Sunday, January 22, 2017

new OPEC report; US gasoline demand at a 35 mo low; largest rig increase in 45 months, DUCs increase

oil prices were little changed over the week, despite a sharp drop over the first 3 days and a subsequent recovery before the weekend....the February US oil contract, which closed last week at $52.37 a barrel, closed this week up a nickel at $52.42 a barrel, after trading as high as $52.90 on Friday, in a rally ahead of next week's OPEC compliance meeting that was cut short by a rig count report that showed the biggest jump in drilling since April 2013...meanwhile, the current oil chart is showing oil prices for March delivery at $53.22 a barrel, an apparent drop from the expiring February contract price .. natural gas prices closed the week 21.5 cents lower than last Friday, falling 4 out of the 5 days this week, only rallying by 6.2 cents on Thursday after the natural gas storage report showed a 243 billion cubic feet drop in supplies, which left us with 12.9% less natural gas in storage than the same week last year, and 2.6% below the 5 year average..  there were two monthly reports released this week, the current oil market report from OPEC and the drilling productivity report from the EIA, that we're going to want to take a look at today, and as usual, we'll also look at the weekly EIA oil data & the Baker Hughes rig count...

we'll start by looking at a few tables from the OPEC Monthly Oil Market Report for January, which not only covers global oil supply and demand data for December, but also includes a global macroeconomic analysis, commodity prices, oil refining, tanker trade and inventories...this first table is from page 55 of the OPEC pdf and it shows oil production in thousands of barrels per day for each of the OPEC members over the recent years, quarters and months as the column headings are labeled...for all their official business, OPEC uses "secondary sources", such as analyst's reports from satellites and shipping data, as an impartial adjudicator for their for their quotas and production cuts, to resolve any potential disputes that might arise if each member reported their own figures...this is also the data you'll usually see quoted in the media, except for independent analysis by energy research divisions of organizations such as Platts and Reuters that'll have their own numbers..

January 18 2017 December OPEC production

here we see that the official data shows that OPEC production was down by 220,900 barrels per day in December, from a November oil production total that was revised 174,000 barrels per day higher from what was reported last month...(for your reference, here is the November table before revisions; one major difference to note is that Indonesia, who would not agree to production cuts, is no longer a member of OPEC and hence their totals are not included in the new table above)....we can see that three countries accounted for most of the December drop, according to these official totals; Saudi Arabia, whose output fell 149,300 barrels per day from November's record high, Nigeria, who's output fell by 113,500 barrels per day, presumably due to ongoing civil strife, and Venezuela, whose output fell 45,200 barrels per day as the country continues to unravel in the face of the economic war waged against it by the US and its allies.. 

the next table, also from page 55 of the OPEC pdf, shows the oil production that each of the members reported to OPEC (for those that did report)...this data is considered suspect because of the many incentives OPEC members have to fudge their data, and is rarely reported by the media, and we would also have ignored it as well if it weren't for a few rather large discrepancies vis a vis the official data...first, Kuwait is reporting their output was 56,000 barrels per day lower, which we'd consider a normal claim in the face of expected cuts...but notice Nigeria; they reported their output rose 403,900 barrels per day, rather than falling by 113,500 barrels per day as the official secondary sources reported...i have no way of judging the accuracy of either, but a discrepancy of over half a million barrels per day is enough to swing the OPEC output reduction of  220,900 barrels per day into an increase of a similar magnitude... 

January 18 2017 December OPEC production.B

a major reason for the brief collapse in oil prices in the middle of this week was comments from Saudi Oil Minister of Energy Khalid Al-Falih that OPEC would likely be wrapping up their production cuts after June, which quite obviously suggested that we'd be back into a glut situation by this summer...while he later walked back that idea once he saw oil prices falling, that the Saudis would want to increase their oil production again so soon brought to mind what we pointed out when the cuts were first proposed; that is, that they had already ramped up their production so much this summer that the supposedly steep cuts in production would only take them back to their output levels of March and April of this past year...let's look at a longer term chart of Saudi Arabian oil production and see if we can figure out what's going on...

January 18 2017 Saudi oil production

the above graph, taken from a detailed post on this December OPEC data at the Peak Oil Barrel blog, shows total oil production, in thousands of barrels per day, for Saudi Arabia over the period from January 2005 to December's well known that the Saudis typically ramp up their oil production in the summer months for their own use, as most of the Saudi cities are air conditioned, with two thirds of their electrical generation petroleum help you see that, i have colored the oil output dot for each July on this chart can thus see that for most years, oil production rose in the summer and then fell in the winter (with the obvious exception of the global financial crisis years of 2009 and 2010), with an especially strong pattern over the past 5 years...thus, by pushing for OPEC cuts during the winter, they get credit for cutting back at a time of year when they would have done so otherwise anyhow, and now they want to ramp back up to normal production again when the heat is on, all the while looking like they're controlling the market..

we'll include one more oil production chart, for the other elephant in the oil room, Russia...the following graph, also in thousands of barrels per day, is for Russian oil production over the period from January 2013 to December 2016, and it's also from that post on December OPEC data at the Peak Oil Barrel blog, although this chart was included in the comment section by the post's author, Ron Patterson...this graph also seems to be from secondary sources, since Russia themselves reported their December oil production at a record 11,210,000 barrels per day, but whatever the case, it's obvious that Russian production over the past four months was well in excess of their historical level, and so far in January, they're reportedly only down by about 100,000 barrels per day...according to the negotiated deal with OPEC and other oil producers, Russia is committed to an eventual cut of 300,000 barrels per day from their November level...but even if they achieve that, they'll still be producing 100,000 barrels per day more than their average production of the first 8 months of 2016

January 20 2017 Russian oil production

The Latest Oil Stats from the EIA

this week's oil data for the week ending January 13th from the US Energy Information Administration showed that our imports of crude oil were down to a near normal level after last week's 4 year high, while our oil refining was also scaled back from last week's record by nearly the same amount, so a small surplus of crude was again added to our stored supplies...our imports of crude oil fell by an average of 674,000 barrels per day to an average of 8,378,000 barrels per day during the week, while at the same time our exports of crude oil fell from last week's record of 727,000 barrels per day to an average of 704,000 barrels per day, which meant that our effective imports netted out to 7,674,000 barrels per day for the the same time, our crude oil production slipped by 2,000 barrels per day to an average of 8,944,000 barrels per day, which means which means that our daily supply of oil, from net imports and from wells, totaled 16,618,000 barrels per day for the week...

meanwhile, refineries reportedly used 16,468,000 barrels of crude per day during the week, a decrease of 639,000 barrels per day from last week's record, while at the same time, 335,000 barrels of oil per day were being added to oil storage facilities in the US...thus, this week's EIA figures seem to indicate that we consumed or stored 185,000 more barrels of oil per day than were accounted for by our oil imports and production…therefore, the EIA inserted that phantom 185,000 barrels per day number into the weekly U.S. Petroleum Balance Sheet (line 13) to make it balance out...the EIA footnote to that line 13 says that number represents "unaccounted for crude oil", which is further described in the glossary of the EIA's weekly Petroleum Status Report as "the arithmetic difference between the calculated supply and the calculated disposition of crude oil." you know, we've been calling that number that's inserted into the data to make oil balance out the EIA's weekly oil fudge factor...

that same weekly Petroleum Status Report tells us that the 4 week average of our oil imports was virtually unchanged at an average of 8.2 million barrels per day, now 4.5% higher than the same four-week period last year...our crude oil production for the week ending January 13th was 3.2% lower than the 9,235,000 barrels of crude that we produced during the week ending January 15th of last year, and 6.9% below our June 5th 2015 record oil production of 9,610,000 barrels per day...this week's 2,000 barrels per day decrease was in Alaskan production, as oil output in lower 48 states was unchanged from the prior week..

US refineries operated at 90.7% of capacity in using those 16,468,000 barrels of crude per day, down from 93.6% of capacity the prior week, but not much changed from the 90.6% capacity utilization during the same week a year ago, even though they refined 1.7% more crude per day this week than they did during the same week last year...gasoline production from those refineries fell by 719,000 barrels per day to 8,953,000 barrels per day during the week ending January 13th, its lowest in 53 weeks, and hence was 5.2% lower than the 9,453,000 barrels per day of gasoline that were produced during the week ending January 15th a year ago, and 2.8% lower than the 9,215,000 barrels per day of gasoline produced during the week ending January 16th, 2015... meanwhile, refineries' output of distillate fuels (diesel fuel and heat oil) fell by 611,000 barrels per day to 4,713,000 barrels per day, following two weeks of near record high distillates production...thus our distillates production was still up by 3.5% from the 4,552,000 barrels per day that were being produced during the week ending January 15th last year, but 1.2% lower than the 4,768,000 barrels per day of distillates produced during the same week of 2014...     

even with the big drop in our gasoline production, the EIA reported that our gasoline supplies rose by 5,591,000 barrels to 240,473,000 barrels as of January 13th, for what is now a three week jump of nearly 19 million barrels in our gasoline inventories...that happened as our domestic consumption of gasoline fell by 401,000 barrels per day to a 35 month low of 8,069,000 barrels per day, following two prior weeks of the lowest gasoline demand in a year..(our gasoline exports and our gasoline imports were both down by similar amounts and hence made little difference in the week's surplus) ...since we now have an unusually sharp, if seasonal, drop in gasoline demand, we'll include a graph of what that looks like..

January 19 2017 gasoline demand

the graph above was taken from the bottom of the gasoline page from the EIA's "This Week in Petroleum" and it basically shows the four week moving average of US gasoline consumption over the past two years, with February 2015 to February 2016 in brown, and February 2016 to the most recent week in blue...what's obvious here is that gasoline consumption was running well ahead of the prior year's pace for most of 2016, until it slipped slightly below the 2015 levels in November and, as you can see, the past three consecutive weeks of low demand has dropped that 4 week average to well below last year's pace, and is in fact at the lowest it's been since the winter of's possible the ice storms that moved through the middle of the country curtailed driving in the reference week, but that in itself should not drop gasoline demand over a 4 week period to a three year low, especially when compared to previous winters with their own periods of hazardous driving...but even with low gasoline usage, and after three large inventories increases in row, our gasoline inventories as of January 13th were just 0.6% higher than the  244,997,000 barrels of gasoline that we had stored on January 15th of last year, and 2.3% above the 240,922,000 barrels of gasoline we had stored on January 16th of 2015...

meanwhile, the big drop in distillates production lowered our supplies of distillate fuels by 968,000 barrels to 169,073,000 barrels by January 13th, following a 2 week jump of 18.4 million barrels, the largest two week jump in distillates supplies on record...the amount of distillates supplied to US markets, a proxy for our consumption, was up by 897,000 barrels per day to 4,095,000 barrels per day, or else we would have added even more...thus our distillate inventories are still 2.8% higher than the distillate inventories of 164,529,000 barrels of January 15th last year, and 23.8% above the distillate inventories of 136,579 ,000 barrels of January 16th, 2015…

finally, even with big drop in oil imports, there was a decrease in the amount of oil we refined of nearly the same magnitude, which meant we again had extra oil to store, and hence our inventories of crude oil rose by 2,347,000 barrels to 485,456,000 barrels by January 13th, a level which was was still  5.2% below the April 29th record of 512,095,000 barrels...nonetheless, we still ended the week with 6.7% more crude oil in storage than the 455,169,000 barrels we had stored January 15th of 2016, and 33.3% more crude than the 364,266,000 barrels of oil we had in storage on January 16th of 2015... 

This Week's Rig Count and December Drilling Productivity Report

US drilling activity increased during the week ending January 20th, with drilling rigs seeing the largest increase in 45 months, after falling last week for the first time in 11 weeks...Baker Hughes reported that the total count of active rotary rigs running in the US increased by 35 rigs to 694 rigs in the week ending on this Friday, which was up by 57 rigs from the 637 rigs that were deployed as of the January 22nd report last year, but still down from the recent high of 1929 drilling rigs that were in use on November 21st of the same time, drilling activity in Canada rose by 24 more rigs to 342 rigs, so they're now up from just 205 rigs two weeks ago, and well ahead of last year's 250 rig deployment...

US rigs drilling for oil increased by 29 rigs to 551 rigs during the week, so oil rigs are now at their highest since November 25th 2015...oil drilling is also up from the 510 oil directed rigs that were working in the US on January 22nd last year, while down from the recent high of 1609 oil rigs that were drilling on October 10, the same time, the count of US drilling rigs targeting natural gas formations increased by 6 rigs to 142 rigs, which is up from the 127 natural gas directed rigs that were in use a year ago, while it is still way down from the recent natural gas rig high of 1,606 natural rigs that were deployed on August 29th, 2008... 

one drilling platform that had been drilling offshore from Louisiana in the Gulf of Mexico was shut down this week, which reduced the Gulf of Mexico rig count to 23, which was down from 29 rigs working in the Gulf a year ago…our total offshore count for the week was still at 24 rigs, with the ongoing drilling operation that was still in the offshore waters of Alaska, but our total offshore was still down from last year's offshore US total of 29 rigs...

the number of horizontal drilling rigs working in the US increased by 22 rigs to 559 rigs this week, which is now up from the 500 horizontal rigs that were in use in the US on January 22nd last year, but still down from the record of 1372 horizontal rigs that were deployed on November 21st of the same time, 12 vertical rigs were added to those active, increasing the vertical rig count to 75, which was still down from the 77 vertical rigs that were deployed during the same week last addition, the directional rig count was up by 1 rig to 60 rigs as of January 20th, which brought the directional rig count even with last January 22nd's directional of 60 directional rigs...

as usual, 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 that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas both tables, the first column shows the active rig count as of January 20th, the second column shows the change in the number of working rigs between last week's count (January 13th) and this week's (January 20th) count, the third column shows last week's January 13th active rig count, the 4th column shows the change between the number of rigs running this Friday and the equivalent Friday a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was for January 22nd of 2016...        

January 20 2017 rig count summary

as you can see above, rigs were added in all of the most active basins except for the Denver-Julesburg-Niobrara, which although unchanged at 23 rigs is still up from the 19 rigs working there a year ago...again, the Permain led with a 13 rig increase, and thus at 281 rigs they account for more than half of the horizontal drilling going on in the US right now...also back above year ago activity levels is the Cana Woodford in Oklahoma, where 9 more rigs were set up this week...i'm sure you'll note the 3 rig increase in the Utica shale as well, which at 23 rigs is also well ahead of the 14 rigs drilling in the Utica last January 22nd....since there was only only a two rig increase in Ohio, we'd assume that the other new Utica drilling is in Pennsylvania, while the new Marcellus drilling is in West Virginia...note that in addition to the state changes shown in the first table above, Alabama also saw a rig start up this week, probably the same one that shut down last week.. the single rig they have active now matches their count of a year ago...Mississippi drillers also added a rig; they now have 3 acive, down from 6 a ear ago

we also want to make note of the Drilling Productivity Report for December, which to our surprise showed another increase in uncompleted wells nationally, mostly as a result of dozens of newly drilled but uncompleted wells (DUCs) in the Permian...we had expected that with higher oil prices, some of the DUC well backlog would be completed, but current report showed that completion of wells slowed even as the drilling rig count rose, as the total count of DUCs in the US rose from 5,212 in November to 5,379 in December....since DUC wells were at 5,097 in September, we've thus had an increase of 282 uncompleted wells over that 3 month span, after a 6 month run when more wells were being completed than were being drilled...all of the December DUC increases were oil wells; the Permian basin, which includes the Wolfcamp and several other shale plays in EIA stats, saw its total count of uncompleted wells rise from 1,569 in November to 1,706 in December, in keeping with the increase in drilling that we've seen in that the same time, DUCs in the Niobrara chalk of the Rockies front range rose by 30, from 674 in November to 704 in December...on the other hand, the Marcellus saw a decrease in DUCs (which means more wells were being fracked than were being drilled) as the Marcellus DUC count fell from 627 in November to 617 in addition; the Utica showed a decrease of six uncompleted wells and thus had only 99 DUCs remaining in December...for the month, DUCS in the 4 oil basins (ie the Bakken, Niobrara, Permian, and Eagle Ford) increased by 180 wells, while the DUC count in the natural gas regions (the Marcellus, Utica, and the Haynesville) fell by 13 wells, as they have generally declined since December 2013, as new natural gas drilling fell to record low levels and has barely recovered.... 


MVSD engineer says dam cracks not serious; Niles officials point to injection well: The outgoing Mahoning Valley Sanitary District chief engineer says cracks detected in the Meander Reservoir dam do not appear to be serious, based on a consultant’s report. “There are no serious cracks in the dam … and there is nothing alarming in the report,” Thomas Holloway told city council during a roundtable meeting today. MVSD provides water from the Meander Reservoir to Niles, Youngstown and McDonald. Reconstruction of the reservoir dam, which was built in 1932, is expected to cost the district $28 million. Niles council members, however, appeared to be more concerned with the court-ordered reopening of an injection well in Weathersfield Township. The Ohio Department of Natural Resources concluded the well was responsible for setting off several earthquakes in 2014. Several council members said they think the quakes may have caused cracks in the dam and in some of MVSD’s 15 buildings. The quakes ceased after the state ordered the well shut down, but earlier this month, a judge in Franklin County ruled the well could resume operations. District officials, including Holloway, who has resigned from the chief engineer position effective Jan. 22, have been reluctant to point fingers at the well and the earthquakes for causing the cracks. They point out a number of the buildings were constructed in the 1930s and 1940s, so other causes for the cracks, such as land that is settling, is possible.

