Their voices got louder and louder: "People gonna rise like the water, gonna calm this crisis down. I hear the voice of my great-granddaughter, saying, 'Keep it in the ground!'" A federal official told the activists that if they didn't quiet down, Salt Lake City police would escort them out. He gave them 60 seconds to stop chanting; police officers stood, ready to act. They stopped chanting — but only for a few minutes, unable to sit silently as oil and gas leases were auctioned off for as little as $2 an acre. This time, they didn't get another chance. As police moved in and ordered them to leave, one of the protesters, Tim Ream, shouted at the bidders, "Show this to your grandkids! Show it to them and explain what’s happening with the climate!"
Minnesota regulators set 12 public meetings on oil pipelines - (AP) — Minnesota regulators plan a dozen public meetings on Enbridge Energy’s proposed Sandpiper oil pipeline across northern Minnesota and its plan to replace its Line 3 pipeline. The meetings will deal with the scope of an upcoming environmental review. Sandpiper would carry North Dakota light crude to Enbridge’s terminal in Superior, Wisconsin, while the Line 3 replacement would carry Canadian tar sands oil to Superior, sharing much of the same route as Sandpiper. Regulators have prepared a draft laying out what the environmental review would cover and a tentative schedule. The Public Utilities Commission will use the review in deciding if the pipelines are needed and what route they should take. The meetings run from April 15-May 11 in communities along the planned route, and May 9 in St. Paul
Keystone XL may be dead, but big pipelines are still an issue - Last November, to the relief of almost everyone not on the TransCanada payroll, President Obama nixed the northern leg of the Keystone XL pipeline that would have taken oil from the Canadian Tar Sands all the way to the US Gulf Coast. It was a good thing. But just because Keystone XL won’t be constructed (until a Republican is in the White House) doesn’t mean that we’re free from fantastically long pipelines, and the number of leaks from these pipelines is increasing. Last year, an analysis of federal data by the Associated Press found that the annual number of significant leaks in oil pipelines had risen by 60 percent since 2009, more or less a match for the increase in U.S. crude oil production. Around two-thirds of those leaks were caused by corrosion, material failure, bad welds or equipment failures. The rest were caused by natural disasters or human error. All of which leads to the EPA suggesting a tighter look at another mega-pipeline in the works. The pipeline will cross through Illinois, Iowa, North Dakota and South Dakota. Dakota Access, a unit of Dallas-based Energy Transfer Partners, has received state permits to proceed with the 1,168-mile pipeline, which will carry nearly half a million barrels of oil a day from northwestern North Dakota's Bakken oil fields. Bakken is one of those fields opened up by fracking, which has completely upended oil and gas production in the US and provided a sudden abundance of cheap oil. This pipeline will cross dozens of rivers (including the Missouri and Mississippi) cut through threatened tall grass prairie, run past the home range of endangered species, and, oh yeah, cut through Native American tribal lands where the EPA official in charge believes it could threaten drinking water supplies.
EPA, other agencies seek more careful review of oil pipeline - (AP) — The Environmental Protection Agency and two other federal agencies have asked the U.S. Army Corps of Engineers to more carefully review and revise its preliminary plan for the Dakota Access oil pipeline, saying it should pay closer attention to the impact a spill would have on drinking water for Native American tribes. Besides the concerns over water for the tribes near the pipeline route, the EPA, Department of the Interior and Advisory Council on Historic Preservation also want a better look at whether the route would disturb historic sites. The pipeline will cross through Illinois, Iowa, North Dakota and South Dakota. Dakota Access, a unit of Dallas-based Energy Transfer Partners, has received state permits to proceed with the 1,168-mile pipeline, which will carry nearly half a million barrels of oil a day from northwestern North Dakota’s Bakken oil fields. It awaits final federal approval from the corps, which has jurisdiction over portions of the pipeline that cross public waterways including the Missouri and Mississippi rivers and must consider impact on historical sites, animal habitat for threatened species and the environment. The corps’ Omaha District is responsible for the project in South Dakota and North Dakota, where the pipeline crosses the Missouri River. Corps officials in Omaha released a draft environmental assessment in December that concluded the company’s proposed route “is not expected to have any significant direct, indirect, or cumulative impacts on the environment.” In March, corps officials received letters from the EPA, Interior Department and Advisory Council on Historic Preservation criticizing that evaluation. The EPA said the corps should better assess the potential impact of a pipeline leak to drinking water sources for Native American tribes. Philip Strobel, an EPA official responsible for ensuring compliance with the National Environmental Policy Act, said the Missouri River is used as the drinking water supply for much of western South Dakota and five Tribal Nations — the Cheyenne River, Crow Creek, Oglala, Rosebud and Lower Brule Sioux tribes.
Oil bust leaves energy industry, real-estate sector locked in battle over empty oilfield worker camps – A no trespassing sign collects dust next to an empty, chained-off parking lot for an equally empty work camp in the heart of North Dakota oil country. The sign and limp chain haven’t kept curious locals from trying to get a closer look at the Black Gold camp – a few brave ones have confessed on condition of anonymity to looking in the windows and scurrying through the vacant halls.Black Gold is one of many camps that are haphazardly scattered in and around Williston, the hub of the state’s shale oil boom. This camp on the northern edge of town was once filled with hundreds of oilfield workers during the shale boom, but, now, like others in the area, sits as empty as a ghost town as crude prices have collapsed. Civic politicians in Williston want the camp gone and have voted to give all camp operators within the boundaries of the city notice that they will need to clean up and leave this July. The deadline is an attempt to turn the city’s transient workers, who fly in and out on work shifts, into permanent, property-tax paying residents. It has also put the local government in the middle of a fight between the energy industry, which has threatened legal action if they are kicked out, and real-estate developers that are keen to sell or rent their apartments and condos to oilfield workers currently in camps. Across the border, officials in Canadian cities are, like their southern counterparts south, also trying to figure out the best way to move oilfield workers from camps into permanent housing. “What we would like to see (companies) do is have workers live in the community and not promote the work camps,”
Utility regulator, SoCal Gas at odds over reopening of natural gas field - SoCal Gas and the California Public Utilities Commission (CPUC) are at odds over how quickly the Aliso Canyon natural gas storage facility will be reopened after a devastating leak that released tens of thousands of tons of methane into the atmosphere this past winter. SoCal Gas, which operates the 115-well Aliso Canyon field, says the field can be up and running again, minus the broken well that had leaked for months, by late summer. But in a Friday meeting of energy officials and residents of the impacted Porter Ranch community, CPUC President Michael Picker said, "I assume we won't have Aliso Canyon back on-line this year,” The issue here is that the Aliso Canyon storage field, which is one of the biggest west of the Mississippi, provides the bulk of the natural gas that Southern Californian utilities run on. The field is currently at one-fifth of its capacity, and the utility is currently barred from filling the reservoirs with any more natural gas. State energy officials have said that the reduced natural gas reserves could mean that the Los Angeles area might experience “limited power outages” for up to 14 days this summer and up to 32 days this year. Last week, CPUC put together a plan (PDF) to deal with the shortages that included making use of a “Flex Alert” program that "calls on residents and businesses to reduce their energy use on days during the summer when electricity demand is highest,” according to a press release. The release continued: "Other measures recommended in the plan include greater coordination among state and local gas and electrical utilities, more energy efficiency programs, and closer matching of gas supply and demand by large gas customers.”
Report Potentially Dangerous Fracking Chemicals Used in California – California has almost 50,000 oil wells and more than 4,100 gas wells – and a new report says federal law allows companies to use chemicals for drilling and fracking with virtually no health testing and then use confidentiality claims says federal law allows companies to use chemicals for drilling and fracking with virtually no health testing and then use confidentiality claims to hide basic information on what's being injected. The report, by the nonprofit advocacy group the Partnership for Policy Integrity, reviewed EPA records and found that health information was made public in only two of 99 cases. Dusty Horwitt, senior counsel with the Partnership for Policy Integrity, says the 1976 Toxic Substances Control Act is too lax. "Companies can claim the chemicals' name confidential, same thing with the expected production volume, how people might be exposed to the chemical,” he states. “And that prevents people from identifying in some cases where the chemicals are used." The EPA has expressed concern about many of these chemicals, saying exposure can cause skin and eye irritation and be toxic to the brain, liver and kidneys. Oil and gas companies say they comply with the law and are within their rights to claim proprietary information as confidential. Horwitt says the EPA tests don't take into account the possibilityof leaks or spills, and adds that researchers found that two of the chemicals of concern have been used in . "We think it's important that someone from the state of California or an independent researcher go to these well sites and make sure that these chemicals aren't migrating into groundwater or otherwise getting out into the environment where they can come into contact with people," he states. Two bills are making their way through Congress that improve the rules on confidentiality and make it easier for the EPA to request more health tests. But Horwitt notes that the bills still don't require public disclosure of information about the chemicals or the health testing.
Feds: EPA fails to protect water from oilfield contamination (AP) — The U.S. Environmental Protection Agency is failing in its mandate to protect underground drinking water reserves from oilfield contamination, according to a federal review singling out lax EPA oversight in California, where the state routinely allowed oil companies to dump wastewater into some drinking water aquifers. The U.S. Government Accountability Office review also sampled EPA operations around the country before concluding federal regulators were failing to collect paperwork and make on-site inspections necessary to ensure states are enforcing the Safe Drinking Water Act when it comes to oilfield operations. “The takeaway overall is that the EPA doesn’t collect and states don’t provide the information for the EPA to exercise the oversight that’s its job,” said Kassie Siegel, senior counsel at the Center for Biological Diversity, one of the environmental groups critical of state and federal regulation of oilfield waste and drinking water. “It shows a massive failure to protect our drinking water,” Siegel said, emphasizing the problem in California. The federal review released last month made an object lesson of California, the country’s No. 3 oil-producing state, where state and federal regulators have acknowledged since at least 2014 that state-permitted oilfield operations were violating safe-drinking water laws. Violations included allowing oilfield companies to dump wastewater into at least 11 underground aquifers that were supposed to have been protected by federal law as potential sources of drinking water. An Associated Press analysis in 2015 cited more than 2,000 permits California had given oil companies to inject into federally protected drinking water reserves. The AP analysis found granting of such permits had sped up since 2011 under Gov. Jerry Brown, although the state said it believed its dates on some of the permitting information were wrong.
Stricter offshore drilling rules issued, upsetting industry: (AP) — The Obama administration issued new rules Thursday to make oil and natural gas offshore drilling equipment safer and to reduce risks in digging wells, but the oil industry and its supporters in Congress say they are costly and questioned their need. The rules published by the Interior Department came nearly six years after the catastrophic blowout of a BP well in the Gulf of Mexico killed 11 workers and injured many others aboard Transocean’s Deepwater Horizon drilling rig. The out-of-control leak dumped millions of gallons of oil into the Gulf. Meanwhile, another federal agency — the U.S. Chemical Safety Board — issued recommendations Wednesday saying even more rigorous safety standards are needed to make offshore drilling safe. That agency said offshore workers should be involved more in safety decisions and regulators given more authority to enforce rules. The Interior Department rules target blowout preventers, massive valve-like devices meant to prevent oil and gas from escaping when a driller loses control of a well. The device failed in the BP spill. Officials said the rules will improve the inspection, maintenance, and repair of blowout preventers, which are known as BOPs. For example, the devices will need to be broken down and inspected every five years. Also, companies will have to use BOPs that are better equipped to shear drill pipe in the case of an emergency. This was one of the problems in BP’s disaster. In addition, drilling of highly complex wells must be monitored in real-time by experts onshore.
AP source: Rule on offshore drilling aims to enhance safety — The Obama administration is planning to issue a final rule designed to enhance the safety of offshore oil drilling equipment. The rule, expected to be announced Thursday, comes in response to the 2010 Deepwater Horizon explosion, which killed 11 people and dumped millions of gallons of oil into the Gulf of Mexico. Federal investigators blamed a faulty blowout preventer for the spill and called for stronger regulations of equipment that prevents oil and gas from rushing to the surface. An administration official not authorized to speak publicly confirmed the timing of the rule announcement on condition of anonymity. Industry officials have complained that the proposed changes would cost billions of dollars more than projected.
Exxon Says `$25 Billion Rule' Will Sink Deepwater Oil Drilling - The world’s biggest oil explorers have bitterly contested a U.S. plan to toughen offshore drilling rules that Exxon Mobil Corp. said will cost as much as $25 billion over 10 years and render many offshore discoveries worthless. The Obama administration issued sweeping new regulations Thursday as part of an effort to reduce the number of well blowouts after the explosion aboard the Deepwater Horizon rig in 2010. The government has pegged the rules’ costs at less than $1 billion. The changes arrived amid the worst oil slump in a generation. ConocoPhillips and Chevron Corp. have already abandoned some Gulf prospects because they wouldn’t be profitable at current prices. Before the final regulations were announced, consulting firm Wood Mackenzie Ltd. predicted they would cause exploration outlays in the Gulf to tumble by 70 percent over the next two decades, wiping out as many as 190,000 jobs. “The “Oil companies and the service providers are trying to come up with ways to reduce costs so the idea that they can absorb any additional expenses -- they’re not in that ballpark at all.” . The regulations, first proposed last year, strictly control the types of fluids pumped into wells, require redundant safety devices and stipulate continuous monitoring from shore. The changes were needed because well blowouts have continued at about the same rate as before the explosion at BP Plc’s Macondo well in 2010 that killed 11 and spewed millions of gallons of crude, the government says.
