Sunday, July 3, 2016

natural gas prices up 49% in largest quarterly rise in 11 years, a record for June crude oil refining, et al

oil prices bounced around like a yo-yo this past week, still overreacting to every piece of news, without establishing a clear'll recall that US oil prices had crashed 6% on the prior Friday to close that week at $47.64 a barrel, after the British vote to exit the European Union...the related global market panic continued on Monday and took oil down to below $46 a barrel by mid-afternoon before prices steadied and closed at $46.33 a barrel, down another 1.5% for the day...prices drifted on Tuesday morning, then jumped back up to close at $47.85 a barrel after the American Petroleum Institute reported a large 3.88 million barrel oil inventory drawdown....when that drawdown was confirmed by the EIA data release on Wednesday, oil spiked to $50 before closing at 49.88 a barrel, an increase of 9% over two days...but oil prices couldn't hold that level after reports of a Nigerian ceasefire agreement with the Niger Delta Avengers and record OPEC oil output showed Nigerian production was coming back, and fell back more than 3% to close Thursday at $48.33 a barrel...then, after going nowhere most of Friday on no news and light pre-holiday trading, oil prices jumped nearly 50 cents in 6 minutes just before the end of trading to close at $48.99 a barrel, up more than 2.8% for the week...

meanwhile, contract prices for natural gas have been rising steadily, seeing little interruption from the global market panic that affected appears that the last time we looked at natural gas prices, they had just hit a 17 year low of of $1.696 per mmBTU (million British thermal units) on February 25th, as the warm El Nino winter had reduced demand and left end of winter supplies well above normal...while natgas prices recovered to over $2.00 per mmBTU shortly thereafter, that price was still well below what even drillers in the best fields needed to break even, and natural gas drilling rig activity continued to set new lows most every week...gas prices stayed in a range roughly between $2.10 and $2.30 per mmBTU most of the spring until a little over a month ago, when traders realized that the forecast for a hotter than normal summer would increase demand for electric power, and thereby for natural gas, which had just recently replaced coal as the top fuel for US electric generation...since that time at the end of May, natural gas prices have seen a steady increase, propelled alternately by heat waves and forecasts of heat waves, and a lower than expected seasonal inventory build up, as prices ended the 2nd quarter at $2.924 per mmBTU, up 96.5 cents, or 49%, the largest quarterly percentage gain since 2005...gas prices then rose another 6.3 cents on Friday, the first day of the 3rd quarter, to close the week at $2.987 per mmBTU, the highest front month contract price in 13 months...with that synopsis, we'll take a quick look at a few natural gas price charts...

July 1 2016 natural gas prices

the above graph shows the August contract price for a million British thermal units (mmBTU) of natural gas at or contracted to be delivered to the Louisiana interstate natural gas pipeline interconnection known as the Henry Hub, which has become the benchmark for setting natural gas prices across the in contracts for delivery in July expired on June 26th and were priced slightly lower, as were each contract before that, but this graph gives us a good sense of the price trajectory...we can see from the chart above that even August contract prices never got much above 2.40 per mmBTU until June, and that they've risen by more than a third in just the past 6 weeks...these prices are still near historical lows, however, as we can see on the next long term graph from the EIA

July 1 2016 natural gas price history

above, we have a 20 year graph of natural gas spot prices, or the prices natural gas sold at when not under contract, for each week over the period, which comes from an EIA data page which lists all those prices over that you can see that our recent February low prices were unmatched by any over the years going back to 1999, and that even this recent spike of gas prices to nearly $3 per mmBTU is still below those of any recent period except for the late winter crash of 2012, which like this year, saw temperatures much above a result of prices which have stayed below $3 per mmBTU for 13 months, natural gas drilling has repeatedly hit new lows almost every week this year, and is now nearly 60% below the already depressed level of a year ago...

The Latest Oil Stats from the EIA

this week's oil data for the week ending June 24th from the US Energy Information Administration indicated a larger than normal drop in our production of crude oil, a return to normal levels of oil imports after last week's 42 month high, another large seasonal increase in oil refining, and thus a decrease in crude oil inventories accompanied by an increase in gasoline inventories... however, the crude oil fudge factor included on the weekly U.S. Petroleum Balance Sheet (line 13) was + 537,000 barrels per day, which means that 537,000 more barrels per day showed up in our final consumption and inventory figures than were accounted for by our production or import figures, meaning one or several of this week's metrics were incorrect by that amount, errors which are typically due to miscues in reporting or gathering that data...

according to the EIA, our field production of crude oil fell by 55,000 barrels per day, from an average of 8,677,000 barrels per day during the week ending June 17th to an average of 8,622,000 barrels per day during the week ending June 24th, the largest one week drop since April 29th ...that was also our lowest oil output since the 1st week of September 2014 and 10.1% lower than the 9,595,000 barrels we produced during the week ending June 26th of 2015... similarly, it was also 10.3% lower than the record 9,610,000 barrel per day oil production that we saw during the week ending June 5th of 2015...our oil production has now been down 20 out of the last 22 weeks and is now 597,000 barrels per day lower than we what were producing at the beginning of this year... 

at the same time, the EIA reported that our imports of crude oil fell by 884,000 barrels per day to an average of 7,555,000 barrels per day during the week ending June 24th, down from the 42 month high of 8,439,000 barrels of crude per day we were importing during the week ending June 17th....this week's imports were still 0.6% more than the 7,513,000 barrels of oil per day we imported during the week ending June 26th a year ago, but as you can see by this week’s change oil imports are quite volatile week to week, so the EIA's weekly Petroleum Status Report (62 pp pdf) reports imports as a 4 week moving average...that summary showed that the 4 week average of our imports slipped back to the 7.8 million barrel per day level, which was 12.0% higher than the same four-week period last year...  

meanwhile, U.S. refineries’ crude oil usage rose by another 190,000 barrels per day, from the average of 16,505,000 barrels of per day barrels they processed during the week ending June 17th, to an average of 16,695,000 barrels of crude per day in this week's report...that was as the US refinery utilization rate rose to 93.0% during the week, from  91.3% of capacity the prior week, which was still down from a refinery utilization rate of 95.0% during the equivalent week last year...this week's crude usage is now 1.0% higher than the 16,531,000 barrels per day US refineries used during the week ending June 26th last year, and also higher than the same week in any prior week in June in the 34 recent years of EIA data, so it also appears that we have a seasonal record for crude refining...

even with more oil being refined, however, US refineries production of gasoline fell by 330,000 barrels per day from the record high of 10,289,000 barrels per day we produced during the week ending June 17th...the 9,959,000 barrels of gasoline produced during the week ending June 24th was also 0.9% less than the 10,046,000 barrels of gasoline per day we were producing during the same week last year...however, our refinery output of distillate fuels (diesel fuel and heat oil) rose during this period, climbing by 65,000 barrels per day to 5,021,000 barrels per day during the week ending June 24th...that was also 6,000 barrels per day more than our distillates production of 5,015,000 barrels per day during the week ending June 26th of last year, even though our distillates inventories are much more excessive today...        

however, even with the large decrease in gasoline production, our end of the week gasoline inventories still rose by 1,367,000 barrels to 238,998,000 barrels on June 24th, the 3rd weekly increase in the last four weeks ...the increase in gasoline supplies was slightly enhanced by a 28,000 barrel per day increase to 904,000 barrels per day in our gasoline imports, and came with a drop of 106,000 barrels per day in gasoline supplied to US markets, which fell to 9,709,000 barrels per day, which was also a fraction lower than the 9,731,000 barrel per day of gasoline consumption during the week ending June 26th last a result of this addition to stores, the week's gasoline inventories were 10.3% higher than the 216,737,000 barrels of gasoline that we had stored on June 26th last year, and 11.8% higher than the 213,742,000 barrels of gasoline we had stored on June 27th of 2014, and thus our gasoline supplies are categorized by the EIA as "well above the upper limit of the average range" for this time of year.. 

at the same time and despite the higher production, however, our distillate fuel inventories fell 1,801,000 barrels to end the week at 150,513,000 barrels, as distillates were withdrawn from storage in the Midwest and on Gulf coast and added to storage elsewhere...but since our distillate inventories have been so much above normal since the warm winter reduced US heat oil consumption, our distillate inventories as of June 24th were still 10.8% higher than the 135,820,000 barrels of distillates we had stored at the same weekend last year, and 23.8% higher than our distillates supplies as of June 27th 2014, and thus they're also characterized as "well above the upper limit of the average range" for this time of year...   

finally, with record refining, lower field production of crude and the large drop in imports, our withdrawal of oil from our stocks of crude in storage was a higher than normal 4,053,000 barrels for the week, leaving our oil inventories at 526,573,000 barrels as of June 24th...but that was still 13.1% higher than the 465,379,000 barrels of oil we had stored as of June 26th, 2015, and 36.8% higher than the 384,9350,000 barrels of oil we had stored on June 27th of 2014....with our oil inventories thus continuing to be that much higher than the seasonal records we set most every week in 2015, it goes without saying that our crude oil supplies are also  "well above the upper limit of the average range" for this time of year..."  

This Week's Rig Counts

US drilling activity increased for the 4th week week out of the past 5 during the week ending July 1st, after the industry had gone the prior 41 weeks without seeing a net increase in total active rigs.....Baker Hughes reported that the total count of active rotary rigs running in the US increased by 10 rigs to 431 rigs as of July 1st, which was down by exactly half from the 862 rigs that were deployed as of the July 3rd report last year, and down from the recent high of 1929 rigs that were in use the week before the OPEC meeting on Thanksgiving 2014...the number of rigs drilling for oil this week rose by 11 rigs to 341, which was still down from the 640 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 a single rig to 89 this week, which was down from the 219  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 that we saw on August 29th, 2008...there was also still one rig running this week that was classified as miscellaneous, unchanged from last week but up from no miscellaneous rigs in use the same week a year ago.... 

since we looked at rising natural gas prices this week, we'll also include one of the few graphs i know of that shows the long term deployments of both oil and gas directed drilling rigs...the graph below comes from a weekly pdf booklet of petroleum graphs produced by Yardeni Research, a provider of independent investment and economics research, run by Dr Ed shows the Baker Hughes rig count from the beginning of 1991 up to and including the week ending June 24th, having not yet updated for Friday's report as of this writing on Saturday indicated, the total US rig count is shown in red, our weekly oil rig count is shown in violet, and our weekly natural gas rig count is shown in green...note that prior to 2015, the previous low for natural gas rigs was the 242 rigs that were deployed on March 27th of 1992, and except for 1992, gas rigs had not dropped below 250 until March 20th, 2015, and they've been down steadily since, to this week's 89 rigs...on a couple of occasions, i've tried looking back through Baker Hughes' North America Rotary Rig Count Archives, and i've never found a week in that history when the natural gas rig count was below 200, but since those exist as static pdf files only, apparently copied from monthly printed sheets, manually scanning the entire lot has proven to be more than i was willing to undertake in the interest of exact data...

July 1 2016 oil and gas rig counts

the past week saw two more drilling platforms that had been drilling in the Gulf of Mexico offshore of Louisiana taken out of service; that cut the Gulf of Mexico active rig count down to 18 rigs, which was down from 29 a year ago, and reduced the total offshore count down to 19, as there still is an offshore platform working off the Cook Inlet in the same time, there was also a rig added on an inland lake in southern Louisiana, which brought the inland waters rig count back up to 4, which was 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 increased for the 4th time in 5 weeks, after dropping weekly since November, as horizontal rigs rose by 7 to 332 rigs this week, which still was down from the 657 horizontal rigs that were in use on July 3rd of last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of the same time, 8 vertical rigs were added, bringing the vertical rig count up to 61, which was down from the 108 vertical rigs that were in use at the end of the same week a year earlier...meanwhile, the directional rig count fell by 5 rigs to 38 rigs, which was also down from the 97 directional 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're again going to include a screenshot of that part of the rig count summary from Baker Hughes, which shows those changes...the first table below shows weekly and annual rig count changes by state, and the second table shows weekly and annual rig count changes for the major geological oil and gas both tables, the first column shows the active rig count as of July 1st, the second column shows the change in the number of working rigs from the prior week, the third column shows last weeks rig count, the 4th column shows the change in the number of rigs running from the same week a year ago, and the 5th column shows the number of rigs that were drilling at the end of that week a year ago, which in this case was July 3rd of 2015: 

July 1 2016 rig count summary

from this we can again see that Texas continues to add rigs, adding 4 in the Permian basin, as Texas additions have accounted for the lion's share of the increased rig count over the past 5 weeks...Oklahoma also added 4 rigs this week, after pulling 4 out last week, but at 54 rigs they're still 5 below the 59 rig they had deployed on June 5th...outside of Texas, North Dakota is the other state that's seen a large increase, as they've gone from 22 rigs to 26 over the past 5 weeks..also note that Nebraska, which had gone without drilling since the week ending May 20th, added a single rig this past week, which is not included on the list of major producing states above...


Belmont County: A profile of where Donald Trump will campaign today in Ohio -  - When Donald Trump campaigns in eastern Ohio on Tuesday evening, he will be in a county that was solid Democratic territory for decades before flipping to vote for Republican Mitt Romney four years ago. Not since Richard Nixon swept to re-election in 1972 had Belmont County voted for a Republican candidate for president. But Romney easily bested Barack Obama there in 2012. Belmont County also is in the heart of the region of the state where Trump ran strongest in the primary.  He defeated John Kasich by a whopping 21.5 percentage points in Belmont County in the spring primary. It's an area once built on the steel, coal and power industries that now has become home to one of the busiest fracking areas in Ohio. Statistics from the state show Belmont County ranked first for natural gas production and fifth for oil production from horizontal wells last year.  

Frackfree group to put fracking ban on Youngstown ballot again -(WYTV) – For the sixth time, voters will have a say on whether to ban oil and gas drilling in the city of Youngstown.Those behind Frackfree Mahoning Valley say they have enough signatures to get the issue back on the ballot again. If the issue passes, it would stop hydraulic fracturing, injection wells and shale gas development within city limits.Monday afternoon, Frackfree Mahoning Valley presented nearly 2,500 signatures to City Hall. They only needed 1,270 signatures. If verified, the signatures would beat the August deadline in plenty of time to be put on the ballot.“In every city and every part of this state, if you allow fracking, you’re killing water, and if you’re killing water, it’s killing people. And we want everybody to be alive, healthy and safe,” said Rev. Young Tensley.Three Ohio communities have already passed this type of legislation, and three more will consider it this fall, along with voters in four counties.“You know, every time is different. And it’s really not about passing the Community Bill of Rights. It’s about raising awareness that citizens have the right to petition their government when their government is not taking care of them,” said Susie Beiersdorfer, a Community Bill of Rights committee member.Ray Beiersdorfer, a backer of the initiative, said that the margin of defeat for the proposal had become narrower at each election, except for the initiative that was defeated by a margin of over 15 percent in November 2014.“Over time, more and more people are getting educated,” Beiersdorfer said.