Citizens have a right to know about fracking chemicals - Virginians have a right to know what chemicals are being pumped into our communities. Just as important, first responders need this information to ensure public safety. This modern drilling combination has not come to Virginia, yet. But after about 86,000 acres were leased in the Northern Neck and Middle Peninsula — including in King George County — we knew we needed to examine fracking and address the risks. Nearby states and localities that embraced the industry without taking a hard look serve as a cautionary tale. Earlier this year an oil and gas company operating in Pennsylvania was ordered to pay more than $4 million to two families for contaminating their groundwater through fracking operations. After a three-year process, the commonwealth is now putting new fracking regulations in place, thanks to approval from Gov. Terry McAuliffe. One critical requirement in these regulations, which went into effect on Dec. 28, is that oil and gas companies must publicly disclose which fracking chemicals they are pumping into our neighborhoods. But before this requirement was even on the books, the oil and gas industry was hard at work on a new bill to put in front of the General Assembly in 2017 that could effectively gut the new disclosure requirement.It’s likely the industry will push bills that provide a “trade secrets” exemption under the state’s Freedom of Information Act (FOIA). In plain English, this FOIA exemption would mean that companies would have the power to pick and choose which “trade secret” chemicals they would disclose and which they would keep secret from the public, regardless of risks to public health or the environment.This could cripple the ability of our emergency responders to plan how they would respond to an emergency at a drilling site in the community. Without FOIA, they have no way to learn which “trade secret” chemicals are being used. Instead, they must wait until an emergency is occurring — a fire, leaking well, or overflowing waste pit — before they can ask the drilling operator or Virginia Department of Mines, Minerals and Energy (DMME) which chemicals are in use.

King George supervisors lobby for disclosure of fracking chemicals - Members of the King George County Board of Supervisors have added their voices to concerns about a proposed General Assembly bill that hides from the public record what chemicals are used in hydraulic fracturing, or fracking. Because King George “has been at the forefront of recent public discussions” about possible gas and oil drilling, the supervisors agreed Tuesday to lobby their legislators to oppose House Bill 1678. It is sponsored by Del. Roxann Robinson, R–Midlothian, and is designed to protect trade secrets of the companies involved in fracking, the process of injecting water and chemicals deep into the ground to loosen trapped gas and oil. The King George County board is among several advocates of open government, as well as environmentalists and the Virginia Association of Counties, who oppose the measure. Supervisors agreed to send a letter to legislators Ryan McDougle, Richard Stuart and Margaret Ransone, asking them to oppose Robinson’s bill and a similar one in the Senate. The letter says that residents have a right to know what chemicals are being introduced into the environment, just as first responders need to know what they’re dealing with in the case of a fire, leaking well or overflowing waste pit. And, they need to know the particular properties of chemicals before something happens, said Eric Gregory, King George’s county attorney. He spoke in opposition of the bill, and House Bill 1679, which would allow information to be released after an accident happens. DMME officials also reported that the majority of comments from the public about drilling regulations suggested the gas and oil industry should be more forthcoming about what chemicals are used. But Robinson, as well as members of the industry, maintain that first responders could get the needed information from the DMME, which would have access to the list of chemicals under her proposed legislation.

The Dakota Access fight is moving to Louisiana - Energy Transfer Partners, the company that’s trying to build the embattled Dakota Access Pipeline (DAPL), is also currently attempting to construct a stretch of pipeline in Louisiana that would ultimately carry oil from DAPL to refineries on the Gulf Coast.If approved, the Bayou Bridge pipeline extension would transport up to 480,000 barrels of crude a day across 600 acres of wetlands and 700 bodies of water, including wells that reportedly supply 300,000 households with drinking water. It would also permanently destroy 77 acres of wetlands in the watershed of Atchafalaya Basin, the largest natural swamp in the U.S.Energy Transfer Partners argues that the pipeline is the safest way to transport the oil, and that it would bring jobs to the area. But while it would create about 2,500 temporary jobs, it would only bring in 12 permanent ones. Locals are understandably concerned about the impact on wetlands, water supplies, and fishing grounds. Hundreds packed into a public hearing on the proposed pipeline last Thursday in Baton Rogue, including members of indigenous communities, climate activists, fishermen, and rice farmers. A number of them said that if the Army Corps of Engineers grants a permit for the project, activists will fight back aggressively, turning the Atchafalaya Basin into the next Standing Rock.

Protests escalate over Louisiana pipeline by company behind Dakota Access   - Scott Eustis. a coastal wetland specialist with the Gulf Restoration Network, was attending a public hearing in Baton Rouge. Its subject was a pipeline extension that would run directly through the Atchafalaya Basin, the world’s largest natural swamp. Eustis was surprised to be joined by more than 400 others.“This is like 50 times the amount of people we have at most of these meetings,” said Eustis, adding that the proposed pipeline was “the biggest and baddest I’ve seen in my career”.The company behind the pipeline, Energy Transfer Partners (ETP), had seemed to turn its attention to Louisiana just one day after Native American protesters thwarted the company’s Dakota Access project last month. A spokeswoman for ETP, Vicki Granado, said the Bayou Bridge pipeline extension was announced in June 2015. If approved, the project will run though 11 parishes and cross around 600 acres of wetlands and 700 bodies of water, including wells that reportedly provide drinking water for some 300,000 families.At the public hearing in Baton Rouge on Thursday, the first speaker, Cory Farber, project manager of the Bayou Bridge pipeline, said it was expected to create 2,500 temporary jobs. When Farber then said the project would produce 12 permanent jobs, the crowd laughed heartily.“Those who have airboat companies and equipment companies that specialize in putting in equipment, they’re not opposed to pipelines because of the short-term jobs,” said Jody Meche, president of the state Crawfish Producers’ Association, one of dozens who spoke at the hearing.  “But once that pipe is in there, the jobs are gone.” Other attendees applauded in favor of the pipeline, and former US senator Mary Landrieu of Louisiana, a supporter, was in attendance. But Native Americans also dotted the crowd, many of them fresh from Standing Rock.

Plains increases Permian crude takeaway with expansion of Cactus Pipeline - Plains All American is expanding its Cactus Pipeline to 390,000 b/d, increasing takeaway capacity for Permian Basin crude into the port of Corpus Christi, Texas, the midstream company said Wednesday. Rising production of light, sweet Permian crude is at odds with the needs of US Gulf Coast refineries, which prefer heavier crude, making it a candidate for export. Increased takeaway capacity of Cactus also expands the crude's reach to local refineries. The expansion is expected to be completed by the third quarter of 2017, the company said in a statement. The 310-mile Cactus line currently carries 250,000 b/d of crude from McCamey, Texas, southeast to Gardendale, where it connects with the Eagle Ford Joint Venture pipeline. That pipeline is jointly owned by Plains and Enterprise Product Partners.Crude output from the Permian Basin is forecast to rise by 53,000 b/d in February to 2.18 million b/d, Energy Information Administration data shows. Platts Analytics Bentek Energy projects volumes to rise by 244,000 b/d in 2017 to reach 2.27 million b/d, assuming a the rig activity stays constant. Current pipeline takeaway capacity from the Permian to the Gulf Coast is 750,000 b/d. The expansion of the Cactus combined with the startup of Enterprise's Midland-to-Sealy pipeline in mid-2018 will increase the region's pipeline away capacity by 440,000 b/d to 1.19 million b/d at that time. Besides access to the Eagle Ford pipeline, crude oil delivered on the Cactus has access to dock facilities in Corpus Christi and neighboring Ingleside, facilitating export of the crude if the economics work to ship the crude out of the country. Access to joint venture's dock facility in Corpus Christi and Ingleside, as well as dock capacity at other regional export facilities is available, including two 200,000 b/d Ingleside facilities owned by Occidental and Flint Hills, respectively.

Exxon Mobil joins Permian land rush - Exxon Mobil announced Tuesday it will sell $5.6 billion in stock to acquire companies that control prime areas of oil and gas real estate in the Permian Basin. The company estimates that 60 billion barrels of oil reside under the land included in the oil and gas interests soon acquired from Fort Worth’s Bass family. About 3.4 billion barrels is currently recoverable, according to Forbes reporter Christopher Helman, but he also reminds us that better technology and higher oil prices may make the region even more valuable. It’s possible the rest of the oil reserves, down the road, may become recoverable. CNBC reports the Exxon Mobil deal is the largest oil and gas acquisition in the United States since the 2014 price crash. The deal also exceeds the last record-setting purchase of Memorial Resources by Ranges Resources for $.4 billion in May. The Permian Basin has been the hottest area for oil and gas exploration, with the greatest number of rigs currently exploring for oil and gas by far. Last week, Baker Hughes reported that out of the 659 rigs in the United States, 268 of them were exploring for oil and gas in the Permian. The next highest number of rigs in any one basin is in the Eagle Ford region in South Texas with 47 rigs, and the Cana Woodford in Oklahoma numbering 37.

Trump's EPA nominee “unsure” if big oil gave him hundreds of thousands of dollars - Donald Trump’s nominee to lead the Environmental Protection Agency has received hundreds of thousands of dollars in political contributions from some of America’s biggest oil companies — and on Wednesday, Senate Democrats seized the spotlight to point it out. At the confirmation hearing for EPA nominee Scott Pruitt, Rhode Island Sen. Sheldon Whitehouse pointed to a large blue cardboard sign held by a staffer. It illustrated the ties between fossil fuel companies and political organizations run by Pruitt, who is currently the attorney general of Oklahoma. As the  Washington Post reported in December, the energy sector donated nearly half of the contributions received by Liberty 2.0, a Super PAC run by Pruitt. The fossil fuel companies Pruitt will soon be responsible for regulating also gave more than $318,000 to his reelection campaign for attorney general, according to pressed these points at Wednesday’s Senate Environment and Public Works committee hearing. Initially, Pruitt, who plans to be an ally of oil and gas by dismantling much of Obama’s environmental legacy, deflected Whitehouse’s questions, before acknowledging that he had been at fundraisers with Exxon Mobil and Koch Industries.Here’s their exchange: […] There’s something a little rich about Democrats complaining so loudly about the role of money in the political system. After all, Hillary Clinton took more than $300,000 from those in the oil and gas industry — and the Democratic Party has taken millions from lobbyists and corporate interests. But Clinton lost. Could that liberate Democratic lawmakers to more pointedly make the case that corporate campaign contributions can warp the decisions of those in government? Judging by Whitehouse’s line of questioning, it certainly seems possible.

EPA nominee Scott Pruitt won't say if he would recuse himself from his own lawsuits against the agency - Scott Pruitt, who repeatedly has sued the Environmental Protection Agency during his tenure as Oklahoma attorney general, declined to say Wednesday whether he would recuse himself from those ongoing cases if confirmed as the agency’s new leader. Questioned by Sen. Edward J. Markey (D-Mass.) about whether he would avoid involvement in a series of ongoing cases against the EPA that he has been party to while in Oklahoma, Pruitt said he would rely on the advice of agency ethics lawyers. “If directed to do so, I will do so,” he said. “If you don’t agree to recuse yourself,” Markey said, “then you become plaintiff, defendant, judge and jury on the cases you are bringing right now as attorney general of Oklahoma against the EPA.” The exchange was among several tense moments Pruitt encountered Wednesday about his fitness to run the agency, his close ties to the oil and gas industry, his views on climate change and even the water crisis in Flint, Mich. Democrats on the Senate Environment and Public Works Committee grilled the 48-year-old former state lawmaker about his financial support from fossil fuel companies, which have given hundreds of thousands of dollars to Pruitt and political action committees associated with him. Sen. Jeff Merkley (D-Ore.) displayed a 2011 letter Pruitt sent to the EPA saying it had overestimated air pollution from natural gas drilling — a letter largely written by lawyers for Devon Energy, one of Oklahoma’s largest oil and gas companies. He accused Pruitt of acting as “a direct extension of an oil company” rather than on behalf of ordinary Oklahomans. Pruitt countered that he was not representing any one company but, rather, expressing the concerns of an entire industry in the state.

Dakota Access pipeline activists say police have used 'excessive' force -- North Dakota law enforcement and the national guard have responded to the latest Standing Rock demonstrations with an aggressive show of force, according to indigenous activists who fear that police violence will escalate after Donald Trump’s inauguration. Firsthand accounts from Native Americans fighting the Dakota Access pipeline – a large number of whom remain at Standing Rock – along with live footage from the clashes on Martin Luther King Jr Day, suggest that police in riot gear deployed pepper spray, tear gas and other “less than lethal” weapons against unarmed people, in some cases leading to serious injuries.Some fear that the harsh police tactics at two demonstrations – which activists insist were peaceful – are a sign that law enforcement may be gearing up to clamp down on the massive protests that are likely to emerge if Trump, as expected, moves to approve the oil pipeline.“It’s gratuitous. It’s just so excessive,” said Irina Lukban, a 22-year-old who said she was hit in the head by the shield of a national guard soldier and likely suffered a concussion. “It’s incredible to see that amount of force.”The standoffs with heavily armed officers – broadcast for hours on numerous Facebook live streams – offered a reminder that the fight is far from over and that law enforcement is still closely monitoring and impeding the activities of demonstrators camped near the construction site. Police, who arrested 16 people in the last two days, have continued to defend their actions, claiming that activists were trespassing and rioting.The Standing Rock Sioux tribe, which has long claimed that the $3.7bn pipeline threatens its water supply and sacred sites, won a major victory last month when the Obama administration denied a key permit for the pipeline corporation.  But Trump, who will be inaugurated on Friday, is an investor in Energy Transfer Partners (ETP), the pipeline operator, and a vocal supporter of the project. He also selected an ETP board member as his energy secretary.

North Dakota Bill Would Protect Motorists Who 'Unintentionally Cause Injury or Death' to Protesters -- As Donald Trump takes office, pushing a wave of explicitly authoritarian federal policies and practices, Republican leaders at every level are following suit. The latest example is North Dakota lawmaker Keith Kempenich , who has introduced a bill that says a driver "who unintentionally causes injury or death to an individual obstructing vehicular traffic on a public road, street, or highway, is not guilty of an offense."   Kempenich, who spoke to the Bismark Tribune , was completely candid in expressing that he created the legislation in response to protests against the Dakota Access Pipeline . The $3.8 billion project, which would span 1,100 miles and include Sioux land at the Standing Rock reservation, was halted in December after months of high-profile protests.   "It's shifting the burden of proof from the motor vehicle driver to the pedestrian," Kempenich told the newspaper. The state Rep. went on to justify his bill, which would allow motorists to potentially maim or kill protesters using a vehicle—thousands of pounds of fast-moving metal—but complaining that protesters are "intentionally putting themselves in danger."   Kempenich's said his opposition to the U.S. Constitution and its First Amendment-granted rights of free speech, is the result of his mother-in-law being inconvenienced while driving through protests. The lawmaker cited an instance when he said, as she drove past a long line of cars parked along shoulder of the road, a protester jumped in front of her car waving a sign.

North Dakota Bill Would Protect Drivers Who ‘Accidentally’ Hit And Kill Protesters - Republican lawmakers in North Dakota are taking aim at protesters with a handful of bills that would make another pipeline protest far more dangerous. The oil-friendly legislature argues that its constituents are frustrated over the protests, which led federal authorities to halt construction of the $3.8-billion Dakota Access Pipeline as thousands of protesters braved cold weather and violence for months.A bill that state GOP Rep. Keith Kempenich introduced would exempt drivers from liability if they accidentally hit a pedestrian, according to the Bismarck Tribune. House Bill 1203 was written up in direct response to groups of protesters blocking roadways, Kempenich told the paper. He claims protesters were seen jumping out in front of vehicles.“It’s shifting the burden of proof from the motor vehicle driver to the pedestrian,” Kempenich said. “They’re intentionally putting themselves in danger.”He admits that the law might be used in cases that don’t involve protests. But a few casualties of justice are apparently worth it; his bill would mitigate instances when panicked drivers might have accidentally “punched the accelerator rather than the brakes” as protesters blocked the roads. Other new bills would be a thorn in the side of protesters and the federal government. One measure would make it a crime for adults to wear masks nearly across the board, while another would allow the state to sue the federal government over millions in extra police costs, according to ABC News.

5 Disturbing DAPL Developments You Need to Know -  The fight to stop the Dakota Access Pipeline (DAPL) wages on. Just this week law enforcement used tear gas and fired bean-bag rounds to disperse crowds and arrested nearly 40 people since Monday, the Billings Gazette reported. One Water Protector appears to have suffered a nasty wound in his leg after an alleged confrontation with an officer on Thursday (warning, the photo is graphic).  But that's not the only concerning news story developing around the controversial project.

