oil prices rose with little interruption this week, largely on the ongoing talk about a possible Russian - OPEC agreement to freeze their oil output, although a falling US dollar (which makes internationally traded goods more expensive here) and a large drawdown of crude oil and gasoline inventories didn't help...the best way to see what happened price-wise is to start with a graph, because that picture of spiking prices goes a long way towards showing us all we really need to know...
the graph above, which should be familiar to you by now, shows the daily prices per barrel over the past 3 months for the September contract of the US benchmark oil, West Texas Intermediate (WTI) as traded at the Cushing Oklahoma depot...Friday's $48.52 a barrel closing price for that oil contract is now up 22.8% from the $39.51 a barrel interim low price seen at the close on Tuesday, August 2nd, while it's still 2.3% below the $49.88 a barrel price seen for the August contract on July 1st...note that the light red and green bars across the bottom of the graph show the trading volume for that contract each day, wherein green bars indicate days when the price rose, and red bars indicate days when the price fell...but while we've seen the oil price rise 7 days in a row, a fairly impressive rally, note that the height of the bars indicate below average levels of trading for every day this week except Thursday...that's a fair indication that it's not big players like major refiners buying oil who are driving this price rise, but rather a collection of smaller oil traders we might think of as bored Pokemon-Go players, who are buying oil contracts in the absence of sellers because that's what they do...also note that September trading for Brent oil, the international benchmark, has already expired, and the international contract for October delivery is now trading $50.88 a barrel, as it's been holding a few dollars above the US price for several months now...
The Latest Oil Stats from the EIA
this week's oil data for the week ending August 12th from the US Energy Information Administration indicated a surprising jump in our production of crude oil, a return to near recent normal levels of oil imports after 3 weeks near 4 year highs, an large increase in oil refining to seasonal levels, and thus a decrease in crude oil inventories, as well as another drop in gasoline inventories... however, the crude oil fudge factor included on the weekly U.S. Petroleum Balance Sheet (line 13) was + 394,000 barrels per day, which means that 394,000 more barrels per day showed up in our final consumption and inventory figures than were accounted for by our production or import figures, meaning one or several of this week's metrics were incorrect by that amount, errors which are typically due to miscues in reporting or gathering that data...that's now the 8th 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 80,000 barrels per day, which means a lot of oil or refined products have been turning up in the data, the sources for which haven't been accounted for...of course, this indicates that this weekly crude oil data is unreliable and will need to be revised later, but it's the weekly data that the markets react to, hence influencing the price of oil and hence ultimately decisions to drill or frack..
at any rate, according to the EIA. domestic production of crude oil from US wells rose by 152,000 barrels per day to an average of 8,597,000 barrels per day during the week ending August 12th, which was our largest one-week jump in oil output since the week ending May 22nd of 2015...moreover, only 52,000 barrels per day of that increase came from Alaska, as the lower 48 saw a 100,000 barrel per day increase to 8,120,000 per day...that increase strongly suggests that a number of those DUC oil wells (drilled but uncompleted) that we looked at 2 weeks ago were likely completed, fracking that may have been set in motion by oil prices near $50 a the end of June....hence our oil production this week was only 8.0% below the 9,348,000 barrels we produced during the week ending August 14th of 2015, and 10.5% lower than the record 9,610,000 barrel per day oil production that we saw during the week ending June 5th last year...
the EIA also reported that our imports of crude oil fell by an average of 211,000 barrels per day to an average of 8,193,000 barrels per day during the week ending August 12th, the least oil we've imported since the week ending July 15th....nonetheless, this week's imports were still more than 1.9% more than the 8,138,000 barrels of oil per day we imported during the week ending August 14th a year ago, while the 4 week average of our imports reported by the EIA's weekly Petroleum Status Report (62 pp pdf) stayed at the 8.4 million barrel per day level, 11.5% above the same four-week period last year...
meanwhile, the amount of crude oil used by US refineries rose by 268,000 barrels per day to an average of 16,865,000 barrels of crude per day during the week ending August 12th...that was as the US refinery utilization rate rose to 93.5% during the week, up from 92.2% of capacity during the week ending August 5th but still below the refinery utilization rate of 95.1% logged during the week ending August 14th 2015...crude oil refining on the product glut bound east coast was down by 1000 barrels per day as their utilization rate oddly rose to 84.2%, but their throughput was still 12.8% below a year ago, when east coast refineries were being operated at 93.5% of capacity...nationally, crude oil refined this week was a half percent more than the 16,775,000 barrels of oil per day US refineries processed during the week ending August 14th last year, and was 2.7% more than the equivalent week in 2014...
with the increase in refining, our refineries’ production of gasoline rose by 182,000 barrels per day to an average of 10,280,000 barrels per day during the week ending August 12th, just 9,000 barrels per day short of the gasoline output record we set during the week ending June 17th...still, that was only 0.3% higher than our gasoline output of 10,248,000 barrels per day during the week ending August 14th last year, which was the high for 2015 gasoline production...at the same time, refinery output of distillate fuels (diesel fuel and heat oil) also jumped, rising by 200,000 barrels per day to 4,939,000 barrels per day during the week ending August 12th....that brought our distillates output to within 2.6% of the 5,072,000 barrels per day that was being produced during the same week last year...
even with the near record output of gasoline, however, our gasoline inventories fell again, dropping by 2,724,000 barrels to 232,659,000 barrels as of August 12th, which was again well above the normal summertime drawdown...contributing to this week's gasoline shortfall was a 320,000 barrel per day drop in our gasoline imports to 610,000 barrels per day, while the amount of gasoline supplied to US markets slipped by an inconsequential 7,000 barrels per day to 9,762,000 barrels per day...nonetheless, this week's gasoline inventories were still 9.3% higher than the 212,774,000 barrels of gasoline that we had stored on August 14th last year, and also 9.1% higher than the 213,274,000 barrels of gasoline we had stored on August 15th 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..
even as our gasoline inventories dropped, our distillate fuel inventories rose by 1,939,000 barrels to 153,155,000 barrels by August 12th, as our demand for distillates fell 8.9% to 3,488,000 barrels per day during the week...that increase in supplies brought our distillate inventories to a level 3.2% above the distillate inventories of 148,400,000 barrels of the 14th of August last year, and 26.0% above the distillate inventories of 121,542,000 barrels of August 15th, 2014, which the EIA characterized as "near the upper limit of the average range for this time of year"...
with our crude oil imports lower and our refinery consumption of crude higher, we needed to draw oil out of storage to meet that need, and hence our stocks of crude oil in storage fell by 2,508,000 barrels to 521,093,000 barrels....nonetheless, we still ended the week with 14.2% more oil in storage than the 456,213,000 barrels we had stored as of the same weekend a year earlier, and 43.7% more oil than we had stored on August 15th 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's pretty obvious that our current crude oil supplies of 521.1 million barrels also remain "well above the upper limit of the average range" for this time of year..."
now, as we mentioned in opening, that 2.5 million barrel drop in crude supplies and the 2.7 million barrel drop in gasoline supplies were widely seen as contributing to this week's oil price rally...oil prices jumped about 50 cents a barrel right after the Wednesday EIA release, then spiked another $1 a barrel on Thursday morning after the inventory data was digested...oil traders apparently see those drops in supply as evidence that the oil glut which drove prices down is being alleviated...however, the day traders in oil apparently can't see past the oil and gasoline numbers, because they ignored the 1.9 million barrel increase in distillates supply, the 1.8 million barrel increase in propane/propylene inventories, the 552,000 barrel increase in residual fuels supply, and a 2.2 million barrel increase in "other oils", which includes unfinished oils, road oil, and natural gas plant liquids...add them all together, it meant that total commercial petroleum inventories were still up 1.3 million barrels for the week, which is a record high, as you can clearly see on the graph below...
the above graph, from the EIA, is a static version of the interactive graph that accompanies the EIA's Weekly U.S. Ending Stocks of Crude Oil and Petroleum Products page...this graph takes crude oil, natural gas liquids, and all the products produced from them and adds them together, for a weekly total of all commercial supplies, amounts for which are all listed separately and in total on the EIA's Total Stocks of Crude Oil and Petroleum Products page...for the week ending August 12th, this total rose to 1,393,563,000 barrels, a new record high that was 1,320,000 barrels more than the previous week...in fact, so far in just this year alone we have set and eclipsed 22 new record highs of this total supply metric, almost a continuous weekly increase except for during May, when the total dropped by less than a million barrels each week...but we've now set new records for total supplies 7 weeks in a row, adding a total of 21.7 million barrels of oil and oil products to what we already have stored over that 7 week stretch....
This Week's Rig Count
drilling activity rose again during the week ending August 19th, for the 11th time in the last 12 weeks, following a prior string of 39 weeks wherein the rig count had not risen at all...Baker Hughes reported that the total count of active rotary rigs running in the US rose by 10 rigs to 491 rigs as of Friday, which was still down from the 885 rigs that were deployed as of the August 21st report last year, and down from the recent high of 1929 rigs that were in use on November 21st of 2014...the number of rigs drilling for oil this week rose by 10 rigs to 406, which was still down from the 674 oil directed rigs that were in use the same week last year, and down from the recent high of 1609 oil rigs that were drilling on October 10, 2014, while the count of drilling rigs targeting natural gas formations was unchanged at 83 rigs, which was down from the 211 natural gas rigs that were drilling on August 21st 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 drilling this week that were classified as miscellaneous, unchanged from last week but up from the same week a year ago, when there were no miscellaneous rigs drilling ....
included in this week's totals was the startup of new drilling from a platform offshore from Louisiana in the Gulf of Mexico, which brought the Gulf of Mexico active rig count back up to 18 rigs, which was still down from 31 Gulf of Mexico rigs a year ago...since the Gulf rigs are the only offshore rigs going right now, 18 is also the count for the US total offshore, which is down from 32 offshore drillers at this time last year...
meanwhile, the number of working horizontal drilling rigs increased for the 10th time in the past dozen weeks, rising by 7 rigs to 382, which still was down from the 677 horizontal rigs that were in use on August 21st 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 2 rigs to 64 rigs, which was still down from the 130 vertical rigs that were drilling in the US during the same week last year, while the directional rig count was up by 1 rig to 41 rigs, which was down from the 78 directional rigs that were in use 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 below of that part of the rig count summary from Baker Hughes which shows those changes...the first table below shows weekly and annual rig count changes 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 19th, the second column shows the change in the number of working rigs between August 12th and August 19th, the third column shows the August 12th 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 week's case was August 21st of 2015:
once again, the increase of 7 rigs in the Permian basin of west Texas underpinned this week's rig count increase, but this week showed some other notable activity; an increase of 3 rigs in central Oklahoma's Cana Woodford basin, and an increase of 3 rigs in the Marcellus, apparently by adding 2 rigs in Pennsylvania and 1 rig in West Virginia...since those Marcellus rigs were almost certainly natural gas directed, we have to guess that 3 conventional natural gas rigs were removed elsewhere, to account for the unchanged gas rig count...the drop of two rigs to 27 in the Williston basin, home of the Bakken shale, is also a surprise; that count from Baker Hughes has not been consistent with the daily rig count released by the North Dakota Department of Mineral Resources, which shows 32 rigs as of this weekend...
Husted nixes anti-fracking charter; group will appeal - athensnews.com: A group proposing to turn Athens County into a charter form of government is taking the issue to the Ohio Supreme Court for a second year in a row after being rejected by the local elections board and the Ohio Secretary of State for the November ballot, also both for the second year in a row. The Athens County Board of Elections voted unanimously in July to reject the anti-oil and gas fracking charter proposal from the Athens County Bill of Rights Committee (ACBORC). Last year, the ACBORC appealed that decision to Athens County Common Pleas Court, and a local judge OKed the proposal for the November ballot. But then a private citizen appealed that decision to the Ohio Secretary of State, who knocked the proposal off the ballot. Finally, the matter ended up in the hands of the Ohio Supreme Court, which ruled that the Athens County proposal couldn’t go on the ballot, not because of home-rule provisions conflicting with the state law giving oil-and-gas regulatory supremacy to the ODNR, but because the proposal for the “charter” itself was not sufficiently complete or explained. This year, the ACBORC protested the elections board decision directly to Ohio Secretary of State Jon Husted, and on Monday he issued a decision rejecting the Athens County proposal along with similar proposals for Meigs and Portage counties. In his decision, Husted recognized that petitioners for each of the proposals had gathered and submitted enough valid signatures for the ballot, but focused his decision on the validity or invalidity of the petitions. Husted pointed to Article X, Section 3, of the Ohio Constitution requiring “all powers” and “all duties” be spelled out in a charter government proposal, calling it a “bedrock provision” and a “foundational prerequisite” for such proposals.
Appeals court upholds lower court ruling in injection well case - athensmessenger.com: An appeals court has ruled against the Athens County Fracking Action Network in a case involving an injection well in Troy Twp. In a decision filed Tuesday, the 10th District Court of Appeals upheld a decision from Franklin County Common Pleas Court that sided with the Ohio Division of Oil and Gas Resources Management and K&H Partners, the company that developed the injection well. The issue in the case was whether the Ohio Oil and Gas Commission had jurisdiction to hear ACFAN’s challenge of a permit the state issued in 2013 for the company’s second well in Troy Twp. After the permit was issued, the Athens County Fracking Action Network took the matter to the commission in an effort to overturn the permit, however the commission agreed with the division and K&H Partners that the permit was a drilling permit, not an injection permit, and therefore the commission lacked jurisdiction to hear the matter.That decision was appealed by ACFAN to Franklin County Common Pleas Court, where Judge Patrick Sheeran agreed that the permit ACFAN appealed was a drilling permit over which the commission lacked jurisdiction. He said the commission only has powers given it by the General Assembly, and the legislature has not given authority for the commission to hear drilling permit cases. Injection permits, but not drilling permits, are appealable to the commission. ACFAN appealed Sheeran’s ruling, arguing that the permit issued in 2013 was, in fact, an injection well permit under the Ohio administrative code that provides for one permit for both drilling and injection. The 10th District Court of Appeals disagreed.
Crews clean up 6-mile spill; liquid used in Harrison County fracking - FREEPORT State and local officials were on the scene for about eight hours Monday cleaning up a spill from a tanker truck hauling water from a well site. The liquid is known as production water and is used in the oil and natural gas industry, said Eric Wilson, director of the Harrison County Emergency Management Agency. It is a byproduct of the drilling process. Production water contains a mixture of chemicals, mostly brine, as well as some hydrocarbons. It has a smell like diesel, he said. The tanker truck was hauling the production water from a well in Moorefield Township to a waste disposal area, he said. Wilson said he was notified of the spill at 4:42 a.m. The truck leaked the water on McElhaney Road and Scott Hill Road in Moorefield Township. The truck then turned onto state Route 799, which runs south of Clendening Lake, and on state Route 800. The leak was spread over a distance of 6 miles. The leak was caused either by a valve malfunction or an open valve. The tanker leaked a total of 160 gallons of production water. Wilson said the driver stopped the truck in Freeport and corrected the problem, because no water was found beyond the village. Firefighters from Freeport, Washington Township and Moorefield Township handled containment of the leak, he said.
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 Biological Diversity, 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.
