Sunday, January 8, 2017

record distillates production, year high jump in gasoline & distillates supplies, rigs now up from a year ago, Utica drilling up 50%, et al

oil prices rose for the 4th week in a row this week, but only after clawing back from an opening day nosedive...after closing December 2016 at $53.72 a barrel, US oil prices shot up to well above $55 a barrel in early trading on Tuesday morning, hitting an 18 month high on the first day of the agreed to oil production cuts by OPEC and non-OPEC oil producers, as Arab media reported that Kuwait and Oman had cut their crude output...however, with other news from other OPEC members not forthcoming, oil traders grew nervous, and oil prices turned sharply lower by that afternoon, as the February contract price tumbled nearly $3 in a few hours before closing at $52.33 a barrel, a two week low...the OPEC rally resumed on Wednesday, and oil prices were further propelled higher to close at $53.20 a barrel after the American Petroleum Institute reported a 7.4 million barrel draw on U.S. crude oil inventories, the largest drop in US oil supplies since September...oil prices then slid on Thursday morning, as official US oil data showed a surprisingly large increase in U.S. gasoline and distillate inventories, but news that Saudi Arabia had cut production as they had agreed to sent prices back up in the afternoon, and they went on to close at $53.76 a barrel....oil prices then opened lower on Friday, after the release of weak economic reports on US employment and trade, but rose again on further signs of OPEC compliance, to end the week at 53.99 a barrel, up slightly from where it started...oil prices have thus increased 19.4% since the November 30th OPEC meeting, and will probably stay at these elevated levels as long as the OPEC/NOPEC production cuts are on the table...

natural gas prices, on the other hand, have no cartel controlling the supply, and when the weather forecast turns against them, as it did this week, natural gas prices might recall that on Wednesday of last week, natural gas prices for January hit a two year high of $3.93 per mm-BTU (million British thermal units) before that contract expired, and then the February contract eventually fell to close the week at $3.743 per mmBTU...well, over the three day weekend, the long range weather forecast changed to indicate a shorter severe cold snap followed by much warmer winter temperatures, and as a result, natural gas prices opened the new year lower and dove 12% on Tuesday to end the day at $3.327 per mmBTU...that weather related price drop extended into Wednesday, as natural gas prices fell another 6 cents to close at a six-week low of $3.267 per mmBTU...gas prices then steadied on Thursday, closing the day at $3.273 per mmBTU,after the EIA's Weekly Natural Gas Storage Report indicated a decline of 49 billion cubic feet (Bcf) of gas in storage for the week ending December 30th, which left our gas supplies at 3,311 billion cubic feet, 9.9% less than a year ago...gas prices then closed higher for the second day in a row on Friday, rising 1.2 cents, or 0.4%, at $3.285 per mmBTU, after recovering after trading as low as $3.214/mmBtu earlier in the session...NOAA's climate prediction center continues to show expectations for a warmer than normal winter for much of the densely populated eastern areas of the country, so unless that should change, we'd expect natural gas prices will remain under pressure...

The Latest Oil Stats from the EIA

this week's reports on oil from the US Energy Information Administration were released on Thursday and are for the week ending December the last week of 2016, our imports of crude oil were almost a million barrels per day lower than the prior week, while our refineries were consuming more oil than in any week since Labor Day, and hence they needed to draw a large amount of crude oil from storage to meet their needs...our imports of crude oil fell by an average of 984,000 barrels per day to an average of 7,183,000 barrels per day during the week, our lowest oil imports since the interruption cause by Hurricane the same time, our exports of crude oil rose by an average of 59,000 barrels per day to an average of 686,000 barrels per day, the 2nd most ever, which meant that our effective imports netted out to 6,497,000 barrels per day for the week...meanwhile, our crude oil production rose by 4,000 barrels per day to an average of 8,770,000 barrels per day, which means that our daily supply of oil, from net imports and from wells, totaled just 15,267,000 barrels per day for the week...

refineries reportedly used 16,689,000 barrels of crude per day during the week, an increase of 123,000 barrels per day from the week before Christmas, while at the same time, 1,007,000 barrels of oil per day were being pulled out of oil storage facilities in the US...thus, this week's EIA figures seem to indicate that we still consumed 415,000 more barrels of oil per day than were accounted for by our oil imports and production, and therefore the EIA inserted that phantom 415,000 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 calls it "unaccounted for crude oil", which is further described on page 61 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 balance number the EIA's weekly oil fudge factor...

that same weekly Petroleum Status Report tells us that the 4 week average of our oil imports fell to an average of 7.8 million barrels per day, now just 0.5% higher than the same four-week period last year....our crude oil production for the week ending December 30th was still 4.9% lower than the 9,219,000 barrels of crude we produced during the week ending January 1st of last year, and 8.7% below our record oil production of 9,610,000 barrels per day that we saw during the week ending June 5th 2015...

US refineries operated at 92.0% of capacity in using those 16,557,000 barrels of crude per day, up from 91.0% of capacity the prior week, but still down from 92.5% of capacity during the same week a year ago, even though they refined 37,000 more barrels of crude per day this week than they did during the same week last year...however, gasoline production from those refineries fell by 1,071,000 barrels per day to 9,467,000 barrels per day during the week ending December 30th, from last week's record high of 10,537,000 barrels per day...nonetheless, this week's gasoline production was still 8.0% more than the 8,766,000 barrels per day of gasoline produced during the week ending January 1st a year ago, and 8.8% more than the 8,701,000 barrels per day of gasoline produced during the week ending January 2nd, 2015, so there's apparently a normal slowdown in gasoline refining at this time of year...and at the same time that gasoline output was falling, refineries' output of distillate fuels (diesel fuel and heat oil) was rising by 372,000 barrels per day to 5,329,000 barrels per day, which was a new record high for distillates production...thus our distillates production was up by 7.1% from the 4,976,000 barrels per day that was being produced during the week ending January 1st last year, and 2.9% higher than the 5,180,000 barrels per day of distillates produced during the same week of 2014...     

however, even with that big drop in our gasoline production, the EIA reported that our gasoline supplies rose by 8,307,000 barrels to 227,143,000 barrels as of December 30th, the biggest one week jump in gasoline inventories since last January, as our domestic consumption of gasoline fell by 813,000 barrels per day to 8,465,000 barrels per day, which was likewise our lowest gasoline consumption since last January...also contributing to this week's jump in our gasoline supplies was a 288,000 barrel per day increase to 722,000 barrels per day in our gasoline imports, while at the same time our gasoline exports fell by 153,000 barrels per day from last week's record high of 1,149,000 barrels per day...that increase kept our gasoline inventories as of December 30th 1.5% higher than the 231,996,000 barrels of gasoline that we had stored on January 1st of last year, while they were still 0.7% below the 237,163,000 barrels of gasoline we had stored on January 2nd of 2015..

moreover, at the same time as our gasoline supplies were jumping by 8.3 million barrels, our supplies of distillate fuels were also rising, increasing by 10,051,000 barrels to 152,378,000 barrels by December addition to record refinery production, a major factor in that increase of distillates supplies was a 1,175,000 barrel per day drop to 2,792,000 barrels per day in the amount of distillates supplied to US markets, a proxy for, that seems to be some kind of anomaly, because that's the lowest product supplied number for distillates since the week ending April 19, 1999, and we have seen a similar drop in that metric at this time of year each of the last 5 years...nonetheless, that, combined with record production of distillates and a 216,000 barrels per day drop from last week's record high of 1,416,000 barrels per day our exports of distillates, meant that we saw the largest one week jump in distillates supplies in two years...since both gasoline supplies and distillate supplies saw such large jumps this week, we'll include a graph here that will help us see what's going on...