Petitions submitted for anti-fracking county law - The Athens County Bill of Rights Committee submitted a proposal to turn Athens County into a charter government to the local Board of Elections Wednesday morning. The ACBORC was unable to get a charter proposal on the November 2015 ballot after a decision by the Ohio Supreme Court, but with that decision in hand and alterations to the proposal made, the group has gathered well over the 1,500 petition signatures required to put the anti-fracking proposal on the ballot this year. Group spokesperson Dick McGinn said Wednesday the group was submitting the proposal with 2,392 signatures on 96 petitions circulated by 32 petitioners.The committee’s charter did not and does not propose to alter the structure of Athens County government with regard to officeholders or duties, but does seek to assert local control over regulation of oil and gas hydraulic fracturing and other activities related to fossil-fuel development (including waste-injection wells). “The proposed charter for Athens County includes a Bill of Rights, an outright ban on injection wells, an outright ban on the sale of county water for use in fracking anywhere and a charter review process,” he said. “The charter will empower the county commissioners to pass laws, and gives every citizen in the county equal powers of initiative, referendum and recall.” While the city of Athens and several other Ohio communities have passed similar anti-fracking bills of rights, none of them has survived court challenges, and the Ohio Supreme Court has made it clear that local governments cannot prohibit what state law permits with regard to oil and gas development.

Petitions submitted for second attempt to place anti-fracking law on county ballot -  The Athens County Bill of Rights Committee has once again submitted petitions in an effort to place a charter ballot initiative on the November ballot. The committee had been unsuccessful in placing a similar initiative on the November 2015 ballot after the petition, along with at least two others in Ohio, were rejected by Secretary of State Jon Husted. According to Messenger reports in March, the committee had revised the petition and was once again preparing to collect signatures. Bill of Rights committee member Dick McGinn told The Messenger on Thursday that the group had redone the charter to comply with the ruling last fall and began circulating petitions on April 1. A total of 2,392 signatures were collected on 96 petitions by 32 petitioners before being submitted on Wednesday, according to McGinn. Approximately 1,485 signatures are required. McGinn said that the charter is important as the government is not protecting the people with regard to injection wells, so people are taking it upon themselves to protect themselves. McGinn said that the ability to take steps such as the charter initiative go back to the original plan of the American Revolution, allowing the people to govern themselves. He added that the committee is not complaining about the structure of the government and this charter would not change the structure of the government, but that this would empower the commissioners and the public. Accoridng to previous Messenger reports, the language of the charter would make it unlawful for any corporation or government to “deposit, store, treat, inject, dispose of, transport or process wastewater, produced water, ‘frack’ water, brine or other substances, chemicals or by-products that have been used in, or result from, the unconventional extraction of gas and oil, including but not limited to high volume hydraulic fracturing, acidification and other techniques on or into the land, air or waters of the county of Athens.”

It’s unanimous: ‘No fracking in Wayne forest’ - At a public meeting in Athens Tuesday night on a proposal to open parts of Ohio’s Wayne National Forest to oil and gas leasing, each one of 30 speakers spoke against it. Nobody spoke in behalf of the proposal, though it has received written and public support in Washington and Monroe counties, where the leasing is proposed. The Athens County Commissioners agreed to hold the meeting at the Athens Community Center after the federal Bureau of Land Management (BLM) and Wayne National Forest supervisors both declined to do so.With a standing-room-only crowd of more than 125 people, a wide variety of local and regional environmental activists, as well as interested citizens, took to the podium to speak out against the BLM’s tentative plans to lease more than 18,000 subsurface acres of the Marietta Unit of the Wayne’s Athens Ranger District for oil and gas development. That plan, if approved, would pave the way for oil and gas operations to apply for drilling permits on specific sites on the Marietta Unit, which then would go through an individual approval process. The drilling presumably would employ horizontal hydraulic fracturing (fracking) into deep-shale layers. In a draft environmental assessment this past spring, the BLM issued a “finding of no significant impact” for leasing on 40,000 subsurface acres in the national forest’s Marietta Unit, located northeast of Marietta in Washington and Monroe counties. Those acres include more than 18,000 acres for which 50 oil and gas companies have submitted “expressions of interest.”

Yale to Study Fracking At 100 Belmont County Homes - Yale University researchers plan to take air and water samples from 100 Belmont County homes to determine how Marcellus and Utica shale fracking impacts the environment. Considering the many active drilling operations, pipelines and compressor stations one can find in Belmont County, the researchers may find plentiful data in the field. Nicole Deziel, an assistant professor in the Yale Department of Environmental Health Sciences, will serve as the study’s lead investigator. Deziel said she and three other Yale researchers will base their operations in the science lab at the Olney Friends School in Barnesville until they leave in August. “We are very interested in whether this expansion in natural gas extraction could contribute to the contamination of water and air supplies,” Deziel said. “Ohio is understudied. Most of the studies are from Pennsylvania or Texas. “We hope our results will advance understanding of the potential for exposure to volatile organic compounds and other toxic substances in communities with natural gas extraction by comparing concentrations of chemical contaminants in homes in close proximity to natural gas wells and homes located farther away,” Deziel said. Deziel and her team are already visiting Belmont County homes. Although the industry is prevalent throughout eastern Ohio, she said the parameters of the study call for evaluating 100 homes in a single county. “The results should have a broader relevance to the surrounding region,” Deziel said. “We have an open mind. We are going to follow the data. Much more work is needed to fully understand the risk to the water and the air.” “We want to know what is in the water that people are using for drinking and bathing,” Deziel said. “We will be collecting air samples from inside and outside the home.”

Ky. residents fight back over radioactive waste - A new citizen's group in Estill County is calling on Kentucky environmental regulators to open up their enforcement discussions with a landfill owner over the dumping of radioactive waste last year, as state officials sought to assure residents of their safety."This relationship between the environmental cabinet and the violators of state statutes (and settlement discussions) to be held in secret, is an age-old tactic," said Craig Williams, a member of the newly formed Concerned Citizens of Estill County Inc. "What's needed is a solutions-based approach that involves all the interested and potentially affected parties, including but not limited to the Citizens of Estill County, and their duly elected representatives," said Williams, program director of the Kentucky Environmental Foundation, who for years has pressed for safe disposal of nerve gas at a federal facility in Richmond. The new group will have to sue the state if it doesn't get included in the talks, he said, with a goal of reaching "a resolution that everyone can agree with."

State seismic network helps tell fracking quakes from natural ones - Up on the ledge, in a clearing behind the office at Keystone State Park in Derry Township earlier this month, Kyle Homman peered at an app on his iPod and hopped. The earth moved ever so slightly at the Westmoreland County site and one of the newest permanent stations in Pennsylvania’s expanding earthquake monitoring network picked up the tremor. Mr. Homman, the network’s manager, had already re-created this assemblage, alone or with help, at 19 other sites across the state. The sensor was connected to a data logger kept on the surface in a waterproof box connected to the park office by wires threaded through sealed pipes for power and internet. Each site has been selected to fill in spots of weak coverage between the existing Pennsylvania seismic network’s 10 stations and a dozen others operated by institutions that share their data publicly. When complete in the near future, the expanded network — funded for three years with a combined $531,000 from the state departments of Conservation and Natural Resources and Environmental Protection, and operated by Penn State University — will provide the best open and ongoing record of the state’s shaking depths that Pennsylvania has ever had. “Pennsylvania has a history of small earthquakes, but we don’t understand the causes very well,” Pennsylvania state geologist Gale Blackmer said. “The more events you can map out, the better your chances are of figuring out what’s going on.”  . As it happens, the Pennsylvania network has already picked up signals that point to both types of quakes. In mid-April, a magnitude 2.2 earthquake near Titusville was likely a natural event, said Andrew Nyblade, a Penn State geosciences professor who championed the expanded seismic network and is the project’s principal investigator. A week later, a series of five small tremors in Lawrence County that ranged from magnitude 1.7 to 1.9 emerged near a Utica Shale gas well that was being fracked.

Oil and Gas Leaders Find New Hope in Cracker, Export Terminal Projects -- Oil and Gas Leaders Find New Hope in Cracker, Exp: — Royal Dutch Shell’s decision to build its ethane cracker near Monaca, Pa. and Dominion Resources’ plans to export liquefied natural gas from from the Cove Point facility in Maryland give industry leaders hope that demand for their products will continue to grow. As drillers dig deeper and farther to achieve maximum output from wells, the limits of the Marcellus and Utica shale boom continue to stretch. “We are building crackers,” said Bernadette Johnson, managing director of Ponderosa Advisors, which provides analytical research for the industry, said while speaking during the 2016 DUG East Conference this week. “This is very good for the Marcellus and Utica region.” Recently, the U.S. Energy Information Administration projected domestic ethane production to grow from 1.1 million barrels per day in 2015 to 1.4 million barrels each day in 2017, an increase of 300,000 barrels daily — with a significant portion to be drawn from Marcellus and Utica drilling. In fact, there is so much ethane in the region that pipeline operators Sunoco Logistics and Kinder Morgan collectively plan to spend about $3.5 billion to move the liquid out of Ohio, West Virginia and Pennsylvania for processing elsewhere. Industry leaders believe Shell’s ethane cracker makes it more likely that PTT Global Chemical will eventually decide to build a similar facility at Dilles Bottom because Shell’s commitment shows the projects are viable in the region. As global energy demands increase, U.S. natural gas can help quench the thirst for power, but only if producers can move their fuel abroad.

Where will all the new US olefins go? - The Barrel Blog: It is well known that shale-driven ethylene expansions are taking place in the North American market. The question is, will these growing supplies of olefins outstrip the ability of units downstream to take in product? US ethylene production is at an all-time record level, according to data from the American Fuel and Petrochemical Manufacturers association. Data for the first quarter of 2016 showed that ethylene production was at 6.857 million mt, down fractionally from the previous quarter but nearly 10% higher than the level from the first quarter of 2015.Gazprom H1 gas exports to Europe up 14% year-on-year: CEO - Natural Gas | Platts News Article & Story: Gazprom's gas sales in Europe in the first half of 2016 rose by 14.2%, or 10.6 Bcm, compared with the same period of last year, Gazprom CEO Alexei Miller said Thursday, signaling a sharp slowdown in export growth in the second quarter of this year. Addressing Gazprom's annual general meeting in Moscow, Miller also hailed the utilization rate of Russia's Nord Stream gas pipeline to Europe, which, he said, far outweighed that of LNG imports. Speaking of Gazprom's supplies to Europe and Turkey in the first half, Miller provided no absolute figures. But according to Platts' analysis of Gazprom data, a 10.6 Bcm increase on the 74.3 Bcm sold in Europe and Turkey (excluding the former Soviet Union states) in the first half of 2015 means H1 2016 sales of 84.9 Bcm. This puts Gazprom well on track to reach its most recently stated target from May of total exports to Europe and Turkey in 2016 of 165 Bcm. However, the 10.6 Bcm increase in the first half confirms that the growth in Gazprom's gas sales to its core foreign markets stalled in the second quarter after strong growth at the start of the year.Meanwhile, the projected balance for the propylene market is less stable. With the increase in lighter feedstock cracking the US has seen production of cracker co-products drop off over the past 10 years. In addition, new crackers being built in the US are all geared at maximizing ethane consumption, which produces lower levels of propylene, crude C4s and aromatics.

4 States Struggling to Manage Radioactive Fracking Waste - The Marcellus Shale has transformed the Appalachian Basin into an energy juggernaut. Even amid a recent drilling slowdown, regional daily production averages enough natural gas to power more than 200,000 U.S. homes for a year.But the rise of hydraulic fracturing over the past decade has created another boom: tons of radioactive materials experts call an “orphan” waste stream. No federal agency fully regulates oil and gas drilling byproducts—which include brine, sludge, rock and soiled equipment—leaving tracking and handling to states that may be reluctant to alienate energy interests.“Nobody can say how much of any type of waste is being produced, what it is and where it’s ending up,” said Nadia Steinzor of the environmental group Earthworks, who co-wrote a report on shale waste. [Earthworks has received funding from The Heinz Endowments, as has the Center for Public Integrity.]The group is among several suing the U.S. Environmental Protection Agency to regulate drilling waste under a federal system that tracks hazardous materials from creation to final disposal or “cradle to grave.” The EPA declined to comment on the lawsuit but is scheduled to file a response in court by early July. The four states in the Marcellus are taking different approaches to the problem; none has it under control. Pennsylvania has increasingly restricted disposal of drilling waste, while West Virginia allows some landfills to take unlimited amounts. Ohio has yet to formalize waste rules, despite starting the process in 2013. New York, which banned fracking, accepts drilling waste with little oversight.

NY Sen. Schumer: Make oil safer before train shipments - (AP) — New York Sen. Charles Schumer says oil companies should be required to make their crude less dangerous to transport before loading it onto trains. The Democrat said Wednesday that much of the oil being shipped via train can be rendered less hazardous by removing flammable gasses first. Oil coming from North Dakota’s Bakken Shale formation is considered more volatile than other types of oil because it contains a greater amount of gas. Schumer says he’s asking the U.S. Department of Transportation to impose the requirement, which he says would reduce the risk of train car explosions. Albany is a hub for crude-by-rail shipments from North Dakota to East Coast refineries.

Evaluating economics of a new natural gas pipeline - part 4 - It’s no secret that a long list of pipeline projects have been proposed to help move natural gas out of the Northeast production areas. But if you were a Marcellus or Utica producer, how would you decide whether you were interested in new capacity that hadn’t been proposed or built yet? Of course, pipeline companies have armies of engineers, cost estimators, and market analysts to bring one of these monster projects to fruition. But for anyone else, particularly in the early stages, how do you even know it’s a reasonable idea? For anyone testing a concept, you need a way to ballpark some scenarios for a new pipe. We’ve been running a blog series on our RBN Pipeline Economics Estimation Model, a quick, rule-of-thumb “sanity test” for new capacity. Today, we wrap up our walk-through of the model, with a real-world example to gauge the accuracy of the model, and then with a discussion on how the model can be used to measure economies of scale in picking the minimum volume you probably need for a new pipeline.

Fracked Gas LNG Exports Were Centerpiece In Promotion of Panama Canal Expansion, Documents Reveal - Steve Horn, DeSmogBlog - After nearly a decade of engineering work on the project, the Panama Canal’s expansion opened for business on June 26. At the center of that business, a DeSmog investigation has demonstrated, is a fast-track export lane for gas obtained via hydraulic fracturing (“fracking”) in the United States. The expanded Canal in both depth and width equates to a shortened voyage to Asia and also means the vast majority of liquefied natural gas (LNG) tankers — 9-percent before versus 88-percent now — can now fit through it.  Emails and documents obtained under open records law show that LNG exports have, for the past several years, served as a centerpiece for promotion of the Canal’s expansion by the U.S. Gulf of Mexico-based Port of Lake Charles.  And the oil and gas industry, while awaiting the Canal expansion project’s completion, lobbied for and achieved passage of a federal bill that expanded the water depth of a key Gulf-based port set to feed the fracked gas export boom. Control of the Panama Canal by U.S. big business and Wall Street has, for over a century, served as a focal point of U.S.foreign policy in the Americas.   Jill Biden’s presence as part of an official Presidential Delegation at the expanded Canal’s opening ceremony symbolized the importance of the waterway and de jure role of the U.S. government in pushing for its expansion over the past several years. So too did the attendance of the U.S. military’s Southern Command (SOUTHCOM). And in turn, the reported participation of LNG exports giant Cheniere Energy at the kick-off serves as a portrayal of the importance of the Canal’s expansion to the oil and gas industry. The Panama Canal Authority estimates that 20 million tons of LNG may pass through on an annual basis. “The volume projected by the Panama Canal Authority represents about 8 percent of global LNG trade and is equivalent to nearly 300 ships a year,” Bloomberg explained.

