Sunday, July 10, 2016

oil & gas prices fall as products pile up on east coast, international rig counts for June, et al

contract prices for both crude oil and natural gas dropped around 7% this week, each for different reasons, and neither as part of a general market selloff....after closing last week at $48.99 a barrel, US WTI oil prices fell right out of the gate on Tuesday, following the Monday holiday, as gasoline prices tanked on an east coast oversupply situation that saw cargoes being turned away from New York for lack of storage space, suggesting that some east coast refineries would need to curtail operations, thus exacerbating the oil glut...with refineries thus squeezed, oil ended Tuesday down over 5% to $46.50 a barrel, its biggest daily drop since early September 2015...however, Wednesday brought the estimates of oil supply from the American Petroleum Institute, which indicated that crude inventories had fallen by 6,736,000 million barrels over the prior week, more than twice the drop expected, so oil prices reversed course and rose more than 2.5% before dropping back to settle at $47.43 a barrel, up 1.78%, or 83 cents on the day...however, Thursday brought the official oil inventory figures from the Dept of Energy, which showed oil inventories had only declined by 2,223,000 barrels, which set off another wave of selling, which sent oil prices down $2.29, or 4.8%, to close the day at $45.14 a barrel...then, with news from the Labor Dept on Friday that employers had added 278,000 jobs, twice the number some had expected, economic fundamentals drove oil prices higher on Friday, as oil prices clawed back 27 cents, to close the week at $45.41 a barrel, down 7.3%, for the largest weekly percentage loss since the week ended Feb. 5th..

the drop in the contract price for natural gas, on the other hand, was pretty much a one day affair, as after dropping 7.5% on Tuesday, the daily price changes for the remainder of the week were less than 1% in either direction...recall that last week we looked at natural gas prices for the first time in 3 months because they'd just completed a one month, 80 cent run-up to $2.987 per mmBTU, the highest contract price in 13 months...that was apparently too much too fast for most traders, because a Platts report that natural gas production had increased by 350 million cubic feet a day over the first few days of July from June’s average average of 70.8 billion cubic feet a day, combined with an errant forecast for cooler weather for the next ten days sent prices tumbling to $2.764 per mmBTU, down 22.3 cents on the day, their biggest one day drop since October...with most other weather forecasts calling for warmer weather ahead, natural gas prices inched back up 2.2 cents on Wednesday, closing at 2.786 per mmBTU....prices then slipped back to $2.777 per mmBTU on Thursday, despite new forecasts for a power consuming heatwave for the eastern half of the country, and an EIA gas storage report that injections into storage totaled 39 billion cubic feet (Bcf) for the week ending July 1, quite a bit less than the 77 bilion Bcf addition we'd normally see at this time of year...that was probably because working gas stockpiles remained at 3,179 Bcf, which was 20% more than a year-ago and 23% above the five-year average for this week...the low injection rate and heat wave news may have finally sunk in on Friday, as gas prices rose 2.4 cents on the day to finish the week at $2.801, a loss of more than 6.2% for the week...

The Latest Oil Stats from the EIA

the oil data for the week ending July 1st, released by the US Energy Information Administration on Thursday of this week because of the Monday holiday, indicated a big jump in our oil imports, a large drop in our output of crude oil, crude refining levels that were virtually unchanged from a week earlier, and modest withdrawals of crude oil and refined products from storage...meanwhile, the crude oil fudge factor included on the weekly U.S. Petroleum Balance Sheet (line 13) was +176,000 barrels per day, down from last week's +537,000 barrels per day, which still meant that 176,000 more barrels per day showed up in our final consumption and inventory figures this week than were accounted for by our production or import figures, meaning one or several of this week's metrics were off by that amount, errors which are typically due to miscues in reporting or gathering that data...however, the past two weeks have served to bring the cumulative daily average of that weekly statistical adjustment factor down to -17,000 barrels per day, which means that figures for the year to date are almost coming into balance...

at any rate, the EIA reported that our imports of crude oil rose by 808,000 barrels per day to an average of 8,363,000 barrels per day during the week ending July 1st, after falling 884,000 barrels per day to an average of 7,555,000 barrels per day during the week ending June 24th...this week's imports were at the 3rd highest weekly level in the last 34 months and 14.3% higher than our imports of 7,316,000 barrels per day the same week a year earlier, but as you’ve seen, 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 rose back to the 8.0 million barrel per day level, which was 11.6% higher than the same four-week period last year...  

at the same time, the EIA reported that our field production of crude oil fell by 194,000 barrels per day, from an average of 8,622,000 barrels per day during the week ending June 24th to an average of 8,428,000 barrels per day during the week ending July 1st...that appears to be the largest one week drop in our oil output since the last week of August 2012, a production drop that was precipitated at that time by the movement of Hurricane Isaac through the Gulf of Mexico…thus such a drop in output would certainly be a matter of concern if the drop were more widespread, but as it was,156,000 barrels per day of that output drop was cut from Alaska output, which must have had issues that weren't reported on...production in the lower 48 states was down by a modest 38,000 barrels per day to 8,088,000 barrels per day, and if Alaska production returns to the mean, that would suggest we might see a overall production it was, this week's oil production was 12.2% below our production of 9,604,000 barrels per day during the same week of 2015, and the lowest since the same amount of oil was produced during the week ending May 9th of 2014....

during the same week, U.S. refineries’ crude oil usage slipped by an insignificant 8,000 barrels per day, from the average of 16,695,000 barrels of crude per day they used during the week ending June 24th to an average of 16,687,000 barrels for the week ending July 1st....that was as the US refinery utilization rate fell to 92.5% during the week, from 93.0% of capacity the prior week, which was still below the refinery utilization rate of 94.7% during the week ending July 3rd last year...nonetheless, this week's refinery throughput was still a half percent higher than the 16,596,000 barrels per day refinery throughput of that week last last year, and also higher than any prior equivalent week in the 34 recent years of EIA data, so they're not exactly slouching...

with refineries throughput little changed, their production of gasoline rose by 59,000 barrels per day to 10,018,000 barrels per day, up from the 9,959,000 barrels per day we produced during the week ending June 24th, which was also 1.5% more than the 9,868,000 barrels of gasoline per day we were producing during the same week last the same time, our refineries output of distillate fuels (diesel fuel and heat oil) fell by 69,000 barrels per day to 4,952,000 barrels per day during the week ending July 1st, which was 2.7% below our distillates production level of 5,092,000 barrels per day during the week ending July 3rd of last year...

with the small increase in gasoline production, our end of the week gasoline inventories fell by just 122,000 barrels to 238,876,000 barrels as of July 1st, as our gasoline imports fell by 139,000 barrels per day to 747,000 barrels per day and gasoline supplied to US markets rose by 46,000 barrels per day to 9,755,000 barrels per day....that means our midsummer gasoline inventories are still a quarter million barrels above the level of the pre-driving season gasoline inventories of May 27th, and thus our gasoline supplies remained 9.6% higher than the 217,952,000 barrels of gasoline that we had stored on July 3rd last year, and 11.5% higher than the 214,321,000 barrels of gasoline we had stored on July 4th of 2014….thus our gasoline supplies are still categorized by the EIA as "well above the upper limit of the average range" for this time of year..  ...

now here's where the sticky wicket we mentioned earlier comes in; despite the fact that our summer inventories of gasoline are always lower than our winter inventories, this summer our gasoline inventories have remained high on the east coast, even as they were reduced somewhat seasonally a result, storage is at capacity on the east coast, and full vessels of refined product remain anchored outside of New York Harbor with no where to offload their products…ultimately, such full storage is also forcing regional refineries to curtail their production...the EIA's weekly Petroleum Status Report (62 pp pdf) reports on and includes graphs of the stores of oil and each of the major refined products nationally and by region, so we'll include the graph of the east coast gasoline inventory history below, so you can see what's happened...

July 9th 2016 PADD 1 gasoline stocks as of July 1st

in the graph above, copied from figure 2 on page 12 of the EIA's weekly Petroleum Status Report (62 pp pdf), the blue line shows the recent track of East Coast gasoline inventories over the period from January 2015 to July 1st, 2016, while the grey shaded area represents the range of East Coast gasoline inventories as reported weekly by the EIA over the prior 5 years for any given time of year, basically showing us the normal range of East Coast gasoline inventories as they fluctuated from season to season over the 5 years prior to the year and a half shown by the blue line....(note that PADD = Petroleum Administration for Defense District, one of the 5 regions of the country that the EIA keeps separate records for...a map of the 5 PADDs is here; PADD 1 includes all the states on the east coast plus W. Virginia..)   from this graph above, we can see that gasoline supplies in this region first breached 65 million barrels in February of 2015 when they rose to over 70 million barrels, then topped that record by 2 million barrels this this winter...however, instead of falling in the spring and summer as they usually do, regional gasoline inventories rose to hit a new record at the end of June, only slightly backing off this week; (note that the five years prior to this years data now includes the record 70 million barrels level set in 2015) can check page 12 of this weeks Petroleum Status Report for similar graphs of the other PAD districts, and you'd see that they're all down somewhat normally for this time of year...but that doesn't ease the glut in the New York area, because all the product pipelines were built to deliver product into that densely populated area, not send products out...

the regional graphs for distillate fuel inventories, which you can find on page 14 of the Petroleum Status Report, show the same situation for PADD 1, which is exacerbated by a similar oversupply in Europe, the normal export destination for surplus distillates...for the week ending July 1st, our distillate fuel inventories fell by 1,574,000 barrels to end the week at 148,939,000 barrels, as again distillates were withdrawn from storage in every region except the east coast...but since our distillate inventories have been well above normal since the El Nino winter reduced US heat oil consumption, our distillate inventories are still 8.4% higher than the 137,461,000 barrels of distillates we had stored as of July 3rd last year, and 22.3% higher than our distillates supplies as of July 4th 2014, and thus they're also characterized as "well above the upper limit of the average range" for this time of year...   

finally, with the big increase of imports, the withdrawal of oil from our stocks of crude in storage was a slightly lower than normal 2,223,000 barrels for the week, leaving our oil inventories at 524,350,000 barrels as of July 1st...however, that was still 12.6% higher than the 465,763,000 barrels of oil we had stored as of July 3rd, 2015, and 37.1% higher than the 382,565,000 barrels of oil we had stored on July 4th of 2014....with our oil inventories thus continuing to be that much higher than the seasonal records we set most every week in 2015, 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 5th week week out of the past 6 during the week ending July 8th, following a string of 41 consecutive weeks without a net increase in total active rigs.....Baker Hughes reported that the total count of active rotary rigs running in the US increased by 9 rigs to 440 rigs during the week ending July 8th, which was down from the 863 rigs that were deployed as of the July 10th report last year, and down from the recent high of 1929 rigs that were in use on November 21st of 2014...the number of rigs drilling for oil this week rose by 10 rigs to 351, which was down from the 645 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 again fell by a single rig to 88 as of July 8th, which was down from the 217 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 were deployed on August 29th, 2008...there was also still one rig running this week that was classified as miscellaneous, unchanged from last week and no different than the miscellaneous count of the same week a year ago....  

the number of working horizontal drilling rigs also increased for the fifth time in six weeks, as their count rose by 11 rigs to 343 rigs this week, which was still down from the 654 horizontal rigs that were in use on July 10th of last year, and down from the record of 1372 horizontal rigs that were in use on November 21st of 2014...during this same week, a net of two directional rigs were pulled down, leaving 36 directional rigs still working, which was down from the 88 directional rigs that were drilling at this time last year....meanwhile, the vertical rig count was unchanged at 61 rigs, which was still down from the 121 vertical rigs that were drilling in the US during the same week last year...      

for the details on which states and which shale basins saw changes in drilling activity this past week, we'll again include a screenshot of that part of the rig count summary from Baker Hughes, which shows those changes...the first table below shows weekly and annual rig count changes by state, and the second table shows weekly and annual rig count changes for the major geological oil and gas both tables, the first column shows the active rig count as of July 8th the second column shows the change in the number of working rigs since July 1st, the third column shows the July 1st rig count, the 4th column shows the change in the number of rigs running from the equivalent 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 10th of 2015: 

July 8 2016 rig count summary

International Rig Counts for June

Friday also saw the monthly release of the international rig counts for June, which unlike the weekly count, is an average of the number of rigs running in each country during the month, rather than the total of those drilling at month end....Baker Hughes reported that an average of 1407 rigs were drilling for oil and natural gas around the globe in June, which was up from the 1,405 rigs that were drilling around the globe in May but down from the 2,136 rigs that were working globally in June of last year...increased North American drilling accounted for the global increase for the first time since July of 2015, as the average US rig count rose from 408 rigs in May to 417 rigs in June, which was still down from 861 rigs in June a year ago, while the average Canadian rig count rose from 42 rigs in May to 63 in June, again still down from 129 rigs in June a year earlier....outside of Northern America, the International rig count fell by 28 rigs to 927 in June, which was also down from 1,158 rigs a year ago, as every other region of the globe saw a decrease in drilling activity for the month...

drilling in the Middle East fell for the 5th time in the past 6 months, as the region's activity was down by 2 rigs to a June average of 389, which was also down from the 401 rigs deployed in the Middle East a year earlier...the regional pullback was entirely accounted for by the idling of 3 rigs working offshore, lowering the offshore count to 49, which was one more than the 48 rigs the Middle East had working offshore in June a year ago....the largest drilling activity decline was in Oman, where their active rig count fell from 69 to 66, which was also down from the 71 rigs working in Oman last year at this time....both Egypt and Iraq saw two rigs idled in June; for Egypt, that left 26 rigs running, down from 41 rigs a year earlier, and for Iraq, that left 41 rigs working, down from the 53 rigs they had deployed in June of 2015...on the other hand, Pakistan saw the addition of 3 more rigs, after they had added 4 rigs in May; that brought their average June count up to 30 rigs, which was also up from the 17 rigs that were drilling in Pakistan a year earlier...meanwhile, the Saudis also added a rig, bringing their active rig count up to 124, which was also up from the 121 rigs they had deployed last June....the Saudis have been averaging a deployment of 125 rigs over the past year, which is up from their average of 105 rigs in 2014, so their drilling has not skipped a beat as oil prices fell by more than half..

at the same time, the Latin American countries pulled out another 10 rigs, after pulling out 15 rigs in both April and May, and hence the region is now down by 92 rigs since the first of the year…Latin America averaged 178 rigs in June, including 31 offshore, down from the total of 314 rigs, which included 62 offshore rigs, that were active in Latin America in June of 2015....Argentina saw the largest drop, as they were down by 8 rigs to 63, which was down from the 104 rigs that were in use in Argentina a year ago...Venezuela idled 7 more rigs, after shutting down 9 in May, and they're thus down to 53 active rigs, from the 66 rigs that were deployed in Venezuela in June of last year...Mexico also shut down 2 rigs in June, leaving 20 still working; that was down from the 51 rigs working Mexico in June of last year...on the other hand, Ecuador restarted 3 rigs in June, bringing their active count back up to 5 rigs, which was still down from the 15 rigs they were running a year earlier, and Columbia, which had cut their active rig count from 30 all the way down to 2 over the nine months ending April, added 2 rigs in June after adding 3 in May, which brought them back up to 7 rigs, which was still down from the 26 rigs they had deployed last June...

meanwhile, the Asia-Pacific region had 182 drilling rigs working in June, down from 190 rigs working in May, and down from the 215 rigs working the region a year earlier, with the Asia-Pacific offshore count steady at 86...Australia, Indonesia, and Thailand each cut 3 rigs, leaving Australia with 3 rigs working, down from 15 a year earlier, leaving Indonesia with 16 rigs, down from 23 a year earlier, and leaving Thailand with 12 rigs, down from the 19 rigs the Thais were running last 29, there were also 2 fewer rigs working offshore of China, down from 31 rigs in May but still up from the 24 rigs working offshore of China in June a year the same time, Indian drillers started 6 additional rigs, bringing the count in India to 108 rigs, still down from 113 rigs a year earlier...

elsewhere, countries in Africa shut down 4 rigs in June, leaving 87 still in use, down from the 103 rigs working the African continent last year at this time...Algerians accounted for half the decrease, as they were down 2 rigs to 53, which was still up from the 51 rigs Algeria had active a year earlier...Nigeria, Cameroon, and South Africa each idled a rig, leaving 5 in Nigeria and left none working in either Cameroon and South the same time, Congo restarted the rig they had idled in May, and now have 2 rigs running, down from 3 a year earlier....lastly, the rig count in Europe also fell by 4 to 91 in June, which was down from the 113 rigs working in Europe a year ago at this time...Sakhalin island, off the east coast of Russia but included in the European count, idled two rigs, leaving 8 rigs still active, same as a year the same time, Norway, Denmark and Iceland each shut down a rig; for Denmark and Iceland, that reverses their additions in May, for Norway, it’s a reduction to 16 rigs, down from 19 a year earlier...the United Kingdom also added a fracking rig in June, which is currently their only land based rig, as they also had none on land a year ago...finally, note that Iran, Russia, and China rig counts are not included in Baker Hughes international data, although China's offshore area, with an average of 29 rigs active in June, is included in the Asian totals here...   


