OPEC announces production cuts; what that might mean for us…

in a surprise outcome of their meeting on Wednesday in Algiers, members of OPEC agreed to cut their oil production back to as low as 32.5 million barrels per day, or back to roughly what they were producing in January of this year, from their current elevated levels of over 33.2 million barrels a day....however, how they will achieve those cuts, and who would be cutting how much, was left to be worked out at the regular biennial OPEC meeting in Vienna at the end of November....crude oil prices, which had been slumping earlier in the week, jumped over 5% within hours of the OPEC announcement, and ended the day up around 6%....initial opposition from Iran was overcome as Saudi Energy Minister Khalid al-Falih said going into the meeting that Iran, Nigeria and Libya would be allowed to produce "at maximum levels that make sense" as part of any output limits...although this meeting was promoted as an agreement between OPEC and non-OPEC countries, there was no indication of a concurrent commitment to cut production from Russia, who remains skeptical of the deal and continues to budget for $40 oil ...however, as they've been amenable to such an agreement in the past, it's likely they'll go along if the ultimate OPEC resolution results in real cuts...

after closing up $2.38 at $47.05 a barrel on Wednesday, US oil prices continued to rally on the deal on Thursday, tacking on another 78 cents to close Thursday at $47.83 a barrel on NYMEX...but by the next day the first crack appeared in the deal as word came that Iraq's new oil minister Jabar Ali al-Luaibi held a separate press conference in which he stated that the figures OPEC used did not represent Iraq's actual production & therefore they could not accept the deal in its present form...the brief price rally thus stalled on Friday, as traders took profits and the rig count indicated another increase in US drilling activity, ending Friday up just 22 cents at $48.05 a barrel

since the OPEC announcement only represents an agreement to reach an agreement in November, oil analysts have been generally dismissive of this week's deal... the range of oil output that will be cut by OPEC is expected to be between 200,000 and 700,000 barrels a day from their current production, an amount that could easily be overwhelmed by the 400,000 barrels a day increase in output Russia is expected to log in September, if Russian output holds at that level....but there is no agreement on how much oil would have to be cut from current global production to bring supply and demand back into balance...some argue that it's already close, and will occur sooner rather than later, while on the other extreme, Venezuela's Oil Minister Eulogio del Pino argues that global oil production needs to be cut 9 million barrels per day, of nearly 10%, to sustain the current level of consumption...

to my memory, as oil prices were falling throughout most of 2015, there seemed to be a general consensus that global oil output was between 2 and 2.5 million barrels per day in excess of what was needed...then in the spring of 2016, as the Alberta wildfires cut a million barrels per day from Canadian production during an acceleration of attacks on oil facilities and pipelines in Nigeria, nearly 2.5 million barrels of oil per day was taken out of production globabally, and oil prices rose 80% from their lows as demand for oil briefly exceeded supply...since the May Canadian shutdown was temporary, and since both Nigerian and Libyan exports are rising again, we're certainly back into an output surplus situation today, but i've seen no hard numbers on that recently (although i expect such analysis to be forthcoming shortly, as the possible outcomes of an OPEC cut are sorted out)...

of course, what OPEC ultimately does is going to make a difference to those of us living atop of shale deposits in the US...a Dallas Fed 3rd quarter energy survey of 149 American oil and gas executives released this week showed that less than 10% of oil execs indicated they would increase production substantially if oil prices stayed under $55 a barrel; however, if oil prices rose to the $60 to $64 per barrel range, between 65% and 70% of oil execs indicated they'd then pull out the stops and start drilling everywhere again...the key to whether this deal makes that much of a difference in the price of oil will be the actions of Saudi Arabia, who promised to cut 500,000 barrels per day, which certainly seems to be a reversal of their policy to pump as much as they could that was initiated in November of 2014, which then set the oil price crash in motion...however, since Saudi production normally falls by around 400,000 barrels per day from their summer peak to midwinter for domestic reasons, we likely won't have a good handle on how much they're actually cutting back until next summer's output is in the books...

The Latest Oil Stats from the EIA

the oil data for the week ending September 23rd from the US Energy Information Administration showed cutbacks in both imports and refining activity, and modest drawdowns in supplies of crude oil and distillates, which were offset in the aggregate by increases in supplies of gasoline and propane/propylene...meanwhile, the crude oil fudge factor that was needed to make the weekly U.S. Petroleum Balance Sheet (line 13) balance swung back to +240,000 barrels per day, after last week's -532,000 barrels per day, which meant that 240,000 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...as with last week, when we saw an even larger swing from a positive adjustment in the data to negative one, a swing of such a magnitude in the opposite direction renders most of the comparisons between this week's data and last week's useless (even though they still drive the market), but at least the 4 week average of this statistical adjustment has leveled off at 13,000 barrels per day, so we may be reaching some kind of equilibrium point in the aggregate...

in keeping with this week's apparent statistical shortfall on the supply side, the EIA reported that our imports of crude oil fell by an average of 474,000 barrels per day to an average of 7,835,000 barrels per day during the week ending September 23rd, which was only 3.7% more than the 7,554,000 barrels of oil per day we imported during the week ending September 25th a year ago...that drop served to push the 4 week average of our oil imports reported by the EIA's weekly Petroleum Status Report (62 pp pdf) down to an average in the range of 7.8 million barrels per day, now just 6.5% higher than the same four-week period last year... our exports of crude oil were also down, by an average of 81,000 barrels per day to an average of 507,000 barrels per day for the week, apparently less than last year's exports of 526,000 barrels per day in the same September week, at a time when these weekly export estimates were less reliable..

the EIA also reported that production of crude oil from US wells fell by 15,000 barrels per day to an average of 8,497,000 barrels per day during the week ending September 23rd, as output of Alaskan oil fell by 10,000 barrels per day and production from the lower 48 states was 5,000 barrels per day lower, the first decrease in continental US oil production in 4 weeks....the week's domestic oil production was thus 6.6% lower than the 9,096,000 barrels we produced during the week ending September 25th of last year, and 11.6% below the record 9,610,000 barrel per day oil production that we saw during the week ending June 5th last  year...that also left our oil production for the week ending September 23rd 722,000 barrels per day lower than what we were producing at the beginning of 2016...

at the same time, the amount of crude oil used by US refineries fell by an average of 253,000 barrels per day to an average of 16,334,000 barrels of crude per day during the week ending September 23rd, the third significant drop in a row, as the US refinery utilization rate fell to 90.1% for that week, down from 92.0% of capacity the prior week, but up from the refinery utilization rate of 89.8% seen during the week ending September 25th last year...US oil refining is now down by 594,000 barrels per day, or 3.5%, in the 3 weeks since Labor Day, and if the past seasonal patterns hold, will likely remain slow until Thanksgiving...nonetheless, the amount of crude refined this week nationally was still 2.3% more than the 15,962,000 barrels of crude per day US refineries used during the week ending September 25th last year, and 4.1% more than was refined during the equivalent week in 2014 ...    

the large drop in crude oil being refined, combined with the ongoing seasonal switch in refinery processes, led to a 528,000 barrel per day drop in our refineries’ production of gasoline to 9,555,000 barrels per day during the week ending September 23rd, our  lowest gasoline output since the week ending April 22nd...that was also 1.2% lower than our gasoline output of 9,674,000 barrels per day during the week ending September 25th last year, but it was still 5.6% higher than the gasoline production of the equivalent week of 2014....at the same time, refinery output of distillate fuels (diesel fuel and heat oil) was also down, falling by 269,000 barrels per day to 4,709,000 barrels per day during the week ending September 23rd, the lowest distillates output since May 6th....that left our distillates output 6.0% less than the 5,010,000 barrels per day that was being produced during the same week last year, and 4.0% less than the 4,907,000 barrels per day of distillates production during the equivalent week of 2014...  

however, even with what appears to be the largest one week drop in gasoline production since the end of February, our gasoline supplies rose by 2,027,000 barrels to 227,183,000 barrels as of September 23rd, the biggest jump in gasoline inventories since May 20th...contributing to the gasoline supply jump was a 209,000 barrel per day increase to 778,000 barrels per day in our gasoline imports and a 770,000 barrel per day drop to 8,800,000 barrels per day in our domestic demand for gasoline, as refiners supplied less gasoline to US markets than in any week since the end of January.....that left this week's gasoline inventories 2.3% higher than the 222,010,000 barrels of gasoline that we had stored on September 25th last year, and 9.0% higher than the 208,488,000 barrels of gasoline we had stored on September 26th of 2014...at the same time, our distillate fuel inventories fell by 1,915,000 barrels to 163,077,000 barrels by September 23rd, which nonetheless still left our distillate inventories 7.6% above the distillate inventories of 151,608,000 barrels of September 25th last year, and 29.7% above the distillate inventories of 125,701,000 barrels of September 26th 2014....

lastly, with the drop in oil imports exceeding the drop in oil demand from refineries while oil production remained stable, our inventories of crude oil fell by 1,882,000 barrels to 502,716,000 barrels as of September 23rd, the 4th oil inventory decrease in a row....nonetheless, we still ended the week with 9.8% more crude oil in storage than the 457,924,000 barrels we had stored as of the same weekend a year earlier, and 41.0% more crude oil than the 356,635,000 barrels we had stored on September 26th 2014... 

This Week's Rig Count

US drilling activity increased for the 2nd week in a row during the week ending September 30th and has now been up 15 out of the last 18 weeks...Baker Hughes reported that the total count of active rotary rigs running in the US rose by 11 rigs to 522 rigs as of Friday, which was still down from the 809 rigs that were deployed as of the October 2nd 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 7 rigs to 425 rigs this week, and they're now up by 110 since the May 27th bottom, but they're still down from the 614 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...meanwhile, the count of drilling rigs targeting natural gas formations rose by 4 rigs to 96 rigs this week, the biggest jump in gas rigs since June 24th, following last week's 19 month high for natural gas prices...however, gas rigs were also still down from the 195 natural gas rigs that were drilling a year ago, and down from the recent natural gas rig high of 1,606 rigs that were deployed on August 29th, 2008...a single rig that was classified as miscellaneous also remained, up from a year ago when there were no miscellaneous rigs at work...  

one of the rigs started up this week was on a drilling platform offshore from Louisiana...that brought the Gulf of Mexico rig count up to 21, which was still down from the 29 rigs that were working in the Gulf of Mexico last year at this time...in addition, another platform was set up to drill offshore from Alaska, but i saw no news on this, so i dont know exactly where they're drilling offshore Alaska at this time of year; this spring and summer, there had been an offshore platform working off the Cook Inlet, but it seems rather late in the season to start driling that far north at this time of year...nonetheless, that addition brought the total US offshore count up to 22 rigs, down from 30 offshore rigs a year ago..

the number of working horizontal drilling rigs rose by 5 rigs to 407 rigs, which was still down from the 609 horizontal rigs that were in use on September 25th of last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...in addition, the vertical rig count rose by 4 rigs to 64 rigs this week, which was down from the 117 vertical rigs that were drilling in the US during the same week last year...at the same time, the directional drilling rig count increased by 2 rig to 51 rigs, which was also down from the 83 directional rigs that were deployed 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 annual rig count changes for the major producing states, and the second table shows weekly and annual rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of September 30th, the second column shows the change in the number of working rigs between last week (September  23rd) and this week (September 30th), the third column shows last week's September 23rd 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 October 2nd of 2015:        

in addition to the changes shown in the major oil & gas producing states shown above, Baker Hughes state tables show that both Alabama and Arkansas saw a drilling rig added this week, while a single rig was removed from Mississippi...Alabama now has two rigs, down from 3 rigs a year ago, and Arkansas now has 1 active rig, also down from 3 rigs a year ago, while Mississippi now has 3 rigs running, down from 5 active drilling rigs a year ago...

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Clinton criticism of coal boosts Trump in struggling southeastern Ohio - Columbus Dispatch -- Taylor Hughes went from making $32 an hour working in a pair of eastern Ohio coal mines to making $10 an hour doing maintenance for a local veterans office. The 34-year-old Army veteran from Neffs, an unincorporated town in Belmont County about 5 miles west of the Ohio River, said he’s making ends meet doing side jobs. But he misses the steady work and good pay of the coal mines, which remain a key employer in this hardscrabble region. He has mixed feelings about the presidential candidates, but he’s supporting Donald Trump. I like the fact that they say Trump is for the coal mines,” he said while manning the phones for a moment in a Bellaire office. “I think he’s going to fight to keep them open.” Southeastern Ohio, which has been slowly turning away from Democrats, appears poised to back Donald Trump and his talk on trade, manufacturing jobs and coal. Trump nearly swept the region over Gov. John Kasich in the Republican primary in March, and he appears headed for a repeat against Hillary Clinton — who seemingly would appeal to traditional working-class voters. “This year, they haven’t given us much to choose from, but I’d never vote for a Clinton, especially that one. She lies and plays to whatever the audience wants to hear,” said Mark McKeever, 56, of St. Clairsville, McKeever doesn’t always vote Republican, but he hopes that Trump can “bring some of the jobs back” as he proceeds to name plants and coal mines that have closed or scaled back along the Ohio River. “We need change in there.”  The economic hardships in southeastern Ohio are real: All five Ohio counties that had unemployment rates higher than 7 percent in August are in the southeast. 

Utica Shale Production Has Jumped 35-Fold in Ohio - –As natural gas production from Utica Shale wells soared 35-fold over the last three and a half years, several national environmental groups are advocating a “keep it in the ground” strategy to halt further drilling and fracking efforts for fear of potential water and air pollution. However, officials with the U.S. Chamber of Commerce claim that failing to frack would cost the nation 4.3 million jobs and $548 billion worth of annual gross domestic product. “The ‘Keep It in the Ground’ movement completely ignores the vast benefits to Pennsylvania and our nation’s economy that the energy renaissance has brought to us,” Karen Harbert, president and CEO of the U.S. Chamber’s Institute for 21st Century Energy, said. “For instance, lower electricity and fuel prices spurred a comeback in manufacturing that alone is responsible for nearly 400,000 American jobs. It costs consumers less to drive a car and heat their homes today. “And all the while, our nation has been decreasing its energy imports and lowering emissions.” According to the U.S. Energy Information Administration, natural gas production from the Utica Shale formation jumped from just about 100 million cubic feet per day in December 2012 to 3.5 billion cubic feet per day in June. Oil yields for the region also spiked from 4,400 barrels per day to 76,000 barrels per day during the same time period. Drillers operating in the eastern Ohio Utica Shale include Rice Energy, Gulfport Energy, XTO Energy, Ascent Resources, Antero Resources, Eclipse Resources, Magnum Hunter and others. If the Marcellus and Utica shale boom did not occur, U.S. Chamber officials believe the state of Pennsylvania would have 118,000 fewer jobs and $13 billion less in annual GDP. “The energy renaissance in this country would not have happened without Marcellus and Utica shale, and Pennsylvania is blessed to sit atop the lion’s share of those resources,”

In gas drilling country, the honeymoon is over on royalties  (AP) — Jan Brown pores over his royalty statement and wonders where all the money went. A few months ago, the nation’s second-largest natural gas producer siphoned $2,201 worth of gas from his 240-acre property — but paid him only $359 after taking deductions for transportation and processing. Brown, 59, who relies on the royalties as his sole source of income, says the deductions are outrageous and claims his lease forbids them. He feels cheated and duped. In Pennsylvania and other leading gas-producing states, a battle royal has developed over royalties, with landowners bitterly disputing the sums that some drillers have been taking from royalty checks already severely diminished by a collapse in prices. Chesapeake Energy Corp. alone is facing royalty lawsuits in Texas, Ohio, Louisiana, Oklahoma, Arkansas and Pennsylvania — including one filed by the Pennsylvania attorney general — and says it has received subpoenas from the U.S. Department of Justice, the U.S. Postal Service and states over its royalty practices. The deductions’ impact is especially acute in Pennsylvania, where gas extracted from the Marcellus Shale, the nation’s largest natural gas field, has been selling at a steeper discount than anywhere else in the country. Some landowners have seen their royalty checks dwindle to nothing at all, despite a 1979 state law that mandates a landowner royalty of at least 12.5 percent of the value of the gas. In rare cases, landowners have even gotten statements with negative balances. “This is robbery,” declared Bradford County Commissioner Doug McLinko, an ardent supporter of gas drilling who has nevertheless found himself at war with the industry. “People up here are fighting mad.”

Pennsylvania Justices Strike Down Frack Anywhere Law -- In a wide-ranging ruling reviewing “special treatment” granted to Pennsylvania’s oil and gas industry by the General Assembly, the state Supreme Court has struck down several sections of Act 13, the state’s oil and gas law, including provisions that allowed gas companies to employ eminent domain, exempted private water sources from notification after a spill and prevented doctors from disclosing information about their patients’ chemical exposures.The justices’ ruling in Robinson Township v. Commonwealth, issued late Wednesday, is the high court’s second swipe at the law passed in 2012 by Republican Gov. Tom Corbett. In a landmark 2013 decision under the same caption, the court struck down portions of the act that had allowed drilling in all zoning districts.John Smith of Smith Butz, who argued before the court on behalf of the group of municipalities challenging the law, said the two rulings combined represent the most significant action in the Supreme Court in decades because of the broad swath of Pennsylvanians they will affect. The legislature and industry’s intent in passing Act 13 has been “wiped out,” Smith said. “Their intent was to control local governments and to allow drilling everywhere. That’s gone,” he said. “Their intent to basically place the oil and gas corporate rights ahead of Pennsylvania citizens is gone.”’

Pro-Fracking Law Ruled Unconstitutional by Pennsylvania Supreme Court -- The Pennsylvania Supreme Court has ruled that the state's controversial Act 13 is unconstitutional , calling it a special law that benefits the shale gas industry. The massive Marcellus Shale formation, which underlies a large area of Western Pennsylvania, provides more than 36 percent of the shale gas produced in the U.S.   The Pennsylvania State Legislature passed Act 13 in 2012 and it was almost immediately challenged by seven of the state's municipalities along with the Delaware Riverkeeper Network and a private physician. The onerous law enabled natural gas companies to seize privately owned subsurface property through eminent domain, placed a gag order on health professionals to prevent them from getting information on drilling chemicals that could harm their patients, and limited notification of spills and leaks to public water suppliers, excluding owners of private wells that supply drinking water for 25 percent of Pennsylvania residents. Act 13 also pre-empted municipal zoning of oil and gas development.  "The decision is another historic vindication for the people's constitutional rights," stated Jordan Yeager, lead counsel on the case representing the Delaware Riverkeeper Network and Bucks County municipalities on the case. "The court has made a clear declaration that the Pennsylvania legislature cannot enact special laws that benefit the fossil fuel industry and injure the rest of us."   On Dec. 19, 2013, the state Supreme Court issued a narrow ruling on the grounds that the law violated the Environmental Rights Amendment of the Pennsylvania Constitution. That ruling returned local zoning rights to municipalities. It also ordered the state Commonwealth Court to reconsider other provisions. The ruling by the Supreme Court issued Wednesday addresses those rulings and should end the litigation.

