Sunday, October 16, 2016

natural gas price hits 22 mo. high, gas drilling jumps 11.7%, gas exports and pipelines being planned, et al

crude oil prices jumped 3% on Monday morning on comments from Vladimir Putin, but stumbled lower the rest of the week to end not too far from where they started...after closing last week at $49.81 a barrel, oil traders awoke to Putin's comments in Istanbul that Russia was ready to join OPEC in limiting oil production with either a freeze or a cut, and quickly drove prices to well over $51 a barrel on Monday morning, where they meandered the rest of the day before closing at $51.35, the highest oil price in a year...but on Tuesday, word that Libya had started exporting oil again put a damper on the rally, and oil prices fell back to close at $50.79...prices were further depressed on Wednesday after OPEC said it pumped a record 33.39 million barrels per day in September, up by 220,100 barrels per day from August and closed at $50.18...oil prices then initially fell on Thursday after the EIA report indicated the largest crude inventory increase in 6 months, but recovered and closed higher at 50.44, after traders turned their attention to product inventory drawdowns in that same EIA data...oil prices then rose to top $51 again on Friday morning, but fell amid concern about the persistent global oversupply of oil to close the week at $50.35, after Baker Hughes reported yet another increase in the US rig count...

meanwhile, natural gas prices, which had spiked to a 21 month high at 3.198 per mmBTU on Friday of last week on forecasts of much warmer than normal weather, were again higher this week, while much more volatile...the rally of last week carried into Monday, as gas prices rose more than 2% to close at $3.275 per mmBTU....prices fell to $3.237 per mmBTU, however, with Tuesday's reports that gas production outside of "the Northeast" had fallen 9% in the year since last September, largely as a result lower gas production from oil directed wells....prices slipped further to  $3.210 per mmBTU on Wednesday, then jumped to close at  $3.341 per mmBTU on Thursday, after the EIA published its Short-Term Energy Outlook which indicated that natural gas production continued to decline and projected it would go into deficit in December of this year...then, on little further relevant news, gas traders took their profits and natural gas prices closed the week at $3.285 per mmBTU...with gas prices now hitting a 22 month high, we'll include a 2 year graph of those prices, so you can see what the price slump we've been through looks like..

October 14 2016 natural gas

the above graph shows the November contract price for a million British thermal units (mmBTU) of natural gas at or contracted to be delivered to the Louisiana interstate natural gas pipeline interconnection known as the Henry Hub, which is the benchmark location for setting natural gas prices across the US...while trading in contracts for delivery in previous months were typically priced slightly lower, this graph gives us a good sense of the natural gas price trajectory over the past two years...before 2014, it was widely thought that the breakeven price for fracked natural gas the best Marcellus spots was around $4 per mmBTU, a price we've now been below for 22 gas prices fell over this span, the gas directed rig count fell from 340 rigs at the end of 2014 to 81 rigs on August 5th and again on August 26th of this we'll see later, with the recent natural gas price increase, the new drilling for natural gas is now picking up again...

Gas Export Projects and Regional Pipeline Projects Planned

RBN Energy, who does excellent in depth analysis on production and movement of oil and gas in the US and Canada, had an important post this week on the number of LNG liquefaction and export projects now in the planning stages or under construction that are scheduled to come online in the next few years or early in the next decade, titled "Catch a Wave - Market Shifts Could Spur a 'Second Wave' of U.S. LNG Export Projects"...up until this year, our exports of natural gas were limited to those we piped to Mexico, while we continued to import even greater volumes of gas from Canada at the same time, making us a net importer of gas, despite the glut of gas in our area...on January 3rd of this year, in a post discussing our first oil exports, we also explained that the first ever batch of US fracked gas was being loaded on a LNG tanker bound for Europe at the new Cheniere Energy Sabine Pass terminal near the Louisiana-Texas the first six months of operation, the first of six planned "liquefaction trains" from that plant had exported 17 cargoes containing the super-cooled, liquefied equivalent of over 50 Bcf of natural gas, so they've probably exported around 30 LNG tanker cargoes by now...this week, the second liquefaction train, which had been operational since July 28, received approval from FERC to start exporting, essentially doubling the Sabine Pass LNG export capacity from current levels...since the April 1 start of the U.S. gas stockpiling season, through Sept. 9, Sabine pass had taken in 119 billion cubic feet of natural gas; during the same period, the US supply glut of natural gas versus the five-year average fell from 874 billion cubic feet to 299 billion cubic feet, so we can see that just the one export train had put a significant dent in our natural gas glut over that short period (the rest of the drawdown was likely related to air conditioning use in light of record high temperatures) it's obvious that once the Sabine Pass facility has all 6 export trains running (2 are scheduled next year), they alone will be sucking up all of the surplus natural gas that we currently produce, even in a year with an El Nino winter...

which brings us back to this week's RBN article, which details the LNG liquefaction and export projects now on the drawing boards...Bruce Oskol, the blogger at The Bakken Oil Blog, dug through that RBN Energy article and produced a list of US LNG export projects at various points along the regulatory process, mostly in Lousiana and Texas, which we will now include below: 

  • Cheniere: to build a sixth 4.5 MTPA liquefaction train at Sabine Pass LNG site
  • Cameron LNG: has proposed two additional 4.5-MTPA liquefaction trains at its Hackberry facility south of Lake Charles, LA
  • Lake Charles LNG: has proposed a three-train, 16.2-MTPA liquefaction/LNG export facilty in advanced stages
  • LNG Ltd: has proposed the development of the Magnolia LNG project; as many as four 2-MTPA liquefaction plants, near Lake Charles
  • Tellurian Investments: developing Driftwood LNG, total capacity up to 26 MTPA; also near Lake Charles
  • Louisiana LNG Energy LLC: has proposed construction of a 6-MTPA liquefaction/LNG export terminal on Mississippi river southeast of New Orleans
  • Venture Global LNG: two proposed liquefaction/LNG export terminals in Louisiana; one 20-MTPA facility and one 10-MTPA facility
  • Southern California Telephone & Energy: developing the Monkey Island liquefaction/LNG export project; south of Lake Charles; at least three 4-MTPA trains
  • G2 LNG: has proposed a liquefaction/LNG export facility; up to 14 MTPA; Cameron Parish
  • CE FLNG: proposed project; two floating LNG vessels; each vessel up to 4 MTPA
  • Cheniere: plans to build three more 4.5-MTPA liquefaction trains at its Cheniere's Corpus Christi facility
  • Freeport LNG: developing a possible fourth 4.4-MTPA train at its Freeport site
  • Port Arthur LNG, an affiliate of Sempra: leading the development of a proposed two-train, 10-MTPA liquefaction/LNG export terminal along the Sabine-Neches Waterway in Port Arthur; Woodside Petroleum is also participating in this project
  • Annova LNG: has proposed a six-train, 6-MTPA liquefaction/LNG export facility planned by Exelon Generation for Brownsville
  • Third Point LLC (a NYC-based investment fund) and Samsung Engineering are developing Texas LNG, a proposed 4-MTPA liquefaction/LNG export terminal in Brownsville
  • Golden Pass LNG: a joint venture of Qatar Petroleum and Exxon Mobil; a 15.6 MTPA plant at its existing LNG import terminal at Sabine Pass
  • Rio Grande LNG, being developed by NextDecade LLC: up to six 4.5-MTPA liquefaciton trains and two LNG loading berths along the Brownsville Shipping Channel
  • Kinder Morgan: two 5-MTPA trains in Pascagoula; and, a 2.5-MTPA Elba Island project in Chatham County, GA
  • Veresen: a proposed 6-MTPA Jordan Cove LNG project in Coos Bay, OR 

according to RBN, if those projects were all completed (which RBN doubts), they would require more than 30 billion cubic feet of gas per day...our current natural gas production has been running at around 72 billion cubic feet of gas per day, down from a high of near 75 billion cubic feet of gas per day early this past year...recently, our daily surplus ran around 3 billion cubic feet of gas per day in the spring, when there is minimal heating or air conditioning, while our deficit in the winter of 2014 was also around 3 billion cubic feet of gas per day, so right now there are not any where near 30 billion cubic feet of extra gas per day to be had for where do they think they'll be getting the gas for these export projects, which cost billions of dollar and take years to complete?  a similar number of planned pipeline projects from West Virginia, Ohio and Pennsylvania strongly suggests that much of that gas will come from our part of the country...while we don't yet have a list of all those pipelines, two series of articles from RBN Energy this summer, links to which we'll incllude here for future reference, probably includes details on most of them:

most of the above articles include discussion of pipelines from our area to elsewhere, ie, "takeaway capacity", whether planned or operational...just to be clear, when they refer to "Northeast Gas", they are referring to West Virginia, Ohio and Pennsylvania gas - ie, when the center of the industry universe is Texas, even Kentucky becomes part of the 'northeast'...again, i haven't yet put together a list of the pipelines that are on the drawing boards in our area or their capacity (maybe later this year), but i recall that as these posts were released this summer, i came away with the impression that their takeaway capacity was far in excess of the current production from the Marcellus and Utica shales, in fact, likely more than double what we now produce...the point is that the industry is putting up a lot of money, tens of billions of dollars, to build natural gas pipelines out of our area and to build export ports for that natural gas, gas that wont be there when these projects are completed unless the local frackers at least double the drilling and double the fracking that they're now doing in the Marcellus and Utica regions..

The Latest Oil Stats from the EIA

the oil data for the week ending October 7th from the US Energy Information Administration again showed a large cutbacks in oil refining activity, which when combined with a modest increase in oil imports, led to the first increase in crude oil supplies in 6 weeks, while the reduced refining simultaneously led to decreases in supplies of gasoline and distillates...however, at the same time, the crude oil fudge factor that was needed to make the weekly U.S. Petroleum Balance Sheet (line 13) balance swung to +415,000 barrels per day, from last week's -130,000 barrels per day, which means that 415,000 more barrels of oil per day showed up in our final consumption and inventory figures this week than were accounted for by our crude production or import figures, meaning one or several of this week's metrics were off by that amount...year to date, the cumulative daily average of that fudge factor has fallen to 18,000 barrels per day, so it appears that most of oil that disappears from the statistics over one period seems to be finding its way back into the data in subsequent weeks...

that fudge factor was the subject of a long post this week by premier oil analyst Art Berman of, which was republished on several websites under the headline "The billion barrel oil swindle: 80% of US oil reserves are unaccounted for"....the use of the word swindle in the headline was unfortunate, and i'm almost certain that click bait word wasn't Berman's choice...there is no swindle in that weekly adjustment, just inaccurate reporting of data...the government simply doesn't have the assets in place to produce exact data on production from every US oil well, exact amount of oil refined by every refinery, the exact oil imports by pipe and by boat, and the amount of oil stored in every tank across the entire country for every Friday by the Wednesday of the next week...most likely, the EIA data is only an estimate in a range, like Census estimates of housing data (which also move markets) which is collected by canvassing Census agents and typically comes up with a 90% confidence range of +/- 15%....since the other numbers which have their accuracy determined by that fudge factor are those that move the markets and the price of oil, that weekly adjustment should likewise be covered by the media, so everyone knows how inaccurate these weekly numbers if you want a better understanding of how these numbers come together, read that Berman piece carefully, as he is exposing that fudge factor that the EIA uses weekly that we've been covering for a year without the detailed explanation that Berman supplies...

moving on to this week's releases, the EIA reported that production of crude oil from US wells fell by 17,000 barrels per day to an average of 8,450,000 barrels per day during the week ending October 7th, as output from Alaskan oil rose by 19,000 barrels per day while production from the lower 48 states was 36,000 barrels per day lower....that left the week's domestic oil production 7.1% lower than the 9,096,000 barrels we produced during the week ending October 9th of last year, and 12.1% below the record 9,610,000 barrels per day of oil production that we saw during the week ending June 5th last  year...our oil production for the week ending September 30th is now 769,000 barrels per day lower than what we were producing at the beginning of this year, which was an interim high after our production had also been rising in the last few months of 2015...

at the same time, the EIA reported that our imports of crude oil rose by an average of 151,000 barrels per day to an average of 7,861,000 barrels per day during the week ending October 7th, which was 7.5% higher than  the 7,315,000 barrels of oil per day we imported during the corresponding week a year ago...that increase helped the 4 week average of our oil imports reported by the EIA's weekly Petroleum Status Report (62 pp pdf) tick up to an average of 7.9 million barrels per day, now 8.9% higher than the same four-week period last year...meanwhile, our exports of crude oil were also up, rising by an average of 41,000 barrels per day to an average of 481,000 barrels per day for the week, in data that is not directly comparable to last year's exports of 526,000 barrels per day in the same week, as the EIA has recently switched to reporting Custom's import data, rather than untimely stats from the Census Bureau..

meanwhile, the amount of crude oil used by US refineries fell by an average of 480,000 barrels per day to an average of 15,552,000 barrels of crude per day during the week ending October 7th, the fifth significant refining cutback in a row and the largest drop since the 22nd of January, as the US refinery utilization rate fell to 85.5% for the week, down from 88.3% of capacity the prior week, and down from the refinery utilization rate of 86.0% seen during the week ending October 9th last year...US oil refining has now slowed by 1,376,000 barrels per day, or by 8.1%, in the 5 weeks since Labor Day, as the refinery utilization rate has dropped from 93.7% over that span ...nonetheless, the crude refined this week nationally was still 1.9% more than the 15,267,000 barrels of crude per day US refineries used during the week ending October 9th last year, and 1.5% more than was refined during the equivalent week in 2014 ... 

with that large reported drop in the amount of oil used by refineries, the output of both gasoline and distillates was lower during the week ending October 7th, after output of both had increased during the week ending September 30th, when there was also a substantial drop in the amount of oil refined...the EIA reported that refineries’ production of gasoline fell by 53,000 barrels per day to 9,935,000 barrels per day during the week ending October 7th, output that was still 3.3% higher than the gasoline output of 9,619,000 barrels per day during the week ending October 9th last year, and 7.4% higher than the gasoline production during the equivalent week of the same time, refinery output of distillate fuels (diesel fuel and heat oil) fell by 217,000 barrels per day, from 4,713,000 barrels per day during the week ending September 30th to 4,496,000 barrels per day during the week ending October 7th....that left our distillates output 2.5% lower than the 4,613,000 barrels per day that was being produced during the same week last year, and 1.9% less than the 4,582,000 barrels per day of distillates production during the equivalent week of 2014...  

with the modest decrease in gasoline production, our gasoline supplies fell by 1,907,000 barrels to 225,498,000 barrels as of October 7th, even as our domestic demand for gasoline fell by 126,000 barrels per day to 9,264,000 barrels per day, partly because our gasoline imports fell by 241,000 barrels per day to 762,000 barrels per day, from last weeks 41 month high of 1,003,000 barrels per day....even with the drop in supplies, however, the week's gasoline inventories were still 1.9% higher than the 221,302,000 barrels of gasoline that we had stored on October 9th of last year, and 9.6% higher than the 205,673,000 barrels of gasoline we had stored on October 10th of the same time, our distillate fuel inventories fell by 3,746,000 barrels to 156,972,000 barrels by October 7th, which nonetheless still left our distillate inventories 6.3% above the distillate inventories of 147,630,000 barrels of October 9th last  year, and 26.0% above the distillate inventories of 124,622,000 barrels of October 10th, 2014....

now, before we explain how our inventories of crude oil rose this week, we should note that as of this week's release, the EIA is no longer including crude oil lease stocks in U.S. total commercial crude oil inventory they explain it, such oil is stored in tanks at sites where producers are drilling on leased land, and are not yet available for commercial use...since the well operators do not count this oil as production until the oil is transferred off the lease, and since the oil supply metric is for "commercial crude oil inventory", they've decided that such lease supplies should not be included in the official supply number...this will thus reduce the reported inventories of crude oil by about 31 million barrels each week, a figure that has not changed much weekly... after that 'fix', our inventories of crude oil rose by 4,850,000 barrels to 473,958,000 barrels as of September 30th, the first increase in our oil supplies in 6 weeks and the largest increase in 6 months...that left us with 8.5% more crude oil in storage than the 436,750,000 barrels we had stored as of the same weekend a year earlier, and 39.7% more crude oil than the 339,303,000 barrels we had stored on October 10th 2014...(NB:  that revised data is from the excel file for Stocks of Crude Oil; the weekly EIA file still has the old figures for prior to this week, which makes it look as if our oil supplies suddenly fell by 31 million barrels)

This Week's Rig Count

US drilling activity increased for the 4th week in a row during the week ending October 14th and has now increased 17 out of the last 20 weeks, after a 39 week stretch that hadn't seen any increases...Baker Hughes reported that the total count of active rotary rigs running in the US rose by 15 rigs to 539 rigs by Friday, an eight month high, which was still down from the 787 rigs that were deployed as of the October 16th 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 rose by 4 rigs to 432 rigs this week, as oil rigs have now been rising for 17 straight weeks without a retreat, but they're still down from the 595 oil directed rigs that were in use a year ago, and down from the recent high of 1609 oil rigs that were drilling on October 10, 2014...

at the same time, the count of drilling rigs targeting natural gas formations was up by 11 rigs to 105 rigs, an 11.7% increase which was largest jump in gas rigs since 14 were added on October 31, 2014, and likely the largest percentage jump ever, since to have increased gas rigs by 11.7% back when there were more than 1000 gas rigs active would have meant over a 117 rig jump in one week, something we just don't see anywhere in the records...that still left active gas rigs down from the 192 natural gas rigs that were drilling a year ago, and down from the recent natural gas rig high of 1,606 natural rigs that were deployed on August 29th, 2008...two working rigs also remain that are classified as miscellaneous, in contrast to a year ago, when no such miscellaneous rigs were active...

while offshore drilling activity was unchanged at 23 rigs, down from 33 a year earlier, 2 rigs were added on inland lakes in southern Louisiana, which brought the inland waters count back up to 3 rigs, same as last year and same as two weeks ago...the number of working horizontal drilling rigs increased by 18 rigs to 431 rigs this week, which was still down from the 591 horizontal rigs that were in use on October 16th of last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of the same time, a single directional drilling rig was also added, bringing the directional rig count up to 51, which was also down from the 86 directional rigs that were deployed during the same week last year...meanwhile, the vertical rig count was down by 4 rigs to 57 rigs this week, which was down from the 110 vertical rigs that were drilling in the US during the same week last year...

the details on this week's changes in drilling activity by state and by 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 year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas both tables, the first column shows the active rig count as of October 14th, the second column shows the change in the number of working rigs between last week (October 7th) and this week (October 14th), the third column shows last week's October 7th active rig count, the 4th column shows the change in the number of rigs running this Friday from the equivalent Friday 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 for October 16th of 2015:          

October 14 2016 rig count summary

obviously, there were quite a bit more changes this week than in those just past, when we had to look hard to find a change greater than 2...for starters, Louisiana drillers added 6 rigs, including two on inland waters and 2 in the Haynesville, and both New Mexico and Oklahoma saw the addition of three rigs...on the other hand, drilling in Texas was down by 3 rigs, with a drop of 4 rigs in the Eagle Ford of south Texas, and a drop of 2 rigs in the Permian...also note that with the addition of 4 rigs in the Cana Woodford; activity in that basin is now up to 39 rigs, more that last year's 36, as the SCOOP and STACK formations are being exploited...what we don't see here is where the increase of 11 natural gas directed rigs occurred; 2 natural gas rigs were set up in the Haynesville, and two in the Marcellus (one each in PA and West Virginia) but checking the detailed records from all the other major basins, i find the other increases in drilling were all for oil...we should also note that of the states not shown above, both Kentucky and Mississippi saw the addition of one rig this week, that brought Kentucky up to 2 rigs, up from none a year ago, and brought Mississippi back to 3 rigs, still down from 5 rigs last October addition, Illinois saw one of their two rigs shut down; as a decrease from the two rigs they had running a year ago..


Massive Bailout Approved for FirstEnergy --The Ohio Public Utilities Commission (PUCO) approved a scheme Wednesday that will force FirstEnergy's customers to hand over approximately $200 million annually to the company and its shareholders for the next 3-5 years. Customers will receive virtually nothing in return for this massive subsidy, which could ultimately reach $1 billion.   Under Wednesday's order, FirstEnergy will begin to receive hundreds of millions of dollars, with effectively no strings attached. Although characterized as a "distribution modernization rider," nothing in the commission's order requires that these customer dollars be invested in modernizing Ohio's electrical grid or in any way be spent to benefit Ohio customers. Instead, the dollars can be siphoned off from FirstEnergy's Ohio utilities and used to bail FirstEnergy Corp. out of its poor coal investments while boosting the profits of corporate shareholders.  "Today's decision takes hundreds of millions of dollars out of customers' pockets in order to create a massive slush fund for FirstEnergy Corp. and its shareholders," said Shannon Fisk, attorney at the non-profit environmental law firm Earthjustice .  "And the fact that FirstEnergy asked for billions more does not make this decision any less unreasonable. Rather than forcing customers to prop up profits for a corporation that made a bad bet on aging coal plants, the commission should be looking after customers and ensuring investments in job-creating renewable energy , energy efficiency and smart grid initiatives."  Through Wednesday's decision, the commission has aided FirstEnergy's efforts to sidestep a recent order of the Federal Energy Regulatory Commission (FERC) that raised serious questions about FirstEnergy's previous bailout proposal. Under that proposal, customers would have directly assumed all of the financial risk of financially struggling coal and nuclear plants owned by FirstEnergy Corp.'s unrelated competition generation business.  In late April, FERC ruled that FirstEnergy's previous bailout proposal—which PUCO had approved a month earlier—may violate federal safeguards concerning transactions between public utilities and their unregulated affiliates. FERC blocked FirstEnergy's bailout scheme pending a federal review. Rather than submit its proposal for FERC review, FirstEnergy concocted a new scheme intended to bypass the FERC order.

Advocates make case in another attempt to ban fracking in Youngstown - (WKBN) – Some raised concerns at a Candidate’s Night forum Monday night in another attempt to ban fracking in Youngstown.“There’s too much in there that allows for people to sue businesses, any businesses, not just businesses related to gas and oil, that they believe is polluting the water,” said Jaladah Aslam with the Mahoning County Democratic Party.Youngstown State geology professor Dr. Raymond Beiersdorfer said fracking poses environmental risks.“We’ve had over 700 earthquakes in this area, illegal dumping of frack waste into the Mahoning River, frack waste spills that have killed everything in neighbors’ ponds, and people forced to live next to fracking wells and injection wells.”The Community Bill of Rights has been defeated by voters five times since 2013. It will appear on the ballot once again in November.

Youngstown voters will consider six charter amendments on the fall ballot - Youngstown Vindicator --City voters will consider six charter amendments – including the anti-fracking Community Bill of Rights for the sixth time – when they cast ballots in this election. In addition to the Community Bill of Rights, there’s another citizen-initiative proposal for a “Part-Time Workers Bill of Rights,” and four charter amendments approved by city council based on recommendations from a charter review commission. The Community Bill of Rights failed five times: twice in 2013, twice in 2014 and in the Nov. 4, 2015, election. The results for last year’s issue were the closest, losing by 2.5 percentage points.“It’s time for people to learn the science about fracking and cut through the propaganda,” said Susie Beiersdorfer, a member of the Youngstown Community Bill of Rights committee and Frackfree Mahoning Valley, which backs the issue. “With global climate change, we can’t put all our eggs in one basket, that being the oil and gas industry.”“The impact of the language is so much more than oil and gas,” said Jackie Stewart, Ohio state director of Energy in Depth, the education and research arm of the Independent Petroleum Association of America. “It would make numerous construction projects illegal. It will impact a heck of a lot more industries than oil and natural gas. It’s why voters have rejected it five times.” In addition to banning fracking – none of which exists in the city – the proposal makes it illegal for any government or corporation to engage in the “depositing, disposal, storage and transportation of water or chemicals to be used in the extraction of oil and gas, and the disposal or processing of waste products from the extraction of oil and gas,” according to ballot language.The proposal doesn’t prohibit the manufacturing, production, sale or distribution of materials and components used in fracking as long as the materials and components aren’t used in Youngstown.

OSU will study impact of gas pipeline construction on agricultural fields - -  Ohio State University will launch a study this fall in conjunction with a planned $500 million, 215-mile petroleum pipeline from Harrison County in Eastern Ohio to the Michigan border. The Utopia East pipeline project will transport 50,000 barrels a day of ethane and ethane-propane mixtures for use in plastics production. Ethane is a byproduct of fracking used to extract oil and natural gas from Utica shale. Kinder Morgan Inc. will construct, own and operate the Utopia pipeline. Construction is scheduled to begin next month and be completed in 2018. The Ohio stretch of the pipeline will link to existing pipeline in Michigan, for delivery of petroleum products to NOVA Chemicals Corp., in Windsor, Ontario. During construction, OSU's College of Food, Agricultural and Environmental Sciences will conduct a three-year study on soil disturbances caused by pipelines and its impact on farmland. The study will be partially financed by a $200,000 gift from Kinder Morgan, and will focus on 50 fields statewide, predominantly in rural areas. Soil samples will be obtained before and after the pipeline's installation, said Steve Culman, soil fertility specialist at OSU's agricultural college in Wooster. "This is an area that affects a lot of acres nationally and locally within the state of Ohio," Culman said. "A lot of landowners are being affected by this. They are genuinely interested in understanding it." Kinder Morgan Vice President Allen Fore said the company takes pride in restoring agriculture properties to their full production yields after pipeline construction.  "This study will examine the effectiveness of our best practices to determine what restoration alternatives, if any, our company and industry should follow," Fore said.

