Sunday, May 15, 2016

more on the Utica shale, oil supplies drop as EIA fudge factor swings by 664,000 bpd, drilling drops again, etc

you'll recall that after looking at the new maps of the Utica/Pt Pleasant "plays" from the EIA last week, wherein we discovered that our part of the state was sitting on top of the thickest areas of the Utica, that i could not understand why our area had not yet been targeted for extensive horizontal drilling, given that the Utica was even closer to the surface in this part of the state than in those areas currently being fracked...among the reasons i suspected was that it was "possible that the shale in those areas [that are being drilled] have a higher hydrocarbon content than the shale in our area" turns out that's exactly the case...searching for sites that would provide that information, i came across a 2012 USGS paper titled "Assessment of Undiscovered Oil and Gas Resources of the Ordovician Utica Shale of the Appalachian Basin Province" (pdf) which included among other graphics a map showing the percentage of organic carbon content for the Utica and Point Pleasant formations that we're including below...

May 14 2016 Utica organic carbon percent

this map shows the extent of the exploitable areas of the Utica shale reservoir in blue and the extent of the Point Pleasant in violet and as the descriptive footnote indicates, the percentage of total organic carbon by weight in those shale layers, which is indicated by isolines marked 1, 2, and 3 across the face of the map...thus, the area in southeast Ohio between the 2 and 3 isolines indicates that the underlying Utica shale has a total organic carbon content of between 2% and 3%....similarly, the area in northwest PA adjacent to the Ohio border also has a total organic carbon content of between 2% and 3%...below our part of the state, in fact below almost all of northern Ohio east of a Toledo-Findlay line, the total organic carbon content of the Utica shale is between 1% and, this is certainly a very generalized map and it's likely there's far more variation than these few lines indicate, but for our purposes it's probably all we really need to know...generally speaking, fracking the shale in the south eastern part of the state would yield almost twice as much hydrocarbon per ton of rock as in the northeast despite that fact that the Utica is both thicker and somewhat shallower in our part the state, the economics dictate that the drilling is concentrated in the "sweet spots" where the hydrocarbon content is twice what we have below us...

now, there's another map of the Utica shale that i stumbled on to this week that we should also take a look at, because it shows that different areas of the Utica will yield larger amounts of crude oil than natural gas and vise-versa......

May 14 2016 Utica source rock maturation status

the above map comes from a page of maps on "the Utica shale blog", produced by a Pennsylvania geologist...the maps show which parts of the Utica are likely to produce oil and which are likely to produce gas, apparently based on a regression analysis of core samples of the shale taken from a number of i gather from wikipedia and other reading, maturity of a rock formation is an indication how long and at what temperature and pressure the organic matter in a formation has been subjected to, which in turn determines the state of those hydrocarbons in the rock...thus those areas of the Utica in western Ohio and Kentucky marked immature include kerogens and incompletely formed oil, probably because they remained shallow, whereas those areas of the Utica in eastern Pennsylvania and southern New York marked overmature have been subjected to so much heat & pressure as to drive [some of?] the gas between, the hydrocarbons exist as oil in northern and central Ohio as shown in green, and they exist as dry gas (mostly methane) in western Pennsylvania and central New York, while in a narrow band of the Utica from western New York through northwest Pennsylvania and eastern Ohio, hydrocarbons exist as wet gas, which is defined differently by different sources. but “gases having more than about 20 bbls/MMscf of condensate” seems as good as any...the same USGS paper on the Utica that we sourced our first graph from says “the gas / oil boundary is typically based on 20,000 cubic feet of natural gas per barrel of oil’...

an EIA map we looked at last week showed that most of the Utica shale wells were in counties around Columbiana, Carroll, Harrison, and points south, and thus a large majority of the wells drilled in the Ohio Utica so far appear to be in that pink band, indicating they've been drilling for the wet gas...this exists as a gas under pressure underground but includes condensates at atmospheric pressure at the surface...that's because it not only includes the natural gas methane that we're familiar with as used for domestic heating purposes, but increasing quantities of ethane, propane, butane, pentane, and possibly even more complex hydrocarbons which fall under the ‘natural gas liquids’ category...those are generally more valuable petrochemical feedstocks, and dry gas contains little or none of those...the other reason we've included this map is to point out that the hydrocarbons in Utica shale that's under this part of the state appear to exist as oil, not as natural gas or as gas liquids...that oil shale area would include Cuyahoga Lake, Ashtabula and most of Portage and Geauga counties (except for Parkman), while Trumbull is split and Mahoning is largely wet my previous assumptions that we'd be subject to immediate exploitation dui to natural gas exports and the rising prices they'd bring seems to be unfounded...

The Latest US Oil Stats and Fudge Factor from the EIA

Wednesday's Petroleum Status reports for the week ending May 6th from the Energy Information Administration indicated that our crude oil production fell a bit again and that our imports of oil were virtually unchanged, while US refineries saw another modest increase in the amount of oil that they used...production of crude oil from US wells fell for the 15th time in the past 16 weeks, dropping by 23,000 barrels per day, from an average of 8,825,000 barrels per day during the week ending April 29th to an average of 8,802,000 barrels per day during the week ending May 6th....that's now 6.1% below the 9,373,000 barrels per day we were producing during the first week of May last year, and 8.4% below the 9,610,000 barrel per day peak of our oil production that was hit during the week ending June 10th of last year...

meanwhile, our imports of crude oil rose by just 5,000 barrels per day, from an average of 7,660,000 barrels per day during the week ending April 29th to an average of 7,665,000 barrels per day during the week ending May 6th...that was 11.2% more than the 6,881,000 barrels of oil per day we imported during the week ending May 8th 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 still 8.4% more than our oil import rate of the same four-week period last year...  

at the same time, inputs of crude oil to US refineries averaged 16,179,000 barrels per day during the week ending May 6th, which was 193,000 barrels per day more than 15,986,000 barrels per day they used during the prior week....while that happens to be 1.3% more than the 15,968,000 barrels per day that US refineries were using the same week last year, our refining over the past couple of months is still about one percent below last year's pace for this time of fact, the US refinery utilization rate actually fell to 89.1% of operable capacity last week, from the 89.7% capacity utilization rate of the week ending April 29th, and it remains well below the capacity utilization rate of 91.2% that we saw during the week ending May 8th of 2015...that's in contrast to the average over 95% of capacity that US refineries ran during a 10 week stretch in the middle of last summer... 

however, in the face of just that modest increase in refining, the 2.8 million barrel surplus of crude oil that we saw build up last week was completely reversed, and the EIA reported that 3.4 million barrels of oil was withdrawn from storage to meet our needs this, anyone with basic math skills knows that doesn't add up, but we never see any oil or energy news and analysis site mention it, much less see it questioned by the regular see, data for each of these oil metrics reported every week is gathered independently of the others; ie, some EIA analysts are responsible for the data on imports, some for the data on field production, some for consumption, some for the amount of oil and petroleum products in storage, and some for the inputs and outputs of our refineries...then on each Wednesday all these reports are published together, led by the weekly U.S. Petroleum Balance Sheet....with independent sources of the data that is included on the balance sheet, it's almost always the case that reports of oil arriving from several sources do not match the reports of oil used by several others....the EIA resolves those differences with an "adjustment" entry on line 13 of the balance sheet (pdf), which is really no more than a fudge factor used to bring the oil inputs and oil outputs into balance (the footnote says the adjustment was "formerly known as Unaccounted-for Crude Oil, a balancing item")....this week's adjustment was minus 375,000 barrels of oil per day, meaning 375,000 barrels of oil that we appear to have produced or imported this week did not show up in the final figures...last week the adjustment was a positive 288,000 barrels per day, which means that the apparent oil that ended up in products or in storage at the end of the week was 288,000 barrels per day more than we should have had...thus the swing in this fudge factor from last week to this week was 664,000 barrels per day, certainly enough to throw off any realistic analysis of what's happening with our crude oil supply nationally, and even worse, quite a bit more than would be needed to significantly move the global price of oil...since that weekly adjustment has become such a significant factor that no one else seems to be reporting, we're just going to have to include a report of that factor in our own coverage every week henceforth...

nonetheless, with more oil apparently being refined, our refinery production of gasoline rose by 240,000 barrels per day, averaging 10,051,000 barrels per day during the week ending May 6th, up from the average 9,811,000 barrels of gasoline per day produced during the week ending April 29th...turns out, that was the first time our gasoline output topped 10 million barrels per day in a week in any May, and the most gasoline we've produced in any week since the week ending August 14th of last the same time, our refinery output of distillate fuels (diesel fuel and heat oil) also increased, rising by 21,000 barrels per day to 4,610,000 barrels per day during week ending the 6th, which was still 250,000 barrels per day, or 5.1% lower than our distillates production during the same week of 2015...    

however, even with that record output of gasoline, our gasoline inventories fell for the first time in 3 weeks, decreasing from 241,795,000 barrels on April 29th to 240,564,000 barrels on May 6th....that was as our imports of gasoline fell by 167,000 barrels per day to 779,000 barrels per day during the week, and as the gasoline supplied to US markets rose by 156,000 barrels per day to 9,658,000 barrels per day, the most we've consumed in any week this year, and the highest weekly consumption level in early May since prior to the great recession... nonetheless, this week's gasoline supplies were still 6.1% higher than the 226,710,000 barrels of gasoline that we had stored on May 8th last year, which were at the time the highest for the first full week of May in the EIA records...thus our gasoline stores are still categorized as "well above the upper limit of the average range" for this time of year..

meanwhile, our distillate fuel inventories fell by 1,647,000 barrels on continued elevated demand from the Midwest states, to end the week at 155,332,000 barrels...this is a normal spring planting season drawdown on distillates, and since distillate inventories were already bloated after the warmer than normal winter reduced heat oil consumption, distillate inventories are still 21.1% higher than the 128,270,000 barrels of distillates we had stored at the same time last year...thus, like gasoline, stores of distillates are also characterized as "well above the upper limit of the average range" for this time of year... 

lastly, after that 375,000 barrels of oil per day disappeared someplace this week, we found it necessary to withdraw 3,410,000 barrels of oil from our stockpiles of crude oil in storage to meet our needs, and hence our inventories of oil as of May 6th fell to 539,984,000 barrels, the first drop in 5 weeks and only the 2nd weekly decrease this although we didn't set a new record for oil stores this week, we've still increased our inventories of crude oil by nearly 57.7 million barrels since the beginning of this year..thus our oil supplies are still 11.4% higher than the 484,839,000 barrels of oil we had stored as of May 8th, 2015, and 35.5% higher than the 398,523,000 barrels of oil we had stored on May 9th of 2014....

This Week's Rig Counts

at any rate, at least we set another record low for drilling activity this week, as the US rig count has now set new all time lows for 10 consecutive weeks....Baker Hughes reported that the total count of active rotary rigs running in the US was down by 9 more rigs to 406 rigs as of May 13th, which was also down from the 888 rigs that were working as of the May 15th report last year, and down from the recent high of 1929 rigs that were deployed on November 21st of 2014... the count of rigs drilling for oil fell by 10 rigs to 318, which was down from 660 oil directed rigs a year earlier, and down from the recent high of 1609 working oil rigs that was reported on October 10, 2014, while the count of drilling rigs targeting natural gas formations rose by 1 to 87, which was still down from the 223 natural gas rigs that were drilling a year ago, and down from the recent natural gas rig high of 1,606 rigs that was set on August 29th, 2008... 

two of the rigs that were shut down this week had been drilling in the Gulf of Mexico, so the Gulf rig count is now down to 21, while the total offshore count fell to 22, as we still have an offshore platform working off the Cook Inlet in Alaska...this week's count was down from 33 rigs in the Gulf of Mexico and 34 total offshore that were in use on May 15th of 2015...there was also a rig removed that had been drilling on an inland lake in southern Louisiana this week, which left the inland waters rig count at 2, down from the 4 rigs deployed drilling on inland waters at the end of the same week last year...

the count active horizontal drilling rigs was down by 3 to 315 rigs this week, which was down from the 685 horizontal rigs that were in use on May 15th of last year, and down from the recent record of 1372 horizontal rigs that were deployed on November 21st of the same time, 6 more directional rigs were also stacked, leaving just 38 directional rigs still working, which was down from the 89 directional rigs that were in use at the end of the same week a year earlier...meanwhile. the vertical rig count was unchanged at 53, which was still down from the 114 vertical rigs that were up and running in the US during the same week last year...   

for the details on which states and which shale basins saw changes in drilling activity this past week, we're again going to include a screenshot of that part of the rig count summary from Baker Hughes, which shows those changes...  the first table below shows weekly and annual rig count changes by state, and the second table shows weekly and annual rig count changes for the major geological oil and gas both tables, the first column shows the active rig count as of May 13th, second column shows the change in the number of working rigs from the prior week, the third column shows last weeks rig count, the fourth column shows the change in the number of rigs running from the same week a year ago, and the 5th column shows the number of rigs that were drilling at the end of that week a year ago, which in this case was May 15th of 2015:

May 13 2016 rig counts

so for example, we can see from the above that the active rig count in the Permian basin of western Texas was down by 5 rigs to 134, which was down from the 233 rigs that were working that basin a year ago, which contributed to the loss of 7 rigs in Texas, as shown in the upper table, where they now have 181 rigs still working in the state, down from 373 a year earlier...we can also see that the Haynesville shale of Louisiana, a natural gas basin, had a rig added, which likely accounts for the increase of 1 gas drilling rig, as the Marcellus and Utica counts were unchanged...that addition did not allay the 3 rig drop in Louisiana drilling, however, as the inland water rigs and both of the Gulf of Mexico rigs that were shut down this week had previously been counted for that state...notice that the state table above does not include Indiana, which saw a rig set up and start drilling this week, the first drilling activity in that state in more than a year...


Davis-Besse nuclear reactor restarted, equipped to handle Fukushima-sized disaster | FirstEnergy's nuclear company has restarted its Davis-Besse nuclear reactor following a biennial shutdown for refueling, inspections and maintenance. The 908-megawatt plant was operating at 60 percent of power this afternoon and expected to reach full power during the week. One megawatt, or 1 million watts, is enough electricity to power 800 to 1,000 homes. During the 44-day shutdown, the company completed construction of a new emergency water and power supply building designed to meet federal and industry emergency standards that have been developed since the disaster at Fukushima, Japan, in March 2011. Constructed next to the reactor containment building, the hardened three story structure has been built on bedrock under the plant and contains more than 130,000 square feet of space. The building houses storage tanks containing 290,000 gallons of water and two large gas-turbine generators to power pumps that would push that water into the reactor if a major disaster knocked out all of the plants redundant emergency systems, which is what happened in Japan following the tsunami. The 290,000 gallons of stored water would be sufficient to cool the plant for up to 24 hours while crews set up emergency pumps and lines to draw water from Lake Erie. There is also sufficient space in the new building to store those additional portable pumps and large generators, said Jennifer Young, FirstEnergy spokeswoman.

Critics: New FirstEnergy ‘bailout’ plan ‘would make Houdini blush’ - FirstEnergy’s latest attempt to recast its Ohio plan to guarantee income for certain power plants remains fatally flawed in the eyes of challengers and other critics. Rather than let federal regulators scrutinize its proposed power purchase agreement, FirstEnergy now wants to withdraw that part of the plan, which was unanimously approved by the Public Utilities Commission of Ohio on March 31. Yet the company still wants ratepayers to pay the charges it previously proposed. According to FirstEnergy, the modified plan is now basically a “hedge” to protect customers when electricity costs eventually rise. Critics disagree. “It’s not clear to me what it means to say it’s a hedge against future price increases,” said William Bowen, an energy policy expert at Cleveland State University. “What’s the difference between a hedge against future price increases and excess profits today?” The average consumer household could wind up paying more than $10 more per month if the plan goes forward, consumer advocates have found. “This continuing saga of the FirstEnergy bailout remains a great risk for Ohioans' electric bills and, nearly two years into the state process, an imposition on government regulation that the public funds,” said Ohio Consumers’ Counsel Bruce Weston. “Enough is enough.‎"

Ohio regulators will consider FirstEnergy's new customer surcharges, expect higher monthly bills | -- State regulators have opened the door for another round of hearings that could give FirstEnergy a way to have customers indirectly subsidize its old uneconomic power plants. The Public Utilities Commission of Ohio decided Wednesday that it would take another look at the company's previously approved rate case set to begin June 1. The new, revised rate plan does not contain the controversial "power purchase agreements" that would have violated federal rules governing utility competition. Instead, it would have surcharges, meaning the result for customers would be the same: higher bills. But the PUCO's ruling came a full day before its previously set deadline for opponents to file arguments against appeals. That deadline is 5 p.m. today. And Wednesday's PUCO order made it clear that it anticipates additional sworn depositions, additional expert testimony and perhaps formal hearings. All of this would happen despite thousands of pages of arguments and roughly 40 days of formal hearings already logged in the 19-month-old case.

Politically connected utilities have outsized influence in Ohio -- Which brings us to the Public Utilities Commission of Ohio, which is supposed to be sure that electric and gas companies charge Ohioans fair prices. Three of the five PUCO members are Republicans, though, a party that, all else equal, is friendly to big businesses, such as utilities.  Rank-and-file Ohioans, regardless of politics, have to get by. And utility rates are a factor in making ends meet. Yet the Statehouse utilities lobby, along with lobbies representing banks, insurance companies, nursing home proprietors and oil-and-gas frackers, is among the most powerful in Columbus. Utilities and other corporate giants will argue, and they're correct, that they're big employers – "job-creators," and all that. But they're also big political players – and not just out of civic-mindedness. A looming PUCO vacancy means Republican Gov. John Kasich will soon appoint a new PUCO member. True, given the five-member commission's seeming ... deference ... to FirstEnergy Corp. (the Illuminating, Ohio Edison and Toledo Edison companies) and American Electric Power Co. (the Ohio Power Co.), a new PUCO member likely wouldn't re-orient the panel, at least not much. Besides, anybody who might rock the boat wouldn't be picked.  Still, it's beyond ridiculous that none of the PUCO commissioners is a Democrat. Besides the three GOP incumbents (including Chairman Andre Porter, who's leaving the commission May 20, creating the vacancy Kasich will fill), two independents are PUCO members.

Ohio’s proposed regulations seek to reduce methane leaks - Toledo Blade: With Ohio becoming a bigger player in the global fracking surge, environmental activists, oil and gas lobbyists, union representatives, fishing and outdoor enthusiasts, and public health officials across the state were weighing in on the Obama Administration’s final rules for methane releases that were announced Thursday. Much of the debate echoed what has been said about tighter rules climate-altering emissions from coal-fired power plants: Better environmental stewardship, but at what cost? But now, Ohio — one of the nation’s largest energy users and one of the most heavily invested in coal power — is facing a similar controversy with its oil and gas industry. While the oil and gas industry claims it does a good job of controlling releases from its drilling sites nationwide, the U.S. Environmental Protection Agency believes it can do more. Its new rules to tighten down on leaks from oil and gas wells that are hydraulically fracture — i.e. frack — shale calls for a 45 percent reduction in methane releases by 2025, compared with 2012 levels. The American Petroleum Institute, the nation’s largest oil and gas lobby, and the Ohio Oil and Gas Association, which represents Ohio drillers, said the rule threatens to slow the fracking surge. Shawn Bennett, Ohio Oil and Gas Association executive vice president, described the new rules as “nothing more than a continued assault” on an industry that creates jobs and provides cheap energy.

Two groups want to put charter amendments on the November ballot in Youngstown: City voters could see several amendments and changes to Youngstown’s charter on the Nov. 8 election ballot, and not all of them will come from the commission reviewing the charter document. Backers of the anti-fracking Community Bill of Rights, which has failed five times, and those supporting a “Part-Time Workers Bill of Rights” have submitted language for charter amendments to the city council clerk’s office. The groups don’t need to submit the charter amendment proposals with the required minimum number of valid signatures for at least three months, but already have provided the proposed language to Valencia Marrow, city council clerk. The charter amendment to ban fracking has failed twice in 2013, twice in 2014, and in the Nov. 4, 2015, general election. The results for last year’s issue loss was the closest: 2.5 percentage points. This would be the first effort to get a part-time workers bill of rights on the city ballot. The proposal would require employers paying the same starting hourly wage it gives full-time workers to part-timers for jobs that require “equal skill, effort and responsibility, and that are performed under similar working conditions,” and require part-timers with “proportional access” to full-time workers in “the same job classification.”

