Sunday, July 31, 2016

oil majors see earnings crash, gasoline supplies at another seasonal record, crude supplies rise first time this summer

oil prices fell every day this week until Friday, at which time they steadied and recovered half of Thursdays loss, but still ended down 5.9% for the week, and down nearly 15% for July, the largest one month drop in a year...after falling to close at $44.19 a barrel last week largely on worries about the gasoline glut, oil opened lower and fell more than a dollar to close Monday at $43.13 a barrel, after the CEO of Vitol, one of the world's largest physical traders of oil, said he expected the oil glut to last two more years...oil then fell to close at a three month low of $42.92 a barrel on Tuesday as hedge funds began unloading their record speculative position in oil....prices were then driven another dollar lower on Wednesday after the weekly EIA report indicated not only another surprise increase in gasoline supplies, but also the first weekly increase in domestic-crude inventories in 10 weeks...oil prices then fell another 54 cents in the first hour of trading on Thursday, and drifted lower from there to close at $41.14 a barrel...oil then steadied Friday morning and rose in the afternoon to close the week at  $41.60 a barrel, apparently relieved that the Baker Hughes rig count showed a negligible increase in new drilling...

Oil Majors Report Second Quarter Results

this week saw the first batch of 2nd quarter reports to shareholders from the major international oil companies, which for the most part showed much poorer earnings than a year ago, and which were generally worse than analysts had expected...recall that when we looked at these reports in earlier quarters, it was the small independent drillers that were piling up the big losses and going bankrupt, while the vertically integrated oil majors, which were also seeing losses in the exploration and exploitation segments of their business, were saved by profits from their refining operations that in some cases more than doubled, as they benefited from some the widest margins on refined products in, with the glut of gasoline and all other refined products, prices for those products have fallen as well, and refining margins shrank even as oil prices rose during the April through June period...hence, the oil majors are not only seeing reduced profits or losses in their oil field operations, but they're also barely making anything on the refining side of their business as well...

for BP, that resulted in their third straight quarterly loss, as the British oil giant reported on Tuesday that it posted a $2.25 billion net loss in the second quarter of 2016, which also included some inventory writedowns and additional charges related to the Deepwater Horizon; their earning from operations fell 45% to $720 million, down from $1.3 billion in the same quarter a year earlier, as profit margins at its refineries were at their lowest levels since 2010...reporting two days later, BP rival Royal Dutch Shell reported their profits plunged more than 70% to $1.05 billion, down from $3.76 billion in second-quarter 2015; they reported that their earnings were impacted by the decline of oil, gas, and LNG prices; a depreciation step-up from the BG acquisition; and weaker refining conditions, as revenues of $58,415 million were below the consensus estimate of $65,464 million.

also on Thursday, ConocoPhillips reported larger-than-expected loss of $1.1 billion on 2nd quarter revenue of $5.58 billion as revenues fell 36% from a year earlier to $5.58 billion, against analysts revenue expectations of $6.62 billion...then on Friday, ExxonMobil reported its profits crashed 59% to a 17 year low of just $1.7 billion as exploration and drilling profits plunged by 82%...also on Friday, Chevron surprised analysts by posting a loss of 1.5 billion for the second quarter, compared with earnings of $571 million in second-quarter 2015, as it reported $2.8 billion in impairments and non-cash charges, as revenues from its exploration and exploitation businesses were expected to be insufficient to cover costs...

The Latest Oil Stats from the EIA

as we mentioned, this week's release of oil data for the week ending July 22nd from the US Energy Information Administration showed unseasonably large increases in our stored supply of both crude oil and gasoline; that was largely due to a big jump in oil imports and the mix of products coming out of refineries, because oil consumption by refineries dropped to below seasonal the same time, this week's crude oil fudge factor included to make the weekly U.S. Petroleum Balance Sheet (line 13) balance was +550,000 barrels per day, which meant that 550,000 more barrels per day showed up in our final consumption and inventory figures this week than were accounted for by our production or import figures, meaning one or several of this week's metrics were off by that amount, errors which are typically due to shortfalls in reporting or gathering that data...that's the 5th week in a row that we've seen a large positive adjustment, and as a result this year's cumulative daily average of that weekly statistical adjustment is now up to a positive 36,000 barrels per day...during much of this this year, that adjustment had been negative, meaning much of what we had appeared to have produced or imported did not show up in the final consumption or inventory figures....that statistical aberration has now completely reversed..

our field production of crude oil rose for the 3rd week in a row, as oil output from US wells rose by 21,000 barrels per day to an average of 8,515,000 barrels per day during the week ending July 15th, entirely on a 33,000 barrel per day increase in production from Alaska...but oil production from the lower 48 states was down just 12,000 barrels per day, a slowing in the rate of decline...but even with production up 3 weeks in a row, our oil output still remained 704,000 barrels per day below the pace we saw at the beginning of this year, which was also 9.5% lower than the 9,413,000 barrels we produced during the week ending July 24th of 2015, and 11.4% lower than the record 9,610,000 barrel per day oil production that we saw during the week ending June 5th last year... 

at the same time, the EIA reported that our imports of crude oil rose by an average of 303,000 barrels per day to an average of 8,437,000 barrels per day during the week ending July 22nd, just 2,000 barrels per day shy of the 42 week high for oil imports we saw during the week ending June 17th....this week's imports were nearly 900,000  barrels per day, or 11.8% more than the 7,545,000 barrels of oil per day we were importing during the week ending July 24th a year ago, while the 4 week average of our imports reported by the EIA's weekly Petroleum Status Report (62 pp pdf) rose to an average of 8.2 million barrels per day, 8.7% above the same four-week period last year...

meanwhile, crude oil usage by US refineries dropped by 277,000 barrels per day to an average of 16,586,000 barrels of crude per day in this week's report...that was as the US refinery utilization rate fell to 92.4% for the week ending July 22nd, down from 93.2% of capacity the prior week and down from the refinery utilization rate of 95.1% logged during the week ending July 24th last year...crude oil refining fell by 95,000 barrels per day on the east coast, and was now at a level 12% below a year ago, indicating that the New York area products glut is having an impact on refinery operations there...nationally, crude oil refined this week was just over 1.0% less than the 16,762,000 barrels per day US refineries used during the week ending July 24th last year, and on a par with the equivalent week in 2014... 

even with the drop in oil being refined, however, US refineries production of gasoline still inched up by 18,000 barrels per day to 10,068,000 barrels per day during week ending July 22nd, as east coast refineries still managed to produce an average of 3,316,000 barrels of gasoline per day, 67,000 barrels per day more than the prior week and 4.2% more than a year earlier....that increase meant that this week's gasoline production was 4.0% greater than the 9,681,000 barrels per day of gasoline produced during the equivalent week a year ago, despite the refinery slowdown....however, refinery output of distillate fuels (diesel fuel and heat oil) did drop during this week, falling by 86,000 barrels per day to 4,918,000 barrels per day during the week ending July 22nd...that left our distillates output 3.5% below the distillates production of 5,096,000 barrels per day during the week ending June 24th of last year......          

with the incremental increase in gasoline production, our gasoline inventories rose again, increasing by 452,000 barrels to 241,452,000 barrels as of July 22nd, the 5th increase in the past 6 weeks, at a time of year when our gasoline supplies are usually being used fact, since July 15th had seen the highest summertime level for gasoline supplies in the EIA's weekly records, July 22nd just topped that record by 452,000 barrels, and that happened even as the amount of gasoline supplied to US markets rose by 12,000 barrels per day to a near record of 9,797,000 barrels per day see what this buildup of gasoline supplies looks like historically, we'll include another one of the EIA's weekly 5 year graphs:

July 29 2016 gasoline inventory for July 22

in the graph above, which was sourced from page 12 of the EIA's weekly Petroleum Status Report (62 pp pdf), the blue line shows the recent track of US gasoline inventories over the period from December 2014 to July 22nd,, 2016, while the grey shaded area represents the range of US gasoline inventories as reported weekly by the EIA over the prior 5 years for any given time of year, thus showing us the normal range of US gasoline inventories as they fluctuate from season to season, normally falling during the driving season every summer and rising in winter...note that gasoline inventories first rose out of that prior trend in January of this year, and by February had set a new record high...then, instead of falling rapidly during the spring as it had in prior years, this year gasoline inventories remained elevated throughout the spring, and once they started rising 6 weeks ago, it didn't take much for them to hit a record for this time of year...gasoline inventories thus ended this week 11.8% higher than the 215,922,000 barrels of gasoline that we had stored on July 24th last year, and also 10.6% higher than the 218,236,000 barrels of gasoline we had stored on July 25th of 2014... thus our gasoline supplies remain categorized by the EIA as "well above the upper limit of the average range" for this time of year..   

meanwhile, our distillate fuel inventories fell by 780,000 barrels to 152,003,000 barrels on July 22nd, which left them still well above the distillate inventories of 148,939,000 on the 1st of July...since our distillate inventories have continued to run far above the normal level since our warm winter reduced US heat oil consumption, our distillate inventories as of July 22nd were still 5.5% higher than the 148,939,000 barrels of distillates we had stored as of July 24th last year, and 20.0% higher than our distillates supplies as of July 25th 2014, and thus they are still characterized as "above the upper limit of the average range" for this time of year...     

finally, as our refineries failed to keep pace with our increased level of imports, we found ourselves with 1,671,000 more barrels of oil than we needed this week, which was subsequently added to our stocks of crude in storage, and hence our crude oil inventories rose to 521,133,000 barrels as of July 22nd, the first increase in oil stocks in 10 weeks....that meant we ended up with 13.4% more oil in storage than the 459,682,000 barrels we had as of the same weekend a year earlier, and 41.9% more oil than we had stored on July 25th of 2014....since our oil supplies first topped 500 million early this year, and first topped 400 million in January of 2015, it goes without saying that our crude oil supplies also remain "well above the upper limit of the average range" for this time of year..."    

This week's rig counts

even though it was just by one more rig, US drilling activity increased for the 8th week out of the past 9 weeks during the week ending July 29th, even as oil prices fell....Baker Hughes reported that the total count of active rotary rigs running in the US rose by 1 to 463 rigs as of Friday, which was still down from the 874 rigs that were deployed as of the July 31st report last year, and down from the recent high of 1929 rigs that were in use on November 21st of 2014...the number of rigs drilling for oil this week rose by 3 rigs to 374, which was still down from the 664 oil directed rigs that were in use a year earlier, and down from the recent high of 1609 oil rigs that were drilling on October 10, 2014, while the count of drilling rigs targeting natural gas formations fell by two rigs to 86 this week, which was also down from the 209 natural gas rigs that were drilling a year ago, and down from the recent high of 1,606 rigs that were drilling for natural gas on August 29th, 2008...there were also three rigs drilling this week that were classified as miscellaneous, unchanged from last week but up from the single miscellaneous rig that was drilling the same week a year ago....  

even with the negligible overall increase, another rig was added offshore from Texas in the Gulf of Mexico, which brought the Gulf of Mexico active rig count back up to 19 rigs, which was still down from 34 Gulf of Mexico rigs a year ago...however, the offshore platform that had been working off the Cook Inlet in Alaska was shut down, which left the total offshore count unchanged at 19, which was also down from 34 offshore a year the same time, there was a single new rig that started drilling through an inland lake in southern Louisiana, which brought the inland waters rig count up to 4, which was still down from the 5 rigs that were deployed drilling on inland waters at the end of the same week last year...  

the number of working horizontal drilling rigs fell for the 2nd time in 9 weeks, as the count of active horizontal rigs dropped by 3 rigs to 354 rigs, which also was down from the 664 horizontal rigs that were in use on July 31st of last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of the same time, 4 more directional rigs were added, bringing the directional rig count back up to 48, which was still down from the 84 directional rigs that were in use at the end of the same week a year earlier...meanwhile, the vertical rig count was unchanged at 61 rigs this week, which was down from the 126 vertical rigs that were drilling 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'll again 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 July 29th, the second column shows the change in the number of working rigs over the last week, the third column shows last week's July 22nd rig count, the 4th column shows the change in the number of rigs running from the equivalent week in July 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 July 31st of 2015:  

July 29 2016 rig count summary

here we can see that the change in the overall rig count that the press characterized as 'negligible' masks quite a bit of activity across the nation...for instance, even though the Texas rig count was down by 3 rigs to 214, drilling in the Permian basin in the western part of the state still increased by 4 active rigs, as 3 rigs were idled that had been working in the Barnett shale near Dallas, and another 2 rigs in the Eagle Ford of south Texas were also shut down...also note that Ohio saw its rig count rise by 1 rig to 13 with the addition of another rig in the Utica, while the Marcellus dropped a rig by virtue of pulling 2 rigs from West Virginia and adding 1 rig in Pennsylvania...also note that Mississippi, which is not included among major producing states above, saw the addition of a rig this week, bringing the state count up to 3 rigs....Mississippi also had 3 rigs deployed on July 31st of 2015....


Could Giant Suction Cups Turn Lake Erie Into a Regional Energy Hub? --  How does one stick a 500-foot-tall turbine to the bottom of Lake Erie? Suction cups, of course. Expense has long been a problem for offshore wind farms, specifically the cost to attach the turbine’s foundation to the ocean floor or lakebed. The traditional method has always been to drill the foundation to the bedrock under the sea bottom — which can be up to several hundred meters down from the surface. That can mean using very expensive equipment, a long time frame to do the work, and environmental disruption undersea from drilling into silt and sediment and rock formations in an already sensitive ecological environment. The suction cup technology innovation (dubbed the “mono bucket”) was developed by Danish engineers in 2002 and acquired by Olsen’s company five years ago. The design and engineering is based on similar foundation attachments in offshore oil drilling. This fairly new technology so impressed the Department of Energy (DOE) that, in May, the agency awarded $40 million to Icebreaker. “The innovative Mono Bucket foundation will reduce installation time, costs, and environmental impacts compared to traditional foundations that require pile driving,” the DOE said in announcing the grant. “The Mono Bucket not only is a solution for the Great Lakes, but also has broader national applicability for offshore wind installations off the Atlantic and Gulf Coasts.” The DOE’s backing of the Icebreaker project is indicative of a shift in the country’s offshore wind energy development. For one thing, the offshore wind projects favored in the past by the federal government had always been on the coasts, but cost issues and opposition by groups who live in communities close to either — especially in Northeast states — have made offshore wind projects difficult to move forward.

Summit County court rules against small city using zoning regulations to regulate oil and gas activities - Athens NEWS - The idea that “reasonable zoning regulations” might offer a way for Ohio municipalities to restrict oil and gas development within their limits took a hit earlier this month when a Summit County court upheld the state’s sole authority to enforce regulations over fracking and related activities such as waste injection wells. While recent battles against deep-shale oil and gas drilling in Ohio mostly have involved proposed “bill of rights” anti-fracking ordinances, such as one passed in the city of Athens in 2014, Ohio courts repeatedly have ruled against them. (Proponents are struggling to place a similar anti-fracking bill-of-rights charter on the ballot for Athens County this November.) The lack of success in the courts has led some advocates of community control over drilling activities to harbor hopes that traditional zoning might be a more effective and legal alternative than the legally suspect bill of rights strategy to dictate where oil and gas activities can occur in a city or village. Whatever the route, the intent is to protect local water, quality of life and other values from oil and gas activities within communities. The Akron suburb of Munroe falls chose to test the traditional zoning route when it filed suit in Summit County Common Pleas Court on May 27 against Beck Energy (of Ravenna, Ohio). The city’s complaint was an attempt to keep the company from drilling an oil or gas well in the center of town, not far from a well-field that supplies water to Munroe Falls, Cuyahoga Falls and Silver Lake, all suburbs on the northeast edge of Akron. The lawsuit sought a declaratory judgment on “whether Munroe Falls has the right to enforce its zoning ordinances relative to oil and gas wells within its municipal jurisdiction; to declare whether Beck Energy is required to obtain a zoning certificate and/or zoning variance from Munroe Falls prior to drilling (its sought-after well); and further requests a stay (suspension) of all drilling activities by Beck until such a time as this court determines all matters in controversy…”

Charter petition protest skips local court, will go to Ohio Sec. of State - A local group looking to turn Athens County into a charter government has appealed a decision by the local elections board to reject the proposal for the ballot. The appeal will go to the Ohio Secretary of State instead of going through the local court as the group did last year. When the Athens County Board of Elections voted unanimously earlier this month to reject the anti-oil and gas fracking charter proposal from the Athens County Bill of Rights Committee (ACBORC), it was the second time in two years. Last year, the ACBORC appealed that decision to the Athens County Common Pleas Court, and a local judge OKed the proposal for the November ballot.But then a private citizen appealed that decision to the Ohio Secretary of State, who knocked the proposal off the ballot. Finally, the matter ended up in the hands of the Ohio Supreme Court, which ruled that the Athens County proposal couldn’t go on the ballot, not because of home-rule provisions conflicting with the state law giving oil-and-gas regulatory supremacy to the ODNR, but because the proposal for the “charter” itself was not sufficiently complete or explained. This year, the ACBORC has protested the elections board decision to Ohio Secretary of State Jon Husted. The protest was filed with the Athens County Board of Election Monday morning, which was expected to forward it to Husted’s office. A press release from the ACBORC Monday claimed that members of the elections board made three errors in denying the validity of the charter proposal. “They exceeded their legal authority when they passed judgment on constitutional validity of the proposed charter. They misread both the Ohio Constitution and the proposed Charter petition. They failed to scrutinize the contradictory advice of the county prosecutor, Keller Blackburn,” the release said.