US Justice Department Issues Subpoena to Chesapeake Energy - The U.S. Department of Justice has issued a subpoena to Chesapeake Energy Corp. that seeks information on the oil and natural gas producer's accounting methods for the acquisition and classification of oil and gas properties. Oklahoma City-based Chesapeake disclosed the subpoena, which is part of a Justice Department investigation, on Thursday in a regulatory filing with the U.S. Securities and Exchange Commission. The filing says Chesapeake has been involved in discussions with the Justice Department, the U.S. Postal Service and representatives of state agencies and will continue to respond to such subpoenas and demands.  Gordon Pennoyer, director of communications and investor relations for Chesapeake, declined further comment on the filing Friday. The Justice Department and other agencies asked Chesapeake for documents, testimony and information related to the company's oil and gas leases and purchases as part of its antitrust investigation, the Journal Record reported ( http://bit.ly/2dwWCJ5 ). Chesapeake alluded to being investigated in its 2015 annual report, filed with the SEC on Feb. 25, 2016. The company was named in several lawsuits alleging underpayment of royalties and defended cases in Arkansas, Louisiana, Ohio, Oklahoma, Pennsylvania and Texas. University of Central Oklahoma economics professor Jeremy Oller, an expert witness on antitrust legal matters, said the Justice Department is likely examining other oil and gas companies as part of the investigation.

EPA Must 'Correct Top Claim in Major Fracking Study' -- Led by Food & Water Watch , more than 200 public interest and environmental groups sent a letter to the U.S. Environmental Protection Agency (EPA) today, urging the agency to heed the recommendation of its own independent Science Advisory Board (SAB) and clarify the seemingly unsupported top-line finding of the June 2015 draft fracking report .  The EPA's June 2015 draft of the study featured a dismissive and unsupported topline finding—that fracking has not led to "widespread, systemic" problems nationally, as if that should be the bar. The groups back the SAB's recommendation that the EPA either drop the controversial language or provide a "quantitative analysis" to support it.  The letter, signed by hundreds of national, statewide and local environmental and public interest groups, representing millions of members, was sent directly to EPA Administrator Gina McCarthy. It is being sent on the heels of an EnergyWire FOIA report indicating that the Obama White House was engaged in the "messaging" for the rollout of the controversial EPA study, stating that "White House aides kept tabs on what the 'topline messages' would be."  In the letter, environmental groups specifically call on the EPA to revisit its statement of findings, consistent with the SAB recommendations, and resolve the three major problems with the controversial line:

• 1. The EPA did not provide a sense of what the agency would have considered "widespread, systemic impacts on drinking water resources in the United States."
• 2. The "widespread, systemic" line is problematic because it presumes, without discussion, that looking on a national scale, over several years, provides an appropriate metric for evaluating the significance of known impacts.
• 3. The "widespread, systemic" line is problematic because the EPA failed to explain adequately the impediments to arriving at quantitative estimates for the frequencies and severities of the impacts already occurring.

Estimating rates for new crude oil pipelines - Many factors are weighed before a midstream company commits to building, or a shipper commits to shipping on, a major crude oil pipeline. Where is incremental pipeline capacity needed? What would be the logical origin and terminus for the pipeline? What should the project’s capacity be, and what would be the capital cost of building the project? Where the economic rubber really meets the road is the question of what unit cost––or rate per barrel––would the pipeline developer need to charge to recover its costs and earn a reasonable rate of return on its investment. Today we continue our review of crude oil pipeline economics with a look at the rules-of-thumb for determining what pipeline transportation rates would be. In Part 1 of this series we discussed the fact that new pipeline development is driven by either need or opportunity, and more often than not, a combination of the two. The key question that pipeline developers and their customers (the shippers) have to consider before committing to build new capacity, we said, is whether it will “pay” to flow crude on the pipeline once it’s built––not just the first year or the first three, but for years if not decades to come. To answer this question, pipeline developers and shippers have to consider both current and future economics. There are three fundamental factors that drive pipeline economics: 1) future supply dynamics (and the resulting price impact) at the origination point (Point A); 2) future demand (and price) at the destination point (Point B); and 3) the transportation cost to flow crude from Point A to Point B. In Part 2, we focused on estimating capital costs. We went through a geometry exercise to confirm an already-popular industry rule-of-thumb for estimating the diameter of the pipe to reach a certain capacity. We also explained and used a “cost per inch-mile” approximation to figure out what the pipe itself would probably cost, then included standard rough estimates of the cost for everything else: the pumps, storage, and meters necessary for the pipeline to work.  We confirmed those numbers by reviewing some pending new projects, and ultimately got to the example of a 200-Mb/d crude oil pipeline 500 miles long costing $990 million to build.  

Permian Gas Output Remains High; Processing Capacity Being Added -- Natural gas production volumes in the Permian Basin are very near the all-time record of 6.9 Bcf/d set last September, and crude oil and gas producers alike see nothing but blue skies for the highly prolific West Texas/Southeast New Mexico play. The Permian already has a lot of gas processing capacity, but a good bit of it is older, and parts of the region—especially the super-hot Delaware Basin—need more of the big, efficient cryogenic plants that can process 100 to 200 MMcf/d. Today, we continue our review of gas production and processing in the biggest U.S. gas-producing region that is not named Marcellus.  The past two years have been a challenging time for crude oil and natural gas producers in most of the U.S., but much less so for exploration and production companies in the 75,000-square-mile Permian Basin. In rock ‘n’ roll terms, the Permian is a lot like Bruce Springsteen––it’s been a consistent producer (of both gas and oil) for decades, and it has more respect today than ever. (You might even call the Permian “The Boss” of hydrocarbon output.) Thanks to favorable production economics and multiple pay zones, output levels in the Permian dipped only slightly as oil and gas prices tumbled, and have since rebounded. As we said in Part 1 of our series, crude oil has always been the big draw for Permian producers, but most of the wells there also produce large volumes of liquids-rich or “wet” natural gas that needs to be processed to extract natural gas liquids (NGLs). In its latest Drilling Productivity Report, the Energy Information Administration (EIA) projected that the Permian would produce an average of nearly 6.9 Bcf/d in October (2016), only 30 MMcf/d less than it did at its peak a year ago. Gas production in the Eagle Ford in South Texas, meanwhile, is projected to fall below 5.6 Bcf/d in October—a 25% drop from its all-time  high in February 2015.

Latinos disproportionately breathe toxic air from big oil and gas - Latinos are 51 percent more likely to live in counties with unhealthy levels of ozone and nearly two million are living less than half a mile from oil and gas facilities, a National Hispanic Medical Association (NHMA) report found. Toxic oil and gas emissions stemming from the summer ozone season alone are causing Latino children some 153,000 asthma attacks and 112,000 lost school days, according to the report published this month. In addition, the report notes that while Latinos made up 17 percent of the U.S. population in 2014, they make up 20 percent of the population in counties with high cancer risk due to oil and gas emissions. This report is the first to quantify the elevated health risk faced by millions of Latinos — who are also more likely to be poor and uninsured — due to pollution from oil and gas facilities like wells, refineries, and storage tanks. Oil and gas facilities are known to emit cancer-causing benzene, hydrogen sulfide, and formaldehyde. Benzene has been linked to cancer, anemia, brain damage, and birth defects, and it is associated with respiratory tract irritation. Hydrogen sulfide gas at high concentrations can cause severe respiratory irritation and death. Formaldehyde has been linked to cancer. It’s been estimated that oil and gas sources produced nearly 22,000 tons of formaldehyde in 2011. The report also comes as the United States Commission on Civil Rights found that the U.S. Environmental Protection Agency (EPA) is failing its environmental justice obligations and struggling to help poor communities of color suffering the effects of pollution. According to the report, more than 1.78 million — or 3 percent of Latinos — live in areas where toxic air from oil and gas production is so high that the associated cancer risk exceeds the EPA’s so-called level of concern.

Navajo Nation lawmakers want study on impact of fracking - KFDA - (AP) - The Navajo Nation is seeking further investigation into the potential environmental fallout of hydraulic fracturing as it looks to update its energy policies. The Farmington Daily Times reports (http://bit.ly/2daZH5w ) that tribal legislators are pushing for a better understanding of energy industry practices as well as any necessary revisions of rules surrounding oil and gas production. The issue of hydraulic fracturing, or fracking, has taken a greater precedence in recent months. Council Delegate Jonathan Hale introduced legislation in April opposing oil and gas drilling on the Navajo Nation. Navajo Nation Oil and Gas Company CEO Louis Denetsosie, however, has said the bill is "not based in sound science." The conflict fueled a tribal committee's request for a scientific study. The tribal council has issued a Dec. 31 deadline for the study.

North Dakota asks pipeline company to explain ranch purchase  (AP) — North Dakota Attorney General Wayne Stenehjem is asking the developer of the four-state Dakota Access oil pipeline to explain its purchase of a ranch where a protest turned violent earlier this month. Texas-based Energy Transfer Partners recently purchased the 7,000-acre ranch last week for an undisclosed price. Stenehjem is giving the company 30 days to say how the land, where tribal officials said construction crews destroyed burial and cultural sites, will be used. North Dakota law generally bars corporations from owning agricultural land unless the property is controlled by a farm family. The company must prove to the state how its purchase complies with the Depression-era anti-corporate farming law.

21 Arrested During Peaceful Prayer Ceremony at Standing Rock -- The Morton County Sheriff's Department, whose officers used mace and unleashed dogs on Dakota Access Pipeline protestors earlier this month, sent in armored vehicles and arrested 21 people Wednesday at two sites. But a video released by those at the Sacred Ground Camp shows unarmed protestors conducting a prayer ceremony involving the planting of willow and corn. "We had a really nice ceremony," said a Sicangu Lakota grandmother. "Then we looked and over that way, there were a few police and the next thing we knew there were 40 police all in riot gear." Police moved in as peaceful demonstrators stood with their hands up. The video then shows officers confronting the protestors, grabbing women and ordering everyone into their cars."I've never had a gun pointed at me," said the grandmother. "I went into shock." In a press release issued Wednesday by the Morton County Sheriff's Department, they allege that "a protester on horseback charged at an officer in what was viewed as an act of aggression."Another video shows at least three riders on horseback but does not show any "charging" toward officers. At least one officer raised his weapon toward the civilians even as they shouted, "We are unarmed. We have no weapons." According to the Indian Country news site, Indianz.com , Morton County Sheriff Kyle Kirchmeier "has previously come under fire for spreading his own rumors. As thousands began to flock to North Dakota in early August, he claimed there were pipe bombs at the encampment but resisters told The New York Times that he was mistaken by the presence of sacred Chanunpa pipes used during ceremonies."

As tribes continue to resist Dakota Access pipeline, oil exec suggests paying them off -- A top oil executive with North Dakota’s largest oil producer said the stalemate between tribes and the controversial Dakota Access pipeline that’s sparked mass protests across the country could end if tribes got oil service contracts. James J. Volker, chief executive officer of Whiting Petroleum, told Reuters tribal grievances against the $3.8 billion pipeline could be solved if the industry gave tribes economic opportunities. That would including contracting with Native American-owned firms for water hauling and other oil-related jobs. “We as an industry like to see them provide those services,” Volker told Reuters Tuesday while at the Independent Petroleum Association of America symposium in San Francisco. “It does provide a better standard of living for them. It does provide a direct tie to the energy business and makes them and their tribal leaders more inclined to want to have more energy development.” The Dakota Access pipeline — a 1,172-mile project about as long as the Keystone XL line — would be the largest oil pipeline out of North Dakota’s Bakken oil field. It would move daily more than half a million barrels of crude oil through the Dakotas, Iowa, and into a hub in Illinois. The Standing Rock Sioux Tribe has long opposed the project, saying the pipeline puts the Missouri River it’s set to cross at risk of an oil spill, meaning the tribe’s sole water supply is also in harms way. In addition, the tribe claims it wasn’t properly consulted and that ancestral cultural resources are at risk of destruction, since the pipeline would run through federal land less than half a mile away from their reservation. The tribe’s opposition has inspired protests across the country, backed by 200 tribes and numerous environmental organizations.

Mainstream Media Still Silent As Dakota Access Pipeline Protests Spread, Construction Blocked In Iowa --The media blackout of opposition to the Dakota Access Pipeline continues as widening protests, which have now blocked pipeline construction in Iowa, go unreported by the national corporate media. The “Mississippi Stand” water protector encampment in Sandusky, Iowa, successfully blockedDakota Access Pipeline construction as of Saturday, September 24th. The protests are taking place where the pipeline is planned to cross the Mississippi River. Water protectors attached themselves to construction equipment in acts of civil disobedience until they were eventually arrested — but police failed to corral them before they halted the pipeline’s construction. Law enforcement arrested a total of 12 people on Saturday at the Mississippi Stand site, according to independent media outlet Unicorn Riot. At least 44 people have been arrested at the Iowa protest site in previous weeks.At issue is the $3.8 billion Dakota Access oil pipeline that Native American tribes, led by the Lakota Sioux, say will endanger tribal and public fresh water across an area that spans several states. In a statement to Unicorn Riot, the Mississippi Stand confirmed their opposition to the Dakota Access Pipeline:“Mississippi Stand comes together in solidarity with Standing Rock, because we acknowledge the importance of the protection and preservation of Native Land. It’s crucial that all water protectors rise up together to fight for our Mother Earth, and all who inhabit this beautiful planet. This begins with defending our most valuable life source, water.” Meanwhile, protests continue near the Standing Rock camp at the Dakota Access Pipeline construction site in North Dakota despite the Justice Department’s order to stop construction on Army Corps of Engineer land. Twenty-one water protectors were arrested on Wednesday alone as militarized police with armored vehicles and shotguns descended upon peaceful protesters. The protesters were arrested for trespassing and resisting arrest, among other charges, Rob Keller of the Morton County Sheriff’s Department confirmed to Anti-Media. Since the corporate media has repeatedly shown it is unwilling to cover the Dakota Access Pipeline protests, stay up to date by checking out Anti-Media’s coverage here.

Bakken producers losing the East Coast market to rising imports -- The prospects for sellers of Williston Basin/Bakken crude oil in what once was a prime growth market—the U.S. East Coast—have been dwindling fast, as have the volumes of Bakken crude being railed and barged to refineries along the Mid-Atlantic coast and the Canadian Maritimes. Today we look at how a combination of weak crude oil prices, declining production, high relative freight costs, and the lifting of the U.S. crude oil export ban have opened the door to more imports from West Africa, and left Bakken producers out in the cold.  The Bakken remains an American success story, but the play’s star has certainly faded along with declining crude prices. As North Dakota oil production ramped up in 2013 and 2014 (peaking at 1.3 MMb/d in December 2014), shipments of Bakken crude to the U.S. East Coast via rail rose in tandem.  From only 10 Mb/d in 2011, Bakken barrels railed to the East Coast ultimately reached 431 Mb/d in May 2015 (see While CBR Gently Weeps). In the early days of CBR, midstream companies, marketers and refiners rushed to develop the infrastructure (rail terminals, rail fleets, etc.) to serve refineries in the Mid-Atlantic states and Maritime Canada. But unfortunately, about the time all that infrastructure was in place, crude prices started to decline, the number of active drilling rigs in the Bakken plummeted, and crude oil production there fell to less than 1.0 MMb/d.  The decline in production continues today; Energy Information Administration’s (EIA’s) Drilling Productivity Report projects that Bakken crude production now (as of September 2016) languishes at only 875 Mb/d. Rail shipments to the East Coast in June 2016 averaged only 132 Mb/d, a decline of 69% since the peak in May 2015.

Technology designed to detect U.S. energy pipeline leaks often fails | Reuters: On a routine check of a surface coal mining facility in rural Alabama early this month, inspector Randall Aldridge first smelled gasoline. Then he saw dead plants and animals along a man-made pond that helps the region manage heavy rain. The cause had nothing to do with a mine. Aldridge happened upon a leak on the main fuel artery to the U.S. East Coast known as the Colonial Pipeline, in what turned out to be the company's largest gasoline spill in nearly 20 years. Colonial Pipeline Co and its peers in the oil and gasoline transport sector, tout high-tech, complex leak detections systems that measure hydraulic data and count on overhead flights and other measures to ensure their pipelines work efficiently and safely. But the fact these systems did not flag the Colonial Pipeline spill is not unique. A Reuters review of U.S. federal records shows that sensitive technology designed to pick up possible spills is about as successful as a random member of the public like Aldridge finding it, despite efforts from pipeline operators. In the past 20 months, Colonial has had eight pipeline spills across its 5,500-mile (8,851 km) fuel pipeline system. None of them were uncovered by the company's primary leak-detection system, according to federal data. The issue stretches beyond Colonial. Over the last six years, there have been 466 incidents where a pipeline carrying crude oil or refined products has leaked. Of those, 105, or 22 percent, were detected by an advanced detection system, according to a Reuters analysis of U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA) data.

The New EIA DUC Estimates and U.S. Oil & Gas Production -- At long last, the Energy Information Administration (EIA) has reported an “official” estimate of the U.S. drilled-and-uncompleted well (DUC) inventory as part of its monthly Drilling Productivity Report.  DUCs are a critical factor in forecasting production trends, as many of these wells are likely to be some of the first to come online as soon as prices move higher and thus have the potential to boost production quicker and easier than would otherwise be the case. However, the number of DUCs has been a difficult thing to measure, though not for lack of trying. There are, in fact, widely varying counts from many different sources circulating in the industry. Today, we begin a short series on these latest DUC counts and their potential implications.  Drilled-and-uncompleted wells, or DUCs, aren’t a new phenomenon. In fact, producers have always carried an inventory of DUCs. But in the environment of low prices and slashed capital budgets the market has been experiencing for the past 20 months or so, DUCs have taken on new relevance, not only as a tool for producers to manage their lease agreements and rig activity, but also as a control valve for production volumes, whether it is to defer supply to a future date or to quickly and economically turn on new production as prices rebound and/or as pipeline capacity is built. You can imagine, then, how without an accurate estimate of DUCs and the rate of actual completions, the current market is ripe for underestimating future production volumes that solely rely on existing and newly drilled wells.

Mothballing the World's Fanciest Oil Rigs Is a Massive Gamble -- In a far corner of the Caribbean Sea, one of those idyllic spots touched most days by little more than a fisherman chasing blue marlin, billions of dollars worth of the world’s finest oil equipment bobs quietly in the water. They are high-tech, deepwater drillships -- big, hulking things with giant rigs that tower high above the deck. They’re packed tight in a cluster, nine of them in all. The engines are off. The 20-ton anchors are down. The crews are gone. For months now, they’ve been parked here, 12 miles off the coast of Trinidad & Tobago, waiting for the global oil market to recover.The ships are owned by a company called Transocean Ltd., the biggest offshore-rig operator in the world. And while the decision to idle a chunk of its fleet would seem logical enough given the collapse in oil drilling activity, Transocean is in truth taking an enormous, and unprecedented, risk. No one, it turns out, had ever shut off these ships before. In the two decades since the newest models hit the market, there never had really been a need to. And no one can tell you, with any certainty or precision, what will happen when they flip the switch back on. It’s a gamble that Transocean, and a couple smaller rig operators, felt compelled to take after having shelled out millions of dollars to keep the motors running on ships not in use. That technique is called warm-stacking. Parked in a safe harbor and manned by a skeleton crew, it typically costs about $40,000 a day. Cold-stacking -- when the engines are cut -- costs as little as $15,000 a day. Huge savings, yes, but the angst runs high. “These drillships were not designed to sit idle,” said Willard Duffey Jr., an electrician who spent two decades with Transocean. The Deepwater Pathfinder, a ship he had served on for four years, was among the first to be parked off the Trinidad coast. The ship made the voyage there from the Gulf of Mexico about a year ago. “To get the Pathfinder back up would be very difficult to guess actually,” he said.

