oil prices rose more than 6.4% this week and are now up nearly 14% from the low they hit the prior Tuesday, largely on renewed rumors that OPEC might negotiate a freeze of oil production at current levels...recall we've been through these rumors before, when Russia and OPEC ministers talked the same game before their April meeting in Doha, and subsequently pushed oil prices up 50% from their February lows, only to have the Saudis refuse to participate and ultimately increase their production ...this time a September meeting of oil producers is planned in Algeria, and Russia will be there (although they've dismissed the freeze rumors so far), and the same agents responsible for the March freeze talk are spreading it again, and the market is reacting, despite record Saudi production, Iraqi contracts to increase theirs, and indications that Oman will not even attend...still, it's obviously in the interest of OPEC's spokesmen, the Russians, and those in the US with oil interests to push oil prices up by keeping the rumor alive, so we may be in for an extended period of volatile oil markets as they respond to the latest "news" of this freeze talk...
so, despite the ongoing glut in oil and oil products, US oil contract prices for September jumped right out of the gate on those rumors Monday, rising by $1.22, or 2.9%, to close at $43.02 a barrel...they opened higher on Tuesday, but slid in the afternoon to close at $42.77 a barrel after the American Petroleum Institute reported a 2.09 million barrel increase in crude supplies, the biggest jump in in 3 months...prices continued to fall on Wednesday despite the EIA"s report of a crude supply increase of half that much, and settled at $41.71 a barrel, as traders focused on an even larger build of inventories at Cushing, the oil depot on which US prices are based...oil prices then jumped over $2 a barrel, or 5%, on Thursday morning, after comments from the Saudi oil minister about possible action to stabilize prices, and closed at $43.49 a barrel, in their largest one-day jump since April...the upward price momentum carried into Friday as prices barely skipped a beat on news of the largest jump in American oil rigs in a year, and they thus added another $1 to close the week at $44.49 a barrel...
The Latest Oil Stats from the EIA
the oil data for the week ending August 5th from the US Energy Information Administration indicated a modest drop in our oil imports from the prior week's near 4 year high, a corresponding drop in the amount of crude being refined by domestic refineries, a modest increase in the amount of crude we stored, and larger than normal seasonal drops in our gasoline and distillate inventories, which were offset by increases in stores of other petroleum products...however, this week's crude oil fudge factor the EIA included to make the weekly U.S. Petroleum Balance Sheet (line 13) balance was again a large positive, at +575,000 barrels per day, which meant that 575,000 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...that's now the 7th week in a row that we've seen a large positive adjustment, and as a result this year's cumulative daily average of that weekly statistical adjustment is now up to a positive 70,000 barrels per day, which means a lot of oil & products are turning up, where the sources haven't been accounted for...i really dont have any idea why that adjustment has so dramatically reversed from earlier this year, when much of what we had appeared to have produced or imported each week did not show up in the final weekly consumption or inventory figures; one would think that aberrant data gathering would at least show a fairly consistent error in one direction or another ...
domestic production of crude oil from US wells was down by just 15,000 barrels per day to an average of 8,445,000 barrels per day during the week ending August 5th, as Alaskan production fell 2,000 barrels per day and output from the lower 48 fell by 13,000 barrels per day...that left us down by 774,000 barrels per day from what we what were producing at the beginning of this year, and our oil production this week was 10.1% below the 9,395,000 barrels we produced during the week ending August 7th of 2015, and 12.1% lower than the record 9,610,000 barrel per day oil production that we saw during the week ending June 5th last year...
at the same time, our imports of crude oil, the other major source of our domestic crude supply, fell to an average of 8,404,000 barrels per day during the week ending August 5th, dropping by 334,000 barrels per day from the 45 month high average of 8,738,000 barrels per day we imported during the week ending July 29th.... however, that was still 11.0% more than the 7,496,000 barrels per day we were importing during the same week of last year, and our 4 week moving average of imports reported by the weekly Petroleum Status Report (62 pp pdf) has now increased to the 8.4 million barrel per day level, 11.5% above the same four-week period last year...
meanwhile, crude oil used by US refineries dropped by an average of 255,000 barrels per day to an average of 16,597,000 barrels of crude per day during the week ending August 5th, as the US refinery utilization rate fell to 92.2% for that week, down from 93.3% of capacity the prior week, and down from the refinery utilization rate of 96.1% logged during the week ending August 7th last year...although east cost crude oil refining fell by 64,000 barrels per day and their capacity utilization fell to 80.6%, the largest pullback of 171,000 barrels per day was seen by Midwest refiners, whose utilization rate fell from 97.7% to 93.4%...nationally, crude oil refined this week was 2.5% less than the 17,029,000 barrels of crude per day US refineries used during the week ending August 7th last year, but still 1.2% more than the equivalent week in 2014...
even with the drop in oil being refined, however, US refineries production of gasoline still increased by 106,000 barrels per day to 10,098,000 barrels per day during week ending August 5th, which was also up by 105,000 barrels per day, or 1.1% more than the 9,993,000 barrels of gasoline per day being produced during the week ending August 7th last year, as east coast refineries still managed to produce an average of 3,321,000 barrels of gasoline per day, 50,000 barrels per day more than the prior week and 3.4% more than a year earlier....however, refinery output of distillate fuels (diesel fuel and heat oil) fell by 201,000 barrels per day to 4,739,000 barrels per day during the week ending August 5th, which left our distillates output 7.9% below the distillates production of 5,148,000 barrels per day during the week ending August 7th of last year......
even with the decent increase in gasoline production, our gasoline inventories fell again, dropping by 2,807,000 barrels to 235,383,000 barrels as of August 5th, which was about twice the normal weekly summertime decrease...that was despite a 293,000 barrel per day jump in our gasoline imports, from 637,000 barrels per day the prior week to 930,000 barrels per day during the week ending August 5th, as the amount of gasoline supplied to US markets barely inched up by 17,000 barrels per day to 9,769,000 barrels per day....in addition, gasoline exports look to be stable, although accurate data for that lags, so i have no idea where all that gasoline production and those gas imports went...nonetheless, this week's gasoline inventories were still 9.2% higher than the 215,482,000 barrels of gasoline that we had stored on August 7th last year, and also 10.7% higher than the 212,689,000 barrels of gasoline we had stored on August 8th of 2014, so our gasoline supplies still remain categorized by the EIA as "well above the upper limit of the average range" for this time of year..
meanwhile, our distillate fuel inventories fell by 1,959,000 barrels to 151,196,000 barrels as of August 5th, which left them just 2.3% above the distillate inventories of 147,806,000 on the 7th of August last year, but still 23.4% above the distillate inventories of 122,502,000 barrels of August 8th, 2014...in this case, there was nearly a 10% increase in demand for distillates, from 3,605,000 barrels per day during the week ending July 29th, to 3,937,000 barrels per day during the reporting week, that accounted for the drawdown of supplies, and thus the EIA has changed the characterization of our distillates supply to "near the upper limit of the average range for this time of year"...
finally, with both crude oil imports and refinery consumption of that crude down by similar magnitudes, we again ended the week with a surplus of oil, and hence our stocks of crude oil in storage rose by 1,055,000 barrels to 523,601,000 barrels, the 3rd increase of more than a million barrels in a row...as a result, we ended the week with 14.8% more oil in storage than the 455,275,000 barrels we had stored as of the same weekend a year earlier, and 42.9% more oil than we had stored on August 8th of 2014....since our oil supplies first topped 500 million barrels early this year, and first topped 400 million barrels in January of 2015, it goes without saying that our current crude oil supplies of 523.6 million barrels also remain "well above the upper limit of the average range" for this time of year..."
This Week's Rig Count
the Friday US rig count was up by the most in one week since July 24th 2015 as US drilling activity increased for the 10th time out of the last 11 weeks....Baker Hughes reported that the total count of active rotary rigs running in the US rose by 17 rigs to 481 rigs as of August 12th, which was still down from the 884 rigs that were deployed as of the August 14th 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 15 rigs to 396, which was still down from the 672 oil directed rigs that were in use a year ago, and down from the recent high of 1609 oil rigs that were deployed on October 10, 2014, while the count of drilling rigs targeting natural gas formations rose by 2 rigs to 83 rigs this week, which was down from the 211 natural gas rigs that were drilling a year ago, and down from the recent high of 1,606 rigs that were drilling for natural gas on August 29th, 2008...there were also two rigs working this week that were classified as miscellaneous, unchanged from last week but up by 1 miscellaneous rig from the same week a year ago....this week's 3.66% increase in rigs was the largest percentage increase in drilling since 30 drilling rigs were added to the prior week's 641 rigs on May 28th, 1993..
the number of working horizontal drilling rigs increased for the 9th time in the past 11 weeks, rising by 13 rigs to 375, which still was down from the 676 horizontal rigs that were in use on August 14th of last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, the vertical rig count increased by 4 rigs to 62 rigs, which was still down from the 127 vertical rigs that were drilling in the US during the same week last year, while the directional rig count was unchanged at 44 rigs, which was down from the 81 directional rigs that were deployed during the same week last year...
details on this week's changes in drilling activity by state and shale basin are included in our screenshot of that part of the rig count summary from Baker Hughes which shows those changes below...the first table below shows weekly and annual rig count changes for the major producing states, and the second table shows weekly and annual rig count changes for the major geological oil and gas basins...in both tables, the first column shows the active rig count as of August 12th, the second column shows the change in the number of working rigs between August 5th and August 12th, the third column shows the August 5th rig count, the 4th column shows the change in the number of rigs running this Friday from the equivalent Friday in August 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 August 14th of 2015:
once again, we see that the lions share of this week's increased activity occurred in the Permian basin of western Texas, where 12 rigs were added, which contributed to the 13 rig increase in Texas....and again, outside of that area, the changes were pretty subdued, with no state or shale basin seeing a change in activity greater than 1 rig...we should note that the Utica shale had a rig added, and hence the count for both the Utica and for Ohio increased to 14 rigs...in other states not listed above, Alabama again saw another rig added, and now they have 3 active, which is an increase of 2 rigs from the 1 rig they had active a year ago, while Illinois saw one of the 3 rigs they had running shut down this week, leaving them two, also up from just 1 rig a year ago...
Kasich order creates hotline for oil and gas emergencies (AP) — Ohio Gov. John Kasich has ordered creation of a single-call notification system for oil-and-gas emergencies and authorized two state departments to start setting it up. An order Kasich signed Tuesday follows his veto last year of budget language he found inadequate that sought to streamline reporting of spills of oil, brine and other hazardous substances, fires, explosions and other emergencies. Rick Simmers, oil and gas chief at the Ohio Department of Natural Resources, says the new system will allow multiple state entities to coordinate and respond more quickly. The ODNR and the Ohio Department of Commerce are authorized to begin making the system’s rules. ODNR technical experts will help the Division of State Fire Marshal, EPA and Public Utilities Commission at the toll-free hotline at 1-844-OHCALL1, or 1-844-642-2551.
Executive order sets up one-call response to oil, gas emergencies in Ohio - Columbus Dispatch --Gov. John Kasich has issued an order that is designed to improve response to emergencies involving oil and gas facilities, which his office says will lead to faster and more effective reaction to explosions, leaks and other disasters.The executive order sets up a "one call" response system, which requires energy companies to call a state hotline within 30 minutes after an accident. The call will begin a process in which state agencies coordinate a response."This is set up to support the locals and make sure the necessary resources are available," said Bethany McCorkle, spokeswoman for the Ohio Department of Natural Resources.Local emergency officials would be in charge; state officials would mobilize to help. Kasich used his line-item veto last year to remove a provision that had a similar intent. At the time, he said he would revisit the issue after having a chance to study it. With the order, temporary rules take effect immediately and will last for up to 120 days, allowing state agencies time to approve permanent rules.The immediacy of the rules is a concern for the Ohio Oil and Gas Association. The trade group says it will scrutinize Kasich's plan and work to address any problems during the rule-making process. The association "remains concerned on how the process was implemented as well as the broader impacts it may have on our membership due to the immediate effectiveness of this order,"
Hotline just first step in oil and gas regulations - The Star Beacon -- The state took a small step this week toward improving its — thus far — inadequate efforts to regulate the fracking industry. On Tuesday, Ohio Gov. John Kasich ordered the creation of a single-call notification system for oil-and-gas emergencies. The goal is to streamline reporting of brine and oil spills as well as fires, explosions or other emergencies. It also mandates the Ohio Department of Natural Resources be alerted when an emergency happens — because ODNR regulates the fracking industry. While we have expressed concerns in the past about ODNR’s ability to do this task effectively, we applaud Kasich’s move because if the state is going to keep the agency in charge of oversight it ought to have actual oversight. The system still needs to be set up by ODNR and the Ohio Department of Commerce, and the sooner the better. The new hotline will involve agencies such as the Division of State Fire Marshal, the Ohio Environmental Protection Agency and the Public Utilities Commission and allow them to be in direct contact with Department of Natural Resources experts. The toll-free hotline will be 844-642-2551. Kasich’s move comes after he vetoed proposed regulations in the budget he said did not go far enough and “would potentially limit essential notifications” with language that was “ambiguous and could result in unnecessary disputes regarding compliance.” As for further efforts to impose regulations, a bill has been drafted which, among many other things, would codify Kasich’s executive order — Patterson points out until that is done another governor, perhaps one with stronger ties to the oil and gas lobby, could undo it. Yet the bill has received just one hearing so far, does not have a second one scheduled and lawmakers aren’t expected back in Columbus until after the election.
Medina County charter dispute goes to Supreme Court - athensmessenger.com: The Ohio Supreme Court is being asked to order the Medina County Board of Elections and Secretary of State Jon Husted to put a county charter issue on the Nov. 8 ballot. A lawsuit was filed Tuesday with the Supreme Court by five members of a committee that sought to put the charter on the ballot. The Medina County Board of Elections had a tie vote, with two Democrats favoring the charter going on the ballot and two Republicans voting against it. Husted broke the tie, voting against the charter being on the ballot. The lawsuit argues that Husted and the elections board members "are forbidden by pertinent constitutional principles from unilaterally exercising the power to peremptorily invalidate the (charter) petition because of their personal opinions about its content, constitutionality and legality." The lawsuit argues that the proposed charter correctly provides a form of government as required by the Ohio Constitution, and that there is no requirement that a county charter alter the existing form of government. The proposed charter would leave in place existing county government offices, but seeks to prohibit: the use of county water for high-volume hydraulic fracturing (fracking), disposal of fracking waste in the county, the new exploration for or extraction of gas and oil, and the siting or operation of new equipment to support extraction of oil or gas. Because the election is approaching, the lawsuit asks that the Ohio Supreme Court expedite its review of the case. Committees also sought to put charter proposals on the ballot in Athens, Meigs and Portage Counties, but the local boards of elections voted against it. Protests filed by the committees are pending before Husted, and those cases could also end up in the Supreme Court.
Husted opens charter dispute to outside parties - athensmessenger - Ohio Secretary of State Jon Husted has given those involved in three county charter disputes until Wednesday to submit written briefs or arguments if they wish, before he rules on whether the charters should go on the November ballot. He is also allowing other interested parties to submit arguments. Husted on Thursday issued an advisory that set this Wednesday at 5 p.m. as the deadline for submitting arguments. ”My office will thoroughly review the materials submitted and render a decision according to statute,” Husted wrote. Boards of elections in three counties — Athens, Meigs and Portage — voted that petitions seeking to put county charters on the November ballot are invalid. The local committees promoting those charters filed protests, sending the matter to Husted. On Thursday, the senior elections counsel for the Ohio Secretary of State’s Office, sent an email notifying the County Commissioners Association of Ohio and several Ohio law firms of the protests and the deadline for submitting arguments. In 2015, Husted ruled that proposed charters in three counties (including Athens County) should not go on the ballot. He also invited outside interested parties to submit arguments before he ruled. The County Commissioners Association of Ohio, American Petroleum Institute, Affiliated Construction Trades of Ohio and the Ohio Chamber of Commerce submitted arguments against the charters. Tish O’Dell, state organizer for the Community Environmental Legal Defense Fund, said that because Wednesday’s deadline is the same for everyone to file arguments, the county charter committees won’t be able to respond to arguments made by outside groups. The defense fund is providing legal advice to the charter committees in the three counties.
Citizens should continue to press Forest Service about fracking | Readers Forum - Roxanne Groff - This is a call to action for all citizens to rise up in protest. Authorizing modern slick-water, extremely high-pressure, high-volume, heavy-industrial horizontal drilling and fracking within the Wayne National Forest, as Kathleen Atkinson and Tony Scardina by their own admission are about to do, will place our national forest in serious jeopardy. Call now demanding that Regional Forester Kathleen Atkinson (414-297-3765) and Forest Supervisor Tony Scardina (740-753-0880) pull their heads out of the sand and face reality. Forest Service officials intentionally have placed their “heads in the sand.” Having created their own myopia, they see nothing and hear nothing, pretending there is nothing more to learn. They profess to know all about fracking, having developed their experience, they say, long ago before the mid-1990s when fracking in horizontal oil and gas wells became a heavy industrial process. As has been demonstrated again and again across the nation, including many incidents in Ohio, this modern, heavy-industrial process wreaks havoc on the environment, and its surface and subsurface impacts are far reaching. Moreover, sidestepping current White House policy, the Forest Service has not evaluated the effects of the federal agency’s decisions to allow fracking and concurrent releases of methane on climate change. The Forest Service is about to approve a poorly prepared Environmental Assessment (EA) authored by the federal Bureau of Land Management (BLM).
Forest Service Asked to Reject Fracking Plan in Ohio's Wayne National Forest - Center for Biological Diversity (press release) - — The U.S. Forest Service should reject a new oil and gas leasing plan in Ohio’s Wayne National Forest due to its failure to address serious concerns over fracking and climate change, conservation groups said today in a letter to the Service. The plan to allow dangerous hydraulic fracturing or “fracking” on 40,000 acres of the state’s only national forest would degrade streams and groundwater, fragment wildlife habitat and worsen climate change — issues inadequately addressed in the environmental analysis for the proposal — according to the letter from the Center for BiologicalDiversity, the Ohio Environmental Council and the Sierra Club. The groups also criticized the agency’s failure to quantify the plan’s greenhouse gas emissions, contrary to the Council on Environmental Quality’s new guidance issued to federal agencies last week. Under the guidance, the agency should disclose the full life-cycle greenhouse gas emissions of the proposed leasing in compliance with the National Environmental Policy Act, including emissions from burning oil and gas extracted from the Wayne, the letter asserts. “Any proposal for new oil and gas leases on public land should include an analysis of its contribution to the climate change crisis,” said Nathan Johnson, an attorney with Ohio Environmental Council. “Legally and morally, any decision on federal fossil fuel must examine the impact that burning that fuel will have on all of us. Indeed, if we are to prevent the worst effects of climate change, the science tells us that all new federal fossil fuel leasing should be off limits.”The groups also highlighted the Forest Service’s failure to address groundwater and surface-water contamination risks from wastewater disposal and other fracking operations. While the agency claims that measures in its land-use plan, such as a prohibition on underground wastewater disposal, would protect water resources, these restrictions do not apply to neighboring private lands scattered throughout the forest. Horizontal wells required for fracking can reach oil and gas deposits two miles away and so need not be sited on federal land. Over three-quarters of the forest’s Marietta Unit, where the leasing is proposed, is private land. “The government’s plan is remarkably shortsighted in its failure to consider the full extent of fracking and wastewater disposal that could occur throughout the forest,” said Wendy Park, an attorney with the Center. “Water quality and wildlife will suffer regardless of where these activities occur.”