Activists critical of federal hearing on PennEast pipeline -- Though scores of people lined up Tuesday afternoon to let the Federal Energy Regulatory Commission (FERC) know why they don't want the PennEast natural gas pipeline in Hunterdon County, environmental activists directed their ire toward FERC for changing its hearing procedures. At an earlier FERC hearing on the project at the Grand Colonial in Union (Union), speakers came to a microphone for hours to voice their opposition to the pipeline that would carry 1 billion cubic feet of natural gas each day 115 miles from near Hazleton, Pennsylvania, to another pipeline in Mercer County. The proposal has the pipeline entering Hunterdon County north of Milford and then paralleling the Delaware River before crossing into Mercer County southeast of Lambertville. But at Monday's FERC hearing at the Holiday Inn, those who wanted to speak about the pipeline were directed to stenographers and had three minutes to make a statement. "FERC has once again demonstrated its tremendous bias for, and partnership with, the pipeline industry, " said Maya van Rossum, leader of the Delaware Riverkeeper Network. "Recognizing that public hearings which allowed the public to hear one another testify was a valuable source of community education and mutual support, FERC is now forcing people to give their testimony in secret, with only a transcriber to hear their words." Van Rossum said the hearings have become a "mere diversion" and force residents "to struggle to craft three minutes of testimony that is meaningful and makes sense." FERC's timeline for input on the 1,524-page draft environmental impact statement gave residents less than a month to give comments. The report, issued in late July, immediately drew fire from critics because it concluded the pipeline's impact would be at "less-than-significant levels" with the implementation of PennEast's and FERC's proposed mitigation measures. "FERC needs to remember it works for the people of the United States not PennEast," said David Pringle, New Jersey campaign director for Clean Water Action.
PennEast critics accuse FERC of trying to control public comment - Opponents of a plan to build a natural gas pipeline from northeastern Pennsylvania to central New Jersey registered their objections with federal regulators on Monday, and accused officials of trying to control public discussion on the controversial project. Participants were not allowed to hear each other’s testimony, nor were reporters granted access. Nevertheless, around 50 people expressed their views on a draft Environmental Impact Statement (EIS) for the proposed PennEast pipeline, published by the Federal Energy Regulatory Commission in July.Testimonies, lasting three to five minutes each, were delivered one-on-one to FERC officials sitting behind a line of black curtains at Penn’s Peak, a concert venue outside the town of Jim Thorpe, PA, near the pipeline route. A stenographer recorded the remarks but the officials did not respond to people’s comments, participants said. Mark Zakutansky, mid-Atlantic policy manager for the Appalachian Mountain Club, said the meeting’s format deprived participants of the right to hear each others’ views, which they would have had in a traditional public meeting. “These meetings have traditionally taken place in a more public format where people can hear other citizen comments,” Zakutansky said. “The more private nature of this meeting is not exactly what we had in mind; we feel the public has a right to hear each other’s testimony.”
Too Much Pipe On My Hands? - Marcellus/Utica Takeaway Capacity to the Southeast - Of the 18 Bcf/d of incremental pipeline takeaway capacity out of the Marcellus/Utica that is due to come online over the next few years, nearly one-third is heading to demand markets in the Southeast via the Atlantic Coast states. The southeastern U.S is a fast-growing region, and its residents and businesses are becoming increasingly dependent on gas-fired power generation –– a real boon to Northeast gas producers. Today, we continue our look at how pipeline takeaway capacity will stack up against Northeast production over the next several years, this time with a focus on projects that will move gas to the Southeast. The central question in this series is whether, after years of capacity constraints, midstream companies might over-estimate the need for natural gas takeaway capacity out of the Marcellus/Utica, and simply build too many pipeline projects. To assess that, we started in Part 1 by looking at the Northeast production outlook and prospects for supply growth under three commodity price scenarios. We found that even the low price, low production scenario will mean at least some growth for Northeast supply due to the robust producer economics in some parts of the Marcellus/Utica. In Part 2, we began our look at the takeaway capacity side of things, starting with the East corridor. Of the 24 projects RBN is tracking in its Midstream Infrastructure Database Interface (MIDI), six projects totaling 3.3 Bcf/d are headed to the East (New England and Mid-Atlantic states); two projects of 0.65 Bcf/d combined to Canada; four projects of 4.3 Bcf/d to the Midwest via Ohio; eight projects totaling 4.5 Bcf/d to the Gulf Coast via Ohio; and four projects with 5.2 Bcf/d to the Southeast along the Atlantic Coast (see Figure 1 in Part 2). We also took a closer look at the six projects (3.3 Bcf/d) gunning for takeaway capacity out of the Marcellus/Utica to the New England and Mid-Atlantic states (the East corridor), with the majority of that capacity ramping up after 2017. However, as we noted, pipeline development to the heavily populated East Coast markets is especially fraught with public opposition and regulatory challenges that could cause delays or cancellations. We also noted that natural gas demand in New England and the Mid-Atlantic region is highly seasonal — modest during the off-peak summer season and high during cold winter months when demand from space heating kicks in. Those incremental takeaway flows will also depend on demand growth within the region. With all that in mind, in Part 3 we turned our attention to takeaway projects that will allow Northeast supply to seek out demand markets outside the region, starting with the four projects in the Midwest takeaway corridor. Next, in today’s blog, we look at each of the projects that will move Marcellus/Utica gas to the Southeast.
EPA’s Own Advisory Board Demands Revision of Deeply Flawed Fracking Report -- The Environmental Protection Agency's (EPA) Science Advisory Board, a panel of independent scientists, is calling on the agency to revise last year's much-maligned report that declared fracking to have "no widespread, systemic impacts on drinking water resources." As the Washington Post reports: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 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, the conclusion can be defended.Environmentalists lauded the advisory panel's comments [pdf]. Lena Moffitt, director of the Sierra Club's Dirty Fuels Initiative, responded in a press statement:The Sierra Club is pleased to see the EPA's Science Advisory Board called out the agency's conclusion that there is no 'widespread, systemic' evidence that fracking contaminates drinking water for what it is: not supported by scientific facts. The EPA's own analysis shows that dirty oil and gas fracking contaminates drinking water, confirming what millions of Americans already know.
EPA Fracking Report Needs Some Big Revisions, Says Science Advisory Board: ― The Environmental Protection Agency’s Science Advisory Board released a review of a major agency report on hydraulic fracturing’s potential impacts on groundwater, and it took to task the way the report’s findings were framed. Hydraulic fracturing, or fracking, is a process used to extract oil and gas from rock formations using a high-pressure stream of water, sand and chemicals. The EPA’s draft report, which was released in June 2015, found “specific instances” of groundwater contamination from fracked oil and natural gas wells or wastewater disposal sites, but the agency concluded that there are no “widespread, systemic impacts on drinking water resources.” But the EPA’s Science Advisory Board, an independent body that exists to review the agency’s research programs and provide the administrator with advice, said in a letter to Administrator Gina McCarthy Thursday that it has concerns about the “clarity and adequacy of support” for several of the report’s major findings.The SAB is concerned that these major findings as presented within the Executive Summary are ambiguous and appear inconsistent with the observations, data, and levels of uncertainty presented and discussed in the body of the draft Assessment Report. Of particular concern in this regard is the high level conclusion statement on page ES-6 that “We did not find evidence that these mechanisms have led to widespread, systemic impacts on drinking water resources in the United States.” The SAB finds that the EPA did not support quantitatively its conclusion about lack of evidence for widespread, systemic impacts of hydraulic fracturing on drinking water resources, and did not clearly describe the system(s) of interest (e.g., groundwater, surface water), the scale of impacts (i.e., local or regional), nor the definitions of “systemic” and “widespread.”
Industry advocate downplays report that reignited fracking debate - A drilling industry advocacy group on Monday downplayed a report released last week by a scientific panel that called into question a major finding that the Environmental Protection Agency had published more than a year ago concerning the lack of evidence that hydraulic fracturing has had any negative impact on drinking water supplies. On Thursday, the EPA Science Advisory Board (SAB) said the EPA had failed to provide sufficient documentation to back up its assertion that the agency had found no evidence that fracking had led to "widespread, systemic impacts on drinking water resources in the United States." The conclusion came in a 180-page report on the EPA's June 2015 draft assessment on the potential impacts of fracking on drinking water. In an email Monday, Katie Brown, a spokeswoman for pro-drilling industry group Energy In Depth, said the SAB report does not refute the EPA's original finding."The panel does not ask EPA to modify or eliminate its topline finding of 'no widespread, systemic impacts' to groundwater from fracking -- it asks EPA to provide more details or a 'quantitative analysis' of how the agency came to that conclusion," she said. Oil and gas industry advocates had seized the EPA's initial finding as proof of the industry's long-held contention that there have been no documented cases connecting underground drinking water sources to nearby fracking operations. Brown said numerous other studies on the subject support EPA's year-old conclusion.
NYC Stands Against Fracking Waste Used to Melt Ice on Roads: Wastewater from hydraulic fracturing (also known as fracking) has been spread over some New York State roads to melt ice in the winter and to control dust in the summer. It has also entered the state’s wastewater treatment facilities and landfills, which critics—including State Senator Brad Hoylman—say are not equipped to process it. On Aug. 16, New York City Council voted in favor of Intro 446-A, sponsored by Councilmember Stephen Levin, which would ban fracking waste from the city. Mayor Bill de Blasio now has 30 days to sign it into law. The city is the first municipality in the country to impose such a ban, though some New York counties have taken similar measures to keep out fracking waste, since state and federal laws have allowed its dissemination. Although New York State has banned high-volume fracking (which typically uses 300,000 gallons or more), low-volume fracking continues and waste from these operations remains. Waste has also entered New York from surrounding states. Pennsylvania has prohibited its treatment plants from accepting the waste, and it has sent some 26,000 barrels of liquid waste to New York, according to a report by Environmental Advocates of New York. Some of the concerning materials in the waste include naturally occurring radioactive materials (NORMs) and carcinogens like benzene.
Fracking Wastewater Ban Moves Forward in NYC · Using fracking wastewater to de-ice roads in New York City will likely soon be illegal, following a City Council vote to ban the practice. The bill now goes to Bill de Blasio. RT reports that sponsors of the bill are confident that de Blasio will sign it into law. Fracking wastewater has a high brine content, which makes it useful in salinating roads icy roads. The waste also contains benzene, which the EPA says is a human carcinogen. Under the bill, the city could issue fines as high as $25,000 for noncompliance. It would ban the use all forms of oil and natural gas waste, including that from oil and natural gas storage. New York State banned fracking in 2015, following a seven-year study that raised public health and environmental concerns. But, as RT reports, it does permit the use of conventional vertical techniques for oil and gas extraction, which creates wastewater, and the New York State Department of Environmental Conservation permits the use of wastewater for road treatment. Additionally, fracking is legal in bordering state Pennsylvania. The bill’s author, Brooklyn City Councilman Stephen Levin (D), told RT that disposing of fracking waste has been challenging for oil and gas companies. “One [method] that has been applied is using it for salivating roads, de-icing roads. That’s a significant danger because there are plenty of times, when it is a particularly bad winter, there can be shortages of salt, we don’t want there ever to be an opportunity for any of this material to get into that supply of salt on our streets,” Levin said.
Court: Ratepayers can't be asked to finance natural gas pipelines (AP) — The highest court in Massachusetts is blocking electric utilities from passing on to ratepayers the costs of building new natural gas pipelines. The Supreme Judicial Court in its unanimous decision on Wednesday said state regulators made a mistake in approving the tariffs and authorizing utilities to sign long-term contracts for natural gas generating capacity. The decision was cheered by environmental groups including the Conservation Law Foundation, which filed suit to stop what it dubbed a “pipeline tax” on consumers. There was no immediate comment from Republican Gov. Charlie Baker’s administration, which pushed for the tariffs as a means of increasing the availability of natural gas to the region. The justices said passing those costs on to ratepayers would violate the intent of laws previously passed by the Legislature.
"A Bridge to Nowhere": A Vision of Fracking Future in the US: To understand just how deeply our lawmakers have drunk the Kool-Aid brewed by industry groups like the American Petroleum Institute, look no further than Colorado and Virginia, two states with Democratic governors who have pretty much sold out their contituents to the oil and gas industry. John Hickenlooper and Terry McAuliffe have pushed natural gas as a "bridge fuel" so hard, they are paraded by industry (and booed by activists) as poster boys for fracking. If McAuliffe has his way, his Virginia may soon be home to two gigantic pipelines transporting fracked natural gas across the state, seizing a 900-mile corridor from Virginians and potentially doubling his state's current emissions through methane leakage alone. And Hickenlooper's Colorado has virtually been bought by the oil and gas industry; it is one of the most fracked states in the country. As I write this, Coloradans are fighting to get initiatives on the November ballot that will allow local communities to have a say in whether they have fracking wells in their backyards or not. You might expect this kind of behavior from Republicans. But the fact is, both major US political parties are into natural gas right now. Yes, Democrats on the national stage seem to still be working out their feelings, but when you actually stop to look at the state level, natural gas is rapidly replacing coal as the source of this nation's electricity. As such, it is touted as the bridge between a dirty fossil fuel based energy system and the clean energy future, which implies that natural gas is some kind of semi-clean middle ground. The thing is, that's completely false.
Why Money in Politics Means More Fracking: A Cautionary Tale From North Carolina- North Carolina's Governor McCrory, a former Duke Employee of 28 years, has been a vocal advocate of natural gas expansion and fossil fuel extraction. He supported legislation that would legalize hydraulic fracturing (fracking) as well as legislation that eases the approval process for Duke Energy to build new gas plants. In addition, he has strong ties to groups working for the expansion of the gas industry: Duke Energy, Americans for Prosperity, Outer Continental Shelf Governors Coalitions, and Moore & VanAllen. If the connections weren't close enough, the Moore & Van Allen law firm is currently representing Duke and Piedmont in the Duke and Piedmont merger proceedings. This consolidation of power power by the state's energy monopoly would lead to more fracking and fossil fuel expansion in the state. Community members staged a wedding themed protest showing how unifying the entities would also increase the close connections between the McCrory Administration and utility interests. With the symbolic breaking apart of the mock "monopoly marriage" constituents and ratepayers issued the demand for energy choice and democratic governance. Over the last few years, we have seen a rapid expansion of this monopoly power's influence correlated with the expansion of more fossil fuels. We're seeing a national trend of investor owned utilities buying gas companies. From the Mountain West to the Southeast, utility companies are rapidly trying to gobble up as many as they can. In North Carolina, the proposed merger would not only consolidate the customer base of two utilities but also their political clout. Duke Energy is among the top campaign contributors in North Carolina, having spent more than $200,000 on legislative political campaigns in the first quarter of 2016 alone. Both companies give generously to state and national races and combined have given nearly $100,000 to this year's gubernatorial candidates over the course of their political careers. This is a prime example of why we need to get money out of and people into our democracy.
Enviro groups file suit to try and stop SE pipeline project (AP) — Environmental groups have filed a federal lawsuit to stop a 516-miles natural gas pipeline project that would travel through three Southeastern states. Groups including the Sierra Club filed the lawsuit Wednesday in the 11th U.S. Circuit Court of Appeals in Atlanta. The suit against the U.S. Army Corps of Engineers comes less than a week after the $3.2-billion Sabal Trail project received final federal approvals, including permits to discharge dredge materials into wetlands and other water bodies. The project, a joint effort by Spectra Energy, Duke Energy and Florida Power & Light, will carry natural gas from Alabama, through Georgia, into Florida. The suit says the project poses a threat to drinking water sources in the region. The Corps did not immediately respond to a request for comment on the lawsuit.