High-Level EPA Adviser Accused of Scientific Fraud in Methane Leak Research - Recently, over 100 community and environmental groups sent a letter urging the Environmental Protection Agency’s internal watchdog to investigate claims that a top methane researcher had committed scientific fraud and charging that he had made false and misleading statements to the press in response to those claims. Earlier this month, NC WARN, an environmental group, presented the EPA Inspector General with evidence it said showed that key research on methane leaks was tainted, and that one of the EPA‘s top scientific advisors fraudulently concealed evidence that a commonly-used tool for collecting data from oil and gas wells gives artificially low methane measurements. The 68-page complaint dated June 8 laid out evidence that David Allen, a professor of engineering at the University of Texas who served as the chairman of the EPA‘s Science Advisory Board from 2012 to 2015, disregarded red flags that his methane measuring equipment malfunctioned when collecting data from fracked well sites, a problem that caused his University of Texas study to lowball leak rates. “We used the terms scientific fraud and cover-up because we believe there’s possible criminal violations involved,” said NC WARN executive director Jim Warren. “The consequence is that for the past 3 years the industry has been arguing, based largely on the 2013 study, that emissions are low enough that we shouldn’t regulate them.”Dr. Allen’s research is a part of a high-profile but controversial research series sponsored by the Environmental Defense Fund that received one third of its funding from the oil and gas industry.

Bad News For Glut As US Offshore To Hit Record In 2017 - Companies pumping oil from the Gulf of Mexico will ramp up production in coming months, propping up American output, despite efforts to curb production and raise barrel prices. The United States currently produces 8.7 million barrels a day - a half a million less than where the figure stood last year, according to data from the Energy Information Administration (EIA). Low prices caused by the high output levels have kept oil exploration efforts at a minimum. Around 500,000 more barrels of crude from Mexico’s namesake gulf will go online by 2017, according to analysis by the Wall Street Journal that included government and private sector sources. "The projects are coming faster and sometimes bigger than expected,” Roger Diwan of IHS Energy told Dow Jones. "The ramp-up seems to have accelerated during low prices.” A handful of sizable fields had been funded for construction years prior, when prices were higher. The projects completed construction as scheduled and will begin production in the coming months. Once the fields become operational, the U.S. Department of Energy predicts offshore oil production will set a record in 2017 with 1.91 million barrels - 24 percent more than in 2015 - flowing out of surrounding bodies of water by next December.

Obama Administration Approved Gulf Fracking During Deepwater Horizon Disaster: Hydraulic fracturing (or "fracking") technology has been widely used to maximize oil-and-gas production in the Gulf of Mexico in recent years, and the government allows offshore drillers to dump fracking chemicals mixed with wastewater directly into the Gulf, according to documents released to Truthout and the Center for Biological Diversity under the Freedom of Information Act (FOIA). From 2010 to October 2014, the Obama administration approved more than 1,500 permit applications for offshore drilling plans that included fracking at hundreds of wells across the Gulf of Mexico, according to the documents. An unknown number of permit applications have yet to be released, so the scope of offshore fracking in the Gulf is likely larger. During this time regulators issued more than 300 "categorical exclusions" to exempt drilling plans that included fracking from complex environmental reviews. The use of categorical exclusions has been under heavy scrutiny since 2010, when the media learned that BP's drilling plan for the Deepwater Horizon rig was categorically excluded from review in the months before a deadly explosion on the platform caused the worst oil spill in United States history. Federal records show that regulators approved several drilling plans involving fracking in the Gulf of Mexico even as the Deepwater Horizon disaster unfolded and oil from a broken well spewed into the Gulf for weeks on end.

Obama Approved Over 1.5k Gulf Offshore Fracking Permits: Media Ignored It - Steve Horn - On June 24, the independent news website TruthOut broke a doozy of a story: the Obama Administration has secretly approved over 1,500 instances of offshore hydraulic fracturing (“fracking”) in the Gulf of Mexico, including during the Deepwater Horizon offshore spill disaster.   Albeit released on a Friday, a day where many mainstream media reporters head out of the office early and venture to late-afternoon and early-evening Happy Hour specials at the bars, the TruthOut story has received deafening silence by the corporate-owned media apparatus.  Google News, Factiva and LexisNexis searches reveal that not a single mainstream media outlet has covered the story.  TruthOut got its hands on the story via documents provided by the Center for Biological Diversity (CBD). CBD explained inpress release that they “obtained the information following an agreement that settled a lawsuit challenging the federal Bureau of Ocean Energy Management’s and Bureau of Safety and Environmental Enforcement’s failure to disclose documents regarding the scope of offshore fracking in the Gulf under the Freedom of Information Act.”  CBD also has published a list of all of the instances of offshore fracking in the Gulf of Mexico provided to it by BOEM, both in list-form and in visual map form.CBD says more documents are on the way too, which means the number of frack jobs that have occurred offshore in the Gulf could rise. A case in point: a well that recently leaked and spilled 90,000 gallons of oil into the Gulf was, as reported by CBS affiliate WWL, fracked by spill culprit Shell Oil.

This Map Shows Where Offshore Fracking Has Occurred in the Gulf of Mexico - Last week, a Truthout report exposed new details on the use of fracking technology in undersea oil-and-gas wells in the Gulf of Mexico, where fossil-fuel firms are allowed to dump billions of gallons of wastewater mixed with chemicals. From 2010 to 2014, federal regulators approved hundreds of permits and permit modifications to allow private companies to use fracking, acid treatments and other technologies to maximize oil-and-gas production in the Gulf, according to a trove of government documents released under the Freedom of Information Act. The Center for Biological Diversity, which fought in court to have the documents released, used 1,200 of these permit documents to map out fracked wells in the Gulf, including one well that was connected to a flow line that spilled 90,000 gallons of oil into the Gulf last month. The Center and Truthout are still waiting on federal officials to release more records, so the scope of fracking in the Gulf is likely even larger.

Environmentalists Not Sorry to See Fracking Stop in Arkansas - The 10-year boom in Arkansas natural gas production poured billions of dollars into the state, but some Arkansans are not sad to see it end. (See After Boom in Shale, Arkansas Oil Industry Faces Halt in Drilling.) For years, environmentalists and some residents have feared the health effects of hydraulic fracturing, which forces highly pressurized water, sand and chemicals into wells to break up rock and free up natural gas reserves. Emily Lane, a graduate student and researcher in environmental justice, is a native and resident of Greenbrier in northern Faulkner County, where a cluster of small earthquakes linked to the fracking process led the state Oil & Gas Commission to impose a ban on the drilling of waste disposal wells. That moratorium remains in place, according to Larry Bengal, the commission director, who said a map of the 1,150-square-mile area is available on the commission’s website. Disposal wells have also been tied to earthquake swarms in Texas, Oklahoma and other areas not usually associated with seismic activity. Lane said the moratorium shut down only four waste wells, and is concerned that many others remain in operation outside the moratorium area. Lane said she is often asked about health concerns associated with fracking, but that “concerns” is a severe understatement. She said the effects are “catastrophic.” “During the boom, water was tainted with toxic chemicals, hazardous waste, runoff from well pads and other spillages,” Lane said.

Sierra Club loses appeal over permit for Enbridge pipeline | (AP) — A federal appeals court has ruled in favor of the government in a dispute over an oil pipeline that runs through a national forest in Michigan’s Oscoda County. The Sierra Club sued the U.S. Forest Service, saying it didn’t prepare an environmental analysis when it renewed Enbridge Energy’s right-of-way permit. But the appeals court on Thursday agreed with a federal judge in Bay City who said the agency wasn’t required to perform an assessment. The 30-inch pipeline is part of an Enbridge line that starts in Wisconsin and ends in Ontario, Canada. The court noted that a biologist found no impact on Kirtland’s warbler birds. The court says the Forest Service’s decision-making process was appropriate and not arbitrary.

New Drilling To Start As Oil Prices Firm Up - In a sign that the U.S. shale industry could spring back to life, one of the top Texas shale companies expects to grow both production and its rig count this year. Pioneer Natural Resources said in an updated 2016 outlook issued in June that it would increase its horizontal rig count from 12 to 17 rigs in the Permian basin in the second half of the year. Pioneer will add the first rig in September, with plans to follow that up with an additional two rigs in each of October and November. Those rigs will begin drilling and see initial production in early 2017. By adding those five rigs, Pioneer expects to see a production growth of 13 to 17 percent next year. That will come on top of the 12 percent growth the company expects this year. The updated outlook comes after several weeks of gains in the total U.S. rig count. The U.S. added 21 rigs between the end of May and mid-June, although the industry removed 7 rigs last week, according to Baker Hughes. Pioneer’s plans, along with the rig data, indicate a slow return of shale drillers to the oil patch. There has been a great deal of speculation whether or not oil rising to $50 would trigger new drilling. The industry won’t come rushing back in a wave, but Pioneer’s decision suggests that at least some companies have an appetite for new drilling at today’s prices. There is also some anecdotal evidence that companies are starting to finish drilled but uncompleted wells in North Dakota, leading to an uptick in hiring for fracking and well completion services. “We are starting to see a definite increase,” Cindy Sanford, a manager at the Williston office of Job Service North Dakota, told the Forum News Service. “It’s not as crazy as it was before, but we’re starting to see some activity.” After thousands of layoffs, companies are hoping to bring back some of their personnel. “We definitely are starting to see a need for some workers,” Sanford said.

Oklahoma Quakes Decline Amid Curbs on Energy Industry’s Disposal Wells - WSJ --  The number of earthquakes in Oklahoma has fallen 25% in 2016 compared with a year earlier, a decline attributed in part to actions by state regulators to police the oil and gas industry’s practice of pumping wastewater from its operations deep underground. The Oklahoma Corporation Commission, which oversees the state’s oil and gas industry, earlier this year stepped up efforts to get companies to reduce the amount of wastewater they inject into hundreds of disposal wells, which have been blamed for a surge in earthquake activity in the state over the past decade. More than 2,700 temblors of magnitude 2.5 or higher occurred in Oklahoma last year, up from 3 in 2005, according to data from the U.S. Geological Survey. So far this year, Oklahoma has had 1,098 quakes of that magnitude—strong enough to be felt by humans— down from about 1,400 over the same period in 2015. While the results represent only a few months of activity, Oklahoma officials and geologists say the state’s efforts appear to be working, and may be starting to reverse the earthquake trend—a development likely to be welcomed by citizens in drilling areas. “Sometime since March or so, it has just slowed way down,” said Jeremy Boak, director of the Oklahoma Geological Survey. “If it slows down much more, we could actually end up with fewer than in 2014.” The oil-and-gas industry, which has faced class-action suits over the quake hazards, has acknowledged the temblor problem, but has said more research is needed to link specific wells to specific incidents. Chad Warmington, president of the Oklahoma Oil & Gas Association, said the local industry has been working with earthquake researchers and regulators to make sure any regulatory decisions are based on solid science. “The directives by the Oklahoma Corporation Commission to reduce wastewater disposal volumes are showing results,” he said.

30 mayors speak out for local control of fracking -   - Following the United States Conference of Mayors here this weekend, over 30 mayors from more than a dozen states issued a statement today urging state and federal leaders to uphold local control of drilling. In their statement, the mayors said they opposed moves by both state and federal officials limiting the ability of communities to protect themselves from the harms of industrial fracking. “The growing trend of preemption is alarming,” the mayors wrote. Many of fracking’s impacts – from air and water pollution to earthquakes and ruined roads – are felt more heavily at the local level, prompting over 500 communities across the country to restrict the practice. But the oil and gas industry and their allies in government are fighting back. Last year, a federal court weighed in on local control of fracking for the first time, striking down a fracking ban in Mora County in rural New Mexico. “This notion of local control – that we have the right to come together with our neighbors and make our own choices on issues that threaten our public health or quality of life– is a long-standing American tradition, and we should reject attempts to limit it,” said Mayor Javier Gonzalez of Santa Fe, New Mexico, one of the statement’s signers. The Colorado Supreme Court struck down fracking bans in Longmont and Fort Collins in May. "It's essential that local municipalities have control because local elected officials understand the pulse of their community and voice of their constituents," said Mayor Nicole Nicoletta from Manitou Springs, just outside of Colorado Springs. "Studies have shown the potential negative impacts of fracking and we need to be able to examine that at the local level."

High Levels of Toxins Found in Bodies of People Living Near Fracking Sites: Many of the toxic chemicals escaping from fracking and natural gas processing sites and storage facilities may be present in much higher concentrations in the bodies of people living or working near such sites, new research has shown. In a first-of-its-kind study combining air-monitoring methods with new biomonitoring techniques, researchers detected volatile organic compounds (VOCs) released from natural gas operations in Pavillion, Wyoming in the bodies of nearby residents at levels that were as much as 10 times that of the national averages. Some of these VOCs such as benzene and toluene are linked to chronic diseases like cancer and reproductive and developmental disorders. Others are associated with respiratory problems, headaches, nosebleeds, and skin rashes. "Many of those chemicals were present in the participants' bodies at concentrations far exceeding background averages in the US population," notes the study, titled "When the Wind Blows: Tracking Toxic Chemicals in Gas Fields and Impacted Communities," which was released last week. Some residents of Pavillion have for years been concerned about the rise in health issues that they suspected were connected to emissions from the gas production activities. This tiny town of less than 250 people has been at the center of the growing debate on fracking since 2008 when locals began complaining that their drinking water had acquired a foul taste and odor back in 2008. In 2014, air monitoring data showed some toxic chemical emissions at oil and gas sites in Wyoming were up to 7,000 times the "safe" levels set by US federal environmental and health agencies. In March of this year, Stanford University researchers found evidence that fracking operations near Pavillion were contaminating the local groundwater.

BLM poised to OK 5,750 new wells for Utah oilfield -- The Bureau of Land Management last week wrapped up a six-year environmental analysis of a massive infill drilling program for the Uinta Basin's Monument Butte unit, which holds the state's largest proven oil reserves. Under the BLM's preferred alternative, Newfield Exploration Co. would, over a period of 16 years, drill all 5,750 oil and gas wells it proposed. That plan relies on directional drilling to reduce the project's footprint in an already affected field covering 119,000 acres south of Myton. The infill project is needed to recover remaining oil and gas with new wells and by injecting water into hydrocarbon-bearing formations to coax further production over the 40- to 50-year life of the project.  Utah's largest oil producer, Newfield already operates about 3,400 wells there, on 40-acre spacings. By drilling many new wells from existing pads, the infill project would concentrate its impacts to spots already served by existing roads and pipelines. These provisions are needed to protect habitat and the Pariette Wetlands. The project area contains no sage grouse areas that the BLM has recently identified for special protections, but it does harbor two species of rare cactus as well as prairie dogs. The preferred alternative identified in the Environmental Impact Statement (EIS) would still allow for 10,122 acres of additional surface disturbance, enabling Newfield to develop 226 miles of new roads and pipelines; build 21 new compressor stations and expand three others; and construct a gas-processing plant, 13 water treatment and injection sites, 12 gas and oil separation plants and six water pump stations. The infill project is expected to yield 335 million barrels of oil and 540,669 million cubic feet of natural gas from the Green River formation and nearly 7 trillion cubic feet from "deep gas development" through 2035, according to the EIS. Utah officials called the project one of the single largest investments in Utah, bringing between $19 billion and $35 billion, but they were critical of the first draft of the EIS, released in 2013. That version called for more directional drilling and a lot fewer new roads.