Rex Energy drilling in Carroll - New Philadelphia Times Reporter -- Rex Energy had a positive balance sheet and started production from two well pads in Carroll County’s Harrison Township during the second quarter. The company closed the quarter with a profit of $16 million, or 22 cents per share, according to a press release. Rex lost $46 million during the same quarter last year. The positive earnings were due to a stock conversion that raised $72.3 million. Rex also announced the sale of Illinois Basin assets for $40 million. The company’s operating revenue was $31.3 million, down 13 percent from the same quarter last year. Rex spent $23.3 million to drill eight wells, frack four wells and begin production from three wells. The company expects its joint-venture partners to reimburse $11 million for capital spent during the quarter. In Carroll County, Rex started production from its three-well Goebeler pad. The wells were drilled to an average lateral length of 7,360 feet and fracked in 41 stages. Each well had an average 24-hour sales rate equal to 2,100 barrels of oil, with 72 percent of the production from liquids. Rex also began production from its two-well Perry pad, which was drilled to an average lateral length of 6,350 feet and fracked in 36 stages. The company didn’t provide production figures. Rex is currently drilling its four-well Vaughn pad in Washington Township with average lateral lengths of 7,200 feet and expects production to start in the first quarter of 2017. The company projects production growth of 5 percent this year.
Feds, Pennsylvania settle Consol Energy water pollution suit (AP) — Consol Energy has agreed to pay $3 million to settle a claim that its Bailey coal mining complex in southwestern Pennsylvania repeatedly polluted nearby streams beyond what’s permitted under federal and state law. The Justice Department filed the federal lawsuit on behalf of the Environmental Protection Agency and the Pennsylvania Department of Environmental Protection. As part of the settlement, the energy company also agreed to make improvements to prevent contaminated discharges of mining wastewater from the Bailey Mine Complex in Greene and Washington counties to the Ohio River and its tributaries. “Today’s settlement ensures that our rivers remain safe for future generations to use and enjoy,” said U.S. Attorney David Hickton for the Western District of Pennsylvania.The lawsuit contended two of the mine’s water discharges exceeded daily pollution limits 188 times and the monthly limit 170 times from January 2006 through June 2015. The illegal pollution fouled streams near coal washing operations and slurry ponds near the Bailey, Enlow Fork and Bailey mines in Greene and Washington counties.
Marcellus / Utica takeaway capacity to the Midwest, Canada -- Given their proximity to the Marcellus and Utica shale regions, the Midwestern states and Ontario would appear to be logical consumers of the increasing volumes of natural gas being produced in Pennsylvania, West Virginia, and eastern Ohio. The catch has been that the pipelines built years ago to serve the Midwest and Canada’s most populous province were designed to move gas into those regions from western Canada, the U.S. Gulf Coast, the Midcontinent and the Rockies, not the nearby Marcellus/Utica. That’s being corrected. Today we continue our look at how pipeline takeaway capacity will stack up against Northeast production over the next few years, with a focus on the Midwest and Ontario. In Part 1 of this series, we looked at the Northeast production outlook and prospects for growth under three commodity price scenarios and found that even our most pessimistic production scenario will mean at least a little growth for Northeast supply. In Part 2, we began our look at the takeaway capacity side of things, starting with the East corridor. As we mentioned, RBN’s Midstream Infrastructure Database Interface (MIDI) is tracking 24 projects totaling 18 Bcf/d of Marcellus/Utica takeaway capacity at varying stages in the development and regulatory approval process. (That’s not all the projects – it is the projects most likely to provide incremental takeaway capacity over the next few years.) We organized the takeaway projects into five corridors: to the East (New England and Mid-Atlantic states), to Canada, to the Midwest via Ohio, to the Gulf Coast via Ohio, and to the Southeast along the Atlantic Coast (see Figure 1 in Part 2). There are a total of six projects (3.3 Bcf/d) gunning for takeaway capacity out of the Marcellus/Utica to the New England and Mid-Atlantic states to the east, with the majority of that capacity coming online after 2017. However, as we noted in Part 2, pipeline development to heavily populated markets from Maine to New Jersey is especially fraught with public opposition and regulatory challenges that could cause delays or cancellations. We also noted that demand in New England and the Mid-Atlantic states will be highly seasonal –– relatively modest during the off-peak summer season and high during cold winter months when demand from space heating kicks in. Those incremental takeaway flows also will depend on demand growth within the region.
Midstream Infrastructure Database Interface -- RBN’s Midstream Infrastructure Database Interface – called MIDI – is an online toolset that links an energy project database and a mapping system. The Project Database includes U.S. crude oil, NGL and natural gas pipeline projects that are under development or have been placed into service within the past few months. Each commodity category (crude, gas, NGLs) has a Table View for details about the projects, and a Map View which displays a project map. MIDI also includes Featured Maps from selected RBN Drill Down Reports and blogs. Each of these maps is described in the text of its report or blog source material. Click to view MIDI help.
EPA’s science advisers challenge agency report on the safety of fracking --- Science advisers to the Environmental Protection Agency Thursday challenged an already controversial government report on whether thousands of oil and gas wells that rely on hydraulic fracturing, or “fracking,” systemically pollute drinking water across the nation. That EPA draft report, many years in the making and still not finalized, had concluded, “We did not find evidence that these mechanisms have led to widespread, systemic impacts on drinking water resources in the United States,” adding that while there had been isolated problems, those were “small compared to the number of hydraulically fractured wells.” The conclusion was widely cited and interpreted to mean that while there may have been occasional contamination of water supplies, it was not a nationwide problem. Many environmental groups faulted the study, even as industry groups hailed it. But in a statement sure to prolong the already multiyear scientific debate on fracking and its influence on water, the 30-member advisory panel on Thursday concluded the agency’s report was “comprehensive but lacking in several critical areas.” It recommended that the report be revised to include “quantitative analysis that supports its conclusion” — if, indeed, this central conclusion can be defended.
Scientific Board Requests More Data on EPA Fracking, Water Study -- The U.S. Environmental Protection Agency’s (EPA) draft assessment of hydraulic fracturing’s impact on drinking water is lacking in several critical areas, scientific advisors working with EPA have concluded. The Scientific Advisory Board (SAB) – which includes members of academia, industry and interest groups – found EPA’s overall assessment approach to the hydraulic fracturing water cycle (HFWC) to be comprehensive. However, the SAB stated in an Aug. 11 letter that more information from EPA was needed to support the draft assessment’s conclusions. In a report released last year, EPA said it did not find evidence that potential mechanisms by which fracking could impact drinking water had led to widespread, systemic impacts on U.S. drinking water resources. EPA also stated in the June 2015 report that the number of identified cases where drinking water resources were affected were small compared with the number of hydraulically fractured wells. The SAB said it was particularly concerned that EPA did not support quantitatively in its conclusion about the lack of evidence of widespread, systemic impacts of hydraulic fracturing on drinking water resources and failed to describe the systems of interest, impact scale, or definitions of systemic and widespread.
Opponents of Seneca gas storage project reject downsize plan (AP) — Opponents of an expanded gas storage facility in the Finger Lakes say they’ll continue to fight the project despite the company’s proposal to downsize it in response to community concerns. Houston-based Crestwood Midstream Partners this week proposed changes to the Seneca Lake project that include elimination of rail and truck shipment facilities and resources to monitor and improve water quality in the lake that supplies drinking water for 100,000 people. The Department of Environmental Conservation has been considering a permit application for the expansion of propane storage facilities in depleted salt caverns along the lake since 2009. The opposition group Gas Free Seneca says in a statement that it is resolved to stop the project completely, saying it’s unsafe and inconsistent with the character of Seneca Lake communities.
Fracking linked to asthma attacks in Hopkins study - Asthma sufferers who live near wells in which hydraulic fracturing is used to extract natural gas are up to four times more likely to have an asthma attack than those who live farther away, according to new research from the Johns Hopkins University.The findings are the latest in a string of studies that have linked health problems to proximity to such wells, and come as Maryland prepares to lift a moratorium next year and issue permits for the controversial method of extraction known as "fracking.""Ours is the first to look at asthma, but we now have several studies suggesting adverse health outcomes related to the drilling of unconventional natural gas wells," said Sara G. Rasmussen, a study leader and doctoral candidate in the department of environmental health sciences at Hopkins' Bloomberg School of Public Health."Going forward, we need to focus on the exact reasons why these things are happening," she said, "because if we know why, we can help make the industry safer." Under then-Gov. Martin O'Malley, a Democrat, Maryland imposed a moratorium on fracking in 2011 out of concerns about possible groundwater contamination, air pollution and earthquake activity. Under Gov. Larry Hogan, a Republican, the state recently released draft rules for use when the moratorium expires in the fall of 2017. Critics call the rules insufficient to protect air and water quality, while supporters say they are among the nation's most stringent.
Coast Guard: Well leaks up to 4,200 gallons of oil (AP) — The Coast Guard says an oil well leaked up to 4,200 gallons of crude oil near the mouth of the Mississippi River. The Coast Guard says the spill on Tuesday came from a well owned by the Texas Petroleum Investment Co. The spill is close to Main Pass, which is in the area where the Mississippi flows into the Gulf of Mexico. The agency says the company has hired OMI Environmental Solutions and Clean Gulf Associates to clean up the spill. The Coast Guard, the Louisiana Department of Environmental Quality, the Louisiana OilSpill Coordinator’s Office and the Louisiana Department of Wildlife and Fisheries are overseeing the response. The Coast Guard says the cause of the spill is under investigation.
Louisiana politicians go to court blaming Big Oil for coastal ruin The oil industry has left a big footprint on Louisiana, but its legacy is being questioned like never before with Democrat John Bel Edwards in the governor’s mansion. Turning state politics upside-down, leaders of both parties are taking Big Oil to court, seeking billions in damages for making the coast sink into the sea. Industry lawyers blame damage on levees built to control the Mississippi River. And one executive calls the lawsuits a hypocritical shakedown, given the industry’s $73 billion economic impact. A Delaware-sized stretch of Louisiana is gone forever, but the politicians hope to save what’s left.
Suits could drive producers from coastal Louisiana: E&P group - A series of lawsuits, brought by local officials in southern Louisiana against dozens of oil and gas companies operating in the region, could drive drillers to abandon the state, resulting in the loss of millions of dollars of business, the head of the Louisiana Oil and Gas Association said Wednesday. About 10 suits have been filed against dozens of oil and gas operators alleging that the energy companies have violated the federal Coastal Zone Management Act by allowing erosion to eat up an untold number of acres of Louisiana's coastline. The suits represent a grave threat to the state's exploration-and-production industry, especially at a time when the industry has been hard hit by low oil and gas prices, LOGA President Don Briggs said in an interview Wednesday. "It's the kiss of death for drilling in South Louisiana," he said.The suits are being studied "in the board rooms where people make decisions of whether they're going to drill and operate in the coastal region of Louisiana," he said. "Why would they risk being sued over the various permits that they would acquire?" Although the suits have been working their way through the courts for a number of months, the industry won a victory recently when 24th Judicial District Court Judge Stephen Enright decided to dismiss a lawsuit filed by trial lawyers on behalf of Jefferson Parish. In that ruling, issued August 1, Enright found that the plaintiffs, including parish and state officials, had failed to avail themselves of existing administrative remedies pursuing their lawsuit.
Proposed Project to Expand Gulf of Mexico Port Capacity - A new deepwater port project planned for Louisiana aims to complement existing Gulf Coast infrastructure to service the oil and gas industry. Located in western Louisiana on the Calcasieu Ship Channel just south of Lakes Charles, the Port Cameron project will allow for faster deployment of supply vessels, support and emergency services for exploration and production (E&P) activities in the U.S. Gulf of Mexico, Jack Belcher, executive vice president of HBW Resources LLC, told Rigzone. HBW is working with Port Cameron LLC to identify and secure customers for the new port. These customers include inventory management, rig support, transportation management and bonded warehouse and crew support. HBW is also seeking out vendors that support oil and gas operators and drillers, such as providers of cranes, lift trucks and dock side equipment, vessel companies, dockside vessel support, stevedores and air transportation support for rig crews. Port Cameron presents an opportunity for a brand new, modern port to be added to the Gulf Coast. Even with the oil price downturn, oil and gas activity in the Gulf of Mexico is expected to increase going forward, Belcher stated.
Environmental Racism Is Poisoning Houston —The smell in the Manchester neighborhood of Houston is like hot Cuban coffee—nutty, bitter and sweet. This isn’t coffee, though. This is the smell of benzene spewing from the nearby Valero oil refinery at 1.5-4.7ppm, the threshold at which most humans can begin to smell the chemical and what the Centers for Disease Control calls a possible indication of “acutely hazardous exposure.” Paula’s house is sparsely furnished, with brightly painted walls. Her grandchildren are all over the place, curious about the audio recorder. Paula tells me the family has been living here for about four years: four adults and six children living in a three-bedroom house. “It’s okay. It’s peaceful, it’s quiet. Except all the chemicals that are around, but that’s about the only thing that concerns us.” The one-story house is right across the street from the Valero refinery. “Sometimes we see something that happens, and we get scared, and there’s been times that they have shut down the roads and they don’t let us know what’s going on. We have to go and ask. And they tell us, there’s nothing to worry about. But that’s about it.” “We’re planning to move as soon as we get a little bit more money together. We’re planning to move.” “My daughter, she works at a dry cleaner. My son, he works at a pharmacy, at CVS pharmacy. And the stepdad, he cuts yards.” She frets about the children not performing well in school. She says she suspects it’s because the teachers are bad, which may be the case as the area is poor and underserved more generally. But she does not mention that the pollution the children live and sleep and eat in may be damaging their ability to learn and putting them at risk for degenerative brain illnesses.
New rules credited for fewer Oklahoma quakes - The number of earthquakes related to fracking has fallen significantly in Oklahoma since last year, leading government experts to attribute the decline to increased regulation. The state's rate of earthquakes was at times higher than that of California, which is considered the U.S. epicenter for naturally occurring earthquakes. The U.S. Geological Survey told USA Today that the reduction in earthquakes in the oil and gas state is mostly likely due to new regulations put in place to reduce the quakes' frequency. The state is still experiencing a whopping number of earthquakes after the regulations were put into place. It has had 448 earthquakes of a 3.0 magnitude or higher this year. But that's down nearly 20 percent from last year, when the state experienced 558 quakes in the same period, according to the U.S. Geological Survey. The practice of hydraulic fracturing, or fracking, is not the culprit in causing the earthquakes. Instead, the quakes are associated with the disposal of the water used in the fracking process, which requires injecting the wastewater into underground aquifers. The state has established a number of new regulations to control the rate of water injected into underground aquifers, which has been the proven cause of quakes not only in Oklahoma but also in places as far away as Ohio. Robert Williams, a geophysicist with the U.S. Geological Survey, said increased regulation of wastewater underground disposal related to oil and gas production could be one reason for the decline in earthquakes. At the same time, oil production has slowed, which means there is less water to dispose of from fracking wells, he said. The lower production is due to the global supply glut, where the oversupply of crude oil on the worldwide market has cut prices so low that it is not economical to drill.
Kansas tightens restrictions on oilfield water injections - Washington Times: - The Kansas Corporation Commission has further restricted the amount of oilfield wastewater that can be injected underground in southern Kansas in the hopes of further reducing the number of earthquakes in the region. Earlier restrictions led to a drop in earthquakes, mostly in Harper and Sumner counties, experts said. During a meeting Tuesday, the commission left in place an 8,000-barrel per day limit in five of the most quake-prone areas of those two counties. But it put a 16,000-barrel per day limit on the rest of those two counties and parts of Kingman, Sedgwick and Butler counties, The Wichita Eagle reported (http://bit.ly/2aFR3pe ). “We’ve taken action to see that we don’t have the seismic activity we’ve seen south of Kansas (mostly in Oklahoma),” said Commissioner Pat Apple, who approved the new restrictions along with Chairman Jay Emler. The commission’s order said it found that increased seismic activity is an immediate danger to the public health, safety, and welfare. Commissioner Shari Feist Albrecht filed a dissenting opinion favoring even stronger restrictions. She agreed with the KCC staff, which wanted to limit dumping to 12,000 barrels a day, saying she believes the 16,000-barrel limit “would do little to change the status quo and provide minimal data from which to draw any conclusions about the small-earthquake trend.”
Future unclear for northern Minnesota oil pipeline project (AP) — The future is unclear for a proposed oil pipeline that would cross northern Minnesota. Enbridge Energy on Tuesday announced it is investing in a different pipeline that would transport North Dakota crude oil — but not across Minnesota. The Canadian company has proposed the $2.6 billion Sandpiper pipeline that would run from the Bakken oil fields through Minnesota to a terminal in Superior, Wisconsin. Enbridge, based in Calgary, Alberta, and Houston-based Marathon Petroleum, a key partner in Sandpiper, are forming a joint venture to buy a stake in the Bakken Pipeline project, which would transport oil from North Dakota across the Midwest to Texas. Once the new Bakken pipeline deal is complete, the company will “evaluate the scope and timing” of Sandpiper, Enbridge said in a statement. In February, Enbridge said it expected to push back the startup date for Sandpiper to 2019. The pipeline proposal is going through the Minnesota regulatory process. Environmentalists contend Sandpiper would threaten ecologically sensitive areas. With Enbridge’s new pipeline investment, Sandpiper “will be put on the shelf,” Scott Strand, head of the Minnesota Center for Environmental Advocacy, told the Star Tribune. Strand’s group had pushed for a full environmental review of Sandpiper. Late last year the Minnesota Public Utilities Commission ordered a full environmental impact review of Sandpiper. Enbridge has said the state’s regulatory process is delaying Sandpiper and another project, a replacement pipeline to carry Canadian crude oil across northern Minnesota.