Despite $62.2M loss, Rex Energy still drills in Carroll County - Canton Repository  - Bolstered by a joint-venture agreement, Rex Energy continues to drill Utica Shale wells in Carroll County. The Pennsylvania-based company released its first-quarter earnings Tuesday ahead of a Wednesday morning conference call with investors. Rex Energy lost $62.2 million or $1.11 per share during the quarter. Revenue from operations was down 44 percent and commodity revenue dropped by a third from the same quarter a year ago. Production from Rex wells was equal to 200 million cubic feet of natural gas a day, up 7 percent from the fourth quarter. Oil, condensate and natural-gas liquids, including ethane, accounted for 38 percent of production. Rex spent $30.6 million during the quarter, nearly all of it on projects in the Utica and Marcellus shales. That spending was offset by $31.8 million in reimbursements through a joint venture with Benefit Street Partners, an affiliate of Providence Equity Partners. In Carroll County, Rex drilled two wells, fracked a well and placed four wells in production during the quarter. The company had five wells drilled and waiting to be fracked at the end of March. The three-well Kiko pad in Washington Township went into production during the first quarter. The wells averaged five-day sales rates equal to 1,300 barrels of oil per day. The production included 2.3 million cubic feet of natural gas per day, 502 barrels of natural-gas liquids per day and 369 barrels of condensate per day, assuming full ethane recovery. The Kiko wells averaged 4,900 in lateral length and were fracked in 33 stages.

New Fracking Study Finds Children at Greater Risk of Respiratory Health Problems -- Unconventional oil and gas (UOG) operations such as fracking might allow for cheaper prices to heat your home, but a growing number of scientists are becoming concerned about its unacceptable health implications.  In the first comprehensive literature review to date on the respiratory health risks associated with UOG, experts from the Center for Environmental Health, the Institute for Health and the Environment, Physicians for Social Responsibility and the Alliance of Nurses for Healthy Environments have found that these operations are particularly harmful to infants and young children. The study, Hazards of UOG Emissions on Children’s and Infants’ Respiratory Health, was published today in the journal Reviews on Environmental Health.  According to the study, at least five chemicals associated with unconventional oil and gas operations and fracking—tropospheric ozone, particulate matter, silica dust, benzene and formaldehyde—are linked to respiratory health issues on infants and children, including asthma, reduced lung and pulmonary function, increased susceptibility to infection, chest discomfort, difficulty breathing, lung inflammation and other adverse outcomes.  The study states: Sources of air pollution include emissions from the extraction and processing of natural gas, as well as the transportation via natural gas infrastructure components including compressor stations and pipelines. Pollutants can be emitted during venting, flaring, production and leaks from faulty casings. In addition, truck transportation of materials to and from well pads and vehicular equipment use during construction and maintenance generate air pollution from particulate matter and diesel exhaust. These processes release numerous contaminants into the air, resulting in elevated concentrations of polycyclic aromatic hydrocarbons (PAHs), methane, ozone, NOx and VOCs [volatile organic compounds] like benzene, formaldehyde, alkenes, alkanes, aromatic compounds, and aldehydes.

This mystery was solved: scientists say chemicals from fracking wastewater can taint fresh water nearby - Washington Post -- The boom in unconventional drilling for natural gas known as fracking hit so fast that scientists have had to scramble to determine whether it’s safe for humans and the environment. Mostly they’re still trying to catch up.  But a recent study by the U.S. Geological Survey appears to have answered one burning question about millions of gallons of water laced with chemicals that bubbles out of the ground after being injected into the wells to fracture rocks to release trapped gas. When the water is stored, do the chemicals somehow leach into nearby surface water such as streams? The short answer is yes, said the study’s lead author, Denise Akob, a USGS microbiologist.“The key take away,” said Akob, who led a team of researchers from Duke University and the University of Missouri in studying a stream near a wastewater storage site in Lochgelly, W.Va., “is really that we’re demonstrating that facilities like this can have an environmental impact.”  Upstream from the site with gray and brown storage tanks, the waters of Wolf Creek tested normal. Downstream, there were detectable levels chemicals that commonly lace fracking waste — barium, bromide, calcium, chloride, sodium, lithium, strontium. The report called the levels low, not enough to have a noticeable impact on marine life. But it did appear to have an effect on something that could be equally important. Communities of microbes that help support marine life were dramatically altered downstream. There was a lower diversity of the life forms downstream, “which could impact nutrient cycling,” a building block of life in the creek, the USGS explained in a statement that announced the study.  Long story short, endocrine disruptors can wreak havoc on the hormones of mammals. In the Chesapeake Bay watershed that includes bays, rivers, streams and creeks in six states and the District of Columbia, scientists have determined that endocrine disruptors have switched the testes of male smallmouth bass to ovaries.

Scientists Just Pinpointed Another Example Of Fracking's Environmental Impact -- A dumping site for fracking fluids long suspected to be leaching into Wolf Creek, a West Virginia waterway with ties to a county’s water supply, has indeed contaminated the creek with multiple chemicals, a new U.S. Geological Survey study has found.The “study demonstrates definitively that the stream is being impacted by [unconventional oil and gas extraction] wastewaters,” Denise Akob, USGS scientist and lead author of the study, told ThinkProgress. Unconventional oil and gas extraction refers to the many processes that involve hydraulic fracturing, also known as fracking.   For this study, scientists in 2014 collected water and sediment samples upstream and downstream from Danny E. Webb Construction Inc.’s disposal site, which is still operational. Samples were then analyzed for a series of chemical markers that are known to be associated with fracking. “We were able to see some elements that are known to be associated with [unconventional oil and gas] wastewaters, including barium, bromide, calcium, chloride, sodium, lithium, and strontium,” Akob said.  They also found that microbial diversity near sampling sites decreased. Though small, microbes play an important role in ecosystems’ food webs, and Akob said changes in microbial community composition is an indication of ecological impact. Yet she noted that of all the chemicals recorded, iron levels were the only ones to exceed aquatic health guidelines for the area. Wolf Creek has for years suffered from iron pollution from legacy mining.  Scientists don’t refer to the company by name in the study or interviews but note the source of the fracking chemicals is clear. However, questions remain. “The two big open questions right now are how are these wastewaters getting to the environment,” and “how far downstream do they go,” Akob said.

Ky. group hears about "hot" waste at W.Va. site - The Courier-Journal  Follow-up tests at a West Virginia company that prepared radioactive fracking waste to be sent to Kentucky revealed material so "hot" that it would need to go to a special landfill for disposal – not the Kentucky municipal dump where earlier shipments were sent, a Kentucky official has revealed.  The disclosure casts some doubt on prior assurances about the radioactive intensity of waste sent to Kentucky, said Louisville attorney Tom FitzGerald, director of the Kentucky Resources Council. The original Kentucky shipments, which are still under state investigation, were said to have been below the radioactivity threshold that would have required disposal in a landfill designed to handle more dangerous waste. The information about testing at the source of the waste from a radiation expert with the Kentucky Cabinet for Health and Family Services was made public during the first meeting of a special work group looking into how to protect Kentuckians from radioactive oil and gas drilling waste. The group of experts was assembled by Energy and Environment Cabinet Secretary Charles Snavely. Curt Pendergrass, the supervisor of the cabinet's radioactive materials branch, led the group through a review of the state's few radioactive waste regulations. But it was his mention of that follow-up testing – involving the situation that prompted Kentucky lawmakers to seek the oil and gas work group's advice – that stood out during a more than three-hour meeting Thursday afternoon. Any such radioactive waste that exceeds a level of 2,000 picocuries per gram must be sent to a landfill designed to handle long-lived and potentially dangerous radioactive waste, Pendergrass explained. "I will tell you this ... that number was exceeded,"

Faced With a Fracking Giant, This Small Town Just Legalized Civil Disobedience —  A tiny community sitting on a 27-square-mile piece of Western Pennsylvania wanted to send a big message to the energy company planning to deposit toxic fracking wastewater under its neighborhoods. And its 700 residents wanted it to be perfectly legal for them to loudly object. Grant Township had seen what happens when people nationwide take to the streets to protest bullying corporations: Arrests. Lots of them. So Grant Township planned ahead. Two weeks ago, it passed a law that protects its residents from arrest if they protest Pennsylvania General Energy Company’s (PGE) creation of an injection well. Residents believe this law is the first in the United States to legalize nonviolent civil disobedience against toxic wastewater injection wells. Township Supervisor Stacy Long said. “We’re doing it to safeguard the residents and protect as many people as possible,” she said. Long said legalizing direct action is a response to the ongoing problem of rural residents seeing their voices excluded from discussions between state governments and big corporations on issues that have local ramifications.

Pennsylvania probes possible link between earthquakes, fracking: Pennsylvania environmental regulators want to determine whether a series of minor earthquakes in the state this week were caused by nearby fracking operations by an oil and gas company. Five tiny temblors, all too weak to be felt by humans, took place in a 22-hour span in Lawrence County, about 50 miles north of Pittsburgh and three-quarters of a mile from a natural gas well owned by Houston-based Hilcorp Energy Co. No damage was reported. Hydraulic fracking, a type of drilling method to extract gas or oil from underground shale, has been tied to earthquakes in neighboring Ohio and other states, but never in Pennsylvania, the nation’s No. 2 natural gas-producing state. The state Department of Environmental Protection is consulting with seismologists and plans to meet with Hilcorp “for them to present geologic data they have collected in the area during and prior to drilling and stimulation,” DEP spokesman Neil Shader said Friday. He didn’t say what action DEP would take if Hilcorp is found to have caused the tremors. “The investigation has to be completed before considering any next steps,” Shader said.

Fracking Hits Milestone as Natural Gas Use Rises in U.S. -- More natural gas in the U.S. is coming from wells that have been hydraulically fractured than ever before, and fracking’s share of the country’s gas supply is continuing to rise, according to new data from the U.S. Energy Information Administration. At the same time, the fracking boom in the U.S. has led to a major boost in natural gas consumption, and for the first time last year, natural gas contributed about the same level of greenhouse gas emissions as coal, the globe’s largest single source of greenhouse gas emissions driving climate change.  Sixty-seven percent of natural gas produced in the U.S. came from fractured wells in 2015, according to the data. That represented a total of 53 billion cubic feet of natural gas per day, up from 50 billion cubic feet in 2014.  In 2000, only 3.6 billion cubic feet of gas came from fractured wells — roughly 7 percent of total U.S. natural gas production that year. About a third of the gas produced in the U.S. is used to generate electricity. TheThe fracking boom led to the U.S. becoming the world’s largest producer of oil and flooded the market with natural gas, driving down prices. That encouraged utilities to build more electric power plants that run on natural gas instead of coal. The shale gas boom is one of the main reasons that more electricity was generated with natural gas than coal for the first time last year, and 2016 is poised to be the first full calendar year that natural gas is expected to eclipse coal as the nation’s chief source of electricity

Demand factors impact natural gas storage injection season -- The U.S. natural gas market is carrying about an 850-Bcf surplus in storage versus last year and the 5-year average. But it looks like the surplus will finally start to contract in earnest over the next few weeks. So the big question is -- will it be fast enough to prevent crippling supply congestion by this fall? With Canadian storage inventories also high and U.S. gas production still averaging slightly higher than last year, it seems record demand will be needed to bring storage into balance. Today we look at the prospects for demand this summer to trump last year’s record demand. This is Part 4 of our natural gas supply/demand and storage update series, “Carry That Weight.” In Part 1 we looked at the 2015-16 winter supply/demand balance, which showed that an exceptionally mild winter resulted in modest demand through what are typically the highest demand months of the year, and that this occurred even as production was reaching new highs. This only exacerbated the surplus in storage, leaving the market nearly 6-Bcf longer than the previous winter.  In Part 2 we then looked at how the enormous storage overhang would impact storage activity in the 2016 injection season: essentially that injections into storage will need to be consistently below what they have been historically in these months if the market is to prevent a storage capacity shortage (and further price discounts) by fall 2016. In Part 3 we began a look at the various fundamental factors at play this summer that could help or hinder that process of grinding down the surplus through the injection season.

The U.S. Natural Gas Export Boom Means Pipelines and LNG -  U.S. piped gas to Mexico has more than tripled since 2010 to about 3 Bcf/day. By 2019, 15 new pipelines will more than double capacity to Mexico to around 15 Bcf/day. This is far more than anticipated imports, but extra pipeline access that would help Mexico meet peak demand.This is important because there’s basically no storage available in Mexico, lacking mature fields, aquifers, and saline domes to store natural gas. Mexico has liquefied gas storage of about 3 days, far lower than the average storage capacity for OECD countries of nearly 85 days. Since 2010, Mexico’s gas consumption is up 22%, but its production is down 11%.Moreover, Mexico is a free trade country, so U.S. gas exports to Mexico are declared in our national interest and thus essentially automatic (a designation problem that the U.S. LNG export business is struggling with). The gas surge in Mexico comes from economic growth, a concerted effort to displace oil with gas, and a manufacturing sector that continues to expand due to lower wages, “integration with and dependence on the U.S. market,” and manufacturers looking to get away from a more problematic China (more distant, unions, rising pay, etc.).With gas now accounting for 60% of Mexico’s electricity, per capita use rates are about 70% lower than the other OECD nations. Given the statistically significant connection between power use and economic development (see my article here), Mexico’s government therefore has a clear obligation to increase personal consumption rates.This will all translate into more imported gas from the U.S.: despite significant energy reforms to bring in outside investors, shale gas in Mexico has potential but won’t really begin until 2020 at best. No matter what, a shift to gas in Mexico will be difficult because the country has historically been an oil-focused producer, with petroleum constituting 80% of hydrocarbon production versus 20% for gas.

France studying possible ban on import of U.S. Shale gas - minister | Reuters: French Energy Minister Segolene Royal said on Tuesday she is investigating legal means to ban the import of shale gas from the United States because France has banned shale gas exploration using hydraulic fracking for environmental reasons. Royal, answering a question in parliament, said contracts signed by French gas utility Engie and power utility EDF with a U.S. producer have led to the import of LNG which contained about 40 percent shale gas. "I have asked the two companies why they weren't vigilant and I have also asked for an examination of a legal means for us to ban the import of shale gas," Royal said in parliament.

Gas sector 'doom and gloom' overdone: IEA -  The "doom and gloom" around global gas demand is overdone, International Energy Agency chief economist Laszlo Varro, said Tuesday at the annual Flame conference. "The opportunities for gas are in the developing world," he told delegates at the event in Amsterdam. "We identified around 800 million mt of coal consumption in China and India that is not possible to replace with wind and solar power [as part of decarbonization].""We also think that as air pollution gets higher on the political agenda [in Asia], there will be an increasing policy push from coal towards gas for industrial use and building heating." Furthermore, the Middle East could re-emerge as a major gas demand driver "if and when oil price recovers" given the resulting positive impact on the macroeconomic environment, Varro said. He also said the worst was over for the European gas industry. "Europe is losing coal and losing domestic gas production and also losing nuclear production and gaining in energy efficiency and renewables ... the good and bad news cancel out so you have a roughly unchanged position." While the gas industry would have to get used to the idea of cheap coal, the elimination of inefficient coal was an opportunity for cheap and secure gas, he said.

Stop the Fracking Lies: Public and Workers Deserve Truth and Solutions About Energy: The future of the coal and fracking industries and jobs in these industries has been in the news a lot these past days. While we must be mindful of the people who currently depend on these industries for their livelihoods, the fact remains that this work is harmful. People are losing their health, the quality of their lives, the safety of their children, the value and sanctity of their homes, the clean water they need to drink and the healthy air they need to breathe. The cost of continued dependence on fossil fuels is far too great to support any longer. While we must support new jobs for fossil fuel workers, these jobs cannot be in the continued use or expansion of fossil fuels and its infrastructure. The research on this issue is clear. The shale gas extraction industry - an industry dependent upon drilling and fracking -- is an industry that devastates the communities where it is happening. The process contributes to greenhouse gas emissions responsible for dangerous storms like the ones we have experienced as recently as this past week. Fracking contaminates drinking water supplies (260 confirmed cases in PA alone), and risks the health of people of all ages (e.g. children of mothers living within 10 miles of gas wells are 30 percent more likely to be born with congenital heart disease and twice as likely to have a neural tube defect.)  For those that think pipelines are getting safer, think again. Research shows that pipelines built since 2010 have incident rates higher than those installed pre-1940s. 

Kalamazoo River Reopens, 23 Months after Spill, But Submerged Oil Remains - About 34 miles of the Kalamazoo River in Southeastern Michigan were opened to the public Thursday, almost two years after the most expensive oil pipeline spill in U.S. history dumped more than 1 million gallons of heavy Canadian crude into an adjoining creek. Crews have been cleaning the waterway since July 26, 2010, when a ruptured pipeline owned by Enbridge Energy Partners, the U.S. branch of Canada's largest transporter of crude oil, was discovered in wetlands in Marshall, Mich. The Canadian crude oil, known as diluted bitumen, contaminated more than two miles of Talmadge Creek and about 36 miles of the Kalamazoo, forcing people to flee their homes because of the overpowering smells. The cost of the cleanup has now reached at least $765 million, making it the most expensive oil pipeline spill since the government began keeping records in 1968. Enbridge is responsible for all of the cost, with most of the cost being paid by its insurance company. With Thursday's opening, all but a short stretch of the river known as the Morrow Lake delta is now available for recreation, according to the U.S. Environmental Protection Agency. That delta area, at the western edge of the contaminated section and near the city of Kalamazoo, remains closed to the public. Although people can once again swim and boat on the Kalamazoo, that doesn't mean the river is oil-free. Cleanup of the remaining oil will continue in the Morrow Lake delta and other low spots along the river bottom. EPA officials in Marshall have told InsideClimate News that removing the rest of the oil could take months or years. Enbridge has estimated that 843,444 gallons of oil were discharged after Pipeline 6B developed a six-and-a-half foot tear. But calculations by the EPA, which is overseeing the cleanup operation, show that more than 1.14 million gallons of oil have been recovered so far.

Atlantic Coast Pipeline Revised, Could Open Late 2018 - WFAE  - Utilities planning the Atlantic Coast Pipeline have altered the route to avoid environmentally sensitive areas. But they say there's no change in the projected cost or 2018 completion date.  Four energy companies are seeking federal approval for the $5.1 billion project, which was announced in 2014. The 600-mile pipeline would carry natural gas from shale oil fields in Ohio, West Virginia and Pennsylvania to power plants in Virginia and eastern North Carolina.   Planners have shifted the pipeline away from sensitive habitats, including national forests in Virginia and West Virginia. And they've made smaller route changes in North Carolina, including Cumberland and Johnston Counties, and in Virginia.  That has added about 36 miles, bringing the total to 600, but officials say that won’t affect the cost. The route will parallel I-95 from the Virginia border to Robeson County, near Lumberton. Duke Energy is among the owners. Spokesman Tom Williams says shale gas, produced by fracking, is a cheaper and cleaner fuel for Duke’s growing number of gas-fired plants. Which are replacing those that burn coal. “In essence, there's been a shale revolution, where there's been lots of very low-cost gas fields that have opened up in the West Virginia, Pennsylvania region. Also across Ohio, other regions, New York. This is a way to access that gas, and bring it to eastern North Carolina,” Williams said. The pipeline, the first of its kind in eastern North Carolina, also will serve Piedmont's industrial customers. Dominion already has signed up customers for 96 percent of the gas.

Big Cypress National Preserve oil exploration wins approval - (AP) — The National Park Service has given the green light for a Texas company to explore for oil and gas in the Big Cypress National Preserve. Park service officials said Friday that a 20-month environmental review showed there would be no significant impact if Burnett Oil Company did a survey 110 square miles in the national preserve. The survey will use sound waves from truck-mounted vibrators to create three-dimensional map of potential oil and gas reserves. The park service says If Burnett Oil finds something that it wants to pursue, the company would have to submit a new plan of operations, and that would require another environmental review. The preserve located in South Florida is home to Florida panthers, black bears and other wildlife.

Oil Company Gets The Go-Ahead To Explore For Oil In Wildlife-Rich Preserve -- Florida’s Big Cypress National Preserve is home to a vast array of plant and animal life, including mangroves, orchids, alligators, and the highly endangered Florida panther.  But that rich biodiversity is one of the key reasons environmentalists were outraged last week when the National Park Service approved Burnett Oil Company’s proposal to explore for oil in the southwest Florida preserve. The Park Service completed an Environmental Assessment of the proposal, and found that the oil exploration outlined in the plan wouldn’t significantly impact the preserve.   Environmental groups, however, aren’t so sure. The oil company plans to use “vibroseis” trucks to test for oil in the preserve — vehicles that weigh 60,000 pounds and which send sound waves down through the earth to help discover where oil reserves are located. It’s similar to the seismic testing technique that scientists and marine activists are protesting in the Atlantic, but in this case, it’s being used on land.   “We’re concerned these trucks could do a lot of damage to the ecosystem,” Amy Mall, senior policy analyst for the Natural Resources Defense Council, told ThinkProgress. The Park Service states in its final assessment of the project that the trucks “would  not create new trails; they would use mostly existing trails” and roads in the preserve. In the case that a truck needs to go off-trail, the NPS says it is emphasizing a plan in which trucks don’t pass over the same area twice, and that “a single pass of a vehicle would not constitute trail creation.”