BLM official signs plan to allow oil and gas leasing on Wayne National Forest - The federal government has scheduled a lease sale for 1,600 acres of public land in the Wayne National Forest’s Marietta Unit for this December, dealing a blow to area environmentalists who oppose oil and gas drilling on the national forest. On Friday, Dean Gettinger, district manager of the Northeastern States District of the federal Bureau of Land Management (BLM), signed a finding of no significant impact (FONSI) for drilling on 40,000 acres in the Marietta Unit, which covers parts of Washington, Noble and Monroe counties, northeast of Marietta. Oil and gas companies so far have filed expressions of interest to drill for natural gas on 18,000 of those acres, with 1,600 acres contained in the first round of land entering the lease program.“Based upon a review of the EA (Environmental Assessment) and supporting documents, I have determined that the proposed action is not a major federal action, and will not significantly affect the quality of the human environment, individually or cumulatively, with other actions in the general area,” the signed FONSI states. According to the document, “the BLM plans to lease some parcels now and make the rest available in the future.” Environmental groups, mainly based in Athens, have opposed the U.S. Forest Service and BLM’s plan to lease national forest land to private companies for deep-shale drilling (also known as fracking). They say it will harm natural resources in the forest, including water, and pose a hazard to people living in the area. They also cite the negative consequences related to climate change. Industry and private landowner groups have supported the leasing program, saying it will not harm the environment but will boost the economy in the affected counties. Jackie Stewart, director of industry-outreach group Energy in Depth-Ohio, praised the decision Friday night.

Fracking may have spawned a new bacteria - The Week --Fracking is a politically fraught subject. But for researchers intent on studying odd ecosystems, nothing could be better than the briny, pressurized deep of a fracking well. Now, efforts to catalogue these odd ecosystems have finally paid off, with the recent discovery of a new genus of bacteria endemic to shale oil and gas wells. In a study published in Nature Microbiology, the authors humorously dub their discovery "Frackibacter" — and note that the genus appears to be a unique product of fracking. Indeed, the study describes identical strains of Frackibacter thriving in two separate fracking wells that were hundreds of miles apart, drilled into two different kinds of shale formations. "We think that the microbes in each well may form a self-sustaining ecosystem where they provide their own food sources," said coauthor Kelly Wrighton of Ohio State University, in a statement. "Drilling the well and pumping in fracturing fluid creates the ecosystem, but the microbes adapt to their new environment in a way to sustain the system over long periods."  The shale heats up to incredible temperatures, the well is flooded with pressure, and salt from the shale leaches into the proprietary fluid. The result is a high temperature, high pressure, briny ecosystem within the shale, where only the hardiest microorganisms can possibly survive. Prior studies have shown that bacteria survive in the shale by producing osmoprotectants, organic compounds that prevent them from bursting as they absorb water to keep up with their salt intake.  But while scientists were rifling through the genetic information present in two separate wells, they came across a bit of bacterial DNA that did not fit into any existing family tree. Even after sampling fluids from each well over the course of an entire year (and reconstructing the genomes of every other bacteria species in the well) they could not account for the interloper. So the scientists designated their find Candidatus Frackibacter — a fitting title, given that "Candidatus" is a biological term for a new organism discovered through genomic analysis, rather than cultivated in a lab. Even the run-of-the-mill bacteria, however, provided fascinating insight. The researchers noted that, even in separate wells hundreds of miles apart, the microbial communities adapting to those extreme conditions were nearly identical. This implies that fracking may give rise to predictable communities of microorganisms. "We thought we might get some of the same types of bacteria, but the level of similarity was so high it was striking," Wrighton said. "That suggests that whatever's happening in these ecosystems is more influenced by the fracturing than the inherent differences in the shale."

Gas industry challenges new drilling rules in Pennsylvania - The natural gas industry in Pennsylvania is challenging new state regulations that govern surface development of shale gas wells, saying they threaten jobs and investment by adding up to $2 million to the cost of drilling a well. Energy companies in the Marcellus Shale, the nation’s largest natural gas field, filed suit against the Pennsylvania Department of Environmental Protection and the state’s Environmental Quality Board over rules that took effect last week, calling them financially burdensome, vague and unlawful. “The provisions we are challenging impose immediate harm to our industry because they affect our ability to operate and remain competitive,” David Spigelmyer, president of the Marcellus Shale Coalition, said Friday in a conference call with reporters. The suit, filed Thursday, marks the first time the powerful trade group has taken the state to court over drilling rules. It seeks to block enforcement pending a ruling on their legality. Neil Shader, spokesman for the Department of Environmental Protection, said the challenged regulations are “common-sense protections” that resulted from an “unprecedented amount of public comment and involvement.” The regulations had been under development since 2011 and are the first major rewrite since energy companies began exploring the Marcellus Shale several years ago. They impose more stringent requirements on wells drilled near schools, parks, forests and other public resources, strengthen standards for replacing or restoring water supplies polluted by drilling, and impact a range of surface activities, including waste processing, freshwater impoundments, pipelines and spill cleanup.

650000 Children in 9 States Attend School Within 1 Mile of a Fracking Well – EcoWatch -More than 650,000 kindergarten through 12th grade children in nine states attend school within one mile of a fracked oil or gas well, putting them at increased risk of health impacts from dangerous chemicals and air pollution .The finding comes from a new study by Environment America Research & Policy Center that exposes the proximity of fracking near schools, hospitals, day care centers and nursing homes, risking the health of our children and other vulnerable populations.  "Schools and day care centers should be safe places for kids to play and learn," said Rachel Richardson, director of Environment America's Stop Drilling program and co-author of the report. "Unfortunately, our research shows far too many kids may be exposed to dirty air and toxic chemicals from fracking right next door." video: Dangerous and Close: Fracking Puts the Nation's Most Vulnerable People at Risk   Using data provided by the oil and gas industry and state regulators, Dangerous and Close—Fracking Puts the Nation's Most Vulnerable People at Risk , found that:

  • 1,947 child care facilities, 1,376 schools, 236 nursing care providers and 103 hospitals are within a one-mile radius of fracked wells in the nine states examined.
  • More than 650,000 kindergarten through 12th grade children attend school within one mile of a fracked well.
  • The highest percentage of children attending school close to fracked wells is in West Virginia, where 8 percent of children spend their school days within one mile of a fracked well.
  • Texas has the largest number of children attending school close to a well, with 437,000 kindergarten through 12th grade students attending public or private school within one mile of a fracked well.

The report included data from nine states total including Arkansas, California, Colorado , New Mexico, North Dakota, Ohio, Pennsylvania , Texas and West Virginia. (see map)

Protesters emerge from pipeline stored at construction site(AP) — Four protesters have emerged from an above-ground section of a steel natural gas pipeline that’s being built underneath the Hudson River after they climbed into it to protest a pipeline from Pennsylvania to New York. A protest group says Rebecca Berlin, Mackenzie Wilkins, Dave Publow and Janet Gonzalez entered a work site early Monday and entered the 42-inch pipeline near the Indian Point nuclear power plant in Westchester County before workers arrived. A spokeswoman for the group says they don’t think putting the pipeline under the river is safe. They’re also protesting the pipeline’s proximity to the nuclear plant. Spectra Energy is building the pipeline. It says it respects peaceful protest, but says the protesters were placing themselves and first responders at risk. The company says the protesters went inside pieces of the pipeline being stored above ground.

Northeast Natural Gas to Gulf Coast Export Markets  -- Over the next three years, 16 pipeline projects are in the works to add more than 14 Bcf/d of new take-away capacity to move Marcellus/Utica natural gas to the south and west, relieving takeaway capacity constraints that have plagued the Northeast since 2012-13. Much of this gas will be moved to the Gulf Coast, primarily via reversals of pipes that traditionally transported gas north and east, and will target rapidly growing LNG and Mexico export markets. But few of these pipeline projects get the gas all the way to those export outlets. The new supplies must traverse “Miles and Miles of Texas” (and Louisiana) to reach the export gateways and along the way deal with shifting production trends within the state, pipeline systems that are "telescoped the wrong way" constraining capacity of the Texas pipeline grid, and unique regulatory considerations associated with Texas intrastate pipelines.  These issues are addressed in RBN’s latest Drill Down Report, highlights of which we discuss in today’s blog. Most of the pipeline projects that will provide desperately needed takeaway capacity out of the Marcellus/Utica region will either bring gas to states on the U.S. Gulf Coast or move gas into markets that have been traditionally served by Gulf Coast supplies, displacing those volumes back into the Gulf region. Either way, significant volumes of gas are being pushed into two states that have historically been the most prolific U.S. sources of natural gas supply: Louisiana and Texas.  Isn’t this a bit like bringing coal to Newcastle?  What are Louisiana and Texas going to do with all that incremental gas supply?  Some will be used to generate electricity, not only in Louisiana and Texas, but in a few states where gas will be dropped off along the way to the Gulf Coast.  But most of the gas is targeted for exports into Mexico, where it will be used to generate power in that country, or is intended for LNG exports to meet demand in Latin America, Europe and Asia. A few new natural gas export facilities have already come online over the past two years, including the first liquefaction trains at Cheniere Energy’s Sabine Pass LNG terminal in Louisiana and NET Midstream’s pipeline to Mexico, which together have ramped U.S. gas exports almost 2.0 Bcf/d over the past two years. Many more export facilities are being developed, including liquefaction/LNG export capacity at Sabine Pass, LA; Freeport, TX; Hackberry, LA; and Corpus Christi, TX, plus another half dozen new pipeline projects being built into Mexico connecting through Texas natural gas supply corridors. 

Catch a Wave - Market Shifts Could Spur a 'Second Wave' of U.S. LNG Export Projects -- Developing a multibillion-dollar liquefaction/LNG export project takes perseverance and patience––and having good luck wouldn’t hurt. The “first wave” of U.S. projects is now cresting; the first two liquefaction “trains” at Cheniere Energy’s Sabine Pass LNG facility are essentially complete, and 12 other trains are under construction and scheduled to come online in the 2017-19 period. But what about the “second wave” of projects that was supposed to be arriving soon thereafter? Today we continue our series on the next round of U.S. LNG projects with a run-through of the projects themselves and a look at how (despite the current market gloom) there is at least some cause for optimism that a few may get built by the early 2020s. In Part 1, we discussed the global LNG market conditions that led to Final Investment Decisions (FIDs) to build a total of 14 LNG liquefaction trains at five project sites, all but one of them along the Gulf Coast in Louisiana and Texas––the other is the Dominion Cove Point LNG project on Maryland’s Chesapeake Bay. When these projects were being planned, the stars of the global market were aligning, and it appeared to make perfect sense for LNG marketers and foreign utilities to commit to huge amounts of U.S. liquefaction capacity. After all, the Shale Revolution was ramping up in the U.S.; natural gas production in the Marcellus and other shale plays was on the rise; most long-term LNG prices were indexed to the price of crude oil (which was then sky-high); and U.S. developers like Cheniere, Cameron LNG and Dominion were offering to base the price of the LNG they loaded onto ships on the price of natural gas (not oil), plus a small mark-up and a flat liquefaction fee (typically $2.25 to $3.50/MMBtu). The price differential between oil- and Henry Hub-based LNG was sizable, big LNG buyers like Japan and South Korea were looking to diversify their LNG sourcing, and up-and-coming economies like China and India were planning to buy a lot more LNG. It all seemed like such a sure thing––a no-brainer. Now, though as this first wave of U.S. LNG projects is “rolling in,” the situation is quite different. The price of crude oil has tanked (as if you hadn’t noticed), bringing the price of oil-indexed LNG down with it; global LNG demand, which had been rising at a healthy pace for several years, only inched up in 2014-15; and a slew of new Australian and U.S. liquefaction capacity is now coming online, threatening to overwhelm the market with far too much supply.

List Of Potential US LNG Export Facilities -- RBN Energy -- October 12, 2016 -- The list of US LNG export projects at various points along the regulatory process, as reported by RBN Energy. First, Louisiana, mostly near Lake Charles:

  • Cheniere: to build a sixth 4.5 MTPA liquefaction train at Sabine Pass LNG site
  • Cameron LNG: has proposed two additional 4.5-MTPA liquefaction trains at its Hackberry facility south of Lake Charles, LA
  • Lake Charles LNG: has proposed a three-train, 16.2-MTPA liquefaction/LNG export facilty in advanced stages
  • LNG Ltd: has proposed the development of the Magnolia LNG project; as many as four 2-MTPA liquefaction plants, near Lake Charles
  • Tellurian Investments: developing Driftwood LNG, total capacity up to 26 MTPA; also near Lake Charles
  • Louisiana LNG Energy LLC: has proposed construction of a 6-MTPA liquefaction/LNG export terminal on Mississippi river southeast of New Orleans
  • Venture Global LNG: two proposed liquefaction/LNG export terminals in Louisiana; one 20-MTPA facility and one 10-MTPA facility
  • Southern California Telephone & Energy: developing the Monkey Island liquefaction/LNG export project; south of Lake Charles; at least three 4-MTPA trains
  • G2 LNG: has proposed a liquefaction/LNG export facility; up to 14 MTPA; Cameron Parish
  • CE FLNG: proposed project; two floating LNG vessels; each vessel up to 4 MTPA
Now, Texas:
  • Cheniere: plans to build three more 4.5-MTPA liquefaction trains at its Cheniere's Corpus Christi facility
  • Freeport LNG: developing a possible fourth 4.4-MTPA train at its Freeport site
  • Port Arthur LNG, an affiliate of Sempra: leading the development of a proposed two-train, 10-MTPA liquefaction/LNG export terminal along the Sabine-Neches Waterway in Port Arthur; Woodside Petroleum is also participating in this project
  • Annova LNG: has proposed a six-train, 6-MTPA liquefaction/LNG export facility planned by Exelon Generation for Brownsville
  • Third Point LLC (a NYC-based investment fund) and Samsung Engineering are developing Texas LNG, a proposed 4-MTPA liquefaction/LNG export terminal in Brownsville
  • Golden Pass LNG: a joint venture of Qatar Petroleum and Exxon Mobil; a 15.6 MTPA plant at its existing LNG import terminal at Sabine Pass
  • Rio Grande LNG, being developed by NextDecade LLC: up to six 4.5-MTPA liquefaciton trains and two LNG loading berths along the Brownsville Shipping Channel
  • In other states:
  • Kinder Morgan: two 5-MTPA trains in Pascagoula; and, a 2.5-MTPA Elba Island project in Chatham County, GA
  • Veresen: a proposed 6-MTPA Jordan Cove LNG project in Coos Bay, OR

Natural-Gas Prices Heat Up as Oil Drilling Cools Off - WSJ: A long period of low oil prices has saved motorists money at the pump, but languishing crude prices could drive up heating bills. That is because the natural-gas supply is closely connected to oil drilling. Low crude prices have led U.S. oil producers to idle more than a thousand rigs over the past two years, resulting in a big decline in so-called associated gas, a byproduct of oil drilling. This gas typically represents about 40% of total supply, but its production isn’t particularly responsive to gas prices. Since September 2015, associated-gas production outside the Northeast, the country’s fastest-growing gas-producing region, has fallen by nearly 9%, or about 2.5 billion cubic feet a day, according to energy data firm Platts Analytics Bentek. That drop-off is enough to fuel roughly 13 million U.S. homes daily, and one reason monthly heating costs are poised to rise. Natural gas heats about half of all U.S. homes while another third are heated by electricity, which is increasingly generated by burning gas, according to the U.S. Energy Information Administration. The decline in production along with an unusually hot summer has helped to shrink a record gas glut that had been pressuring prices. U.S. gas production in September was about 2.4% lower than a year earlier and down 3.5% from its peak in February, according to Platts. Natural gas for November delivery on Tuesday closed down 1.2% at $3.2370 per million British thermal units, but prices are up 38.5% for the year and at their highest level since December 2014.

Is The Era Of Cheap Natural Gas Over? | Natural gas prices have been low for years, as shale gas drillers continued to break records with higher and higher production. But just as the oil markets have gone through a very painful bust that is leading to a drop off in supplies, the market for natural gas is going through a similar period of adjustment. Not only that, but demand is on the rise, with a wave of new gas-fired power plants coming online. The result is a much tighter market for gas than we have seen in years. Before there was a boom in oil production in the United States, the shale gas revolution led to massive flood of new supply, which sent prices careening downwards. Natural gas spot prices are always volatile, but have largely traded below $3 per MMBtu since 2014. With prices so low, companies pared back drilling plans and focused much more on liquids-rich and oil-heavy shale plays. But a funny thing happened: instead of a subsequent crash in natural gas production as drillers pulled rigs from the field, output continued to rise, setting new records along the way. Part of that had to do with impressive advancements in drilling technologies and techniques, allowing companies to extract more gas for less money and with less effort. Another reason that gas output kept climbing was because a lot of gas is produced in conjunction with oil. The drilling frenzy for shale oil ensured that the gas kept flowing. But the crash in oil prices put that to an end. Both oil and gas rig counts plunged, and natural gas production finally peaked in the U.S. and begun to decline. After hitting a high watermark in February 2016 at 92 billion cubic feet per day (Bcf/d), production has since shrunk by 5 percent.Meanwhile, on the demand side of the equation, the trajectory is only on the upswing. Years of low natural gas prices have led to a huge uptake in the electric power sector, hollowing out the coal industry, and leading to the construction of new gas-fired power plants at a frenzied pace. In years past, existing natural gas plants were simply used more, as low spot prices meant gas plants were cheaper to run than coal plants. But now an entirely new generation of power plants is coming online, which will ensure demand continues to rise into the future. The new plants are like a one-way ratchet, ensuring a structural increase in demand and not just a cyclical increase, as John Kemp of Reuters recently noted.

NYMEX November gas settles at $3.237/MMBtu, down 3.8 cents -  The NYMEX November natural gas futures contract opened higher Tuesday and then lost some ground as traders attempted to gauge the direction of the market after several days of significant price increases. The November contract settled at $3.237/MMBtu Tuesday, down 3.8 cents day on day. The contract's trading range was $3.209-$3.30/MMBtu. A week ago, the November contract finished the day at $2.974/MMBtu. In the past week, the front-month contract has pushed 10% higher during what is traditionally considered a "shoulder" month, with moderate temperatures and working gas in storage nearly 6% above the five-year average of 3.475 Tcf. Energy consultant Kyle Cooper with ION Energy Group said that the current bearish storage situation makes it hard to justify the recent rally."The fundamentals just don't support it right now, but I am still bullish for this winter," Cooper said. The US National Weather Service forecast for the upcoming six to 10 days continued to show slightly above-average temperatures from the Rockies to the East Coast. However, a few degrees of higher temperatures during mid-October is not likely to translate into significantly higher demand for gas as the market transitions from air-conditioning load to the winter heating season.

EIA Natural Gas Figures Don't Make Sense -- The EIA published its latest Short-Term Energy Outlook and it is not exactly the most bullish report the agency has ever put out. The EIA believes that the losses to U.S. oil production are largely over. It estimates that the U.S. will produce 8.6 million barrels per day (mb/d) in 2017, which is higher than the current output levels of just around 8.5 mb/d. The rig count is up and investment is returning to the shale patch, which should allow for more drilling and new sources of supply. The EIA revised up its forecast from last month for 2017 production by 0.1 mb/d. At the same time, the EIA expects global inventories to build at a 0.3 mb/d pace next year, which is 0.3 mb/d more than the agency predicted in its previous forecast. The EIA sees higher production from the U.S. and Russia, combined with weaker global demand, extended the glut. On the natural gas side of things, the predictions are a bit more curious. As noted in a previous article, U.S. natural gas production hit a peak in February 2016 and has been declining since then. A severe cutback in drilling – including less oil drilling, which affects associated gas production – has led to a drop off in gas output by about 5 percent this year. As a result, prices have crept up above $3 per MMBtu in recent weeks as supply continues to fall and demand risesBut looking forward, the EIA has some seemingly contradictory figures for 2017. The agency sees natural gas production somehow rebounding sharply, surging from 77.5 Bcf/d in 2016 to 81.2 Bcf/d next year. That 3.7 Bcf/d increase is a bit hard to believe given that gas production will likely fall for the remainder of this year and into at least the early months of 2017. But it seems all the more improbable given that at the same time the EIA sees natural gas prices averaging just $3.07 MMBtu in 2017. With supply tightening, and prices already at $3.34/MMBtu for November 2016 delivery, the price forecast seems a bit odd. For production to rise as sharp as the EIA believes, prices will probably need to be higher. If prices stay stuck at $3/MMBtu, it would seem like a bit of stretch to see production rise by so much next year. One of those predictions is likely off significantly.

EPA: FERC's Pipeline Environmental Impact Assessment Is Wrong - The Federal Energy Regulatory Commission (FERC) did not properly account for climate change in its environmental impact assessment of a $1.4 billion natural gas pipeline, according to the U.S. Environmental Protection Agency (EPA).   FERC found that the 160-mile pipeline would have a limited impact on the environment, but the EPA argues potential emissions from burning the natural gas transported by the pipeline need to be factored in.  In April, FERC found that the 160-mile Leach Xpress pipeline would have a limited impact on the environment, but the EPA argues potential emissions from burning the natural gas transported by the pipeline need to be factored in.  The EPA's statement comes just a few months after the Obama administration called on federal agencies to consider the climate impacts of their projects and at a time of increasing pipeline protests due to environmental justice and climate impacts.

Fossil fuel production emits more methane than previously thought, NOAA says -- Emissions of planet-heating methane from fossil fuel production are between 20 and 60 percent higher than widely cited estimates, including those used by the Intergovernmental Panel on Climate Change (IPCC), the science body whose assessments influence climate action around the world. That is the main finding of a peer-reviewed study published last week in the journal Nature. It is one of the most exhaustive analyses of long-term global methane emissions and methane carbon isotope records, with implications for climate policy worldwide. The two-year study was done by 11 researchers from the National Oceanic and Atmospheric Administration (NOAA) and the Cooperative Institute for Research in Environmental Sciences at the University of Colorado. The study also found that biological sources—including flatulent cows and rotting landfills—are to blame for the ongoing massive methane spike first detected by NOAA in 2007. "It was a substantial effort," said co-author Ed Dlugokencky, a methane expert at NOAA's Earth System Research Laboratory, "with a thorough analysis of uncertainties, to show that the fraction of atmospheric methane emitted from fossil sources (both anthropogenic and natural seeps) is greater than previously thought." Methane is dozens of times more potent as a greenhouse gas than carbon dioxide. It is the main component of natural gas and leaches out of every stage of production, development, transportation and consumption. It also escapes from oil operations and coal mines.Methane escaping from natural gas, oil and coal production accounts for 132 to 165 million tons of the 623 million tons emitted by all sources every year, according to the study. That makes fossil fuel industries responsible for between 20 and 25 percent of the global methane problem. That's one-fifth higher than IPCC estimates, and as much as 60 percent higher than the estimates in the European Joint Research Centre's Emissions Database for Global Atmospheric Research(EDGAR). 

Colonial Pipeline to stop shipping high sulfur jet, heating oil in Jan 2018 -  The US' Colonial Pipeline intends to eliminate shipments of high sulfur grades of jet fuel and heating oil in January 2018, the pipeline operator told shippers Tuesday. This change would affect products with a sulfur content greater than 500 ppm, which includes 54 Grade (jet) and 70, 71, 77 and 88 grades (high sulfur heating oil), according to its notice to shippers. "The effective handling/management of the high sulfur interface is becoming a significant issue as limited markets exist for distillate containing more than 500 ppm sulfur due to the reduction of state heating oil sulfur limits and a decreased use for this product in the Locomotive and Marine sector as railroads convert to engines requiring 15 ppm fuel," Colonial Pipeline said. Colonial said its decision to eliminate the high sulfur grades from its tariff was based on feedback from shippers, transmix processors, refiners and end users.The pipeline said shipments of low sulfur products, such as low sulfur heating oil (75 grade and 85 grade) and ultra low sulfur kero (55 grade), would continue.

Cheniere cleared to export LNG from second Sabine Pass plant | Fuel Fix: Cheniere Energy Inc., which shipped its first cargo of liquefied natural gas in February, has been cleared to double exports from its landmark terminal in Louisiana. Cheniere’s second liquefaction plant at Sabine Pass was approved by the Federal Energy Regulatory Commission in a notice on Wednesday. Each plant has the capacity to produce the equivalent of about 650 million cubic feet a day. Additional volumes will come at a testing time for the global LNG market, which is reeling from a worldwide glut that’s set to worsen through 2020 as demand from key Asian customers slows. Still, the first LNG exports from the lower 48 states have helped whittle down a U.S. supply glut and put Cheniere on the road to posting its debut profit. Train 2, as the plant is known, began producing LNG on July 28 during the commissioning process. Trains 1 and 2 were shut in late September for planned work, which was expected to last about four weeks. Next year, the company is planning to bring online a third plant and start the commissioning of a fourth. Sabine Pass took in 119 billion cubic feet of gas from April 1, which marked the start of the U.S. gas stockpiling season, through Sept. 9, ABB Inc. data show. During the same period, the country’s supply glut versus the five-year average fell to 299 billion cubic feet from 874 billion.