Frick & Frack are back – Youngstown Vindicator -  Here's a not-so-friendly suggestion for the advocates of the nonsensical proposal to ban fracking in the city of Youngstown: Track down some of the Vallourec Star workers who have been laid off and tell them why they deserve to lose their well-paying jobs. Indeed, it would be fun to watch Dr. Ray Beiersdorfer, who has slopped at the public trough for many years, preach to those private- sector workers that their loss of income is for the greater good. It's easy to be a paragon of virtue when you have a cushy job as a professor at Youngstown State University, where the line between fantasy and reality is often blurred. Ray Beiersdorfer and his wife, Susie, have long been the driving force behind the effort to push through a charter amendment that would prohibit the use of fracking to extract oil and gas in the city of Youngstown. City voters have rejected the anti-fracking Community Bill of Rights charter amendment on five different occasions, but the Beiersdorfers and other members of FrackFree Mahoning Valley are undaunted. Consider this comment from Susie Beiersdorfer last week after she submitted petitions to get the charter amendment on this year's general election ballot: "We don't lose until we quit."

The only ‘fringe’ elements are those advocating fracking | Letters | Editor: It was good to see the coverage of last Tuesday’s public meeting in the June 30 Athens NEWS. I do take issue with oil and gas advocate Jackie Stewart’s comments, however. Firstly, Tuesday’s public meeting was much more than a “media stunt,” as she indicated. Secondly, the individuals present were not “a group of fringe activists.” There’s nothing fringe about a diverse group of concerned citizens speaking rationally about their desire to protect their community, trying to use their voices as citizens in a democracy to effect change (as opposed to using money to buy influence). There’s nothing fringe about being anti-fracking. A Gallup poll from March of this year shows a majority of Americans are opposed to fracking, and this percentage is growing every month. There’s nothing fringe about wanting to be informed by reading the ever-growing list of incredibly alarming, destructive, and deadly disasters caused by fracking, around the country and in Ohio. The attendees of Tuesday’s meeting and a growing number of Americans are discovering the threat fracking poses because they’re curious and concerned. The group of “fringe activists” that attended Tuesday’s public meeting represented all parts of Athens County and even various parts of Ohio. Not all of the people there would identify as activists. None of the people attending were being paid to make comments. Instead, unlike Jackie Stewart, their comments were motivated by something much more pure than dirty money from a dirty industry; they were motivated by a sense of hope for the future.

Ohio now has 1334 shale wells producing natural gas and oil - Through July 2, there were 2,187 permits issued for horizontal drilling and 1,755 horizontal wells drilled in the Utica and Point Pleasant shales, according to state figures released this week. There were 1,334 wells producing in the state, Ohio’s Division of Oil & Gas Resources reported. A permit was issued July 1 to XTO Energy Inc. for a well in Belmont County and a permit was issued June 27 to Antero Resources Corp. for a well in Noble County.

University retracts shale fracking air pollution study - Drilling - Ohio: The University of Cincinnati has retracted a study on shale fracking air pollution in Carroll County, pro-fracking organization Energy in Depth reports: "The University of Cincinnati (UC) has yet to publish the results of a now year-old study that found no water contamination from hydraulic fracturing in a scientific journal, despite scrutiny, media attention, and numerous calls from groups and elected officials to do so. "This indefinite delay is all the more interesting considering that UC couldn’t wait to publish the results of its 2015 study that claimed fracking was causing significant air pollution in Carroll County. That study appeared in Environmental Science & Technology just three months after it was completed. "But the UC researchers’ urgency has apparently come back to bite them as they have just retracted the study due to 'errors' and 'incorrect' calculations ..." The full EID story is here. The link to the retraction is here.

Probe Sought Into Government Suppression of Link Between Water Contamination and Fracking - Between The Lines -  For the past decade, Pennsylvania has been “ground zero” for fracking, the industrial fossil fuel extraction process that requires a million gallons of water, sand and hundreds of unknown chemicals for each gas well that is drilled. Families living near such wells have been complaining that fracking has contaminated their drinking water, but in most cases they haven't been able to prove it. A series of investigations – by ProPublica, the Center for Public Integrity, Harvard University, and others – all revealed problems with Pennsylvania’s Department of Environmental Protection's lack of enforcement and follow-through on suspected cases of water contamination linked to fracking. Last fall, Public Herald, a non-profit investigative news organization based in Pittsburgh, released a report that found nine different ways the state has kept complaints out of the public record. Between The Lines’ Melinda Tuhus spoke with Joshua Pribanic, executive editor of the Public Herald, who explains that after a court case was won by another news outlet, he and his partner were able for the first time to get access to 2,300 complaint investigations. The Herald is now calling for a federal investigation of both the Pennsylvania DEP and the federal Environmental Protection Agency, which in 2015 issued a report stating that there was no evidence of a serious problem with the state's drinking water due to fracking. However, the report did not cite any of the thousands of complaints in making its determination. Here, Pribanic discusses this investigation. [Rush transcript]

When Oil Boomtowns Go Bust - VICE -- One-third of energy used in the US comes from natural gas. In 2015, the US consumed 7.08 billion barrels of oil and other petroleum products-more than 20 barrels per person. Those numbers are mind-boggling, but stranger still when we imagine what it takes to pull that gas and liquid from the ground, and consider how much of it originates in America.  Thanks to technologies like hydraulic fracturing, which allows drillers to break up oil and gas-soaked rocks with a mixture of water and chemicals pumped thousands of feet beneath the surface, domestic gas and oil production is at an all-time high.  Oil production has been so brisk in the US and elsewhere, in fact, that prices have collapsed. In 2008, oil was trading for over $100 a barrel; today, it goes for less than half that. And that's led drillers to cut back, abandoning rigs in towns across the country, and sometimes even shuttering their operations completely. At least 130 North American oil and gas companies, representing tens of billions of dollars, have gone bankrupt since the beginning of 2015, and more will likely follow.  The quick rise and fall of US-based fracking and oil operations has left many towns temporarily prosperous, others on shaky financial footing, and many landscapes pockmarked with drilling rigs and compressor stations, crisscrossed by pipelines.   Nearly every state in the union produces some oil or gas, but there are a few regions that account for a lot more than others, and therefore have been hardest hit by the fluctuations in the market: the Marcellus, located in Pennsylvania and Ohio, the Bakken, located in North Dakota, and the Eagle Ford, located in Texas. The effects of the downturn are similar everywhere: The once-plentiful drilling rig jobs that often paid $100,000 a year have vanished, as have many of the people who came to oil and gas regions looking for those jobs.  But that doesn't mean the infrastructure that supports oil and gas production has disappeared. New refineries, which can pollute the communities that surround them, have been built across the country, especially in the Midwest and South, to process the oil and gas; new pipelines stretching from coast to coast to distribute the oil and gas have been built too. Wherever new oil and gas infrastructure has been built, water sources, the land, and the air have been polluted. Here's a look at how three of the US's biggest-producing regions are faring in this new age of oil and gas.

Pennsylvania power plant to draw on natural gas - (UPI) -- A Houston-based oil and gas company working primarily in U.S. shale basins said it signed a 10-year deal to supply natural gas for a Pennsylvania power plant. Cabot Oil & Gas Corp. signed a 10-year sales agreement to become the sole supplier to a 1,500-megawatt plant planned for Lackawanna County, Pa. Billed as one of the most efficient power plants in the country, the Lackawanna Energy Center power plant will start full-scale operations by the end of 2018. Dan Dinges, the company's top executive, said the agreement is unique in that it will power a state-of-the-art facility from natural gas "directly in our backyard." The announcement comes as the energy landscape is shifting away from coal. According to the Pennsylvania Coal Alliance, the state relies on coal for about 40 percent of its electricity. A federal report, however, finds the amount of coal produced in the United States is the lowest it's been since the early 1980s. Generating electricity accounts for nearly all of the coal use in the United States. Power plants during the fourth quarter received more coal than they consumed, leaving a net surplus of coal on the market. the primary source of electricity in the United States. Prior to April 2015, the total monthly share of electricity generated by coal had always been greater than gas, data from the U.S. Energy Information Administration show.

Feeding the Shell cracker plant is the worrisome part of this deal - Pittsburgh Post-Gazette --The Shell cracker plant commitment has brought so much excitement to Western Pennsylvania that I was compelled to think about what will happen in a decade or two after it’s up and running. First, I’m thrilled for the short term — the plant’s construction. Contracting companies, electricians, welders, tradespeople, real estate agents/​homeowners, and all nonfracking and petrochemical-related companies that will benefit from the plant’s construction will be great. The next five to six years will be exciting. The day the plant opens, however, will be looked at as the first day of the protracted death of our region. It’s frightening to think about all the fracking and drilling needed to feed that plant. That’s a whole other argument. I’m not an economist or actuarial scientist, but I am an investor, and I’ll be betting on pharmaceuticals, health systems/​hospitals, insurance companies, environmental remediation firms, asthma/​oncology, dermatology, water treatment, lumber (coffins), other funeral-related industries and the “pop-up” medical clinics that will be sprouting up everywhere. There will be lots of sick patients! Notice no mention of steel companies. The “patriotic” oil and gas companies import 60 percent of all pipe put in the ground in this country to save a few bucks, crippling our domestic pipe makers. Expect more cheap-imported-pipe spontaneous explosions!  Oh, and go eat dinner on Mount Washington, quickly. All of the fracking-related earthquakes will exacerbate the deterioration of an already crumbling mountainside. Sell your house before 2022!

PHMSA Increases Maximum Civil Penalties for Violations of Pipeline Safety Laws and Regulations ShaleEnergyLawBlog -  On June 30, the Pipeline and Hazardous Materials Administration (PHMSA) issued an interim final rule, effective August 1, 2016, titled “Pipeline Safety:  Inflation Adjustment of Maximum Civil Penalties.”  This interim rule increases the maximum administrative civil penalties that may be issued for a violation of the pipeline safety laws and regulations from $200,000.00 per violation per day up to $205,638.00, and from $2 million for a related series of violations up to $2,056,380.00.  The interim rule also increases the maximum for the additional civil penalties applicable to violations of PHMSA’s LNG regulations from $50,000.00 to $75,123.00 and increases the maximums for violations of the pipeline safety whistle blower protection laws from $1,000.00 to $1,194.00.  PHMSA issued the rule pursuant to the “Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015” and used a multiplier of 1.02819 pursuant to guidance provided by the Office of Management and Budget in order to calculate the increase.

Fracking Foes Take Their Protest to Regulator’s Front Door -Tony Clark was wrapping up dinner with his family when the doorbell rang.  He didn’t need to answer. He already knew who it was. Anti-fracking activists had followed him home, taping “wanted-style” posters with his face plastered on them across his leafy suburban neighborhood outside of Washington. Coming up to his front door was the last straw. He called the police.  Clark is one of four members serving on the Federal Energy Regulatory Commission. It’s not the first time his agency has been the subject of high-profile attacks. In the aftermath of the California energy crisis, the panel took heat for failing to clamp down on power-market manipulation by the likes of Enron Corp. It has been so resented by opponents that they’ve used its acronym to say they’ve been “FERC’ed.” But at no time until now, as the commission oversees an unprecedented expansion of the U.S. natural gas pipeline network, have these campaigns been so personal.  Today, the commission is facing attacks on several fronts. Public Citizen, an advocacy group that bills itself as the people’s voice in Washington, has called out the agency for employing people who later left to take jobs at the companies it regulates. The Delaware Riverkeeper Network is accusing the panel of bias because its pipeline program is funded by industry. The agency denies the charge and says safeguards are in place to avoid conflicts of interest by staff. The commission barred the public from attending a meeting in May after the activists said they would step up their protests against the agency.  Beyond Extreme Energy, made up of people fighting an oil and natural gas drilling technique known as hydraulic fracturing, or fracking, have taken issue with the energy commission’s use of eminent domain, whereby the government has the right to seize private land for public use. They’ve brought the fight to the doorsteps of commissioners, said Ted Glick, a co-founder of the group, which has taken responsibility for orchestrating the protest at Clark’s home. “We would not be going to the commissioners’ homes if FERC was not enabling the taking of the land, and sometimes the destruction of the land, and the health, and the property values for easily thousands, if not tens of thousands,” Glick said.

Underwater Oil-Well Bolts Are Failing, Causing Alarm - WSJ: General Electric, oil drillers and U.S. regulators are scrambling to determine why massive bolts used to connect subsea oil equipment keep failing, prompting costly shutdowns and raising safety concerns about hundreds of wells in the Gulf of Mexico. Safety regulators at the Department of the Interior began investigating the matter in 2013, officials said in an interview, after a GE oil-exploration equipment business issued a global recall for faulty bolts on one of its components. The bolts have corroded and sometimes snapped, raising the possibility of a major oil leak. But the U.S. investigation and two recent bolt failures convinced regulators and industry officials that the problem goes beyond GE and its blowout preventers—safety gear used to halt oil-and-gas flow during a well emergency. Flaws also have been found in bolts made by GE’s two main competitors for blowout preventers— National Oilwell Varco and the Cameron unit of Schlumberger —and in bolts used in other areas on subsea wells, said Interior Department officials. “This is what we view as a very critical safety issue,” . “If your smallest component fails, you can’t expect a sophisticated many-million-dollar piece of equipment” to hold fast and prevent a leak. Like other equipment companies, GE said its bolts have come from subcontractors, which it hasn’t publicly identified. The company said the components are subject to rigorous safety testing before being delivered to customers.  The review has found bolt failures stretching back at least to 2003, regulators said. “This is a systematic industry problem that requires immediate attention,”

US ‘didn’t really study’ impact of toxic chemicals when allowing offshore fracking - US authorities “didn’t even know what they were allowing” when permitting companies to conduct offshore fracking and dump billions of gallons of chemicals into the ocean, a lawyer for an environmental NGO has told RT. “They were permitting fracking offshore in the Gulf of Mexico and […] the agencies didn’t know it was happening, they didn’t even know what they were allowing,” Kristen Monsell, a lawyer at the US-based Center for Biological Diversity (CBD), told RT on Thursday. In late June, the CBD released a report suggesting the Obama administration have issued over 1,200 offshore fracking licenses between 2010 and 2014. Controversial offshore fracking has been taking place in hundreds of wells in the Gulf of Mexico, including within the habitat of loggerhead turtles, CBD said in late June.   When deciding to license offshore fracking, the authorities “did so without conducting any real environmental analysis or any analysis on fracking-endangered species, without involving the public, and that’s just unacceptable,” Monsell said.  The US government “hasn’t really studied it before, they haven’t studied the impact of the chemicals that these companies are allowed to dump directly into the ocean including critical habitat and fracking-endangered species.”