Ohio Producing 1000% More Natural Gas Than 10 Years Ago --Ohio is producing 1,000 percent more oil and natural gas than it was in 2006, according to a report published Thursday. The state’s energy production is still surging, as its natural gas production grew 41 percent faster last year than it did in 2014, according to the Energy Information Administration  “The energy renaissance that’s transforming our nation is bringing great benefits to Ohio including jobs in the state. In fact over 255,000 jobs are supported by the oil and natural gas industry in Ohio,” Jack Gerard, the president of the American Petroleum Institute, wrote in Your Oil And Gas News. “Over the last decade, natural gas production has increased by more than 1000 percent in the state due in part to the technological advancements in hydraulic fracturing that has contributed to Ohio’s energy revolution.”  America produced 79 billion cubic feet per day of natural gas in 2015, breaking the previous record by 5 percent, according to the EIA. Most of that natural gas boom in 2015 was concentrated in Pennsylvania, Ohio, West Virginia, Oklahoma, and North Dakota. Together, these states accounted for 35 percent of total American natural gas production while the rest of the country saw a modest decline.  America surpassed Russia’s energy production early last year as as the world’s largest and fastest-growing producer of oil and natural gas. Today, America’s proven recoverable natural gas reserves are seven times larger than they were in 2014.

Stored working gas continues climbing: EIA - Kallanish Energy News: Working gas in storage edged during the week of July 15 from the previous week, the Energy Information Administration reported. For the week of July 15, 3.28 trillion cubic feet of working gas was stored, up 34 billion cubic feet (Bcf) from 3.24 Tcf one week earlier. The latest EIA total was up 471 Bcf, or 16.8%, from the year-ago total of 2.81 Tcf, and was up 559 Bcf, or 20.6%, from the five-year average of 2.71 Tcf, Kallanish Energy calculates. Three of the five regions of the Lower 48 States EIA divides the U.S. into reported a week-to-week increase in stored gas. The largest jump was in the East Region, up 19 Bcf, or 2.8%, to 697 Bcf, from 678 Bcf one week earlier. The latest total was up 75 Bcf, or 12.1%, from the year-ago total of 622 Bcf, and was up 64 Bcf, or 10.1%, from the five-year average of 633 Bcf. The Midwest Region reported a 16 Bcf week-to-week increase, to 801 Bcf, from 785 Bcf. The total was up 172 Bcf, or 27.3%, from the year-ago total of 629 Bcf, and was up 146 Bcf, or 22.3%, from the five-year average of 655 Bcf, EIA reported.

API: America leading in natural gas production, carbon emission reductions: The United States is leading the world in natural gas production that has increased 46 percent over the past decade. The leadership of the United States in natural gas production has also led to our nation being a global leader in the reduction of carbon emissions which are near 20-year lows.  . Natural gas production has increased nearly 50 percent over the last decade thanks to technological advances in hydraulic fracturing. With the increase in natural gas production, America continues to lead the world in the reduction of carbon emissions due in part to clean-burning natural gas,” said API President and CEO Jack Gerard. “American consumers want an energy policy that embraces our abundant natural gas resources and it’s up to leaders at all levels of government to follow the will of the consumer.” API is the only national trade association representing all facets of the oil and natural gas industry, which supports 9.8 million U.S. jobs and 8 percent of the U.S. economy. API’s more than 650 members include large integrated companies, as well as exploration and production, refining, marketing, pipeline, and marine businesses, and service and supply firms. They provide most of the nation’s energy and are backed by a growing grassroots movement of more than 30 million Americans.

US shale gas shaking up global market as LNG trading surges --Shale drillers from Pennsylvania to Texas flooded the U.S. with so much natural gas over the past decade that prices slid to a 17-year low. Now they’re going global, with the potential to upset markets from London to Tokyo. The U.S. began shale gas exports by sea this year and is projected by the International Energy Agency to become the world’s third-largest liquefied natural gas supplier in five years.  Gas will challenge coal at European power plants and become affordable in emerging markets. LNG became the world’s second most traded commodity after oil last year and demand will keep growing. U.S. gas is adding to the global glut triggered by new Australian supply and weakening Asian consumption. Shale is having an outsized impact on how LNG is sold, prompting spot trading in lieu of long-term contracts. "The U.S. clearly changed the picture," Costanza Jacazio, a senior gas analyst with the Paris-based IEA, said in a phone interview. "The US is going basically from zero to the third-largest LNG capacity holder in the space of five years and it brings a new flexible dimension to the LNG market." With supplies growing, some Asian nations like Japan are contracted to buy more than they can consume, leaving surpluses to be sold. That’s lured major traders into the LNG market in recent years, including Vitol Group, Trafigura Group, Koch Industries Inc., Gunvor Group Ltd. and Noble Group. The annual capacity of liquefaction plants, where gas is chilled and compressed for shipping, grew to 415 billion cubic meters in 2015 and will expand to 595 billion by 2021.  Cheniere Energy Inc. has sent 19 tankers of the liquefied gas abroad from its Sabine Pass terminal in Louisiana. By 2020, five terminals will be operating on the U.S. Gulf Coast and in Maryland. Global export capacity will surge 45 percent and the U.S.’s share will jump to 14 percent from nothing, according to Energy Aspects Ltd. While U.S. supply is still relatively small, it’s having an impact because the American contracts are flexible. Australian and other foreign processors conclude long-term agreements to send gas to specific countries such as Japan and China. Asian buyers have contracted for more than half of the U.S. supply, but they have the freedom to ship the fuel to anywhere in the world, encouraging spot trading.

A New Study Adds Fuel to Calls for a Fracking Ban - About 386 million years ago, Pennsylvania received a great gift—or, depending on your point of view, a curse: the Marcellus Shale, a formation of black rock and limestone containing vast reserves of natural gas.  Pennsylvania will receive another dubious benefaction next week, when Philadelphia hosts the Democratic National Convention. Considering the party’s division over fracking and the shale gas revolution it enabled, it’s a provocative setting. The Obama administration, along with Hillary Clinton as secretary of state and other prominent Democrats, have promoted natural gas as beneficial for both the climate and the economy. But communities situated near heavy fracking activity have long reported adverse environmental and health impacts. And new research on the scale of leaks of methane—a greenhouse gas even more potent than carbon dioxide, in terms of its ability to trap heat in the atmosphere—from natural gas wells and pipelines has intensified calls from climate activists to end the practice. The Democratic platform draft walks a strained line between these two camps, offering support for local moratoriums and more federal oversight, while stopping short of calling for a broader ban. Now there’s new evidence suggesting the drilling technique may harm human health. On Monday, researchers at the Johns Hopkins Bloomberg School of Public Health released a study of the medical records of more than 35,000 people with asthma who lived above the Marcellus Formation between 2005 and 2012. Residents of areas with intense shale-gas activity faced “significantly higher odds” of having asthma attacks, the researchers found, even when taking into account factors like whether they smoked or lived near major roads. Though the study doesn’t trace an exact line of causality, the authors note that fracking has been linked to increases in air pollution, and stress and sleep deprivation from noisy equipment and bright lights, all of which can worsen asthma.

Before DNC: Thousands defy heat to demonstrate for Bernie, against fracking: An environmental advocate dressed in a furry, head-to-clawed-paw polar bear suit defied Philadelphia's staggering heat wave on Sunday and prepared to join thousands of more comfortably dressed protesters at the March for a Clean Energy Revolution. The march, aimed at banning the natural gas drilling practice known as fracking, promised thousands of participants from all 50 states on the eve of the Democratic National Convention. At least 1,000 people gathered at Broad and Market as the march began and police estimates at 2 p.m. ranged between 5,000 and 10,000 as the march proceeded.  At the same time, another 3,000 supporters of Sen. Bernie Sanders planned to assemble in a rally and march, energized by the announcement that DNC Chairman Debbie Wasserman Schultz would resign as party head and not preside over the convention. Hours earlier, Sanders called outright for her resignation on ABC's "This Week," telling host George Stephanopoulos the DNC "was not running a fair operation, that they were supporting Secretary Clinton." Sanders said he was "not shocked" but was "disappointed" by the DNC emails leaked by the WikiLeaks last week. The Washington Post reported that WikiLeaks had revealed about 20,000 emails apparently favoring Hillary Clinton's candidacy over Sanders.

The Fight Over Fracking Heats Up - “Frack no!” That provocative refrain ricocheted through the streets of Philadelphia on Sunday on the eve of the Democratic National Convention, as thousands of clean-energy activists vented their fury at the party’s refusal to include a hydraulic fracturing ban in its platform. The fight over fracking is, well, fractious, pitting environmentalists against fossil fuel interests, cities against states, Republicans against Democrats, and now Democrats against one another. Despite all the high-profile battles over fracking at the national level, enacting a nationwide ban would be difficult, if not impossible, legal experts say. That has brought the fight to the cities and counties, where local voters and lawmakers have passed measures to regulate or ban fracking. Those efforts have not gone unnoticed by the well-funded oil and gas industry, which has set its sights on state capitals, where lobbyists aggressively push for statewide prohibitions on local bans.Proponents say the technique is environmentally sound, creates jobs, increases energy independence, and produces enough natural gas to build a clean-energy “bridge” to more sustainable resources such as wind and solar. Critics contend that any benefits from fracking are overwhelmed by public health and environment impacts. Fracking has been proved to contaminate groundwater, emit methane and other poisons into the air, and trigger earthquakes that now put 7 million Americans at risk of “induced seismic activity.” On the campaign trail, Republican presidential nominee Donald Trump has supported the practice, while the highest-profile fracking opponent, Sen. Bernie Sanders, called for a national ban.

A Former Governor Admitted He Put Economics Ahead Of Safety By Approving Fracking Projects - Former Pennsylvania Governor Ed Rendell, who presided over the state’s fracking boom of the mid-2000s, admitted the state’s fracking regulations favored economics over environmental safety during much of his tenure.  “I made a mistake in the rush to get the economic part of fracking delivered to Pennsylvania,” said Rendell, State Impact reported. “We didn’t regulate well construction and….frack water as well as we should. We cured that in 2010 and we haven’t had any significant incidents since.” Rendell, a former chairman of the Democratic National Committee, governed Pennsylvania from 2003 to 2011. That was right when improvements in fracking technology made Pennsylvania’s vast Marcellus Shale gas resources economically viable. During his tenure, companies rushed to exploit what is now one of the largest natural gas reservoirs in the United States and the source of more than 35 percent of the country’s shale gas as of 2015. The boom brought millions of dollars and new jobs to Pennsylvania, but also countless allegations of environmental violations and lawsuits.  Hydraulic fracturing has been controversial in Pennsylvania — and elsewhere — over concerns of how the wastewater is disposed, and because wells have been known to leak, polluting nearby aquifers with gas and turning the water toxic and at times even flammable. Just in March, a federal court found Cabot Oil & Gas Corp. — one of Pennsylvania’s largest oil and gas companies — guilty of polluting the well water of two Pennsylvania families.  Rendell's comments come at a time when the anti-fracking movement has been growing across the nation. Thousands marched in Philadelphia Sunday, a day before the Democratic National Convention began, and called for a nationwide fracking ban and major investments in renewable energy. Rendell's comments also explicitly acknowledged that environmental laws were overlooked as the state tried to profit from fracking, an issue that environmentalists long said was taking place as companies moved into the state. Moreover, he inadvertently raised questions as to whether the issues were adequately addressed, and whether real solutions were actually put in place during his time in office.

Too Much Pipe on Our Hands? - Northeast Natural Gas Production vs. Takeaway Capacity -  Over the past five years, essentially all of the growth in U.S. natural gas production has come from the Marcellus/Utica shale regions in the Northeast, constrained only by takeaway capacity, and as of 2015 the region began producing more gas than it can consume almost all year round. There are about two dozen pipeline projects planned to come online totaling nearly 17.5 Bcf/d over the next few years to help Northeast producers target demand in other regions, namely growing power generation demand, LNG export markets along the U.S. Gulf Coast, (see Back Down South), and Mexico via Texas. But since mid-2014, drilling activity has slowed dramatically across the U.S., including the Northeast, and output in Marcellus/Utica has flattened out. Is it possible that the market is headed toward an overbuild situation in which Northeast takeaway capacity will end up far exceeding regional production? That has certainly happened in just about every other segment of the U.S. energy market — from pipes moving gas east out of the Rockies and Texas, to crude by rail, to crude oil pipelines to the Gulf –– with important implications for the market. Could it happen in the Northeast? Today, we begin a series on the prospect of an overbuilt Northeast gas market. ... For years now, the drumbeat about the Northeast natural gas market has been about the meteoric rise of native supply in the region and the perpetually constrained capacity to get this gas to market, whether within the Northeast to New England or the Mid-Atlantic states or to growing demand markets south and west of the region. Each year, some takeaway capacity is added, but is quickly followed by a surge in Marcellus/Utica production that fills up the new capacity, leading back to a capacity-constrained market and depressed supply prices. The constraints have also gotten increasingly dire because most of the supply that used to flow into the old, supply-starved Northeast region has been pushed out and there are few more inbound flows to push out (see End of the Displacement). What’s more, starting in 2015 the region became an overall net producer (see One Step Closer), which means that in order for the region to balance (as the gas market must) any incremental molecule of Northeast production from here on out will need to serve demand outside the region. That has only increased the Northeast’s dependence on the timing of incremental takeaway capacity.

Southwestern Energy Company Loses $1.8B - Wheeling Intelligencer — Southwestern Energy Co., which now controls virtually all Marcellus and Utica shale drilling lease agreements in Ohio and Brooke counties, lost $1.8 billion during the first six months of 2016.Company leaders, however, believe the firm remains destined for a bright future.A global price slowdown during the last two years affected Southwestern and virtually every oil and natural gas production firm in the world, resulting in fewer active drilling rigs. Oilfield services giant Baker Hughes shows Ohio and West Virginia now feature only 23 active rigs, which compares to the 70 that worked in the two states in July 2014. However, natural gas prices have increased to about $2.80 per 1,000 cubic-foot unit from about $1.70 per unit in March. As prices continue to recover, officials with drillers such as Southwestern and Antero Resources believe their companies are well-positioned to take advantage. Last summer, Southwestern President and CEO Bill Way said the company planned to invest $24 billion to produce oil and natural gas in West Virginia over the next two decades. Company officials continue to renew the five-year leases they acquired from Chesapeake for an additional five-year period.Speaking about the company’s activity for the April-June period, Way acknowledged his company lost $620 million during this time frame. However, the losses were less than the $1.2 billion from the first three months of the year. “As promised, we took significant and deliberate steps this quarter to strengthen our balance sheet that, when combined with the continued outperformance by our assets, positions us to reinitiate drilling and completion activities and accelerate our path to value-adding growth,” Way said.

Developers seek more time to build Constitution Pipeline (AP) — Constitution Pipeline Company is asking federal regulators for more time to build a 124-mile natural gas pipeline from Pennsylvania’s shale fields to eastern New York. The Federal Energy Regulatory Commission approved a permit for the pipeline in December 2014 on condition of getting a state water quality permit and completing work by December 2016. But New York’s Department of Environmental Conservation denied the state permit in April, saying it failed to meet standards to protect streams and other water resources. The company has appealed the permit denial to the U.S. Circuit Court of Appeals, arguing that the state’s refusal is arbitrary and capricious. In a letter to FERC on Friday, the developers asked to have the completion time extended to December 2018 while it pursues legal action.

Tim Kaine is a Democrat who backed Atlantic drilling, LNG exports, coal - While Hillary Clinton’s running mate supports policies to address climate change, he’s also been supportive of his home state’s coal industry, offshore drilling in the Atlantic and of LNG exports. He teamed up with Wyoming Republican John Barrasso to sponsor a bill that would require the Department of Energy to decide on an LNG export application within 45 days.On offshore drilling, Kaine campaigned for the Senate criticizing Interior’s earlier decision to leave Virginia out of its five-year drilling plan and promising to pursue legislation to allow that production. In March, after Interior dropped offshore Atlantic drilling from its next five-year plan, Kaine offered this response: I have long believed that the moratorium on offshore drilling, based on a cost-benefit calculation performed decades ago, should be re-examined. Today’s announcement by theBureau of Ocean Energy Management suggests that they have grappled with this question and concluded that the risks of such production outweigh potential gains. I am particularly struck by the material objections of the Department of Defense to the incompatibility of drilling with naval operations off Virginia’s coast…The DOD has been relatively quiet during this public debate and has never shared their objections with me before. I look forward to additional discussions with DOD to understand its position.  If Clinton wins this fall, her administration won’t reverse course and allow drilling in the Atlantic, Rob Barnett of Bloomberg Intelligence writes today. Still, Kaine may push for legislation to provide financial incentives to help coal-heavy states transition from coal, Barnett says.