Dallas Fed: Oil and Gas Activity Rises in Third Quarter - Surveys and reports from the Federal Reserve Bank of Dallas are now available for the third quarter. The business activity index – the survey’s broadest measure of conditions facing Eleventh District energy firms – was up from 13.8 in the second quarter to 26.7. While the survey still shows weakness in both industry employment and production, it does show some encouraging improvement. Oil and gas production, according to E&P firms, fell for the third consecutive quarter, yet at slower rate. Also of note in the report was the poll the Fed conducted that received participation from 149 oil and gas executives. They asked, What WTI price do you think is necessary for U.S. crude oil drilling activity to substantially increase? In an almost unanimous response, executives believe that $50 per barrel is the magic mark, with some indicating $55 as the number that will allow substantial increases in activity. Below is the graph that shows the poll results.Results also showed that most executives did not expect the price of oil to rise until at least the middle of the second quarter 2017. To read the rest of the report go to the Dallas Federal Reserve website. You can also sign up there to be one of their survey panelists.

SEC: Weatherford International oil firm to pay $140M fine  (AP) — Oilfield-services company Weatherford International PLC has agreed to pay a $140 million fine to settle government claims that it used fraudulent tax accounting to inflate its earnings. The Securities and Exchange Commission announced the settlement Tuesday with Weatherford, which is based in Switzerland and has major operations in Houston. According to a settlement order, Weatherford issued financial statements that inflated its earnings by more than $900 million between 2007 and 2012. The company was forced to restate financial results three times, at least partly due to a tax-accounting fraud orchestrated by two former tax executives to make the company’s tax rate match estimates that had been given to analysts and investors, the SEC said. The scheme was intended to make a Weatherford tax-reduction structure look far more successful than it was, the SEC said. Weatherford restated previous results in 2011, which knocked $1.7 billion off the company’s stock market value, and twice more in 2012. The company and the former executives consented to the SEC order without admitting or denying the findings. James Hudgins, the vice president of tax, resigned in 2012. He was ordered to pay $334,067 to cover a civil penalty and ill-gotten gains, according to the settlement. Darryl Kitay, a tax manager who was fired in 2013, was ordered to pay a $30,000 civil penalty. Over the past four years Weatherford agreed to pay $173 million to settle shareholder lawsuits over the financial restatements, according to company filings.

Oil And Gas Bankruptcies Set To Double This Year - Creditors from bankrupt oil and gas companies are suffering in the current climate, as loan recovery rates have plummeted while insolvencies have increased, which may even be on a par with the collapse of the telecoms industry in the early 2000s, according to Moody’s Investor Service. The branch of the ratings agency which provides credit assessments, research, and risk analysis in 130 countries, has announced that in 2015 a glut of bankruptcies and defaults in the oil and gas sectors, have been encouraged by the low commodity price conditions. Throughout 2015, Moody’s counted that there were 17 oil and gas bankruptcies, with 15 of them coming from the exploration and production sector (E&P). The number of E&P bankruptcies has accelerated this year, with analysts anticipating that the volume of failed E&P companies will reach twice the number for last year.  In comparison, when the telecoms industry boom had turned into bust, Moody’s Database recorded 43 company bankruptcies, during a three-year period between 2001 and 2003. David Keisman, Senior Vice President at Moody’s, suggested that the end result of the current unfolding patterns, could turn out to be a segment wide bust of historic figures.  The knock on effect on creditors has been huge, as the 15 E&P companies who filed for bankruptcy, held debts that totalled at least $100 billion.Recovery rates for E&P bankruptcy in 2015 averaged only 21 percent, a significantly low ratio of arrears being claimed, far lower than the historical average of 58.6 percent. Overall, Moody’s study revealed that the average recovery rate between 1987 and 2015 was 50.8 percent for corporate bankruptcy protection levels in that time. Additionally, at the debt instruments level, in total 81 percent of reserve based loans were recovered in 2015, 17 percent lower than what was retrieved from E&P bankruptcies during 1987 and 2014. Other debt instruments suffered more, high yield bonds recovered a derisory 6 percent, compared to a recorded rate in the low 30 percent range in previous E&P bankruptcies.  The U.S. Federal bank regulator, the Office of the Controller of the Currency, is also keeping a watchful eye on the banks’ oil and gas portfolios, after seeing a rise in undeveloped reserves, which banks have used as collateral for loans.  Overall, the Deloitte report revealed that the debt/EBITDA ratio of a large section of U.S. oil and gas companies has surpassed the asset impairments threshold of over $135 billion by U.S. oil and gas companies.

Low Oil Prices Are Not The Reason Oil Companies Are Going Bankrupt -- The reason oil companies have gone bankrupt over the past few years is not due to “historically low oil and natural gas prices”. Here is a long term inflation adjusted price chart: Does the current price look historically low on an inflation adjusted basis?  Here is the chart not adjusted for inflation.  Natural Gas prices are closer to the lower end of the price range. Below is the inflation adjusted long term natural gas price  However, for as far back as the above data goes the price of natural gas is regularly between $2-4/mcf. This is the natural range. The higher prices have all been “spikes” due to hurricanes, La Nina events or other short term phenomenon.  Here is the non-adjusted price chart. As you can see these are not historically low prices.The real reason energy companies are going bankrupt is more technical. Reserve base lending for unconventional reservoir projects became a ponzi scheme.This is how it works.

• Step 1) An oil company borrows money or issues equity to drill a well.
• Step 2) The well “discovers” oil. The reason I put discover in quotations is that the resource (not reserve, there is a difference) potential of shale source rocks has been known for decades.
• Step 3) Estimate the resource and reserve potential.
• NB: Resource is properly defined as uneconomic at the current price. Reserve is properly defined as economic at the current price.
• Step 4) Book the reserve as an asset on the balance sheet as per SEC legislation.
• Step 5) Borrow money against the reserve.
• Step 6) Drill more wells and book more reserves and borrow more money.
• Step 7) Repeat until you cannot repeat again.

Americans are addicted to oil: Gasoline consumption is higher than ever before - August was the biggest month ever for U.S. gasoline consumption. Americans used a staggering 9.7 million barrels per day. That’s more than a gallon per day for every U.S. man, woman and child. The new peak comes as a surprise to many. In 2012, energy expert Daniel Yergin said, “the U.S. has already reached what we can call ‘peak demand.'” Many others agreed. The U.S. Department of Energy forecast in 2012 that U.S. gasoline consumption would steadily decline for the foreseeable future. This seemed to make sense at the time. U.S. gasoline consumption had declined for five years in a row and, in 2012, was a million barrels per day below its July 2007 peak. Also in August 2012, President Obama had just announced aggressive new fuel economy standards that would push average vehicle fuel economy to 54 miles per gallon.Fast forward to 2016, and U.S. gasoline consumption has increased steadily four years in a row. We now have a new peak. This dramatic reversal has important consequences for petroleum markets, the environment and the U.S. economy.How did we get here? There were a number of factors, including the the Great Recession and a spike in gasoline prices at the end of the last decade, which are unlikely to be repeated any time soon. But it should come as no surprise. With incomes increasing again and low gasoline prices, Americans are back to buying big cars and driving more miles than ever before.

Two Years Into Oil Slump, U.S. Shale Firms Are Ready to Pump More - WSJ: When oil prices began to plunge two years ago due to a global glut of crude, experts predicted U.S. shale producers would be the losers of the resulting shakeout. But the American companies that revolutionized the oil and gas business with hydraulic fracturing and horizontal drilling are surviving the carnage largely unbowed. Though the collapse in prices caused a wave of bankruptcies, total U.S. oil production has only fallen by about 535,000 barrels a day so far this year compared with 2015, when it averaged 9.4 million barrels, according to the latest federal data.As the oil markets ponder where production will resume when prices pick back up, one clear answer has emerged: America. Goldman Sachs forecasts the U.S. will be pumping an additional 600,000 to 700,000 barrels of oil a day by the end of next year—making up for every drop lost in the bust. Few predicted that in the fall of 2014, when Saudi Arabia signaled that it wouldn’t curb its output to put a floor under crude prices. Oil pundits concluded that a brutal culling would force higher-cost players known as marginal producers—a group that includes shale drillers—out of the market. But the greatest consequence of the Saudi decision and subsequent price drop is that it has delayed costly oil megaprojects, from deep-water platforms off Angola to oil-sands mines in Canada. “The U.S. isn’t the marginal barrel but the most flexible,” said R.T. Dukes, an analyst at Wood Mackenzie. “We’ll be the fastest to snap back.” More than 100 North American energy producers have declared bankruptcy during this downturn, but even companies working through chapter 11 keep pumping oil and gas. Many exit bankruptcy stronger thanks to a balance sheet that has been wiped clean. SandRidge Energy Inc., which filed in May, will exit next month after erasing nearly $3.7 billion in debt. Many shale operators are still struggling at current prices, drilling at a loss and tapping Wall Street for new infusions of cash. But the strongest producers, including EOG Resources and Continental Resources soon will be able to generate enough money to pay for new investments and dividends—as well as boost production—even at low prices, analysts say. U.S. production began inching up in July, shortly after oil prices rebounded to $50-a-barrel territory. Producers quickly put 100 rigs back to work this summer.

How is the US shale boom panning out on global markets? --Snapshot video  - S&P Global Platts managing analyst Hetain Mistry discusses and reviews the latest developments in US ethane exports and related current and future crude, naphtha and NGLs pricing trends and impact on cracker margins in Europe. Also discussed are the latest ethane export infrastructure plans and why producers are pursuing plans to acquire US ethane despite the advantage decreasing due to the oil landscape.

How Fracking is Re-Calibrating Global Geo-Politics -- Oil, whether we like it or not, still remains one of the biggest commodities driving the geo-political manoeuvring of nation states, specifically for the US, the lone hegemon. However, the critical role of oil in shaping US foreign policy over the past many decades has now drastically changed, altering the dynamics of the US’s international relations policies. In fact, many of the country’s policies of engagement and dialogue with its traditional foes such as Iran, Russia and Cuba are possible today because the US is close to achieving a significant milestone for its economy and national security – energy independence. The advent of hydraulic fracturing technology, commonly known as ‘fracking’, which uses an injection of high-pressure fluids (often a combination of water and chemicals) to release oil and gas from crevasses of rock formations deep underground, has changed the landscape of American energy. From 2007 to 2012, shale oil saw a 18-fold increase in the production of light tight oil. Apart from the US, only a handful of other countries have commercially viable shale prospects, these are China, Argentina and Canada. The success of these countries, according to researchers Michael Zimmer and Elissa Welch of Ohio University, will also erase the US’s need to import liquefied natural gas (LNG) for the next 20 years (although, arguably, this is a short period of time as far as energy security is concerned). While the US has embraced fracking, some countries have opposed it completely, including major economies in Europe – as the debate around environmental protection and climate change gains global traction. In June, Germany, Europe’s largest economy that had also decided to shun nuclear power, decided to ban fracking. Germany’s decision comes on back of its population’s ‘suspicion’ over the technology and its impact on the environment, specifically on drinking water resources. Others such as the UK have also scuttled progress on fracking on its mainland, with England banning fracking from 40% of its designated ‘shale’ areas and Scotland opting for a complete ban. Other European states such as France and Bulgaria have also banned fracking completely over environmental concerns.The US still remains the only country that has a very successful shale economy because of a host of reasons. First and foremost, in the US, if a private landowner strikes oil on his plot, the natural resource belongs to that person and not the state. Secondly, abundance of other natural resources like water and land, abundantly available in the US, made it much more commercially viable. Third, the US administration provided many tax sops to both companies and land owners to develop and produce shale gas, giving a new lease of economic life to many US states such as North Dakota, Texas, Colorado, Wyoming, Alaska and so on.

NYMEX November gas falls slightly despite bullish storage build - The NYMEX November natural gas futures contract failed to capitalize on bullish weekly gas storage data Thursday, settling at $2.959/MMBtu, down 4.3 cents, after trading in a range between $2.956/MMBtu and $3.032/MMBtu. The US Energy Information Administration estimated a 49-Bcf injection into storage in the week that ended September 23, boosting inventories to 3.600 Tcf. The injection was 5 Bcf below analysts' consensus expectation of a 54-Bcf build and about 50% below the five-year average injection of 97 Bcf. The storage level remained nearly 7% above the five-year-average of 3.38 Tcf heading into October. "Despite about 15 minutes of a brief rally after the storage news came out, the market gave it all back this morning," said David Thompson, PowerHouse executive vice president. "In the bigger scheme, though, we have seen a decent rally in natural gas prices since mid-August despite some weakness over the past week. We haven't collapsed below $2.85 yet, so I am moderately bullish entering October," he added. Meantime, dry gas supplies for the Lower-48 states Thursday are expected to be about 70.6 Bcf, but supplies are expected to rise by nearly 500 MMcf/d to 71.1 Bcf/d by early next week, according to Platts Analytics' Bentek Energy. On the demand side, total US usage was expected to slide by about 1 Bcf Thursday to 62.7 Bcf, mostly on lower power generation volumes. The National Weather Service's six- to 10-day outlook provided support for gas prices heading into next week though.

Conference delegates temper prospects over role of US LNG -  Panel participants gave sobering views of the ability of US LNG to move markets in Europe and East Asia in the near future at S&P Global Platts European Gas Summit over Tuesday and Wednesday. "One's view on the future of Henry Hub prices is crucial," the head of Gas, Coal and Carbon at Energy Aspects Trevor Sikorski said of potential exports to the EU. He said high US gas output in 2015 was a consequence of high prices in the preceding year, and conversely, in 2016 to date, output is already slightly lower. "[They] need a price of around $4/MMBtu to keep production high." As well as Henry Hub, the other crucial factor was the strategy chosen by Gazprom, the Russian gas giant. Sikorski divided Gazprom's plausible courses of action into three scenarios -- either cut, maintain or increase production. He said cutting production to defend prices was the least likely one because it would amount to incentivizing more gas production in the US. Head of strategy and portfolio steering at Wintershall, the energy unit of German chemicals company BASF, Steffen Liermann said: "We believe Russia is more than before willing to maintain its market share [by adjusting its prices]."

Los Angeles jet falls as 'armada' of cargoes boosts supply -  West Coast sources said regional jet fuel inventories have been boosted by a wave of cargoes coming in California from northern Asia. "[An] armada of imports [are] due to hit the West Coast in October," one jet trader said. S&P Global Platts assessed the cash differential for Los Angeles jet fuel at NYMEX October ULSD futures minus 3.75 cents/gal Thursday, down 25 points from Wednesday. Energy Information Administration data released Wednesday showed imports into the West Coast from northern Asia rose 43,000 b/d to 73,000 b/d for the week ended September 23. At least three vessels arrived in California from northern Asia last week. Wednesday saw the first of at least five more expected through the middle of October, sources said. The Glenda Meryl sailed from South Korea on September 8 and arrived at the Port of Los Angeles on Wednesday, according to cFlow, Platts trade-flow software. The Nave Equator sailed from South Korea on September 15 and is expected to arrive at Richmond, California, on Friday. The Elandra Spruce, chartered by Vitol, sailed from China on September 16. It is expected to arrive at Los Angeles on Monday. The FPMC 18 sailed from South Korea on Wednesday. It is expected to arrive at Los Angeles on October 16. The Torm Kansas sailed from Japan on September 25, and is expected to arrive at Honolulu, Hawaii, on October 7. It may continue to the West Coast after that. The latest California Energy Commission data showed statewide jet fuel inventories rose 4.6% last week to 3.08 million barrels.

Japan propane imports from US unlikely to rise on high stocks, closed arb - Japan may not see a rise in US propane imports in coming months, even though product coming from the US rose to a five-month high in August, as firmer Very Large Gas Carrier freight rates for the US-Chiba route and high stockpiles in the country gave no grounds for spot purchases ahead of the peak winter demand season, market sources said Friday. The short-lived arbitrage window for US suppliers to ship spot LPG cargoes to Far East Asia was seen as shut again, after VLGC rates for a trip from the US to Chiba, Japan, climbed to 9.98 cents/gal Thursday, or $52/mt, up from a near two-week low of 8.06 cents/gal, or $44.80/mt September 20. US Mt. Belvieu non-LST propane cargoes for front-month October-loading were assessed at a three-month high at 53.875 cent/gal Thursday, or $280.69/mt, up $7.82/mt from Wednesday, boosted by stronger international crude benchmarks and higher export demand to Asia. At the Asian close Friday, the November CP propane swap was assessed at $337/mt, up $4/mt day on day.VLGC freight rates for the key Persian Gulf to Far East Asia route hovered at around $20-$21/mt levels, shipbroker sources said Friday. Such competitive freight rates offered by VLGC charterers made it a hard call for Japanese buyers to decide between lifting Middle Eastern cargoes or those from the US. "I don't think [Japanese importers] can buy any [more] US spot cargoes," a trader based in Japan said, also pointing to the high stock levels. Since the expanded Panama Canal reopened June 27, Japan has snapped up more parcels from the US through the canal, which is a shorter route compared with going round the Cape of Good Hope.

Canadian light oil output to decrease to 1.471 million b/d by 2018: CERI - Conventional oil production in Canada, which in already on the decline due to the current low prices and reduced drilling activities, will decrease to 1.47 million b/d by 2018 from 1.5 million b/d in 2015, an industry official said Monday. The benefits of cutting-edge technology, particularly multistage fracking along with horizontal drilling, and higher WTI prices were seen in the past few years with Canadian light oil output reaching a high point of 1.5 million b/d in 2015, said Dinara Millington, vice president of research with the Canadian Energy Research Institute.But that has changed with output now expected to decrease to 1.475 million b/d by 2017 and falling to 1.471 million b/d a year later, she said. Output in the current year is expected to be about 1.485 million b/d. Millington's comments came after CERI issued Friday a study called: Canadian Crude Oil and Natural Gas Production and Supply Costs Outlook (2016 to 2036). With an output of about 700,000 b/d, Alberta was the highest producer of conventional oil last year in Canada, followed by Saskatchewan at 500,000 b/d and Eastern Canada (mainly offshore Newfoundland and Labrador) the remaining 300,000 b/d, the study said. The output figures represent both conventional oil and NGL production, the CERI study said, without giving a breakup.

Trudeau government approves Petronas' $36-billion LNG project in BC - Prime Minister Justin Trudeau’s Liberal government has provided the $36-billion Pacific Northwest liquid natural gas (LNG) production and export facility project in Prince Rupert, BC with the green light to proceed. The announcement was made by members of the federal cabinet at a press conference held in Richmond this evening. “The Pacific NorthWest LNG Project will deliver thousands of good middle-class jobs and will help pay for schools and roads and social programs that enrich people’s lives,” said Jim Carr, federal Minister of Natural Resources. “We are moving forward with natural resource development in a sustainable manner, because we have an obligation to leave the planet in better shape than we found it. This is an exciting day for British Columbia, for Canada and for the natural gas industry in this country.” The controversial project is spearheaded by Petronas, a global oil and gas company owned by the Government of Malaysia, and will become the largest single foreign direct investment in Canadian history. It entails constructing a facility on Lelu Island with two LNG liquefaction plants, two LNG storage tanks, a power plant, a two-lane access bridge linking the island with the mainland, marine berths for loading of the LNG onto special LNG carriers to overseas markets, and a suspension bridge connecting the island to the marine berths. Natural gas will be transported to the facility for processing through a new 900-km-long pipeline to be built and operated by TransCanada from an area in northeastern BC to Prince Rupert.