Exxon Mobil Exports First Cargo of Offshore Gulf of Mexico Crude - Exxon Mobil is shipping a cargo of crude produced from its deepwater Julia field in the Gulf of Mexico to its refinery in Rotterdam, Netherlands, marking the first export of offshore oil to leave a U.S. port since a ban was lifted. The crude came from initial well tests conducted on the Julia project, Aaron Stryk, a company spokesman, said in an emailed statement on Thursday. The oil company is sending a modest 18,000 barrels of oil on a Panamax tanker, the PGC Marina. Refiners typically do tests to see how new crudes will impact yields from making fuels. While only a small volume, the cargo is the first known export of offshore oil from the United States since Congress lifted a ban last December. Until now, all other shipments had been of light onshore oil. The vessel departed from Gramercy, Louisiana, in early April and is expected to arrive in Rotterdam on April 19, according to the data. It was not clear whether Exxon would continue to export Julia crude, but the firm anticipates an initial production of 34,000 bopd following the startup of the field in the second quarter of this year. Initial testing on the Julia field, a joint venture between Norway's Statoil and Exxon Mobil located roughly 200 miles south of New Orleans, Louisiana, began in March.
Three Oil Majors Have Debt Ratings Cut by Moody's on Price Rout - Bloomberg: Chevron Corp. and Royal Dutch Shell Plc had their ratings reduced by one level, while Total SA’s was cut two steps, according to statements by the New York-based rating company on Friday. Chevron will generate negative cash flow amid rising debt for at least the next two years, while Shell will have elevated leverage following its acquisition of BG Group Plc, Moody’s said. Prices are expected to stay low through this year and next and continue to pressure Total’s operating cash flows and credit metrics, Moody’s said. Oil companies big and small are having their credit ratings cut as the collapse in crude prices reduces cash flows and limits their ability to sustain debt payments. Prices in New York are down by more than 60 percent from a mid-2014 peak. Chevron and Shell’s ratings were lowered to Aa2, the third-highest grade, from Aa1. Total’s rating was brought down to Aa3, from Aa1. BP Plc’s rating was confirmed at A2, as its credit metrics and business profile compare favorably with its major oil peers and the July 2015 settlement over the Macondo spill reduced legal uncertainties and gave clarity on its business, Moody’s said. The actions conclude reviews started in January and February by Moody’s, which expects that global oil prices will remain weak over the medium term. The world is “awash in oil” and high inventories and production are declining slowly, Moody’s analysts led by Terry Marshall said in a March 30 report. If U.S. crude rises above $50 a barrel, investment by lower-cost, short-cycle producers will undercut the effort by Organization of Petroleum Exporting Countries to bring down the global glut, the analysts said.
U.S. shale oil firms feel credit squeeze as banks grow cautious | Reuters: Nearly two years into an epic oil rout, U.S. shale drillers that have upended global energy markets are finally feeling a credit squeeze as banks make their biggest cuts yet to their loans. Every six months, oil and gas producers and their banks negotiate how much credit they should be given based on the value of their reserves in the ground. In previous reviews, banks were willing to offer borrowers some leeway, encouraged by producers' hedges against falling prices and their ability to keep cutting costs in step with crude's slide that began in mid-2014. This time, with many companies' hedges largely gone and crude prices used in the reviews as much as 20 percent lower than six months earlier, banks are getting tough. Just a few weeks into the current round of talks more than a dozen companies have had their loans cut by a total of $3.5 billion, equivalent to a fifth of available credit, according to data compiled by Reuters.U.S. crude CLc1 settled up $1.81, or 4.48 percent at $42.17 a barrel. In post-settlement trade, both Brent and WTI pared gains under pressure from a larger-than-expected build in U.S. oil inventories suggested by data from the American Petroleum Institute, a trade group. Brent retreated to $44.19 by 4:50 p.m. EDT, while WTI pulled back to $41.64. Oil markets were already boosted ahead of an OPEC member meeting with outside producers in Doha, Qatar, on Sunday, but the comments fueled hopes that oil producers will agree on steps to tackle a supply glut. Still, some analysts remained skeptical. While the market was being driven higher on a global supply-demand rebalancing, the threat of record-high inventory levels and producers increasing output once prices rebound continued to loom.
Oil And Gas Sector Troubles Drive Corporate Default Rate To Highest Level In Seven Years: S&P -- The troubled oil and gas industry has been a big factor in driving global corporate defaults to their highest rate in seven years. Four more companies defaulted this week, bringing the overall tally to 40 so far this year, the ratings agency Standard & Poor’s said Friday in a research note. The last time defaults hit such heights was in the depths of the global recession in 2009. About one-third of that total, or 14 defaults, came from oil and gas companies, which are struggling to pay off debt acquired when oil prices were higher. U.S. crude prices are down more than 60 percent from their June 2014 peak of $105 a barrel, trading at around $39 a barrel Friday. Investors now face tens of billions of dollars in energy defaults as the worst oil crash in decades leaves drillers struggling to stay afloat. U.S. companies saw the highest number of defaults, with 34 of the total thus far in 2016. S&P in February lowered its ratings on Paragon Offshore PLC to "D," or "default," after the Houston company said it was filing for Chapter 11 bankruptcy protection and had entered talks with bondholders and other creditors. The ratings agency also slapped a D rating on Energy XXI Ltd., which said in March it would delay two interest payments on loans worth a combined $1.54 billion. Despite the gloomy days, some investors are still banking on a near-term recovery. Investors issued around $8.9 billion in equity to U.S. oil and gas companies in the first quarter — a more than tenfold jump above the $0.8 billion in equity issued in the same period last year, the Carbon Tracker Initiative said Wednesday in a report, citing Bloomberg data on 60 exploration and production companies.
Banks Face New Headache on Oil Loans - WSJ: The $147 billion question for banks: Will energy companies max out their credit lines? When big banks announce earnings starting Wednesday, the spotlight will be on vast energy loans that most investors didn’t know much about until recently. These unfunded loans have been promised to energy companies, which haven’t yet tapped the money. Many banks historically haven’t disclosed these loans, but began doing so recently following the extended slide in prices for oil and gas. In the first quarter, a handful of energy borrowers announced more than $3 billion of drawdowns against these types of loans. Those commitments are expected to trickle down to bank earnings and saddle firms with more energy exposure just as they are trying to pare it back. “Let’s not sugarcoat it. This is not necessarily a loan a bank wants to make at this point,” said Glenn Schorr, a bank analyst at Evercore ISI. Oil prices have risen in recent weeks, with the U.S. benchmark settling at $42.17 a barrel on Tuesday, but analysts say the unfunded loans to the sector still are a headache for banks at that price. Banks in recent months have set aside billions of dollars to cover potential losses tied to energy companies, a trend likely to continue as more loans go bad. Fitch Ratings Inc. released a report Tuesday that said that nearly 60% of unrated and below-investment-grade energy companies are likely to have loans labeled as “classified,” or in danger of default under regulatory guidelines. “Banks often use a company’s proven energy reserves as collateral for loans and typically reset the value of these reserves twice a year, usually in spring and fall. The draws made so far were done ahead of the spring redetermination process, in which banks are expected to cut the credit lines of energy firms by an average of more than 30%, according to a survey from law firm Haynes & Boone LLP.
Wells Fargo Misjudged the Risks of Energy Financing - At its annual investor conference in San Francisco in May 2014, with oil trading at $102 a barrel, Wells Fargo & Co. boasted that in just two years it had almost doubled its energy exposure and seized the title of Wall Street’s top oil and gas banker. The timing couldn’t have been worse. Crude prices peaked a month later and have since plummeted to $40. Wells Fargo has downgraded 38 percent of its energy loans and set aside $1.2 billion to cover potential losses, according to company filings. The loans are coming under increasing scrutiny from regulators and investors, even though they make up only 2 percent of the bank’s portfolio. Wells Fargo’s foray into oil shows how Wall Street misjudged the risks hidden in an esoteric type of energy financing long thought to be bulletproof. To fuel the growth of its energy desk, the bank targeted some of the least creditworthy borrowers in the shale patch, offsetting the risk by demanding oil and gas as collateral. This type of financing, known as reserves-based lending, was considered safe because banks historically got back every penny they loaned, even after default, according to a 2013 Standard & Poor’s report. “The perception was the risk was reasonably low,” Dennis Cassidy, co-head of the oil and gas practice at consulting firm AlixPartners in Dallas, said of reserves-based lending across the industry. “The volume and velocity of deal flow was such that it was a rubber stamp. They were not scrutinizing price assumptions and forecasts. Everyone was open for business. It was full on, full throttle.”
Wells Fargo Has A Problem: $32 Billion In Junk-Rated Oil And Gas Exposure - The Full Breakdown -- Following its recent critical profile by Bloomberg which earlier this week penned, "Wells Fargo Misjudged the Risks of Energy Financing", which came about 4 months after we wrote an almost identical report, the biggest US bank by market cap knew it had to reveal more than just the usual placeholder data in its investor presentation today. Sure enough, Warren Buffett's favorite bank finally opened its books more than usual as concerns built about its $17.4 billion in total outstanding oil and energy loans (at the end of 2015). This is what it revealed. First, the big picture. As the chart below shows, Wells' net income has been consistently declining in the past year, with earnings of $5.5BN down from $5.8BN a year ago even as revenues grow 4% over the same period. Here is the reason: Net Interest Margin continues to decline, as a result of the continued curve flattening. This ongoing decline in NIM is forcing Wells to issue ever more loans to maintain its average loan/yield constant. As the chart below shows, it is doing just that, with period end loans outstanding soaring by $86BN from a year ago to $947.3BN. All of that, however has to do with the structural constraints of the economy, and the ongoing collapse in rates. What about Wells' overall credit book? Here we find some curious observations here. Net charge-offs rose to $886 million, up $55 million, or 7%, LQ on $87 million higher oil and gas portfolio losses. And yet, despite the abovementioned $17.8 billion (as of Q1) in loans to oil and energy and despite the deteriorating conditions, Wells only built reserves by a paltry $200 million reserve build in the quarter, resulting in a 0.38% net charge-off rate "as continued improvement in residential real estate was more than offset by higher oil and gas reserves."
US banks spell out toll of low oil prices -- Three of America’s biggest banks have each taken $500m hits on their energy portfolios and warned of more pain to come, as they spelt out the damage inflicted by lower oil prices. Wells Fargo, Bank of America and JPMorgan Chase were among the most aggressive lenders to the oil boom, putting together portfolios on the basis that high prices were here to stay. But as explorers and producers continue to struggle with crude at about $40 a barrel, down more than 60 per cent from the 2014 peak, the bills are coming due for the lenders that backed them. Wells on Thursday announced that it would pump up its reserves for energy losses to $1.7bn, from $1.2bn at the end of the fourth quarter, while Bank of America added $525m to its buffer. A day earlier, JPMorgan Chase said it had increased its reserves by $529m during the quarter — and said it could add another $500m by the time the year is out.The disclosures have been the focus so far of the US banks’ first-quarter earnings season. On each earnings call, analysts have repeatedly grilled executives on their discussions with borrowers, asking if the troubles on the oil patch were likely to get worse — and if the banks were seeing spillover effects in other areas such as mortgages, car loans and credit cards.The banks have emphasised that their energy loans are manageable, accounting for about 2 per cent of their total loan books.They have also stressed that second-round effects of the oil slide appear, for now, to be contained to oil-dependent regions. Wells Fargo said it had spent a lot of time examining consumer portfolios in states such as Texas, Oklahoma and the Dakotas, and noted that delinquency rates were now more in line with nationwide averages, after years of outperformance. "We in the financial markets got worried about stresses spreading; it looks like that was overblown,” said Brennan Hawken, an analyst at UBS.
More Energy Defaults: Energy XXI Files Chapter 11; Gulf Keystone Delays Bond Payment -- Following yesterday's historic bankruptcy of the world's largest coal miner Peabody Energy, the defaults continue hot and heavy overnight when first Energy XXI, which had already warned it would unlikely make its bond payments, filed for a prepack Chapter 11, and then Gulf Keystone announced it would delay a bond payment. This is what XXI posted overnight to explain its prepackaged bankruptcy: Energy XXI Enters Restructuring Support Agreement With Second Lien Noteholders to Strengthen Balance Sheet and Reduce Debt Energy XXI announced today that it and certain of its subsidiaries have entered into a Restructuring Support Agreement (the "RSA") with holders of more than 63% of the Company's secured second lien 11.0% notes (the "Second Lien Notes") on the material terms of a balance sheet restructuring plan that will strengthen the Company's financial position by reducing long-term debt and enhancing financial flexibility. Through the Chapter 11 restructuring, Energy XXI will eliminate more than $2.8 billion in debt from its balance sheet, substantially deleverage its capital structure and position the Company for long-term success. The RSA eliminates substantially all of the Company's prepetition funded indebtedness other than its first lien reserve based loan facility, resulting in a significantly deleveraged balance sheet upon the Company's emergence from the Chapter 11 bankruptcy process. The RSA also provides that John Schiller will continue as the reorganized company's Chief Executive Officer and a member of its board of directors. The Company is also continuing ongoing negotiations with a steering committee of lenders under the Company's first lien reserve based loan facility that is not party to the RSA at this time.
$14 Billion In Junk Bond Defaults Push April Total To Highest Since 2014 -- Following yesterday's bankruptcy of Peabody Energy and today's Chapter 11 filing of XXI Energy, defaults among American junk bonds just topped $14 billion in April, the highest monthly volume in two years according to Fitch calculations, and that is only for the first two weeks. April's surge in bankruptcy filings is not unexpected: according to JPM's default tracker, the number of bankruptcies was on a tear in both the month of March and the first quarter. In the past month alone seven companies defaulted totaling $16.4bn, including $12.3bn in high-yield bonds and $4.1bn in leveraged loans. This marked the third highest monthly volume since the last default cycle, trailing only April 2014’s $39.5bn (TXU) and December 2014’s $18.3bn (CZR). With two weeks left in the month, April may well surpass March. For context, during the last default cycle in 2008/2009, monthly default volume exceeded the March total only six times. By comparison, nine companies defaulted in February totaling $9.7bn (upwardly revised as UCI International totaling $400mn in bonds was added), which followed five defaults totaling $5.25bn in January and five defaults totaling a 2015-high $8.2bn in December. Default activity has clearly picked up over the last several months, with March marking the fifth consecutive month of greater than $5bn in default volume and the seventh $5bn month from the past ten. Further evidencing the recent pickup in activity, an average of $6.8bn has defaulted per month over the last eight months, compared with a $2.1bn average over the prior seven months and a modest $1.6bn monthly average from 2010 through 2014 (excluding TXU and CZR).