Colorado anti-fracking initiatives hit signature target | Reuters: Environmental groups in Colorado on Monday said they collected enough signatures to add proposed anti-fracking initiatives to a state ballot in November, as long as their petitions make it through a validation review by the Secretary of State's office. One of the initiatives would strengthen the state's "setback" rules, requiring new oil and gas development facilities to be located at least 2,500 feet from occupied structures and areas of interest, such as parks. The second would transfer regulatory control of new oil and gas development to local governments. Both needed 98,492 signatures to make the ballot. "We made it over the hurdle of having the signatures needed to turn into the Secretary of State and now it's in their hands to go through the validation process," said Lisa Trope, an organizer with Food and Water Watch, one of the groups gathering the signatures. The Secretary of State's office will review the petitions in the coming weeks to ensure no duplicate signatures or unregistered voters were included. An issues committee for Coloradans Resisting Extreme Energy Development led the signature gathering process. A spokeswoman for that organization did not immediately respond to a request for comment. The initiatives come after the state's Supreme Court earlier this year struck down fracking bans approved by voters in the cities of Fort Collins and Longmont.
In Colorado, anti-fracking referendums clear ballot hurdle: Colorado is one step closer to having two statewide referendums on fracking go to the voters this fall after proponents turned in nearly 200,000 signatures Monday. A last-minute push over the weekend by proponents of the measures appears to have paid off for their cause, allowing them to gather more signatures ahead of the Monday deadline. A grassroots coalition called "Yes for Health and Safety Over Fracking" said it submitted enough signatures to place two initiatives on Colorado's November ballot. The Colorado secretary of state's office confirmed the petition signatures for the two oil and gas measures were turned in Monday before the 3 p.m. local deadline. "The office will now conduct a 5 percent random sample of submitted signatures to determine whether the proposals meet the threshold to make the ballot," a spokeswoman said. "To get on the ballot, proponents need to submit 98,492 valid voter signatures — 5 percent of the total votes cast for all candidates for Colorado secretary of state in the last general election." The state has until Sept. 7 to announce whether the two referendums meet the threshold to make the fall ballot. Initiative 75 would give local governments the authority to regulate oil and gas development, including restricting the practice of hydraulic fracturing, or fracking. Current state law allows local governments to regulate land use related to oil and gas development as long as it does not conflict with state law. Initiative 78 would force mandatory setbacks for oil and gas development in Colorado, including requiring any development or fracking to be located more than 2,500 feet away from both an "occupied structure" or "areas of special concern" such as public places and playgrounds as well as waterways.
Colorado Readies for 'All Out War' as Anti-Fracking Measures Advance to Ballot -- The government of Colorado has so far managed to quash efforts to halt the spread of fracking in that state, but come November, residents will finally have the chance to overpower the will of politicians and Big Oil and Gas. Petitioners on Monday submitted more than 200,000 signatures backing two separate initiatives to amend the Colorado constitution, specifically in regards to the controversial drilling method."This is a good day for Colorado, and it’s a good day for democracy," said Lauren Petrie, Rocky Mountain Region director of Food and Water Watch. "These initiatives will give communities political tools to fend off the oil and gas industry’s effort to convert our neighborhoods to industrial sites. This is a significant moment in the national movement to stem the tide of fracking and natural gas."Initiative 78 would establish a 2,500-foot buffer zone protecting homes, hospitals and schools, as well as sensitive areas like playgrounds and drinking water sources, from new oil and gas development. This expands the current mandate of a 500-foot setback from homes and, according to Coloradans Resisting Extreme Energy Development (CREED), is based upon health studies that show increased risks within a half mile of fracked wells and the perimeters of real-life explosion, evacuation, and burn zones. Colorado regulators say that, if passed, Initiative 78 could effectively halt new oil and gas exploration and production in as much of 90 percent of the state. Initiative 75 would establish local government control of oil and gas development, authorizing local municipalities "to pass a broad range of more protective regulations, prohibitions, limits or moratoriums on oil and gas development—or not," according to the grassroots group. This measure challenges a May ruling by the Colorado Supreme Court which said that state law overrides local fracking bans.
Energy group sues over canceled lease sales - An energy trade group is suing the Obama administration over canceled oil and natural gas lease sales in the West. The Western Energy Alliance on Thursday sued the Interior Department and the Bureau of Land Management (BLM), saying they are breaking congressional mandates by canceling several lease sales over the past two years.The group, which represents oil and natural gas companies, said the administration is working too closely with the anti-fossil fuel activists who have pushed officials to end lease sales on federal land. “Through protests and petitions, the Keep-It-In-The-Ground movement is trying to coerce BLM into violating the law by stopping all leasing on federal lands,” Kathleen Sgamma, the group's vice president of government and public affairs, said in a statement. “Yet without doing anything, activists could achieve the same goal just by leaving BLM to its own devices. Western Energy Alliance is simply asking the courts to compel BLM to follow decades-old law and hold quarterly lease sales in every oil and natural gas state.” Federal law directs the BLM to hold four lease sales annually in a handful of oil- and gas-producing states in the West, but the agency has canceled or postponed several such auctions there since 2015. Environmental advocates have threatened to protest several of the lease sales as part of their effort to ban fossil fuel development on federal land. They have often declared victory when the BLM cancels the sales.
Steel company says it’s not liable for 2013 Casselton train derailment (AP) — A Pennsylvania steel company named in a lawsuit over a fiery oil tanker train derailment near Casselton says it should not be held liable for the 2013 accident. Standard Steel and BNSF are named in a complaint filed by Bryan Thompson, the engineer who was at the helm of the train when it derailed. Thompson says Standard Steel produced a defective axle that contributed to the crash, which he says left him with post-traumatic stress disorder. The steel company said in court documents filed Friday that the axles were properly designed and manufactured and that the suit should be dismissed. “Standard Steel admits that it knew its axles would be used on railcars, but denies that any of its axles were improperly designed or manufactured, and further denies that any of its axles created a substantial risk of harm,” says Elizabeth Sorenson Brotten, an attorney for the company. A National Transportation Safety Board investigation did not pinpoint the broken axle as the cause of the crash, but the NTSB ordered the industry to recall 43 axles made by Standard Steel in the same 2002 batch. Thompson’s suit says the axle was in “an unreasonably and dangerously defective condition” when it was sold and that the company failed to “adequately warn” Thompson or BNSF. The accident near Casselton on Dec. 30, 2013, happened when a train carrying soybeans derailed in front of Thompson’s train, causing the oil tanker train to also derail. The crash spilled about 400,000 gallons of crude oil and set off a fire that could be seen for miles.
State Health Council ratifies radioactive waste rules - (AP) — North Dakota’s State Health Council ratified Tuesday a reapproval of rules allowing elevated levels of oilfield radioactive waste to be dumped at certain landfills. The 11-member advisory panel to the state Health Department voted unanimously to reapprove last year’s rules allowing 50 picocuries per gram of concentrations of TENORM — technologically enhanced radioactive material. It had been 5 picrocuries per gram. Picocuries are a measure of radioactivity. The rules are based on a $182,000 study it funded by Illinois-based Argonne National Laboratories that sought to determine the exposure risk of radioactive waste to oilfield and landfill workers and the public. The study originally was to be funded in part by the oil industry, but that was scrubbed after public criticism that it smacked of conflict of interest. Environmental groups had alleged last year’s advisory panel meeting was held illegally. Attorney General Wayne Stenehjem issued an opinion in March saying the panel violated state law by not providing adequate notice of the meeting. The North Dakota Energy Industry Waste Coalition and the Dakota Resource Council also are suing in state court over the rules, a lawsuit that attorney Sarah Vogel said Tuesday will proceed. More than 50 opponents turned out Tuesday to voice their displeasure with the rules, which regulators say are intended to crack down on the illegal dumping of radioactive oil filter socks, the tubular nets that strain liquids during the oil production process.
8,400 gallons of oil-saltwater mixture spills near Mohall - (AP) — A damaged injection line has caused a spill of about 8,400 gallons of a mixture of saltwater and oil in Bottineau County. The North Dakota Department of Health says the spill happened Wednesday about 3 1/2 miles north of Mohall. A representative of Texas-based Enduro Operating LLC, which operates the line, wasn’t immediately available to comment. Initial estimates show about 8,400 gallons of what’s known as produced water, a mixture of saltwater and oil that can contain drilling chemicals, was released onto a pasture. The department says no surface water has been impacted at this time. The Health Department says it will work with the company on plans for remediation.
Saltwater spill reported at well site near White Earth (AP) — North Dakota regulators say almost 20,000 gallons of oilfield wastewater has been contained and recovered at a saltwater disposal well in Mountrail County. Regulators with the state Oil and Gas Division say Houston-based Oasis Petroleum North America reported the 470-barrel spill on Wednesday at the well near White Earth. A barrel is 42 gallons. Officials say the spill was caused by a failed fitting that caused a tank to overflow. A state inspector has been on site investigating the spill. North Dakota Department of Mineral Resources spokeswoman Allison Ritter says no water sources were affected. Saltwater is an unwanted byproduct of oil production and is considered an environmental hazard by the state. It is many times saltier than sea water and can easily kill vegetation exposed to it.
Drilling mishaps damage water in hundreds of cases -- When a pipeline break in North Dakota spilled salty, toxic drilling wastewater into a tributary of the Missouri River last year, it was national news. But it was only one of more than 640 oil and gas spills that affected groundwater or surface water in some way in 2015, according to a review of state and federal records by EnergyWire. Such spills can contaminate water with oil, salt, metals and even radiation. At nearly 3 million gallons, the January 2015 pipeline break north of Williston, N.D., was the largest spill reported to have affected water (Greenwire, Jan. 26, 2015). Most were far smaller. But 500,000 gallons of coalbed methane wastewater reached a small creek in southern Colorado in July 2015, and a 250,000-gallon spill from a West Texas well site in February 2015 reached the Pecos River. Water spills can create more problems than land spills because the contaminants spread faster, said Desirée Plata, an associate professor of chemical and environmental engineering at Yale University who has studied oil and gas spills. "If something is released to a solid piece of land, it does buy you time and manageability" to scoop up the material for treatment or burial elsewhere, she said. "The water's moving downstream before you have a chance to do anything about it." "Water is always key," Skinner said. "The minute water gets involved, it kicks off another level of variables, because it can travel and has the potential to affect so many people." Since 2009, nearly 2,500 spills have been reported to have affected groundwater in some way, according to the EnergyWire review. But that is likely an undercount, as many oil and gas agencies don't track whether spills affect water. Some don't even track spills at the state level.
North Dakota oil output drops 20K barrels daily in June (AP) — North Dakota’s oil production decreased by more than 20,000 barrels a day in June. The Department of Mineral Resources says the state produced an average of 1.02 million barrels of oil daily in June, down from 1.04 million barrels in May. North Dakota’s production record was set in December 2014 at 1.22 million barrels daily. North Dakota also produced 1.66 billion cubic feet of natural gas per day in June, up from 1.64 billion cubic feet daily in May. The June tally is the latest figure available because oil production numbers typically lag at least two months. There were 34 drill rigs operating in North Dakota’s oil patch on Friday, which is up six rigs from the June average.
New crude oil shipment applications on hold at Cherry Point (AP) — The Whatcom County Council has temporarily banned new permit applications for projects that ship crude oil and other unrefined fossil fuels out of Cherry Point. The 60-day moratorium unanimously approved Tuesday night prevents shipments or exports of fuels such as methane, coal or crude oil from tar sands not processed in that industrial zone north of Bellingham. The council says the emergency measure is needed to protect public health and safety, while the county weighs land-use changes at Cherry Point that could restrict future crude oil and other fossil fuel exports. In its ordinance, the council cited the dangers of increased shipments of crude oil by train and pipeline through the area and the need to prevent new permit applications while changes are considered. The moratorium, however, wouldn’t affect current shipments or projects. Cherry Point, located on Puget Sound with access to deep waters for shipping, is the site of an aluminum smelter and two oil refineries. In recent years, BP and Phillips 66 have expanded their facilities to accept crude oil shipments by train. In May, the U.S. Army Corps of Engineers denied a permit for a $700 million project to build the nation’s largest coal-export terminal at Cherry Point. The Lummi tribe successfully argued the project would interfere with its treaty-protected fishing rights. The terminal would have handled up to 54 million metric tons of dry bulk commodities, mostly coal, at Cherry Point for export to Asia.
Statement: Emergency Moratorium Stops All Unrefined Oil, Coal, and LNG Export Infrastructure Projects in Whatcom County, WA -- On Tuesday, July 26, 2016, the Whatcom County Council unanimously approved a 60-day emergency moratorium to immediately suspend approval of any proposed projects that could facilitate shipment of unrefined oil, coal or gas through Whatcom County. The move temporarily prevents permitting for new projects that would allow the shipment or export of crude oil, coal, or liquefied natural gas (LNG) from Cherry Point. The emergency moratorium was put into place while the county finalizes a Comprehensive Plan update that will inform future zoning regulation changes that could prevent permits for new projects facilitating the export of crude oil, coal, or fracked gases. Cherry Point is home to two oil refineries (BP and Phillips 66), a liquid petroleum gas (LPG) processing and export facility (PetroGas), and three pipelines that carry crude oil, natural gas, and refined petroleum products. In response, environmental organizations RE Sources for Sustainable Communities and Stand issued the following statements:
Why is some plastic recycling no longer cost-effective? Blame fracking - The past couple of years of relatively cheap crude oil and natural gas has upended the industry with the greenest image: recycling. Yes, it's still an advantage for many businesses and municipalities to recycle rather than have the junk hauled to a landfill. But only a few years ago, there was plenty of cash in reselling that trash - paper, plastics and metal - to provide a nice profit for the recycling companies and give money back to the cities and companies producing the waste. No longer. And if that doesn't turn around, it may mean some people will pay relatively more for trash pickup than if the market for recycling were better. The problem is not only about the cheap oil and gas made possible by fracking in America's shale fields, and particularly in Texas. It's also linked to a slump in the world demand for raw materials.A used plastic water bottle than once might have been turned into a few threads of polyester in a pair of Chinese-made jeans, woven into a carpet or been part of another bottle is now struggling harder to find a new home. Nationwide, around 200 of more than 7,000 scrap recycling companies have gone belly-up over the past couple of years, said Joe Pickard, chief economist for the Institute of Scrap Recycling Industries. Many others have throttled back operations, he said. "The price volatility makes it really hard for our guys to do business," he said.
EIA: "Gasoline prices at 16-week low, expected to average less than $2 a gallon by December" -- The EIA released the Short-Term Energy Outlook today. From the STEO:
- • EIA expects the retail price of regular gasoline to average $2.19/gal during the 2016 summer driving season (April through September), 6 cents/gal lower than projected in last month's STEO and 44 cents/gal lower than the price in summer 2015. EIA expects that the U.S. average retail price of regular gasoline reached a peak of $2.37/gal in June and will fall to an average of $2.05/gal in September and to an average of $1.92/gal in December.
- • The monthly average spot price of Brent crude oil decreased by $3/b in July to $45/b, which was the first monthly decrease since January 2016. Significant outages of global oil supply contributed to rising oil prices during the second quarter of 2016. However, concerns about future economic growth related to the United Kingdom's June 23 vote to exit the European Union and the easing of supply disruptions in Canada contributed to falling oil prices in late June. Prices continued to fall in July because of concerns about high levels of U.S. and global petroleum product inventories, despite relatively strong demand, and because of growing U.S. oil rig counts. The Baker Hughes U.S. active oil rig count increased for six consecutive weeks in July and early August, the longest stretch of weekly increases in almost a year.
- • EIA expects consistent global oil inventory draws to begin in mid-2017. The expectation of inventory draws contributes to accelerating price increases in the second quarter of 2017, with price increases continuing later in 2017. Brent prices are forecast to average $52/b in 2017, unchanged from last month's STEO. Forecast Brent prices average $58/b in the fourth quarter of 2017, reflecting the potential for more significant inventory draws beyond the forecast period.
Is This A Death Sentence For U.S. Strippers? -- There were a lot of predictions last year that 2016 would lead to the disappearance of many strippers – the oil well producers who take nearly depleted “stripper” wells and keep them running and producing a few barrels a day. This year is proving that strippers are much tougher than many analysts gave them credit for. While many strippers have taken action to cut back some of their less profitable wells, by and large, stripper production is much more resilient than many had expected. That reality holds important implications for the industry at large - more on that later though. The strippers are pursuing a variety of techniques to keep their leases active on wells and minimize their losses. The result is that while output has fallen from strippers, it is still significant as a portion of U.S. production according to the EIA. Getting reliable data on exactly how much production comes from stripper wells is nearly impossible because of the vast number of wells, and informality of the market. Strippers are facing new problems from proposed federal oil and gas regulations though. The oil price crunch has failed to force strippers to their knees, but the new federal rules might. The rules come from the U.S. EPA and relate to the production of methane from wells. For larger companies and more productive wells, the new rules are a nuisance, but not a serious threat to economic viability. For strippers producing 5, 10, maybe 15 barrels of oil per day at each well using inexpensive, and often antiquated equipment, the rules could be a death sentence."These new rules will cripple stripper and marginal well owners and operators, and on top of historically low oil prices, we are looking at total disaster," according to National Stripper Well Association Chairwoman Darlene Wallace. "By requiring the addition of new costly equipment requirements and expensive leak detection the economics within the oil and gas industry as a whole will be fundamentally changed, severely and forever."
Big Oil Increasingly Funding Dividends With Borrowing -- How do you ride out low oil prices and still pay dividends and CEO salaries? You double down on debt, apparently. All oil majors posted plunging profits or accumulated losses in the second quarter, blaming low crude prices and weak refining margins for these results that missed estimates—in some cases by wide margins. All saw cash flows shrinking, and yet, all kept dividends intact and vowed to continue investing in their respective major projects. Quite naturally, all these factors have led to supermajors amassing more and more debt since crude oil prices started slumping in 2014. Estimates by Bloomberg have shown that oil majors have doubled their combined debts to US$138 billion since 2014. That’s also a staggering tenfold jump from the 2008 total oil major debts. Looking at the Q2 balance sheets of some oil majors, we see debts rising, cash flows dropping, capex diminishing, but dividends firmly held, and in Exxon’s case, even raised by 2.7 percent compared with the second quarter of 2015—the same quarter in which Exxon’s earnings plunged 59 percent annually. Another U.S. oil major, Chevron—which swung to a US$1.47-billion net loss in the second quarter—reported a total debt of US$ 45.085 billion as of June 30, 2016, up from US$38.549 billion at the end of December 2015, while cash and cash equivalents dropped to US$8.764 billion from US$11.022 billion. Cash flow from operations shrank to US$3.7 from US$9.5 billion. Capex declined to US$12 billion from US$17.3 billion. But interim dividends were diligently kept unchanged, lest shareholders be disappointed by their returns. Dividends were also held steady at BP, whose second-quarter profit plunged to US$720 million from US$1.3 billion for the second quarter of 2015. In the group’s own words, “refining margins were the weakest for a second quarter since 2010.”