Could Online Bidding for Offshore Drilling Undermine Protesters? -- Rep. Garret Graves wants lease sales for offshore oil and gas drilling to be held online to improve transparency and haul in more money for taxpayers. He said Wednesday he is not trying to undermine protesters who have swarmed previous in-person lease sales. “This has nothing to do with avoiding public input,” the Louisiana Republican said at a House Natural Resources subcommittee hearing. He added that he would personally support a “hybrid model” of lease sales, involving a live stream of an in-person and online sale. The White House isn’t opposed to online sales either, although agency officials quibble with some of what Graves is proposing. Graves’ bill, sponsored with Rep. Alan Lowenthal (D-Calif.), also includes transparency provisions requiring the Bureau of Ocean Energy Management to publicly disclose details of the leases. The purpose of the bill is to increase transparency and attract more bidders, which generally leads to higher bids and a better return for taxpayers, Graves said. Offshore drilling opponents, however, are skeptical that his proposal would do either. Oil and gas leases involve secret bids, rather than an auction-style format. If an organization is determined to win the lease, it may drastically overpay, not knowing what its competitors will offer. Online lease sales aren’t a totally new idea. The Bureau of Land Management plans to conduct an online lease sale for onshore production this fall. The Bureau of Ocean Energy Management already does online sales for offshore wind leases.

SEC Charges "Frack Master" Chris Faulkner, Shale CEO and Industry Advocate, with $80 Million Fraud - DeSmog (blog) At the start of June, Chris Faulkner, Chief Executive Officer of Breitling Energy, was a high-flying shale company executive and media darling, often interviewed on CNN, Fox Business News and even the BBC. During his most recent appearance on CNN on June 2nd, he weighed in on the financial prospects for drillers who survive low oil prices despite the spate of bankruptcies sweeping the shale industry. It was hardly the first time the Texas oilman aired his views on the national stage. "The era of coal is coming to an end," Mr. Faulkner told The New York Times in June 2014. "We are entering the era of natural gas." "Instead of rejecting promising new energy-extraction techniques, citizens should work with responsible energy companies to preserve the benefits of fracking, while stamping out current abuses," he said in the Wall Street Journal in August of the same year."I believe that strict compliance to current regulations is sufficient to protect the aquifer while allowing American companies to tap into rich U.S. reserves and free the nation from its dependence on foreign sources of energy," he wrote in the U.S. News and World Report in 2011. But behind the scenes, Mr. Faulkner's world - which according to the U.S. Securities and Exchange Commission amounted to little more than a house of cards - was already beginning to collapse by the time he made his June CNN appearance. In September, Breitling Energy had been forced to tell investors that its auditors had concluded that some of its prior financial statements "should not be relied upon". By April, Breitling could no longer keep up with its drilling obligations and had lost expensive drilling rights covering roughly 3,600 acres in Texas, the SEC says. And by May, federal investigators were closing in. On the last Friday in June, the authorities made their move. Mr. Faulkner and seven others at Breitling Energy Corp. and three additional related companies were charged with what the SEC says was a massive financial fraud that bilked investors out of $80 million.. Mr. Faulkner, 39, had personally used at least $30 million worth of investor money for his own "lifestyle of decadence and debauchery," according to the SEC lawsuit, including not only jewelry, fashionable clothing and fine dining, but also the frequent use of escort services.  

3.5 magnitude earthquake rattles parts of northern Oklahoma (AP) — The U.S. Geological Survey says an earthquake has rattled parts of northern Oklahoma. Geologists say a 3.5 magnitude temblor was recorded at about 12:21 p.m. Tuesday in Garfield County, about 16 miles west of Perry. The USGS says the earthquake was recorded at a depth of three miles. No damage or injuries were immediately reported. Geologists say damage is not likely in earthquakes below magnitude 4.0. The number of magnitude 3.0 or greater earthquakes in Oklahoma has risen from a few dozen in 2012 to more than 900 last year. Scientists have linked the increase to the underground disposal of wastewater from oil and natural gas production operations in the state. State regulators have instructed oil and gas producers to reduce volumes at their wastewater disposal well

Number of Oklahoma earthquakes down this year: state geologists - In recent weeks, the number of earthquakes felt in Oklahoma has decreased compared with this time last year, which might reflect measures state officials took earlier this year to severely limit the volumes of oil and natural gas wastewater injected into deep disposal wells, according to the Oklahoma Geological Survey. "The incidence of earthquakes is down, and that's attributed to decreased injections," OGS Director Jeremy Boak said in an interview. Year-to-date the state has seen 403 earthquakes of magnitude 3.0 or above, which puts it on pace to see fewer earthquakes of that magnitude than last year, when Oklahoma saw 907 temblors of 3.0 or higher. However, the current year is still likely to see more quakes than in 2014 when the state saw 569 such earthquakes. "We believe most of the earthquakes that have been happening since 2010-11 have been induced, although there are a few specific examples where we're not really sure yet," Boak said."In general most of the substantial earthquake activity is due to induced seismicity of deep injection of produced water," he said. If the upswing in earthquakes was due to injection, then the recent downturn in earthquake activity can be traced to the injection decrease, he said. Boak said there are about 1 million fewer barrels a day of wastewater being injected than before the Oklahoma Corporation Commission instituted limits on the volume of water being injected into the deep Arbuckle formation in a 10,000-square-mile area of interest, which covers much of the western and central regions of the state.

Record Cushing Storage; Update On PADD 2 Storage -- RBN Energy - RBN Energy: "I still haven't found all the crude storage I'm looking for -- PADD 2."  The famous Field of Dreams misquote “If you build it, they will come” certainly has proved true for the midstream companies that added a record 18.7 million bbls of crude oil storage capacity in PADD 2 in late 2015 and early 2016.  During that six-month period, crude inventories in PADD 2 blasted 24.4 million bbls higher to a record 155.6 million bbls.  And while PADD 2 oil stockpiles have been shrinking somewhat in recent weeks, they remain above 150 MMbbl—a mark the PADD had never seen before this year. Storage levels have been particularly high at the Cushing, OK, storage and distribution hub within PADD 2.  Why is so much crude being socked away?  Today, we continue our look at the new storage capacity being added in the U.S., and at why demand for storage has been so high.

Judge's Ruling to Halt Fracking Regs Could Pose a Broader Threat to Federal Oversight -- A federal judge in Wyoming recently struck down Bureau of Land Management rules to regulate hydraulic fracturing on public and tribal lands. But while the fate of the rules is far from final-with the Obama administration immediately indicating it would appeal-the implications of the controversial decision could extend far beyond fracking and the BLM, according to environmental, legal and policy experts. In the decision, released last week, U.S. District Judge Scott Skavdahl stated the BLM, which is overseen by the U.S. Department of the Interior, has no authority to regulate the most widely used process for extracting oil and gas resources on publicly owned land. Most of the approximately 100,000 active oil and gas wells on public and tribal lands are fracked.  The rules are a mix of regulations for disclosing the chemicals used in fracking, well casing requirements and the handling of related waste. "The Constitutional role of this Court is to ... determine whether Congress has delegated to the Department of Interior legal authority to regulate hydraulic fracturing. It has not," Skavdahl wrote in his ruling. Skavdahl, appointed by President Barack Obama in 2011, cites an exemption in the Safe Drinking Water Act, known as the "Halliburton loophole," to support his decision. "What the court is doing is taking a very narrow exemption of hydraulic fracturing from one act-the Safe Drinking Water Act-and suggesting that exemption applies to all other federal statutes," said Hannah Wiseman, an environmental law professor at Florida State University. "You could read the opinion to suggest that no federal agency has control over this activity...this is sort of an unprecedented decision."

US Crude Oil Reserves, Green River Formation, Global Impact Of US Energy In The 21st Century -- IBD -- July 7, 2016  The story that the US has more recoverable reserves than both Russia and Saudi Arabia continues to have "legs." This op-ed" in Investor's Business Daily: Anu Mittal, GAO director of natural resources and environment, in May 2012 told a stunned Congress that just one U.S. energy region -- the Green River Formation, which stretches across parts of Wyoming, Utah and Colorado -- contained an "amount (of oil) about equal to the entire world's proven oil reserves." With oil prices near $100 a barrel at the time, it was hard to believe. Dubbed our Persia on the Plains, the Green River Formation is estimated to have four times the proven reserves of Saudi Arabia, Mittal testified. While the formation's total reserves are 3 trillion barrels, even at the then-high prices for oil, recoverable reserves were about half that: 1.5 trillion barrels. Now, four years later, oil prices are down more than half -- in part, because global demand is much weaker than expected, but also because the U.S. fracking and petro-technology boom has created nothing less than an energy revolution. Rest assured: While much of the oil that the U.S. has underground is not recoverable under current market conditions, it will be there when we need it.  And it's also important to remember that 72% of the Green River Formation and much of the rest of our country's oil reserves lie under federal lands. So it will take a president and a Congress willing to "drill, baby, drill" to keep us supplied with energy for centuries to come.

Judge approves deal in methane pollution lawsuit (AP) — An agreement between the U.S. government and environmentalists who sued over greenhouse gas emissions from federal oil and gas leases in Montana has been approved by a judge. U.S. District Judge Sam Haddon issued an order on Thursday finalizing the agreement. It allows drilling to proceed on two dozen oil and gas leases with only minimal changes to current government approval practices. Attorneys for the Montana Environmental Information Center, WildEarth Guardians and Earthworks wanted the government to force companies to reduce emissions of methane from oil and gas fields. Federal officials agreed to consider such steps for two dozen federal leases in eastern Montana, but are not compelled to adopt them under terms of the agreement. Methane is a far more potent greenhouse gas than carbon dioxide. It gets into the atmosphere when pipelines leak and when companies vent or flare excess natural gas from oil production. The American Petroleum Institute and other industry groups that intervened in the case argued the U.S. Bureau of Land Management should not have settled. They said the government would have prevailed if the lawsuit had proceeded and the settlement means only minimal changes. “The plaintiffs asked this court to declare the federal defendant’s decision to issue the leases to be in violation” of federal environmental laws, said Hadassah Reimer, an attorney for the industry groups. “In short, the plaintiffs have not been afforded any relief on the merits of their claims.”

Sharp Decline In Bakken Production In April, 2016, Due To Temporary Conditions -- Rystad Energy -- From the Director's Cut for April, 2016, data and my comment: Crude oil production:

  • April, 2016: 1,041,007 bopd
  • March, 2016: 1,111,421 bopd
  • Month-over-month change: a decrease of 70,414 bopd.
  • Month-over-month change: a decrease of 6%.
  • Comment: that's as big a decrease as I can remember.
I don't know if folks were surprised by that or not. I took it in stride but did not think much about it. I missed the analysis by Rystad Energy which was posted June 23, 2016“Research shows that operators are now starting to complete wells that have previously been put on hold deliberately. This comes as more than 90% of the accumulated oil DUC inventory can be commercially completed at a WTI of 50 USD/bbl,” says Artem Abramov, Senior Analyst and product manager at Rystad Energy.  The recent extreme production decline - among the key crude producing states, North Dakota suffered from an all-time high historical decline rate of 70,000 bopd in April 2016 - fell far outside a natural 10,000 - 20,000 bopd range, which one would expect as a result of current completion activity and mature base production.  The significant decline acceleration appears to have come from older “low decline” wells brought on-line before 2016.  “It is not the first time such temporary shifts in base decline are observed, and they were caused by road restrictions imposed by the state over the month. This trend is unlikely to persist and should not be extrapolated to the US Shale industry in general,” says Abramov.

Post-oil boom, drug prices fall as gang trafficking increases - The Bakken oil boom may be over, but people on the front lines of fighting crime in western North Dakota say drug trafficking here is worse than ever. The price of drugs is dropping and an influx of out-of-state gangs are intensifying the problem, a lead agent with the North Dakota Bureau of Criminal Investigation says. "Because the oil industry has slowed down, people automatically assume the drug world has slowed down. What we've found out is that's absolutely not the case," said Rob Fontenot, a BCI agent and member of the Southwest Narcotics Task Force. "There's more dope here now than there ever has been."There's been a 75 percent drop in the price drug traffickers are getting for methamphetamine, Fontenot said. Plus, deadly fentanyl-laced heroin has spread from eastern North Dakota to the Bakken. The plummeting price of meth because of its prevalence in western North Dakota has led to it being trafficked and sold in greater quantities. Fontenot said meth that was going for $3,300 an ounce in the height of the oil boom is now worth about $800 an ounce on the street. "I never imagined in my law enforcement career-and I've been working dope for 14 years-that I would see meth for $800 an ounce," he said. U.S. Attorney for North Dakota Chris Myers said it's obvious by his office's caseload that drug cases in the Bakken aren't slowing down."There's a myth outside of our state," Myers said. "People believe that because oil activity has slowed, that the criminal activity has stopped. That's just not true.."

Multi-pad drilling in North Dakota -- One of many ways energy wizards are driving down the cost of drilling for oil is putting multiple wells on one site. Bakken multi-well pads getting bigger – The technique of drilling several wells from one site, called multi-pad drilling, is increasing. Both the number of pads and the number of wells per pad is going up.  For several years now I have noticed multiple pump jacks on one site. In September 2015, I saw a 15 well pad. It is a few miles west of Ross and about a mile and a half north of highway 2. You can see it on Google maps at coordinates 48.333785, -102.653962, although the satellite photo is really old. It shows only the middle six wells with pumps installed and a drilling rig working on the west row of wells. No progress on the east row of wells. Look around on Google maps a half mile north from that site and you will see a railroad trans-loading facility. Look to the east for a mile from there and you can pick out two medium-sized multi-pad sites and one site that is just being developed that is as large as the one with 15 wells. I’ll guess there will be 15 or 20 wells on that site eventually.Just one part of the efficiency is land usage. Article says a single well averages 3.35 acres of land. A large multi-pad operation reduces the land to an average of 1 acre or less, according to Lynn Helms.Consider how much easier and cheaper it is with 12 or 15 or 18 wells in one place to put in pipelines to gather the natural gas and get the oil to a terminal.  Article says Hess has an 18 well pad in Mountrail County. A line of nine wells each reach out 2 miles in one direction and nine wells go 2 miles in the opposite direction. That is 1,280 acres covered in each direction, or 2,560 acres worked from one site. There is another big multi-pad site at the southwest corner of Williston. The satellite photo at Google maps shows 14 wells. Using my negligible understanding of such things, it seems to me like there is room for another 6 or 7 wells eventually.

Obama toughens Arctic drilling rules | TheHill: The Obama administration rolled out a suite of new regulatory standards Thursday to strengthen offshore oil and natural gas safety in the unique, unforgiving Arctic Ocean. It’s the first time that the federal government has put forth specific safety rules for the Arctic, which is vastly different from more developed offshore drilling areas such as the Gulf of Mexico. The regulation from the Interior Department is meant in part to allay fears from environmentalists, Alaskan Native American tribes and others who believe drilling in the United States’s portion of the Arctic, off Alaska’s northern shore, is inherently risky, with a high chance of catastrophe. The standards, proposed last year, come despite the fact that no company is using offshore rigs to drill in Arctic federal waters, no company has any imminent plans to drill, and numerous companies have abandoned their drilling rights leases. President Obama is considering prohibiting new drilling  rights auctions through 2022. “The regulations we are issuing today support the Administration’s thoughtful and balanced approach to any oil and gas exploration in the Arctic region,” Janice Schneider, Interior’s assistant secretary for land and minerals management told reporters Thursday. “The rules help ensure that any exploratory drilling operations in this highly challenging environment will be conducted in a safe and environmentally responsible manner, while protecting the marine, coastal, and human environments, and Alaska Natives’ cultural traditions and access to subsistence resources,” she said.