Is Cheap Oil Contractionary? - Krugman - Low oil prices were supposed to be a big boost for the world economy; but it didn’t happen. Maury Obstfeld, my long-time textbook co-author and now chief economist at the IMF, offers an interesting argument about why: he suggests that it’s because of the zero lower bound. Falling oil leads to falling inflation expectations, and since interest rates can’t fall, real rates go up, hurting recovery. Matt O’Brien is skeptical, and so am I — even though I am very much in favor of rethinking our usual assumptions when the economy is at the ZLB. First, a priori, falling oil prices shouldn’t affect expectations for the rate of inflation of non-oil goods and services, or at least it’s not obvious that it should — and that’s the inflation rate that should matter for investment. Still, you could argue that oil is in fact driving those expectations, whether it should or not. What Matt does is question whether correlation is causation. I’d make another point: even using market expectations, real interest rates have in fact gone down, not up, in the face of falling oil prices: How is this possible, given the zero lower bound? It’s all about the term structure: long-term rates aren’t at zero, although they’re at least somewhat supported by the floor on short-term rates. And as it turns out, during the recent oil crash long-term rates fell enough to more than offset the decline in expected inflation.
Pay Shrinks for Most Oil CEOs, as Crude’s Swoon Hits Stocks - WSJ: Most—but not all—top oil executives are seeing their pay shrink, after a plunge in crude prices that has erased $200 billion in stock-market value from the world’s largest publicly traded energy companies. Bob Dudley, BP’s chief executive, enjoyed about a 20% bump in pay to $19.6 million in 2015, despite his company’s $5.2 billion loss for the year and an accompanying stock-price decline of 11%. Many BP shareholders are incensed by the increase, and investor-advisory firms including Institutional Shareholder Services are counseling them not to ratify Mr. Dudley’s pay package at the company’s annual meeting Thursday. “This proposed increase is both unreasonable and insensitive,” BP defended the pay package. “Despite the very challenging environment, BP’s safety and operating performance was excellent throughout 2015, and management also responded early and decisively to the steep fall in the oil price,” a company spokesman said. Other executive pay packages shrank along with stock prices. Exxon Mobil released data Wednesday that showed CEO Rex Tillerson’s salary rose 6% to $3 million in 2015 even as the company’s shares lost 15% of their value. But Mr. Tillerson’s total pay fell 18% to $27.3 million, due to a lower bonus, stock awards and interest-rate-related changes in his pension. For the past five years, oil giants Exxon, Chevron. Royal Dutch Shell and BP have paid their top bosses nearly $500 million in combined compensation, even though the companies’ annualized returns for the period have undershot those of the S&P 500. In 2015, Chevron chief John Watson’s pay, including salary, bonus and stock options, rose 3%, but with pension-benefit changes his total compensation fell by 15% to about $22 million.
BP chief suffers shareholder revolt over $20M pay pack - (AP) — British energy producer BP has suffered a revolt by shareholders who objected Thursday to increasing Chief Executive Bob Dudley’s pay package by 20 percent after profit plunged last year. Almost 60 percent of shareholders rejected the remuneration report, which awarded Dudley a $19.6 million pay package even though the company experienced a drop in profit and planned thousands of job cuts worldwide. But the vote was only advisory, and merely registered displeasure. The company said it got the message — and promised to review its remuneration policy ahead of next year’s meeting. New proposals are expected to be put forward for shareholder approval in 2017. “We hear you,” Chairman Carl-Henric Svanberg said in excerpts released Thursday. “We will sit down with our largest shareholders to make sure we understand their concerns and return to seek your support for a renewed policy.” Aberdeen Asset Management, which manages more than 290 billion pounds ($411 billion), was among those complaining BP’s award system was too complex. A representative from the Church of England also questioned the morality of such a rise, given that Britain is undergoing a time of fiscal austerity. Shares in BP fell almost 14 percent in 2015. Its earnings plunged 91 percent in the fourth quarter, though much of that can be attributed to falling global oil prices.
Introducing IOGCC: The Most Powerful Oil and Gas Lobby You’ve Never Heard Of -- Steve Horn - The Interstate Oil and Gas Compact Commission (IOGCC) is far from a household name, but a new investigation published by InsideClimate News’ Pulitzer Prize-winning investigative reporter Lisa Song may have just put what is likely the most powerful oil and gas lobbying node you’ve never heard of on the map. Titled, “Is the IOGCC, Created by Congress in 1935, Now a Secret Oil and Gas Lobby?,” the article’s origins lay in the hundreds of documents obtained from open records requests and historical archives by me and Jesse Coleman, a researcher at Greenpeace USA, that are part of an ongoing investigation into IOGCC. Song’s article for the award-winning InsideClimate News reveals documents that show for the first time that it was IOGCC at the front and center, and not just Halliburton, which created what many now know as the Halliburton Loophole. That regulatory loophole exempts the oil and gas industry from U.S. Environmental Protection Agency enforcement of the Safe Drinking Water Act as applied to hydraulic fracturing (“fracking”) and is seen as what opened the Pandora’s Box for industrial high volume slickwater horizontal drilling in the United States.But before getting too far into the weeds of IOGCC‘s deeds, what exactly is it? Simply put, the Interstate Oil and Gas Compact Commission is a quasi-governmental organization founded and headquartered in Oklahoma City and located on property adjacent to the Governor’s Mansion and on Oklahoma state property given to the organization via a land deed. IOGCC exists due to a 1935 act of Congress that allowed the oil-producing states to compact together, under authority of theU.S. Constitution, in an effort to conserve oil and limit what were then wasteful production practices. All of the oil and gas producing states of the United States are dues-paying members, with dues paid based on production stats: the more you produce, the more money that goes into the pot. IOGCC‘s official members, gubernatorial appointees of each respective member state, are generally the top oil and gas regulators of each state. Caveat: sometimes Governors pick lobbyists or industry attorneys instead.
Is the IOGCC, Created by Congress in 1935, Now a Secret Oil and Gas Lobby? - Earthworks (blog) --When Congress severely limited the Environmental Protection Agency's ability to regulate hydraulic fracturing in 2005, it was a victory for a quasi-governmental organization that has been quietly working for decades to restrict federal oversight of oil and gas. The group, the 80-year-old Interstate Oil and Gas Compact Commission, began fighting for a fracking exemption as early as 1999. Congressionally sanctioned as an interstate compact, the IOGCC characterizes itself as a government entity, which allows it to call its lobbying of lawmakers "education." But in reality, it is led by regulators from industry-friendly oil and gas producing states, and a full third of its members come from the industry itself. The group has worked behind the scenes for decades to prevent federal regulation so stridently that in 1978, the Justice Department argued it should be disbanded because it had evolved into an advocacy organization. That seemed particularly true when the group pushed to exempt fracking from the Safe Drinking Water Act. The IOGCC passed a resolution in 1999 advocating a bill introduced by Sen. James Inhofe (R-Okla.) and six years later, claimed credit when a similar measure finally became law at the start of George W. Bush's second term. The provision—known as the Halliburton loophole after the oilfield services giant—was part of the 2005 Energy Policy Act. Along with advances in drilling and fracking technology, it helped enable the modern fracking boom that has created vast economic benefits, but also has been implicated in cases of drinking water contamination, air pollution and rising emissions of climate-changing methane. The loophole is just one example of the IOGCC's influence on U.S. energy policy, according to interviews with more than two dozen energy policy experts, scientists, current and former congressional staffers, environmentalists and IOGCC members, as well as a review of hundreds of pages of documents shared by Greenpeace and DeSmogBlog.
Canada provides record-high share and amount of U.S. crude oil imports in 2015 - EIA - Although total U.S. crude oil imports in 2015 continued to be lower than levels reached during the mid-2000s, imports from the United States' top foreign oil supplier—Canada—were the highest on record, according to annual trade data from EIA's Petroleum Supply Monthly. Canada provided 4 out of every 10 barrels of oil imported into the United States in 2015. U.S. gross crude oil imports from all sources averaged 7.4 million barrels per day (b/d) in 2015, down 27% since the 2005 high of 10.1 million b/d. As gross crude oil imports decline, a growing share of remaining imports are being sourced from four top suppliers: Canada, Saudi Arabia, Venezuela, and Mexico. Canada, America's largest crude oil supplier since 2004, sent a record-high 3.2 million b/d of gross crude oil exports to the United States in 2015, up 10% from the year before, accounting for a record 43% of total U.S. crude oil imports. Canada also receives nearly all U.S. crude oil exports, making up 422,000 b/d, or 92%, of the 458,000 b/d of crude oil exported from the United States in 2015. Canada generally produces heavy, sour crude oil that is well-matched to processing capacity in the United States, where many refineries have the equipment needed to process such oil. Canada has few alternative outlets for the heavy crude produced in Alberta, where most of Canada's proved oil reserves are located. Canada is expected to continue to provide a large share of U.S. oil imports for the foreseeable future, especially given the expansion of pipeline and rail shipping capacities to transport Canadian oil.
Canadian oil sands producers target single-digit sustaining capital - Oil | Platts -- Alberta's leading oil sands producers are currently working on ways to reduce the sustaining capital for their projects in order to maintain global competitiveness and also attract investment, executives said Tuesday. Sustaining capital is the expenditure needed to keep an asset operating at its current level. With a sustaining capital of C$9/b to C$11/b ($7.05/b to $8.62/b), Cenovus Energy is trying to reduce it to "just a single" digit, Chief Financial Officer Ivor Ruste told the 2016 CAPP Scotiabank Investment Symposium in Toronto. A similar target is also on the radar of its fellow producer Suncor Energy, which currently requires an investment of C$5/b to C$10/b for maintaining output from its steam-assisted gravity drainage oil sands facilities in the province, CFO Alister Cowan told attendees, adding that just under C$3 billion has been set aside in 2016 as sustaining capital for the company's oil sands operations.The companies' costs are being cut by reductions in drilling costs and headcounts, focusing more on brownfield rather than greenfield developments and cutting input costs like diluents and replacing them with lower-priced solvents, they said. Diluents are needed to transport bitumen through pipelines by making it more viscous and thus easier to ship. "The cost of drilling is about C$9 million/well pair [for a SAGD oil sands facility] and our target now is to try to bring it down to C$7 million/well pair over the next 18 months,"
$hillary Was Paid Over $1.6 Million to Support Keystone XL - Keystone XL Banks Paid $1.6M For Hillary’s Canadian Speeches. — Two Canadian banks tightly connected to promoting the controversial Keystone XL pipeline in the United States either fully or partially paid for eight speeches made by former Secretary of State Hillary Clinton in the period not long before she announced her campaign for president. Those speeches put more than $1.6 million in the Democratic candidate’s pocket. Canadian Imperial Bank of Commerce and TD Bank were both primary sponsors of paid Clinton speeches in 2014 and early 2015, although only the former appears on the financial disclosure form she filed May 15. According to that document, CIBC paid Clinton $150,000 for a speech she gave in Whistler, British Columbia, on Jan. 22, 2015. Clinton reported that another five speeches she gave across Canada were paid for by tinePublic Inc., a promotional company known for hosting speeches by world leaders and celebrities. Another speech was reported as paid for by the think tank Canada 2020, while yet another speech was reportedly funded by the Vancouver Board of Trade. But a review of invitations, press releases and media reports for those seven other speeches reveals that they, too, were either sponsored by or directly involved the two banks. Both banks have financial ties to TransCanada, the company behind the Keystone XL pipeline, and have advocated for a massive increase in pipeline capacity, including construction of Keystone. Further, Gordon Giffin, a CIBC board member and onetime U.S. ambassador to Canada, is a former lobbyist for TransCanada and was a contributions bundler for Clinton’s 2008 presidential campaign.
Mexico Energy - Mexico's reserves slashed by a fifth: regulator - Mexico's proven hydrocarbon reserves fell to 10.24 billion boe in January, a drop of 22.2% from the 13.17 billion boe of a year earlier, the National Hydrocarbons Commission announced March 31. Ulises Neri, head of the commission's technical unit, told a meeting of the commission's executive that the drop was due in part to the reduction in value of the proven reserves as a result of the sharp fall in world markets, and to the drop in exploration activity by the state company Pemex. Proven oil reserves fell to 7.6 billion barrels on January 1, down from 9.71 billion barrels a year earlier, Neri added. The Mexican results follow an international trend. The world's top six oil producers saw their proved reserves shrink by more than 2.8 billion boe last year as the price slump and growing difficulty in accessing new resources takes a rising toll on sources of future growth. According to annual statements and filings, the West's biggest integrated oil companies also failed to replace, on average, their production with new reserves for a second year running, with just half of all production replenished over the year.
Mexico Announces Over $4 Billion in Aid for Struggling Pemex - ABC News: The government announced more than $4 billion in aid Wednesday for state oil company Petroleos Mexicanos, whose finances, production and exploration projects have been hit by the fall in crude prices. The package will include a direct infusion of $1.5 billion to the company better known as Pemex, the Treasury Department said in a statement. The government will also provide over $2.6 billion to pay company pensions and retirements this year. In return, the government wants Pemex to commit to reducing its liabilities and debt by the same amount. "The adverse economic conditions that the hydrocarbons sector is going through on an international level and the depletion of different wells have weakened Pemex's financial situation," the department said in the statement. Pemex reported in March that it had secured lines of credit to pay 85 percent of its vendors. The company closed 2015 with around $8.4 billion in debt, of which it paid $1.1 billion in the first quarter. In late February, Pemex announced it was cutting about $5.5 billion from its 2016 budget, mostly in exploration and production. Mexico's oil production peaked in 2004 at about 3.4 million barrels a day but has since slid to about 2.2 million a day today. President Enrique Pena Nieto sought to modernize the company and improve production by pushing through legislation that opened up Mexico's energy sector to some private investment for the first time in decades. But the law was followed closely by the global plunge in oil prices, crimping the country's oil ambitions.