January 7 2017 invenories as of December 30th

the two bar graphs above, taken from the Zero Hedge coverage of this week's EIA report, show the weekly change in gasoline and distillate inventories for each week of the last 3 years, with the bar graph for gasoline inventories on top and the bar graph for distillate inventories below that....within each graph, each red or green bar represents a weekly change in inventories over the past 3 years, with green bars indicating an addition to that inventory during the reference week, and red representing a withdrawal from that inventory for that week, with the size of the bars indicating the volume in barrels of the addition or addition, a heavy green arrow has been added to each chart to indicate the number of weeks that have elapsed since an inventory addiction large as the current one has occurred ....thus on the gasoline graph we can see that large volumes of gasoline are typically added to storage during the winter months of November through February, while smaller withdraws from storage are made most weeks during the summer driving this week's increase in gasoline supplies was not that unusual at all, as increases to gasoline inventories of that magnitude were obviously typical in each of the last three winters...we have a similar seasonality, but less regular, for distillate storage and withdrawal as shown in the lower graph...since refineries tend to step up distillate production during the winter months to meet heat oil demand, wintertime withdrawals aren't as severe as they otherwise might be, and when that increased winter distillates output coincides with a week of weak demand such as we saw this week, all that extra distillate production ends up heading for storage....thus we have the largest addition to distillate inventories since the 2nd week of January 2015, which leaves us with 1.4% more distillate inventories than we had on January 1st last year, and 18.1% above the distillate inventories of 136,926,000 barrels on January 2nd, 2015...…

finally, the big drop in our oil imports, combined with the increase in refining, meant that we had to pull crude oil out of storage to meet the refiner's needs, and hence our inventories of crude oil fell by 7,051,000 barrels to 479,012,000 barrels by December 30th, which was the lowest level for our crude supplies since February 19th of last year, and  6.4% below the April 29th record of 512,095,000 barrels...nonetheless, we still ended the week with 6.2% more crude oil in storage than the 450,956,000 barrels we had stored at the beginning of 2016, and 37.2% more crude than the 348,806,000 barrels of oil we had in storage on January 2nd of 2015...    

This Week's Rig Count

US drilling activity increased for the 10th week in a row and for the 15th time in the past 16 weeks during the week ending January 6th, although the pace of increase remains modest compared to that of the weeks immediately following the OPEC deal...Baker Hughes reported that the total count of active rotary rigs running in the US rose by 7 rigs to 665 rigs by this Friday, which was up by 1 from the 664 rigs that were deployed as of the January 8th report last year, but still down from the recent high of 1929 drilling rigs that were in use on November 21st of 2014... 

rigs drilling for oil increased by 4 rigs to 529 rigs during the week, which was the most oil drilling rigs that have been in use since December 4th of 2015, as oil drilling activity has only retreated once in the past 27 weeks...oil drilling is now up from the 516 oil directed rigs that were working in the US on January 8th last year, but down from the recent high of 1609 oil rigs that were drilling on October 10, the same time, the count of drilling rigs targeting natural gas formations increased by 3 rigs to 135 rigs, which still left active gas rigs down from the 148 natural gas rigs that were in use a year ago, and down from the recent natural gas rig high of 1,606 natural rigs that were deployed on August 29th, 2008... one rig that was classified as miscellaneous also remained active, compared to a year ago, when no such miscellaneous rigs were deployed..

a single drilling platform began working offshore from Louisiana in the Gulf of Mexico this week, which brought the Gulf of Mexico rig count up to 23, still down from 27 offshore rigs a year ago..another drilling operation was still ongoing in the offshore waters of Alaska, which means our total offshore count for the week was 24 rigs, also down from last year's offshore total of 27...the number of working horizontal drilling rigs increased by 2 rigs to 534 rigs this week, which is now up from the 519 horizontal rigs that were in use in the US on January 8th last year, but still down from the record of 1372 horizontal rigs that were deployed on November 21st of the same time, four vertical rigs were added to those active, increasing the vertical rig count to 74, which was down from the 81 vertical rigs that were deployed during the same week last addition, the directional rig count rose by 1 rig to 57 rigs as of January 6th, which still left the directional rig count down from last year's deployment of 64 directional rigs...

once again, 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 6th, the second column shows the change in the number of working rigs between last week's count (December 30th) and this week's (January 6th) count, the third column shows last week's December 30th 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 case was for January 8th of 2016...       

January 6th 2017 rig count summary

we do have an unusual change this week, in that 5 rigs were pulled out of the Granite Wash of the Texas-Oklahoma panhandle region, yet it's hard to tell where they came from at a glance, since the Oklahoma rig count is unchanged and the Texas rig count is up three...looking at the details on drilling in the individual Texas oil districts, we see that drilling in district 10, which is the panhandle region, was down from 11 rigs to 6 rigs, so that question is solved addition, it also appears that at least one of the 3 rig increase in New Mexico was in the Wolfcamp, in the western part of the Permian, since Texas details only shows a 2 rig increase in that basin...note that yet another gas-directed rig was also added in Ohio's Utica shale...that brings the Utica shale rig count up to 21, up from 14 a year ago...we could therefore say that with a 50% year over year increase, drilling in the Utica shale is increasing faster than in any other basin in the US, since the 58 rig increase in the Permian only represents a 28% jump...also note that of the states not shown among the major producers above, Indiana saw two rigs pulled out this week, leaving one still active in the state, whereas a year ago they had none, while Illinois drillers added a rig, their first activity in a while, which is still down from the 2 rigs that were deployed in Illinois last January 8th..


Ohio utility’s efficiency programs to move forward under settlement | Midwest Energy News As 2016 drew to a close, key environmental groups signed onto FirstEnergy’s revised energy efficiency plan for its Ohio utility customers.The December 8 stipulation addresses major objections to FirstEnergy’s earlier plan, including elimination of terms that would have let the company profit from energy-saving activities it played no part in.FirstEnergy’s revised energy efficiency plan “comes on the heels of the thaw on Ohio’s previously frozen clean energy standards, and the growing acknowledgement across Ohio’s utilities of the value of energy efficiency for customers,” said Samantha Williams at the Natural Resources Defense Council, which is one of the settling parties. While other Ohio utilities continued to offer a range of money-saving efficiency programs during the recent two-year freeze on the state’s clean energy standards, FirstEnergy moved to gut most of its efficiency programs in 2014. “Thankfully, the programs are back, and we’re very encouraged by the progress we’ve made with the utility in working towards more extensive, innovative options,” said Williams. “The plan will allow our customers to participate in energy-saving programs through 2019, and strives to achieve energy savings each year that will meet or exceed Ohio’s annual reduction targets,” FirstEnergy spokesperson Doug Colafella said. Not all parties have joined in the settlement, however, and the revised plan still requires approval by the Public Utilities Commission of Ohio. A hearing is scheduled for January 23.

Five years after the 4.0 quake, Ohio is a seismic-monitoring leader, ODNR officials say. -  In the five years since a magnitude-4.0 injection well- induced earthquake jolted the Mahoning Valley, Ohio has become a leader in seismic monitoring, state regulatory officials say. That memorable, locally unprecedented earthquake rattled the Valley shortly after 3 p.m. Dec. 31, 2011. It was one of 13 tremors between March 17, 2011, and Jan. 13, 2012, which the Ohio Department of Natural Resources determined were caused by a 9,000-foot-deep D&L Energy Inc. injection well on Ohio Works Drive in Youngstown, which was used for brine disposal. Before that series of Youngstown earthquakes began, no quakes centered in the Mahoning Valley had ever been recorded. “I believe we’ve had no felt [earthquake] events in [Ohio] injection wells since the Youngstown event,” of Dec. 31, 2011, said Jim Zehringer, director of the Ohio Department of Natural Resources, whose Division of Oil and Gas regulates the drilling industry. Rick Simmers, the state’s Division of Oil and Gas chief, seconded Zehringer’s observation and clarified that “felt” earthquakes are generally of a magnitude 2.5 or greater. Zehringer and Simmers were referring to the lack of felt injection-well-induced quakes in the last five years.A magnitude-3.0 quake, however, linked to fracking shook Poland Township on March 10, 2014.That and subsequent quakes were associated with fracking by Hilcorp. Energy Co. at the Carbon Limestone landfill.ODNR said in April of that year the fracking likely aggravated a small, previously undetected fault. A fault is a fracture in rock. ODNR imposed a moratorium on drilling at that site, but allowed Hilcorp. to recover oil and gas from five previously drilled wells with seismic monitoring.