Louisiana’s Sinking Coast Is a $100 Billion Nightmare for Big Oil - From 5,000 feet up, it’s difficult to make out where Louisiana’s coastline used to be. But follow the skeletal remains of decades-old oil canals, and you get an idea. Once, these lanes sliced through thick marshland, clearing a path for pipelines or ships. Now they’re surrounded by open water, green borders still visible as the sea swallows up the shore. The canals tell a story about the industry’s ubiquity in Louisiana history, but they also signal a grave future: $100 billion of energy infrastructure threatened by rising sea levels and erosion. As the coastline recedes, tangles of pipeline are exposed to corrosive seawater; refineries, tank farms and ports are at risk. “All of the pipelines, all of the things put in place in the ’50s and ’60s and ’70s were designed to be protected by marsh,” said Ted Falgout, an energy consultant and former director of Port Fourchon. Louisiana has an ambitious -- and expensive -- plan to protect both its backbone industry and its citizens from this threat but, with a $2 billion deficit looming next year, the cash-poor state can only do so much to shore up its sinking coasts. That means the oil and gas industry is facing new pressures to bankroll critical environmental projects -- whether by choice or by force. “The industry down there has relied on the natural environment to protect its infrastructure, and that environment is now unraveling,”
Refinery trips boost ULSD crack, make for wild day in US products: trade - Refinery outages in Texas and Louisiana and the draw on US gasoline stocks drove up refined products values Wednesday and lifted the ULSD crack against Louisiana Light Sweet crude to a nine-month high. Market-moving news landed nearly every hour from early morning into early Wednesday afternoon, keeping traders on edge. "Days like today will make you drink," a US refined products source said. Refineries in Baton Rouge, Louisiana (ExxonMobil); Convent, Louisiana (Motiva); and Port Arthur, Texas (Total) reported production problems, and a fluid catalytic cracker remained offline at the ExxonMobil plant at Baytown, Texas. California blendstock found a discount to futures, meanwhile, after market talk of refinery trouble earlier this week.The crack for Colonial Pipeline ULSD against region-dominant LLS crude rose $1.71/b to $13.25/b, and the crack for pipeline 87-unleaded against LLS rose $1.85/b to a six-day high $12.59/b. Futures cracks also rode the news upward. The front-month RBOB crack against NYMEX crude was $14.13/b, up from $12.70/b Tuesday. The RBOB crack also got support from Energy Information Administration data Wednesday showing US gasoline stocks fell 2.724 million barrels last week.
New crude oil pipeline from hubs to refineries --New pipelines to increase crude oil takeaway capacity from major producing areas like the Permian and the Bakken to oil storage and distribution hubs like Houston, TX and Cushing, OK seem to garner most of the media’s attention. Just outside the spotlight’s glare, though –– and even during the ongoing slump in oil prices –– midstream companies are building several “demand-pull” pipelines to move crude to refineries more efficiently, and to give refineries easier, cheaper access to new, desirable supplies. Today, we begin a look at these new pipeline connections, their rationales, and their effects on other pipelines, barge deliveries and crude-by-rail. Say “Keystone XL,” “Energy East” or, more recently, “Dakota Access” and you’ll grab headlines and eyeballs. But say “Diamond,” “Caddo” or “Maurepas” and you’ll probably get blank stares from folks outside the crude market. This latter group of hub-to-refinery pipelines (and others like them) are definitely second-tier (if that) in the public’s mind, and for good reason: they are generally shorter and smaller in capacity, and they are designed to move oil the last miles to where it is refined into gasoline, diesel and other petroleum products. Still, these demand-pull pipelines, whose development is typically instigated by refiners looking for an economic edge and/or better access to certain types of crude, punch above their weight, and are important elements in midstreamers’ pipeline portfolios. In this blog series, we’ll consider the tranche of hub-to-refinery pipeline projects now being built –– why they are advancing now, what benefits they will provide their refinery sponsors, and how their development is likely to affect other infrastructure (pipelines, barge and rail offloading facilities) already in place to deliver crude in the refineries’ neighborhoods.
EOG Resources Boosts Fracking Plan by 30 Percent - EOG Resources planned fracking will revise its plans upward by 30 percent in 2016, despite the price of oil falling below the US$40 per barrel mark. As reported by Oil and Gas Investor (OGI), the revised numbers from the Houston-based company indicate how strong shale companies, particularly those with the oiliest land, are surviving. Other firms have faltered en masse and have sought creditor protection in actions unseen since the wave of bankruptcies of telecom firms in the early years of this century. EOG upped the number of wells it plans to make functional this year from 270 to 350 while also boosting the number of wells to be drilled by 50 to 250. The company also announced plans to increase its backlog of premium drilling locations from its current level of 3200 to 4300. At the same time, EOG anticipates maintaining a stable budget of approximately US$2.5 billion. A company statement claimed it has become more efficient and should likely receive an after-tax rate of return of more than 30 percent on its premium wells. (Assuming oil prices stay at multi-year lows, that is). EOG is best known for its South Texas operations in the Eagle Ford, but fracking has come under fire from critics for environmental damage as well as health problems of residents near drilling sites. The Texas Observer on 1 August mentioned the battle between oil and gas industry representatives and researchers who feel fracking has led to an increase in seismic activity in the Lone Star State.
EIA: Permian Production Should See An Increase In September - The Permian Basin, after suffering a downturn in production, is poised to rebound next month. That prediction comes from the U.S. Energy Information Administration’s Productivity Report. The Permian hung on in terms of production for about a year before experiencing a downturn similar to other areas in the country. However, the report anticipates that in September, production in the massive basin should see an increase of 3,000 barrels of oil per day to 1.977 million barrels per day next month. The report also looks at six other oil producing areas in the United States: Bakken, Eagle Ford, Haynesville, Marcellus, Niobrara, and Utica regions. From 2011 to 2013, those six regions accounted for 95 percent of crude oil and natural gas production increases. While the Permian should see a spike in production, the report says that collectively, the areas will see a decline in production next month. Altogether, production is forecasted to drop 85,000 barrels of oil per day to 4.47 million barrels for September. The Eagle Ford is expected to see the biggest decrease, with an anticipated drop of 53,000 barrels per day to 1.026 million barrels per day. For the Bakken, the EIA expects a drop of 26,000 barrels per day to 942,000. The Niobrara was anticipated to see a loss of 7,000 barrels per day, which would drop it to 370,000.
States' efforts to curb fracking-related earthquakes appear to be paying off - Stopping an earthquake before it starts? It sounds like a feat possible for only a superhero. But policymakers in Kansas and Oklahoma are showing that insofar as humans are causing earthquakes, they can stop them, too. After restricting oil and natural gas operations in certain hot spots, Oklahoma is feeling an average of about two earthquakes a day, down from about six last summer, and Kansas is feeling about a quarter of the tremors it once did. Using a growing body of research, along with trial and error, scientists and state regulators are getting closer to pinpointing the cause of the startling increase in earthquakes in the central and eastern parts of the country, and preventing them. The general cause, scientists have found, is not drilling, but what happens after, when operators dispose of wastewater that comes up naturally during the oil and gas extraction process. The operators inject the wastewater into disposal wells that go thousands of feet underground, which can increase fluid pressures and sometimes cause faults to move. Since March 2015, Kansas and Oklahoma have placed new restrictions on how much wastewater each operator in certain areas can dispose of at a given time. About 7 million people in central and eastern states are now at risk of man-made shaking powerful enough to crack walls and knock items off shelves, according to a one-year forecast released by U.S. Geological Survey in March. The report outlined the risk from man-made earthquakes for the first time, listing the states with the highest risk as Oklahoma, Kansas, Texas, Colorado, New Mexico and Arkansas.
Study: A Closer Look at Urban Methane Pollution - The United States produces approximately 33 trillion cubic feet of natural gas each year. A majority of this gas is converted to electricity at power plants or used for industrial purposes, but about one third ends up making the journey from the well head, through underground pipelines, and into our homes and businesses. How much of this gas gets lost along the way—whether it’s through leaky equipment or other factors—is important because of the damaging climate impacts of methane pollution. And a new study published this week in Environmental Science and Technology is helping to expand our understanding of methane emissions in urban environments. The study—a multi-year collaboration led by Washington State University—used a variety of techniques to measure the rate at which methane is lost to the atmosphere in Indianapolis, Indiana. This is the second paper in which EDF’s research partners have looked at methane pollution in an urban environment, and the results reveal regional variations. Last year researchers in Boston—an old city with a vast network of aging local gas pipelines—found natural gas was being emitted at a rate of about 38 kilograms per person. That’s enough natural gas to fuel about 200,000 homes each year. By contrast, in Indianapolis—which recently replaced much of its leak-prone, cast iron pipelines with tighter plastic pipes—emissions were almost 50 percent less per person. These results confirm our previous understanding that old pipes are prone to leaks. But, it also indicates that aging gas pipelines are not the only source of natural-gas derived methane emissions.
Study: Most sources of methane hot spot are gas facilities — Most methane sources contributing to a puzzling concentration of the greenhouse gas over the Southwestern United States appear to be natural gas production facilities, scientists said Monday. Researchers identified more than 250 sources of a methane hot spot over the Four Corners region of Arizona, Colorado, New Mexico and Utah. They include gas wells, storage tanks, pipelines and processing plants. Only a handful were natural seeps from underground formations, and one was a vent from a coal mine, according to researchers at NASA’s Jet Propulsion Laboratory and the California Institute of Technology. The findings were published in the Proceedings of the National Academy of Sciences. The study said as much as two-thirds of the methane could be spewing from only about 25 locations. Methane is a key component of natural gas. The hot spot is not a local safety or a health issue, but methane does contribute to global warming. Methane is 86 times more potent for trapping heat in the short-term than carbon dioxide. Evidence of the hot spot dates as far back as 2003, and a satellite image released in 2014 showed it in vivid color. But the origin wasn’t clear. The new study identified the sources with spectrometers aboard aircraft that flew over about 1,200 square miles in the Four Corners in April 2015, at altitudes ranging from 3,300 to 9,800 feet.
NASA Study Nails Fracking as Source of Massive Methane 'Hot Spot' -- A NASA study released on Monday confirms that a methane "hot spot" in the Four Corners region of the American southwest is directly related to leaks from natural gas extraction, processing, and distribution. The 2,500-square mile plume, first detected in 2003 and confirmed by NASA satellite data in October 2014, is said to be the largest concentration of atmospheric methane in the U.S. and is more than triple a standard ground-based estimate. Methane, the primary component of natural gas, is a highly-efficient greenhouse gas—84 times more powerful than carbon dioxide, and a significant contributor to global warming. The study, published in the Proceedings of the National Academy of Sciences and funded primarily by NASA and the National Oceanic and Atmospheric Administration (NOAA), surveyed industry sources including gas processing facilities, storage tanks, pipeline leaks, and well pads, as well as a coal mine venting shaft. It found that leaks from only 10 percent of the individual methane sources are contributing to half of the emissions, confirming the scientists' suspicions that the mysterious hotspot was connected to the high level of fracking in the region. There are more than 20,000 oil and gas wells operating in the San Juan Basin, where Arizona, Colorado, New Mexico, and Utah meet. The U.S. Energy Information Administration estimates that overall annual gas production in the basin is as much as 1.3 trillion cubic feet, mostly from coal bed methane and shale formations.
Energy-related CO2 emissions from natural gas surpass coal as fuel use patterns change - Today in Energy - U.S. (EIA) - Energy-associated carbon dioxide (CO2) emissions from natural gas are expected to surpass those from coal for the first time since 1972. Even though natural gas is less carbon-intensive than coal, increases in natural gas consumption and decreases in coal consumption in the past decade have resulted in natural gas-related CO2 emissions surpassing those from coal. EIA's latest Short-Term Energy Outlook projects energy-related CO2 emissions from natural gas to be 10% greater than those from coal in 2016. From 1990 to about 2005, consumption of coal and natural gas in the United States was relatively similar, but their emissions were different. Coal is more carbon-intensive than natural gas. The consumption of natural gas results in about 52 million metric tons of CO2 for every quadrillion British thermal units (MMmtCO2/quad Btu), while coal's carbon intensity is about 95 MMmtCO2/quad Btu, or about 82% higher than natural gas's carbon intensity. Because coal has a higher carbon intensity, even in a year when consumption of coal and natural gas were nearly equal, such as 2005, energy-related CO2 emissions from coal were about 84% higher than those from natural gas.In 2015, natural gas consumption was 81% higher than coal consumption, and their emissions were nearly equal. Both fuels were associated with about 1.5 billion metric tons of energy-related CO2 emissions in the United States in 2015. Annual carbon intensity rates in the United States have generally been decreasing since 2005. The U.S. total carbon intensity rate reflects the relative consumption of fuels and those fuels' relative carbon intensities. Petroleum, at about 65 MMmtCO2/quad Btu, is less carbon-intensive than coal but more carbon-intensive than natural gas. Petroleum accounts for a larger share of U.S. energy-related CO2 emissions because of its high levels of consumption.
Feds, law professors say judge wrong to block fracking rules (AP) - A group of law professors and lawyers for the federal government say a U.S. judge in Wyoming was wrong to block rules for hydraulic fracturing on federal land. Judge Scott Skavdahl of Casper ruled in June that the U.S. Bureau of Land Management lacks the authority to regulate fracking - a technique of injecting materials underground to increase energy production. The Obama administration filed a brief last week with the 10th U.S. Circuit Court of Appeals in Denver, arguing the BLM may enact rules requiring companies to disclose what they're injecting. The law professors, including the author of a paper Skavdahl cited in his ruling, also told the court this week that they believe the judge was wrong. Skavdahl had ruled on a legal challenge by Wyoming and other states.
Oglala Sioux Tribe members to join pipeline protesters (AP) — Oglala Sioux Tribe members are traveling from their reservation in southwest South Dakota to join a growing protest against the construction of a four-state oil pipeline. Donna Solomon is the tribe’s legislative liaison. She says at least two buses and several cars carrying tribal members will arrive Monday evening to the site of the protest in North Dakota, just north of the Standing Rock Indian Reservation. The Standing Rock Sioux had quietly opposed the Dakota Access pipeline for months near their reservation, but protesters’ resistance heated up last week as at least 18 people were arrested. Pipeline opponents say the project would disturb sacred sites and could affect drinking water on the reservation and for people downstream. The company says the pipeline would include safeguards such as leak detection equipment.
North Dakota patrol asks motorists to avoid pipeline protest (AP) — The North Dakota Highway Patrol is asking motorists to avoid state Highway 1806 near Fort Rice because of an oil pipeline protest along the road. Troopers say traffic delays are expected on the highway that runs through the Standing Rock Sioux Reservation in southern North Dakota. Opponents of the $3.8 billion Dakota Access pipeline are protesting near a construction zone just north of the reservation. Troopers say motorists should use an alternate route, such as state Highway 6. Highway Patrol Lt. Tom Iverson says about 250 protesters were at the site on Monday. He says there are about 30 troopers monitoring the protest.
Judge tosses flag desecration charge; was pipeline protest (AP) — A flag desecration charge was dropped Monday for a man who protested a crude oil pipeline that crosses his property by hanging an American flag upside down at his home, online court records show. Homer Martz, 63, was charged Friday under a state law that makes it illegal to defile, cast contempt upon, satirize or deride a flag. That law, however, was declared unconstitutional by a federal judge in December 2014 and state prosecutors were told not to enforce it. The law, which lawmakers have not removed from the books, says law enforcement officers have a duty “to enforce the provisions of this chapter, and for failure to do so they may be removed as by law provided.” Calhoun County Attorney Tina Meth Farrington filed a motion to dismiss the charges Monday, saying that she read the 2014 federal ruling and concluded she shouldn’t pursue the charge. “The Legislature should take immediate action to repeal this law so that other citizens and law enforcement are not caught in this type of situation again,” she said. A judge approved the motion Monday afternoon. Calhoun County Sheriff William Davis said at the time Martz was arrested, he and the two arresting officers were unaware the law had been struck down.
Sioux tribe leader wants political help to halt oil pipeline(AP) — The chairman of the Standing Rock Sioux Tribe says he has contacted the White House and met with North Dakota’s senators in an effort to halt construction of a $3.8 billion, four-state oil pipeline. David Archambault II says he met Wednesday with North Dakota Sens. John Hoeven and Heidi Heitkamp to “express concerns” about the Dakota Access pipeline that will cross the Missouri River just north of the Standing Rock reservation and also travel through South Dakota and Iowa to Illinois. Archambault says he is calling for peaceful protests of the pipeline. Archambault and others have been arrested in the past week for interfering with construction in southern North Dakota. North Dakota transportation officials on Wednesday closed a several-mile stretch of Highway 1806 because of the protest along the road.