Delaware Basin Still Selling For $60,000 / Acre -- October 14, 2016 -- RSP Permian acquires Silver Hill for $2.5 billion. I've posted RSP Permian on the blog for the past several days. Interesting how things turn out. Data points:

  • RSP Permian to buy two privately held entities
  • together, they control 41,000 net acres in the Delaware Basin of the Permian Basin
  • $2.5 billion
  • sellers: Silver Hill Energy Partners and Silver Hill E&P II (controlled by equity firms Kayne Anderson Capital Advisors and Ridgemont Equity Partners
$61,100 / net acre.

4 companies plead guilty to federal clean air violations (AP) — Four companies have pleaded guilty and agreed to pay a total of $3.5 million for criminal clean air violations at two Southeast Texas oil and chemical processing facilities. Papers filed in federal court Wednesday in Beaumont show KTX Limited and KTX Properties Inc. pleaded guilty to negligently releasing hazardous air pollutants in a tank explosion at its Port Arthur plant in March 2011. The explosion killed one worker and injured two other severely. The documents also show Crosby LP and Ramsey Properties LP admitted failure to monitor leaks of ground-level ozone-producing air pollutants at its Crosby plant from 2008 until 2012. They also admitted falsifying records and reports to the U.S. Environmental Protection Agency and the Texas Commission on Environmental Quality. A message left with the companies drew no response.

Enviros to Texas Lawmakers: What About the Fracking Kids? - Texas Observer - A new report detailing the proximity of schools and daycare centers to fracking wells in Texas should serve as a wakeup call to state lawmakers, environmental groups say. Unveiled at a news conference in Austin on Thursday, the report found that nearly 437,000 students in kindergarten through 12th grade attend one of 850 Texas schools that are within one mile of a fracking site. In addition, 1,240 daycare centers — or 9 percent of the total number — are within one mile of a fracking well. Health hazards associated with fracking include air pollution, groundwater contamination, truck traffic and explosions or other accidents, according to the report. Children are more susceptible to harm because their immune, respiratory and nervous systems are still developing. “This report lays out a pretty clear choice for Texas and the Legislature,” said Cyrus Reed, conservation director for the Sierra Club’s Lone Star Chapter. “Choose to protect children or the oil and gas industry.”  Last year, the Legislature passed House Bill 40, which bans cities from banning fracking. Though the measure is unlikely to be repealed anytime soon, Reed said,lawmakers could strengthen state oversight of the oil and gas industry during a sunset review of the Railroad Commission, which regulates oil and gas, in 2017.  He noted that the state’s Sunset Advisory Commission recently concluded that monitoring and enforcement related to the the oil and gas industry should be improved “to effectively ensure public safety and environmental protection.” “The Railroad Commission appears to be compromised by the influence of oil and gas campaign contributions, so it’s up to our state leaders whether we get serious about enforcing rules for companies that break the law and jeopardize the health and safety of Texans,” Reed said.

Fracking Sand -- Rigzone -- October 9, 2016 --- This article was previously linked to highlight another aspect of the shale boom. This short post highlights fracking sand:
Many operators have optimized their completion designs using higher intensity fracs with longer laterals and higher proppant volumes. The in-basin frac sand suppliers continue to dominate among the sand suppliers. Sand suppliers will continue to keep a close eye on the DUC inventory, especially with nearby transload and rail facilities in Permian, STACK, SCOOP and Williston. The longer lateral trends are clear in the Eagle Ford, Permian and Williston. The average lateral length in each basin increased from 2014 to 2015.
The graph below is hard to read, but if you click on it and then zoom in, maybe you can make it out more easily. Spend some time on this graphic; lots of interesting items to note. Also from the linked article: Today, there are few operators continuing to drill and complete wells.  Most notably, Pioneer Natural Resources stated a “no backlog” stance in a recent investor call.  Several other operators, including Continental Resources, EOG Resources, Oasis Petroleum and Whiting Petroleum have started completing DUCs or expect to as oil returns to $50/bbl.  The increase in the number of DUCs is likely due to the increase in rig count along with the market volatility. The horizontal rig count reached a low of 307 the week of May 20 this year (2016) and as of the latest Baker Hughes rig count, there are 396 active horizontal drilling rigs, a 29 percent increase. The Permian Basin accounts for 50 of the 96 horizontal rigs added during this time. Just as the Permian has led the drilling activity, expect the DUC inventory reductions to occur first in the Permian.

The governor of Oklahoma created ‘Oilfield Prayer Day’ in hopes of saving the state’s oil and gas industry - The religious right has a lot to pray about these days: the overdue rapture; babies they'll never get to know; the rise and impending fall of documented coveter of other peoples' wives, Donald Trump.   But right now, they're praying for the oil fields, which are in such an imperiled state that Oklahoma Gov. Mary Fallin — an avid Trump supporter — named Thursday Oilfield Prayer Day, inviting her constituents to appeal the Lord to show mercy on its oil and gas industry.  When Oilfield Prayer Day was initially reported in October, it applied only to Christians, but on Monday, Fallin widened her call to prayer to include members of all faiths, the Associated Press reported.  This because Oklahoma's oil industry is flagging. Slumping oil prices have hit Oklahoma particularly hard. But according to Reuters, during the boom, cash wasn't flowing into the state's reserves so much as into the pockets of a few. Now that the boom is over, oil barons still enjoy enormous tax breaks — to the tune of $470 million in 2015. Government services instead took the hit, with some public schools now operating only four days a week, so low is their funding. "There are many people suffering right now who have lost their jobs in the energy sector ... there are a lot of families who have been hurt, and I think prayer is always a good thing, for anyone," Fallin said, according to the Associated Press. So, rather than praying for those families — or reconsidering those low, low oil tax rates — Fallin is rallying good Christian folks to pray for the oil fields themselves.  "We have a saying: The oil field trickles down to everyone," Oilfield Christian Fellowship member, Jeff Hubbard, told the Washington Post.  But, as Reuters' report indicates, that's not really true in Oklahoma. Despite his industry's nose dive, oil tycoon Harold Hamm remains the richest person in Oklahoma with a net worth of $15 billion, according to Forbes. In any case, people are tweeting their unfiltered thoughts and prayers in honor of Oilfield Prayer Day. 

It's Official: Injection of Fracking Wastewater Caused Kansas’ Biggest Earthquake - The largest earthquake ever recorded in Kansas—a 4.9 magnitude temblor that struck northeast of Milan on Nov. 12, 2014—has been officially linked to wastewater injection into deep underground wells, according to new research from the U.S. Geological Survey (USGS). The epicenter of that extremely rare earthquake struck near a known fracking operation. The Wichita Eagle noted from the study that this man-made quake, which hit 40 miles southwest of Wichita and felt as far away as Memphis, likely came from just one or two nearby wells. The publication ominously noted that, "one of those two wells, operated by SandRidge Energy , is still injecting water at the same level as when the earthquake occurred two years ago." The USGS scientists believe that the 4.9-magnitude earthquake was triggered by wastewater injection for the following reasons:

  • There had not previously been similar earthquakes in the area.
  • There were waste-water injection wells nearby.
  • The earthquake activity started after the amount of water injected in the wells increased.
  • There's a piece of earth that could be activated by changes in pressure.

Kansas has had a long history with fracking. In fact, the first well ever fracked in the United States happened in 1947 in the Sunflower state. The process is now used for nearly all of the 5,000 conventional wells drilled in Kansas every year.But just like Oklahoma, Kansas is seeing an alarming uptick of "induced" earthquakes connected to the underground disposal of wastewater from the fracking process. Kansas is a region previously devoid of significant seismic activity, however, the number of earthquakes in the state jumped from only four in 2013 to 817 in 2014, The Washington Post reported.

Methane Emissions Sky High -- Once again we see the EPA erring on the side of protecting Industry instead of protecting the environment… EPA Agrees Its Emissions Estimates From Flaring May Be Flawed.  Agency says it will re-examine the formulas it uses, based on data provided by industry, and people near oil and gas sites hope that means cleaner air. Emissions from the widespread practice of flaring has been a matter of dispute with the EPA, with several environmental groups successfully pressuring the agency to consider recalculating its estimates.  The U.S. Environmental Protection Agency has agreed to re-examine the accuracy of its 33-year-old estimates of air pollution from flaring near refineries and at oil and gas drilling sites. The decision has health advocates and some people in South Texas hoping relief from the effects of foul air is coming. The agreement comes in the wake of a lawsuit against the EPA by four environmental organizations. They claimed that air samples near oil refineries in Houston showed elevated levels of volatile organic compounds, chemicals associated with threats to public health and smog-forming pollution. Those levels, the plaintiffs said, were 10 to 100 times higher than being reported under outdated and inaccurate formulas that estimate levels of air pollution. Although the lawsuit focused on refineries in Houston, the agreement could have consequences nationwide. Booming oil and gas drilling in Pennsylvania, Colorado, North Dakota and other states have been blamed for noxious emissions that residents say has sickened them. The EPA said it will re-examine, and if necessary revise, the emissions formulas for flares at many of the estimated one million natural gas drilling and production sites across the country, according to the consent decree filed with the U.S. District Court for the District of Columbia.

DUCs To The Rescue -- October 13, 2016 - Tudor, Pickering, Holt & Co (TPH), oil analysts, in recent note to investors:

  • US crude oil production needs to grow a bit if market is to re-balance by the end of the year
  • increased number of rigs may not be enough
  • estimated exit right on target but 1Q17 could miss
  • drillers hesitant to add more rigs (except in Permian and STACK)
  • the solution? DUCs
  • analysts "feel comfortable the Bakken may catch up ... but less confident that Eagle Ford will catch up"
  • highest totals in the Eagle Ford (1,250) and the Permian (1,350)

TPH:  In the next few years, operators will likely target a backlog of two to three wells per rig. A total inventory of about 2,000 would be a normal level, TPH said, which could be the case by 2018. That would make roughly 3,000 DUCs available toward production across the Permian, Eagle Ford, Bakken and Niobrara.  Wells on backlog cost about two-thirds the price of new wells to bring to production; the cost to reach equilibrium would be close to $12 billion, TPH said.Note that TPH is using the same accounting methods used by CLR: Wells on backlog cost about two-thirds the price of new wells to bring to production. 

EOG Big Well Design Winner In The Bakken And Probably Everywhere Else -- Investing in oil and gas can be a difficult prospect. Operators have a plethora of costs, differing leaseholds and production levels. The oil industry is unique based on valuation. The P/E ratio tells us little, although others use this as a basis for putting dollars to work. Operators are often spurned for debt levels and spending to grow production in the face of large debt payments. Investors have access to operator costs, hedges and other pertinent information. Production and well performance are not as easy to find. This data is placed on state sites and some are very difficult to pull data from. Well performance is a major variable, as it has changed the way we look at oil and gas. We continue to preach about well design and the importance of its effect on production. There were a significant number of people who believed that unlocking more resource from shale would be impossible. The opposite has occurred as Mega-Fracs or enhanced completion methods have caused a major shift in where we think oil will be in the long term. The industry had thought $80/Bbl. oil would be here soon and now we are just hoping for $60.

  • Well design can alter production significantly over the first five years of well life.
  • Some operators try to keep well costs down, hurting economics significantly.
  • Results in the Bakken and other plays seem to show that operators will be forced to use Mega-Fracs or suffer in this new lower oil price environment.
  • EOG is the pioneer of enhanced completions and seems to be far ahead of the competition.

A Sixth Pipeline Company Wants To Tap Into The DAPL -- From The Seattle Times, October 7, 2016:

  • Epping Transmission Company
  • proposes a $6.5 million project to connect its Epping Station and Divide Mainline Pipeline to DAPL
  • Epping is located a few miles northeast of Williston
  • Epping has become a surprising center of activity in the Bakken
  • there is also a CBR terminal in Epping (seldom used now according to locals)
  • the Epping addition would add 30,000 bopd to the DAPL
  • with the additional Epping contribution, the DAPL would move 470,000 to 570,000 bopd
Currently, the Bakken is producing about 1 million bopd, i.e., 365 million bbls/year.

Appeals Court Refuses to Halt Construction on Dakota Access Pipeline  - In a setback for the Standing Rock Sioux Tribe and their supporters, on Sunday evening, one hour before the start of the second presidential debate , the DC Circuit Court of Appeals lifted an injunction that had stopped construction on the Dakota Access Pipeline , allowing work to resume. The $3.7 billion, 1,170-mile pipeline would transport 470,000 barrels of crude oil across four states, which include sacred sites and burial grounds documented by the tribe. "We are troubled by the court's decision, but as water protectors and land defenders, our resolve to stop this Bakken frack-oil pipeline will not be diminished," Tom Goldtooth, executive director of the Indigenous Environmental Network , said. "This fight is far from over." Last month, after a federal judge rejected the tribe's challenge to halt construction on lands near their reservation, the Obama administration stepped in and revoked its authorization to construct the pipeline on federal land bordering or under Lake Oahu. The U.S. Army Corps of Engineers is conducting a review that it says will be completed within weeks.  In its order , the court noted, "But ours is not the final word. A necessary easement still awaits government approval—a decision corps' counsel predicts is likely weeks away; meanwhile, intervenor DAPL has rights of access to the limited portion of pipeline corridor not yet cleared—where the Tribe alleges additional historic sites are at risk."

Dakota Access Pipeline Construction Allowed To Resume Near Defiant Tribe --  Construction may resume on a stretch of the contested Dakota Access Pipeline near a Native American reservation in North Dakota, a federal court ordered Sunday evening.  The order, issued shortly before the symbolically important Columbus Day holiday, denied the Standing Rock Sioux’s attempt to halt work on the pipeline while their lawsuit proceeds against the federal agency that approved the project. The Sioux contend that the 1,172-mile pipeline running from the Bakken oil fields in North Dakota to facilities in Illinois may contaminate the Missouri River, their water source, and destroy sacred and historical sites. “The Standing Rock Sioux Tribe is not backing down from this fight,” said tribal chairman Dave Archambault in a statement. “We are guided by prayer, and we will continue to fight for our people. We will not rest until our lands, people, waters and sacred places are permanently protected from this destructive pipeline.”The U.S. Court of Appeals in Washington, D.C., said in its two-page order that the tribe did not prove “the existence of irreparable harm” nor did it meet other conditions necessary to obtain an injunction. The ruling addresses only work in the 20-mile area around Lake Oahe in North Dakota. Soon after the three-judge panel handed down its decision, the Associated Press reported that the departments of the Interior and Justice, as well as the Army, announced that no construction on federal land would be allowed within that buffer zone around the lake.   Energy Transfer Partners, the Dallas-based company that designed the pipeline to carry 570,000 barrels of oil per day, may resume building on other land in the area. The U.S. Army and the departments of Interior and Justice, however, asked the company to voluntarily suspend all work within this section, according to Reuters. A final reckoning on the project could come in weeks as the departments involved have been reviewing what factors led the U.S. Army Corps of Engineers to issue construction permits. Pipeline opponents have argued the Corps didn’t fully investigate the potential for environmental harm, and the Standing Rock Sioux have said they weren’t properly consulted as required by the National Historic Preservation Act.

Shailene Woodley + 26 Others Arrested While Peacefully Protesting Dakota Access Pipeline -- Shailene Woodley, star of The Fault in Our Stars and the Divergent series, was arrested Monday morning while protesting the Dakota Access Pipeline in Sioux County, North Dakota. Woodley was streaming live on her Facebook page Monday during a peaceful protest at Standing Rock. The protest was in response to the DC Circuit Court of Appeals ruling on Monday that lifted a temporary injunction on the pipeline, allowing construction to resume.The actress and environmental activist was trying to head back to her RV to go back to camp, when she noticed it was surrounded by police and a riot vehicle. As she approached her RV, she was stopped by police dressed in riot and military gear. After speaking with them, she was told on camera that she was being arrested for criminal trespassing. A spokesman for the Morton County Sheriff's Department said she was also arrested for engaging in a riot. Her mother was with her at the time. When she asked why she was being arrested and no one else, and whether it was because people know who she is, the officer who appeared to be in charge said it was because she was identified. As she was being put in handcuffs, Woodley explained to a person off-camera that she was being arrested for trespassing down by the pipeline where hundreds of others had gathered, but that she left as soon as police arrived and was told to leave. "It's because I'm well-known, it's because I have 40,000 people watching it," she said.

Award-Winning Filmmaker Arrested Documenting Pipeline Protest - Josh Fox - Deia Schlosberg, the producer of my new climate change documentary, How to Let Go of the World and Love All the Things Climate Can't Change, was arrested Tuesday in Walhalla, North Dakota, for filming a protest action against a pipeline bringing Canadian tar sands oil into the U.S. The action was conducted by Climate Direct Action, but Deia was not part of the group and did not participate in the action, only filmed it. Her film footage was confiscated and she is currently being held in jail. According to Reuters: A spokeswoman for the Pembina County Sheriff's Office confirmed that Schlosberg was being held at the jail but declined to release any further information, referring calls from a Reuters reporter to State's Attorney Ryan Bialas. Bialas could not immediately be reached for comment on Wednesday.  Deia is an award-winning filmmaker in her own right, and How to Let Go of the World, which she produced, is the third film in the Oscar-nominated, Emmy-winning Gasland series.  Here's my Facebook live video from Tuesday after I learned about Deia's arrest: Arrest of journalists, filmmakers and others witnessing and reporting on citizen protests against fossil fuel infrastructure amid climate change is part of a worrisome, growing pattern. Amy Goodman, host of Democracy Now, was arrested last month for covering Native American-led protests of the Dakota Access Pipeline. The actress Shailene Woodley was arrested and jailed this week while leaving a protest at a construction site for the Dakota Access Pipeline. She was singled out and was told by police that she was arrested because she was well known and has 40,000 people watching her Facebook page.  Journalism is not a crime, it is a responsibility. The actions of the North Dakota police force are not just a violation of the climate, but a violation of the constitution.

Outrageous! Felony Charges Given to Journalist Filming Anti-Pipeline Protest – Josh Fox - Many of you may have read my post on EcoWatch this morning , and already know that Deia Schlosberg, the producer of my new climate change documentary, How to Let Go of the World and Love All the Things Climate Can't Change , was arrested Tuesday in Walhalla, North Dakota, for filming a protest action against a pipeline bringing Canadian tar sands oil into the U.S.  But, what you probably don't know is that she was escorted to the courthouse this afternoon and was charged with Class A and C felony charges that carry 45 years maximum sentences combined. The charges include, two Class A felony charges and one Class C felony charge, and conspiracy to theft of property, conspiracy to theft of services and conspiracy to tampering with or damaging a public service.  I am outraged and need your help. Please watch my Facebook video below, read the letter I'm asking you to sign and then if you want to sign it, comment below the article and we'll add your name. Thank you!   Here's my Facebook live video from just one hour ago:  Here's the letter I'm asking you to sign on to. Comment below if you'd like to be added to the letter.

Amy Goodman: 'I Will Go Back to North Dakota to Fight This Charge' - Award-winning journalist Amy Goodman, charged with criminal trespassing for filming an attack on Native American-led pipeline protesters, will turn herself in to North Dakota authorities on Oct. 17.  Amy Goodman will surrender to authorities at the Morton County–Mandan Combined Law Enforcement and Corrections Center at 8:15 a.m. local time (CDT).  "I will go back to North Dakota to fight this charge. It is a clear violation of the First Amendment," said Goodman. "I was doing my job as a journalist, covering a violent attack on Native American protesters."  The charge in State of North Dakota v. Amy Goodman stems from Democracy Now! 's coverage of the protests against the Dakota Access pipeline. On Sept. 3, Democracy Now! filmed security guards working for the pipeline company attacking protesters. The report showed guards unleashing dogs and using pepper spray and featured people with bite injuries and a dog with blood on its mouth and nose.  Democracy Now!'s report went viral online, was viewed more than 14 million times on Facebook and was rebroadcast on many outlets, including CBS, NBC, NPR, CNN, MSNBC and the Huffington Post.  On Sept. 8, a criminal complaint and warrant was issued for Goodman's arrest.  Ironically, in the state's criminal complaint, North Dakota Bureau of Criminal Investigation Special Agent Lindsey Wohl, referencing the Democracy Now! video report in a sworn affidavit, stated, "Amy Goodman can be seen on the video identifying herself and interviewing protesters about their involvement in the protest." This is precisely the point: Goodman was doing the constitutionally protected work of a reporter.

Ranchers Tote Guns as Tribes Dig In for Long Pipeline Fight - — Ranchers are arming themselves before they climb onto tractors or see to their livestock. Surveillance helicopters buzz low through the prairie skies. Native Americans fighting to prevent an oil pipeline near the Standing Rock Sioux Reservation are handing out thick blankets and coats and are building maple-pole shelters that can withstand North Dakota’s bitter winter.As the first deep freeze looms, many here are bracing for a long fight as the company behind the Dakota Access pipeline races to finish the $3.7 billion project by January, and thousands of protesters tucked into tents, tepees and trailers in prairie camps vow to stop it.“This is where we are, and where we’re staying,” Retha Henderson said, surveying a bustling camp on the edge of the Cannonball River. “We’re not giving up.”Ms. Henderson said she had been drawn to the site by memories of her grandfather, an Oglala Lakota, and by dreams. She left her apartment and her catering job in Myrtle Beach, S.C.; gave away her cat; and hitchhiked to the Sacred Stone Camp.   Crews kept digging ditches and draping sections of the light-green 30-inch pipe into ranchers’ fields not covered by the federal order. And protesters kept dogging them, driving to construction sites as far as 80 miles from their camps to try to halt work. On Monday, a holiday that many celebrate as Indigenous Peoples Day instead of Columbus Day, scores of protesters rallied and pitched a tepee beside a section of pipe near the tiny farming town of St. Anthony. Twenty-seven people were arrested. In all, about 130 have been arrested since the large-scale protests began this summer.  Winter may be coming, but so are new supporters. A group of Comanche teenagers and their parents drove to a camp from Oklahoma over the weekend to march up a rural highway to land that the pipeline would cross. A group of 400 indigenous grandmothers is making plans to come. In South Dakota, people are raising money for 1,000 Oglala Lakota Sioux children to travel to the camps. “Something bigger than us is happening here,” said LaDonna Brave Bull Allard, a tribal historian for the Standing Rock Sioux who helped found the first camp, on her property, in April.

N.D. Pipeline Protests Have Agitated Area Farmers - The construction of the $3.8 billion Dakota Access Pipeline has gone anything but smoothly. Though the project was approved this summer by the U.S. Army Corps of Engineers, it has been plagued with protestors due to a portion that will run beneath a river near North Dakota’s Standing Rock Sioux Reservation. In fact, NPR reports that more than a thousand protesters have shown up so far, which has led to a couple of high-profile arrests, including a documentary filmmaker and actress Shailene Woodley.Now, area farmers and ranchers say the unrest has left them more than a little uneasy. Some, like North Dakota farmer Jared Ernst, say they’ve been carrying an extra piece of equipment with them to their fields.“I’ve been carrying a sidearm with me everywhere I go,” he says. “I have a small revolver that I carry. My wife has started carrying, a bunch of the neighbors have started carrying firearms in their vehicles … you just don’t know.”Ernst began carrying the revolver after he had a run-in with protesters trespassing in one of his alfalfa fields, he says.AgDay has more on the story; watch the video.

Hotline set up to help farmers affected by pipeline protests (AP) — North Dakota’s Agriculture Department has set up a hotline to help farmers and ranchers south of the Bismarck-Mandan area who’ve been affected by protests against the Dakota Access oil pipeline. Many producers need to finish seasonal work before winter sets in, and they’re having problems trying to find willing truck drivers and custom silage-chopping services, Agriculture Commissioner Doug Goehring said Wednesday. “We are appealing to those who can provide these services to contact the hotline,” he said. The protests have drawn thousands of people to the area where Texas-based Energy Transfer Partners is trying to wrap up construction on the $3.8 billion, 1,200-mile pipeline from North Dakota to Illinois. Opponents of the pipeline worry about potential impacts to drinking water on the Standing Rock Sioux reservation and further downstream, as well as destruction of cultural artifacts. But a protest camp spokesman says the notion that protesters are harassing farmers or farm workers is “not true.” “(W)e’ve had quite a few farmers and ranchers stop by the camp to show their support and thank us for taking a stand against Big Oil,” spokesman Cody Hall said. Rancher Matthew Rebenitsch told The Associated Press earlier this month that many people are locking their doors and carrying guns. And Morton County Sheriff Kyle Kirchmeier has said his office has received reports of people in rural areas being stopped on roads and intimidated, a claim Hall denied. Goehring said the Farm/Ranch Emergency Assistance Hotline (701-425-8454) is aimed at helping producers and those looking for work to connect with one another. Department employees will answer calls weekdays from 8 a.m. to 5 p.m., and callers can leave messages on evenings and weekends.