Shell Oil Spill Dumps Nearly 90,000 Gallons of Crude Into Gulf -- An oil spill from Royal Dutch Shell’s offshore Brutus platform has released 2,100 barrels of crude into the U.S. Gulf of Mexico. The leak—roughly 88,200 gallons—created a visible 2 mile by 13 mile oil slick in the sea about 97 miles south of Port Fourchon, Louisiana, according to the U.S. Bureau of Safety and Environmental Enforcement. Officials said that the accident occurred near Shell’s Glider field, an underwater pipe system that connects four subsea oil wells to the Brutus platform, which floats on top of the water with a depth of 2,900 feet. Shell spokeswoman Kimberly Windon said in a statement that the likely cause of the spill was a release of oil from the subsea infrastructure. The Coast Guard said that the source of the discharge is reportedly secured. A cleanup crew has been dispatched. Shell spokesman Curtis Smith said in a statement that a company helicopter observed the sheen yesterday, and that the wells were under control after it isolated the leak and shut in production. “There are no drilling activities at Brutus, and this is not a well control incident,” the company said. “Shell is determining the exact cause of the release by inspecting the subsea equipment and flowlines in the Glider field. The company has made all appropriate regulatory notifications and mobilized response vessels, including aircraft, in the event the discharge is recoverable. There are no injuries.”

Shell: Skimmers in Gulf to clean up 88,200 gallon oil spill: (AP) — Crews were preparing to clean up an oil spill in the Gulf of Mexico after about 88,200 gallons of oil were released from a Shell flow line about 90 miles off the coast of Louisiana, the company said Friday. Shell said five boats were dispatched to clean up oil they can skim off the surface of the Gulf. Meanwhile, environmental groups said this latest spill was another example of why offshore drilling should be banned. Activists plan to hold a march in Washington, D.C., on Sunday to demand an end to drilling and used this new spill as further evidence. “It’s unacceptable that oil spills have been permitted to become the status quo in the Gulf,” said Michael Brune, the Sierra Club’s executive director, in a statement. “We have allowed the region to be perpetually treated as a sacrifice zone.” Shell did not directly respond to the complaints of environmental groups. In a statement, Kimberly Windon, a Shell spokeswoman, said, “No release is acceptable, and safety remains our priority as we respond to this incident.” Spills happen every year in the Gulf. This new spill is classified as medium in size under U.S. Coast Guard guidelines. Since 2012, there have been 147 spills and about 516,900 gallons of oil spilled in the Gulf, according to figures from the Bureau of Safety and Environmental Enforcement, the agency that oversees drilling.

Citing Earthquakes, EPA Urged to Toughen Regs - (CN) — With data linking pollution to earthquakes and contaminated drinking water, regulators must get strict on disposing oil and gas waste, nonprofits say in a federal complaint. With no federal review of oil and gas waste criteria since 1988, horizontal drilling and hydraulic fracturing technologies, or fracking, have become "mainstream" in the industry, according to the complaint filed last week in Washington.      A statement that the project released with the May 4 lawsuit says the wells "have been linked to numerous earthquakes in Arkansas, Colorado, Kansas, New Mexico, Ohio, Oklahoma, and Texas."  "Updated rules for oil and gas wastes are almost 30 years overdue, and we need them now more than ever," Adam Kron, a senior attorney at the Environmental Integrity Project, said in the statement. "Each well now generates millions of gallons of wastewater and hundreds of tons of solid wastes, and yet EPA's inaction has kept the most basic, inadequate rules in place. The public deserves better than this." The complaint notes that another method of disposal, "road-spreading," can allow toxic runoff to into bodies of water. Pits meanwhile can leak.     "EPA's authority is limited by statutory or regulatory exemptions under the Clean Water Act, Safe Drinking Water Act, the Comprehensive Environmental Response, Compensation and Liability Act, and the Resource Conservation and Recovery Act," the spokeswoman said in an email. "Where EPA's exemptions exist, states may have authority to regulate unconventional oil and gas extraction activities under their own state laws. The EPA continues to work with states and other stakeholders to understand and address potential concerns with hydraulic fracturing to ensure that natural gas and oil production will proceed in a safe and responsible manner."  Alleging violations of the Resource Conservation and Recovery Act, environmentalists accuse the EPA of having created a "state-by-state patchwork, where operators can 'venue shop' for the least stringent requirements and community protections from human health and environmental impacts."

New Fracking Lawsuit Already Nailed By Koch Bros : So, that didn’t take long. Last Wednesday, a group of prominent environmental organizations filed a major new lawsuit accusing the US Environmental Protection Agency of failing to regulate fracking as a hazardous waste for the past 30 years. Just two days later, the Koch-backed Washington Legal Foundation issued a scathing op-ed accusing the EPA of colluding with the groups to establish new regulations through “orchestrated settlements.” The op-ed is an obvious attempt to undermine the legitimacy of any future regulation of fracking by EPA, regardless of how the lawsuit shakes out. Quantifying impacts of fracking on a national level has run into an informational brick wall because of the loophole. The EPA’s most recent effort was a tepid draft report on fracking impacts issued last year, which the oil and gas industry welcomed as vindication. However, on close reading, the report was really a cry for help. The authors noted “a significant data gap for hazard identification” — attributable to the 2005 loophole — making it impossible to reach any broad conclusions about risks and impacts on the nation’s water resources. That brings us to the new fracking lawsuit. If you don’t have time to read the filing, our friends over at Think Progress offer the following rundown of the main issue: A coalition of environmental organizations is suing the Environmental Protection Agency, claiming federal regulators have for three decades failed to update rules for disposing of fracking and drilling wastes that may threaten public health and the environment.

Groundwater Contamination from Fracking Changes over Time: Study -  A new Texas study has found that horizontal oil wells fractured by the injection of high volumes of chemicals, sand, and water contaminate nearby water wells with a variety of heavy metals and toxic chemicals that fluctuate over time. . ''In our most recent study, we found that as more unconventional wells were drilled and stimulated, more drilling-related contaminants were found in the groundwater,'' study author Zacariah L. Hildenbrand told The Tyee.  Dichloromethane, an industry chemical and potential human carcinogen, was found in quantities above safe drinking water levels in water wells on highly fracked landscapes. The U.S. Environmental Protection Agency says the chemical ''poses health risks to anyone who breathes the air when this compound is present.''   In 2012, the Texas researchers sampled 38 water wells in a three-county region already punctured by 298 oil wells and found significant amounts of heavy metals such as iron and arsenic and high levels of dissolved salts in the water wells. Several months later when an additional 85 wells appeared in the study area, more or higher levels of contaminants appeared in 36 monitored water wells, including toluene, arsenic, barium, strontium, and chromium. The pH of the water also changed while dichloromethane, a degreaser used on well pads, appeared in the water as well. During phase three (in 2013), while industry drilled and fracked another 37 wells in the region, the project recorded significant increases in pH (the water became more alkaline), inorganic carbon, toluene, o-xylene (probable human carcinogens), and barium, along with statistically significant decreases in salts, fluoride, beryllium, chromium, iron, zinc, and zirconium.* By 2014, as industry drilling and fracking intensified, the chemical composition of the water changed once again. Concentrations of ethanol, bromide, fluoride, chloride, nitrate, and sulfate all increased from phase three. Samples containing common frack or drilling ingredients such as methanol, isopropyl alcohol, acetaldehyde, cyclohexane, ethyl benzene, and o-xylene also increased. In many cases, the oil wells were located within four kilometres from the sampled water wells.

Insurers shun risk as oil-linked quakes soar in Oklahoma | Reuters: As the number of earthquakes in Oklahoma exploded into the hundreds in the last few years, nearly a dozen insurance companies moved to limit their exposure, often at the expense of homeowners, a Reuters examination has found. Nearly 3,000 pages of documents from the Oklahoma Insurance Commission reviewed by Reuters show that insurers and the reinsurers who cover them grew increasingly concerned about exposure to earthquake risks because of heightened frequency of seismic activity, which scientists link to disposal of saltwater that is a byproduct of oil and gas production. Even as they insured more and more properties against earthquakes in the past two years, six insurers hiked premiums by as much as 260 percent and three increased deductibles. Three companies stopped writing new earthquake insurance altogether, state regulatory filings obtained by Reuters show. Several insurers took more than one of those steps. In addition, the insurers would consider suing oil and gas companies for reimbursement in instances where they would have to pay damages to homeowners, according to several sources, including two insurance company officials. So far Oklahoma's biggest earthquake was a 5.6 magnitude temblor in Prague in 2011 that buckled road pavement and damaged dozens of homes.

Increasing Federal Income From Crude Oil And Natural Gas On Federal Lands: The production of oil and natural gas in the United States has increased rapidly over the past decade. As of 2014, domestic production of crude oil had grown to about half of total consumption, and domestic production of natural gas represented almost 95 percent of total consumption. Domestic oil and gas production occurring on federal lands or in federal waters off the coast of the United States represented about one-fifth of total U.S. production in 2014. All told, the gross income (before payments to states) from onshore oil and gas resources averaged $3.0 billion annually from 2005 to 2014, comprising the following amounts:

  • • About $230 million per year in bonus bids,
  • • $50 million per year in fees for nonproducing leases, and
  • • $2.7 billion per year in royalties from production. Total gross income from offshore oil and gas resources averaged $8.0 billion per year over the 2005 - 2014 period:
  • • Lease auctions generated about $1.8 billion,
  • • Rental fees generated about $230 million, and
  • • Royalties from production yielded about $6.0 billion.

Production from parcels and associated royalty payments can continue for many years, and thus leases issued in any given year represent only a small share of annual royalty income. In 2013, about 6 percent of royalty income from onshore oil and gas came from parcels that were leased in the previous 10 years; in contrast, about half came from parcels that were leased more than 50 years earlier. For offshore resources, about 8 percent of royalty income in 2013 came from parcels that were leased in the previous 10 years, and the majority came from parcels that were leased more than 20 years earlier (see figure below).

Silent sandbox: Once booming frac sand industry continues major downturn  - This should be the time of year when the frac sand mines that dot western Wisconsin are buzzing with activity after a seasonal winter slowdown. Instead, most of the facilities in the once-booming sand mining sector sit dormant, with skeleton crews occasionally stopping by to ensure the lights are still working and groundwater runoff is properly contained. “There’s been a huge, huge slowdown,” said Kent Syverson, chairman of the geology department at UW-Eau Claire and a frequent consultant for the frac sand industry. “Many operations have idled their plants and laid off people. And even the ones that are still operating are not operating at full capacity.” Chippewa County conservationist Dan Masterpole visited most of the county’s supposedly active frac sand mining sites in the past two weeks and saw little evidence of activity. None of the companies had reinstated their mining operations, he said. “The mining companies are definitely not cranking back up this spring as quickly as they normally do,” Masterpole said. “Normally this time of year they’d be in full production.” The dramatic change from the go-go days of just a few years ago — when the industry sprang up in west-central Wisconsin because of the region’s high-quality sand — is the result of sand shipments plummeting in response to lower oil prices. The price of a barrel of U.S. West Texas Intermediate crude oil closed Friday at $44.66, down about 25 percent from a year ago and more than 50 percent from June 2014, when Eau Claire gasoline pump prices peaked at $3.74 a gallon. As oil prices have fallen, so has the demand for the Wisconsin sand that helps fuel the nation’s shale oil industry.  With oil prices so low, Masterpole said, “People are choosing to leave the oil in the ground and the sand in the hills.”

Company seeks Iowa OK to immediately start oil pipeline work - — A Texas-based company has asked Iowa regulators for permission to immediately start work on most of the Bakken oil pipeline route through 18 Iowa counties. Dakota Access LLC, a unit of Energy Transfer Partners of Dallas, said in a filing Thursday that the work must begin this month to complete the project in one construction season. Pipeline opponents promise to fight the request, The Des Moines Register reported. The Iowa Utilities Board has approved pipeline plans but said construction can’t begin until the U.S. Army Corps of Engineers approves federal permits. Dakota Access said it wants to begin work except in areas where preconstruction notifications are required by the Corps. Des Moines climate change activist Ed Fallon said his organization is challenging the legitimacy of Dakota Access’ request. “Throughout this process, Dakota Access has bullied landowners,” Fallon said. “Now, they are trying to bully the Iowa Utilities Board. In doing so, they’re hoping for an end-run around the Army Corps of Engineers — the entity rightfully charged with a full, objective analysis of the wide range of potential impacts of this pipeline.”

Push to start Dakota Access pipeline construction meets firm opposition - (AP) — Opponents of a proposed oil pipeline slated to run through four Midwestern states pressed Iowa regulators Thursday to keep a Texas-based petroleum company from starting construction before all federal permits are approved. Dakota Access planned on beginning construction by now on the 1,150-mile pipeline that’s designed to carry a half-million barrels of oil a day from the Bakken oil fields in northwest North Dakota to a tank storage facility in south-central Illinois. The company told the Iowa Utilities Board in a filing last week it must begin laying pipe by Tuesday to finish before winter and avoid disturbing farmland for a second growing season. It also has notified regulators in North Dakota that construction would start Sunday and on Monday in South Dakota, and a company spokeswoman confirmed Thursday that construction is set to begin next week in Illinois. But the Iowa board’s approval in March required Dakota Access to obtain all other permits before beginning construction in the state. And the U.S. Army Corps of Engineers, which is responsible for ensuring there’s no adverse impact on wildlife and natural resources, hasn’t issued any permits and also has been delayed by complaints it hasn’t been thorough in its review. Dakota Access filed a request last week with the Iowa Utilities Board to begin construction on land for which it has landowner approval and for which no federal permits are required. The board has set a Monday deadline for other parties to comment on the request, but hasn’t set a date to decide about whether it will allow construction to begin soon. Environmental group the Sierra Club said in a filing Thursday that the Iowa Utilities Board should stick with its decision to withhold construction approval until all permits are approved because input from other federal agencies may affect the route. And Ed Fallon, director of Bold Iowa, another organization that opposes the pipeline, told The Associated Press that Dakota Access has been very aggressive with landowners and is now “bullying” the Iowa board to give in.

State inspecting weekend saltwater spill in Mountrail County: (AP) — North Dakota’s Oil and Gas Division is looking into a saltwater spill in Mountrail County over the weekend. EOG Resources Inc. reported Saturday that 259 barrels of saltwater was released and contained, with all but 10 barrels recovered. A barrel holds 42 gallons. Saltwater is a byproduct of oil production. Equipment failure was cited as the cause of the spill at a storage tank site about 7 miles north of Parshall. A state inspector was visiting the site Monday.

Duke Study: Rivers Contaminated With Radium and Lead From Thousands of Fracking Wastewater Spills --Thousands of oil and gas industry wastewater spills in North Dakota have caused “widespread” contamination from radioactive materials, heavy metals and corrosive salts, putting the health of people and wildlife at risk, researchers from Duke University concluded in a newly released peer-reviewed study. Some rivers and streams in North Dakota now carry levels of radioactive and toxic materials higher than federal drinking water standards as a result of wastewater spills, the scientists found after testing near spills. Many cities and towns draw their drinking water from rivers and streams, though federal law generally requires drinking water to be treated before it reaches peoples’ homes and the scientists did not test tap water as part of their research.High levels of lead—the same heavy metal that infamously contaminated water in Flint, Michigan—as well as the radioactive element radium, were discovered near spill sites. One substance, selenium, was found in the state’s waters at levels as high as 35 times the federal thresholds set to protect fish, mussels and other wildlife, including those that people eat.The pollution was found on land as well as in water. The soils in locations where wastewater spilled were laced with significant levels of radium and even higher levels of radium were discovered in the ground downstream from the spills’ origin points, showing that radioactive materials were soaking into the ground and building up as spills flowed over the ground, the researchers said. The sheer number of spills in the past several years is striking. All told, the Duke University researchers mapped out a total of more than 3,900 accidental spills of oil and gas wastewater in North Dakota alone.Contamination remained at the oldest spill site tested, where roughly 300 barrels of wastewater were released in a spill four years before the team of researchers arrived to take samples, demonstrating that any cleanup efforts at the site had been insufficient.

Duke study: Fracking has poisoned North Dakota's soil and water: - A study of 3,900 fracking waste-water spill sites in North Dakota has revealed that soil and water contamination is widespread and persistent, endangering the health of humans, wildlife and the environment. It seems that in our search for oil and gas, we don't do anything half-way. Such is the case with North Dakota. While there is no question that fracking has given a huge boost to the state's economy, the long-term costs may be too much to bear. Researchers at Duke University have been studying the effects of hydraulic fracturing in several states since 2010. In the North Dakota study, they found that some rivers and streams in the state now carry levels of radioactive and toxic materials higher than the federal drinking water standards, reports EcoWatch. The researchers found high levels of ammonium, selenium, lead and other toxic contaminants from spilled "produced water," also known as salt water or brine, a by-product of fracking. The levels of selenium, a radioactive element, were 35 times higher than the federal threshold set to protect fish and other aquatic wildlife. “The magnitude of spills that we see in North Dakota I haven’t seen elsewhere,” said Avner Vengosh, a Duke University professor who has been studying the effects of hydraulic fracturing since 2010 in several oil-producing states. The soil in locations where after four years, there were significantly high levels of radium at the spill site, was bad enough but downstream, the levels of radium in the soil were even higher, showing that radioactive materials were soaking into the ground and building up, the researchers said. The problem of the ongoing contamination is exacerbated by the fact that inorganic substances in the wastewater are resistant to biodegradation, leaving a "long-term legacy of contamination," according to the study.

Study: Bakken oil field leaks 275,000 tons of methane yearly: (AP) — A new study says the oil-producing region of North Dakota and Montana leaks 275,000 tons of methane annually, an amount that’s less than previously reported. Researchers say it’s the first field study of methane emissions from the Bakken shale formation. Methane is a greenhouse gas that contributes to global warming. It’s the primary component of natural gas. The study released Wednesday was based on air samples a National Oceanic and Atmospheric Administration airplane took from over the Bakken region in May 2014. The study says the methane emissions were less than what had been reported by some satellites and slightly lower than U.S. Environmental Protection Agency estimates. Researchers say the amount of methane leaking from the Bakken is similar to the emission rate from the oil-rich Denver-Julesburg Basin in Colorado.

In North Dakota, new pipeline rules split industry, landowners - Neil Benter got the call last August. An oil company's pipeline had started leaking on his farmland outside Ambrose, North Dakota. It turned out the leak had been going on for days or weeks, spilling an estimated 4,260 barrels -- 178,900 gallons -- of salty wastewater. Nine months later, Benter is left to wonder how the leak happened and whether the salt will permanently sterilize part of the land. "That pipeline wasn't even 2 years old," Benter said. "They've got to do a better job of putting these pipelines in." By the end of the summer, Benter and other landowners will know how strictly the state plans to regulate pipeline construction in an effort to prevent similar leaks and spills. The North Dakota Industrial Commission is preparing to finalize a package of rules that could impose construction and safety requirements on the largely unregulated network of gathering pipelines that connect to individual oil wells in the state. The oil industry opposes most of the changes, saying they're too expensive and come at a time when the global crash in oil prices has caused a steep decline in drilling in North Dakota. Environmentalists and landowner groups are pushing for tougher restrictions, saying the state should do more to prevent pipeline accidents like the one on Benter's land.

Top oil county wants state inspectors on the home front -- – Leaders in North Dakota’s top oil producing county pushed state health officials Wednesday to consider stationing inspectors in Watford City to more closely monitor the oil and gas industry. The issue came up Wednesday during a presentation by the North Dakota Department of Health about radioactive material that is a byproduct of oil production. A landfill in McKenzie County is the first to apply to the state to accept waste with radioactivity levels up to 50 picocuries per gram. McKenzie County leaders questioned how much state oversight there would be if the landfill gets approved for accepting the higher level of radioactivity.  Scott Radig, director of the health department’s Division of Waste Management, said the health department requires dust control in all landfills, but county leaders said the photo told a different story. The health department inspects special waste landfills at least once a month, Radig said. In addition, the department has a spill response team that’s on the road Monday through Friday, with one person stationed south of Lake Sakakawea and one person stationed north.

North Dakota oil output drops 9,850 barrels daily in March (AP) — North Dakota’s Department of Mineral Resources says the state’s oil production decreased by about 9,850 barrels a day in March. The agency says the state produced an average of 1.09 million barrels of oil daily in March. North Dakota’s production record was set in December 2014 at 1.22 million barrels daily. North Dakota also produced a record 1.70 billion cubic feet of natural gas per day in March, up from 1.68 billion cubic feet daily in February. The March tally is the latest figure available because oil production numbers typically lag at least two months. There were 27 drill rigs operating in North Dakota’s oil patch on Thursday — the lowest number since July 2005.

North Dakota oil production falls 9,846 B/D in March: state agency -  Platts - North Dakota's crude oil production fell less than 1% or 9,846 b/d in March from the previous month, the state's department of mineral resources said Thursday, a smaller decline than officials had expected. The state produced 1.109 million b/d in March, compared with 1.119 million b/d in February, the agency said. The state notched peak production of 1.227 million b/d in December 2014. There is a two-month lag in reporting output numbers. "We were anticipating more than double [the actual decline]," Lynn Helms, director of North Dakota's Oil and Gas Division, said in his monthly press conference which was also available via webex.As recently as 10 days ago, state officials believed crude output would drop below 1.1 million b/d, Helms said. But, "we had four operators who came in with amended reports that showed significant production increases," which boosted output above that figure. The director said Ft. Berthold-area production in March was up about 9,500 b/d. Two of the operators that delivered large production increases operated exclusively in the Fort Berthold area, a prolific region of the giant Bakken Shale that underlies the western part of the state. A third operator had some production there. "Those companies fracked a bunch of wells and increased production there," Helms said.