A Fracking Pipeline Puts Tim Kaine's Fossil Fuel Industry Ties to the Test - The Intercept - Democratic vice presidential candidate Sen. Tim Kaine is facing pressure from landowners in his home state of Virginia to stand against the planned Atlantic Coast Pipeline, which would carry fracked gas from Pennsylvania, Ohio, and West Virginia to mid-Atlantic markets.  He’s made some moves in that direction: he’s held private meetings with landowners in the pipeline’s pathway; he’s asked the Federal Energy Regulatory Commission to strengthen the consultation process for residents; and he introduced an amendment to a federal energy bill that would encourage regulators to carry out a review of the cumulative impact of the region’s four planned pipelines. But he hasn’t ruled the pipeline out, making environmentalists worry that he ultimately shares the quietly fossil-fuel friendly politics of the Democratic Party.  Kaine’s record on energy is mixed. He’s been supportive of offshore drilling in the Atlantic and introduced legislation to speed up liquid natural gas exports. In 2012 he pushed for the construction of one of the nation’s last new coal plants. And he helped pressure the federal government to lower Virginia’s greenhouse gas emissions goals under the Clean Power Plan.In Virginia, the Atlantic Coast Pipeline’s biggest investor, Dominion, was the largest single corporate contributor to local politicians between 1997 and 2016, and Kaine has accepted his share of the company’s cash and gifts: more than $300,000 in total since 2001. When asked what he thought of Kaine, senior American Petroleum Institute lobbyist Louis Finkel told Intercept reporter Zaid Jilani, “He’s the best we could have hoped for.” Virginia’s governor and longtime friend of the Clintons Terry McAuliffe supports the pipeline.

Obama administration closes offshore drilling sale to public | TheHill: The Obama administration is banning environmental activist protesters from an offshore drilling lease sale next month. The auction, scheduled for Aug. 24 in New Orleans, will be webcast, and the public will not be allowed in the venue, a change from the tradition of the Bureau of Ocean Energy Management (BOEM) and its predecessors.The decision came after a boisterous lease sale in March, in which hundreds of protesters at the Mercedes-Benz Superdome yelled over announcements, stormed the stage and tried unsuccessfully to shut down the event, according to the New Orleans Times-Picayune.  The activists were part of the “keep it in the ground” movement, a campaign that’s taken off in the last year and seeks to stop the federal government from allowing additional fossil fuel development on public lands and offshore.The protests have taken the federal government by surprise; the sale events have previously been low-key with few public observers or protesters.It spurred efforts both in the Obama administration and Congress to move sales online in some way. The House Natural Resources Committee approved a bill this month to require BOEM to move to a completely internet-based lease system within a year, inspired largely by the disruptive protests. Environmentalists have pushed back against the efforts and accused the administration and oil and gas industry of trying to hide the sales from public scrutiny. “New fossil fuel leasing is wrong for people and the planet. Moving lease sales online will only make it easier for fossil fuel companies to get away with turning our public lands and waters into energy sacrifice zones,” Marissa Knodel, the climate change campaigner with Friends of the Earth, said last week of the House bill.

Northeast Natural Gas vs Gulf Coast production -- Until a few years ago, a good bit of the natural gas produced along the Gulf Coast was piped long-distance to warm homes and businesses in the Northeast and the Midwest. Now, though, cheap-to-produce Marcellus and Utica shale gas has come to dominate gas heating and power markets from Boston to Cleveland, and Northeast-sourced gas is starting to move into Louisiana and Texas, competing head-to-head with Gulf Coast production. With Marcellus/Utica gas production in ascendance, what will be the fate of all the gas still being produced along the U.S. Gulf Coast? That’s the subject of RBN’s latest Drill Down Report, highlighted in today’s blog, which describes the battle lines being drawn and the important roles LNG exports and Mexican demand will play in keeping U.S. gas markets in balance. A quarter-century back, if you’d told a Louisiana or East Texas utility executive in 1991 that in the not-to-distant future he might be burning Pennsylvania-sourced natural gas to run his power plants he might have suggested bed rest and counseling. But here we are. As we say in RBN’s new Drill Down Report (which is available to Backstage Pass subscribers, or for individual purchase), the Shale Revolution continues to have a transformational effect on the U.S. energy sector –– and on our neighbors and the world, for that matter. Texas still produces more natural gas than any other state (20.4 Bcf/d of “marketed production” in April 2016, according to the Energy Information Administration, or EIA), and Louisiana produced an average of 5.2 Bcf/d the same month (25.6 Bcf/d combined). But the core Marcellus/Utica region produces almost as much: 22.0 Bcf/d in April, including 14.3 Bcf/d in Pennsylvania, 4.0 Bcf/d in Ohio, and 3.7 Bcf/d in West Virginia, and it seems likely that, given the Marcellus/Utica’s favorable production economics (which are detailed in the report), these three Northeast states will soon produce more gas than their Gulf Coast rivals.

US Gulf Coast distillate exports to Europe 370,000 mt to date in August - Some 370,000 mt of distillates, most of it diesel, have loaded from the US Gulf Coast for discharge in Europe in August, so far, according to CFlow, Platts trade flow software. In comparison, a total of 1.42 million mt crossed the Atlantic on that route in July, down from previous months. The 370,000 mt of products should reach European coasts in the first week of August or so, cFlow showed, and come in nine parcels, four of which are currently headed towards Mediterranean ports. Of the remaining five cargoes, four are en route to the Amsterdam-Rotterdam-Antwerp hub while the other one was expected in Rouen, France."Not much is being fixed from the US. There is room for more product to come," a European diesel trader said. European diesel cash prices rose last week, as market participants anticipated a decline in refining margins to trigger run cuts, hence resulting in a tighter supply pool. "The entire [diesel] market was in upswing mode and I think it is because of fears that refining margins won't be able to hold and that there will be run cuts," a European diesel trader said. "It is part of it for sure, also the structure got to levels close to floating storage economics and, in terms of cash prices, they came to levels where it was possible to export out of ARA in cargoes," another diesel trader said, adding: "There are high [diesel] stocks and the structure is incenvitizing people to keep oil in tanks".

SABIC, ExxonMobil explore development of US Gulf Coast petchem complex -  Saudi Arabian Basic Industries Corp. (SABIC) and ExxonMobil Corp. affiliate ExxonMobil Chemical Co. are exploring potential development of a jointly owned grassroots petrochemical complex to be built at the US Gulf Coast. If developed, the project—which would include a steam cracker and derivative units—would be built in Texas or Louisiana near natural gas feedstock, ExxonMobil said. Before making final investment decisions for the project, the companies said they first plan to conduct necessary studies as well as work with state and local officials to help identify a potential site with adequate infrastructure access. Further details regarding the proposed development, including an estimated cost and timeline for construction, were not disclosed. This latest possible joint venture involving SABIC follows an announcement by the company last month that it has partnered with Saudi Aramco to conduct a joint feasibility study for development of a fully integrated crude oil-to-chemicals complex in Saudi Arabia

Analysis: Pipelines see no impact from US Tier 3 gasoline sulfur cuts -   Refiners already are taking out more of it. Gas stations will be pumping less of it. Tailpipes will be spitting out less of it -- or so the federal government hopes. As 2017 nears it is bringing broad changes to how producers such as refineries and market players manage sulfur at most parts of the US gasoline stream -- except for the nation's pipelines. Meanwhile, talk is starting to circulate among traders how the sulfur restrictions will affect cash markets. And the swaps trade in July for US Gulf Coast gasoline is pointing to stronger values for January product after the switch compared with December contracts, according to S&P Global Platts data.Officials at most major US pipelines said this month that the Tier 3 standards that appear poised to reduce sulfur in gasoline by more than half do not apply to them.The federal government is requiring that finished gasoline average 10 ppm sulfur by January 1. This happens while regulators are finalizing standards for the refinery gate at a maximum of 80 ppm sulfur and a downstream cap of 95 ppm. According to an energy glossary published by the Cornell University law school, the refinery gate is defined as the point at which refined products leave the plant. The largest impact will be seen at the refinery, where the law means a reduction of sulfur in gasoline during production. The US Environmental Protection Agency expects that the majority of the gasoline refineries impacted by the Tier 3 standards either already meet the 10 ppm sulfur requirement or will be able to come into compliance within two to three years.

First LNG vessel through Panama Canal headed to Far East - The first LNG vessel to transit the Panama Canal is headed to the Far East, two market sources said Wednesday. The Shell-controlled vessel, the 161,870 cubic meter Maran Gas Apollonia, was previously expected to deliver into Latin America. However, after entering the North Pacific Tuesday, the vessel is holding a bearing of 287 degrees, headed toward East Asia, according to cFlow, Platts' trade-flow software. According to one trading source and another market source, the US-sourced cargo will be delivered to a terminal in the Far East.The vessel loaded at the Cheniere-operated Sabine Pass liquefaction facility in the US Gulf Coast on July 19 and entered the Panama Canal at the Port of Colon on Monday. This would be the first cargo from the US Gulf Coast to land in East Asia. Previous cargoes from Sabine Pass have been delivered to Europe, the Middle East, South America and South Asia, with the majority of cargoes going to South America. Shell has annual offtake of 3.5 million mt from Sabine Pass Train 1.

Updated Panama Canal opens premium Asian markets to US LNG - The Barrel Blog: It has been quite a year for the US LNG industry. In February, Cheniere’s Sabine Pass LNG terminal exported the continental US’ first commercial cargo of LNG. Since February, Cheniere’s Train 1 at Sabine Pass, the only fully commissioned operating US LNG export terminal, has exported 19 cargoes to eight different nations on three continents. While South America has so far received more US LNG cargoes than any other region, the re-opening of the newly expanded Panama Canal could drive new competition from North Asian markets. While many expected the majority of Cheniere’s cargoes to end up on Europe, ten of the first 16 cargoes (three are out at sea) have delivered into South America, specifically Brazil, Chile and Argentina. Only two cargoes have delivered into Europe.  Cheniere’s first cargo was delivered to Rio de Janeiro, Brazil’s furthest regasification terminal from Sabine Pass. Depending on what terminal you deliver into Brazil, shipping a cargo of LNG from the US Gulf Coast can take between 11 and 16 days. Delivery into either of Argentina’s two terminals takes roughly 21 days.The expanded Panama Canal will allow US LNG producers to deliver their cargoes to select destinations in South America and Asia faster and cheaper. Chile is a good example: when travelling around the southern tip of South America, an LNG vessel departing from Sabine Pass must travel 9,507 nautical miles over 30 days to deliver into Chile’s Mejillones terminal. Through the Panama Canal, the trip is cut down to just 3,607 nautical miles, lasting about 11 days.A shorter trip to North Asia through the Panama Canal means South American LNG importers will now face new competition for US LNG supply. Before the opening of the Panama Canal, the idea of sending a cargo of US LNG to North Asia seemed like a pretty far off idea. Via the Suez Canal, a US Gulf Coast laden LNG vessel must travel around 47 days and 14,500 miles to reach Tokyo Bay. Around the Cape of Good Hope, the trip is 15,689 nautical miles, lasting 50 days. Through the Panama Canal, the trip is cut down to 29 days and a distance of 9,214 nautical miles. From a distance and time perspective, this is significant.

Vermilion sues oil and gas companies over coastal damage (AP) — Vermilion Parish is suing dozens of oil and natural gas companies over damage the parish’s district attorney says drilling caused to the coast. District Attorney Keith Stutes filed the lawsuit Thursday in state court. Vermilion is the fourth parish to file suit against oil and gas companies over such damage claims. The suits accuse oil and gas companies of violating coastal permits or not obtaining permits when they dug oil access canals and dumped toxic waste into pits. The oil industry dismisses the suits as being without merit and says companies have followed the rules. Earlier this year, Gov. John Bel Edwards and Louisiana Attorney General Jeff Landry intervened in the suits. Edwards has urged the industry to reach a global settlement over the claims.

Coast Guard: 4,200 gallon oil spill in south Louisiana (AP) — The Coast Guard says about 4,200 gallons of crude oil has leaked from an abandoned oil pipeline near marshland in southeast Louisiana. A Tuesday news release from the Coast Guard says the leak was reported and stopped Monday. The line belongs to Hilcorp Energy of Houston. A company spokesman said he would have more information on the leak later Tuesday. The Coast Guard says Hilcorp has contracted with an organization to clean up the spill. Coast Guard Petty Officer Lora Ratliff says the leak happened at the edge of marshland along Lake Grand Ecaille (eh-KY’-uh), in an area of open water and coastal marshes roughly 60 miles southeast of New Orleans.

Pioneer Says Some US Fracking Costs Competitive with Saudis  (Reuters) - Improved fracking techniques have helped cut Pioneer Natural Resources Co's production costs in the Permian Basin to about $2 a barrel, low enough to compete with oil rival Saudi Arabia, CEO Scott Sheffield said on Thursday. The comments from Sheffield, who is retiring soon, were perhaps the most concrete sign yet that the fittest U.S. shale oil producers will survive the price crash that started in mid-2014 when Saudi Arabia and OPEC moved to pump heavily to win back market share from higher-cost producers. Dozens of shale companies, many with marginal assets, have filed for credit protection in the biggest wave of corporate bankruptcies since the telecoms crash of the early 2000s. Sheffield said high costs would continue to make U.S. shale plays outside the Permian basin relatively less competitive. On Pioneer's second-quarter results call, Sheffield said that, excluding taxes, production costs have fallen to $2.25 a barrel on horizontal wells in the Permian Basin of West Texas, so it is nearly on even footing with low-cost producers of conventional oil. "Definitely we can compete with anything that Saudi Arabia has," he said. "My firm belief is the Permian is going to be the only driver of long-term oil growth in this country. And it's going to grow on up to about 5 million barrels a day from 2 million barrels," even in a $55 per barrel price environment, he added. Oil traded near $50 a barrel for much of the second quarter but is currently around $42. Pioneer's shares were up more than 3 percent on Thursday at $155.91 each. Sheffield said other U.S. shale plays, notably the Bakken in North Dakota and the Eagle Ford in South Texas, may not be able to weather the downturn as well given their higher costs.

Did CLR Just Report A Long Lateral In Oklahoma Producing In Excess Of 70,000 Bbls Of Oil In First Month Of Production? -- July 25, 2016 - The STACK story in Oklahoma is getting fairly interesting. Harold Hamm was the first to really talk about it, along with SCOOP. Then Mike Filloon picked up on it. Right now, the onshore tight oil plays in order of excitement: the STACK, the Permian, maybe the Niobrara is in the mix, the Bakken, and finally, the Eagle Ford. On July 19, 2016, Devon reported its record Meramec well in STACK: In the overpressured oil window in southwest Kingfisher County, the Pony Express 27-1H well, drilled with a 5,000-ft lateral, recorded a 30-day average rate of 2,100 boe/d, 70% oil.  I suppose, 0.7 x 2,100 = 44,000 bbls of oil / over the first month (30 days). EOG, others have reported similar wells in the Bakken but generally it seems the better Bakken wells are running 12,000 to 20,000 bbls oil / month in the first two or three months of production. Now CLR is reporting its record Meramec well in STACK.  On May 17, 2016, CLR announced .... the completion of an industry record well in the over-pressured oil window of Oklahoma's STACK play. The Verona 1-23-14XH flowed at an initial 24-hour test rate of 3,339 barrels of oil equivalent per day, comprised of 2,345 barrels of oil, or 70% of production, and 6.0 million cubic feet of 1,370-Btu natural gas (British thermal units). The Verona is producing from the Meramec reservoir through a 9,700-foot lateral at a flowing casing pressure of approximately 2,400 psi, on a 34/64-inch choke. Note:

  • the Devon well was a short lateral, a 5,000-ft lateral: 2,100 boepd over 30 days, first month
  • the CLR well was a long lateral, a 9,700-ft lateral: 3,339 boepd over 30 days, first month

Again, I suppose, 0.7 x 3,339 = 70,000 bbls of oil / over the first month (30 days).

An Oil Pipeline Nearly As Long As Keystone XL Has Been Fully Approved  -- Despite several months of heavy opposition, an oil pipeline slated to cut through four Midwestern states has all the regulatory permits it needs for full build-out.  The U.S. Army Corps of Engineers gave the final blessing to the Dakota Access pipeline on Tuesday. Developers now have the last set of permits they need to build through the small portion of federal land the line crosses, which includes major waterways like the Mississippi and the Missouri rivers. The so-called Bakken pipeline goes through mostly state and private land in North Dakota, South Dakota, Illinois, and Iowa. It received the last state permit in March. Construction has been ongoing in some areas, although some landowners have pending court cases as they object to the eminent domain powers the company got.  Tribes too opposed the project, claiming the pipeline would harm wildlife and Sioux sacred land in northwest Iowa. The Army Corps of Engineers delayed their permits in part to review how sacred land could be avoided, and concluded the line would run underneath. The final set of permits approved relate to crossing waterways. The pipeline will transport up to 570,000 barrels of sweet crude oil per day from North Dakota’s oil-rich Bakken Formation, to a market hub near Patoka, Illinois. Critics have long said the pipeline could severely harm thousands of miles of fertile farmland, forests, and rivers if a spill were to occur. Federal agencies have said the Bakken Pipeline avoids “critical habitat.” But Dakota Access, a subsidiary of Dallas-based Energy Transfer Partners, says it will use state-of-the-art monitoring equipment and shut-off valves. Personnel will be stationed along the more than 1,150-mile pipeline for further support. Yet U.S. pipelines spilled three times as much crude oil as trains over the period of 2004 to 2012, according to a recent studyby the International Energy Agency.