LNG project approval won't mean green light for other pipelines, Jim Carr says - The government's approval of a controversial gas pipeline in B.C. responds to a global "thirst" for Canada's natural resources, but it shouldn't be read as a likely green light for other energy projects, says Natural Resources Minister Jim Carr. The government faced a barrage of criticism Wednesday from those worried about the environmental impact — and from others who say the job-generating project should open the door for other pipelines.But Carr stressed that each project will be judged individually, including Kinder Morgan's Trans Mountain expansion. "Kinder Morgan will be decided on its own merits," he said. "There is no linkage between these projects." The federal government approved the Pacific NorthWest LNG project in British Columbia with 190 legally binding conditions Tuesday night. Today, interim Conservative Leader Rona Ambrose expressed skepticism the pipeline would ever get built, and pressed the government to green light the Kinder Morgan project that's now on Prime Minister Justin Trudeau's "desk." 'It will be built if it's approved," she said. "That's hundreds of jobs and billions of dollars in investment, and it's making sure our oil that is land-locked in Alberta and Saskatchewan can finally get to tidewater and sold at a higher price which benefits all Canadians."

Trudeau Sets November Deadline for Enbridge Pipeline Decision | Rigzone-- Canadian Prime Minister Justin Trudeau’s government has given itself a two-month window to decide on Enbridge Inc.’s Northern Gateway oil pipeline after declining to appeal a legal ruling that revoked its construction permits. A cabinet order, dated Sept. 23, enacted Natural Resources Minister Jim Carr’s recommendation to set the Nov. 25 deadline for a decision on how to proceed with Gateway. Trudeau also has to decide on Enbridge’s Line 3 project on or before that same day.  The two Enbridge projects are among the raft of energy decisions Trudeau will make this fall -- including this week’s approval of Petroliam Nasional Bhd’s Pacific NorthWest liquefied natural gas project. Trudeau must also decide on Kinder Morgan Inc.’s Trans Mountain pipeline expansion by Dec. 19. “Given the complexity of the proposed Northern Gateway Pipelines project, this extension provides the Government with additional time to consider next steps in response to the Federal Court of Appeal decision,” Alexandre Deslongchamps, a spokesman for Carr, said in a written statement Thursday. The government continues to “work to restore public confidence” in Canada’s environmental and regulatory system, he added. Trudeau is said to have decided to approve at least one new oil pipeline in his first term, with Kinder Morgan considered the favorite. Northern Gateway, an estimated C$7.9 billion ($6 billion) project approved by a previous government, had its permits invalidated by a court ruling earlier this year that found the government didn’t fulfill its duty to fully consult indigenous people. The government said on Sept. 20 it wouldn’t appeal that ruling, and now must decide whether to re-do the consultation and, then, reissue the permits. Enbridge also declined to appeal and called on the government to work on a “renewed consultation process.”

Sending Western Canadian Natural Gas East For Export As LNG -   For some time now, discussions about the possible development of Canadian liquefaction/LNG export terminals have focused on the Western Canadian coast in British Columbia––partly because most of Canada’s natural gas reserves are nearby in northeastern BC and in Alberta, and partly due to Asia being a primary LNG target market. . But it could be that liquefaction/LNG export projects in Eastern Canada may make more sense. In today’s blog, “So Far Away –Sending Western Canadian Natural Gas East for Export as LNG,” LNG Ltd.’s Greg M. Vesey considers the rationale for piping Western Canadian natural gas long distances to Quebec and the Canadian Maritimes for export as LNG.Western Canada has vast reserves of natural gas that would be cost-competitive to drill for, produce and transport to market if only there was a new, incremental market for large natural gas volumes. This conundrum has been a frequent topic in the RBN blogosphere, and has been looked at from several angles. Most recently, in One Way or Another, we discussed the facts that natural gas producers in Alberta and BC have been struggling to replace markets in Ontario and the U.S. Midwest that they’ve been losing to Marcellus/Utica producers in recent years, and that––thanks mostly to the current-and-growing glut of worldwide liquefaction capacity (see Too Much, Too Little, Too Late)––no liquefaction/LNG export projects along the BC coast have advanced to Final Investment Decisions (FIDs) and construction. Getting approval for big new gas pipelines from BC and Alberta gas production areas to the BC coast has been another challenge. RBN blogs have also handicapped the leading BC projects (see Slip Sliding Away) and at the possibility of moving Marcellus/Utica gas through New York and New England to Canada’s New Brunswick and Nova Scotia provinces not only to meet in-province needs but to export as LNG (see Movin’ Out andBreak on Through to the Canadian Side).

US drives rainforest destruction by importing Amazon oil, study finds - US imports of crude oil from the Amazon are driving the destruction of some of the rainforest ecosystem’s most pristine areas and releasing copious amounts of greenhouse gases, according to a new report. The study, conducted by environmental group Amazon Watch, found that American refineries processed 230,293 barrels of Amazon crude oil a day last year. And California, despite its green reputation, refines an average of 170,978 barrels, or 7.2m gallons, of Amazon crude a day, with the Chevron facility in El Segundo accounting for 24% of the US total alone. The expansion of planned oil drilling poses “one of the most serious threats” to the western region of the Amazon, with most of the oil originating from Ecuador, Peru and Colombia. While green groups have enjoyed some success in fighting the Amazon ambitions of large oil firms like Chevron, other players from countries such as China have moved in, with proposed oil and gas fields now covering 283,172 sq miles of the Amazon – an area larger than Texas.  Felling the carbon-rich trees of the Amazon produces greenhouse gases even before the oil is transported and burned, while indigenous communities and the Amazon’s vast trove of biodiversity are also at risk.  Ecuador’s state oil company PetroAmazonas recently started drilling close to the Yasuni national park, which is considered to be one of the most biologically rich places on Earth. The park contains 655 endemic tree species – more than the US and Canada combined – as well as two of the last tribes in the world living in voluntary isolation.  As oil interests seek to exploit areas of the Amazon, there are fears that indigenous communities will suffer from pollution, displacement and deadly illnesses due to a lack of acquired immunity. “Our demand for Amazon crude is literally driving the expansion of the Amazon oil frontier and is putting millions of acres of indigenous territory and pristine rainforest on the chopping block, ” said Leila Salazar-López, executive director of Amazon Watch.

Collapse in new projects threatens North Sea oil industry - The UK's North Sea oil industry faces an uncertain future with just one new development project approved so far this year, even as output is likely to remain robust in the short term, lobby group Oil and Gas UK said in a report published Tuesday. The North Sea oil and gas industry has surprised some observers with its resilience since oil prices began collapsing in 2014. Last year saw the first significant increase in UK crude output since 1999, with a 14% rise to 882,000 b/d, helped by an efficiency drive and past investment in big projects. However this year only one new development project has been given the go-ahead: the Arundel oil field in the BP-operated Andrew Area. With the possibility of no further approvals in 2016, "this is set to be the worst year in the history of the UK continental shelf for new field approvals," Oil and Gas UK said in its annual economic report. The report forecast overall capital expenditure this year would be GBP9 billion ($11.7 billion), compared with GBP14.8 billion in 2014.The report paints a picture of near-term resilience that should support production until 2018 and also notes benefits from a weaker sterling currency given that oil revenues are in dollars. New projects are now likely to be 25% cheaper on a like-for-like basis than 12 months ago, it says. But it also describes obtaining finance for new projects as "extremely difficult" and says exploration activity is at an all-time low, meaning the industry collectively is producing four times more oil and gas than it is discovering on an annual basis. It also includes a downgrade to the total volume of estimated recoverable oil and gas, to 10 billion-20 billion barrels of oil equivalent, from 22 billion boe in last year's report. The volume of recoverable reserves sanctioned for development has fallen by 8% to 6.3 billion boe.

Global Oil: Venezuela Sees The Market Oversupplied By 9 Million Barrels Per Day - - As the informal meeting by the leading oil exporters in Algeria is approaching, journalists scrutinize every statement by the world's oil officials in an attempt to find cues regarding potential outcome of the meeting. The mosaic of opinions quoted is colorful and at times entertaining. Last week, the prize for the most head-turning statement goes to Venezuela's Oil Minister Eulogio del Pino. According to a Reuters report, the minister stated in a TV interview with state oil company PDVSA that the current global oil production needs to be reduced by 10% to meet the current level of demand. The minister was also quoted as saying that a "fair price" for oil would be around $70 per barrel. According to Reuters, the minister stated: "Global production is at 94 million barrels per day, of which we need to go down 9 million barrels per day to sustain the level of consumption." Minister del Pino's view on global oil statistics is a bit surprising. Here is OPEC's most recent estimate with regard to the current global crude production (Venezuela is an OPEC member): World liquids supply in August 2016 decreased by 0.14 mb/d m-o-m to average 95.65 mb/d, but grew by 0.18 mb/d y-o-y. From the same source:…world oil demand growth [in 2016, relative to 2015 - RZ] is now pegged at 1.23 mb/d, with total global consumption at 94.27 mb/d. In 2017, world oil demand growth was kept relatively unchanged… at 1.15 mb/d, with total global consumption forecast at around 95.42 mb/d. Given that summer demand is seasonally higher than the average for the year and using OPEC data, it is not obvious that the market was oversupplied in August or is oversupplied currently. What would happen if Minister del Pino's wish came true and global supply unexpectedly dropped by 9 million barrels a day? I would argue that the current global overstock would come down to a benign level within approximately a month. Within two months, the world would begin to experience acute oil shortages. Strategic petroleum reserves would be tapped. The scenario is obviously from a fiction category. A drop of global oil production by 9 million barrels per day is inconceivable without assuming a catastrophic development such as an act of war affecting several key suppliers in the Middle East.

Israeli consortium signs gas deal with Jordan (AP) — Israel’s Delek Group, one of the developers of the country’s biggest natural gas reservoir, says it has signed a deal to sell gas to neighboring Jordan. The agreement announced Monday would provide 45 billion cubic meters (1.6 trillion cubic feet) of gas to Jordan over 15 years. Delek says revenues could amount to $10 billion. Delek Drilling CEO Yossi Abu hailed the “historic” deal and said developers of the Leviathan reservoir would pursue similar agreements with others in the region, including Egypt, Turkey and the Palestinian Authority. Resource-poor Israel announced the discovery of sizeable offshore natural gas deposits about five years ago, and a partnership of Israeli and U.S. companies, including Texas-based Noble Energy and Delek, have already begun extracting.

Russia's Sakhalin 2016 crude production to grow 8% on year, but slowing -  Russia's Far Eastern Sakhalin region is expected to raise crude and condensate production by 8% this year, but with growth slowing further in coming years, Vera Shcherbina, chairman of the Sakhalin regional government, said Wednesday. The region is expected to produce 18.1 million mt, or 362,500 b/d, this year, according to Scherbina's presentation at the annual Sakhalin Oil and Gas forum in Yuzhno-Sakhalinsk. "Such situation is the result of the dynamic development of projects on the exploration of offshore fields in the Sea of Okhotsk," Shcherbina said. The growth rate is a sharp slowdown from the 15% year-on-year rise in 2015, an increase the regional government doesn't believe can be repeated. In fact, the output volumes are seen flattening in the mid-term, Shcherbina said.Sakhalin's governor, Oleg Kozhemyako, last year forecast the region's crude output would grow to 18.85 million mt by 2020, which means a 4% increase in the course of the next three years. Shcherbina said the volume is achievable, but the region's task is to maintain the output despite the difficult economic situation.

Sharp production falls, strong domestic demand curb Indian gasoline exports - India, Asia's largest gasoline net exporter, shipped out only 1.16 million mt of the fuel in August, down 14.99% on the month and 24.5% lower than a year ago, data from the country's Petroleum Planning and Analysis Cell showed. It was the fourth consecutive month of declines and coincided with a sharp fall in production of non-Bharat Stage III and non-Bharat Stage IV specification gasoline -- the so-called "Others" category, the majority of which is exported. Even bigger falls were seen at the state-controlled Indian Oil Corp. and Hindustan Petroleum Corporation Ltd. IOC posted the biggest drop in crude process volume among all Indian refining companies in August -- down 12.88% on the month company-wide. This was due to 25.11% fall at the 300,000 b/d Panipat refinery and 33.34% fall at the Paradip refinery of the same capacity. Similarly, HPCL saw its 166,000 b/d Visakhapatnam refinery run 29.36% lower on the month. A large amount of production from private refiners was expected to be supplied to the domestic market with the production crunch at state-owned refineries. Further tightening the country's balance was a major spike in domestic consumption. The country consumed 2.2 million mt of gasoline in August, 14.95% more than July and 24.70% higher than a year ago. Production of this grade fell 15.31% on the month in August to 1.22 million mt, the lowest since April 2015. PPAC's crude throughput data showed a 3.78% drop at India's biggest gasoline exporter Reliance, with a total of 6 million mt crude refined.

Shell Nigeria refuses to confirm oil militants' attack (AP) — Shell Nigeria refused Monday to confirm a report by the Niger Delta Avengers militant group that it has bombed the company’s Bonny oil pipeline and again crippled its exports. Friday night’s bombing breaks a month-long ceasefire between militant groups and the government and comes days after repairs from an earlier attack had allowed Shell’s exports to resume. Shell spokesman Precious Okolobo said only that “We cannot comment on the reported incident.” A contractor working at Bonny terminal said production has fallen significantly since Saturday. He spoke on condition of anonymity for fear of losing his contract. The Niger Delta Avengers said the attack “has brought down oil production activities at the Bonny 48 inches crude oil export line,” which can export 600,000 barrels of oil a day. The Avengers said the bombing was “only a wake-up call” responding to a clampdown by security forces that it said violated the ceasefire. The military reported arresting at least two Avenger commanders last week. The ceasefire was a government precondition for negotiations to end attacks, which officials say have halted 40 percent of oil production and thrown Nigeria into recession. Oil accounts for 70 percent of government revenue and 90 percent of exports. Militants this year have damaged installations of the Dutch-British Shell, the American Chevron and ExxonMobil, the Italian Agip and the French Total. The militants demand that the multinationals leave the Niger Delta, where decades of petroleum production has polluted fishing grounds, agricultural fields and mangrove swamps.

Why Oil Prices Will Rise More And Sooner Than Most Believe - As the September 26 to 28 “informal” meeting of OPEC producers in Algeria draws near, media speculation could easily cause mental anguish. On oil news websites simultaneous headlines claim OPEC will both fail and succeed in capping output. Called by OPEC August 8, the stated purpose of the gathering was, “OPEC continues to monitor developments closely, and is in constant deliberations with all member states on ways and means to help restore stability to the oil market”.  Obviously that is the view of the organization, not the member countries. Iran and Saudi Arabia remain at loggerheads over which will exert the most influence in the Persian Gulf. Iraq, Nigeria, Libya and Venezuela are all experiencing various forms of internal meltdown which thankfully (human suffering notwithstanding) is keeping a lot of oil off the market.  On September 20, OPEC Secretary-General Mohammed Barkindo was talking publicly about a one-year production freeze among OPEC members and Russia. Two days later it was reported the Saudis would cut output if Iran followed. We’ll see. In August, OPEC believed non-OPEC production would fall by 1 million b/d this year from 2015 and a bit more in 2017. Even the most pessimistic estimates for demand growth see 1.2 million b/d this year and next. But there is no consensus on these numbers.  At some point global supply/demand curves will cross enough to cause prices to rise. Some data indicates they already have. With low oil prices causing massive cutbacks in spending on new supplies, everyone agrees oil prices are very unlikely to revisit recent record lows and will rise over time. The question is how much and when. The rest of this article is dedicated to the thesis that the market and the price are not the same thing so nobody actually knows. Despite relentless bad news this means something good could easily occur.  Goldman Sachs Group Inc. analyst Jeff Currie opined there would be no price rally anytime soon.  Curry said, “It really looks similar to the period of the early 1990s, when we were at US$20 oil. Is US$45 to US$50 the new US$20?”.  The problem with the Goldman prognosis is oil markets today look nothing like they did in the early 1990s. Then oil was half-way through an extended period of low prices from 1985 to 2004. It is quite common to say oil markets are similar to what they were 20 and even 30 years ago. Except it’s wrong. Review the following and reach your own conclusion.

Why Oil Prices Can’t Stay Low For Much Longer -- For many oil companies, the current downturn in oil is a back-breaker, but some have adapted to the falling prices and are fighting each day to survive and benefit from the higher oil prices that lay at the end of this dark tunnel. In order to understand the prevailing glut, we have to go back more than a decade when investments into the oil and gas sector began to soar.  As seen in the chart above, the investments have multiplied from their lower levels to about $780 billion in 2014. The rise has been steady throughout, with the only dip coming in 2009. Such huge investments in a single decade resulted in the global oil supply increasing by 13 percent. During the same period, OPEC’s supply increased by 21.6 percent. The massive amount of money being pumped into the oil and gas sector was due to the impressive gains in crude oil during that period. According to an analysis by the Zephirin group; between 2003 to 2013, WTI prices increased by 215.3 percent, whereas, Brent rallied by 276.3 percent. However, demand failed to catch up with the breakneck speed at which oil was being pumped into the market. This ended with a massive oil glut, which has led to the worst oil crisis in decades.There are a number of optimistic voices that point to a steep fall in investments from $780 billion to $450 billion in the past two years. They believe that soon the glut will shift to a deficit due to fewer oil discoveries and aging wells, which will boost prices higher..

What If The Oil Rebound Never Happens? - Oil prices are hovering in the mid-$40s per barrel, and the hopes of a rebound have once again been delayed. The IEA’s September Oil Market Report predicts that the supply/demand equation might not come into balance until next year, suggesting another year of low oil prices. But what if oil prices never rebound? The question seems ridiculous, not only because the oil markets always go through booms and busts, but also because demand continues to rise. Supplies are also falling from high cost areas, ensuring that the supply overhang will eventually be erased. Moreover, the oil industry has made unprecedented cuts in spending on exploration and development. The IEA says the industry cut spending by more than $300 billion over the past two years and a separate estimate from Wood Mackenzie expects oil and gas producers to slash about $1 trillion from spending between 2015 and 2020. Such draconian measures are surely sowing the seeds of another supply crunch, guaranteeing a price spike in the years ahead. But the world is still oversupplied with oil, and the recent ramp up in production from OPEC could lead to low oil prices for a few years. Libya is set to bring back around 600,000 barrels per day (although those claims are questionable), and Nigeria has already returned somewhere between 200,000 and 300,000 barrels per day of interrupted supply. Production in the U.S. has also recently leveled off over the past month at 8.5 million barrels per day, after nearly 18 months of declines. The IEA expects global supplies to exceed demand through next year, and inventories to continue to build through 2017. Crude oil and refined product inventories are only slightly down from record levels, and will take a few more years to get worked through. All of that is to say there is a good chance that ample supplies could ensure relatively low oil prices for several years, perhaps as long as towards the end of this decade.