  • 1.  On Tuesday, reports emerged that the North Dakota National Guard had sent two Avenger missile launchers near a critical work site near the pipeline. National Guard spokesman William Prokopyk told the Daily Beast the missiles were unloaded and had no authorization to be loaded. The Morton County Sheriff's Department also confirmed these missiles in a Facebook post, saying they were "strictly for observation of ungoverned encampments to help protect private property and maintain public safety." The Daily Beast notes that the Avenger is "foremost a weapon of war" that "combines a Humvee truck chassis with a rotating turret that can be armed with eight Stinger missiles and a .50-caliber machine gun."
  • 2. North Dakota Bill Would Protect Motorists Who "Unintentionally Cause Injury or Death" to Protestors  State Rep. Keith Kempenich has introduced a bill that says a driver "who unintentionally causes injury or death to an individual obstructing vehicular traffic on a public road, street, or highway, is not guilty of an offense."
  • 3. DAPL Company Tried to Block Environmental Study  While the U.S. Army Corps of Engineers denied a key easement in December for the pipeline to travel under Lake Oahe and recently announced plans to prepare a full environmental impact study on the Oahe crossing that could take two years to complete, the company building the $3.8 billion project is determined to finish it. On Jan. 17, Texas-based Energy Transfer Partners asked U.S. District Judge James Boasberg to stop the corps from publishing a notice announcing the study in the Federal Register.
  • 4. Company Engaged in Deceit and Fraud in Acquiring Land Easements, Lawsuit Claims  "Dakota Access's representations to the Morton County landowners were false representations and deceptive," the lawsuit states. The company has until about the end of the month to file its response in court.
  • 5. DAPL Likely Rolling Full Speed Ahead Under President Trump  Donald Trump , who has personal investments in the DAPL, has formally announced his support of the project. Some of his main priorities after being sworn in on Jan. 20 are, according to Bloomberg , "nullifying President Barack Obama's guidelines that federal agencies weigh climate change when approving pipelines, deciding what areas to open for drilling or taking other major actions, two people familiar with Trump's transition planning say."

Rule to require oil and gas producers to curb venting, burn-off on public land takes effect – Federal land managers’ rule aimed at reducing burn-off, venting and leaks by oil and gas companies that gain the right to operate on public lands took effect Tuesday after a federal judge rejected an industry challenge. Oil and gas companies that obtain leases to extract oil and gas from federal public land now must take steps to control their emissions into the atmosphere. For years, companies have disposed of methane gas they could not process by opening valves and venting it and by partially burning off or “flaring” gas because they did not put systems in place to capture the gas for sale or use it on-site. Bureau of Land Management data show that companies between 2009 and 2014 wasted enough gas to power 5.1 million homes for a year. They wasted gas on which they otherwise would have had to pay royalties to state, tribal and federal governments. U.S. District Judge Scott Skavdahl in Wyoming on Monday rejected an industry effort to prevent the rule from taking effect. Skavdahl concluded it was within the authority of the BLM to set this rule, but his decision left open avenues for the oil and gas industry to continue to fight it. He has set an expedited hearing schedule to resolve the issue fully in the coming months.Federal BLM officials issued the rule in November 2016 and industry leaders immediately challenged it seeking a preliminary injunction. “It’s difficult to get a preliminary injunction, and while we’re disappointed the judge was not willing to stop the rule now, we feel that our chances are very good once the full merits of the case are heard,” Western Energy Alliance president Kathleen Sgamma said. “There were several statements in his ruling that show he’s extremely skeptical of BLM’s authority to regulate air quality. We’ll be driving those points forward in more detail in our brief due in March.”

Cheap crude and captive market boost Pacific Northwest refineries. The five refineries in the U.S. Pacific Northwest (PNW) performed better in 2016 than rivals on the East Coast for two main reasons. First, the changing pattern of North American crude supply has worked to their advantage. Faced with the threat of dwindling mainstay crude supplies from Alaska, refiners in Washington State replaced 22% of their slate with North Dakota Bakken crude moved in by rail. They have also enjoyed advantaged access to discounted crude supplies from Western Canada. Second, PNW refiners face less competition for refined product customers than rivals on the East and Gulf coasts, meaning they have a captive market that often translates to higher margins. Today we review performance and prospects for PNW refineries. This blog is based on Morningstar Commodities and Energy’s recently published Pacific Northwest Refining Outlook. See contact information at the end of this blog to request a copy of the report.

California regulators propose slashing Aliso Canyon gas storage capacity -  California regulators are proposing to allow the Aliso Canyon natural gas storage facility to reopen, but at about one-third its capacity. The facility, near Los Angeles, can hold 83 Bcf of natural gas, but would be limited to 29.7 Bcf and have at least 15.4 Bcf under the proposal and safety findings released Tuesday. "Managing the facility in this manner is estimated to address safety and reliability needs and will provide flexibility to respond to gas market conditions to support just and reasonable rates," the California Public Utilities Commission said in a report released Tuesday. The proposed inventory limit is needed to meet one-in-10 peak-day demand, maintain a balance across the Southern California Gas system during the winter season and provide a "reasonable" level of system-wide storage at the start of the summer season, the PUC said.

The long reach of the Aliso Canyon gas leak - When a geyser of gas began spewing from the ground in October 2015, it was just the beginning of an energy and environmental crisis in Southern California with far-reaching repercussions. In nearby communities, like Porter Ranch, the disaster upended lives: Schools relocated. Thousands of people moved to motels and temporary housing. The leak at an Aliso Canyon gas storage facility not only sent vast amounts of methane — a heat-trapping greenhouse gas — into the atmosphere, it also ended up spraying other chemicals, including some that were being used in the effort to plug the leak. The catastrophe led officials to shutter the facility, at least until investigations and testing could determine the cause of the leak and demonstrate the safety of the wells. The Southern California Gas Company has had other, smaller leaks in the year since — one as recently as last month — but it says that 34 of its 115 wells are now certified to be in good working order and it is pressing to reopen the facility. Many residents, however, as well as environmentalists and some officials, are fighting to keep it shut.Even before the leak, there were complaints about an odor of gas and symptoms like headaches and fatigue, said Matt Pakucko, who relocated for months along with Kyoko Hibino and their five cats. A group he helped found, Save Porter Ranch, had arranged for an area health study, but it was pre-empted by the catastrophe. The couple, who wore their gas masks while outside during the height of the leak, are among those pressing for a study to be completed and for the depot to remain shut down.The effects of the fumes on residents varied widely — even on opposite sides of the street or within households — a result, residents said, of different sensitivities and dispersal patterns from the strong winds that whip down and around the hilly, winding streets. Some at the edge of the canyon felt nothing, while others miles away complained of rashes.

Re-Posting A Most Spectacular Graphic -- Gasoline Demand -- January 18, 2017 I posted this earlier but did not spend much time on it: Some important data points about the graphic:

  • the individual green bars represent year-over-year growth; left hand axis is 4 - 6% for the 2014 - 2016 surge
  • this graphic goes back all the way to January, 2008, the last year of George W Bush's presidency
  • the graphic encompasses the years of the entire Obama presidency; this is not political; this has nothing to do with Obama; it just puts the timeline i perspective for me
  • the Saudis opened the crude oil spigots on/about October, 2014 -- their $1 trillion mistake
  • by January, 2015, only three months later, gasoline demand (proxy for miles traveled) surged to highest year-over-year growth  in almost a decade, and possibly the greatest surge in modern history
  • and then it spiked even higher in early 2016
  • the year-over-year growth continued to surge throughout the next two years of the Saudi crude oil surge
  • some pundits have suggested that gasoline is like crack cocaine: bring the price down, get more people hooked, demand will persist even as the price is brought back up 
  • Saudis are now suggesting that they may be able to open the spigots again, as soon as five months from now

The Low-Cost Oil & Gas Producers to Focus on Amidst a Production Rebound –  This week, Barclays came out with a report that forecasted 2017 to be much brighter for U.S. oil and gas. On this episode of Industry Focus: Energy , Motley Fool analysts Sean O'Reilly and Taylor Muckerman go over the most important points from the report -- how much spending and production is projected to increase by, which micro-sectors will see the most change, why the E.U. is seeing a drilling decline amid this growth, and more.Also, the hosts talk about a report from the U.S. Department of Energy, which happily reports that U.S. oil declines are finally over for the first time in several years. Listen in to find out how nervous companies are going to be about ramping up production in light of the last few years, and a few companies that investors might want to look into that could benefit from this upside. A full transcript follows the video.

US shale oil update – More rigs, higher productivity and net production about to break higher -- The US EIA yesterday released its monthly Drilling productivity report. It adjusted both historical and current US shale oil drilling higher with current productivity up by 2.7%. The annualized mth/mth volume productivity growth was still close to a 20% pa rate. This is higher than our assumed 5% pa from here to end of 2019. Together it lifted the volume productivity in our US shale oil production model up by 4.5% for the forecast period to December 2019. The shale oil rig count for December also came in at 454 rigs which were 10 rigs higher than we had in our model. The higher productivity and rig count lifted our total US crude oil production forecast as follows:
2017: 9.29 mb/d (+109 kb/d)
2018: 10.48 mb/d (+221 kb/d)
2019: 11.58 mb/d (+303 kb/d)
Our forecast for US crude oil production will naturally be changing along with constant updates in actual rig counts versus projected once as well as revisions to volume productivity. Besides the still continued solid 20% pa rise in volume productivity what also became very clear from the report is that US shale oil production is on the verge of breaking higher. When US shale oil production peaked in Mar 2015 at 5.46 mb/d it started to head downwards as if the line had been broken off. It was no soft turnaround. The turnaround was abrupt as new production each month broke below the running losses in already existing US shale oil production. To some degree this is now likely to happen in reverse. As shown in the graph below: “New US shale oil crossing above losses in old prd.”, the rise in newly initiated US shale oil production is now about to break straight up through the level of gradually declining legacy losses. As such the net increase in US shale oil production which has headed downwards in a pretty straight line since Mar 2015 is now likely going to head upwards in a pretty straight line instead. If we extrapolate monthly rig additions seen this autumn (about +30 rigs per month) for January and February we’ll have a US shale oil rig count standing at 514 rigs at the end of February. If we then productivity adjust the historical rig count we see that the rig count at the end of February this year will only be 122 rigs shy of the prior peak of 636 rigs (in real terms versus today’s rig productivity).

Rising U.S. shale-oil output threatens OPEC’s production pact -- The oil market got a stark reminder Tuesday that rising oil production in the U.S. could upend efforts by major producers to bring global supply and demand for crude back in to balance.Just ahead of the settlement for oil futures prices CLG7, +0.23%  on the New York Mercantile Exchange on Tuesday, the Energy Information Administration released a report on drilling productivity—forecasting a monthly rise of 41,000 barrels a day in February oil production to 4.748 million barrels a day.  “That is bearish for oil and a concern for [the Organization of the Petroleum Exporting Countries,” said James Williams, energy economist at WTRG Economics, pointing out that the volume of new oil per rig has climbed because of gains in efficiency. “If maintained, the expected February production gain means production from the shale plays will be up at least a half million barrels per day by the end of the year,” said Williams. Prices for February West Texas Intermediate crude lost the bulk of the day’s gain on Tuesday to settle with a modest 11-cent climb at $52.48 a barrel.“Since rigs are higher now than in December and should continue to increase, that means a half million [barrel-per-day] gain in production by year-end is a conservative estimate,” Williams said.“Most OPEC members expected this, but U.S. shale production will be the closest monitored data after OPEC’s own compliance with quotas,” he said.

Warm Weather Weighs on Natural Gas: Natural gas prices followed through on Tuesday’s pullback, with the contract for February settlement on the New York Mercantile Exchange closing today’s session at $3.29/MMBtu, down 3.5%. This week’s decline is coming on the heels of last week’s gain of nearly 5% in natural gas prices. Forecasts for warmer winter weather continue to weigh on natural gas. Forecasts had called for colder weather, thereby driving last week’s advance. However, forecasts have turned warmer, particularly over the remainder of January, resulting in a reduction in demand for natural gas. Prices have been volatile in recent weeks due to changing weather forecasts. As a result of today’s move to the downside, first support at the highs established January 4-6, which corresponded to the contract’s 50-day moving average, was broken. The contract is now testing the 50% retracement level of the advance from the January corrective bottom. A drop below this level would leave the target at the 61.8% Fibonacci retracement at $3.255. Failing to hold this level would increase the probabilities of a retest of the January low at $3.098. Open interest was not supportive during the advance from the January low, as the number of outstanding natural gas futures contracts declined 3.6% from the December 9th closing low through last Friday’s close. Thus, it appears the move is vulnerable to a complete retracement. On the upside, resistance above the current rally high at $3.513 is at large gap which resulted from the weak open at the start of 2017. The upside of this gap is at the $3.690 level. Filling the gap would leave the target at the December peak at $3.902. At present, with the Stochastic still above an oversold level, the path of least resistance heading into tomorrow’s session is to the downside.

Natural Gas Price Dips on Larger-Than-Expected Inventory Decline - The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks decreased by 243 billion cubic feet for the week ending January 13. Analysts were expecting a storage decline of between 220 billion and 230 billion cubic feet. The five-year average for the week is a withdrawal of around 170 billion cubic feet, and last year's storage decline for the week totaled 178 billion cubic feet. Natural gas inventories fell by 151 billion cubic feet in the week ending December 30.Natural gas futures for February delivery traded down by about 1% in advance of the EIA's report, at around $3.26 per million BTUs, and traded around $3.32 immediately after the data release. Natural gas closed at $3.30 per million BTUs on Wednesday, after falling from a high of $3.51 on Tuesday. The 52-week range for natural gas is $2.49 to $3.90. One year ago the price for a million BTUs was around $2.83. Natural gas prices are expected to remain depressed as the most recent forecasts for the last two weeks of January have turned warmer than previously expected, dampening expected demand for heating fuel. Winter weather is still in the forecast, but the very cold Arctic air flowing south from Canada will be missing. Daytime temperatures could reach the 40s through the 60s in the northern part of the country and top out at around 80 in the south. Stockpiles have now dropped to 12.9% below their levels of a year ago and 2.6% below the five-year average. The EIA reported that U.S. working stocks of natural gas totaled about 2.917 trillion cubic feet, around 77 billion cubic feet below the five-year average of 2.994 trillion cubic feet and 431 billion cubic feet below last year's total for the same period. Working gas in storage totaled 3.348 trillion cubic feet for the same period a year ago.

Gas generation squeezed by coal in US winter power markets: (podcast) Wholesale electric power prices in the US are starting 2017 by ticking upward, lifted by firmer natural gas prices, which overall has caused coal generation to take some of gas generation’s share in the overall fuel mix. Kassia Micek and Eric Wieser of the North American power pricing team look at how power prices and generating fuels have shifted thus far this winter in key regions like ERCOT, the Southwest Power Pool and the Midcontinent ISO.

Shale Break-Even Level Could Rise $10 In 2017 | The joy for shale producers stemming from rising oil prices following the OPEC production cut agreement may soon be over as oilfield service providers join the party, raising the prices for their services. According to  an analysis from Tudor, Pickering, Holt &Co., the costs of drilling and fracking new wells in the shale patch could grow by 20 percent by the end of this year. In real terms, this means that the breakeven level for new shale wells could rise by U.S.$10 a barrel. This would be problematic for many shale producers who are already having trouble generating sufficient cash flows to repay their debts, which swelled considerably over the last two years. For drillers and other oilfield service providers, however, the cost increase is a logical move: after all, the crisis has been particularly harsh on this segment of the industry. A December report from Wood Mac warned that they are still not out of the woods, cautioning service providers that 2017 will be another tough year. Beginning in 2018, however, things should start looking up. In such an environment, it’s perfectly understandable that service businesses would take advantage of rising prices to regain some of the revenue lost when they were forced to offer huge discounts on their services just to remain in business. According to another analyst, this service price increase won’t be sufficient to make ends meet for many service providers. Bill Herbert from investment bank Simmons & Co., as quoted by FuelFix, said that some providers of fracking equipment have already raised their prices by 20-40 percent, and even this hasn’t been enough to help them get back in black.

2017 Another Year Of Excessive Volatility For Oil Prices - This year will see further volatility in oil prices despite international efforts to restore the market to balance and improve prices more consistently. This push may, however, rebalance the market in the first half of 2017, according to the chief of the International Energy Agency, Fatih Birol, who spoke to Reuters. Birol said that the prospects of rising global output as a result of the market rebalancing work of OPEC and 11 other producers will be one of the factors to contribute to this more intense volatility. Another will be the very fact of higher prices, which are bound to affect demand trends. A third factor could be rising production in China: oil production in the world’s second-biggest consumer has been declining because of the low oil price environment, so now that prices are improving, Chinese E&Ps may get the motivation they need to revert to production growth. U.S. oil output is already rising, and it has been for much of the second half of 2016, reaching 8.95 million barrels per day in the week to January 6, 2017. The active rig count across the country stood at 659 as of January 13, of which 522 were oil rigs. Although the total number marked a weekly decline, the short-term trend is upward, according to analysts, as shale producers take advantage of the higher oil prices. Related: U.S. Shale To Kill Off Oil Price Rally The OPEC members that were exempt from the production cut are also pumping more, and are unlikely to suddenly stop doing it even if prices fall back to US$50 a barrel. There is also the bearish sentiment among investors to consider, caused in large part by OPEC’s history of cheating in market-rebalancing endeavors and a lack of definitive evidence that everyone that is party to the deal is indeed cutting production. This sentiment was last week reinforced by growing uncertainty about the direction in which the global economy is heading, thanks to the latest economic data from China. The country’s December 2016 statistics revealed that overall exports for 2016 declined by the most since 2009.