Angry Driver Plows Pickup Through Native American Crowd Protesting Dakota Access Pipeline --  Caught live on video, an 18-year old male driver plowed his pickup into a crowd of about 40 Native American protestors in Reno following an angry exchange of words. One woman was hospitalized. Quanah Brighten, executive director of United Native Americans Inc., called it a hate crime.  At about 6:40 p.m. Monday, the pickup truck approached the intersection where demonstrators had gathered under the Reno Arch. On video, the truck can be heard revving its engine. Witnesses said they heard racial slurs from the male driver and his 17-year old female companion. Angry words were exchanged. Then, suddenly, the man roared into the crowd. The entire horrific event was broadcast live on Facebook.  Five people were hurt, including Kitty Colbert, 59, of Carson City, Nevada, who was taken to the hospital with injuries that were described as non-life threatening. According to the Reno Police Department , four others were treated on the scene for minor injuries. "He could have killed me," Colbert says on the video.   It could have been far worse. "I heard the driver ask one of the protesters, 'Do you want me to kill your homies?' and that really set everybody off," Wayman told AP on Tuesday. "This is a hate crime," Brightman told the Reno Gazette-Journal.  The driver stopped his vehicle several blocks from the scene and called police. The two occupants of the vehicle have been questioned, but no arrests have been made.

Donald Trump's Ties to the Dakota Access Pipeline - Since the presidential debate on Sept. 26 , we've been hearing quite a bit about Donald Trump 's tax returns (or lack thereof). While the conversation has revolved around why Trump has chosen not to release his returns—as all presidential candidates have since 1980—we do know some things about what those returns would reveal should he choose to make them public.  In particular, we already know quite a bit about Trump's connections to the fossil fuel industry and to the Dakota Access Pipeline . Trump has deep financial and personnel ties to the pipeline, which would transport nearly 500,000 barrels of fracked oil per day from North Dakota to Illinois. The pipeline threatens the water supply and sacred lands of the Standing Rock Sioux, who have joined with dozens of tribes and other groups to stop the project. While much of Trump's finances remain a mystery, he did have to file a financial disclosure form when he declared his candidacy for president (despite his claims, this is not the same and does not provide the same level of transparency as a tax return). This disclosure form shows significant investments in the fossil fuel industry and two of the fossil fuel companies Trump holds stock in are directly funding the Dakota Access Pipeline .  Trump disclosed between $500,000 and $1 million in investments in the primary builder of the pipeline, Texas-based Energy Transfer Partners . He also disclosed $50,000 to $100,000 in investments in Phillips 66 , which would own one-quarter of the Dakota Access Pipeline once completed.

Tale of Two Tribes: Utes Want to Drill as Sioux Battle Pipeline - Bloomberg: While the Standing Rock Sioux have drawn considerable media coverage for their fight against the Dakota Access Pipeline project, the Southern Utes have attracted scant attention for their 15-year push to make it easier to drill on Indian land. Their goal: Extend financial opportunities that have already given them control of 1,600 wells across four states, and helped make them one of the richest tribes in the U.S. “Without a prolonged effort to take control of our natural resources, the Southern Ute Indian Tribe would not be the economic powerhouse it is today,” Tribal Council Treasurer James Olguin told lawmakers in a congressional hearing last week. “We are the best protectors of our own resources and the best stewards of our own destiny.” Lobbying Push Since 2012, the Southern Ute tribe has spent $1.6 million lobbying Washington to ease energy permits, ensure tribal sovereignty and lighten U.S. Interior Department rules on fracking and methane emissions, according to the Senate’s Lobbying Disclosure Act database. That’s three times more than Pioneer Natural Resources Co., a shale driller with more than $32 billion in market value. While the Standing Rock Sioux vowed last week to keep fighting the Dakota Access Pipeline after a federal court declined to halt construction, the Southern Utes met with U.S. lawmakers in Santa Fe, New Mexico, to argue for new laws loosening federal control over their drilling operations. They were joined by representatives of the Navajo Nation, the largest U.S. tribe, and the Arctic Slope Regional Corp., owned by Alaska natives.The three groups called on Congress and the Interior Department to streamline permitting on Indian lands and give tribes more control over energy leasing and environmental reviews. “Nearly every aspect of energy development on tribal lands is influenced or controlled by the federal government, a policy stemming from old notions that Indian tribes are incapable of or unwilling to manage their resources,” Utah Republican Rob Bishop, chairman of the House Natural Resources Committee, said during the hearing.

Dedicated Activists: The Next Big Threat For North-American Oil -- Oil producers and pipeline developers are having a rough time trying to get their product to market, running into resistance from protestors and seeing projects fall by the wayside. The latest came from Royal Dutch Shell, backed out of a plan last week to build an oil train terminal in Washington State. The rail terminal would have received 400,000 barrels per day of oil from the Bakken, but Shell said that the project no longer made sense with the ongoing slump in crude oil markets, and crucially, because capital availability is getting tighter. The setback is only the latest in a string of defeats for developers of energy infrastructure around the country. Also last week, city planners in San Luis Obispo rejected a proposed rail terminal that would service a Phillips 66 refinery in central California. Yet another oil train terminal met defeat in Benicia, CA, a project that would service a refinery owned by Valero. Moreover, the U.S Surface Transportation Board, a federal rail regulator, affirmed Benicia’s right to reject the terminal, a decision that is important because it grants local communities more power to deny permits for energy infrastructure, which should raise an alarm bell for energy developers around the country. The Huffington Post summed up the latest developments nicely with a headline reading “West Coast Deals Four Major Blows to Big Oil.” Additionally, the fate of the much higher-profile Dakota Access Pipeline is up in the air. An appellate court gave Energy Transfer Partners the greenlight to resume construction but the Obama administration’s U.S. Army Corps of Engineers reiterated its request for a voluntary cessation of construction while the matter can be reviewed. The Dakota Access Pipeline would carry crude oil from the Bakken to refineries in Iowa and Illinois.  "This development (with Shell), along with the developments regarding the DAPL, will hurt Bakken producers' netbacks," said Sarp Ozkan, a senior energy market analyst with Ponderosa Advisors, according to Reuters. In other words, the stoppage of pipelines will hurt oil producers’ profits.

First Nations flex muscles in US, Canada pipeline debate -- First Nations tribes in Canada and the US have started flexing their muscles, successfully delaying pipeline projects on both sides of the border. Indications are that this effort is becoming more organized and may play a larger role in infrastructure decisions across the continent. Tribal action is behind the delays encountered by Energy Transfer Partners’ Dakota Access Pipeline in North Dakota. Tribes are demanding more consultation and, in some cases, opposing expansion of energy infrastructure altogether. That effort reached a new level in late September, when First Nations and tribal chiefs gathered simultaneously at Musqueam in Vancouver and Mohawk in Montreal to sign a new continent-wide treaty and form an alliance committing nearly 50 other bands in Canada and the US to stop all proposed oil sands pipeline, tanker and rail projects in their territorial lands and waters. “What this treaty means is that from Quebec, we will work with our First Nation allies in BC [British Columbia] to make sure that the Kinder Morgan Trans Mountain pipeline does not pass and we will also work with our tribal allies in Minnesota as they take on Enbridge’s Line 3 expansion, and we know they’ll help us do the same against Energy East,” Kanesatake Grand Chief Serge Simon said in a statement. The collective stance will have a major impact on the Liberal Party government, which was voted into power last November on the promise of granting a larger say for stakeholders and particularly First Nation bands in British Columbia in any oil pipeline approval and building process.“This whole issue in relative. They have always been bold and we will see that happening in the future,” Chris Bloomer, president of the Canadian Energy Pipelines Association, told Platts.

The billion barrel oil swindle: 80% of US oil reserves are unaccounted for - U.S. Storage Filling Up With Unaccounted-For Oil - U.S. crude oil storage is filling up with unaccounted-for oil. There is a lot more oil in storage than the amount that can be accounted for by domestic production and imports. That’s a big problem since oil prices move up or down based on the U.S. crude oil storage report. Oil stocks in inventory represent surplus supply. Increasing or decreasing inventory levels generally push prices lower or higher because they indicate trends toward longer term over-supply or under-supply. Inventory levels have reached record highs since the oil-price collapse in 2014. This surplus supply is a major factor keeping oil prices low. Current inventories are 45 million barrels higher than 2015 levels, which were more than 100 million barrels higher than the average from 2010 through 2014 (Figure 1). Until the present surplus is reduced by almost 150 million barrels down to the 2010-2014 average, there is little technical possibility of a sustained oil-price recovery. Understanding U.S. stock levels should be straight-forward. Every Wednesday, EIA publishes the Weekly Petroleum Status Report which includes a table similar to Figure 2. The calculation to determine the expected weekly stock change is fairly simple: Stock Change = Domestic Production + Net  Imports – Crude Oil Input to Refineries   Domestic production and net imports account for crude oil supply, and refinery inputs account for the volume of oil that is refined into petroleum products. If there is a surplus, it should show up as an addition to inventory and a deficit, as a withdrawal from inventory. But that’s not how it works because EIA uses an adjustment in order to balance the books (Table 1).  The logic is that estimated stock levels in tank farms and underground storage are relatively dependable and that any imbalance must be from less reliable production, net import or refinery intake data.  There is nothing wrong with adjustment factors if they are small in comparison to what is to be balanced. In the Table 1 example from September 2016, however, the adjustment is 60% of the stock change–a bit too much. A one-off perhaps? No, it’s a permanent problem that has gotten worse during the last several years. Figure 3 shows that crude oil supply and refinery intake of oil vary considerably on a weekly basis. The balance is cumulatively negative over time beginning with a zero balance in January 1983. That suggests that crude oil stocks should be falling over time but instead, they have been rising. The vertical bars show the weekly crude supply from production and net imports either exceeding the refinery input requirements (positive, green) or not reaching these requirements (negative, red). The solid red line is the cumulative.   The truth—however improbable—is that inventories are probably much lower than what is reported.

EIA Changes Reporting Process As Of Thursday (Two Days From Now) -- October 11, 2016 -- From the EIA today: Starting with the Weekly Petroleum Status Report (WPSR) published on Thursday, October 13, the U.S. Energy Information Administration will no longer include crude oil lease stocks in U.S. total commercial crude oil inventory data.  Crude oil lease stocks refer to oil (currently about 31 million barrels) that is stored in tanks at sites across the United States where producers are drilling on leased land. Lease stocks are not yet available for commercial use, and in many cases, operators do not count them as production until the oil is transferred off the lease. – EIA

US Shale Oil Output Seen Surging If Crude Reaches $60 a Barrel -- Crude at $60 a barrel would probably trigger a strong increase in North American oil output, the head of the International Energy Agency said, amid signs that OPEC members and Russia may be edging toward an agreement to limit production. Benchmark Brent crude hit a one-year high above $53 a barrel on Monday when President Vladimir Putin said Russia was willing to work with the Organization of Petroleum Exporting Countries to stabilize the market. A deal could lift prices as high as $60 by the end of this year, Saudi Arabia’s Energy and Industry Minister Khalid Al-Falih said at the World Energy Congress in Istanbul.  If prices reach $60 and stay there, U.S. shale drillers could find it commercially viable to revive production at some mothballed wells and boost output by more than 1 million barrels a day by early 2018, according to Vienna-based consultant JBC Energy GmbH. “We may well see, in a short period of time, strong production growth coming from North America and elsewhere,” IEA Executive Director Fatih Birol said Tuesday in a Bloomberg TV interview. “Prices around $60 would be sufficient.”  Brent crude climbed to $53.14 a barrel on Monday as Russia’s Putin said the world’s largest energy exporter was ready to join OPEC in restraining oil production either with a freeze or a cut. The international pricing benchmark has gained almost 15 percent since OPEC agreed last month on the first supply curbs in eight years, and it was trading near $53 a barrel on Tuesday.  Some U.S. producers have already stepped up operations. The number of active oil-drilling rigs in the U.S. has climbed from 328 in early May to 428 last week, according to Baker Hughes Inc. “As soon as OPEC moves into a position of trying to manage the price, it basically takes care of the downside risk,”  “The consequence is increased U.S. production.” If crude reaches and holds steady at $60, he said he expects U.S. output to rise by at least 500,000 barrels a day by the end of 2017. U.S. shale drillers could add from 1 million to 1.5 million barrels a day within the next year and a half, if prices stay at that level, JBC Energy said in an e-mailed note.

Why Dividends Are Still A Must For Big Oil | The big oil companies—at least in this oil price environment—have come under a lot of criticism for their decision to generate cash flow rather than focus on return on equity. Much has been discussed about the dividend-paying capabilities of the companies, as that they have dished out dividends that have often exceeded their earnings. Is this a sound strategy, and should investors continue to hold onto the big four stocks? The big four oil company’s dividend payout in 2015 was more than 100 percent of their profits. The situation got worse in 2016, when Exxon ponied up a whopping $3.1 billion in dividends for Q2, against a net income of $1.7 billion, according to S&P Global Market Intelligence. The gap was likely filled by taking on debt. The net debt of the big four oil companies; Exxon Mobil Corp., Royal Dutch Shell PLC, BP PLC, and Chevron Corp, has more than doubled in the last two years. The debt to equity ratio of Exxon is the least at 18 percent, while Shell has the highest gearing of 28 percent, likely to reach 30 percent, according to their Chief Financial Officer Simon Henry. BP is also expected to have a gearing of 30 percent by end 2017, according to Jefferies analyst. For the sake of comparison, in 2012, Exxon’s debt to equity was just 1.2 percent, and Shell’s was only 10 percent; looking back to a decade ago, Exxon had no debt at all.Though the companies are resorting to asset sales, job cuts, and other budget cuts to survive the downturn, many have asked why they continue to dish out dividends to their investors. Globally, more than $9 trillion of government securities yield below zero, according to Bloomberg Barclays index data. In such an environment where investors are scrounging for yields, the big four oil companies offer mouth-watering ones. Exxon has a dividend yield of 3.4 percent, Chevron has a yield of 4.19 percent, BP has a yield of 6.68 percent, and Royal Dutch Shell has a dividend yield of 6.4 percent. This has led the investors to continue holding the stocks of these companies even during such a massive oil rout. If the investors bail and trigger a sell off of these stocks, it would dampen the sentiment towards their stock, and the companies would find it difficult to raise new debt. Hence, taking some debt to continue paying dividends is the smart strategy—and possibly the only strategy—to follow.

Email Dump Exposes Hillary's Secret Love of Fracking - Fracking was invented by the U.S. government and Hillary Clinton loved the energy production process so much, she advocated it worldwide, according to leaked transcripts of speeches made to businessmen.  The disclosure comes after Wikileaks released emails hacked from John Podesta, chairman of the Clinton campaign, on Friday. Despite a fracking ban in her home state of New York, Hillary Clinton told bankers, “I’ve promoted fracking in other places around the world.”Podesta received comments made in past Hillary Clinton speeches flagged as potential liabilities. Parts of those speeches included speeches to big investment banks such as Goldman Sachs. And many of the excerpts betrayed significant conflicts between what Democratic presidential nominee Hillary Clinton says on the campaign trail and what she really believes.Clinton’s support for fracking, or hydraulic fracturing, could cause further consternation among those in her base who enthusiastically supported Vermont Sen. Bernie Sanders during their contentious primary. Standing before Deutsche Bank on April 24, 2013, Clinton not only said she supported fracking — an energy production process hated by left-wing environmentalists — but that the government invented it. "I mean, fracking was developed at the Department of Energy. I mean, the whole idea of how fracking came to be available in the marketplace is because of research done by our government," Clinton said in a paid speech before the bankers. "And I've promoted fracking in other places around the world." The U.S. government is generally not credited with developing hydraulic fracturing to get at trapped natural gas and oil. In lesser forms, the process started in the 1860s, according to John Manfreda, writing for The Department of Energy did help the process along in the 1970s, according to the New York Times. But the modern practice -- made economically feasible, to boot -- was refined by George P. Mitchell. According to the Times, Mitchell's company injected the ground with water, sand and a chemical mixture, rather than more expensive foams and gels, into the wells. The process became viable for gas and made Mitchell rich.

Hillary Clinton Expresses Support For Fracking In Wikileaks Document - -  During the fight for the Democratic presidential nomination, Hillary Clinton cast herself as a skeptic of hydraulic fracturing -- the controversial process to extract natural gas. But newly released documents purporting to show excerpts of her paid speeches show that Clinton proudly touted her support for fracking, which environmental groups say can pollute groundwater and undermine the fight against climate change. The excerpts also show Clinton saying that some environmental organizations trying to restrict her work to promote fracking were front groups for Russian oligarchs. The transparency group Wikileaks published the document as part of what it says is a tranche of emails from John Podesta, Clinton’s campaign chairman. Podesta has refused to say whether the excerpts are authentic but has not denied their authenticity, either. The document published by Wikileaks shows what purports to be an 80-page memo of excerpts of Clinton’s speeches -- which she refused to publicly release during the primary campaign. It appears to be attached to a January 25, 2016 email to Podesta and other Clinton campaign aides.  In one excerpt of a speech to Deutsche Bank in April 2013, according to the document, Clinton boasted about the federal government’s support for fracking and her own work to promote the process across the globe. “Fracking was developed at the Department of Energy,” the document shows Clinton saying. “I mean, the whole idea of how fracking came to be available in the marketplace is because of research done by our government. And I've promoted fracking in other places around the world.” In another excerpt of the same speech, Clinton outlines why she supports a continued push for fracking. “The ability to extract both gas and oil from previously used places that didn't seem to have much more to offer, but now the technology gives us the chance to go in and recover oil and gas,” the document shows her saying. “Or with the new technology known as fracking, we are truly on a path -- and it's not just United States; it's all of North America -- that will be net energy exporters assuming we do it right."

Neither Clinton Nor Trump Opposes Fracking - The Real News Network - (video interview and transcript) Hydraulic-fracturing, the process of using millions of gallons of water, sand, and chemicals to break apart shale rock to extract natural gas. This industry has grown tremendously over the past decade plus. In the year 2000, fracking was 2% of oil output in the US. In 2016, it counts for over half of American oil production. There aren’t definitive numbers of exactly how many active fracking wells there are but the range is somewhere between 300,000 and 1.7 million. There have also been a lot of push and pull around this issue. The oil industry is viciously drilling new wells and seeking to expand into states that have not yet hopped on the fracking boom. The reason why these states haven’t hopped on this boom is in large part due to massive grassroots resistance from groups and every day citizens who voice concerns about the hazardous environmental impacts of releasing massive amounts of methane gas and the contamination of ground water. The EPA under President Barack Obama has been somewhat laissez faire about fracking. Climate change unfortunately has taken a back seat in the presidential election but Hillary Clinton was campaigning in Florida on Monday and here’s what she had to say.  Climate change is real, it’s urgent, and America can take the lead in the world in addressing it, right. We here in America can develop new clean energy solution. We can transform our economy. We can rally the world to cut carbon pollution.   She went on to remind the crowd that Donald Trump is a climate change denier whose said that climate change is a hoax perpetuated by the Chinese to undermine American industry. But is Hillary Clinton all that different in her support of the fossil fuel industry and what does her track record have to say about the future of the US and climate change under a Clinton administration. To discuss these and related topics, we’re joined in studio by one of the leading voices of the environmental movement, Wenonah Hauter is the author of Frackopoly: The Battle for the Future of Energy and the Environment. She’s also the founder and executive director of Food and Water Watch Action Fund, the first national advocacy group to call on a ban on fracking. Wenonah thank you so much for joining us.

Leaked emails show Hillary Clinton blaming Russians for funding 'phony' anti-fracking groups - -- Supporters of hydraulic fracturing have long accused Russia of funding anti-fracking environmental groups, and it turns out Democratic presidential nominee Hillary Clinton agrees.Mrs. Clinton complained about “phony environmental groups” pushing an anti-fracking agenda in a speech to a private audience, according to excerpts leaked Saturday by WikiLeaks after purportedly hacking into the account of Clinton campaign manager John Podesta. The Clinton campaign has refused to comment on the leaked documents while declining to dispute their authenticity. “We were up against Russia pushing oligarchs and others to buy media. We were even up against phony environmental groups, and I’m a big environmentalist, but these were funded by the Russians to stand against any effort, ‘Oh that pipeline, that fracking, that whatever will be a problem for you,’ and a lot of the money supporting that message was coming from Russia,” Mrs. Clinton said in her remarks. She allegedly made the comments at a June 18, 2014, speech sponsored by tinePublic, a Canadian promotional group. Filmmaker Phelim McAleer, who linked Russia to U.S. anti-fracking campaigns in his 2014 documentary FrackNation, said the former Secretary of State’s comments vindicate what he and others have long alleged. “Clinton had access to intelligence reports and briefings. This is a huge story,” Mr. McAleer said in an email. “We at FrackNation are now calling for Hillary Clinton and the State Department to release the names of all anti-fracking organization funded by [Vladimir] Putin’s Russia.” At the same time, the leaked speeches came as another blow to Mrs. Clinton’s tenuous relationship with environmentalists. “Apparently, @HillaryClinton will help clean up world w/ renewable energy—right after she helps poison it w/ fracking,” Mediaite columnist and The Young Turks political reporter Jordan Chariton said in a Sunday tweet.

Hillary's Leaked Speeches Confirm Russia Funded Anti-Fracking Groups -- Democratic nominee Hillary Clinton confirmed to an audience behind closed doors what national security experts have warned about for years — Russians are pumping money into anti-fracking environmental groups.  Clinton told an audience in Edmonton, Canada, hosted by the PR firm tinePublic, that Russian oligarchs were propping up “against phony environmental groups” opposed to pipelines and hydraulic fracturing, according to emails published by WikiLeaks.“We were up against Russia pushing oligarchs and others to buy media,” Clinton said in a June 2014 speech. “We were even up against phony environmental groups, and I’m a big environmentalist, but these were funded by the Russians to stand against any effort, oh that pipeline, that fracking, that whatever will be a problem for you, and a lot of the money supporting that message was coming from Russia,” she said. It’s unclear exactly to whom Clinton was speaking when she made these remarks or if she was referring to U.S.-based environmental groups or just European ones since the full transcript of her speech is unavailable. Clinton’s Edmonton speech was one of five she gave across Canada in 2014 that were sponsored by tinePublic. Edmonton is the capital of Alberta, which is Canada’s largest petroleum-producing province. Conservatives and energy proponents have been concerned for years the anti-fracking movement was being fueled by Russian money. Environmentalists largely oppose fracking on the grounds it makes global warming worse and contaminates groundwater, but defense officials and U.S. conservatives have found Russian fingerprints on anti-fracking campaigns. Eastern European officials have said Russia is backing environmental protesters at potential fracking sites in Romania and Bulgaria. Russia is currently Europe’s main gas supplier.

Fracking is a form of climate-change denial - We need to face the fact that the climate crisis is upon us, and that the greenhouse gases we’ve already emitted have locked in even worse that’s yet to come. The mass deaths in Haiti and the evacuation of 1.5 million people from the Florida coast in the wake of Hurricane Matthew is just the kind of weather-related event that we can expect to happen more frequently in a warmer world.  So what do we need to do? Run and cower in the corner? Accept futile half-measures? No, courage is what the movement fighting climate change and fossil fuels needs most now. Lack of courage by western governments is having devastating consequences, and in the case of America, one of them is fracking. This is the unacceptable “solution” to the climate crisis that the US has been pushing all across the world. The decision by the British government last week to overturn Lancashire’s rejection of fracking shows that the UK, too, seems to be falling for it.  Our movement and our scientists, by contrast, do have the courage to identify what needs to be done. Bill McKibben, founder of, estimates that we have 17 years to replace all fossil fuel infrastructure with renewable energy. That means no new fossil fuel projects. Period. We burn down what we have, and we build renewable energy sources as fast as we can. That means no new pipelines, no new fracking fields, no new offshore drilling, no new tar sands or coal mines. That would mean no new fracking in the US or the UK. You cannot be a climate leader and support fracking: it is a new form of climate denialism. One only has to look at the brave stand people all across the world are taking to fight fossil fuel developments to see the kind of courage our governments lack but that the future will demand. Britain has seen protests in Balcombe in West Sussex, and in Blackpool, while in the US we have had brave pipeline fighters in Nebraska and Standing Rock reservation, North Dakota. The neoliberal promise that we can both prevent catastrophic warming and allow energy companies to get rich extracting and burning more fossil fuels, including shale gas, is a fallacy. We can’t. Yet the US State Department’s shale gas initiative is seeking to expand fracking to other countries, even when their citizens don’t want it. The UK’s Institute of Gas Engineers and Managers, IGEM, cites it as a model for the world, and now Britain is seeking to import its own US-style fracking boom.