Goldman Cuts Oil Price Target From $50 To $43 On Rising Global Surplus - While we await every new headline out of Algiers, overnight Goldman threw in the towel on its "transitory" oil market bullishness, and in a note by Damien Courvalin looking "Beyond Algiers, Weakening Oil Fundamentals", the bank cut its Q4 oil price target from $50 to $43, as the bank admits the previously anticipated rebalancing will take longer to achieve, and now expects "a global surplus of 400 kb/d in 4Q16 vs. a 300 kb/d draw previously." Speaking of the Algiers meeting, Goldman also notes that "while a potential deal could support prices in the short term, we find that the potential for less disruptions and still relatively high net long speculative positioning leave risks skewed to the downside into year-end. Importantly, given the uncertainty on forward supply-demand balances, we reiterate our view that oil prices need to reflect near-term fundamentals – which are weaker – with a lower emphasis on the more uncertain longer-term fundamentals." Here is the summary from Courvalin: Oil prices have remained range bound ahead of the OPEC consultation in Algiers this week and as production disruptions have yet to meaningfully ramp up. Statements by participants suggest potentially greater collaboration between OPEC members than in previous attempts, although the outcome of this advisory meeting remains uncertain. Our production forecast continues to reflect a seasonal Saudi production decline into year-end and no growth elsewhere (the equivalent of a deal) with OPEC exc. Libya/Nigeria production growth only resuming in 1Q17.

OPEC Circus Sees Oil Volatility Spike -- All eyes are on Algeria this week where the International Energy Forum is being held. But instead of the conference itself, the global oil markets are anxiously awaiting the developments of an informal meeting to be held on the sidelines of the Forum between OPEC and non-OPEC officials. At the time of this writing, no deal had been announced, although there are some unconfirmed reports that Iran and Saudi Arabia are considering some sort of limit on production. The proposal would call for Saudi Arabia cutting output by several hundred thousand barrels per day if Iran froze production at 3.7 million barrels per day. Oil prices surged on Monday on hopes of a deal, jumping more than 2 percent. However, in early trading on Tuesday, WTI and Brent were back down by more than 2 percent as expectations of an agreement began to fade. The result may not be known until Wednesday, but comments from Iran’s oil minister, saying that the talks were simply “consultative,” seemed to dash hopes of any specific agreement. For now, it appears that if anything is agreed to, it would only be the outlines of a deal, which would make the official Nov. 30 summit in Vienna much more important for finalizing the specifics. Saudi Arabia appears more desperate than Iran. For years, Iran wanted higher oil prices while Saudi Arabia was satisfied letting other producers sweat. But after two years of low oil prices, Saudi Arabia is under serious fiscal pressure, an unfamiliar predicament in Riyadh. Saudi Arabia just announced that it would cut its ministers’ salaries by 20 percent and slash benefits for government employees as the country pursues deeper belt tightening. Meanwhile, Iran is seeing a resurgence in its economy after the lifting of international sanctions and the return of supply. Saudi Arabia has a massive budget hole equivalent to 13.5 percent of GDP, while Iran’s deficit will only reach 2.5 percent of GDP. In other words, Saudi Arabia seems to be more desperate than Iran for higher oil prices.

Crude Crashes As Iran Says "No Deal" After Saudi Offer -- And sure enough, as we noted yesterday, the Saudi "cut" offer that juiced crude yesterday was nothing but a strawman to enable them to pinpoint blame on Iran for the failure of talks. Unwilling to freeze its output - even based on the 'offer' of Saudi cuts - Iran's Bijan Zanganeh exclaimed "it’s not our agenda to reach agreement in these two days," blowing a hole in the hope train for crude's recovery. As Bloomberg reports, Iran is not willing to freeze its oil output at current levels and doesn’t intend to forge an agreement with other major crude producers at talks in Algiers this week, the nation’s oil minister said. Iran wants to raise its crude production to 4 million barrels a day, Bijan Namdar Zanganeh told Bloomberg Television in an interview Tuesday. OPEC’s third-largest producer -- with daily output of 3.6 million barrels last month -- will talk to other members at the International Energy Forum in the Algerian capital and it’s possible the group could reach a formal supply deal at its November meeting in Vienna, he said.  “It’s not our agenda to reach agreement in these two days,” Zanganeh said. “We are here for the IEF and to have a consultative informal meeting in OPEC to exchange views. Not more.” OPEC’s decision to hold informal talks this week has fanned speculation that it might be about to deviate from a two-year-old policy of pumping without limits, which succeeded in hurting rival suppliers but also sent prices into free-fall. Ministers from member countries arriving in Algiers have downplayed the prospect of a deal. Iran rejected Saudi Arabia’s offer last week to cut its own production if Iran capped output at current levels. And the result is clear - yesterday's gains gone...

Oil Pops After Crude Inventories Unexpectedly Drop -- In the week since the last API report, oil has ripped and dipped back to unchanged following an unexpected draw and Algiers disappointment, but prices jumped higher (tagging $45.00) as API noted a 752k draw (4th week in a row). This was dramatially below the 3mm build expected. Cushing, Gasoline, an Distillates all saw inventory draws (the latter's first draw in 7 weeks). API

• Crude -752k (+3mm exp)
• Cushing -832k
• Gasoline -3.7mm
• Distillates-343k

The last 3 weeks have seen the biggest drawdown in crude inventories (over 4%) since July 2013 and if this 4th week's data holds it will hold the biggest drop in 3 years.

Saudis Offer To Cut Production By 500,000 Barrels: "The Oil Market Situation Is Much More Critical" -- Saudi Arabia's oil policy, unveiled just under two years ago, at the November 2014 OPEC meeting where it effectively splintered the OPEC cartel by announcing it would produce excess quantities of oil in hope of putting shale and other high-cost producers out of business has backfired spectacularly: not only has OPEC failed to crush the US shale industry, which as a result of increasing efficiencies, and debt-for-equity exchanges has seen its all in production costs tumble, making even far cheaper oil prices profitable (especially with the addition of hedges), not to mention Wall Street's ravenous desire to buy any debt paper that offers even a modest yield allowing US oil producers to delay or outright avoid bankruptcy. But while shale has avoided annihilation, it is Saudi Arabia that has been suffering. In "Kingdom Comedown: Falling Oil Prices Shock Saudi Middle Class", the WSJ reports that "a sharp drop in the price of oil, Saudi Arabia’s main revenue source, has forced the government to withdraw some benefits this year—raising the cost of living in the kingdom and hurting its middle class, a part of society long insulated from such problems." The kingdom is grappling with major job losses among its construction workers—many from poorer countries—as some previously state-backed construction companies suffer from drying up government funding. Those spending cuts are now hitting the Saudi working middle class. Saudi consumers in major cities, the majority of them employed by the government, have become more conscious about their spending in recent months, said Areej al-Aqel from Sown Advisory, which provides financial-planning services for middle-class individuals and families. That means cutting back on a popular activity for most middle-class Saudis: dining out. “Most people are ordering less food or they change their orders to more affordable options,” she said.

In Oil Price Battle With Saudi Arabia, It's Advantage Iran -- Suddenly the tables have been turned on Saudi Arabia. The biggest oil exporter has swapped its traditional role as price dove with regional foe Iran, for years OPEC price hawk. The government in Riyadh is now offering a deal -- including its first output cut in eight years -- to boost prices; Tehran is dragging its feet. At the center of the reversal is their contrasting thresholds for enduring economic pain. "Both countries are coming from different positions," said Jason Tuvey, Middle East economist at consulting firm Capital Economics. "Iran has been under sanctions until recently, so it’s getting an economic boost as investment returns and oil output rises. Meanwhile, Saudi Arabia is facing steep fiscal cuts." The contrast between the two countries is stark. Iran, never as dependent on oil revenue as its neighbor, has seen prospects boosted by rapprochement with the west. In Saudi Arabia, tentative moves toward economic reform haven’t prevented two years of weak prices causing financial havoc: it’s burning through foreign exchange reserves, government contractors have gone unpaid and civil servants will get no bonus this year. Saudi Arabia will suffer a fiscal deficit equal to 13.5 percent of gross domestic product this year, compared with one of less than 2.5 percent of GDP for Iran, the International Monetary Fund estimates. The IMF says the Saudis need oil close to $67 a barrel to square the books. For Iran, it’s lower, at $61.50. Brent crude, the global benchmark, fell to $46.50 a barrel in early trading in London on Tuesday.When it comes to economic growth, Saudi Arabia is slowing sharply to 1 percent while Iran is accelerating toward 4 percent. The current account -- a broad measure of a country’s economic relationship with the world -- tells the same story. Saudi Arabia faces a double-digit deficit this year; Iran’s is nearly balanced following economic reforms in 2012 and 2013 to weather the impact of international sanctions over its nuclear program. While Iranian President Hassan Rouhani faces elections next May and is under pressure over the country’s economic performance since sanctions were lifted, it’s already been through the austerity that’s only starting in Saudi Arabia, according to Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd. "Iran has already been through so much pain, incrementally they aren’t really worse off," she said.

Saudis, Iran dash hopes for OPEC oil deal in Algeria - Iran rejected on Tuesday an offer from Saudi Arabia to limit its oil output in exchange for Riyadh cutting supply, dashing market hopes the two major OPEC producers would find a compromise this week to help ease a global glut of crude. "The gap (in views) between OPEC countries is narrowing. I don't expect that an agreement will come out of the consultations tomorrow," Saudi Energy Minister Khalid al-Falih told reporters. Iranian Oil Minister Bijan Zanganeh said earlier: "It is not the time for decision-making." Referring to the next formal OPEC meeting in Vienna on Nov. 30, he added: "We will try to reach agreement for November." The Organization of the Petroleum Exporting Countries will hold informal talks at 1400 GMT on Wednesday. Its members are also meeting non-OPEC producers on the sidelines of the International Energy Forum, which groups producers and consumers. Oil prices LCOc1 have more than halved from 2014 levels due to oversupply, prompting OPEC producers and rival Russia to seek a market rebalancing that would boost revenues from oil exports and help their crippled budgets. The predominant idea since early 2016 among producers has been to agree to freeze output levels, although market watchers have said such a move would fail to reduce unwanted barrels. A deal has also been complicated by acute political rivalry between Iran and Saudi Arabia, which are fighting several proxy-wars in the Middle East, including in Syria and Yemen.

Oil prices claw back gains after falling on big gasoline stock build: Oil prices rose on Wednesday, rebounding from a brief fall after government data showed a large rise in gasoline stocks and as the focus shifts to a potential output-curbing deal from OPEC later this year. U.S. commercial crude stockpiles fell by 1.9 million barrels to a total of 502.7 million barrels in the week through Sept. 23. Analysts polled by Reuters had forecast of 3 million barrel build. The drawdown in crude stocks was offset by a 2 million barrel build in gasoline stockpiles, compared with expectations in a Reuters poll for a gain of 178,000 barrels. Higher stockpiles of gasoline typically reduce demand for feedstock crude oil. Brent crude rose 69 cents, or 1.5 percent, to $46.66 a barrel by 12:07 p.m. ET (1607 GMT), trading at roughly the same level as prior to the EIA data. U.S. West Texas Intermediate (WTI) crude was up 51 cents, or 1.1 percent, at $45.18 a barrel.Although chances of a deal being finalized in Algeria today are slim, the Organization Of Petroleum Exporting Countries (OPEC) might still agree an oil output-limiting deal later this year. "The market is still trying to figure out and price the outcome of the meeting at Algeria," said Olivier Jakob, oil analyst at Petromatrix. Saudi Energy Minister Khalid al-Falih said on Tuesday Iran, Nigeria and Libya would be allowed to produce "at maximum levels that make sense" as part of any output limits which could be set as early as the next OPEC meeting in November. That represents a strategy shift for Riyadh, which has previously said it would reduce output only if every other OPEC and non-OPEC producer followed suit. Iran has said it should be exempt from such limits because its production is recovering after the lifting of European Union sanctions earlier this year.

Oil Oscillates As Production Drops; RBOB Plunges After Biggest Gasoline Build In 4 Months -- Following the surprising across-the-board inventory draws report by API overnight, DOE confirmed crude's overall draw (-1.88mm bartrels vs +3mm exp). However, gasoline saw the biggest build in 4 months (as distillates saw the biggest draw in almost 2 months). Crudeproduction dropped very modestly on the week but remains stuck around 8.5mm barrels. Oil prices popped then dropped and remain lower for now... DOE:

• Crude -1.88mm (+3mm exp)
• Cushing -631k
• Gasoline +2.03mm (+500k exp)
• Distillates -1.915mm

Total U.S. imports of crude 7835k b/d vs 8309k Imports into U.S. by country in b/d:

• Canada imports 3194k vs 3460k
• Saudi Arabia imports 1272k vs 1100k
• Venezuela imports 775k vs 791k
• Mexico imports 434k vs 561k
• Colombia imports 353k vs 547k
• Ecuador imports 259k vs 218k
• Nigeria imports 302k vs 141k
• Kuwait imports 340k vs 155k, highest since wk of July 22
• Iraq imports 352k vs 358k
• Angola imports 99k vs 64k

For the 4th week running crude inventories fell but Gasoline saw the biggest build in 4 months...

Oil futures rally on speculation over OPEC supply deal - Oil | Platts News Article & Story: Oil futures climbed Wednesday after OPEC members appeared to find common ground Wednesday on efforts to limit production, lifting prices off lows seen after US inventory data showed a surprise build in gasoline stocks. NYMEX November crude settled $2.38 higher at $47.05/b. ICE November Brent settled up $2.72 at $48.69/b. NYMEX October ULSD settled 8.11 cents higher at $1.4910/gal. NYMEX October RBOB settled up 8.4 cents at $1.4777/gal.Full ratification of the deal will likely come at OPEC's next formal meeting November 30 in Vienna. OPEC members pumped 33.13 million b/d in August, according to the latest S&P Global Platts survey. Using secondary sources, OPEC reported its output that month at 33.24 million b/d. Media reports that OPEC members might have reached a deal seemed to catch the market by surprise after expectations were lowered earlier this week by Iran's insistence on raising its production. Early Wednesday, Iran appeared open to compromise after Zanganeh said his country would seek an exemption until its production was close to 4 million b/d, rather than his previously stated requirement of 4.2 million b/d. "I don't believe for a second that there will be much of a production cut," said Kyle Cooper, principal at ION Energy. OPEC members seemed to agree on a deal that would limit output to between 32.5 million b/d and 33 million b/d, Iran oil minister Bijan Zanganeh said Wednesday after exiting talks.

Oil jumps after report OPEC reaches deal to limit oil output in November: Oil prices rose as much as 6 percent on Wednesday on a report that OPEC members have reached a deal to limit oil supply. OPEC agreed on Wednesday to reduce its oil output to 32.5 million bpd from the current production levels of around 33.24 million bpd, two OPEC sources told Reuters. The producing group will agree concrete levels of production by each country at its next formal meeting in November, the sources said. One source also said that once production targets were reached, OPEC would reach out to non-OPEC producers for cooperation. Brent crude rose $2.53, or 5.5 percent, to $48.50 a barrel by 2:46 p.m. ET (1846 GMT), trading at roughly the same level as prior to the EIA data. U.S. West Texas Intermediate (WTI) crude settled up $2.38, or 5.3 percent, to $47.05 a barrel.Saudi Energy Minister Khalid al-Falih said on Tuesday Iran, Nigeria and Libya would be allowed to produce "at maximum levels that make sense" as part of any output limits which could be set as early as the next OPEC meeting in November. That represents a strategy shift for Riyadh, which has previously said it would reduce output only if every other OPEC and non-OPEC producer followed suit. Iran has said it should be exempt from such limits because its production is recovering after the lifting of European Union sanctions earlier this year. Iranian Oil Minister Bijan Zanganeh said on Wednesday OPEC producers were still trying to reach a deal on output limits and that under any such pact the Islamic Republic would agree to curtail its production "at close to 4 million barrels per day." Iranian output has stagnated at 3.6 million bpd. On Wednesday, Mustafa Sanalla, the head of Libya's state-run National Oil Company, said the country's oil production had more than doubled to 485,000 barrels a day following the reopening of oil ports this month, Dow Jones reported.

OPEC Agrees to First Oil Output Cut in Eight Years - Bloomberg: OPEC agreed to a preliminary deal that will cut production for the first time in eight years. Oil prices gained more than 6 percent as Saudi Arabia and Iran surprised traders who expected a continuation of the pump-at-will policy the group adopted in 2014. The group agreed to drop production to a range of 32.5 to 33 million barrels per day, said Iran’s Oil Minister Bijan Namdar Zanganeh, following a meeting in Algiers. While some members of OPEC will have to cut output, Iran won’t have to freeze production, he said. Many of the details remain to be worked out and the group won’t decide on targets for each country until its next meeting at the end of November. The lower end of the production target equates to a nearly 750,000 barrels-a-day drop from what OPEC said it pumped in August. The deal will reverberate beyond the Organization of Petroleum Exporting Countries. It will brighten the prospects for the energy industry, from giants like Exxon Mobil Corp. to small U.S. shale firms, and boost the economies of oil-rich countries such as Russia and Saudi Arabia. For consumers, however, it will mean higher prices at the pump. "The cut is clearly bullish," "What’s much more important is that the Saudis appear to be returning to a period of market management." The agreement also signals a new phase in relations between Saudi Arabia and Iran, which have clashed on oil policy since 2014 and are backing opposite sides in civil wars in Syria and Yemen. The deal indicates that Riyadh and Tehran, with the mediation of Russia, Algeria and Qatar, were able to overcome the differences that sunk another proposal to cap production earlier this year. Brent crude surged as much as 6.5 percent to $48.96 a barrel in London. The shares of Exxon Mobil, the world’s largest publicly listed oil company, climbed 4.2 percent, the biggest one-day increase since February.

OPEC Agrees to Cut Oil Output -- From Bloomberg: OPEC Agrees to First Oil Output Cut in Eight Years In two days of round-the-clock talks in Algiers, the group agreed to drop production to 32.5 million barrels a day, the delegate said, asking not to be named because the decision isn’t yet public. That’s nearly 750,000 barrels a day less than it pumped in August.  As OPEC agreed to limit its output, Russia smashed a post-Soviet oil-supply record, pumping 11.1 million barrels a day in September, up 400,000 from August, according to preliminary estimates. Russia participated in the Algiers talks, but it’s not party to the OPEC deal. This graph shows the year-over-year change in WTI based on data from the EIA. Five times since 1987, oil prices have increased 100% or more YoY. And several times prices have almost fallen in half YoY. Brent and WTI oil prices are now up about 5% year-over-year. The second graph shows WTI and Brent spot oil prices from the EIA. (Prices today added). According to Bloomberg, WTI is at $46.83 per barrel today, and Brent is at $48.41. Prices really collapsed at the end of 2014 - and then rebounded a little - and then collapsed again at the end of 2015 and in early 2016. Who knows if this agreement will hold, but it seems likely that oil prices - and eventually gasoline prices - will be up year-over-year at the end of 2016 and no longer a drag on CPI.