Governor signs emergency declaration for pipeline protest (AP) — Gov. Jack Dalrymple has declared an emergency to make more state resources available to manage public safety risks from an ongoing oil pipeline protest near Cannon Ball. Dalrymple said Friday the declaration allows the state to bring greater resources to bear if local officials need help addressing safety concerns. Over two dozen protesters have been arrested since last week for interfering with the construction of the $3.8 billion Dakota Access Pipeline that’s designed to carry North Dakota crude to Illinois. Developers have agreed to halt construction of the project in southern North Dakota until a federal court hearing next week. Dalrymple says the state is committed to protecting lawful assembly rights, but says unlawful acts have led to “serious public safety concerns.” The order doesn’t include activation of the North Dakota National Guard.
North Dakota pipeline construction halted until court date (AP) — Developers of a $3.8 billion, four-state oil pipeline have agreed to halt construction near an American Indian reservation in southern North Dakota until a federal court hearing next week in Washington, D.C. The Standing Rock Sioux Tribe is suing federal regulators for approving permits for the Dakota Access Pipeline that will move oil from North Dakota to Illinois. Tribal officials filed the lawsuit last month against the U.S. Army Corps of Engineers. The tribe argues the pipeline would affect drinking water for residents on the reservation and disturb sacred sites outside of it. The tribe’s request for a temporary injunction hearing is slated for Wednesday. Dallas-based Energy Transfer Partners said Thursday it will temporarily stop work near the reservation but that work continues in other parts of the state.
Clashes Halt Work on North Dakota Pipeline - WSJ: Work on a 1,154-mile pipeline that would carry oil from North Dakota to Illinois was halted this week near the Missouri River, amid growing confrontations between members of the Standing Rock Sioux tribe and police guarding a construction site. Native American groups and environmentalists have staged protests to block the Dakota Access pipeline for months from a “spirit camp” outside a pipeline construction site. The groups say the pipeline threatens sacred sites near the Standing Rock reservation and poses a risk to the tribe’s drinking-water supply. In July, environmental group Earthjustice filed a lawsuit on behalf of the tribe in U.S. District Court for the District of Columbia against the U.S. Army Corps of Engineers, which authorized the $3.7 billion project, seeking a preliminary injunction. A hearing in the case is scheduled for next week. In recent days, protesters have clashed with police and threatened company officials as they blocked access to a construction site 34 miles south of Mandan, N.D., according to a separate lawsuit filed Monday by Dakota Access LLC, the pipeline’s developer. The company is asking a judge to grant a restraining order against the tribe’s chairman, David Archambault II, and other members. “They were preparing to throw pipe bombs at our line, M80s, fireworks, things of that nature to disrupt us,” said Morton County Sheriff Kyle Kirchmeier in a press conference this week. “That in itself makes it an unlawful protest.” “The only ‘pipes’ in this camp are peace pipes, used for prayer and expressions of love,” said a joint statement from the Indigenous Environmental Network and two other groups that have helped organize the protests. The opposition raises echoes of the battle over the Keystone XL oil pipeline that President Barack Obama rejected last year. Unlike that pipeline, Dakota Access doesn’t cross an international border and so doesn’t require permission from the State Department.
Oil Is Seeping From A North Dakota Hillside —An oil leak in North Dakota is seeping from a hillside and is thousands of gallons larger than initially reported last month, state officials say. About 504 barrels of oil or more than 20,000 gallons of the highly polluting substance have been recovered since the line leak occurred July 19, the North Dakota Department of Health said in a press release Friday. The company, Texas-based Denbury Onshore LLC, first said the equivalent of two barrels of oil had been spilled at a facility in the western town of Belfied. But state investigations found the spillage is considerably larger. Karl Rockeman, director of the Division of Water Quality, said to the Grand Forks Herald Friday that oil was seeping out of a hillside in multiple locations. The actual size of the spill is still undetermined and current figures may also be inaccurate. “It may be larger than that yet as well,” Rockeman said referring to the most recent estimates. Misreported leak volumes often happen once companies and officials investigate accidents and discover oil seeped deeper in the ground or waterways. Indeed, revised figures are at times much larger than first reported. It is unclear whether latest oil spill has reached the groundwater. The investigation and remediation is ongoing, the state said. The Grand Forks Herald said that spills have been reported at the same Denbury site in 2006, 2010, and 2014. The cause of the most recent spill is listed as a failure of an underground flow line.
Continental Resources Announces $222 Million Sale Of Non-Strategic Assets In North Dakota And Montana -- Continental announced today that it has signed a definitive purchase and sale agreement with an undisclosed buyer to sell non-strategic properties in North Dakota and Montana for $222 million. The sale includes 68,000 net acres of leasehold primarily in western Williams County, North Dakota, and 12,000 net acres of leasehold in Roosevelt County, Montana. The sale also includes net production of approximately 2,800 barrels of oil equivalent (Boe) per day. "This is our third sale of non-strategic assets this year, with total expected proceeds of more than $600 million. We plan to apply proceeds to reduce debt and strengthen our balance sheet," said Harold Hamm, Chairman and Chief Executive Officer. In May 2016, the Company announced the sale of approximately 132,000 net acres of leasehold in the Washakie Basin in Wyoming for $110 million. On August 3, 2016, Continental announced it had signed a definitive purchase and sale agreement with an undisclosed buyer to sell approximately 29,500 net acres of non-strategic leasehold in the eastern SCOOP play in Oklahoma for $281 million. "Our guidance for the year has not changed. The combination of Continental's high quality drilling inventory, strong balance sheet and $560 million investment in drilled but uncompleted wells (DUCs) provides the Company with a robust platform for high-value future growth," Mr. Hamm said. The $560 million investment includes both operated and non-operated DUCs, approximately 80% of which are in North Dakota. Continental currently has approximately 215 gross operated DUCs in inventory, of which approximately 165 are in the Bakken. The Company expects the total to grow to approximately 240 gross operated DUCs at year-end 2016, with approximately 190 in the Bakken. The Company said its Bakken DUCs have an average estimated ultimate recovery (EUR) of 850,000 Boe per well and can be completed at an average cost of between $3.0 million to $3.5 million per well.
Tighten Up - Dakota Access to Close Gap in Bakken Pipeline Takeaway Capacity - The 450-Mb/d Dakota Access Pipeline (DAPL) has broken away from the pack of out-of-the-Bakken crude takeaway projects. On August 2, Enbridge Inc., through its master limited partnership Enbridge Energy Partners, agreed to take a large stake in DAPL from Energy Transfer Partners (ETP) and Sunoco Logistics Partners (SXL), a move that suggests Enbridge’s own 225-Mb/d Sandpiper Pipeline may drop out of the race soon. Joining Enbridge in the $2 billion deal is Marathon Petroleum, its former joint venture partner and anchor shipper on Sandpiper. Today, we consider these recent developments in the long-running effort to transport North Dakota crude oil to market more efficiently. The apparent demise of Sandpiper could potentially change the outlook for the future balance between Williston Basin production and takeaway/in-region refining capacity. In our recent With or Without You – Could the Bakken End Up with Too Much Pipeline Capacity?, we noted that during the run-up in Bakken production earlier in this decade a lot of new crude-by-rail capacity was built, as were incremental additions to pipelines. Midstream companies also made big plans for more takeaway capacity, but some of those plans were reconsidered after the plunge in oil prices that started two years ago. As a result of that price decline, Bakken production fell from 1.3 MMb/d in December 2014 to an estimated 998 Mb/d in July 2016, according to the Energy Information Administration’s (EIA’s) Drilling Productivity Report. Based on our production economics analysis, it looks like the decline in production will be continuing until prices get back above $50/bbl netback to the basin. In the meantime, some producers are taking drastic action. For example, we hear that Continental Resources will be shutting in (yes, you read that right, shutting in) about 20 Mb/d of Bakken production in September. No doubt declines in production are one reason for the pullback in new pipeline takeaway projects, leaving only about 500 Mb/d of incremental pipeline and regional refining capacity on the drawing board. But that is still a big number. If it all gets built, pipeline takeaway/refining capacity in the Bakken would total 1.35 MMb/d (excluding rail capacity). So the big question remains, is that still too much?
In The Pacific Northwest, Oil Train Derailment Highlights Potential Dangers : NPR (audio and transcript) In the Northwest, the number of trains carrying oil along the Columbia River could dramatically increase, and that's sharpened a debate over oil train safety in Washington state and Oregon. There's a plan to ship more oil from the Bakken region to a proposed oil terminal in Washington. As Conrad Wilson of Oregon Public Broadcasting reports, a recent derailment has shown the potential danger the area faces.
Does Offshore Fracking Put Endangered Species at Risk? -- Environmental groups in California are preparing to file lawsuits against federal regulators for allegedly approving the use of offshore fracking at 23 oil and gas platforms in sensitive Pacific waters without consulting wildlife officials about the potential harms to endangered species, such as sea otters and whales. The Environmental Defense Center (EDC) and the Santa Barbara Channelkeeper announced last week their intent to sue the two US Interior Department agencies that regulate offshore oil and gas production, alleging that regulators violated the Endangered Species Act when they decided to lift a moratorium on using offshore fracking and other "well stimulation techniques" in the Pacific. Another environmental group, the Center for Biological Diversity, announced on Wednesday that it would file a separate lawsuit against the agencies on similar grounds. That decision to lift the moratorium was made in May after the regulators completed an assessment of the potential environmental impacts of offshore fracking and subsea acid washes, which are used to stimulate oil and gas production in aging offshore wells. Despite protests from environmental groups, the regulators concluded that offshore fracking is not expected to have a "significant impact" on the environment.
Moody’s: Huge debt wave approaching drillers and service firms -- Global oilfield services and drilling companies are facing a massive wave of maturing debt over the next five years that could challenge firms already reeling from low oil prices. According to a report published by Moody’s Tuesday, nearly $110 billion of debt associated with oilfield services and drilling (OFS) companies will mature over the next five years. Speculative-grade companies will account for 65 percent of all the maturities and expirations, Moody’s said. The ratings agency said that estimates show the maturity wall “growing dramatically to more than $21 billion” in 2018. That figure is nearly three times the sector’s total expected debt burden in 2017. The debt burden is then projected to continue climbing into 2021 when nearly $29 billion of issuance and revolvers are scheduled to come due, Moody’s said. According to the report, over 70 percent of the rated high-yield bonds and term loans that mature through 2018 are rated Caa1 or lower, and more than 90 percent are rated below B1. Those bonds and loans are in addition to about $3.1 billion of rated and unrated committed revolvers among issuers rated Caa1 or lower that are expiring through 2018, Moody’s said. Moody’s said that most of the maturing debt was issued between 2011 and 2015 as energy prices climbed and the U.S. shale drilling activity boomed.
Too Big to Frack? Oil Giants Try Again to Master Technology - The oil-and-gas well BP is drilling here in the Texas Panhandle looks ordinary enough from the surface. Yet a mile-and-a-half underground, horizontal pipes shoot off for at least a mile in three directions, like a chicken’s foot. The idea, part of an experiment by BP executive David Lawler, is to make three wells from one. It also is designed to help turn the London-based energy giant into a shale-oil innovator that can better compete with the entrepreneurial outfits that pioneered the business of hydraulic fracturing, or fracking. Big oil companies like BP are in need of a jolt. The multibillion-dollar projects they specialize in—giant offshore oil rigs and gas-export projects—are often prohibitively expensive in a world of $45-a-barrel oil. U.S. wells are a tempting option, but major oil companies have yet to prove they can master the techniques pioneered by shale drillers, whose innovations fueled a rebirth in U.S. energy production. London-based BP is moving into shale-oil drilling with wells such as the King Harry 1H in the Texas Panhandle, which descends 8,000 feet before splitting into three shafts. If BP, Exxon and others can figure out how to coax enough oil out of fracked wells cheaply enough to make it profitable, it could help them maintain production levels. Failure could make it harder to replace the oil from declining older megaprojects, and leave them further behind on innovations transforming the industry.
US ethane squeezing out Canadian propane/butane in Sarnia - The availability of vast amounts of ethane from the nearby “wet” Marcellus and Utica plays is spurring a petrochemical rejuvenation in Sarnia, ON. Two years ago NOVA Chemicals stopped using naphtha as a feedstock at its 1.8 million pound/year ethylene plant in Sarnia’s Chemical Valley and now relies on a combination of ethane, propane and butane. Next year the company is planning to complete the plant’s conversion to 100% ethane and is considering the possibility of building a big polyethylene plant nearby. Today, we continue our comprehensive review of southwestern Ontario’s NGL, petchem and refining infrastructure, including Sarnia’s NGL fractionation, storage and end-use markets. As we said in Part 1 of this series, Sarnia has been a major player in crude oil, refining and petrochemicals for well over a century. An 1858 oil well in nearby Oil Springs, ON is said to have been the first on the continent, and over time, oil-production, refining and petchem infrastructure was developed in southwestern Ontario (as were pipelines and railroads). Sarnia’s role as a major refining/petchem player continues to this day, decades after most oil production in southwestern Ontario dried up. In Part 2, we looked at the crude oil side of things, describing the three refineries in Chemical Valley, the oil pipelines that supply them, and the petroleum-products pipelines that help move the refineries’ output to market. In today’s episode, we turn to Sarnia’s important NGL sector: the pipelines that transport purity ethane and mixed propane/butane to Chemical Valley, the fractionator that separates mixed NGLs into purity products, the NGL storage facilities, and the big ethylene plant that “cracks” ethane, propane and butane into ethylene –– a critically important petchem building block.
BC Hydro concerned over impact of fracking on dams, documents reveal: Officials at BC Hydro have been raising concerns as early as 2009 that earthquakes caused by a controversial gas-extraction method used in the mining industry may put the province's largest hydroelectric dams at risk, internal documents reveal. Emails obtained through an access-to-information request by the Canadian Centre for Policy Alternatives show BC Hydro discussing the possible threat posed by hydraulic fracturing, or fracking, a mining technique that involves injecting high-pressure fluid deep underground in order to extract either natural gas or coal-bed methane. Critics have slammed fracking as a poorly understood and risky industrial activity that contributes to increased seismic activity and risks contaminating nearby aquifers. In one BC Hydro email exchange dated Dec. 3, 2009, safety officer Ray Stewart expresses his unease to water rights comptroller Glen Davidson over the risks of a particular methane-extraction project near the Peace Canyon Dam.."BC Hydro believes that there are immediate and future potential risks to BC Hydro's reservoir, dam and power generation infrastructure as a result of this coal-bed methane project." He provides a list of potential impacts, including seismic activity beyond what the dam can withstand and hydrogeologic effects on the reservoir. Another email, dated March 17, 2013, from dam safety engineer Scott Gilliss to engineering scientist Desmond Hartford, discusses Gilliss' research connecting an increase in fracking to a jump in seismic activity. "In my view, the province should simply add buffer zones around any very extreme and very high consequence dams, where hydraulic fracturing cannot be undertaken without a prior full investigation into the risks, and an implemented risk management plan," Gilliss writes. "Why is this so difficult?"