Judge orders Ohio to let company reopen brine injection well - Columbus Dispatch — The pumping of waste from hydraulic fracturing operations into a closed Ohio injection well is expected to resume after a judge's ruling that the state's oil-and-gas regulator failed to consider a new plan after shutting down the well in 2014 because of two small earthquakes nearby. Franklin County Common Pleas Judge Kimberly Cocroft ordered the state and well operator, American Water Management Services, to submit language for a judgment order to reopen the well in Trumbull County's Weathersfield Township, about 65 miles southeast of Cleveland. Cocroft's ruling last month said the state had the authority to shut down the well after earthquakes were detected below ground in July and August of 2014. But the ruling said the Division of Oil and Gas Resources Management should have allowed American Water to resume operations after submitting a plan that called for pumping brine at lower pressures and volumes. At least 20 other small seismic events were recorded in 2014 near the well before it was closed. The ruling noted that American Water was operating within state guidelines when the shutdown order came. A spokesman for the Ohio Department of Natural Resources said state attorneys are considering a response to Cocroft's order. The state argued in court that it was waiting to formulate state regulations based on guidance from a national workgroup studying the link between injection wells and seismic activity. Cocroft's ruling said it's unclear when the workgroup would complete its study. Larry James, an attorney for American Water, said the company hoped to resume operations soon. The shutdown has cost the company "a lot" of money, James said, but didn't have a dollar figure for the loss.  The state argued that the well was a health and safety risk to the community. Regulators placed a temporary moratorium on injection well operations statewide in December 2011 after a 4.0 earthquake was detected above ground close to a well owned by a different company near Youngstown. The state cited evidence then that injecting fracking waste below ground caused existing fault lines to become stressed, resulting in earthquakes. That injection well remains closed.

Legislature kicks locals on fracking: The legislature just made it harder for anyone to use local ballot issues to fight fracking, thanks to a bill rammed through the legislature, House Bill 463, which Gov. John R. Kasich signed Wednesday. That’s not the only problem that mars the 67-page Christmas tree, which passed Dec. 8. Reprehensibly, the bill also weakens Ohio’s housing-discrimination law. As to the environment, HB 463 takes aim at attempts to propose county charters, or city or village ballot issues, that would ban fracking or any other local initiative that would run counter to statewide law (example: ballot issues to soften marijuana penalties). HB 463 gives Boards of Elections and the secretary of state power to decide if a municipal initiative or proposed county charter fails to follow proper procedures for reaching the ballot – or (this is key) tries to claim local control over powers the state reserves for itself. (A 2004 law gives the state sole authority over oil and gas production.) If a ballot issue does either, HB 463 allows elections boards and the secretary to keep it off the ballot. The backdrop: In 2015, voters in Athens, Fulton (Wauseon) and Medina counties signed petitions proposing county charters they wanted on the ballot. The 2015 proposals didn’t make changes in each county’s government structure; for example, an executive wouldn’t have replaced county commissioners. But, Ohio’s Supreme Court said, the proposed Athens, Fulton and Medina charters would’ve “effectively (banned) high-volume hydraulic fracking as a method of oil and gas extraction (in each county).” Secretary of State Jon Husted ruled the proposals off the ballot. He said Ohio law gives sole authority over oil and gas production to the state. And Husted said the proposals didn’t include required specifics about which county officeholders the proposed charter counties would elect, etc.

Startup offers “online booking” for industrial water - MIT News - With oil and gas drilling, water is always on the move — and it’s pricey. Hydraulic fracturing (fracking), for instance, requires millions of gallons of fresh water to be shipped daily to drilling sites, and it produces millions more gallons of wastewater that are sent to treatment facilities or disposal wells. However, this water-management supply chain still relies heavily on word-of-mouth and phone calls to find and conduct business. “The whole process is managed by one guy calling another guy and asking him to come by and bring his truck to haul off water,” Adler says. “The whole system is stuck in the 1950s.” Sourcewater, on the other hand, provides users with a list and interactive map of all available fresh and wastewater, treatment facilities, shippers, and other water-based services. Users can search based on price, location, water quality, and other parameters to reduce the distance, cost, and environmental impact of hauling water. A fracking firm, for instance, may list its wastewater with about 30 characteristics, such as location, quality, volume produced per day, and mineral or chemical properties. Then, they’ll list a price they’ll pay to have it hauled it away. Shippers and treatment facilities can bid on transporting and treating the water. Alternatively, a nearby gas-drilling firm may offer to take away the wastewater for its own operations. From all these offers, the firm can choose the deal that best fits its budget and schedule. Consider it “an Expedia for water management,” Adler says. Currently, the website has about 1.4 billion barrels of water listed online, primarily in the Marcellus Shale region of the United States — including Pennsylvania, Ohio, and West Virginia. Among the dozens of companies and organizations using Sourcewater are Shell, Mountaineer Keystone, Pennsylvania General Energy, and Waste Management, Inc.

Oil calling the shots in new administration - When we drove from Elkins to Snowshoe in late August, I was surprised to note the absence of political campaign signs at that time. What we did see were lots of “No Pipeline” signs in both Randolph and Pocahontas counties, an indication of continuing opposition by homeowners, landowners and others on the relentless drive to build unneeded gas pipelines through scenic mountains, farmland and even the treasured national forests in West Virginia. The pipeline issue drives home a sense of helplessness and lack of control felt by many in their own lives to intrusions by both government and big business interests, a sentiment that was a key factor in this year’s election. Through a wide-angle lens, how this battle plays out will determine whether the United States can move toward a clean energy future or whether we’ll be tied to a fossil fuel infrastructure for the next 50 years or longer. With President-elect Donald Trump and his fossil fuel cronies taking power, it’s clear where policymakers are headed. Natural gas and oil barons will be calling the shots for at least the next four years. This is dangerous and devastating on far too many levels to possibly capture here. So let’s just examine this mindless dash to building pipelines: One of the attractions is the beauty and charm of the mountains and backcountry roads. We worry some of this appeal may vanish in the not-too-distant future as pipeline companies start to blast their way through the Monongahela National Forest, the George Washington National Forest and many other scenic parts of the state. Energy development, especially natural gas projects, appear certain to get a huge boost in the Trump era, especially if many of the existing regulations are gutted, as expected. Some of this would have happened even under a Clinton-Kaine administration. Both Democratic candidates supported fracking and both received substantial campaign contributions from the natural gas industry. Watching recent TV coverage of the brutal crackdown on Native Americans in South Dakota, we were reminded that in eastern states at least 10 new pipeline corridors are on drawing boards. At least five of them would transverse parts of West Virginia. These include the $5 billion Atlantic Coast pipeline, Mountain Valley pipeline, Western Marcellus pipeline, Leach Xpress/Columbia pipeline and the Access South pipeline and possibly others. With oil and gas prices likely to remain at low levels, most of these pipelines are simply not needed in the short term. Most could be scrapped or delayed without any serious consequences. The “Say No to Pipelines” campaign, underway long before the election, is an encouraging development. And formation of the Appalachian-Blue Ridge Alliance to fight corporate interests and greed is good news, too.

Pipelines crucial to fulfill our energy needs: Until a few years ago, most Americans weren’t used to hearing about oil and natural gas pipelines on the nightly news. But then came the Keystone XL Pipeline, which the president disallowed. More recently, the Dakota Access Pipeline is big with the media. Opposition to these pipelines, fueled by the anti-oil and anti-gas crowd, has found a sympathetic ear in the Obama administration. But these pipeline protesters have forgotten some simple truths: Pipelines remain the safest and most efficient means to move the oil and natural gas that power our country. But sensing a weak link in the fossil-fuel system, opponents seized upon infrastructure — specifically, oil and natural gas pipelines — to hamper the production and use of these fuels. So, across the country, needed pipelines, such as the Atlantic Coast Pipeline right here in West Virginia, are facing surprising opposition. These pipelines represent billions of dollars in investment, thousands of good jobs and even reduction in our energy costs. Pipelines are the arteries of our energy system. They move the natural gas, which heats half of our homes, generates the largest share of the nation’s electricity and provides much of the feedstock for our petrochemicals. Oil and gasoline pipelines fuel our vehicles. We already have a network of more than 200,000 miles of liquid pipelines and 3 million miles of natural gas transmission pipelines in this country. The need for new pipeline capacity is being driven by our resurgent domestic oil and natural gas production. Thanks to “fracking” (hydraulic fracturing) and the shale revolution, the U.S. has become the world’s largest combined oil and natural gas producer. As production has grown over the past decade, the need for new pipelines has grown as well.Increasingly, oil and natural gas production are coming from places that don’t have the pipeline networks to move the energy to population centers. New pipelines are needed to get gas from areas of production, such as West Virginia, Ohio and Pennsylvania, to major population centers where demand for natural gas is growing fastest.