5 Climate Activists Shut Down 5 Tar Sands Pipelines -- Activists successfully shut down five pipelines today across the U.S. that deliver tar sands oil from Alberta, Canada. The pipelines targeted were Enbridge line 4 and 67 in Leonard, Minnesota; TransCanada's Keystone pipeline in Walhalla, North Dakota; Spectra Energy's Express pipeline at Coal Banks Landing, Montana; and Kinder-Morgan's Trans-Mountain pipeline in Anacortes, Washington.  In an online statement by #ShutItDown , the group said:   "This morning, by 7:30 PST, 5 activists have successfully shut down 5 pipelines across the United States delivering tar sands oil from Alberta, Canada in support of the call for International Days of Prayer and Action for Standing Rock . Activists employed manual safety valves, calling on President Obama to use emergency powers to keep the pipelines closed and mobilize for the extraordinary shift away from fossil fuels now required to avert catastrophe."  Since then, EcoWatch has learned that police have approached two sites so far and two women have been arrested in Minnesota. The two are Emily Johnston, 50, and retired attorney Annette Klapstein, 64. "For years we've tried the legal, incremental, reasonable methods, and they haven't been enough; without a radical shift in our relationship to Earth, all that we love will disappear," Johnston said. "My fear of that possibility is far greater than my fear of jail. My love for the beauties of this world is far greater than my love of an easy life." Only one activist is at each site, accompanied by a support person and video crew. The groups have been posting and live-streaming on Facebook .

Fracking controversy erupts in UK following approval of shale gas industry request — MercoPress: Horizontal fracking can go ahead, the British government has said, in a landmark ruling for the UK shale gas industry. Communities Secretary Sajid Javid has approved plans for fracking at Cuadrilla's Preston New Road site at Little Plumpton in Lancashire.Environmentalists and local campaign groups reacted angrily, saying it was a denial of local democracy. It means, for the first time, UK shale rock will be fracked horizontally, which is expected to yield more gas. A second site, Roseacre Wood, has not yet been given the green light amid concerns over the impact on the area. Lancashire County Council (LCC) refused permission to extract shale gas at both sites last year on the grounds of noise and traffic impact, but Cuadrilla appealed. In response to the decision, LCC has called on the government to do more to address people's concerns about fracking. “It is clear the government supports the development of a shale gas industry, but I would ask them to do more to address the concerns of local communities and the councilors who represent them by supporting the best environmental controls,” it said. Cuadrilla chief executive Francis Egan said: “We have been through an exhaustive environmental impact assessment on this. We have assessed everything; noise, traffic, water, emissions, etc. ”The Environment Agency are entirely comfortable with it.“

Farmers condemn go-ahead for fracking in Lancashire - Farmers Weekly: Farmers have condemned a government decision to allow shale gas exploration in Lancashire – despite the local county council’s refusal to grant the go-ahead.The government over-ruled Lancashire County Council’s (LCC) refusal to grant permission for exploratory fracking by energy company Cuadrilla on Thursday (6 October).A decision on whether to allow fracking at a second site is expected to be granted following pending a request for further information. Dairy farmer’s son and agricultural engineer Tony Holden said: “This is a very dark day for agriculture and the UK as a whole.”Mr Holden argued Theresa May’s government was effectively making landmark decisions without a mandate from the public. ““This is about turning farms into gas fields and then farming crops, meat and milk on gas land,” he added. If fracking took place, the quality of food produced from farms in the area could be called into question, said Mr Holden. This could undermine food security, he added. By over-ruling the decision of LCC, the government was acting in the interests of an energy company, rather than in the interests of local people.“This is not democracy, it is dictatorship.” Local farmer Robert Sanderson said he too was disappointed at the decision. “I think it is catastrophic,” he told ITV News. Mr Sanderson said he had almost 1,000 head of cattle and their fertility could be jeopardised if there was any contamination.

Ignoring local concerns on fracking will come back to haunt Britain - When a county council in the north of England refused to grant planning permission for a shale gas site back in June 2015, it was hailed as a victory for anti-fracking campaigners and concerned locals. The UK secretary of state for communities and local government, Sajid Javid, has now overruled this decision. Fracking will go ahead in Lancashire after all. The planning authority’s initial position clearly reflected a high level of public concern over the local impacts of the proposed fracking site. But the government’s move sends a clear message: councils who refuse applications not only face the challenge of an appeal, but also the potentially huge cost of defending their decisions in court. This could have big implications for local decision making and everyone affected by proposed fracking sites. However, in the long run, this overruling may actually harm the UK shale industry. My research shows that there is already an extreme deficit of trust in the UK planning system. People view planning authorities and local councils as being under significant policy pressure to allow shale gas exploration. This perception is not unfounded. The government has not only declared its explicit support for shale gas and fracking, but has also actively changed the law on subsurface trespass to facilitate underground drilling.  There’s now a strict time limit, 16 weeks, for fracking-related planning applications. Given that many planning authorities won’t have much experience of dealing with oil and gas developments, this deadline may prevent detailed consideration of local impacts. Such decisions must also be made in accordance with the UK’s national planning framework which explicitly emphasises the economic importance of mineral extraction. But how can fracking decisions be seen as legitimate if local decisions and local concerns are simply vetoed? The overrule is all the more surprising given that last year new wind farm planning guidance stressed that locals should have the final say.

BP Abandons Drilling in the Great Australian Bight -- Conservationists and environmentalists in Australia are celebrating a major victory after the oil giant BP announced that it is abandoning its hugely controversial plans to drill for oil and gas in the Great Australian Bight. The area, which is off the country's southern coast, is a marine park and home to one of the largest breeding populations of endangered southern right whales in the world. BP had big plans for the Bight and had once boasted that the region could be as important to the oil industry as the Gulf of Mexico.  But BP had also been struggling to persuade Australia's regulator, National Offshore Petroleum Safety and Environmental Management Authority, Nopsema, that it could safely drill in the highly ecologically sensitive region. Three times the regulator has knocked back the company, the third being just last month, when it again found BP's environmental plans inadequate.  The company's plans have also long been opposed by the Wilderness Society and other groups. Speaking last year, the Society's South Australia's director Peter Owen said: "The Great Australian Bight is a haven forwhales , boasting the world's most significant southern right whale nursery as well as many humpback, sperm, blue and beak whales." Environmentalists have called on BP to abandon its plans saying that the area could not be put at risk from oil exploitation and that the company could never adequately clean up an oil spill.Today their wish was granted. BP said it was pulling out due to costs and the low oil price.

Jet fuel being bought for blending into diesel for winter spec: traders - Jet fuel is being bought for blending into diesel to improve its cold properties as winter draws closer, European and Russian traders said. Blending was being reported by sources in Northwest Europe, the Mediterranean and Scandinavia, with the current pricing environment and availability of appropriate fuel grades serving to create the situation. Middle distillate margins have been helped recently by a weaker Dated Brent market, with cracks -- the relative value fetched by a product when compared with the input cost of crude -- moving up slightly. Ultra low sulfur diesel cracks are seeing greater support than the rest of the middle distillate complex, which is contributing to the economic favourability of blending jet into diesel.The jet FOB/Dated Brent crack moved to $11.7853/b Thursday, from $11.5852/b Wednesday while the ULSD 10 ppm FOB ARA barge/Dated Brent crack jumped 24 cents/b to $12.0833/b. Blending jet into diesel has helped push up kerosene prices in Russia, traders said. Stocking of diesel with more stringent cold properties was under way, even though current demand was dampened by relatively mild weather, sources said.

It Takes Two - Supplying Mexico's Growing Natural Gas Demand -- There is a natural gas renaissance of sorts happening south of the U.S.-Mexico border. The state-owned Comisión Federal de Electricidad (CFE) is investing heavily in expanding and modernizing its power generation fleet with thousands of megawatts of new, natural gas-fired power plants, and the energy secretary also last October put forth an aggressive five-year plan to build out a pipeline system to supply growing gas-fired generation demand. Mexico’s power generation demand is increasingly a target for U.S. gas producers and pipeline projects. At the same time, as we discuss in Part 2 of RBN’s Miles and Miles of Texas Drill-Down Report published last week, a good portion of this new demand is relying on — and in large part has been driven by — availability of low-priced gas from the U.S. via Texas and the U.S. Southwest states. But there is a lot that needs to happen on both sides of the border over the next few years to facilitate this mutually beneficial relationship. Already since October, Mexico’s newly appointed independent pipeline operator, Centro Nacional de Control del Gas Natural (CENAGAS), has pulled back on the pipeline buildout. Today, we begin a two-part series on how plans to facilitate this new demand are progressing, starting on the Mexico side of things.

Argentina wants to delay, cancel three-four Oct LNG cargoes: sources - Argentina's Enarsa is trying to defer or cancel three to four LNG cargoes due to be delivered in October, after doing the same for up to four cargoes in September, sources told S&P Global Platts Monday. Enarsa awarded contracts for a total of eight October cargoes via tender, with five cargoes scheduled for delivery into the Escobar terminal and three for the terminal at Bahia Blanca. According to cFlow, Platts trade flow software, only one cargo has been delivered to either port. One vessel, the Arctic Voyager, is laden and has been in a holding pattern off the coast of Bahia Blanca for two weeks. The country's reduced appetite for LNG is understood to be driven by warmer-than-expected weather after an Argentinian winter -- which runs between June and August -- that was colder than in the previous three years.Enarsa told Platts on October 4 that warmer weather conditions have caused demand for natural gas to drop considerably, adding that its ability to store LNG was minimal relative to the total volume consumed. According to one London-based analyst: "My view on Argentina is that they overbought for September assuming colder weather, similar to [that of] July and August, but the reality turned out relatively normal and demand is falling fast as it is mainly residential." The tenders for the October cargoes were launched in July and August, when temperatures were below those seen in previous years.

Russian natural gas pipeline exports to Germany, Slovakia hit record high -  The amount of natural gas exported from Russia via the Nord Steam, Yamal, and Brotherhood pipelines combined rose to a record high Monday as gas transit via Ukraine increased, data from Platts Analytics' Eclipse Energy showed Tuesday. Total Russian pipeline gas exports via Nord Stream, Yamal, and Brotherhood hit 360 million cu m Monday, above the previous record high of 357 million cu m from early September and over 15% higher than the 313 million cu m from October 10, 2015.Russian gas transit via Ukraine neared a three-year high in early September of 195 million cu m/d on Nord Stream maintenance, but averaged 136 million cu m/d in August and 102 million cu m/d in July, with Russia attempting to reduce gas transit flows via Ukraine. Indeed, Russian state-owned Gazprom is pressing ahead with plans for both the Nord Stream 2 and TurkStream pipelines, which if realized, would see Russian gas able to bypass Ukraine into Europe. But with these pipelines still several years away from being put into operation and oil-indexed prices competitive with hub pricing this winter, Russia has had to increase reliance on Ukrainian transit to boost flow rates. Flows through the Yamal pipeline are limited to 87 million cu m/d due to the pipeline's capacity, and flows through Nord Stream have been capped at about 120 million cu m/d due to restrictions in place regarding capacity on the OPAL pipeline, with the Brotherhood pipeline currently the swing factor in Russian gas exports. The record daily high has been achieved by an increase in Russian gas transit via the Brotherhood pipeline, taking Russian gas to the Slovakian border via Ukraine, which increased to 153 million cu m on Monday.

Emerging winter demand propels Asian LPG prices to 10-month high - Asian LPG prices shot to a 10-month high of $379.50/mt late Thursday, waking up from a protracted slumber, as robust appetite from China to stockpile for winter and a high-priced deal by oil kingpin Saudi Aramco this week set the stage for firmer prices, market sources said Friday. "[There is] strong demand since winter is coming," said a source with a Chinese company. The price was last higher on January 4, the first trading day of the year, at $385/mt, data from S&P Global Platts showed. Chinese buyers such as Ouhua Energy, Star Gas, Oriental Energy and Tianjin Bohai have bought end October to early November arrival cargoes of propane and butane since late September.Exact price details were sketchy but traders said some clips were done at Far East Index plus $1-$3/mt on a delivered basis. Tianjin Bohai earlier this week bought an early November-arrival cargo from Turkish trader Bayegan. The cargo was heard to be an evenly-split 44,000 mt parcel. Price details were not available. The physical CFR Singapore-Japan propane price climbed $3.50/mt day on day Thursday -- bucking a $1.07/b ($8.56/mt) slump in the crude complex -- to be assessed at $379.50/mt. The front month contango structure in Far East Index swaps has largely flattened out, while the CP swap structure has flipped into backwardation.

OPEC production cut: Just another Saudi head fake? - What do you do when everyone is bugging you to do something, but you don't want to do it? The simple answer is that you make it look like you are doing something in order to get others off your back. It is not always easy to tell what people's intentions are. But we can look at what they have done in the past. The main thing that the Kingdom of Saudi Arabia has done over the past year in response to pressure from other OPEC members is talk about steps it would take to raise oil prices. But in the end the kingdom doesn't actually do them, or it does things which have no practical significance. (Saudi Arabia, the world's largest exporter, is the OPEC member with the greatest flexibility in its production. Any OPEC production cut without Saudi leadership would lack credibility.) We should keep all this in mind when evaluating the latest reports that OPEC has agreed to cuts. Bloomberg tells us right up front that OPEC has merely agreed to the "outline of a deal" that will be taken up at its November meeting. One of Saudi Arabia's partners in its yearlong public talkfest has been Russia, the number one or number two oil producer in the world depending on what month it is. The Russians said in early October 2015 that they were ready to discuss oil prices with OPEC. Later that month it was leaked that the Russians had no intention of cutting their own production. In late January of this year, the oil price catapulted after Russia's energy minister said he was "ready to meet with OPEC and Saudi Arabia to discuss a production cut," the Financial Times reported. When the Russians did meet with Saudi Arabia and also with representatives from Qatar and Venezuela in late February, the group proposed a freeze in production, but no production cut. Only the uninitiated may be forgiven for not understanding that a freeze would change nothing. Oil production would simply continue at the current level, hardly a strategy to achieve higher prices. In early March the Russians announced that their oil companies agreed to a freeze in production. In late March the Saudis announced that they, too, would be freezing production even if Iran would not commit to a similar freeze. The Iranians, of course, have been keen to get back into the export market in a major way after having been crippled by trade sanctions for years, sanctions which have been lifted in the wake of an international agreement governing Iran's nuclear program.The stated intention of the Saudis and the Russians was to raise oil prices. But, given that the practical effect on production was zero, they must have had some other method in mind. One possibility is that they have been working together simply to jawbone the price of oil higher without having to reduce production. If that's the case, it seems to have worked reasonably well as all the announcements of meetings and rumors about what might happen at those meetings seem to have coincided roughly with a rising price.

OPEC action should not shock rebalancing oil market: Saudi energy minister - Saudi energy minister Khalid al-Falih said Monday an agreement among OPEC members outlined last month should not shock the market and a "very gentle hand on the wheel" was needed as global supply and demand was already converging. Speaking at the World Energy Congress in Istanbul, Falih said he was "optimistic" the details of last month's preliminary agreement in Algiers would be pinned down when OPEC holds its regular meeting in Vienna in November. Several OPEC ministers are expected to meet here this week, with Russian energy minister Alexander Novak also due in Istanbul.Falih reiterated comments earlier in the year that an increase in oil prices to $60/b was "not unthinkable," while insisting that prices were not the over-riding consideration. However his comments on the need for caution by OPEC may fuel suggestions that Saudi Arabia is reluctant to deviate greatly from the policy it adopted in 2014 of tolerating low prices and seeking to maintain market share. "OPEC needs to make sure that we don't crimp too tightly and create a shock to the market. We don't want to give the market the opposite signal and shock markets into prices that could be harmful," he said. Falih added that market conditions had changed since OPEC made its decision in late-2014 not to intervene in the market to support prices -- a time, he said, when booming US shale production was causing a divergence in the market. "It's a very gentle hand on the wheel and we're not doing anything dramatic, different. I think the market forces have shifted significantly between 2014 and now," he said.

Post-Algiers prospects: What's really at stake when OPEC meets again in November? - Capitol Crude podcast: This week’s episode of Capitol Crude looks at the fallout from OPEC’s Algiers meeting and the prospects for rebalancing global oil supply and demand. Platts senior editors Meghan Gordon and Brian Scheid talk to former Capitol Crude co-host Herman Wang about his time chasing oil ministers in Algiers and what’s at stake when the group meets again in November. Veteran OPEC watcher Bob McNally of The Rapidan Group lays out some longer-term rebalancing scenarios, and Platts Global Editorial Director Dave Ernsberger considers the possibility of peak demand.

Putin Says Russia Ready to Join OPEC Effort to Limit Oil Supply - Bloomberg: Russia, the world’s largest energy exporter, is ready to join OPEC in limiting oil production with either a freeze or a cut, said President Vladimir Putin. “Russia is ready to join in joint measures to limit output and calls on other oil exporters to do the same,” Putin said on Monday at the World Energy Congress in Istanbul. “In the current situation, we think that a freeze or even a cut in oil production is probably the only proper decision to preserve stability in the global energy market.”Ministers from some of the largest oil-producing nations are gathering in Turkey this week to discuss ways to end a two-year supply glut. With benchmark Brent crude trading at about $52 a barrel -- less than half its price in mid-2014 -- countries from Saudi Arabia to Russia remain under severe economic pressure. Last month in Algiers, the Organization of Petroleum Exporting Countries reversed its policy of pumping without constraints, helping boost prices. Even so, a lot of work needs to be done by the next OPEC meeting on Nov. 30, with crucial details still to be resolved on how the burden of cuts will be shared, or whether producers outside the group will cooperate. Russia would prefer to freeze its output at current levels rather than make reductions, Energy Minister Alexander Novak said earlier Monday in Istanbul. Russia has pumped 11.2 million barrels a day of oil so far in October, beating a post-Soviet record, according to preliminary data from the Energy Ministry’s CDU-TEK unit. November Meeting Putin said he hoped OPEC would agree in November on limits to its crude production and that Russia was ready to back such a decision, while remaining a reliable energy supplier. “We support OPEC’s recent initiative to cap output and think that at the OPEC meeting in November this idea will materialize in a specific agreement, giving a positive signal to the markets and investors,” Putin said. Brent crude climbed as much as 1.7 percent to $52.80 a barrel Monday amid signs that Russia and Saudi Arabia could be moving closer to a supply agreement. The international benchmark has gained 15 percent since OPEC agreed last month on the first supply curbs in eight years.

Oil Spikes Above $50 As Russia, Saudis Hint At Output Freeze... Again -- Oil prices are rebounding from their Friday drop as first the Saudis, then Russia dropped more hints at the potential for maybe, possibly, kinda, sorta considering an output freeze... As Bloomberg reports, Russia, the world’s largest energy exporter, is willing to consider freezing or even cutting oil output in cooperation with OPEC, said President Vladimir Putin.Speaking at the World Energy Congress in Istanbul Monday, Putin said he hoped OPEC would agree on limits to its crude production in November and that Russia was ready to support that decision. Russia will continue to be a reliable energy supplier, he said.Ministers from some of the largest oil-producing nations are gathering in Turkey this week to discuss ways to end a two-year supply glut. With benchmark Brent crude trading at about $52 a barrel -- less than half its price in mid-2014 -- countries from Saudi Arabia to Russia remain under severe economic pressure. Last month in Algiers, the Organization of Petroleum Exporting Countries reversed its policy of pumping without constraints, helping boost prices.“It is not unthinkable that we could see $60 by year-end” following the agreement in the Algerian capital, Saudi Arabia’s Minister of Energy and Industry Khalid Al-Falih said in Istanbul.Even so, a lot of work needs to be done by the next OPEC meeting on Nov. 30, with crucial details still to be resolved on how the burden of cuts will be shared, or whether producers outside the group including will cooperate. Russia would prefer to freeze its output at current record levels rather than make cuts, Energy Minister Alexander Novak said earlier Monday.Russia has pumped 11.2 million barrels a day of oil so far in October, beating last month’s post-Soviet record of 11.1 million, according to preliminary data from the Energy Ministry’s CDU-TEK unit.

"Verbal Stimulus" Sends Oil To 1-Year Highs... Now What? --Thanks to the miracle of "verbal stimulus" oil prices have recovered to their highest since July 2015... As UPI's Daniel Graeber explains, Crude oil prices erased a pronounced slump in early Monday trading after Russia signaled it would join a production agreement reached last month in Algeria.Oil prices traded in the red overnight in a carry-over from Friday's slump. A long rally in oil prices faltered last week amid sluggish growth in the U.S. labor sector. Wage growth was slightly better than inflation over the last year, though the U.S. Labor Department said employment gains were worse than last year.Crude oil prices are up more $5 per barrel, or around 15 percent, since members of the Organization of Petroleum Exporting Countries agreed in late September to work toward a goal of capping production levels at between 32.5 million and 33 million barrels per day.Friday's downturn was supported in part by data from Baker Hughes that show an increase in activity in exploration and production in North America. The increase in North American oil production helped drag oil from $100 per barrel in 2014 to lower than $30 per barrel this year as markets moved in favor of the supply side. Exploration and production activity has yet to translate to real gains in output, however.Monday's rally was supported in part by Russia moving in support of the production agreement reached last month in Algeria. Russia is already producing oil at record-setting levels, though the Algerian proposal has given the market confidence that oil prices won't drop below $30 per barrel again anytime soon. The price for Brent crude oil moved up 0.3 percent to start the trading day at $52.66 per barrel. West Texas Intermediate, the U.S. benchmark for oil prices, gained 0.2 percent to open at $50.54 per barrel.

Libya Starts Expanding Oil Exports — for Now, at Least - Little more than a week after the OPEC cartel moved to reduce oil supplies on the glutted global market, embattled Libya has reopened a major seaport terminal for oil exports and has announced that it intends to expand production through the rest of the year.The expansion, if successful — some experts have doubts — would effectively cancel out much of the cuts recently agreed to by Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries.The successful loading of a tanker on Thursday was the first time this year that oil has been dispatched from an oil terminal in Zueitina, Libya. The cargo of 800,000 barrels, destined for China, is viewed by energy experts as a tentative sign that Libya may finally be ready to return to the world market.Although Libya has Africa’s largest oil reserves, the country has been unable to export more than a trickle for most of the last five years because of the revolution that overthrew Col. Muammar el-Qaddafi in 2011 and the civil war among competing militias that has continued since.The renewed Libyan exports and plans to expand production were made possible by the Libyan National Army, the militia that took control of Zueitina and two other major ports last month.AdvertisementContinue reading the main story Libya, as well as Iran and Nigeria, were exempted by the other 11 members of OPEC when they agreed on Sept. 28 to the general outlines of a cut of up to 700,000 barrels from the cartel’s current daily production level of just over 33 million barrels

OPEC says it pumped 33.39 mil b/d in Sep, up 220,100 b/d from Aug - OPEC's two largest oil producers Saudi Arabia and Iraq told the oil producer group that their production continued to be at elevated levels, helping the organization's output to rise sharply in September, according to OPEC's monthly oil market report Wednesday. Two weeks ago OPEC surprised the market by provisionally agreeing to rein in production to between 32.5 million and 33 million b/d with the aim of reversing the fall in oil prices. OPEC's 14 members collectively pumped 33.39 million b/d in September, a jump of 220,100 b/d from 33.17 million b/d in August, the report showed. The oil producer group made marginal changes in its supply and demand forecast for 2016 but said it expected new production from Russia to increase the non-OPEC supply growth forecast for next year. With regards to the US, it said total liquids production in the country would "marginally" pick up towards the third quarter of next year but that it would still decline year on year. Output from top producer Saudi Arabia is estimated to have fallen to 10.491 million b/d in September from 10.578 million b/d in August, according to figures published by the oil producer group in its October market report. The Vienna-headquartered group officially uses secondary sources to monitor its crude production but also publishes a table of production figures submitted directly by member countries. Saudi Arabia told OPEC it produced 10.65 million b/d in September, up by 20,000 b/d from the August level.

A Strange "Production Cut" - OPEC Oil Output Hits Record High As Rosneft Says "No" To Production Cap -- Something odd happened on the way to the recently "agreed upon" OPEC production cut: instead of cutting production, OPEC countries have seen their oil output surge, and according to an IEA reported released today, the oil producing countries pumped oil at record-high volume last month, while officials from three member countries, those exempt from the "deal", said they plan to raise output even more in the near future. OPEC increased output by 160,000 barrels a day to a record 33.64 million barrels a day in September, the IEA said, a rather stark departure from last month's Algiers agreement where most OPEC members agreed to bring output down to a maximum of 33 million barrels a day. The increased production shows, among other things, not only just how farcical the recent oil surge has been on the back of expectations that somehow OPEC will actually not only agree on lower production quotas and more importantly comply with then, but also how much work OPEC must do to achieve production cuts it agreed to last month in an attempt to end a crude glut that has depressed prices for two years.  “Now the real work starts,” the IEA, which advises industrialized nations on energy policy, wrote in its monthly report. The market—if left to its own devices—may remain in oversupply through the first half of next year, it said.The work will be even more difficult as a result of the deal exemption granted to Libya, Iran and Nigeria, who are now scrambling to capture as much market share as possible before the OPEC deal is effected, if ever. As the WSJ reports, last month, production from Iran, Libya and Nigeria increased by a collective 120,000 barrels a day over August levels, the IEA said. In the near term, officials from those countries say they aim to boost daily production by another 580,000 barrels or so—an amount about equal to the total volume OPEC said it would cut. Further increases from those countries “would suggest that bigger cuts would have to be made by others, such as Saudi Arabia,” the IEA said. Saudi Arabia, OPEC’s largest producer, saw output fall by about 20,000 barrels a day to 10.58 million barrels a day from August to September, the IEA said.