Environmental groups plan appeal of US fracking decision as debate swirls over impact - Environmental groups said Monday they will appeal a federal judge's decision to overturn the Obama administration's rules over hydraulic fracturing, a ruling an attorney for these groups said will have far-reaching impacts over future regulation of US oil and gas operations. The ruling, which US District Court of Wyoming Judge Scott Skavdahl issued last week, could make many of the existing regulations over fossil fuel production illegal and could severely hinder any future oversight of oil and gas operations, according to Mike Freeman, a Colorado-based attorney with Earthjustice. "This is really just a long overdue update to the [US Interior Department's Bureau of Land Management's] oil and gas rules," Freeman said. "It's not some improper power grab." Freeman is representing several environmental groups, including the Sierra Club, Western Resource Advocates and Southern Utah Wilderness Alliance, who filed notice Monday with the US Court of Appeals for the 10th Circuit that they were appealing Skavdahl's ruling. The Obama administration on Friday filed notice that they were also appealing the ruling. "Obviously we disagree with the decision," Jessica Kershaw, an Interior spokeswoman, said in a statement Monday. "The fracking standards reflect today's industry practices and are aimed at ensuring adequate well control, preventing groundwater contamination, and increasing transparency about the materials used in the fracturing process. The standards are well within BLM's statutory responsibility to protect our public lands, and ensure that oil and gas operations are conducted safely and responsibly on those lands."

U.S. hardens royalty rules on fossil fuel production | Reuters: The Obama administration on Thursday completed new rules for how energy companies value oil, gas and coal extracted from federal land in a reform meant to protect taxpayers' stake in those sales. The Interior Department updated the valuation rules that were first enacted in the 1980s and have not been significantly changed in over a decade. They were completed Thursday after four years of public engagement. "These improvements were long overdue and urgently needed to better align our regulatory framework with a 21st century energy marketplace, offering a simpler, smarter, market-oriented process,” Interior Secretary Sally Jewell said in a statement. Jewell said the new oil, gas and coal valuation update is a key part of the administration's reform agenda to improve the transparency and accountability of the federal coal program. The rule expects companies to pay royalties on sales to the first unaffiliated customer, known as an arm's-length sale, as the fuel moves to market. This better reflects the market value of the coal, oil or gas extracted than situations when energy companies sell to affiliates, officials have said. “This valuation rule is important because it ensures, in part, that our federal coal program is properly structured to obtain all revenue due to taxpayers,” Jewell said.

Public Lands Development Rigged in Favor of Oil and Gas --A staggering 90 percent of our public lands and minerals managed by the Bureau of Land Management (BLM) are open to oil and gas leasing due to fundamental flaws in the BLM’s policies, according to a new report from The Wilderness Society. The No Exit report shows that regardless of conservation value or potential energy resources, the Bureau of Land Management automatically places our public lands on the highway to oil and gas leasing. Instead of seeking to preserve some of the nearly 250 million acres of public lands and 700 million acres of subsurface mineral resources owned by the American people, the agency relies on outdated and unbalanced policies and defaults to managing public lands for energy development.  This directly conflicts with the BLM’s own guiding principle that some lands, especially those with low potential energy resources, be managed for conservation, wildlife habitat and recreation.  Currently, nearly 32 million acres of BLM lands are leased for oil and gas development, including areas that do not contain oil and gas. Lands under lease remain unavailable for any other use, even when they are not actively under development. And the majority of these leased lands—60 percent—remain undeveloped due to oil and gas companies hoping for future profits if energy prices rise or the land could be sold.

North Dakota adopts rules to reduce oil industry spills  (AP) — North Dakota regulators on Wednesday adopted new rules aimed at reducing spills in the state’s oil patch, despite objections by the industry. The state Industrial Commission approved the rules that include bonding and third-party inspections of gathering pipelines that carry briny oilfield wastewater. Another new rule requires berms at least 6 inches high be built around existing and future well sites to keep oil and saltwater spills from spreading. The North Dakota Legislature last year directed the Industrial Commission’s Oil and Gas Division to draft new rules. The action came in the wake of a 3-million gallon saltwater pipeline leak near Williston in western North Dakota that regulators said was the biggest such spill to occur in the state. Saltwater is a naturally occurring, unwanted byproduct of oil and natural gas production that is many times saltier than sea water. The briny liquid also may contain petroleum and residue from hydraulic fracturing operations. North Dakota oil companies have opposed the rules, saying that adding more regulations adds costs to companies that already are dealing with depressed crude prices. Lynn Helms, director of the state Department of Mineral Resources, said public hearings on rules were done in several cities in April. Helms’ agency regulates the state’s oil and gas industry and is overseen by the Industrial Commission, an all-Republican panel whose members are Gov. Jack Dalrymple, Attorney General Wayne Stenehjem and Agriculture Commissioner Doug Goehring.

Washington Gov. Jay Inslee Asks Union Pacific To Halt Oil Trains . News | OPB: Gov. Jay Inslee asked the Union Pacific Railroad on Friday to halt oil train shipments through Washington until the company does more walking inspections of its railroad track. Inslee joins Oregon Gov. Kate Brown, who has repeatedly called for a moratorium on oil train traffic after a fiery oil train derailment in Mosier, Oregon, on June 3. Union Pacific said it will continue operations. “We are required to transport crude oil and other commodities for our customers, as long as the customers deliver those packaged in conformity with U.S. Department of Transportation requirements,” said Union Pacific Spokesman Justin Jacobs in response to Inslee’s statement.Federal regulators blamed Union Pacific for the 16-car derailment, saying the railroad failed to maintain its track. Union Pacific had inspected the track in Mosier before the derailment, but failed to find multiple broken bolts that led to the crash. In a report Thursday, the Federal Railroad Administration said inspections done by walking instead of driving are a more effective method of detecting rail defects like broken bolts. “A moratorium should be placed on any oil trains in Washington using track that is not inspected to these rigorous standards,” Inslee said in a press release. “I will continue pressing federal regulators and the railroads for swift action.”

In California, Study Finds Drilling and Fracking into Freshwater Formations -- In California's farming heartland, as many as one of every five oil and gas projects occurs in underground sources of fresh water, according to a new study published Monday in the Proceedings of the National Academy of Sciences. The study by Stanford scientists assessed the amount of groundwater that could be used for irrigation and drinking supplies in five counties of California's agricultural Central Valley, as well as the three coastal counties encompassing Los Angeles, Santa Barbara and Ventura. The study estimated that water-scarce California could have almost three times as much fresh groundwater as previously thought. But the authors also found that oil and gas activity occurred in underground freshwater formations in seven of the eight counties. Most of the activity was light, but in the Central Valley's Kern County, the hub of the state's oil industry, 15 to 19 percent of oil and gas activity occurs in freshwater zones, the authors estimated.  The overlap of oil and gas development and underground freshwater formations underscores the vulnerability of California's groundwater, and the need for close monitoring of it, the authors said. "We don't know what effect oil and gas activity has had on groundwater resources, and one reason to highlight this intersection is to consider if we need additional safeguards on this water,". The study arrives as California grapples with the possible impact of past oil and gas activity on its groundwater resources and the push to develop new fossil fuel reservoirs through hydraulic fracturing, or fracking. In 2014, state officials admitted that for years they had allowed oil and gas companies to pump billions of gallons of wastewater into more than 2,000 disposal wells located in federally protected aquifers. In 2015, Kern County officials found hundreds of unlined, unregulated wastewater pits, often near farm fields. Oil and gas wastewater is highly saline and laced with toxic substances, such as the carcinogen benzene.

Earthquake Dangers at Diablo Worsened by Fracking - We know that both onshore and offshore hydraulic fracturing or “fracking” is the process of drilling and injecting a high-pressure mixture of fracking fluid at subterranean rock to release the shale gas, tight gas, and tight oil inside the earth.  The highly pressurized toxic liquids used in fracking can start earthquakes by lubricating preexisting faults deep underground. This allows masses of rock to slide past each other. Both the U.S. Army and the U.S. Geological Survey have concluded that the practice of injecting pressurized water into deep rock formations causes earthquakes. Unfortunately, the federal government just lifted a moratorium on 19 offshore fracking platforms in the Santa Barbara Channel. The Hosgri fault, which is located in the southern part of the San Gregorio-Sur-San Simeon-Hosgri fault system, is truncated against or merges with the faults in northwestern Santa Barbara Channel. The problem is that offshore hydraulic fracturing in the Santa Barbara Chanel could trigger a meltdown at the aging and brittle Diablo Canyon Nuclear power plant. In 1812, the Santa Barbara Channel magnitude 7 earthquake produced five tsunami waves in front of the Santa Barbara Presidio. The USGS estimated the largest wave was about 50 feet high. The Diablo Cove Fault, which runs east to west directly under the Diablo Canyon nuclear plant’s Unit One Reactor and turbine building, cuts across the seismically active Shoreline Fault. The Diablo Cove Fault, the Shoreline Fault, the Hosgri Fault, and the San Andreas Fault are all seismically linked, and the power stored within the combined network of fault systems could create an earthquake sufficient to exceed Diablo Canyon’s safeguards.

Betraying Progressives, DNC Platform Backs Fracking, TPP, and Israel Occupation -  Despite its claims to want to unify voters ahead of November’s election, the Democratic party appears to be pushing for an agenda that critics say ignores basic progressive policies, “staying true” to their Corporate donors above all else.  During a 9-hour meeting in St. Louis, Missouri on Friday, members of the DNC’s platform drafting committee voted down a number of measures proposed by Bernie Sanders surrogates that would have come out against the contentious Trans-Pacific Partnership (TPP), fracking, and the Israeli occupation of Palestine. At the same time, proposals to support a carbon tax, Single Payer healthcare, and a $15 minimum wage tied to inflation were also disregarded.  In a statement, Sanders said he was “disappointed and dismayed” that representatives of Hillary Clinton and DNC chairwoman Debbie Wasserman Schulz rejected the proposal on trade put forth by Sanders appointee Rep. Keith Ellison (D-Minn.), despite the fact that the presumed nominee has herself come out against the 12-nation deal.

First Alaskan North Slope Crude Export Planned for Nicaragua - Alaskan North Slope (ANS) crude will be shipped to Nicaragua for the first time in July, underscoring a shift in oil flows to and from the U.S. West Coast. Global crude flows have changed in the last six months as oversupplied markets force producers to compete aggressively on price. The United States in December lifted a four-decade ban on exporting crude, giving global refiners access to a wider variety of crude. ANS, which was exempted from the U.S. export ban, is almost exclusively sold to West Coast refiners and transported on U.S. flagged vessels owned by BP Plc, Exxon and ConocoPhillips that comply with maritime law. The rare cargoes that have moved abroad in recent years have gone to South Korea or Japan. In March, Trafigura took 380,000 barrels of West Texas Intermediate (WTI) crude at its Puma refinery in Nicaragua. Trafigura has a stake in Puma Energy, which operates a small refinery in Managua, Nicaragua, and manages downstream assets in 47 countries.

New Panama Canal Locks No Game-changer To Americas Crude Flows -- Interest in the expanded Panama Canal is tepid among US Gulf Coast and Caribbean dirty tanker market participants, as draft restrictions make large Aframaxes the largest tanker able to transit its new lock system, and they are unlikely to leave their lucrative home markets for what looks like little gain in freight savings. Shipowners are taking a wait-and-see approach about the effects of the canal’s expansion. “It’s not going to be a game-changer, because you won’t be able to get the bigger ships through,” one said. “You can only get a partially laden Suezmax through.” Although a Suezmax could not make the transit fully loaded with crude, a ship could go through with a full load of condensate. With the opening of the expanded lock system on June 26, vessels of 1,200 feet (366 meters)in length and a beam of 160.7 feet (49 meters) can transit. Those dimensions would accommodate a typical Suezmax tanker. Currently, the Panama Canal’s locks allow ships of up to 965 feet (294.1 meters) long and 106 feet (32.3 meters) wide to make the transit. But, draft is an issue. The depth of the canal’s present configuration will allow a maximum draft of 39.5 feet (12.04 meters). That increases to 49.9 feet (15.2 meters) with the expansion. Suezmaxes typically draw 53 feet (16.15 meters) of draft, which would exclude them from making the transit with a full load of crude. A drought has compounded the draft issue, however. Due to low water levels, the Panama Canal Authority has imposed some draft restrictions.

Big Oil: From black to green -- The short-term crisis for oil companies has been the slump in crude prices over the past couple of years, triggered by the US shale boom. In the longer term, the more fundamental challenge is a potential move away from oil that would hold down prices indefinitely. Paul Spedding of the Climate Tracker Initiative, a think-tank that works on the financial risks of climate change, says investors can face large losses when companies invest in “stranded assets” that cannot be developed at a profit. “That is the real risk climate change poses for the industry: over-investment, followed by oversupply, followed by value destruction via price,” he says. At least in their rhetoric, there is a divide between US and European companies in their stance on climate change. BP, Shell, Total and Statoil of Norway signed a statement before the Paris talks saying they were “committed to playing our part” in keeping the rise in global temperatures below the internationally agreed limit of 2C. The largest American oil groups, however, were not on that list. “We thought that Exxon and Chevron might sign up to things like this, but then do very little about it,” says one executive at a major European oil company. “But they haven’t even done that.” The US companies do not deny that global warming is a threat. “We know the risks of climate change are real, and governments will and should take reasonable steps to address those risks,” says Bill Colton, vice-president of corporate strategic planning at Exxon. But he adds, “each government is limited in what it can do, and they might not go as far as some people would like”. That means Exxon expects demand for fossil fuels can continue to grow. It projects that total world energy demand will grow by about 25 per cent in the next 25 years, compared to 59 per cent growth in the past 25, in part because climate policies will drive increased energy efficiency.

Big Oil Faces US$2 Trillion Cash Shortage – Deloitte -- A report by consultancy Deloitte has revealed that the oil and gas industry may find itself unable to improve its reserves replacement rate and overall performance over the next five years due to a huge shortage of cash of as much as US$2 trillion. Deloitte notes in the report that oil and gas exploration and production is a capital-intensive industry, and a lot is necessary to just stay afloat. With all the budget cuts that this industry has seen over the last two years, staying afloat has become challenging, not to mention any growth, said Deloitte vice chairman John England.  The report was based on a survey of integrated public and listed national companies as well as independent E&Ps and warned that things are not looking particularly good. The rate of well depletion is 7-9 percent annually for both traditional and shale wells, and spending at many of the companies surveyed has been cut to below the necessary minimum that would ensure that this depletion is being offset, England noted.Findings in the area of capital spending are also grim. Outside the Middle East and North Africa, capex in the exploration and production business dropped by a quarter last year and is expected to fall by a further 27 percent this year.  Debt maturing over this and the next four years totals US$590 billion, the report pointed out, and dividend payouts are estimated at around US$600 billion. In order to cope with these payments, E&Ps will need more than US$4 trillion, which they won’t have if oil prices don’t start rising above US$50 a barrel.