For Oil Companies $110 Billion Debt Wall Looms Over Next 5 Years - Bloomberg: The worst may be yet to come for some strained oil services companies as $110 billion in debt, most of it junk rated, creeps closer to maturity. More than $21 billion of debt from oilfield services and drilling companies is estimated to be maturing in 2018, almost three times the total burden in 2017, according to a report from Moody’s Investors Service on Aug. 9. More than 70 percent of those high-yield bonds and term loans are rated Caa1 or lower, and more than 90 percent are rated below B1. Speculative-grade debt is becoming increasingly risky, as the default rate is expected to reach 5.1 percent in November, according to a separate Moody’s report. The 12-month global default rate rose to 4.7 percent in July, up from its long-term average of 4.2 percent, Moody’s wrote. Of the 102 defaults this year, 49 have come from the oil and gas sector, Moody’s noted. “While some companies will be able to delay refinancing until business conditions improve, for the lowest-rated entities, onerous interest payments and required capital expenditure will consume cash balances and challenge their ability to wait it out,” Morris Borenstein, an assistant vice president at Moody’s, said in the report. The pressure on oilfield services companies will only increase through 2021, when nearly $29 billion of bonds and loans are expected to come due. Much of the maturing debt was issued between 2011 and 2015, when U.S. drilling was at a record high fueled by strong energy prices and new technologies. Moody’s expects that more than one-third of the analyzed companies will be carrying debt loads that are more than 10 times higher than earnings this year.
20 Months, 90 Bankruptcies In North-American Oil & Gas -- A report published earlier this month by Haynes and Boone found that ninety gas and oil producers in the United States (US) and Canada have filed for bankruptcy from 3 January, 2015 to 1 August, 2016. Approximately US$66.5 billion in aggregate debt has been declared in dozens of bankruptcy cases including Chapter 7, Chapter 11 and Chapter 15, based on the analysis from the international corporate law firm.Texas leads the number of bankruptcy filings with 44 during the time period measured by Haynes and Boone, and also has the largest number of debt declared in courts with around US$29.5 billion.Forty-two energy companies filed bankruptcy in 2015 and declared approximately US$17.85 billion in defaulted debt. The costliest bankruptcy filing last year occurred in September when Samson Resources filed for Chapter 11 protection with an accumulated debt of roughly US$4.2 billion. The study noted an acceleration in bankruptcy filings in 2016 with forty-eight filings in the first seven months alone including at least twelve cases with defaulted debts of at least US$1.2 billion. Oklahoma-based SandRidge Energy reported a US$8.2 billion deficit for during a one-week span in May where seven firms declared bankruptcy on debts of at least US$26.7 billion.In June and July, nine companies filed for bankruptcy with roughly US$6.7 billion worth of debt, as the Haynes and Boone study shows. The main factors behind the rise in bankruptcies is the fall in the price of oil, hurting companies that over expanded with cheap debt. Haynes and Boone researchers expect the number to bankruptcies to keep increasing in the months ahead due to the low price of oil. The bankruptcy bug isn’t only affecting North American energy firms. A Deloitte study published in February concluded that a “third of the world’s publicly-traded oil companies are at high risk of going bankrupt this year.”
Do Oil Companies Really Need $4 Billion Per Year of Taxpayers’ Money? - What would happen if the federal government ended its subsidies to companies that drill for oil and gas? The American oil and gas industry has argued that such a move would leave the United States more dependent on foreign energy. Many environmental activists counter that ending subsidies could move the United States toward a future free of fossil fuels — helping it curtail its emissions of heat-trapping carbon dioxide into the atmosphere. Chances are, it wouldn’t do much of either. In a new report for the Council on Foreign Relations, Gilbert Metcalf, a professor of economics at Tufts University, concluded that eliminating the three major federal subsidies for the production of oil and gas would have a very limited impact on the production and consumption of these fossil fuels. Mr. Metcalf’s analysis is the most sophisticated yet on the impact of government supports, worth roughly $4 billion a year. Extrapolating from the observed reaction of energy companies to fluctuations in the price of oil and gas, he models how a loss of subsidies might curtail drilling and thus affect production, prices and consumer demand. Cutting oil drilling subsidies might reduce domestic oil production by 5 percent in the year 2030. As a result, he thinks, the worldwide price of oil would inch up by only 1 percent. He assumes it will hardly be affected because other countries would increase production as the flow of American crude slowed. Demand would hardly budge, as the price of gasoline at the pump would rise by at most 2 cents a gallon.
U.S. Drillers Need $60 Oil to Stage Real Comeback, IEA Say - Bloomberg: While shale drilling in the U.S. is on the rise again, prices need to climb nearer to $60 a barrel for U.S. producers to have a “substantial” boost in activity, the International Energy Agency said. Producers remain “cautious on outlook,” and further drilling increases this year may be “limited,” the IEA said in its monthly report. Drillers hired more rigs this year as U.S. oil prices staged a rally that saw futures close at $51.23 a barrel in June, the highest so far this year. There were 381 active rigs as of August 5, the highest number since March 18, according to Baker Hughes Inc. data. That number remains more than 75 percent below the October 2014 peak, the IEA said. Despite the gains in the rig count, the IEA reiterated its view that shale oil production will decline by half a million barrels a day this year with a further drop of 200,000 barrels a day next year. The number of completed wells will drop by half this year compared with last year, it said.
Mexico's "Legendary" Oil Hedging Desk Is Quietly Preparing For The Next Plunge --While oil longs and Saudi Arabia are enjoying this week's latest, substantial short squeeze, prompted if not so much by the latest set of cheerful, if repetitive, IEA "rebalancing" forecasts, the fundamental reality as confirmed not only by a recent Morgan Stanley report which sees oil dropping to the mid-$30s, but also by the just released Baker Hughes oil rig count which reported a spike of 15 rigs in the past week, the most since 2015, suggests that there is more downside pressure in store for oil. Some are already actively hedging for just that. According to Bloomberg, Mexico has started "quietly" buying contracts to lock in 2017 oil prices when futures were near their peak in June, signaling the start of what has in prior years been the "world’s largest sovereign petroleum hedge." The Latin American country has been buying put options earlier than the usual period of late August to late September, according to Bloomberg sources, suggesting that at least according to one prominent trading desk, the oil peak has come sooner than expected this year. Specifically, Mexico is targeting the price of $49 as its breakeven, suggesting it does not expect oil to rise above this level.
What Is Happening With Propane Exports and Ship Cancellations -- U.S. propane production from natural gas processing has doubled over the past five years, but domestic demand has hardly moved the needle. So the only way the propane market has balanced is through exports, and it is no overstatement to say that the ship has really come in for U.S. propane exporters. All those exports have also helped support the U.S. propane market, holding inventories down to about where they were last year, and supporting propane prices at about 43% of crude oil versus 35% this time last August. But it looks like the market may be shifting, possibly pulling some of the export safety net out from under the market. That’s because the economics from exports are looking pretty dismal –– so bad, in fact, that cargos are being cancelled right and left. Today, we examine the market for propane exports, why the market is changing now, and what it means for propane over the next few months. Propane exports have been a frequent topic here in the RBN blogosphere. Back in 2012 we posted Exports Prescribed For Propane Relief. In 2013, we covered export volumes beginning to surge in She Don’t Lie, She Don’t Lie, Propane. Exports Take Off! and in 2014 we highlighted propane export volumes as they escalated further in Sail Away – Propane Exports Exceed 400 Mb/D For The First Time. Then, earlier this year in Spinning Wheel, we talked about the possibility that propane exports may be headed back down in a couple of years as propane’s use in ethylene steam crackers and propane dehydrogenation (PDH) plants ramps up. We remain convinced that Gulf Coast exports will stay at historically strong levels until petrochemical demand (and growth in East Coast propane exports) take some barrels out of the market, but it is also clear that export volumes have the potential to swing widely between now and then, depending on the price spread – the arbitrage value – between U.S. propane markets and those in Asia and Europe. That is what is going on right now.
The Pipelines Moving Crude, NGLs to Sarnia, and Moving Products Out -- In the past century and a half, Sarnia, ON has evolved into one of Canada’s leading refinery and petrochemical centers, and a major consumer of Alberta and Bakken crude and Alberta and –– more recently –– Marcellus/Utica natural gas liquids. Getting that oil and those NGLs to southwestern Ontario is the task of a small group of pipelines and a few rail facilities; other pipelines out of Sarnia help to move refined petroleum products to nearby demand centers. Today, we continue our comprehensive review of refinery and petchem-related infrastructure in and around Ontario’s Chemical Valley. As we said in Part 1 of our series, Sarnia was present at the creation of the North American oil industry –– an 1858 well in nearby Oil Springs, ON is said to have been the first on the continent, beating Col. Edwin Drake’s (of course) more famous well in Titusville, PA by a year. Over time, oil-production, refining and petchem infrastructure was developed in southwestern Ontario (as were pipelines and railroads), and Sarnia’s role as a major refining/petchem player continues to this day, decades after most oil production in southwestern Ontario dried up. Since what Americans hear about Canada sometimes seems to go in one ear and out the other, we’ll remind you that Sarnia is along the St. Clair River near the southern tip of Lake Huron. There are currently three refineries in Sarnia’s Chemical Valley with a combined capacity of about 277 Mb/d: Imperial (121 Mb/d; pink area along upper part of the St. Clair River in Figure 1), Suncor (85 Mb/d; light purple area just downstream from Imperial), and Shell (71 Mb/d; red area downstream from Suncor).
June Atlantic LNG production drops 16% year on year - LNG production at Trinidad-based gas liquefaction complex Atlantic LNG totaled 2.0 million cubic meters in June, down 16% year on year, according to a bulletin released Thursday by Trinidad and Tobago's Energy Ministry. The decline continues the trend of reduced production at the facility for the past 17 months compared with year-ago figures. Point Fortin-based Atlantic LNG has been struggling with ongoing natural gas curtailments by producers in Trinidad, which have impacted supplies since about 2010. The shortfalls stem from disruptions caused by upgrades to major gas infrastructure and a collapse in upstream investment by the largest gas producers in Trinidad.June LNG sales and deliveries from Atlantic were 44.2 million MMBtu, down 20% year on year, the report said. The company's sales and deliveries of NGLs in June totaled 383,382 barrels, down 20% year on year. Atlantic operates and manages four LNG trains in Point Fortin, with each train owned by a holding company comprised of different companies. The shareholders are BP; BG; Shell LNG; Summer Soca LNG Liquefaction; and the National Gas Co. of Trinidad and Tobago, according to the company.
US Gulf Coast distillate exports to Europe reach 1.29 mil mt in Aug to date: cFlow - Some 1.29 million mt of distillates, most of it likely to be diesel, have set sail from the US Gulf Coast for arrival in Europe in August, according to an estimate based on Platts trade flow software cFlow. The bulk of the cargoes are heading towards Northwest Europe, with the UK, France's Atlantic coast and the Amsterdam-Rotterdam-Antwerp hub taking the lion's share, as would be expected. While sources continued to report a closed USGC-Europe arbitrage, cheap freight rates were supporting the shipment of product across the Atlantic. Clean freight rates on this route were stuck at multi-month lows, with rates for Medium Range and Long Range 1 tankers assessed at $9.29/mt and $8.85/mt respectively Monday.In the jet market, volume was also said to be heading to Europe from the US: "There have been some DefStan [Defense Standard aviation fuel] cargoes placed into the EU," one trader said. A number of jet cargoes have been seen arriving, or are due to arrive into Denmark from the US over the past week. The 50,144 dwt Excelsior Bay arrived in Copenhagen from Pascagoula on August 5, while the 54,712 dwt Star Falcon is due to arrive in Copenhagen from the Port of South Louisiana on Thursday. The imported fuel was for domestic use, according to a source. In terms of gasoil flows, the MR Star Merlin is heading to the Mediterranean, with options to head to West Africa, with what is most likely high sulfur gasoil. The vessel loaded at P66's Alliance refinery in Louisiana, an occasional exporter of gasoil to Europe and West Africa. In an unusual movement, the Torm Troilus is heading to Lebanon. While the balance of probability indicates that the material would most likely be gasoil, market sources are expecting Lebanon to switch to 10 ppm ultra low sulfur diesel in September from the previous 350 ppm standard.
As US Crude Exports Soars, Here Are The Biggest Foreign Buyers Of US Oil -- Strange things are happening in a world continues to find itself with "low-priced" oil and an unprecedented gasoline glut, the latest of which is an unexpected boon for US fuel makers as Latin American refineries quietly go bust. As Bloomberg writes, from Brazil’s Petroleo Brasileiro SA to Mexico’s Petroleos Mexicanos, state oil companies have failed to complete nine projects worth at least $36.4 billion that would have supplied 1.2 million barrels of gasoline and diesel daily. U.S. refiners have stepped up to help fill the gap, with exports almost doubling in the past six years, according to the U.S. Energy Information Administration. Falling oil prices, high levels of debt and failure to find partners to help finance the plants are among the reasons cited by Pemex, Costa Rica’s Refinadora Costarricense de Petroleo SA and Colombia’s Ecopetrol SA for postponing their plans. Brazil’s Petrobras has been slowed by the price drop as well as a corruption scandal. “Refinery investment plans in the region have really fizzled out over the past year or so,” Mara Roberts, a BMI Research analyst based in New York, said in an e-mail. “Latin America is keen to take in growing U.S. supplies.” As a result, US exports to the region have been rising steadily and reached a record 1.88 million barrels a day this year. Latin America now accounts for 42 percent of America’s fuel exports, up from 38 percent a decade ago. U.S. fuel output increased 4.1 percent over two years to a record 19.9 million barrels a day in 2015, EIA data show. US gasoline exporters aren't the only ones benefiting from current conditions. As the EIA writes in its most recent blog post, since the removal of restrictions on exporting U.S. crude oil in December 2015, the number of countries receiving exported U.S. crude has risen sharply. These exports have occurred despite a sustained narrow price premium of international crude oil prices over U.S. domestic crude oil prices, the many costs associated with arranging cargoes for export, and falling U.S. crude production. In the first five months of 2016, U.S. crude oil exports averaged 501,000 barrels per day (b/d), 43,000 b/d (9%) more than the full-year 2015 average. This rate of growth is significantly slower than before the restrictions were lifted, when year-over-year growth from 2012 to 2013 was 100%, and then 162% from 2013 to 2014 (Figure 1). However, after the lifting of restrictions, the number and variety of destinations for U.S. crude oil exports has changed. So far in 2016, crude oil was exported to 16 different nations, six more than 2015 and double the number of destinations in 2014.
How the Marshall Islands Became a Top U.S. Crude Export Destination (Reuters) - Best known for diving, lagoons and the island that gave the world the name for the bikini swimsuit, the Marshall Islands is now gaining attention as a top-five destination for U.S. crude exports despite the lack of a refinery to process the oil. The shipments to the Marshall Islands, a tiny atoll nation in the middle of the Pacific Ocean, are a quirk of U.S. regulations, providing a vivid example of how traders carry out arbitrage opportunities and how fuel is supplied to some of the world's most remote regions. Since the removal of restrictions on exporting U.S. crude in December 2015, the oil has gone to a rising number of countries, with an average monthly volume of over 500,000 barrels per day (bpd), according to figures from the U.S. Energy Information Administration (EIA) published this week. Among the top takers of U.S. crude are the Netherlands, Japan and Italy. But, ahead of France, at number five comes the Marshall Islands. "The Marshall Islands... is the fifth-largest non-Canadian destination for U.S. crude oil exports in 2016, averaging 14,000 barrels per day," the EIA said. They are an unlikely destination for crude exports, with a population of 50,000, located in the middle of the Pacific to the west of Hawaii and to the east of the Federated States of Micronesia. The EIA says that the U.S. oil is unlikely to remain in the Marshall Islands. "With no refineries, the Marshall Islands are unlikely the final destination, but rather may be the location of ship-to-ship transfers for delivery to destinations in Asia, or a point at which a cargo of crude oil would await a buyer in Asia," the agency said.
Japan's Tepco steps up LPG procurement to meet summer power demand - Japan's Tepco Fuel & Power is stepping up LPG procurement for thermal power generation to meet peak summer power demand over July-August, sources familiar with the matter said this week. Tepco Fuel & Power, a unit of Tokyo Electric Power Company Holdings, bought a few LPG cargoes in July, marking the first procurement of the fuel in fiscal 2016-2017 (April-March), sources said. Traders said the utility was likely to have bought two to three cargoes of LPG for delivery in July, with a propane/butane mix of either 60:40 or 50:50. For August, Tepco Fuel & Power had bought a half cargo of 21,000 mt of propane so far, a trader said. It was unclear if the utility will buy any more cargoes for August.
Japan LNG buyers pay average $5.80/MMBtu for spot cargoes contracted in July - Natural Gas | Platts News Article & Story: Japan LNG buyers paid an average of $5.80/MMBtu for spot cargoes contracted in July, data released Tuesday by the Ministry of Economy, Trade and Industry showed. METI did not publish an average contracted price transacted in June due to a lack of reported trades. The ministry gathers data from utilities and other LNG buyers in the country to publish a simple average of contract prices. The delivery months of the cargoes are not disclosed. Platts JKM averaged $5.63/MMBtu in July, reflecting spot deals concluded for August and September deliveries to Japan and South Korea. METI also said Tuesday that the average price of cargoes delivered into Japan in July was $6/MMBtu, jumping 33.3% from $4.50/MMBtu in June. Kyushu Electric was heard to have bought a cargo in July, via a Japanese trader, from Trafigura above $6/MMBtu in July, Platts reported earlier. The cargo, a reload lifted from Singapore on July 17, was being shipped aboard the Corcovado and arrived at Kyushu Electric's Oita terminal on July 27, according to Platts shiptracking software cFlow. The Platts JKM for July delivery averaged $4.833/MMBtu. The assessment period started on May 16 when the JKM stood at $4.475/MMBtu and ended on June 15 when it was assessed at $5.25/MMBtu.