PG&E closes gas storage field in delta after finding leaks - SFGate: Pacific Gas and Electric Co. has temporarily closed down its largest natural gas storage field, located beneath an island in the delta, after finding small leaks of the flammable fuel. The move comes amid heightened concern about the safety of California’s underground gas storage fields following an immense, four-month leak just north of Los Angeles that forced the evacuation of a nearby neighborhood. The leaks spotted by PG&E at its McDonald Island facility in the Sacramento-San Joaquin River Delta appear to be far smaller. According to the state’s oil and gas regulatory agency, the leaks range from 236 to 763 kilograms of gas per hour. Southern California’s massive Aliso Canyon leak, in contrast, peaked at more than 60,000 kilograms per hour. In a letter to PG&E, Kenneth Harris, supervisor of California’s Division of Oil, Gas and Geothermal Resources, called the amount of gas leaking from McDonald Island “similar to or only slightly above background levels at natural gas storage facilities.

Inside FERC Henry Hub July index up 96 cents to $2.92/MMBtu - The July bidweek US average natural gas price climbed 87 cents to $2.68/MMBtu, as prices in the Northeast and Southeast made the largest move higher, according to Inside FERC's Gas Market report Friday. The July bidweek price at the benchmark Henry Hub added 96 cents to average $2.92/MMBtu. That came as the NYMEX July contract settled at $2.917/MMBtu, up 95.4 cents from the June contract's close of $1.963/MMBtu. In the Upper Midwest, Chicago city-gates rose 86 cents to average $2.80/MMBtu. Elsewhere in the region, Consumers Energy and Michigan Consolidated city-gates tacked on 92 and 93 cents to average $2.89/MMBtu and $2.87/MMBtu, respectively. Toward Northeast markets, Transcontinental Gas Pipe Line Zone 6 New York traded higher, adding 86 cents to average $2.39/MMBtu.In New England, Algonquin Gas Transmission city-gates jumped $1.01 to average $3.12/MMBtu. Elsewhere in the region, Tennessee Zone 6 delivered saw an even larger move to the upside, adding $1.06 to average $3.08/MMBtu. Upstream in the Northeast producing regions, Dominion, Appalachia, advanced 59 cents to average $1.98/MMBtu. To the west, prices mostly moved higher as Northwest Pipeline-Rockies averaged $2.52/MMBtu after adding 74 cents. Cheyenne Hub also saw a similar move, adding 75 cents to average the same. Along the West Coast, SoCal gas climbed 95 cents to average $2.85/MMBtu. Elsewhere in the region, El Paso, Permian Basin, prices were up 75 cents to average $2.56/MMBtu.

Record Heat Wiping Out US Gas Glut Fuels Best Rally Since '08 - Rigzone A blistering start to summer is helping put U.S. natural gas futures on course for the biggest gain in eight years. Gas has surged 17 percent this year, rebounding from a 17-year low. Drillers, burned by earlier declines, are refilling storage at half last year’s pace as extreme heat boosts the use of air conditioners, increasing gas demand from power plants. By November, supplies will probably drop below the five-year average, the benchmark for normal levels, for the first time in 13 months, based on storage rates. Just four months ago, gas plunged after the warmest winter on record left the market with a glut large enough to last through the year. Instead, hot weather and a slowdown in shale production are eating into the surplus, signaling an era of higher prices as gas exports rise and electricity generation cuts into excess supply. “We’re moving toward a potentially serious deficit in the supply-demand balance for this coming winter,” said one analyst. Gas inventories were 25 percent above the five-year average in late June, down from 54 percent in April. An extended slide in production would erase the surplus by the end of the year, leaving stockpiles at a deficit to normal levels for the first time since May 2015 and pushing prices to $3 this month.

Natural Gas Prices Tumble After Scoring One-Year High: Natural gas futures experienced a large sell-off on Tuesday, with the commodity losing 7% during the session, making it the worst performing energy commodity of the day, which was saying a lot given the sell-off that the energy sector experienced, as a whole. Tuesday’s sell-off came as all market participants returned from the holiday weekend. Last Friday, before the long weekend, natural gas futures closed at a one-year high after adding 12% to its value over the course of the week. On Tuesday, traders took the fact that the commodity recently soared to such lofty levels, and that MDA weather services forecast cooler weather in the next ten days to sell their positions. However, Tuesday’s reaction was seen as a bit of a knee-jerk reaction. The commodity’s recent strength has been due to hot weather, which has boosted air conditioning use and therefore the demand for natural gas by utilities to generate electricity. Another pressuring factor on Tuesday was the sentiment that US natural gas production is rebounding. According to Platts Analytics, since the start of July US natural gas production has averaged 70.8 billion cubic feet a day, an increase of 350 million cubic feet a day from June’s average. This week, market participants will pay close attention to the US natural gas storage data. Expectations are that the addition will be less than usual for this time of year due to the recent string of hot weather. Natural gas prices are up nearly 50% since late May.

Natural Gas Rebounds from One-Week Low - WSJ: Natural gas prices inched up Wednesday, rebounding from losses just after prices dipped to a one-week low. Natural gas for August delivery settled up 2.2 cents, or 0.8%, at $2.786 a million British thermal units on the New York Mercantile Exchange. It rebounded from losses of 7.5% on Tuesday, which had been the biggest one-day decline since October. That made gas relatively cheap for this time of year, said John Woods, a Nymex trader. Demand often rises in the summer to fuel power plants as people turn up their air conditioners during hot weather. And forecasts for the rest of the summer still show above-normal temperatures. “We’re gonna go right back up again,” Mr. Woods said.   Mr. Woods and some analysts do, however, think the rally has limited potential, maybe capped at around $3/mmBtu. Power generators have been burning more coal in recent weeks as gas prices moved higher. They consumed more natural gas, too, but largely because of unexpected declines in output from nuclear, wind and hydropower units, which analysts had warned might be temporary. Natural-gas demand started July down 7% from the last week of June at 61.6 billion cubic feet a day, according to Platts Analytics, a forecasting and analytics unit of S&P Global Platts. Weather has cooled about 1.5 degrees Fahrenheit in that time, hurting demand for gas-fired electric power to run air conditioners, which fell 12% from the last week of June, Platts said. “The bulls are spooked currently, as the first indications of July demand…were pretty poor,”

Natural Gas Weekly Update (EIA): Overview: (For the Week Ending Wednesday, July 6, 2016)

  • Natural gas spot prices fell at most locations this report week (Wednesday, June 29, to Wednesday, July 6). The Henry Hub spot price ended five weeks of increases, falling by 18¢ from $2.93/MMBtu last Wednesday to $2.75/MMBtu yesterday.
  • At the New York Mercantile Exchange (Nymex), the August 2016 contract also declined, falling from $2.863/MMBtu last Wednesday to $2.786/MMBtu yesterday.
  • Net injections to working gas totaled 39 billion cubic feet (Bcf) for the week ending July 1. Working gas stocks are 3,179 Bcf, which is 20% above the year-ago level and 23% above the five-year (2011-15) average for this week.
  • According to Baker Hughes, for the week ending Friday, July 1, the natural gas rig count declined by 1 to 89. Oil-directed rigs increased by 11 to 341, the largest weekly increase in the rig count since December 2015. The total rig count increased by 10 over the week.
  • The natural gas plant liquids composite price at Mont Belvieu, Texas, rose by 3¢, closing at $5.41/MMBtu for the week ending July 1. The price of natural gasoline fell 2%, but the prices of all of the other natural gas liquids products rose. Propane and isobutane each rose by 1%; and butane and ethane rose by 2%.

Natural Gas Price Bounces Higher After Storage Report - The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks increased by 39 billion cubic feet for the week ending July 1. Analysts were expecting a storage addition in a range of 36 billion to 46 billion cubic feet. The five-year average for the week is an injection of around 77 billion cubic feet, and last year’s storage addition for the week totaled 87 billion cubic feet. Natural gas inventories rose by 37 billion cubic feet in the week ending June 17. Natural gas futures for August delivery traded up about 0.7% in advance of the EIA’s report, at around $2.80 per million BTUs, and they traded near $2.83 after the data release. Natural gas closed at $2.79 per million BTUs on Wednesday, after dropping from $2.99 on Tuesday.  The 52-week range for natural gas is $1.99 to $3.18. One year ago the price for a million BTUs was around $3.04. Cooler weather both earlier this week and forecast into next week east of the Mississippi has weighed heavily on natural gas prices. Tuesday’s price drop was the largest single-day decline in eight months. Warmer weather continues to be forecast for the West and Southwest, raising demand for natural gas across the country to moderate to high levels. Stockpiles are about 20% above their levels of a year ago and more than 23% above the five-year average. The EIA reported that U.S. working stocks of natural gas totaled about 3.179 trillion cubic feet, around 599 billion cubic feet above the five-year average of 2.58 trillion cubic feet and 538 billion cubic feet above last year’s total for the same period. Working gas in storage totaled 2.641 trillion cubic feet for the same period a year ago.

What's Going On? - Supply/Demand Factors Driving Natural Gas Price Volatility  -- June was somewhat of a game-changer for the 2016 U.S. natural gas market. Summer weather finally arrived and U.S. consumption, particularly from power burn, was at record highs, as were exports to Mexico. Meanwhile, production volumes sagged, flattening and even declining versus year-ago levels in recent weeks. The market response to all of this was swift. The CME/NYMEX Henry Hub prompt futures contract ripped nearly $1.00 higher over the last five weeks to flirt with the $3.00/MMBtu mark. In fact, the U.S. natural gas market was behaving downright giddy — a bit like it the oversupply problem was ancient history. That is, until yesterday. On Tuesday the market returned from the long, holiday weekend to higher production, weaker temperature-adjusted demand and the likelihood of higher storage injections than previously expected. The resulting price action led the August contract to whipsaw back down more than 20 cents from Friday to a settle of $2.764. So where do the fundamentals really stand? Today, we provide an update of the supply/demand balance this summer to date, what’s driving the volatility and the potential risks to prices in July trading.

Canadian natural gas exports to US to continue decline: study - - Canada has the potential to continue its role as a net exporter of natural gas to the US through 2037, despite dramatic increases in US production, particularly in the Appalachian Basin, over the past several years, according to a recent study by Canadian Energy Research Institute. However, the Canadian Natural Gas Market Review finds that Canadian exports to the US will continue to decline over the next several years, as gas from the Marcellus Shale finds its way into US markets once supplied by Canada. "The production that's coming out of US gas plays, particularly the shale gas coming out of the Marcellus and Utica, is impacting the export markets," Dinara Millington, CERI vice president of research, said in an interview Wednesday. "The Marcellus is now shipping their gas into markets that were traditionally sourced from western Canadian gas-producing regions," said Millington, one of four authors of the report. "While historically Canada's exports to the United States vastly exceeded its imports from the United States, this gap is shrinking as advances in the US Marcellus Shale bring lower-priced gas onto the market," the CERI study states. "The demand for Canadian gas is shrinking as Marcellus gas displaces it in the market, primarily in eastern Canada." "Millington added that even though the market share held by western Canadian gas has started to fall off, there is still room for Canadian natural gas exports through the end of the study period, which extends to 2037.

Second US LNG cargo heads to Europe, set to reach Spain July 22: sources - A new cargo of US LNG is headed for southwestern Europe, only the second cargo to target the European market since US LNG exports began at the end of February. According to shipping sources and cFlow, Platts trade flow software, the Sestao Knutsen LNG tanker left the Sabine Pass liquefaction facility on Monday and is set to arrive at Spain's Mugardos LNG import terminal at the port of Ferrol on July 22 or earlier. If the cargo is indeed delivered to Spain, it would be the second to land in Europe after the Creole Spirit offloaded at Portugal's Sines terminal at the end of April.A total of 13 US LNG cargoes have been delivered from Sabine Pass since February, with the majority, nine, sent to the South American countries of Brazil, Argentina and Chile. Two cargoes were delivered to the Middle East -- Dubai and Kuwait -- while one went to India. Much industry attention is being focused on how much US LNG will come to Europe given increasing competition for buyers in the oversupplied European market. The fact that Portugal and Spain are the first European countries to import LNG from the US is telling. The Iberian peninsula is considered an "island market" with poor interconnection to the rest of Europe, so the delivery of US LNG into the region is not likely to be seen as a sign that US LNG will take hold in the wider European market. In addition, the biggest suppliers to Europe -- Russia and Norway -- do not supply the Iberian market with their pipeline gas so they are likely to be non-plussed about US LNG headed to southwestern Europe.

Can a new set of buyers reinvigorate the LNG market?  With liquefaction capacity and supply of liquefied natural gas on the rise and LNG demand flat, prices for super-cooled, liquefied gas are low and may well stay low into the early 2020s. That’s a concern for LNG suppliers, who (like all suppliers) would prefer it if demand was soaring and supply was a little tight. There are some rays of hope, though, in what many have seen as a gloomy time for the LNG sector. After all, with spot LNG prices below $5/MMBtu (far lower than they were 30 months ago) and ample supplies of LNG available, a growing list of nations are looking either to become LNG importers or to significantly expand their LNG imports. Today, we continue our review of the LNG market with a look at the new demand that may be spurred by supply surpluses and low prices.

The Shale Boom's New Winner: Propane - WSJ: The U.S. is exporting record volumes of propane, another way in which the shale boom has made the nation a more dominant force in the global energy trade. Foreign sales are surging as U.S. producers capitalize on higher prices overseas. That in turn is causing U.S. prices to rise, making Fourth of July barbecues a bit more expensive than cookouts a few months ago. In a first, U.S. oil-and-gas companies are on track this year to export more propane than the next four largest exporting countries combined-OPEC members Qatar, Saudi Arabia, Algeria and Nigeria, which have long dominated the trade-according to analytics provider IHS. U.S. exports already account for more than a third of the overall market for waterborne shipments, IHS said.  Propane exports hit an all-time high of 884,000 barrels a day in February, according to the U.S. Energy Information Administration. Platts Analytics, an energy data provider, projects that a new record was set in May, for which government data isn't yet available. The exports have been enabled by a new network of pipelines, shipping terminals and tankers that doubled capacity from a year ago. "It's been a major source of investment and one of the big success stories,"  After the shale boom made propane more plentiful, exports became a widely sought solution because it is much easier to bottle and ship than other fuels. About half of all U.S. exports wind up in Latin America, while the rest goes to northwest Europe and Asian markets. In 2013, the U.S. overtook Qatar as the world's top propane shipper.

Petroleum product exports riding high --We are getting into the peak summer driving season and gasoline demand has been hitting all-time highs. You might think that inventories would be drawing down and that the U.S. would need to import more gasoline and gasoline blending components. But not so. U.S. refineries are cranking out the products. Gasoline stocks are up 10% from a year ago—15 million barrels (MMbbl) higher than the top of the five-year range—and last week gasoline inventories made a contra-seasonal move upward, increasing by 1.4 MMbbl.  Net exports for the first quarter were up almost five times the same period in 2015. But what does all this mean for refined product markets in general, and gasoline balances in particular? Today, we examine the state of U.S. petroleum product markets. The upswing in U.S. gasoline demand is nothing new. RBN blogged about it this time last year in King of the Road (Again) and covered issues related to delivering gasoline, diesel and jet fuel to Northeast markets a few weeks back in Move It on Over. In the Energy Information Administration’s (EIA) June 2016 Short-Term Energy Outlook, gasoline consumption this summer was projected to average 9.5 MMb/d, a solid 1.9% higher than the summer of 2015, which was a strong demand season itself.  What really stands out, though, is that even with high domestic demand for gasoline, net U.S. export volumes remain impressive. Figure 1 shows EIA net exports of gasoline (exports less imports of finished motor gasoline and motor gasoline blending components) and net exports of distillates (exports less imports of distillate fuel oil and kerosene-type jet fuel). The graph on the left is the total of net gasoline and distillate exports, showing the huge shift of the U.S. from a net importer of about 1.5 MMb/d in 2006 to a net exporter of about 1.2 MMb/d over the past six months. The graph on the right in Figure 1 focuses on the 2012-16 timeframe and splits net exports into gasoline (green line) and distillates (brown line).