Canada court overturns approval of Enbridge oil pipeline (AP) — Canada’s Federal Court of Appeal has overturned the previous government’s controversial approval of a pipeline proposal that would bring oil to the Pacific Coast for shipment to Asia. In a ruling released Thursday, the court said the former Conservative government did not adequately consult aboriginal communities regarding their traditional territory or accommodate their concerns. “It would have taken Canada little time and little organizational effort to engage in meaningful dialogue on these and other subjects of prime importance to Aboriginal Peoples. But this did not happen,” said the ruling. Canada’s former Conservative government in 2014 approved Enbridge Inc.’s US$6.11-billion (CA$7.9-billion) Northern Gateway pipeline project, which would carry oil from the Alberta oil sands to a port in northern British Columbia for export. Its construction was subject to more than 200 conditions. After the approval, numerous British Columbia aboriginal communities, along with environmental groups, filed lawsuits seeking to overturn the decision. The court on Thursday sent the matter back to Prime Minister Justin Trudeau’s cabinet for “prompt redetermination.” Northern Gateway president John Carruthers said that while the matter has been remitted to the federal government for their redetermination, Northern Gateway will consult with aboriginal equity partners and its commercial project proponents to determine the next steps.

TransCanada formally seeks NAFTA damages in Keystone XL rejection - TransCanada Corp. is formally requesting arbitration over U.S. President Barack Obama's rejection of the Keystone XL pipeline, seeking $15 billion US in damages, the company said in legal papers dated Friday. TransCanada submitted a notice for an arbitration claim in January and had then tried to negotiate with the U.S. government to "reach an amicable settlement," the company said in files posted on the pipeline's website. "Unfortunately, the parties were unable to settle the dispute."TransCanada said it then filed its formal arbitration request under North American Free Trade Agreement provisions, seeking to recover what it says are costs and damages. The Keystone XL was designed to link existing pipeline networks in Canada and the United States to bring crude from Alberta and North Dakota to refineries in Illinois and, eventually, the Gulf of Mexico coast. Obama rejected the cross-border crude oil pipeline last November, seven years after it was first proposed, saying it would not make a meaningful long-term contribution to the U.S. economy. TransCanada is suing the United States in federal court in a separate legal action, seeking to reverse the pipeline's rejection.

US ethane exports to Asia, Latin America about to pop. Canadian ethylene plants have been receiving U.S.-sourced ethane by pipeline for two and a half years now, and waterborne ethane exports from Marcus Hook, PA to Norway started earlier in 2016. Soon the real fun will begin, when Enterprise Products Partners initiates (and quickly ramps up) ethane exports from a new, 200 Mb/d terminal on the Houston Ship Channel at Morgan’s Point.  The destinations of the ships leaving Morgan’s Point are likely to be places like India, Brazil, Europe, and maybe even Mexico.  Today, we consider the imminent bump-up in U.S. ethane export capacity, the international markets ethane will be headed to in the near-term, and the longer-term question about how much ethane exports can grow. Just a few years ago, before the Shale Revolution, the thought that sometime soon the U.S. would be piping significant volumes of ethane to Canada and floating ship after refrigerated ship of the lightest natural gas liquid (NGL) to European ethylene plants (steam crackers) would be dismissed as nothing short of crazy. But here we are.  As shown in Figure 1 (left graph), ethane exports to Canada via the Mariner West and Vantage pipelines ramped up from zero in 2013 to average 38 Mb/d in 2014, 65 Mb/d in 2015 and almost 80 Mb/d so far this year.  Oceangoing ethane exports started on March 9 of this year when the JS Ineos Intrepid departed Marcus Hook with 175 Mbbl of ethane headed for INEOS’s cracker at Rafnes, Norway.  Since then about 16 Mb/d of ethane has moved out of Marcus Hook, with 22 Mb/d exported in May (Figure 1, right graph).

Natural Gas Storage Hits A Record For First Week In June; The Bakken Turns Out To Be A Major Contributor --The Bakken is considered an "oil" play. Somewhere between 93% and 95% of all hydrocarbon produced from the Bakken is oil; throw in condensates and "we" might be "pert near" 97%, leaving only about 3% of hydrocarbon production in the Bakken to be natural gas. On the other hand, the Woodford, Haynesville, and Barnett are all considered natural gas plays. The link: For the "Natural Gas Weekly Update" report released June 22, 2016. Some data points from that release:

  • working natural gas stocks hit a new record for the first week in June: over the 3 trillion cubic foot mark -- that's storage! -- storage hit 3 Tcf during the first week in June -- earlier in the refill season (April 1- October 31) than ever before
  • the record set back in 2012 was erased 
  • comparable to 2012, working gas stocks entered the refill season this year (2016) at a record high level, totaling 2.492 Tcf on March 31, 2016. That was 19 Bcf above the record set in 2012
  • the EIA uses the phrase "considerably higher" to say where we are now compared to 2012 (the previous record year)
  • despite this huge injection, total natural gas during this same period has exceeded both year-ago and 2012 levels -- a trend driven by power-sector consumption
  • power burn: 26 Bcf/d; 10% greater than a year ago; 5% greater than 2012
  • exports: to Mexico have more than doubled since 2012 to 4 Bcf/d; LNG up to 0.5 Bcf/d from negligible in 2012
  • natural gas production has slowed in all seven of the shale-producing regions

UK's Brexit vote leads to bearish impact on LNG as currencies weaken -  The UK's Brexit vote is expected to have a bearish effect on the global LNG market due to the weakening of European currencies, several trading sources said Friday. News of the UK's decision to leave the EU on Friday caused both the pound and the euro to weaken against the dollar, the currency in which LNG is traded. This in turn has reduced the value that regasified spot LNG at western European gas hubs, which have traditionally been considered as a pricing floor for the global LNG market. The UK's National Balancing Point is often used as a reference for the relative value of spot LNG transactions, with prices at the Dutch Title Transfer Facility also used as relative marker.At close of business Friday, the Platts assessed NBP forward contract for July had lost 4.9% of its value in dollar-denominated terms day on day, moving from $4.934/MMBtu on June 24 to $4.694/MMBtu June 25. In pound terms, however, the value of the July contract gained 3.9% or 1.3 pence to close at 34.55 pence/therm. In the case of TTF, in dollar terms the Platts assessed July forward contract lost 5.26% of its value between Thursday and Friday, moving from $5.056/MMBtu to $4.790/MMBtu. The change in terms of euros, which the TTF is traded in, was a more modest loss of 3.29%.

Earthquakes Cause Giant Natural Gas Field To Cut Production By 44% --Europe just lost a big chunk of production from one of its most critical natural gas fields, and not for any of the usual reasons — technical problems, pipeline constraints, or terrorist disruptions. These cuts are due to earthquakes. The development came at the Groningen natgas field in the Netherlands. The largest producing field in Western Europe — and one of the world’s top 10 gas fields by size. Groningen’s massive size has been an issue lately though, with drawdown from the field having caused seismic events in the areas above and surrounding the field. Such concerns prompted the Dutch government to take action Friday. With the country’s Economics Minister Henk Kamp saying that regulators will reduce Groningen’s permitted output by 11.1 percent — to 24 billion cubic meters per year (850 billion cubic feet), down from a previous allowance of 27 billion cubic meters. Minister Kamp also said that the reduced production quota will stay in effect for the next five years. This means that Europe has lost a significant slice of its go-to production for the foreseeable future. This latest production cut continues a dramatic slide in Groningen’s output over the past 18 months. With the Dutch government deciding in early 2015 to cut production from 42.5 billion cubic feet annually to 39 billion cubic feet — and then further reducing the quota to 33 billion cubic feet just a few months later.

Chile Just Gave Cheniere a Big Reason to Build Another LNG Plant - - Chile this week gave Cheniere Energy Inc. a good reason to build another plant to export U.S. natural gas by clearing the final environmental hurdle for a proposed floating import terminal.Approval was granted for the Penco Lirquen LNG project, which comprises a floating storage and regasification unit, Juan Jose Gana, executive director of Biobiogenera SA, the developer behind the project, said in an e-mail Thursday. The 1,200-megawatt Central El Campesino power plant, which will be supplied by the gas import vessel, “should be approved” in July or August, he said. This approval marks a milestone for Cheniere, which has a 20-year agreement to supply gas to the power plant. Cheniere is also a co-owner of the LNG import project with Biobiogenera, according to Hoegh LNG Holdings Ltd., which is building the terminal.Success in Chile may help Cheniere find other new buyers needed to sign long-term contracts before it makes a decision on an additional liquefaction plant at its Corpus Christi facility in Texas, according to Energy Aspects Ltd. and Hennessy Funds.“This a positive development for U.S. exports,” Alex Tertzakian, an analyst with Energy Aspects in London, said by e-mail Thursday. Although the contract to supply the terminal and the connected power plant “is relatively small volume-wise,” the latest developments will “undoubtedly increase the chances” of Cheniere moving ahead with building the third liquefaction plant at Corpus Christi, he said.   Although it got the environmental nod, the project has stirred up controversy in the local community. Police used a water cannon to break up protests in the Chilean city of Concepcion on Tuesday after the regional environmental commission unanimously approved the LNG project, Radio BioBio reported on its website.

Too Much, Too Little, Too Late - Competition, Low Prices Unsettling the LNG Market - The international market for liquefied natural gas (LNG) is in the midst of a wrenching transition. The old order, founded largely on long-term, oil-indexed contracts that called for certain volumes of LNG to be delivered by specified Point A to specified Point B, is being replaced by a new order characterized by intense competition among suppliers, new sources of supply (and demand), a glut of liquefaction capacity expected to last at least a few years, more spot purchases, and contracts incorporating destination flexibility—and, for many, tied to natural gas (not oil) prices. Today, we continue our exploration of the industry’s fast-changing dynamics with a look at the fierce battle now under way among LNG suppliers for market share, and at new approaches to pricing LNG. As we said in Episode 1, only eight years ago U.S. natural gas prices were spiking, domestic gas production was declining, and much of the market was anticipating a boom in LNG imports to the U.S. from Qatar and other major suppliers. Now, pipelines are being reversed to bring gas from the Marcellus and Utica basins to Gulf Coast to be super-cooled into LNG, and LNG from the first liquefaction/LNG export facility in the Lower 48 (Train 1 at Cheniere Energy’s Sabine Pass in southwestern Louisiana) is being shipped to overseas buyers. (Train 2 at Sabine Pass is in the process of being started up.) But the market expectations on which the development of new liquefaction capacity at Sabine Pass, Cameron LNG, Corpus Christi LNG (another Cheniere project), Freeport LNG, and Dominion’s Cove Point were founded have been shaken to their core. Recent spot prices for LNG (around $5/MMBtu—75% lower than where prices stood two and a half years ago) suggest that the world is awash in LNG. Worse yet, it is possible (but by no means certain) that during the 2016-20 period worldwide liquefaction capacity (for super-cooling/condensing natural gas into very transportable LNG) will rise to 448 million tons per annum (MTPA) from the 308 MTPA online at year-end 2015, a 45% increase in less than five years.

NYMEX August gas settles at $2.924/MMBtu, up 6.1 cents - Natural Gas | Platts - The NYMEX August natural gas prompt-month contract jumped 6.1 cents to settle at $2.924/MMBtu, its highest close since August 12, 2015, on bullish weather reports and a below-average injection reported by the US Energy Information Administration. The August contract traded in range of $2.851/MMBtu to $2.945/MMBtu. According to the EIA's weekly gas storage report, a net injection of 37 Bcf was reported for the week ended June 24, including a non-flow-related adjustment that decreased working gas stocks by about 5 Bcf. This injection falls below the 46 Bcf expected by a consensus of analysts surveyed by S&P Global Platts and was below last year's 73-Bcf injection and the five-year average of 78 Bcf, boosting prompt-month prices.Additional upward pressure on prices came from a projected tightening of the supply-demand balance. Platts unit Bentek Energy projected total US demand to reach 66.7 Bcf/d over the next seven days amid bullish weather reports, almost 2 Bcf/d higher than the June month-to-date average, while total US production is expected to sit around 70.1 Bcf/d, about 400 MMcf/d lower than the June month-to-date average and almost 2 Bcf/d lower than June 2015. Weather will continue to be a driver for the prompt-month contract. According to Phil Flynn, senior market analyst at Price Futures Group, "we haven't seen the worst heat wave yet. July is expected to be a scorcher." If this weather projection comes to fruition, it will give a fair amount of momentum to the prompt-month contract, Flynn added.

US Gas Futures Head for Best Second-Quarter Gain in 16 Years  |  Rigzone - - U.S. natural gas futures headed for the best second quarter since 2000 after a government report showed a smaller-than-forecast stockpile gain that reflected a revision to West Coast supplies. Gas inventories rose 37 billion cubic feet after the Pacific region reclassified 5 billion cubic feet from working gas, or stockpiles that can be withdrawn and sent to customers, and instead tagged it as gas needed to maintain adequate storage pressure. That made the implied flow for the week 42 billion. Analysts had predicted an increase of 45 billion. The inventory surplus narrowed for a twelfth straight week, according to the U.S. Energy Information Administration data. Prices have surged 81 percent from a 17-year low in March as hot weather boosts demand for electricity generation, eroding the supply glut. Production disruptions from flooding in West Virginia and an explosion at an Enterprise Products Partners LP gas plant in Mississippi are also limiting supplies. "The supply declines have been greater than anticipated by the market,” said Teri Viswanath, managing director of gas at PIRA Energy Group in New York. "The market wants to look at the winter, but there’s still enough moving parts in the injection season alone that it should pose a question at whether the arrival at the three-dollar mark is premature." Futures for August delivery rose 4.9 cents, or 1.7 percent, to $2.912 per million British thermal units at 2:10 p.m. on the New York Mercantile Exchange after the release of the EIA inventory report. Gas is on course to gain 49 percent this quarter. Temperatures may be broadly warmer than normal in the contiguous U.S. from July 10 through July 14, with the West hotter than previously expected, according to MDA Weather Services.

Cedigaz: Global gas demand to rise 1.6%/year over 2014-35 - Oil & Gas Journal --Worldwide natural gas demand is expected to rise 1.6%/year during 2014-35, driven by emerging markets, electric power generation, and industry, according to a recent outlook from Cedigaz. In its Medium and Long-Term Natural Gas Outlook 2016, the international gas association highlights the increasing role of gas as a bridge fuel towards a longer-term, increasingly renewables-based energy system.Cedigaz noted that political action is needed to promote coal-to-gas switching worldwide, given the vast low-cost coal resources. The trajectory of Cedigaz’s scenario is based on the assumption that energy-related carbon dioxide emissions increase an average of 0.3%/year, reaching almost 35 Gt over 2030-35. “Looking forward to 2035, the total primary energy consumption is forecast to grow at a moderate rate of 1%/year in a context of increased energy efficiency. In this context, gas stands as the fastest-growing fossil fuel over 2014-35 (+1.6%/year). In contrast, the growth of oil and coal is expected to slow sharply, with respective annual rates of 0.2% and 0.1%.” Cedigaz said. Gas will therefore increase its relative share in the global primary energy supply to 23.9% in 2035 from 21.4% in 2013. However, the pace of gas demand growth has been revised downwards compared with the association’s Outlook 2015. Intended Nationally Determined Contributions (INDCs) ahead of Conference of Parties (COP21) have been taken into account, meaning greater efforts to meet environmental goals via the deployment of renewables and increasingly efficient technologies.Also, according to the Outlook 2016, virtually all of the additional energy is consumed in emerging economics and 85% of gas growth comes from emerging economies. The US is the only industrialized market to record a significant growth in gas consumption in volume terms, thanks to the competiveness of shale gas and the adoption of the Clean Power Plan.