B.C. Hydro concerned earthquakes from fracking could damage Peace River dams | Financial Post: Internal documents show B.C. Hydro officials have had concerns since at least 2009 that earthquakes triggered by fracking are a potential risk to its Peace River dams. The electricity-generating dams in northeastern B.C. include one of the largest earth dams in the world, the W.A.C. Bennett Dam, as well as the smaller Peace Canyon Dam, and the $9-billion Site-C dam, which is under construction. The Crown agency has not discussed the issue publicly. But as a result of its concerns, B.C. Hydro worked out an agreement, possibly as early as 2014 with the B.C. Oil and Gas Commission (BCOGC), to create five-kilometre buffer zones around dams where no new fracking and drilling rights are issued, according to a report released today from the Canadian Centre for Policy Alternatives, a left-wing think-tank.There is no ban on fracking or drilling for companies that hold existing rights, but B.C. Hydro says it will work with the BCOGC, responsible for development and regulation of the natural gas sector, to effectively manage any risk, according to the report. This is the minimum that should be done, said report author Ben Parfitt, a resource analyst for the centre for policy alternatives. “If a dam were ever to fail, it would be absolutely catastrophic,” said Parfitt. Hudson’s Hope, a community of about 1,000, and several other smaller communities, are downstream of the Peace Canyon Dam.
YP Letters: Farmers must lead the fight against fracking - Yorkshire Post: AGRICULTURE has been the primary industry of every nation since the beginning of time, a fact which highlights the importance of food production. In England it is now facing the greatest threat it has ever known, from one of the most dangerous industries ever known to mankind – fracking for shale gas. Yet, our own dictatorial government is hell bent on forcing this upon us, and will stoop to anything to get their own way. I urge all farmers to learn more about it, because being a lifelong farmer myself, I feel deeply concerned about the enormous risks involved. Our MP Kevin Hollinrake says it can take place here, because he will ensure it is done safely. What an irresponsible statement. Besides the terrible disturbance and defacing of Yorkshire, our precious pure air and water supplies will be in grave danger. Whichever commodity we produce, be it cereals, beef, milk, sheep or vegetables, it will take just one hint of contamination for our buyers to immediately reject our produce. This is not scaremongering, this is the stark reality of fracking. Our businesses will fail and our land will be worthless. Will Mr Hollinrake compensate us? The answer is no! It is quite clear that the future wellbeing of our wonderful land, of our agriculture and its allied industries and of our communities, rests entirely on our own shoulders.
Lack Of Investment, Payment Delays Hamper Venezuela Oil Output (Reuters) - Venezuela, which holds the world's largest crude reserves, is on track to suffer its steepest annual oil output drop in 14 years as it suffers the effects of an economic crisis and years of under investment and mismanagement, according to data seen by Reuters and interviews with company sources and workers. The state-run oil company, Petroleos de Venezuela (PDVSA), is struggling to stem a production decline that has accelerated this year as a result of payment delays to suppliers, lack of investment in equipment, and poor planning in the country's vast oil fields. In the 12 months to June, Venezuela's crude output fell 9 percent to 2.36 million barrels per day (bpd), while the Organization of Petroleum Exploration Countries (OPEC) has boosted its output by 4 percent, according to the group's official figures. Venezuela's oil minister and PDVSA president, Eulogio Del Pino, last month confirmed a 220,000-barrel-per-day production decline -- around 8 percent -- so far this year compared with 2015. However, he said the "circumstantial fall" had been "contained." The Oil Ministry later said the country's output rebounded in July to 2.54 million bpd, without giving comparative figures. The data have not yet been reported to OPEC. PDVSA's statistics have been a matter of debate for years. Internal trade and supply data seen by Reuters show that PDVSA's crude exports, which account for 94 percent of the country's hard currency income, fell to 1.19 million bpd in July, excluding independent sales made by its joint ventures. PDVSA did not respond to a request for comment on its sales to customers.
Indian government raises oil equity dues issue with Venezuela: sources - India has raised with Venezuela the issue of past dues of $530 million-$600 million payable to its oil equity and the possibility of settling them by means of a barter deal, official sources said Friday. Indian oil minister Dharmendra Pradhan discussed the issue during a meeting with visiting Venezuelan oil minister Eulogio del Pino. Pino, part of a delegation led by Venezuelan foreign minister Delcy Rodriguez, is on a visit to India, which ends Friday. ONGC Videsh Ltd, the overseas arm of state-owned upstream major Oil and Natural Gas Corp, has a 40% stake in the San Cristobal oilfield in Venezuela. The dues included its accumulated share of oil sales.In 2008, OVL invested around $190 million in the project in which Venezuela's state-owned Petroleos de Venezuela SA holds a 51% stake. Issues of sourcing of crude and a mechanism for registering state-owned Indian oil and gas companies, the status of the two upstream projects in which Indian companies have stakes, the possibility of more oil exploration-related ties on an intergovernmental basis also figured during the discussion, an official statement by the Indian oil ministry said after the delegation-level meeting on Thursday. The possibility of settling the outstanding oil equity dues through barter deals with cash-strapped Venezuela also figured at the meeting, sources said. Pino remained non-committal on an immediate settlement of the dues issue at the meeting, they added.
Analysis: For Asian LPG buyers, it's an 'all-you-can-eat buffet' - The acute state of oversupply in Asian LPG markets can be best described by the title of a 1966 song by The Beatles -- "Here, There and Everywhere." A steady influx of cargoes from the US, Iran's aggressive move to push cargoes at competitive prices, slower-than-expected demand growth in China on the back of a sluggish economy and Japan's inventory levels hovering at multi-year highs have all contributed to supply in Asia far outweighing demand, creating a glut not seen in recent years. "For a region that is structurally short of LPG and experiences the strongest demand growth globally, Asia is currently awash with LPG supplies," Andrew Echlin, global oil products analyst at Energy Aspects, wrote in a research report on LPG titled "Hero to Zero" published this month.Plentiful US exports, aided by VLGC rates falling to multi-year lows, have prompted gas carriers to put LPG into floating storage off Singapore. Energy Aspects said in the report that at least seven VLGCs were parked off the coast of Singapore, with some anchored for weeks. The precarious oversupply situation has pulled down prices sharply. The price of refrigerated propane on a CFR Japan basis first plunged to a record low of $271.50/mt on July 29, dragged down by a sluggish crude complex and chronic LPG oversupply. This was the lowest since Platts started publishing this assessment in October 2006. The first cycle propane price breached this level again on August 11. It has since rebounded and was assessed at $284.50/mt on August 15, underpinned by a firmer crude complex. In addition to bulging supplies and slower-than-expected Chinese demand growth, propane in Asia has come under significant downward pressure as third-quarter consumption is seasonally weak, in the absence of support from winter demand.
Cheniere's first LNG export cargoes: A contrarian indicator for U.S. natural gas prices? -- Cheniere Energy has long been my favorite contrarian indicator in the U.S. natural gas market. For those unfamiliar with the term, a contrarian indicator is an event which suggests that a broadly and firmly held view--in this case, the view that U.S. natural gas supplies will grow and remain cheap for decades--is about to begin a reversal. As the company shipped its first cargo of U.S. liquefied natural gas (LNG) for export earlier this year, the glut of cheap U.S. natural gas seem to vindicate Cheniere's plans. I, on the other hand, imagined that the shipment was not confirmation of Cheniere's assumptions, but a contrarian signal that natural gas production was about to dip and that prices were finally going to turn higher in a sustained way. I say this based on the timing of Cheniere's last scheme, a U.S. natural gas import terminal that now sits unused next to its newly built LNG export terminal in Louisiana. The import terminal received its first LNG shipment in April 2008 just two months before U.S. natural gas prices peaked around $13 per thousand cubic feet, collapsing to a low of $2.06 by September 2009. But, only months after the terminal was operational, there was no longer any reason to bring LNG into the United States. It was just too expensive to compete with cheap domestic production which continued to grow. So, Cheniere got the idea that it would reinvent itself as an LNG exporter. After all, because of the so-called shale revolution U.S. natural gas production was supposed rise for decades keeping U.S. domestic gas cheap. The rest of the world, Europe and Asia especially, would be hungry for LNG supplies and would pay dearly for them. That was then. Now, of course, LNG prices have collapsed because of worldwide overexpansion of LNG capacity and flat demand in a world struggling to grow.
Natural Gas Prices Extend Recent Rebound Rally: Natural gas futures continued to advance in today’s session, gaining 1.04% with a settlement at $2.617 per million BTU. Unlike Friday and Monday, when the contract closed well off the best levels of the day, today’s close was near the high of the session, suggesting more sustained buying interest. However, the contract still has not made a great deal of progress from the lower boundary of a downward sloping trend channel dating to the early July high, keeping the trend of the contract firmly to the downside despite the recent recovery rally. The sustainability of the recent rebound remains questionable, as volume has been light on the advance, particularly relative to the volume on the decline into the August low. In addition, open interest has experienced a very modest increase, rising just 0.48%. This is compared to an increase of more than 7% during the decline into the August low. A return by sellers, which results in a breakdown below the lower boundary of the falling trend channel, shown on the daily chart would signal an acceleration of the contract’s multi-week downtrend and call for a drop to at least the 50% retracement of the May-July advance at $2.47 per million BTU. A 61.8% retracement of the advance would put the contract down at the $2.35 level. The contract’s recent rebound rally may be merely a reaction to the fully oversold condition, which developed during the decline to the August low. Near term resistance is at the $2.62 level, representing the July 21st low. This level has been tested over the past three trading days. Failing to sustain a move above $2.62 per million BTU on a closing basis would keep the trend bias in natural gas firmly to the downside.
LNG exports impact US natural gas supply, demand and price. - It’s been a volatile summer for U.S. natural gas. The CME NYMEX front month contract spiked from $1.96/MMBtu in late May to $2.99 on July 1, up more than 50% in just over a month. Since then the price has headed mostly south, closing at $2.62/MMBtu on Tuesday, down $.37/MMBtu from its summer high a few weeks ago. As often is the case, the primary culprit has been weather. But for the first time, a new factor is starting to have an impact: LNG exports. During August, approximately 30 Bcf of gas will likely flow into Cheniere Energy’s Sabine Pass for now-routine LNG exports from Train 1 and the initial volumes needed for the start-up of Train 2. The more recent decline in gas prices just happened to follow the announcement that the entire Sabine Pass LNG facility will be shut down for several weeks starting next month for maintenance and to address a design issue. Was LNG a factor in the price decline? Hard to say. We may get a better sense of the market impact of LNG exports when the plant starts back up. At that point even more gas –– up to 1.25-1.5 Bcf/d in total –– could be sucked out of the market, possibly taking a 125-Bcf bite out of supply by the end of this year. The gas market has changed. From here on out, you won’t be able to understand the U.S. natural gas market without a solid grasp of LNG export dynamics. Today, we begin a two-part series on how international demand for U.S.-sourced LNG will have an increasing effect on gas supply, demand and price.
Oil Rises to Five-Week High on Freeze Optimism, Weakening Dollar - Bloomberg: Oil closed at its highest in five weeks, bolstered by a weakening dollar and speculation that OPEC talks next month could result in a crude output freeze. Futures climbed 1.8 percent in New York, extending gains following comments from Saudi Arabia’s energy minister that the country is prepared to act to stabilize markets. The dollar extended declines following mixed U.S. economic reports. A weaker dollar increases investor appetite for commodities. While government data is expected to show crude inventories rose, fuel stockpiles are forecast to shrink. Oil has advanced about 18 percent since closing below $40 a barrel and tumbling into a bear market earlier this month. Russian Energy Minister Alexander Novak told Arabic-language newspaper Asharq Al-Awsat that the nation was open to cooperating to stabilize markets after Saudi Energy Minister Khalid Al-Falih said talks in Algiers may result in action. "The longer they can put that story out there that there’s going to be a potential production cap, the better they’ll be able to support prices," "There is no coincidence that this is happening." West Texas Intermediate for September delivery added 84 cents to settle at $46.58 a barrel on the New York Mercantile Exchange, the highest since July 12. Total volume traded Tuesday was about 4 percent above the 100-day average. Brent for October settlement rose 88 cents, or 1.8 percent, to close at $49.23 a barrel on the London-based ICE Futures Europe exchange, the highest since July 4. The global benchmark crude settled at a $2.01 premium to WTI for October delivery, the widest spread since April.
API: Drop in US Crude Oil Stocks, But Surprise Gasoline Build | OilPrice.com: U.S. crude oil inventories are down just over 1 million barrels for the week ended 12 August, according to the weekly American Petroleum Institute (API) report, but U.S. gasoline inventories are up over 2 million barrels in the biggest increase in six months. Cushing crude inventories were down 680,000 barrels. Earlier today, crude oil rallied to a one-month high, but slid back down following the release of the API data. West Texas Intermediate (WTI) for September delivery closed at US$46.58 on the New York Mercantile Exchange, but was down to US$46.41 in electronic trading at the time of writing. Analysts expectations, as carried by S&P Global Platts, were for a 200,000-barrel drawdown on U.S. crude oil inventories, with the API figures coming at roughly half that. But for gas, the API figures were unexpected. Analysts were tapping a 1.8-million-barrel drop in gasoline inventories, while the API is showing a nearly 2.2-million-barrel increase. Distillates were also up significantly over the week, with the API data showing a 2.4-million-barrel build. This should contribute to further market volatility, though Zero Hedge notes that oil is primarily tracking the dollar right now and not paying as much attention to its own fundamentals. More attention will be on the official inventory data coming tomorrow at 10:30am (EST) from the Energy Information Administration (EIA), which could contradict API data, as has been a recent trend.
Crude Tumbles After Surprise Gasoline Inventory Build (Biggest In 6 Months) - With oil largely tracking the dollar as opposed to actual fundamentals - ignoring 3 weeks of crude builds at an odd seasonal time - the surprising build in gasoline inventories (after 2 big draws) seems to have woken some traders up. While crude and Cushing inventories fell, the combination of gasoline (biggest in 6 months) and distillates builds were significant. Oil prices had surged to one-month highs ahead of the API data but quickly dropped after the print. API
- Crude -1.007m (+950k exp)
- Cushing -680k (+100k exp)
- Gasoline +2.167m
- Distillates +2.406m
After 2 big draws, gaosline had an unexpected build this week - the biggest in 6 months...Crude inventories fell following last week's 3rd build in a row - quite unprecedented for this time of year...
WTI Oil Prices UP Year-over-year --Oil prices were up over the last week with WTI futures at $44.57 per barrel and Brent at $46.97 per barrel. A year ago, WTI was at $42, and Brent was at $48 - so prices are mostly unchanged year-over-year. Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.12 per gallon (down about $0.55 per gallon from a year ago).This graph shows the year-over-year change in WTI based on data from the EIA. Five times since 1987, oil prices have increased 100% or more YoY. And several times prices have almost fallen in half YoY. WTI oil prices are now up YoY! (Brent is still down YoY)The second graph shows WTI and Brent spot oil prices from the EIA. (Prices today added). According to Bloomberg, WTI is at $44.57 per barrel today, and Brent is at $46.97 Prices really collapsed at the end of 2014 - and then rebounded a little - and then collapsed again at the end of 2015 and in early 2016. Unless prices fall sharply again, oil prices - and eventually gasoline prices - will be up year-over-year and no longer a drag on CPI.