Relief arrives for U.S. shale firms as OPEC folds in price battle | Reuters: It was a moment U.S. shale oil producers have been waiting on for more than two years: OPEC nations finally agreed to cut production on Wednesday in a move that lifted low prices ravaging their budgets. Two sources in the Organization of the Petroleum Exporting Countries said the group would reduce output to 32.5 million barrels per day (bpd) from current production of 33.24 million bpd, by around half the amount of global oversupply. The agreement effectively establishes a floor on prices near $50 a barrel - around where many U.S. shale oil companies can make money and drill new wells. The floor is twice as high as where oil languished in the depths of the downturn. "This gives U.S. producers more confidence,” said James West, partner at the investment firm Evercore ISI in New York. “They may become a touch more aggressive than they had planned to be.” U.S. benchmark crude rose more than 5 percent to $47 a barrel on the news, pending final details about the cut, which won't be known until after another OPEC meeting in November. One U.S. shale oil industry veteran likened the results of the prolonged price war to a bruising 12-round boxing match that ended in a technical draw. After OPEC in mid-2014 let oil prices fall as it sought to regain market share, dozens of small and high-cost U.S. producers fell into bankruptcy. Meanwhile, budgets of OPEC members from Venezuela to Angola shrank on a 60 percent slide in crude prices. And two days before the deal was announced, Saudi Arabia cut ministers' salaries by 20 percent and scaled back financial perks for public sector employees.

Not Even An OPEC Deal Will Stop Oil Going Lower, Goldman Warns - Having been bullish for nearly half a year, yesterday Goldman's flipped again, when it cut its Q4 oil price target from $50 to $43, admitting the previously anticipated rebalancing will take longer to achieve, and now expects "a global surplus of 400 kb/d in 4Q16 vs. a 300 kb/d draw previously." Moments ago, the same Goldman analyst released a follow up note, confirming what we have been saying for the past year, namely that OPEC is increasingly irrelevant as a marginal supply-setter in a world in which it is the lack of demand that is a far bigger threat. In "OPEC won't stop oil going", Damien Courvalin writes that "an OPEC deal to curb oil production, either today or at the November meeting, is thought more likely than at any point in the past two years." That said, he notes, "we remain sceptical of its impact. For one, our production forecast continues to reflect a seasonal Saudi production decline into year-end, with no growth elsewhere. Second, even with this OPEC help, our updated oil supply-demand forecast now points to a renewed build in inventories in 4Q 2016 vs. a forecast for a draw only last month. This weaker oil outlook into year-end led us yesterday to lower our year-end WTI oil price forecast to $43/bbl, from $51/bbl previously. Given a well-supplied market and a crude curve in contango (with limited spot upside)." Here are the details behind Goldman's pessimism:Intraday oil price volatility has picked up over the past week and ahead of today’s OPEC advisory meeting in Algiers. Statements by participants suggest a deal to curb production today or at the next meeting in November is more likely than at any point over the past two years. We remain sceptical of its impact, for two reasons: (1) independent of today’s outcome, our production forecast continues to reflect a seasonal Saudi production decline into year-end and no growth elsewhere, the equivalent of a deal; and (2) even with this OPEC help, our updated oil supply-demand forecast now points to a renewed build in inventories in 4Q 2016 vs. a forecast for a draw only last month.

Fade OPEC -- From CLSA:

• At the conclusion of the Algeria meeting, Reuters is reporting OPEC has agreed to limit production
• The agreement would be finalized at the next OPEC meeting on November 30, 2016
• OPEC is supposedly limiting its output to 32.5 mmbpd, which is effectively where OPEC was in January 2016.
• But in August, output reached 33.47 mmbpd, which implies a 1 mmbpd cut.
• The delta from August output levels is contributing to the market jolt
• But remember, Saudi Arabia oil output spikes in the summer due to cooling demand
• What is unclear is Iran and Libya
• Iran is at 3.6 mmbpd with a target of 4.2 mmbpd…and a staunch resistance to freezing until reaching 4.2 mmbpd
• Libya is at 0.3 mmbpd with a target to recover to 1.0 mmbpd by year-end (aggressive)

All-in, if the 32.5 mmbpd number is accurate, then OPEC is rolling back to January levels, which is effectively what it had previously suggested it might due. The market response is not surprising, but probably not sustainable either. The devil is in the details and we still do not know how Iran and Libya fit into the equation, or if this is just another proposal that will be dismissed by Iran. Shale oil economics are an increasingly convincing and credible source of supply growth. Initial production rates have jumped 50 – 100% just in the span of a few years. Spud-to-pipe times have also dropped to 135 days for a pad of three wells, down 13% from 2015. Oil prices sustained in the low $50s is the level that seduces more capital in shale…thus Saudi better be careful what it wishes for. We already expect supplies to flatten out in the US in early 2017 with limited increases in rig activity. A rebirth of activity could prompt a rapid rise in US oil output within 6-months, offsetting OPEC’s efforts once again. Russia, the world’s largest energy exporter, is reportedly on course to pump a post-Soviet record amount of oil in September, adding as much as 400,000 barrels a day to the country’s production.  Who is going to cut? Iran? No. Iraq? No. Libya? No. Nigeria? No. The tiddlers? No. Maybe Kuwait but without the others? Saudi is nodding at itself in the mirror. It cuts unilaterally or there is no cut.

OPEC deal shows Saudi oil strategy has backfired, says John Kilduff: The concessions offered by Saudi Arabia in its bid to lock down a deal to limit the globe's oil supply show the world's largest crude exporter is getting pinched by its own policy, Again Capital founding partner John Kilduff said Wednesday. Sources told Reuters that OPEC hammered out a deal on Wednesday to reduce the cartel's production to 32.5 million barrels per day from around 33.24 million, with output levels for each member to be determined in November. The Saudis decided in November 2014 to allow an oversupplied oil market to balance on its own, rather than coordinating an oil output cut among OPEC members. The policy was designed to reduce supply by washing out high-cost producers — such as U.S. shale drillers — but the strategy has also piled pressure on Riyadh. Saudi Arabia's foreign exchange reserves have fallen 20 percent over the last two years, to $587 billion through March, the last month for which IMF data were available. On Monday, the kingdom said it would cut ministers' pay by 20 percent and pare perks for public sector employees, who make up two-thirds of the country's workforce, Reuters reported. The move to squeeze public employees came ahead of an informal gathering of OPEC members and other producers at a previously scheduled meeting in Algeria to discuss a plan to stabilize oil prices, which remain nearly 60 percent below their 2014 peak."The big takeaway is how into a corner the Saudis have backed themselves. This whole plan has backfired on them. They're going to be bearing most of the cutback if they pull it off, and they've had to really kowtow to the Iranians in this whole thing," Kilduff told CNBC's "Power Lunch."

Crude Declines As OPEC Deal Doubts Emerge; Futures Roll Over After oil soared over 5% yesterday, its biggest jump since April which pushed the commodity to a three week high on the unexpected announcement that OPEC had agreed on cutting as much as 700kbpd in production (without providing any actual detail who would cut), overnight skepticism and doubts have emerged about the viability and compliance with the deal, coupled with a boost in production by non-OPEC producers, and as a result WTI has dipped back under $47, down 0.5%, suggesting that the OPEC surge may be short-lived and modestly pressuring US equity futures.“Skepticism on the implementation is probably weighing on prices today - but we also need to see how the U.S. market reacts,” says Giovanni Staunovo, commodity analyst at UBS.The modest rolloff in oil prices has also put a "cap" on US equity futures overnight, which were trading roughly unchanged during the overnight session, but not before yesterday's euphoria pushed stocks in Asia and Europe higher. India’s assets fell after it attacked terrorist targets in Pakistan.Energy companies led gains on the MSCI All-Country World Index, which is on course for its best quarter since 2013. Sovereign bonds fell amid speculation higher energy prices will revive inflation. After posting its biggest gain in five months, crude slipped under $47 a barrel. India’s rupee fell the most in three months after the biggest military escalation since 199For those who missed yesterday's main event, Bloomberg conveniently summarizes that OPEC said its members agreed a preliminary dto trim production to a range of 32.5 million to 33 million barrels per day following informal talks in Algiers, although it won’t decide on targets for each country until a November meeting in Vienna.

Goldman Says OPEC Deal May Add Up To $10 To Price Of Oil, Two Days After Cutting Oil Price Target By $7 -- Goldman has done it again. Two days after the central banker-incubator cut its year end price target from $50 to $43, admitting the previously anticipated rebalancing will take longer to achieve, and now expects "a global surplus of 400 kb/d in 4Q16 vs. a 300 kb/d draw previously", and followed the next day by a report in which it said that not even an OPEC deal would stop oil going lower, overnight the very same analyst, just 24 hours after saying the opposite, Goldman's Damien Courvalin said that the OPEC agreement will "likely provide support to prices, at least in the short term" and added that the announced production quota should boost the price of oil by $7/bbl - $10/bbl. Again: this is two days after cutting the 2016 price target by $7, and one day after saying an OPEC deal would have no impact.Still, trying to avoid looking like a total flip-flopper, Courvalin adds that "at the historical average 4.8% production beat relative to quotas, this target would be 33.7 mb/d, above current production levels. It has historically taken a fall in oil demand to ensure quota compliance, as in that case, production is forced lower by a decline in refinery intake around the world. This is not the case today with resilient demand growth" and said that "we maintain our year-end $43/bbl and 2017 $53/bbl WTI price forecasts given: (1) uncertainty on this proposal until it is ratified, (2) likely quota beats if ratified, (3) potential for production above our cautious forecasts in areas of disruptions (as was the case today in Libya and KRG), and (4) our conservative supply forecasts outside of OPEC for next year."Then again, the only thing that will be stuck in algos' random access memory is that Goldman now expects oil to rebound by up to $10/bbl, which may explain why oil is now rolling over.Here is Goldman's full note for those who care:

Oil Prices Climb After OPEC Deal - WSJ: Oil prices continued to push higher Thursday, building on gains following the Organization of the Petroleum Exporting Countries’ agreement to cut output. OPEC’s surprise proposal prompted the largest daily gains in crude prices since April on Wednesday, and the rally continued Thursday even as many investors have raised questions about whether the cartel’s members would stand by an agreement and over how much sway the cartel now has over a market still brimming with crude from around the world. West Texas Intermediate crude rose 78 cents, or 1.66%, to $47.83 a barrel on the New York Mercantile Exchange. Brent crude, the global oil benchmark, rose 55 cents, or 1.13%, to $49.24 a barrel on London’s ICE Futures exchange. “Beyond a doubt, I think this is credible,” “There is a lot of concern from the major suppliers that things are going to get worse—this cut is the tip of the iceberg.”The group reached an understanding at a meeting Wednesday in Algeria that there was a need to scale back production. It agreed on a preliminary outline to cut its collective output to between 32.5 million barrels a day and 33 million barrels a day, down from the levels of 33.2 million barrels a day in August, national oil ministers said. OPEC members will wait until the next official meeting in November to complete the details, including the quota for individual producers. The agreement hasn’t been enough to break crude from the roughly $40-to-$50 range it has traded in for months, but some analysts said any sign of cooperation from the group is bullish for the oil market. “You want to see actions not words, but quite frankly, over the last few years, they haven’t even been able to deliver words, so this is a step forward,”

Iraq Revolts, Says "We Cannot Accept" OPEC Deal In This Form - While historically the major conflict within OPEC in recent years had been between Iran, whose oil production had been mothballed since 2013 as a result of the US embargo and which is now eager to regain its roughly 4mmbpd in production, and Saudi Arabia, which successfully picked up market share from Iran, a new source of contention within OPEC emerged last night when Iraq disagreed with OPEC's method of production estimates as reported last night. And now it appears that Iraq - which in August produced between 4.4mmbpd and 4.6mmbpd depending on whose estimates are used, will not be easily placated. As Reuters details, Iraq, which overtook Iran as the group's second-largest producer several years ago but kept its OPEC agenda fairly low-profile, on Wednesday finally made its presence felt. "What it did, however, pleased neither Saudi Arabia nor Iran."Iraq's new oil minister Jabar Ali al-Luaibi told his Saudi and Iranian counterparts, Khalid al-Falih and Bijan Zanganeh, in a closed-door gathering in Algiers that "it was an OPEC meeting for all ministers", a source briefed on the talks said. Luaibi, it turns out, is also the key OPEC member who "didn't like the idea of re-establishing OPEC's output ceiling at 32.5 million barrels per day (bpd), according to OPEC sources." Continuing the point made first yesterday, Luaibi told the meeting that the new 32.5 mmbpd ceiling was no good for Baghdad as OPEC had underestimated Iraq's production, which has soared in recent years. Confusion followed, according to Reuters sources, and after a debate OPEC chose to impose a ceiling in the range of 32.5-33.0 million bpd - a decision dismissed by many analysts as weak and non-binding. OPEC's current output stands at 33.24 million bpd.  "These figures do not represent our actual production," he told reporters. If by November estimates do not change, "then we say we cannot accept this, and we will ask for alternatives".

US oil rig count rises for 13th week in 14, up 7 rigs to 425: Baker Hughes - Oil prices were on track to their largest weekly advance in more than month on Friday, supported by planned OPEC output cuts, but profit-taking after a two-day rally kept benchmark crude contracts below the key $50 per barrel mark. Also on Friday, the U.S. oil rig count rose by 7 to a total of 425, marking the 13th time in the last 14 weeks the tally has ticked up, oilfield services firm Baker Hughes reported. At this time last year, U.S. drillers were operating 614 oil rigs. On a weekly basis, Brent was up nearly 7 percent, while WTI had climbed 8 percent from last Friday's close. On Friday, the two benchmarks diverged. Global benchmark Brent crude futures were down 29 cents at $48.95 a barrel by 1:04 p.m. ET (1704 GMT), but still nearly five percent higher than levels seen before the OPEC agreement on Wednesday. U.S. West Texas Intermediate crude futures were up 24 cents at $48.07 a barrel. For the quarter, Brent was down about 1 percent and WTI about 0.5 percent lower.

U.S. Oil Rig Counts Rise Again On Permian, Williston Gains -- The U.S. oil rig count rose by seven this week to 425, according to Baker Hughes (BHI) data out Friday, as drilling ramps up in the Permian Basin. Oil rigs have risen in the past 13 out of 14 weeks. In the latest week, rigs in the Permian rose by three to 204. In the Williston formation, they rose by two to 30, and the Cana-Woodford play saw an increase of two to 35. Eagle Ford rigs were steady at 33. Total oil and gas rigs in the U.S. rose 11 to 522. U.S. crude was up 0.6% to $48.10 per barrel. Brent crude dipped 0.5% to $49.00. On Wednesday, the Organization of the Petroleum Exporting Countries agreed to cut output to 32.5 million-33 million barrels per day in November. OPEC's move could bring more rigs online in the U.S. as prices near $50.U.S. rig counts are expected to rise next year. Rigs in operation will average 579 for 2017, up 29% from what's expected this year, according to a study out Wednesday by Platts RigData, a forecasting unit of S&P Global Platts. Analysts forecast 11,151 new wells to be drilled next year, up 25% from the 8,915 wells expected to be started this year.

AP Explains: What does OPEC's tentative deal mean for oil?  (AP) — OPEC nations have agreed in theory that they need to reduce their production to help boost global oil prices during a meeting in Algeria, but a major disagreement between regional rivals Saudi Arabia and Iran still may derail any cut. What happened to oil prices and why can’t OPEC agree to anything more binding?  Crude oil sold for over $100 a barrel in the summer of 2014 before bottoming out below $30 a barrel this January. That fall largely came from a boom in U.S. shale oil and countries like Saudi Arabia keeping their production high to hold onto market share. In the time since, a deal between Iran and world powers over its contested nuclear program allowed it more firmly back into the global oil market. The Islamic Republic wants to make up for lost time by boosting its own production. The 14-member Organization of the Petroleum Exporting Countries, which had tremendous power in previous decades, has spent some two years trying to decide what to do. An April summit in Qatar that was widely expected to produce an output cut fell apart. Meanwhile, financial markets have hung on every vague utterance suggesting a deal, sparking mini-rallies in crude prices that later fade. The same seemed to be happening after Wednesday’s meeting, as U.S. crude futures surged and later fell back. Under the terms of Wednesday’s deal, OPEC agreed to have a committee look at potentially cutting production to 32.5 million to 33 million barrels a day. That would be down from August’s production of 33.2 million barrels a day. At the most, the possible deal would shave off 700,000 barrels a day — some 2 percent of overall production. The deal would need to be agreed to by OPEC members at their planned Vienna meeting in November.  Producers like Venezuela and Nigeria face tremendous economic pain as oil prices remain low. Even mega-producer Saudi Arabia has cut salaries for senior government officials while eating through its foreign reserves and cutting subsidies as it wages a costly war in Yemen. But consumers benefit. U.S. drivers pay an average of $2.20 a gallon (58 cents a liter) for regular gasoline, down from $3.69 a gallon (97 cents a liter) in June 2014 at crude’s height. If ratified in November, an OPEC production cut wouldn’t stop members from ignoring their quotas and pumping whatever they can. It’s happened many times before. Meanwhile, any price rise in oil also could entice U.S. shale producers, whose break-even production costs are often higher than OPEC countries’, back into the market. A generally weakened global economy could keep demand down as well.

The "OPEC Freeze"? -- All Talk -- Nothing Changed -- October 1, 2016 -- John Kemp has a nice analysis of the "OPEC freeze" at this link. Some data points:

• it's a vague statement: unenforceable, and doesn't even set quotas by country
• before the annual summer surge in production (for domestic consumption), OPEC produced 32.45 million bopd 
• the "freeze": a range between 32.5 million and 33.0 million bopd
• the delta: inconsequential

The only "thing" that comes out of the hastily-called meeting was the fact that Saudi Arabia showed some flexibility and was willing to talk. Actually, the only other "thing" that came out of this hastily-called meeting was an admission, though not explicitly stated, that Saudi had made a trillion-dollar mistake, is in deep trouble, and has now admitted as much. Saudi's trillion-dollar mistake:

• the downturn in oil prices lasted much longer than Saudi policymakers thought likely in 2014 
• the downturn shows no sign of ending
• falling oil revenues are having a huge impact on Saudi Arabia
• Saudi Arabia foreign reserves have declined by 24%, or $182 billion, since August, 2014
• reserves declined by $53 billion in first seven months of 2016 despite big cuts in government spending and attempts to raise non-oil revenues
• Saudi Arabia still has $564 billion in cash reserves and the ability to raise a lot of cash by issuing debt but risks: losing confidence in the riyal's peg to the US dollar; a flight in capital; and, a run on currency

I have always said that whether oil is priced at $40 or $60, it won't make much difference for Saudi Arabia. From the article: Prince Mohammed indicated earlier this year it did no matter for the kingdom whether oil prices were $30 or $70 per barrel. But in recent months officials have indicated they believe prices are unsustainably low and want them to rise.This is John Kemp's bottom line: The Saudis probably calculate that an increase in prices to $50-60 per barrel would bring useful extra revenue without stimulating too much extra shale production.