$25 Trillion Investment Needed To Meet Future Oil Demand - The world needs to invest US$25 trillion in new oil-producing capacity over the next 25 years to meet growing demand, Saudi Aramco’s chief executive Amin Nasser said at the World Economic Forum in Davos on Tuesday.According to the CEO of Saudi Arabia’s giant state-held oil company, global demand for oil and gas will still grow in the coming decades, so if capital investment drops, it could create “spikes” in prices and hurt the global economy, CNBC reports. Demand is still healthy and oil “will be with us for decades”, CNBC quoted Nasser as telling a Wall Street Journal panel at the Davos forum.The global oil and gas industry needs to expand and requires more investment, Nasser said.After two years of significantly lowered capital investment by the industry, a recent report by Wood Mackenzie suggests that “the global investment cycle will show the first signs of growth in 2017, bringing the crushing two-year investment slump to a close”.WoodMac sees E&P global spend rise with about 3 percent in 2017 to around $450 billion. According to WoodMac’s Malcolm Dickson, ‘’companies will get more bang for their buck,” as internal rates of return jump from 9 to 16 percent, comparing 2014 to 2017. The chart below from WoodMac shows that the amount of final investment decisions (FID’s) are expected to double in 2017, compared to 2016.

Schlumberger projects global oil and gas drilling recovery - During 2016, the “oil glut” that helped drive global oil prices down was the impetus for cutbacks by OPEC and other oil-producing nations. But oilfield services company Schlumberger chairman and CEO Paul Kibsgaard mentioned a shortage, not oversupply, of oil in years to come, reports Fuelfix. In a conference call with investors, Kibsgaard said drillers will need to begin putting money back into the oilfields in order to prevent a shortage as the industry sits on the cusp of recover in all markets.The main challenge is going to be to reverse the effects of several years of global E&P under-investment and then mitigate the impending supply shortage we see unfolding. Kibsgaard predicts production will steadily increase with the price of crude as 2016 unfolds, reversing the trend that prevented big projects from being approved by many companies around the globe. As the industry sees recover, Schlumberger and other oilfield services companies are beginning to renegotiate contracts that included deep discounts that allowed drillers to operate at break even prices. Increasing the price for its own services would allow Schlumberger, like other companies, to operate at sustainable rates as well. Schlumberger’s 2016 fourth quarter loss of $204 million was significantly higher than the previous year. The company cannot continue to operate with such significant losses despite a recent increase in its steerable rotary system used in unconventional drilling. Kibsgaard said:

New drilling technology will create an explosion of oil -- Energy stocks have been tearing higher since the election on bets that the Trump administration will relax environmental restrictions and open more federal lands to oil and gas drilling. Crude oil’s staying north of $50 hasn’t hurt, either.   It is up there in part because OPEC threw in the towel and agreed to production limits. Unfortunately for OPEC, those limits don’t apply to US and Canadian shale producers. And the history of OPEC is that they all cheat like crazy, anyway. I think it is entirely possible that we will see oil prices climb somewhat further by mid-year, possibly approaching $60, and then pull back as capped US production comes back online. I also think that this year, we’ll start to see a new pattern: Production could keep rising even as prices fall. Conventional wisdom says that producers stop pumping at some point when it becomes unprofitable, but I think that is about to change.  If you are an oil producer—or really, any commodity producer—two things can improve your profit margin: higher selling prices for the resource you produce or lower production costs. Some combination of both works as well.   Now, selling prices are mostly outside the producer’s control, though adept hedging can help. Cost reduction is, therefore, the place to concentrate your attention. Back in 2015, I wrote about new drilling techniques and other technology that promised to bring oil and gas production costs significantly lower.  Now, in the last few weeks, people in the business have told me these technologies are moving rapidly toward deployment. They foresee considerably lower drilling and production costs by the end of this year.  I had a confidential briefing recently about some new energy production processes that are coming online in the oil patch. Let me just say that production from an oil well drilled with these new techniques is getting ready to increase substantially.  In some cases, the amount of oil produced per dollar spent on drilling is going to more than double. There are significant chunks of the petroleum-producing parts of the United States where $40 oil will not be a barrier to drilling and new production.  Eventually—in a few years—these techniques will begin to show up in wells around the world, and there will be an explosion of oil. Even as many oilfields dry up, there will be new fields developed from previously unprofitable sources.

GOP tax reform and what’s at stake for the oil industry - The Barrel Blog: The U.S. still imports a lot of crude oil. It also now exports crude oil. It’s also the world’s biggest exporter of petroleum products. So any change in the country’s corporate tax system that has an enormous shift in the tax treatment of imports and exports is going to have the potential to impact oil flows, and by extension, oil markets. It’s a realization that is starting to spread through the nation’s oil industry as the inauguration of Donald Trump draws closer and the possibility of DBCFT becomes more possible. DBCFT is the abbreviation for Destination Based Cash Flow Tax, and it’s the general term for the type of tax that is at the heart of the Republicans’ corporate tax proposal, spearheaded primarily by Speaker Paul Ryan (R-WI) and Ways and Means chairman Kevin Brady (R-CA). The analyses of the tax plans are coming out fast and furious in the last few weeks. The short version of what you need to know is this: The DBCFT has been likened to having many of the same fundamental characteristics as a European VAT. As the Ways and Means blueprint on the proposal states: “The focus on business cash flow…(is) a move toward a consumption-based approach to taxation.”• The US version of the DBCFT would lower the top corporate tax rate to 20%. But its provisions that have gotten the most attention — because they are such a radical departure from current policy — are that companies would not need to count revenue from exports in their tax base, but would not be allowed to deduct the cost of imports. • The economics 101 analysis of the impact of these changes is that the value of the dollar would increase significantly, offsetting the higher prices for imports (like low-cost apparel to be sold at Walmart), thereby negating price increases for the US buyers of that product. This part of the equation is much in dispute, but it does seem clear that a further strengthening of an already healthy dollar would occur, as imports decrease (putting fewer dollars into global markets) and now tax-favored exports increase (necessitating dollars for the goods’ purchase). The potential areas of impact to the global oil industry are clear. The US oil industry will be incentivized to export more crude and products, import less of the same, and the always-present correlation between the dollar and the price of oil will be a significantly bearish factor. Just how much of an impact remains a significant question.

Trump Interior pick considering reversing Obama designations - President-elect Donald Trump's pick as interior secretary Tuesday said he will review President Barack Obama's decision to block oil and natural gas drilling in most US Arctic waters and suggested a reversal of recent national monument designations may be in the works. During his confirmation hearing before the Senate Energy and Natural Resources Committee, Ryan Zinke said the incoming Trump administration would likely wade into the legally murky areas of trying to reverse land and water designations done by a previous president under the Antiquities Act. "Legally, it's untested," said Zinke, currently Montana's lone member of the US House of Representatives. Even if the Trump administration decided to reverse an Obama designation it would face a certain legal challenge, Zinke added. In December, Obama ordered 125 million acres in the Chukchi and Beaufort seas to be permanently protected, blocking oil and gas drilling in much of offshore Alaska. In November, Interior announced that no Arctic lease sales were included in its 2017-2022 plan and in early December the administration closed more than 40,000 square miles of Bering Strait-area waters to future oil leases. Zinke, who in November won his first re-election campaign to the House, said Alaska needs to be handled differently by the federal government and committed to a formal review of these decisions. In addition, he rebuffed a request by Senator Bernie Sanders, a Vermont Independent, to block fossil fuel development on federal lands. "We need an economy and jobs too," Zinke said.

Trump Interior Nominee Would Review Obama's Limits on Oil Drilling - — President-elect Donald Trump's pick to run the Department of the Interior, Representative Ryan Zinke of Montana, said on Tuesday he would consider scrapping some of President Barack Obama’s environment initiatives if confirmed, including reviewing curbs on oil drilling on federal lands. "Yes," he said in response to a question from Republican Senator Lisa Murkowski of Alaska during his confirmation hearing about whether he would review drilling curbs imposed by Obama's administration in her state. "The president-elect has said that we want to be energy independent. I can guarantee you it is better to produce energy domestically under reasonable regulation than overseas with no regulation," he said. "We need an economy." The Interior Department oversees territories covering a fifth of the United States' surface from the Arctic to the Gulf of Mexico, including sensitive wildlife habitats, iconic landscapes, rich deposits of oil, gas and coal and important pasturelands for ranchers. Zinke, a former Navy SEAL commander and an avid hunter and angler, emerged as a surprise pick to head the department in part because he has embraced federal stewardship of national parks, forests and refuges. This diverges from the Republican Party's official position to sell off acreage to states that might prioritize development.

Rex Tillerson Says Oil Companies Don’t Take Handouts - Rex Tillerson, President-elect Donald Trump’s nominee for secretary of state, denied that tax breaks to fossil fuel companies amount to subsidies during his Senate confirmation hearing on Wednesday. Yet Exxon Mobil Corp., the oil giant Tillerson worked at for 41 years and led for 10, receives between $700 million and $1 billion per year in government giveaways, according to a new analysis by Oil Change International, a nonprofit research firm that tracks the fossil fuel industry.  During the hearing, Sen. Jeanne Shaheen (D-N.H.) asked Tillerson if he would pursue a 2009 pledge ― led by the United States and backed by Russia, China, India and 16 other nations ― to scale back subsidies for oil and other carbon dioxide-spewing fuels. Tillerson argued that he would have little influence over incentives baked into the tax code, and said he was “not aware of anything that the fossil fuel industry gets that I would characterize as a subsidy.” “The industry’s long-time argument is that liability loopholes and sweetheart tax breaks like the Intangible Drilling Costs are not a form of special treatment for the oil and gas industry,” Janet Redman, U.S. policy director at Oil Change International, wrote in the group’s analysis. “In reality, the IDC is specifically designed to make drilling, survey work, clearing ground, workers’ wages, drilling supplies — basically anything you need to produce oil and gas (aka ExxonMobil’s products) — less expensive for oil and gas companies.”

European Lawmakers Vote to Pursue Tar Sands Oil Friendly Trade Deal with Canada - EU lawmakers today voted for the European Parliament to push ahead with a trade deal that could encourage Canadian tar sand oil imports and make it easier for energy companies to sue governments when environmental policies threaten their profits. The UK’s international trade minister, Liam Fox, last year circumvented parliament to approve the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada. The deal now has to be approved by European policymakers. MEPs in the committee charged with overseeing environmental regulation today voted 40 to 24 for the European Parliament to back the deal, Reuters reports. A final decision is expected in February.Writing in The Ecologist ahead of the vote, Mark Dearn from campaign group War on Want said the deal had already “put rocket boosters under runaway climate change by bringing high-polluting tar sands oil into Europe”. Reacting to the vote, he told DeSmog UK:“The committee's decision on CETA is an utter disgrace. It flies in the face of a wealth of evidence showing CETA to be bad news for the environment, food and health - not least that the EU sacrificed its own climate change legislation to appease the tar sands demands of Big Oil companies and the Canadian and US governments.”Campaigners are also concerned that the deal will make it easier for companies to sue governments that use environmental regulations to try and move their economies away from fossil fuels.A mechanism called investor-state dispute settlements is included in the deal, and could allow companies to sue countries that ban tar sands oil. Companies have used the mechanism in Canada to oppose fracking moratoriums, and in Germany to protest the closure of nuclear power plants. The Canadian government has also objected to EU chemical regulations on over 20 occasions between 2003 and 2011, EnergyDesk has previously revealed, leading to concerns that companies could use CETA to undermine those rules.

New Tar Sands Pipelines Are Incompatible With Paris Climate Goals - New research released Thursday reveals disturbing new evidence on how locking-into new long-lived tar sands production undermines global efforts to address the global climate crisis far beyond Canada's borders. "Trudeau's pipeline decisions will lead directly to suffering, displacement and even death for vulnerable people around the world due to impacts of a warming world," said Saleemul Huq , senior fellow of the International Institute for Environment and Development in Bangladesh. "People who have contributed least to this global crisis will pay the highest price for Canada's efforts to dig up and export more oil in the midst of a global crisis." The analysis from Oil Change International finds that Canada will be the world's second highest contributor of new oil production globally over the next 20 years if action isn't taken to halt new tar sands pipelines and production growth. Once extracted, much of this oil will be burned, pushing global temperature limits over the brink. Cumulative emissions from producing and burning Canadian oil would use up 16 percent of the world's carbon budget to keep temperatures below 1.5 degrees or 7 percent of the budget for 2 degrees. Canada has less than 0.5 percent of the world's population.  These revelations have provoked international climate vulnerability experts to call out Prime Minister Trudeau for failing to understand what's required to protect the most vulnerable from climate change .

Trump’s New Border Conflict of Interest - As President-elect Donald Trump promises to push ahead with a border wall and threatens to penalize companies that move production to Mexico, the final touches are being put on two pipelines that snake from Texas shale fields across the southern U.S. border. The projects, which have a combined value of $1.4 billion, will supply the Comisión Federal de Electricidad, Mexico’s state-owned electric utility, with U.S. natural gas that will lower power costs in Mexico—including those at factories churning out everything from car parts to flatscreen TVs for American consumers. The utility contracted in 2015 with a transnational consortium that includes Mexican-based Carso Energy, to develop and operate the Comanche Trail Pipeline and the Trans-Pecos Pipeline.  The consortium brings together an unlikely cast of characters: Carlos Slim, the billionaire who controls Carso Group; Texas billionaire Kelcy Warren, chief executive officer of Dallas-based Energy Transfer Partners, who donated more than $100,000 to Trump’s campaign; and Trump himself, who owned as much as $1 million worth of shares in Energy Transfer Partners according to his federal candidate disclosures in 2015 and still had as much as $50,000 worth as recently as May, according to his most recent disclosure. (Trump spokeswoman Hope Hicks says the president-elect sold his shares in the company last year.) In October, the U.S. government sued to stop construction of the Comanche Pipeline to give federal agencies time to assess its impact on irrigation canals and a section of border fence. A judge ordered a halt on Nov. 8, the day before Trump was elected. Trump said during his campaign that Slim, a top shareholder in the New York Times and a Clinton Foundation donor, was working alongside Hillary Clinton’s campaign to help generate negative coverage. At the time, a Slim spokesperson said the billionaire had never met Trump and wasn’t interested in U.S. politics. On Dec. 17, Slim joined Trump for dinner at Mar-a-Lago, his Florida resort. Two days later the consortium reached a settlement, allowing construction to resume on the Comanche Trail Pipeline in exchange for paying $5.4 million to protect the irrigation canals. The U.S. government determined there was “no immediate damage” to the border fence, according to a spokesman for the U.S. Attorney’s Office for the Western District of Texas.

Indonesia's Pertamina eyes US LPG to replace some Mid East supply - Indonesia's state-owned oil and gas company Pertamina is eyeing more LPG imports from the US to replace part of its Middle Eastern supply as US cargoes are currently cheaper, a senior company official said Tuesday. "Currently more than 90% of LPG supply comes from the Middle East and the rest from the spot market. We would like to import more from the US into Indonesia. We expect to get a more competitive price from US," said the senior vice president of Pertamina's integrated supply chain, Daniel Purba, on the sidelines of the LPG Indonesia 2017 conference in Jakarta. The expansion of the Panama Canal enables US LPG cargoes to reach the Asia Pacific, including Indonesia, faster than the Cape of Good Hope passage. With that, Pertamina expects its LPG imports from the Persian Gulf to decline, although it estimates overall US LPG imports will remain lower than Middle Eastern supplies, according to Purba. US cargoes currently make up 3% of Pertamina's overall imports.

Blockbuster Oil Deal In Argentina Could Trigger Drilling Boom | A blockbuster deal between the oil and gas industry, labor unions, and the Argentine government could pave the way for a flood of new investment in shale oil and gas in the South American nation. The deal involves a determination by the state to shoulder the cost of new drilling, but it could lead to the spread of the shale revolution beyond North America. Argentina’s government has agreed to extend regulated natural gas prices at elevated levels, in effect a public subsidy to entice major oil and gas companies to flock to Argentina’s prolific Vaca Muerta shale basin. Prices for gas will be set at $7.50 per million Btu (MMBtu), vastly higher than market places in most parts of the world. The fixed prices were scheduled to expire this year. By way of comparison, natural gas prices in the U.S., home of the original shale gas revolution and still the largest natural gas producer in the world, are currently trading for $3.33/MMBtu, or less than half that price. For years, Argentina has been cited as the most likely place to replicate North America’s shale revolution. While international oil and gas companies have invested capital and drilled wells in places like China, Argentina, Mexico and a handful of European countries, a new major source of shale production has not been achieved anywhere outside of the U.S. and Canada.  Argentina is thought to hold 27 billion barrels of oil and 802 trillion cubic feet of natural gas in its shale formations, according to the EIA. In terms of gas, those reserves are nearly 30 percent larger than the estimated reserves in the U.S., and are second only to what is thought to be located in China. If the shale revolution is to truly spread beyond North America, the Neuquén Basin – where the Vaca Muerta is found – is where it will unfold.