EIA sees US gas output increase in late 2016, 2017; Q3 estimate lower - Natural gas price increases and growing LNG exports should give a boost to natural gas marketed production in late 2016 and 2017, the US Energy Information Administration said Tuesday, even as it scaled back third-quarter production estimates. EIA's August Short-Term Energy Outlook said natural gas marketed production in May averaged 78.1 Bcf/d, down 2 Bcf/d from a record daily average production set in February, The agency lowered by 0.28 Bcf/d to 79.22 Bcf/d its natural gas marketed production estimate for the US in Q3 2016. Yet it forecast production should pick up in late 2016, and rise 0.6% in 2016 and 2.9% in 2017. In recent weeks, it said slightly tapering production and high use of natural gas for power generation contributed to gas injections falling short of average levels. "Natural gas inventories were drawn down in the last week in July for the first time in 10 years during the June-August period, when gas stocks normally increase," EIA Administrator Adam Sieminski. EIA said working gas inventories were 3.288 Tcf as of July 29, 6 Bcf below the previous week's levels.Nonetheless, with inventories at record levels because of last winter's warm weather, the winter season may still start over with record high gas in storage, EIA said. It forecast inventories at 4.042 Tcf at the end of October. Gas pipeline exports to Mexico are likely to rise by 0.7 Bcf/d in 2016 and 0.1 Bcf/d in 2017, it said, noting Mexico's power sector demand and flat production has led to growing demand this year.
US EIA chief shares short-term outlook for oil market: Fuel for Thought -- The 100th episode of the weekly S&P Global Platts Capitol Crude podcast, which aims to demystify the complex world of US oil policy, featured Adam Sieminski, head of the US Energy Information Administration. Here are excerpts from the interview, edited for space. Listen to the podcast in full.
Oil Companies Face $110-billion in Debt, Default Rates Are Rising: Moody's - As if oil in the $40s and hyper-aggressive Middle Eastern production wasn't enough to deal with, oil services and drilling companies have been dealt another blow with news that their cumulative debt load is estimated at $110 billion, and that it'll have to be paid off over the next five years. According to a Moody's Investors Service report released this week, $60 billion of the debt is from bonds sold to investors; another $45 billion is from revolving credit lines. Most of the debt is junk-rated: over 70 percent of the high-yield bonds and term loans are rated Caa1 or lower, and over 90 percent are rated below B1. The report states that speculative-grade companies account for 65 percent of all maturities and expirations; estimates for 2018 show the maturity wall growing dramatically to more than $21 billion, almost three times the total debt burden in 2017, and the debt burden will increase in 2021, when nearly $29 billion of issuance and revolvers is scheduled to come due. The credit ratings agency says one-third of the 67 companies on its list could see debt levels climb to 10 times more than raw earnings: "Not surprisingly, these companies are most at risk for debt restructurings and defaults," wrote Morris Borenstein, assistant vice president at Moody's.
Investors Have $100 Billion to Spend on Oil Assets No One Else Wants - Bloomberg: The long wait may finally be over. Since the great crash of oil in mid-2014, more than $100 billion has been raised by buyout firms and distressed-debt funds eager to scoop up energy assets on the cheap. But as the months rolled by, few opportunities cropped up as cash-starved drillers limped along with the help of their bankers. Not any more. What started out as a trickle has now turned into something much more, with Blackstone Group LP, Apollo Global Management LLC and WL Ross & Co. all jumping in this year to buy a grab bag of assets at discounted prices. Precise numbers are hard to come by, but in conversations with investors, bankers and analysts across the industry, there’s little doubt that private equity firms are ramping up their investments in everything from undrilled and developed oil and gas acreage to troubled loans. “We’ve gone very aggressively into the market” after holding back for most of last year, said Shaia Hosseinzadeh, who oversees energy-focused distressed-debt investing at WL Ross, the namesake firm of billionaire dealmaker Wilbur Ross. “You’ll see more deals in the second half.” Deals are picking up for a few key reasons. Oil prices are no longer in a free fall, but at $40 a barrel, they’re still well below the $60 to $80 levels many drillers need to break even. Wall Street has started to turn away the weakest borrowers after extending more than $2 trillion in loans and commitments during the boom. And with the cash crunch causing a surge in bankruptcies this year, many firms are looking to unload assets to stay afloat. Much of the action is unfolding in distressed debt, where buyers have targeted loans and bonds with an eye on seizing ownership in bankruptcy or restructuring. Billionaire Leon Black’s Apollo, WL Ross and EIG Global Energy Partners have snapped up more than half of the $1.6 billion in unsecured debt of Permian Resources, an oil and gas producer started in 2014 by the late Aubrey McClendon, people familiar with the matter have said. The explorer has leaseholds to 85,000 net acres in the Permian Basin of west Texas, one of the most prolific oil and gas fields in the country.
UK considers plan to pay households affected by fracking | GulfNews.com: Some tax proceeds from shale gas developments in Britain could be given directly to residents, Prime Minister Theresa May said on Sunday, in a bid to help clear the path for an industry hampered for years by local opposition to fracking. Britain is estimated to have substantial amounts of shale gas trapped in underground rocks yet fracking applications have struggled to find approval from local communities, concerned about noise and environmental impacts. Last year, then finance minister George Osborne said the government would create a shale wealth fund that would receive up to 10 per cent of tax revenue from shale gas developments for investments in communities affected by the projects. May, who took over as prime minister last month after Britain’s June 23 vote to leave the European Union, said she wanted to look at the option of this money being paid directly to residents rather than to local authorities. “The government I lead will be always be driven by the interests of the many, ordinary families for whom life is harder than many people in politics realise,” May said in a statement on Sunday, ahead of the launch of a consultation on the fund.
Theresa May "trying to bribe Britons to accept fracking" -- Theresa May has been accused of trying to bribe homeowners after offering up them up to £20,000 each to back fracking . The Prime Minister hopes to persuade reluctant families to accept the controversial method to extract shale gas . Supporters say taping into Britain’s vast reserves would provide a massive jobs boost and slash fuel prices. But critics claim have repeatedly raised safety fears and say the technology is too risky . Mrs May hopes the cash boost will quell resistance. But Shadow Energy Secretary Barry Gardiner said: “An incentive to do the wrong thing is properly called a bribe and Theresa May is using this bribe to set neighbour against neighbour.
Massive Oil Rig Washes Ashore in Remote Scotland - A massive ocean oil rig that was being towed through the Atlantic broke free during severe weather and washed ashore on the remote Isle of Lewis in Scotland. The Transocean Winner broke free from its tow late Sunday night and washed up on the coast near Carloway, Scotland, according to the Maritime and Coastguard Agency (MCA). There are no personnel on board, according to the MCA, but there are 280 metric tons (617,294 pounds) of diesel on board. The Secretary of State’s Representative for Maritime Salvage and Intervention (SOSREP) and the MCA's counter pollution branch have been closely monitoring grounded oil rig. The MCA announced this morning that final preparations were being made to put a small team of salvors on board the oil rig to do an initial assessment. "This initial [reconnaissance] will be checking a number of things, including fuel tanks," SOSREP spokesman Hugh Shaw said in a statement. "Weather permitting, it’s then intended to put a second larger group of salvors on tomorrow to carry out a more detailed inspection." A temporary exclusion zone of 300 meters (about 984 feet) has been implemented in the area around the rig, according to the MCA.
UK coast guards warn sightseers away from oil rig on beach - (AP) — Police are warning people to stay away from an oil rig that was blown onto a remote Scottish beach in a storm. The Transocean Winner drilling rig was being towed when it broke free of its tug and ran aground on the Isle of Lewis off Scotland’s west coast on Monday. Environmental groups have expressed concern, but coast guards say the risk of pollution is low. Salvage crews are working to recover some 280 tons of diesel on board. Local politicians are calling for an emergency towing vessel to be based in Scotland’s Western Isles after reports it took the coast guard 18 hours to reach the rig. Scottish National Party lawmaker Angus MacNeil says he also wants to know “why this oil rig was being towed in severe winds.”
Diesel oil spills from grounded oil rig on Scottish island -- (AP) — A British official says thousands of liters (gallons) of diesel have likely spilled from an oil rig that was blown onto a remote Scottish beach. The Transocean Winner was being towed when it broke free of its tug and ran aground on the Isle of Lewis on Monday. The Maritime and Coastguard Agency says two fuel tanks on the rig have been breached. Hugh Shaw, the government representative for maritime and salvage, said “we’re probably talking about a maximum of 52 (metric) tons of diesel oil as the worst-case scenario.” That’s more than 50,000 liters (13,000 gallons). Shaw told the BBC Thursday that any oil spill was a concern, “but this is extremely low-risk.” He said there was no sign of oil on the ocean surface or coastline.
BP reveals Great Australian Bight oil drilling sites are within marine reserve --BP has quietly announced the planned location of its controversial drilling in the Great Australian Bight, and the two sites fall within the Commonwealth Marine Reserve. Despite being the subject of a Senate inquiry, and having its application to drill knocked back twice by the regulator NOPSEMA, BP had so far never released the precise location of its exploratory drilling wells in the pristine Great Australian Bight. In a document released by BP entitled “Update on regulatory approvals”, the company included a small map showing the location of the planned wells. The map doesn’t indicate the location of the marine reserves but, when overlaid with the reserve maps, the wells could be seen to fall within them. According to the Department of Environment, that particular area was inscribed in the reserve system for a range of reasons including being a “globally important seasonal calving habitat for the threatened southern right whale” and important foraging areas for sea lions, white sharks and sperm whales. The section of the marine park that BP wants to drill in is listed as a “multiple use zone”, which allows for mining, oil and gas activities. According to analysis by the Wilderness Society, 47% of BP’s exploration leases were outside the marine reserves. A spokeswoman for BP said they believed the oil industry could safely coexist with the marine environment.
Western Europe's Top Oil Producer Has a Surprise for Markets - For Norway, the collapse in crude prices has a silver lining: output has exceeded expectations every month for the past two years. That’s likely to continue as oil companies boost efficiency and pump at full pace amid dwindling revenue, according to the head of Petoro AS, the state-owned oil company that owns more than a quarter of the petroleum output in Western Europe’s biggest producer. “Improvement efforts and the focus on profitability have led to very high regularity,” Chief Executive Officer Grethe Moen said in a phone interview on Friday from Stavanger, Norway’s oil hub. “There’s no sign this won’t last, at least thus far.” Companies, led by state-controlled Statoil ASA, which operates about 70 percent of the fields, have slashed investments and sought to increase efficiency to combat a rout that has left oil prices 60 percent lower than two years ago. But even as spending on future production dwindles, current output has risen thanks to more efficient operations and past investments that have just started delivering barrels.
Nigeria using power, persuasion to curb oil militant attacks (AP) — Nigeria’s government has resumed paying stipends to former militants even as security forces’ air and ground assaults have reportedly killed scores of fighters disrupting petroleum production in the oil-rich Niger Delta. President Muhammadu Buhari’s government is using power and persuasion in a bid to halt attacks on oil installations that have cut production from 2.2 million to 1.2 million barrels a day. The attacks have slashed the budget of a government dependent on oil for 70 percent of its revenue. The Nigerian Air Force says it has been bombing “legitimate targets, such as observation post, anti-aircraft gun position, boats laden with suspected stolen petroleum products and armed combatants.” Residents say scores of militants have been killed. There was no way to get a death toll independently. The commander of a joint task force, Rear Admiral Joseph Okojie, said the massive military deployment since Sunday is in response to “threats by militants to declare the Niger Delta Republic on August 1, 2016.” Such demands are new in the Niger Delta, where oil militants are threatening to join forces with separatists from the southeast who have renewed their intentions to create a state called Biafra. Nigeria suffered a civil war that killed a million people in the late 1960s after the Igbo people declared an independent Biafra.
Militants: Ex-president is sponsor of Nigeria oil attacks - (AP) — A splinter group of Nigerian oil militants accuses former President Goodluck Jonathan and other politicians in the oil-rich Niger Delta of sponsoring attacks on oil installations that have slashed the West African nation’s petroleum production. Jonathan denied the allegations Monday and, through a spokesman, said the militants want to kill him. On Sunday, the Reformed Niger Delta Avengers published names of 20 alleged sponsors of the Niger Delta Avengers, the group it broke away from, including former and current governors of southern states. Politicians long have been accused of backing the oil militants. Southerners are accused of trying to destabilize the government of President Muhammadu Buhari, a Muslim from the north. The southerners, who are predominantly Christian, have accused politicians backing Buhari of sponsoring the militants as a ploy to militarize their region. Buhari made himself even more unpopular in the south by suspending stipends under a 2009 amnesty program for 30,000 ex-militants who were paid to halt attacks. Buhari’s government last week resumed the payments and said it is negotiating with the Movement for the Emanicipation of the Niger Delta, which negotiated the amnesty. But that group has been denounced as corrupt by the Niger Delta Avengers, a new group responsible for this year’s devastating attacks that have cut oil production by up to 45 percent. It has refused to negotiate without foreign mediation.
Kuwaiti state oil firm says spill strikes onshore oil field (AP) — Kuwait’s state-run oil company says an oil spill has struck an onshore field. The Kuwait Oil Company says in a statement on Tuesday that workers were trying to contain the spill at the Ahmadi field. The company says the spill struck at its BWD-133 drilling rig. The company did not offer any details on how much oil had been spilled or if the spill was ongoing. It said no workers had been injured in the incident. In February, a fire erupted at an oil well in northern Kuwait after an oil spill. OPEC member Kuwait is a major oil producer. The U.S. Energy Information Administration says Kuwait produces some 2.8 million barrels of crude oil a day and holds the world’s sixth-largest oil reserves.
Oil groups’ optimism shortlived as pressure mounts —When the price of oil rose above $50 a barrel in June, it looked like the worst was over for international oil companies. Few people expected a return to the industry’s $100 a barrel heyday, but steady recovery seemed under way. Two months later, with prices back down to about $45 a barrel, that optimism has been extinguished. The oil majors’ second-quarter results in recent weeks were mostly worse than expected, with sharp drops in profits, rising debts and gloomy outlooks. As well as weak prices of crude oil and natural gas, margins for refined products are also being squeezed, as excess production and high storage rates ripple down the supply chain. BP said its refining margins in the second quarter were the lowest since 2010. “The glut of crude oil has translated into a glut of refined product,” says Michele Della Vigna, co-head of European equity research at Goldman Sachs. “So the integrated oil majors are getting hit at both ends.” In response, companies are once again reducing spending. Royal Dutch Shell, fresh from its £35bn takeover of BG Group, said capital expenditure this year would be 38 per cent less than the pair jointly invested as standalone companies in 2014. Yet, cost cuts alone are not enough to defend shareholder returns. With the exception of Eni of Italy, all the oil majors have so far maintained their prized dividends — but they have had to increase borrowing to do so.
Why Oil Under $40 Will Bring It All Down Again: That's Where SWFs Resume Liquidating -- After several months of aggressive selling of stocks in late 2015 and early 2016, the culprit for the indiscriminate liquidation and concurrent market swoon was revealed when it emerged that the seller was not only China (which was forced to sell USD-denominated reserves to offset a surge in capital outflows following the Yuan devaluation), but also Sovereign Wealth Funds belonging to oil-exporting countries, who were dumping billions in risk assets to offset the collapse of the price of oil, which in turn exacerbated current account and budget deficits. Among the prominent sellers was Norway and Saudi Arabia, arguably the biggest casualties of the death of the Petrodollar to date, as well as Abu Dhabi, Kuwait and most other SWFs, listed on the table below. As JPM calculated back in January, the SWF equity selling was inversely proportional to the price of oil: according to the bank, SWF's would liquidate some $75 billion in equities in 2017 assuming oil at $31 per barrel. Needless to say, the lower oil goes, the more selling there would be. "This prospective $75bn of equity selling by SWFs in 2016 is not huge but becomes significant after taking into account the potential swing in equity fund flows," JPM continued, in an attempt to discuss the impact this will have on markets. "Last year retail investors bought $375bn of equity funds globally. This year we expect an amount between 0 and $200bn. Subtracting $75bn of selling from SWFs would leave the overall equity flow from Retail+SWF investors barely positive for 2016." No matter the cause, the biggest benefit of this oil surge is that the same SWFs which were actively selling stocks in early late 2015 and early 2016 put their liquidation on hold as oil rose above $40. And in this illiquid, low volume market, the absence of a determined seller is all that it took to push the S&P to all time highs, and as of Friday's close, just shy of 2,200, a level which even sellside brokers such as Goldman believe is effectively in bubble territory and in the 99% percentile of all overvalued metrics.
Of $40 oil and forced SWF selling - You know who doesn’t like a falling oil price? Sovereign wealth funds for countries dependent on high oil prices and in love with their (endangered) petrodollars.And a risk based on that dislike is a presumption of forced selling and equity market weakness becoming self-fulfilling as/ if oil prices slide. Stable oil prices means SWFs don’t have to suddenly liquidate but the opposite would also seem to be true…The last time JPM’s Flows & Liquidity team looked at this risk they based it on a fall in Brent to an average price of $45 per barrel.They now assume an average oil price of $40 for 2016 and also note that the “YTD average has already fallen to $42.”:In our previous analysis based on a $45 average oil price for 2016, we projected the current account balance for oil-producing countries to worsen from around -$70bn in 2015 to -$140bn in 2016. This estimate is based on the same sensitivity of the current account balance to the change in oil prices as last year, i.e. between 2014 and 2015. However, the depletion of official assets could be higher than the current account deficit if these countries also experience capital outflows as it happened last year. If we assume $80bn of capital outflow for 2016, the same level as last year, we project a depletion of $150bn in FX reserves and a depletion of $50bn in SWF assets. If we assume an average oil price of $40 for 2016 instead, using a similar sensitivity analysis and assumptions as described above, we project the current account balance for oil-producing countries to worsen from around -$70bn in 2015 to -$183bn in 2016. This would imply depletion of $170bn in FX reserves and a depletion of $75bn in SWF assets….A $40 average oil price, and assuming that these reserve managers and SWFs sell in accordance to their average allocation, would imply selling of $118bn of government bonds and $45bn of public equities. If we assume reserve managers and SWFs are mostly done with selling equities and that they are more likely to liquidate fixed-income mandates, this would imply selling of around $120bn-$160bn of government bonds and $10bn-$15bn of corporate bonds. However, should oil prices continue to fall further below $40 on a sustained basis, SWFs would face greater pressure to sell equity mandates, similar to the end of last year and the beginning of this year.
Morgan Stanley Expects Oil To Hit $35 In A Few Weeks: Here's Why -- Morgan Stanley's Adam Longson has been one of the most bearish sellside analysts on oil, and overnight he confirmed he isn't going to change his opinion any time soon, and instead warns that while "a profit taking and short covering bounce in oil late in the week has led some to declare that the troubles are behind us" he believes that "very little has been addressed fundamentally to correct these problems. Greater headwinds lay ahead, especially for crude oil. In fact, we would argue that recent price action and developments may have exacerbated the situation." Putting a number to his call: oil will slide to $35 in the next 1-3 months. The key point in Longson's latest note is a simple, and recurring one: "Fundamental Oil Issues Have Not Been Addressed" and that "Physical market stress due to fundamental headwinds is still ahead." This is what he says: A profit taking and short covering bounce in oil late in the week (partly on a US gasoline draw driven by lower imports) has led some to declare that the troubles in oil are behind us. However, while the market began to price in some of the headwinds prematurely via flat price, very little has been addressed fundamentally or through physical market indicators to correct the material problems in oil markets. Greater headwinds ahead, especially for crude oil. In fact, we could argue that recent price action and developments may have exacerbated the situation.