America's "Soaring" Gasoline And Oil Demand Was Just An Illusion: How The EIA Fooled The Algos -- When it comes to "real-time" measurements of crude demand and supply, the data is notoriously bad (and perhaps, according to some, intentionally manipulated). We pointed this out most recently in early March when we that according to IEA data, crude oil production exceeded consumption by an average of 0.9 million barrels per day in 2014 and 2.0 million bpd in 2015. Of this 1 billion barrels which the IEA said was produced but not consumed, some 420 million are said to be stored on land in OECD member countries and another 75 million can be found stored at sea or in transit by tanker somewhere from the oil fields to the refineries. This means that as of this moment, about 550 million "missing barrels" are unaccounted for "apparently produced but not consumed and not visible in the inventory statistics."  However, it is not only data at the annual level that is flawed: monthly, and especially weekly data is just as, if not even more distorted. In fact, as Bloomberg's oil energy analyst Julian Lee asks, "could it be that the U.S. demand that's helped drive a near doubling of oil prices since mid-February was illusory?" Lee is referring to a major discrepancy in DoE reporting which through the Energy Information Administration, produces two sets of U.S. demand data that drive sentiment and influence trading. The first shows monthly figures. They're two months out of date, but they give the most accurate assessment of what's going on in the world's largest oil-consuming country. The second set of numbers come out each Wednesday, giving preliminary estimates for the previous week. For crude markets these weekly figures - though less reliable - are arguably more important, largely because they're bang up to date. As Lee puts it, "It's the discrepancy between the two sets of data that gives cause for concern."He adds that "when taking the weekly figures, it looks like U.S. gasoline demand is soaring. According to those data, it's been on a steady upward path all year, reaching a record high of 9.8 million barrels in the week ending June 17, with the summer driving season barely started." But the latest monthly data, showing the numbers for April, paint a very different picture. They show U.S. gasoline consumption falling between March and April and imply a downward revision of April demand of 260,000 barrels a day, or 2.7 percent, from the preliminary figures.

Cruel summer for U.S. refiners as margins tank | Reuters: Summer driving season is in full swing and American motorists are filling their tanks at a healthy clip, but that is not swelling the profit margins as much as usual at U.S. independent oil refiners such as PBF Energy and Valero Energy Corp.  In April, executives shrugged off the industry’s lousy first quarter as an aberration that would be remedied this summer. “We still are bullish gasoline and bullish octane," PBF CEO Tom Nimbley told investors in an earnings call back then. “The driving season really hasn't hit that hard yet.” Nimbley was right about the surging summer demand. But refiner margins are still being squeezed as gasoline and diesel inventories stubbornly sit well above five-year averages. Summer gasoline demand usually fattens margins for refiners with seasonally high levels for the crack spread, the premium of a barrel of gasoline over a barrel of crude oil. That will not happen this year, said analysts who expect the situation to remain bleak in the weeks ahead unless there are large drawdowns in inventories. Late on Wednesday, the American Petroleum Institute, an industry group, assuaged some of those concerns, reporting a 3.6-million-barrel drawdown in gasoline stocks. Yet inventories remain much higher than they were last year at this time, and analysts have slashed earnings estimates for big U.S. refiners who report second-quarter results in coming weeks. The situation is so dire that U.S. East Coast refineries have been cutting production. Refiners on the East Coast, known as "PADD 1" by the U.S. Energy Department, are typically the first to feel a profit pinch, because their margins tend to be thinner than those of other regions.

With oil price near $50, resilient U.S. shale producers eye new chapter | Reuters: Two years into the worst oil price rout in a generation, large and mid-sized U.S. independent producers are surviving and eyeing growth again as oil nears $50 a barrel, confounding OPEC and Saudi Arabia with their resiliency. That shale giants Hess Corp (HES.N), Apache Corp (APA.N) and more than 25 other companies have beaten back OPEC's attempt to sideline them would have been unthinkable just months ago, when oil plumbed $26 a barrel and collapses were feared. To regain market share, the Organization of the Petroleum Exporting Countries in late 2014 pumped more oil despite growing global oversupply. It aimed to drive prices lower and force higher-cost producers out of the market, with shale oil seen as especially vulnerable. The pain was acute. Industry revenue fell more than 30 percent in 2015 from the previous year, the U.S. drilling rig count dropped by more than 70 percent from when oil was still above $100 per barrel, stock valuations plunged and scores of small producers filed for bankruptcy. But so far no U.S. producer that pumps more than 100,000 barrels per day (bpd) has gone bankrupt. The survival of these big producers partly explains why overall U.S. production has slipped only about 10 percent since peaking at 9.69 million bpd. Their agility - which required slashing costs in half while doubling down on improved techniques to squeeze more oil from each new well - is now allowing the industry to cautiously focus on growth again. But this time, U.S. producers say they will stay focused on capital returns, having abandoned a culture of maximizing production regardless of costs.

Big Oil Could Spark A Renaissance In U.S. Shale - - The collapse of oil prices has killed off any appetite that the oil industry had for megaprojects that cost tens of billions of dollars. With scarce resources, oil companies have shifted their focus, pouring resources into short-cycle projects, which often means shale drilling.  Liam Denning over at Bloomberg Gadfly put some numbers to the phenomenon, using data from Oslo-based Rystad Energy. The data is revealing, painting a portrait of an industry that has scaled down the size of new oil projects. Intriguingly, the focus on smaller oil fields began before the plunge in oil prices, although the price crash is accelerating that trend. Spending on oil fields that hold more than 1 billion barrels of reserves rose by 12.5 percent annually between 2000 and 2014. However, spending on oil fields between 30 million and 1 billion barrels increased by 15 and 16 percent each year. Moreover, spending on these smaller fields will grow by 12.5 percent per year through the rest of the decade, double the rate of investment in the mega oil fields.  There are several reasons that the oil industry have shifted resources into smaller oil plays. One is that there just are not that many massive oil fields left to develop that are not under national control. Also, with so many megaprojects suffering from cost inflation, delays, and technical problems, they are no longer attractive to either oil executives or their shareholders.  Another reason that oil investment has backed out of megaprojects is the rise of shale drilling, which opened up a tidal wave of investment into smaller fields. Low oil prices will likely ensure this trend continues. Arctic drilling is now off the table in most parts of the world aside from a few exceptions; deepwater projects will likely be deferred for several years; and expensive forms of oil such as oil sands will also see investment dry up.

U.S. Oil Industry May Soon Face Rig And Worker Shortages -- Coming on the heels of the last few articles about DUCs (drilled uncompleted wells) another discussion that is beginning to occur between analysts and companies is the shortage of equipment and manpower. Since pricing began to slide in 2014 over 350,000 people have lost their jobs across the United States and around the world from service companies, E&P’s, etc. While these cuts were necessary due to the cuts in CAPEX and D&C budgets. The question is what occurs if pricing and liquidity in the commodities market opens up allowing for E&P’s to begin drilling and completing wells again? According to the IEA’s outlook oil market is set to balance in second half of 2016 begging the question of whether this shortage will occur sooner rather than later. By using DrillingInfo’s rig analytics and DUC monitor we overlayed strip pricing by month to see how the number of DUC’s compares to that of pricing. The question that remains is what pricing will it take to begin completing these DUCs; strip or hedged? Through price swings up and down, the general trend is that as things pick up more field workers are hired and crews get back to work. There is some lag time as equipment needs to be fixed and prepared to get back to work and workers need to be retrained on equipment. This shortage creates a small price pop due to increased demand of services and a shortage of equipment and people that generally fixes itself over a relatively short time frame. A price rebound today might be different than those of past; the main reason DUCs. The number of DUCs around the country is topping 3,304 (as of 6/12/2016; taking into account a 6 month time lag in accurate reporting) across multiple basins and hundreds of operators as seen in the figure below. While there is enough HP in the market currently to serve the wells that are being completed what will occur when operators begin completing DUCs and drilling at the same time?

Revving Up Oil Fields Won’t Be So Easily Done - WSJ: Oil-field-services companies are depleted after slashing prices and laying off workers, and their slow recovery could crimp the energy industry’s overall ability to bounce back from the oil bust. The workhorses of the energy sector, the services companies, which range from giants, such as Schlumberger, to small family-run operations, provide much of the muscle and specialty know-how needed to extract oil and gas. They pioneered the technologies that allowed producers to unlock massive volumes of oil and gas trapped in shale-rock formations, and marshal critical equipment and people to drill and pump wells from remote corners of North Dakota to platforms miles offshore.  But they have borne the brunt of two years of belt-tightening in the oil patch, leaving them short on cash and manpower as prices slowly rebound and companies need them again to increase production. IHS Energy estimates that nearly 70% of fracking equipment in the U.S. has been idled, and 60% of field workers involved in fracking have been laid off. Roe Patterson, chief executive of Fort Worth, Texas-based Basic Energy Services Inc., which fracks wells in the Permian basin and other shale formations, said shortages of experienced workers could hamstring a recovery in its early days. Many of the thousands laid off have found other jobs, and the best will have to be lured back with higher wages that companies can ill-afford, he said. “It’s scary to think what a drag and what a headwind finding experienced labor is going to be this time around,” Mr. Patterson said, adding that while his fracking fleet is still in good shape, a lot of equipment isn’t. “Pop the hood on your car and let it sit for a year. I guarantee the car won’t be in the same condition.” Larger and better-financed oil-field-services companies were better positioned to weather the drop in business and are now poised grab market share from smaller competitors that had to make deeper cuts, analysts said..  Halliburton has laid off more than 28,500 workers—one third of its labor force. But the company has been careful to hold on to employees with specialized skills.

US holds more oil reserves than Saudi Arabia, Venezuela, new study shows - The US holds the world's biggest recoverable reserves of oil putting it ahead of OPEC giants Saudi Arabia and Venezuela as well as Russia, according to an independent study by Norwegian research group Rystad Energy. In estimates which include potential reserves in recent discoveries and in yet to be discovered fields, US reserves total 264 billion barrels, ahead of 256 billion barrels in Russia and 212 billion barrels in Saudi Arabia. For the US, more than half of the remaining oil reserves are made up of unconventional shale oil with Texas alone holding over 60 billion barrels of shale oil, Rystad said Monday citing the new data. Under a more conservative measure based on proven and probable reserves in existing fields, however, the US holds 40 billion barrels of oil, well below Saudi Arabia's 120 billion barrels but almost double Venezuela's 22 billion barrels, the Rystad figures show. Rystad differentiates its estimates from those such as BP's closely-watched Statistic Review, which are based on reporting from national authorities often using an "opaque" set of reporting standards. Some OPEC countries like Venezuela, for example, report official reserves apparently including yet undiscovered oil, Rystad noted, while others like China and Brazil report conservative estimates based only on existing fields. Rystad's own figures include just crude and condensate, whereas BP's figures also include natural gas liquids.

US oil reserves surpass those of Saudi Arabia and Russia -  The US holds more oil reserves than Saudi Arabia and Russia, the first time it has surpassed those held by the world’s biggest exporting nations, according to a new study.   Rystad Energy estimates recoverable oil in the US from existing fields, discoveries and yet undiscovered areas amounts to 264bn barrels. The figure surpasses Saudi Arabia’s 212bn and Russia’s 256bn in reserves.  The analysis of 60,000 fields worldwide, conducted over a three-year period by the Oslo-based group, shows total global oil reserves at 2.1tn barrels. This is 70 times the current production rate of about 30bn barrels of crude oil a year, Rystad Energy said on Monday.   Recoverable reserves — those barrels that are technologically and economically feasible to extract — are analysed by the energy industry to determine company valuations and the long-term health of an oil-producing nation’s economy.  Conventional oil producers, such as Saudi Arabia, have traditionally used their huge resource riches to wield power globally, particularly among big consumer countries such as the US.  This relationship has been disrupted in recent years by hydraulic fracturing and other new technologies that have helped the US unlock vast reserves and enabled it to become more energy independent. “Three years ago the US was behind Russia, Canada and Saudi Arabia.”  More than half of the US’s remaining oil reserves are in unconventional shale oil, Rystad Energy data show. Texas alone holds more than 60bn barrels of shale oil.   Other global oil reserves data, like the closely watched BP Statistical Review that is based on official reporting from national authorities, show the US still ranks behind countries such as Saudi Arabia, Russia, Canada, Iraq, Venezuela and Kuwait.

Report: US is now world’s largest oil reserve but global supply still small - The United States has surpassed Saudi Arabia and Russia as the global leader in oil reserves, according to a report by a Norwegian consultancy firm. “We have done this benchmarking every year, and this is the first year we’ve seen that the US is above Saudi Arabia and Russia,” Per Magnus Nysveen, head of analysis at Rystad Energy, said. He credited the rise to a sharp increase in the number of discoveries in the Permian basin in Texas over the past two years. The report found that many, especially members of the Organization of Petroleum Exporting Countries, exaggerated the size of their reserves in self-reported surveys. Rystad Energy came to the conclusion by only recording each country’s economically viable reserves. Rystad found that the US had 264bn barrels of oil in reserve, ahead of Russia at 256bn barrels and Saudi Arabia at 212bin barrels. The study also painted a grim picture for the future of oil globally. A press release accompanying the findings said, at the current rate of production oil supplies will only last 70 more years, while the number of cars will double in the next 30 years. With this in mind, the release added, “it becomes very clear oil alone cannot satisfy the growing need for individual transport”. American oil reserves have grown dramatically in the past two years due to improvements in technology for extracting shale. Increased productivity has cut the cost of extracting oil in half in the past two years, when compared to the price per barrel.

240 years of US energy use -- With the 4th of July weekend about to begin, the US Energy Information Administration decided to look back to our nation's founding. So it plotted the country's energy use starting from 1776. Most of the result isn't a surprise: biomass had a long run before fossil fuels took over and stayed on top. But recent years have seen the biggest change since nuclear was added to the mix. Biomass spent nearly a century on top of the US energy mix before being displaced by coal, although it never went above providing four quadrillion Btus (each Btu is a bit over 1,000 Joules). But biomass never entirely went away, and its resurgence this century puts it at its highest level ever. With nuclear holding steady and renewables surging to nearly the same level as hydropower, fossil fuels are on the verge of dropping below 80 percent of the US' energy mix.  Fossil fuels haven't been that low a percentage for over a century.  Biomass' comeback is mirrored by the decline of coal. Coal was the US' dominant form of energy for roughly 75 years, until the rise of automobiles allowed petroleum to displace it. It saw another surge as the electric grid expanded starting in the 1960s, and coal's percentage of the mix continued to grow even as nuclear power expanded dramatically. But in the last few years, coal has dropped dramatically, in part due to a huge rise in the use of natural gas. The EIA also includes projections out to 2040, but these tend to be of limited utility, as they assume no additional energy policies will be enacted.