Standing Rock Sioux sues Corps over oil pipeline permits (AP) — The Standing Rock Sioux Tribe is suing federal regulators for approving permits for a $3.8 billion pipeline that will move oil from North Dakota to Illinois. Tribal officials filed the lawsuit Wednesday against the U.S. Army Corps of Engineers. The Corps issued permits for the project on Tuesday. The Standing Rock tribe opposes the Dakota Access Pipeline, which is planned by Dallas-based Energy Transfer Partners. The tribe says it fears a spill could contaminate drinking water on its reservation, which straddles the North Dakota-South Dakota border. The tribe also says in court documents that the project threatens sacred sites and violates federal laws, including the National Historic Preservation Act. Corps spokeswoman Eileen Williamson says the agency’s review of the pipeline found “no significant impacts to the environment or historic properties.”

Crude Slump, Pipeline Expansion Mark End of U.S. Oil-Train Boom - WSJ: The oil-train boom is waning almost as quickly as it began. Rail became a major way to move crude after companies began unlocking new bounties of oil from shale formations, with volumes rising from almost nothing in 2009 to more than one million barrels a day by 2014, according to the U.S. Energy Information Administration. But those numbers began falling after oil prices started tumbling two years ago, and aren’t projected to recover anytime soon. In April, just 430,000 barrels of oil rode the rails each day, according to the latest federal figures.Some of the decline came from a drop in U.S. oil production, but oil and rail executives say the drop-off may be permanent. “At least some portion, and it could be a pretty large portion,” of the rail business won’t return, said Union Pacific Chief Executive Lance Fritz. More pipelines have begun reaching North Dakota and other shale regions, giving producers a cheaper way to move their oil to market. Also, a string of fiery crude-freight-train derailments—including one in Lac Mégantic, Quebec, that killed 47 people in 2013—have prompted a host of new and expensive regulations, and fueled opposition that has helped delay major rail projects on the West Coast, where a dearth of pipelines makes rail useful. Regulators have mandated new safer tank cars, and older tank cars are being phased out—adding to future costs for transporting oil. The changes are evident in North Dakota, once the epicenter of the crude-by-rail trend. Oil output from the state’s Bakken Shale formation has fallen by 180,000 barrels a day from its 2014 peak. Meanwhile, pipeline takeaway capacity has more than doubled since 2010.  Enough pipeline capacity is coming online to replace all of the current volume BNSF Railway Co. is shipping out of North Dakota, said David Garin, the railroad’s group vice president of industrial products. BNSF used to transport as many as 12 trains daily filled with crude primarily from North Dakota’s Bakken Shale, carrying about 70% of all rail traffic out of the area. Now it is down to about five a day.

At Oil Industry Funded DNC Event, Surprising Turn: Protests, Ex-Governor Admits "Mistake" Over Fracking - At an oil-industry sponsored event during this week's Democratic National Convention, all did not go as planners may have hoped.  The event was sponsored by, an initiative by the American Petroleum Institute, the oil and gas industry's trade association, and featured some of the Democratic party's most ardent supporters of fracking, including Colorado Governor John Hickenlooper. But protesters with an anti-fracking message repeatedly disrupted the panel and one of the gas industry's best-known cheerleaders, former Pennsylvania governor Ed Rendell, admitted he “made a mistake” in failing to adequately regulate shale gas extraction. The first politician to speak was Colorado's Gov. Hickenlooper — a man who once staged an event where he drank “fracking fluid” (actually CleanStim, a Halliburton fluid made using food-grade additives — the recipe for most frac fluid is proprietary with its secrecy fiercely guarded by industry advocates). Mr. Hickenlooper, long-rumored to be on the Clinton administration's list of potential cabinet members — including a potential position as the Secretary of the Interior where he would hold sway over drilling on federal and American Indian lands — told the crowd at the Politico event that he had little interest in a national-level position. “[I]t’s pretty unlikely I would take a cabinet position to be very blunt,” he told the crowd.

US oil, gas applications could drop 40 percent -- U.S. officials say applications to drill for oil and gas on federal and Indian lands are expected to decrease 40 percent in coming years versus their historical average. The projection comes as cheap prices have curtailed domestic energy exploration, driving down state and federal revenue. The U.S. Bureau of Land Management on Thursday will announce a proposal for all drilling applications to be filed online, in an effort to streamline the approval process. The move follows years of criticism from the energy sector over the Obama administration’s handling of drilling applications. Industry groups say lengthy delays drive up costs. Bureau spokeswoman Bev Winston says the move to online permitting will allow 90 percent of applications to be completed within 115 days. The average time in 2015 was 220 days.

Advocates seek more disclosure on fracking chemicals - (AP) — Landowners, environmentalists and health advocates petitioned Montana regulators on Tuesday to require companies to more fully divulge which fracking chemicals they use to produce oil and gas. Dozens of chemicals, some of them hazardous to human health and the environment, are used as part of the process technically known as hydraulic fracturing, in which millions of gallons of fluid are pumped deep underground to release oil and gas trapped in shale or other rock formations.  A 2011 state rule allows companies to conceal from public scrutiny any chemicals they consider to be trade secrets. Officials can request the full ingredients list in the event of a spill or release of the fluids. The rule also allows medical professionals to request the information for diagnosis or emergency treatment because of chemical exposure. But critics say the trade-secrets exception represents an unlawful loophole, violating the public's right to know about chemicals that can contaminate groundwater and pollute the air. The oil and gas industry is set to oppose any rule change.

California Sunset - Radical Shifts in the Golden State's Power and Gas Markets - Part 2 -- After averaging more than a nickel below Henry Hub all this year, the California Border natural gas price spiked to 66 cents/MMbtu above Henry on Friday. This kind of price volatility is no surprise to anyone following the radical shifts in California energy markets, starting five years ago when the state legislature enacted its 33%-by-2020 renewable portfolio standard (RPS) law. By mid-2015, more than 14,000 MW of new solar and wind power had pulled down gas demand in California to the point that natural gas prices at the SoCal Border were averaging a negative basis to Henry Hub. Still not satisfied, last year California legislators voted to establish a 50% renewables target for 2030. On top of it all, the West Coast was coming up on a La Niña year that would bring more rain –– and hydroelectric generation –– to the Pacific Northwest and eventually into California. With all that renewable power (solar, wind and hydro), California seemed headed for an unprecedented period of low gas prices, but it did not turn out to be so simple. In today’s blog, we continue our look at California’s power and gas markets with the events and drivers that shaped late 2015 and the first six-plus months of 2016, and consider what’s to come.

NYMEX September gas settles at $2.873/MMBtu, up 21.3 cents - Natural Gas | Platts News Article & Story: On its first day as the front-month contract, the NYMEX September natural gas futures contract jumped 21.3 cents to $2.873/MMBtu after bullish gas storage data from the US Energy Information Administration. According to the EIA, working gas in storage for the week that ended Friday was 3.294 Tcf, a net build of 17 Bcf from the previous week. Stocks were 436 Bcf above last year at this time and 524 Bcf above the five-year average of 2.770 Tcf. EIA historical data showed that last year at this time, the injection was 49 Bcf. This week's reported injection was below analyst expectations estimating a build of 27 Bcf. In fact, the South-Central region this week showed a net pull of 18 Bcf as every other region except the Pacific showed net week-on-week injections. The Pacific region was flat with the prior week.Weather continues to be a driving factor in the prompt-month's direction. Pira Energy's Teri Viswanath in an interview mentioned that weather fundamentals surrounding storage activity are conducive to possibly a net withdrawal to be reported next week before a turnaround to net builds. In its latest six- to 10-day forecast, National Weather Service models remain relatively unchanged, showing the eastern two-thirds of the US holding at above-normal weather patterns. Areas of the Pacific Northwest and deep Southwest can still expect below-normal temperatures. Eight to 14 days out, NWS models turn slightly warmer as the area of above-normal temperatures begins to extend its reach into larger parts of the Southwest than previously expected. The September contract traded in a range of $2.651-$2.893/MMBtu Thursday.

Cities turn to local action to block oil trains (AP) — As crude oil trains began rolling through its downtown a few years ago, Spokane was among the first cities to pass a resolution calling for stronger federal safety regulations. But when a mile-long train derailed in the scenic Columbia River Gorge along the Oregon-Washington border last month — after earlier passing through this major railroad hub in eastern Washington — some city leaders said they couldn’t wait for tougher federal protections. This week the Spokane City Council decided 6-0 to ask voters in November whether the city should prohibit the shipment of crude oil or coal by rail. The ballot measure, if approved, would make rail shipments of crude oil or coal a civil infraction, punishable by a fine of up to $261 per tank car. Spokane is certain to face a steep uphill legal fight, since the federal government regulates railroad operations and safety. Even councilmembers expect the matter to end up in court, though some say it’s worth putting to voters. Main rail lines converge in Spokane and there’s no realistic alternative route, BNSF Railway spokesman Gus Melonas said. “There have been a distressing number of incidents in the U.S. and Canada with oil trains derailing or exploding, sometimes with catastrophic consequences, so cities certainly have a strong reason to regulate this kind of traffic,” said Michael Gerrard, a professor and director of the Sabin Center for Climate Change Law at Columbia University. “Unfortunately, the jurisdiction over it is firmly centered on the federal government.”

The Donald Trump Coal Plan Vs. The Donald Trump Fracking Plan: The ambitious pro-coal plan of US presidential candidate Donald Trump has been on full display during this week’s Republican National Convention, but leave it to that pesky meddling EPA to put a damper on the party. On Tuesday, the same day that US Senator Shelley Moore Capito (R-WV) spoke to the convention in support of the coal industry, a federal court issued a ruling that upheld the EPA’s veto of the notorious Spruce No. 1 mine in her home state. However, all is not lost. The Spruce decision may rile up Capito and other pro-coal Trump supporters, but it will help provide a competitive boost for Trump’s other favorite fossil sector, the natural gas fracking industry.  Industry analysts widely agree that coal consumption in the US has been declining in recent years, primarily because of competition from low cost natural gas for electricity generation. Renewable sources have been a far less significant factor, and they are only just beginning to weigh in more.  Low cost gas is a side effect of the domestic shale fracking boom, which was touched off by a loophole in environmental regulations created under the Bush Administration. So, blame President Bush for the decline in domestic coal consumption. The loophole has crippled the Obama Administration’s efforts to bring the fracking industry under the regulatory umbrella of the EPA, and this lack of oversight has helped to keep gas costs down.  Coal supporters like Capito have been especially fond of nailing President Obama’s energy policies for the decline of coal in West Virginia and other states in the Appalachia region, but the fact is that Appalachian coal faces a triple whammy. In addition to new competition from natural gas for the domestic market, it also has to compete with coal from Wyoming’s Powder River basin, and compete globally with Australia and other coal-exporting countries.

High pressure water drilling touted as an environmentally friendly replacement for fracking - Research undertaken at the Australian industry research outfit, CRCMining, into more environmentally friendly oil and gas drilling is ready to be commercialised. The new water-jet technology can replace traditional fracking in which water, sand and chemicals are pumped into geological structures, under high pressure, to fracture the rock and release recoverable oil and gas. The patented technology is owned by V2H International and its Australian arm is already rolling out the technology. CEO Darren Rice said the technology could be used to access all forms of unconventional oil and gas, but he saw it as a direct competitor to hydraulic fracturing in the coal seam gas sector. "It is much more environmentally friendly, it uses about 5 per cent of the amount of water CSG wells need and it is also much cheaper to drill wells this way," he said. "Instead of cracking (fracturing) the host rock, as in fracking, we drill directly into the rock using high pressure water."Unlike fracking, where you don't actually have control of where the fracked area extends to, with this system we can go down to within 3 inches of where we want to be in a well. "We can ensure that drilling with this system we never go near a water table or an aquifer." Mr Rice said the method would prevent the possibility of gas migrating into water bodies, a concern often voiced by those against fracking.

Oil Bust Endures For Big Oil As Refining Margins Deteriorate -- Second quarter earnings season is underway and BP was the first oil major to kick off the fun.The British oil giant reported its third consecutive quarterly loss, although much of that was due to big charge related to its disastrous 2010 Deepwater Horizon spill. BP said it lost $2.25 billion in the second quarter, which is an improvement over the $6.27 billion loss it reported a year earlier. The loss was made worse by the $5.2 billion pretax charge from the 2010 disaster, which brought the oil major’s total bill for Deepwater Horizon up to a ghastly $61.6 billion. When the one-time charges are excluded, BP reported a $720 million replacement cost profit (similar to net profit), which is down 45 percent from its $1.31 billion earnings from the second quarter in 2015. But one interesting takeaway from BP’s earnings is how poor the second quarter was for the downstream sector. The refining units at the oil majors have been a rare silver lining during most of the two-year downturn in oil prices, offsetting the upstream losses from low oil prices. But this year refining margins have collapsed amid oversupply while inventories of gasoline and other refined products have surged. Refining margins have declined to their lowest level since 2010 as a result.The problem for the oil majors will be compounded if WTI and Brent fall back again. Oil prices are down below $45 per barrel this week, down from over $50 per barrel in June. Only ExxonMobil reported profitable earnings from its upstream unit in recent quarters – all of the other oil majors saw their upstream units in the red, with their downstream assets offsetting some of the losses.

Energy company BP says 2Q earnings fell 45 percent (AP) — BP’s second-quarter earnings fell 45 percent as lower oil prices hit the British energy company. Underlying replacement cost profit, which excludes one-time items and fluctuations in the value of inventories, fell to $720 million from $1.3 billion in the same quarter a year earlier, the company said in a statement released Tuesday. BP’s net loss narrowed to $1.4 billion from $5.8 billion. BP took a pre-tax charge of $5.2 billion in the quarter for costs related to the Deepwater Horizon disaster in 2010. The company sought to draw a line under the incident earlier this month, saying it estimated the final pre-tax cost of the spill — including fines, litigation and environmental costs — at $61.6 billion. The statement marked an important milestone for BP as it tries to persuade investors that the years of retrenchment have ended and it is ready to grow — despite oil prices hovering below $50 a barrel. “The sigh of relief emanating from BP HQ is almost palpable as the Gulf of Mexico spill is finally consigned to the history books,” said Richard Hunter, head of research at Wilson King Investment Management. “This is not to say that the challenges are over, not least of which is an underlying oil price still markedly short of the level which would provide comfort for the company.” Oil companies have rushed to cut costs and curtail investment after oil prices fell to a 12-year low in January. Brent crude, the benchmark for international oil, averaged $46 a barrel in the second quarter, down from $62 a barrel a year earlier, according to BP. The price rebounded from the first quarter when Brent crude averaged $34 a barrel.

BP’s Profit Plummets To $720M On Weak Refining Margins, Oil Prices  - BP Plc reported on Tuesday a profit of US$720 million for the second quarter, down from US$1.3 billion for the second quarter of 2015, citing lower oil and gas prices, and significantly lower refining margins. The US$720-million underlying replacement cost profit, BP’s definition of net profit, is US$120 million below an analyst consensus provided by the company and lower than the US$819-million estimate of 13 analysts polled by Bloomberg. The Brent price was US$46 on average in the second quarter this year, up from US$34 in the first quarter, but still well below the US$62 average in the second quarter of 2015. Despite the fact that refining margins improved from the first quarter, they were at their weakest for a second quarter since 2010, BP noted. The downstream business booked an underlying pre-tax replacement cost profit of US$1.5 billion, down from US$1.9 billion in the second quarter last year, as significantly weaker refining margins more than offset the benefits of lower costs and stronger fuels marketing performance, BP said. For the first half of 2016, the group’s underlying replacement cost profit fell to US$1.252 billion from US$3.89 billion, chiefly due to lower oil and gas realizations on the upstream result. Organic capital expenditure came in at US$7.9 billion, BP said, expecting full-year 2016 capex to be below US$17 billion. Upon announcing the first-quarter results in April, BP said it expected this year’s capex at around US$17 billion.

BP sees 2016 capital spending below target; Q2 oil, gas production slips - Oil | Platts News Article & Story: BP said Tuesday that its oil and gas production fell year on year during the second quarter of 2016 but that it was on track with further spending cuts and expected capital spending to come in below budget this year. Excluding BP's 20% share of Russia's Rosneft, its upstream production was 2.09 million b/d of oil equivalent in Q2, 1% lower than a year earlier, mainly due to higher maintenance. Looking ahead, BP said it expects Q3 production to be lower than in Q2 due to seasonal maintenance and an outage at the Pascagoula gas processing plant in the Gulf of Mexico. BP has said that it sees full-year 2016 underlying production to be broadly flat from 2015's 2.26 million boe/d, excluding Russia.The oil major said it was making progress with efforts to slash costs to ride out lower oil prices. BP said its organic capital expenditure for the first half of 2016 was $7.9 billion and that it now expects full year 2016 capital expenditure to be below $17 billion. Previous guidance was for 2016 capex of around $17 billion. "We are delivering significant improvements to the business that will stick at any oil price. We are now well down the path of transforming our business to compete, whatever the future holds," CEO Bob Dudley said in a statement. BP reported an underlying replacement cost profit for the quarter of $720 million, down from $1.3 billion for Q2 2015. BP reported a $1.4 billion loss for the quarter, however, after taking a $2.8 billion one-off charge including a further charge for Gulf of Mexico oil spill liabilities.