Pipeline resistance gathers steam from Dakota Access, Keystone success - When President-elect Donald Trump takes office next month, his pro-drilling, anti-climate action energy policy will buoy the oil industry. But it will also face staunch resistance from a pipeline opposition movement that gathered momentum, particularly with this year's successful showdown over the Dakota Access pipeline, and shows no signs of slowing. Local grassroots action, governments' environmental concerns and market forces have stopped or delayed dozens of fossil fuel projects since the high-profile Keystone XL pipeline was cancelled in November 2015, and activists are continuing to oppose at least a dozen oil and gas pipelines around the country.   "There have been people fighting pipelines since pipelines first went into the ground," but awareness of the issue has grown due to the Keystone XL and Dakota Access, said Cherri Foytlin, director of the advocacy group Bold Louisiana.Opposition to pipelines has united environmentalists, Native Americans and rural landowners of all political backgrounds, many of whom resent the pipeline companies' use of eminent domain to seize their land. This "Keystone-ization" effect, along with low oil prices, has created a hostile environment for fossil fuel expansion projects. The election of Trump, who favors building the Keystone as well as the Dakota Access, will put advocates back on the defense—but they say they are ready for the challenge. Environmentalists have prioritized stopping pipelines because every pipeline is a decades-long investment in fossil fuels, locking in demand and hampering a transition to cleaner fuels. Successfully blocking them limits companies' ability to move their product to market, which feeds into a strategy of "making life more difficult for the fossil fuel industry going forward," said Adam Rome, a history professor at the State University of New York at Buffalo who studies the environmental movement.

EIA sees natural gas production up nearly 4% a year to 2020 -The US Energy Information Administration's Annual Energy Outlook 2017 is projecting growth in natural gas production from now until 2050, and sees gas exports helping drive the US to switch to being a net energy exporter by 2026. Gas production "is actually going to go up quite a bit, with relatively low and stable prices," supporting higher levels of domestic consumption, especially in the electric and industrial sectors, EIA Administrator Adam Sieminski said in a briefing on the annual report Thursday. EIA's outlook examined eight cases in making projections for energy markets, this year extending those out to 2050. It looked at a reference case that assumes current regulation and central views of economic forecasters, as well as some improvement in known technologies. It also examined cases that assumed low and high economic growth, low and high oil prices, low and high oil and gas resource and technology, and one case that assumed no Clean Power Plan to rein in CO2 emissions from the power sector. In the reference case, natural gas production would grow at nearly 4% annually from 2016 to 2020, before rising at a lower rate as net export growth eases, domestic gas use becomes more efficient and prices slowly rise, the report said. After 2020, the reference case puts gas production growth at a 1% annual average. Gas prices would rise modestly from 2020 through 2030, in the reference case, as electric power consumption rises. After that, prices would stay relatively flat at about $5/MMBtu from 2030-2040 because of technology improvements, before rising again in the following decade, the outlook said. Under the high oil and gas resource and technology case, which assumes major improvements in production technology and greater resource availability, EIA projected increased production at lower prices, in turn boosting domestic consumption and exports.

Court delays appeal over Obama’s fracking rule -- A federal court on Wednesday delayed oral arguments in the Obama administration’s appeal to reinstate its hydraulic fracturing regulation for federal lands for two months. The Denver-based Court of Appeals for the Tenth Circuit made its decision without a request by a party in the case. It means that attorneys working for President-elect Donald Trump will be in charge of the federal government’s appeal. Oral arguments will now take place the week of March 20, when litigants will have an hour to present their cases to the three-judge panel. The court in November had scheduled a half-hour of arguments on Jan. 17, three days before Trump takes office.The Justice Department filed the appeal in June on behalf of the Interior Department’s Bureau of Land Management (BLM), which wrote the fracking rule in 2015. It challenges a decision from Judge Scott Skavdahl. The Wyoming-based federal judge ruled that the BLM is specifically prohibited under a 2005 law from regulating fracking on federal land. Federal lawyers said in court filings that Skavdahl’s “crabbed view of BLM’s authority is wholly unprecedented and manifestly incorrect.” A group of conservative states and oil and natural gas industry groups filed the original lawsuit and is challenging the government’s appeal. On the campaign trail, Trump promised to roll back President Obama’s restrictions on fossil fuel development, including fracking. The Trump administration could direct attorneys to stop pursuing the regulation’s appeal, but environmentalists and others involved in the case could keep it going. Trump could also have his Interior Department work to repeal the rule. The rule sets standards in three areas: well casing integrity, storage of waste fluids and public disclosure of the contents of fracking fluid used.

US Coast Guard Responding To Fire On Oil Platform Off Louisiana Coast --The US Coast Guard said on Thursday morning it was responding to a fire on an oil platform in the Gulf of Mexico off the coast of Louisiana. A Coast Guard news release says the fire was reported around 2:30 a.m. Thursday on an oil platform about 80 miles south of Grand Isle, Louisiana. It was not immediately clear whose platform it was. The Coast Guard says four people aboard the platform evacuated and were rescued by a supply vessel. No injuries have been reported.  Four vessels are fighting the fire and the cause is under investigation. The USCG said a Clean Gulf oil spill response organization is enroute to platform Developing story.

Halliburton hiring in West Texas - According to FuelFix, Halliburton is set to hire 200 workers in the Permian Basin in West Texas and New Mexico. The Current-Argus reported that Halliburton spokeswoman Emily Mir said in late December there will be job opportunities throughout the Permian, including in Artesia. As the oil industry begins to see a small upswing, local businesses are crossing their fingers that local economies will see a positive effect as well. While the rest of the industry is still struggling to recover from rock-bottom oil prices in early 2016, hitting $28.36, the lowest price since 2003. Yet innovation and greater efficiency have helped to trim the excess cost from drilling, making oil profitable at a lower price. In June of last year, Forbes reported the breakeven price in the Permina was $61, far above the price of oil at the time. However, that estimate was drastically lower in an IHS Markit study, citing $50 as closer to the mark.We at IHS Markit found that the Delaware Basin’s multiple company sub-plays are delivering impressive economics at a $50 per barrel reference, and we attribute that to two primary considerations—early entrance into the play and extensive geologic knowledge,” said analysis author Sven Del Pozzo, CFA, director of energy company and transaction research at IHS Markit.Most experts now agree that drilling is profitable in the area at anywhere from $45-50.Shannon Carr, development  coordinator with the Department of Development in Carlsbad, New Mexico, attributed growth in the region to the new OPEC agreements to cut production. She also told the Current Argus “Our incoming president is pro-e nergy and pro-gas, which is great,” Carr said. “The industry is very complicated and hard to predict, but the prices are right and the companies are looking to expand.” So it’s possible that the hiring spree by Halliburton may be extended to other companies throughout the oil and gas industry. Carr is hopeful that the increase in activity will translate into a recovering Carlsbad economy, hopefully replicated throughout other areas where drilling activity has significantly decreased.’

Anti-Fracking Movement Alarmed at Trump's Focus on Fossil Fuels - Earl Hatley, a descendant of the Cherokee/Delaware tribe, has witnessed the consequences of using hydraulic fracturing or "fracking" on his native land to produce shale gas. "Fracking is harmful to water supplies, wildlife, and property values. It has caused earthquakes where there were none. Since 2007, it began to tremble more and more near the wells. I can smell the foul emissions, which make me sick," the founder of Local Environmental Action Demanded (L.E.A.D.), a non-governmental organisation based in Oklahoma, told IPS. Hatley has property in Payne, Oklahoma, in the Midwest, which he says he cannot visit anymore because of the toxic emissions from the wells. "The oil and and gas industry flares their escaping gas and also do not monitor leaks, as there are no regulations in Oklahoma demanding they do. We had the opportunity to test a few wells and found all of them were bad," he said. In the state of Oklahoma there are about 50,000 active natural gas wells, of which some 4,000 use fracking. At least 200 of them are in Payne. With similar scenarios in other states, the anti-fracking movement in the US is especially worried about what President-elect Donald Trump will do after he takes office on Jan. 20, since he pledged to give a boost to the fossil fuel industry, despite its impact on global warming. Trump "is sending signals of the support the industry will receive, which will exacerbate the already-known impacts of fracking, such as water pollution and methane emissions,"  For the fracking industry, good times will return when Trump is sworn in. In May he launched a plan for the first 100 days of his administration, which included giving a strong boost to the sector, despite the denounced environmental, social and economic impacts.