Study: Bakken oil field leaks 275,000 tons of methane yearly (AP) — A new study says the oil-producing region of North Dakota and Montana leaks 275,000 tons of methane annually, an amount that’s less than previously reported. Researchers say it’s the first field study of methane emissions from the Bakken shale formation. Methane is a greenhouse gas that contributes to global warming. It’s the primary component of natural gas. The study released Wednesday was based on air samples a National Oceanic and Atmospheric Administration airplane took from over the Bakken region in May 2014. The study says the methane emissions were less than what had been reported by some satellites and slightly lower than U.S. Environmental Protection Agency estimates. Researchers say the amount of methane leaking from the Bakken is similar to the emission rate from the oil-rich Denver-Julesburg Basin in Colorado.

Update On Bakken Methane Emissions As EPA Gets Ready To Implement New Methane-Emission Rules -- May 12, 2016 - For background to this next Dickinson Press story, see this months-old story over at FuelFix: EPA expands methane rules to all oil and gas wells.  Here's The Dickinson Press story: The Bakken oil and gas field emits 275,000 tons of methane each year, says a new study. The results of the study published Wednesday in the Journal of Geophysical Research: Atmospheres found that the Bakken is leaking a lot of methane, but less than some satellites have reported. According to wiki when asking the question, what gas is flared from oil wells?  Improperly operated flares may emit methane and other volatile organic compounds as well as sulfur dioxide and other sulfur compounds, which are known to exacerbate asthma and other respiratory problems.  Other emissions from improperly operated flares may include, aromatic hydrocarbons (benzene, toluene, xylenes) and benzapyrene, which are known to be carcinogenic.  Natural gas is a naturally occurring hydrocarbon gas mixture consisting primarily of methane, but commonly including varying amounts of other higher alkanes, and sometimes a small percentage of carbon dioxide, nitrogen, hydrogen sulfide, or helium.   Flaring can affect wildlife by attracting birds and insects to the flame. Approximately 7,500 migrating songbirds were attracted to and killed by the flare at the liquefied natural gas terminal in Saint John, New Brunswick, Canada on September 13, 2013.

ExxonMobil restarts Torrance refinery a year after fire (AP) — ExxonMobil has restarted its oil refinery in Torrance more than a year after an explosion crippled the plant and led to higher gas prices in California. As a safety precaution, ExxonMobil shut down a pollution control device for six hours during the re-start process early Tuesday. City News Service says that shutdown will result in up to 600 pounds of excess particulate emissions — but South Coast Air Quality Management District officials do not expect it to expose residents to unhealthy levels. The refinery has sat largely idle since the February 2015 blast injured four contractors, caused heavy damage at the plant and rocked nearby neighbors. The plant’s shutdown led to a shortage of gas that meets California’s stricter pollution regulations and caused higher prices at the pump.

The Case for Building Low-Cost Methanol Capacity - Even in tough times like these, companies need to look ahead, to consider what steps they would take--or investments they would make--if, for example, oil prices were to rise to X dollars per barrel, or the cost of drilling and completing a well were to fall by Y%. For methanol producers, these “what-ifs” might include what if methanol prices (holding steady the past few months at $249/metric ton, or MT) were to rebound to where they stood a year ago ($442/MW in May 2015)? Or what if we could add new capacity at a fraction of the cost of new-build? Today, we consider how building more methanol capacity might make sense in the right circumstances. Decisions to invest—whether it be investments in drilling and completing a well or in building new infrastructure—are based not only on current and projected prices for the related commodity or product but on the (sometimes changing) magnitude of the investment. Recall that even before oil prices started to collapse in mid-2014, the per-Bbl and per-MMBtu cost of producing oil and gas, respectively, had been falling as producers gained drilling-and-completion experience and increased efficiency. As oil prices slid and demand for drilling and completion services fell, the cost of those services plummeted, further changing the dynamics of when it’s profitable to drill and complete wells. Or consider the first wave of U.S. liquefaction and liquefied natural gas (LNG) export terminals, which was led by the projects that could make use of existing LNG import facilities (including docks capable of handling large LNG vessels, and adjoining pipelines that connect the terminal to the regional gas pipeline network) and thereby reduced the projects’ costs.

US imposes rules on fracking emissions The Obama administration is imposing controls on the US shale industry by unveiling rules demanding that oil and gas producers curb leaks of greenhouse gas. The crackdown on methane leaks comes as the 2016 presidential campaign leaves the oil industry facing uncertainty over the future of fracking regulation. President Barack Obama is targeting the production and distribution of oil and gas — the second largest industrial source of greenhouse gases after power plants — as part of his efforts to leave a record of action against climate change. But Mr Obama’s latest steps underlined how his legacy is likely to be determined only after he has left the White House by the courts or future presidents. The effort will first hit new oil and gas facilities via rules that were finalised on Thursday by the Environmental Protection Agency. But the regulator also said it was initiating plans to target existing facilities, which are likely to have a bigger impact on the industry. The oil industry decried the regulations as “unreasonable and overly burdensome”. The American Petroleum Institute, a lobby group, warned they could harm the shale energy revolution unleashed by hydraulic fracturing, which has already lost considerable momentum due to the oil price slump. The rules on new facilities require owners and operators to find and repair leaks of methane — the main component of natural gas — that occur during the drilling, production or transmission of oil and gas. While most global action on climate change has focused on emissions of carbon dioxide, the principal greenhouse gas, the EPA said there was a growing body of evidence that methane was doing more harm than previously thought. The EPA estimated that the cost of implementing its new rule, which requires companies to perform rolling leak checks, would be $530m, a figure it said would be outweighed by climate-related benefits of $690m in 2025.

US proposes to cut methane from oil, gas by nearly half - (AP) - The Obama administration issued a final rule Thursday to sharply cut methane emissions from U.S. oil and gas production, a key part of a push by President Barack Obama to reduce methane emissions by nearly half over the next decade. The rule by the Environmental Protection Agency is the major element of an administration goal to reduce methane emissions from oil and gas drilling by up to 45 percent by 2025, compared to 2012 levels. It will require energy producers to find and repair leaks at new or modified oil and gas wells and capture gas that escapes from wells that use the common drilling technique known as hydraulic fracturing, or fracking. Methane, the key component of natural gas, tends to leak during oil and gas production. Although it makes up just a sliver of greenhouse gas emissions in the United States, it is far more powerful than carbon dioxide at trapping heat in the atmosphere, making it a top target for environmentalists concerned about global warming.  Officials estimate the rule will cost the industry about $530 million in 2025. Those costs would be outweighed by reduced health care costs and other benefits totaling about $690 million, officials estimate. EPA administrator Gina McCarthy said the new rule would "protect public health and reduce pollution linked to cancer and other serious health effects while allowing industry to continue to grow and provide a vital source of energy for Americans across the country." The mandate, which will take effect this summer, will apply only to new and modified sources, such as wells, pumps, pipes and compressors, but it will set a framework for the EPA to impose similar requirements on nearly 1 million existing wells and other equipment nationwide. Those rules are not expected before Obama leaves office.

EPA Finalizes Methane Rule For New Oil And Gas Operations --The Environmental Protection Agency on Thursday issued its final rule for methane emissions from the oil and gas industry. The rule limits methane emissions from new oil and gas infrastructure and requires operators to submit to semi-annual or quarterly monitoring, depending on the type of operation. In addition, the agency took another step toward drafting a rule that would apply to existing oil and gas operations. “They will help keep the nation on track to help the us cut emissions from the oil and gas sector,” EPA administrator Gina McCarthy said on a call with reporters Thursday. The new rule will reduce emissions by 11 million tons per year of CO2 equivalent by 2025, she said. The Obama administration has a goal of reducing methane emissions from the oil and gas sector by 40 to 45 percent from 2012 levels by 2025. Natural gas is 80 percent methane, while oil extraction processes also often release methane trapped underground. In 2012, 30 percent of the country’s methane emissions came from oil and gas operations.  Methane is a potent greenhouse gas, trapping heat 86 times more effectively than CO2 over a 20-year span, so leaking methane can be a huge problem. While natural gas burns more cleanly than coal, leaks in the system can eliminate the climate benefits. Scientists have found that in the United States, methane leaks and venting have nullified any emissions benefit from transitioning the electricity sector from coal- to natural gas-fired power plants. In fact, the EPA recently found that the problem of escaping methane is even worse than initially feared. The United States currently gets a third of its electricity from natural gas, up from 24 percent in 2010.  The final rule increases monitoring frequency — and smaller wells will be included There are, though, two key changes from the initial draft rule the EPA published last year that environmentalists welcomed. Under the new rule, natural gas compressors will be subject to quarterly monitoring — twice as often as under the proposal. In addition, low-production wells will be included in the rule. In its fact sheet, the agency credited the changes to the more than 9,000 public comments it received after the draft rule was published.

Map: The Fracking Boom, State by State - As debate intensifies over oil and gas drilling, most states with frackable reserves are already fracking—or making moves to do so in the near future. That translates to 21 states, from California to Texas, Michigan to West Virginia, currently employing this high-intensity form of energy extraction, and five others may soon follow. Called high-volume hydraulic fracturing, or fracking, the controversial process became commercially viable in the late 1990s. It generally involves injecting millions of gallons of water, along with sand and chemicals, down a well to extract oil-and-gas reserves that were previously hard to access. InsideClimate News News compiled a comprehensive map of the nation's fracking activity. This state-by-state breakdown will be periodically updated.  Fracking is used differently in each state, depending on the available fossil fuels. Texas has thousands of wells that tap into deeply buried shale deposits. By contrast, in Indiana, fracking occurs for a small percentage of wells. Tennessee and Kentucky are outliers. While both states allow high-volume fracking (modern fracking), drillers there tend to use other extraction techniques that can involve injecting nitrogen gas underground. Illinois and North Carolina are the most recent states to allow modern fracking, with their state legislatures passing new rules in 2015 and 2014, respectively, and regulators are now waiting for applications. Nevada allows the process and had active operations as recently as December 2014; New York and Maryland buck the trend. New York was the first  state with sizeable fossil fuel reserves to close its borders to fracking. In December 2014, Gov. Andrew Cuomo banned the practice. His decision cited the public health risks from water and air pollution, and the unknown climate change impacts of extracting natural gas. Maryland lawmakers, also concerned about fracking's impact on the environment and public health, passed a moratorium in May 2015 that bars the process until October 2017.

Two More Energy Companies Go Bankrupt: Linn Energy, Penn Virgina File Chapter 11  --According to data compiled by Haynes and Boone, in just the first four months of 2016 there had already been double the amount of bankrupt energy debt than in all of 2015, with the total secured and unsecured defaults rising to $34 billion, double the $17 billion total for all of 2015. We can now add two more major names succumbing to the Saudi onslaught against marginal shale producers when overnightfirst Linn Energy announced a prepackaged Chapter 11 deal, followed by Penn Virginia defaulting just hours later. In the first case, oil and gas producer Linn Energy LLC filed for chapter 11 bankruptcy afterreaching a deal with lenders to restructure its $8.3 billion debt load and obtain $2.2 billion in fresh financing. In its bankruptcy filing press release, Linn announced that the holders of more than 66% of its credit facility have agreed to the “broad terms” of a debt restructuring but didn’t provide further details. The lenders also agreed to let Linn Energy spend the cash securing their debt, known as cash collateral, and to help fund a new $2.2 billion term loan. LinnCo LLC, a publicly traded affiliate, filed for bankruptcy alongside Linn Energy Wednesday. LinnCo was created to help Linn Energy raise additional equity capital and is taxed as a corporation, rather than as a master limited partnership like Linn Energy.  For those wondering if the bankruptcy would prevent the company from pumping more oil, bad news: Linn Energy said access to the cash will allow it to continue normal operations without lining up new bankruptcy financing. However, the company still requires permission from the U.S. Bankruptcy Court in Victoria, Texas, to begin spending.

Oil At $45 A Barrel Proving No Savior As Bankruptcies Add Up  - -- Three bankruptcies this week shows that $45 a barrel oil isn’t enough to rescue energy companies on the verge of collapse. Since the start of 2015, 130 North American oil and gas producers and service companies have filed for bankruptcy owing almost $44 billion, according to law firm Haynes & Boone. The tally doesn’t include Chaparral Energy Inc., Penn Virginia Corp. and Linn Energy LLC, which filed for bankruptcy this week owing more than $11 billion combined. At least four more oil and gas companies owing more than $8 billion are nearing default, including Breitburn Energy Partners LP and SandRidge Energy Inc. Bankruptcies have accelerated as cash-starved companies find it almost impossible to raise capital. Energy companies have been virtually shut out of the high-yield bond markets, banks are cutting credit lines and asset sales have slowed. While troubled companies may not be saved by $45 oil, some of the better operators will turn profitable at $50, said Subash Chandra, an analyst with Guggenheim Securities in New York. Companies best able to take advantage will be those with with acreage in North Dakota’s Bakken shale, the Permian in Texas or the Scoop and Stack prospects in Oklahoma. "If oil is at $50, fortunes turn dramatically," Chandra said. "But the problem is they turn so much that the service companies come in and raise prices and take a share of it, or if production responds so quickly that oil has a hard time staying at $50." While some of the best operators in the most prolific acreage may boast well break-evens of $35 a barrel, that only includes the cost of drilling,. Expenses like overhead, salaries, taxes and interest expenses easily add another $10 to $15 a barrel, he said. "The short answer is $45 a barrel doesn’t save anybody," Cutter said. "Anyone who was going bankrupt at $30 is still going bankrupt at $45. You need to see oil sustained at $60 to $65 before you see a real turnaround in profitability for the sector."

Banks see more pain despite crude’s rally -- The recent rally in the price of oil is doing little to improve the prospects of overstretched borrowers in the oil patch, say banks and their advisers, raising the prospect of further pain for companies and their lenders in the months ahead. Trouble in the energy sector was one of the themes of the first quarter for the big US banks, where provisions for loan losses leapt an average 61 per cent from the same period a year earlier, according to DBRS, the credit rating agency. Now, with many banks deep into the twice-annual process of resetting borrowing limits for their energy customers, they say they are cutting facilities by between 20 and 25 per cent — a deeper contraction than the 15-20 per cent cuts late last year. The squeeze comes despite a recovery in the price of oil, which has risen more than 60 per cent from its February lows. It is likely to mean that more cash-strapped borrowers tip into bankruptcy. “At the margin, the higher spot price has helped, but it has definitely not fixed companies with too much leverage in their capital structure,” said one senior Texas-based banker, speaking on condition of anonymity. Another banker at a rival bank noted that, unlike late last year, most customers no longer had the option of refinancing via equity markets or high-yield bond markets. “It’s a little trickier this spring,” he said. “The market is running out of places to go for money.” April was the heaviest month for energy company bankruptcies since the oil price started to turn in late 2014, according to Haynes and Boone, a Dallas-based law firm. Eleven companies filed for Chapter 11 protection during the month with total debts of $14.9bn — a significant increase from March, which saw seven collapses with total debts of $1.9bn.

Oil bankruptcies rack up as banks cut credit lines | Fuel Fix – Oil-company bankruptcies surged over the past two months as drillers ran into hefty interest payments amid one of the toughest financial squeezes for the industry in decades. Eighteen North American oil companies filed for bankruptcy in March and April, a big two-month haul that included two of Houston’s midsized public drillers, Energy XXI and Ultra Petroleum Corp. Several of the 18 producers chose not to make quarterly interest payments on a combined $8.9 billion in debt while banks cut oil company credit lines, part of a semi-annual review by lenders. “There’s no point in paying the interest to bond holders at that point,” said Buddy Clark Jr., an attorney at Dallas law firm Haynes & Boone. “They’ve got to conserve cash. A lot of the bondholders will be out of the money.” Since the start of the downturn, 69 oil companies in the United States and Canada have filed court papers seeking Chapter 11 bankruptcy protection, according to Haynes & Boone. Eleven of them filed in April. And 27 filed this year, compared to just eight that filed in the first four months of 2015.

Major Banks Shrug Off Concerns Of Bad Energy Debt | The latest survey by the Federal Reserve among senior loan officers has revealed a pessimistic picture. Banks operating in the U.S. are still skeptical about the ability of their energy industry clients to pay back their loans, and they are taking a variety of steps now to minimize the damage.  Last month, the Wall Street Journal quoted data from Barclays that showed American banks are saddled with over $140 billion in unfunded loans to E&Ps in oil and gas. They cautioned this will very likely weigh down on banks’ first-quarter earnings and plunge them even deeper into the abyss of unfunded, non-repayable debt. Fortunately for the lenders, their first-quarter results largely beat expectations, which were understandably low in light of this degree of exposure to an industry in distress.  Citigroup, for instance, booked a healthy $3.5 billion in net earnings, which although lower than the result for Q1 2015 was still good, especially given that its exposure to the energy industry is close to $60 billion. Bank of America actually reported an increase in both revenues and earnings on an annual basis, despite over $40 billion of exposure to energy industry loans, both funded and unfunded. JPMorgan’s net earnings were slightly down on the year at $5.5 billion versus $5.9 billion, but still above analyst expectations.

Wave of Fossil Fuel Project Cancellations Follows Keystone XL Rejection -- Six months after the Obama administration rejected the Keystone XL pipeline, at least 20 other proposed energy projects—mines, pipelines, plants, related rail projects and export terminals—have been canceled, rejected or delayed, according to research compiled and mapped by InsideClimate News. Sustained grassroots resistance and public opposition have played a role in at least some of these decisions; other influential factors include unfavorable economic conditions such as low oil prices, as well as governments' environmental concerns and project siting issues. Proposed in 2008, the Keystone XL was originally slated to transport Canadian oil sands crude to Gulf Coast refineries. Federal regulators rejected the project for its potential climate impact and minimal economic benefits—and activists hailed the decision as a victory for their years of action against the project. Since then, the Federal Energy Regulatory Commission rejected two project applications—for the Oregon-based Jordan Cove LNG project and Pacific Connector Pipeline—and delayed the decisions on two other facilities. For five of the projects, the bids or key permits were rejected by either a federal panel or state or local officials. Companies chose to cancel five other projects, including Arch Coal's abandoning its planned Otter Creek coal mine in Montana and Kinder Morgan's pulling the plug on its Northeast Energy Direct pipeline. The remaining facilities are delayed.

Big Oil Abandons $2.5 Billion in U.S. Arctic Drilling Rights --- After plunking down more than $2.5 billion for drilling rights in U.S. Arctic waters, Royal Dutch Shell, ConocoPhillips and other companies have quietly relinquished claims they once hoped would net the next big oil discovery. The pullout comes as crude oil prices have plummeted to less than half their June 2014 levels, forcing oil companies to slash spending. For Shell and ConocoPhillips, the decision to abandon Arctic acreage was formalized just before a May 1 due date to pay the U.S. government millions of dollars in rent to keep holdings in the Chukchi Sea north of Alaska. The U.S. Arctic is estimated to hold 27 billion barrels of oil and 132 trillion cubic feet of natural gas, but energy companies have struggled to tap resources buried below icy waters at the top of the globe. Shell last year ended a nearly $8 billion, mishap-marred quest for Arctic crude after disappointing results from a test well in the Chukchi Sea. Shell decided the risk is not worth it for now, and other companies have likely come to the same conclusion, said Peter Kiernan, the lead energy analyst at The Economist Intelligence Unit. "Arctic exploration has been put back several years, given the low oil price environment, the significant cost involved in exploration and the environmental risks that it entails," he said.

The Oil Industry Just Backed Out Of A Multi-Billion Dollar Investment --It seems that the rent really is too high, at least for the major oil and gas firms that have now cancelled their exploration leases in the Arctic. ConocoPhillips, ENI, and Iona have relinquished all their leases in the Chukchi and Beaufort seas off the coast of Alaska, according to new documents obtained in a Freedom of Information Act request filed by advocacy group Oceana. “The decisions to give up leases reflect both environmental and economic realities of operating in a remote and unforgiving environment like the Arctic,” Michael LeVine, senior counsel for Oceana, told ThinkProgress. Statoil, which also had leases in the region, had previously relinquished all its leases, and Shell has relinquished all but one block, where it has already done exploratory drilling, he said. A spokesman for ConocoPhillips confirmed that the leases no longer represented a good investment for the company. “Given the current environment, our prospects in the Chukchi Sea are not competitive within our portfolio. This will effectively eliminate any near term plans for Chukchi exploration for the company,” Christina Khul told ThinkProgress in an email. While Khul specified that she was referring to the economic environment, not the political one, both are likely on the minds of shareholders for the world's largest oil and gas companies. Exploration in the Arctic Ocean is an incredibly expensive endeavor. The Arctic is a harsh and unforgiving environment. The drilling season is short, since it's impossible to drill in the freezing temperatures from fall to spring. And the location is remote, which means it costs more to get equipment and people up there. It has been estimated that Shell — the only company that has tried drilling in the Chukchi — spent about $7 billion on its efforts, which have not yet paid dividends.