Rising OPEC Oil Output Shows Challenge of Curbing Production —OPEC pumped oil at record-high volume last month, the International Energy Agency said Tuesday, and officials from three of its member countries say they plan to raise output in the near future. The increased production shows how much work the Organization of the Petroleum Exporting Countries must do to achieve production cuts it agreed to last month in an attempt to end a crude glut that has depressed prices for two years.  But the agreement exempted Libya, Iran and Nigeria, OPEC members with recent oil-industry troubles, from any near-term cuts. Now they are presenting a challenge by boosting output at a time when the cartel wants to collectively pull back.Last month, production from Iran, Libya and Nigeria increased by a collective 120,000 barrels a day over August levels, the IEA said. In the near term, officials from those countries say they aim to boost daily production by another 580,000 barrels or so—an amount about equal to the total volume OPEC said it would cut.Further increases from those countries "would suggest that bigger cuts would have to be made by others, such as Saudi Arabia," the IEA said. Saudi Arabia, OPEC's largest producer, saw output fall by about 20,000 barrels a day to 10.58 million barrels a day from August to September, the IEA said.  Rising production in Libya, Nigeria and Iraq is due to a convergence of disparate factors. In Libya, years of fighting that blocked oil ports ended recently when a militia took control of key export facilities and agreed to restart shipments. The government also plans to link long-dormant oil fields to a new export pipeline. Libyan officials say the country's production could rise from 300,000 barrels a day in August—the baseline that OPEC used in calculating its proposed production cap—to 700,000 barrels a day.After years of depressed oil production under the weight of Western sanctions, Iran is slowly ramping up its exports now that those penalties are lifted.Nigeria, where oil thieves and rebel groups have sabotaged oil facilities, is adding up to 200,000 barrels a day after it repaired a key pipeline that had been damaged and was out of commission for months. Another challenge for OPEC is dealing with Iraq, which has protested the data OPEC is using to calculate production. Iraq says the independent analysis firms OPEC relies on understate Iran's recent production and could result in the country being forced to adopt an unfairly low cap. The IEA said Iraq increased output by 90,000 barrels a day last month over the previous month.

IEA Pours Cold Water On Oil Price Rally - Just as oil prices really started to pick up steam, the IEA had to spoil the party. The Paris-based energy agency said on Tuesday that the oil market will remain in a state of oversupply through the first half of 2017, and in fact, there are some worrying signs for oil prices in the near-term. The IEA lowered its oil demand forecast once again, dropping demand growth for 2016 to 1.2 million barrels per day. In September it expected growth of 1.3 mb/d, which in turn was down from the 1.4 mb/d estimate in August. Two consecutive months of downgrades to its demand figures come as the agency sees “vanishing OECD growth and a marked deceleration in China.” The development is all the more surprising because low fuel prices were expected to stoke demand. That did happen in the early phase of the current oil price downturn – in the third quarter of 2015 demand grew at its fastest rate in five years at 2.5 mb/d, as motorists and industry around the world burned through cheap fuel. But demand growth has screeched to a halt, largely due to a slowdown in China. The third quarter of 2016 saw crude oil demand grow at a four-year low of 0.8 mb/d on an annualized basis. Slowing demand is a major problem for oil prices, particularly because the OPEC-fueled rally may not have a lot more room to run. Oil prices are up roughly 15 percent since OPEC said that it would cut production by 200,000 to 700,000 barrels per day. But the IEA warned that ongoing production gains from other OPEC members could more than offset those cuts. In September, OPEC’s collective output rose to 33.64 mb/d, an all-time record. Iraq added 90,000 barrels per day; Libya added about 70,000 bpd; Nigeria brought back 20,000 bpd; Iran added a modest 30,000 bpd. Much more oil could be forthcoming from some of those nations, particularly Nigeria and Libya, if damaged infrastructure can be repaired and brought back online.

Global crude oil stocks draw may have hit five-year high in Q3: IEA -  Global crude stocks may have fallen by almost 700,000 b/d during the third quarter, the first significant decline since mid-2011, if demand from ongoing Chinese stockbuilds is factored into market balances, the International Energy Agency said Tuesday. China has been filling its strategic crude stocks at higher than previous rates since oil prices fell in late 2014 and the stock building has accelerated this year, according to figures implied from official import and refining throughput data.Even Chinese commercial crude stocks grew by 9.2 million barrels in August, the largest month-on-month rise recorded since early 2015, the IEA said. Excluding demand from implied Chinese stockbuilding, the global crude market would have been almost balanced during the third quarter of 2016, the IEA said. But including the implied stockbuild in China, world crude stocks have drawn at a rate close to 700,000 b/d, the IEA said. "The extent and duration of Chinese reserves filling may prove to be the biggest uncertainty," the IEA said. "While still an inventory build, these barrels are effectively neutralized from the market, for an emergency situation, hence can be effectively added on the demand side." China's strategic stocks may have grown by an average 700,000 b/d during the first half of the year taking into account official data and likely undeclared demand from Chinese independent refiners, the IEA said in its latest oil market report.

Not ‘unthinkable’ for oil to hit $60 this year, says Saudi energy minister - Saudi Arabia’s energy minister Khalid al-Falih said that he was optimistic major oil producers could agree to cut production by November and that it wasn’t “unthinkable” that crude prices could rise another 20% this year to $60 a barrel. The minister’s words confirmed a decisive shift in policy by the Organization of the Petroleum Exporting Countries toward a return to market intervention—a role the oil cartel seemed to abandon two years ago when it refused to step in to prop up sinking prices. A production cut is meant to reorder the supply and demand landscape and push prices up during a historic market slump. “I think the role of responsible producers around the world, and Saudi Arabia considers itself to be the leading one, is to try to balance supply and demand in a very responsible way,” Falih told a conference in Istanbul this week that has become a meeting point for major oil producers to try to hammer out a tentative agreement to reduce output. It follows an agreement in principle reached in Algiers last month. Significant questions remain over the deal, including how much each country will cut and when. OPEC members Iran, Libya and Nigeria—where there have been significant oil-production disruptions—are exempt from cutting output, further clouding the deal’s effectiveness. Falih said accommodating these members and managing uncertainties over the supply and demand balance in the market is the reason OPEC has set itself a range for its production volume rather than a hard target. He warned that the producer group must remain flexible to avoid a supply shock as the market tightens.

OPEC must enact cuts for sustained oil price rise, IEA says (AP) — The International Energy Agency is urging OPEC countries to swiftly deliver on promised production cuts if they want to see a sustained increase in oil prices that will also help shore up their economies. In its monthly report Tuesday, the global watchdog said production from the Organization of the Petroleum Exporting Countries hit a record high in September of 33.64 million barrels a day. Iraq produced more oil than ever, while Libya reopened oil ports. Further boosting global supply levels is the fact that production in non-OPEC member Russia hit a post-Soviet record. While supply is running high, the IEA said demand is slowing along with the global economy — a combination that could pressure oil prices. The IEA forecast that the market will remain oversupplied through mid-2017 if OPEC doesn’t enact last month’s pledge in Algeria to cut supply to between 32.5 and 33 million barrels per day. “OPEC has abandoned its free-market policy set in train nearly two years ago. Global oil inventories are far too high — in the view of some producers – and they aren’t being worked off nearly fast enough,” the IEA said. “The current price of oil has caused discomfort for all producers.” At last month’s meeting, OPEC countries said the specific details of the overall production cut would be ironed out at a meeting in Vienna Nov. 30. Timelines and country-by-country breakdowns have still to be worked out, though Iran, Libya and Nigeria may be exempt from the cuts for various reasons. “Now the real work starts,” the IEA said. It’s also unclear how much non-OPEC members, notably Russia, are willing to play along. Russian President Vladimir Putin intimated at a meeting in Istanbul on Monday that Russia was ready to support OPEC, which further buoyed oil prices.

Why energy prices are ultimately headed lower; what the IMF missed - Gail Tverberg  - We have been hearing a great deal about IMF concerns recently, after the release of its October 2016 World Economic Outlook and its Annual Meeting October 7-9. The concerns mentioned include the following:

  • Too much growth in debt, with China particularly mentioned as a problem
  • World economic growth seems to have slowed on a long-term basis
  • Central bank intervention required to produce artificially low interest rates, to produce even this low growth
  • Global international trade is no longer growing rapidly
  • Economic stagnation could lead to protectionist calls

These issues are very much related to issues that I have been writing about:

  • It takes energy to make goods and services.
  • It takes an increasing amount of energy consumption to create a growing amount of goods and services–in other words, growing GDP.
  • This energy must be inexpensive, if it is to operate in the historical way: the economy produces good productivity growth; this productivity growth translates to wage growth; and debt levels can stay within reasonable bounds as growth occurs.
  • We can’t keep producing cheap energy because what “runs out” is cheap-to-extract energy. We extract this cheap-to-extract energy first, forcing us to move on to expensive-to-extract energy.
  • Eventually, we run into the problem of energy prices falling below the cost of production because of affordability issues. The wages of non-elite workers don’t keep up with the rising cost of extraction.
  • Governments can try to cover up the problem with more debt at ever-lower interest rates, but eventually this doesn’t work either.
  • Instead of producing higher commodity prices, the system tends to produce asset bubbles.
  • Eventually, the system must collapse due to growing inefficiencies of the system. The result is likely to look much like a “Minsky Moment,” with a collapse in asset prices.
  • The collapse in assets prices will lead to debt defaults, bank failures, and a lack of new loans. With fewer new loans, there will be a further decrease in demand. As a result, energy and other commodity prices can be expected to fall to new lows.

Let me explain a few of these issues.

OPEC points to larger 2017 oil surplus despite deal to cut | Reuters: OPEC reported a increase in its oil production in September to the highest in at least eight years and raised its forecast for 2017 non-OPEC supply growth, pointing to a larger surplus next year despite the group's deal to cut output. The Organization of the Petroleum Exporting Countries pumped 33.39 million barrels per day (bpd) last month, according to figures OPEC collects from secondary sources, up 220,000 bpd from August, OPEC said in a monthly report on Wednesday. The figures underline OPEC's challenge in seeking to restrain supplies for the first time since 2008 to curb a persistent supply glut and prop up prices. Oil is trading near $53 a barrel LCOc1, less than half the price hit in mid-2014. "Inventories stand near all-time highs worldwide," OPEC said in the report. "Although in recent weeks these high levels have been slightly drawn down." To speed up a rebalancing of the market, OPEC agreed at a meeting in Algeria on Sept. 28 to cut supply to between 32.50 million bpd and 33.0 million bpd. The group hopes to finalize details, including how much each of the its 14 members can pump, at a meeting in November. The report showed the supply boost in September mostly came from Libya and Nigeria, which are restoring output after disruptions, and from Iraq, which has questioned the accuracy of OPEC's secondary-source figures. OPEC uses two sets of figures to monitor its output: figures provided by each country, and secondary sources which include industry media. The reason why two sets of figures are used is because of past disputes over how much countries were really pumping. Iraq told OPEC it produced 4.775 million bpd in September, while the secondary sources put output at 4.455 million bpd. Baghdad has taken issue with the gap between the two sets of figures. Iraqi Oil Minister Jabar Ali al-Luaibi called a separate briefing on the day of the Algeria meeting to complain about the gap. Crude Tumbles After OPEC Raises Doubts Over Cut Timing -- Just when everyone thought "oil" was "fixed" the meeting ends and OPEC secretary-general drops this little tape-bomb - We haven’t decided yet whether OPEC and non-OPEC would make cuts at the same time, or OPEC would move first, Secretary-General Mohammed Barkindo tells reporters in Istanbul. And WTI slumps...

Even More OPEC Confusion: Unclear Who Cuts First, If Anyone, As Production Hits New Record High -- Following yesterday's latest IEA report which showed that OPEC production had hit an all time high, this morning OPEC released its own estimate of production by OPEC member nations for September and, not surprisingly, the latest report showed that in the month OPEC was supposed to be set on "cutting" production, the 14-nation group produced a whopping 33.39 million b/d crude in Sept., up 220k b/d from August.  While Saudi Arabia showed the largest decline of 88K to 19.49mmbpd, other members promptly ate up the Saudi market share which as recently as last month hit a record. To wit

  • Iraq +105k, 4.46m
  • Nigeria +95k, 1.52m
  • Libya +93k, 363k (an increase of 34%)

Even more notable is what we touched upon last month after the Algiers deal was announced, namely that Venezuela and Iraq oil output may be underestimated by as much as 565k b/d for Sept., according to secondary sources cited in OPEC’s monthly oil market report.

  • Venezuela reported crude output of 2.33m b/d in Sept. to OPEC, 245k more than secondary source estimates
  • Iraq reports 4.78m b/d in Sept., 320k above secondary source estimates
  • Secondary source estimates also lower for 5 other OPEC members; higher for members Angola, Nigeria, Qatar.

Recall that OPEC "agreed" to cut total output to 32.5m-33m b/d as part of agreement to steady oil markets, however both Iraq, Venezuela have disputed secondary sources. This means that if OPEC agrees with the country's own source data, the cartel will need to cut as much as 565k more, an output cut which would have to come out of Saudi production.

Oil Slides After API Reports Biggest Crude Inventory Build In Six Months - Not even the combination of OPEC and Russia talk can keep oil prices up after this week’s American Petroleum Institute report, released Wednesday, which showed a 2.7 million build – the first increase in U.S. supplies in six weeks and the largest single inventory increase in the last six months.  Experts had expected a large build of 2 million in crude oil for this week—but 2.7 million exceeded even this pessimistic figure, and the already unsteady markets appear rattled. The large build report caused a notable weakness in West Texas Intermediate prices, which were trading down 1.46% at $50.05 after the data was released, with Brent down 1.26% at $51.75.This build will either be confirmed or denied by the U.S. Energy Information Administration (EIA) report to be released tomorrow—a day later than normally scheduled due to this week’s holiday schedule.API also reported a gasoline build of 688,000 barrels, in sharp contrast to analyst experts’ anticipated 900,000-barrel draw.Distillate supplies declined by more than 4.5 million barrels, marking the third straight week of draws in that type of fuel. The distillate withdrawals were particularly high last week – the highest since October 2014 - due to the effects of Hurricane Matthew.Oil supplies at the Cushing, Oklahoma, facility saw a 1.35 million-barrel dive, as opposed to the 100,000-barrel build that analysts anticipated. Crude oil inventories in the U.S. reached 499.7 million barrels in the week ending on September 30, the EIA reported last week, down by 3 million barrels from the previous week.

Oil price gains limited by higher OPEC output, U.S. crude stocks | Reuters: The price of crude oil climbed on Thursday, gaining support from record Chinese imports, but gains were limited after OPEC said its production had risen to the highest level in at least eight years and following reports of an increase in U.S. crude stocks. Brent crude futures LCOc1 were trading at $51.91 per barrel at 1037 GMT, up 10 cents from their previous close. U.S. West Texas Intermediate (WTI) crude was up 3 cents, at $50.21 per barrel. Traders said oil markets had come under pressure after the Organization of the Petroleum Exporting Countries (OPEC) reported a rise in output. "Crude responded predictably, with both Brent and WTI falling," said Jeffrey Halley of brokerage OANDA. OPEC on Wednesday reported its oil production climbed in September to an eight-year high of 33.39 million barrels per day. It also raised its forecast for 2017 non-OPEC supply growth, pointing to a larger surplus next year despite the group's decision to limit output. But some investors see the OPEC plan to curb output as a reason to take a bullish stance on the prospects for crude prices. "In 2014 the big opportunity was in prices going down and now the big opportunity is in prices going up. That’s the way I see it," hedge fund manager Pierre Andurand told the Reuters Commodities Summit. He added that OPEC's decision in Algiers to limit its overall output to 32.5-33 million bpd "takes off a large wild card from the oil markets for 2017."

Oil Prices Extremely Volatile After Massive Crude Build | The Energy Information Administration tipped markets towards bear territory when it reported that U.S. crude oil inventories had jumped by 4.9 million barrels in the week to October 7. The total of 474 million barrels remains higher than the average for this time of year. Yesterday, the American Petroleum Institute was the first to spread oil doom and gloom by estimating that crude inventories had gone up by 2.7 million barrels in the same week. This immediately weighed on international oil prices, as it came amid a temporary pause to the news flow about OPEC and Russia’s freeze plans. It also suggested that inventories may be building for the first time in the last six weeks. Analysts polled by media had expected an increase of 2 million barrels in crude oil stockpiles, along with a 900,000-barrel decline in gasoline inventories. Last week, the EIA reported a 3-million-barrel draw after API estimated a draw of 7.6 million barrels the day prior. According to the EIA, gasoline inventories last week fell by 1.9 million barrels, with refineries producing an average 9.9 million barrels a day. The rate of crude oil processing stood at 15.6 million barrels, down 480,000 bpd from the previous week, with the facilities operating at 85.5 percent of available capacity. The EIA’s latest report will push downward already volatile international prices, especially after the excitement started to wane about Russia joining the OPEC freeze after temporarily pushing Brent above US$53 a barrel. Markets are more than likely to remain excessively volatile until the end of November, when OPEC will meet to make a final decision on the output cap. At the time of writing, Brent crude was trading down 1.29% at US$51.14 a barrel, while West Texas Intermediate traded down 1.3% at US$49.53 a barrel.

WTI Plunges Below $50 On Biggest Inventory Build In 6 Months --Following last night's bigger than expected build from API, DOE reports an even bigger (4.85 mm barrel) build - the biggest since April (and first build in six weeks). Cushing, Gasoline, and Distillates saw bigger than expected draws (likely presured by Hurricane effects). While Production dropped very modestly on the week, WTI plunged off early high back below $50. DOE:

  • Crude +4.85mm (+2mm exp)
  • Cushing -1.318mm (+100k exp)
  • Gasoline -1.907mm (-900k exp)
  • Distillates -3.746mm

US Crude inventories rose for the first time in six weeks with the biggest build in 6 months...

Oil ends up; refined products draw offset U.S. crude build | Reuters: Oil prices settled up on Thursday after a U.S. government report showing hefty draws in diesel and gasoline offset the first crude inventory build in six weeks. Crude prices fell initially when the U.S. Energy Information Administration (EIA) said crude stocks swelled 4.9 million barrels in the week ended Oct. 7. It was the first crude build since the end of August and was far above a 700,000-barrel rise forecast by analysts in a Reuters poll. [EIA/S] Prices bounced back as the market turned its attention to product inventory drawdowns in the same EIA data. The EIA reported a drop of 3.7 million barrels for distillates, which include diesel and heating oil, and 1.9 million barrels decline for gasoline. Analysts had expected distillates to draw by just 1.6 million barrels and gasoline to decline by 1.5 million. Brent crude LCOc1 settled up 22 cents, or 0.4 percent, at $52.03 per barrel. U.S. crude CLc1 ended up 26 cents, or 0.5 percent, at $50.44. "There is a lot of seasonality in this data," Scott Shelton, energy futures broker at ICAP in Durham, North Carolina, said, referring to the EIA inventory report. Shelton said crude builds were common this time of year as U.S. refineries headed into maintenance. The rise in crude imports by 110,000 barrels per day (bpd) last week was also "marginal" and "hard to get too excited about if you were bearish", he argued. John Kilduff, partner at New York energy hedge fund Again Capital, said that while more crude builds were likely in the coming weeks due to depressed refinery runs, "the declines in distillate fuels, of late, are starting to add up".

OilPrice Intelligence Report: Oil Hits Ceiling At $50 Per Barrel - Crude oil is set to close out the week not much different from where it started, seesawing a bit along the way. Oil prices sank on EIA data showing rising crude inventories – the first increase in six week – but that was offset by a large drawdown in refined product stocks. “It could simply be the fact that selling couldn’t sustain itself below $50,” Mark Anderle, director of supply and trading at TAC Energy, told the WSJ in an interview. “Clearly to me this says the bulls are still in charge.” Oil prices are looking for some direction with conflicting data emerging this week.  The Bakken continues to feel the effects of low oil prices. New data shows that North Dakota’s oil production dipped below 1 million barrels per day for the first time in more than two years. Output fell to 981,000 bpd in August, down from a peak of over 1.2 mb/d in December 2014. The Bakken has seen drilling vanish and companies decamp to more profitable plays such as the Permian in West Texas. "It does send a signal to the world markets that U.S. producers are serious about reducing activity, reducing costs, reducing production and I think that should help support the recent price increase we saw," Lynn Helms, director of state’s Department of Mineral Resources, told reporters.   The flurry of drilling in the Permian basin is leading to an increase in the volume of associated natural gas produced. Gas production has topped 7 billion cubic feet per day, according to Bloomberg Intelligence, equivalent to about 8 percent of U.S. supply. Natural gas markets are growing tighter in the U.S. as demand rises and drilling slows (in most places), but the Permian remains as one region where gas output is expected to climb in the near-term. As such, it could be one of the few downside risks to natural gas prices. Nevertheless, Henry Hub is up to $3.30 per MMBtu as overall supply in the U.S. falls.   The EIA says that energy-related emissions in the U.S. in the first half of 2016 have declined to their lowest levels since 1991, due to mild weather and a cleaner energy mix. A warm winter led to weak demand for electricity, and renewable energy and energy efficiency continue to eat into the market share for fossil fuels, particularly for coal. But the upcoming winter is expected to be colder, which could lead to higher emissions, and as the EIA noted in a separate report, higher natural gas prices and more expensive electricity. 

US Rig Count up 15 This Week to 539; Louisiana Gains 6 - ABC News: The number of rigs exploring for oil and natural gas in the U.S. increased by 15 this week to 539. A year ago, 787 rigs were active. Depressed energy prices have sharply curtailed oil and gas exploration. Houston oilfield services company Baker Hughes Inc. said Friday that 432 rigs sought oil and 105 explored for natural gas this week. Two were listed as miscellaneous. Among major oil- and gas-producing states, Louisiana gained six rigs, New Mexico and Oklahoma increased by three each, Colorado was up two and Alaska, Pennsylvania and West Virginia added one apiece. Texas declined by three rigs. Arkansas, California, Kansas, North Dakota, Ohio, Utah and Wyoming were unchanged. The U.S. rig count peaked at 4,530 in 1981. It bottomed out in May at 404.

U.S. Rig Count Rises To 8 Month High As Permian, Eagle Ford See Decline  - Houston oilfield services company Baker Hughes, Inc. showed a four-rig increase in the United States oil count, marking 16 straight weeks of no-decline in the active oil rig figure and signaling the continuation of a strong recovery for the country’s drilling activity. The oil rig count now stands at an eight-month high at 432 sites – but still 163 rigs lower than the 595 figure that we saw one year ago. Last week, the US oil rig count rose 3 to 428, while the gas rig count fell 2 to 94. The number of active gas rigs rose by eleven, the biggest jump since late January. The gas rig total stood at 105, which is a 10-month high, but 87 rigs short of last year’s 192. Zero Hedge predicts the trend of the increasing number of rigs will stop soon, because the counts have tracked the lagged oil price “very closely” over the past few weeks. Canada saw a three-rig increase in its oil count and a three-rig decrease in its gas count, which meant a zero-sum difference in its total count. State-wise, Louisiana saw a massive six-rig rise. New Mexico and Oklahoma saw a more modest three-rig increase each. The biggest decreases by basin were the Eagle Ford and the Permian, which lost a total of six rigs. Cana Woodford gained four rigs, while DJ-Niobrara, Haynesville and Marcellus saw a two-site increase. Brent oil traded down by 0.71 percent at $51.66 at the time of the report’s writing. West Texas Intermediate barrel prices stood at $50.11, down by 0.65 percent.

Kuwait postpones $10 billion bond issue until 2017 | Dubai: Kuwait has delayed a sovereign bond issue of up to $10 billion (Dh36.7 billion) until next year after deciding it is in no rush to raise funds overseas, bankers familiar with Kuwaiti debt policy said.Finance Minister Anas Al Saleh said in July the government planned to sell as much as $10 billion of US dollar-denominated conventional and Islamic bonds in international markets to help plug its budget deficit for the current fiscal year, which will end on March 31.Officials subsequently said they were looking at a window of September or possibly October for the issue.But the government has still not sent banks a request for proposals to arrange the issue, while the sale still needs official approval by the Ministry of Finance, said one of the bankers. This means the deal will definitely take place in 2017, he added.“The government has not mandated banks on the bond, which would suggest that they were targeting a later release post-the Saudi Arabia one,” said Dima Jardaneh, head of regional economic research at Standard Chartered. This implies the first quarter of 2017 is a likely time period for the issue, she said. Kuwait’s Ministry of Finance did not respond to requests for comment.