How much will really change for the West's oil and gas industry under Trump? -  The election of Donald Trump has thrilled many people across the West’s oil and gas industry who say his promises to roll back regulations will free it from unfair and unnecessary obstacles imposed by President Obama. “If the Trump administration does nothing but stop being hostile to us, we’ll be happy,” said Kathleen Sgamma, president of Western Energy Alliance. Yet how much will things really change under a Trump administration? Even as some in the oil and gas industry are optimistic — and as conservation groups gird for protests and court fights to protect public lands — experts say blaming government, or giving it too much credit, for restricting oil and gas is mostly missing the point. If another Western energy boom is around the corner, they say, it will be because prices rise, not because regulations decline. “The market is the elephant in the room,” said Michael Lynch, president of Strategic Energy & Economic Research, an industry consulting firm. “All this other talk about access to public lands and such for oil and gas, it’s a pretty minor issue.”  Although the Obama administration is often criticized by the fossil fuel industry, it presided over a boom that saw domestic oil and gas production soar. The administration allowed a broad and controversial expansion of hydraulic fracturing, or fracking, which infuriated many conservation groups while it transformed parts of North Dakota, Oklahoma, Texas and the Rockies into meccas for energy workers and the United States became a powerful new global energy player.  “For a Democrat, he’s really been pro-oil,” Lynch said of Obama. “He’s been a lot nicer to oil than some Republicans.”   But the boom helped deflate itself by driving up supply and driving down prices for oil and gas. Around the same time, the administration began paying more attention to climate change — limiting emissions from power plants and methane from oil and gas production, removing certain public lands from energy development, and rejecting or withholding decisions on projects such as the Keystone XL and Dakota Access oil pipelines.

Russia carried out disinformation campaign against oil and gas frackiing -  Around the same time that the federal government’s intelligence community reported that #Russia ran an operation attempting to influence the outcome of the 2016 election for Donald Trump, it has been revealed that Moscow has been running a disinformation operation against fracking. The Washington Examiner reports that Russia has been using its government controlled new agency RT to claim that fracking, the technique of forcing oil and natural gas out of shale formations by injecting them with fluid, is environmentally hazardous. The idea seems to have been to support environmentalist demands to get the practice banned in the West. The reason for the anti-fracking disinformation campaign is evident. Much of Russia’s trade consists of natural gas sales through its giant company Gazprom. Russia has, in the past, used its natural gas exports to influence the foreign policy of its neighbors, just as the Arab oil sheiks used to do in the 1970s and 1980s. Unfortunately for Russia, fracking has unleashed hitherto untapped reserves of oil and gas, making the United States a fossil fuel exporting country for the first time in many decades. The situation has tended to depress the price of oil and gas much to the detriment of Russia’s economic and political interests. It has also given oil and gas consumer nations and alternative source of fuel, degrading Moscow’s political influence.  The environmental movement, which has opposed fracking and indeed any oil and natural gas drilling, has some explaining to do. How much is the anti-fracking campaign being influenced by Russia and is serving Russia’s national interests and opposing American energy independence? 

US Court of Appeals Rules Against Standing Rock Tribe in Dakota Access Pipeline Case: The U.S. Court of Appeals for the District of Columbia Circuit on Sunday rejected the Standing Rock Sioux Tribe’s request for an injunction to halt construction of the Dakota Access Pipeline by Texas-based Energy Transfer Partners. The announcement was made public by the Standing Rock Sioux Tribe in a news release distributed within the past hour on Sunday evening. The decision comes as the Tribe is pursuing an appeal to stop construction while the rest of the case proceeds in U.S. District Court. “The Standing Rock Sioux Tribe is not backing down from this fight,” said Dave Archambault II, Chairman of the Standing Rock Sioux Tribe. “We are guided by prayer, and we will continue to fight for our people. We will not rest until our lands, people, waters and sacred places are permanently protected from this destructive pipeline.” The 1,168-mile pipeline crosses through the Standing Rock Sioux Tribe’s ancestral lands and within a half mile of the reservation boundary. Construction crews have already destroyed and desecrated confirmed sacred and historic sites, including burials and cultural artifacts. The original pipeline route crossed the Missouri River just north of Bismarck, the capital of North Dakota. The route was later shifted downstream, to the tribe’s doorstep, out of concerns for the city’s drinking water supply. “We call on Dakota access to heed the government’s request to stand down around Lake Oahe,” said Jan Hasselman, lead attorney from Earthjustice, which is representing the Tribe. “The government is still deciding whether or not Dakota access should get a permit. Continuing construction before the decision is made would be a tragedy given what we know about the importance of this area.”

Standing Rock activists are looking to hit the Dakota Access pipeline’s finances to cement their win - Indigenous activists are focusing on the Dakota Access pipeline’s finances before Donald Trump takes office in an effort to further strain the oil corporation and cause continuing delays that they hope could be disastrous for the project.  After the Obama administration denied the company a key permit to finish construction, Native American activists warned that the win was only temporary and that Trump, an investor in the pipeline corporation, would seek to quickly advance the project next year.   Some indigenous advocates and environmental groups have focused their efforts to hurt the pipeline company’s profits on an approaching 1 January deadline that the operator, Energy Transfer Partners (ETP), cited in court records.  The firm wrote in a filing this year that the pipeline “committed to complete, test and have DAPL in service” by the start of 2017. And if the company did not meet its contract deadline, then its shipping partners had a “right to terminate their commitments”.  In asking a judge to speedily green-light the $3.8bn project, vice-president Joey Mahmoud claimed that the loss of shippers could “effectively result in project cancellation”, leading advocates and analysts to declare that a missed January deadline could be financially disastrous for ETP and a huge feat for Standing Rock.  But in emails to the Guardian, DAPL spokeswoman Vicki Granado claimed that January was just an “initial target” and not a “contractual date”, which is “much later”, though she refused to say when.

US Army Corps keeps oil pipelines in streamlined permitting rule over protests --  The US Army Corps of Engineers will not remove oil pipelines from the next five-year authorization of its streamlined permitting program, despite opponents of the Dakota Access Pipeline and historic preservation groups calling for more scrutiny in order to prevent spills. The agency released a final rule Thursday authorizing the program through March 2022. More than 53,000 of the 54,000 comments the Corps received about the wide-ranging program dealt with Nationwide Permit 12, or NWP 12, a provision that allows oil pipelines to avoid much of the federal scrutiny that interstate natural gas pipelines undergo. NWP 12 includes oil pipelines in its definition of utility lines that are eligible for streamlined federal permitting authorizing construction, maintenance and repair work in federally regulated waters. Some projects can begin work without prior approval from the Corps. Other projects with certain characteristics -- including those that cross a navigable river or run more than 500 feet in a single water body and those that may affect sensitive cultural resources or endangered species -- must get pre-construction authorization from the Corps' regional office that oversees that area of the pipeline and comply with a number of general conditions. The Corps decided not to make any major changes to the provision. Dakota Access Pipeline opponents like the Standing Rock Sioux Tribe in North Dakota amplified calls to modify or eliminate NWP 12, which would have made it more difficult for companies to site oil pipelines. Standing Rock Chairman Dave Archambault said NWP 12 was intended for projects with minimal effect on the environment. "However, as events across the country have shown, spills from oil pipelines occur with great frequency, often with devastating environmental effects, particularly when they occur in the aquatic environment," Archambault

Analysis: What Iraq reveals about Rex Tillerson - Iraq Oil Report: Rex Tillerson has never held a government position, but he does have a long track record of conducting foreign policy as the leader of ExxonMobil – one of the largest and most profitable oil companies ever. He's likely to be confirmed as the next U.S. Secretary of State after hearings next week before the U.S. Senate Foreign Relations Committee, which will probe how his experience as a business leader might make him qualified to serve as the world's most powerful diplomat. Exxon's activities in Iraq over the past decade provide a rich series of case studies that illuminate how Tillerson has negotiated with foreign leaders and pursued business interests aggressively – sometimes with little apparent regard for the political consequences. Ever since the country's oil sector opened to foreign investment, in 2009, Iraq Oil Report has covered Exxon's saga in detail. Each chapter shows the character of the company, where Tillerson has spent his entire professional career, and provides insight into the worldview of the man who stands to shape U.S. policy toward Iraq, and the world, in the Trump administration.In the country's first oil contracting auction, in 2009, Exxon won the West Qurna 1 oil field. Although international oil companies (IOCs) generally regarded the government's terms as stingy, Exxon – like many other western companies – wanted to establish a foothold in the oil-rich nation, betting that the relationship could lead to further, more lucrative opportunities. Just a year after Exxon got to work, West Qurna 1 hit a key production milestone that triggered additional payments for Exxon and its junior partner, Royal Dutch Shell. (Since then, it has taken the field to nearly 500,000 barrels per day (bpd) of production, or roughly 10 percent of the country's output.) The company was also tendering for engineering and design work for an important water injection project, Exxon's Iraq chief, James Adams, told Iraq Oil Report. Exxon appeared to be on track to becoming one of the Iraqi government's most important international partners. During this time, however, unbeknownst to government leaders in Washington or Baghdad, Tillerson and his team were getting ready to risk it all.