Big Oil Abandons the Arctic, Obama Under Pressure to Do More to Protect the Region - Sometimes it is hard to find good news on the climate. Take a quick look at a couple of today’s stories: According to Australian researchers, five tiny Pacific islands, which are part of the Solomon islands, have completely disappeared due to rising sea levels, in what is being described as the “first scientific confirmation of the impact of climate change on coastlines in the Pacific.” Another six islands have had large swathes of land washed into the sea too. Elsewhere, one in five of the world’s plant species is said to be threatened with extinction, with climate change one of the factors along with farming and construction. But there is good news too, which gives immense hope to those fighting Big Oil, especially in the Arctic: Big Oil is in full retreat from the region.  Once the Arctic was the seen as the last big untapped frontier for the industry. But rather than being full of black gold, the Arctic has proven to be one of the most expensive black holes for the industry ever. Bloomberg reported this morning that after spending a whopping $2.5 billion for drilling rights in U.S. Arctic waters, oil companies such as Shell and ConocoPhillips have quietly relinquished their rights to some 2.2 million acres. This equates to nearly 80 percent of the leases they bought nearly a decade ago. This is truly significant: Peter Kiernan, the lead energy analyst at The Economist Intelligence Unit told Bloomberg: “Arctic exploration has been put back several years, given the low oil price environment, the significant cost involved in exploration and the environmental risks that it entails.” Oil giant, Shell which has already blown $8 billion on its mis-guided Arctic folly, relinquished 274 leases in the Chukchi and Beaufort Seas, although it is holding onto the lease that it started to drill last year. ConocoPhillips formally relinquished its 61 Chukchi Sea leases. Statoil had already dumped 16 Chukchi Sea leases and its working interest stakes in 50 others in the U.S. Arctic last November.

EIA revises up U.S. crude production in 2017 amid higher prices -  U.S. crude production in 2017 will decline less than previously forecast as higher oil prices encourage higher output, the Energy Information Administration said in a monthly report on Tuesday. The statistical arm of the U.S. Department of Energy said crude production will decline by 830,000 barrels per day in 2016, in line with previous expectations, but that the decline will slow to 410,000 bpd in 2017, rather than the 560,000 bpd previously forecast. "U.S. crude oil production in 2017 is expected to be more than 100,000 barrels per day higher than previously forecast in response to higher oil prices," EIA Administrator Adam Sieminski said in comments released after the data. Until last month, oil had seen one of the strongest rebounds since the financial crisis, with prices rallying nearly 80 percent from multiyear lows under $30 a barrel in the first quarter, supported by falling U.S. production, supply constraints in Libya and the Americas and a weak dollar. The rally has since stalled at around $45 as record output by Russia and major Middle East producers renewed worries about a global glut of some 1.5 million bpd that originally drove prices down from above $100 in mid 2014. The EIA also lifted its U.S. oil demand forecast for the second quarter of 2016 by 0.5 percent to 19.58 million bpd, and revised upwards its demand growth forecast by 0.1 percent for the entire year to 19.54 million bpd. The EIA trimmed its 2017 oil demand forecast by 0.2 percent to 19.66 million bpd.

EIA Revises Crude Oil Price Forecast Up $6/Barrel - The US Energy Information Administration (EIA) has revised its earlier crude oil price forecast, originally issued in April, but now expected to be around $40.52 per barrel, up $6 from its April estimates of only $34.73 per barrel for the average price of crude in 2016."Improving economic data, growing supply disruptions, and falling U.S. crude oil production and rig counts contributed to the price increase," the EIA said in its Short-Term Energy Outlook report released today. The forecast for Brent crude prices in 2017 were also revised upwards, from $40.58 per barrel to $50.65 per barrel. The West Texas Intermediate (WTI) prices were also revised positively, with new expectations for 2016 at $40.32 per barrel. For 2017, the EIA expects to see Brent and WTI at the same price. Average Brent crude prices in April were $42 per barrel, or $3 higher than in March.

EIA revises inventory build forecasts downward - In its Short-Term Energy Outlook for May, the US Energy Information Administration estimates that global petroleum and other liquid fuels inventory builds will average 1 million b/d in 2016 and 200,000 b/d in 2017 compared with the average of 1.4 million b/d in 2016 and 400,000 b/d in 2017 forecast in last month’s STEO. Lower inventory build forecasts mainly reflect revised historical rates of demand growth in 2015, along with the expectation of higher demand growth in 2016 and 2017. EIA expects global oil inventory draws to begin in third-quarter 2017.  EIA increased its estimates of historical and forecast global consumption for 2015-17 compared with April’s STEO. Global consumption of petroleum and other liquid fuels is now estimated to have increased by 1.4 million b/d in 2015, 100,000 b/d higher than previously estimated and reflecting upward revisions to 2015 growth in both China and India. EIA now expects global oil consumption to increase by 1.4 million b/d in 2016 and by 1.5 million b/d in 2017, 300,000 b/d and 200,000 b/d higher, respectively, than forecast in the STEO for April. China’s consumption is forecast to grow by 400,000 b/d in both 2016 and 2017.

Latest IEA US shale scenario paints worsening outlook picture - Oil | Platts News Article & Story: The International Energy Agency issued a downbeat forecast for US light tight oil production levels through 2020 Wednesday, predicting that overall shale output would not flatten out even at $60/b average oil prices over the period. In a presentation at the Platts Global Crude Oil Summit, IEA chief economist Laszlo Varro gave an updated set of scenarios that appeared more negative than the agency's previous World Energy Outlook, published in November 2015. Varro also addressed the effect of climate change policies on investment and said even under a scenario that sees global temperatures rise 2 degrees Celsius, investment in oil production would still be needed. Long-term demand for diesel looks "quite robust" despite recent air quality concerns, he added.The latest forecast expects US light tight oil production to decline by 3 million b/d in the 2015-2020 period if oil prices average $40/b over the period and would still decline slightly at $60/b. Only at $70/b prices would light tight oil production rise slightly, while $100/b prices would result in a 1.5 million b/d increase over the period, according to the forecast. "The US oil industry is fighting very hard and I'm really impressed by how hard they fight, but they cannot overcome the laws of gravity. So investment is declining in the US quite significantly," Varro said.

Whatever Happened to Condensates after Lifting of the Crude Export Ban?  -- Few segments of the energy market have experienced the roller-coaster ride that U.S. condensates have been on over the past five years.   Prior to 2011, U.S. condensates were a forgotten backwater of the hydrocarbon complex, mostly blended off into crude oil.  Then condensates rapidly transitioned from obscurity to an oversupplied, price-discounted growth market, then to a driver of massive infrastructure investment, then to the star of the show as the only member of the U.S. crude oil family that could be exported.  By mid-2014, producers and midstreamers were in love with condensates.  Exports were legal and growing.  New pipeline, splitter, stabilizer and export dock infrastructure was coming online.  U.S. condensate markets were tightening and condensate prices were increasing.  Then in one fell swoop in December 2015, Congress swept away all export restrictions on crude oil, potentially relegating U.S. condensates back to the obscurity from whence they came. All of this turmoil in U.S. condensates has played out within the much broader context of international condensate markets. The natural gas production of many countries yields substantial volumes of condensates.  These volumes are traded in robust markets, with the epicenter of demand in the Asia/Pacific region, supplied mostly by producers in the Middle East, Asia and Africa.  These markets are also in transition, though not with the level of turmoil being experienced by U.S. condensates.  The key to condensates in the global market is the relationship between condensate production growth, export volumes and the major market for these exports – condensate splitters and refineries.  Prior to lifting of the export ban, these markets were gearing up for significant volumes of U.S. condensates.  Now things have changed.

The Real Oil Limits Story - What Other Researchers Missed -- Gail Tverberg -- For a long time, a common assumption has been that the world will eventually “run out” of oil and other non-renewable resources. Instead, we seem to be running into surpluses and low prices. What is going on that was missed by M. King Hubbert, Harold Hotelling, and by the popular understanding of supply and demand? The underlying assumption in these models is that scarcity would appear before the final cutoff of consumption. Hubbert looked at the situation from a geologist’s point of view in the 1950s to 1980s, without an understanding of the extent to which geological availability could change with higher price and improved technology. Harold Hotelling’s work came out of the conservationist movement of 1890 to 1920, which was concerned about running out of non-renewable resources. Those using supply and demand models have equivalent concerns–too little fossil fuel supply relative to demand, especially when environmental considerations are included. Virtually no one realizes that the economy is a self-organized networked system.There are many interconnections within the system. The real situation is that as prices rise, supply tends to rise as well, because new sources of production become available at the higher price. At the same time, demand tends to fall for a variety of reasons:

  • Lower affordability
  • Lower productivity growth
  • Falling relative wages of non-elite workers

The potential mismatch between amount of supply and demand is exacerbated by the oversized role that debt plays in determining the level of commodity prices. Because the oil problem is one of diminishing returns, adding debt becomes less and less profitable over time. There is a potential for a sharp decrease in debt from a combination of defaults and planned debt reductions, leading to very much lower oil prices, and severe problems for oil producers. Financial institutions tend to be badly affected as well. If a person looks at only past history, the situation looks secure, but it really is not. 

Difference between Trump and Clinton as president: One million barrels of oil a day - If Trump becomes next U.S. president, it could mean a boost to U.S. oil production.  U.S. oil production is bound for a significant shake up after the presidential election in November, says a senior editor at energy-information provider Platts. “This election is going to have a major impact on the direction of U.S. and, possibly, global oil supply. Maybe the most significant impact of any election in U.S. history,” said Brian Scheid, senior oil editor at Platts, at the Platts Crude Oil Summit in London on Tuesday. Looking at a worst case/best case scenario worked out between several analysts in Washington, he estimated that with a Republican win, U.S. oil production could jump by as much as 500,000 barrels a day. If the Democrats win, there could be a decline of 500,000 barrels a day, Scheid said. “Essentially a one million barrel per day swing depending on the result of a single election. This is a relatively major difference in supply, equal to nearly the amount of crude the entire state of North Dakota now pumps each day,” he said.

Six States Join TransCanada To Sue Obama Over Rejection Of The Keystone XL Pipeline - Six states have joined with TransCanada to sue the Obama administration over its rejection of the Keystone XL pipeline permit application.   TransCanada filed the suit in a federal court in Houston in January, alleging that the president had overstepped his constitutionally granted powers. The right to regulate trans-border commerce is reserved for Congress, the suit says.   But the president denied the permit based on national security grounds, which is well within his rights, Center for Biological Diversity attorney Bill Snape told ThinkProgress.  “They are basically asking the court to second-guess the president on a national interest decision,” Snape said.  The states seem to be alleging that the Obama administration rejected the Keystone XL pipeline permit application because the president thought his own reputation was on the line.  “In [President Obama’s] view, overriding the States and Congress is necessary to preserve his stature on the world stage and his bargaining position in ongoing or future multinational negotiations,” wrote the attorneys general of Oklahoma, Kansas, Montana, Nebraska, South Dakota, and Texas, who this week filed an amicus brief in support of a suit against the federal government by Keystone’s developer, TransCanada.   Snape says that may well have been part of the president’s intention — and that it’s well within his purview to do so. “This law allows the president to make this decision and he gets to make it based on his interpretation of national interest,” Snape said. This is not the first time Obama or his agencies — particularly the Department of the Interior and the Environmental Protection Agency — have been sued by the states for actions intended to reduce pollution or take action on climate change. The Waters of the United States Rule has been targeted. The Clean Power Plan is at the courts. The Mercury Rule went to the Supreme Court.

Shift in the Wind May Push Gargantuan Fort McMurray Fire Toward Tar Sands Facilities on Saturday  - Robert Schribbler - The Fort McMurray Fire is now so vast that it has both burned through and completely surrounded the city, its airport, and the neighboring community of Anzac 31 miles to the south. Spinning out blazes in a long tail across the green forested land of Canada, the fire now appears to cover about 40 miles of distance and 10 miles of width at its longest and widest points. A secondary fire to the northeast of the main blaze also appears to have lit off. And by the end of Saturday officials now believe the fire could cover an area the size of Rhode Island. Viewing the massive scope and extent of the blaze, one can see why an evacuation convoy of 1,500 vehicles — composed of members of the fire response team and a number of stranded evacuees from the tar sands industrial zone — was unable to flee the region earlier on Friday. BBC News reports indicated that the convoy encountered walls of flames 200 feet high and was forced to turn back to a city that finds itself surrounded with walls of flame on every side. This was the second time in two days that the evacuation convoy attempted to leave the fire zone and the second time that all ways out were found to be blocked by the fires. Thousands of people remain stranded in the fire zone to the north of the blaze and officials say it will take four days to move them once a clear pathway out is found RCMP reported that by late Friday a third attempt from the convoy, now swelling to 2,500 vehicles, finally made its way south away from the fire zone. GFS model forecasts indicate that temperatures will rise into the mid 80s Saturday. Yet another day of record hot readings for a climate change baked Canada. Winds are shifting toward the south. And very dry conditions will continue to worsen the already extreme levels of fire danger. With the fire now burning very close to the Athabasca oil production facility — a section of the tar sands that was evacuated yesterday due to fire encroachment — it appears that these winds will likely drive the fire toward and, possibly, into that industrial section. 

Alberta's 'Vicious' Wildfires Spread to Suncor Oil-Sands Site -- Wildfires raging through Alberta have spread to the main oil-sands facilities north of Fort McMurray, knocking out an estimated 1 million barrels of production from Canada’s energy hub. A cold front scheduled to pass through the area today may bring light rain that would help fire fighters battle the inferno. The blaze, which was forecast to expand to more than 2,500 square kilometers (965 square miles) in the next few days, grew slower than expected overnight and now covers less than 2,000 square kilometers, Travis Fairweather, a forestry spokesman, said Sunday. A cold front may bring a “bit of rain,” but will be proceeded by winds of up to 60 kilometers an hour (37 miles an hour), spreading the fire further. The out-of-control inferno may keep burning for months without significant rainfall. “Heavy winds push the fire,” he said. “Spread rates increase significantly.” The fire that began a week ago was encroaching oil-sands operations run by Suncor Energy Inc. and Syncrude Canada Ltd. and may soon cover an area the size of Luxembourg. While “creeping small flames” appear from satellite images to have reached the “doorstep” of the Suncor bitumen mining operations in the north, the blaze mostly expanded to the southeast and to the west, Fairweather said Sunday. The Suncor facility hasn’t been damaged, the company said in an e-mail Sunday. “It is a dangerous and unpredictable and vicious fire that is feeding off an extremely dry Boreal forest,” The wildfires have led to combined productions cuts of about 1 million barrels of oil a day, or about 40 percent of the region’s output of 2.5 million barrels, based on IHS Energy estimates. The cuts, and the mass exodus of more than 80,000 people from the fires raging in Fort McMurray, represent another blow to an economy already mired in recession from the oil price collapse.

Finally Good News For Canada's Raging Wildfire: Rain, Wind Conditions Push Blaze Away From Oil Sands - Cooler weather on Monday will help in firefighters  battle to get the Alberta wildfire under control. The fire, which has destroyed about 620 square miles and has been nicknamed "The Beast", has been burning since May 1 and now has more than 100 water-dropping helicopters flying over it. After expecting the fire to double in size over the weekend, light rains and cooler temperatures helped prevent that from happening. "This is great firefighting weather, we can really get in here and get a handle on this fire, and really get a death grip on it," said Alberta fire official Chad Morrison on Sunday. The fires have knocked out an estimated 1 million barrels a day, or about half the crude output from the center of Canada's oil sands region, and while the fire approached operations of Suncor Energy, Canada's biggest energy company, there was no damage as firefighters were able to hold the blaze southwest of the area. The good news, as far as the oil facilities and future production are concerned, is that the forecasts show that the winds have shifted, and with gusts of up to 31mph, is moving the fire east, away from the oil sands. Once the fires are under control, oil sands mining projects could be back to normal production levels in about a week, however projects that require steam to extract the oil could take two or more weeks depending on the start-up method and pressure requirements according to Morgan Stanley.Companies such as Suncor, Phillips 66, and Statoil ASA have declared force majeure, a provision that protects companies from liability for contracts that go unfulfilled. According to Bloomberg, Suncor has said that it has begun planning to restart production after moving more than 10,000 employees and their families out of the Fort McMurray area. The restart will happen once it's safe and when third-party pipelines are available. The city's water is undrinkable, its gas has been turned off, and its power grid is significantly damaged, so when that restart occurs depends on a number of factors.

Canada wildfire could be costliest natural disaster in its history - (Reuters) - Canadian officials on Sunday showed some optimism for the first time that they were beginning to get on top of the country's biggest wildfire, as cooler weather and light rain stopped the blaze from growing as much as feared and winds took the flames away from oil sands boomtown Fort McMurray. "It definitely is a positive point for us, for sure," said Alberta fire official Chad Morrison in a news briefing, when asked if the fight to contain the flames had a reached a turning point.  The wildfire scorching through Canada's oil sands region in northeast Alberta had been expected to double in size on Sunday, threatening the neighboring province of Saskatchewan, as it moved into its seventh day. But favorable weather helped hold it back, giving officials hope that they can soon begin assessing the damage to Fort McMurray, close to where the fire started, causing its 88,000 inhabitants to flee. "As more and more fire has burned out around the city and the fuel around the city starts to disappear ... we are starting to move into that second phase of securing the site and assessing the site," said Alberta Premier Rachel Notley, during the same media briefing.The broader wildfire, moving southeast through wooded areas away from the town, would still take a long time to "clean up," Morrison cautioned. Officials had previously warned that the fire could burn for months. Fort McMurray is the center of Canada's oil sands region. About half of the crude output from the sands, or one million barrels per day, had been taken offline as of Friday, according to a Reuters estimate. The inferno looks set to become the costliest natural disaster in Canada's history. One analyst estimated insurance losses could exceed C$9 billion ($7 billion).

Alberta officials say oil sands city saved from fire's worst (AP) — Alberta’s premier has declared Canada’s oil sands city has been largely saved and said a plan will be put together within two weeks so most of the 88,000 evacuees can return to their homes. At least two neighborhoods in Fort McMurray became scenes of utter devastation with incinerated homes leveled by a wildfire that the city’s fire chief called a “beast … a fire like I’ve never seen in my life.” But the wider picture was more optimistic as officials said 85 percent to 90 percent of the city remains intact, including the downtown district.  Alberta Premier Rachel Notley said about 2,400 homes and buildings were destroyed, but firefighters managed to save 25,000 others, including the hospital, municipal buildings and every functioning school. “This city was surrounded by an ocean of fire only a few days ago but Fort McMurray and the surrounding communities have been saved and they will be rebuilt,” Notley said. She said the fire continues to grow outside the city and now is about 790 square miles (2,020 square kilometers) in size. Notley said there will be a meeting Tuesday with the energy industry to discuss the state of their facilities and the impact on operations. The fire has forced as much as a third of Canada’s oil output offline and was expected to impact an economy already hurt by the fall in oil prices.

Suncor looks to restart oil-sands production after wildfires | Fuel Fix: Canada oil-sands producers including Suncor Energy Inc. could resume production within a week after the threat subsides from wildfires that cut as much as 40 percent of the region’s output. A quick restart depends on whether companies managed shutdowns properly and if power and pipeline infrastructure is unscathed, according to analysts at Wood Mackenzie Ltd. and IHS Energy. Suncor and Syncrude Canada Ltd., two of the biggest producers in the area that’s been ravaged by wildfires near Fort McMurray, Alberta, both said they managed safe shutdowns. Only one oil-sands site, Cnooc Ltd.’s Nexen operations, has suffered minor damage. “The best possible case, you’re probably looking at somewhere within a week to get them restarted,” said Harold York, vice president of integrated energy at Wood MacKenzie. Restarts will also depend on availability of workers after large-scale evacuations, which may be hindered given destruction of homes in the area, he said. If companies executed controlled shutdowns, that means bitumen has been cleared from the system so that restarts won’t be hindered, according to Kevin Birn, a director at IHS Energy in Calgary.