- The fall in oil prices has only lifted refinery margins, which should support product oversupply: Refinery margins (p.38-39) are not at a level to cause distress or the large run cuts that will be required, despite lower product cracks. The issue is that lower oil, fuel oil and natural gas prices globally reduce operating costs, while a strong USD has lowered general opex and G&A for Europe and Asia on a relative basis.
- A cut in Saudi OSPs reinforces Asian crude oil demand, which should delay necessary run cuts. Asia and the Middle East were the primary incremental contributors to the oversupply in global gasoline and diesel. Expectations had been for Asia to see economic run cuts, but efforts from oil suppliers to support crude demand and refinery margins reduce that probability. Hence, product markets may need to, and are likely, to deteriorate further before corrective actions are taken.
- Returning supply is a boon to refiners. The crude oil oversupply has shifted more refiners to spot purchases where new distressed cargoes can provide opportunities.
- Refiners are reluctant to capitulate. During earnings season, a number of refiners admitted that run cuts may be needed, but few were willing to make economic run cuts themselves. In fact, the global fall maintenance schedule looks surprisingly light at this point. We expect more maintenance or unplanned outages (e.g. Whiting) ahead.
OPEC bullish on oil demand in H2 2016, says current price slide 'temporary' - OPEC on Monday sounded an optimistic tone about the oil market, saying that higher demand is expected in the third and fourth quarters. The comments, from Qatar energy minister Mohammed bin Saleh Al-Sada, who serves as OPEC president, are likely to quell any expectations of a production freeze deal in the near future. The recent decline in oil prices "is only temporary," and the result of weaker refinery margins, inventory overhang and the UK's recent vote to leave the EU, Sada said, according to an OPEC news release. With major oil consuming countries seeing their economies improve and winter approaching in the Northern Hemisphere, oil demand will rise in the next two quarters, he continued."This expectation of higher crude oil demand in [the] third and fourth quarters of 2016, coupled with decrease in availability is leading the analysts to conclude that the current bear market is only temporary and oil prices would increase during the later part of 2016," OPEC stated. OPEC member countries are scheduled to meet informally on the sidelines of the International Energy Forum in Algeria from September 26-28. The Wall Street Journal on Friday had reported that a production freeze deal could be mooted at that meeting, citing unnamed OPEC delegates, but several analysts are doubtful that such a pact could be agreed.
Oil Rises Despite Supply Glut - Oil rallied Monday as fresh hopes that OPEC members might consider freezing production provided support to the market, despite a continuing glut of crude supply. The Organization of the Petroleum Exporting Countries said Monday that it would hold informal talks at an energy conference in September, renewing beliefs among analysts that the cartel’s members may revisit production freezes this fall. Such a deal could be reached as early as the week of Sept. 26, OPEC delegates told The Wall Street Journal, which could alleviate an oversupply of crude and refined products that has pressured the market in recent months. “The talks are definitely driving the rally right now,” . U.S. crude oil for September delivery settled up $1.22, or 2.9%, to $43.02 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose $1.12, or 2.53%, to $45.39 a barrel on ICE Futures Europe. Chatter about the potential production freeze comes a week after oil entered a bear market, settling more than 20% below its 2016 high. Crude had rallied above $50 a barrel in early June, only to briefly dip below $40 a barrel last Monday as concerns about a glut of oil triggered a market selloff. Analysts have blamed much of the problem on stubbornly high output. While demand for gasoline in the U.S. has touched record highs, a combination of soaring production by OPEC members in July, Canadian production resuming after temporary outages and signs that U.S. drillers are picking up activity has weighed on oil prices and led analysts to cut their outlook for prices. While oil climbed in relatively steady trading on Monday, the large global oversupply should keep prices below $45 a barrel.
Oil Spikes On Renewed OPEC Supply Cut Chatter, Just As Hedge Funds Turn Record Short -- Oil prices rose Monday as modestly stronger margins for refiners provided support to the market despite the continuing glut of crude supply. The October contract for global benchmark Brent gained 1.3% to above $45 a barrel, while U.S. counterpart West Texas Intermediate increased 1.4% above $42.50 for September deliveries. Several factors have boosted oil prices over the past three trading days. Among the more trivial ones, Olivier Jakob from Swiss-based Petromatrix was cited by the WSJ noting the improvement in the gasoline crack margin, a technical term for the price difference between crude oil and the figure refiners charge for gasoline, as providing a tailwind for the market. “The gasoline crack [margin] has rebounded and stabilized and this has relieved the pressure on oil prices a little bit,” he said. “That said, he noted that the fundamentals for gasoline hadn’t changed and there was a large global oversupply, which should keep prices below $45 a barrel. However, the key catalyst for today's spike is another convenient report by OPEC, according to which the oil exporting organization will hold informal talks at an energy conference in September, the cartel’s president said Monday, as oil-producing nations worry over a recent downturn in the crude market. OPEC is always discussing ways to stabilize the market, said Qatar’s energy minister, Mohammed bin Saleh al-Sada, who is serving as the 14-nation oil cartel’s president this year. Of course, oil traders are familiar with OPEC strategy of "leaking" such supply cut reports just as oil is headed for key support levels, aimed largely at headline scanning algos, and so far today the verbal intervention has managed to push oil higher. A similar initiative died back in April during talks in Doha, Qatar, when Saudi Arabia backed out over Iran’s refusal to join in a so-called production freeze until it had reached pre-sanctions levels of oil output. Under the freeze, countries would have agreed to limit their production to certain levels in a bid to raise oil prices by constricting the amount of crude on the market. “OPEC continues to monitor developments closely, and is in constant deliberations with all member states on ways and means to help restore stability and order to the oil market,” Sada said. “Expectation of higher crude oil demand in the third and fourth quarters of 2016, coupled with decrease in availability, is leading the analysts to conclude that the current bear market is only temporary and oil price would increase during later part of 2016,” he added,
Oil Surge Continues As Short Squeeze Accelerates--- Despite a significant build at Cushing (Genscape +300k), tumbling China demand, and Libyan supply, the ever more financialized crude oil market is a oneway street higher of short-squeezing exuberance. As 2015's August explosion plays out again, WTI Crude just broke back to $43 as record shorts suffer... Cushing storage builds... Genscape reports a 310,000 barrel build. Supply is set to rise... Libya has started maintenance work at Es Sider port, the nation’s largest oil export terminal, as part of plans to increase output from Africa’s biggest holder of crude reserves. Exports should resume in a month once official orders are received to reopen the port, Galal Mohamed, head of operations at Waha Oil Co. , said in a phone interview Sunday from Libya’s eastern city of Ras Lanuf. Es Sider, operated by Waha Oil, has been closed since December 2014 when armed groups attacked the port. The state National Oil Corp. has engineers and other workers at the port to evaluate damages and decide when to resume exports, NOC’s Ibrahim Al-Awami said by phone. “We haven’t received official orders to reopen the port and resume exports, but there were intensive meetings with the National Oil Corp. officials last week to discuss this,” Mohamed said. Six of the port’s 19 storage tanks are damaged from fighting over the last two years, he said. And demand is fading... China oil imports dropped to six month lows. China imported 31.07m mt of crude last month, the General Administration of Customs in Beijing says on website. That’s equivalent to 7.35m b/d, lowest since January. But the 'storage-carry' trade remains supportive as despite the drop in contango (flattened curve), the cost of storage has also dropped...
WTI Slides After Unexpected Large Crude Build ---Having rallied from last week's unexpected Cushing draw (seemingly ignorant of the crude build), crude prices faded heading into tonight's API data. With expectations of draws across the board, crude prices tumbled after API reported a surprise build (the 3rd week in a row) of 2.09mm (-1.5mm exp.) - the biggest build in 3 months. Cushing also saw a significant build (while product inventories dropped). API:
- Crude +2.09mm (-1.5mm exp) - biggest in 3 months
- Cushing +1.2mm (-1.3mm exp) - biggest in 3 months
- Gasoline -3.9mm (-1.3mm exp)
- Distillates -1.5mm
This is the 3rd weekly build in a row...
Crude Chaotic As Surprising Builds Battle With Gasoline Draw And Production Cut --Following last night's unexpected build in crude (and Cushing) inventories, DOE data confirmed the surprising build in Crude (+1.05mm - 3rd weekly rise) and Cushing's 1.2mm build is the most in 3 months. Gasoline inventories drewdown less than API reported but Distillates saw an unexpected build. Crude is whipsawing around as the bullish gasoline draw (and production cut) battles with bearishly unexpected builds in Crude, Cushing, and Distillates. DOE
- Crude +1.055mm (-1.5mm exp)
- Cushing +1.16mm (-1.3mm exp) - biggest in 3 months
- Gasoline -2.8mm (-1.3mm exp)
- Distillates +1.15mm
This is the 3rd weekly crude build in a row and Cushing's biggest build in 3 months... but all eyes are on the Gasoline draw (even though it is less than the API print)
Global oil demand to cool, oversupply is ending, agency says (AP) — Global demand for oil will grow less than expected next year due to a weaker world economy, though the oversupply of crude in the market is ending, the International Energy Agency said Thursday. The Paris-based agency, which consults oil-importing nations, lowered its forecast for demand growth next year to 1.2 million barrels a day from 1.3 million barrels a day previously. That would be a slowdown from this year’s growth of 1.4 million barrels a day. However, the agency said in its monthly report that it expects oversupply to have ended in the third quarter of this year, with inventories likely to drop after a long period of increases. That, the IEA said, will “help pave the way to a sustained tightening of the crude oil balance.” The price of oil has fallen in recent weeks, and the international benchmark, Brent, was flat at $44.05 on Thursday. The U.S. benchmark was down 9 cents at $41.62.
Oil up 5 percent as Saudis mull meeting, tighter market forecast | Reuters: Oil prices rose about 5 percent on Thursday after comments from the Saudi oil minister about possible action to stabilize prices triggered a round of buying and the International Energy Agency forecast crude markets would tighten in the second half of 2016. Saudi Energy Minister Khalid al-Falih said OPEC members and nonmembers would discuss the market situation, including any action that may be required to stabilize prices, during an informal meeting on Sept. 26-28 in Algeria. The comments by the minister of the world's top oil exporter triggered fund buying and some short covering, giving a boost to prices, traders and brokers said. Both benchmarks soared more than 5 percent and Brent futures were up $1.89 at $45.94 a barrel by and U.S. crude CLc1 rose $1.76 to $43.47. U.S. refined products futures, including gasoline and distillates jumped after Motiva Enterprises 235,000 barrel per day Convent, Louisiana, refinery was evacuated due to a fire around midday on Thursday. Distillate futures rose to their highest level since July 21 after the news, touching a session high of $1.3934 a gallon. Many traders remain skeptical of the outcome of the meeting, expecting a repeat of the Doha meeting in April when talks fell through after Saudi Arabia backed out, citing Iran's refusal to join in a so-called production freeze.
Oil leaps 5% in best one-day rise since April -- The see-saw in oil prices keeps swinging. Brent crude, the world’s oil benchmark, is enjoying its best day in four months after Saudi Arabia, the world’s oil lynchpin, said it was ready to step in and help stabilise the over-supplied market. A barrel of Brent for October delivery has gained 4.9 per cent at publication time, or $2.17 today, to trade at $46.22 – its highest level since July 27. It is heading for its most impressive one-day rise since the start of April when prices spiked 6.3 per cent. West Texas Intermediate, the US marker, is up 4.87 per cent to $43.74, also climbing to its highest level since late last month. The rally accelerated this afternoon after Khalid Al Falih, Saudi’s energy minister, said the kingdom was ready to work with its non-Opec partners to “help the market rebalance”. His comments from an interview with the official Saudi news agency, which were mistakenly sent to journalists, come after Opec nations said they would be meeting informally at the sidelines of a major commodities conference next month. “Despite the justified consensus that Opec seems dysfunctional, there is room for the cartel to once again change sentiment given the type of outcome that could occur”, said Helima Croft at RBC Capital Markets. The reassurance has helped oil regain its poise after the commodity fell back into bear territory last week. A barrel of Brent had risen to near $52 in July, but fell back below $40 as concerns about bloated gasoline supplies in the US came back to burn investors.
OilPrice Intelligence Report: More Than Just Rumors? Oil Rallies Spectacularly -- Oil prices staged a strong rally on Thursday moving higher by 4.27%. WTI ended the day at $43.67 per barrel while Brent was at $46.04. The rally was due in part to twin optimistic comments from the IEA and the Saudis. The IEA reported that crude production is falling behind demand. At this point that gap is likely to average around 1M barrels per day in Q3, says the IEA. The agency reports "Our balances show essentially no oversupply during the second half of the year." That result is thanks to a combination of sizeable production cuts by non-OPEC producers including US producers, and healthy demand in many parts of the globe. Adding to optimism, in other news, Saudi Arabia energy minister Khalid al-Falih said market forces are already doing their work, but his country is ready to do what it can to further support prices. Venezuelan President Nicolas Maduro is reportedly trying to raise prices to at least $70 a barrel. Maduro announced his plan on TV this week. That plan essentially consists of trying to encourage the Saudis to support prices and rally OPEC producers to hold a new meeting and reach an agreement to freeze production. Bloomberg reports that private equity buyout firms have raised $100B in capital and may finally be ready to put some of that dry powder to work in M&A deals in the energy space. Thus far major buyouts have been few and far between. Carl Icahn who already holds a controlling stake in CVR Energy is reportedly preparing an offer to buy oil refiner Delek Holdings.
Oil futures surge higher on IEA monthly report, Falih comments - Oil futures rallied Thursday after the International Energy Agency reported global crude demand was outpacing supply and Saudi Arabia's energy minister said his country was prepared to help the market rebalance. NYMEX September crude settled $1.78 higher at $43.49/b. ICE October Brent settled up $1.99 at $46.04/b. NYMEX September ULSD settled 6.65 cents higher at $1.3849/gal. NYMEX September RBOB settled up 6.03 cents at $1.3617/gal. Crude oil inventories should see a "hefty draw" this quarter after a "lengthy stretch of uninterrupted builds," the IEA said Thursday in its latest monthly report.While the IEA's forecast of a tighter crude market helped lift oil futures Thursday, the Paris-based organization cautioned prices will likely face resistance from the large accumulation of crude in storage. "The massive overhang of stocks is also keeping a lid on prices, with both newly produced and stored crude competing for market share in an increasingly volatile refinery margin environment," the IEA said. Moreover, the IEA's revisions to its 2017 outlook for supply and demand compared with last month's report were "clearly bearish," In an interview distributed Thursday, Khalid al-Falih, Saudi Arabia's energy minister, said that the global market was rebalancing, but added that current low oil prices were "unsustainable." OPEC ministers will consider "any possible action that may be required to stabilize the market" when the group meets informally next month, Falih said, according to remarks carried by the Saudi Press Agency.
Crude Spikes To 3-Week Highs After Biggest Surge In Open Interest In 10 Years - WTI is now up 14% from its lows last week, with Sept 2016 trading back above $44.50 at 3-week highs. Oil's rapid OPEC-headline-driven recovery continues...Despite rising inventories (and record production levels in OPEC), the Saudi statement hope remains and prompted the biggest spike in WTI Open Interest since August 2006 yesterday! As Bloomberg notes this is the highest level of aggregate open interest since 2013 with volumes above 1mm for the 7th session in a row. Bloomberg also points out that WTI front month 25-delta skew jumped to iutsmost 'bullish' biased since November... WTI Call vol is highest relative to put vol (demand) since Nov 2015... Of course, that is "probably nothing" but we suspect the last few days sudden spike in prices and aggregate positioning are a little excessive relative to any fundamentals... “The contracts have recovered well but be careful,” PVM Oil Associates director Robin Bieber writes in a note. “The speed and size of the reaction up should make one very cautious at the 34-day MAs. They’ve spoilt plenty of bullish parties before”
US rig count up 17 this week to 481, Texas up 13 (AP) — The number of rigs exploring for oil and natural gas in the U.S. increased by 17 this week to 481. A year ago, 884 rigs were active. Depressed energy prices have sharply curtailed oil and gas exploration. Houston oilfield services company Baker Hughes Inc. said Friday that 396 rigs sought oil and 83 explored for natural gas this week. Two were listed as miscellaneous. Among major oil- and gas-producing states, Texas gained 13 rigs and Colorado, New Mexico, North Dakota, Ohio and Utah were up one each. California declined by one. Alaska, Arkansas, Kansas, Louisiana, Oklahoma, Pennsylvania, West Virginia and Wyoming were unchanged. The U.S. rig count peaked at 4,530 in 1981. It bottomed out in May at 404.
Permian Basin leads big jump in rig count | Fuel Fix: The nation’s oil rig count during the past week saw its biggest jump of the year, and nearly all of the growth came in West Texas’ resilient Permian Basin. The number of rigs actively drilling for oil increased by 15, including 12 just in the Permian, while the number of rigs primarily seeking natural gas grew by two. The total rig count is now at 481 rigs, up from an all-time low of 404 rigs in May, according to data from the Baker Hughes oil field services firm. Of the total tally, 396 of them are primarily drilling for oil. The Permian now accounts for 189 rigs, which equates to 48 percent of all the nation’s oil rigs. The next most active area is Texas’ Eagle Ford shale with just 36 rigs, according to the Baker Hughes data. The Eagle Ford counted more than 100 rigs this time a year ago. Despite this week’s jump, the oil rig count is down 75 percent from its peak of 1,609 in October 2014, before oil prices began plummeting. After dipping below $40 a barrel early last week, the price of crude oil has since rebounded to more than $44 a barrel on Friday. The price of U.S. oil hit a low $26.21 on Feb. 11.
Oil Prices React Stoically On Biggest Rig Count Rise In 2016 - This week’s Baker Hughes figures saw the largest jump in the American natural gas and oil rig count this year. The combined count stood 17 rigs higher than the same count last week, bringing the domestic figure to 481 rigs—a figure that is still 403 below the year-ago rig count. Most of this week’s spike occurred in the oil rig count, which saw a jump of 15. Two new gas rigs went into production as well. The jump came after six weeks of consecutive increases in the U.S. rig count, and could signal a recovering drilling economy despite the continuing pressure on prices.WTI stands at $44.39 at the time of this writing, up 2.07% over yesterday’s close. The data follows last week’s U.S. oil and gas rig count increasing by a single rig, with the oil rig count jumping seven last week, offset by the gas rig count falling by five, and miscellaneous rigs falling by one. Texas was the big winner this week, with 13 extra rigs put into production. Texas is still down 159 rigs over last year, with 230 rigs currently in production. By basin, The Permian Basin added 12 rigs, down 66 from a year ago. Utica, Granite Wash, and Williston also each added rig, while Haynesville and Eagle Ford each lost a rig.