Saudi Capital Spending to Drop 71% in 2016 Amid Low Oil Prices -- Saudi Arabia’s austerity measures will slash capital spending this year by 71 percent, as the world’s biggest exporter of crude seeks to repair public finances damaged by low oil prices. Capital expenditure is projected to fall to 75.8 billion riyals ($20.6 billion) this year compared with 263.7 billion in 2015, according to the government’s bond prospectus obtained by Bloomberg. In 2014, capital spending amounted to 370 billion riyals. The kingdom, with the largest budget shortfall among the world’s 20 biggest economies, has delayed payments to contractors and is weighing plans to cancel more than $20 billion of projects, according to people familiar with the plans. The government estimates that the budget deficit will decline to 13.5 percent of gross domestic product this year from 15 percent in 2015, according to the prospectus.  “I would’ve liked to have seen more cuts to current spending rather than focusing almost entirely on capital expenditure,” said Khatija Haque, head of Middle East and North Africa research at Emirates NBD. “In the short term, the impact will be slower growth” as government spending and investment is reduced, she said. The government also suspended bonuses and trimmed allowances for government employees, including a 20 percent cut to ministers’ salaries. As a result, current spending will decline to 581.2 billion riyals from 714.4 billion. Economists expect the spending cuts to weigh on the largest Arab economy. Growth will likely slow to 0.6 percent this year from 3.4 percent in 2015, according to HSBC Holdings Plc.

Saudi Arabia Burns Through Cash Subsidies, More Pain Ahead - Saudi Arabia, OPEC’s de facto leader and the world’s largest oil exporter, has seen better days – much better days. Its now infamous decision in November 2014 to abandon its role as swing producer and actually ramp up production as global oil supplies were increasing and prices were tanking has hurt itself as much or more than U.S. shale oil producers it wanted to drive out of the market. In the ensuing two years since that decision, Saudi Arabia’s state coffers have taken a hit. Due to low oil prices, attributed to the supply glut, the kingdom – which derives as much as 92% of its revenue from oil sales - ran a historic budget deficit last year of $98 billion, with an estimated $87 billion forecasted for this year. Saudi Arabia is also being forced to raise cash in its first international bond sale, as much as $16.5 billion , sometime this month. It’s massive state-owned oil company, Saudi Aramco, the world’s largest, will soon go public, offering partial ownership in an IPO in 2018 worth as much as $2 trillion, the largest IPO in history. However, if oil markets remain over supplied with corresponding low prices, the company’s offering will not bring as much as it could have previously. Saudi Arabia’s budget woes have also hit ordinary citizens hard, while most are used to generous cash subsidies and other state benefits. Nearly 30% of Saudi Arabia’s 32 million population is under the age of 15, while the country’s median age is just 28.6 years.   Now, all of that is changing.

Employment and immigration in oil-exporting countries --Citigroup suggests a rather grim fix for oil-exporting countries struggling with the drop in crude prices: Lower ambitions for economic growth, and fewer unskilled immigrants. Limiting immigration is a tactic that’s appealed to other countries recently (we’d make a snarky comment about the UK, if only we Yanks were in any place to feel superior). But we’re willing to at least entertain the logic, since GCC countries — the United Arab Emirates, Bahrain, Kuwait, Oman, Qatar, and Saudi Arabia — are in a very different situation than Europe and the US. They’ve historically relied heavily on foreign nationals’ labour in the private sector, and employed domestic workers in oil-funded government jobs.  The Gulf Research Center’s most recent estimate pegs foreign nationals (non-citizens, that is) at about half of the GCC’s population. (To compare, foreign nationals made up around 8 per cent of the UK’s population in 2014, and roughly 7.8 per cent of the US population based on Pew Research estimates that include undocumented foreign nationals.)  As Farouk Soussa, Citi’s chief Middle East economist, observes in a note this week, the GCC’s immigration policies were a response to growth in the region during the oil boom, which was “hugely dependent on input growth, with productivity growth actually negative since the 1970s,” he writes.  He argues that one cause of the negative productivity growth is “the abundance of cheap foreign labour. His argument is that it “gives labour-intensive industries such as these a competitive advantage… and reduces incentives to invest in innovative technologies and industries.”

Without Saudi oil aid, Egypt rushes out big buy tenders -- Egypt has not received October allocations of petroleum aid from Saudi Arabia, traders told Reuters, forcing its state oil buyer to rapidly increase tenders even amid a severe dollar shortage and growing arrears to oil producers. Saudi Arabia agreed to provide Egypt with 700,000 tonnes of refined oil products per month for five years under a $23 billion deal between Saudi Aramco and the Egyptian General Petroleum Corporation (EGPC) signed during a state visit this year by Saudi Arabia's King Salman. Delivery of the Saudi Aramco products was halted as of Oct. 1 though the reason remains unclear, a trader that deals with the EGPC told Reuters. The kingdom has pumped billions of dollars, including grants, into Egypt's flagging economy since the toppling of President Mohamed Mursi of the Muslim Brotherhood in 2013 after mass protests against his rule. The oil aid has saved Egypt hundreds of millions of dollars per month at a time when it faces an acute shortage of hard currency that has forced it to ration dollars for key commodities and negotiate long term credit arrangements with oil producers to keep critical supplies flowing. Under the 700,000-tonne monthly supply deal, Saudi Aramco agreed to provide 400,000 tonnes of gas oil, 200,000 tonnes of gasoline and 100,000 tonnes of fuel oil per month, all on a credit line with a 2 percent interest rate to be repaid over 15 years, an EGPC official has told Reuters. The EGPC has re-entered the spot market in recent weeks to fill the gap, traders said, announcing its largest purchase tenders in months, including calls for some 560,000 tonnes of gasoil for October arrival, a steep rise from the roughly 200,000 tonnes sought in September. The state oil buyer announced additional tenders on Thursday and Friday for 665,000 tonnes of gasoil and 132,000 tonnes of gasoline for November arrival, levels that could suggest a protracted delay or suspension of Saudi Aramco products.

Hillary Confirms Saudi Arabia, Qatar Fund ISIS In Leaked Email - Over three years after we first reported that one of the two chief sources of funding and support for the "Islamic State" is the small but wealthy nation of Qatar, and long after we also announced that Saudi Arabia had revealed that it was behind ISIS, in a report that was widely disputed, overnight we finally got definitive evidence that it was indeed Qatar and Saudi Arabia that are the main "logistical and financial" supporters of the Islamic State terrorist organization. In a leaked email sent on August 17, 2014 by Hillary Clinton to her current campaign manager, John Podesta, who back then was counselor to Barack Obama, she admitted that Qatar and Saudi Arabia "are providing clandestine financial and logistic support to ISIL and other radical Sunni groups in the region." The email, which was sent just days after the US launched it "temporary" air campaign in Syria, which has now extended over two years, represents an eight-point plan laying out ideas how to defeat ISIS in Iraq and Syria. Clinton’s email said that the United States should engage in "military operations against these very irregular but determined forces" by "making proper use of clandestine/special operations resources, in coordination with airpower, and established local allies" such as Kurdish forces. Having confirmed the role of Qatar and Saudi Arabia, Hillary then states that "we need to use our diplomatic and more traditional intelligence assets to bring pressure on the governments of Qatar and Saudi Arabia" and recommends to step up US commitment to the Kurdish Regional Government or KRG. "The Qataris and Saudis will be put in a position of balancing policy between their ongoing competition to dominate the Sunni world and the consequences of serious U.S. pressure.  By the same token, the threat of similar, realistic U.S. operations will serve to assist moderate forces in Libya, Lebanon, and even Jordan, where insurgents are increasingly fascinated by the ISIL success in Iraq."

WikiLeaks emails reveal Bill Clinton's $1M 'birthday' present from Qatar for foundation - Washington Times: WikiLeaks emails reveal Bill Clinton’s $1M ‘birthday’ present from Qatar The WikiLeaks document dump of Hillary Clinton campaign chairman John Podesta has revealed Qatar’s previous desire to give her husband a $1 million “birthday” present. Thousands of emails leaked by WikiLeaks founder Julian Assange’s nonprofit organization continue to embarrass Democrat presidential hopeful Mrs. Clinton. The latest email thread shows an aide discussing conversations with  ambassadors from Qatar, Brazil, Peru, Malawi, and Rwanda while in the nation’s capital. “[Qatar] would like to see WJC ‘for five minutes’ in NYC, to present $1 million check that Qatar promised for WJC’s birthday in 2011,” an employee at The Clinton Foundation said to numerous aides, including Doug Brand. “Qatar would welcome our suggestions for investments in Haiti — particularly on education and health. They have allocated most of their $20 million but are happy to consider projects we suggest. I’m collecting input from CF Haiti team.” The documents, which U.S. intelligence blames on Russian state actors, are just a few of roughly 50,000 WikiLeaks says it has on Mr. Podesta. Jake Johnston, an analyst at the nonpartisan Center for Economic and Policy Research, told the Daily Caller Thursday that Mr. Clinton’s lucrative “birthday” present further solidifies the perception that a “pay for play” operation was going on between the State Department and The Clinton Foundation while Mrs. Clinton was secretary of state.

US Allows Qatar to Buy F-15s — and Seals a $19B Sale of Jetliners - The White House’s recent decision to allow the sale of F-15 fighter jets to Qatar helped to seal the $18.6 billion purchase of 100 Boeing jetliners announced Friday by Qatar Airways, according to people with knowledge of the deal. Executives with Boeing and state-owned Qatar Airways denied links between the military and commercial sales.“The Qatar Airways has its independent policy of ordering airplanes,” CEO Akbar Al Baker said when asked whether the two sales were connected. “So nothing is attached to anything.”But the jetliner deal — which has been under negotiation for months — was finalized less than two weeks after the Obama administration approved the 36 F-15 fighter jets for Qatar on Sept. 28, people close to the agreement say. The up-to-$4 billion fighter jet deal has been in the works for years, but has reportedly been on hold while the U.S. negotiated a 10-year, $38 billion security package with Israel. Israel has reportedly raised objections to Qatar buying F-15s. Last week, White House officials informally told members of Congress that the F-15 sale would get approval, but the State Department and Pentagon have yet to formally announce the deal, which reportedly has options for up to 72 fighters. Boeing builds the F-15 in St. Louis.

Clinton is right on Syrian Kurds – AEI - During the second presidential debate at Washington University in St. Louis, moderator Martha Raddatz asked former Secretary of State Hillary Clinton about Syria: You advocated arming rebels, but it looks like that may be too late for Aleppo. You talk about diplomatic efforts. Those have failed. Cease-fires have failed. Would you introduce the threat of U.S. military force beyond a no-fly zone against the Assad regime to back up diplomacy? Clinton started out weakly, declaring “I would not use American ground forces in Syria,” even though there already are US forces in Syria, a discrepancy that neither Raddatz nor her co-moderator Anderson Cooper seemed to catch. What followed was pretty standard: Clinton argued that she would target Islamic State leader Abu Bakr al-Baghdadi:  That is important, though to capture him and show him weak and cowering might have greater resonance if the US goal is to delegitimize the ideology which he espouses.  Clinton also said she would increase US support for the Kurdish peshmerga. There is nothing controversial about arming the Iraqi Kurds. Clinton may be unaware that the US government already generously provides weaponry to them, albeit through Baghdad. The most interesting part of her answer—and a break with conventional wisdom—was the conclusion of her remarks:  And I know there’s a lot of concern about that in some circles, but I think they should have the equipment they need so that Kurdish and Arab fighters on the ground are the principal way that we take Raqqa after pushing ISIS out of Iraq. Her mention of Raqqa, the Islamic State’s capital in Syria, suggests she seeks to arm the People’s Protection Units (YPG), Syrian Kurdish units close to the Kurdistan Workers Party (PKK), designated by both Turkey and the United States as a terror group. Once again, neither Raddatz nor Cooper seemed to realize the significance of what Clinton proposed, although the Turkish government certainly has.

Russia & US will engage in ‘global war’, unless ‘proxy’ Syria conflict resolved – Turkey’s deputy PM -- The Syrian conflict has now become a “proxy war” between the two Cold War superpowers, believes Deputy Prime Minister of Turkey, Numan Kurtulmus, who warned that that the conflict could escalate beyond the Middle East. “If this proxy war continues, after this, let me be clear, America and Russia will come to a point of war,” Kurtulmus told the state’s Anadolu news agency, adding that the world was “on the brink of the beginning of a large regional or global war.” Kurtulmus described the government of Syrian President Bashar Assad as a “pawn” in the conflict, and urged it to seek peace, claiming that there would be no way to overcome the alliance of forces that opposes it. The politician insisted that Assad has no place in any future political system in the country, as the opposition will “not negotiate with a bloody dictatorship.” Turkey has been one of the leading advocates of Assad’s removal since the conflict, which has resulted in more than 400,000 deaths, broke out in 2011. But Russia, a staunch Syria ally, which has intervened in the conflict at the request of Damascus, has refused to contemplate Assad’s unilateral removal unless Syrian people decide so. In an interview with French television broadcast on Wednesday night, Russian President Vladimir Putin reiterated that the Syrian president would agree to develop a new, more democratic and inclusive constitution, and overhaul the political system – but only if he was allowed to stand in a future election.

Royal Air Force Pilots Ordered To Shoot Down "Hostile" Russian Jets Over Syria -- As the US officially enters the Yemen military campaign, the UK appears ready and willing to precipiate a catalytic event from which there is no going back. With relations between Russia and the West at post-Cold War lows and deteriorating fast, Royal Air Force (RAF) pilots have been given the go-ahead to shoot down Russian military jets when flying missions over Syria and Iraq, if they are endangered by them. The development comes with warnings that the UK and Russia are now "one step closer" to being at war, according to the Sunday Times. While the RAF's Tornado pilots have been instructed to avoid contact with Russian aircraft while engaged in missions for Operation Shader, the codename for the RAF's anti-Isis work in Iraq and Syria, their aircraft have been armed with air-to-air missiles and the pilots have been given the green light to defend themselves if they are threatened by Russian pilots. "The first thing a British pilot will do is to try to avoid a situation where an air-to-air attack is likely to occur — you avoid an area if there is Russian activity," "But if a pilot is fired on or believes he is about to be fired on, he can defend himself. We now have a situation where a single pilot, irrespective of nationality, can have a strategic impact on future events." Where things get tricky is the qualifier "if he believes he is about to be fired on" - since this makes open engagement a function of threat evaluation in real time during stressed conditions, the likelihood of an escalation that could result in two warplanes shooting at each other, just jumped significantly.

US, Saudis to grant 9,000 ISIS fighters free passage from Iraqi Mosul to Syria – source -- The US and Saudi Arabia have agreed to grant free passage to thousands of Islamic State militants before the Iraqi city of Mosul is stormed. The jihadists will be redeployed to fight against the government in Syria, a military-diplomatic source told RIA Novosti.   "More than 9,000 Islamic State (IS, formerly ISIS, ISIL) militants will be redeployed from Mosul to the eastern regions of Syria to carry out a major offensive operation, which involves capturing Deir ez-Zor and Palmyra,” the source said.  According to the anonymous diplomatic source, US President Barack Obama has already sanctioned an operation to liberate Mosul, due to take place in October. During the storm of the city in northern Iraq the US-led coalition’s planes would only strike detached, vacated or uninhabited buildings, while keeping terrorists as targets, he said.In September, US Secretary of Defense Ashton Carter confirmed that Washington would send an additional 600 troops to Iraq to help liberate Mosul at the request of the local authorities. The source suggested that redeployment of IS militants is necessary because “Washington must somehow counter Russia’s achievements in Syria, try to diminish their importance.”"Apart from the purely political dividends, the other purpose of this operation, obviously, will be to discredit the success of Russian Airspace forces. And, of course, it’s an attempt to undermine Syrian President (Bashar) Assad,” he said. The leadership of Saudi Arabia’s General Intelligence Directorate will be the mediators and guarantors of the agreement on safe passage for the jihadists from Mosul, he claimed.

The Truth About the War in Aleppo - David Stockman  -- This is starting to sound pretty ominous. The Washington War Party is coming unhinged and appears to be leaving no stone unturned when it comes to provoking Putin’s Russia and numerous others. The recent collapse of cooperation in Syria – based on the false claim that Assad and his Russian allies are waging genocide in Aleppo – is only the latest example. So now comes the U.S. Army’s chief of staff, General Mark Milley, doing his best imitation of Curtis LeMay in a recent speech dripping with bellicosity. While America has no industrial state enemy left on the planet that can even remotely challenge its economic might, technological superiority and overwhelming military power, General Milley unloaded a fusillade of bluster at the Association of the United States Army’s annual meeting in Washington DC: “The strategic resolve of our nation, the United States, is being challenged and our alliances tested in ways that we haven’t faced in many, many decades,” Army Chief of Staff Gen. Mark Milley told the audience. “I want to be clear to those who wish to do us harm … the United States military – despite all of our challenges, despite our [operational] tempo, despite everything we have been doing – we will stop you and we will beat you harder than you have ever been beaten before. Make no mistake about that.” That is rank nonsense. We are not being “tested” by anyone. To the contrary, Imperial Washington is provoking tensions and confrontations everywhere – from the South China Sea to Syria, Iraq, Yemen, Libya, the Black Sea, the Baltics and Ukraine – that have no bearing whatsoever on the safety and security of the citizens of Spokane WA, Topeka KS and Springfield MA.

How Syria Became the New Global War - Der Spiegel -- As the noose around Aleppo tightens -- and the Assad regime and its Russian allies continue to bomb the city -- the extremely dangerous nature of this proxy war is becoming more apparent than ever. Could escalation between Moscow and Washington be on the horizon?   Every group participating in the murderous fighting around the city is trying to listen in on the radio communications of their opponents. In the "Afghan sector" near Khan Tuman southwest of the city, Dari is spoken, a dialect of Persian common in Afghanistan, Yazen says. In the "Hezbollah sector" in the south, Arabic with a Lebanese accent can be heard. The Iranian officers, meanwhile, speak Persian. And nobody, the scout continues, understands the Pakistanis when they speak Urdu. He says that the Iraqi militias surrounding Aleppo tend to speak with the strong accent prevalent in southern Iraq, "but we've gotten used to it." The only reason they don't hear much Russian, he says, is because the pilots flying overhead "only use frequencies that are difficult for us to intercept." Aleppo, the destroyed, divided city, has become a symbol for the horrors of the air war that the Syrian regime and its allies are waging against the Sunni rebels, as well as a symbol for the impotence of the West. Seldom have Western politicians been as helpless as they are now. And seldom has the air war in Syria been as brutal as it has been in the last two weeks.Now that diplomacy has collapsed, the eyes of the world are once again squarely on Russian President Vladimir Putin, who has thrown his unconditional support behind the Syrian regime of Bashar Assad. And they are on US President Barack Obama, the leader of the Western world, who didn't want to become deeply involved in the Syrian conflict.

Saudi Air Strike Kills At Least 82, Injures 534 At Yemen Funeral - While the US and western powers condemn Russian airstrikes conducted in Aleppo, to the point where yesterday John Kerry accused Russia of "crimes against humanity", a parallel campaign waged by Saudi Arabia in Yemen gets little press coverage. Perhaps as a test how far it can go without provoking a diplomatic rebuke, earlier today an air strike by the Saudi-led coalition on mourners in Sanaa on Saturday killed at least 82 people, the acting health minister in the Houthi-led administration in the Yemeni capital said. Ghazi Ismail told a news conference in Sanaa the number of people wounded in the attack was 534, Reuters adds. The International Committee of the Red Cross said it had prepared 300 body bags. Hundreds of body parts were found inside and outside the hall after the strike. “The number of casualties from the air force of the Saudi-American aggression at the main hall in the capital Sanaa has risen to more than 450 dead and wounded,” the SABA news agency quotes Abdul-Salam al-Madani, who is a deputy to the Houthi health minister, as saying. A missile tore through the hall of the building, leaving many dead and injured, Reuters reported earlier, citing eyewitnesses. According to the news agency, a medic said that he saw “mutilated and charred bodies,” adding that the funeral was being held for the deceased father of the Houthi rebels’ Interior Minister. Military and security officials from the rebel movement are among the victims, according to the outlet.  As RT reports, one of the deadliest attacks occurred after the coalition’s aircraft attacked a crowded marketplace in Mastaba, a village in Yemen’s northern Hajja governorate in April. The UN children’s agency, UNICEF, put the death toll from that airstrike at 119, including 22 children. In August, at least 11 people were killed and 19 injured in an airstrike that targeted a hospital in northwestern Hajjah province, according to Doctors Without Borders (MSF). (pictures, videos)

UN calls on Saudi Arabia to stop torturing, executing minors in scathing report - A UN watchdog has slammed Saudi Arabia for subjecting minors as young as 15 to stoning, flogging, amputation, and even execution, contrary to the children rights convention, but a Saudi official reportedly responded that sharia is “above all laws and treaties.”   On Thursday, the Committee on the Rights of the Child (CRC) published a report on Saudi Arabia’s track record in enforcing the Convention on the Rights of the Child, to which it is a party. Upon reviewing the kingdom’s government policy towards children, who are defined as individuals under 18 years old for the purposes of the convention, the committee urged Saudi authorities to revise its legislation “without any further delay… with a view to unambiguously prohibit the imposition of death sentence on children” pursuant to the convention.  The document noted that minors in Saudi Arabia can stand trial as adults after they reach the age of 15, and that Saudi courts issue and carry out death sentences “after trials falling short of guarantees of a due process and fair trial… especially as concerns the absolute prohibition of torture.”“The Committee is particularly concerned that out of the 47 persons executed on 2 January 2016, at least four, namely Ali al Ribh, Mohammad Fathi, Mustafa Akbar and Amin al-Ghamadi were under the age of 18 when sentenced to death by the Specialized Criminal Court,” the report says.  The 18-member committee also strongly criticized Saudi Arabia’s traditional practices of punishing perpetrators with stoning, flogging, and limb amputation, demanding that it “repeal all provisions contained in legislation” authorizing such penalties.

US May Be Guilty Of War Crimes For Enabling Saudi Mass Killings Of Yemeni Civilians - As the US slams Russian bombing in Aleppo, accusing Putin of "crimes against humanity" and in the process sending US-Russian relations to levels not seen since the Cold War, it quietly sells billions in weapons and equipment to Saudi Arabia, a nation which has "exported more extreme ideology than any other place on earth over the course of the last 30 years." It also happens to be one of the biggest state donor to the Clinton Foundation. Which may explain why as Reuters reported in an exclusive story today, the Obama administration went ahead with a $1.3 billion arms sale to Saudi Arabia last year despite misgivings and warnings from some officials that the United States could be implicated in war crimes for supporting a Saudi-led air campaign in Yemen that has killed thousands of civilians. Citing government documents and the accounts of current and former officials, Reuters reveals that while the Obama administration and the Pentagon rail against Russian bombing in Syria, State Department officials have been skeptical - in private of course - of the Saudi military's ability to target Houthi militants without killing civilians and destroying "critical infrastructure" needed for Yemen to recover.  However, and this may be where Saudi funding for Hillary's campaign - according to a recent report, Saudi Arabia funded 20% of Hillary's presidential campaign - and her election came into play, government lawyers ultimately did not reach a conclusion on whether U.S. support for the campaign would make the United States a "co-belligerent" in the war under international law, Reuters said citing four current and former officials. Such a finding would have obligated Washington to investigate allegations of war crimes in Yemen and would have raised a legal risk that U.S. military personnel could be subject to prosecution, at least in theory. The findings emerge days after an air strike on a wake in Yemen on Saturday that killed more than 140 people renewed focus on the heavy civilian toll of the conflict. The Saudi-led coalition denied responsibility, but the attack drew the strongest rebuke yet from Washington, which said it would review its support for the campaign to "better align with U.S. principles, values and interests."

US ship and Saudi forces targeted as Yemen’s civil war escalates - Saudi Arabia said on Monday that it had stopped two ballistic missiles fired at its forces by Yemen’s Houthi rebels, and the US said two missiles were fired from Houthi-controlled territory at an American naval vessel in the Red Sea, as the civil war in Yemen escalates. The Houthis denied they fired the missiles that targeted — but missed — the US warship, but the incident will raise concerns about maritime security in one of the world’s most important waterways. Last week, Houthis struck a commercial vessel of the United Arab Emirates, which is part of the Saudi-led coalition fighting the rebels. “The [naval] attacks are very, very significant developments. If you had told the US Navy two years ago they would be fired at by anti-ship missiles from Yemen, they’d have laughed at you,” said a former Nato naval officer. ”This is hugely significant at a strategic level as these missiles threaten the key shipping route between Europe and much of the rest of the world.” The missiles targeting the Saudi forces, two days after Saudi air strikes killed more than 140 people at a funeral, were fired toward Marib in Yemen and the Saudi city of Taif. The 19-month war in Yemen has claimed more than 10,000 lives but neither side has been able to gain the upper-hand, with the Houthi rebels controlling Sana’a, the capital, and the northern highlands, and the government controlling the southern port of Aden and swaths of the east. But with a deepening humanitarian crisis and Saudi Arabia repeatedly accused of hitting civilians targets, including the funeral attack, scrutiny has increased on the US and UK role in supporting the Saudi-led coalition. In the wake of the funeral attack on Saturday, Washington said it would review its support for the Yemen operation. Ban Ki-moon, the UN secretary-general, on Monday said there must be accountability for the “appalling conduct” of the war.