Oil Panic-Buyers Ignore US Dollar Bounce--The market remains glommed onto Saudi comments from a few days ago, choosing to ignore the real bearish fundamentals which are getting worse. This morning's USD weakness sparked some oil momentum... but once the USD started to bounce higher so oil ignored it and melted up... Oil is ignoring the usd now that the usd is rising again... As Oil surges above $46.50 ahead of tonight's API data... despite Russia denial of talks, and Nigeria and Iran saying "no deal" As Bloomberg notes, Saudi energy minister’s recent comments regarding possible action to stabilize market helped to push price “a little higher, but the reality of what they promise is a bit more unconvincing,” Harry Tchilinguirian, head of commodities strategy at BNP Paribas, says by phone, “Oil inventories remain just as high, the U.S. active rig count continues to rise. It’s quite interesting that the market chooses to ignore these more bearish fundamental developments to latch on to the potential promise of producer cooperation”
Morgan Stanley Says The Oil Squeeze Will End On August 17: Here's Why -- Following his bearish note last week, Morgan Stanley's oil analyst Adam Longson is out with a new report, in which he accurately explains that the recent oil-price jump is driven by traders covering bearish bets, even as market fundamentals are seen remaining weak in coming months. According to Longson, a “sizeable” amount of Sept. WTI put positions at $40, $45 recently came into or near the money, leading to spike in hedging by traders to cover their exposure. However, the good news for oil bears is that the effect of this action will fade once option expires Aug. 17. As we have pointed out previously, the recent comments from OPEC, and IEA helped reverse bearishness and also unleash the recent short squeeze which led to the biggest weekly jump in oil in 4 months. He then notes that he “would not be surprised to see tank top fears return in 1Q17” as he sees rising U.S. crude inventories in coming months.He list other bearish factors for oil, which include modest implied draw in global oil stockpiles in 3Q, as well as a lack of meaningful cuts to refinery run rates. A record OPEC production, albeit seasonal, with potentially higher Libyan exports and Iraqi output growth into 2017 add to bearish indicators. He notes that the draw in U.S. gasoline inventory seen deceptive as higher net exports - lower imports and more overseas shipments - could be “masking the problem.” He concludes that if global product markets remain oversupplied, ability to export on larger scale may be limited and run cuts unavoidable.
Oil Slides To $45 Handle After Saudis Set To Increase Output To Record High: Qatar Warns OPEC "Do Something" - Following last night's major build in gasoline inventories, the bullish exuberance in crude took another spill this morning as sources say Saudi Arabia is set to increase output yet again to a new record high. Furthermore, Qatar's energy minister urged OPEC and NOPEC to "do something" warnings that another failed meeting would "cause more damage than good." Saudi Arabia was “quietly telling” the market output could rise in Aug. to as high as 10.8m-10.9m b/d, Reuters reports, citing one unidentified person from outside OPEC familiar with the matter. Qatar’s Al-Attiyah Says OPEC and Non-OPEC ‘Need to Do Something’ It's "hard to say" whether OPEC will reach freeze deal w/ non-OPEC producers, Qatar’s former energy minister Abdullah Bin Hamad Al Attiyah says in phone interview. Another failed meeting would “cause more damage than good” “OPEC and non-OPEC should be very careful on holding a new meeting without proper consent and preparation” Freeze deal wouldn’t have huge impact on fundamentals but would boost mkt sentiment Mkt still oversupplied by ~1.2m b/d-1.5m b/d, may need until end-2017 to fully rebalance.
Oil Spikes After EIA Reports Significant Crude, Gasoline Draw | OilPrice.com: Oil prices began climbing shortly after the EIA published its weekly inventory report on Wednesday, which showed that crude oil inventories last week fell by 2.5 million barrels in the week to August 12, standing at 521.1 million barrels. The authority, however, added—likely to no avail to the already unsettled oil market—that inventories are still at a record-high level for this time of year. The caveat, although immediately disregarded by the market, may takes away much of the report’s potential for any longer-term stabilization of the oil market. Gasoline stockpiles were also down, by as much as 2.7 million barrels but, like crude, too high for the season. Distillate inventories were up, however, by 1.9 million barrels, yet still slightly below the upper limit for the season, which may reinforce a sense of optimism in fuels. Refineries processed 16.9 million bpd of crude last week, a weekly increase of 268,000 barrels per day from the previous week, operating at 93.5 percent of capacity. Markets were again volatile today, with traders expecting not just EIA inventory data but also the minutes of a Fed meeting that could see interest rates finally increased after much hesitation. Yesterday the American Petroleum Institute said commercial crude oil inventories had fallen by 1 million barrels, while Cushing stockpiles recorded a 680,000-barrel draw. The industry body also said that gasoline inventories were up by 2.2 million barrels in the seven days to 12 August, which was the biggest weekly jump for the last six months. Last week’s data from the EIA had crude oil inventories at 523.6 million barrels, up by 1.1 million barrels, remaining at a record-high level for this time of year.
Oil Jumps On Inventories Despite Biggest Production Increase In 15 Months -- With oil sliding after last night's surprise gasoline build from API (and headlines from the middle east), all eyes are on today's DOE data. As opposed to API, DOE reported a major drawdown in gasoline (-2.7mm) and along with draws in Crude and Cushing, oil prices jumped (despite a big build in distillates). Oil held gains despitye the biggest surge in US crude production since May 2015. DOE:
- Crude -2.508m (+950k exp)
- Cushing -724k (+500k exp)
- Gasoline -2.724m (-1.7m exp)
- Distillates +1.939m (-600k exp)
After 3 weeks of builds, crude inventories fell this week:
Oil up fifth day on U.S. stock draws; Saudi output threatens rally | Reuters: Oil's rally extended for a fifth day on Wednesday, helped by a weaker dollar and an unexpected drawdown in U.S. crude and gasoline but traders said the run up may not last, pointing to galloping Saudi output and technical factors. Crude futures have gained as much as 13 percent since Thursday after Saudi Arabia, the kingpin in the Organization of the Petroleum Exporting Countries, stoked speculation that OPEC was ready for an output freeze deal with producers outside the group. On Wednesday, Brent crude settled up 62 cents, or 1.3 percent, at $49.85 a barrel after touching five-week highs of $49.93. U.S. West Texas Intermediate (WTI) crude futures rose 21 cents, or 0.5 percent, to $46.79. Some traders and investors cautioned that crude futures, which slipped into bear market territory in early August after falling 20 percent from this year's highs in June, were looking overbought. "We've gained too much in too little a time, at least technically, and I think this rally has to stop,"
Wednesday Energy Tweets -- August 17, 2016 John Kemp:
- commercial crude oil stocks still well above 2015 levels; no sign of inventory drawdown
- distillate fuel oil stocks rise; well above 10-year median, but narrowing to 2015 levels
- crude oil imports decelerated but still very high
- US refinery throughput rose; reversing previous week's decline; in line iwht 2015; well above 10-year average
- gasoline supplied about the same as previous week; at 9.77 million bopd
- US midwest gasoline stocks fell significantly; now just 1.6% above 10-year average
- US gasoline stocks falling faster than normal; approaching 10-year average
- commercial crude oil inventories down 2.5 million bbls in week ended August 12
Close but no cigar: it looks like we won't quite hit the 10 million bopd four-week average this summer; we came close; in the report released today, the number was 9.770 million bopd compared with 9.776 the previous week, and historically, from here on out, until early next spring, the number will continue to fall.
How The East Coast Is Getting Rid Of Its Gasoline Glut -- One month ago, before the commodity trading world's attention turned to the unprecedented glut in gasoline stocks, we wrote "PADD 1 Is A Holy Mess" - Is This What Finally Drags Crude Oil Lower, in which we showed the historic excess of gasoline stocks on the US East Coast, known as the PADD 1 region. A week later, in a follow up article we explained that as a deluge of Chinese gasoline exports had flooded the world, the PADD1 glut was only getting worse,leading to a pile up of tankers in New York harbor. It got so bad, that gasoline stockpiles in PADD 1 rose to a record 72.5 million barrels in the week ended July 22. Meanwhile, as crack spreads collapsed, concerns about both gasoline and oil demand emerged, leading to a sharp selloff in oil, and the recent bear market in WTI (at least until the subsequent OPEC-meeting driven rally). After all, the key bullish narrative for the oil long case was that with a strong summer driving season, gasoline was not going to be a production bottleneck, and yet this is precisely what happened. However, over the past three weeks, gasoline inventories finally dipped, and as we reported this morning, commercial gasoline stocks declined by another 2.7 million barrels according to the DOE, the third consecutive drop... with PADD1 gasoline inventories declining by 790,000 barrels to 70.125 million barrels. To some this seemed that the much needed inventory drawdown in gasoline had finally arrived. We thought so too, and then we read something surprising: as Bloomberg reported, "gasoline has also shifted south amid cargo diversions and deviations. A 330,000-barrel tanker usually on the Houston-to-Jacksonville, Florida, run last month moved two products cargoes to Florida from New York Harbor, according to vessel tracking data compiled by Bloomberg. Since June, at least eight foreign import cargoes originally booked to supply. New York were sent instead to the U.S. Gulf Coast and Mexican West Coast."
Crude oil and gasoline gluts beginning to shrink | Fuel Fix: The nation’s massive stockpiles of crude oil and refined gasoline are finally beginning to shrink in tandem, the Energy Department said Wednesday. Although oil and refining production levels are on the rise, the amount of oil and gasoline sitting in storage are falling. Crude inventories fell by 2.5 million barrels from last week, while motor gasoline stockpiles dipped by 2.7 million barrels. Still the Energy Department cautioned that commercial crude oil stockpiles of 521 million barrels are still at “historically high levels for this time of year,” while motor gasoline inventories of 232.7 million barrels remain “well above” average. U.S. oil prices are hovering above $46 a barrel after a few days of increases. Although crude and gasoline stockpiles are down, the nation’s overall petroleum stocks rose slightly in the last week. That’s because inventory levels rose for distillates, which are used to make diesel and heating oils, and for propane and propylene.
Total Commercial Oil and Petroleum Inventories at Record Highs (Video) - Refiners are playing games with refinery runs to make gasoline appear in less of a glut situation year over year. Gasoline inventories are still up 20 Million Barrels versus this time last year. So Oil is much higher than this time last year with 65 Million more Barrels of Oil in storage year over year, 20 million more in gasoline inventories, 5 Million more in Distillate stocks, and overall Petroleum and Oil Inventories not only at record highs but increasing each of the last three weeks. Furthermore, we have about 10 more days of the Summer Driving Season, and demand for Petroleum products is going to weaken during the soft part of the season as well as refiners going into maintenance mode. Lots of games being played in the refinery space to move gasoline prices up 32 cents in a couple of weeks when inventories are as dismal as ever all over the globe. Throw in a potential rate hike announcement by Janet Yellen next week and the U.S. Dollar looks like an undervalued currency relative to its peers. I think the market is far too dovish on the Fed, market complacency regarding the lessening chance of rate hikes after the Fed minutes on Wednesday seems highly displaced in my opinion.
OilPrice Intelligence Report: Oil Makes Significant Gains Fueled By OPEC Talk -- West Texas Intermediate (WTI) crude futures were up $1.43, or about 3.1% percent on Thursday to $48.22 a barrel. That price brings black gold back to highs last seen in early July. Both Brent and WTI have risen more than 20 percent off of their August lows. That resurgence in price has followed news that OPEC and other key exporters may discuss freezing output levels during the OPEC meeting in Algeria in September. Freezing production at current levels may not be enough to keep prices at present levels according to some analysts. Saudi Arabia has indicated that it could boost crude oil supplies in August to a new record as the Kingdom continues its rivalry with Iran, even as it prepares to discuss output levels with other producers. That behavior would likely undermine freeze talks before they even begin. "The latest news from Saudi Arabia is not price supportive at all," Carsten Fritsch, senior oil and commodities analyst at Germany's Commerzbank, said, "This is a double whammy for the oil market. A test of the lows of early August is quite possible." Analysts at Citi also warned of the risk to the current rally given the failure of talks earlier this year on freezing crude output levels. "OPEC cooperation hopes should be treated with caution, as this is shaky ground to base a bull rally on," the bank said.
US rig count up 10 this week to 491, Texas up 8 (AP) — The number of rigs exploring for oil and natural gas in the U.S. increased by 10 this week to 491. A year ago, 885 rigs were active. Depressed energy prices have sharply curtailed oil and gas exploration. Houston oilfield services company Baker Hughes Inc. said Friday that 406 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 eight rigs, Pennsylvania was up two and Louisiana, Oklahoma and West Virginia added one each. North Dakota declined by two and New Mexico was down one. Alaska, Arkansas, California, Colorado, Kansas, Ohio, Utah and Wyoming were unchanged. The U.S. rig count peaked at 4,530 in 1981. It bottomed out in May at 404.
US rig count rises for eighth straight week, up 10 to 406: Baker Hughes: Brent crude oil prices were lower on Friday after rising above $51 a barrel to an eight-week high that capped a rally driven by speculation producers could agree to measures to support crude. Also on Friday, oilfield services firm Baker Hughes reported the number of rigs operating in U.S. fields rose for an eighth consecutive week, increasing by 10 to a total of 406. The report marked the first time the count has exceeded 400 since February. At this time last year, the oil rig count stood at 674. International benchmark Brent crude oil futures were trading down 23 cents at $50.66 per barrel at 12:56 p.m. ET (1656 GMT). Brent earlier hit $51.22. U.S. West Texas Intermediate (WTI) crude futures fell 1 cent to $48.21 a barrel, after earlier rising as high as at $48.75. "We would argue that improved fundamentals are not a key reason for the recent price bounce," Morgan Stanley said in a note. "Crude oil demand is anemic, gasoline demand has decelerated globally, and China crude oil imports are likely to decelerate (in the second half of 2016)," the bank said, adding that supply appears set to surprise to the upside in a number of countries. Both benchmarks have risen 15 percent in the last six sessions amid comments by officials from crude-producing nations that they will discuss intervening in markets when they meet next month on the sidelines of a conference in Algeria.
Crude Shrugs As US Oil Rig Count Rises For 8th Straight Week -- Crude prices had slipped back into the red ahead of Baker Hughes rig count data (after topping $48.50 Sept 16 overnight). For the 8th straight week (and 11 of last 12) the US oil rig count rose (up 10 to 406), tracking the lagged recovery of WTI Crude prices and up 28% from cycle lows. The us oil rig count is now up 90 from the late-May lows at 316 (and based on the lagged oil price, is set to keep rising for another month). Charts: Bloomberg
Oil Prices Continue To Rise On Hollow Saudi Comments -- Last week Saudi Arabia’s Oil Minister said that the large number of short positions on crude have caused prices to fall, even though the market is already rebalancing itself. This statement immediately led to frantic covering, which pushed prices higher.This is just the latest confirmation that Saudi Arabia has taken center stage when it comes to oil. Nobody cares anymore about fundamentals, everyone listens to what Riyadh says. If Riyadh is bullish on oil, then oil prices rise, despite any production data that might contradict their words. If Riyadh decides for some reason to be bearish, the market follows. The extent of this dependency of traders on every word that comes out of Khalid al-Falih’s mouth (and other Saudi officials) becomes all the more evident in light of the latest production forecasts for Saudi Arabia. August production is expected to hit a new high of 10.8-10.9 million bpd, up from 10.67 million bpd in July. Why? Likely so Riyadh has more leverage at the upcoming unofficial OPEC meeting in Algeria. Not that it needs it, now that it is the undisputable tone-setter of the organization.And here’s another example of how far things have gone: virtually nobody expects the meeting to lead to any sort of agreement to freeze production. In the slim chance it does lead to such an agreement, the Saudi’s record output would indeed provide it with additional leverage: it will be able to continue pumping at the same level. However, the chance is so slim, it’s next to non-existent. Even so, the mere talk about the possibility of a production freeze got traders going long on crude—despite the clear lack of any sign of willingness on the part of Saudi Arabia to cut its output.Some analysts believe that Saudi officials are simply reflecting the rebalancing of the market. They argue that the market is indeed rebalancing and that next year oil fundamentals will swing into a deficit. Others, such as Goldman Sachs and Morgan Stanley, are not as bullish.