Gazprom H1 gas exports to Europe up 14% year-on-year: CEO - Gazprom's gas sales in Europe in the first half of 2016 rose by 14.2%, or 10.6 Bcm, compared with the same period of last year, Gazprom CEO Alexei Miller said Thursday, signaling a sharp slowdown in export growth in the second quarter of this year. Addressing Gazprom's annual general meeting in Moscow, Miller also hailed the utilization rate of Russia's Nord Stream gas pipeline to Europe, which, he said, far outweighed that of LNG imports. Speaking of Gazprom's supplies to Europe and Turkey in the first half, Miller provided no absolute figures. But according to Platts' analysis of Gazprom data, a 10.6 Bcm increase on the 74.3 Bcm sold in Europe and Turkey (excluding the former Soviet Union states) in the first half of 2015 means H1 2016 sales of 84.9 Bcm. This puts Gazprom well on track to reach its most recently stated target from May of total exports to Europe and Turkey in 2016 of 165 Bcm. However, the 10.6 Bcm increase in the first half confirms that the growth in Gazprom's gas sales to its core foreign markets stalled in the second quarter after strong growth at the start of the year.

Overseas Fracking Operation Finds Wastewater Solution In The Sea - Fracking is not just an issue facing different cities around the United States, but one that has become a large problem overseas. As a result, a UK shale gas company is considering dumping wastewater from fracking in the sea. Ineos, which owns the Grangemouth refinery andholds 21 shale licenses, many in the northwest, North Yorkshire, and the east Midlands, has said it wants to become the biggest player in the UK’s nascent shale gas industry according to The Guardian.In North Yorkshire, where councilors gave the go-ahead to a fracking application by another company in May, a senior executive said in an email that water produced during fracking could be discharged in the sea after being treated. “We will capture and contain it, treat it back to the standards agreed… with the Environment Agency and discharge where allowed under permit, most likely the sea,” Tom Pickering, director for Ineos Shale, wrote in the email. People who are living near prospective sites have highlighted the potential environmental impacts of fracking, such as contamination of water supplies, minor tremors, and local air pollution reported The Guardian. Under the Environment Agency (EA) regulations, the water used for fracking must be treated on site or elsewhere at a “designated treatment facility,” before a permit is issued to discharge it. Ineos added that any fracking wastewater would be treated before being disposed of.

Chevron Deadline Nears For $40B Bet On Next Decade's Oil - -- Chevron Corp. may shortly give a green light to the most expensive oil project in the world this year as the industry digs out from the worst slump in a generation. The company said this week in a presentation on its website that the decision on expanding the Tengiz development in Kazakhstan will be made in mid-2016. Installing 4,500 camp beds for construction crews is done and port dredging 25 percent complete, it said. The project may cost as much as $40 billion and add crude supply equivalent to that of Libya. The investment was put on hold last year after cost estimates ballooned amid plunging oil prices. In a May interview, Kazakh Energy Minister Kanat Bozumbayev predicted a late-June approval and estimated the cost at $36 billion to $37 billion. Wood Mackenzie Ltd. said it could reach $40 billion. Chevron spokesman Kurt Glaubitz declined to comment on the pace of the Chevron board’s deliberations or the projected price tag.The Tengiz expansion would come after oil explorers around the globe slashed more than $1 trillion in investments to weather a downturn that saw U.S. crude tumble 75 percent from June 2014 to last February. Hundreds of thousands of drillers, engineers and geologists were fired and the contagion spread to steel mills, trucking and lodging companies. The project represents a bullish bet that oil demand will continue to grow through the next decade and beyond, according to IHS. For Chevron, the squeeze meant writing off hundreds of millions of barrels of deepwater discoveries in the U.S. Gulf of Mexico and elsewhere. The San Ramon, California-based explorer slashed annual spending plans for 2017 and 2018 to between $17 billion and $22 billion each year, a reduction of about 26 percent from this year. Chevron’s 50 percent ownership interest in Tengiz means it has more at stake than its partners: Exxon Mobil Corp., Kazmunaigaz National Co. and Lukoil PJSC. The field already accounts for almost one-fifth of Chevron’s worldwide oil production.

Argentina oil workers go on strike, warn of longer walkout - Oil workers in much of Argentina launched a 48-hour strike Monday, with a labor union saying the action could be extended if demands for higher wages are not met. If oil producers and services companies do not agree to increase wages by at least 30% before the end of Tuesday, the strike will continue through Wednesday, Jorge Avila, secretary general of the Union of Private Oil and Gas Workers in Chubut, said in a statement over the weekend. If there is still no response by the end of Wednesday, then the walkout will go on "indefinitely", he said. The strike had originally been planned for much of Patagonia, a southern region that produces most of the country's oil and natural gas. But it gained adherence by unions elsewhere in the region as well as in the northwestern province of Salta, according to the statement. This means the strike is affecting about 99% of Argentina's 530,000 b/d of oil production and 88% of its 123 million cu m/d of gas, according to data from industry group Argentine Oil and Gas Institute.

Venezuela’s Oil Output Decline Accelerates as Drillers Go Unpaid -- Venezuela’s oil output, already the lowest since 2009, is set to slide further this year as contractors scale back drilling after the cash-strapped country fell more than $1 billion behind in payments. The Latin American nation’s oil production, which generates 95 percent of export revenue, will decline by about 11 percent to 2.1 million barrels a day by the end of the year, Barclays Plc estimates. Output is falling largely because oil-services companies aren’t being paid, according to the International Energy Agency. Venezuela’s economy has been in crisis since crude prices slumped, with sporadic looting as the desperate population fights for food and other essentials. President Nicolas Maduro has pledged to continue payments to bondholders, while the partners of state-run oil company Petroleos de Venezuela SA, known as PDVSA, aren’t paid. Further output decline in the OPEC nation, combined with disruptions in fellow members Nigeria and Libya, could leave the oil market short of supply next year. “The situation is becoming more and more difficult for oil services in Venezuela,” As long as oil prices are at current levels, it’ll be “very difficult” for PDVSA to pay the contractors, he said. Schlumberger Ltd., the world’s largest oil-services company by market value, was owed $1.2 billion by PDVSA as of March 31, according to an April 27 filing. Halliburton Co. said last month the amount it was owed rose 7.4 percent in the first quarter to $756 million. The number of rigs drilling for oil in Venezuela fell by 10 to 59 in May, the lowest level in more than a year, according to Baker Hughes Inc. Schlumberger has reduced activity in line with the drop in payments, the company’s president, Patrick Schorn, told investors. It still works in the country and could boost operations if “new payments models” are implemented, he said.

Follow-Up To The Stranded BP Tanker -- June 29, 2016  Does anyone remember this story from June 1, 2016? - Reuters reporting: Four tankers carrying over 2 million barrels of U.S. crude are stuck at sea and cannot discharge at a Caribbean terminal because Venezuela has not yet paid supplier BP.  The cargoes are part of a tender [Venezuela] awarded in March to BP and China Oil.  The deal was to import some 8 million barrels of West Texas Intermediate (WTI) crude so Venezuela could dilute its extra heavy crudes and feed its Caribbean refineries. So, how did that turn out? Reuters reports that a "swap" resolved the issue: Britain's BP Plc this month received a Venezuelan crude cargo from state-run PDVSA, the first since the companies agreed on a swap arrangement to settle pending payments for U.S. oil shipments.  BP and China Oil won a tender launched by PDVSA in March to be supplied with U.S. and African light oil during the second quarter of this year. The light oil is needed to dilute Venezuela's extra heavy output and for processing at Caribbean refineries.  After cash-strapped PDVSA did not make payments on time, BP in May halted further discharges of cargoes of U.S. crude at the port of Curacao.  Then a swap agreement was reached involving deliveries of Venezuelan oil to BP as payment for the U.S. crude.

Exxon's Guyana Oil Discovery May Be Twice as Large as Thought  |  Rigzone - Exxon Mobil Corp.’s oil discovery off the coast of Guyana may hold as much as 1.4 billion barrels, twice the size of the previous estimate, making it worth as much as $69.5 billion based on current prices. The Liza field 120 miles (193 kilometers) from the coast of Guyana is a “world-class discovery” that probably will yield the equivalent of 800 million to 1.4 billion barrels of crude. Hess Corp., a partner in the field, will see a a 39 percent boost in current proved reserves at the upper end of the estimate. The Liza discovery may not add to global oil supplies for years as deepwater finds can take half a decade or more to bring into production. It’s an enormous discovery for Hess. At the high end of the estimate, the New York-based company’s stake equates to 420 million barrels, a 39 percent addition to proved reserves.

Australia's Santos links with Bangladesh's Bapex to drill offshore - Australian oil and gas exploration company Santos inked an agreement Monday with state-run Bangladesh hydrocarbon exploration company Bapex to carry out offshore drilling at the Magnama structure in the Bay of Bengal. Bapex would now have the opportunity to carry out oil and gas exploration offshore for the first time under the JV with Santos, Bapex managing director Md Atiquzzaman told Platts Monday, boosting the Bangladesh's company technical know-how in offshore exploration. Under the deal, Bapex will pay Santos US$16.50 million for entering the JV under a "binding offer agreement," Atiquzzaman said. Santos will have 51% of the JV, with Bapex holding a 49% stake, he said.Before the deal, Santos owned 100% of the Magnama structure after it bought Cairn Energy's interests in Bangladesh in 2010. "We are hopeful of having a potential hydrocarbon reserve in Magnama," said Santos' Dr. Mahmudul Karim at the deal signing ceremony, adding that Santos hoped to start drilling the Magnama-2 well in February next year. The drilling cost has been estimated at $26 million, with Bapex bearing $12.7 million of the expenses. Bangladesh's entire natural gas production currently comes from onshore gas fields after the shutdown of the Santos-operated offshore Sangu gas field in October 2013.

Did Brexit Kill The Oil Price Rally? - Oil prices fell again on Monday after last week’s rout following the Brexit vote, deepening the losses and killing off a multi-month oil price rally. There is quite a bit of debate around how lasting the negative effects of the Brexit result will be for crude oil. On the one hand, there has been no change to the physical oil market. The global economy continues to hum along, albeit at an unimpressive pace. Billions of people continue to fuel up their cars, factories continue to operate. In other words, not much has changed. Although the UK ranks as a top five global economy, a Brexit won’t materially affect the supply/demand balance for crude oil, even if a withdrawal from Europe turns out to be hugely negative for economic growth. Goldman Sachs looks at the numbers: "If we assume a 2 percent drop in UK GDP in response to the exit vote, which is on the high end of our economists' estimates, then UK oil demand would likely be reduced by 1 percent or 16,000 barrels per day, which is a 0.016 percent hit to global demand. This is extremely small on any measure,” the investment bank wrote following the vote. In that sense, the crash in oil prices seems unjustified. But the Brexit is much more significant for the financial and currency markets than it is for oil supply and demand. And these effects can be just as important for price movements of WTI and Brent.

The Oil Price Rebound Will Be Brief – Goldman Sachs  -- Goldman Sachs has rejected analysts’ opinions that the global oil market is recovering, noting that while it expects a “modest” deficit in the coming months based on the slight rebound in oil prices, the market will again be in a state of surplus by early next year. It may seem as if oil is recovering on the back of supply disruptions that have helped to chip away at the global glut and push prices close to $50, but Goldman says that in the best-case scenario this isn’t a rebound—it’s just the first signs of one. Goldman Sachs’ analysts point to the restart of Canadian oil sands production following the devastating wildfires, and OPEC’s stay-the-course production as two indications that the a surplus is in store for early next year. They also note that non-OPEC production could be less than what was previously anticipated due to the slight price recovery that has producers pumping again. Goldman Sachs’ predictions echo those released Tuesday by the International Energy Agency (IEA). The Agency had earlier predicted that the 2016 oil stockpile would reach 1.5 million barrels per day. Now, it expects that figure to be 800,000 bpd—a 40-percent lower surplus than estimated just a month ago.

Goldman Warns Of Downside Risk To $50 Oil Forecast Due To Ceasefire With Niger Delta Avengers -- In the aftermath of the successful Brexit referendum, many expected France, Italy, maybe Catalonia, and the Netherlands to demand a referendum next. Instead, the loudest call for a referendum over the weekend came from an odd source: the Niger Delta Avengers, who as we profiled recently, "hold the price of oil in their hands" by mothballing Nigerian production and exports for the past two months. President Buhari borrow a leaf from PM David Cameron, call for a referendum and let Nigerians decides like they did to vote you into Power. — Niger Delta Avengers (@NDAvengers) June 25, 2016 As All Africa adds,the group  which has been attacking Nigeria's oil infrastructure since early this year  urged President Muhammadu Buhari to call the vote, in a post on Twitter at the weekend. "It's probably not going to happen," says Ryan Cummings, a political analyst at Signal Risk. "The Niger Delta Avengers is not the first group to agitate for a seperate state in Nigeria. It's a common place used by other groups in the country, most notably Boko Haram itself." The attacks have so far cut oil production by some 600,000 barrels a day. This, and the global oil prices remaining low, has sent Nigeria's economy into a tailspin. "[The government] should be concerned that they have a group that seems quite capable to strike targets in defiance of Nigeria's naval capabilities," says Chris Ngwodo, a security specialist of the region. "In my view, they should not be answering to the requests of this group, because doing so would be a signal that violence is a tool of political engagement and that would be disterous for the nation". Abuja has offered to talk with the Avengers but the militant group has denied reports it has met government representatives. The group also this weekend called for Buhari to visit the Niger delta region. That may not be the case. According to a new note just out of Goldman, a recent tentative ceasefire between the Nigerian government and the NDA has created upside risk to local production and ownside risk to Goldman's $50/bbl H2 price target.

The One Chart That Shows Why Oil Prices Have To Keep Rising - There has been a lot of pessimism among oil investors in recent months, and indeed the bear market over the last couple of years in black gold has destroyed many nest eggs. With that said, oil investors who have run for the hills could find themselves regretting that decision in the months and years to come. Oil prices are almost certain to continue rising and the chart below spells out why. The recent bear market in oil is largely a by-product of a technology shock and a set of ideal production conditions that will be hard for the world to replicate in the medium-term. As the chart shows, the next century really will be the Asian Century – at least when it comes to oil demand. Western Hemisphere demand has been flat since roughly the year 2000, and even before that, growth was fairly uneven. Unlike the oil shock of the 1980’s, which caused an unsustainable rise in Western demand for oil to plummet, there has been no comparable extreme run up in oil prices today, nor has there been a resulting collapse in demand. On the Asian side, demand growth has been steady and consistent for decades, tracking the rising development of the Asian tigers and the slow lumbering rise of China. While China is still not a first world nation, it’s not as poor as it was. At this stage, China is really a second world nation – between the first and third world; an appropriate moniker given it is the last major bastion of communism (which is what the term first/second world referred to). There is still significant opportunity in Asian nations for additional development. India is extremely undeveloped, while smaller though still significant nations like Malaysia and Indonesia still have opportunities as well. All of this is merely to point out that despite the advancing technology in the West, the Asian nations are still extremely underdeveloped and have huge needs, creating massive upside potential for oil demand.