Fracking Boom Spreads Threats Across the World -- "If we continue methane production at current rates, the world will run up against the 1.5° limit in 12-15 years. If we stop producing methane, which means stopping fracking of natural gas and oil, the world wouldn't run up against that limit for about 50 years," Robert Haworth, a Cornell professor who has done cutting edge research on fracking, told The Nation. Emissions from fracking are "big enough to wipe out a large share of the gains from the Obama administration's work on climate change - all those closed coal mines and fuel-efficient cars. In fact, it's even possible that America's contribution to global warming increased during the Obama years," writes Bill McKibben of 350.org in The Nation. In the US, methane emissions are up over 30% since 2002, accounting for 30-60% of the enormous spike in atmospheric methane, according to a Harvard University study. While researchers don't attribute a source for the rise, it occurred since fracking began in earnest in the US. "Methane emissions make it a disastrous idea to consider shale gas as a bridge fuel, letting society continue to use fossil fuels over the next few decades," says Robert Haworth, Professor of Ecology and Environmental Biology at Cornell University, whose research first exposed the spike in methane. The industry is digging its own grave by allowing these emissions, because it originally had widespread support as an alternative to coal. President Obama saw it as a bright spot in a dead economy when he entered office - offering lots of jobs and home grown, cheap energy that even brought overseas manufacturers back home. But as frackers moved from rural areas where few people live to places like the Marcellus Shale in Pennsylvania, contamination of farms and drinking water became obvious ... and the movement against it began.
Global trade of LNG hits record high: Global trade of liquefied natural gas (LNG) reached record numbers in 2015, according to a new report. The International Group of LNG Importers said shipments of LNG grew by 2.5 percent to an all-time high of 245.2 million tons annually. Increased trade was driven by new liquefaction plants in Indonesia and Australia. The new facilities began exporting LNG to customers in Europe and the Middle East and contributed 11.4 million tons per year of new liquefaction capacity. Australia became the second-largest exporter of LNG, surpassing Malaysia. There were 19 exporting counties in 2015. Qatar was the global export leader, supplying 32 percent of LNG volumes in 2015. With the opening of Cheniere Energy’s Sabine Pass export facility early this year, the United States is on track to become the world’s leading supplier of flexible LNG. Even with abundant supplies of LNG, demand may be wavering. Markets in South Korea and Japan experienced their first decline since the 2009 recession. “In a global context of lower energy prices and sluggish economic growth, the LNG industry is holding its breath for the impact of an export wave from the United States,” GIIGNL president Domenico Dispenza said. Though global demand remains uncertain, several markets have emerged. Three counties — Egypt, Jordan and Pakistan — started importing LNG in 2015, alleviating some pressure from the supply glut.
Northern Territory fracking debate 'life or death', says cattle farmer - The fracking debate in the Northern Territory is a matter of “life or death” for farmers, a pastoralist says. Daniel Tapp, a cattle farmer, says he is very concerned about over-allocations of water for mining activity in the NT. “We can’t live without water,” he said in Darwin on Tuesday after a hearing held by the Senate select committee on unconventional gas mining. “We’ve got a real strong industry up here, potentially the food bowl of the north, and this puts it all at risk, whether it’s at risk by contamination or simply by depletion. Our aquifers have been stretched to their limits already.” The NT government hopes that new regulations it is drafting for the mining industry will be more transparent and will build community confidence. There has never been a recorded instance of groundwater contamination or significant environmental harm caused by fracking for shale gas in the NT, the inquiry heard. If NT Labor wins the August election it has promised a moratorium on fracking until it can be sure the practice is safe, amid increasing anti-fracking community sentiment.
United States cattle producer warns Northern Territory pastoralists about impacts of fracking - A cattle producer from the United States says Northern Territory pastoralists should be wary of assurances offered by mining companies wanting to conduct hydraulic fracturing on their land. Hydraulic fracturing, also known as fracking, is shaping up to be an issue at the upcoming Northern Territory election, with Labor promising to introduce a moratorium on the gas-extracting method if it is elected to government. John Fenton said he had an oil and gas company frack wells on his farm in Wyoming, which he said went on to cause a number of issues. A study by Stanford University recently found evidence that fracking practices near Mr Fenton's home in Pavillion, Wyoming had caused an impact on underground drinking water. Speaking to ABC Rural in Katherine, where he was invited by anti-fracking group Lock the Gate, Mr Fenton said oil and gas companies could not ensure the safety of fracking wells. "The companies that are coming here and saying they can do [fracking] right here in Australia are very often associated with the very same companies in my country who have destroyed a big portion of our water and air," he said. "[They] are now laying off men by the thousands and leaving our country because the industry is bankrupt."
Gazprom improves oil recovery at Orenburg field in Russia with multistage fracking - Energy Business Review: Gazprom Neft has conducted five multistage fracking operations to improve recovery rate in the eastern part of Orenburg oil and gas-condensate field in southwestern Russia. The company said that the fracking operations, combined with new technologies, led to a 50% increase in flow rates. The technologies include viscoelastic diverting acid (VDA), which is designed to cause an extensive network of fissures to develop, while allowing additional inflow of oil into the well. Gazprom said that the acid can form a gel, which could temporarily block potential cracks and directs the remaining acid to other parts of the strata while increasing the coverage area. The viscosity of the gel, however, will be reduced after interacting with hydrocarbons and then be and washed away with the oil into the well. In order to further optimize oil recovery, the VDA was used throughout the entire horizontal well shaft. Gazprom Neft first deputy CEO Vadim Yakovlev said: "Combining multiple technologies significantly improves efficiency in field development. "Continuing the implementation of our Technology Strategy, Gazprom Neft is successfully testing and improving the most up-to-date methodologies of enhanced oil recovery. "Positive results from pilot projects mean the company has the opportunity to utilise experience gained at other assets." Gazprom added that the impact of drilling operations has been significantly improved with the use of various technologies including the development and refinement of drilling mud for use throughout the entire length of the well bore.
Central Asian oil: destined to disappoint? - The Barrel Blog: The stagnation pervading Central Asia’s oil industry could be alleviated by a couple of big announcements in the coming months, on the Kashagan and Tengiz fields. But industry veterans are more heedful of the numerous obstacles presented by the region, from the geological to the bureaucratic, and an unpromising global context. Home to some of the world’s largest oil and gas fields, ex-Soviet Central Asia and particularly Kazakhstan was once an exciting frontier for the industry. But of late Kazakh oil production has stagnated at around 1.7 million barrels per day, partly because of a decade of delay starting output from the giant Kashagan project. A consortium led by Chevron has also delayed plans to increase output at Tengiz from around 600,000 b/d to nearly 900,000 b/d, a project that could cost tens of billions of dollars. In neighboring Turkmenistan, planned gas exports to Europe have made little headway due the cost of building a trans-Caspian pipeline, doubts about European demand, and difficult regional politics. Turkmenistan’s gas exports have increased — the International Energy Agency expects it to have pipeline capacity for 80 billion cubic meters/year of exports to China by the early 2020s — and it has hopes of eventually building another pipeline across Afghanistan to South Asia. But for now Turkmenistan is increasingly reliant on China as a sole client. More marginal projects, in Tajikistan and Uzbekistan, are languishing.
Schlumberger to Pare Venezuela Services on Lack of Payments - Schlumberger Ltd. will reduce activity in Venezuela after the world’s largest oil services provider failed to collect enough payments from the national oil company. The reduction will take place this month in close coordination with all customers in Venezuela to continue servicing those with available cash flow, the Houston- and Paris-based contractor said in a statement Tuesday. Venezuela, which holds the biggest oil reserves of any country, has been battered by the collapse of prices as most of the government’s revenue comes from petrodollars. In October, Schlumberger was said to be shifting some of its workers from Brazil to Venezuela, reinforcing the contractor’s commitment at the time as others in the industry pulled back. By late January, Schlumberger said it had entered into a deal with Petroleos de Venezuela SA during the fourth quarter to receive certain fixed assets in lieu of payment of about $200 million of accounts receivable. "Schlumberger appreciates the efforts of its main customer in the country to find alternative payment solutions and remains fully committed to supporting the Venezuelan exploration and production industry," the company said in the statement. "However, Schlumberger is unable to increase its accounts receivable balances beyond their current level."
The Invisible Money Makers Who Thrived During 2015's Oil Slump - Even in the closely knit energy industry they are virtually unknown. On the streets of Geneva, London and Houston they go unrecognized. Yet a handful of executives were oil-industry standouts in 2015. They thrived because of -- not despite -- plunging crude prices. From Total SA to Trafigura Group Pte, trading emerged as the industry’s cash cow. Take Vitol Group BV, the world’s largest independent energy-trading operation. The 50-year-old company reported net profit of $1.6 billion last year -- the fourth highest ever, buoyed in part by the strategies employed by the teams headed by Mark Couling, chief oil trader. “The oil trading industry as a whole enjoyed the best year since 2008-09,” Oil traders were rewarded by a surge in volatility. They also capitalized by holding onto crude to take advantage of the market contango -- a situation where future prices are higher than current prices -- allowing them to buy oil cheap, store it in tanks to sell later and locking in a profit via derivatives. Vitol hired one of the world’s largest tankers, the Overseas Laura Lynn -- a 380-meter-long vessel (about equal to the Empire State Building laid on its side) capable of carrying 3 million barrels of oil -- to store crude offshore of Dubai. Competitors including Glencore Plc prospered by hiring capacity on land from St. Lucia in the Caribbean to Saldanha Bay in South Africa. “A combination of low prices and contango is great for traders,” nt.” It wasn’t just the independent houses. Although better known for their oil fields, refineries, and petrol stations, BP Plc, Royal Dutch Shell Plc and Total SA are also the world’s biggest oil traders.
Hopes and Fears About Oversupply Whipsaw Oil Prices - Dallas Fed - Russia and several members of the Organization of the Petroleum Exporting Countries have introduced the idea of a production freeze, and a meeting is set for April 17 in Doha to discuss further details. A major roadblock on the road to Doha is Iran, which is slowly reentering the oil market this year following the lifting of nuclear sanctions. Iran has summarily dismissed all talks of participating in the freeze until it reaches pre-sanction production levels. Saudi Arabia also made it clear on April 1 that its participation is contingent on Iran, essentially ruling out the possibility of a meaningful agreement. Whether an agreement is reached or not, it remains unclear if the freeze would change the supply outlook for 2016 without Iran’s participation. The other countries are unlikely to significantly boost supply in 2016 and, in several cases, appear to be currently producing at very high levels. For example, Russian production has recently increased to levels last seen in the early 1990s.Unlike the freeze, unplanned outages have materially affected global supply in recent months. Outages cut global production levels in February by almost 450,000 barrels per day, with Iraq and Nigeria accounting for 75 percent of the cuts. Reductions in U.S. crude production are expected to play an important part in reducing oversupply in the oil market. Newly released data, while lagged, hint that these cuts began in fourth quarter 2015 and continued into first quarter 2016. U.S. crude production averaged 9.18 million barrels per day in January 2016, down half a percent from the previous month and down more than 1.7 percent from January 2015. Shale production led to the recent decline, falling more than 1.7 percent in January and another 1.4 percent in February (Chart 2).
Reports of Oil Rally's Death Premature as Inventories Decline - Hedge funds betting that oil’s rally was over missed an 11 percent gain after U.S. crude inventories unexpectedly fell. Short positions in West Texas Intermediate crude jumped 35 percent in the week ended April 5, according to the U.S. Commodity Futures Trading Commission. The next day, the government reported a 4.94 million-barrel drop in U.S. oil inventories, the first decline in eight weeks. "Everybody thought there was going to be a build in the inventories" and the actual data proved otherwise, said Carl Larry, director of oil and gas issues in Houston for consultant Frost & Sullivan, Inc. "The market’s bouncing back a little." WTI oil for May delivery dropped 6.2 percent to $35.89 a barrel on the New York Mercantile Exchange during the report week, before rebounding to $39.72 April 8. Prices were up 1.7 percent at $40.40 as of 11:24 a.m. on Monday. The drop in supply data last week ran counter to analysts’ forecasts for an increase. Production declined to the lowest level since November 2014 while refiners used the most crude in three months, Energy Information Administration data showed on Wednesday.
Crude Speculators Got Short … and Got Crushed - MoneyBeat - WSJ: CFTC data out this afternoon shows financial speculators in the benchmark U.S. oil contract ramped up short sales against the market 35% in the week through Tuesday as euphoria about the recent market rally faded. The increase in short sales was the largest since July, and they came into the market when the price was between roughly $35 and $38 a barrel. The 50% rally in crude prices between February and March was attended by a lot of skepticism and not much evidence of improvement in supply-and-demand conditions, but what happened next illustrates the inherent danger in betting against a market that is intrinsically tilted toward the bulls. U.S. oil prices rallied nearly 11% between Tuesday and Friday, ending the week at $39.72 and creating sharp losses for anyone who clung to those losing bearish bets. When the market turns against recently-established short trades, so-called weak shorts bail out — driving prices up even further as they buy back in to cover their position. That might help explain oil’s 6.6% gain Friday — a day with few clear triggers for a surge.