Stranded in Desert, Foreign Labor Is Casualty of Saudi Slowdown - Bloomberg: First they had no pay, and then no work. For a time, there wasn’t even food in the squalid, concrete camps where they had been abandoned to live in the searing heat of the Saudi Arabian desert. Medical supplies dried up two months ago. Owed weeks and weeks of back pay from construction companies squeezed by the kingdom’s economic slowdown, thousands of foreign laborers from South Asia face the grim uncertainty of how long their plight will continue. “They don’t give us any answers about our salaries,” said Mohammed Salahaldeen, a duct fabricator from Bangladesh, As Saudi authorities slash spending and delay payments to contractors to cope with the plunge in oil prices, the austerity is exacerbating the woes of private businesses that have, for decades, relied on government spending for growth. Casualties include the thousands of foreign laborers who helped to keep the economy humming with low-paying jobs in construction. Abandoned laborers, including nearly 16,000 from India and Pakistan alone, according to their governments, haven’t seen a paycheck in about eight months. Under a system of sponsorship known as kafala that leaves many workers at their employers’ mercy, they’re also not being given the exit visas they need to leave the world’s largest oil exporter. In Saudi Arabia, it’s up to employers to arrange such visas, but before doing so they’d have to pay back wages and end-of-service benefits.The conditions in which the workers from Bangladesh, India, Sri Lanka, Pakistan and the Philippines wait are fetid and cramped. They sleep eight to a tiny concrete room and share dirty toilets with feral cats. Temperatures soar to 50 degrees Celsius (122 degrees Farenheit) in the summer, and the electricity powering air conditioners often goes off. Some of the laborers are so destitute that they only own one set of clothes. Mohammed Khan, an Indian nurse from Mumbai at the Saudi Oger camp, is left to treat patients suffering from diabetes, hypertension and high cholesterol without medication. “They can’t go to a hospital because they no longer have insurance,” said Khan, 45. “They have no money.” Workers said Saudi Oger stopped paying their medical insurance policies.
Saudi Economic Woes Leave Indian, Pakistani Workers Stranded - Bloomberg: A total of 7,700 Indians and 8,000 Pakistanis have been stranded, according to tallies provided Tuesday by the foreign ministries in New Delhi and Islamabad. Many were employed by construction companies battered by the downturn in oil prices that began two years ago. As prices plummeted from more than $100 a barrel in 2014 to below $30, the Saudi government cut spending and delayed payments to contractors, who have relied on public contracts for business growth. With Brent still a relatively low $42 a barrel, growth in the Arab world’s largest economy is forecast to slow to 1.5 percent this year, the lowest level since 2009, according to data compiled by Bloomberg. Building projects have fallen off dramatically along with the drop in oil revenue. Construction contracts shrank by about 50 percent in the first quarter from the same period a year earlier, according to data published by Jeddah-based National Commercial Bank. The government didn’t award any contracts during the first quarter in 2016 or the fourth quarter of last year, the bank said. More than 4,050 workers from Saudi Oger, a Riyadh-based construction and management company, are stranded, according to the Indian Foreign Ministry. The Indian Embassy is providing food to workers in 20 camps in Riyadh, Jeddah and Dammam, the ministry said. India’s government also sent a top diplomat, Vijay Kumar Singh, to Saudi Arabia to assist stranded workers. Pakistani Prime Minister Nawaz Sharif said his government will help the stranded workers “in all possible ways.” Summer temperatures can climb above 50 degrees Celsius in Saudi Arabia, worsening the plight of the workers.
Oil Income Falling, Saudi Arabia Raises Government Fees and Fines —Saudi Arabia, faced with dwindling oil income, has sharply increased government fees such as visa charges as part of a range of measures aimed at raising revenue from non-oil sources. Under the new rules approved by the Saudi government, foreigners will have to pay $800 for a six-month visa, six times the current cost. The government also announced hefty fines for traffic violations that include drifting, a practice that involves intentionally skidding and spinning at high speed—a popular pastime for men in a country that notoriously lacks entertainment options. First-time violators will face fines of 20,000 Saudi riyals ($5,332). It also more than tripled the fees it charges to advertise on billboards. In an era of cheap energy prices, Riyadh is pushing to overhaul its oil-dependent economyby asking its citizens as well as foreigners to do more to help fill state coffers. The visa-fee increases, which will come into force in October, will mostly affect foreigners who regularly travel to the kingdom for work. A two-year, multiple-entry visa, for instance, will typically cost 8,000 riyals. The increase in visa fees alone, however, will do little to help make up for the two years of low oil prices that have strained the country’s finances, resulting in last year’s record budget deficit of around $98 billion. “It’s about the message,” “It underscores the idea that the government is trying to hike fees on different activities, whether it is visas, water or electricity.” The government’s target is ambitious: It wants to more than triple its non-oil revenue from 163.5 billion riyals at present to 530 billion riyals by the end of 2020. Riyadh already cut spending and raised the domestic cost of utilities such as water, fuel and electricity. It also announced plans to reduce the amount of money it spends on public sector wages by 5% through measures that include gradually shrinking the size of the civil service.
Saudi Arabia tells OPEC it pumped record high of 10.673 mil b/d of crude oil in Jul - Oil | Platts News Article & Story: Saudi Arabia, has told OPEC it pumped a record high of 10.673 million b/d of crude oil in July, up by 123,000 b/d from the previous month, the oil producer group's monthly oil market report showed Wednesday. Analysts told S&P Global Platts that production in July had risen as the country's internal use of crude in power stations climbed significantly this summer as temperatures have continued to rise, increasing power demand for air-conditioning. A steady climb in its July crude oil exports was another factor, they added.These figures are in line with the country's market share strategy, which shows no signs of abating. The previous high for OPEC's largest producer was in June last year when it produced 10.564 million b/d, according to data from the Joint Organizations Data Initiative, a transparency initiative linked to the Riyadh-based International Energy Forum, which go back to January 2002. "Last year we saw a fall in exports in Saudi Arabia in July compared to June. But this July, exports are up sharply [compared to the previous month]," said an oil analyst, speaking on condition of anonymity. The July figure submitted directly by Riyadh, is 196,000 b/d higher than OPEC's own secondary source-derived estimate of 10.477 million b/d.
Saudi Oil Output Sets Record Despite Global Glut -- The fight for market share among the world’s biggest oil producers is still raging, pushing output from OPEC members close to an all-time high in July and suggesting the group isn’t yet seriously considering a meaningful curtailing of production. Output by Saudi Arabia, OPEC’s key member, reached a high last month, as part of a broader ramp-up by the Organization of the Petroleum Exporting Countries, according to OPEC data published Wednesday. Led by the kingdom and Iraq, OPEC members’ July crude production rose by 46,000 barrels a day from June, to 33.11 million barrels. The increasing level of OPEC production, combined with the latest U.S. data, shows that the global oil market remains oversupplied. U.S. crude-oil futures for September delivery fell $1.06, or 2.5%, at $41.71 a barrel on the New York Mercantile Exchange on Wednesday after the Energy Information Administration said that domestic inventories of crude oil and petroleum products rose last week to a record. Oil markets have gyrated in recent days. OPEC, which controls more than a third of the world’s oil supply, on Monday announced it would hold informal talks in Algeria next month, after which the market rallied briefly—but then gave back all those gains. Analysts say that an OPEC deal to freeze output growth might be easier to achieve on paper, since nearly all producers are pumping flat-out already and can’t likely produce more. But such an agreement wouldn’t change the underlying dynamics between supply and demand.
Hike in Saudi Arab Extra Light crude oil supply to weigh on Murban, DFC: traders - Oil | Platts News Article & Story: Saudi Arabia plans to increase production of Arab Extra Light crude in coming weeks, which could translate to weaker spot differentials for similar grades in the Middle East, market participants said Friday. Industry sources had said earlier this month that the production of Arab Extra Light crude was expected to rise by about 200,000 b/d from September, though Saudi Aramco could not immediately be reached for comment. "[Saudi Aramco's] October supply volumes [of Arab Extra Light] to term lifters would be increased... or perhaps some term customers may want to lift additional volumes if the incremental cost is lower than what they would have to pay to grab additional [light sour crude] barrels in the spot market," said a North Asian sour crude trader with knowledge of allocations in Saudi Arabian term crude liftings. The talk of higher Saudi output emerged soon after Saudi Aramco slashed the September official selling price differentials for its crudes bound for Asian buyers early in the month.At the start of the month, Aramco cut the OSP of its Arab Light crude loading in September and bound for Asia by $1.30/b, making it the lowest price since January. The September OSP of Asia-bound Arab Super Light crude was cut by 80 cents/b from August and Extra Light by $1.60/b. Market participants said Aramco's bigger-than-expected OSP cuts and the planned fourth quarter output increase suggested that the major Middle Eastern producer was stepping up efforts to remain price competitive in order to appeal to Asian end-users and fend off competition from Europe's North Sea crude suppliers amid a narrowing Brent-Dubai spread.
Saudi Arabia Needs To Cut Oil Production (Video) -- The bottom line is that the only way the oil market rebalances in the near future is if Saudi Arabia cuts Oil Production. They are realistically the only party that can pull this production cut off right now.
What If Saudi Arabia Collapses? « LobeLog: The Saudis are entering a period of immense uncertainty as the kingdom moves forward with the National Transformation Plan (NTP) and Vision 2030 announced by Deputy Crown Prince Mohammed bin Salman (MBS) in April. Vision 2030 aims to streamline the bloated state bureaucracy, increase private sector investment, and curb youth unemployment in order to end the kingdom’s dependency on oil. Although many Arab states faced mounting protests and calls for political liberalization during 2011’s Arab Spring, Saudi Arabia maintained relative peace and stability. However, changes to the kingdom’s socio-economic system could lay the groundwork for similar dissent by sparking demands for social and political reforms while undermining Saudi cohesion.To reduce Saudi Arabia’s budget deficit, Vision 2030 calls for a phased reduction of the subsidies offered to Saudi nationals and promises to increase private sector employment. If economic growth and job creation fail to meet expectations, discontent could catalyze demands for liberal political reforms that will require serious input from the kingdom’s clerics. Saudi Oger’s bankruptcy and expat layoffs may be a sign of labor shedding that is required system wide. According to Saudi economist Fadl al-Boainain, “declining corporate profitability has made the foreign workforce a target for managements seeking to cut fixed financial obligations.” In January, a Saudi businessman speculated that by the end of 2016 one million expats may leave the country given the financial squeeze stemming from plunging oil prices.However, successful implementation could also trigger demands for greater reform from a rising capital class that is less economically dependent on the state.
OPEC bullish on oil demand in H2 2016, says current price slide 'temporary' - OPEC on Monday sounded an optimistic tone about the oil market, saying that higher demand is expected in the third and fourth quarters. The comments, from Qatar energy minister Mohammed bin Saleh Al-Sada, who serves as OPEC president, are likely to quell any expectations of a production freeze deal in the near future. The recent decline in oil prices "is only temporary," and the result of weaker refinery margins, inventory overhang and the UK's recent vote to leave the EU, Sada said, according to an OPEC news release. With major oil consuming countries seeing their economies improve and winter approaching in the Northern Hemisphere, oil demand will rise in the next two quarters, he continued."This expectation of higher crude oil demand in [the] third and fourth quarters of 2016, coupled with decrease in availability is leading the analysts to conclude that the current bear market is only temporary and oil prices would increase during the later part of 2016," OPEC stated. OPEC member countries are scheduled to meet informally on the sidelines of the International Energy Forum in Algeria from September 26-28. The Wall Street Journal on Friday had reported that a production freeze deal could be mooted at that meeting, citing unnamed OPEC delegates, but several analysts are doubtful that such a pact could be agreed.
OPEC oil ministers to meet informally in September (AP) — OPEC has announced that oil ministers of the 14-nation organization will meet in September, well ahead of their previously scheduled November meeting. Monday’s announcement notes that the meeting will be “informal.” Still, it is unusual for the Organization of the Petroleum Exporting Countries to come together at the ministerial level outside of their regularly set gatherings. OPEC headquarters in Vienna says the meeting will be held in Algeria on the sidelines of the 15th International Energy Forum grouping 75 fossil energy producing and consuming countries as well as transit nations for oil and gas. The cost of a barrel of oil has been generally stuck in a range between $40-$50 a barrel for more than a year, less than half of what a barrel fetched three years ago.
Russia Dismisses OPEC Rumors, But Is Ready To Talk | OilPrice.com: Right now Russia sees no grounds for resuming talks to put a freeze on crude production, but is open to join discussions if OPEC members raise the issue, Russia’s Energy Minister Alexander Novak told reporters on Monday. “A basis for this has yet to develop, considering prices are still at more or less normal levels,” Bloomberg quoted Novak as saying. Should prices drop, the need for discussion is most likely to arise, the minister noted. After the crude prices had dropped to 12-year-lows at US$26 in February, all eyes were riveted on the April meeting in Doha for clues whether OPEC would cap production in a bid to lift off oil prices. The Doha talks collapsed with no deal in sight when Saudi Arabia insisted that any deal must include Iran, which of course, Iran never agreed to, just having been relieved of several years of oil sanctions. Last week, Venezuela had informal talks with OPEC officials to discuss ways to boost the oil prices. On Monday, Qatar’s Minister of Energy and Industry and current OPEC President, Mohammed Bin Saleh Al-Sada, said in an official OPEC press release that an informal meeting of OPEC member countries was slated to take place on the sidelines of the 15th International Energy Forum in Algeria between September 26 and 28, 2016, but OPEC’s official statement abstains from referring to any talks on an oil price freeze. Mr Al-Sada commented instead on the recent decline in crude prices, saying the market volatility was “only temporary” and that higher demand in the third and fourth quarters would support oil price increases later in 2016.
Oman Refuses To Attend Algeria Oil Producer Meeting, Leaving OPEC Oil "Plan" In Limbo -- Having briefly dipped under $40, oil quickly rebounded over the past few days after the now traditional rumors of an "imminent" OPEC oil supply cut re-emerged, with the catalyst this time supposedly being the informal meeting set to take place next month in Algeria. Alas, this "plan" to push the price higher appears to have just suffered a terminal setback after Oman announced it would not participate in a meeting of oil producers and consumers in Algeria next month "as it is disappointed by the group's failure to address the issue of low oil prices" the Minister of Oil and Gas Mohammad bin Hamad al-Rumhy said on Wednesday, cited by Reuters. The International Energy Forum, which groups producers and consumers, is due to meet on Sept. 26-28 in Algiers. Qatar said on Monday that OPEC members had agreed to hold talks on the sidelines, which served as a substantial upside catalyst to WTI and Brent. Alas, any credibility OPEC may have left evaporated when Oman, a small non-OPEC oil producer, said that it doesn't "see the point of continuing to be part" of the group, Rumhy told Reuters in an interview in Muscat.
Iraq's Deal With Oil Majors Could Crush OPEC's Output Freeze Plans - Iraq and oil majors BP, Shell, and Lukoil have agreed to resume investments in oil fields the foreign groups are developing, which is expected to raise the country’s crude output by 250,000-350,000 barrels per day in 2017, Reuters reported on Thursday, quoting Iraqi officials - a move that has the potential to aggravate the supply glut and muddy the waters of the additional OPEC meeting in September, which some were glass-half-fulling might end with a production cap of some sort. The recently reached accords actually push projects that the companies had originally planned for the first half of 2016 to the second half. The projects had been previously put on hold due to the low crude prices. BP, Shell and Lukoil have agreed to spend in the second half this year around half the budgets they had planned for 2015, Reuters said, citing documents it has seen. BP will be spending US$1.8 billion at the Rumaila field, Shell will spend US$742 million, and Lukoil - US$1.08 billion. “Many vital projects that foreign firms were forced to halt due to lower oil prices will be brought online after the recent budget cuts agreements,” Basim Abdul Kareem, the deputy chairman of South Oil Co, told Reuters. Iraq approves every year the investments of foreign companies to develop its oilfields, and repays the companies with the proceeds from exporting crude from existing fields. Since the oil prices crashed, however, the country has seen its coffers depleting, and it is struggling to pay, especially after big spends on fighting ISIS in the north. In early 2016, oil majors started scrapping investments for this year at some of Iraq’s fields in the south. Most of Iraq’s largest oilfields are located in the south.
Israel ordered to pay Iran $1.2 billion - The Swiss Supreme Court in Lausanne has ordered the Israel-controlled Trans-Asiatic Oil Company to pay a debt of $1.2 billion to Iran's national Oil Company. According to Global Arbitration Review, which published the Swiss court’s ruling, Iran’s oil company has been removed from the sanctions regime, so there is no legal obstacle to paying it any money. On June 27, the court directed Trans-Asiatic to pay the Iranians 250,000 Swiss francs (about 1 million shekels, or $260,000) of the monies that have been deposited with the court, and another 200,000 francs in court costs. Trans-Asiatic appealed, and lost, saddling the company with a heavy fine. The lost appeal is the latest skirmish between Israel and Iran over an oil transporting and marketing partnership the two countries formed before the 1979 Islamic Revolution. The partnership had two parts: the Eilat-Ashkelon pipeline, which operated overland to stream Iranian oil from the Red Sea to the Mediterranean, and Trans-Asiatic Oil Ltd (TAO), which was registered in Panama, operated out of Tel Aviv, and ran a fleet of tanker ships and marketing channels to sell Iranian oil to Europe. The partnership, signed in 1968, lasted only 11 years. In 1979, after the Islamic Revolution, Iran cut off all ties with Israel. Despite the diplomatic cold shoulder, Iran still faced off with Israel in three different legal procedures, in an attempt to glean money for the oil it forwarded to Israel on credit before the revolution, for the value of their half of the partnership. The total disputed sum is in the ballpark of $7 billion. Since the Iranian oil company has been formally separated from Iran, global financial sanctions don't apply to it.