ConocoPhillips reports larger-than-expected EPS loss, reduces spending plans: ConocoPhillips on Thursday reported a wider-than-expected quarterly loss as the company lowered its planned capital expenditures for the year but increased its production forecast for 2016. Share prices were up 1.6 percent. They had initially declined following the report. For the second quarter, ConocoPhillips reported a loss of 86 cents per share, or $1.1 billion, Analysts expected a loss of 61 cents a share, according to Thomson Reuters. The report marks the fifth-straight quarterly profit loss for the Houston-based company amid a protracted price rout. ConocoPhillips reported a loss of 15 cents per share, or $179 million, in the year ago period.The world's largest independent exploration and production company further lowered its capital expenditure plan for 2016 to $5.5 billion from a previously stated $5.7 million. It had lowered its guidance in each of the last two quarters. Still, the company increased its full-year production guidance from 1.540 million barrels of oil equivalent per day to 1.570 million. In a note, Wells Fargo said the reduced capital and operating expenses and higher-than-expected operating cash flow — $1.23 billion versus Wells' projection for $1.14 billion — compensated for the earnings miss.

Exxon reports smallest profit since 1999 (AP) — Lower oil prices continue to punish Exxon Mobil Corp., which reported its weakest quarterly profit in nearly 17 years. Exxon still earned $1.7 billion in the second quarter. It was, however, down 59 percent from a year ago, and per share income missed Wall Street expectations. The energy giant cited lower prices for oil and gas and weaker margins from its refining operations. Chairman and CEO Rex Tillerson said Friday that the results “reflect a volatile industry environment.” The company is cutting exploration spending to manage through the lower prices. Exxon shares had climbed nearly 30 percent since late January as crude prices rallied from a deep slump. But more recently oil prices have fallen back due to high inventories and the continued sluggish global economy — this week, U.S. oil hit a three-month low, and Exxon shares lost 4 percent through Thursday’s close. Exxon’s report followed weak second-quarter results from BP and Shell. While oil companies are seeing profits shrink, consumers are enjoying the benefit of cheaper energy. The average U.S. price for a gallon of regular gasoline stood at $2.14 on Friday, the lowest price since April, according to auto club AAA. Gasoline prices are skidding because of high inventories. The decline in pump prices defies the usual pattern of higher prices during summer, when people drive more. Motorists are filling up on the cheapest July gasoline in 12 years, the auto club says. Exxon’s net income was lower than the $1.8 billion it earned in the first quarter and the Texas-based company’s smallest profit since the third quarter of 1999, when it earned $1.5 billion. The profit equaled 41 cents per share, well below the 64 cents per share forecast from 21 analysts surveyed by FactSet. Exxon did not exclude any one-time costs from the per share calculation.

ExxonMobil earnings badly miss expectations as profits sink 59% -- ExxonMobil reported reported its quarterly profit fell nearly 60 percent from a year ago as commodity prices remained low and its refining margins were weak. The world's largest publicly traded integrated oil company earned $1.7 billion, or an adjusted 41 cents per share in the second quarter, compared with $4.2 billion, or $1 per share, in the year ago period. Analysts polled by Thomson Reuters had expected earnings per share of 64 cents. The stock was 2.6 percent lower in premarket trading (See what shares are doing now.) "While our financial results reflect a volatile industry environment, ExxonMobil remains focused on business fundamentals, cost discipline and advancing selective new investments across the value chain to extend our competitive advantage," CEO Rex Tillerson said in a statement. Revenues were $57.694 billion, versus $74.11 billion in the second quarter of 2015. Earnings in ExxonMobil's upstream exploration and production business fell by $1.7 billion as the company's liquids and natural gas products fetched a lower price. The Irving, Texas-based company produced 4 million barrels of oil equivalent per day, with liquids output up 1.7 percent and natural gas production down 3.6 percent. Downstream earnings were down $681 million, due to weaker refining margins. Refiners have seen their profit margins squeezed this year as prices rise for crude oil, the feedstock for gasoline. U.S. crude prices rebounded about 85 percent from the lows of January through the end of the second quarter.

OilPrice Intelligence Report: Big Oil Struggles To Churn Out A Profit -- Rough second quarter earnings. The oil industry made headlines this week with their second quarter earnings, revealing painful numbers from the three-month period that saw shrinking refining margins even while oil prices rose. The 80 percent rally in oil prices helped to bring some revenues back during the quarter, but oil prices are still very low compared to previous years. The majors all held onto their dividends, but that comes at the cost of rising debt. They are biding their time for now, cutting spending, selling assets, and taking on more leverage, hoping to ride out the storm. By and large, most companies disappointed, and saw their share prices tumble after reporting. Here is a quick rundown of second quarter earnings from some of the top oil companies.
•    Eni (NYSE: E): Q2 EPS of -€0.27
•    ExxonMobil (NYSE: XOM): Q2 EPS of $0.41 (misses by $0.23)
•    Chevron (NYSE: CVX): Q2 EPS of -$0.78 (misses by $1.10)
•    ConocoPhillips (NYSE: COP) Q2 EPS of -$0.79 (misses by $0.18)
•    Total (NYSE: TOT) Q2 EPS of $0.90 (beats by $0.16)
•    Royal Dutch Shell (NYSE: RDS.A) Q2 EPS of $0.13
•    BP (NYSE: BP): Q2 EPS of $0.23 (misses by $0.05)
•    Pioneer Natural Resources (NYSE: PXD): Q2 EPS of -$0.22 (beats by $0.12)
•    Suncor Energy (NYSE: SU) Q2 EPS of -$0.36 (misses by $0.15)
•    Anadarko Petroleum (NYSE: APC) Q2 EPS -$0.60 (beats by $0.20)

Oil-Price Rout Casts Shadow Over Earnings in Energy Sector - WSJ: —After two years of spending cuts, canceled projects and tens of thousands of layoffs, Europe’s biggest energy companies are still struggling to cope with a prolonged oil-price rout. Royal Dutch Shell Thursday reported a 93% drop in profit and rocketing debt for its most recent quarter, sending shares down sharply. Smaller peers such as France’s Total and Spain’s Repsol also booked lower profits Thursday, while rivals BP and Statoil announced similarly grim results earlier in the week. The sector’s second quarter results show how difficult it is for companies built to spend billions of dollars pumping $100-a-barrel oil to adapt to a world where oil now sells for less than half that. Since mid-2014, the oil price has dropped by some 60%. “Lower oil prices do continue to be a significant challenge across the business,” Shell Chief Executive Ben Van Beurden said Thursday on a conference call. Shell’s shares fell more than 4% after the Anglo-Dutch oil giant reported declines across its business. Weaker oil prices, poor refinery profits and high charges stemming from Shell’s $54 billion acquisition of BG Group PLC, which completed in February, all dragged down results. While the BG deal helped boost Shell’s oil and natural-gas production by nearly a third in the second quarter from a year earlier, the prices it received for its products were a third lower. Shell’s profit on a current-cost-of supplies basis—a measure similar to the net income that U.S. oil companies report—was $239 million, down from $3.36 billion a year earlier.

KKR looks to unload fracking firm at a steep discount - One of Henry Kravis’ big, bad energy bets is looking even worse. Suitors for bankrupt Samson Resources are seeking to pick up pieces at a steep discount to the $7.2 billion the fracking giant fetched in a buyout led by Kravis’ KKR in 2011, The Post has learned. Preliminary bids for all the pieces of the shale oil firm total roughly $1.2 billion, or less than a quarter of its previous valuation, according to two sources. The $1.2 billion figure doesn’t include the $300 million in cash Samson has on its books. Investors aiming to scoop up Samson and other energy assets at discounted prices expect natural gas prices to stay relatively low despite signs the prolonged glut is easing. “It’s not a crazy valuation,” said one buyer of distressed energy assets. “I think there is not a high ceiling on gas.” Natural gas prices shouldn’t go much above $3.50/MMBtu because of the huge reserves in the Marcellus shale region that includes Ohio, Pennsylvania and West Virginia, one source said. Samson declined to comment. The Tulsa, Okla.-based company’s senior lenders, including JPMorgan and Bank of America, took possession of Samson after it filed for bankruptcy last year. The bankruptcy wiped out the $4.1 billion in cash KKR and its partners invested in the company, which drills mostly in Texas, Oklahoma and North Dakota. The $1.5 billion recovery, including Samson’s cash, would be more than its senior debt of $950 million, making those creditors whole. But it is far short of Samson’s $4.9 billion in total liabilities — leaving more junior creditors in the cold.

Anadarko, Hess CEOs say $60/b crude oil price enough to kick-start activity - Anadarko Petroleum and Hess Corporation see a $60/b crude oil price as sufficient to begin accelerating activity, the pair said in separate conference calls on Wednesday. And the companies' top executives said they are looking ahead to an eventual industry recovery, although they continue to lower costs and look for ways to economize in a still-low price climate. For Anadarko, global demand drivers appear strong enough to foresee $60/b going into next year, with US production likely bottoming at 8 million b/d of crude, company CEO Al Walker said. "A sustained $60/b oil price is likely to emerge as we move into 2017 [which] will provide the necessary cash margins and cash ... improvements to encourage us to accelerate activity," Walker said."We think the fundamentals are there to sustain" that price level next year, he added. At the same time, Walker foresees global demand growth at 1.2 million-1.4 million b/d per year through the rest of the decade, which will help boost crude prices. As for Hess, it has been driving down operational costs this year which has resulted in a lower-than-projected 2016 capital budget by $300 million, to $2.1 billion, Hess COO Greg Hill said. The company is focused on "maximizing value, not volume," and has reduced its drilling program to levels that cover cash flow and other obligations at current low crude prices, which have dropped to the low $40s/b, Hill said. "When oil prices approach $60/b, we'll begin to ramp up activity, starting with the Bakken Shale," he said.

Keystone’s Death Means Record Oil Revival for Canadian Railways - Keystone was the great hope for opening U.S. markets further to Canadian crude. Now that it’s dead, the railways are going to make not just a comeback, but transport more oil than ever before. The Keystone XL pipeline was set to carry heavy Canadian crude south from Hardisty, Alberta’s oil hub, before being blocked by President Barack Obama last November, largely on environmental grounds. In a sign of what’s coming, exports by train rose 23 percent in April, the biggest year-on-year jump since September 2014, according to Canada’s National Energy Board. That’s just the beginning. Next year, with about a half dozen new projects and expansions in the oil sands, rail exports could double by the third quarter to a record, said Eric Peterson, research chief at Denver-based ARB Midstream LLC, an oil transport investor. That’s good news for USD Group LLC, Imperial Oil Ltd. and Cenovus Energy Inc., all of which invested in new rail terminals or plan on expanding older ones this year. “That production has to find an alternative source of take-away and that’s where rail comes in,” said Brad Sanders, chief commercial officer of USD Group, which plans to double capacity at its Hardisty terminal within 12 months to four trains a day, each of which could carry 65,000 barrels. “We expect from this point on that activity to grow.”

Canada to ban rail cars involved in fiery crash (AP) — Canada’s transport minister says the rail car model involved in a fiery crash that killed 47 people in Quebec three years ago will no longer be allowed to transport oil in Canada as of Nov. 1. Marc Garneau said Monday that older tankers, called DOT-111 cars, and a version jacketed with an extra layer of metal to make it stronger will be taken out of service by Nov. 1, 2016. Garneau says the new directives are for crude oil only. A runaway freight train pulling 72 crude-oil laden DOT-111s derailed and exploded on July 6, 2013, killing 47 people and flattening downtown Lac-Megantic, Quebec. Garneau said tankers carrying crude originating from the U.S. that are not up to code will be prohibited from crossing the border.

Environmentalists take aim at TransCanada pipeline project (AP) -- Environmentalists are again taking aim at the company that proposed the Keystone XL pipeline - this time for another of its projects they fear would send hundreds of supertankers laden with crude oil down the Atlantic coast to refineries in Texas and Louisiana. TransCanada is behind the Energy East Pipeline project, a 4,600-kilometer pipeline, or nearly 3,000 miles, that would carry crude oil from tar sands in Western Canada to the East Coast, where it would then be shipped to refineries along the Texas Gulf Coast. When completed, the project would carry 1.1-million barrels of crude oil every day from Alberta and Saskatchewan to refineries in Eastern Canada. . The Natural Resources Defense Council, Sierra Club and other environmental groups are concerned about potential spills of tar sands diluted bitumen along the route in Canada that goes over thousands of rivers, streams and lakes. They also warned a spill along the East Coast could prove devastating to communities that depend on tourism and fisheries and are not prepared to handle an event of this kind.The groups held a conference call Tuesday with the media, in releasing a report , "Tar Sands in the Atlantic Ocean: Transcanada's Proposed Energy East Pipeline," that lays out their case against the project. "What we have is a proposal to move nearly 300 super tankers down the eastern seaboard, and we don't have the techniques and technology to contain and clean a spill of tar sands diluted bitumen should one happen," said Anthony Swift, the Canada project director for the Natural Resources Defense Council.

Tar Sands in the Atlantic Ocean: TransCanada’s Proposed Energy East Pipeline  - TransCanada—which was thwarted in its effort to drive Keystone XL through America’s heartland—is now pursuing a project that would effectively create a waterborne tar sands pipeline that would threaten the U.S. Atlantic and Gulf coasts. This proposed Canadian pipeline, Energy East, would bring as much as 1.1 million barrels per day of mostly tar sands oil from Alberta to Canada’s eastern seaport of Saint John, New Brunswick. From there, nearly 300 supertankers per year would form a high-risk “pipeline” down the entire U.S. Eastern Seaboard, from the tip of Maine to the Florida Panhandle, around Florida’s peninsula, and on to refineries along the Gulf Coast. The tankers—representing a 300 percent increase in crude oil traffic in Nova Scotia’s ecologically critical Bay of Fundy—would pose a significant threat to endangered marine mammals and regionally critical fisheries in the form of deafening ocean noise and an increased risk of oil spills and ship strikes. Given that the National Academy of Sciences has concluded that emergency responders lack the tools to effectively contain and clean up diluted bitumen (the most common form of tar sands crude), the risk of a tar sands spill threatens vibrant and irreplaceable marine habitats all along the East Coast—along with economies that depend on them. The pipeline would also bring a significant increase in carbon pollution, equivalent to the annual emissions of as many as 54 million passenger vehicles, and lock in high-carbon infrastructure expected to operate for at least 50 years. Despite the significant risks posed by Energy East, our analysis reveals that the scope of the forthcoming environmental review by Canadian authorities is sorely lacking. In this report, we offer a series of recommendations for reforming the current regulatory review process and propose several critical safety regulations for the United States and Canada, including:

They Killed Keystone. Now What? - Opposition to TransCanada’s Keystone XL pipeline galvanized the environmental community and brought global attention to Canada’s tar sands oil industry. President Obama’s rejection of the permit was seen as a major coup for environmental activism.  But, like a high-stakes game of whack-a-mole, projects to bring tar sands oil out of Alberta keep popping up — and activists in both Canada and the United States are rallying to keep the infrastructure at bay.  There are three main projects under consideration right now that would bring millions of gallons of tar sands oil out of Canada every day. Kinder Morgan wants to expand its Northern Gateway pipeline to the west, where oil could be shipped south to California’s refineries. Enbridge is trying to increase capacity in two pipelines in Minnesota which would feed into a system carrying oil down to the Gulf Coast. And TransCanada is proposing a major pipeline to the maritime provinces in order to ship tar sands oil down the Eastern Seaboard.  There is no existing spill response plan or technology or technique that would deal with a spill of bitumen.  Oil from tar sands is incredibly heavy oil — it is very thick, tar-like. Technically known as bitumen, the petroleum product has to be diluted in order to flow through pipelines. Alberta has one of the largest bitumen deposits in the world. In fact, the Alberta tar sands produce more oil each year than the entire country uses. For this reason, and because some 90 percent of the facilities for refining the heavy oil are located in the Gulf Coast, the United States is the biggest buyer of tar sands oil.  And tar sands oil, from a climate and environmental safety perspective, is really bad.  According to the Union of Concerned Scientists, a gallon of gasoline from bitumen is responsible for 15 percent more carbon dioxide emissions than a gallon of gas from conventional oil. In addition, the energy-intensive tar sands oil extraction process uses a lot of water, which ends up in toxic man-made pools.