Most Of Last Week's Crude Oil Drawdown Went Right Into Storage - Last week, oil investors cheered the big 4.9M barrel reduction of crude stocks, leading to single-day 5% jump in the price of oil. At the same time, gasoline stocks went up by 1.4M barrels and distillate product stocks went up by 1.8M barrels. Total product stocks were up by 3.2M barrels. That means 65% of the crude drawdown effectively went right back into storage on the product side. How should we interpret this weekly data? I took a look at a few crude oil and product storage relationships and their history, and analyzed them. I wanted to see what I could glean from weekly storage change data since everyone makes a big deal about the weekly numbers. That includes traders playing the markets. I found that a plot of the combined weekly crude oil, gasoline, and diesel fuel stocks change was revealing. (Note that there are other components I could have included but these are the largest.) Here it is, obtained using last week's EIA data. Notice that the weekly change is actually too variable to reveal much information, averaging nearly zero with a very small positive slope over time. As an alternative, I also plot the 3-month moving average, which is much more interesting. We see that the moving average also fluctuates around zero but it occasionally has a noticeable, revealing feature.
Oil prices fall on producer meeting doubts, stronger dollar | Reuters: Oil futures traded lower on Wednesday on concerns that a producer meeting, planned for Sunday in Doha to discuss freezing output, will do little to trim oversupply and a strengthening dollar. Brent crude was down 34 cents at $44.35 a barrel at 0916 GMT, after hitting a four-month high in the previous session, when it settled up $1.86. U.S. crude declined by 49 cents to $41.68 a barrel after gaining $1.81 the day before. Comments by Saudi oil minister Ali al-Naimi in the al-Hayat newspaper in which he confirmed his country's position that an outright production cut was out of the question weighed on prices, traders said. "Forget about this topic," al-Naimi told the paper, when asked about any possible reduction in his country's crude output
Oil Slides After Algeria Oil Minister Admits Russia Refused To Cut Output --First it was the Saudis who said they would not cap oil output unless Iran joins the production freeze, which it won't. And now, Bloomberg reports citing APS, that Russia was in on the plot to make the Doha meeting a total and complete farce.
- ALGERIA OIL MINISTER SAYS RUSSIA REFUSED TO CUT OUTPUT: APS
More details: Planned April 17 meeting of OPEC, other major producers in Doha, Qatar, aims to reach agreement to freeze oil production at Jan. levels, Algeria’s state-run news agency APS reports, citing Energy Minister Salah Khebri. Meeting “crucial” because if all countries agree to cap production, this will allow oil market to recover gradually “Oil producers don’t want to cut their output. We have already asked for the decrease of production, but some countries have refused, including non-OPEC members, especially Russia,” Khebri says, according to APS Which to regular readers should not come as a surprise: recall that as we wrote three weeks ago, What Oil Production Freeze: Russia Just Revealed The Laughable Loophole In The OPEC "Agreement" Oil algos finally pay attention. And as goes Crude, so goes stocks...
U.S. Oil Climbs Back Above $40 - WSJ: The U.S. oil benchmark settled above $40 a barrel for the first time in nearly three weeks and the global Brent contract touched a four-month high Monday, as the dollar faded and hopes rose for a coming agreement among sovereign producers that would begin to reduce the global crude glut. Both major contracts rose for the second trading session in a row, after surging more than 6% on Friday. The U.S. benchmark ended 1.6% higher at $40.36 a barrel on the New York Mercantile Exchange, while the Brent contract rose 2.1% to end at $42.83 a barrel on the ICE Futures Europe exchange. Analysts said there appeared to be little direct reason for the gains Monday, and said it was likely a combination of a softening dollar, hopes that U.S. oil production and inventory data this week would extend declines last week and that Sunday’s meeting of producers in Doha, Qatar, would yield an agreement to freeze output levels. A softening dollar can drive oil higher as it becomes cheaper for traders using foreign currencies. Oil prices have surged more than 14% in the last week, including Friday’s 6% gain, as U.S. Energy Department data last week showed a surprise decline in U.S. supplies, prompting bearish speculative traders to close out short sales against the market. And the agency’s estimate of domestic oil production was just barely above 9 million barrels a day, stoking hopes that it would fall under that threshold in this week’s report.
Crude Continues To Surge Ahead Of Doha: Oil prices have regained ground over the past week, with more and more data points emerging to back up the flurry of bullish bets that the markets saw since February. The outcome of the Doha meeting on April 17 will be a pivotal moment for the short-term trajectory of oil prices. By mid-week, oil is in positive territory, trading up on shrinking shale production, a weak dollar, and anticipation of the Doha meeting. WTI is back above $40 per barrel and Brent traded above $43 per barrel on Tuesday. Can Doha produce a result? Heading into the meeting, there are not high hopes for a significant result, with most participants at or near a peak in production. At the same time, several key members are not exactly sitting idle. Kuwait Oil Company could soon offer offshore drilling contracts to drill in the Persian Gulf, according to Bloomberg. Kuwait is hoping to boost output from 3 million barrels per day to 3.165 mb/d by late 2016 or at some point in 2017. Also, the rig count in Saudi Arabia, Kuwait, and the UAE is at its highest level in decades. Saudi Arabia’s Shaybah field could add 250,000 barrels per day in production by June. This raises questions about how all the parties involved in the Doha meeting will reach an agreement on a freeze. Oil traders see the bottom for crude prices. After nearly two years of a down market, oil traders are growing confident that we have passed the low point. “The down market is behind us,” Torbjorn Tornqvist, CEO of Gunvor Group Ltd., said on Tuesday at the FT Global Commodities Summit in Lausanne. “It is the beginning of the end of that for sure.” Although there will be a lot of volatility for quite a while, Tornqvist said that “from here on, the trend is up.”
Crude Jumps On Russia-Saudi "Production Freeze" Headline -- Total chaos reigns as equity market "participants" flip from manic-sellers (IMF un-growth and Italian sbank bailout failure) to panic-buyers after the following headline hits Bloomberg:
- SAUDI ARABIA, RUSSIA REACH CONSENSUS ON OIL FREEZE: INTERFAX
Saudi Arabia, Russia reached consensus on oil freeze during talks Tuesday, Interfax reports,citing unidentified “informed diplomatic source” in Doha. Interfax cites source as saying Saudi Arabia will make final decision on freezing oil production regardless of Iran’s position Just a day after Algeria said Russia would not agree. And the funniest thing about all of this farce is that if this headline proves true it is merely the original agreement - in principal - but with both Saudi Arabia and Russia now producing at new record highs. Stocks have begun to fade the euphoria...
WTI Crude Tops $42 As Russia "Hopes" For Deal At Doha -- Despite the day's rampacious rally in stocks and crude aftwer "unidentified sourtces" said a Russia-Saudi deal was done, Russia's Dmitry Peskov just issued a statement that "there is hope" for a deal at Doha. This sent stocks and crude jumping once again... even though we suggest "hope" for a deal is not "a deal." Russian Energy Minister Alexander Novak briefed Russian President Vladimir Putin on latest talks with Saudi Arabia, Kremlin spokesman Dmitry Peskov says in message without saying when talks took place. “There is hope” that an oil output freeze agreement can be reached in Doha regardless of Iran’s position following Saudi talks. So buy more crude and stocks...
Oil Strategist: "Doha Freeze Talks, If Anything, Look Bearish For Oil" - In the past few weeks, we have expressed our view why the much anticipated OPEC Doha meeting on "freezing" oil production will be one of the biggest "sell the news" events when it comes to oil. Yesterday, even Goldman opined why the OPEC Doha meeting will likely be a dud when Damien Courvalin said: "Don't Expect A Bullish Surprise." Now, we present the view of Bloomberg oil strategist Julian Lee, who says "Doha Freeze talks, if anything, look bearish for oil." Here's the simple reason why. Crude oil’s ~35% rally since Doha talks were announced in mid-Feb. shows a market expecting OPEC, non-OPEC nations to proceed with plan to freeze crude production at Jan. levels. Russia, Saudi Arabia are among at least 16 producing nations w/ ~60% of global crude output attending an April 17 meeting in Doha to discuss production freeze That price rally may have gone too far given that Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman said late last mo. that freeze plan depends on Iran, all big producers participating. Iran, among those expected to attend, looks almost certain to reject curbs on its own output: Country has said it won’t allow its exports to be restrained and is seeking to bolster them after lifting of sanctions; needs oil revenue to rebuild its economy; plans to raise output to 4m b/d by March 2017 from 3.2m last mo. Best that can be hoped for from Doha mtg is an output freeze that won’t take any oil off market and would simply allow several of the biggest producer countries to keep pumping at or near record levels. That’s unlikely to provide much additional price support given size of the rally that’s already occurred this year.
Brent hits four-month high on reports of oil output freeze deal | Reuters: Global oil prices hit four-month highs on Tuesday, hovering just under $45 a barrel after a report that top producers Russia and Saudi Arabia have agreed to freeze output ahead of a much-anticipated producers meeting on Sunday. Russia's Interfax news agency quoted a diplomatic source in Doha saying that Russia and Saudi Arabia reached a consensus on Tuesday about an output freeze and that the final decision will not depend on Iran. The output freeze news came as the U.S. government said that U.S. crude output was forecast to fall by 560,000 barrels per day in 2017 to 8.04 million bpd, underscoring that the 21-month price rout is picking up steam. "People are now realizing that this OPEC meeting could be a historic turning point for the market," said Phil Flynn, an analyst at Price Futures Group. "Now, with U.S. production cuts, our sense is that we're entering a new cycle upwards." Brent crude LCOc1 prices settled up $1.86, or 4.3 percent, at $44.69 a barrel.
Oil price optimism grows as Brent climbs to 2016 high - The heads of the world's largest oil trading houses sought to draw a line under nearly two years of falling prices on Tuesday as Brent crude rose to its highest level so far in 2016. Vitol, Trafigura, Mercuria, Gunvor, Glencore and Castleton, which sell enough oil to meet almost a fifth of global demand — were all but unanimous in telling a Financial Times conference in Lausanne that oil prices were unlikely to revisit the sub-$30 lows they hit in early January. Brent crude oil, the international benchmark, climbed by nearly 4 per cent to hit a four-month high of almost $45 a barrel on Tuesday amid mounting expectation of a deal to freeze production at this weekend’s Opec summit in Doha. Prices fell back in Asian morning trading on Wednesday with Brent crude down 0.8 per cent at $44.35 a barrel by mid-morning. It is still up 12.2 per cent in the month to date. West Texas Intermediate, the US marker, was down 1.1 per cent at $41.71 a barrel having touched $41.83 on Tuesday. It is up 9 per cent in the month to date. Igor Sechin, head of the Kremlin-backed oil company Rosneft, echoed the traders’ view, and argued that a price of at least $50 a barrel was needed to avert future supply shortages. “The oil price is growing. I think everyone is expecting the successful outcome of our work,” Mr Sechin told the FT conference in an apparent reference to a possible deal on an output freeze this weekend. “We will need higher price levels than $45 or even $50 a barrel.” The remarks came ahead of a weekend meeting in Qatar when Opec kingpin Saudi Arabia and other big oil producers, including Russia and Venezuela, will try to freeze output in a bid to hasten the end of an oil glut. This is potentially the first significant concerted action to stabilise prices since the oil price went into freefall in late 2014.
American Petroleum Institute (API) data: Build of 6.2mln barrels: Stockpile data for oil via API's weekly survey:
- Crude build of 6.223 mln barrels
- Cushing draw of 1.93 million barrels
- Gasoline draw 1.58mln barrels
- Distillate draw 530K bbls
The crude stockpile build was well above expectations (they were around 1.9 mln) The API data is closely watched as a guide to the official EIA inventory data due tomorrow morning (US time). The 'expected' for the data from EIA tomorrow is a stock build of 733.33Kbbls for US Crude Oil Inventories.
Oil price optimism grows as Brent climbs to 2016 high - The heads of the world's largest oil trading houses sought to draw a line under nearly two years of falling prices on Tuesday as Brent crude rose to its highest level so far in 2016. Vitol, Trafigura, Mercuria, Gunvor, Glencore and Castleton, which sell enough oil to meet almost a fifth of global demand — were all but unanimous in telling a Financial Times conference in Lausanne that oil prices were unlikely to revisit the sub-$30 lows they hit in early January. Brent crude oil, the international benchmark, climbed by nearly 4 per cent to hit a four-month high of almost $45 a barrel on Tuesday amid mounting expectation of a deal to freeze production at this weekend’s Opec summit in Doha. Prices fell back in Asian morning trading on Wednesday with Brent crude down 0.8 per cent at $44.35 a barrel by mid-morning. It is still up 12.2 per cent in the month to date. West Texas Intermediate, the US marker, was down 1.1 per cent at $41.71 a barrel having touched $41.83 on Tuesday. It is up 9 per cent in the month to date. Igor Sechin, head of the Kremlin-backed oil company Rosneft, echoed the traders’ view, and argued that a price of at least $50 a barrel was needed to avert future supply shortages. “The oil price is growing. I think everyone is expecting the successful outcome of our work,” Mr Sechin told the FT conference in an apparent reference to a possible deal on an output freeze this weekend. “We will need higher price levels than $45 or even $50 a barrel.” The remarks came ahead of a weekend meeting in Qatar when Opec kingpin Saudi Arabia and other big oil producers, including Russia and Venezuela, will try to freeze output in a bid to hasten the end of an oil glut. This is potentially the first significant concerted action to stabilise prices since the oil price went into freefall in late 2014.
Crude Extends Losses After Bigger Than Expected Inventory Build Trumps Production Slowdown -- After a significant draw the previous week, API reported a large 6.22mm build overnight, now confirmed by DOE with a 6.63mm build. Cushing was expected to see a considerable draw due to the outage at TransCanada's Keystone crude pipeline outage and was almost triple expectations (-1.76mm vs -610k exp). A larger than expected draw in gasoline inventories and build in Distillates was also evident as Production data fell for the 11th week of the last 12 to the lowest since Oct 2014. Oil prices are tumbling... API:
- Crude +6.22mm (+1mm exp.)
- Cushing -1.93mm (-800k exp.)
- Gasoline -1.58mm
- Distillates -530k
- Crude +6.63mm (+733k exp.)
- Cushing -1.76mm (-610k exp.)