Venezuela’s PDVSA sees 2017 oil output stuck near historic lows - Venezuelan state energy company PDVSA projects oil production will remain near 23-year lows in 2017, an internal document shows, suggesting more hardship ahead for the crisis-wrought OPEC member country. Cash-squeezed PDVSA, which accounts for nearly all of Venezuela’s export revenues and is the socialist government’s financial motor, saw production tumble by nearly 10 percent in 2016 due to an unraveling economy and low oil prices. The company’s weak finances are causing operational disruptions, and are both affected by and contributing to Venezuela’s economic downturn. Three years of recession and soaring prices have pummeled Venezuelans, with many skipping meals and lootings of supermarkets commonplace. Some economists have estimated that gross domestic product contracted by 10 percent or more in 2016. This year, PDVSA sees production at 2.501 million barrels per day (bpd), an increase of just 5,000 from the 2.496 million bpd for the first 11 months of 2016, according to a nine-year strategic plan presented in December. That is broadly on par with output levels in 1993, as the struggle to pay providers has led some services companies to halt work and oil suppliers to delay or halt deliveries of fuel and crude.

Total sees average gas price realization up in Q4, OMV price slips - France's Total said Monday its average global gas price realization in the fourth quarter was $3.89/MMBtu, up from $3.45/MMBtu in the previous quarter as prices continued to recover from their multi-year lows earlier in 2016. While Total saw its Q4 realized price rise, fellow European oil and gas company, Austria's OMV, failed to increase its average realized price. In Q4, OMV saw its average price drop to Eur12.10/MWh -- the equivalent of around $3.76/MMBtu using current exchange rates -- down from Eur13.10/MWh in the previous quarter. Both companies' realized prices are down on Q4 2015, however, Total by 12.6% year-on-year and OMV by 17.6%. OMV also said its sales volumes in Q4 rose to 29.8 TWh from 28.7 TWh in Q4 2015 and from 22.2 TWh the previous quarter. Total's quarter-on-quarter rise in the realized gas price in Q4 came as global oil and gas prices were boosted from the early-year lows. Benchmark Brent crude averaged $49.30/b in Q4 compared with an average of just $33.90/b in Q1. US gas prices have also rallied, with the Henry Hub price currently running at around $3.40/MMBtu. European prices are currently higher still, with the Dutch TTF day-ahead price trading at the equivalent of $6.62/MMBtu, according to Platts' assessments.

Argentina, Bolivia's state oil companies push ahead on gas project - Argentina and Bolivia's state oil companies are to push forward on plans to explore and produce natural gas together in eastern Bolivia, helping to boost supplies for exporting to Argentina. Argentina's YPF and Bolivia's YPFB plan to explore Charagua, a 99,250 hectare block with an estimated 2.7 Tcf of gas resources in the department of Santa Cruz, the companies said. YPF chairman Miguel Gutierrez and his YPFB counterpart, Guillermo Acha, signed a 40-year oil services contract for the project in La Paz. If a commercial find is made, the companies will form a consortium to invest more than $1.1 billion developing the block, with expectations of reaching production of 10.2 million cu m/d, YPFB said.YPF said the production would help meet demand in Argentina, which ran a 30% deficit in 2016. "For YPF, exploration is strategic and fundamental for creating new investment projects to sustain the supply of natural gas to Argentina," Gutierrez said. Argentina imported an average 30.8 million cu m/d in the first 11 months of 2016, split between deliveries from Bolivia and the global LNG market, plus five million cu m/d in regasified supplies from LNG terminals in Chile, between May and August, according to data from Argentina's energy ministry. Argentina could not import more because of a lack of regasification capacity, and because of slower-than-expected production growth in Bolivia. Argentina plans to reduce gas imports as soon as 2021, starting with LNG, as it puts into development is huge unconventional resources in plays like Vaca Muerta. Even so, Argentina's energy minister, Juan Jose Aranguren, has said imports from Bolivia would likely continue for longer, given the lower price compared with LNG and the ease of supplying its northern provinces from Bolivia instead of Vaca Muerta, in southwestern Argentina.

Norway raises oil and gas production forecasts -- Oil and gas output from Western Europe’s top producer Norway will be higher than previously expected in 2017 and 2018 following above-forecast output last year, the Norwegian Petroleum Directorate (NPD) predicted on Thursday. At the same time the regulator cut its forecast for the industry’s investments in 2017 and said it would continue to decline in 2018 before a predicted rebound the following year. Oil production for 2017 is now expected to hit 93.9 million cubic metres, corresponding to 1.62 million barrels per day and in line with 2016, against a year-ago forecast that output would fall to 87.3 million cubic metres in the current year. Gas production for 2017 is seen at 114.5 billion cubic metres (bcm), down from 116.8 bcm in 2016, but much higher than the forecast a year ago of 107.9 bcm.NPD said forecasts were revised up because the fields, through efficiency measures, particularly within drilling of wells and regularity on the facilities, produced more than previously presumed.

Russian gas flows to Europe, Turkey surge 25% on year in H1 Jan - Russian gas flows to Europe and Turkey were already 25.5% higher year on year in the first 15 days of January, according to the latest Gazprom data, having hit an all-time high daily level on January 8. The continued high flows in 2017 -- following record-breaking volumes last year -- come as cold weather across Europe, especially in the east, triggers increased demand for Gazprom gas. Russian gas prices also remain competitive compared with European hubs -- the oil price rally of end-2016 will only filter through to oil-indexed gas contracts in the coming months -- so European buyers are thought to be maxing out their Russian gas purchases. In a statement Monday, Gazprom said gas flows to what it calls the Far Abroad -- Europe and Turkey but not the ex-Soviet states -- were 25.5% higher than in the same period of 2016."In absolute terms, the increase amounted to about 1.9 Bcm of gas," Gazprom said. Flows to Germany were 20.7% higher in January 1-15, it said, without giving absolute volumes. "We are reaching record levels through the Nord Stream pipeline," CEO Alexei Miller said. Russian gas flows via the Nord Stream pipeline to Europe continue to run at maximum capacity, with flows to Germany at 158 million cu m on Monday, according to data from Platts Analytics' Eclipse Energy. Of that, 76 million cu m was delivered into the OPAL pipeline to the Czech Republic, up on the average 44 million cu m/d in 2016 before Gazprom was granted additional capacity in OPAL in October by the European Commission.

Europe misses out on global LNG surge as Russian gas pumps at record rate -- With the United States finally breaking the seal on LNG exports last year, analysts envisaged the ocean-going tankers challenging Russia’s land-locked pipelines supplying Europe in a race that would send gas prices ever lower. But with attacks on Nigerian pipelines that would have sold supplies into Latin America, new consumers and nuclear outages in Asia, major U.S. gas shippers and other exporters took advantage of the shortages to plug those gaps. The United States sent only two shipments to Europe, analysts said. Industry consultants expect LNG to stay scarce in Europe for at least the next six months, giving Russia’s Gazprom – already supplying a third of Europe’s gas needs – free rein to capture more market share. Concern in Europe over relying on Russia for gas since pricing spats between Moscow and Kiev disrupted supplies has grown in the wake of Russia’s seizure of the Crimea region from Ukraine in March 2014. While the EU has succeeded in increasing renewables and the use of reverse-flow pipelines to maximise available supplies, some countries are still 100 percent dependent on Russian gas.

Russia acknowledges threat from Trump's energy policy on EU gas market | Reuters: Russia's Gazprom has acknowledged for the first time a threat to its dominant position in European gas market from an expected influx of liquefied natural (LNG) gas produced in the United States under Donald Trump's administration. Gazprom, which supplies a third of Europe's needs, had previously dismissed possible rivalry from the LNG exports from the United States, saying the costs of transportation via the Atlantic Ocean make it unfeasible. Trump has picked former Texas Governor Rick Perry to head the Department of Energy. The country's oil and gas industry welcomed his appointment and called on him to make increasing exports of U.S. natural gas a "top priority". Trump, who takes office on Jan. 20, has made energy a central part of his agenda, has promised to revive oil and gas drilling and coal mining as president by cutting back on federal regulation. "We see the main source of rivalry from the United States, this is obvious. We don't know what the first steps of the new American administration will be, be judging from its previous statements, it is possible that they will boost their production," Gazprom's Deputy Chief Executive Valery Golubev told a conference in Moscow. Analysts have speculated the Kremlin-controlled company could retain its dominance in Europe as U.S. gas shippers take advantage of shortages in Asia and Latin America to plug those gaps, but Golubev conceded U.S. plans may have an impact. "New LNG production capacities (in the U.S.) may have implications for the European market," Golubev said.

Analysis: China buys 70% of Russian ESPO cargoes from Kozmino in 2016 -  China became the dominant purchaser of Russian eastern crude grade ESPO in 2016, having bought over two-thirds of all cargoes loaded from the Kozmino port in Russia's Far East last year, and significantly outstripping other buyers, data from national oil pipeline operator Transneft showed Tuesday. Russia exported a total of 31.8 million mt (or 636,868 million b/d on average) of ESPO crude from Kozmino in 2016, up 4.6% year on year and estimates the deliveries to remain roughly flat this year as the volumes have been exceeding the port's installed capacity. Of the total, China bought 22.2 million mt, up 51% year on year, taking its share of total ESPO cargoes delivered from Kozmino to 69.8% in 2016, compared to just over 48% in 2015, when it was competing with Japan as the biggest purchaser of ESPO cargoes from Kozmino. The increase in Chinese imports was due to a significant boost in purchases by independent refineries, which received the right to import crude in 2015. In addition to Rosneft's term buyers CNPC and ChemChina, independent refineries, including Luqing Petrochemical, Kenli Petrochemical, and Hongrun Petrochemical, Haiyou Petrochemical, as well as trading companies Kunyang and Yijia, took delivery of the barrels. Russia, which also pumped around 23.5 million mt of pipeline crude to China, competing with Saudi Arabia as the main crude supplier to China through the year. Apart from China, Malaysia was the other country which significantly increased purchases by ESPO blend, becoming the fourth-biggest buyer of the Russian crude. The imports rose eightfold to 1.6 million mt, although from a low basis of just two cargoes, each 100,000 mt, bought in 2015, Transneft data showed.

Oil production in Asia declining at record levels: Wood Mackenzie -  Oil production in Asia-Pacific is declining at a rate not seen elsewhere in the world, with around half of losses coming from China alone, Wood Mackenzie has warned. "We estimate 2016 production of 7.5 million barrels per day will fall by over a million barrels per day by 2020," said Angus Rodger, the energy consultancy's Asia-Pacific upstream research director. China, Indonesia, Malaysia and Thailand are among the biggest producers in Asia but the near having of crude oil prices since 2014 has hit the industry and resulted in an annual average base decline rate of around 7 percent within existing oil fields, Rodger pointed out. "Lower oil prices and the severe cuts to upstream capex (capital expenditure) to mature assets has increased decline rates," he explained in a new video published on Wood Mackenzie's site. Recently, global prices have staged a rebound as the Organization of the Petroleum Exporting Countries (OPEC) and other producers move to implement a supply cut of nearly 1.8 million barrels per day for the first half of 2017. "Regional oil production will be underpinned by giant fields in Indonesia, Malaysia and China but these fields are super mature and will require expensive techniques, high break-evens and capex cuts," Rodger said. Moreover, the bulk of exploration in the region is on gas so there are far too few new oil projects to make up for dwindling production, he continued, pointing out there are only a handful of undeveloped fields that can be online by 2020."The scarcity of new oil discoveries over the last two decades combined with lower prices and hefty capex cuts, particularly to legacy fields, will see decline rates spiral across the region."

China's CNPC forecasts record oil demand, warns on product glut | Reuters: China's crude oil demand will grow by 3.4 percent this year to a record of almost 12 million barrels per day (bpd), the country's top state-owned oil producer forecast on Thursday, as refiners in the world's second-biggest oil user ramp up output. The robust outlook for crude combined with surging vehicle sales in the world's largest auto market boosted oil futures even as the report cautioned that demand growth for products like gasoline and diesel will slow and overcapacity will remain a significant problem. [O/R] Total crude oil consumption will hit 594 million tonnes, or 11.88 million bpd, state-owned China National Petroleum Corporation (CNPC) [CNPET.UL] forecast in an annual report released by its research institute. Total refinery throughput will rise by 3.3 percent to 557 million tonnes, or 11.2 million bpd, with refiners adding 702,000 bpd of net capacity. That will increase to 11.8 million by 2020, it said. The rising refinery demand will lift crude imports by 5.3 percent to 396 million tonnes, or 7.95 million bpd. By 2020, it forecast imports will hit 8.2 million bpd. But, the rising refinery runs will maintain the domestic supply glut that has forced refiners to export into a saturated Asian market in recent years. CNPC predicted that net exports of diesel will surge by 55 percent this year to 22.4 million tonnes, or about 450,000 bpd. In addition, slowing growth in the world's second-largest economy and the shift to renewable energy will hamper the consumption growth for oil products, the report said.

India's oil demand hits record high -- According to oil ministry data, India’s oil consumption soared 11% to the record high in 2016. India’s oil consumption increased to 196.5 million tons last year from 177.5 million tons in 2015. Meanwhile, Saudi’s Aramco cut February term crude oil loadings to some buyers in India and Southeast Asia.

Strong Asian demand props up cash differentials for Mideast medium heavy sour crude - Strong demand from Asian refiners amid healthy distillate cracks and expected implementations of OPEC production cuts have propped up cash differentials of Middle Eastern medium heavy sour crude for March loading, traders said late last week. Spot cargoes of March-loading Qatar Marine crude were heard sold at premiums ranging between 10 cents/b and 20 cents/b to the grade's official selling price, traders said. They added that all spot cargoes for March loading could have been sold. "All [Qatar Marine] cargoes [for March loading] are gone," said a North Asian crude trader. Apart from Qatar Marine, March-loading Upper Zakum crude cargoes were heard to have changed hands at premiums of between 20 cents/b and 25 cents/b to the grade's OSP. Inpex and ExxonMobil were heard to have sold a cargo each to Shell, while some cargoes could have been placed to Japanese end-users, traders said. Two March-loading Dubai crude cargoes were also heard to have been placed at premiums of around 20 cents/b to Dubai crude, traders said. Further information on the trades remained unclear. Traders indicated that strong cracks for heavy and middle distillates and expected cuts to supply are supporting sentiment for the medium, heavy grades. Second-month 180 CST and 380 CST high sulfur fuel oil to Dubai crude swap cracks averaged minus $2.15/b and minus $3.02/b respectively in January to date, the highest since July and June 2012 when they averaged at minus $1.83/b and minus $2.25/b respectively, S&P Global Platts data showed.

Analysis: Asia's unquenchable thirst for oil to outpace 2017 refining growth - Asia is gearing up to witness new refining capacity growth in at least four countries in 2017, but capacity reductions in some top consuming nations will pull down the net addition to a level that would be lower than the anticipated demand growth the region is likely to see this year. While China, India, Taiwan and Vietnam are expected to add to their refining capacities this year, Japan will witness closures, while some independent refiners in China might be forced to give up capacity, analysts and market participants told S&P Global Platts. "Oil demand growth in the Asian region is expected to exceed the net refining additions this year," said Sri Paravaikkarasu, Head of Oil, East of Suez, at Facts Global Energy. "And looking at the next five-year horizon, oil products demand growth should exceed net refining additions every single year, helping to clear product surplus somewhat." Growth in India is set to be one of the strongest, with the rise in oil demand expected to outpace that of China's for the third year in a row this year, according to Platts Analytics. Indian demand is expected to grow by 7% year on year to 4.13 million b/d in 2017, while China's oil consumption is expected to rise by only 3% to 11.5 million b/d in the same period.Looking at the overall oil products demand, FGE expects Asia's oil products demand to grow by 950,000 b/d in 2017, while Wood Mackenzie expects demand to grow by about 660,000 b/d in the same period. "We expect a net capacity addition of 430,000 b/d in Asia Pacific for 2017. Oil products demand is expected to grow by 660,000 b/d in 2017. So demand growth will outpace capacity growth in Asia in 2017,"

Platts launches LNG assessment for Middle East: video - Shelley Kerr, global director, LNG, and Desmond Wong, managing editor, European and Atlantic Basin LNG, discuss Platts new Middle East Marker (MEM) price assessment which reflects the growing importance of the Middle East as an LNG import destination rather than just exporter of cargoes.

Feature: South Sudan's fragile oil industry faces uphill struggle -  The future of South Sudan's oil industry, Sub-Saharan Africa's third-largest, looks grim, at least in the short term, as armed conflict and falling international oil prices have combined to undermine the country's fledgling oil industry. Unless these trends are reversed, analysts fear the fall in production to 130,000 b/d in 2016 from 245,000 b/d in 2013 may continue well into 2017 or even beyond. This is because, they say, it will be impossible to explore new oilfields and restart the Unity and Tharjath oilfields due to problems surrounding security. Both the Unity oilfields in Block 1, run by the Greater Nile Petroleum Operating Company, or GNPOC, and Tharjath in Block 5A, operated by SUDD Petroleum Operating Co. Ltd, or SPOC, have been at the epicenter of the conflict since violence erupted in Africa's newest country in 2013.Rebels loyal to former Vice-President Riek Machar are still threatening any plan to restart the oilfields they shut in in January 2014. As a result, key player ONGC Videsh, the overseas arm of India's Oil and Natural Gas Corp., is said to be insisting on a new security protocol before its workers could return to the troubled region to resume production. A November meeting between India's ambassador to South Sudan, Srikumar Menon, and South Sudan's oil minister, Ezekiel Lol Gatkuoth, in Juba set the tone for the resumption of the oil production by Indian companies. But security problems remain unresolved. Although details are sketchy at the moment, discussions are continuing between Juba and New Delhi. ONGC Videsh has a 25% in the Greater Pioneer Operating Co., or GPOC, and a 25% stake in Tharjath oilfields. It remains to be seen whether South Sudan's cabinet would approve the implementation of OPEC's December deal to cut production.