Natural Gas Storage Dives Under 5-Yr Average on Big Draw - The U.S. Energy Department's weekly inventory release showed a big decrease in natural gas supplies - the season's sixth successive withdrawal. Following the massive drop - the largest since February 2014 - natural gas storage has run into a deficit versus the five-year average, while price surged to a 2-year high. The Weekly Natural Gas Storage Report - brought out by the Energy Information Administration (EIA) every Thursday since 2002 - includes updates on natural gas market prices, the latest storage level estimates, recent weather data and other market activities or events. The report provides an overview of the level of reserves and their movements, thereby helping investors understand the demand/supply dynamics of natural gas. It is an indicator of current gas prices and volatility that affect businesses of natural gas-weighted companies and related support plays. Stockpiles held in underground storage in the lower 48 states fell by 237 billion cubic feet (Bcf) for the week ended Dec 23, 2016, just above the guidance (of 236 Bcf draw) as per the analysts surveyed by S&P Global Platts, a leading independent commodities and energy data provider. The past week's decline represents the sixth successive withdrawal of the 2016-2017 winter heating season after stocks hit an all-time high in November. Moreover, the decrease handily exceeded both last year's drop of 58 Bcf and the 5-year (2011-2015) average shrinkage of 80 Bcf for the reported week. Following the monster withdrawal, the current storage level - at 3.360 trillion cubic feet (Tcf) - is down 413 Bcf (11%) from last year and has now fallen 79 Bcf (2%) below the five-year average. Successive below-average builds in the recent past and now some big draws - with strong power sector consumption - has meant that the storage surplus has now turned into deficit. As a result, natural gas prices have rebounded strongly and more than doubled from the extreme lows it hit in Mar. The dramatic recovery has helped the commodity cross the key psychological level of $3.5 per MMBtu. With winter turning out cooler than expected, natural gas demand has picked up on the back of elevated power sector consumption due to air-conditioning use. What's more, the heating fuel is set to rise further with abnormally frigid weather predictions over the entire U.S. Currently at a 2-year high of around 3.8 per MMBtu, prices look set to break the $4 barrier if inventories continue to fall.

Natural Gas Falls on Warmer Weather Forecast - WSJ: Natural-gas futures had their worst day in nearly three years, as forecasts of mild weather replaced predictions of severe cold. Natural gas for February delivery fell 39.7 cents, or 10.66%, to $3.327 a million British thermal units on the New York Mercantile Exchange. That was the largest decline since Feb. 24, 2014, when natural-gas prices fell 11.25%. The selloff pummeled shares of natural-gas producers. Southwestern Energy Co. and Range Resources Corp. were the biggest losers in the S&P 500 on Tuesday, down 7.9% and 5.1%, respectively. Shares of Cabot Oil & Gas Corp. and EQT Corp., two big Pennsylvania drillers, also fell as natural-gas futures gave back last week’s big gains on forecasts for milder winter weather. Big swings in natural-gas prices have been common in recent months. Natural-gas markets have been volatile, changing course rapidly in response to shifts in the short-term weather outlook. Prices pushed to two-year highs at the end of December amid weather forecasts that predicted extreme cold would hit most of the country in January. Many have bet that between higher demand for natural gas to heat homes and fire power plants and lower production, even normal winter weather will rapidly eat up supplies. “The stakes are higher come winter time because weather is a bigger factor. Cold weather can really increase demand,”But the arctic blast is now expected to be briefer than many anticipated, with milder temperatures taking hold in mid-January. That could bring an end to a string of mammoth withdrawals of natural gas from storage, analysts said.

Natural Gas Prices Recover Losses - Natural gas prices closed higher for the second day in a row on Friday, reversing course after trading at a six-week low.  Futures for February delivery settled up 1.2 cents, or 0.4%, at $3.285 a million British thermal units on the New York Mercantile Exchange, after trading as low as $3.214/mmBtu earlier in the session. Warmer-than-average weather forecasts have sent natural gas tumbling at the start of the year, leading prices down nearly 12% year to date. On Friday, the steep decline led some investors to cash out on bearish bets and adjust positions, traders said. Natural gas is used to heat half of the homes in the U.S., and is largely influenced by changes in weather expectations. An MDA Weather Services report on Friday showed higher-than-normal temperatures spreading across more than half the U.S. in the 11-15 day forecast. “The market has suffered badly every time the weatherman changes his forecast,” said Donald Morton, senior vice president at Herbert J. Sims & Co., who runs an energy-trading desk. However, Mr. Morton said much of the recent weakness is attributable to a pile-on of speculative positions, while natural gas consumption has remained steady despite fluctuating forecasts. On Thursday, the U.S. Energy Information Administration reported a inventory decline of 49 billion cubic feet for the week ended Dec. 30, which fell short of analyst expectations for a larger withdrawal from storage. However, some noted that the last report of the year may be a skewed portrayal of market demand. “Yesterday’s disappointing draw has many scratching their heads as to accuracy,” Mr. Morton said. “There’s still a lot of winter ahead of us.”

U.S. on Track to Become Net Energy Exporter by 2026 - The amount of energy Americans use and the pollution they emit from using coal, oil and natural gas are not likely to change radically over the next 30 years, even as the U.S. becomes a major energy exporter, according to the U.S. Energy Information Administration’s Annual Energy Outlook, published Thursday. The outlook, which does not factor in any policies from the incoming fossil fuel-friendly Trump administration, shows that the U.S. is unlikely to make significant gains in reducing greenhouse gas emissions to meet its obligations under the Paris Climate Agreement, even though zero-carbon renewables are expected to grow faster than any other energy source over the next three decades. Electricity generation is expected to remain the largest single use of energy in the U.S., but crude oil use for transportation is expected to be largest source of energy-related carbon emissions. Carbon emissions from transportation surpassed those from electric power generation for the first time in U.S history in 2016. The U.S. is likely to become a major exporter of energy because it is expected to produce about 20 percent more energy than it does today through 2040 while using only about 5 percent more energy, said EIA administrator Adam Sieminsky.

Through 2050, US To Be Net Exporter Of Energy -- EIA -- January 5, 2017 --From EIA's annual energy outlook 2017: EIA's AEO2017 projects the United States as a net energy exporter in most cases.This is the first time that EIA is publishing projections through 2050 in the AEO tables. The United States becomes a net energy exporter in most AEO2017 cases as petroleum liquid imports fall and natural gas exports rise. Exports are highest, and grow throughout the projection period, in the High Oil and Gas Resource and Technology case, as favorable geology and technological developments combine to produce oil and gas at lower prices.  The High Oil Price case provides favorable economic conditions for producers while restraining domestic consumption, enabling the most rapid transition to net exporter status. In all cases but the High Oil and Gas Resource Technology case, which assumes substantial improvements in production technology and more favorable resource availability, U.S. production declines in the 2030s, which slows or reverses projected growth in net energy exports.   "The variation across the analysis cases of projected net energy export levels—as well as other findings in AEO2017— demonstrates the importance of considering the full set of AEO cases.” Alternative cases incorporate different key assumptions, reflecting market, technology, resource, and policy uncertainties that may affect future energy markets. Other key findings:

  • Energy consumption is consistent across all AEO cases, bounded by the High and Low Economic Growth cases. In the Reference case, total energy consumption increases 5% between 2016 and 2040. As a significant portion of energy consumption is related to economic activity, energy consumption is projected to increase by approximately 11% in the High Economic Growth case, over 2016-40, and remain nearly flat in the Low Economic Growth Case. In all AEO cases, the electric power sector remains the largest consumer of primary energy.
  • Energy production ranges from nearly flat in the Low Oil and Gas Resource and Technology case, to nearly 50% growth over 2016-40 in the High Resource and Technology Case. Unlike energy consumption, which varies less across AEO cases, projections of energy production vary widely. Production growth is dependent on technology, resource, and market conditions. Total energy production increases by more than 20% in the Reference case, from 2016 through 2040, led by increases in crude oil and natural gas production.
  • Energy related carbon dioxide emissions decline in most AEO cases, with the highest emissions projected in the No Clean Power Plan case. All of the AEO2017 cases except the No Clean Power Plan case include the Clean Power Plan (CPP).