Next hot spot for shale drilling? Argentina - The economy in Argentina is best described as a "pendulum", going from loose economic policies in the '80s to Washington-consensus liberalisation in the '90s and back again under the Kirchner regime. Since the current president Macri took office in December 2015, he has been reversing the policies of his predecessor and has focused on boosting the economy with free-market measures through eliminating currency controls and lowering utility subsidies. In March, the government also announced a $7.50 per barrel subsidy on exported oil while Brent remained below $47.50 per barrel to attract foreign investment. Argentina's recoverable shale oil reserves are estimated at 27 billion barrels and hold the third largest shale gas and fourth-largest shale oil reserves in the world. Appearing in the spotlight is the Vaca Muerta formation with technically recoverable shale gas of 308 trillion cubic feet and 16 billion barrels of oil. The Vaca Muerta Shale spans across four provinces - Neuquén, La Pampa, Mendoza and Rio Negro and is almost double the size of the Eagle Ford shale.  Current production from the Vaca Muerta formation is about 50,000 bbl/day, an amount that is expected to double by 2018. IHS Energy research indicates that the Vaca Muerta is characterized by favourable traits such as thick, high-quality, organic-rich shale, similar to the Permian Basin. While the American consumer basks in low oil prices, the Argentinean consumer is helping to fund the oil industry. Government regulated oil prices were imposed to protect citizens from market fluctuations, although consumers currently face the reverse effect by paying a premium on Brent and WTI.

European development bank considers funding Trans Adriatic Pipeline (AP) — The European Bank for Reconstruction and Development is looking to support financially the development of the Trans Adriatic Pipeline, which plans to bring gas across the Balkans and on to Italy. President Suma Chakrabarti told Albanian Prime Minister Edi Rama during a visit Tuesday that the pipeline project was of great interest as it would help the region’s energy security and was deemed environmentally sustainable. “In the energy sector, the EBRD is well aware of the need to secure energy for Europe which is affordable and acceptable from the point of view of climate change. In this context we are positive about the Trans Adriatic Pipeline, a project that develops the three characteristics of energy security, energy access and environmental sustainability,” he told The Associated Press by email. The so-called TAP, which formally started construction in May, will run for 878 kilometers (550 miles) from Greece’s border with Turkey, through Albania and to southern Italy, including a 105-kilometer (65-mile) stretch under the Adriatic Sea. First deliveries to Europe are expected in 2020. The EBRD confirmed it has started negotiations for 500 million euros ($549 million) in direct financing and plans to attract up to 1 billion euros ($1.1 billion) from a syndicate of commercial banks. Riccardo Puliti, the bank’s energy and natural resources head, said negotiations started in April and may take 12 to 15 months.

Brazil eyes regulatory shift for natural gas industry: energy ministry -  Brazil is studying potential changes to the country's regulatory regime for natural gas that would increase competition and boost investment in the sector, a key official from the Mines and Energy Ministry said Tuesday. "We want gas to grow," Marcio Felix, the secretary for oil and natural gas at the Mines and Energy ministry, said during a natural gas seminar hosted by the Brazilian Petroleum Institute (IBP) in Rio de Janeiro. "A large country like Brazil, which is the size of a continent, also needs a large natural gas industry." The potential changes to natural gas regulations are part of a broader transformation of Brazil's oil and gas industry, driven in large part by the collapse in oil prices and a corruption scandal at state-led producer and refiner Petrobras. Low oil prices and fallout from the scandal have left Petrobras, the country's dominant player throughout the oil and natural gas supply chain, on the verge of financial ruin.The company's troubles, however, have also created opportunities for a sector that has long complained about Petrobras' dominance, according to Jorge Camargo, president of the IBP. "The crisis brings opportunities to overcome challenges and to ease a transition into a new model for the natural gas sector," Camargo said. Petrobras has embarked on a broad divestment program in response to the crises, including a dramatic reduction in the company's role in the natural gas sector, as it focuses primarily on exploration and production in the prolific subsalt region. The company is not only the country's largest producer of natural gas, but also owns a de facto monopoly on natural gas pipelines, LNG import terminals and imports of the fuel from neighboring Bolivia. But that has already started to change under the asset sales program, which is targeting divestitures of $15.1 billion in the 2015-2016 period.

Statoil to buy 66% operated interest in license off Brazil for $2.5 billion - Oil & Gas Journal: Statoil ASA has agreed to buy the 66% operated interest in the BM-S-8 offshore license in Brazil’s Santos basin held by Petroleo Brasileiro SA (Petrobras) for $2.5 billion. The license includes a substantial portion of the 2012 Carcara presalt oil discovery (OGJ Online, May 29, 2015). Statoil said it is on the geological trend of the nearby Lula field and Libra area. It has 30° API oil and associated gas “in a thick reservoir with excellent properties.” Carcara straddles BM-S-8 and open acreage to the north, which Statoil said is expected to be part of a license round in 2017. In addition to Carcara, the license “holds exploration upside.” The license is in its final exploration phase with one remaining exploration commitment well to be drilled by 2018. Statoil estimates the license has recoverable volumes up to 1.3 billion boe. Statoil said half of the purchase price will be paid after closing and the remainder paid when “certain milestones” have been met, including future unitization of Carcara. Closing is subject to partners’ and government approval. Statoil and Petrobras are also in discussions focusing on long-term cooperation in the Campos and Espirito Santo basins, and new cooperation within gas and technology projects in the Santos basin. Statoil said it has been in Brazil since 2001. The Statoil-operated Peregrino field marks 5 years of production this year (OGJ Online, June 28, 2016).

Schlumberger continues to halt work on Venezuela Lake Maracaibo rigs: source - Oil | Platts News Article & Story: Oil fields services company Schlumberger Tuesday continued to suspend work at four of six drilling platforms it operates in Lake Maracaibo, Venezuela, a union official said. Operations on platforms 102, 110, 111 and 112 in Lake Maracaibo were stopped because of the lack of payment by [Venezuelan state-owned] PDVSA, said the Lagunillas union official, who spoke on condition of anonymity. Only platforms 101 and 102 are operating. Schlumberger did not return a call for comment. On June 13, Schlumberger said it had reached an agreement with PDVSA to keep six drilling platforms operating.Schlumberger's operations vice president for Venezuela, Roy Ayllon, did not disclose details of the company's new agreement with PDVSA, but said in a PDVSA statement that payment in the national currency bolivar was allowed. Although PDVSA has announced payment agreements on some debts owed to drilling companies that control 52% of the 375 platforms in Venezuela, problems continue.

8 companies seek oil drilling rights for 3 areas off Cyprus (AP) — Cyprus’ energy minister says eight companies have formally applied to carry out exploratory oil and gas drilling in waters off the island’s southern coast. Yiorgos Lakkotrypis says six applications for a drilling license were submitted for all three blocks, or areas, that were available as part of the island nation’s third licensing round. He said the companies’ names will be announced next week. Lakkotrypis said after an application deadline expired Friday the government is “completely satisfied” with the outcome in light of the “difficult conditions” the oil and gas industry is going through. U.S. company Noble Energy, France’s Total and Italy’s Eni received drilling licenses in previous rounds. Noble discovered a gas field off Cyprus estimated to contain more than four trillion cubic feet of gas.

"Too Simple" Energy-Economy Models Give Misleading Answers -- Gail Tverberg - Does it make a difference if our models of energy and the economy are overly simple? I would argue that it depends on what we plan to use the models for. If all we want to do is determine approximately how many years in the future energy supplies will turn down, then a simple model is perfectly sufficient. But if we want to determine how we might change the current economy to make it hold up better against the forces it is facing, we need a more complex model that explains the economy’s real problems as we reach limits. We need a model that tells the correct shape of the curve, as well as the approximate timing. I suggest reading my recent post regarding complexity and its effects as background for this post. The common lay interpretation of simple models is that running out of energy supplies can be expected to be our overwhelming problem in the future. A more complete model suggests that our problems as we approach limits are likely to be quite different: growing wealth disparity, inability to maintain complex infrastructure, and growing debt problems. Energy supplies that look easy to extract will not, in fact, be available because prices will not rise high enough. These problems can be expected to change the shape of the curve of future energy consumption to one with a fairly fast decline, such as the Seneca Cliff. It is not intuitive, but complexity-related issues create a situation in which economies need to grow, or they will collapse. See my post, The Physics of Energy and the Economy. The popular idea that we extract 50% of a resource before peak, and 50% after peak will be found not to be true–much of the second 50% will stay in the ground. Some readers may be interested in a new article that I assisted in writing, relating to the role that price plays in the quantity of oil extracted. The article is called, “An oil production forecast for China considering economic limits.”  This article has been published by the academic journal Energy, and is available as a free download for 50 days.

Oil glut ‘to last for two more years’ -- The International Energy Agency estimated that there were 94 million barrels of crude in floating storage globally at the end of May.  The global oil market has a huge overhang of crude that could take up to two years to clear, according to one of the world’s top traders. Ian Taylor, chief executive of Vitol, warned that “it could take a year or two” to clear the build-up of surplus crude in onshore storage facilities or, increasingly, in floating storage aboard tankers around the world. He said: “There’s probably 500 million to 600 million barrels in the system. We are no longer sure that’s going to disappear this year.” Mr Taylor runs one of the world’s biggest physical traders of oil.

Turmoil in U.S. Gasoline Markets and the Arcane World of RINs --  The rising cost of Renewable Identification Numbers (RINs) –– ethanol credits used by refineries to prove compliance with the federal Renewable Fuel Standard –– is putting added financial pressure on the refining sector, which already is squeezed by too-high inventories and thin crack spreads. In fact, for some refiners RIN expenditures may soon be their biggest single operating cost category. (Yes, you read that right.) The cost of ethanol credits is being driven up to record levels by several factors, chief among them the concern there may not be enough to go around this year and next. And things may only get worse from there. In today’s blog, we begin a two-part examination of the 2016-17 market for RINs, a regulatory must-do that rankles and vexes most refiners and gasoline importers.

Oil Set For Bigger Drop As Historic Gasoline Glut Forces Early Switch To Winter Blends --With everyone now talking about the record gasoline glut, something which we first predicted in February is the "big threat" to oil prices, oil finally succumbed to the unprecedented imbalance in the market, not only on the crude side of the supply-chain, but more importantly in the past month, on the product side, led by both record gasoline stocks as well as soaring Chinese exports of gasoline, distillates and other refined products. To underscore this point, earlier today Morgan Stanley's Adam Longson - a prominent oil bear - released a note saying that "A refinery-driven correction is upon us." Some of his key points: Along with supply disruptions, healthy refinery margins and overly bullish sentiment towards global gasoline helped drive abnormally high crude oil demand in late 2015 and early 2016 - well beyond what product markets required.While such appetite for crude oil helped to improve crude oil statistics in some regions, it simply resulted in a market awash in product, namely gasoline. With inventories above 5Y highs in almost every region, product margins have been falling sharply. This product overhang will weigh on crude oil markets as well, just with a lag. As refinery margins continue to fall, refiners will look to cut back on utilization, leading to lower crude oil demand. Ultimately, this should lead to distressed cargoes, deeper contangos, inventory builds, and lower prices. Just as bad, the widely anticipated gasoline demand surge, which was supposed to open the gasoline inventories and provide the impetus for the next leg higher in crude oil prices, never happened. In fact, gasoline demand, according to Morgan Stanley is decelerating.

Crude Crumbles To Fresh 3-Month Lows As Hedgies Unwind Record Longs - WTI Crude (Sept) oil futures have continued their 6-day slide this morning, pressing back to a $43 handle at 3-month lows. While the seasonality, both price and oil demand, and gasoline glut remain significant overhangs, it appears a bigger driver for now is the rapid unwind of record long speculative positioning in crude markets.  As Bloomberg reports, Oil’s retreat to a three-month low this week demonstrates that surpluses in other parts of the market, most notably refined fuels like gasoline, are holding back any lasting recovery. Combined inventories held by industrialized nations of all forms of oil -- from crude to refined products to natural gas liquids -- reached a record of more than 3 billion barrels last month, data from the Paris-based International Energy Agency shows. In the U.S., gasoline stockpiles were at the highest for the time of year since 1984 as record consumption failed to drain the glut refiners created when crude was cheap, according to the Energy Information Administration. Sept 2016 has pushed back to fresh cycle lows... Tracking last year's pump-and-dump of hope perfectly. As demand is set to tumble... But, as Reuters reports, it appears the bigger driver for now is hedge funds have been liquidating their former record bullish position in crude futures and options putting downward pressure on oil prices in recent weeks. But now the liquidation of old long positions is being replaced by the establishment of new short positions as fund managers try to capitalise on the downward cycle in prices. Hedge funds and other money managers cut their net long position in Brent and WTI futures and options by 31 million barrels to 453 million in the week ending on July 19. The net bullish position has been reduced by 197 million barrels from a recent high of 650 million in the middle of May and 210 million barrels from an earlier record of 663 million at the end of April. The former emphasis on long liquidation is now being replaced by fresh short selling. In the week to July 19, long positions actually rose by 5 million barrels as some funds sought buying opportunities after prices had been battered down. But short positions increased by almost 36 million, as many more managers positioned themselves for a momentum-driven drop in prices coupled with mounting concerns about weakening demand fundamentals.

Oil Prices at Multi-month Lows on Growing Concerns About Oversupply – WSJ -  Oil prices sank to a fresh three-month low Tuesday as a glut of gasoline keeps weighing on the market. U.S. crude oil for September delivery recently fell 35 cents, or 0.8%, to $42.78 a barrel on the New York Mercantile Exchange. It traded as low as $42.36 a barrel, the lowest intraday price since April 20. Brent, the global benchmark, fell 12 cents, or 0.6%, to $44.60 a barrel on ICE Futures Europe. Oversupply concerns have sent oil into retreat throughout July, reversing a five-month rally that had sent oil above $50 a barrel. U.S. refiners have overwhelmed even record demand, and saturated international markets have supplies backing up in the U.S., too, analysts said. Despite those fears, U.S. drillers are also showing signs they’re ready to ramp up production again. They added 15 active rigs to oil fields last week, the fourth consecutive week of increases. That is a major turning point, said Bjarne Schieldrop, commodities analyst from Sweden’s SEB bank. “The revival in rig count mirrors what happened to the oil price rally in 2015,” which ended in late June and cut oil prices by half during the eight-month collapse that followed, Mr. Schieldrop said. “We had expected to see some delayed reaction in the return of shale oil due to elevated debt levels, but the data is telling a different story.” Government data last week indicated that shale-oil production was essentially flat, and many expect the growing rig count is a precursor to production growth. Germany’s Commerzbank shared those concerns and cited data from Genscape indicating the U.S. could see stocks rise by 1 million barrels this week.

Oil prices down for fourth day as glut worries weigh - Brent crude hit its lowest since May on Tuesday, falling toward $44 a barrel on concerns a long-awaited rebalancing of the market would be delayed due to excess supply. Brent crude is still up more than 60 percent from a 12-year low near $27 in January, but the rally has petered out on signs the supply glut will persist and as economic jitters raised concern about the strength of oil demand. Global benchmark Brent was trading at $44.56 a barrel by 10:08 a.m. ET (1408 GMT), down 16 cents. It fell to $44.14 intraday, the lowest since May 10. U.S. crude was down 31 cents, or 0.7 percent, at $42.82, having fallen to $42.36, its lowest since April. Britain's BP, the first oil major to report second-quarter results, on Tuesday reported lower-than-expected profit and said its refining margins were the weakest for a second quarter in six years. Record crude output from the Organization of the Petroleum Exporting Countries, a glut of refined products, and signs of more drilling activity in the United States in the face of low oil prices have added to concern about excess supply.

Faulty Data? Why The Oil Glut Could Be Much Smaller Than Believed -- The oil price rally came to a quick end in June, topping $50 per barrel but quickly falling back again. The main reason for the renewed sense of pessimism comes down to the glut of oil sitting in storage. The U.S. has been dealing with oil stocks at 80-year highs since early 2015, a metric that has become closely watched in the market for signs on whether or not supply and demand are moving closer to balance. After hitting an all-time high earlier this year, crude oil stocks began to decline in May, and although they are still above 500 million barrels, the industry has steadily drawn inventories down from their peak. A more recent worry for the oil markets are the stubbornly high levels of gasoline sitting in storage. The problem of a glut of refined products has emerged as a top concern for oil traders since prices ran into a wall of resistance at $50 per barrel and the data on gasoline stocks became gloomy. Like crude oil, gasoline inventories also hit a peak earlier this year, but instead of consistent declines, the weekly drawdowns have been anything but. Gasoline stocks have even increased four out of the past five weeks. The refined product glut has killed off the price rally. The EIA data releases are a tradition for the oil markets – the weekly publications spark movements in oil prices, whether up or down. But the tricky thing about international prices trading on these metrics is that they only encapsulate what is going on in the United States. The markets know very little about what is going on in the rest of the world. As The Wall Street Journal notes in a July 24 article, countries such as China and Russia do not report data on their storage levels. In fact, there is very little transparency on market data in much of the world. “The data itself is so inconsistent,”  “In countries like Nigeria, Brazil, Angola, it’s not trustable.”

Oil Extends Losses After Surprisingly Large Cushing Build -- With all eyes now focused on Gasoline inventories, API's report surprised with a modest draw (-420k) but a considerablyless than expected draw in Crude (-827k vs -2mm exp) and major build at Cushing (+1.4mm vs 750k exp). Crude had faded into the close after testing stops at $43, and extended losses after the API data hit. API:

  • Crude -827k (-2mm exp)
  • Cushing +1.4mm (+750k exp)
  • Gasoline -420k
  • Distillates +292k

Overall crude extended its series of drawdowns to 10 weeks but Cushing's huge build is ringing alarm bells...