For Israel, Energy Boom Could Make Friends Out of Enemies - Once a barren energy island in a part of the planet otherwise awash in resources, Israel is, after years of delay, finally pushing ahead with an ambitious strategy to tap offshore reserves that could transform its economy and, it hopes, its place in a historically hostile region.If all goes according to plan, Israel will not only become largely energy-independent, it will also supply neighbors that will have new reason to be friends. There is no guarantee that all will go according to plan, of course. Israel struggled for years to develop regulations to manage its newfound wealth. The international energy firms that Israel is now courting have other options in an evolving global market. And the politics of a new era, as President-elect Donald J. Trump encourages assertive Israeli action in Jerusalem and the West Bank, could kindle fresh conflicts with Arab neighbors that make energy partnerships problematic. But optimists see cause for confidence as once-stalled drilling in the Mediterranean resumes, additional tenders are issued and new customers sign up — or at least talk about it. The government in Jerusalem envisions building pipelines that could transport Israeli gas as far away as Europe. The potential for enhancing Israel’s relations with its neighbors is alluring. Mr. Steinitz credited energy for a recent reconciliation with Turkey. This development came years after diplomatic relations had broken down over a violent confrontation at sea that resulted in the deaths of 10 Turkish activists who were trying to break through Israel’s naval blockade of Gaza.

OPEC Commitments Push Iraq Towards Oil Export Deal With Kurds - Amid the ongoing struggle over oil control between the Iraqi Kurds and the Iraqi central government in Baghdad, the Iraqi central authorities have halted exports of oil from Kirkuk via the state’s marketing authority, SOMO—agreeing to let the oil all go to the Kurds. Crude exports had only been resumed in September after the two sides reached a revenue-sharing agreement to jointly export crude from the giant Kirkuk field, with the intention of splitting the oil between Baghdad and Erbil. Instead, the oil produced in Kirkuk will now be transferred to refineries in Kurdistan, according to Kurdish news agencies. The export and sale of oil produced in Kirkuk has been a complicated issue between Baghdad and the Iraqi Kurds. This oil is produced by the Iraqi federal government in northern Iraq, but exported via a pipeline system owned by the Kurdistan Regional Government (KRG). At the height of the squabble, Baghdad was considering attempting to bypass the Kurdish pipeline and trucking the Kirkuk oil to Iran. The September agreement came after five months of haggling, and only after a change in regime at the Iraqi Oil Ministry. It remains unclear why Baghdad has now agreed to send all the Kirkuk oil via the Kurdish pipeline to Kurdistan to be refined, and Kurdish news agencies have offered no additional details of this deal. The move comes as a surprise as Baghdad has long insisted that only SOMO could market Iraqi crude, while the Kurds have continually accused Baghdad of reneging on an earlier revenue-sharing agreement. The September deal for a 50/50 split had appeased both sides for the first time in almost half a year.

Is A Full Recovery Possible For Iranian Oil And Gas? - In January 2016, the Islamic Republic of Iran (IR) agreed to scale back its nuclear facilities in exchange for the lifting of economic sanctions. During the sanction years, it had dreamed of a stampede of international oil companies returning to Iran and injecting substantial investment of capital into the waning Iranian energy industry. The IR was therefore expecting a quick rejuvenation of its oil and gas industries and an economic bonanza following the end of international sanctions. It is a fact that Iranian oil output has been at a plateau for some time now, and production has been on the wane year after year. Dropping reservoir pressure and a continuous decline in crude production appear to have been triggered by long periods of technical constraints on operation and by natural aging of the major Iranian oil fields. The lack of regular maintenance and application of new technology and particularly the extensive neglect of the reservoirs in the last several years under sanctions have resulted in further damage to the Iranian oil-producing fields. Oil production after the Islamic revolution 38 years ago never returned to its previous peak, not because the IR did not want to have production over 6 million barrels per day, but because experienced, well-educated, and properly trained oil workers from all levels in every industry sector were arrested or terminated, and many fled the country. Further, the eight-year war with its neighbor Iraq and naturally poor management with roots in bribery and corruption inevitably caused a drastic drop in oil production.

Deepest Oil Cuts in World’s Top Market Didn’t Need OPEC deal - Malaysia and Brunei are doing their bit for the global pact to rebalance oil markets, but the biggest production cuts in Asia are coming from a country that didn’t sign up.  China, the world’s fifth-biggest producer last year, has reduced output by about 300,000 barrels a day this year, more than the combined cuts announced Saturday by non-OPEC countries, excluding Russia, as part of a deal coordinated with the producer group. The decline is expected to continue next year, with Chinese production shrinking as much as 200,000 barrels a day, according to consultant Energy Aspects Ltd.  “We’re seeing a natural decline in China oil production as fields are very mature and depletion rates are high,” said Virendra Chauhan, a Singapore-based oil analyst at industry consultant Energy Aspects Ltd. “The price level we had in last 12 to 18 months has incentivized imports over spending on domestic production.”China’s output slumped as state-owned firms shut wells at mature fields that are too expensive to operate amid last year’s price crash. Production during the first 10 months of the year averaged about 4 million barrels a day, down about 7 percent from the same period last year, according to Bloomberg calculations based on National Bureau of Statistics data.  Malaysia and Brunei were the only Asian nations in the group of producers outside the Organization of Petroleum Exporting Countries that agreed to cut output by a combined 558,000 barrels a day starting Jan. 1. The region will use 32.88 million barrels a day of oil this year, accounting for more than a third of global consumption, according to data from the International Energy Agency. Daily demand is forecast to expand to 33.7 million barrels in 2017.  Morgan Stanley estimates Malaysia will reduce output by 20,000 barrels a day, while Brunei will lose 4,000 barrels a day. Both countries were celebrating holidays Monday and nobody responded to e-mails seeking comment sent to Brunei’s Energy and Industry Department, as well as Malaysia’s Ministry of Energy and state-run oil and gas company, Petroliam Nasional Bhd.

What does it take to keep oil prices stable? -- Capitol Crude podcast -- Robert McNally, author of the new book 'Crude Volatility: The History and the Future of Boom-Bust Oil Prices' joins senior oil editors Meghan Gordon and Brian Scheid to talk about the history — and future — of crude oil prices.  McNally, a former White House energy advisor and president of the Rapidan Group, discusses the new era of market volatility, OPEC's relevance to the crude market and what impact the incoming Trump administration will have on world oil supply and demand. His book argues that swing producers since the US Civil War have kept oil prices relatively stable, but the current absence of such a swing producer now has prices in a period of accelerating volatility and instability.

Saudi Minister Talks Up Oil Prices - The production cuts only just started but Saudi Arabia believes they will be able to declare “Mission Accomplished” in June after the terms of the six-month deal expire. Saudi energy minister Khalid al-Falih said that the oil market will already reach a balance by that point, with inventories drawn down to reasonable levels. As such, he sees little chance of an extension of the deal that will see 1.2 million barrels per day (mb/d) plus 0.6 mb/d from non-OPEC countries taken off the market. But it is an open question whether or not inventories will merely resume their upward trajectory if OPEC members go back to producing full-tilt – some analysts think that the supply surplus would return if OPEC opens the taps again. Every utterance from the Saudi energy minister seems to be moving the market these days. Oil was down on al-Falih’s comments regarding the extension of the OPEC deal, but turned positive on Tuesday after he said that OPEC as a whole – and not just Saudi Arabia – would adhere to its deal. Meanwhile, the U.S. dollar fell after president-elect Donald Trump said that dollar strength was hurting U.S. competitiveness. The weaker dollar helped crude oil prices. "The market genuinely seems quite happy here (around $55) ... but people are watching with caution as the slightest hint of this OPEC/non-OPEC agreement going wrong is going to drive the market down," Matt Stanley, a fuel broker at Freight Investor Services (FIS) in Dubai, told Reuters.  The uncertainty surrounding OPEC production cuts coupled with the rebound in U.S. shale, which could push oil prices down again, will ultimately lead to much more volatility this year. That comes from the IEA’s executive director Fatih Birol. “I would expect that we will see a rebalancing of the markets within the first half of this year,” he said over the weekend, according to Reuters. “But what I want to say (is) that we are entering a period of much more volatility in the market ... the name of the game is volatility.” He also warned about a supply shortfall towards the end of the decade if the oil industry does not substantially increase upstream investments from multi-year lows seen last year. “This year, if there are no major investments coming we may well see in a few years from now significant supply-demand gap with serious implications on the market,” he warned.

Oil Slides After Saudis Suggest Early End To OPEC Deal -- Following a brief spike overnight (as China intervened in its equity market), crude prices slipped lower, testing towards a $51 handle after Saudi Arabia says OPEC is on track to wrap up its production curbs by the middle of the year, potentially leaving its aim of clearing a global oil glut unfinished.As Bloomberg reports, OPEC and Russia won’t need to prolong output cuts beyond June because the agreed reductions will have already ended the oversupply in world crude markets, Saudi Minister of Energy and Industry Khalid Al-Falih said in Abu Dhabi on Monday. However, ending the deal by mid-year and restoring production would mean the surplus just starts building again, thwarting OPEC’s ambition of whittling down bloated oil inventories.The Organization of Petroleum Exporting Countries said that draining off a stockpile “overhang” of more than 300 million barrels -- enough to supply China for almost a month -- was the main aim of supply curbs agreed with Russia and other producers. Twenty-four nations signed up to a joint cutback of 1.8 million barrels a day on Dec. 10.If they extend the deal for six months beyond its scheduled expiry in June, that surplus will be entirely eliminated by the end of the year, according to Bloomberg calculations based on data from the International Energy Agency. If they don’t extend the deal, and restore output to previous levels, about two-thirds of that glut will remain in place. “If the reduction is of such short duration, this will hardly be sufficient to balance the oil market,” said analysts at Commerzbank AG led by Eugen Weinberg in Frankfurt. “In this case the market participants who bet on rising prices will probably withdraw from the market, putting corresponding pressure on prices.”

Oil steady as weak dollar offsets U.S., Russia output forecasts | Reuters: Oil prices were little changed on Tuesday as a decline in the U.S. dollar and comments by Saudi Arabia that it would adhere to OPEC's commitment to cut output. That offset forecasts that U.S. and Russian producers would boost crude output later this year. The dollar fell to a near six-week low against a basket of currencies after U.S. President-elect Donald Trump said that the strong greenback was hurting U.S. competitiveness. A weaker greenback makes dollar-denominated crude less expensive for users of other currencies. "The oil market is actually weaker than it looks because it is being propped up by the weak dollar," said Phil Davis, managing partner at PSW Investments in Woodland Park, New Jersey. Brent futures lost 39 cents, or 0.7 percent to settle at $55.47 a barrel, while U.S. West Texas Intermediate (WTI) crude gained 11 cents, or 0.2 percent to settle at $52.48 per barrel. Both contracts were up by $1 earlier Tuesday. Oil drew some support earlier Tuesday from top crude exporter Saudi Arabia, which said it would adhere strictly to its commitment to cut output under the agreement between OPEC and other producers, such as Russia.Under the agreement, the Organization of the Petroleum Exporting Countries (OPEC), Russia and other non-OPEC producers have pledged to cut oil output by nearly 1.8 million bpd, initially for six months, to bring supplies back in line with consumption. Oil exports from Iraq's southern terminals, meanwhile, were down so far in January, according to loading data and an industry source, a sign that OPEC's second-largest producer is following through on the group's decision to cut output. /p>

Oil Slides After Brazil Denies Saudi Production Cut Request --With US Shale production surging, and now Brazil declining Saudi Arabia's request to cut production, doubts are continuing to rise over OPEC's deal and the hopes for balance in the energy markets.As Bloomberg reporets, Brazil Energy Minister Fernando Coelho Filho said during an in interview in Davos...

  • Petrobras can’t reduce output after corruption scandal and drop in international oil prices.
  • The company had already cut 2020 output target to 2.7 million b/d from more than 4 million b/d.
  • “Petrobras is coming now from a very difficult period. They can’t reduce production now. We’re trying to put the company back on its feet”
  • The Brazilian governmentt “has a lot of power on Petrobras,” but president Michel Temergave Petrobras CEO Pedro Parente independence.
  • “Petrobras will do what they think is necessary to be done”

And oil prices are tumbling...

Declining Chinese Oil Production Could Help Boost Oil Prices -- While all eyes are on OPEC to see whether or not they will follow through on production cuts, there is another major source of oil supply that will have a substantial impact on prices this year, and very few people are talking about it. China is often a central player in oil market analysis, but usually in terms of oil demand. But even as China is the world’s second largest crude oil consumer, and the largest importer, it is also no slouch in terms of production. Crude oil output climbed steadily over the past three decades, rising from 2 million barrels per day in the 1980s to a peak of about 4.4 mb/d in 2015, enough to rank it as the fourth largest producer in the world after the U.S., Russia and Saudi Arabia, and roughly on par with Canada. However, the collapse of crude oil prices has forced Chinese oil production into a state of decline. Many of China’s oil fields are old, mature and require heavy investment to stave of depletion. The market meltdown for crude oil beginning in 2014 forced China’s state-owned companies to take a hard look at whether or not pumping money into their older fields was still a worthy investment. In May 2016, we wrote about forecasts for Chinese oil output, projecting a decline of roughly 5 percent for the year. Those estimates turned out to be too conservative – some older and costly fields were shut down, forcing the country’s output to decline by 335,000 bpd in 2016, or about 6.9 percent. But even as oil prices have climbed back above $50 per barrel, the declines are expected to continue. Output could fall by an additional 7 percent this year, taking another 240,000 bpd off the market, according to several oil watchers interviewed by Bloomberg, including Bernstein & Co., Nomura Holdings Inc., and CLSA Ltd.Some of China’s oil fields are just too costly in today’s pricing environment. “China’s domestic crude output decline will certainly help OPEC’s plan to reduce global supply,” Nelson Wang, an oil and gas analyst at CLSA, told Bloomberg. ”Even if that isn’t China’s intention, it’s just the reality that China can’t produce more under the current circumstances.”

Saudi Plans for Early End to OPEC Pact May Leave Job Undone - Saudi Arabia says OPEC is on track to wrap up its production curbs by the middle of the year. That would leave its aim of clearing a global oil glut unfinished.  OPEC and Russia won’t need to prolong output cuts beyond June because the agreed reductions will have already ended the oversupply in world crude markets, Saudi Minister of Energy and Industry Khalid Al-Falih said in Abu Dhabi on Monday. However, ending the deal by mid-year and restoring production would mean the surplus just starts building again, thwarting OPEC’s ambition of whittling down bloated oil inventories.  The Organization of Petroleum Exporting Countries said that draining off a stockpile “overhang” of more than 300 million barrels -- enough to supply China for almost a month -- was the main aim of supply curbs agreed with Russia and other producers. Twenty four nations signed up to a joint cutback of 1.8 million barrels a day on Dec. 10.If they extend the deal for six months beyond its scheduled expiry in June, that surplus will be entirely eliminated by the end of the year, according to Bloomberg calculations based on data from the International Energy Agency. If they don’t prolong the cuts and instead restore output to previous levels, about two-thirds of that glut will remain in place.“If the reduction is of such short duration, this will hardly be sufficient to balance the oil market,” said analysts at Commerzbank AG led by Eugen Weinberg in Frankfurt. “In this case the market participants who bet on rising prices will probably withdraw from the market, putting corresponding pressure on prices.”

Crude Chaotic As Inventory Data Shows Huge Gasoline Build But Crude Draw - Following last week's surge in crude and product inventories, API reported a much bigger than expected drawdown in crude inventories ( versus -1mm expectations). While this spiked WTO prices, they fell back amid massive builds in gasoline (9.75mm) and distillates. API:

  • Crude -5.042mm (-1mm exp)
  • Cushing -1.01mm (-500k exp)
  • Gasoline +9.75mm
  • Distillates +1.17mm

Another massive build in gasoline inventories offsets the exuberant price action from a big draw in crude and Cushing...

Oil price slides on prospect of rising U.S. production | Reuters: Oil prices fell on Wednesday on expectations that U.S. producers would boost output, while OPEC signaled a drop in the global oil supply surplus this year as the producer group's output fell back from a record high. Brent crude futures, the international benchmark for oil prices, were down $1.05 at $54.42 a barrel at 1455 GMT. U.S. West Texas Intermediate (WTI) crude oil futures were trading down $1 at $51.48 per barrel. U.S. shale production is set to snap a three-month decline in February, the U.S. Energy Information Administration said on Tuesday, as energy firms boost drilling activity with crude prices hovering near 18-month highs. February production will edge up 40,750 barrels per day (bpd) to 4.748 million bpd, the EIA said. In January, it was expected to drop by 5,900 bpd. The Organization of the Petroleum Exporting Countries, excluding Indonesia, pumped 33.085 million barrels per day (bpd) last month, according to figures OPEC collects from secondary sources, down 221,000 bpd from November, OPEC said in a monthly report on Wednesday. The figures showed the biggest reduction came from Saudi Arabia, which told OPEC it cut output to 10.47 million bpd. OPEC cut its forecast of supply in 2017 from non-member countries following pledges by Russia and other non-members to join OPEC in limiting output. OPEC now expects non-OPEC supply to rise by 120,000 bpd this year, down from growth of 300,000 bpd forecast last month, despite an upwardly revised forecast of U.S. supply. Under the agreement, OPEC, Russia and other non-OPEC producers have pledged to cut oil output by nearly 1.8 million bpd, initially for six months, to bring supplies back in line with consumption.