Exporting oil and natural gas will import economic growth - President Barack Obama opened the door to exporting U.S. oil and natural gas; the Trump administration is likely to drive a tanker through it. As part of the $1.1 trillion spending bill that passed in December 2015, Obama agreed to end the 40-year ban on U.S. crude oil exports. The president opposed the repeal, but the bill also extended the wind and solar energy tax credits, so he took the compromise. In addition, the U.S. Department of Energy has finally begun approving construction of terminals to export U.S. liquefied natural gas (LNG) — 10 so far (in Texas, Louisiana, Maryland and Georgia) with most of them still under construction. When completed, we should see natural gas production and export increase exponentially. In the first five months of the year, the U.S. exported half a million barrels of crude oil per day to 16 countries — including several in Europe, South and Central America, Israel and even China — according to the U.S. Energy Information Administration.In the first six months of the year, some 50 billion cubic feet (Bcf) of natural gas has been exported. One energy analyst estimated shortly before the presidential election that the U.S. will be exporting about 7 Bcf per day by 2020 and 17 Bcf/day by 2040. The U.S. currently produces about 80 Bcf/day. Given the incoming Trump administration’s embrace of fossil fuel production — and given the individuals nominated to run the Environmental Protection Agency and the Department of Energy — those Forbes estimates are likely on the low side. The nascent energy export industry is important for several reasons. First, the EIA projects the U.S. will become a net gas exporter in the second half of 2017. The U.S. needs markets for that abundance of natural gas. Second, exports enhance economic efficiency. For those who wonder why U.S. companies would export crude oil when the country still imports 24 percent of its oil, the answer has to do with efficiency and refining. Most U.S. refineries are set up to process very heavy oil. But most of the oil coming from shale formations, comprising about 52 percent of total production, is what’s called light sweet crude, which requires a different, less-intensive refining process. While some refineries are starting to adapt to the lighter crude slate, that refining transition isn’t quickly or cheaply made. Third, U.S. exports could help meet the energy needs of some or our allies — especially those dependent on oil and natural gas from countries like Russia, which use energy supplies as a geopolitical hammer. Finally, exporting crude oil and natural gas will jump start economic growth and reduce the U.S. trade deficit.

Solar Farms Expected to Outpace Natural Gas in U.S. - 2016 is shaping up to be a milestone year for energy, and when the final accounting is done, one of the biggest winners is likely to be solar power.  For the first time, more electricity-generating capacity from solar power plants is expected to have been built in the U.S. than from natural gas and wind, U.S. Department of Energy data show. Though the final tally won’t be in until March, enough new solar power plants were expected to be built in 2016 to total 9.5 gigawatts of solar power generating capacity, tripling the new solar capacity built in 2015. That’s enough to light up more than 1.8 million homes.  The solar farms built in 2016 were expected to exceed the 8 gigawatts of natural gas power generating capacity and the 6.8 gigawatts of wind power slated for construction this year. No new coal-fired power plants were planned in 2016.

Canada's Oil Sands Downturn Hints at Ominous Future - It was a dark year for Canada's tar sands. Plunging oil prices caused companies to cancel or delay nearly three dozen projects. Extensive wildfires forced producers to shut down operations for weeks. And after a decade that saw little action on climate change policy, Canadian officials began shaping plans to cap the tar sands' emissions and set a national price on carbon with an eye to meeting the country's commitment to the Paris climate agreement. Now the question is whether the downturn is just a blip or is the start of a trend away from the expensive and carbon-intensive fuel.  Since oil prices tanked in 2014, energy companies have delayed or canceled at least 64 projects in Alberta's oil sands, according to data from JWN Energy. Across the industry, producers have slashed billions of dollars from their balance sheets, with the latest a December divestment of oil sands assets by Norway's Statoil. In October, ExxonMobil said it may wipe 3.6 billion barrels of tar sands oil from its reported reserves early next year in its annual filing to the Securities and Exchange Commission. The announcement came amid investigations by state attorneys general and reportedly the SEC into whether the company misled investors about the business risks of climate change and the value of its holdings. Reserves measure the amount of oil that a company can profitably extract, and Exxon had long resisted calls to reduce its reserves figure as oil prices fell. Some economists and advocates have argued that Canada's oil sands, because of high operating costs and high emissions, should be among the first reserves abandoned as the world phases out fossil fuels. A 2015 article in the journal Nature examined the carbon content of remaining coal, oil and gas reserves and compared that to the emissions cuts required to keep global warming below 2 degrees Celsius. The authors concluded that about 75 percent of Canada's oil reserves should be left in the ground, compared to a third of oil globally.

AltaGas to start construction on West Coast Canada propane export terminal - Canada's AltaGas has reached a final investment decision for a British Columbia propane export terminal after receiving approval from federal regulators and will begin construction early this year, the company said Tuesday. The Ridley Island terminal near Prince Rupert would be the first propane export facility on the Canadian West Coast -- a 10-day voyage to Asia. By comparison, cargoes to Asia from the US Gulf Coast take about 25 days via the Panama Canal. "The brownfield site also benefits from Canadian National railway access and a marine jetty with deep water access to the Pacific Ocean," AltaGas said in a statement. The facility, slated to come online in the first quarter 2019, will be able to ship 1.2 million mt/year of propane and cost about $450 million-500 million, AltaGas said in a statement."My that product is all headed to Japan [and] in discussion with time charter freight to supply it," a shipbroker said. "I don't think you'll see many, if any, spot sold ex-Ridley." The company already has a memorandum of understanding with Japan's Astomos Energy for the purchase of at least 50%, or 600,000 mt/year, of the total planned output. US LPG exports, the bulk of which is propane, have increasingly been sent to Asia, with China, Japan, South Korea and Singapore combined making up roughly 40% of US LPG exports in October, which averaged 1.07 million b/d, US Energy Information Administration data shows. US Gulf Coast exports of propane averaged 778,000 b/d in October, near the record high 799,000 b/d in May, and up from just 28,000 b/d 10 years ago, according to the EIA. The Ridley Export Terminal will initially be 100% owned and operated by Altagas, the company said, adding it is keeping options open to sell 30% stake in the planned facility.

Mexicans Rage, Protest After Gas Prices Surge, And Now The Drug Cartels Are Involved --Even as Mexico has reasons to be concerned about the upcoming presidential inauguration of Donald Trump, who has vowed to make life, and especially trade relations, for Mexicans far more "complicated" under his administration, the population of Mexico has far more pressing problems at this moment, because just days after the finance ministry announced on December 27 that it would raise the price of gasoline by as much as 20.1% to 88 cents per liter while hiking diesel prices by 16.5% to 83 cents, the hikes went into effect on January 1, welcoming in the new year with a surge in the price of one of Mexico's most important staples and leading to widespread anger, protests and in some cases violence. As Telesur reports, the people of Mexico "are entering the New Year in a state of rage and anxiety" with protests planned for Sunday to strongly denounce the government's huge hike in gasoline prices. The sharp rise in gasoline prices has been called the "gasolinazo" in Spanish, which roughly translates to "gasoline-punch." On Sunday, the day the price hikes went into effect, Excelsior reported that angry citizens protested in several spots of the capital, Mexico City, blocking roads, demanding a return to lower gas prices. But before readers blow this off as just another protest by an angry population which fails to grasp the "global deflationary collapse" while focusing on "fringe, outlier events"  - at least in the words of central bankers -  things suddenly got serious when none other than the country's powerful Jalisco New Generation cartel has entered the fray, threatening to burn gas stations in response to the price hikes, according to Jalisco authorities cited by TeleSur.

Looting erupts amid protests over Mexico gas price hike - France 24: (AFP) - Looting broke out at several stores in Mexico on the sidelines of protests against a gasoline price increase as authorities detained dozens of people. Mexicans have blocked service stations, disrupted highway traffic and held protests since the government increased fuel prices by 20.1 percent on January 1. But acts of vandalism and looting erupted, prompting Interior Minister Miguel Angel Osorio Chong to instruct the National Security Commission to support local authorities. The government of the State of Mexico, which surrounds the capital, said in a statement that 161 people were detained for "various acts of vandalism and thefts at shops" in six municipalities. The statement said "some groups of people have seized on the situation to commit thefts and acts of vandalism under the pretext of protesting the liberalization of the price of gasoline." In Mexico City, around 20 people were detained after some shops were looted, the local government's secretary general, Patricia Mercado, told Radio Formula.