U.S. Launches Strikes in Yemen After Missiles Aimed at American Ships - NBC - The U.S. military launched Tomahawk cruise missiles against radar sites in Yemen early Thursday, a senior defense official said.  The strikes followed two incidents this week in which missiles were fired at a U.S. Navy ship from a rebel-controlled area of the country.  The missiles were launched from the destroyer USS Nitze at around 4 a.m. Thursday local time (9 p.m. Wednesday ET), and initial assessments were that all three coastal sites in rebel Houthi-controlled areas were destroyed, the official said.  Pentagon press secretary Peter Cook said in a statement that President Barack Obama authorized the strikes on the recommendation of Secretary of Defense Ash Carter and Chairman of the Joint Chiefs General Joseph Dunford.  "These limited self-defense strikes were conducted to protect our personnel, our ships, and our freedom of navigation in this important maritime passageway," Cook said. "The United States will respond to any further threat to our ships and commercial traffic, as appropriate, and will continue to maintain our freedom of navigation in the Red Sea, the Bab el-Mandeb, and elsewhere around the world."

State Department Asked What Is Difference Between Yemen And Syria Bombings, Awkward Moment Follows  -- As we asked rhetorically yesterday, how Kerry can accuse Russia of committing war crimes in Syria with a straight face is unclear, as reports of atrocious crimes committed in Yemen continue to surface. It seems AP's Tom Lee questioned this hypocrisy also. As The Independent reports, a US government spokesperson has struggled to answer questions put to him on why the US condemns Russian bombing in Syria, and supports Saudi-led bombing in Yemen, both of which have killed thousands of civilians.During a media briefing in Washington DC on Tuesday, State Department spokesperson John Kirby was asked repeatedly about whether Saudi coalition bombing of Houthi rebels in Sanaa - facilitated by US arms sales to the Gulf state - deliberately targets civilian infrastructure.“Over the weekend there was this air strike on a funeral by the Saudi-led coalition,” Matt Lee of the Associated Press asked. “I was just wondering: does the administration see any difference between this kind of thing, and what you accuse the Russians, Syrians and the Iranians of doing in Syria, and particularly Aleppo ?”Mr Kirby struggled to answer the question, pointing out that the Kingdom has launched an investigation into how the funeral hall was hit, whereas nothing of the sort has been carried out by the Syrian or Russian governments, which he accused of deliberately causing harm to civilians.

The Podesta Emails: The outrageous US obsession to adjust the Middle East chaos according to the US interests - An email sent by John Podesta to Hillary Clinton in late September of 2014, shows characteristically the degree of US obsession to adjust things in Middle East perfectly according to their interests. Even in an environment of absolute mess, for which the US intervention was highly responsible, the key associate of the Clintons, is an authentic example of how the US officials are thinking. How they insist, after all this chaos, to play the same games on the expense of millions of people who lose their lives, their homes.  The most characteristic part of this email, is that Podesta is still considering that the US should fight ISIS under specific terms and conditions, as if the US have the time and the luxury to do so. As he writes characteristically: “... we will be able to work with the Peshmerga as they pursue ISIL into disputed areas of Eastern Syria, coordinating with FSA troops who can move against ISIL from the North. This will make certain Basher al Assad does not gain an advantage from these operations.” This shows that even after ISIS went out of control, the biggest concern of the US was to prevent Assad of taking advantage. At the same time, Podesta admits that the US allies, Qatar and Saudi Arabia, are helping ISIS: “... we need to use our diplomatic and more traditional intelligence assets to bring pressure on the governments of Qatar and Saudi Arabia, which are providing clandestine financial and logistic support to ISIL and other radical Sunni groups in the region.” The plans for a kind of Kurdish autonomous state also confirmed: “in return for increase autonomy, the KRG will not exclude the Iraqi Government from participation in the management of the oil fields around Kirkuk, and the Mosel Dam hydroelectric facility.”, as well as, the subsequent worsening of the US-Turkish relations: “In the past the USG, in an agreement with the Turkish General Staff, did not provide such heavy weapons to the Peshmerga, out of a concern that they would end up in the hands of Kurdish rebels inside of Turkey. The current situation in Iraq, not to mention the political environment in Turkey, makes this policy obsolete. [...] as Turkey moves toward a new, more serious Islamic reality, it will be important for them to realize that we are willing to take serious actions, which can be sustained to protect our national interests.

Diplomatic divide over Libya threatens EU unity on defense - Politico - European governments’ new push to cooperate more effectively on defense and security is already being tested in Libya, where France is accused of playing a double game in an ongoing conflict that has exposed divisions within the bloc. The North African country has been torn between two capitals since a France-led NATO intervention in 2011 that toppled its longtime leader, Muammar Gaddafi. Europe officially backs the Tripoli-based government of Fāyez al-Sarrāj, which has been recognized by the U.N. But France has also been accused of giving support to Khalīfa Ḥaftar, the leader of an Egypt-backed government in the eastern city of Tobruk that refuses to accept Tripoli’s legitimacy. At least one EU partner criticized France for projecting “ambiguity” in the dispute at a time when Europe is otherwise trying to show off its new plans for military integration — and as France, Germany and Italy have been calling to set up a military-civilian European headquarters and to share some troops. “We are concerned about French ambiguity but Paris is a strategic partner in Libya,” Nicola Latorre, chairman of the Italian senate’s defense committee and a close ally of Prime Minister Matteo Renzi, told POLITICO. For months analysts and diplomats have said France is following two opposite lines in Libya: a political one to support Tripoli and a military one to back Ḥaftar and his main sponsor, Egypt. A French diplomat rejected that criticism, saying Paris is fully in line with the rest of its European partners in the push for stability in the country, a departure point for African migrants hoping to reach Italy. But questions continue to be raised, especially after an incident in July that fed suspicions France was playing a double game in Libya. Paris confirmed that three French soldiers engaged in intelligence operations against terrorists in Libya were killed in a helicopter crash. A militia, the Benghazi Defense Brigades, claimed in a statement it had shot the aircraft down and that the helicopter belonged to Haftar’s forces. Analysts stress that the only forces in that area with helicopters are Haftar’s militias, pointing at the accident as evidence of France’s ambiguous policy in the region.

Russia and Turkey agree gas pipeline deal- For the third time in three months, Russian president Vladimir Putin and Turkish president Recep Tayyip Erdogan met in Istanbul. The result of this meeting is a Gas Pipeline Deal that bypasses Ukraine. “Russia and Turkey have put tensions over Syria behind them to agree a gas pipeline deal which would open a new route for Russian energy to western Europe. The TurkStream agreement between Russian president Vladimir Putin and Turkish president Recep Tayyip Erdogan in Istanbul on Monday would, if implemented, redraw the energy map of Europe by allowing Russia to bypass some of its gas around Ukraine. It would also strengthen ties between Moscow and Ankara at a time of growing mistrust between Turkey and the west in the wake of the coup attempt that plunged the country into turmoil three months ago and killed 270 people. Monday’s agreement committed the pair to construction of two lines of pipes beneath Turkish waters on the bed of the Black Sea, with a combined capacity of 30bn cubic metres of gas. One would serve the Turkish market and the other the rest of Europe. TurkStream, to be operated by Gazprom, the Russian state-owned gas monopoly, was proposed by Mr Putin two years ago as a replacement for the abandoned South Stream pipeline which had involved co-operation between Russia and several EU countries.

Putin and Erdogan pledge deeper military contact after gas deal signed - BBC News: The Russian and Turkish leaders have agreed to intensify military and intelligence contacts after a meeting in Istanbul. President Vladimir Putin also said he and Recep Tayyip Erdogan had agreed on the need for aid to get to the northern Syrian city of Aleppo. The two countries have signed a deal to construct two pipelines to send Russian gas under the Black Sea to Turkey. Ties were strained after Turkey downed a Russian military jet last year. But speaking at a joint news conference with Mr Putin, Mr Erdogan said he was confident that the normalisation of relations would take place rapidly. Unlike Russia, Turkey is a member of Nato, but both countries currently have uneasy relations with the West and are also facing economic challenges. Despite the deal, differences remain between the countries. While Russia supports Syria's President Bashar al-Assad, Turkey has called for him to be ousted and has offered support to forces fighting Syrian government troops. On Saturday, Russia vetoed a French-drafted UN resolution calling for an end to air strikes and military flights over Aleppo.

Army Chief Issues Stark Warning to Potential Enemies - The U.S. Army's chief of staff on Tuesday issued a stern warning to potential threats such as Russia and vowed the service will defeat any foe in ground combat."The strategic resolve of our nation, the United States, is being challenged and our alliances tested in ways that we haven't faced in many, many decades," Army Chief of Staff Gen. Mark Milley told an audience at the Association of the United States Army's annual meeting in Washington, D.C."I want to be clear to those who wish to do us harm … the United States military -- despite all of our challenges, despite our [operational] tempo, despite everything we have been doing -- we will stop you and we will beat you harder than you have ever been beaten before. Make no mistake about that."Milley's comments come during an election year in which voters will decide a new president and commander in chief -- and a period of increased military activity of near-peer competitors, including Russia and China.The Army has struggled to rebuild its readiness after more than a decade of extended combat operations in Iraq and Afghanistan. The service has significantly cut the size of its force since the Cold War and decreased its modernization budget in the last decade, Milley said."While we focused on the counter-terrorist fight, other countries -- Russia, Iran, China, North Korea -- went to school on us," he said. "They studied our doctrine, our tactics, our equipment, our organization, our training, our leadership. And, in turn, they revised their own doctrines, and they are rapidly modernizing their military today to avoid our strengths in hopes of defeating us at some point in the future."Milley also quoted a senior Russian official as saying publicly, "The established world order is undergoing a foundational shake-up" and that "Russia can now fight a conventional war in Europe and win." The general warned that future warfare with a near-peer adversary will "be highly lethal, unlike anything our Army has experienced at least since World War II." "On the future battlefield, if you stay in one place for longer than two or three hours, you will be dead."

Russia Says It’s Joining China to Counter U.S. Missile Defense -- Russia said it’s working with China to counter U.S. plans to expand its missile-defense network, which the two nations see as targeting their military assets. The upgrades aim to give Washington the ability to launch a nuclear strike “with impunity,” Lieutenant General Viktor Poznikhir of the Russian Armed Forces General Staff said Tuesday at a security forum in Xiangshan, China, according to a transcript of his speech posted on the Defense Ministry’s website. The Asian neighbors this year conducted a joint missile-defense exercise of their computer command staff, he said.“We are working together on ways to minimize possible damage to the security of our countries," Poznikhir said. “The illusion of invulnerability and impunity under the guise of missile defense will encourage Washington to make unilateral steps in dealing with global and regional issues. This could lead to a decrease in the threshold for using nuclear weapons to preempt enemy actions.” Russia’s concern about U.S. nuclear capabilities highlights a deepening rift between the Cold War foes as they trade accusations over the war in Syria. While NATO members have stressed that the alliance’s global missile shield will be a defense solely against potential attacks from so-called “rogue states,” particularly Iran and North Korea, Russia and China have been voicing concerns over their own security. In May, Russian President Vladimir Putin said that placing parts of the system in Romania and Poland -- once Soviet satellites -- is threatening peace in Europe and warned that it may trigger a new arms race. China described the U.S. Terminal High Altitude Area Defense system as an "out-and-out strategic" move that threatens its national security, warning about taking “necessary measures to safeguard” its interests. The plan has already soured Chinese ties with South Korea. According to Poznikhir, the U.S. defense system includes weapons that, if fired from a warship in the Baltic Sea, can intercept ballistic missiles launched from the European part of Russia before a nuclear warhead is separated. U.S. missile defense launchpads can also be used for Tomahawk cruise missiles and there is no guarantee that such systems wouldn’t replace Thaad complexes in South Korea, he said.

Russian Government Officials Told To Immediately Bring Back Children Studying Abroad --In Europe, when it gets serious, you have to lie... at least if you are an unelected bureaucrat like Jean-Claude Trichet. In Russia, however, when it gets serious, attention immediately turns to the children.Which is why we read a report in Russian website Znak published Tuesday, according to which Russian state officials and government workers were told to bring back their children studying abroad immediately, even if means cutting their education short and not w aiting until the end of the school year, and re-enroll them in Russian schools, with some concern. The article adds that if the parents of these same officials also live abroad "for some reason", and have not lost their Russian citizenship, should also be returned to the motherland. Znak cited five administration officials as the source of the report.The "recommendation" applies to all: from the administration staff, to regional administratiors, to lawmakers of all levels. Employees of public corporations are also subject to the ordinance. One of the sources said that anyone who fails to act, will find such non-compliance to be a "complicating factor in the furtherance of their public sector career." He added that he was aware of several such cases in recent months. It appears that the underlying reason behind the command is that the Russian government is concerned about the optics of having children of the Russian political elite being educated abroad, while their parents appear on television talking about patriotism and being "surrounded by enemies."

Russia orders all officials to fly home any relatives living abroad | Daily Mail Online: Russia is ordering all of its officials to fly home any relatives living abroad amid heightened tensions over the prospect of global war, it has been claimed.Politicians and high-ranking figures are said to have received a warning from president Vladimir Putin to bring their loved-ones home to the 'Motherland', according to local media.It comes after Putin cancelled a planned visit to France amid a furious row over Moscow's role in the Syrian conflict and just days after it emerged the Kremlin had moved nuclear-capable missiles nearer to the Polish border.Former Soviet leader Mikhail Gorbachev has also warned that the world is at a 'dangerous point' due to rising tensions between Russia and the US.According to the Russian site, administration staff, regional administrators, lawmakers of all levels and employees of public corporations have been ordered to take their children out of foreign schools immediately. Failure to act will see officials jeopardising their chances of promotion, local media has reported. The exact reason for the order is not yet clear. But Russian political analyst Stanislav Belkovsky is quoted by the Daily Star as saying: 'This is all part of the package of measures to prepare elites to some 'big war'.' Relations between Russia and the US are at their lowest since the Cold War and have soured in recent days after Washington pulled the plug on Syria talks and accused Russia of hacking attacks.

Putin Ally Warns Americans To Vote For Trump Or Face Nuclear War -- The name of what is arguably Russia's most flamboyant, ultra-nationalist politician, and according to some the local incarnation of Donald Trump,  Vladimir Zhirinovsky, a deputy in the state Duma and leader of the nationalist LDPR party, is familiar to frequent readers: he most recently made an appearance on these pages two months ago, when he warned Germany that it risks utter destruction if it continued on its present track of operating Bundeswehr forces in the Baltics. Zhirinovsky also shares another feature with Donald Trump: both are outspoken to a fault. Which is why we were not surprised to read that as Reuters reported earlier, Zhirinovsky urged Americans to vote for Donald Trump as president or "risk being dragged into a nuclear war." In an interview with Reuters, Vladimir Zhirinovsky, known in Russia and Europe for his fiery rhetoric, said that Trump was the only person able to de-escalate dangerous tensions between Moscow and Washington. On the other hand, Hillary Clinton could spark World War Three, said the Russian who received a top state award from Putin after his pro-Kremlin Liberal Democratic Party of Russia (LDPR) came third in Russia's parliamentary election last month.  "Relations between Russia and the United States can't get any worse. The only way they can get worse is if a war starts," said Zhirinovsky, speaking in his huge office on the 10th floor of Russia's State Duma, or lower house of parliament. "Americans voting for a president on Nov. 8 must realize that they are voting for peace on Planet Earth if they vote for Trump. But if they vote for Hillary it's war. It will be a short movie. There will be Hiroshimas and Nagasakis everywhere." Zhirinovsky's comments come at a time when relations between Russia and the US are at generational lows, as a result not only of the conflicts raging over Syria and Ukraine but also the recent White House accusation that Russia was responsible for cyber attacks against Democratic Party organizations. In turn, an amused Putin replied his country was not involved in an effort to influence the U.S. presidential election. Instead Putin accused the US of "starting this hysteria, saying that this (hacking) is in Russia's interests. But this has nothing to do with Russia's interests," in a speech during a business forum in Moscow. He added that the accusations were a ploy to divert U.S. voters' attention at a time when public opinion was being manipulated. "Everyone is talking about 'who did it' (the hacking)," said Putin. "But is it that important? The most important thing is what is inside this information."

West is playing with nuclear war -  Britain’s ruling elite are making advanced preparations towards a major escalation of military operations in Syria. Parliament met in an emergency three-hour session yesterday to accuse Russia of war crimes in Syria and lay the basis for Britain’s involvement in establishing a no-fly zone and possibly sending ground forces into the war-torn country. Global tensions over Syria are at a boiling point. As parliament met, Russian President Vladimir Putin cancelled a planned October 19 visit to France in response to the accusation made the previous day by French President Francois Hollande that Moscow was guilty of “war crimes” in Syria. The Syrian army, with the support of Russia, have been attacking the east of Aleppo, where NATO’s Al Qaeda-linked Islamist proxies in Syria are based. With its proxies facing defeat, Washington, backed by its international allies, is calling for the imposition of a no-fly zone in order to save them. “The population [of Aleppo] is the victim of war crimes. Those who commit these acts will pay for this responsibility before the international court of justice,” said Hollande. Tensions have been ratcheted up ever since Washington, without any evidence, pinned responsibility on Moscow for an attack on a UN aid convoy and demanded that Russia and Syria ground their aircraft. Russia denies any involvement.

Stein: endless war led to failed states, mass refugee migrations and worse terrorist threats -- After our call to independent media for a 'counter-debate' with the US third parties, the independent news network Democracy Now! made a first revolutionary step to break the US bipartisan debate monopoly. Amy Goodman of Democracy Now! explains again the process, in this second presidential debate: “We spend the rest of today’s show airing excerpts of the Donald Trump-Hillary Clinton debate and give Green Party presidential candidate Jill Stein a chance to respond to the same questions posed to the major-party candidates. Again, Dr. Stein and Libertarian presidential candidate Gary Johnson were excluded from the debate under stringent rules set by the Commission on Presidential Debates, which is controlled by the Democratic and Republican parties. We invited both Stein and Johnson to join us on the program; only Stein took us up on the offer.” In this second part of the second debate, Trump focused on the "threat" of the waves of refugees. Clinton defended the refugees, but put all the blame on ... guess who: Russia and Syria!  Again, Stein exhibited her superiority by saying the whole truth. That the endless US wars and interventions are responsible for the failed states, mass refugee migrations and worse terrorist threats. This is the root of the problem, and the US should change policy towards what Jill Stein said:“Instead of continuing to pour gasoline on this fire, we need to take a stand on behalf of a weapons embargo to all parties, since our weapons are getting into the hands of all parties. We need to impose a freeze on the bank accounts of our allies that are continuing to fund terrorist enterprises, and to work with the Turks, who are our ally—in name, at least—to close down their border to the flow of terrorist militias across their border. That is the contribution that we need to make.” There is no need for further analysis here. Every point that Jill Stein made about the US disastrous wars and interventions, was spot on. Just

Jill Stein: Trump Is Less Dangerous Than Clinton; She Will Start Nuclear War With Russia - (video) Green party presidential candidate Jill Stein: Donald Trump is less scary on foreign wars, because he wants to work with Russia. JILL STEIN: It's important to look at where we are going. It's not just a moment in time, but where has the strategy of voting for the lesser evil you will taken us?  All these times you have been told to but for the lesser evil because you didn't want the wars, or the meltdown of the climate, or the offshoring of our jobs, or the attack on immigrants or the massive bailout for Wall Street, that is actually what we have gotten. By the droves.Because we with public interest allow ourselves to be silent and voted for the lesser evil. But the lesser evil doesn't solve the problem.The Obama administration, even with both houses of Congress, actually did all of these fossil fuel emissions. "All of the above" gave us some renewable energy but it completely amplified and intensified our film production, which has been incredibly destructive to the climate.The wars have gotten bigger, we are now bombing seven countries. It is important to not just look at the rhetoric but also look at the track record and the reality is the lesser people and greater people is a race to the bottom, and even Donald Trump in the right wing extremism grows out of the policies of the Clintons, in particular Nafta, which sent our jobs overseas and Wall Street deregulation, which blew 9 million jobs up into smoke.That is what is creating this right wing extremism. A vote for Hillary Clinton isn't going to fix it... It is now Hillary Clinton that wants to start an air war with Russia over Syria by calling for a no fly zone. We have 2000 nuclear missiles on hairtrigger alert. They are saying we are closer to a nuclear war than we have ever been. Under Hillary Clinton, we could slide into nuclear war very quickly from her declared policy in Syria.  I sure won't sleep well at night if Donald Trump is elected, but I sure won't sleep well at night if Hillary Clinton elected. We have another choice other than these two candidates who are both promoting lethal policies.

“Oops!”—A World War! - Dmitry Orlov - Over the past week or so I’ve been receiving a steady stream of emails demanding to know whether an all-out nuclear war is about to erupt between the US and Russia. I’ve been watching the situation develop more or less carefully, and have been offering my opinion, briefly, one on one, to a few people’s great relief, and now I will attempt to spread the cheer far and wide. In short, on the one hand, all-out nuclear annihilation remains quite unlikely, barring an accident. But, on the other hand, such an accident is by no means impossible, because when it comes to US foreign policy “Oops!” seems to be the operative term. One reason to be cheerful is that any plan to attack Russia is bound to become mired in bureaucracy. Battle plans are developed by mid-rank people within the US military establishment, approved and forwarded up the chain of command by higher-rank people and finally signed off on by the Pentagon’s top brass and their civilian political accomplices. The top brass and the politicians may be delusional, megalomaniacal and inadvertently suicidal, but the mid-rank people who develop the battle plans are rarely suicidal. If a particular plan has no conceivable chance of victory but is quite likely to lead to them and their families and friends becoming vaporized in a nuclear blast, they are unlikely to recommend it. Another reason to be cheerful is that Russia has carefully limited the Pentagon’s options. One plan that, in the popular imagination, could lead to an all-out war with Russia, would be the imposition of a no-fly zone over Syria. What many people miss is that it is not possible to impose a no-fly zone on a country with a sufficiently powerful air defense system, such as Syria. As a first step, the air defense system would have to be taken out, and the air campaign to do so would be very expensive and incur massive losses in both equipment and personnel. But then the Russians made this step significantly worse by introducing their S-300 system. This is an autonomous, tracked, mobile system that can blow objects out of the sky over much of Syria and some of Turkey. It is very difficult to keep track of, because it can use “shoot and scoot” tactics, launching an attack and crawling away in a random direction over rough terrain. Last on my list of reasons why war with Russia remains unlikely is that there isn’t much of a reason to start one, assuming the US behaves rationally.

Could Falling Chinese Oil Production Kill The OPEC Deal? --Dwindling Chinese oil production could lead the Organization of Petroleum Exporting Countries (OPEC) to delay a freeze deal further, as the Asian giant ramps up its own imports to make up for lost domestic supply. China, which was ranked as the fifth-largest oil producer in the world during 2015, reported a production rate of 3.87 million barrels per day in August—the lowest since December 2009, and the second consecutive month of sharp declines, according to Forbes.Markets will have to reach an oil price of $60 a barrel before Chinese energy companies can grow production operations back to previous highs, analysts speaking to Bloomberg have said.  The China National Offshore Oil Cooperation (CNOOC) can see profits at barrel prices above $41 a pop on average – a figure almost 40 percent higher than the break-even point of select Middle Eastern outlets who can still viably produce in a $25 a barrel market.  Around 15 percent of the oil that China purchases from foreign sources comes from Saudi Arabia – the de facto leader of OPEC, who’s regional rivalry with Iran caused two major efforts at implementing an oil production freeze to fail.Though Saudi Arabia and its fellow OPEC members have agreed to discuss the terms of a deal in the weeks leading up to their official meeting in Vienna at the end of November, the Chinese government’s perspective as a distant observer of the bloc’s internal banter does not give it much power to improve its companies’ prospects.As a group, OPEC controls 40 percent of oil exports while China, on its own, contributes far less to the international markets. Even in 2015 –a year when oil prices were thought be on the road to recovery after the 2014 crash – Sinopec reported that it slashed oil and gas production. Using satellite imagery of China’s oil warehouses, Silicon Valley start-up Orbital Insight Inc. calculated that the country had roughly 600 million barrels of oil in storage as of May – a figure that exceeds existing estimates by roughly one-third.   “There is more storage available in China than the market is willing to acknowledge. Any information around this is valuable.”  In total, China maintains 2,100 commercial storage tanks capable of storing 900 million barrels in total, according to observations made from the satellite imagery. If OPEC and Russia fail to come to an agreement in November, the member states that compete to supply energy to China – notably Iran, Saudi Arabia and Russia – will economically benefit from the China’s falling domestic oil production.

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