Saudi Arabia Injects $5.3 Billion Into Banks to Ease Crunch -- Saudi Arabia’s central bank stepped up efforts to support lenders in the Arab world’s biggest economy as they grapple with the effects of low oil prices. The Saudi Arabian Monetary Agency, as the central bank is known, said it decided to give banks about 20 billion riyals ($5.3 billion) in the form of time deposits “on behalf of government entities.” It’s also introducing seven-day and 28-day repurchase agreements, as part of its “supportive monetary policy.” The plunge in oil prices over the past two years forced the government to draw down on its deposits in the banking system, squeezing domestic liquidity. That’s pushed up the three-month Saudi Interbank Offered Rate, a key benchmark used for pricing loans, to the highest level since 2009. The central bank was said to have offered lenders 15 billion riyals in short-term loans in June to help ease liquidity constraints. The move is “the next step in the continuing story we’ve been hearing since the start of the year on the tightening of liquidity among Saudi banks and a follow-on to the first injection provided to banks earlier this year,” said Murad Ansari, a Riyadh-based analyst at investment bank EFG-Hermes. “The liquidity situation remains challenging. However, it shows that the central bank will continue to support Saudi banks.” The announcement comes as the world’s biggest oil exporter prepares to sell its first international bonds to finance a budget deficit that the International Monetary Fund expects to reach about 13 percent of economic output this year. The economy will likely expand 1.1 percent in 2016, according to a Bloomberg survey, the slowest pace since 2009.

Saudi Arabia Cancels Public Sector Bonuses, Slashes Salaries -- While Saudi Arabia scrambles to boost the price of oil without undoing the policy it itself unleashed at the November 2014 OPEC meeting, its economy continues to founder as reportedmost recently on Sunday. The latest indication of just how pressured Saudi budgets have become as a result of persistently low oil prices, a function of the Saudi strategy to push shale producers out of the market, came moments ago when Reuters reported that Saudi Arabia's government has decided to curb to some financial perks for public sector employees,according to a live broadcast of the cabinet's weekly meeting. "The cabinet has decided to stop and cancel some bonuses and financial benefits,"read a line of text on Ekhbariya TV, as a minister read to assembled ministers and royals, including King Salman, a list of cuts to be made in various grades in the civil service.A royal decree read on the channel following the broadcast announced a cut to ministers' salaries by 20 percent and to members of the appointed Shoura Council by 15 percent.  The decision comes as low oil prices have pushed energy-rich Gulf Arab states to rein in lavish public spending. So what are Saudi's options ? Well, if it wishes to undo nearly 2 years of oil policies, it will have to do one of two things. It could claim that supply and demand are now in balance, and it's time for OPEC to manage production again and boost prices. That would stretch the limits of credibility when OPEC's just published forecasts that rebalancing won't happen until the second half of next year. Or, as Bloomberg's Julian Lee writes, Saudi Arabia could admit to its fellow OPEC members that it had got it wrong. "You can just picture the scene in Algiers:"

Saudi Arabia is showing signs of financial strain as its relationship with the US sours | The Independent: Hundreds of foreign hospital workers in Saudi Arabia, unpaid for seven months, went on strike this week and were blocking a highway in Eastern Province in defiance of the ban on strikes and demonstrations in the Kingdom. The employees’ anger was deepened by the belief that the same employer who has been holding back their salaries, regularly offers massive fees to attract international singers to perform at his parties. Things are not well in Saudi Arabia and this week there were two pieces of bad news. Hitherto, there have been protests like this by foreign employees suffering from the knock-on effects of cuts in state expenditure following the drop in the oil price. In work camps far out in the desert workers complain that, not only have they stopped receiving money owed to them, but they are no longer even receiving supplies of food and electricity. Footage shows extent of child malnutrition in Yemen as Britain continues to sell arms to Saudi Arabia But now cuts are extending to the public sector workers who are Saudi citizens, 70 per cent of whom work for the government. So far the austerity is limited, with lower bonuses and overtime payments and a 20 per cent reduction in the salaries of ministers, though those close to political power are unlikely to be in actual need. There are political dangers in this strategy. In the oil states of the Middle East there is a trade-off between the spectacular wealth of a corrupt and autocratic elite and an extensive patronage system through which much of the rest of the native population plugs into oil revenues. Some $120bn, or half of government spending, went on salaries, wages and allowances in 2015.

Gulf States Continue Bumper Debt Issuance, Bahrain Next in Line - WSJ: Bahrain has hired banks to sell bonds to international investors, the latest in a long line of Gulf states raising money to replace revenues lost to falling energy prices this year. The country has hired banks to arrange a series of investor meetings in the Middle East, the U.S., Asia and the U.K, starting Wednesday, one of the banks involved said on Tuesday. If successful, those meetings will be followed up by a U.S. dollar benchmark dual-tranche transaction, the bank said. States in the Persian Gulf have been issuing bonds at their fastest pace ever this year, raising cash to replace lost oil revenue as the energy bust continues. Still, the Bahrain deal would be the first since the start of the summer. The Gulf Cooperation Council states of Saudi Arabia, United Arab Emirates, Bahrain, Kuwait, Qatar and Oman together have raised a record $18 billion in 2016, according to Dealogic. Analysts at Oxford Economics predict an unprecedented amount of new international sovereign debt from the oil-rich region over the next few months, triggered by large fiscal deficits. Tight market liquidity, ratings downgrades and pessimism over the outlook for oil prices, however, means the issues will need to be priced attractively to success, the analysts said. In February, Bahrain canceled a $750 million bond sale after Standard & Poor’s downgraded its credit rating it to junk, although later that month it completed a $600 million bond sale. In a June review S&P affirmed its rating and said the stable outlook on the sovereign’s rating reflected expectations that the country’s modest economic growth could offset ongoing fiscal and external pressures over the coming 12 months. The issuance would be made up of a so-called sukuk bond and a longer-dated conventional tranche, subject to market conditions, the bank said.Sukuk bonds are structured to abide by Islamic law which forbids conventional interest payments. Instead, they are usually backed by assets or cash.

A Disgusting, Child-Murdering Vote – On The $1.15 billion Saudi Arms Sale -- Matthew Cunningham-Cook - In a craven act of genocidal depravity, the US Senate voted Wednesday to approve yet another tranche of weapons sales to the far-right Wahhabist theocracy of Saudi Arabia, bringing the total to over $20 billion in sales since the Saudi war began in March 2015. Those weapons will be used in the Saudis’ campaign of extermination against the civilian supporters of the Houthis, a postcolonial-nationalist militia aligned with Tehran. Because of Saudi Arabia’s indiscriminate bombing of civilians, 14.4 million people in Yemen, out of 25.4 million, are food insecure, according to the World Food Program. On September 21 the BBC released a harrowing documentary on malnutrition among children in Yemen, all a direct result of the Saudi bombing campaign.  Over 4,000 civilians have been killed by the Saudi’s bombing campaign, with likely countless more dead from ancillary effects of malnutrition. The region includes wartorn Somalia–the recipient of numerous US interventions and the site of ongoing drone strikes and US special forces presence–and the dictatorial, pro-US regime in Ethiopia that is also waging a campaign of mass slaughter and starvation, except against its Oromo ethnic plurality and rural villagers. All three countries sit at the center of the Mandeb Strait, a key strategic chokepoint that features around 7% of the world’s oil tanker transportation. Directly north is the fiercely independent nation of Eritrea, one of just two nations in Africa to not cooperate with the US military in its neo-colonial Africom project. What in particular concerns Washington and Riyadh is that a Houthi Yemen would align itself with Iran and Eritrea, forming a counter-hegemonic bloc at the epicenter of global oil transportation and production. That just can’t happen. Hence the campaign of starvation against the Yemeni people. It’s not without historical precedent–the British effort to head off anti-colonial disruption in Bengal by artificially raising the price of food in Bengal, leading to the starvation of over 4 million people, comes to mind. 

Lawmakers Vow Override of Obama's 9/11 Victims Bill Veto - Throughout Obama’s presidency, his vetoes have always survived Congressional challenges. That his first might be a bill about Saudi Arabia reflects waning Saudi influence in lobbying Congress to get their way, and what would likely have once been a very safe veto is now at serious risk. Obama’s Friday veto of the Justice Against Sponsors of Terrorism Act (JASTA) aims to block a bill that would allow family members of 9/11 victims to sue Saudi Arabia in American courts.The House and Senate both passed JASTA unanimously, and many in both parties are expressing confidence they have the votes for an override of the veto. The House was widely expected to override easily, but Sen. Chuck Schumer (D – NY) insisted that the Senate too would “quickly” override Obama’s veto, insisting that the Saudis must be held accountable if the courts find they were culpable in 9/11. President Obama has warned that the JASTA would set a dangerous legal precedent, warning that allowing individual lawsuits against the Saudi government could lead to other countries allowing their own citizens to sue the US government over its own misdeeds. The Administration had originally hoped to keep the veto and override votes until after the November elections, hoping it would make newly reelected senators more willing to listen to Saudi lobbyists and less concerned about strong voter support for the bill. Saudi lobbying clearly isn’t what it once was, however, and those senators that switch sides on the override now risk serious repercussions in the election.

U.S. Corporations Side With Saudi Arabia Against The American People Over 9/11 Victims Bill -- Shortly after the release of the infamous 28-pages earlier today, the White House issued a statement dismissing allegations of Saudi involvement in the attacks of 9/11. I believe such assurances are intended to prevent people from reading it in the first place, because if you actually read them, your mouth will be wide open the entire time in disbelief.There are only two conclusions any thinking person can come to after reading the 28-pages.

• 1. Elements within the Saudi government ran the operations behind the 9/11 attack.
• 2. The U.S. government covered it up.

– From The 28-Pages Are Way Worse Than I Thought.  If you want to know just how insignificant the interests of the American people are when they happen to conflict with the profit margins of multinational corporations, the following article should leave little doubt. Politico reports: Saudi Arabia is mounting a last-ditch campaign to scuttle legislation allowing families of victims of the Sept. 11, 2001 attacks to sue the kingdom — and they’re enlisting major American companies to make an economic case against the bill. General Electric, Dow Chemical, Boeing and Chevron are among the corporate titans that have weighed in against the Justice Against Sponsors of Terrorism Act, or JASTA, which passed both chambers unanimously and was vetoed on Friday, according to people familiar with the effort. The companies are acting quietly to avoid the perception of opposing victims of terrorism, but they’re responding to Saudi arguments that their own corporate assets in the kingdom could be at risk if the law takes effect.

Congress Votes to Override Obama Veto on 9/11 Victims Bill - — An overwhelming majority in Congress on Wednesday overturned President Obama’s veto of legislation that would allow families of those killed in the Sept. 11, 2001, terrorist attacks to sue Saudi Arabia for any role in the plot, the first successful override vote of his presidency.  The 9/11 override is a remarkable yet complicated bipartisan rebuttal, even as some of its supporters conceded that they did not fully support the legislation they had just voted for. Mr. Obama and his allies vowed to find a way to tweak the legislation later.  In recent days, Mr. Obama, Defense Secretary Ashton B. Carter and General Joseph F. Dunford Jr., the chairman of the Joint Chiefs of Staff, all wrote letters to Congress warning of the dangers of overriding the veto.The law “could be devastating to the Department of Defense and its service members,” Mr. Obama wrote, “and there is no doubt that the consequences could be equally significant for our foreign affairs and intelligence communities.” The White House and some lawmakers were already plotting how they could weaken the law in the near future.Yet most of Mr. Obama’s greatest allies on Capitol Hill, who have labored for nearly eight years to stop most bills he opposes from even crossing his desk, turned against him, joining Republicans in the remonstrance.Only one senator, Harry Reid, Democrat of Nevada, sided with the president as 97 others voted Wednesday to override. In the House, the veto override was approved a few hours later, 348 to 77. The bill succeeded not with significant congressional debate or intense pressure from voters, but rather through the sheer will of the victims’ families, who seized on the 15th anniversary of the attack and an election year to lean on members of Congress. That effort was aided by the waning patience of lawmakers with the kingdom in recent years. The Senate vote also represents another White House miscalculation on Capitol Hill, where it was once again slow to pressure members and to see the cracks in its firewall against the bill.

Obama Humiliated: Senate Overrides President's Veto Of "Sept 11" Bill In Crushing 97-1 Vote –- Late last Friday, we reported that in a troubling development for all Americans, Barack Obama sided with Saudi Arabia when he vetoed the Justice Against Sponsors of Terrorism Act , better known as the "Sept 11" bill, allowing Americans to sue Saudi Arabia over its involvement in terrorism on US soil, passed previously in Congress, despite clear signs that the veto may be rejected by both the Senate and the House. Moments ago, that is precisely what happened, when the Senate voted overwhelmingly 97 to 1, to override President Obama’s veto of a bill letting the victims of the 9/11 attacks sue Saudi Arabia, striking a blow to the president on foreign policy weeks before he leaves office. The vote marks the first time the Senate has mustered enough votes to overrule Obama’s veto pen.As the Hill reported, not a single Democrat came to the Senate floor before the vote to argue in favor of Obama’s position. Obama has never had a veto overridden by Congress. Lawmakers don’t want to be seen as soft on punishing terrorist sponsors a few weeks before the election, at a time when voters are increasingly worried about radical Islamic terrorism in the wake of recent attacks in Manhattan, Minnesota and Orlando, Fla. Oddly enough, Obama had no problem with those particular optics.

9/11 Bill Crashes Saudi Stock Exchange, Bond Market Ambitions - With oil prices continuing to languish below $50 per barrel, the major oil producers in the Middle East are seeing their financial positions deteriorate. To plug the gap in the government budgets, the Gulf States are having to turn to the international bond markets. Saudi Arabia plans on taking out $10 billion to $15 billion in debt from international financial markets, but a controversial piece of legislation passed by the U.S. Congress could complicate Saudi Arabia’s plans. Congress passed a bill that would allow the victims of the September 11, 2001 attacks to sue Saudi Arabia for its potential involvement. President Obama opposes the legislation for fear of damaging America’s relationship with Saudi Arabia, but the U.S. Senate, with huge levels of support, overrode the president’s veto. The issue is rattling confidence in a crucial strategic and economic alliance between the U.S. and Saudi Arabia. Riyadh has threatened to sell off U.S. treasuries if the bill moves forward. As the veto override vote has worked its way through the Senate, Saudi Arabia’s currency plunged to its lowest level in four months, and its stock market “lost the most in the world for a second straight day,” Bloomberg reported. Bloomberg follows 90 stock indices, and Saudi Arabia’s Tadawal All Share Index was the worst performer in recent days, falling to its lowest point since the beginning of this year (a time when oil prices dropped to below $30 per barrel). This could complicate or delay Saudi Arabia’s bond sale, sources told Bloomberg. The 9/11 bill could interrupt Saudi Arabia’s plans for a bond offering, but it probably won’t derail the effort. The potential rift between the Washington and Riyadh probably won’t be a deal-breaker for Saudi Arabia’s plans for new debt issuance. “It is simply a matter of when, not if, Saudi Arabia decides to tap the international debt capital markets," “This doesn’t change the fact that Saudi Arabia needs to raise a substantial amount of cash through the bond markets.”

Panic In The Kingdom: Saudi Currency, Bonds, Banks Extend Collapse Despite OPEC 'Deal' -- Following Obama's 9/11 bill veto defeat yesterday, and despite a surge in oil prices after a 'deal' was struck by OPEC, Saudi Arabia's markets are signaling panic in The Kingdom.Currency forwards are collapsing, default risk is jumping, and bank stocks are hitting record lows... Mint's Bill Blain, in his Morning Porridge noted that last nights “surprise” OPEC agreement to agree to agree about talks on cutting oil production is fascinating. Not from the likelihood it may not ever happen, (the earliest we will know is the Vienna meeting in November), but what it tells us about how the sands are shifting around Saudi Arabia. Deliberate Saudi over-production caused the oil glut and was a policy designed to take out expensive US producers. Voodoo economics didn’t work – US producers cut and adapted, and the rest of the world hasn’t played along. Last night’s agreement represents a fundamental shift in Saudi – a wake up and smell the camel-waste moment. The result is the kingdom is suffering rising twin deficits amounting to over 20% of GDP. As global oil revenues have tumbled on the back of crashing prices, Saudi faces a cash and spending crisis for which it’s largely unprepared. Social issues are mounting. The elites “salaries” have been slashed. It’s being forced towards the international debt markets – a massive deal is on the new issue stocks. My colleague Martin Malone expects to see Debt/GDP rise from 15% to 50%.

Saudi Arabia Reacts To Sept. 11 Bill Veto Override -- In the aftermath of yesterday stunning snub of Barack Obama, when the Senate overrode Obama's veto of the Justice Against Sponsors of Terrorism Act, or JASTA (aka the Sept.11 bill which would allow US citizens to sue Saudi Arabia over the Sept. 11 attack) with a whopping 99 votes, followed shortly by the same outcome in the House, there was just one question on everyone's mind: would Saudi Arabia make good on its threat from April to sell some or all of its over half a trillion in foreign reserves. And while so far there has been nothing but a stony silence from Riyadh, some Saudis have bristled, saying the kingdom should curb business and security ties in response. To be sure, Saudi's government is in a tight spot as it has always dismissed suspicions that it backed the Sept 11 attackers even though the release of the "28 pages" clearly confirmed Saudi involvement. In the coming weeks it will have to not only simply deny, but also prove in a court of law it had no involvement when an avalanche of lawsuits hits it. While the Saudi government financed an extensive lobbying campaign against the "Justice Against Sponsors of Terrorism Act", or JASTA, in the run-up to the vote, and warned it would undermine the principle of sovereign immunity, Saudi officials who had lobbied against the bill stopped short of threatening any retaliation if the law was passed. Officially. Unofficially the NYT reported on April 15 that Saudi Arabia had told the Obama administration and members of Congress that it will sell off hundreds of billions of dollars’ worth of American assets held by the kingdom if Congress passes the JASTA bill. For now, however, there is no official statement, and no official reaction from Saudi Arabia after the votes, and in the short-term, few expect little more than a curt statement of disapproval from Riyadh. However, unofficial channels have been more forthcoming. As Reuters reports, the long-standing alliance between the kingdom and the United States is one of the cornerstones of Middle East politics, security and trade, and in their reactions on Thursday some Saudis said JASTA would jeopardize what they see as an interdependent relationship. "What would happen if Saudi Arabia froze its cooperation with the United States with regards to counter-terrorism as a response to JASTA?" Salman al-Dosary, editor-in-chief of the pan-Arab, Saudi-owned Al Sharq al-Awsat newspaper, wrote on Twitter.

Iran oil industry fires, blasts raise suspicions of hacking  (AP) — A series of fires at Iranian petrochemical plants and facilities have raised suspicions about hacking potentially playing a role, with authorities saying that “viruses had contaminated” equipment at several of the affected complexes. Iran officially insists the six known blazes over the span of three months weren’t the result of a cyberattack. However, the government acknowledgment of supposedly protected facilities being infected points to the possibility of a concerted effort to target Iranian infrastructure in the years after the Stuxnet virus disrupted thousands of centrifuges at a uranium enrichment facility. Among the worst of the fires was a massive, days-long inferno in July at the Bou Ali Sina Petrochemical Complex in Iran’s southwestern province of Khuzestan. Insurance officials later estimated the damage at some $67 million. Authorities preliminarily blamed the blaze on a leak of paraxylene, a flammable hydrocarbon, without elaborating. Other recent blazes include: — A July 29 fire at a storage tank at the Bistoon Petrochemical

• — A July 29 fire at a storage tank at the Bistoon Petrochemical Complex in Iran’s western province of Kermanshah that authorities blamed on an electrical fault;
• — An Aug. 6 gas pipeline explosion in the port city of Genaveh that killed one person and injured three;
• — An Aug. 7 fire at a storage area of the Bandar Imam Khomeini Petrochemical Complex that burned for two days;
• — An Aug. 30 inferno that erupted in a sewage unit at Iran’s South Pars gas field; and
• — A Sept. 14 gas leak and fire at the Mobin Petrochemical Factory that services the South Pars gas field that injured four workers.