Post Coup: Gazprom Still Eager To Complete Turkish Stream -- On June 27, Russian President Vladimir Putin received a letter from President of Turkey Recep Tayyip Erdo?an, expressing Turkey’s willingness to restore ties with Russia (Kremlin.ru, June 27). Immediately, Gazprom spokesperson Sergey Kupriyanov announced his company’s openness to dialogue with Ankara on the construction of the “Turkish Stream” natural gas pipeline (RT, June 27). Turkish Prime Minister Binali Y?ld?r?m also expressed Ankara’s support for the project (Sputnik News, July 15). Russian Deputy Prime Minister Arkady Dvorkovich said that Turkey confirmed its willingness to resume dialogue with Russia on the construction of Turkish Stream (News.az, July 26). Gazprom’s Deputy CEO Alexander Medvedev said that the establishment of a working group on project implementation was agreed and the intergovernmental agreement can be signed when Putin and Erdo?an meet in St. Petersburg later this August (TASS, July 26). The construction of Turkish Stream under the Black Sea to the Turkey-Greece border was announced during Putin’s visit to Turkey in 2014 and endorsed by a Memorandum of Understanding (MoU) between Turkey’s BOTA? and Russian Gazprom (Kremlin.ru, Gazprom.com, December 1, 2014). However, the two sides failed to sign an intergovernmental agreement. No permission was granted for offshore construction in Turkey’s waters—only for engineering and surveying (Oxfordenergy.org, February 2016). Although Gazprom had earlier agreed to a 10.25 percent price discount for BOTA?, that agreement was not fulfilled. Therefore, BOTA? brought a suit against Gazprom at the International Arbitration Court. Russia wanted to link the “price discount” with “pipeline implementation” (as a prerequisite to Turkish Stream), but Turkey wanted to treat both separately (Hurriyet Daily News, September 11, 2015;Independent Turkey, March 20). In September 2015, Gazprom announced it agreed with the Turkish partners that they would only be working on the first line (between Russia and Turkey) of Turkish Stream, reducing the pipeline’s total capacity from 63 billion cubic meters (bcm) per year down to 32 bcm (Novinite, September 7, 2015; Interfax, October 8, 2015). After the November 24 “jet incident” (see EDM, December 3, 2015), Russia’s Energy Minister Alexander Novak announced the suspension of further negotiations over Turkish Stream (RT, December 2, 2015).
Obama Expands the ISIS Bombing Campaign to a 4th Country, the Media Barely Notice --The Obama administration announced on Monday the beginning of US air strikes in Libya against ISIS targets, marking the fourth country the United States is currently bombing with the goal of “degrading and destroying” the terror group. A campaign that began two years ago this Sunday has now, 50,000 bombs and 25,000 dead ISIS fighters later, expanded to a whole new continent. You’d hardly notice, however, if you followed US media. The New York Times didn’t even find the news important enough to give it a front-page headline, instead relegating it to a quick blurb at the far-bottom corner of the page, next to a teaser about the G train “having a moment.” Even many center-left outlets barely touched on the massive mission creep. To give some perspective, Slate, Mother Jones, and Buzzfeed News all ran more stories about Trump’s dust-up with an infant than they did on what was effectively the start of a new war. ABC World News Tonight mentioned the Libyan air strikes for only 20 seconds, 13 minutes into the show, and NBC Nightly News didn’t mention the air strikes at all. The president’s announcement that the United States is bombing a new country has become entirely banal. This is by design. Obama’s “frog in boiling water” approach to war removes a clear deadline, thus stripping his use of military force of the urgency of, say, Bush’s “48 hours to get out of Baghdad” Gary Cooper approach. Meanwhile, an anti-ISIS bombing campaign that began as “limited,” “targeted” air strikes in Iraq two years ago expanded to Syria six weeks later, to Afghanistan in January of this year, and to Libya this week. Combat troops and special forces have also crept into play, with US military personnel first appearing in Iraq and Syria in 2014, 2015, or 2016, depending on how one defines “boots” and “ground.”
Libya, not Syria, is now the frontline in the war against Isis -- On Wednesday, Italy agreed to “positively consider” any US request to use Italian airspace and airbases for bombing missions against Isis in Libya. The move follows a series of US air strikes against Isis militants in the Libyan coastal city of Sirte on Monday. That action – which President Barack Obama declared as in the “vital national interests” of the US – is anticipated to be the first move in a sustained international offensive against Isis outside of Iraq and Syria. The US strikes were conducted after a request from the UN-backed Libyan Government of National Accord (GNA). While the attack is not the first time that US warplanes have bombed Isis in Libya (a training camp in Sabratha was attacked in February), Monday’s move could prove more significant because it signifies a deepening of Western commitment to the Libyan administration – militarily, politically and economically. At a time when the GNA is trying to restore order in the country, there are growing concerns that Isis may be establishing a stronghold in Libya. US intelligence, for instance, estimates indicate the number of Isis fighters in the country has doubled to between 4,000 and 6,000 in the last 12-18 months, with growing evidence that a significant number of these terrorists are travelling from Iraq and Syria where – because of offensive operations from the 66 member coalition forces – Isis fighters are now believed to be at the lowest levels for at least two years.
Pentagon acknowledges US ground forces supporting ISIS fight in Libya | TheHill: The Pentagon acknowledged Wednesday that a "small number" of U.S. forces are going in and out of Libya in support of an expanded air war against the Islamic State in Iraq and Syria. "As with any military operation supporting another force, coordination and synchronization of effort is essential. To that end, a small number of U.S. forces have gone in and out of Libya to exchange information with these local forces in established joint operations centers, and they will continue to do so as we strengthen the fight against [ISIS] and other terrorist organizations," said Deputy Defense press secretary Gordon Trowbridge. Those forces are based in joint operations rooms, away from the forward line, to facilitate coordination among Libyan forces fighting ISIS, he said. The Pentagon announced on Aug. 1 that it had expanded its air war against ISIS into Libya, where its fighters have established a foothold in Sirte. At the time, defense officials said there were no U.S. forces on the ground supporting the air operations, but did not deny there were U.S. forces on the ground there. The acknowledgement came after The Washington Post on Tuesday reported that U.S. special operations were "providing direct, on-the-ground support for the first time to fighters battling" ISIS in Libya.
Obama releases drone strike 'playbook' - President Barack Obama has to personally approve the killing of a U.S. citizen targeted for a lethal drone strike outside combat areas, according to a policy Obama adopted in 2013. The president also is called upon to approve drone strikes against permanent residents of the U.S. and when "there is a lack of consensus" among agency chiefs about whom to target, but in other cases he is simply "apprised" of the targeting decision, the newly-disclosed document shows. The presidential policy guidance on drone strikes, often called the drone "playbook," was disclosed in an edited form Friday night in response to a Freedom of Information Act lawsuit brought by the American Civil Liberties Union. When Obama approved the guidance in May 2013, the White House issued a fact sheet about the policy, about the policy, but declined to release the document itself—even in a redacted form. However, a series of decisions from a federal appeals court in New York and from lower court judges have made it more difficult for the government to withhold legal and policy documents when many of the details in them have been disclosed elsewhere, such as in speeches or press releases.In February, a federal judge in New York demanded to see the policy guidance and related documents in her chambers as part of the ongoing ACLU suit. A few days later the government advised the court that officials had already been engaged in "lengthy" deliberations about releasing the document and had recently decided to do so.
Are There Any Limits on Obama’s Drone War, Really? -- Marcy Wheeler -- Early in his second term, President Obama set out to create a Rule Book that would provide some semblance of legal oversight over his administration’s drone program, which in the previous four years had become the administration’s preferred method of targeting suspected terrorists in remote regions of Pakistan, Yemen, and elsewhere. Sometimes dubbed the “Disposition Matrix,” news articles about the Rule Book offered tidy flow charts of how a suspected terrorist would go from “suspect” to “dead”—or, less realistically, “captured.” Obama announced the formalization of the Rule Book—now dubbed the Presidential Policy Guidance (PPG)—in May 2013. It was partly a response to critics who said the administration was essentially conducting extrajudicial killings, with no rubric by which to judge whether it was staying within the bounds of international law. Obama explained that after four years of drone war without such formal rules, he was now “insisting upon clear guidelines, oversight, and accountability that is now codified in Presidential Policy Guidance.” It took three more years and a lawsuit before, on Friday, the administration finally released a copy of the PPG to the ACLU in response to a Freedom of Information Act request. While some of the policy promises in the document are laudable, the document, in a structural sense, doesn’t seem to add the oversight to the war on terror that Obama promised back in 2013. Indeed, it seems designed not to. As Obama did in his 2013 speech, the PPG lays out certain standards for dealing with terrorist targets overseas. It applies to capture operations and lethal strikes—presumably including those done without a drone or other airstrike—outside areas of active hostility, like Afghanistan and Iraq. Most of these standards stem from legal requirements; for example, that “direct action will be taken only if there is near certainty that the action can be taken without injuring or killing non-combatants.” (Though even in this instance, there’s nothing unredacted in the PPG that answers all the questions about who gets counted as a non-combatant.) At that level, the PPG simply says: Follow the law.
Hundreds More 'Non-Boots-On-The-Ground' American Troops Are Being Deployed To Iraq --Adding to the ever-growing number of US ground troops in the “no boots on the ground” war in Iraq, Anti-War.com's Jason Ditz notes, Army officials announced yet another significant deployment from the 2nd Brigade Combat Team of the 101st Airborne Division, from which some 400 troops will be sent to Qayara, just south of Mosul. The idea is that the troops will be part of the logistics effort to prop up the Iraqi military in Nineveh Province, with an eye toward them eventually attacking Mosul, though there is no timeline for when such an offensive will begin, and Pentagon officials have gone on record doubting Iraq’s military is anywhere near ready for such an attack. Officials at Fort Campbell say the troops were part of a “Strike Ready Force” which had been pre-trained and prepared to go to Iraq “at a moment’s notice,” suggesting that the continued escalation of the US ground force in Iraq is being planned well ahead of actually announced deployments.
The US is hiring military contractors for operations in Syria -- In an obscure yet publicly available report, the Pentagon has for the first time indicated that it was hiring military contractors for operations in Syria. In an investigation from The Daily Beast, the nearly 300 US troops already present in Syria would be receiving “intelligence analysis services” from Six3 Intelligence Solutions Inc., a privately held defense contractor based out of McLean, Virginia. This $10 million contract would place an unknown number of contractors in various countries, including Syria. According to The Daily Beast, neither the Pentagon nor Six3 Intelligence Solutions would elaborate further on the type of services or other relevant information on the subject. Details on Six3 Intelligence Solutions also remain scant; however, Georgetown University professor and former contractor Sean McFate provides some insight. “This is no ordinary contractor… Six3 Intelligence Solutions is a private intelligence company, and the fact that we outsource a good portion of our intelligence analysis creates a strategic dependency on the private sector to perform vital wartime operations,” McFate explained to The Daily Beast.
Why Is the Pentagon Hiding the Number of Troops in Iraq and Syria? --It has been more than two years and 14,000 coalition bombings since President Barack Obama launched his open-ended war against ISIL under the dubious authority of a 15-year-old law authorizing military attacks. As the mission creeps to Libya, where military officials say there is “no end point” in sight, the Pentagon is refusing to disclose how many U.S. troops are currently deployed to Iraq and Syria. The military does reveal the “force management level,” or full-time troops deployed to Iraq and Syria. According to a June 2016 statement from the White House, “The Force Management Level for U.S. Armed Forces in Iraq currently is 4,087. The Force Management Level for U.S. Armed Forces in Syria is 300.” Yet, journalist Kristina Wong reported Thursday for the Hill that a Central Command spokesman acknowledged “that some troops that temporarily deploy aren’t counted”—and this number could be far higher. According to Wong’s reporting, defense officials are making the conscious choice not to reveal the final tally of U.S. troops in Iraq and Syria. “There’s been a decision made not to release that number,” spokesperson Army Col. Steve Warren told reporters in March. Since Warren made that statement, the Hill’s repeated requests for exact numbers have been rejected. Any final tally of U.S. forces would have to include the droves of U.S. contractors in Iraq and Syria, exact number unknown. The Pentagon revealed in late July that Six3 Intelligence Solutions—which is now owned by CACI International—won a windfall $10 million no-bid contract from the Army for “intelligence services” in Syria. CACI International faced global condemnation for its role in torturing and dehumanizing people held captive at the notorious Abu Ghraib prison in Iraq. According to Wong’s calculations, “the total amount of troops and Defense Department personnel involved in the [ISIL] fight could be anywhere from to 8,252 to 10,152.” This is well above the “FML” estimates officially provided by military officials.
ISIS Hits Largest Oil Field in Kirkuk, Kills Five | OilPrice.com: Islamic State fighters have killed five people in an attack on the largest oil field in Kirkuk, Bas Hassan, and have attempted to take down a gas compression station nearby as well, where they planted bombs after killing four guards. The fifth victim was an engineer working at Bas Hassan, media report, citing Iraqi and Kurdish sources. However, ISIS itself has so far not claimed responsibility for the attack. Sources from the Kurdish military forces, the Peshmerga, said that the attack on the gas station was neutralized and that three of the four ISIS terrorists involved in the double hit were killed, one of them managing to blow himself up, causing explosions in oil storage tanks at Bas Hassan. The fourth one escaped. There have been suggestions that the attackers belonged to a sleeper cell based in the oil-rich region of Kirkuk in northern Iraq. Bas Hassan is the largest oilfield in Kirkuk and contributes around a third of the oil exports of the Kurdistan Regional Government, which has been locked in an unofficial dispute over the oil-rich province with the central government in Baghdad since the removal of Saddam Hussein. Multi-ethnic as it is, Kirkuk has been hard to win for either Baghdad or Erbil, the center of the Kurdistan government. It seems, however, that a large portion of the population would back a referendum on where it belongs, which could see it become even more closely affiliated with Kurdistan than with Iraq, as Oilprice wrote back in April.
ISIS Releases Photos Of Latest Batch Of Captured US Weapons --Over the weekend, militants linked to Islamic State released photos that purport to show weapons and equipment that belonged to American soldiers and were captured by the group in eastern Afghanistan. The photos, which came to light on Saturday, show an American portable rocket launcher, radio, grenades and other gear not commonly used by Afghan troops, as well as close up views of identification cards for a U.S. Army soldier, Specialist Ryan Larson. In an emailed statement, Brig. Gen. Charles Cleveland, the deputy chief of staff for the U.S.-led mission in Afghanistan, said the soldier had not been captured and is currently with his unit.However, contrary to report that the soldier may have been captured by ISIS, the U.S. military command in Kabul denied any such suggestion, saying he "has been accounted for and remains in a duty status within his unit." American special operations troops have been fighting alongside Afghan forces in a renewed offensive against militants who claim allegiance to Islamic State in Nangarhar Province, which borders Pakistan. There was less clarity about where the supposedly US weapons came from. The website that published the photos speculated that the equipment and weapons were left behind during that engagement, but Flesvig said American officials are still trying to determine exactly when and how it was lost.
Lopsided Peace Talks Collapse, Saudis Resume Bombing Yemen and U.S. Sells More Weapons -- The Pentagon announced an additional $1.15 billion in weapons sales to Saudi Arabia this week, even as a three-month cease-fire collapsed and the Saudi-led coalition resumed its brutal bombing campaign of the Yemen capital Sana. The U.S. has already sold more than $20 billion in weapons to Saudi Arabia since the war began in March 2015, defying calls from Human Rights Watch and Amnesty International to cut off support. The Saudi-led coalition is responsible for the majority of the 7,000 deaths in the conflict, which has left more than 21 million people in need of urgent humanitarian assistance. Saudi Arabia has been accused of intentionally targeting homes, factories, schools, markets, and hospitals. On Tuesday, the coalition targeted and destroyed a potato chip factory, killing 14 people (see top photo). The Yemeni press has since reported that coalition has conducted hundreds more airstrikes across the country, killing dozens of people.The Saudi-led coalition started bombing Yemen several months after Houthi rebels overran the capital and forced the U.S.- and Saudi-backed dictator, Abd Rabbuh Mansur Hadi, into exile. Saudi Arabia has demanded the return of their preferred ruler, calling the rebel group a “coup militia.” Tuesday’s bombing comes after months of negotiations failed to reach a peace deal between Saudi Arabia, the Houthis, and Yemen’s exiled government. Both the Saudi regime and exiled Yemeni government were quick to place blame on the Houthi rebels, who rejected a U.N.-brokered peace deal.
US Approves Sale Of 130 Abrams Battle Tanks, 20 Armored Vehicles To Saudi Arabia For $1.2 Billion -- Over the years, Saudi Arabia has emerged as the biggest donor to the Clinton Foundation, having donated between $10 and $25 million. And just in case there is still any confusion what the quid to that particular "pro quo" is, moments ago we got another answer when Reuters reported that the U.S. State Department has approved the potential sale of more than 130 Abrams battle tanks, 20 armored recovery vehicles and other equipment, worth about $1.15 billion, to Saudi Arabia, the Pentagon said on Tuesday. The approval for land force equipment comes at a time when Saudi Arabia is leading a war in Yemen in support of forces, loyal to the exiled government of President Abd-Rabbu Mansour Hadi, who are trying to oust Iran-allied Houthi forces from the capital, Sanaa. The coalition's air strikes have come under repeated criticism for killing hundreds of civilians. The U.S. Defense Security Cooperation Agency, which oversees foreign arms sales, said that General Dynamics will be the principal contractor for the sale, adding it would contribute to U.S. national security by improving the security of a regional partner. "This sale will increase the Royal Saudi Land Force’s (RSLF) interoperability with U.S. forces and conveys U.S. commitment to Saudi Arabia's security and armed forces modernization," the agency said in a notice to lawmakers posted on its website.
Saudi Losses in Yemen War Exposed by US Tank Deal - The U.S. State Department says Riyadh can buy 153 Abrams tanks, 20 of which will replace ones destroyed in combat. The U.S. State Department and Pentagon Tuesday OKed a $1.2 billion sale of 153 Abrams tanks to Saudi Arabia Tuesday. But that’s not the real news. Turns out: 20 of those tanks, made in America by General Dynamics Land Systems, are “battle damage replacements” for Saudi tanks lost in combat. Even though the formal announcement of the sales does not say where the tanks were fighting, the Saudi military is believed to have lost some of its 400-plus Abrams tanks in Yemen, where it is fighting Iranian-backed Houthi separatists. This revelation was tucked inside a benign Pentagon announcement of the deal, one that for the most part reads just like dozens of other arms sales approved each year. The announcement does not even mention the conflict in Yemen, yet it gives a glimpse into this wildly underreported war between Arab states, the U.S., and the Houthis. While the secretive Saudi government has not formally disclosed its battles losses from its 16-month involvement with its neighbor’s civil war, videos posted on YouTube purport to show rebels blowing up Abrams tanks with Iranian-made rockets. A year ago, Houthi fighters reportedly destroyed two Saudi Abrams and captured others. In February, Iran’s state-run Fars News Agency reported that five more tanks had been destroyed. The deal approved by the U.S. government this week also includes 20 armored recovery vehicles, which are used to fix broken or damaged tanks on the battlefield.