WTI Jumps Above $48 After Bigger Than Expected Crude Inventory Draw - Last week's huge API-reported inventory draw followed by disappointing DOE-reported draw sent crude prices flip-flopping around $50 before they plunged into Brexit. Having ramped all day and beyond the NYMEX close, WTI tagged $48 and was fading into the API data. Against expectations of a 2.5mm draw, API reported a 3.86mm draw (remember they said 5.22mm draw last week before DOE said 917k). The entire complex saw inventories drawdown with Cushing more than expected, bouncing WTI back above $48. API

  • Crude -3.86mm (-2.5mm exp)
  • Cushing -1.207mm (-900k exp)
  • Gasoline -416k
  • Distillates -832k

First distillate draw in 4 weeks, 6th weekly Crude draw in a row...

Oil Jumps Above $49 As Crude Production Tumbles, Inventories Drop -- Following last night's across the board inventrory drawdown from API, DOE data was more mixed with a surprisingly large build in gasoline stocks but bigger than expected Distillates and total crude inventory drawdowns. Production tumbled 0.63% MoM, the biggest drop in 2 months and back to Sept 2014 lows. Crude prices spiked above $49 for the firest time since Brexit. DOE

  • Crude -4.05mm (-2.5mm exp)
  • Cushing -951k (-900k exp)
  • Gasoline +1.367mm
  • Distillates -1.801mm

6th week of crude inventory draws, Distillates back into drawdown as Gasoline built.

WTF WTI -- WTI Crude has now soared 9% in the last 2 days ripping back to pre-Brexit highs above $50... The machines managed to perfectly tag $50.00 before fading back.

Mid-Week Energy Tweets -- June 29, 2016

US gasoline consumption (implied) averaged 9.7 million b/d over last 4 wks, seasonal record, and up +173,000 on 2015 -- sets new record
US distillate consumption averaged 3.8 million b/d over last 4 weeks, very close to 2015 and 10yr avg levels
US distillate stocks adjusted for consumption continue to fall rather than rise as oversupply worked down
US distillate stocks fell -1.8 million bbl to 151 million bbl last week, just +14.7 million bbl (+10.8%) above 2015
US refinery throughput rose +190,000 b/d to a new seasonal record of 16.695 million b/d (up +164,000 b/d on 2015). It would be interesting to know how much of this is related to a) the French refinery strikes; and, b) the Venezuela debacle.
US gasoline stocks adjusted for consumption edged up to 24.6 days, versus 22.7 days in 2015 and 10yr avg 22.9 days.
US gasoline stocks rose +1.4 million bbl to 239 million bbl, and now +22 million bbl (+10%) over 2015 level -- by the way, a new graph is needed -- the current numbers are practically off the historical graph.
US crude oil imports returned to more normal 7.6 million b/d last week from the elevated 8.4 million b/d in prior week.
US commercial crude oil stocks fell -4.1 million bbl to 527 million bbl last week, but a new graphis still needed. Current data is almost off the historical graph
US commercial crude stocks fell more heavily than usual with YoY surplus down from +68 million to +61 million bbl

EIA Petroleum Report Analysis 6-30-2016 (Video) -  Gasoline is the weak link in the Petroleum Complex, and will lead the way down at the end of the summer driving season.

Two-day crude rally halted as focus returns to fundamentals - - The oil complex settled lower Thursday as a two-day rally lost momentum and the market shifted its focused back to supply and demand fundamentals, while a stronger dollar provided downward pressure. NYMEX August crude settled $1.55 lower at $48.33/b, while ICE August Brent settled down 93 cents at $49.68/b. Prompt NYMEX crude had gained $3.55 in the previous two trading sessions, while ICE Brent was up $3.45 over the same period. Refined products tracked crude lower, with NYMEX July RBOB settling down 2.34 cents at $1.5014/gal and NYMEX July RBOB 4.88 cents lower, flipping below RBOB after settling at a premium yesterday for the first time since February 29. "The dollar is up pretty strongly today and that is probably behind some of the downward pressure." The dollar index was trading 0.471 point higher at 96.240 at 2:30 pm EDT (1830 GMT). Some market spectators cited the downside risk to prices from rising Nigerian output on the heels of a ceasefire agreement with the Niger Delta Avengers, a rebel group that unleashed a series of attacks on oil infrastructure that cut production by at least 400,000 b/d. "After a furious two-day rally that eliminated most of the post-Brexit losses in equity and energy markets, petroleum prices are sliding once again this morning," TAC Energy said in a note. "A potential cease-fire agreement in Nigeria -- where crude oil production has been crippled by attacks on oil infrastructure -- is being credited with the selling so far, but it's worth noting that US and European equities are also taking a break from their recovery rally."

Is Raymond James’ $80 Oil Realistic? | Crude oil prices have stabilised near the $50 per barrel mark, leaving traders confused as to whether the next 20 percent move from the current levels is going to be higher or lower. The divergent views of the experts don’t make the job easier, and instead, add to the confusion. A Raymond James report forecasts an $80 per barrel oil price in 2017—a figure which is 60 percent higher than current levels. On the other hand, A. Gary Shilling, president of A. Gary Shilling & Co., a New Jersey consultancy, and author of “The Age of Deleveraging: Investment Strategies for a Decade of Slow Growth and Deflation,” forecasts that oil will drop to $10 per barrel from the current levels, reports Bloomberg. Further complicating matters, there is a Goldman Sachs report that says that the oil market will be back in a surplus by early 2017, reports Oilprice. So which outcome currently looks most likely to become a reality in the future? Though supply disruptions are not a new phenomenon, large-scale supply outages to the tune of 3.5 million barrels per day is significant, because it turns the supply glut into a deficit. Though it is easy to confirm that the Canadian supply will be completely restored, forecasting normalization of disruptions in Nigeria and Libya is more difficult. However, efforts are in progress in both places to bring supply back on track. The result of these efforts was seen in Nigeria in June, where production increased from 1.3 million barrels per day in the early part of the month to 1.9 million barrels per day by the end of the month, as per Nigerian government sources. Nigeria is targeting production of 2.2 million barrels per day in July 2016, if pipeline repairs are completed, reports the Market Realist. If Nigeria is able to do so, it will be a significant boost to the supply. As these disruptions are temporary in nature, any success with normalization will again lead to a supply excess.

Shilling's $10 Oil Prediction Is Not Completely Ridiculous | Few expected oil prices to crash below $30 per barrel earlier this year, but that is just what they did. Now that oil is back up near $50 per barrel, the worst is over…right? Not everyone thinks so. Over at Bloomberg View, A. Gary Shilling is making a headline-grabbing prediction: that oil will not only fall from today’s levels, but will fall to between $10 and $20 per barrel. Many in the energy world would roll their eyes at such a prediction, and it could be way off base. But a year ago when oil prices rose to $60 per barrel at the beginning of the summer of 2015, everyone also thought the worst was over. Companies began adding rigs back to oil fields, hoping to capitalize on a rebound in prices. But crude began crashing again at the end of the summer, culminating in a deep plunge below $30 per barrel in January and February of this year. Very few people saw that coming. Now, most analysts and oil companies, although more cautious than a year ago, again think that the worst is over. A. Gary Shilling disagrees. He says that the run up in prices over the past few months was due to temporary supply outages in Canada and Nigeria, not based on lasting fundamentals. And the fundamentals are weak. Iran is back, and aims to double production to 6 million barrels per day by 2020. Libya could bring production back. And Saudi Arabia and Russia continue to produce at elevated levels. Meanwhile, shale producers have become more efficient and successfully lowered breakeven costs. Indebted companies will continue to produce in an effort to pay back creditors. On the demand side, China’s economy is slowing. The West is becoming more energy efficient, needing less oil and gas for their economies.

OilPrice Intelligence Report: Market Uncertainty Holds Back Oil Price Rally -- Oil prices bounced around this week, stabilizing after the Brexit chaos, but failing to rally as the oil markets returned to concerns about oversupply. Nigeria has brought back somewhere around 500,000 barrels per day to the market, restoring disrupted supply. Canada continues to rebound from the wildfires a few weeks ago as well.   But there is no consensus about where crude oil prices will go from here. The restoration of supplies from Canada and Nigeria have caused the market contango to widen, indicating concerns about short-term oversupply. Moreover, OPEC production hit a record high in June, on gains from Iran and Saudi Arabia. Still, because the markets have moved closer to a balance, chipping away at the global surplus, there are some analysts who argue that things are not so grim. EIA reported another strong reduction in oil storage levels, falling by 4 million barrels last week, while production also continues to slide.  In short, the markets and energy analysts are at odds over whether prices will rise or fall in the short run. The uncertain effects of the British exit from the European Union is also adding to the confusion. “We see more uncertainty than we have seen before in terms of price formation,” Eldar Saetre, chief executive of Statoil ASA, told The Wall Street Journal in an interview. WTI and Brent stayed just below $50 per barrel in early trading on Friday.  The EIA released new monthly figures for April, showing that U.S. oil production fell by 222,000 barrels per day compared to a month earlier, tipping U.S. output below 9 million barrels per day for the first time since September 2014. The retrospective monthly figures tend to be more accurate than the more recent weekly data. Still, the EIA says that for the week ending on June 24, it estimates oil production fell by another 55,000 barrels per day to 8.62 million barrels per day.

US energy secretary sees oil market coming into balance (AP) — The U.S. energy secretary said Friday he sees the global oil market coming into balance over the next year as rising demand catches up with a two-year-old supply glut that depressed prices. Ernest Moniz said supplies should be adequate after the market comes into balance. He said Saudi Arabia has made clear it will maintain spare production capacity if it is needed by the market. Moniz spoke after meeting with his Saudi counterpart, Khalid al-Falih, while both were in Beijing for a gathering of energy ministers from the Group of 20 major developed and emerging economies. The Saudi minister told the Houston Chronicle on June 22 the oversupply of oil was ending and he expected markets to come into balance this year. “That’s reasonable, although it could also go into next year,” said Moniz. “Let’s say, within the next year, most of the people would expect a balance in the market.” Crude prices tumbled from 2014 highs of more than $100 a barrel to a 13-year low of less than $30 in mid-February before rising to just under $50. “We still are in a situation of more production than demand,” said Moniz. “The gap is narrowing as global demand goes up slowly and production is not going up.” Moniz said higher prices could lead to more supply as operators develop additional U.S. wells. "As prices go up — $50, $60, $70 — you probably will see more of those wells being completed,” he said. “The market seems to be pretty well supplied, and there is no reason to think there will be a big change over the next couple of years.”

US rig count up 10 this week to 431 (AP) — The number of rigs exploring for oil and natural gas in the U.S. increased by 10 this week to 421. A year ago, 862 rigs were active. Oil and gas exploration has plummeted amid depressed energy prices. Houston oilfield services company Baker Hughes Inc. said Friday 341 rigs sought oil and 89 explored this week for natural gas. One was listed as miscellaneous. Among major oil- and gas-producing states, Texas and Oklahoma each gained four rigs, Colorado was up two and Louisiana one. Alaska and New Mexico declined by two apiece. Arkansas, California, Kansas, North Dakota, Ohio, Pennsylvania, Utah, West Virginia and Wyoming were unchanged. The U.S. rig count peaked at 4,530 in 1981. It bottomed out in May at 404.

Oil rig count rises by the most in 6 months - The US oil rig count rose by 11 to 341 this week, the biggest increase since December 2015, according to driller Baker Hughes. The tally has now risen for four out of the last five weeks, as rising oil prices encouraged some producers to ramp up production. Last week, the count fell by 7 after climbing during the prior three weeks — the longest streak since last August. The gas rig count fell this week by 1 to 89, while miscellaneous rigs were unchanged at 1, taking the total up by 10 to 431. West Texas Intermediate crude futures in New York were little changed after the data, down 0.2% to $48.30 per barrel.

BHI: Land, oil rigs lift overall US rig count by 10 units - Lifted entirely by onshore oil-directed units, the US drilling rig count jumped by 10 during the week ended July 1 for the second time in 3 weeks, tallying 431 rigs working, according to data from Baker Hughes Inc.  The count has now risen in 4 of the past 5 weeks, gaining 27 units over that time (OGJ Online, June 24, 2016). Since the overall drilling dive commenced following the week ended Dec. 5, 2014, the count has fallen 1,489 units. Amid the recent increase in drilling activity, the US Energy Information Administration this week noted that some 380,000 stripper oil wells were operating in the US at yearend 2015 compared with just 90,000 nonstripper oil wells. Stripper wells, which produce no more than 15 boe/d over a 12-month period, accounted for 10% of overall US crude oil production in 2015. Their share of output, however, was down nearly half from their 2008 level because of “the large increase of production volume from very prolific wells drilled in shale and tight oil formations with enhanced completion techniques,” EIA explained.Lifted entirely by onshore oil-directed units, the US drilling rig count jumped by 10 during the week ended July 1 for the second time in 3 weeks, tallying 431 rigs working, according to data from Baker Hughes Inc. The count has now risen in 4 of the past 5 weeks, gaining 27 units over that time (OGJ Online, June 24, 2016). Since the overall drilling dive commenced following the week ended Dec. 5, 2014, the count has fallen 1,489 units.Amid the recent increase in drilling activity, the US Energy Information Administration this week noted that some 380,000 stripper oil wells were operating in the US at yearend 2015 compared with just 90,000 nonstripper oil wells. Stripper wells, which produce no more than 15 boe/d over a 12-month period, accounted for 10% of overall US crude oil production in 2015. Their share of output, however, was down nearly half from their 2008 level because of “the large increase of production volume from very prolific wells drilled in shale and tight oil formations with enhanced completion techniques,” EIA explained.

OPEC Oil Output Hits Record High in June on Nigerian Rebound  (Reuters) - OPEC's oil output has risen in June to its highest in recent history, a Reuters survey found on Thursday, as Nigeria's oil industry partially recovers from militant attacks and Iran and Gulf members boost supplies. Higher supply from major Middle East producers except Iraq underlines their focus on market share. Talks in April between producers on freezing output failed and have not been revived as a recovery in prices to $50 a barrel reduces the urgency to prop up the market. Supply from the Organization of the Petroleum Exporting Countries has risen to 32.82 million barrels per day (bpd) this month, from a revised 32.57 million bpd in May, the survey based on shipping data and information from industry sources found. That June output figure would be less than the average demand OPEC expects for its crude in the third quarter, suggesting demand could exceed supply in coming months if OPEC does not pump more than current levels. "We could see a slight supply deficit - it depends on further development of unplanned outages," said Carsten Fritsch, analyst at Commerzbank in Frankfurt. OPEC's June output exceeds January's 32.65 million bpd, when Indonesia's return as an OPEC member boosted production and output from the other 12 members was the highest in Reuters survey records, starting in 1997. Supply has surged since OPEC abandoned in 2014 its historic role of cutting supply to prop up prices. The biggest increase in June of 150,000 bpd came from Nigeria, where output had fallen to its lowest in more than 20 years due to militant attacks on oil facilities, due to repairs and a lack of major new attacks since mid-June. Iran managed a further supply increase after the lifting of Western sanctions in January, sources in the survey said, although the pace of growth is slowing. Gulf producers Saudi Arabia and the United Arab Emirates increased supply by 50,000 bpd each, the survey found. Saudi output edged up to 10.30 million bpd due to higher crude use in power plants to meet air-conditioning needs.