Oil Demand Might Peak By 2030 -- McKinsey -- July 6, 2016 - These are the highlights of a recent McKinsey study as reported by the Oil & Gas Journal:

  • The energy demand growth rate worldwide will slow to 0.7%/year through 2050—30% slower than the firm originally forecast. Energy demand will grow in emerging and developing countries and decline in Europe and North America.
  • Chemicals will grow twice as fast as energy demand while demand for light vehicles peaks around 2023.
  • Demand for electricity will grow at twice the rate of nonelectric energy. Solar and wind will account for almost 80% of net added capacity and 34% of generation by 2050.
  • The fossil-fuel share of total energy will decline to 74% in 2050 from 82% at present. Gas will grow at almost twice the rate of total energy demand, while coal peaks by 2025. Oil demand growth will slow to 0.4%/year.
  • Carbon dioxide emissions related to energy will flatten and start to subside about 2035 as efficiency of combustion engines improves, electric vehicles increase in number, and power generation shifts to wind and solar.
  • Through 2035, the analysts say, 70% of growth in demand for liquid hydrocarbons will be for petrochemical feedstock.

Alberta oil sands producers will eye new projects at $55-$60/b WTI: execs - Investments in additional oil sands production capacity in Alberta will be boosted with a WTI price hovering between $55/b and $60/b even as producers spare no effort to reduce their capital costs, executives said Wednesday. "It is still tough out there, but in the past year we have dropped operating and capital costs by 17% and 30%, respectively, with our focus still being on consolidation and optimization," Lyle Stevens, Canadian Natural Resources executive vice president, told the 2016 TD Securities Energy Calgary Conference. CNR is adding 23,000 b/d of oil equivalent of heavy and light oil output in Western Canada over the coming six months at a cost of C$17,000 ($13,120)/flowing barrel and is also three months away from adding 45,000 b/d of bitumen output at its Horizon facility in northern Alberta, he said. Flowing barrel costs include construction costs and sustaining capital and operating expenditure."We're feeling a lot better this year than last year and have also been successful in cutting costs by 40% primarily due to the application of new technologies and deflation in the service sector," Harbir Chhina, executive vice president of oil sands development with Cenovus Energy, told attendees of the same event. Cenovus will restart three projects that were put on the backburner last year due to low oil prices. But the company would seek "price sustainability" before taking a final investment decision, Chhina said.

How a Quebec island became the centre of a debate over oil and gas exploration - Montreal - CBC -- Plans to drill for oil and gas on an island in the Gulf of St. Lawrence has made Premier Philippe Couillard the target of environmentalists, with one group calling his decision to go ahead with the project "illogical and unacceptable." Couillard has repeatedly said he's bound by an agreement signed by the previous Parti Québécois government to allow for testing in Anticosti, a rocky, 200-kilometre stretch of land known for its salmon fishing. The deal with Quebec City-based Petrolia Inc. was inked shortly before the 2014 election.   "The contract is there. We have to follow it," Couillard said Tuesday at a news conference in Montreal. "It doesn't mean that we're happy. We're going to protect that unique ecosystem, I can tell you that."  The exploratory drilling involves fracking, a controversial practice where a mixture is pumped deep underground in order to crack rocks and release natural gas, which risks affecting the water table. In a statement, Petrolia said Wednesday it's committed to working with Anticosti residents and being completely transparent about its plans.  The province's Environment Ministry confirmed this week that Petrolia will be allowed to draw a total of 30 million litres of water at three testing sites.

Chevron Approves $37 Billion Expansion of Kazakh Oil Field - — Bucking the trend of conserving cash at a time of low oil prices, the American oil giant Chevron said on Tuesday that it would go ahead with a $37 billion expansion of a gargantuan oil field on the Caspian Sea in Kazakhstan.Giving the green light to such an expensive project, called Tengiz, looks on the face of it to be an unusual move, but analysts say the field has been lucrative and important for Chevron and its partners, who include Exxon Mobil.Tengiz, which began producing oil in 1993, has been Chevron’s star, earning the company as much as $50 a barrel when prices were more than $100 a barrel, estimates Iain Reid, a London-based oil analyst at Macquarie, an investment bank. Prices were about $46 a barrel as of midday Tuesday.In a telephone interview, Todd Levy, a Chevron regional president, said that the company believed that, contrary to conventional wisdom, now “is a good time in the industry to proceed.” Chevron figures it can obtain low prices from suppliers, who might otherwise be idle.In recent years Chevron has invested heavily in big undertakings like the $54 billion Gorgon liquefied natural gas project off Australia, but lower oil and gas prices have left Chevron and other companies with costs that are too high in comparison to current revenue.AdvertisementContinue reading the main story In April, Chevron reported a $725 million loss for the first quarter of 2016, in contrast to a $2.6 billion profit in the same period a year earlier.The company also had little choice but to move forward in Kazakhstan, which has become a cornerstone of its business. The company, which is based in San Ramon, Calif., obtains about one-sixth of its global oil production from Kazakhstan.

Petrobras' Indian Partners Fight Delay In Troubled Brazil Oil Project - Rigzone  - Petrobras has warned its Indian partners in a huge offshore project to not expect oil from the site until 2022, a fresh sign of how low oil prices and the state-owned company's corruption scandal and mountain of debt are dragging on Brazil's energy industry. The previously unreported, four-year delay in the "super-giant" discovery off the northeastern coast of the Brazilian state of Sergipe is forcing India's Oil and Natural Gas Corp and IBV Brasil Petroleo Ltd to seek ways to speed up the Petrobras-led project which has cost them $2.1 billion with no return in sight. The delay and pressure from the Indian partners is just one of many challenges for new Petrobras Chief Executive Pedro Parente, named by Brazil's interim-President Michel Temer in late May amid an ongoing financial crisis. In the face of a massive bribery and kickback scandal and Petrobras' $126 billion of debt, Parente has pledged to run the company in a more market-friendly way but has declined to comment on individual projects. He has also promised a revamped investment plan by the end of October - though it is unclear whether it will address the Sergipe offshore standoff. In April, Petrobras told IBV, a 50-50 joint venture between state-owned Bharat Petroleum Corp and privately held Videocon Industries Inc, that there will be no oil output from Sergipe "until at least 2022," an IBV executive told Reuters. A year ago, Petrobras' promised first oil by 2018.

Key Oil Upside Catalyst Gone, As Niger Delta Avengers Twitter Account Suspended -- Over a month ago we declared, somewhat tongue-in-cheek, that the group that "holds the price of oil in their hands" is the quixotic, and formerly completely unknown Nigerian militant group the Niger Delta Avengers, or NDA, whose generous source of funding remains to this day unknown (although one can make some very astute assumptions as to who would benefit from the price of oil rising as a result of relentless supply disruptions). Then, just last week, in the aftermath of the NDA going rather quiet, Goldman once again chimed in, this time predicting that the recently signed "tentative" ceasefire between the Nigerian government and the NDA could lead to downside risk to the bank's $50 target: If sustainable, this ceasefire would pave the way for higher output, with the government optimistically aiming for a return to normal production by end-July. A normalization in production, even over several more months, would create downside risk to our $50/bbl 2H16 price forecast as it would bring the global oil market close to balance over that time period. This Day later reported that "the relative peace that attended the federal government’s offer of dialogue-for-peace initiative to the militant group in the Niger Delta, the Niger Delta Avengers (NDA), snapped at the weekend as the group resumed hostilities breaching major crude oil pipelines in parts of Delta State. The militant group yesterday said it had bombed Chevron’s two major oil wells 7 and 8 close to Abiteye flow station in Warri South West Local Government Area of the state." None of this was unexpected, and has been in fitting with the NDA's modus operandi to date. Yet, a big surprise emerged just a few hours ago, when Twitter did something it has not done before: it suspended the (unconfirmed) account of the Niger Delta Avengers: What is very surprising about this move is that Twitter had no problem with the NDA's account for the past 2 months when the militants were announcing the destructive exploits on Twitter, often without official confirmation, and often resulting in spikes in crude oil (as their tweets would be without fail indicative of further Nigerian oil infrastructure damage). And yet, something changed in the past week, just days after Goldman created a narrative in which the NDA would no longer be an upside price catalyst and, if anything, lead to the unwind of the "production disruption" trade. Why do it now? According to Bloomberg, Twitter’s press office didn’t immediately reply to an email seeking comment, however we will be very curious to see the official explanation as to who may have complained about the NDA's account, and just who is no longer axed in a way to benefit from further NDA-induced oil upside.

African Energy Outlook: Fresh attacks cast doubt on Niger Delta oil recovery --Barely 10 days after a 30-day ceasefire deal with the Nigerian government, militants claimed a round of fresh attacks in the country's Niger Delta over the weekend of July 2-3, marking a major setback after weeks of respite that allowed Nigeria's oil output to rebound. Nigerian oil rebel group Niger Delta Avengers said on July 3 its fighters carried out five separate attacks on oil pipelines operated by state-owned Nigerian Petroleum Development Co. and US firm Chevron over July 2-3. The group said its fighters had earlier on July 2 bombed two NPDC major crude oil trunk lines close to Batan flow station in southern Delta state, and also blew up a trunk line owned by state energy firm Nigerian National Petroleum Corp. that transports crude to the 125,000 b/d Warri refinery. However, by the midday July 4, the group's Twitter account had been suspended, and there were no reports of these attacks on the group's website. The attacks represents a major blow to peace and stability in the oil rich region, after the government and the militants agreed to a 30-day truce almost two weeks ago, allowing President Muhammadu Buhari's administration more time to come up with a comprehensive plan to tackle militancy in the Niger Delta. When the news of ceasefire was announced, however, the Niger Delta Avengers appeared to deny that it was part of such a truce. There was no immediate comment from Chevron, which had seen its facilities the most attacked in the recent waves of violence launched by the militant group. A NNPC spokesman said that a team of engineers had been dispatched to investigate the incident. But a spokesman for the ethnic Ijaw Youth Council Udengs Eradiri on July 4 confirmed the attacks, which he said was due to the breakdown of the talks between the government and the rebel group.

Nigerian oil militants claim attack on Agip pipeline (AP) — Nigerian oil militants say they have blown up a crude oil pipeline belonging to Italian oil company Agip in Bayelsa state. The Niger Delta Avengers made the claim on their website Friday. Such attacks targeting the oil industry in the Niger Delta have caused Nigeria to lose its position as Africa’s largest oil producer. Desmond Agu, Bayelsa state commandant of the Nigerian Security and Civil Defense Corps, said his colleagues exchanged gunfire with heavily armed youth in two speedboats who attacked the pipeline early Friday. The Tebidaba-Brass pipeline is the major pipeline leading to the Agip Brass crude oil terminal with a carrying capacity of 3.2 million barrels. Agip has not commented on the attack. The militants say they want a greater share of Nigeria’s oil wealth for local communities.

Things just got a lot 'messier' for Africa's largest oil producer -- Angola announced last week that it wanted to discontinue talks with the International Monetary Fund about getting a loan.  Africa's largest oil producer had first turned to the Washington-based lender back in April amid ongoing stresses from lower oil prices.   The decision to abandon the talks has folks worrying about possible negative effects in the struggling oil producer's economy.  "The Angolan government's decision to discontinue talks with the IMF on a potential loan increases risks to the sovereign's external financial position if no other sources of external funding are available," a statement by Fitch Ratings said.   "We've long held a below-consensus view on Angola, but Luanda's decision to abandon an IMF bailout has increased the risk of a messier crisis," "A recession and accompanying debt crisis are now possible," he continued, noting that his team estimated that the country's account deficit would be about 12% of gross domestic product in 2016.   Angola is one of many oil producers to struggle over the past year and a half. The country relied on oil for about 70% of government revenues and 97% of its export revenue in 2014; lower prices therefore were not exactly a welcome surprise.  Over the past year, Angola's currency has lost about 35% of its value against the dollar, foreign-exchange reserves have declined to about $22 billion from $32 billion, and the government has imposed new currency controls, which have only helped to drive up the cost of key imports, as RBC Capital Markets' Helima Croft previously observed. Plus, inflation hit 29.2% in May — the highest level since January 2005.  So without getting a loan from either the IMF or Beijing, it will be difficult for authorities in the country to be able to do much to tackle the problem.

Why oil is still headed as low as $10 a barrel - A. Gary Shilling – I’m sticking to my call for prices to decline anew to $10 to $20 per barrel. Recent gains have little to do with the fundamentals that led to the collapse in the first place. Wildfires in the oil-sands region in Canada, output cuts in Nigeria and Venezuela due to political unrest, and hopes that American hydraulic fracturing would run out of steam are the primary causes of the recent spurt. But the world continues to be awash in crude, and American frackers have replaced OPEC as the world’s swing producers. The once-feared oil cartel is, to my mind, pretty much finished as an effective price enforcer. Even OPEC’s leader, Saudi Arabia, is acknowledging the new reality by quashing recent attempts to freeze output, borrowing from banks and preparing to sell a stake in its Aramco oil company as it tries to find new sources of non-oil revenue. The Saudis and their Persian Gulf allies continue to play a desperate game of chicken with other major oil producers. Cartels exist to keep prices above equilibrium, which encourages cheating as cartel members exceed their allotted output and other producers take advantage of inflated prices. So the role of the cartel leader, in this case Saudi Arabia, is to cut its own output, neutralizing the cheaters to keep prices up. But the Saudis suffered market-share losses from their previous production cuts. OPEC has effectively abandoned restraints, with total output soaring to as high as 33 million barrels per day at the end of last year: Iran, freed of Western sanctions, plans to double output to 6 million barrels a day by 2020, which would make it the second-largest OPEC producer behind Saudi Arabia. Russia continues pumping to support its economy after the collapse in oil prices devastated government revenue and export earnings. War-torn Libya is also ramping up production as best it can.

Oil Dragged Lower By Crashing Gasoline Futures | Crude prices are again coming under downward pressure as economic concerns swirl and uncertainty swells. That said, dollar strength was much more apparent earlier in the day; as the dollar eases from its highs, oil is paring its losses – ahead of weekly inventory data tomorrow, and Nonfarm Friday the day after.  As we zoom past the 4th July holiday, with a record number of people hopping in their cars and putting the pedal to the metal, realization has dawned that we are in the midst of a gasoline glut, regardless of what demand is doing. As as we reach the peak demand plateau of the summer driving season, gasoline prices recently have been getting a good ole fashioned drubbin’. We highlighted on our Twitter account last week that a number of gasoline cargoes (such as the Torm Neches – see image) are being diverted away from the U.S. East Coast, while we also highlighted on CNBC how we are seeing vessels anchored outside of New York Harbor. These views have been affirmed elsewhere in recent days.  The fundamental weakness in gasoline markets is being exemplified by the Rbob crack spread, which is closing in on levels which could encourage refiners to dial back on runs. In fact, already starting to see signs of this; Delta has cut production rates by ~16 percent at its Trainer refinery – likely given the drop in refining margins. As the chart below illustrates, the 1st month Rbob crack spread has been dropping since April, whereas last year it gradually increased through the peak summer demand period. We find ourselves dropping below $15/bbl, now less than half the profitability seen at this time last year:

OilPrice Intelligence Report: Crude Crashes On Global Economic Woes --Oil prices fell sharply on Tuesday, down more than 4 percent as the U.S. rig count shot up at the end of last week. Ongoing fears about economic turmoil in Europe are also weighing on WTI and Brent. An assessment from Genscape also predicted that oil inventories increased in Cushing, a bearish sign that excess supply remains. $50 oil remains elusive once again, after a brief period of time above that threshold in June. U.S. has more oil reserves than Saudi Arabia. A new assessment from Oslo-based Rystad Energy finds that the United States has the world’s largest oil reserves, not Saudi Arabia or Venezuela. The U.S. is sitting on an estimated 264 billion barrels of reserves, compared to Russia’s 256 billion barrels, and Saudi Arabia’s 212 billion barrels. More than half of the U.S. reserves are located in shale. Venezuela is commonly thought to have the world’s largest reserves, but Rystad says that much of that is not discovered. Venezuela pays bond holders as country falls apart. Venezuela’s economy is melting down, but the government has prioritized meeting bond payments even as food riots spread across the country and medical supplies and other basic items run dangerously low. Bloomberg notes that in the recent past, other countries have defaulted on bond payments long before the crisis has blown up to the extent it has in Venezuela. The situation is curious, especially for a socialist government. But a much bigger test looms later this year when larger debt payments fall due. Between the sovereign and the state-owned PDVSA, a combined $5.8 billion in debt payments will fall due in the second half of 2016. As Barclays noted in a recent research note, there are very large downside risks to Venezuela’s oil production – with several hundred thousand barrels per day of output at stake.