Factbox: Fort McMurray fire impact on Canadian oil market - Oil | Platts - Canadian crude prices continued to rise Friday as oil production remained shut in because of a wildfire, although companies were in the process of returning output. The fire, which started Sunday, caused a massive evacuation from the oil sands capital of Fort McMurray, Alberta, and has resulted in roughly 820,000 b/d of oil sands output being cut. The fire could potentially impact some 1 million b/d of bitumen production capacity from the Athabasca region, but work was underway Friday to restart the lost capacity once the fire abates. Light crude benchmark Syncrude Sweet Premium was heard bid at front-month NYMEX light sweet crude oil futures contract (WTI CMA) plus $2.35/b, up from minus 25 cents/b on Tuesday, before the production outages.Heavy crude benchmark Western Canadian Select was unchanged at minus $11.85/b, although that was up from an assessment of minus $13.45/b Tuesday.  Prices could have been higher if not for high crude inventories. In the US Midwest, for instance, where the bulk of Canadian crude exports arrive, stocks at 158.3 million barrels for the week ended April 29 were 45 million barrels above the five-year average, US Energy Information Administration data showed. Midwest refiners imported a record high 2.5 million b/d of Canadian crude in February, according to the EIA.  Canadian Natural Resources, which saw a "minor outage" at its 128,000 b/d Horizon oil sands facility due to pipeline stoppages, has now returned to normal production levels. CNR is the operator of the Horizon and Kirby oil sands mining facilities in the Fort McMurray area.

U.S. Cash Crude-Bakken grades jump to near 3-year high on Alberta wildfire shut-ins - Bakken differentials rose on Monday to the strongest in nearly three years as traders hurried to buy the crude on worries about supply constraints due to a raging wildfire in Canada's Alberta province. The move follows Syncrude Canada cutting estimated production volumes by some 35 percent in May after a wildfire forced the company to close its mines and upgrader operations over the weekend, sources said. U.S. Bakken for June settled at 40 cents a barrel over WTI from 35 cents a barrel below WTI on Friday, according to Shorcan Energy Brokers. That was the strongest since July 2013. Canadian crude prices climbed further on Monday as the wildfire entered a second week, with offline capacity estimated at around 1 million barrels per day. Light, sweet barrels in the U.S. Gulf got a boost, with traders expecting barrels to possibly move inland as a result of the production curbs. * Light Louisiana Sweet (WTC-LLS) for June delivery rose 20.5 cents to a midpoint of $2.13 and traded between $2.05 and $2.15 a barrel premium to U.S. crude futures. * Mars Sour (WTC-MRS (LSE: MRS.L - news) ) rose 3 cents to a midpoint of -$3.22 and traded between $3.20 and $3.25 a barrel discount to U.S. crude futures. * WTI Midland (WTC-WTM) rose 7 cents to a midpoint of -$0.13 and traded at a 10 cent a barrel discount to U.S. crude futures . * West Texas Sour (WTC-WTS) rose 17.5 cents to a midpoint of -$1.1 and traded at a $1.20 a barrel discount to U.S. crude futures. * WTI to East Houston traded at $1.75 a barrel over WTI. * ICE Brent July futures fell $1.74 to settle at $43.63 a barrel. * WTI June crude futures fell $1.22 cents to settle at $43.44 a barrel. * The Brent/WTI spread (WTCLc1-LCOc1) widened by 45 cents to settle at 40 cents.

Oil firms have 10 years to change strategy or face 'short, brutish end' -- International oil companies such as Shell and BP must completely change their business model or face a “nasty, brutish and short” end within 10 years, one of Britain’s most influential energy experts has warned. Paul Stephens, a fellow at Chatham House thinktank, said in a research paper the oil “majors” were no longer fit for purpose – hit by low crude prices, tightening climate change regulations and their own wrongheaded strategies. In the report, Stephens argues the only way forward for the companies lies in diversifying into green energy, drastically reducing their operations or consolidating through mega-mergers. “The prognosis for the IOCs [international oil companies] was already grim before governments became serious about climate change and the oil price collapsed … their old business model is dying,” said Stephens, a visiting professor at University College London. “In this new world, the only realistic option … lies in restructuring and realising (selling) many of their current assets to provide cash for their shareholders.” The death of these key fossil fuel providers would be an astonishing reversal in fortunes for powerful companies that have previously been accused of being climate change deniers and tools – if not makers – of foreign policy.

Argentina shale development moves forward, but still slow -   Platts - Argentina has the potential to become a net exporter of oil and natural gas from its huge shale resources, a task that will require large investments not just by majors but also a lot of junior players, executives said Monday. "If Argentina does things right, it could become a big exporter of oil and gas," Arturo Vilas, general manager of Canada's Miramar Hydrocarbons, said at the Argentina Shale Gas and Oil Summit in Buenos Aires. Argentina has among the world's largest shale oil and gas resources, and big companies like the country's state-run YPF, Chevron and Dow Chemical have started to put them into production, while ExxonMobil, Shell and Total are pursuing production pilots. The country is producing about 50,000 b/d of oil equivalent in shale oil, gas and liquids, according to Neuquen government data. Neuquen is a southwestern province that is home to the giant Vaca Muerta play and most of the country's shale drilling. There could be an increase in investment this year thanks to improved conditions for doing business in the country. The new right-of-center government of President Mauricio Macri, who took office in December, has returned the country to global financial markets by ending a 15-year sovereign debt default, expanding financing opportunities for companies. His administration has also raised most energy prices, lifted capital controls and scrapped trade restrictions.

Analysis: As LPG demand balloons, India to become more reliant on imports - A raft of government initiatives has propelled India's insatiable appetite for LPG to record highs, leading analysts to believe that growth is expected to hover close to double digit levels in the near to medium term as New Delhi intensifies its push towards cleaner fuels. But with LPG domestic demand growing at a much faster rate than output, the country, where refiners find it more profitable to focus on middle distillates rather than boosting LPG output, will be increasingly dependent on imports to meet its incremental consumption growth, analysts added. LPG demand in March hit a record high of 1.835 million mt, up 14.16% year on year, taking the cumulative demand in January-March 2016 to 5.254 million mt, up 11.28% year on year, data from India's Petroleum Planning and Analysis Cell showed. The growth in March meant that LPG consumption has recorded positive growth over 31 months in a row.Top officials of Indian oil companies and independent analysts recently told Platts that even though demand growth is unlikely to hold at those lofty levels, LPG demand will continue to grow around 7%-9% over the coming years.

GSPC in talks with ONGC on selling gas field stake: The Gujarat State Petroleum Corp (GSPC) said on Monday it is in talks with the country's top explorer Oil and Natural Gas Corp on selling a stake in its gas block off the east coast, to revive the challenging deep water field. The block, where the discovery of gas was announced in 2005 by Prime Minister Narendra Modi while leading his home state of Gujarat, was to start commercial production in 2011 but difficulties in drilling 5,000 metres below the seabed pushed back the plan by about five years. GSPC, controlled by the state government, has already invested about $3.6 billion in exploring and building infrastructure around the block but with little success, and now wants ONGC's help on funds and drilling expertise. GSPC says it now hopes to start commercial production from the Krishna Godavari field later this year, with an initial output of 70-80 million cubic feet a day (mcfd). "Commercial production is expected to start after the drilling, hydraulic fracturing and completion of the fifth development well (D5), tentatively by the end of October," GSPC said in a statement emailed to Reuters. GSPC had managed to extract around 23 mcfd since August 2014 from three wells it drilled using conventional drilling methods. To expedite recovery, the company has now migrated to hydraulic fracturing (fracking) - a technique popularised by U.S. shale drilling companies and in which fractures are created in rock formations using pressurised fluids. The fourth well is expected to start production by this weekend using the fracking method, which would cost $60-$70 million for each well and involve global oilfield services firms such as Halliburton and Schlumberger.

What's Next For Big Oil Now Brazilian President Rousseff Is Suspended? -- Brazilian President Dilma Rousseff has been suspended from office following a senate vote to initiate her impeachment trial on corruption allegations that lead back to state-run Petrobras, leaving vice-president Michel Temer to take over in the interim, while foreign oil companies wait anxiously to see what this will mean for the industry.Rousseff has denied any wrongdoing and refers to the impeachment process as a ‘’coup’’. Temer is an academic who has also been accused of corruption. He is expected to take office today. He may remain in office until the end of Rousseff’s term in 2018 if the senate votes this through. For now, however, the senate has voted only to suspend Rousseff for 180 days. Temer is expected to pursue privatization of state assets if he is left in office, and Brazil’s strong labor unions will fight this. An immediate strike has already been threatened by the labor union behind Transpetro—Petrobras’s transportation subsidiary—over Rousseff’s suspension. Other industry-related labor unions are also talking about strikes. For the oil industry, nothing is clear. While the industry is seeking reforms on a number of levels, including changes to rules that require state-run Petrobras to have a 30-percent operating stake in all sub-salt projects and changes to tough local content rules, nothing is likely to be decided until Rousseff’s status is definitive. At the same time, there were already indications that the oil industry was gaining ground with the current government. The day before Rousseff’s suspension announcement, Brazil said it was planning to push through new regulations any day that would allow companies other than state-run Petrobras to operate some sub-salt projects, according to anonymous sources cited by Reuters. These projects are part of the Subsalt Polygon—where the major discoveries have been—and presently only Petrobras can operate them.

Shell Nigeria shuts oil terminal as attacks cut production: (AP) — Shell is temporarily closing the terminal exporting Nigeria’s benchmark Bonny Light crude oil as militant attacks have cut production in Africa’s biggest petroleum producer. Shell refused to confirm labor union reports that the company is also evacuating workers from Bonga oilfield following a threat. A bomb attack last week closed a major Chevron facility. Shell’s Forcados export terminal has been shut since an undersea pipeline attack in February. In a statement Wednesday, Shell declared force majeure on Bonny exports effective 1100 GMT the day before to protect the company from contractual obligations, citing a leak on the Nembe pipeline. Pipeline operator Aieto Exploration blamed sabotage or an attack. Militants want a bigger share of Nigeria’s oil wealth. Nigeria’s production is down to 1.7 million barrels a day from 2.2 million.

Nigeria's NNPC records 3,153 vandalized points on oil pipelines over 12 months - Oil | Platts -- State oil firm Nigerian National Petroleum Corp said it recorded 3,153 punctured points on its oil pipelines in the 12 months to end March, adding that continued crude and oil products losses were draining it financially. "Incessant vandalism and products theft have continued to destroy value and put NNPC at [a] disadvantaged competitive position," the NNPC said. NNPC recorded an operating deficit of Naira 24.23 billion ($123 million) in February and Naira 18.89 in March, it said, on the back of attacks on the Forcados crude export line that resulted in the loss of the entire oil export revenues of its subsidiary, NPDC. NNPC said the crippling of the 48-inch Forcados export line resulted in the shut-in exports of 300,000 b/d of the Forcados crude grade since February.NNPC manages the government's average 57% interest in joint ventures with foreign oil firms including Chevron, Eni, ExxonMobil, Shell and Total. It said that due to dwindling revenue, it used $4.3 billion, or 95.9% of total export earnings between April 2015 and March 2016, to fund joint venture cash calls, thus transferring little into the so-called Federation Account.

Nigeria rules out negotiations with oil pipeline attackers - - Nigerian military high command Wednesday ruled out engaging militants sabotaging oil production facilities in the Niger Delta, saying it would rather deploy "every available resources to deal decisively" with the militants. Recent attacks on Nigeria's oil facilities by Niger Delta militants have caused Nigerian production to fall by 12% to around 1.67 million b/d at the end of April, according to S&P Global Platts OPEC survey data. Foreign oil firms operating in the Niger Delta have also started evacuating some of their workers to reduce the risk to their lives. "The military will employ all available means and measures within its Rule of Engagement to crush any individual or group that engages in the destruction of strategic assets and facilities of the government in the Niger Delta [and] they will stand to regret the consequences of their actions," military spokesman Rabe Abubakar said in a statement."The whole world has seen what they [militants] are causing in terms of economic terrorism against the nation and would be treated as criminals in line with the laws of the land." Violence in Nigeria's vast southern oil patch had subsided after a 2009 government amnesty to militants halted a spate of attacks on oil installations. The administration of President Muhammadu Buhari, which has already cut funds for the amnesty program, said it would end next year. The militants, who call themselves the Niger Delta Avengers, have renewed demands for control of the region's oil. The Nigerian Navy said late Tuesday it had destroyed two illegal oil refineries located in the creeks of the Niger Delta.

Nigeria to deregulate domestic gasoline prices to woo importers: minister - The Nigerian government will deregulate the domestic pump price of imported gasoline in a bid to encourage private marketing companies to import more, minister of state for petroleum Emmanuel Kachikwu said late Wednesday, as the country seeks to end months of crippling fuel shortage. Kachikwu said on state television that the national fuel pricing regulatory body, the Petroleum Products Pricing Regulatory Agency, would announce Thursday a new price band not above Naira 145/liter ($0.74/liter), which fuel marketers would not be permitted to exceed. "In order to increase and stabilize the supply of the product any Nigerian entity is now free to import the product, subject to existing quality specifications and other guidelines issued by regulatory agencies," Kachikwu said. The government previously maintained a regulated price of Naira 86.50/liter for gasoline, but private marketers said this was not enough to cover the cost of imports, which had already been hiked by tight access to foreign exchange as well as high bank charges.

The OPEC Epoch is Over – Where are oil prices headed now? -- The fate of oil companies and nations hangs in the balance of oil prices. Russia could go broke. Some think that’s by US design. Saudi Arabia could experience its Arab Spring if oil prices remain too low too long. And OPEC is dead. That’s the biggest news in this new century for oil. The House of Saud has stated clearly many times now and again this week in an even more emphatic manner that it intends to move the oil market from decades of OPEC price manipulation to a raw supply-and-demand equation. Rigging the price of oil was the raison d’être of the cartel known as the Organization of Petroleum Exporting Countries, and that function has now ended. But people are slow to get their heads around such big news. Saudi Arabians enjoyed a tax-free environment as long as oil paid the bills and cheap subsidized fuel. Huge revenue from oil enabled constant pay-offs to the powerful that stabilized the state. All of that has ended or is at risk of ending as the Saudis seek to rebalance their state budget in the face of huge declines in revenue. . It’s fraught with peril for all. Among oil companies and banks, it’s not just the little leaguers that are hurting. Royal Dutch Shell reported an 83% decline in profits year on year. Most oil companies reported significant drops in profit for the first quarter of 2016, though many saw their stock values soar upon reporting because investors had feared an even worse hit. Their banks have reported the same.  As I speculated in a recent article, the oil market may be entirely rigged by central banks. We know from experience the Federal Reserve will buy anything in any quantity to save its member banks. So, if low oil prices are hurting major banks, why wouldn’t the Fed start buying oil … if nothing else, through proxies? And why would it tell us if it did? We learned months ago that trouble in the tar pits was bad enough that the Dallas Federal Reserve Bank was telling its member banks not to foreclose on bad oil loans because they’d just drown themselves in oil debt if they started writing down their balance sheets to match the fire-sale values they’d be creating by foreclosing.

WTI Crude Tumbles To $43 Handle After Large Cushing Build -- On the heels of downward price momentum from positive headlines out of Alberta with regard the wildfires, Genscape has just reported a forecast 1.4 million barrel build at Cushing - significantly above expectations and recent activity. This has pushed WTI crude further below the pre-Saudi oil minister levels and back to a $43 handle...

Oil Jumps Despite Saudi Plans For "Significant Output Growth"; Kuwait Unveils Plans For Record Production Surge -- A day after oil tumbled to the lowest level in weeks, it has once again started to climb, ignoring the changing dynamic in the oilsands region where the fire has now moved away from critical Canadian oil infrastructure, and is instead focusing on concerns about supply disruptions not just out of Canada but also a series of attacks on Nigeria's oil infrastructure which pushed the country's crude output close to a 22-year, cumulatively knocking out 2.5 million barrels of daily production. However, two stories that oil traders are ignoring in today's action is the latest out of Saudi Arabia where Saudi Aramco, the state oil company, announced it was raising production to capture more customers as it pushes ahead with what could be the world’s biggest stock market listing next year the FT reported earlier. Additionally, Kuwait's head of research at state-owned Kuwait Petroleum said the country aims to produc a record 4 million a barrels a day by 2020, a major increase of nearly 50% compared to its recent 2.8mmbpd output recorded in March. First, back to Saudi Arabia, where in some of the first comments since a major government reshuffle at the weekend, Saudi Aramco chief executive Amin Nasser emphasized the company’s willingness to compete with rivals, putting oil producers from regional adversary Iran to US shale producers on notice. “Whatever the call on Saudi Aramco, we will meet it,” he said during a rare media visit to the headquarters of the state oil company in Dhahran. “There will always be a need for additional production. Production will increase upward in 2016.” As we noted over the weekend when analyzing the recent Saudi oil minister succession, Mohammed bin Salman, deputy crown prince, hinted that the kingdom could easily accelerate output to more than 11m b/d as Iran, Riyadh’s regional rival, tries to attract customers after years of sanctions. Saudi Aramco, which pumps more than one in every eight barrels of crude globally, is at center of a reform program being pushed by Prince Mohammed, who has emerged as the man holding the main levers of power in Saudi Arabia.

Oil Slides After Crude Inventory Surges Most In A Month -- Following Genscape's 1.4mm build estimate at Cushing, and expectations of a 1.1mm build, API reported a 1.46mm build. Chatter across trading desks was that API data had been leaked and that is what drove oil prices higher (after their Genscape-driven dump) which proved 100% incorrect as total crude inventories soared a shocking 3.5mm barrels (against expectations of no change) - the most in 5 weeks. Gaosline built less than expected and Distillates saw a draw but the damage was done and prices of WTI started to give back the days gains. API:

  • Crude +3.45mm (Exp unch)
  • Cushing +1.46mm (+1.1mm exp)
  • Gasoline +271k (+710k exp)
  • Distillates -1.36mm

The biggest weekly  build in 5 weeks...

API Reports Another 3.5 Million Barrel Build in Oil Inventories (Video) -- The EIA Report is tomorrow, but under any interpretation of the API numbers the Bulls will still be waiting for their big Drawdown EIA Report. It looks like we just keep replacing US Production with OPEC Production, namely Saudi Arabia, Iraq and Iran excess production.

OilPrice Intelligence Report: Increasing Outages Continue To Stabilize Oil Prices: Oil traders have largely dismissed the massive wildfires in Canada, which caused the outage of more than 1 million barrels of oil production per day. Instead, the markets saw that the wildfires might not spread as much as was previously thought over the weekend, and the fires remained at a distance from some major sources of production. Again, as we said last week, the supply disruptions, for now, have more to do with the evacuation of personnel, and not lasting damage to facilities. The outage is very substantial, but unless it lasts much longer than expected, the oil markets should not be affected by the events too much. Meanwhile, reports from Genscape suggest that oil storage levels continue to climb, a bearish signal for oil. Crude prices shot up in early trading on May 9 but WTI lost more than 2 percent by Monday’s close and Brent dropped by nearly 4 percent. The big news from the weekend came from Riyadh, where long-time oil minister Ali al-Naimi was removed in favor of the former chief of Saudi Aramco, Khalid al-Falih. The 80-year old Naimi was expected to eventually leave power, but the move came somewhat as a surprise. The reshuffling caused some uncertainty in the oil markets, as the loss of Naimi’s steady hand makes interpreting Saudi oil policy a bit more tricky. On the other hand, the move ensures that Saudi Arabia will continue to pursue its current strategy of elevated production and fighting for market share. Coordinated action within or outside of OPEC is unlikely. Ultimately, little changes in terms of supply and demand for oil.

Oil Spikes After DOE Reports Huge Inventory Draw, Production Drop -- Following Genscape and API's 1.4mm barrel build estimates at Cushing, DOE confirmed a 1.52mm build. However, API's 3.45mm build overnight was shockingly opposed by DOE's 3.41mm inventory draw - the 3rd biggest weekly draw of the year (as we suspect Canadian issues are impacting levels). Gasoline also saw an unexpected draw and Distillates drew down. Following last week's big production drop (Alaska), US crude production fell once again - for the 16th week in a row. This combination of a surprise draw and lower production shocked prices of WTI above $45.50. DOE:

  • Crude -3.41mm (+2.9mm whisper)
  • Cushing +1.52mm (+1.45mm whisper)
  • Gasoline -1.23mm (+162k whisper)
  • Distillates -1.67mm (-1.146mm whisper)

DOE bucked the trend and reported a huge draw, 3rd biggest weekly draw of the year...

Oil closes at $46.23, a 6-month high, after first US crude draw in six weeks: Oil prices jumped more than 3 percent on Wednesday after the U.S. government reported crude inventories fell unexpectedly for the first time since March, adding to concerns over supply disruptions in Canada and Nigeria. The U.S. Energy Information Administration (EIA) said crude inventories fell 3.4 million barrels last week, compared with analysts' expectations for an increase of 714,000 barrels and the American Petroleum Institute's (API) build of 3.5 million barrels in preliminary data issued on Tuesday. The EIA report "has been quickly viewed as bullish, with the crude draw just about exactly opposite to what API had," said Dominick Chirichella, senior partner at the Energy Management Institute in New York. Motor gasoline stocks also fell 1.2 million barrels, and distillate fuel inventories were down 1.6 million barrels. International Brent crude oil futures were up $1.98, or 4.3 percent, at $47.51 per barrel. U.S. West Texas Intermediate (WTI) crude futures settled 3.5 percent higher, or $1.57, at $46.23, a six-month high.