- Gasoline -4.23mm (1.42mm exp.)
- Distillates +505k (+233k)
As Bloomberg's Javier Blas notes, U.S. refineries are processing record amounts of crude oil for the time of the year -- and from here until late July is all up. The strong refinery intake should reduce the crude glut, but risk exacerbating an overhang in middle distillates like diesel. U.S. crude oil stocks traditionally start to decline at the end of April, as refineries ramp-up activity ahead of the driving season. But with current stocks well above the previous 5-years range, it will take months (or even years) to work through the glut.
Weekly Energy Tweets And News -- April 14, 2016 - Earlier today it was reported that OPEC forcast non-OPEC production falling faster than predicted, from 700,000 bopd to 730,000 bopd or about a 0.03 percent change. As soon as I read that, I knew that the price of oil rests on the Chinese and the Indian economy. Right on cue, Bloomberg/Rigzone report: China’s crude imports climbed to a record in the first quarter as higher refining margin encouraged refiners to boost purchases. The world’s biggest energy user increased inbound shipments to 91.1 million metric tons in the first three months of the year, data from the Beijing-based General Administration of Customs showed on Wednesday. That’s equivalent to about 7.34 million barrels a day, 6 percent higher than the previous quarter and 13 percent up from the same period last year, according to Bloomberg calculations. Imports last month fell about 4 percent from February’s record to 7.71 million barrels a day, the third-highest ever. The nation’s net oil-product exports jumped to 1.3 million tons in March, the highest in three months, Wednesday’s data show. Refiners are importing more oil to take advantage of local retail fuel prices that are frozen when oil trades below $40 a barrel. The margin for major Chinese refineries to process Oman crude was about $16 a barrel in the first quarter, 68 percent higher than last year’s average...The other weekly energy tweets:
- US crude oil inventories rose 6.6 million bbls last week to an estimated 537 bbls. It should be noted that storage capacity has been increasing this year, and we are in a state of contango.
- US crude imports rebounded to 7.9 million b/d last week after slumping to 7.3 million the week before
- US gasoline stocks adjusted for implied consumption at 25.5 days demand, same as in 2015
- implied US gasoline consumption remains high averaging 9.4 million b/d over last 4 weeks (+500,000 b/d over 2015)
IEA Sees Oil Oversupply Almost Gone in Second Half on Shale Drop - Global oil markets will “move close to balance” in the second half of the year as lower prices take their toll on production outside OPEC, the International Energy Agency said. The world surplus will diminish to 200,000 barrels a day in the last six months of the year from 1.5 million in the first half, the agency said in a report on Thursday. Production outside the Organization of Petroleum Exporting Countries will decline by the most since 1992 as the U.S. shale oil boom falters. The glut is also being tempered as Iran restores exports only gradually with financial barriers to sales persisting even after the lifting of international sanctions. “There is no doubt as to the direction of travel for the supply-demand balance,” the Paris-based adviser to industrialized nations said. “There are signs that the much-anticipated slide in production of light, tight oil in the U.S. is gathering pace.” Oil prices, which sank to 12-year lows in January amid a global surplus, have climbed 30 percent in the past two months as OPEC and Russia work on a plan to limit their crude production. Still, without any proposal to reduce supply, there will be little real impact from the accord, due to be finalized in Doha this weekend, the IEA said. . The latest outlook represents a shift for the agency, which as recent as February raised its estimates of the global surplus raised its estimates of the global surplus and warned that the potential for further price losses had intensified. Supplies outside OPEC will decline by about 700,000 barrels a day this year to an average of 57 million a day. While U.S. shale output “has been more resilient to lower prices and the drop in drilling activity than expected,” there’s growing evidence “that output declines are accelerating,” the IEA said.
IEA sees oil markets moving 'close to balance' in second half 2016 - Platts - Global oil markets will move "close to balance" in the second half of this year as the fall in US tight oil production gathers pace and India helps drive global demand, the International Energy Agency said Thursday. The agency's latest monthly oil market report estimated that global oil supply had dropped by 300,000 b/d month-on-month in March, two thirds of the drop being outside OPEC, but also noted several bearish factors for prices. These included global demand growth slowing to 1.2 million b/d in the first quarter of this year, led by Europe and North America.Commercial oil stocks in the OECD countries appear to have continued their "relentless rise" in February and March, rising by a counter-seasonal 7.3 million barrels in February to create an overhang 387 million barrels above the average at the end of the month, the IEA said. Refined product stocks had fallen by just 11.5 million barrels in February, barely a third of the five-year average for the month, due to mild weather. The IEA also foresees little impact for the time being from a meeting of oil producing countries this Sunday, called to discuss a possible freeze in production levels. It noted that Iranian oil production had risen by nearly 400,000 b/d since the start of the year. In Iraq, surging production in the south is helping compensate for disruption in the north of the country, although a political crisis and shortfalls in payments to companies operating in the south could bode ill for production next year, the IEA said. Regarding Sunday's meeting in Qatar: "If there is to be a production freeze, rather than a cut, the impact on physical oil supplies will be limited," the report said.
As Oil Nations Consider a Freeze, Looking for Tensions to Thaw - When officials from OPEC, Russia and some other oil-producing countries meet this weekend in Doha, Qatar, to discuss freezing petroleum production at current levels, the session’s significance might have more to do with style than substance.The fact is that the two biggest players at the meeting — Saudi Arabia and Russia — are already pumping virtually flat out. They have little room to increase production even if they wanted to.But signals the two countries have sent recently, indicating they would rather discuss cooperation than continue cutthroat competition, have buoyed oil prices well above their lows in mid-January, when the Brent crude international benchmark dipped below $30 a barrel. On Monday Brent crude was trading above $41.Analysts, oil buyers and speculators will be watching the Doha meeting mainly to see whether the 13 members of the Organization of the Petroleum Exporting Countries and Russia show signs of being able to cooperate enough to exercise market discipline — and maybe even to cut production at some point, if necessary, to bolster oil prices. Signs of disharmony, or a last-minute cancellation of the summit, might send oil prices plummeting yet again, and possibly stir up the broader financial market anxieties that accompanied the winter sell-off.
Oil Spikes Back To $42 After IEA Comments --Forget Doha, says the International Energy Agency (IEA), bet it all on US production crashing. First, IEA says Doha Don't Matter...A deal to freeze oil production by OPEC and non-OPEC producers will have a limited impact on global supply and markets are unlikely to rebalance before 2017, the International Energy Agency (IEA) said on Thursday.The IEA, which oversees the energy policies of industrialized nations, said even though the decline in U.S. output was gathering pace and Iran was not adding as many barrels as expected, the world would still produce more oil than it consumes throughout 2016. Then, as Bloomberg reports, IEA says global oil markets will “move close to balance” in the second half of the year as lower prices take their toll on production outside OPEC... The world surplus will diminish to 200,000 barrels a day in the last six months of the year from 1.5 million in the first half, the agency said in a report on Thursday.Production outside the Organization of Petroleum Exporting Countries will decline by the most since 1992 as the U.S. shale oil boom falters. The glut is also being tempered as Iran restores exports only gradually with financial barriers to sales persisting even after the lifting of international sanctions.“There is no doubt as to the direction of travel for the supply-demand balance,” the Paris-based adviser to industrialized nations said. “There are signs that the much-anticipated slide in production of light, tight oil in the U.S. is gathering pace.” And the algos love it...
US rig count drops 3 this week to 440, another all-time low (AP) — The number of rigs exploring for oil and natural gas in the U.S. dropped by three this week to 440, again reaching an-time low amid depressed energy industry prices. A year ago, 954 rigs were active. Houston oilfield services company Baker Hughes Inc. said Friday 351 rigs sought oil and 89 explored for natural gas. Among major oil- and gas-producing states, Texas lost three rigs and Alaska, North Dakota, Pennsylvania and Wyoming each dropped one. New Mexico gained two rigs while Kansas and Louisiana gained one apiece. Arkansas, California, Colorado, Ohio, Oklahoma, Utah and West Virginia 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.
The oil rig count downward trend continues in Texas, U.S. | Fuel Fix: Texas again led the way in another drop in the number of rigs actively drilling for crude as just 351 oil rigs are left nationwide. Both Texas and the U.S. saw a net loss of three rigs in the past week, according to weekly data compiled by Baker Hughes. That leaves a U.S. total of 440 rigs, including 89 gas-seeking rigs, which represents the lowest total count since the oil field services company first began compiling the data in 1944. Texas’ Permian Basin and Eagle Ford remain the two most active shale plays in the county, based on drilling activity, but each lost one rig this week. Texas is still home to 45 percent of the nation’s operating rigs. Analysts have projected the rig count would dip through most of the first half of 2016. The oil rig count is now down more than 78 percent from its peak of 1,609 in October 2014 before oil prices began plummeting. The benchmark price for U.S. oil was down nearly $1 on Friday and hovering near $40.60 per barrel. While many companies have stopped actively drilling new wells, it hasn’t stopped them from producing oil from existing wells. So oil production is taking much longer to fall than the rig count.
Crude Oil Prices Rise On New Record Low US Rig Count - With all eyes on Doha this weekend, today's rig count data may have even less signaling power than normal. The US oil rig count has risen for only one week this entire year and continues to track lagged crude prices lower, dropping 3 to 351 (lowest since Oct 09). With gas rigs unchanged, the total rig count dropped once again to a new fresh record low at 440. The reaction in crude oil prices was a small bounce. The US oil rig count is tracking lagged crude prices perfectly still...
- *U.S. OIL RIG COUNT DOWN 3 TO 351 , BAKER HUGHES SAYS
- *U.S. GAS RIG COUNT UNCHANGED AT 89 , BAKER HUGHES SAYS
Oil Slips While All Eyes Are On Doha - Oil prices held their ground above $40 per barrel this week, bouncing around at their highest levels since December 2015. Prices lost some ground at the end of the week but held their ground, awaiting the result from Doha when several OPEC members sit down with Russia to hash out their production freeze deal. There has been a lot of confusion surrounding the meeting – whether Saudi Arabia would sign up without Iran’s participation, whether or not any participant would agree to something that places restrictions on their production – but it is unlikely that they would agree to meet unless a positive result was all but assured. Whether that has any material impact on global oil supplies is another matter. Saudi Arabia’s oil minister has already explicitly ruled out a production cut. Nevertheless, oil prices could receive a modest bounce if the parties emerge with a formal “production freeze” deal, even if they had little capacity to increase production anyway. IEA issues bullish report on oil. The three main energy bodies – OPEC, IEA and EIA – released monthly reports this week, and the IEA’s was the most bullish of the bunch. The Paris-based energy agency said that the excess global oil supply may currently stand at around 1.5 million barrels per day (mb/d), but that glut would shrink rapidly to just 0.2 mb/d in the third and fourth quarter of this year. The EIA does not see markets tightening that much until sometime in 2017. If the IEA is correct, oil storage levels will start to draw down significantly in the second half of 2016. Oil prices will continue to be volatile, but the price floor will rise. In other words, prices will go up and down, but we could see higher highs and higher lows.The IEA’s bullish prediction is echoed in the latest movements in the futures market. The contango structure has switched over to backwardation, an indication that speculators are no longer as concerned about a short-term glut in supply as they once were. Some supply disruptions in Nigeria, along with maintenance in the North Sea, has temporarily cut into global production. Meanwhile, in the U.S., the latest EIA data was mixed – weekly oil production dipped below 9 mb/d but oil inventories jumped again to a new record of 536 million barrels.
US oil closes at $40.36, down 2.75 pct, ahead of Doha: U.S. oil prices fell nearly 3 percent on Friday in thin trade as analysts anticipated a meeting of major oil exporters would provide a floor for the market, but do little to help to clear global oversupply quickly. Futures slightly pared losses after oilfield services firm Baker Hughes reported the number of rigs drilling for oil in U.S. fields fell by 3 to a total of 351 in the previous week. At this time last year, U.S. producers were operating 734 oil rigs. Oil producers led by top exporters Saudi Arabia and Russia will meet in Doha, Qatar on Sunday to discuss freezing output around current levels in an effort to contain a glut exacerbated by production that exceeds demand by about 1.5 million barrels a day. It would be the first joint action by major OPEC and non-OPEC producers in 15 years, although Iran has refused to participate, saying that it wants to rebuild its output to levels achieved before imposition of the recently lifted economic sanctions. "Unless there's a total surprise, the likelihood is that the Doha meeting on Sunday between OPEC/non OPEC will produce something very wishy washy and will be nothing more than smoke and mirrors," one trader said. "I therefore want to sell crude today."
Iran will not attend Doha oil freeze talks on Sunday: sources | Reuters: Iran will not attend a meeting between OPEC and non-OPEC member countries about freezing oil output levels in Qatar on Sunday, two sources familiar with the situation told Reuters. Producers are struggling with low oil prices and an oversupplied market but have been loath to cede market share by cutting output. Instead, OPEC members Saudi Arabia, Qatar and Venezuela reached a preliminary agreement with Russia in February to freeze production at January levels. They will seek backing for that deal from other producers at Sunday's meeting in Doha, Qatar. Iran's oil minister had not been scheduled to attend, but Tehran was due to send Iran OPEC Governor Hossein Kazempour Ardebilli, oil ministry news agency Shana reported on Friday. Sources told Reuters that Iran had been informed that only those countries willing to agree to freeze their output level should attend. Iran has said it supports the freeze but would not join it until it raises its output and market share to their pre-sanctions levels. Sanctions imposed by the United States and other world powers were lifted in January in return for Tehran agreeing to long-term curbs on its nuclear program. A rise in Iran's oil output will undermine efforts to rebalance the market in 2016, a Reuters poll of oil analysts showed this week. Its production has already surpassed 3.5 million barrels per day (bpd) and exports are set to reach 2 million bpd next month, Iran's deputy oil minister was quoted as saying by state news agency IRNA on Saturday.