If Oil Prices Don't Rise, the Middle East Will Sink - The ongoing collapse in oil prices that began two years ago is setting the stage for a catastrophic situation in the Middle East if it continues. That catastrophe could come in three stages of war: civil war within the boundaries of each sovereign; war between sovereign states; and most broadly, for the intra-Islamic fight between the Sunnis and Shias to devolve into a war of finality between them, with one side vanquishing, conquering and perhaps even attempting to extinguish the other. I first addressed the potential for oil prices to be caught in a secular decline and its implications shortly after the collapse in prices began in 2014 in the column, "Oil and the Limits to Growth." Although the process I laid out has largely occurred over the past two years, one part of that process has glaringly not occurred, and has enormous implications for what happens from this point forward. That issue is that U.S. alternative oil producers have not been driven out of business to the extent I envisioned was probable; not even close. As I discussed in the column, "The Biggest Current Threat to the Markets" last November, my expectation was that as the Saudis held oil prices down, the U.S. alternative producers would have to severely reduce production, loan defaults would spike, bankruptcies requiring the transfer of assets would follow, and the time it would take for all of this action to play out legally would preclude the ability of the U.S. alternative E&P industry from raising capital to restart production, even as the Saudis allowed oil prices to begin increasing again. It would have been a temporary situation but would have provided an immediate reprieve of the fiscal issues facing all the OPEC countries, and in the process relieve the social tensions caused by the lack of economic activity in the region. That hasn't happened and economic activity throughout the Middle East has plunged as a result.
Is Iran back in the game? - The Chief Executive of this family business, a US-educated MBA, smiled at our puzzled expressions. “Contrary to what you all think, this country is still living under sanctions.” Of course some sanctions against Iran have come off. We watched it happen on 16th January, when—much sooner than sceptics had expected—the Iranians were commended for carrying out their commitments with regard to mothballing or reconfiguring key parts of their nuclear industry, and John Kerry, US Secretary of State, announced that his country and the European Union would “immediately lift nuclear-related sanctions.” (That focus on “nuclear-related” sanctions is all important: US terrorism- and human rights-related sanctions remain in place, meaning that most American business with and investment into Iran remains illegal.) Iran is now able to sell its oil to Europe for the first time since early 2012—as well as other commodities such as steel and petrochemicals; its banks have been reconnected to Swift, the interbank messaging service that handles cross-border payments; and some of the world’s biggest companies, from Shell to Peugeot, Airbus to Danieli, have been falling over themselves to get a piece of the world’s last big frontier market. This is the theory of what has been happening over the past four months. What the CEO in the Zagros meant when he said that Iran continues to live under sanctions is that theory and practice are so far apart as to make his life indistinguishable from pre-January days. His company remains unable to access top-of-the-range German components without long delays, and export remittances still have to come through a shell company in Dubai. The old frustrations of extra costs and compromises on quality—the Chinese are usually ready to supply what the west will not—haven’t gone away.
The Simple Reason Why OPEC Won't Strike a Deal on Oil - After a more upbeat start to the week, oil prices fell and hovered around $42 a barrel for WTI (the main U.S. benchmark). It looks like we’re settling into another period of range-bound oil. Oil’s initial move up this week was caused by some OPECmembers calling, once again, for a cut or “freeze” in oil production. Traders, who need to literally hedge their bets on forward contracts, responded by nudging the market up. Yet there was little substance to these rumors. . Now, it’s true that every single member of OPEC is suffering from low oil prices – and some much more than others. But the truth is, Saudi Arabia has burned too many diplomatic bridges to get any deal like that off the ground… For quite some time, a number of OPEC countries have been in dire straits over low oil prices. In fact, every single member of the cartel is taking it on the chin with budget deficits, including the most solvent of them – Saudi Arabia, the United Arab Emirates, and Kuwait. But it’s the likes of Venezuela, Nigeria, Libya, and Algeria that have been hit the hardest. All are facing acute financial meltdowns, with the accompanying escalation in inflation, unemployment, shortages of food and other staples, and rising unrest. Moscow is still reeling from the meeting in Doha earlier this year, where the Russians thought they would have an agreement in principle for a cap only to find Saudi Arabia sabotaging the talks at the eleventh hour. Riyadh suddenly declared that there would be no cap if Tehran was not on board. Russia, of course, has its own central budgetary problems to worry about. But it has decided that, until there is some firm indication that OPEC will be cutting its historically high production levels, it will not do so either. We are, therefore, back to each competitor defending market share, with pricing cuts used to wrestle export markets from other producers. This was the reason for the Saudi move I discussed last week, a move directed squarely againstRussian exports to Asia.
Russia says oil market talks with Saudi developing - newspaper | Reuters: Russia, the world's top oil producer, is consulting with Saudi Arabia and other producers to achieve oil market stability, Energy Minister Alexander Novak said, adding that the door is still open for more discussions on freezing output levels if needed. In an interview published on Monday Novak also told Saudi-owned newspaper Asharq al-Awsat that a complete return of market stability is only likely in 2017. "With regard to the cooperation with Saudi Arabia, the dialogue between our two countries is developing in a tangible way, whether in the framework of a multi-party structure or on a bilateral level," Novak was quoted as saying. "We are cooperating in the framework of consultations regarding the oil market with OPEC countries and producers from outside the organisation, and are determined to continue dialogue to achieve market stability," he said. "We are ready to achieve the widest possible level of coordination... and put in place joint measures to achieve oil market stability, with the condition that these measures will not be for a limited period of time." Novak's comments come only days after Saudi Arabian Energy Minister Khalid al-Falih said his country would work with OPEC and non-OPEC members to help stabilise oil markets. An informal meeting of major producing countries is scheduled in Algeria late next month.
Iran Undecided On Joining OPEC’s Production Meeting | OilPrice.com: Iran has not yet made a decision on whether or not it will join the OPEC meeting next month, and according to officials there, production levels have not reached a point at which the country can ink an output agreement. This time around, September’s OPEC meeting is an informal one set to take place in Algiers, with a main agenda of talks surrounding the tightening of oil output. A spokeswoman for the nation’s oil ministry said that no decision has been made about attending the meeting, and that the country has not made a decision on joining an output cap. That spokeswoman said that the country would probably not reach pre-sanction production levels prior to the September meeting. The oil market fluctuated a bit in reaction to the news. US crude futures closed on Tuesday at $46.62 a barrel. Brent closed just above $48.50 per barrel. Iran was the holdout in creating a cap agreement in April, citing production levels in January that were far below historic levels. Iran has previously said that it will not consider a cut in production until its exports increase by 1.5 million barrels per day, above the current level of 1.1 million per day. Iranian officials added that they would not support an emergency meeting unless there was a consensus on what would be done. One oil official said “If the meeting takes place and there is no agreement, it will have a negative impact on prices.” That same official said that the country might support such a meeting if the country was not asked to reduce its production. Iran is still in the process of recovering from the effects of nuclear sanctions. Iran had said that it planned to increase production by 500,000 barrels per day in short-term production, with a goal of reaching 1 million barrels per day by the end of the year.
U.S. Held Cash Until Iran Freed Prisoners - WSJ: —New details of the $400 million U.S. payment to Iran earlier this year depict a tightly scripted exchange specifically timed to the release of several American prisoners held in Iran. The picture emerged from accounts of U.S. officials and others briefed on the operation: U.S. officials wouldn’t let Iranians take control of the money until a Swiss Air Force plane carrying three freed Americans departed from Tehran on Jan. 17. Once that happened, an Iranian cargo plane was allowed to bring the cash home from a Geneva airport that day. President Barack Obama and other U.S. officials have said the payment didn’t amount to ransom, because the U.S. owed the money to Iran as part of a longstanding dispute linked to a failed arms deal from the 1970s. U.S. officials have said that the prisoner release and cash transfer took place through two separate diplomatic channels. But the handling of the payment and its connection to the Americans’ release have raised questions among lawmakers and administration critics. The use of an Iranian cargo plane to move pallets filled with $400 million brings clarity to one of the mysteries surrounding the cash delivery to Iran first reported by The Wall Street Journal this month. Administration officials have refused to publicly disclose how and when the transfer took place. Executives from Iran’s flagship carrier, Iran Air, organized the flight from Tehran to Geneva where the cash—euros and Swiss francs and other currencies—was loaded onto the aircraft, these people said.
An oil tanker carrying 900,000 litres of diesel has been hijacked and taken to Indonesia - (Reuters) - An oil tanker, which was earlier reported to have been hijacked and sailed into Indonesian waters, was believed to have been taken due to a commercial dispute, Malaysian authorities said on Wednesday. Vier Harmoni, carrying 900,000 litres of diesel, went missing after leaving the Tanjung Pelepas port on the eastern coast of Peninsular Malaysia on Tuesday before it was relocated in the waters off Batam, Indonesia. A Malaysian Maritime Enforcement Agency (MMEA) spokesman confirmed to Reuters that there was no element of terrorism involved in the tanker's disappearance. The spokesman said early investigations showed the tanker had been taken due to a disagreement between the ship's management and the crew. The ship was registered in Batam but was being leased by a Malaysian company, the spokesman said.The MMEA's southern regional chief Admiral Adon Shalan told The Star newspaper there could have been a financial dispute within the company. "We tried to contact the ship but it went unanswered," he was quoted as saying on the daily's website. "We believe the ship's captain might have turned off its tracking system as we could not trace it on our radar." Shipping data in Thomson Reuters Eikon suggests the ship's transponder has been turned off since June 20. The ship was carrying diesel with an estimated value of 1.6 million ringgit ($390,000).
Opium Rules: Afghan Oil Will Never Get Out Of The Ground - Afghanistan may have mouth-watering oil riches, but opium still rules this economy amid a lack of any real investment in getting oil and gas out of the ground. In 2011, the United States Geological Survey released a report on Afghanistan arguing that the responsible exploitation of the country’s natural resources, including oil and natural gas, could help alleviate its economic addiction to opium sales.At that time, opium production represented just under 50 percent of Afghanistan’s Gross Domestic Product. Since then, the nation has set new opium cultivation records. With an estimated 59 trillion cubic feet of natural gas resources hidden in its ground, Afghanistan does not seem to get the financial attention it deserves as a potential game-changer in the Central Asian natural gas market. American efforts to rebuild Afghanistan’s economy through the energy industry have created opportunities for Republican candidates to criticize the ability of the U.S. government—and of the Obama administration, in particular—to affect positive change in Iraq, Afghanistan and other areas in the Middle East. Case in point: the scandalous story that broke last November about a $43 million compressed natural gas station built in Afghanistan by the Task Force for Business and Stability Operations (TFBSO). A report by the Special Inspector General for Afghanistan Reconstruction (SIGAR) said the costs of the Sherberghan station appeared to exceed 140 times the amount of capital needed to build a comparable station in Pakistan.
ISIS recruits have minimal knowledge of Islam - Islamic State recruits who joined the group in Syria knew very little about Islam, according to documents found in a former Islamic State stronghold in Syria and provided to the Associated Press. After analyzing forms that applicants had to fill out, the AP, which got the documents from a Syrian opposition site called Zaman al-Wasl, reported that 70 percent of recruits were listed as having just "basic" knowledge of Shariah, or Quranic law. That was the lowest possible choice in the forms reviewed by the AP. Just 5 percent of the applicants were deemed to be advanced students of Islam. The documents and interviews by the AP show that several young men from France were lured by a recruiter named Mourad Fares, who went bar-hopping with them even though Islam forbids alcohol. Others, from Britain, had ordered "Islam for Dummies" from Amazon before making the trip to join the Islamic State in Syria. But ignorance of Islam was not considered a negative by IS recruiters. Quite the contrary; young men ignorant of the religion could be shaped into ruthless fighters, and lured with practices that included giving them sex slaves and telling them that raping the slaves was justified under Islam
For The First Time, Russian Strategic Bombers Strike ISIS From Iran's Hamadan Air Base - Russian strategic bombers with full payloads delivered their first airstrikes on terrorist targets in Syria operating from an Iranian airbase, the Russian Defence Ministry said, after Moscow deployed Russian aircraft to an Iranian air force base to widen its campaign in Syria. The ministry said the strikes, by Tupolev-22M3 long-range bombers and Sukhoi-34 fighter bombers, were launched from Iran's Hamadan air base. Russia's state-backed Rossiya 24 channel earlier on Tuesday broadcast uncaptioned images of at least three bombers and a Russian military transport plane apparently inside Iran, but said it was unclear how many Russian bombers had arrived there. This was the first time that Russia has struck targets inside Syria from Iran since it launched a bombing campaign to support Syrian President Bashar al-Assad in September last year. Moscow and Tehran signed a military agreement allowing Russian aircraft to station at Hamadan Airport in western Iran, and according to Iran's Natioanl Security Council the cooperation between the two countries in Syria is “strategic." Tehran has agreed to share its military facilities and capacities with Moscow, confirming dedication to strategic cooperation in fighting against terrorism in Syria, Iran’s Secretary of Supreme National Security Council Ali Shamkhani told Islamic Republic News Agency (IRNA) in an interview on Tuesday.
Saudi Airstrike Kills 7 At Yemen Hospital Run By Doctors Without Borders -- Many have forgotten that as US and Russian forces battle the Islamic State, a few hundred kilometers away, Saudi Arabia continues to wage war in Yemen, which is where earlier today a Saudi-led coalition air strike hit a hospital run by Doctors Without Borders (MSF) in the northern Hajja province in Yemen, killing at least seven people and wounding 13. A Reuters witness cited by The Guardian at the scene of the attack in the Abs district, said medics could not immediately evacuate the wounded because war planes continued to fly over the area and first responders feared more bombings. The facility is run by aid group Medecins Sans Frontières, which confirmed on its official Twitter account that an air strike had occurred but said the number of deaths and injuries remained unclear. BREAKING: #Yemen MSF-supported hospital was hit by airstrikes at 15:45. We are assessing the situation. Number of casualties still unknown. — MSF International (@MSF) August 15, 2016 “Yes, we confirm the news. A hospital that is run by MSF was hit by a couple of airstrikes today at 3.45pm local time. Right now we don’t have more information. Medical staff are attending the wounded,” MSF spokesperson Malak Shaher told RT. MSF says it has supported the hospital since July 2015, adding that 4,611 patients have been treated at the facility. The incident comes less than two days after MSF accused the Saudi-led coalition of killing 10 children and injuring 28 more in a strike that hit a school in the Houthi rebel stronghold of Saada in northern Yemen. The coalition denied targeting the school and claimed it hit a rebel camp where underage fighters were trained, AFP reports.
U.S.-backed, Saudi-led Coalition Bombed a Hospital in Yemen supported by Doctors Without Borders -- After the U.S.-backed, Saudi-led coalition bombed a hospital in Yemen supported by Doctors Without Borders on Monday, the U.S. State Department offered a rare condemnation of the coalition’s violence. “Of course we condemn the attack,” said Elizabeth Trudeau, a spokesman for the State Department. The State Department has previously deflected questions about coalition attacks by referring reporters to the Saudi government — even though the U.S. has supplied the coalition with billions of dollars of weapons, and has refueled Saudi planes. Trudeau also stressed that “U.S. officials regularly engage with Saudi officials” about civilian casualties — a line that spokespeople have repeated for months. Saudi Arabia has nevertheless continued to bomb civilian sites, including homes, markets, factories, and schools. “We’ve also encouraged them to do their utmost to protect entities protected by international law, such as hospitals,” said Trudeau. But for the Saudi coalition, bombing medical facilities has become business as usual. In October, the coalition bombed an MSF-supported hospital in Yemen’s Haydan district, destroying the only emergency medical facility serving 200,000 people. (Doctors Without Borders is also known as Médecins Sans Frontières, or MSF.) In December, airstrikes destroyed an MSF clinic in Taiz while doctors were treating the wounded from a nearby Saudi airstrike in a park. And in January, the coalition destroyed a hospital in Razeh district, killing five people — and killing an ambulance driver working for MSF later that month.