Oil trims loss as OPEC's Barkindo says he sees 'tremendous effort' to cut output -- Oil futures fell by nearly 3% on Wednesday as concerns about climbing U.S. shale production pushed prices to their lowest in about a week, offsetting some earlier support from signs that major crude producers have kept output in check as promised. A monthly report from the Organization of the Petroleum Exporting Countries released Wednesday said that “initial reports show positive signs of compliance” with pledged production cuts, but also noted that its forecast for oil supplies from non-OPEC countries depends on how much U.S. tight oil production improves in the coming months. So-called light, tight oil refers to crude produced by shale producers.  On the New York Mercantile Exchange, February West Texas Intermediate crude CLG7, -2.10%  fell $1.40, or 2.7%, to settle at $51.08 a barrel. Brent crude LCOH7, -2.16% fell $1.55, or 2.8%, to $53.92 a barrel on London’s ICE Futures exchange.WTI and Brent both logged their lowest finish since Jan. 10, according to FactSet data.Speculation that “higher oil prices will translate into additional U.S. shale-oil production as a counter- balance to OPEC efforts to trim supply and reduce excess inventories,” pressured prices, said Tim Evans, energy analyst at Citi Futures, in a note Wednesday. Higher prices for oil “may lead to a resurgence in U.S. tight oil production from the most prolific shale regions,” OPEC said in its report. The Energy Information Administration released a report Tuesday that showed a forecast for an increase in U.S. shale oil production in February, with the largest rise likely to come from the Permian Basin, which covers parts of western Texas and southeastern New Mexico.

OPEC sees weaker appetite for its crude as cut deal kicks in -  OPEC expects demand for its own crude to fall this year but is mindful that the return of US shale could dent positive early signs on non-OPEC compliance with the landmark production restraint deal to rebalance the market, the exporters group said in its monthly oil market report Wednesday. In a sign that OPEC is serious about sticking to its recently instated output agreement, the producer group said it produced 33.085 million b/d in December, down 220,900 b/d from November, with Saudi Arabia leading the way by posting a sizeable fall. . In its monthly oil market report, OPEC projected that the call on its crude for 2017 would be 32.10 million b/d, just below the target of 32.5 million b/d that the organization is aiming to hold production to under the deal, though exemptions for Libya and Nigeria could complicate the picture.Noting that non-OPEC supply cuts were "somewhat challenging," OPEC said it had seen "positive signs" of compliance with the pledged production cuts. But it remains wary that US oil production could start "improving" as higher oil prices start to feed through to stronger rig counts and cash flows. "The number of drilling rigs and reactivation of companies' spending are the two most important factors leading to an output surge in the coming months," it said. Its US oil production forecast for 2017 was revised up by 230,000 b/d, as a move "towards higher prices may lead to a resurgence in US tight oil production from the most prolific shale regions." Non-OPEC oil supply will grow to average 57.26 million b/d in 2017, up from 57.14 million b/d in 2016, OPEC said in the monthly report, an 180,000 b/d smaller increase than previously forecast because of reduced expectations for output from Russia, Kazakhstan, China, Congo and Norway

OPEC sees 2017 call on its crude at 32.10 MIL B/D, below agreed output ceiling - OPEC said Wednesday its 13 members collectively pumped 33.085 million b/d in December, a sharp fall of 220,900 b/d from November, paving the way for its output deal to kick in. On November 30, OPEC agreed to cut 1.2 million b/d from its October output for six months from January 1 and to freeze production at around 32.5 million b/d, with the total including Indonesia. A total of 11 non-OPEC countries have also agreed to cut output by 558,000 b/d in the first half of 2017, with Russia accounting for the bulk of the reduction at 300,000 b/d. Output from top producer Saudi Arabia is estimated to have fallen to 10.474 million b/d in December from 10.623 million b/d in November, according to figures published by the oil producer group in its monthly oil market report. The Vienna-headquartered group officially uses secondary sources to monitor its crude production, but also publishes a table of production figures submitted directly by member countries. But Saudi Arabia told OPEC it produced 10.465 million b/d in December a seven-month low, and a fall of 254,700 b/d from the previous month, a sign it is leading the way in compliance with the agreed output deal. Under the recent deal, Saudi Arabia has agreed to bring its output down to 10.06 million b/d between January and June. Saudi Arabia, the world's largest exporter of crude, saw its oil output rise to record levels last year, with reported production above 10.6 million b/d for five successive months. In 2015, Saudi oil output averaged 10.193 million b/d, according to official data.In its monthly oil market report, OPEC projected that the call on its crude for 2017 would be 32.10 million b/d, just below the target of 32.5 million b/d that the organization is aiming to hold production to, under the deal, though exemptions for Libya and Nigeria could complicate the picture. OPEC's second largest producer Iraq said its average oil production in December jumped to a record high 4.83 million b/d, up 30,000 b/d from November, it told OPEC. Iraq's output in December, according to OPEC's secondary sources, was 4.632 million b/d, which is a difference of 198,000 b/d from Baghdad's number.

Oil Tumbles After Unexpected Crude Inventory Build  --A mixed bag of crude draw and gasoline builds from API combined with IEA comments on rising US Shale output offset by Saudi jawboning about more production cuts possible has pushedoil green before today's DOE data. However, oil prices tumbled when DOE printed an unexpected 2.347mm barrel crude build (1mm draw expected) and another major build in gasoline inventories. US crude production remains at 9-month highs. As Bloomberg's Julian Lee notes, Crude inventories rose in contrast to the draw reported yesterday by the API, combined with another big jump in gasoline, is going to undo all the good work done by Saudi Arabia's oil minister in Davos trying to talk up prices. DOE:

  • Crude +2.347mm (-1mm exp)
  • Cushing -1.274mm (+300k exp)
  • Gasoline +5.951mm (+2mm exp)
  • Distillates -968k (+1.5mm exp)

Following DOE's big builds last week, this week's data snubbed API's draw with a surprising build of 2.347mm barrels in crude and another large build in gasoline inventories...

US crude settles at $51.37, up 29 cents as IEA sees oil market tightening - Oil prices edged higher on Thursday, but swelling U.S. crude stockpiles limited the rebound from a one-week low after the International Energy Agency said oil markets had been tightening even before cuts agreed by OPEC and other producers took effect. The IEA said that while it was "far too soon" to gauge OPEC members' compliance with promised cuts, commercial oil inventories in the developed world fell for a fourth consecutive month in November, with another decline projected for December. U.S. West Texas Intermediate crude oil settled up 29 cents at $51.37 per barrel, having dropped to a one-week low on Wednesday at $50.91 a barrel. International benchmark Brent crude was up 34 cents at $54.26 a barrel by 2:33 p.m. ET (1933 GMT), after closing down 2.8 percent in the previous session. A strong U.S. dollar limited oil's advance. Prices tumbled to session lows after U.S. Energy Information Administration (EIA) data showed crude inventories rose unexpectedly last week as refineries sharply cut production. U.S. commercial crude inventories rose by 2.3 million barrels in the week through Jan. 13 to 485.5 million barrels, well above the expectations of a 342,000-barrel decline. The data also showed much larger-than-expected increases in stocks of gasoline and a surprise drop distillates inventories. Stockpiles of gasoline in the U.S. East Coast swelled to the highest weekly levels on record for this time of year, when refiners typically begin storing barrels ahead of summer driving season.

Texas increases lead huge rig count jump - It’s definitely not a little hop, or even a skip. This week’s rig count jump might even be classified as a huge leap of faith as reports across the industry indicate a the oil and gas industry is on the road to recovery. This week, large acquisitions – one by Exxon Mobil and another by Noble Energy–indicate further optimism that activity will continue to increase. CEO Paul Hibsgaard of Schlumberger also said that recovery is “on its way in all markets.” Of the 35 total new rigs this week, 29 of the new rigs are exploring for oil while 5 are exploring for gas. Texas led the increases with 17 new rigs, but a surprising increase of 7 rigs in Oklahoma warrants attention. The Woodford Cana Basin now has 46 total rigs, only 3 fewer than the prolific Eagle Ford. A year ago, the Cana Woodford only had 39 rigs whereas most other basins had more rigs last year. Other statewide rig count increases this week include the following: New Mexico 1, North Dakota 3, Ohio 2, Oklahoma 7, Pennsylvania 1, Texas 17, Utah 1, & West Virginia 1. The price of WTI crude is currently up at $52.53 while Brent Crude sits at $55.46 (12:55 CST). However, indicates that the price could dip as the U.S. production increases “may very well undo whatever measures OPEC is undertaking to lift prices out of the early 2016 doldrums.”

Oil Slides After Massive Rig Count Gain | The number of active oil and gas rigs in the United States increased on Friday by 35 for a total of 694 active rigs, according to oilfield services provider Baker Hughes, which is 57 rigs above the rig count a year ago. Not surprisingly, most of this week’s gains were in the form of oil rigs, which were up 29, from 522 last week to 551 this week. The number of active oil rigs in the United States is now 41 more than the same week last year. Gas rigs also saw a bump of 6, from 136 last week to 142 this week, which is 15 above the count for the same week last year. This marks 11 straight increases to the gas rig count. Last week marked the first decrease in active oil rigs in 12 weeks. The upward trajectory to the number of active oil rigs follows closely that of higher oil prices, particularly in the Permian basin, which now boasts 281 oil and gas rigs—82 rigs more than the same week last year. The huge increase in oil rigs this week may lend credence to the fear that U.S. shale may very well undo whatever measures OPEC is undertaking to lift prices out of the early 2016 doldrums.Last week we looked at a snapshot of the number of active oil and gas rigs by basin a year ago compared to the current week, which showed a shift in activity, most notably away from Eagle Ford to the coveted Permian, which holds an estimated mean of 20 billion barrels of oil, 16 trillion cubic feet of associated natural gas, and 1.6 billion barrels of natural gas liquids.This week, the shift is even more pronounced as the Permian continues to gain traction, threatening the Eagle Ford’s prominence.

Rig count leaps by 35, largest jump in 5 years | Fuel Fix: The number of oil and gas rigs in U.S. fields skyrocketed this week, up 35 over last week — the largest increase in five years, since the U.S. shale revolution was booming. After a dip last week, this week’s count marks the ninth increase in the last 10 weeks, and brings to almost 300 the number of rigs added since the count fell to its most recent low last spring. U.S. oil drillers collectively sent 29 more rigs into the patch this week, the Houston oilfield services company Baker Hughes reported Friday. Gas drillers added six rigs. Texas led the rise, with 17 more rigs. West Texas’ Permian Basin added 13. Oklahoma added seven. The total rig count rose to 694, up from a low of 404 in May. The number of rigs has now surpassed the count from this time last year, when 637 were operating in U.S. oil and gas fields. The number of active oil rigs jumped to 551 this week. Gas rigs ticked up to 142. The number of offshore rigs dipped by one to 24, down 5 rigs year over year. Total rig counts incrased by 17 in Texas, seven in Oklahoma, three in North Dakota, two in Ohio, and one each in New Mexico, Pennsylvania, Utah and West Virginia. Not a single state lost a rig this week. The Permian has now added almost 150 rigs, doubling its total since the May low. Drilling activity has continued to rise despite stagnating oil prices. Since February’s low of about $26 a barrel, prices have hovered above $50 for several weeks now. U.S. oil prices Thursday settled at $51.37, up 29 cents, or about half a percent, and were rising again in midday trading Friday, following news that global oil demand was up and supplies down.

OilPrice Intelligence Report: U.S. Drillers Open The Spigots - Oil was flat this week as rising U.S. shale production and a bearish inventory report continued to put pressure on WTI and Brent. Crude oil inventories rose by another 2.4 million barrels, gasoline stocks jumped by nearly 6 million barrels, and upstream production figures provided further evidence that U.S. shale output is coming back, supported by today's huge rig count increase. A new CNBC survey of energy forecasters finds that experts believe that oil prices will fall from today’s levels if the OPEC cuts do not materialize. Many analysts have pegged the expected compliance rate of OPEC members at about 80 percent, which translates to roughly 1 million barrels of oil per day taken off the market. Others argue that the oil market has become unduly optimistic. "The recent rally in oil prices above $50 rests more on faith than fact: no hard data on compliance around pledged supply cuts by OPEC and non-OPEC countries will emerge until February" Harry Tchilinguirian, global head of commodity markets strategy at BNP Paribas, told CNBC. He forecasts Brent to average just $47 per barrel in the first quarter. And he isn’t the only one. "I'm convinced that prices will fall through the year as the market recognizes that OPEC is not complying, Russia does not comply at all, U.S. shale recovers massively thanks to some steps of the Trump administration," Eugen Weinberg, head of commodities research at Commerzbank, said.  The IEA upgraded its estimate for rising U.S. shale production this year, projecting output will increase by 500,000 bpd by the end of 2017, which will translate to an increase of 170,000 bpd averaged over the year. In addition, Brazil and Canada will chip in another 415,000 bpd, mainly from large projects planned years ago. The Paris-based energy agency says that OPEC cuts could lead to significant inventory drawdowns of about 0.7 mb/d, tightening the market in the first half of the year and leading to increases in crude prices. But beyond that, rising non-OPEC production could cause oil prices to fall back again towards the second half of the year. At a minimum, greater price volatility is set to return, the IEA says.

OPEC December Production Data » (graphs) The new January OPEC Monthly Oil Market Report is out with crude only production numbers for December 2016. All charts are in thousand barrels per day. Indonesia has left OPEC so they are now down to 13 nations. The Indonesia historical data has been removed from the entire OPEC data. Therefore the December data does not reflect any drop due to Indonesia leaving OPEC.OPEC crude oil production dropped to 33,085,000 bpd in December. That was a drop of 220,900 bpd. However that was after the November production numbers were revised upward by 175,000 bpd. Therefore the drop was only 46,000 bpd from what was reported last month.Officially, the OPEC agreed to cut production by 1.2 million barrels per day. Those cuts are supposed to kick in in January. But I would not count on their January production numbers being down that much. OPEC’s December production represents an all time high for the cartel.

Despite OPEC Deal Oil Prices Could Fall Sharply From Here - The impact of the OPEC production cuts could be much more muted than many had hoped for as non-OPEC output comes roaring back in 2017. And it isn’t just from U.S. shale. The IEA predicts that non-OPEC countries on the whole will add 380,000 bpd of net capacity this year, and crucially, that figure includes the promised 558,000 bpd reductions that 11 countries promised in conjunction with the OPEC cuts. Of course, U.S. shale will be a major factor in this output rebound. In its latest Oil Market Report, the IEA revised up its forecast for U.S. production this year, expecting gains of 170,000 bpd. Drilling activity is rising quickly – in December, the U.S. saw the largest monthly increase in the rig count in more than two years. Capex is rising, employment is positive, and the industry is becoming more efficient at drilling. “Whether it be shorter drilling times or larger amounts of oil produced per well, there is no doubt that the U.S. shale industry has emerged from the $30/bbl oil world we lived in a year ago much leaner and fitter,” the IEA said in its report. Elsewhere, the gains could be even more substantial. For example, Brazil and Canada, home to major offshore drilling and oil sands, respectively, have long-term projects planned years ago when oil prices were much higher set to come online. Together, Brazil and Canada could add a hefty 415,000 bpd this year. As such, the resurgence of oil production from different parts of the world will take the wind out of the sails of the OPEC deal. But as the U.S. and other non-OPEC countries bring production back to the market, the OPEC deal will help tighten global supplies, even if only modestly. While it is still too early to tell whether or not OPEC will adhere to the promised cuts that it laid out in November, the latest data is encouraging – OPEC output fell by 320,000 bpd in December, largely because Saudi Arabia moved quickly to lower output, while unplanned outages in Nigeria added to the reductions. The “early indications suggest a deeper OPEC reduction may be under way for January, as Saudi Arabia and its neighbors enforce supply cuts,” the IEA said. The Paris-based energy agency says that if OPEC were to comply with the deal, it would imply a drawdown in global inventories on the order of 0.7 mb/d for the first six months of 2017.