OPEC’s Pain Is Only Getting Worse As Revenues Continue To Fall - Yahoo Finance: OPEC lost $349 billion in revenue last year because of low oil prices, cutting revenues almost in half from the year before. A report from the EIA in mid-June estimated 2015 revenues for OPEC countries at $404 billion, down 46 percent from the $753 billion the member countries earned in 2014. Revenues last year fell to their lowest level in eleven years. Worse still for OPEC is the fact that revenues could fall even further this year, as low oil prices sank to new depths, particularly in the first quarter of 2016. The EIA projects OPEC revenues this year to drop to $341 billion. That will result in per capita oil export revenues in OPEC countries falling from $606 in 2015 to $503 this year.For its part, OPEC put out a more dire assessment of its own finances, putting its losses last year at $438 billion, much higher than the $349 billion estimated by the EIA. That came even though overall exports climbed by an average of 400,000 barrels per day, or a 1.7 percent increase, largely because of production gains in Iraq and Saudi Arabia. The plunging revenue led to OPEC members to post a current account deficit of $99.6 billion, the first deficit since 1998. That compared to the 2014 surplus of $238.1 billion.  The largest losses came from Saudi Arabia, which saw revenues plunge nearly in half from $247 billion to just $130 billion last year. Of course, those losses merely reflect Saudi Arabia’s importance as the group’s largest oil producer and one of the largest producers in the world. The revenues that Riyadh earns from exporting oil accounts for one-third of total OPEC earnings.

Saudi Arabia’s Oil Storage Falling As Exports Exceed Production - The U.S. has seen several weeks in which the levels of crude oil sitting in storage have declined, falling from 80-year record highs. Inventories have dropped more than 10 million barrels since May, offering clues that suggest that the oil market is moving closer to a supply/demand balance. Although the EIA storage figures are closely watched by oil analysts, a lesser known but similar metric from Saudi Arabia also indicates an oil market continuing to adjust. According to data from the Joint Organisations Data Initiative, and reported on by Bloomberg, Saudi oil inventories have declined for six consecutive months, the longest period of contraction since data collection began 15 years ago. Saudi oil inventories have drawn down by 38.6 million barrels since October, taking storage down to 290.9 million barrels, a two-year low. The new Saudi energy minister Khalid Al-Falih told Bloomberg TV on June 2 that he sees “a balanced market.” He also said that Saudi Arabia has “started inventory drawdowns that will continue for the foreseeable future.”The declines are contributing to a convergence in supply and demand. As exports continue to exceed production, Saudi Arabia should continue to burn through inventories. But it cannot keep up that pace indefinitely. At some point, if it cannot boost production (or chooses not to), oil exports will have to fall as inventories become low. A drop in exports will tighten global supplies, reducing any remaining global surplus and thereby push up oil prices. Moreover, the drawdowns could increase because of higher domestic oil demand during summer months, as air conditioners run full blast. Saudi Arabia consumes a substantial volume of oil for power generation, upwards of 1 million barrels per day. But for now, few have noticed the large declines in oil storage levels. “The drop in Saudi crude stocks signals the rebalancing has started,” Amrita Sen, chief oil analyst at Energy Aspects Ltd., told Bloomberg. “Crude stocks are coming off in places where either the data is opaque or the market isn’t paying as much attention.”

Aramco, SABIC plan joint study for crude-to-chemicals complex - Oil & Gas Journal: Saudi Aramco and Saudi Arabian Basic Industries Corp. (SABIC) plan to conduct a joint feasibility study for development of a fully integrated crude oil-to-chemicals complex in Saudi Arabia. The proposed plant would use a crude oil-to-chemicals process derived from improved refining technology that mixes innovative configurations with proven conversion technologies to create an integrated petrochemical complex capable of maximizing chemical yield, transforming and recycling byproducts, driving efficiencies of scale and resource optimization, and diversifying Saudi Arabia’s petrochemical feedstock mix, the companies said. Pending a positive outcome of the study, Aramco and SABIC plan to establish a joint venture to advance the project, which if approved, would fulfill Saudi Vision 2030 goals for the downstream sector (OGJ Online, June 1, 2016). The companies did not disclose further details regarding the proposed project. Announcement of the joint study follows a May 21 joint release from Aramco and SABIC quashing speculative news reports that the companies were planning to merge their petrochemicals businesses. While the companies clarified they had no intention to pursue a merger, they did confirm they would continue to explore partnership opportunities that would help to expand and diversify Saudi Arabia’s economy.

Iran’s Oil Production Is Slowing Fast | A major part of the fall in oil prices last year was driven by concerns over the rising production levels of Iran. With nuclear sanctions in place, Iran had been forced to significantly curtail production due to lack of buyers. Once those sanctions disappeared due to the Iranian nuclear deal, the country was prepared to begin exporting crude en masse once more. That outcome caused investors to panic and led oil prices to fall considerably. Analysts reassured the markets that it would take a couple of years for Iran to get production back to pre-sanctions levels. Almost all of this conventional wisdom has turned out to be incredibly wrong. Iranian oil production has rebounded much faster than many analysts ever anticipated as the chart below shows. At this point, Iran is roughly back to pre-sanctions production levels. Score one against analysts who expected the process to take years. The result is that there is probably very little additional crude that is going to come online from Iran. The country is already pumping as fast as it can, and frankly its post-sanctions export program has been at best minimally successful. Again, this is a ding on conventional wisdom that suggests Iran’s production would have a significant impact on the market share of other major oil producers. This is probably a large part of what has driven Saudi commentary that the oil glut has disappeared. Iran believes it can move from producing 3.5 million barrels per day (mb/d) in May to 4.8 mb/d by 2021, but to do that the country needs $70 billion in foreign capital to hit the target. The reality is that capital is probably not going to come in the volume that Iran needs. China has its own problems to deal with, and Europe is still very wary of reengaging with Iran. The EIA thinks that the best case production scenario for Iran is 4.1 mb/d and that’s with the EIA assuming that Iran gets foreign capital and technology, and that sanctions do not remerge on Iran – a political possibility that cannot be ruled out.

Iran exports 28 mil mt of petrochemicals worth $3.5 bil Mar 20-June 20 - Iranian petrochemical plants exported 27.87 million mt of petrochemical products worth $3.54 billion in the period March 20-June 20, the Ministry of Petroleum's official Shana news agency reported Wednesday. The exports accounted for 33.8% of Iran's total exports, Shana said. Shana did not provide a breakdown of its petrochemicals exports. Iran is known to be a major exporter of polyethylene and methanol. Iran exported liquefied natural gas worth $1.7 billion and liquefied propane worth $343 million during the period, Shana reported.

Indonesia's Pertamina targets stakes in two Iranian oil, gas blocks - - Indonesia's state-owned Pertamina will sign a memorandum of understanding with the National Iranian Oil Co. next month to develop oil and gas blocks in Iran. Under the initial agreement, Pertamina will be allowed access to data on four Iranian oil blocks, a senior company official said Friday. "There are two to four blocks that will be evaluated based on the initial study. Of the four, there are two blocks that will be our priority," Syamsu Alam, Pertamina's upstream director, said. Pertamina expects to get an additional production of 30,000 b/d from each block if it is allowed to acquire the blocks, Alam said.Indonesia and Iran have recently intensified efforts to cooperate. Pertamina and NIOC recently signed a heads of agreement for the latter to supply refrigerated LPG to the former. Pertamina is also planning to import a 1-million-barrel cargo of Iran Light crude oil in the third quarter of this year to test the grade at its 348,000 b/d Cilacap refinery in Central Java Pertamina has allocated a capital expenditure of $5.31 billion this year, of which 72% is for upstream business. The company plans to spend $2 billion on upstream mergers and acquisitions this year. The state-owned company's overseas blocks produced 83,000 b/d in May 2016 compared with 75,000 b/d in May last year. The increase mainly came from the company's 10% stake in the West Qurna block in Iraq. Pertamina has three producing oil and gas blocks located in Malaysia, Algeria and Iraq.

Islamic State, Political Instability Derails Libyan Oil Industry  |  Rigzone - Ongoing militant attacks on hydrocarbon installations in Libya have helped stem the production of oil in the country to well below pre-2011 output levels. “Such activity, in combination with oil embargos, has contributed to an 80 percent fall in national oil output since 2011,” said Ruth Lux, a senior consultant within JLT’s credit, political & security risk division consulting team. For most of the last two years, oil production in Libya has been stuck at around 300,000 to 400,000 barrels per day (bpd), Martijn Murphy, research manager for Wood Mackenzie’s Middle East and North Africa upstream oil and gas team, told Rigzone.This output drop is not good news for the country considering it’s one of the most dependent oil economies in the world, according to a study by Bloomberg released in January.Since the start of 2016, Islamic State (IS) has launched a number of attacks on Libya’s oil and gas assets.In January, IS set fire to oil storage tanks in anassault on the Ras Lanuf terminal in northern Libya and the group is suspected to have staged an attack on a water plant near the Sarir oil field in eastern Libya in March. An attempted assault on an oil field on Apr. 2 led to the death of two guards and it was revealed on Apr. 10 that staff from three oilfields in eastern Libya had been evacuated because of fears of further attacks.Following the latest assaults, the most senior United Nations official in Libya, Martin Kobler, said he was deeply concerned. “The attacks of the so called Islamic State…are a serious threat to Libya’s oil installations,” said Kobler, the special representative of the secretary-general and head of the UN support mission in Libya, in an April 27 press release.

Russia's attack on U.S.-backed rebels in Syria puzzles, frustrates the Pentagon: One week after Russian aircraft bombed American-backed rebels in Syria, U.S. officials say they are still waiting for Russia to explain the incident that has put the two militaries at risk of confrontation. Russian aircraft on June 16 dropped cluster bombs on a New Syrian Army unit garrisoned at a base in al-Tanf, a remote desert outpost where the borders of Iraq, Syria and Jordan meet. The New Syrian Army unit is a product of the American-backed train-and-equip program. Its mission is to fight Islamic State militants in Syria and to avoid confrontation with forces loyal to Syrian President Bashar Al Assad. The Russians provided no explanation for the strike, which violated the “memorandum of understanding” between the U.S. and Russia that was put in place last year, and designed to maintain flight safety and avoid misunderstandings as the two major militaries share the same airspace and support different factions of the multi-sided civil war.

Islamic State suspected after suicide bombers kill 42 at Istanbul airport | Reuters: Turkey pointed the finger at Islamic State on Wednesday for a triple suicide bombing and gun attack that killed 42 people at Istanbul's main airport, and President Tayyip Erdogan called it a turning point in the global fight against terrorism. In the deadliest of a series of suicide bombings this year in Turkey, the attackers struck the busy airport, a symbol of Istanbul's role as the Muslim world's most open and cosmopolitan city, a crossroads between Europe and Asia. Three bombers opened fire to create panic outside the airport on Tuesday night, before two of them got inside and blew themselves up. Two hundred and thirty-nine people were wounded, officials said, giving a full account of the bloodshed. Prime Minister Binali Yildirim said the attackers shot at random to overcome security checks at the international terminal of Ataturk airport. One blew himself up in the departures hall, a second in arrivals, and the third outside. Authorities said on Wednesday 41 were killed. The figure is now believed to be 42 after Turkish state-run news agency Anadolu reported an injured woman had died.

Shi'a death squads liberate Fallujah from Sunni death squads: — Shi’a death squads have resumed patrols on the streets of Fallujah, “restoring a sense of normalcy” to the beleaguered Iraqi city, residents say. The Shi’a patrols follow the flight of Sunni death squads, religious police, and bootleg pornography vendors who had dominated the largely Sunni city since the Islamic State conquered it in 2014. The rapid departure of ISIS has paved the way for a welcome return to sectarian tension, corruption and graft. Iraqi government forces announced new rules, heralding an end to the barbaric reign of ISIS. “We are delighted to announce an end to the Sunni-on-Sunni rape that has so typified Daesh rule,” said Brig. Gen. Haider al-Obeidi of the Iraqi Federal Police/Iranian Revolutionary Guard. “From now on, brutal violence against women and children will be conducted under the rule of law.” Fallujah’s embattled population expressed their gratitude at their liberation from slavery to second class citizenship. “We’re just so grateful!” exclaimed repatriated resident Amira Albu Issa. “I thought we’d surely be killed for being Christian, but now, we only have to worry about being killed for going outside on Friday nights.”

Oil Bulls Beware: Crude Demand Is About To Slide As China's SPR Is "Close To Capacity" - Throughout oil's torrid rally from the February lows, one major driver of demand - namely China - had been broadly ignored by the punditry which instead focused on supply, whether excess OPEC oversupply or lack thereof, due to production disruptions in Canada or Nigeria. And yet, China and specifically its demand, may have been the elephant in the room all along. Two months ago we reported that "China Is Hoarding Crude At The Fastest Pace On Record", a move which among other things was attributed to China's aggressively filling up its Strategic Petroleum Reserve. However, just a few weeks ago, we followed up with "China Oil Imports Drop To Four Month Low As Demand Is Expected To "Moderate Significantly" In 2016." We now may have an answer what has caused this drop. As Bloomberg says, citing a JPM report, "one of the pillars of oil’s recovery from the lowest price in 12 years may be on the verge of crumbling." The reason: as many speculated, a big source of China's demand in the past 5 months was Beijing's decision to stockpile oil for its SPR. However, that is now over as China is likely close to filling its strategic petroleum reserves after doubling purchases for it this year as prices plunged. JPM estimates that China's SPR demand was equivalent to approximately 1mm bpd. More importantly, stopping shipments for the reserve would wipe out about 15 percent of the country’s imports, according to the bank.

China's Robust Crude Oil Imports Mask Changing Fuel Dynamics (Reuters) - China is a bigger concern for crude oil and products markets than the current worries about the British vote to leave the European Union. On the surface crude imports by the world's No.2 consumer China look healthy enough, rising 16.5 percent to the equivalent of about 7.49 million barrels per day (bpd) in the first five months of the year compared to the same period last year. But there are several factors at work that make the strength in imports appear misleading. Firstly, domestic crude production is falling, with official figures showing output dropped by 7.3 percent in May from a year earlier, taking the decline for the first five months of the year to 3.7 percent. China produced 85 million tonnes of oil in the January-May period, equivalent to about 4.08 million bpd, representing a drop of about 170,000 bpd from the same period in 2015. This means that at least 170,000 bpd of the nearly 1 million bpd in additional crude imports in the first five months of this year has merely been to replace lost domestic output. The second factor at work is that China appears to be continuing to fill strategic storages at a fairly rapid pace.  In the first five months of the year imports and domestic production were a combined 240.9 million tonnes, while refinery throughput was 221.3 million tonnes. This means that 19.6 million tonnes, or about 941,000 bpd went into either commercial or strategic storage. This is sharply up from the figures for 2015, which showed a difference between crude imports and domestic output and refinery throughput of about 560,000 bpd.

No comments:

Post a Comment