Oil producers gather to weigh output freeze as global industry watches - CBC News: The members of OPEC and some non-OPEC oil producers will sit down in Doha, Qatar, on Sunday with the goal of hammering out a production freeze meant to ease oversupply that has led to a massive, devastating drop in prices. Joining the members of OPEC, minus Libya, will be four countries who are not part of the cartel — Russia, Mexico, Oman and Azerbaijan. Several other large oil producers, including Canada, the United States, Norway and Brazil, won't be there. Whether the parties can work out a deal is far from clear. A Bloomberg survey of 40 analysts and oil traders found an even split on whether they think a deal will be struck. The driver behind the meeting has been the dramatic fall in crude prices to 12-year lows. Producers everywhere have been feeling the pain. Billions in spending plans have been chopped. Tens of thousands of jobs have been cut. Oil prices have been hammered — with the price for West Texas Intermediate crude falling from around $100 US a barrel in mid-2014 to a low around $27 US a barrel in January of this year. There's been a small recovery in recent weeks, pushing the price for WTI on Tuesday back above $42 US a barrel for the first time since November, partly due to speculation that the Doha meeting will produce an agreement, the International Energy Agency said.
What to expect as key meeting on oil-output freeze looms - But on Wednesday, Saudi Arabia’s Oil Minister Ali al-Naimi played down the prospect of oil producers taking action at the meeting. When asked about such action, al-Naimi reportedly said, “Forget about this topic.” Until Saudi Arabia officially says it has agreed to a production freeze, “rumors will be bought [and] news will be sold,” said John Macaluso, an analyst at Tyche Capital Advisors. The market is often at the mercy of comments from key oil producers. Prices have been volatile, though generally climbed, with Brent and WTI crude up by more than $10 a barrel, since Feb. 16. That is when Saudi Arabia, Russia, Qatar and Venezuela said they wouldn’t increase their output above January’s levels as long as other major producers followed suit. But one member of the Organization of the Petroleum Exporting Countries, Iran, has already rejected the idea, vowing to ramp up production until it reaches the pre-sanction level of 4 million barrels a day. A Platts survey pegged Iranian output at 3.23 million barrels a day in March. “The oil rally is almost completely based on the idea that we will hear an official announcement of a freeze by Russia and the Saudis,” said Kevin Kerr, managing editor and executive publisher of Commodities Watch. “The question is, what about everyone else?” he said. Will a freeze “be adhered to” even if one is announced? [That is] a lot of ‘what ifs’ for the market.”
What's at risk if Doha oil freeze deal fails -- At best, oil producers meeting in Doha this weekend are expected to come up with a sketchy deal to freeze production at record levels. Analysts say that would do very little to change the world oil glut, but it might help producing nations buy time until the oil market stabilizes. "I think it will be a very loosely worded agreement," said John Kilduff of Again Capital. "I think it's going to be transparent there is no deal." Oil prices have gained sharply over the past two months on high hopes that the Sunday meeting of OPEC and non-OPEC countries will result in a deal to freeze crude production at January levels. But oil analysts now say the best deal producers may agree to could be what seems more like the outlines of a deal. "There's a lot of rhetoric, a lot of statements around the oil market, but the fundamental thing you have to look at is money. It's revenues, and the revenues of these countries that export oil have really collapsed," said Dan Yergin, vice chairman of IHS. That could indeed be what brought producing nations to the table. "In 2014, OPEC revenues were about a trillion dollars. Last year, they were half a trillion dollars. This year they're on a course to be down another 20 percent," said Yergin. "This creates inordinate pressure on governments. Very difficult choices have to be made. Budgets have to be cut, credit ratings go down. There is a risk of social turmoil and problems. I think that is really weighing on producers, forcing them to find some way to stabilize things." According to a new CNBC Oil Survey, there's better than a 50/50 chance of a freeze agreement being reached, and any deal would be seen as supportive of prices. If it fails, the survey respondents see prices falling sharply,
Qatar's Oil-Freeze Letter to Norway Reveals Doha Deal Logic - The preliminary agreement by Russia, Saudi Arabia, Venezuela and Qatar to freeze output has already put a floor under crude prices and a deal this weekend to include other producers would extend the recovery, according to Qatar’s Energy Ministry. Analysts and traders have puzzled over exactly why oil producers have devoted so much diplomatic energy to the meeting in Doha on April 17, when the consensus is that the freeze would have little immediate impact on crude production. The letter -- an invitation to the Doha meeting that Norway declined -- gives some answers. Qatar, which is hosting talks between at least 15 countries to finalize the accord, told Norway’s Ministry of Petroleum and Energy that the plan to cap output at January levels has already “changed the sentiment of the oil market,” according to a letter from Energy Minister Mohammed Al Sada obtained by Bloomberg through a freedom-of-information request. If more producers like Norway join in, it will temper the global oil surplus and “build up on this” price recovery, Qatar reasoned. Oil prices, which sank to 12-year lows in January amid a global surplus, have climbed more than 30 percent in the past two months amid speculation producers would make the first significant attempt at coordinating oil output between the Organization of Petroleum Exporting Countries and producers outside the group in 15 years. Oil market watchers see a 50-50 chance that producers will strike a deal, but either way they don’t anticipate any impact on crude supply because most of the countries are already pumping flat out. While the initiative is supporting prices, any agreement that only limits supply rather than implements output cuts will do little to tackle the global glut, the International Energy Agency said on Thursday.
Saudi Prince Drops Friday Night Bomb: "No Deal Without Iran...We Are Selling At Every Opportunity" - In what appears to be a Doha party-pooping statement, Saudi deputy crown prince Mohammed bin Salman stated unequivocally that The Kingdom won’t restrain its oil production unless other producers, including Iran, agree to freeze output at a meeting this weekend in Doha. This a major problem because - if you remember - this week's melt-up in oil (and thus stocks) was predicated on an anonymous diplomat cited by Interfax saying a deal will get done without Iran (which the Russians refused to confirm). All that hope crushed by a reality that has been painfully obvious that no side will be given in the Iran-Saudi tete-a-tete... and now, as Citi warned "expect a sharp sell-off." As Bloomberg reports, the world’s biggest crude exporter would cap its market share at about 10.3 million to 10.4 million barrels a day, if producers agree to the freeze, Prince Mohammed bin Salman said during an interview on Thursday at King Salman’s private farm in Diriyah, the original home of the Al Saud royal family. “If all major producers don’t freeze production, we will not freeze production,” said Prince Mohammed, 30, who has emerged as Saudi Arabia’s leading economic force. Adding - rather pointedly that... “If we don’t freeze, then we will sell at any opportunity we get.” “If prices went up to $60 or $70, that would be a strong factor to push forward the wheel of development,” Prince Mohammed said. “But this battle is not my battle. It’s the battle of others who are suffering from low oil prices.” Prince Mohammed also said that Saudi Arabia isn’t concerned because “we have our own programs that don’t need high oil prices.” Simply put, "no deal," given Iran is sending a junior minister in a clear message that it will do nothing.
Indonesia eyes overseas oil storage to hold buffer stocks -- Indonesia is in talks with several Middle East nations to lease oil storage tanks as Southeast Asia's biggest consumer aims to eventually create buffer crude and oil product stocks equivalent to 30 days of consumption but faces domestic infrastructure challenges. The country, which consumes around 1.5 million-1.6 million b/d of refined products, last year unveiled long-term plans to build 30 days of stocks over the next five years. Indonesia currently has no mandate on stock levels oil companies need to hold. State-owned Pertamina is expected to hold stocks equal to between 18 and 22 days of demand, and its stocks currently hover at around 18 days. The government would have preferred holding stocks domestically but since domestic storage availability is insufficient, the country is looking overseas, director general of oil and gas at the energy and mines ministry Wiratma Puja said last week.
Crude congestion Reuters maps of global tanker congestion. Huge traffic jams of tankers have formed around the world with some 200 million barrels of oil either waiting to be loaded or delivered as ports struggle to cope with record volumes in perhaps the most visible sign of the global oil glut. Almost all of the over 660 Very Large Crude Carriers (VLCCs), the largest tankers in use to transport seaborne oil, are used to ship crude between the Middle East and Asia’s consumption hubs around India and the Far East. The map above shows all of these super tankers in operation on April 11. Each icon on the maps represents a large crude tanker of either VLCC or Suezmax size. Hundreds of other small and medium crude carriers are also present in the region but not shown here. Waiting in line Each orange symbol below represents a parked large crude tanker. Ships in transit are not shown.The exporters Despite war and conflict, there are 19 VLCCs and suezmax tankers with a combined capacity of 43 million barrels waiting to be filled off Iraq's Basra as the port struggles to cope with the country's rising crude output. A further 19 are waiting off the eastern coast of the U.A.E. at the ports of Fujairah and Khor Fakkan, also due to loading delays. China's independent refiners, freed of government constraints after securing permission to import just last year, have gorged on plentiful low-cost crude in 2016. This has created delays for tankers that have quadrupled to between 20 to 30 days at Qingdao port in Shandong province, the key import hub for the plants, known as teapots.
OPEC cuts forecast for non-OPEC crude oil supply in 2016, trims demand outlook - Platts -- OPEC believes crude supply outside the producer group is set to fall more than expected, with weaker Chinese, Colombian, UK and US oil output eclipsing better outlooks for Canada, Norway, Oman and Russia. The outlook for non-OPEC supply has been hit largely by lower expectations for crude oil production from China's onshore mature fields. OPEC also cited the postponement of major new projects due to reduced cash flow as the impact of lower prices takes its toll.The 13-member producer group now sees output falling 730,000 b/d over the year, up from a previous estimate of 700,000 b/d, to average 56.39 million b/d in 2016. Indeed, OPEC also partly attributed the 20% surge in oil futures in March on weaker non-OPEC supply in 2016, supply disruptions in Iraq and Nigeria, signs US shale is shrinking, along with expectations of a supply intervention plan by major crude exporters in Doha on April 17. OPEC highlighted that bigger oil producers were adapting to lower prices, with lower production costs mainly in the US, hedging and some companies swallowing losses rather than cut output. The question remained for how long, as OPEC also warned that oversupply persists amid record stock levels.
India Echoing Pre-Boom China As New Center Of Oil Demand Growth -- In the energy world, India is becoming the new China. The world’s second-most populous nation is increasingly becoming the center for oil demand growth as its economy expands by luring the type of manufacturing that China is trying to shun. And just like China a decade ago, India is trying to hedge its future energy needs by investing in new production at home and abroad. India may have one advantage its neighbor to the northeast didn’t. While China’s binge came during a commodity super-cycle that saw WTI crude reach a high of $147.27 a barrel in 2008 -- due in no small part to its demand -- India’s spurt comes during the biggest energy price crash in a generation. While oil has tumbled more than 50 percent from mid-2014 levels, the South Asian nation spent $60 billion less on crude imports in 2015 than the previous year even while buying 4 percent more. “In addition to the boost from low oil prices, structural and policy-driven changes are under way which could result in India’s oil demand taking off in a similar way to China’s during the late 1990s, when Chinese oil demand was at levels roughly equivalent to current Indian oil demand,” said Amrita Sen, chief oil analyst for Energy Aspects Ltd. in London. In 1999, China’s economy was less than a 10th of its current size of more than $10 trillion, and bicycles vied for space with taxis and buses on crowded streets in major cities like Shanghai. In the ensuing 17 years the economy, spurred on by foreign investment in manufacturing, grew from the seventh largest in the world to No. 2. Vehicle sales surged and oil demand has nearly tripled since then, positioning the country to overtake the U.S. as the world’s largest crude importer this year. -
India, Iran seek to boost ties on crude oil, LPG, petchems - Platts - India and Iran have agreed to boost energy cooperation, with Tehran eyeing increased crude oil sales to the Asian importer, while New Delhi explores the potential for Indian companies to invest up to $20 billion in various projects in the Middle Eastern country. After holding talks with visiting Indian oil minister Dharmendra Pradhan in Tehran, Iranian oil minister Bijan Zanganeh said he was hopeful that crude oil exports to India would rise from the current 350,000 b/d. "We hope that this figure is increased with the support and assistance of the Indian government, now that sanctions have been lifted," Zanganeh was quoted as saying by Shana news agency.The Indian side has positively responded to the offer. "Iran is the sixth-largest oil exporter to India. But we would like Iran to increase its oil exports to India and regain its previous position," Pradhan was quoted as saying by Shana. According to latest shipping data obtained by Platts and cFlow, Platts trade flow software, Iran was the sixth-largest crude oil supplier to India in the January-February period, with imports at 1.74 million mt, up nearly 13% from 1.54 million mt in the same period a year earlier.
Saudi Arabia gets credit rating downgrade: Saudi Arabia's reputation for sterling finances encountered a setback Tuesday as Fitch Ratings downgraded the country's credit ratings. The downgrades follow the crushing decline in oil prices, which has battered the country's fiscal picture even as it continues to pump out petroleum at a steady clip. The agency downgraded Saudi Arabia's long-term and local-currency issuer ratings from AA to AA- and left the outlook for both ratings at negative, signaling possible future downgrades. The move stemmed from Fitch's assumption that oil prices will average about $35 per barrel in 2016 and about $45 per barrel in 2017. It also comes more than a month after Saudi Arabia oil minister Ali bin Ibrahim Al-Naimi told industry executives in Houston that a production cut by the Organization of the Petroleum Exporting Countries is "not gonna happen" despite a global glut of oil. He signaled at the time that Saudi Arabia was prepared to keep pumping oil at low prices to maintain market share as the market weeds out higher-cost players. But that strategy is coming at a cost for Saudi Arabia. Oil's slide triggered a gaping budget deficit of 14.8% of gross domestic profit in 2015, up from 2.3% a year earlier, according to Fitch. Fitch said that hole would "narrow only marginally" this year. In addition to rising debt, Fitch said one of its concerns is geopolitical risks emanating from tension between Saudi Arabia and Iran.