Crude Crashes Most In 9 Months -- WTI Crude is down over 5% to $46.50 - its biggest daily drop since early September 2015... With East Coast gas inventories at a record high... Sparking selling in crude.. Crude dropped with equities on a gloomy outlook for the global economy and amid signs that oil stockpiles remain ample. Nigerian oil output rose last month following repairs to infrastructure that had been damaged by militant attacks, a Bloomberg survey showed, while gasoline supplies on the U.S. East Coast reached a record, the government said. Gasoline futures dropped to the lowest price in more than two months. "The path of least resistance is lower," said Michael Wittner, the New York-based head of oil-market research at Societe Generale SA. "The long-term picture remains bullish but in the short-term, crude is coming back from the disruptions. We have a lot of crude to work off as well."

Oil ends down nearly 5 pct on Brexit worry, supply builds | Reuters: Oil prices tumbled nearly 5 percent on Tuesday as investors worried that Britain's exit from the European Union would slow the global economy, making it unlikely energy demand will grow enough to absorb a supply glut. Brexit worries hit Britain's property market and drove the pound to a 31-year low. A flurry of data from China in coming weeks is likely to show weaker trade and investments. Traders also cited data from market intelligence firm Genscape showing a build of 230,025 barrels at the Cushing, Oklahoma storage hub for U.S. crude futures, during the week to July 1. "There are risk-off trades across the board," said David Thompson, executive vice-president at Washington-based commodities broker Powerhouse. "Stocks, commodities, sterling are all off while U.S. bonds and T-bills are soaring." Brent futures settled down $2.14, or 4.3 percent, at $47.96 a barrel while U.S. crude fell $2.39, or 4.9 percent, to end at $46.60. Oil prices are up almost 80 percent from 12-year lows of around $27 for Brent and $26 for U.S. crude in the first quarter. The rebound was fueled by supply outages from Canada to Nigeria that created the perception that a two-year-old supply glut may be easing.

Oil Prices Lower; Oversupply Concerns Linger - Crude-oil prices headed south in early Asia trade Tuesday as more supply from Nigeria and Libya is likely to return online, which would slow down the pace of a rebalance in a well-supplied market. Trading volume is expected to be thin as U.S. markets were closed Monday for Independence Day. Global oil prices got a boost on Monday after Saudi Arabia's Energy Minister Khalid al-Falih said oil prices are starting to settle around current levels, as the market is starting to find a new balance between supply and demand. The upbeat sentiment is echoed by U.S. Energy Secretary Ernest Moniz, who said last week that the markets would be balanced by next year. The downtrend in U.S. domestic crude production has been an integral catalyst in pulling prices out of the 13-year low back in February. But analysts worry the pace of the rebalance could be hindered as some supply disruptions around the world are showing signs of ending. In Nigeria, despite months of militant attacks on the country's oil facilities, the country's output rose last month. In Libya, rival oil companies have finalized a deal to merge, a development that removed a key obstacle to the unification of a conflict-torn country. The merger could mean reopening of ports in the east and fields in the Sahara. "This could see Libya's output double to 700,000 barrels a day if the agreement progresses smoothly," said Stuart Ive, a client manager at OM Financial.

Oil rises in post-settlement trade after API report: Oil rose in post-settlement trade after a report that U.S. crude oil stocks fell. Crude inventories fell by 6.7 million barrels in the week to July 1 to 520.9 million, compared with analysts' expectations for a decrease of 2.3 million barrels. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 80,000 barrels, American Petroleum Institute said. U.S. crude was last up $1.17, or 2.53 percent, at $47.78, after it settled at $47.43 a barrel, up 1.78 percent, or 83 cents. The contract fell 5 percent to end at $46.60 on Tuesday. Global benchmark Brent futures were up 76 cents at $48.72 a barrel after a 4.1-percent drop on Tuesday. Before the report, oil prices had risen after a two-day decline lured buyers back, although analysts cautioned the market will likely remain under pressure from a U.S. gasoline glut and economic worries over Britain's exit from the European Union. Gasoline futures were up a quarter of a percent after hitting a 3-month low. Profit for turning crude oil into gasoline, known as the gasoline "crack," fell to a February bottom below $13 a barrel as oversupply in the motor fuel forced U.S. refiners to cut output.  Vessels carrying gasoline-making components could not unload at New York Harbor this week due to a glut.

Oil Spikes After Biggest Inventory Draw In 13 Months -- After six straight weeks of drawdowns and against expectations of a 2.5mm barrel build, API reported a massive 6.736mm barrel drawdown - the biggest since June 2015. Distillates and Gasoline also saw major draws.  The result - unsurprisngly - is a surge in crude, extending the day's gains, even though Cushing saw a modest 80k build. API

  • Crude -6.736mm (-2.5mm exp)
  • Cushing +80k
  • Gasoline -3.603mm
  • Distillates -2.305mm

This is the biggest drawdown since June 2015 and 2nd biggest since July 2014...

Crude Tumbles As Inventory Draw Disappoints Despite Production Plunge - Following last night's larger-than-expected API-reported biggest drawdown in 13 months, DOE reported a mere 2.2mm draw (well below API's 6.7mm draw and expectations of a 2.5mm draw). Perhaps even bigger was the very small 122k draw in gasoline stocks compared to API's 3.6mm draw and WTI is tumbling in reaction. However, crude production plunged by 2.25% last week - the biggest drop since Sept 2013. DOE:

  • Crude -2.223mm (-2.5mm exp)
  • Cushing -82k
  • Gasoline -122k
  • Distillates -1.57mm

The breakdown by region, in which it is notable that PADD 3 crude imports rose to 3.86m b/d last wk, highest since Dec. 11 as total U.S. imports of crude 8363k b/d vs 7555k.

  • PADD 1 837k b/d vs 764k
  • PADD 2 2037k b/d vs 2138k
  • PADD 3 3858k b/d vs 3072k
  • PADD 4 305k b/d vs 299k
  • PADD 5 1324k b/d vs 1282k

Canad imports dropped as imports from most other regions jumped.

  • Canada imports 2618k b/d vs 3037k
  • Saudi Arabia 990k b/d vs 738k
  • Venezuela 670k b/d vs 702k
  • Mexico 803k b/d vs 613k
  • Colombia 738k b/d vs 578k

This is the 7th weekly draw in a row but notably below API... Additionally, Gulf coast gasoline inventory up 1.8 million, east coast down 600k

Oil products fill storage tanks and cast doubt over crude demand | Reuters: The levels of diesel, gasoline and heating oil in storage tanks in Europe this week are so high they are causing delivery backlogs and are casting doubt on whether demand for oil to be refined can be sustained. High levels of oil product stocks have plagued the market for months but the increase seen this week in Europe has come despite a series of factors that should be reducing gasoline and distillate inventories. French refineries have been hit by strikes over the past few weeks causing shutdowns, it has become unprofitable to ship diesel to Europe from the United States and demand typically climbs in the summer months as holidaymakers take to their cars. However, PJK International, a Dutch consultancy that tracks independent storage in Amsterdam-Rotterdam-Antwerp (ARA) hub, said gasoil stocks rose by more than 4 percent this week. Industry monitor Genscape also recorded a nearly 4 percent rise this week, putting all ARA gasoil stocks at 6 million tonnes, or 34 percent above the level this time last year. Genscape's data put stocks of gasoline, naphtha and blending components at 2.9 million tones, or a 2 percent rise this week. "There is so much stock in the system," Steve Sawyer, head of refining at FGE Energy, said. "We had almost 600,000 barrels per day of refining capacity out in France and margins barely moved." Strikes across France in May crippled its energy sector, shutting half its refineries. At least two, Total's Donges and Gonfreville, were still getting back to full capacity this week, according to Genscape. Yet storage tanks for diesel and heating oil are already so full in Germany, Europe's largest diesel consumer, that barges looking to discharge their oil product cargoes along the Rhine are being delayed, sources told Reuters. "Inland inventories are quite full," PJK International analyst Patrick Kulsen said, adding there is "no tankage left".

Oil prices skid as traders worry there's a fuel glut  (AP) — Oil prices fell nearly 5 percent on Thursday after a government report on fuel stocks reinforced worries about an oil glut. The report said that crude inventories are declining at a slower pace than expected. Stockpiles of oil and gasoline remain high, even though people drive more during the summer. A country awash in fuel has stalled an oil-price rally that began in February. The Energy Information Administration said Thursday that inventories fell by 2.2 million barrels to 524.4 million barrels last week. S&P Global Platts had forecast a decline of 2.6 million barrels, while the American Petroleum Institute estimated a drop of 6.7 million barrels. Gasoline stockpiles also declined by less than Platts expected. They had risen the week before, pointing to production that is outpacing even the stronger demand for gas in summer. Benchmark U.S. crude slid $2.29, or 4.8 percent, to settle at $45.14 on the New York Mercantile Exchange. Brent crude, the international price, fell $2.40, or 4.9 percent, to $46.40 a barrel. Oil prices skidded to a 13-year low in February but have since rebounded by more than 70 percent. There are fewer new wells coming into service. That means overall production is likely to continue falling, but only gradually. That is likely to push prices higher. Producers in U.S. shale formations from Texas to the Northeast have reduced output, and pumping has been interrupted in some foreign fields. The American Petroleum Institute estimated that in the second quarter, the number of completed U.S. oil wells — those that drillers had finished making and were ready to produce oil or gas — plunged by 69 percent in the second quarter compared with a year earlier. That’s a sign that domestic production is likely to continue slipping.

"PADD 1 Is A Holy Mess" - Is This What Finally Drags Crude Oil Lower -- Several months ago we reported that the next big threat to oil prices had nothing to do with oil fundamentals, either lack of demand or excess supply, or technicals, i.e., algo buying or selling, and everything to do with the upcoming glut of the most important crude byproduct: gasoline. Sure enough, now that summer is here, this prediction is playing out just as expected and as Reuters reports, summer driving season is in full swing and American motorists are filling their tanks at a healthy clip, but that is not swelling the profit margins as much as usual at U.S. independent oil refiners such as PBF Energy and Valero Energy Corp. How come?  As it turns out, the optimism that refiners had in the spring that the gasoline excess would clear out has not materialized. During the first quarter earning season, refining executives shrugged off the industry’s lousy earning as an aberration that would be remedied this summer. “We still are bullish gasoline and bullish octane," PBF CEO Tom Nimbley told investors in an earnings call back then. “The driving season really hasn't hit that hard yet.” It has now, and while Nimbley was right about the surging summer demand, refiner margins are still being squeezed as gasoline and diesel inventories stubbornly sit well above five-year averages. Nowhere is the situation more dire than the US East Coast, where refineries have been forced to cut production, just as we forecast several months ago they would have to as the relentless supply in crude did not balance out the demand for refined product. As Reuters points out, refiners on the East Coast, also known as "PADD 1" by the U.S. Energy Department, are typically the first to feel a profit pinch, because their margins tend to be thinner than those of other regions. “PADD 1 is a holy mess,” said Andrew Lebow, senior partner at Commodity Research Group in Darien, Connecticut. “It is very unusual. If a market becomes extremely oversupplied, like PADD 1, they are going to have to cut runs.” That is another way of saying refiners will have to stay shut, which in turn will force crude to  build up in various on and offshore storage locations.

OilPrice Intelligence Report: Demand Concerns See Oil Fall To 2 Month Lows: Oil prices touched two-month lows on Thursday, with WTI falling to around $45 per barrel. The catalyst for the large sell off this week was a much weaker than expected draw on U.S. oil inventories. Industry estimates called for a drawdown of roughly 6 million barrels but the EIA revealed a weaker 2.2 million barrel reduction, disappointing oil traders. Meanwhile, gasoline stocks, still at elevated levels, barely budged. Coming on the heels of a downward revision for U.S. gasoline demand from the EIA for April, the demand side picture does not look quite as good as once thought. WTI and Brent were heading for a weekly loss of around 7 percent this week, but edged up in the early trading hours on Friday. Large U.S. production drop off. The fundamentals are not all bad. Nigeria may not be able to return as much oil as was expected just a few weeks ago (more on that below), and the EIA revealed an extremely large decline in weekly U.S. oil production. The weekly estimates should be taken with a grain of salt since they are less accurate than the retrospective monthly figures, but the EIA believes U.S. production fell by 194,000 barrels per day last week to just 8.43 million barrels per day (mb/d). A few more weeks of data will help clear up what is going on, but if that figure proves to be reliable, it would mean that U.S. output is down about 1.2 mb/d from the peak in April 2015.

Oil rig count climbs for a 2nd straight week - The US oil rig count this week rose by 10 to 351, the highest count since April 15, according to oilfield-services giant Baker Hughes. The number of gas rigs fell by 1 to 88, and miscellaneous rigs were unchanged at 1, taking the total up 9 to 440. Last week, the oil-rig count jumped by the most in six months. It climbed by 11, as the gas rig count also fell by 1, taking the total up by 10. The increase in oil rigs last week was driven by a rise in the more efficient horizontal rigs, as well as in vertical rigs, amid a small decline in directional rigs. Crude oil prices slipped to a two-month low on Thursday after data from the Energy Information Administration showed that inventories fell last week by less than analysts had estimated. Ahead of the rig-count data on Friday, West Texas Intermediate crude futures in New York are up 0.4% to $45.33 per barrel. Here's the latest chart of oil rigs:

U.S. Oil Rig Count Higher, Sees Biggest 2-Week Rise In A Year | The U.S. oil rig count rose by 10, while natural gas lost one rig, week-on-week, bringing the total rig count increase last week to 9, for 440 rigs in play, according to Baker Hughes. The new rig count represents the biggest two-week rise since this same time last year. According to the Baker Hughes’ rig count, released today, while the U.S. count was up 9 in total, with 10 new oil rigs on the scene, Canada made even further gains, with 21 new rigs.  More specifically, the data shows that the U.S. now has 351 active crude oil rigs. In the U.S., gains were made in Texas’ Permian basin, with the addition of 4 new oil rigs, and in Williston, with the addition to 2 new oil rigs. The Permian now has 158 oil rigs in operation, while Williston has 28 oil rigs in operation. Internationally, however, the counts fared poorly as of the latest count, in June, with 28 fewer oil rigs compared to May, dipping down to a total of 927 oil rigs globally, but 1,407 oil and gas rigs combined—up two from the previous month.   Latin America lost 10 rigs—the biggest drop recorded. Oil futures gained a bit in early morning trading today (8 July) on data showing the lowest level of U.S. production in over three years, and despite the increased rig count were still holding steady by the early afternoon. West Texas Intermediate (WTI) was up 1.6 percent at the open this morning, trading at US$45.87 per barrel after having fallen 4.8 percent at the close yesterday to the two-month low of $45.14 after the Energy Information Administration (EIA) came in with crude inventory data showing a smaller-than-expected draw.