Middle East debt issuance jumps 145% to $77.8 billion - Khaleej Times: Debt issuance in Middle East jumped to a record $77.8 billion in 2016 compared to 2015 as major economies in the region resorted to bond and sukuk market to tide over the challenges posed by the drop in oil revenue. "Bolstered by Saudi Arabia's $17.2 billion bond sale in October, Middle Eastern debt issuance reached $77.8 billion during 2016, a 145 per cent increase compared to the value raised during 2015 and by far the highest annual total in the region since records began in 1980," said Nadim Najjar, managing director, Mena, Thomson Reuters. Saudi Arabia was the most active nation in the Middle East accounting for 29 per cent of overall activity, followed by the UAE and Qatar, according to Thomson Reuters annual investment banking analysis International Islamic debt issuance increased 24 per cent year-on-year to reach $37.9 billion during 2016. HSBC took the top spot in the Middle Eastern bond ranking during 2016 with 13.3 per cent share of the market, while CIMB Group took the top spot for Islamic DCM issuance with a 13.5 per cent share. In the backdrop of a steep fall in oil revenues, the combined deficit of the six GCC states is estimated to be $153 billion in 2016, up from $119 billion in 2015. Saudi Arabia accounted for 55 per cent, or more than $84 billion. The GCC countries, which together pump more than 18 million barrels per day of crude oil, suffered significant revenue shortfall in 2016. In 2015, total GCC total revenue, mainly from hydrocarbons, dropped to $443 billion, the lowest in five years, from a peak of $735 billion in 2013. In 2016, combined GCC revenue is estimated to have dropped further to $365 billion. According to forecast by Kuwait's investment firm Kamco, the six-nation group is set to post an average annual shortfall of $100 billion until 2021

Saudi Arabia suggests another production cut possible in 2017.  Saudi Arabia's energy minister says there's a chance of another production cut from OPEC countries this year. Speaking at the World Economic Forum at the Swiss ski resort of Davos, Khalid Al-Falih says he "would not exclude" another cut to follow last year's December agreement if higher prices don't stick. He noted that in the past the OPEC oil cartel has often had to cut production more than once to stabilize the market. Another option, he says, is that the recently agreed on production cut could be extended further. However, he says oil ministers don't want to create a shortage too early. Oil prices are trading over $50 a barrel, nearly double the level they were a year ago. Earlier Thursday, the International Energy Agency said global oil output is dropping for the first time in months, as Saudi Arabia and other oil-producing countries follow through on pledged cuts aimed at lifting oil prices. The IEA's monthly report says Thursday that OPEC production dropped to 33.09 million barrels a day in December from 34.2 million the previous month.

IMF Slashes Saudi Arabia Growth Forecast on Lower Oil Output - The International Monetary Fund cut its growth outlook for Saudi Arabia on lower oil production, underscoring the challenges facing the kingdom as it seeks to overhaul its economy. Gross domestic product will expand 0.4 percent in 2017, the lender said in its World Economic Outlook report update on Monday, citing the impact of the recent deal by the Organization of the Petroleum Exporting Countries to reduce output. It compares with the fund’s October prediction of 2 percent, and a median estimate of 0.9 percent in a Bloomberg survey. The forecast reflects cuts in government spending as well as the impact of lower oil production, Gian Maria Milesi-Ferretti, deputy director of the IMF’s research department, told reporters on Monday. “There is a big adjustment in spending downwards,” he said. “There is an adjustment in taxes upwards, and as a result non-oil growth is not going to be as good as it was during periods of strong oil prices.” Saudi Arabia is seeking to build investor confidence in its long-term strategy to reduce dependence on crude and boost non-oil sectors of its economy, while trying to plug one of the Middle East’s biggest budget deficits. The kingdom is planning to borrow as much as $15 billion this year on international debt markets to help fund its spending plans, following last year’s $17.5 billion sovereign bond sale. Saudi Arabia’s so-called Vision 2030 strategy derives from the global slump in oil prices since 2014, which severely dented revenue. Led by Deputy Crown Prince Mohammed bin Salman, it includes a plan to set up the world’s biggest sovereign wealth fund and to sell a stake of less than 5 percent in state-run Saudi Arabian Oil Co. by 2018. Saudi Arabia estimates growth fell to 1.4 percent in 2016, the lowest since the recession in 2009, as it cut spending by suspending bonuses for public employees and reducing ministers’ salaries. The government has also raised the cost of fuel, and plans to introduce value-added taxes and fees on expatriate workers.

Saudi Arabia’s Flawed ‘Vision 2030’ – Analysis – The dramatic drop in oil prices has depleted Saudi Arabia’s cash reserves by a whopping US$150 billion and driven the ruling family to contrive hastily a financial rescue plan.[1] On April 25, 2016, Deputy Crown Prince Muhammad bin Salman announced the “Vision 2030” plan to revolutionize the Saudi economy by ending its dependency on oil.[2] Based on a report by the consulting firm McKinsey, the plan seeks to reinvigorate a Saudi economy that yielded an annual gross domestic product (GDP) growth of only 0.8 percent between 2003 and 2013, less than most emerging economies.[3] The plan seeks to reduce the role of the public sector and bureaucracy while simultaneously empowering the private sector to become the main employer and vehicle for economic growth. The plan calls for the creation of a huge sovereign wealth fund to be funded by an unprecedented initial public offering (IPO) of a 5 percent stake in Aramco. The International Monetary Fund (IMF) reservedly endorsed the Saudi intention to address its alarming monetary deficit but voiced subtle doubts about Vision 2030, specifically because its 14-year time frame “sets a bold and far-reaching transformation of the economy to diversify growth, reduce dependence on oil, and increase the role of the private sector.”[4] Another more critical assessment by John Edwards, a member of the board of the Reserve Bank of Australia, warned that, in order for the plan to be successful, it must “profoundly change Saudi society and politics.”[5] And selling 5 percent of Aramco cannot reverse the kingdom’s gloomy economic outlook unless revenues are generated as soon as possible from non-oil sources since the proceeds from the IPO equal the annual depletion rate of cash assets. Riyadh has already wasted precious time, having spent trillions of dollars in 1970-2014 on nine 5-year development plans that left 90 percent of the annual Saudi budget dependent on oil revenues.[6] Vision 2030 is, therefore, bound to fail for four reasons: It is an overblown mega-project scheme; it focuses on economics and discards political development; it superficially approaches the challenge of instilling values of achievement; and it takes the generation of non-oil revenues as its ultimate goal.

Can Saudi Arabia Survive With Oil Below $60? - With the OPEC production deal holding, at least for the moment, questions have now arisen over how prospects look for the cartel’s biggest producer. It’s been a strange few years for the Kingdom of Saudi Arabia, as its endured budget deficits for the first time in its modern history, stagnation in oil prices and rising competition from other OPEC members and the American shale boom. Recently, talk has centered on the Saudi monarchy’s glimpse of the future: the Vision 2030 plan, whereby it hopes to diversify its economy and end its dependence on the mercurial oil and gas market. But can the world’s biggest oil producer and OPEC’s de facto leader pull it off? In the short term, Riyadh will continue to feel the pain of lower-than-normal oil prices.The growth outlook for Saudi Arabia has been slashed, as the International Monetary Fund (IMF) announced on January 16 that the world’s largest oil producer would see its GDP grow by only 0.4 percent in 2017. The estimate comes on the basis of the continued low price of oil, but more importantly on the country’s slashed oil production: as a result of the recent OPEC production deal, Saudi Arabia has agreed to keep its production level at or below 10 million bpd. This has resulted in a cut in its growth outlook, down from 2 percent in October, according to Bloomberg.This comes after anemic growth in 2016, where GDP expanded by only 1.4 percent. If oil prices stabilize, and the country’s economic forecast improves, GDP will likely expand by 2.3 percent in 2018. The official Saudi response decried the IMF’s results as overly conservative. A government spokesman declared that Saudi growth would be “north of 1 percent,” citing the anticipated investment in renewable energy and a stimulus packaged the Saudi government was planning for the private sector, according to Bloomberg. The Saudi leadership had been pivotal in the campaign to bring about an OPEC cut, after resisting production deals for years. The stakes were raised this year, as draining cash reserves and a resistant American energy sector convinced Riyadh that cuts were needed to boost prices. The cuts have come, surprising many analysts, and the OPEC deal looks set to hold at least for the time being.

UN Reports Death Toll In US-Sponsored Yemen War Reaches 10,000 -- A UN envoy held talks with Yemen’s President Abd Rabbuh Hadi on Monday as the United Nations said the death toll from the war had reached 10,000.The envoy, Ismail Ould Cheikh Ahmed, was in Aden for the meeting that focused on a return to a ceasefire and to political talks to end the nearly two-year war.The talks came as fighting in the southern Shabwa area on Monday reportedly killed 34 people and wounded 16 others during clashes between Houthi fighters and pro-government forces.The United Nations said the civilian death toll in fighting since a Saudi-led force intervened in March 2015 had reached 10,000, up from the previous figure of 7,000.The Saudi-led coalition has been blamed for most of the civilian casualties. The devastation has also  drawn attention to the role of western powers who have continued to provide Riyadh with weapons, logistical support and intelligence. The Houthis have also been accused of human rights violations. The higher toll “underscores the need to resolve the situation in Yemen without any further delay”, said UN spokesman Farhan Haq in New York. “There is a huge humanitarian cost.” Jamie McGoldrick, humanitarian coordinator of the UN Development Programme, said the latest death toll is based on lists of victims gathered by hospitals and the true figure could be higher. McGoldrick said up to 10 million Yemenis were also in urgent need of humanitarian assistance.

Over Two Million Yemenis Displaced by Conflict - The humanitarian crisis in Yemen caused by the ongoing conflict over the past 22 months has led to the internal displacement of over 2.1 million Yemenis. It is also complicating an already difficult situation for thousands of migrants from the Horn of Africa attempting to cross the country on the way to Saudi Arabia. A high-ranking delegation from IOM earlier this month visited Sana’a, Yemen to assess and support IOM Yemen’s efforts to aid displaced Yemenis and migrants in the country. Carmela Godeau, IOM’s Regional Director for Middle East and North Africa based in Cairo, and Mohammed Abdiker, Director of IOM’s Department of Operations and Emergencies, visited a settlement of displaced Yemenis in Sana’a and met local partners working with IOM to provide health care and non-food items to help displaced families cope with winter weather. The delegation also visited one of the 31 Child Friendly Spaces that IOM has opened in Yemen. These provide direct assistance to displaced children. They aim to ease the stress and effects of the conflict on children, in addition to providing awareness-raising sessions and psychosocial support for traumatized children. Other visits allowed the IOM delegation to see the work of an IOM health clinic, which provides primary health care to displaced Yemenis and migrants, including psychosocial support to those suffering from displacement and war traumas.

Mosul battle: Iraqi army prepares offensive on west of city - BBC News: The Iraqi army says it is preparing military operations to retake western Mosul, the last urban stronghold in Iraq of so-called Islamic State. The preparations follow a recent offensive which officials said on Wednesday had recaptured nearly all of the city's east. Counter-terror chief Talib Shaghati said special forces had retaken all eastern districts assigned to them. Some IS fighters remain holed up in north-eastern districts, he added. Earlier reports suggested the army had retaken all of the city's east. The jihadists remain in control of all of Mosul west of the Tigris river, including the warren-like streets of the old city, which present a challenge to government forces.The army has made swift advances through eastern Mosul since re-launching its operation to retake the city last month. The operation began in October, more than two years after the jihadists overran the city, but stalled amid heavy IS resistance. It is the Iraqi military's largest operation in years, involving domestic security forces, Kurdish Peshmerga fighters, Sunni Arab tribesmen and Shia militiamen, and assisted by US-led coalition warplanes and military advisers. More than 100,000 people have fled their homes in and around Mosul and UN officials have warned that the figure is likely to rise as pro-government forces press further into the city.

As caliphate crumbles, Islamic State lashes out in Iraq | Reuters: Two days after Iraqi forces launched a new push against Islamic State in Mosul, bomb blasts ripped through a marketplace in central Baghdad - the start of a spate of attacks that appear to signal a shift in tactics by the Islamist group. The Sunni jihadists have targeted Shi'ite Muslim civilians. Raids on police and army posts in other cities, also claimed by Islamic State, have accompanied the bombings. The attacks show that even if Islamic State loses the Iraqi side of its self-styled caliphate, the threat from the group may not subside. It will likely switch from ruling territory to pursuing insurgency tactics, seeking to reignite the sectarian tensions that fueled its rise, diplomats and security analysts say. In addition to operations in and around Baghdad, IS has carried out attacks in the region and Europe as it has come under pressure in Syria and Iraq. In Iraq, U.S.-backed Iraqi forces are driving IS out of Mosul, its largest urban center in the vast territories it seized 2-1/2 years ago there and in neighboring Syria. Iraq's government is aware of the challenge it faces in stemming the IS threat after Mosul. "Terrorism uses the weapon of sectarianism in Iraq and Syria ... in order to drive people and communities apart and take control of them,"

The US Dropped Bombs Every Three Hours In 2016 - Few people would claim that 2016 was a particularly peaceful year for the world. Being the globe’s foremost military power, the United States was a major player in a number of conflicts. The United States military was so active, in fact, that public data recently analyzed by the Council on Foreign Relations found that over the past year 26,171 airstrikes were conducted. Compared to 2015, just over 3,000 more bombings were carried out in 2016. Doing the math shows that in 2016, on average, the U.S. military conducted an airstrike every three hours.It is worth pointing out that the Department of Defense data does not necessarily tally every bomb dropped, instead tracking strikes which can often encompass a large number of bombings. What’s more, the U.S. does not always disclose military operations to the public. Considering these two factors, it could be argued that bombing every three hours may be a rather conservative number. Though the American media and public last year focused primarily on the U.S.’ role in fighting the Islamic State in Syria and Iraq – where, indeed, the majority of 2016 airstrikes were carried out – five other countries were also bombed: Afghanistan, Libya, Yemen, Somalia and Pakistan. After the disastrous wars in Afghanistan and Iraq begun under the Bush administration, Barack Obama ran on a platform of finally putting an end to both drawn out conflicts. American voters were beyond exasperated with what they rightly viewed as military ventures that had been costly in taxpayer dollars and uniformed lives with few tangible results. Such was the world’s faith in President Obama’s pledges that he was awarded the Nobel Peace Prize.With Obama’s two-term presidency drawing to a close, it might be difficult to say he has made good on these promises. Though he has done much to wind down t he use of ground troops in these nations, Obama has replaced them with bombing raids and drone strikes.

On His Way Out the Door, Obama Bombs Libya One Last Time - U.S. B-2 war planes bombed two camps in Libya overnight that Pentagon officials claim were housing Islamic State (ISIS) militants, concluding President Barack Obama's time as commander in chief with another slew of deaths. More than 80 people were killed at the camps about 25 miles southeast of Sirte, where ISIS fighters fled from last year after attacks by Libyan fighters backed with American air power. The bombing, which was reportedly requested by Libya's Government of National Accord, comes a month after the U.S. claimed a "successful conclusion to a months-long air campaign against the militant group," the Guardian notes. Obama reportedly authorized the strikes earlier this week, without congressional approval. The president committed to giving Libya air support after the U.S.-backed toppling of former Libyan leader Muammar Gaddafi in 2011. He later said the military's lack of an action plan for the day after Gaddafi's ouster was his "worst mistake" as a president. The strikes appear to underscore that ISIS remains a threat in Libya, regardless of U.S. military claims. For a Pentagon that erroneously claimed it "doesn't do body counts," some more body counts on the way out the door.

The U.S. flew stealth bombers across the globe to strike ISIS camps in Libya -- Two Air Force B-2 stealth bombers struck Islamic State camps southwest of the Libyan city of Sirte on Wednesday night, less than a month after the Pentagon declared an end to an extended air campaign there. Pentagon press secretary Peter Cook said that the aircraft, known for their distinctive bat-like appearance, dropped more than 100 bombs and hit two Islamic State encampments about 30 miles outside Sirte. The outposts were inhabited at least in part by fighters who had fled the city in the fall, and the operation was approved by President Obama, Cook said. Defense Secretary Ashton B. Carter told reporters Thursday that the camps contained militants “actively plotting” attacks in Europe and that the strikes were “critically important.” “As always, external operations are a very important part of the reason to destroy ISIL, as well as to wipe them out of Libya itself,” Carter said, using an acronym for the Islamic State. MQ-9 armed drones also participated in the strikes, using Hellfire missiles to hit targets that remained after the initial bombardment, Col. Patrick Ryder, an Air Force spokesman, told reporters. The operation took 34 hours, and the two B-2s, named the Spirit of Pennsylvania and the Spirit of Georgia, flew from Whiteman Air Force Base in Missouri to carry out the strikes, Ryder said. The camps were in remote desert locations, and no civilians were believed to have been hit in the bombardment, officials said.

Russia Invites Incoming Trump Administration To Syria Peace Talks After Snubbing Obama -- Three weeks after John Kerry's State Department was humiliated one last time when Russia, Turkey and Syria sat down alone, demonstratively without inviting the US, to discuss the terms of a proposed Syrian ceasefire, Russia has already offered a diplomatic fig leaf to the incoming Trump administration when Russian Foreign Minister Sergey Lavrov told the press Russia has invited the United States to take part in the upcoming talks on Syria,  "As I said yesterday, we have already invited the US," Lavrov told journalists in Moscow on Thursday. And since the meeting on the Syrian settlement is scheduled to take place in the Kazakh capital of Astana on January 23, three days after Trump takes over, the implication is clear: the invite is for the Trump administration only. Lavrov confirmed: “We think it would be the right thing to invite the representatives of the UN and the new US administration to the meeting,” Lavrov had said on Wednesday, at a press conference summing up the results of Russian foreign policy in 2016. Quoted by RT, a spokesman for UN Secretary-General Farhan Haq told RIA Novosti on Wednesday that the UN “has received an invitation to take part” and will attend. He added that the UN representatives will “try to give maximum support” to the negotiations.

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