Exclusive: Civil war costs Yemen $14 billion in damage and economic losses - report | Reuters: The cost from damage to infrastructure and economic losses in Yemen's civil war is more than $14 billion so far, according to a confidential report seen by Reuters that highlights the effort needed to rebuild the country, where more than half the population is suffering from malnutrition. "The conflict has so far resulted in damage costs (still partial and incomplete) of almost $7 billion and economic losses (in nominal terms) of over $7.3 billion in relation to production and service delivery," said the May 6 joint report by the World Bank, United Nations, Islamic Development Bank and European Union. The internationally recognized Yemeni government of President Abd Rabbu Mansour Hadi is battling the Iran-allied Houthis in a bitter civil conflict, and is also facing the al Qaeda in the Arabian Peninsula militant group. The 16-month civil war has killed more than 6,500 people, displaced more than 2.5 million and caused a humanitarian catastrophe in a country with a per capita gross domestic product the World Bank last estimated at only $1,097 in 2013. The Preliminary Damage and Needs Assessment report is an internal working document that is not being publicly released. "These preliminary findings are not only partial, but also evolving" because the conflict is ongoing, the report said. The assessment, it said, was conducted between late 2015 and early this year. A survey by Yemen's education ministry cited by the report showed that of 1,671 schools in 20 governorates which suffered damage, 287 need major reconstruction, 544 were serving as shelters for internally displaced persons, and 33 were occupied by armed groups. Based on a sample of 143 schools, the estimated cost of the damage was $269 million.
Bin Laden’s Son Urges Overthrow Of Saudi Regime, Jihad Against US Influence -- Following several unclaimed terrorist attacks on Saudi territory over the past few months, yesterday the son of Al-Qaeda's founder Osama bin Laden urged Saudis to take discontent to the next level and to "overthrow" the kingdom's rulers in order to "free" themselves from US influence, SITE Intelligence Group reported Wednesday. In an undated audio message, Hamza bin Laden urged Saudi youth to join the Yemen-based Al-Qaeda in the Arabian Peninsula (AQAP) to "gain the necessary experience" to fight, according to SITE. In a new recording released on Wednesday by the Al-Qaeda-linked As-Sahab media outlet, the heir of Osama bin Laden urged Saudi youth to join the Yemen-based Al-Qaeda in the Arabian Peninsula (AQAP) to “gain the necessary experience” in waging “intifada” to free the country from the Al-Saud family. The undated audio message is Hamza bin Laden’s fourth speech since August 2015, as he tries to assert his influence over the global terrorist network. While Al-Qaeda has been headed by Ayman Al Zawahri since 2011, experts believe that Hamza is aiming for the top terrorist position. Furthermore, the resurgence the ‘heir’ comes amid rivalry among the notorious jihadist groups. Al-Qaida’s Syria affiliate Al-Nusra Front is a rival of the Islamic State, which itself is a former Al-Qaeda offshoot whose leader Abu Bakr al-Baghdadi in 2014 declared an Islamic caliphate across Iraq and Syria.
Senators consider vote to block US arms deal to Saudi Arabia – report --Days after the Obama administration approved a major arms sale agreement to Saudi Arabia, Republican senator Rand Paul of Kentucky is considering blocking the move, citing objections to the country’s human rights record and a possible regional arms race. “I will work with a bipartisan coalition to explore forcing a vote on blocking this sale,” said Paul, according to a statement provided to Foreign Policy magazine. “Saudi Arabia is an unreliable ally with a poor human rights record. We should not rush to sell them advanced arms and promote an arms race in the Middle East.” Paul’s statement comes amid a deteriorating situation in Yemen, Saudi Arabia’s neighbor to the south, where Riyadh has been involved in a US-supported intervention for more than a year. Peace talks being brokered by the United Nations and held in Kuwait fell apart last week and fighting resumed on Tuesday, as airstrikes from the Saudi-led coalition struck a food facility, killing more than a dozen people. Though Paul, and his colleague on the Senate foreign relations committee, Democratic senator Chris Murphy, have been critics of US policy in Yemen and of providing Saudi Arabia with the logistical and military support it has asked for.
Fractured Lands: How the Arab World Came Apart - The New York Times: This is a story unlike any we have previously published. It is much longer than the typical New York Times Magazine feature story; in print, it occupies an entire issue. The product of some 18 months of reporting, it tells the story of the catastrophe that has fractured the Arab world since the invasion of Iraq 13 years ago, leading to the rise of ISIS and the global refugee crisis. The geography of this catastrophe is broad and its causes are many, but its consequences — war and uncertainty throughout the world — are familiar to us all. Scott Anderson’s story gives the reader a visceral sense of how it all unfolded, through the eyes of six characters in Egypt, Libya, Syria, Iraq and Iraqi Kurdistan. Accompanying Anderson’s text are 10 portfolios by the photographer Paolo Pellegrin, drawn from his extensive travels across the region over the last 14 years, as well as a landmark virtual-reality experience that embeds the viewer with the Iraqi fighting forces during the battle to retake Falluja.It is unprecedented for us to focus so much energy and attention on a single story, and to ask our readers to do the same. We would not do so were we not convinced that what follows is one of the most clear-eyed, powerful and human explanations of what has gone wrong in this region that you will ever read.
How the Europeans’ creation of Iraq, Syria and Libya contributed to today’s chaos - While most of the 22 nations that make up the Arab world have been buffeted to some degree by the Arab Spring, the six most profoundly affected — Egypt, Iraq, Libya, Syria, Tunisia and Yemen — are all republics, rather than monarchies. And of these six, the three that have disintegrated so completely as to raise doubt that they will ever again exist as functioning states — Iraq, Syria and Libya — are all members of that small list of Arab countries created by Western imperial powers in the early 20th century. In each, little thought was given to national coherence, and even less to tribal or sectarian divisions. Certainly, these same internal divisions exist in many of the region’s other republics, as well as in its monarchies, but it would seem undeniable that those two factors operating in concert — the lack of an intrinsic sense of national identity joined to a form of government that supplanted the traditional organizing principle of society — left Iraq, Syria and Libya especially vulnerable when the storms of change descended. The process began at the end of World War I, when two of the victorious allies, Britain and France, carved up the lands of the defeated Ottoman Empire between themselves as spoils of war. In Mesopotamia, the British joined together three largely autonomous Ottoman provinces and named it Iraq. The southernmost of these provinces was dominated by Shiite Arabs, the central by Sunni Arabs and the northernmost by non-Arab Kurds. To the west of Iraq, the European powers took the opposite approach, carving the vast lands of “greater Syria” into smaller, more manageable parcels. Falling under French rule was the smaller rump state of Syria — essentially the nation that exists today — and the coastal enclave of Lebanon, while the British took Palestine and Transjordan, a swath of southern Syria that would eventually become Israel and Jordan. Coming a bit later to the game, in 1934, Italy joined the three ancient North African regions that it had wrested from the Ottomans in 1912 to form the colony of Libya.
The Drone Presidency - On March 5, the United States used unmanned drones and manned aircraft to drop bombs on a group of what it described as al-Shabab militants at a camp about 120 miles north of Mogadishu, Somalia, killing approximately 150 of them. The administration claimed that the militants presented an imminent threat to African Union troops in the region with whom US advisers have been working, although it produced no evidence to support the claim. The news that the United States had killed 150 unnamed individuals in a country halfway around the world with which it is not at war generated barely a ripple of attention, much less any protest, here at home. Remote killing outside of war zones, it seems, has become business as usual This is a remarkable development, all the more noteworthy in that it has emerged under Barack Obama, who came to office as an antiwar president, so much so that he may be the only person to win the Nobel Peace Prize based on wishful thinking. Our Peace Prize president has now been at war longer than any other American president, and has overseen the use of military force in seven countries—Afghanistan, Iraq, Syria, Pakistan, Libya, Yemen, and Somalia. In the latter four countries, virtually all the force has come in the form of unmanned drones executing suspected terrorists said to be linked to al-Qaeda or its “associated forces.” That an antiwar president has found the drone so tempting ought to be a warning sign. Other countries are unlikely to be reticent about resort to unmanned aerial warfare to “solve” problems beyond their borders. Already, Israel, the United Kingdom, Iran, Iraq, Nigeria, and Pakistan have joined the US in deploying armed drones. China is selling them at a list price of only $1 million. In short order, most of the developed world will have them. And when other nations look for precedents, Obama’s record will be Exhibit A.
US nukes at Turkey base at risk of seizure: report (AFP) - Dozens of US nuclear weapons stored at a Turkish air base near Syria are at risk of being captured by "terrorists or other hostile forces," a Washington think tank claimed Monday. Critics have long been alarmed by America's estimated stockpile of about 50 nuclear bombs at Incirlik in southern Turkey, just 70 miles (110 kilometers) from the border with war-torn Syria. The issue took on fresh urgency last month following the attempted coup in Turkey, in which the base's Turkish commander was arrested on suspicion of complicity in the plot. "Whether the US could have maintained control of the weapons in the event of a protracted civil conflict in Turkey is an unanswerable question," said Monday's report from the Stimson Center, a nonpartisan think tank working to promote peace. Incirlik is a vital base for the US-led coalition fighting the Islamic State group in Iraq and Syria, with the strategically located facility affording drones and warplanes fast access to IS targets. But the Pentagon in March ordered families of US troops and civilian personnel stationed in southern Turkey to quit the region due to security fears. "From a security point of view, it's a roll of the dice to continue to have approximately 50 of America's nuclear weapons stationed at Incirlik Air Base in Turkey," report co-author Laicie Heeley said. "There are significant safeguards in place. ... But safeguards are just that, they don't eliminate risk. In the event of a coup, we can't say for certain that we would have been able to maintain control," she told AFP.
Why Russia values a non-nuclear Iran more than higher oil prices | Bulletin of the Atomic Scientists: One of the key questions that remain unanswered more than one year after the signing of the Joint Comprehensive Plan of Action—the Iran nuclear deal—is why Russia supported it. A failure of the talks between Iran and the P5+1 (Russia and the four other permanent members of the United Nations Security Council, plus Germany) would have at least stopped decline in the price of oil and tangibly benefited the Russian economy. As the talks edged toward completion in 2015, some Russia watchers in the West began to suspect that Russia might be looking for ways to stir up trouble, so that oil prices would go up. I see at least four reasons why Putin chose to support the deal.First, as my reading of Russia’s vital interests indicates, preventing Iran from obtaining nuclear weapons is of greater lasting value to Russia than shorter-term gains from a surge in oil and gas prices.Second, although any regional destabilization induced by the failure of the Iran nuclear talks would have had a significant effect on oil prices, the effect would have been temporary. For instance, the first Iraq war had no lasting effect on oil prices, according to a recent chart in the Economist. Third, the model of economic growth based on rising oil prices is no longer working for Russia. Even high oil prices will not restore the economic growth rates of 7 percent per year that Russia saw in the 2000s, and the Russian government knows this well. As theFourth, the lifting of the international sanctions on Iran allows Russia to increase trade with Iran, counteracting some of the losses that Russian exporters will endure from competition on the Iranian market with Western suppliers—competition that is bound to intensify as Western governments lift their own national restrictions on their companies’ trade with Tehran.
With China Crash, Saudi Arabia Hemorrhaging Cash: With China’s economic crash driving U.S. oil prices down to $42 a barrel, Saudi Arabia is the oil-exporting nation suffering the worst economic decline. The 15,000 members of the six branches of the Saudi royal family have been buying national support with massive social welfare spending. But with the oil price plunging by 60 percent, causing a massive budget deficit, the kingdom’s foreign exchange reserves could be wiped out in four years. Most analysts have focused on Russia as suffering the worst impacts of the oil price crash. The value of Russia’s oil & gas production is approximately $350 billion per year; it accounts for 20 percent of Russia’s GDP, and equals two thirds of all exports. But even at current prices, Russia will still achieve a trade surplus of about three percent of GDP. As an oil exporter, Russia’s is uniquely self-sufficient and a military exporter. Saudi Arabia’s oil and gas sector makes up 45 percent of GDP, funds about 80 of the government’s budget, and accounts for 90 percent of exports. Saudi Arabia’s 2014 budget spending was $294.3 billion, with a $14.4 billion deficit. The 2015 Saudi budget was cut down to $229.3 billion in spending, with an expected $38.6 billion deficit. But in June with the average price of oil estimated to be $60 a barrel for the year, the IMF estimated that Saudi Arabia’s $745 billion GDP would fall to $649 billion and the nation would post a budget deficit of 20 percent of GDP, or $130 billion. With international oil prices at $49 a barrel, the Saudi deficit will jump to about $163 billion and Saudi GDP will plunge by another $80 billion, to $570 billion. The IMF also did not make any mention of the added cost of Saudi Arabia’s air campaign against the Islamic State in Syria, and its war and invasion of Yemen.
China Set to be the World's 2nd Largest Shale Gas Producer by 2040 | Rigzone - China is poised to be the world's second largest shale gas producer after the U.S. by 2040, when it would account for more than 40 percent of the country's total natural gas production, the U.S. Energy Administration (EIA) said Monday. The Asian economic giant, who has been among the first countries outside North America to develop shale resources, has drilled more than 600 shale gas wells in the last 5 years, producing 0.5 billion cubic feet per day (Bcf/d) of shale gas as of 2015, according to EIA's International Energy Outlook 2016 (IEO2016) and Annual Energy Outlook 2016 (AEO2016). China is progressing development of its shale gas resources through joint venture with international oil and gas companies. Earlier this year, BP plc and China National Petroleum Corp. (CNPC) signed a production sharing contract (PSC) for shale gas exploration, development and production in the Neijiang-Dazu block in China's Sichuan Basin. The EIA estimated that the world's natural gas production is set to grow 62 percent from 342 Bcf/d in 2015 to 554 Bcf/d by 2040 and shale gas resources are expected to be the largest component of this growth. According to the EIA, global shale gas production -- projected to increase from 42 Bcf/d in 2015 to 168 Bcf/d in 2040 -- would account for 30 percent of the world's natural gas supply by the end of the forecast period. The projection also indicated that the U.S. would remain the world's top shale gas producer. Shale gas accounted for more than half of the country's natural gas output last year and production is expected to more than double from 37 Bcf/d in 2015 to 79 Bcf/d by 2040, or equivalent to 70 percent of overall natural gas production. Apart from the U.S. and China, Canada and Argentina are the other 2 countries with commercial shale gas production. Canada's shale gas production, which reached 4.1 Bcf/d in 2015, is likely to continue growing and make up almost 30 percent of the country's overall natural gas production by 2040. Over the same period, Argentina's commercial shale gas production would rise from 0.07 Bcf/d last year to account for 75 percent of the South American country's total natural gas production by 2040.
China’s Gas Ambitions Could Have A Huge Impact On Energy Markets | OilPrice.com: China has been working on developing its shale gas resources for a few years now, with mixed success, mainly because of the difficult geology. But times are a changing and, due to developments in shale, Asia’s biggest economy is well on its way to becoming the world’s second-largest producer of natural gas. The Energy Information Administration, in its latest International Energy Outlook 2016, estimates that China, which was last year producing 500 million cubic feet of shale gas daily, is on its way to ramping this up to over 20 billion cubic feet daily by 2040. While 2040 may seem a long way off, this still represents seriously significant growth, and there is more than one reason for this new focus on shale gas. For starters, China’s oil and gas majors are suffering not just from low oil prices but also from mature fields, many of them nearing depletion. However, its energy needs are not declining, and the country is still the world’s top energy consumer, with consumption 30 percent higher than that of the U.S., according to World Finance. Second, while currently China relies predominantly on coal to satisfy these energy needs, it is also paying increasing attention to the environmental problems related to coal, the cheapest – and dirtiest – fossil fuel that helped its industrial revolution turn into the economic hothouse the world still looks to in hopes that Chinese consumption of energy and mining commodities will help the respective ailing industries. Third, China is finally moving away from heavy industry and towards a more service-focused economic model. This has been bad news for energy exporters that have counted on the Asian economy’s huge energy needs for much of their revenue, but it shouldn’t be too bad as the transition won’t be quick, and there is still India, who will replace China as Asia’s industrial hothouse.