Global oil markets 'heading towards balance': IEA: Global oil markets are heading towards a long-awaited equilibrium, according to updated supply and demand data from the International Energy Agency (IEA). The IEA said in its latest oil market report on Thursday that a rebalancing of supply and demand was starting to become evident from the existing supply and demand data which showed that global oil supply was starting to look more measured. Demand was resilient and a surplus of oil could start to shrink later this year, it added. "Global oil supplies rose 250,000 barrels a day in April to 96.2 million barrels a day (mb/d) as higher OPEC output more than offset deepening non-OPEC declines," the IEA said in its monthly report. However, it noted that year-on-year, "world output grew by just 50,000 barrels a day in April versus gains of more than 3.5 million barrels a day a year ago" and noted that 2016 non-OPEC supply is forecast to drop by 800,000 barrels a day to 56.8 mb/d.  Despite the higher output from the 12-country OPEC group, the IEA noted that falling non-OPEC supply and rising demand could cause oil stock growth to decline in the latter half of the year helping the supply and demand dynamic – and crucially, oil prices – to return to a more stable footing.

US crude falls after rising to top $47 a barrel: U.S. crude gave up gains after rising to a 2016 intraday high on Thursday, having earlier been supported by data from the International Energy Agency (IEA) showing tightening supply, in addition to a surprise drop in U.S. crude inventories. U.S. West Texas Intermediate (WTI) crude futures were 33 cents lower at $45.90 at 11:32 a.m. ET (1532 GMT) on Thursday, after briefly turning negative and having earlier hit $47.02, the highest level since Nov. 4. International Brent crude futures were trading at $47.08 per barrel, down 52 cents from their last settlement.The IEA on Thursday raised its 2016 global oil demand growth forecast to 1.2 million barrels per day (bpd) from its April forecast of 1.16 million. It also noted that output from Nigeria, Libya and Venezuela is down 450,000 bpd from a year ago. Analysts said that while the IEA data was helping to support prices, the gradual return of Canadian oil sands output and the expectation that prices are nearing levels that could trigger the return of some U.S. production might cap gains. "The only thing that could throw a spanner in the works to prevent oil from rallying further would be the (U.S.) production,"

Oil up 1 percent after swing on mixed data; U.S. crude at Nov highs | Reuters: Oil prices rose 1 percent in volatile trade on Thursday, with U.S. crude hitting six-month highs as investors weighed a forecast for tighter global supplies against signs of another storage build at the hub for U.S. crude futures. Worries of a major outage in Nigerian crude also boosted the market, some traders said. "It was a mixed bag, with both longs and shorts trying to defend positions based on the data that appealed most to them. The bulls prevailed," said Phil Flynn, analyst at the Price Futures Group in Chicago. Brent crude futures LCOc1 settled up 48 cents at $48.08 per barrel. U.S. crude's West Texas Intermediate (WTI) futures CLc1 rose 47 cents to settle at $46.70. It hit a six-month high of $47.02. With that, Brent was on track for a weekly rise of 6 percent and WTI 4 percent, continuing a broad uptrend that has added about $20 to a barrel from lows in January and February. WTI could advance to almost $51 in the near-term "on pure technical merits", said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates. "But from a longer-term perspective, we still see this market setting up for a hard fall next month" from a potential dollar rally or weak Chinese economic data, he added.

Oil demand growth strengthens in Q1 — IEA -- The International Energy Agency is more likely to raise forecasts for oil demand than cut them because of a booming global gasoline market and India’s increasing thirst for crude. Demand growth in the first three months of 2016 was 200,000 barrels a day higher than earlier anticipated at 1.4m b/d, the world’s leading energy forecaster said on Thursday, with India responsible for almost a third of the upward revision. “India saw the largest volume growth globally,” said the IEA in its closely watched monthly oil market report. “With demand at 4.4m b/d in the first quarter, India is the world’s fourth biggest oil consumer behind the US, China and Japan.” Although the IEA left its forecast for global demand growth unchanged at 1.2m b/d for the year, it said the risks to future forecasts was to the upside, citing gasoline demand growth which it said was growing “strongly in nearly every key market”. Preliminary US government data earlier this week showed petrol demand in the world’s largest oil consumer had hit 9.65m b/d last week, the highest since last summer and approaching record levels reached before the financial crisis. Rising demand is one of the factors that could help accelerate the rebalancing of the oil market, which has been weighed down by oversupply for almost two years. After increasing by 1.3m b/d in the first half of 2016, the IEA sees global oil stocks rising by just 200,000 in the remainder of the year as supply and demand come into line. On the demand side, the IEA said it had revised its forecast for the decline in non-Opec production this year to 800,000 b/d from 700,000 b/d previously because of devastating wildfires in Canada and unscheduled shutdowns in Ghana and India. There have also been disruptions to supply in Opec countries such as Libya, Nigeria — Shell this week declared force majeure on Bonny Light output — and Venezuela, where it has been difficult to maintain operations in the face of power cuts.

Global oil demand surprises on the upside: Kemp | Reuters: Global oil consumption is growing much faster than most analysts expected at the start of the year but increases in demand remain very uneven geographically and by fuel. World oil demand increased by 1.4 million barrels per day (bpd) in the first three months of 2016 compared with the same period in 2015, the International Energy Agency said on Thursday ("Oil Market Report", IEA, May 2016). First-quarter consumption grew faster than the agency predicted at the end of last year, when it forecast growth of 1.2 million bpd between January and March ("Oil Market Report", IEA, December 2015). For the time being, the IEA has left its forecast for average consumption growth this year at 1.2 million bpd, noting "headwinds" as a result of sluggish global growth, which implies a slowdown later in 2016. But coupled with large crude supply interruptions from Canada, Nigeria, Libya, Iraq and Venezuela, and a slowdown in U.S. shale, the agency predicts the "the direction of travel of the oil market (is) towards balance". The agency expects the global supply-demand surplus to narrow sharply from 1.3 million bpd in the first six months to just 200,000 bpd in the second half of 2016.The strongest demand growth is coming from India and the United States, where cheaper prices are encouraging motorists to consume record quantities of gasoline. India's consumption of petroleum products topped 4 million bpd for the first time in the 12 months ending in April, according to data from the Ministry of Petroleum and Natural Gas.

OPEC Sees Rival Oil Production Declining as Markets Rebalance - WSJ: Shrinking U.S. output and massive cuts to investment in new projects will reduce the global oil glut over the course of this year, the Organization of the Petroleum Exporting Countries said Friday, potentially pushing world-wide oil production lower than demand in 2017. OPEC forecast that production by countries outside the cartel will help rebalance a global crude market that is seen prices fall by more than half since 2014, even though OPEC has declined to rein in its own production. OPEC said in its monthly report that non-OPEC production will fall by 740,000 barrels a day from 2015 to 56.4 million barrels a day this year—10,000 barrels a day less than OPEC previously predicted. Most of the decline will stem from cuts that U.S. oil producers are making to cut production that is become unprofitable with the oil-price rout. “Outside the U.S., there have been consistent signs of declines in non-OPEC production, which should likely flip the global oil market into a net deficit in 2017,” OPEC said.OPEC forecast U.S. production this year will fall by 431,000 barrels a day from 2015 to 13.56 million barrels a day. The rest of the predicted non-OPEC decline will come from lower investments and production delays in China, Mexico, the U.K., Kazakhstan and Colombia. Overall, oil companies world-wide will cut their exploration and appraisal investments during 2016, 2017 and 2018 to $40 billion annually, half the average annual spending of 2012 through 2014, the group said.The reduction in non-OPEC production is cushioning the effect of OPEC’s rising output. A meeting between countries in April to discuss a production freeze collapsed after Saudi Arabia said it would only limit its production if Iran did too, according to officials from Saudi Arabia and other countries involved in the talks. Iran, which was released in January from international sanctions curbing its oil sales, hasn’t agreed to production limits. Its oil output in April was 3.45 million barrels a day—up 198,000 barrels from a month earlier, OPEC said. That accounted for the cartel’s entire output boost from March. Overall OPEC production last month was up 188,000 barrels a day, to 32.44 million barrels, from a month earlier.

OilPrice Intelligence Report: Oil On Track To Balance Later This Year: Oil prices held steady this week despite a rash of news that emerged. Canada lost more than 1 million barrels per day of oil production, but several oil sands companies are working with the Alberta government to bring at least some production back online as quick as possible. Oil prices took a breather though earlier in the week when it became apparent that the fires were held at a distance from most oil sands facilities. But, by Wednesday, prices ticked up again when the EIA reported a draw in crude oil stocks, combined with more losses in production.Oil stocks fell by 4 million barrels last week, the first drawdown in more than a month. Weekly production figures dropped again, down another 23,000 barrels per day. U.S. oil production now stands at 8.8 million barrels per day (million b/d), down about 900,000 barrels per day from the April 2015 peak. The weekly declines have been extremely consistent, with drop offs only varying in degree. By all accounts, the losses will continue through the rest of the year.  Cnooc’s Nexen Energy warned its shareholders and customers that it may not be able to fulfill contracts because of the outage at its facility. Nexen declared force majeure for its May production, joining at least three other companies. The supply disruptions are significant, amounting to well over 1 million b/d. But to reiterate, this disruption probably won’t last too long.  Although the volume of oil disrupted in Nigeria is smaller than in Canada, the problems facing oil producers in Nigeria are much more serious. The Forcados export terminal remains offline, blocking 250,000 barrels per day of exports. Several pipelines have been attacked by the militant group Niger Delta Avengers. The group attacked a platform operated by Chevron (NYSE: CVX), forcing supply offline. Royal Dutch Shell withdrew staff from some of its projects. Altogether, Nigeria has roughly 500,000 barrels per day offline, taking production down to more than twenty-year lows. Shell also declared force majeure on Tuesday for Bonny Light because of an explosion at a pipeline, shutting down the conduit. The outage could affect 200,000 barrels per day. Separately, ExxonMobil (NYSE: XOM) said that mechanical difficulties at one of its drilling rigs damaged a pipeline that it operates in conjunction with the state-owned Nigerian National Petroleum Corp. (NNPC). The malfunction caused an oil spill and some supplies were interrupted. The problem adds to the long list of woes facing Nigeria, which is reeling from low oil prices and a floundering economy.

Is Glencore Manipulating The Price Of Oil: Swiss Trader Holds Over 30% Of June Brent Supply While oil bulls were delighted by yesterday's DOE news of an inventory drawdown refuting the prior day's API news of a major build, what was ignored was the build in Cushing storage (more on that shortly), which according to Genscape hit a utilization just shy of 80%, or more than 70 million barrels, a record high since Genscape began monitoring the hub in 2009. To be sure, the risk of running out of land storage has been one we have previously discussed on various occasions and hinted that one way this is being circumvented is with substantial amounts of oil being stored on tankers at sea, mostly by commodity trading companies, who take advantage of the market's contango to generate month to month profits as producers choose to keep their product away from the market until prices rise.  As it turns out, not only is this the case, but according to Reuters, one particular energy trader - a name well-known to Zero Hedge readers - Glencore, has built up a massive inventory stake in the Brent market where it now holds an unprecedented 30% position in Brent, which it is holding for offshore storage in its tankers in hopes of pushing the price of Brent, and thus the entire energy complex higher, by limiting supply.  As Reuters details, citing trade sources, Glencore has built up one of the largest positions in part of the Brent crude market which acts as a benchmark for global oil prices since the start of the year. For those unfamiliar, the Brent market is based on four North Sea crude oils - Brent, Forties, Oseberg and Ekofisk, or BFOE. According to Reuters Glencore is quietly cornering the Brent market, by holding more than a third of the 37 BFOE cargoes loading in June and is expected to acquire more. The report details that Glencore has been acquiring June BFOE cargoes through the "chains" - a forward market in which cargoes soon to be assigned loading dates are traded, according to trade sources citing data from pricing agency Platts."It's definitely a bold statement of market view by Glencore," said a trading source with another company operating in the North Sea. "You'd have to be in their heads and in their books to know exactly what's going on."

Genscape: "Inventories At Cushing Are Close To Maximum Operating Capacity" - Cushing, OK, crude inventories reached a record high May 3, 2016 of more than 70mn bbls after refinery outages in the U.S. Midcontinent displaced barrels to both storage tanks and the U.S. Gulf Coast. Without significant new storage capacity, Midcontinent stocks could reach maximum operating capacity this year, according to Genscape. Cushing inventories increased 1.3mn bbls week-on-week following the spring maintenance season, which also caused Patoka, IL, stocks to climb 1.4mn bbls to a record high above 11mn bbls week ending April 29, 2016. Meanwhile, along the Gulf Coast, waterborne loadings to international and domestic destinations recently hit a 2016 high while stocks increased in the Midcontinent. Inventories at Cushing are close to maximum operating capacity, and on May 3, 2016 reached utilization just shy of 80 percent, a record high since Genscape began monitoring the hub in 2009. Genscape has never observed capacity utilization higher than 80 percent based on historical data, though utilization may breach 80 percent depending on the utilization of merchant capacity, or capacity that is leased by an owner to other users. Utilization of operational capacity has remained above 70 percent at Cushing since November 2015. Storage capacity at six of 16 operators at Cushing was utilized above 80 percent as of May 3, 2016. There is little help on the horizon from new storage capacity to prevent Cushing from hitting maximum operating capacity. There are two tanks under construction at Cushing, totaling 540,000 bbls. No tank construction projects are underway at Patoka.

US rig count drops 9 this week to 406, another all-time low | The Seattle Times: (AP) — The number of rigs exploring for oil and natural gas in the U.S. dropped by nine this week to 406, another all-time low amid depressed energy prices. A year ago, 888 rigs were active. Houston oilfield services company Baker Hughes Inc. said Friday 328 rigs sought oil and 86 explored for natural gas. One was listed as miscellaneous. Among major oil- and gas-producing states, Texas declined by seven rigs, Louisiana was down three and North Dakota, Oklahoma and Wyoming each fell by one.New Mexico gained two rigs and California one. Alaska, Arkansas, Colorado, Kansas, Ohio, Pennsylvania, Utah and West Virginia were all 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 slide.

US Rig Count Continues To Crash - The total US rig count declined yet again this week, down 9 to 406 - a new record low. The last four times rig counts collapsed anything like this, the US economy was in recession. Oil rigs dropped 10 to a new cycle low at 308, but appear near a turning point if lagged oil prices remain any indication...

U.S. Oil Rig Count Falls by Ten in Latest Week - WSJ: The U.S. oil-rig count fell by 10 to 318 in the latest reporting week, according to oil-field services company Baker Hughes Inc., deepening an extended trend of declines. The number of U.S. oil-drilling rigs, viewed as a proxy for activity in the sector, has fallen sharply since oil prices began to tumble in 2014. The number of oil rigs in the U.S. peaked at 1,609 in October 2014. According to Baker Hughes, the number of U.S. gas rigs rose by one in the latest week to 87. The U.S. offshore-rig count was 22 in the latest week, down two from the previous week and down 12 from a year earlier. Crude oil prices fell on Friday as investors took profits following Thursday’s steep gains and the dollar added to its recent rally. Oil hit fresh six-month highs on Thursday in part from a bullish report on supply and demand from the Paris-based International Energy Agency. It focused on recent supply outages and strong demand world-wide, which helped revive oil’s rally in the past week. But many of those supply disruptions are temporary, and the market has effectively accounted for them, making this a logical time for some to cash out. U.S. crude was recently down 1.2% to $46.14 a barrel.

$100 Trillion Shift From 'Just-In-Time' To 'Just-In-Case' - This article provides indicators of a $100 trillion market shift from "Just-in-Time" to "Just-in-Case" in transport/energy investments. Based on the "Extra Energy Tooth" following US peak oil in 1970, this will push all energy prices higher for 10 years:

  • Saudi Arabia announced a $2 trillion to their "post-oil era" fund.
  • China recently announced a $50 trillion plan to deploy solar and wind energy networks.
  • The American Society of Civil Engineers Report Card on Infrastructure grades the US with a D+. They estimate investments of $3.6 trillion are required.
  • "Reed Hundt, former chairman of the Federal Communications Commission, compared the switch from fossil fuels to clean energy with the 1990s transition from analog technology to digital technology - ' a feat that took more than a trillion dollars of U.S. investment during a period of eight years. If we invested that much money in clean energy, he argued, we could similarly transform our energy system in the next eight years.'"
  • The Physical Internet® will be built to change urban mobility. My guess is this market is about $5 trillion in the US and $25 trillion in the world. See payback in the Physical Internet section.
  • In October 2015, 193 nations signed the Sustainable Development Goals.

The current "Just-in-Time" market psychology is focused on improving inventory turns to minimize costs to the oil companies and prices to customers. It pays little attention to the risks of outages.  The "Just-in-Case" market psychology is focused on minimizing risks of supply disruptions.

Oil "Rebalancing" In Jeopardy After Iran Output Soars To Pre-Sanction Levels, Russia "Pours Cold Water" On OPEC Forecast -- Earlier today, the OPEC released its latest monthly forecast which echoed what the IEA said yesterday, as the organization which Roseneft CEO Sechin said has "practically stopped existing", said shrinking U.S. output and massive cuts to investment in new projects will reduce the global oil glut over the course of this year, potentially pushing world-wide oil production lower than demand in 2017. In the report, OPEC was eager to call the early demise of its non-OPEC competitors, and predicted that production outside of the (defunct) cartel countries will fall by 740,000 barrels a day from 2015 to 56.4 million barrels a day this year—10,000 barrels a day less than OPEC previously predicted. Most of the decline will stem from cuts that U.S. oil producers are making to cut production that is become unprofitable with the oil-price rout. OPEC forecast U.S. production this year will fall by 431,000 barrels a day from 2015 to 13.56 million barrels a day. The rest of the predicted non-OPEC decline will come from lower investments and production delays in China, Mexico, the U.K., Kazakhstan and Colombia. Overall, oil companies world-wide will cut their exploration and appraisal investments during 2016, 2017 and 2018 to $40 billion annually, half the average annual spending of 2012 through 2014, the group said. It said that “outside the U.S., there have been consistent signs of declines in non-OPEC production, which should likely flip the global oil market into a net deficit in 2017." In other words, OPEC thinks that OPEC's strategy to cut non-OPEC production is working.  As such, OPEC believes that production by countries outside the cartel will help rebalance a global crude market that is seen prices fall by more than half since 2014, even though OPEC has declined to rein in its own production. Ironically, as non-OPEC production may (or may not) shrink by 740,000 barrels, Iran alone has already added that amount of production and then some.

Saudi Arabia Ousts Longtime Oil Minister - — Saudi Arabia on Saturday announced the ouster of its longtime oil minister as part of a larger ongoing government shakeup.A royal decree announced that Ali al-Naimi has been replaced by former Health Minister and Saudi Aramco board chairman Khaled al-Falih.Al-Naimi has long been a pillar of Saudi oil policy, leading the Ministry of Petroleum and Mineral Resources since 1995. Prior to that role he'd served as the president of oil giant Aramco.Under a new Saudi leadership led by King Salman, the king's son Deputy Crown Prince Mohammed bin Salman has largely been overseeing Saudi economic policy along with a handful of new ministers. The changes announced Saturday come as the government plans wide-ranging reforms aimed at overhauling the Saudi economy amid lower oil prices that have eroded state revenues.Saudi Arabia's dominant market share and historical ability to influence prices by loosening or tightening its taps gave al-Naimi exceptional influence at meetings of the oil cartel OPEC, where the kingdom is by far the largest producer and de facto policy-maker. His brief utterances on the sidelines of OPEC meetings often had the power to swing global oil prices.AdvertisementContinue reading the main story He has presided over a controversial strategy of keeping production levels high despite the drop in prices over the past two years in an effort to drive more expensive producers in the U.S. and elsewhere out of the market. That has led to a glut of supply.At a talk in February in Houston, he stood by that strategy, arguing that cuts by lower-cost producers like Saudi Arabia would simply subsidize higher-cost ones."The producers of these high-cost barrels must find a way to lower their costs, borrow cash or liquidate," he said in Houston. "It sounds harsh, and unfortunately it is, but it is the more efficient way to rebalance markets."