Crude Carnage Continues: WTI Hits $42 Handle On Inventories, Dollar -- With WTI now down over 17% from its mid-June highs, and energy stocks just beginning to wake up to the 2015-analog collapse, fears are rising that once again low oil prices are not 'unequivocally good' for stocks or the economy. Between record speculative long positioning in futures, the fundamental strength of the dollar and surge in gasoline inventories remain the big overhangs (along with rising storage levels at Cushing as demand begins to fade seasonally). Sept 16 WTI is now down 17% from its recent highs... Back to unchanged on the year at 3 month lows... “It’s the same things that have been driving it for the past few days now, gasoline inventories haven’t declined as much as people thought they were going to,” says Michael Hewson, analyst at CMC Markets. And Energy stocks are catching down fast... Tracking last year's pump-and-dump of hope perfectly.

US crude falls below $42 on surprise stock build of 1.7M barrels: EIA: Global benchmark Brent crude was on track for the first monthly loss since January and the largest of 2016. Futures traded down $1.17, or 2.6 percent, at $43.70 a barrel by 10:39 a.m. ET (1439 GMT). U.S. West Texas Intermediate (WTI) crude fell 97 cents, or 2.2 percent, at $41.95 a barrel, breaking through a three-month low of $42.36 reached on Tuesday. Bart Melek, head of commodities strategy at TD Securities, told CNBC oil could be heading to its 200-day moving average at $40.76 per barrel. "Technicals will seek a level around $40.38, then we'll see ... the fundamental outlook is much, much better than it was six months ago. We're still looking toward $60 for year end," he said. He added that if $40 is broken, the next level would be just above $36. "Today's weakness is just part of the general belief that the market is oversupplied,"  Other analysts said they expect prices to fall further in the short term as oversupply persists while demand growth stutters.  "Falling gasoline stocks and a renewed decline in U.S. oil production would contribute to stabilizing oil prices," said Carsten Fritsch, commodities analyst at Commerzbank.  A firmer dollar has also weighed on oil prices over recent weeks. A stronger U.S. currency makes dollar-denominated commodities such as oil less expensive to buy.

Here’s the key factor pushing oil prices to $35 a barrel - After enjoying a stellar run-up, crude futures are headed south again, hovering at three-months lows. However, the fundamentals of supply and demand may not be the key reason behind the recent bout of weakness in crude futures. U.S. benchmark oil, West Texas Intermediate trading on the New York Mercantile Exchange CLU6, -2.10% has lost more than 11% of its value so far in July, as of Tuesday. Back on June 8, WTI had nearly doubled its value closing at a 2016 high of $51.03 a barrel after reaching a low of $26.21 on Feb. 11. What a difference seven weeks can make. The change in direction has industry specialists like those at Morgan Stanley pointing to “worrisome trends” and forecasting crude prices to resume a fresh decline—possibly to as low as $35 a barrel for the second half of 2016.Morgan Stanley, in a Sunday research note, argues that positive tailwinds that have underpinned the recent rise in crude prices, namely a reduction in supply and output problems, are fading. Morgan Stanley describes the headwinds for crude this way: Supply continues to return from disruptions, refined products are severely oversupplied, crude demand is falling well short of product demand, and key product demand is decelerating. Our revised below-consensus GDP outlook, macro risks and longer positioning in oil markets only add to downside risks. Morgan Stanley points out that one of key issues for crude is a severe oversupply of refined products from crude, including distillates and gasoline, while demand is waning. “Refined product glut and market share battle will weigh on crude oil. An overcorrection in crude oil demand from refiners is needed to clear product market overhangs,” researchers at Morgan Stanley, led by economist Adam Longson, wrote.

Oil Industry About To Be Burned Again By Fall In Oil Prices - Arthur Berman --U.S. rig counts have surged as oil prices sink. Capital is driving the oil markets and it enables bad behavior by producers. That is why oil prices will stay low. The oil-price rally that began in February is over. Prices rose from $26 per barrel to $51 by early June and are now below $42 (Figure 1). If they fall through $40, the next likely support level is at $36 per barrel. Most people think that fundamentals–supply and demand–drive the oil market but capital drives the market and oil prices. More than anything, rig count reflects capital flow. Many believe that oil prices drive the rig count but it is really capital flow that drives rig count and production and that affects oil prices. When oil prices fall and oil-price volatility increases, the floodgates of capital open. Every genius-investor wants to buy low and sell high. Rig count rises with fresh capital, production increases and oil prices fall (Figure 2). The weekly change in tight oil horizontal rig count is the leading indicator of capital expenditures. Price trends roughly follow the inverse path. When oil prices were around $100 per barrel in mid-2014, oil-price volatility was low. When prices fell below $90 per barrel in October 2014, oil-price volatility began to increase. When prices bottomed below $46 in January 2015, volatility peaked. Correctly believing that a price floor had been reached, investors poured capital into the markets and oil companies were flush with money to start drilling again. Prices rose to $60 per barrel by May 2015. As drilling proceeded, oil-prices began to fall as market confidence in a price recovery faded. In July 2015, prices began to fall. As they fell to near $40 per barrel by late August, price volatility increased again. Investors saw another price floor and opened their wallets.

Oil Crashes On Surprise Inventory Build, Production Rise -- Despite last night's API-reported surge in Cushing inventories, oil futures surged into this morning's DOE data on the heels of terrible durable goods data. However, a shocking build in overall crude levels (+1.67mm vs -2mm) breaking crude's record 9-week streak of draws, sent crude prices reeling. Cushing also saw a major build as did Gasoline and production rose for the 3rd week in a row. DOE:

  • Crude  +1.67mm (-2mm exp)
  • Cushing +1.11mm (+750k exp)
  • Gasoline +452k
  • Distillates -780k

This week's crude build ends the 9-week drop in overall crude inventories in a row... the longest streak of declines in US history (since 1982 Bloomberg EIA data - 8 week streaks in June 2015, Jan 2008, Sept 2004, Sept 1998)

Oil futures drop as U.S. crude supplies break 9-week streak of declines - Oil futures fell to their lowest levels in more than three months Wednesday after U.S. government data revealed the first weekly climb in domestic-crude inventories in 10 weeks, along with a surprise increase in gasoline stockpiles and a rise in total crude production. September West Texas Intermediate crude CLU6, +0.21% fell 91 cents, or 2.1%, to trade at $42.01 a barrel on the New York Mercantile Exchange. A settlement around this level would be the weakest since April 18 for a most-active contract, FactSet data show. Prices traded around $43.13 before the supply data. September Brent crude LCOU6, +0.12% London’s ICE Futures exchange dropped $1.10, or 2.5%, to $43.77 a barrel. “Look out below,” said John Macaluso, an analyst at Tyche Capital Advisors, referring to prices. The U.S. Energy Information Administration early Wednesday reported that domestic crude supplies rose by 1.7 million barrels for the week ended July 22. That was contrary to the 2.6 million-barrel decline expected by analysts polled by S&P Global Platts. The American Petroleum Institute late Tuesday reported a fall of 827,000 barrels. “With a surprising build in U.S. crude oil inventories today along with builds in Cushing, Okla., we expect prices to trade below some key technical numbers,” said Macaluso. The EIA showed a rise of 1.1 million barrels for stocks of crude oil at the storage hub. Meanwhile, “continued strength in the U.S dollar and an increase in U.S production could spell another leg lower for oil prices,” he said. Total domestic crude production rose by 21,000 barrels to 8.515 million barrels a day as output in Alaska grew, though it fell by 12,000 barrels to 8.033 million barrels a day in the lower 48 states.

US crude settles down 2.3% at at 3-month low of $41.92 per barrel: U.S crude futures settled down more than 2 percent at a three-month low on Wednesday after the U.S. government reported surprise builds in crude and gasoline inventories. Prices held their losses after the Federal Reserve announced it would leave interest rate policy unchanged, though the central bank signaled its view of the economy had improved. The oil and gas stockpile builds came despite the peak summer driving season as refiners cut production amid faltering demand and profits. U.S. commercial crude in storage rose by 1.7 million barrels to a total of 521.1 million barrels in the week through July 22, the Energy Information Administration said. Analysts had expected a draw of 2.3 million barrels. Gasoline stocks rose 452,000 barrels, compared with analysts' expectations for a 40,000-barrel increase.Global benchmark Brent crude was on track for the first monthly loss since January and the largest of 2016. Futures traded down $1.32, or 2.9 percent, at $43.55 a barrel by 2:38 p.m. ET (1838 GMT).  U.S. West Texas Intermediate (WTI) crude settled down $1, or 2.3 percent, at $41.92 a barrel, having fallen to a three-month intraday low of $41.68.

An oil price dilemma: The world may just need less fossil fuels to get by - This is not supposed to happen: a sharp rise in stocks of gasoline in the middle of the summer vacation period. The United States is the world’s biggest gas consumer and this is the time when the nation fills up, when every normal American has stuffed his kids and the dog in the back of the car for the long haul to the beach. Weak consumer demand for road fuel has broken the back of the oil-price recovery. Refineries went hell for leather in the spring, buying cheap shale oil and distilling it into gasoline in anticipation of the great summer sale bonanza. But, this year, strangely, it didn’t happen. According to the U.S. Energy Information Administration, gasoline stocks rose by almost half a million barrels last week when most analysts were predicting a sharp fall. Inventories are now 12 per cent higher than they were last year. The oil price is back on the skids; after peaking at $53 (U.S.) per barrel in June, West Texas Intermediate is below $42 and looking weak. Anyone planning a late trip to the summer cottage can count on a cheap journey as the oil companies are desperate to shift the product. It’s good consumer news to tide us over the geopolitical crises, but it may also be part of a much bigger picture; the world may just need less fossil-fuel energy to get by. It’s not just oil. China appears to have reached peak coal a decade ahead of schedule. For two consecutive years, Chinese coal consumption has shrunk, falling by 2.9 per cent in 2014 and 3.6 per cent in 2015. According to research published in Nature Geoscience, coal usage in China has already reached an inflection point, despite previous estimates that consumption would continue to rise well into the next decade. The interesting point is that coal usage is falling despite continuing strong growth in the Chinese economy; China’s gross domestic product expanded by about 7 per cent per annum in the past two years.

US Rig Count Up 1 This Week to 463 - The number of rigs exploring for oil and natural gas in the U.S. increased by one this week to 463.A year ago, 874 rigs were active. Depressed energy prices have sharply curtailed oil and gas exploration.Houston oilfield services company Baker Hughes Inc. said Friday that 374 rigs sought oil and 86 explored for natural gas this week. Three were listed as miscellaneous.Among major oil- and gas-producing states, Louisiana and New Mexico each gained two, while Colorado, Ohio, Oklahoma and Pennsylvania were up one apiece.Texas declined by three, Alaska and West Virginia by two each and Utah by one.Arkansas, California, Kansas, North Dakota and Wyoming were unchanged.The U.S. rig count peaked at 4,530 in 1981. It bottomed out in May at 404.

U.S. drillers add 3 oil rigs back to the field | Fuel Fix: U.S. drillers put three oil rigs back in the field this week, Baker Hughes said Friday, still pushing the nation’s rig count higher even as crude prices fall back toward $40 a barrel. Companies have dispatched 58 oil rigs back into the field since Baker Hughes’ oil rig count hit bottom at 316 in late May. This past week’s rise in oil rigs, while smaller than recent weekly jumps (the oil rig count climbed by 14 two weeks ago), is a sign that the earlier surge in oil prices to around $50 a barrel from $26 a barrel in February, is setting the industry in motion. Crude prices have recently fallen below $42 a barrel, but analysts say it takes a few weeks or more for domestic drilling activity to respond to rising or falling crude prices. In Texas, Baker Hughes data shows, the onshore rig count declined by 4 to 213, the state’s first drop in 11 weeks. Three rigs were taken out of the Eagle Ford Shale in South Texas, but companies added four rigs in the Permian Basin in West Texas. The overall rig count, including gas rigs, increased by 1 to 463, Baker Hughes data shows.

U.S. oil drillers add the most rigs in a month in over 2 years -Baker Hughes | Reuters: U.S. drillers this week added oil rigs for a fifth consecutive week as part of the biggest monthly rig count increase in over two years, Baker Hughes Inc said on Friday. The oilfield services provider and some analysts, however, have cast doubts on a substantial recovery in drilling this year with U.S. crude prices heading for their biggest monthly loss in a year. Drillers added three oil rigs in the week to July 29, bringing the total rig count up to 374, compared with 664 a year ago, according to the closely followed Baker Hughes weekly report.  The rig count rose by 44 during July, the most in a month since April 2014, signaling a recovery in U.S. drilling after the biggest price rout in a generation prompted a slump in rigs from a peak of 1,609 in October 2014. Drillers have returned to the well pad since U.S. crude prices tipped above $50 in early June. That is the key level that analysts and producers said would prompt their return. U.S. crude futures, however, earlier Friday slipped below $41 a barrel for the first time since April and were on track for a monthly loss of about 15 percent, pressured by persistently high inventories. "I believe oil prices in the upper $50s at a minimum are required for a sustainable recovery in North America," Baker Hughes Chief Executive Martin Craighead said on Thursday. Bigger rivals Schlumberger Ltd and Halliburton Co last week both said they expected a modest recovery in North American activity.

Oil Ends July with Worst Monthly Loss for WTI in a Year (Reuters) - Oil prices steadied on Friday after touching three-month lows amid a week-long selloff but still finished the month nearly 15 percent lower, with U.S. crude declining the most in a year because of a persistent glut. Slower economic growth and high inventories of crude and refined oil products have driven Brent and U.S. West Texas Intermediate (WTI) crude futures 20 percent below from their 2016 highs, technically placing them in bear market territory. The two benchmarks matched April lows on Friday before their most actively traded contracts settled up on what traders said was short-covering by investors taking profit on bearish bets. Hedge funds, some of the biggest bulls in oil, slashed their positive bets on WTI to a five-month low in the week to July 26, U.S. Commodity Futures Trading Commission data showed, amid growing worry about oil's fundamentals. The dollar's drop to a three-week low also made greenback-denominated oil more affordable to holders of the euro and other currencies. The September Brent contract, which expired as the front-month, settled at $42.46 a barrel, down 0.6 percent on the day and 14.5 percent on the month. That was the biggest monthly drop for Brent since December. Brent's more actively traded October contract rose 30 cents to settle at $43.53, after hitting $42.52, its lowest since April 19. WTI's front-month contract, September, rose 46 cents, or 1 percent, to settle at $41.60 a barrel, after slipping earlier to below $41 for the first time since April 20. For the month, the contract finished down 14 percent, the biggest decline for a WTI front-month since July 2015. Crude prices are still up more than 55 percent from 12-year lows of $26 to $27 in the first quarter. The recovery faded after prices above $45 enticed U.S. oil drillers to return to the well pad. Drillers added 44 rigs in July, the most in a month since April 2014.

Oil Surges After OPEC Production Hits Record High: Here's Why --Now that the narrative of rising gasoline demand and a "strong summer driving season" is finally over, courtesy of gasoline stocks that just refuse to drop... ... defenders of the "bull" crude oil thesis are stumped. "Doubts are rife as to whether the oil supply imbalance is indeed slowly drawing to an end," Stephen Brennock of oil brokerage PVM, said. So with no fallback "story" both WTI and Brent are down 20% since their last peak in June, as another bear market for oil has arrived. Worse, earlier today we got confirmation that another parallel narrative, namely that OPEC is cutting its production, is also dead and buried.  According to a Reuters survey, OPEC's oil output is likely in July to reach its highest in recent history, as Iraq pumps more and Nigeria manages to export additional crude despite militant attacks on oil installations. Top OPEC exporter Saudi Arabia has kept output close to a record high, the survey found, as it meets seasonally higher domestic demand and focuses on maintaining market share rather than trimming supply to boost prices. Supply has been rising since OPEC abandoned in 2014 its role of cutting supply to prop up prices as major producers Saudi Arabia, Iraq and Iran pump more.According to the survey, OPEC supply rose to 33.41 million barrels per day in July from a revised 33.31   million bpd in June. There's more: OPEC's production could rise even further should talks to reopen some of Libya's oil facilities succeed. Conflict has been keeping Libyan output at a fraction of the pre-war rate. "This could shortly release more oil into an already abundantly supplied market," Carsten Fritsch of Commerzbank said, although earlier hopes of a restart have not been realized. "It therefore remains to be seen whether this time will be different."  It won't be different.  As Reuters notes, OPEC's output has climbed due to the return of former member Indonesia in 2015 and another, Gabon, this month, skewing historical comparisons. July's supply from the remaining members, at 32.46 million bpd, is the highest in Reuters survey records, starting in 1997.