The Natural Gas War Burning Under Syria - In 2009, Qatar, a leading natural gas producer, approached Syria about routing its planned 1,500 mile pipeline to the gas markets of Europe through Syria’s Aleppo province. Qatar wanted a pipeline straight to Europe as its current gas transport modes were limited to Liquefied Natural Gas (LNG) tanker, mostly to Asia with limited spot shipments to Europe or the Dolphin pipeline to the United Arab Emirates and Oman. The pipeline would head north and end in Turkey after crossing Saudi Arabia, Jordan, and Syria. Syria declined Qatar’s offer, which would have cut the European market share of its partner, Russia, and instead agreed to participate in the “Friendship Pipeline” between Iran and Iraq that was considered a “Shia Pipeline” to some and a target for the Sunni monarchies of the Gulf. Not understood, or ignored, was Syria’s longstanding support of the Iranian regime, especially during the 1980-1988 Iran-Iraq War, and its long relationship with Russia, dating from 1944, which should have been a warning of who might appear if things hotted up.  In 2011, Syria, Iran, and Iraq agreed to build a pipeline to connect Iran’s South Pars gas field to Europe. The pipeline would run from Assalouyeh, Iran to Europe via Iraq, Syria, and Lebanon, with Syria as the center of assembly and production.  What remains unclear is why, when Syria turned down its original pipeline proposal, it didn’t pursue its second option for the pipeline route: Saudi Arabia – Kuwait – Iraq. Aside from the challenging terrain in Iraq, the mostly likely reasons are the discovery of vast gas reserves in the eastern Mediterranean, and Saudi opposition to a pipeline through Kuwait. If a more Qatar-friendly regime were to gain control of Syria, Qatar would be able to garner more profit and have influence over the state, something it is unable to do with Saudi Arabia, which vehemently opposes Qatar’s historic support of the Muslim Brotherhood, Jordan, a U.S. ally, or Iraq, an Iranian ally. At that point it was nothing personal, just business, and the Assads had to go. To better understand the war in Syria, remember the surge in natural gas discoveries in the Eastern Mediterranean starting in 2009. Israel, Cyprus, and Egypt have found large gas deposits, and offshore Lebanon has the potential for significant gas resources. Israel has the potential to export gas to Egypt, Jordan, the Palestinian Authority, and Turkey.  In the pipeline from Iran to Syria it could create an energy hub in Syria, and could block Qatar gas sales to Europe at a time when Qatar’s gas exports to the U.S. have dropped to zero, largely due to increasing U.S. domestic production of natural gas. Thus Qatar would be limited to the Asian LNG market as it scrapped for the EU market with Iran, Iraq, Syria, and Russia. And the only thing that could make it worse is happening: Europe is forecast to take more than half of U.S. LNG exports by 2020.

How the Pentagon sank the US-Russia deal in Syria – and the ceasefire -- Another US-Russian Syria ceasefire deal has been blown up.Whether it could have survived even with a US-Russian accord is open to doubt, given the incentives for al-Qaeda and its allies to destroy it. But the politics of the US-Russian relationship played a central role in the denouement of the second ceasefire agreement.The final blow apparently came from the Russian-Syrian side, but what provoked the decision to end the ceasefire was the first ever US strike against Syrian government forces on 17 September.That convinced the Russians that the US Pentagon had no intention of implementing the main element of the deal that was most important to the Putin government: a joint US-Russian air campaign against the Islamic State (IS) militant group and al-Qaeda through a “Joint Implementation Centre”. And it is entirely credible that it was meant to do precisely that. The Russians had a powerful incentive to ensure that the ceasefire would hold, especially around Aleppo.  It was understood that the “demilitarisation” north of Aleppo was aimed at allowing humanitarian aid to reach the city and was, therefore, the central political focus of the ceasefire. The Russians put great emphasis on ensuring that the Syrian army would comply with the demilitarisation plan. It had established a mobile observation post on the road on 13 September. And both the Russians and Syrian state television reported that the Syrian army had withdrawn its heavy weaponry from the road early on 15 September, including video footage showing a bulldozer clearing barbed wire from the road. The Syrian Observatory for Human Rights also reported the Syrian army had withdrawn from the road.  At an extraordinary video conference with Kerry immediately after the negotiation of the ceasefire agreement was complete, Secretary of Defence Ashton Carter strongly objected to the Joint Centre – especially the provision for sharing intelligence with the Russians for a campaign against IS and al-Qaeda. Obama had overridden Carter’s objections at the time, but a New York Times story filed the night of 13 September reported that Pentagon officials were still refusing to agree that the US should proceed with the creation of the Joint Implementation Centre if the ceasefire held for seven days.

Syria Claims To Have Recording Of Conversation Between ISIS And US Military Before Strike On Syrian Army -- In a stunning allegation, one which would lead to dramatic gepolitical implications, the speaker of the People's Council of Syria said on Monday that the Syrian intelligence possesses an audio recording of conversation between Islamic State terrorists and the US military taken just prior to the Washington-led coalition's airstrikes on the government troops near Deir ez-Zor on September 17 which left over 60 Syrian troops dead. As reported last weekend, coalition warplanes hit Syrian government troops near the eastern city of Deir ez-Zor on September 17, leaving 62 military personnel killed and a hundred wounded. The Pentagon said initially that the airstrike was a mistake and targeted ISIS militants.  Britain, Australia and Denmark confirmed their air forces' participation in the deadly airstrikes. "The Syrian Army intercepted a conversation between the Americans and Daesh before the air raid on Deir ez-Zor", Hadiya Khalaf Abbas said as quoted by the Al Mayadeen broadcaster. Hadiya Khalaf Abbas, the head of the Syrian parliament, added during her visit to Iran that after the coalition's airstrikes on the government troops US military directed terrorists' attack on the Syrian army. The attack on government positions, followed by an attack on a UN humanitarian convoy which the US has accused Russia of organizing, with Russia in turn putting the blame on US-supported rebels, has led to the collapse of the September 9 Syrian ceasefire. Russia's Foreign Minister Sergei Lavrov said last Friday it was necessary to separate Daesh terrorists from "moderate" opposition forces in order to salvage the truce.

Rogue Mission: Did the Pentagon Bomb Syrian Army to Kill Ceasefire Deal? - A rift between the Pentagon and the White House turned into open rebellion on Saturday when two US F-16s and two A-10 warplanes bombed Syrian Arab Army (SAA) positions at Deir al-Zor killing at least 62 Syrian regulars and wounding 100 others. The US has officially taken responsibility for the incident which it called a “mistake”, but the timing of the massacre has increased speculation that the attack was a desperate, eleventh-hour attempt to derail the fragile ceasefire and avoid parts of the implementation agreement that Pentagon leaders publicly opposed. Many analysts now wonder whether the attacks are an indication that the neocon-strewn DOD is actively engaged in sabotaging President Obama’s Syria policy, a claim that implies that the Pentagon is led by anti-democratic rebels who reject the Constitutional authority of the civilian leadership. Saturday’s bloodletting strongly suggests that a mutiny is brewing at the War Department. The chasm that’s emerged between the Pentagon warhawks and the more conciliatory members of the Obama administration has drawn criticism from leading media outlets in the US (The New York Times) to high-ranking members in the Russian cabinet. On Saturday, at an emergency press conference at the United Nations, Russia’s UN ambassador Vitaly Churkin referred to the apparent power struggle that is taking place in Washington with these blunt comments: “The big question that has to be asked is ‘Who is in charge in Washington? Is it the White House or the Pentagon?’ …Because we have heard comments from the Pentagon which fly in the face of comments we have heard from Obama and Kerry…” (https://www.youtube.com/watch?v=bID01gIEIOY See–10:15 second) Churkin is not the only one who has noticed the gap between Obama and his generals. A recent article in the New York Times also highlighted the divisions which appear to be widening as the situation in Syria continues to deteriorate. Here’s an excerpt from the New York Times: (SECDEF Ash) “Carter was among the administration officials who pushed against the (ceasefire) agreement … Although President Obama ultimately approved the effort. On Tuesday at the Pentagon, officials would not even agree that if a cessation of violence in Syria held for seven days — the initial part of the deal — the Defense Department would put in place its part of the agreement on the eighth day…

Caught On Tape: Did The US Target Syrian Aid Convoy With Hellfire Missile? - Footage of the nighttime attack on the Syrian aid convoy in Aleppo has surfaced. But there's something curious about how the footage has been appearing on Western news reports. A commenter on the Moon of Alabama blog, PavewayIV, made the following observations about what appears in the video, and what it suggests. First, however, here's an unedited version of the blast, courtesy of ABC:In the screen cap above, you can see what looks to be a cloud of sparks following an initial explosion. According to PavewayIV, this is a signature of the Metal-Augmented Charge (MAC) Hellfire AGM-114N, the Predator drone's typical payload. The fiery cloud is produced by the residue of the fine-mesh fluorinated aluminum particles (the "metal augmentation"). Aside from the ABC footage, most other networks have shown edited versions that make this signature difficult to detect.  For example, here's AP's version: Shakey-cam added for jihadi-vision effect? Why would they do this? Thermobaric Hellfire air-blasts don't leave craters, and they typically start fires. No craters are visible in footage of the burned convoy. The Russians have thermobaric bombs, too, according to PavewayIV, but they use different particles and their blast patterns are different: either no "sparkles" or long-duration "sparkles", not the fast-duration flash as seen in the video of the Aleppo blast.

John Kerry Gives Russia An Ultimatum: Stop Bombing Aleppo Or All Cooperation Ends -In the latest, and most dramatic - if perhaps entertaining - escalation of diplomacy between the US and Russian, earlier today Secretary of State John Kerry threatened to cut off all contacts with Moscow over Syria, unless Russian and Syrian government attacks on Aleppo end. Kerry issued the ultimatum in a Wednesday telephone call to Russian Foreign Minister Sergey Lavrov. Kerry told Lavrov the U.S. was preparing to "suspend U.S.-Russia bilateral engagement on Syria," including on a proposed counterterrorism partnership, "unless Russia takes immediate steps to end the assault on Aleppo" and restore a cease-fire. As the AP reported, in the telephone call with Lavrov, Kerry "expressed grave concern over the deteriorating situation in Syria, particularly for continued Russian and Syrian regime attacks on hospitals, the water supply network and other civilian infrastructure in Aleppo," Kirby's statement said. Kerry also told Lavrov the U.S. holds Russia responsible for the use of incendiary and bunker-buster bombs in an urban area. It was unclear what effect Kerry's words would have. There have been many threats lobbed at Russia over the years for the duration of the Syrian conflict, now in its 6th year, and most warnings have gone unfulfilled, including President Barack Obama's declaration that the U.S. would take military action if Syrian President Bashar Assad crossed the "red line" of using chemical weapons. Furthermore, Syria has repeatedly stressed that it is in its right to try to retake Aleppo from rebel forces. "The burden remains on Russia to stop this assault and allow humanitarian access to Aleppo and other areas in need," Kerry told Lavrov, according to State Department spokesman John Kirby.

US To Suspend Syria Diplomacy With Russia, Prepares "Military Options" --In the most dramatic diplomatic escalation involving the Syrian conflict in the past years,yesterday John Kerry issued an ultimatum to Russia, in which he warned his colleague Lavrov to stop bombing Aleppo or else the US would suspend all cooperation and diplomacy with Russia. 24 hours later, this appears to be precisely what is about to take place, leading to an even greater geopolitical shock in Syria. According to Retuers, the United States is expected to tell Russia on Thursday it is suspending their diplomatic engagement on Syria following the Russian-backed Syrian government's intense attacks on Aleppo, U.S. officials said on condition of anonymity. Why now and what happens next? According to US officials, the Obama administration is now considering tougher responses to the Russian-backed Syrian government assault on Aleppo,including military options. According to Reuters, the new discussions were being held at "staff level," and have yet to produce any recommendations to President Barack Obama, who has resisted ordering military action against Syrian President Bashar al-Assad in the country's multi-sided civil war.However, now that diplomacy with Russia is set to end, this will give the greenlight for Obama to send in US troops in Syria, with Putin certain to respond appropriately, in what will be the biggest military escalation in the Syrian proxy war in its five and a half year history.

DANGER - Tensions rising sharply between nuclear superpowers - Tension between Russia and USA rose dangerously, on Thursday 29th of September, as the spokesman of the American Pentagon proceeded to indirect, still clear and quite unprecedented threats, about what can happen to Russian soldiers, interests and even cities, if Moscow and Damascus do not alter their policy in Syria. In the same time the US Secretary of State is threatening with suspension of talks with Russia on the situation in Syria. Answering to these threats, the spokesman of the Russian Ministry of Defense said that (Pentagon’s spokesman Kirby’s) “words are the most frank confession by the U.S. side so far that the whole ‘opposition’ ostensibly fighting a civil war in Syria is a U.S.-controlled international terrorist alliance…What makes Kirby’s statement particularly shocking is that the scale of direct U.S. influence on terrorists’ activity is global, and that it reaches as far as Russia.” These exchanges came only three days after US Defense Secretary Ashton Carter went to the Air Force Global Strike Command base, in Minot, South Dakota, to defend the massive modernization of the US nuclear arsenal and issue bellicose threats against Russia, essentially outlining plans for a nuclear war with Russia! Look for more information in the following articles:

US and EU Sanctions Are Devastating Syrian Civilians - Real News Network video & transcript - A United Nations report obtained by The Intercept, shows that the UN has found US and EU sanctions to be worsening the humanitarian crisis in Syria. The report titled Humanitarian Impact of Syria-Related Unilateral Restrictive Measures, found that the detrimental impact on aid, trade, healthcare, and national infrastructure is taking a toll on citizens. It concludes, “Unless addressed now, the impact of sanctions will last well after the sanctions are either removed or modified and may create a new catastrophe in terms of crippling economic and humanitarian effects.”  Joining us now to discuss this is, Rania Khalek. Rania is an associate editor at the Electronic Intifada and a co-host of the podcast, Unauthorized Disclosure. Her latest article for The Intercept is titled, “U.S. and EU Sanctions Are Punishing Ordinary Syrians and Crippling Aid Work, U.N. Report Reveals.”

Chemical weapons are being used in Iraq – but the US won’t raise hell about it - The group known as Islamic State (IS) reportedly used a sulpur-mustard gas against US troops in Iraq. It was detected in a black oily substance found on a rocket fired at an American airbase in Qayyarah, south of the city of Mosul. None of the soldiers stationed at the airbase – deployed there to support a forthcoming Iraqi offensive to take back Mosul from IS – have suffered any symptoms of mustard gas poisoning. The base took decontamination measures after the rocket hit. This is not the group’s first chemical strike. Reports are mounting up that weapons of mass destruction (WMD) are now part of the organisation’s arsenal – and all thanks to US foreign policy.  The US-led invasion of Iraq in 2003 and the regional chaos that followed is a major reason why IS emerged in the first place; had the war never happened, the group might never have existed, and it certainly wouldn’t have been able to tear through and take control of huge swathes of the country. So at last, the US has finally found WMD in Iraq, but only after its own actions allowed them to spring up there again. There are lots of reasons not to make a song and dance about the strike. While it’s now been confirmed that sulphur-mustard was used, no-one was hurt – so why make a fuss? The US also probably doesn’t want to admit that IS is capable of carrying out any sort of attack against American troops, especially not with a weapon like this. And with a major push to take back Mosul in the offing, the US doesn’t need IS’s capacity and capabilities amplified any further. Another explanation, however, is less practical: the US doesn’t want to talk about WMD in Iraq because it was an American-led war that created the situation in which these weapons have ended up in the country. It’s also a difficult reminder of the “threats” invoked as a pretext for that devastating conflict. In 2003, the US cried wolf – and despite the change of regime since then, it doesn’t want to remind everyone what a mess that turned out to be.

"America Is On Our Side": Al-Nusra Commander Tells German Press US Is Arming Jihadists -- In a striking interview with German journalist Jürgen Todenhöfer published today the German press including the prominent newspaper Focus, a militant jihadist commander said that US weapons are being delivered to Jabhat Al-Nusra by governments that Washington supports, adding that American instructors were in Syria to teach how to use the new equipment.  “Yes, the US supports the opposition [in Syria], but not directly. They support the countries that support us. But we are not yet satisfied with this support,” Jabhat al-Nusra unit commander Abu Al Ezz said in an interview with Koelner Stadt-Anzeiger newspaper from the city of Aleppo. According to the commander, the militants should be receiving more “sophisticated weapons” from their backers to succeed against the Syrian government.

Satellite Imagery Reveals China's Strategic Petroleum Reserve Is Vastly Greater Than Disclosed - At the end of August, we did a follow up article on what we believe is a far bigger marginal driver to the price of oil than OPEC production (which may or may not be reduced by up to 750kbpd in November), namely the Strategic Petroleum Reserve of China, a major importer of oil in recent years, along with India, taking advantage of low prices and largely supporting global oil demand growth at a time of rampant oversupply, and which we profiled most recently in "A Chinese "Mystery" Has Become The Biggest Wildcard For The Price Of Oil." The simplest reason why China's SPR capacity (and storage) is of key importance, is that it determines the ongoing demand China has for oil - of which much ends up in storage -  and also allows analysts to calculate how much more oil China would need, in order to fill up its SPR. While China has traditionally kept any data about its SPR inventory as opaque as possible, in a rare release this month, Beijing reported adding about 43 million barrels of crude to its strategic reserves between mid-2015 and early this year. Reserves totaled 31.97 million tons in early 2016, equivalent to about 234 million barrels,  However, in retrospect it appears China may have been lying, again. According to satellite images by  geospatial analytics startup Orbital Insight, China, has not only misrepresented how much oil it has stored, it has done so at a massive scale, with the real number dwarfing even JPM own estimate: the real amount of Chinese oil in storage, according to Orbital, was a whopping 600 million barrels as of May. Assuming JPM's estimated rate of SPR accumulation of about 1mmbpd, the 600 million number as of May would have grown to well over 700 million barrels as of September.

Analysis: Rebound in sight as China's gasoline exports hit five-month low -  China's gasoline exports in August slid further to hit five-month lows, extending the downward trend that started in the previous month, as steady demand at home, a squeeze in local supplies and lower gasoline cracks discouraged refiners from shipping out plentiful cargoes. But analysts said exports could recover in September as gasoline cracks had recovered from the lowest level in more than 32 months that the Asian market witnessed in early July. Gasoline exports fell to 672,347 mt, or 184,353 b/d, in August, which was 30% lower than the 966,528 mt in July, and 41% lower than the historical high of 1.1 million mt, recorded in June, the latest data from the General Administration of Customs showed. Exports in August were also lower than the average of 212,143 b/d registered in the first eight months of the year. But they were nearly 44% higher than the 467,000 mt in the same month of last year, signaling that the year-on-year trend of rising gasoline outflows was still intact.The government-backed Xinhua news agency said that, as domestic demand remained buoyant in August, it led to a 1.5% month-on-month decline in gasoline stocks by the end of August. In addition, supplies in eastern China were tight because of heavy maintenance, as well as the output restrictions imposed during the G20 summit in Hangzhou that started end of August, refining sources in Shanghai said.