Oil Shocker: Saudi Arabia Fires Powerful Oil Minister al-Naimi In Dramatic Power Reshuffle - For years, Ali al Naimi was the most important person in the world of oil: the former CEO of Saudi Aramco ascended to the post of Saudi oil minister in 1995, and over the past 21 years had the power to send the price of oil soaring or plunging with one word. To be sure, over the past two years it was mostly plunging because as is well-known, Saudi Arabia's policy ever since the 2014 Thanksgiving OPEC meeting in which Saudi Arabia broke off from the rest of the petroleum cartel to pursue its intention of putting US shale and high cost OPEC production out of business. Then things unexpected, and dramatically, changed in April when Bloomberg published a detailed interview on the present and future of Saudi oil policy, which however took place not with al Naimi but with a young man few had heard of: Deputy Crown Prince Mohammed bin Salman, barely 30 years old, who just happens to be the favored son of Saudi Arabia's new King Salman who took control one year ago. For oil watchers Doha was not so much about OPEC oil production, but about a huge power move that had just taken place in Saudi Arabia, as a result of which al Naimi had become irrelevant overnight.  The FT confirmed as much:  "the episode has left Ali al Naimi, the kingdom’s technocratic oil minister for the past 21 years, looking increasingly sidelined. While the Saudi royal family has always had the final say on oil policy, rarely has a member spoken so publicly — or freely — on its direction. Delegates from other countries had been assured Mr Naimi was there to deliver a deal. “Saudi Arabia’s oil policy is now firmly in the hands of Deputy Crown Prince Mohammed bin Salman,” said Sean Evers, managing partner of Gulf Intelligence in Doha." This is all came to a stunning culmination moments ago, when Al Arabiya reported the shocking, if inevitable news, that Saudi Arabia has fired long-serving oil minister Ali al-Naimi, on Saturday. According to the WSJ, Naimi would be replaced with Khalid al-Falih, chairman of state oil company Aramco.

Saudi Arabia government overhaul sees oil minister removed - BBC News: Saudi Arabia's King Salman has removed the country's veteran oil minister as part of a broad government overhaul. Ali al-Naimi has been replaced after more than 20 years in the role by former health minister Khaled al-Falih. Saudi Arabia, the world's largest crude exporter, unveiled major economic reforms in April, aimed at ending the country's dependence on oil. About 70% of its revenues came from oil last year, but it has been hit hard by falling prices. The government shake-up, announced in a royal decree, sees a number of ministries merged and others, such as the ministry of electricity and water, scrapped altogether. A public body for entertainment is being created, and another for culture. King Salman's son Prince Mohammad directs the country's economic policy, and Mr al-Naimi's removal is an indication that he wants tighter control over the commodity,  For 20 years, Ali al-Naimi was regarded as the most powerful figure in the global oil industry. He ran the biggest exporter of crude, Saudi Aramco, and was seen as being able to drive the price of oil on the markets through the producers' group Opec. Over the past few years, he has been involved in a battle to protect Saudi Arabia's share of global oil sales in the face of competition from newer producers in the US. His refusal to cut oil production led to a glut of supply - more than the market needed. This resulted in a sharp fall in the price of oil, and so cheaper petrol at the pumps. It has also meant the Saudi kingdom has earned less money. Ali al-Naimi has characterised this as a fight to secure oil sales in the long term, one he hopes Saudi Arabia will win and US fracking companies will lose. But it is a gamble. The fall in the price of oil has been much more extreme - and longer-lasting - than many analysts expected.

Saudi Arabia Gives First Glimpse Of Oil Strategy Under New Minister -- Following the biggest news of this weekend, the (anticipated) resignation/termination of Saudi Arabia's longstanding oil minister Ali al-Naimi, everyone has been wondering about what comes next and how this development will impact the price of oil. We laid out our preliminary thoughts as follows: Ultimately this is not about the new oil minister: this is about Prince Mohammed taking full control over Saudi oil. So the question everyone now wants answered is "what does this mean for oil?"  While nobody knows the answer, what is clear is that over the past 2 months, Prince Mohammed has had a far more hawkish outlook on oil prices. [I]t was Mohammed who effectively scuttled the Doha oil deal which was "this close" to reaching a conclusion before a last minute collapse as the crown prince intervened, overriding al Naimi's proposal. Furthermore, as the FT reported at the time, "there were other signs that Saudi Arabia’s oil ministry was preparing for a deal. Between January and March the country held its oil output at around 10.2m barrels per day — a level consistent with the proposed freeze." Then a few weeks ago, Prince Mohammed once again poured cold water over any expectations that Saudi Arabia would permit higher oil prices when he said last week said "the country’s production could immediately rise to 11.5m b/d — if there was demand." In other words, on the margin al Naimi's termination and Prince Mohammed's official ascent to the top of the Saudi oil chain of command are likely bearish in the short term, as Saudi Arabia reverts to its 2014 strategy of pushing oil prices low enough to put marginal producers out of business, a process that due to relentless hedging and generous banks, has taken way too long. Still, speculation is just that, and the market will be driven by any official statement out of Saudi Arabia and its new oil minister, Khalid al-Falih. One day after the surprising power shift, made his first official statement saying that Saudi Arabia was "committed to meeting demand for hydrocarbons from its customers and would maintain its petroleum policies." From Reuters: "Saudi Arabia will maintain its stable petroleum policies. We remain committed to maintaining our role in international energy markets and strengthening our position as the world's most reliable supplier of energy," Khalid al-Falih said in an e-mailed statement. "We are committed to meeting existing and additional hydrocarbons demand from our expanding global customer base, backed by our current maximum sustainable capacity."

What OPEC Has To Fear From The New Saudi Oil Minister  -- In a surprise move, Saudi Arabia sacked its long-time oil minister over the weekend, an event that illustrates the near-total control that the new young Saudi prince has obtained over the country’s energy industry. For many years, Ali al-Naimi, the outgoing Saudi oil minister, was the voice of Saudi Arabia’s oil industry and policy. Even seemingly insignificant remarks from al-Naimi could move oil prices up or down. But the 80-year old oil minister has seen his power eclipsed by the 30-year old Deputy Crown Prince Mohammed bin Salman. In April, when al-Naimi was forced to backtrack on the Doha oil freeze deal, reportedly at the behest of the Deputy Crown Prince, it was clear that his time at the helm was coming to an end. Over the weekend, al-Naimi was pushed out in favor of Khalid al-Falih, the head of the state-owned oil company Saudi Aramco. The swap was expected and had been previously announced, but the timing came as a surprise. The move leaves the Deputy Crown Prince with undisputed control over Saudi Arabia’s energy strategy, as well as its broader economy. As for oil policy, however, the ouster of al-Naimi probably does not change much. If anything, it confirms that Saudi Arabia will continue to fight for market share, keeping production elevated in order to bankrupt high-cost producers such as U.S. shale.  And why should Saudi Arabia or OPEC change course? Saudi Arabia decided not to reduce production in the face of oversupply in late 2014 – a strategy, it should be noted, that had the backing of al-Naimi – and while it has taken much longer than expected, forcing prices to crash due to high levels of output is finally beginning to bear fruit. Some sixty-odd U.S. shale companies have declared bankruptcy and U.S. oil production is down almost 800,000 barrels per day from a year ago. More declines are forthcoming. Other non-OPEC oil producers are also reporting declines in output. Production cuts from OPEC would only throw a lifeline to these struggling high-cost producers, a move that would make little sense from the Saudi point of view.

OPEC Is Dead, What’s Next? -- OPEC is dead, Rosneft’s head Igor Sechin has told Reuters. In a fine example of stating the obvious – at least to those who have been keeping an eye on the energy industry – and putting it in context, the chief of Russia’s largest oil company welcomed an era where the oil market will be driven by “finance, technology and regulation.  Russia and OPEC are natural rivals, although there has been a sense of partnership, especially after the advent of shale in the U.S., when both started pumping more and more crude to preserve their market share.  It was Russia that tried earlier this year to negotiate a production freeze with OPEC, and while some smaller OPEC members were ready to sign on the spot, the organization’s leader, Saudi Arabia, blew the proposal off, demanding that Iran also take part in the freeze.  This was an embarrassing moment for Russia, and in his email to Reuters, Sechin made a point of noting that Rosneft was always against this move, with perfectly reasonable skepticism.  Riyadh has boasted repeatedly that it can wait out the price slump. Of course, the success of this strategy would depend on the length of the slump, but Saudi Arabia has deeper pockets than Russia. Saudi Arabia also has a new economic development program that involves a move away from oil.  The Saudis have all but said outright that their national priorities in energy would always trump OPEC priorities. The country has repeatedly used its influence as the largest producer in the organization to dictate the energy policies of smaller producers, which has been harmful for the latter. And these policies, which can be summed up as “pump as much as you can, don’t let the shale boomers get a breather” have not led to a clear victory. 

Saudi Aramco finalizes IPO options and plans global expansion - (Reuters) - Saudi Arabia's state-owned oil giant Aramco is finalizing proposals for its partial privatization and will present them to its Supreme Council soon, its chief executive said about the centerpiece of the kingdom's efforts to overhaul its economy. The company has a huge team working on the options for the initial public offering (IPO) of less than 5 percent of its value, which include a single domestic listing and a dual listing with a foreign market, CEO Amin Nasser said on Tuesday. They will be presented "soon" to Aramco's Supreme Council, headed by Deputy Crown Prince Mohammed bin Salman, who is leading an economic reform drive to address falling oil revenue and sharp fiscal deficits by boosting the private sector, ending government waste and diversifying the economy. Nasser stressed that even after the listing, the Saudi government would retain sole control over Aramco's oil and gas output levels. "Production is sovereign," he said. Riyadh has traditionally kept an expensive "spare cushion" of excess production capacity, allowing it to raise or reduce levels to influence prices according to the government's market strategy. Private oil companies, by contrast, do not hold back output for strategic gain. Nasser also said Aramco was seeking to expand globally via joint ventures in Asia and North America.

Saudi Aramco signals rise in oil output - Saudi Arabia’s state-owned oil company is likely to increase its production to meet rising demand this year, its chief executive said, as the company begins an expansion that includes a partial IPO and new refining capabilities.   “We’re seeing a global increase in demand,” Amin Nasser, the chief executive of Saudi Arabian Oil Co., known as Saudi Aramco, said at a news briefing Tuesday at the company’s headquarters. “We are meeting that call on us.”  Saudi Arabia, the world’s largest exporter of crude oil, is already pumping at near-record levels of about 10.2 million barrels a day. That output was part of an overall Saudi strategy for dealing with oil prices that collapsed more than 70% from June 2014 to January 2016: Pump flat out and compete with other countries for crude buyers.  Mr. Nasser’s comments suggest the kingdom’s oil company isn’t changing course. Saudi Arabia’s output tends to increase in the summer to deal with rising air-conditioner use when temperatures in the kingdom reach scorching levels, but Mr. Nasser said Aramco would pump more to meet demand elsewhere, particularly in the U.S. and India.   Mr. Nasser declined to give an average figure for crude production this year but said the new output would come mostly from expansions of current fields.  Jim Krane, a fellow at Rice University’s Baker Institute where he studies Saudi energy policy, said the kingdom has no choice but to increase production if it wants to protect its share of crude markets and increase its refining capacity. He said the Saudis were also considering the possibility of oil demand falling in the future.

Saudi raising oil output ahead of Aramco IPO - Saudi Arabia is raising production and pressing ahead with a global expansion plan for its state oil company ahead of what could be the world’s largest ever stock market listing. In some of the first comments since a government reshuffle at the weekend, Saudi Aramco chief executive Amin Nasser emphasised the company’s willingness to compete with rivals, putting on notice oil producers from regional adversary Iran to US shale producers. “Whatever the call on Saudi Aramco, we will meet it,” he said during a rare media visit to the headquarters of the state oil company in Dhahran. “There will always be a need for additional production. Production will increase upward in 2016.” The oil industry is watching for any shifts in Saudi policy or crude output levels after the kingdom on Sunday replaced veteran oil minister Ali al-Naimi after more than two decades in office. Mohammed bin Salman, deputy crown prince, has hinted that the kingdom could easily accelerate output to more than 11m b/d as Iran, Riyadh’s regional rival, tries to attract customers after years of sanctions. Saudi Aramco, which pumps more than one in every eight barrels of crude globally, is at the centre of a reform programme being pushed by Prince Mohammed, who has emerged as the man holding the main levers of power in Saudi Arabia. He believes the company could be valued at more than $2tn. The plan — Vision 2030 — aims to end the country’s dependency on oil within 15 years, leveraging the assets of the state oil company to fund wide-ranging investments to diversify its economy.

The 30-Year-Old Saudi Revolutionary - WSJ - It is testing time for the House of Saud. Until last year, the monarchy had been treading water for half a century under the leadership of the increasingly aged and infirm sons of its founder, Abdul Aziz ibn Saud. Then a 29-year-old grandson, Mohammed bin Salman,was named deputy crown prince by his father, King Salman, and put in charge of the economy, national defense and the Saudi oil giant, Aramco. In late January, on the anniversary of his ascension to power, he began opening the curtains on his sweeping vision to transform his country—and his countrymen. That vision includes reducing the country’s dependence on oil; privatizing the economy, including a slice of Aramco; turning Saudi citizens from dependents of the government into self-reliant individuals; expanding work opportunities for women; creating more jobs for young people; imposing taxes for the first time; encouraging a more-moderate form of Islam; and even sanctioning various forms of public entertainment—this, in a country that bans cinema. The prince’s vision is little short of revolutionary. There is no shortage of skeptics within and beyond the royal family, with its more than 7,000 princes, many of whom are devoutly conservative and fear any change that upsets the established order and princely privileges. And not only princes are discomforted. For generations, Saudi citizens have been brought up in the belief that the kingdom’s unique social compact guaranteed them security and prosperity in exchange for loyalty, or at least acquiescence, to the Al Saud royal family. What are Saudis to make of a vision in which they are to take responsibility for themselves and for producing their own prosperity? And, if that part of the compact has been changed, what degree of loyalty will they still extend to the Al Saud? These fundamental questions invite another: What is the future of Saudi Arabia and of the Al Saud?

Panama Papers Data Leak : King of Saudi Arabia sponsored Netanyahu’s campaign - According to the Middle East Observer, Isaac Herzog, member of the Knesset and Chairman of the Israeli Labor party, revealed that Saudi King Salman bin Abdulaziz financed the election campaign of Israeli Prime Minister, Benjamin Netanyahu. “In March 2015, King Salman has deposited eighty million dollars to support Netanyahu’s campaign via a Syrian-Spanish person named Mohamed Eyad Kayali. The money was deposited to a company’s account in British Virgin Islands owned by Teddy Sagi, an Israeli billionaire and businessman, who has allocated the money to fund the campaign Israeli Prime Minister Benjamin Netanyahu”, Herzog cited a leaked Panama Paper.

Saudi King Salman Financed Netanyahu’s Campaign. Panama Papers Leak --- This revelation has broad geopolitical implications. Since the late 1970s, Saudi Arabia has financed Al Qaeda and the recruitment of the Mujahideen. Saudi Arabia is  a state sponsor of “Islamic terrorism”. Saudi Arabia is also a staunch ally of the United States which, according to the Chairman of the Israeli Labour Party  finances the Zionist political agenda of Likud in Israel. Isaac Herzog, member of the Knesset and Chairman of the Israeli Labor party, revealed that Saudi king Salman bin Abdulaziz financed the election campaign of Israeli Prime Minister, Benjamin Netanyahu.“In March 2015, King Salman has deposited eighty million dollars to support Netanyahu’s campaign via a Syrian-Spanish person named Mohamed Eyad Kayali. The money was deposited to a company’s account in British Virgin Islands owned by Teddy Sagi, an Israeli billionaire and businessman, who has allocated the money to fund the campaign Israeli Prime Minister Benjamin Netanyahu”,Herzog cited a leaked Panama Paper. Related Panama Papers can be found in the following links:

Additional Evidence Emerges That US Officials Intentionally Whitewashed Saudi Role In 9/11 -- The reason I believe the “28 pages” are so important is because it unquestionably demonstrates that senior members of the U.S. government care more about the public perception of Saudi Arabia, and protecting its terrorist spawn, than cares about the public interest. Indeed, focus on these pages is already beginning to achieve just that. As the Guardian reported earlier today: A former Republican member of the 9/11 commission, breaking dramatically with the commission’s leaders, said Wednesday he believes there was clear evidence that Saudi government employees were part of a support network for the 9/11 hijackers and that the Obama administration should move quickly to declassify a long-secret congressional report on Saudi ties to the 2001 terrorist attack.The comments by John F Lehman, an investment banker in New York who was Navy secretary in the Reagan administration, signal the first serious public split among the 10 commissioners since they issued a 2004 final report that was largely read as an exoneration of Saudi Arabia, which was home to 15 of the 19 hijackers on 9/11. “There was an awful lot of participation by Saudi individuals in supporting the hijackers, and some of those people worked in the Saudi government,”Lehman said in an interview, suggesting that the commission may have made a mistake by not stating that explicitly in its final report. “Our report should never have been read as an exoneration of Saudi Arabia.” He was critical of a statement released late last month by the former chairman and vice-chairman of the commission, who urged the Obama administration to be cautious about releasing the full congressional report on the Saudis and 9/11 – “the 28 pages”, as they are widely known in Washington – because they contained “raw, unvetted” material that might smear innocent people.

Kuwait courts South Korea in the face of drop in crude market share - Kuwait is making a concerted effort to retain its importance as a reliable crude oil supplier to South Korea, where it has seen its market share dip as Korean refiners, spoilt for choice, have picked up more barrels from Iraq and Iran. A high-profile delegation led by Kuwaiti Prime Minister Sheikh Jaber Al-Mubarak Al-Hamad Al-Sabah and Deputy Prime Minister and Acting Oil Minister Anas Khalid Al Saleh is in Seoul this week where they met with several South Korean leaders, including President Park Geun-Hye and her energy minister, and chief of the country's biggest refiner, among others. Kuwait has seen its market share in South Korea's total crude imports drop to 14% in Q1 2016 from 14.7% in Q1 2015 as Iraq has raised its share to 14.3% from 12.9% and Iran to 8.6% from 4.2% over the same period, data from state-run Korea National Oil Corp. showed. Kuwait supplied 37.41 million barrels in Q1 2016, up 3.3% year on year.This compares with Iraq's 38.05 million barrels, up almost 20% year on year, and Iran's 22.85 million barrels, up nearly 123%. "Middle East oil producers are striving to tighten relations with customers in the Asia-Pacific region, the biggest market for their crude," an official at the Korea Petroleum Association said Tuesday. "They are struggling to maintain their share in the South Korean market in the face of increasing shipments from Iran and Iraq," he said.

De-Dollarization Accelerates As Russia Nears Launch Of Ruble-Priced Oil Trading Platform - It appears Russia is close to taking the next big step towards de-dollarization and killing the petro-dollar as Vladimir Putin's "dream" of ruble-based pricing of its domestically-produced oil is on the verge of realization. SPIMEX (The St. Petersburg International Mercantile Exchange) is actively courting international oil traders to join its emerging futures market, which as Bloomberg reports, is designed "to create a system where Russian oil is priced and traded in a fair and straightforward way." Step-by-step Russia, China and other emerging economies are taking measures to reduce their dependence on the US dollar, and as SputnikNews detailed, F. William Engdahl warns - referring to Russia's crude oil benchmark initiative - this move could deal a dramatic blow to the "petrodollar's" dominance. Russia has taken a significant step which will undermine the current Wall Street oil price monopoly: Russia's own crude oil benchmark futures contract will price oil in rubles and no longer in US dollars, American-German researcher, historian and strategic risk consultant F. William Engdahl remarks. "The move is part of a longer-term strategy of decoupling Russia's economy and especially its very significant export of oil, from the US dollar, today the Achilles Heel of the Russian economy… It is part of a de-dollarization move that Russia, China and a growing number of other countries have quietly begun," the American researcher writes in his recent article for New Eastern Outlook. He explains that the setting of an oil benchmark price is a cornerstone of the method used by omnipotent Wall Street bankers to control world oil prices. "Oil is the world's largest commodity in dollar terms," the historian stresses.

Iran Hits Saudis Where It Hurts, Offers Biggest Discount On Asian Crude Since 2007 -- Iran has extnded its discount on the June contract for its heavy crude going to Asia, just a few days after Saudi Arabia announced a price increase for its own June contract for the continent. With this new discount, Iranian oil will be noticeably cheaper for Asian clients than both Saudi and Iraqi crude.  The motivation behind Iran’s move is easy to see. The country is starving for oil revenues. It has a lot of work to do on its oil production and transport infrastructure to boost production, and it has just begun to recover from years of harsh sanctions.  Asia is a priority destination for its crude, so Iran has been lowering prices in parallel with pumping more oil. In March, for example, its exports to Asia marked a 50 percent increase on the year. Even factoring in the sanctions that were in effect last March, a 50 percent increase is a substantial achievement. Saudi Arabia’s price increase is harder to interpret. Riyadh is currently sending a lot of mixed signals. Its deputy crown prince recently announced a comprehensive economic reform plan that aims to reduce the kingdom’s dependence on oil over the next 14 years. At the same time, Saudi Aramco—the state-run oil behemoth—has said it will continue to increase production despite the market depression. Now the Saudis are raising prices for Asia because they say they expect a pickup in demand.  Saudi Arabia and Iran are playing a game of barrels. Asia is the ultimate prize, not just because of China, but because global economic forecasts peg emerging economies as the main driver of overall growth in the medium term. Oil demand in the developed world is likely to fall over the medium- and long-term as vehicles become more efficient. Iran’s strategy makes sense—lowering prices will allow it to capture more market share. Plus, Iran needs any revenues it can get its hands on.

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