Fitch Sees Saudi's Oil Price Averaging $35/Bbl In Current Calendar Year -- The headline caught my attention: Saudi Arabia gets credit rating downgrade, as reported in USA Today. But the real story was in the fourth paragraph: The move stemmed from Fitch's assumption that oil prices will average about $35 per barrel in 2016 and about $45 per barrel in 2017. For as long as most folks can remember, Saudi Arabia set their national budget based on $100 oil. Then in 2015, Saudi Arabia set their 2016 (this year's) budget on $60 oil, which seemed to confirm the "word on the street" that Saudi Arabia never expected oil to drop below $60/bbl as an average for an entire year. I've run the numbers under several scenarios. I don't know how "we" get to $60 oil as an average this year. Fitch suggesting that the 2016 (this year's) average will be $35/bbl, suggests that Fitch sees new lows this year.
GCC states set to borrow billions to fund deficits | GulfNews.com: The oil-rich states in the Gulf Cooperation Council (GCC) region could end up borrowing $285 billion to $390 billion through 2020 to contain budget shortfalls caused by lower oil prices, according to a new report. The cumulative borrowings, which will be generated through the issuance of local and international debt/bonds, is a significant jump from the $72.1 billion raised between 2008 and 2014, noted the latest research furnished to Gulf News by Marmore, a fully-owned subsidiary of Kuwait Financial Centre (Markaz). Between 2015 and 2016 alone, countries in the GCC are expected to register a fiscal deficit of $318 billion as a result of lower oil prices. “Prolonged lower oil prices could further exacerbate the fiscal situation,” the report said. “Assuming low oil prices persist, public foreign assets could decline substantially over the next five years. The bulk of the financing requirement would be concentrated in Saudi Arabia, while Kuwait, Qatar and the UAE are expected to preserve the sizable foreign assets.” The GCC states include Saudi Arabia, Kuwait, Oman, UAE, Qatar and Bahrain. Most of these economies rely heavily on revenues from oil. The price of oil has dropped significantly in recent times. After rallying to $115.19 per barrel in June 2014, Brent crude plummeted to $27.88 per barrel on January 20, 2016, posting a massive decline of about 75 per cent. The drop has affected GCC economies, considering that the money generated from oil constitutes approximately 80 per cent of overall government revenues. Some analysts, however, are skeptical about the assumptions raised by the Markaz research. Experts have also said that certain GCC states, like the UAE, remain resilient and are poised to weather the impact of lower oil prices.
How 315 Billion Petrodollars Evaporated - The world’s top oil exporters are burning through their petrodollar assets at an accelerating pace, increasing the pressure to reach a deal to freeze production to bolster prices. The 18 nations set to gather in Doha on Sunday to discuss a production freeze have spent $315 billion of their foreign-exchange reserves -- about a fifth of their total -- since the oil slump started in November 2014, according to data compiled by Bloomberg. In the last three months of 2015, reserves fell nearly $54 billion, the largest quarterly drop since the crisis started. The petrodollar burn has consequences beyond the oil nations, affecting international fund managers like Aberdeen Asset Management Plc and global currencies markets. Oil nations have traditionally held their reserves in U.S. Treasuries and other liquid securities. Nonetheless, the impact in credit markets has been muted as central banks continue to buy debt. "We expect 2016 to be yet another painful year for most of the oil states," said Abhishek Deshpande, oil analyst at Natixis SA in London. The gathering in Doha will comprise both OPEC and non-OPEC states, though any deal to boost prices will probably be largely cosmetic as countries are already pumping nearly at record levels. In a letter inviting countries to the Doha meeting, Qatar Energy Minister Mohammed Al Sada said oil countries need to stabilize the market in "the interest of a healthier world economy as the present low price is seen to be benefiting no one." Saudi Arabia accounts for nearly half of the decline in foreign-exchange reserves among oil producers, with $138 billion -- or 23 percent of its total -- followed by Russia, Algeria, Libya and Nigeria. In the final three months of last year, Saudi Arabia burned through $38.1 billion, the biggest quarterly reduction in data going back to 1962.
Iran's Massive Oil Fleet Begins To Move: 29 Million Barrels Depart Iran In Past 2 Weeks -- A recurring oil market theme in the past few months has been the speculation that despite its jawboning that it is ready and willing to boost crude production, Iran has had a hard time getting both the funding and the required infrastructure to substantially boost its production to recapture its supply levels last seen before the recent US sanctions. That however appears to be changing fast. Recall all those tankers we have profiled before on anchor next to the Iran shore? They have finally started to move. According to Bloomberg, tankers carrying about 28.8 million barrels of crude, or more than 2 million a day, left the Persian Gulf country’s ports in the first 14 days of April, according to tanker-tracking data. That compares with a rate of about 1.45 million barrels a day in March. As a result, Iran’s crude shipments have soared by more than 600,000 barrels a day this month, adding to the pressure facing producer nations as they prepare to meet in Doha to discuss freezing output to prop up oil prices. Putting that number in context, 600,000 barrels a day is precisely how much US oil production has declined by since peaking late last year as a result of the collapse in oil prices and the mothballing of various rigs. Where is all this fresh oil headed? According to Bloomberg, most of these tens of millions in fresh barrels of oil are headed to China which will be the biggest recipient of Iranian crude loaded so far this month, while flows to Japan are resuming after halting in March, the tracking data show. To be sure Iran is taking advantage of supply disruptions at other OPEC exposrters: Nigeria and Iraq saw a combined decline of 90,000 barrels a day, according to the International Energy Agency.
Angola Could Be OPEC's First Member To Fall -- OPEC-member Angola, which is dependent on oil for 95 percent of its export revenues, isfacing an urgent cash flow problem, and the only way out is external help as thedominoes start to fall. Angola has sought financial aid from the International Monetary Fund (IMF) to weather the crisis engulfing the African nation due to low oil prices, while President José Eduardo dos Santos has gone as far as to dip into the country’s sovereign wealth fund just to pay civil servant salaries. The Finance ministry said in a statement: “The government of Angola is aware that the high reliance on the oil sector represents a vulnerability to the public finances and the economy more broadly. The government will work with the IMF to design and implement policies and structural reforms aimed at improving macroeconomic and financial stability, including through fiscal discipline.” Along with the drop in oil prices, it doesn’t help that Angola’s economy has largely become a kleptocracy - a government run by those gunning for status and personal gain at the expense of the nation. For those who may argue with this terminology, we can look at the Angolan President’s daughter, Isabel dos Santos, who is worth $3.3 billion and is the richest woman in Africa, according to Forbes. Meanwhile, 68 percent of the Angolan population lives below the poverty line. President José Eduardo dos Santos has run the country since 1979, but until now, he hasavoided seeking aid from the IMF, most likely because the IMF has been known to delve into the state’s finances to locate irregularities—irregularities such as the President’s daughter’s net worth being over 6,000 times Angola’s GNI.
Russia Refutes Its Own Rumor, Says Doha Deal Will Have Few Detailed Commitments - Yesterday, Russia said there was a virtual deal assured with Saudi Arabia to "freeze" production (at record levels) that did not require Iran's participation. And now, it appears the Russians are walking that confident "hope" back. Russia's energy minster just told a briefing that the Doha "freeze" deal would be "loosely-framed with few detailed commitments." Not exactly what the market was hoping for... And finally, the incessant bullshit on mainstream media that "everyone" is short oil into the Doha weekend is utter tripe - in fact Oil ETF shorts are at the lowest level in 4 months.
Second Russian intelligence report on Turkey’s current assistance to Daesh -- The main supplier of weapons and military equipment to ISIL fighters is Turkey, which is doing so through non-governmental organizations. Work in this area is overseen by the National Intelligence Organization of Turkey. Transportation mainly involves vehicles, including as part of humanitarian aid convoys.The Beşar foundation (President — D. Şanlı) is most actively engaged in pursuing these objectives and, in 2015, formed around 50 conveys to the Turkmen areas of Bayırbucak and Kızıltepe (260 km north of Damascus). Donations from individuals and entities are “officially” its main source of funding. In point of fact, the organization’s account receives such funds from a specific budget allocation of the National Intelligence Organization [MIT]. The Beşar foundation has opened current accounts in Turkish and foreign banks with the support of the Government.The İyilikder foundation (President — Mr. I. Bahar) is also a major supplier of weapons and military equipment to Syrian territory under ISIL control, having dispatched around 25 different supply convoys in 2015. The leadership of this non governmental organization is funded by sources from European and Middle Eastern countries. Funds in hard currency are transferred to Kuveyt Türk and Vakıf bank accounts. The Foundation for Human Rights and Freedoms [IHH] (President — Mr. B. Yıldırım) is actively engaged in delivering munitions to terrorists in Syria. It is officially supported by the Government of Turkey and acts under the direction of the Turkish intelligence services. Since 2011, the foundation has sent 7,500 vehicles with various supplies to territory under ISIL control. This organization is funded from Turkish sources and by other States. The Turkish banks Ziraat and Vakıf are used for fundraising.
U.S. Delivers 3,000 Tons Of Weapons And Ammo To Al-Qaeda & Co in Syria - The United States via its Central Intelligence Agency is still delivering thousands of tons of additional weapons to al-Qaeda and others in Syria. The British military information service Janes found the transport solicitation for the shipment on the U.S. government website FedBizOps.gov. Janes writes: The FBO has released two solicitations in recent months looking for shipping companies to transport explosive material from Eastern Europe to the Jordanian port of Aqaba on behalf of the US Navy's Military Sealift Command. Released on 3 November 2015, the first solicitation sought a contractor to ship 81 containers of cargo that included explosive material from Constanta in Bulgaria to Aqaba...The cargo listed in the document included AK-47 rifles, PKM general-purpose machine guns, DShK heavy machine guns, RPG-7 rocket launchers, and 9K111M Faktoria anti-tank guided weapon (ATGW) systems. The Faktoria is an improved version of the 9K111 Fagot ATGW, the primary difference being that its missile has a tandem warhead for defeating explosive reactive armour (ERA) fitted to some tanks.The Janes author tweeted the full article (copy here). One ship with nearly one thousand tons of weapons and ammo left Constanta in Romania on December 5. The weapons are from Bulgaria, Croatia and Romania. It sailed to Agalar in Turkey which is a military pier and then to Aqaba in Jordan. Another ship with more than two-thousand tons of weapons and ammo left in late March, followed the same route and was last recorded on its way to Aqaba on April 4. We already knew that the "rebels" in Syria received plenty of weapons during the official ceasefire. We also know that these "rebels" regularly deliver half of their weapon hauls from Turkey and Jordan to al-Qaeda in Syria (aka Jabhat al-Nusra):
Let The Carpet Bombing Begin: U.S. Deploys B-52s In Fight Against ISIS -- Several months ago, the US press and military had a field day with Donald Trump's suggestion to send the heavy equipment to Syria and Iraq and "carpet bomb" the Islamic State. In February, Army Lt. Gen. Sean MacFarland, who directs the coalition fighting ISIS in Iraq and Syria, butchered the idea and detailed why it's militarily unacceptable. "Indiscriminate bombing where we don't care if we are killing innocents or combatants is just inconsistent with our values," he said in response to a question from CNN on the possibility of using carpet bombing. According to Reuters, for the first time in 25 years, the U.S. Air Force deployed B-52 bombers to Qatar on Saturday to join the fight against Islamic State in Iraq and Syria. This is the first time the B-52 has been based in the Middle East since the end of the Gulf War in 1991.
As Islamic State is pushed back in Iraq, worries about what's next | Reuters: As U.S.-led offensives drive back Islamic State in Iraq, concern is growing among U.S. and U.N. officials that efforts to stabilize liberated areas are lagging, creating conditions that could help the militants endure as an underground network. One major worry: not enough money is being committed to rebuild the devastated provincial capital of Ramadi and other towns, let alone Islamic State-held Mosul, the ultimate target in Iraq of the U.S.-led campaign. Lise Grande, the No. 2 U.N. official in Iraq, told Reuters that the United Nations is urgently seeking $400 million from Washington and its allies for a new fund to bolster reconstruction in cities like Ramadi, which suffered vast damage when U.S.-backed Iraqi forces recaptured it in December. "We worry that if we don't move in this direction, and move quickly, the progress being made against ISIL may be undermined or lost," Grande said, using an acronym for Islamic State. Adding to the difficulty of stabilizing freed areas are Iraq's unrelenting political infighting, corruption, a growing fiscal crisis and the Shiite Muslim-led government's fitful efforts to reconcile with aggrieved minority Sunnis, the bedrock of Islamic State support. Some senior U.S. military officers share the concern that post-conflict reconstruction plans are lagging behind their battlefield efforts, officials said. "We're not going to bomb our way out of this problem,"
World War Three may have already begun in Iraq and Syria - The recent death of a Marine in Iraq exposed the fact the United States set up a firebase there, which in turn exposed the fact the Pentagon misrepresented the number of American personnel in Iraq by as many as 2,000. It appears a second firebase exists, set up on the grounds of one of America’s largest installations in the last Iraq war. Special operations forces range across the landscape. The Pentagon is planning for even more troops. There can be no more wordplay: America now has boots on the ground in Iraq.The regional picture is dismal. In Syria, militias backed by the Central Intelligence Agency are fighting those backed by the Pentagon. British, Jordanian and American special forces are fighting various enemies in Libya, which, as a failed state, is little more than a nascent Iraq likely to metastasize in its neighbors.But Iraq remains the center of what Jordanian King Abdullah now refers to as the Third World War. It is where Islamic State was birthed, and where the United States seems to be digging in for the long haul.Though arguably the story of Islamic State, Iraq and the United States can be traced to the lazy division of the Ottoman Empire after World War One, things truly popped out of place in 2003, when the U.S. invasion of Iraq unleashed the forces now playing out across the Middle East. The garbled post-invasion strategy installed a Shi’ite-dominated, Iranian-supported government in Baghdad, with limited Sunni buy-in.