Libya army commander threatens to target oil tankers (AP) — Libya’s chief of staff on Tuesday threatened to target foreign oil tankers if they entered territorial waters, after a controversial deal was struck between the United Nations envoy and a militia commander in control of the oil terminals. The agreement between U.N. Envoy to Libya Martin Kobler and militia leader Ibrahim Jedran, has been widely criticized amid accusations that it empowers the warlord who is viewed by many as having held Libya’s oil hostage for the past three years. Brig. Gen. Abdel-Razek al-Nadhouri warned foreign companies against signing oil deals with any party except for the state-run National Oil Corporation (NOC) branch in Benghazi. “Any movement of any vessels or oil tankers toward the Libyan territorial waters without prior agreement with the NOC affiliated to the Libyan parliament, will be targeted,” the statement read. Libya’s oil corporation — like the rest of the oil-rich North African country’s state bodies— has been split between eastern and western branches. Benghazi’s branch falls under the authority of the internationally-recognized parliament seated in the eastern city of Tobruk. The western one falls under the Tripoli-based, UN-brokered government which together with a presidency council was formed after rival factions in Libya signed a peace deal last year aimed at ending the country’s rift. The eastern parliament has so far failed to give a crucial vote of confidence to the government, because of objections over a key article in the peace deal that determines who would wield authority over the armed forces. Al-Nadhouri — who answers to the eastern parliament— made his threat days after Kobler and Jedran struck their deal. Many from both sides believe that the deal — the terms of which haven’t been publicly laid out — empowers the militia commander and undermines the government.

Kerry hopes to work with Russia on Syria, U.N. aims to restart talks | Reuters: The United States said on Tuesday it hoped to announce in early August details of planned military cooperation and intelligence sharing with Russia on Syria, and a United Nations envoy said he would also aim to resume peace talks next month. U.S. Secretary of State John Kerry said Washington and Moscow, which support opposing sides in Syria's five-year-old conflict, had made progress in recent days towards working more closely together. The proposals would have the two powers share intelligence to coordinate air strikes against the al Qaeda-affiliated Nusra Front and prohibit the Syrian air force from attacking rebel groups labeled as moderate. Efforts to bridge the divide between the United States and Russia and bring Syrian government and opposition forces back to negotiations come after pro-government forces have effectively put rebel-held districts of Aleppo under siege. Concern is growing for at least 250,000 people who have been trapped in rebel-controlled eastern Aleppo since early July, and the U.N aid chief asked on Monday for weekly 48-hour pauses in fighting to allow food and aid to be delivered. Syrian state television said on Tuesday the army had sent text messages to residents and fighters in eastern Aleppo, saying it will grant safe passage to whoever wants to leave and asking militia to put down their weapons. The Syrian Observatory for Human Rights monitoring group said 25 people, including three women and eight children, were killed in the last 24 hours in the Mashhad quarter of rebel-held Aleppo, when it was hit by barrel bombs thrown from helicopters.

U.S. Coalition Just Dropped Its 50,000th Bomb On ISIS - The United States-led bombing campaign against the Islamic State in Iraq and Syria surpassed a stunning milestone this month, underscoring the magnitude of the coalition’s quest to crush the militant group. Coalition drones and warplanes unleashed 49,917 bombs and missiles against ISIS targets through June 30, according to new official figures released this week by the U.S. Air Forces Central Command. Daily airstrikes by America and its allies throughout July has since pushed that number above 50,000, according to Airwars, a watchdog group that monitors the U.S.-led air campaign against ISIS. That figure does not include airstrike operations conducted by Russia, which began a bombing campaign of its own against in the Islamic State in Syria last year. The relentless airstrikes by the coalition, now in their 24th month, reflect the intensity of air campaign against ISIS, said Chris Woods, the director of Airwars, which is based in the United Kingdom. By comparison, U.S.-led forces in Afghanistan have dropped just over 16,000 bombs in the last six years, military data shows.

France Escalates - Sends Aircraft Carrier To Fight ISIS -- Seemingly not satisfied with the domestic blowback from their interventionist-driven Washingtonian foreign policy, Francois Hollande - lagging badly in the polls - has decided to double-down following the recent terror attack in Nice. As Sputnik News reports, France will send artillery to Iraq and its Charles de Gaulle aircraft carrier to assist the US-led coalition’s efforts in Syria and Iraq in the coming months. The French aircraft carrier Charles de Gaulle will be sent to the region in September, the President added.  "The Charles de Gaulle airacrft carrier will arrive in the region by the end of September. It and our Rafale aircraft will allow to intensify our strikes against Islamic State positions in Syria and Iraq," Hollande said in a televised statement. France will also send artillery to Iraq in August to help the Iraqi army fight Daesh terrorists, the President added.

Boy beheaded by Syrian rebels was ’19-year-old regime fighter’-- A Syrian who was beheaded by a rebel group in Aleppo this week was a 19-year-old pro-regime fighter suffering from a growth defect and not a child, activists have claimed. He was named as Abdullah al-Issa and that his family members said he was a 19-year-old who volunteered to fight with the regime’s National Defence Forces militias. Other social media users said he was from the Alawite village of Wadi al-Dahab in Homs, and photos emerged allegedly showing his funeral in the area. Issa was said to be suffering from thalassemia, which led to a growth defect that made him appear to be a child. Photos shared of Issa online show him in military fatigues and carrying a rifle. “This boy, whose [beheading] has caught the world’s attention is my cousin Abdullah Issa from Wadi al-Dahab district of Homs, and he suffers from thalassemia,” his alleged cousin – Loly Alamora [“Loly the cutie”] – wrote on her Facebook page. “That is why he appears younger than his age, but he is 19-years-old.”  The Syrian regime had earlier claimed that Issa was a 12-year-old Palestinian civilian who was on his way to hospital for treatment when he was picked up by militants from the Harakat Nour al-Din al-Zinki rebel group. His murder caused outrage, particularly as he appeared to be a child.

In First "Emergency" Decree, Erdogan Seizes Thousands Of Hospitals, Schools, Charities -- With the failed/staged Turkish coup quickly fading from memory and media attention, just as Erdogan likes it, and opposition from "western democracies" to a historic purge virtually non-existant aside from the occasional media soundbite, overnight Erdgoan implemented his first decree since imposing a state of emergency in the country last week, and tightened his grip on Turkey by ordering the closure of thousands of private schools, charities and other institutions in his first decree since imposing a state of emergency after the failed military coup.   In his first "emergency powers" decree, published by the Anadolu state news agency, Erdoganauthorised the closure of 1,043 private schools, 1,229 charities and foundations, 19 trade unions, 15 universities and 35 hospitals over suspected links to the Gulen movement. The government also announced it would seize the properties of all these schools, universities and private institutions.  As documented, Erdogan has accused U.S.-based Muslim preacher Fethullah Gulen, who has many followers in Turkey and abroad, of masterminding the failed coup, in which at least 246 people were killed. Gulen denies the charge and has condemned the coup.  In the decree Erdogan also extended to a maximum of 30 days from four days the period in which some suspects can be detained. It said this was "to facilitate a full investigation into the coup attempt."

Erdogan’s Power Game: Turkey On Collision Course With NATO | It is unsurprising that the world should be incredulous at the explanations given by the Turkish Government as to the origins, sponsors, and actions of the putsch which was attempted against it on the night of July 15-16, 2016. Indeed, the great difficulty is to avoid considering the “conspiracy theory” that the entire event had been orchestrated by Pres. Reçep Tayyip Erdogan himself. We have discussed the entire incident in separate analysis, taking on face value the events as reported, and the ramifications. The event was cut from whole cloth. It was too perfect, and the responses too com-plete. Its outcome could not have been more favorable to the President and his ambitions. And as with all conjuring, the audience was complicit, and the scale of the deception bold and outside the scale of comprehension of Turkey’s traditional allies and supporters. What Erdogan did and achieved — regardless of whether he had staged the patently-unworkable putsch himself — was breathtaking in its scope and objectives, and was initially successful in consolidating his power and removing Turkey from the secular, Western-oriented path of the President’s nemesis, Mustafa Kemal Atatürk. The fact that the leaders of the putsch have not been credibly identified (some officers have been blamed, true, and some military personnel went along with the affair, believing it to be a genuine attempt to over-throw the President), and the blame so laughably assigned to convenient “enemies”, makes it necessary to question the reality of events in Turkey before, during, and after the incident.Whatever actually happened, it is clear that Pres. Erdogan has — with the catalyst of the alleged putsch — completely transformed the strategic position of Turkey: its alliances and dependencies; its chances for survival, and the fate of the region which is vital not only to its inhabitants, but as a nexus of global trade. The Russian Government knows very well just how mercurial Pres. Erdogan has been, and how he has tried — and failed — to confront Russia strategically. It was Russia which essentially defeated Turkey in Syria and Iraq, and possibly in the Caucasus and Balkans.

Is Fethullah Gülen behind Turkey's coup? --  Dani Rodrik -- If what Erdogan said on TV today is correct, there is no longer much doubt about the answer to this question. According to Erdogan, the officers who detained the chief of general staff, Hulusi Akar, on July 15 offered to put Akar in contact with Gulen. As of this writing, Akar has not made any statements confirming this. But if he does, it will be manifest that responsibility for the coup attempt reaches all the way to Pennsylvania. It will be very difficult for the U.S not to extradite Gulen, subject, of course, to (some huge) fair trial concerns back in Turkey. What evidence, other than Erdogan’s word, is there that Gulen is behind the coup attempt?   My best guess is that the coup was planned and organized by Gulenists but that they were joined by quite a few others as well. The joiners may have had diverse motives: personal ambition, hatred of Erdogan, or simply the belief that they were obeying orders from the higher-ups. One of the curious aspects of the coup attempt is that it had no public face or apparent leader. I know of no coup attempt, in Turkey or elsewhere, successful or otherwise, where a clear leader was not obvious or did not emerge very quickly. In Turkey, the clearest instances of failed coup took place in the early 1960s, and these attempts were spearheaded by a well-known renegade, Colonel Talat Aydemir. This lack of a public face is a lot less anomalous from the standpoint of Gulenist modus operandi. Gulenists always prefer to operate in the shadows, behind the scenes, and never take direct ownership of operations they launch and control. They have never formed (or explicitly joined) political organizations or parties, even though they clearly have political aims, choosing to operate within existing political parties instead. In Ergenekon and Sledgehammer, the bogus documents that led to the trials were first leaked to a “liberal” newspaper (Taraf), which thereafter acted as a front. When public support for the trials waned, leading Gulenists kept arguing that it was Erdogan who pushed for the prosecutions.

"Credible Evidence" Shows Turkish Authorities Raped And Tortured Detainees Since 'Failed' Coup --Human rights group Amnesty International said on Sunday it had "credible evidence" of abuse and torture of people detained in sweeping arrests since Turkey's 15 July attempted military coup. The London-based group said some of those being held were being "subjected to beatings and torture, including rape, in official and unofficial detention centres in the country". Amnesty said more than 10,000 people have been detained since the attempted coup, and the group called for independent monitors to be granted access to detention sites across Turkey. Amnesty raised serious allegations of mistreatment against Turkish police, who they said haveheld detainees in “stress positions, denied them food, water and medical treatment, verbally abused and threatened them, and subjected them to beatings and torture, including rape and sexual assault”.

Turkey Expands Purge, Shutting Down News Outlets — The Turkish government ordered the closing of more than 100 media outlets on Wednesday, including newspapers, publishing companies and television channels, as part of a sweeping crackdown following a failed military coup this month.The Turkish authorities ordered the shutdown of 45 newspapers, three news agencies, 16 television channels, 15 magazines and 29 publishers in a decree that was published in the government’s official gazette on Wednesday.Among those ordered to close are the newspaper Zaman and the Cihan News Agency, which had previously been seized by the government over suspicions that it has links to the network of Fethullah Gulen, a Muslim cleric who lives in self-imposed exile in the United States and has been accused of orchestrating the July 15 coup attempt.Mr. Gulen’s network has been designated a terrorist organization by Turkey, and President Recep Tayyip Erdogan has vowed to purge followers of the movement from state institutions, including the police and the judiciary.In response to the botched coup, the government has purged tens of thousands of soldiers, police officers, journalists, teachers and government employees accused of having ties to the Gulen organization. More than 9,000 people have been arrested in connection with the coup attempt, and thousands more have been detained, the semiofficial Anadolu News Agency reported. Since Monday, detention warrants have been issued for at least 80 journalists suspected of having ties to Mr. Gulen.

John Helmer: The New Byzantine Alliance – Will Russia and Turkey Revolutionize the Center of the Old World? --  Yves Smith - One has to infer that Erdogan is furious that the US has not turned over the exiled cleric Fethullah Gülen, who Erdogan has depicted as the mastermind of the failed coup, and is giving us the biggest poke in the eye he can come up with. This one is awfully big if Erdogan follows through with more cooperation with Russia. And this may tie into the increased demonization of Putin of late. I’ve only been following the various theorizing as to whether the US was behind the coup. I doubt it, and the Russians appear to doubt it. Per Helmer by an earlier e-mail: This is the best Russian account so far, and it shows evidence of Russian military monitoring of communications during the coup: The gist is important – if the coup plotters and participants were confused about what they wanted to achieve, except for removing Erdogan, why wasn’t his aircraft shot down? Answer from the Russian side: there was no command and control of the various ground and air units engaged – they couldn’t talk to one another, and couldn’t coordinate. By failing to strike Erdogan first, they allowed him time to mobilize his party apparatus and the mosques. Once they moved people into the streets, the soldiers inside the tanks couldn’t act. You can see from SecState Kerry’s hesitant, non-committal statement from Moscow on Friday evening, Moscow time, in favour of “security and stability” that he and Washington weren’t sure how many of their “assets” were engaged, and on whose side. It took hours for Obama to come out in favour of “democracy” – that’s to say, the winning side. By then Erdogan had decided some of the plotters were on the US side. It is clear this is so from the attempt by General Van to seek asylum from the US at Incirlik; imagine how many hours it took for Washington to say no, and hand him over.

Russia's Gazprom continues efforts for gas demand creation in China - Russia's Gazprom is continuing its efforts to push for increased gas demand stimulation in China as part of its plans for supplying the country with gas via pipeline after 2018. The prospects for Chinese gas demand growth are not as strong as they were a few years ago, which has dampened Beijing's appetite for increasing its options for Russian gas imports. Now Gazprom is pushing to help create more demand, signing last month a new MoU agreement with China's state-owned CNPC on building gas-fired power stations in China.And at the end of last week at a meeting in St Petersburg, the two sides approved the steps needed to implement the deal, which also includes cooperation on gas storage inside China. "In the course of the meeting, the parties approved the road maps for implementing the MoU on underground gas storage and gas-fired power generation in China," Gazprom said. Gazprom also said it wants to help boost the use of gas as a fuel in vehicles in China. China is already a strong advocate of using gas in its public transportation fleet, and is hoping to boost domestic gas production through incentives for development of, for example, coalbed methane.

Japan's LNG import price to average $6.60/MMBtu CIF for Jul-Dec, $7.40/MMBtu in 2017: IEEJ - Japan's LNG import price over July-December is expected to average $6.60/MMBtu CIF, compared with $6/MMBtu in January-May this year, and will likely rise to $7.40/MMBtu for calendar year 2017 on the back of higher crude oil prices, the Institute of Energy Economics, Japan said Monday. "There is a possibility that the gap between long-term LNG price and spot price will widen as we expect LNG spot price to remain depressed and to trade around $5/MMBtu with more supply to be added to the market," IEEJ said in a report. IEEJ projects Brent, WTI and Dubai crude oil prices to be at $50/b, $49/b and $47/b respectively in July-December this year. For 2017, Brent, WTI and Dubai crude oil prices are expected to rise to $55/b, $54/b and $52/b, respectively.Japan's LNG imports are expected to come in at 82.2 million mt for fiscal year 2016-17 (April-March), down 6.2% year on year, and fall further to 70.9 million mt in fiscal year 2017-18, according to IEEJ. The estimates are based on the assumption that seven nuclear reactors will restart by March 2017, and another 12 reactors to restart in the next fiscal year starting April 2017, bringing to total 19 nuclear reactors up and running by the end of March 2018. Japan's coal demand meanwhile, is projected to inch up just 0.1% from a year ago to 190.2 million mt in fiscal year 2016-17, and is expected to remain largely the same at 190.1 million mt in the following fiscal year, according to IEEJ. IEEJ said globally, a total 74 million mt/year of LNG liquefaction capacity -- mainly from the US and Australia -- will be added in calendar year 2016 and 2017. Some of the new projects may delay or may whittle down output as the market is likely to remain oversupplied.

Analysis: India's voracious appetite offers a bright spot for Malaysian crudes - Malaysian crude exports fell by close to a quarter in May following a shift in Asian importers' preference from light sweet crudes to relatively cheaper cargoes from West Africa and the Mediterranean amid reluctance by Malaysia to cut their offers. But with price differentials for light sweet Malaysian crudes showing a recovery from the lows seen in the late second quarter, traders said they expect a slowdown in arbitrage cargo flows from outside the region in the following months. In addition, buoyant Indian demand is seen as one of the brightest spots for Malaysian crude sales.Malaysia's crude exports fell by more than 23% year on year in May to 1.02 million mt, or 240,584 b/d, from 1.33 million mt in May 2015. It was also 11.5% lower from 1.15 million mt in April, data from the Department of Statistics showed earlier this month. Market participants said limited offers from state-owned Petronas in an environment of low prices contributed to the sharp fall in exports in May. "It was probably the company's strategy to protect values amid the current low crude price environment," said a Singapore-based sweet crude trader. "When crude prices were over $100/b, suppliers weren't really bothered by a $1-$2/b drop in crude premiums, but obviously it's different now where every cent matters."