International oil rig numbers fall 36% in two years: Baker Hughes - The number of rigs targeting oil outside North America fell by 36% to 677 in the two years to June 2016, continuing to slide after a brief uptick in May, data from service company Baker Hughes showed Friday. Latin America and to a lesser extent Africa have led the fall in rig numbers during the last two years of oil price weakness, the data confirmed, with the count for Latin American rigs targeted at oil less than half what it was two years earlier, at 151. In Brazil the number of rigs targeting oil has fallen from 43 to 13 since June 2014, while in Argentina, where the industry is mainly onshore, the number has fallen from 88 to 56, and in Colombia from 43 to seven. In Africa, the number of rigs targeted at oil has fallen from 95 to 58 over the two years, with reductions in Nigeria, Libya, Gabon and Angola. However the reduction for the first six months of this year, at 11%, is less steep than for the corresponding six months in 2015, when oil rig numbers fell 30%.Rig numbers have also fallen in the Middle East, with 284 targeted at oil across the region in June 2016 compared with 339 two years earlier. However the reduction is mainly accounted for by Iraq, where the number of oil rigs fell from 96 to 41. By contrast, Abu Dhabi has increased its oil rig count from 30 to 42 over the period, Kuwait from 27 to 35 and Oman from 50 to 55, with Saudi Arabia virtually unchanged on 66. Baker Hughes does not provide numbers for Iran or Russia.

Saudi Arabia's oil reserves: how big are they really? - Kemp | Reuters: “How much oil lies beneath the desert sands of Saudi Arabia and how long will it last before running out?” is a question that has intrigued and confounded oil experts for five decades. The kingdom has proven reserves of 266 billion barrels according to government estimates submitted to the Organization of the Petroleum Exporting Countries (“Annual Statistical Bulletin”, OPEC, 2015). If these numbers are correct, Saudi Arabia’s reserves will last for another 70 years at the average production rate of 10.2 million barrels per day reported for 2015. But there is widespread scepticism about the official estimates, which were abruptly raised without explanation from 170 billion barrels in 1987 to 260 billion in 1989 ( Official reserves have remained constant every year since then at 260-265 billion barrels, even as the country has consumed or exported another 94 billion barrels (“Statistical Review of World Energy”, BP, 2016). If the government data is accurate, the kingdom has managed the remarkable feat of exactly replacing each produced barrel with new discoveries or increased estimates of the amount recoverable from existing fields. But most of the country’s giant and super-giant oil fields were discovered between 1936 and 1970 and no comparable discoveries have been made since then. The problem is that field-by-field production profiles and reserve estimates are state secrets known by only a small group of insiders, making it impossible to test or verify them.

Is Russia Winning The Oil Export War Against The Saudis? -- Russia is on track to set a new record in crude oil exports this year, and Iran is boosting exports to Europe, intensifying competition on the continent, which is a key market for both countries. As noted at the beginning of June, Russia has surprised analysts time over time by keeping oil production at near-record levels throughout the rock bottom of the oil bust. Not only has Russia managed to keep output at high levels, it has actively increased its exports to China and has managed to maintain its market share in other key markets. Russian Energy Ministry figures reveal a 4.9 percent increase in exports to 5.55 million barrels a day during the first half of 2016 when compared to the same period last year. In June, the country’s output rose 1.14 percent from a year earlier, with total crude export figures on the rise during every month since summer 2014.“If production remains steady, then it will likely be a record year for exports,” said Christopher Haines, head of oil and gas at BMI Research told Bloomberg. “This should mean competition is strong, es pecially with Iran sending more oil into southern Europe.” Russia – also known as the world’s most prolific energy producer – said earlier this year that it would fund a spike in crude production after members of the Organization of Petroleum Exporting Countries (OPEC) failed to agree on a plan to reduce the existing glut in oil and gas markets. Iran has also been increasing production as it aims to regain market share after international sanctions against it were lifted earlier this year.

Saudi Strategy Working: OPEC Captures Largest Market Share Since 1975 -- OPEC has captured its largest share of the oil market since 1975, which could be seen as avindication of the cartel’s strategy over the past two years. But it also creates vulnerabilities for the U.S. and others, who are once again increasingly dependent on the Middle East for oil. OPEC and its de facto leader Saudi Arabia have pursued market share over the past two years, and with great success. Rather than curtailing production in order to prop up prices, OPEC members ran horrific budget deficits and kept output elevated. That crushed crude oil prices, and has forced many high-cost drillers out of the market – and continues to do so. Even though the overall benefit to OPEC is questionable given the huge revenue losses, OPEC has emerged with its largest market share in forty years. That might be viewed as a win in Riyadh, but it creates problems elsewhere – the world is at risk of being overly dependent on the Middle East for oil, warns the executive director of the International Energy Agency, Fatih Birol, in an interview with The Financial Times. Oil producers in the Middle East now have 34 percent of the global market share at 31 million barrels per day, the highest share since it had 36 percent back in 1975. By comparison, during the oil price bust in the 1980s, a time when new supplies came online in the North Sea, the Middle East’s share fell to 19 percent. The U.S. has lost 900,000 barrels per day since April 2015 because low oil prices forced shale companies to bring drilling to a halt. Meanwhile, OPEC members Iraq, Iran, and Saudi Arabia ramped up output. “The Middle East is reminding us that they are the largest source of low-cost oil,” Fatih Birol told the FT.

The Persian Gulf’s Huge New Export: Debt - WSJ: The energy-producing states of the Persian Gulf are issuing bonds at the fastest clip ever, showing how the oil bust is reshaping the region’s finances despite a near doubling of crude prices this year. The Gulf Cooperation Council states of Saudi Arabia, United Arab Emirates, Bahrain, Kuwait, Qatar and Oman together have raised a record $18 billion in 2016, according to Dealogic, helping refill coffers depleted by sharp revenue declines. Investors expect issuance to increase further, as governments brace for lower prices than they were budgeting only a few years ago. Saudi Arabia is expected to raise up to $15 billion more in the coming weeks, and total issuance by the Gulf nations could reach $35 billion this year, according to J.P. Morgan Chase & Co., more than doubling the previous high set in 2009.The issuers are paying slightly higher costs than other emerging countries with similar ratings, reflecting uncertainty over how successful they will be in opening up their economies, the region’s geopolitical risks and the murky outlook for oil prices, analysts and portfolio managers said. But the bond sales generally have been successful, driven by strong demand from local investors and banks, improving market sentiment due to the oil rebound, and a persistent decline in global interest rates that is putting a premium on securities with better yields. In May, Qatar raised $9 billion in an offering that drew more than twice that sum in orders. The five-year notes issued by the nation of 2.5 million trade at 2.13%. That is more attractive when compared with 1.83% on the comparably rated bonds issued by Korea National Oil Corp., according to Anita Yadav, head of fixed-income research at Emirates NBD.

Multiple suicide blasts hit Saudi Arabia (AFP) - At least four people died in suicide bombings in Saudi Arabia on Monday following attacks elsewhere in the region before the end of the Muslim holy month of Ramadan. There were no immediate claims of responsibility for the three attacks one of which, at the Prophet's Mosque in Medina, left four members of the security forces dead and others wounded. Since late 2014 Saudi Arabia has been hit by bombings and shootings claimed by the Islamic State group but multiple attacks on the same day are unusual. The Prophet's Mosque, in the west of the kingdom, is one of Islam's holiest sites -- where Mohammed is buried and which attracts millions of visitors each year. "Security forces suspected a man who was heading towards Al-Masjid al-Nabawi (the Prophet's Mosque) as he passed through a visitors' parking lot," the interior ministry said in a statement. "As they tried to stop him, he blew himself up with an explosive belt causing his death, and the death of four security personnel," said the statement, adding that five others were injured. The two other blasts occurred in the Red Sea city of Jeddah near the US consulate and in Shiite-populated Qatif on the Gulf coast of the country.

Saudi king vows to fight religious extremists after bombings | Reuters: The king of Saudi Arabia warned his country would strike with an "iron hand" against people who preyed on youth vulnerable to religious extremism, a day after suicide bombers struck three cities in an apparently coordinated campaign of attacks. In a speech marking Eid al-Fitr, the holiday that celebrates the end of the Islamic holy month of Ramadan, King Salman said a major challenge facing Saudi Arabia was preserving hope for youth who faced the risk of radicalization. "We will strike with an iron hand those who target the minds and thoughts... of our dear youth," Salman, 80, said. Four security officers were killed in Monday's attacks that targeted U.S. diplomats, Shi'ite Muslim worshippers and a security headquarters at a mosque in the holy city of Medina. The attacks all seem to have been timed to coincide with the approach of the Islamic Eid holiday. The U.N. human rights chief on Tuesday described the bombing outside the Prophet Mohammed's Mosque in Medina as "an attack on Islam itself" and many Muslims expressed shock that their second-holiest site had been targeted. No group has claimed responsibility but Islamic State militants have carried out similar bombings in the U.S.-allied, Sunni Muslim-ruled kingdom in the past year, targeting minority Shi'ites and Saudi security forces.

Iraq PM orders removal of British-made fake bomb detectors - For the past nine years, Iraq’s security forces have tried to stop car bombs with a British-made bomb detector wand that was long ago proven to be fake. A day after a car bomb killed at least 157 people in central Baghdad, the country’s prime minister, Haidar al-Abadi, has demanded their withdrawal.  After the single deadliest attack in Iraq this year, Abadi also ordered a renewed corruption investigation into the sale of the devices from 2007-10, which cost Iraq more than £53m and netted the Somerset businessman James McCormick enormous profits, as well as a 10-year jail sentence for fraud. The cost to the Iraqi public will remain incalculable: the vast majority of the bombs that have killed and maimed at least 4,000 people since 2007 have been driven straight past police or soldiers using the devices at checkpoints.  Their withdrawal follows years of insistence by interior ministry officials, who bought the wands at vastly inflated fees, that they were effective in sensing odours from explosive components. Near the scene of Sunday’s bomb attack in the suburb of Karrada, which was claimed by Islamic State, Iraqis reacted with derision at the ban, which follows years of complaints from citizens and warnings by both the British government and US military that the wands have no scientific value.

Islamic State Extends Reach as It Suffers Defeats - WSJ: During a rare spate of attacks in Jordan recently, Western officials in the capital Amman intercepted messages from Islamic State leaders urging supporters to spread terror at home rather than join militants across the border in Syria. That call, which was sent to all the group’s affiliates, and a similar appeal in a public speech by an Islamic State spokesman were followed by attacks outside the boundaries of its self-declared caliphate in Syria and Iraq. In the past week, supporters with suspected or confirmed ties to Islamic State have launched deadly strikes in Turkey, Iraq and Bangladesh. Islamic State is increasingly reverting to less expensive but spectacular guerrilla maneuvers, calling on supporters to launch assaults while its costly makeshift army faces retention problems and casualties, Western officials said. It is expanding its global scope, inspiring groups and individuals spread across several continents, even though they may have different agendas and operational methods. The frequency of attacks outside Syria and Iraq has increased in tandem with battlefield and territorial setbacks that have deprived the militants of key sources of income such as oil. The group’s shift in tactics has been prompted by those territorial losses, U.S. officials and security advisers say. Because its territory and finances continue to be pressed by competing U.S. and Russian-led military campaigns, Western and Arab officials say they expect more attacks with varying degrees of sophistication and links.

Washington Post: Bombing makes them hate us, but let’s bomb away – Legally Graphic: (Legally Graphic)  Never underestimate the propensity for Washington post to embarrass itself with cutting edge analysis such as “killing people makes them hate you.”  If you are so inclined, read the entire gem here:  Four reasons why killing insurgents in Syria might backfire – The Washington Post The cutting edge analysis may have been reasonable if left to the obvious conclusion. Unfortunately, Washington Post must come in the aid of good old military imperialism, thereby turning it into a comic, self-parody of an article. Here comes my meta-analysis of their ridiculous article. The astute analysis starts with “bombing kills people.” Indeed, bombing does kill people. But of course, they choose to cloak the killing in euphemistic terms for the delicate western eyes.I wish I had a chrome extension that would change collateral damage to its real definition: dead, innocent, brown people. In case, my definition isn’t clear enough. I have included a handy visual guide to what they describe as “collateral damage.”  Click Here to See Collateral Damage  Even if they choose not to take up arms, civilians who lost a friend or family member to a military strike may begin to harbor attitudes that favor militancy, especially if they view these deaths as unjust….. may begin to harbor sympathies for terrorists Civilians, by definition, are people who are not actively taking up arms. Of course, it is unjust to kill a civilian. This anti-coalition sentiment can persist even when militants themselves kill civilians and damage civilian infrastructure. A recent study of violence in Afghanistan showed that attacks by International Security Assistance Forces (ISAF) that harmed civilians reduced local support for ISAF, but equivalent attacks by the Taliban did not result in similar declines in support for the Taliban.

Qatar LNG to South Asia up near 50% year on year in H1 2016 - The amount of LNG volume delivered to South Asia (India, Pakistan) from Qatar during the first half of the year climbed almost 50% year on year, taking advantage of weaker demand from East Asia (Singapore, Malaysia, Taiwan, Thailand, Japan, South Korea, China) and higher Qatari output, data from Eclipse Energy, an analytics unit of S&P Global Platts, showed Tuesday. Qatari LNG volume deliveries to South Asia hit 7,138,785 mt during January-June, up 46% in comparison with the first six months of last year. Increases in deliveries from the world's largest LNG-exporting country were split between India and Pakistan at 6,045,886 mt and 1,092,899 mt respectively for the first six months of 2016.In India, this was largely driven by a reworked supply contract between Petronet, the country's largest gas importer, and Qatar's Rasgas. In December last year, the two companies renegotiated an existing 25-year supply deal for the delivery of 7.5 million mt/year after Petronet lifted 30- 32% below its contractually levels to September 2015, as previously reported by Platts. Under the revised agreement, contracted volumes not taken in 2015 would need to be bought during the remaining term of the contract, and an additional 1 million mt/year was added to the total contract volume going forward. Similarly, the uptick in deliveries to Pakistan was attributable to a new 15-year agreement with Qatargas for up to 3.75 million mt/year with was singed in February.

Analysis: Japan's appetite for Iran oil rebound to pre-sanctions levels - Japan's crude oil imports from Iran rebounded to pre-sanction levels for the first time in May and will likely hover around that level, at least in the near term, as the Middle Eastern producer intensifies its efforts to regain market share with an aggressive pricing policy. For the second consecutive month, in June Japan's oil imports from Iran are estimated to be more than 300,000 b/d -- the amount Japan used to buy before sanctions were imposed -- as Tehran battles to win back its market share in Japan, which was about 10% before sanctions. "While taking into account physical restrictions [for taking Iranian cargoes] and our relationship policy for other producers, we intend to consider maximizing [taking Iranian crudes] as long as Iran maintains its current OSP pricing policy," a Japanese refining source said.Japanese industry sources said Japan's crude imports from Iran are expected to continue hovering at near pre-sanction levels at least over the June-July period, as some importers find Iran Heavy crude more attractive than similar medium sour crudes from the Persian Gulf.

Saudi Arabia's Falih seeks to expand oil cooperation with China, South Korea - Oil | Platts News Article & Story: Just two months after his appointment as Saudi Arabia's oil minister, Khalid al-Falih last week visited China and South Korea, seeking ways to expand trade flows and explore investment prospects, in a sign that OPEC's top producer is intensifying efforts to expand its presence in key Asian oil buyers. Falih, who was only appointed oil minister in early May, wasted little time in visiting the kingdom's leading buyer, China, and held meetings with several high-ranking officials during the G20 Energy Ministers Meeting in Beijing. These included Chinese Vice Premier Zhang Gaoli, who extended an invitation to the Saudi Deputy Crown Prince Mohammed bin Salman, to visit China later this year, Saudi Arabia's oil ministry said in a statement Friday. China and Saudi Arabia discussed growth prospects and areas of cooperation and found mutual interests in crude oil storage, logistics, infrastructure, industrial development, mining, technology, energy, renewables and sovereign wealth funds, according to the ministry statement.Falih assured Beijing that Saudi Arabia was ready to help China to meet its future energy needs, and called for new areas of partnership between Beijing and Riyadh.  Saudi Arabia is stepping up efforts to find opportunities to grow its oil sale volumes as it plans to raise its global refining capacity to 8 million-10 million b/d, from 5.4 million b/d currently. 

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