600 Hundred Arrested And 1 Dead As Mexican Gas Price Protests Intensify --Some 600 people have been arrested, one policeman killed and around 300 stores looted as protests intensify in Mexico following the weekend decision to hike fuel prices by 20 percent, the Associated Press reports. Citing Mexican business chambers, the news agency said that supplies of basic goods and fuel are under threat as protesters blockade highways, ports and terminals and the situation intensifies to chaos on the streets and looting.As one of the more difficult to implement parts of the government’s sweeping energy reforms, deregulation required a 20 percent increase in fuel prices that has enraged the population.On New Year’s Day, when the policy took effect, the cost of a gallon of standard-grade unleaded fuel was US$2.95, up 14 percent from the price of US$2.60 on 31 December. The price of premium fuel rose by up to 20 percent, according to the LA Times.This situation is critical for Mexican President Enrique Peña Nieto, who had promised that fuel prices would go down with the energy sector reforms. Protests were easily sparked by opposition politicians who fed on the sudden removal of decades of set fuel prices and heavy subsidies for a population that is not accustomed to fuel price increases.The government only announced the deregulation of gas prices on 27 December, as part of the wider reforms being implemented to end the oil and gas monopoly enjoyed for decades by corruption-scandalized state-run Pemex.The reforms will allow foreign companies to operate in Mexico’s lucrative oil and gas sector for the first time. The Mexican president is calling for calm but has so far failed to convince the protesters that the alternative to fuel deregulation would have been much more painful for the economy. The government says that by March the market will be allowed to dictate fuel prices.

Record number of oil and gas firms go bust as renewable energy revolution begins to bite - A record number of oil and gas companies became insolvent last year, according to a new study which environmentalists said highlighted the need for the UK to prepare for the move to a low-carbon economy. They warned that the loss of jobs in the sector when it becomes clear that fossil fuels can no longer be burned because of the effect on global warming would lead to “desolate communities” unless people were retrained to work in the “new industries of the 21st century”. The study by accountancy firm Moore Stephens found 16 oil and gas companies went insolvent last year, compared to none at all in 2012. First commercial flight powered by renewable energy takes to skies After oil prices fell from about $120 a barrel to under $50 for most of the past year, smaller firms in the sector were unable to cope, Moore Stephens found.Jeremy Willmont, who carried out the research, said: “The collapse of the price of oil has stretched many UK independents to breaking point. “The last 15 years has seen a large increase in the number of UK oil and gas independents exploring and producing everywhere from Iraq to the Falkland Islands. “Unless there is a consistent upward trend in the oil price, conditions will remain tough for many of those and insolvencies may continue.”

EU’s gas dependence on Russia hits new record - The share of Gazprom’s gas in the balance of non-CIS countries receiving Russian gas in 2016 reached 33.5%, after (reaching) 31% in 2015. Gazprom Export’s December corporate bulletin Blue Fuel notes a steady increase in the company’s share of gas on European market, it has already reached approximately 1/3. According to the Interfax news agency, in 2016 Gazprom will supply to non-CIS countries about 179 billion cubic meters of gas (in the past year, the volume was 159.4 billion cubic meters). At the same time, the European market grew by 4-5%, Gazprom’s gas supply to it increased by 13%. The deputy director of energy policy of the Institute of Energy and Finances, Alexey Belogoriev noted that the EU had to increase the purchase of gas from Russia, despite the desire to be less dependent on Gazprom, due to the sharp growth in demand for gas. The choice in favor of large purchases from Russia is explained by the stability of Gazprom as a supplier, despite Europe’s political problems with Moscow. “Over the past 15 years they have not managed to find alternative suppliers of pipeline gas. Supplies of Azerbaijani gas by the TANAP and TAP pipelines will not exceed 11 billion cubic meters by 2025, and it is not much for the European market. Expectations for the North African, Nigerian gas though Algeria were not fulfilled due to resource constraints in the region, and the war in Libya. In fact, the Russian gas competes only with LNG,” Alexey Belogoriev noticed.

Energy Prices in Europe -- A few days ago a link to a UK government report called Quarterly Energy Prices landed in my in box. At the end was a series of interesting charts comparing liquid fuel, natural gas and electricity prices across Europe. This post presents these charts alongside some simple but rather interesting observations. Let me begin by taking a look at liquid fuel. Some key observations:

  • Diesel is marginally more expensive than petrol
  • The cost of the raw product (ex tax) is pretty well uniform across countries, thus what little variation there is in price comes from different tax levels
  • There is little variation in price between countries with the ratio of most expensive / least expensive = 1.4 (petrol) and 1.5 (diesel).
  • Luxembourg has the cheapest diesel and petrol while the UK is about the mid point for petrol but has the most expensive diesel.

The relative uniformity of price throughout The Common Market presumably discourages motorists crossing borders bargain hunting. Natural gas and electricity prices have two main tariffs, one for domestic users and one for industrial users, the industrial tariff being much lower than the domestic tariff.

  • The Netherlands and Denmark, the two gas exporters, have the lowest raw prices.
  • Otherwise it is difficult to rationalise the variations since the pattern of raw price variations for domestic and industrial varies.
  • Excluding the high and low outliers, the mean ratio of domestic / industrial price = 2.1±0.25 (1SD)
  • The main trend in domestic prices is caused by progressive higher tax levels.
  • Surprisingly, The Netherlands, with the EU’s largest gas resource also has the second and third highest prices owing to high tax levels.
  • The UK has the third and fourth lowest gas prices.

Wave of US LNG heads to northeast Asia as prices surge - As many as nine cargoes of US LNG are currently headed for the world's key LNG demand center in northeast Asia, according to cFlow, Platts trade flow software, as higher spot LNG prices in Asia incentivize the journey for vessels carrying US LNG through the Panama Canal. Since mid-September when Asian LNG spot prices were around $5.50/MMBtu, prices have risen sharply due to trips at liquefaction plants including Gorgon in Australia. Platts assessed the JKM LNG Asian benchmark price at $9.75/MMBtu on Tuesday, a considerable jump from as low as $4/MMBtu in April 2016.Before December, only one US LNG cargo had sailed to northeast Asia out of some 33 sailings from Sabine Pass -- the Maran Gas Apollonia delivered what was said by sources to be a "test" cargo to China in August. But now nine more vessels are on their way to the region -- home to the major demand centers of Japan, South Korea, China and Taiwan. China took its second US LNG cargo in December, but Beijing is set to receive a number of the vessels currently headed to the region, according to cFlow. South Korea -- the second biggest LNG buyer globally -- received its first ever cargo of US LNG on December 23 aboard the Maria Energy, which was the 42nd cargo of LNG to load from Sabine Pass. Japan has yet to receive any US LNG cargoes, but at least one of the vessels en route to the region currently is expected to offload in Japan.

Turkmenistan halts gas flow to Iran in arrears row: Turkmenistan halted gas supplies to Iran Sunday amid tensions between the two countries over arrears, the Iranian National Gas Company was quoted by oil ministry news agency Shana as saying. "The gas company of Turkmenistan has cut gas exports to Iran, contrary to the agreement reached, by demanding immediate payment of arrears," Shana cited an official statement as saying. The two countries have been holding discussions but have not yet reached agreement on the payment and amount of arrears Iran owes to Turkmenistan. The Islamic republic uses Turkmen gas in the populated north of the country while its main gas fields are in southern Iran. The National Iranian Gas Company asked consumers to "pay attention to consumption", but added that with domestic production rising, the country did not need to import gas and could cope by making savings. Turkmenistan currently exports up to 10 billion cubic meters of gas to Iran, its third largest trading partner after China and Turkey. Ten years ago, Turkmenistan abruptly stopped its gas exports to Iran in the middle of winter, and demanded a ninefold increase in the price. According to an oil ministry official, Iran currently produces 700 million cubic meters of gas daily, and imports from Turkmenistan represents only 1.5 percent of domestic consumption. Turkmenistan's total gas reserves are estimated to be the fourth largest in the world behind Qatar, Russia and Iran.

Oil Hits 18 Month High On Reports Kuwait, Oman Cut Crude Output --Oil prices hit 18-month highs on the first full trading day of 2017, following reports by Al-Ansa newspaper that OPEC member Kuwait has cut output by 130,000 barrels a day to about 2.75 million a day, according to Kuwait Oil Co. Chief Executive Officer Jamal Jaafer. Meanwhile, Oman was sait to cut 45,000 barrels a day from 1.01 million, the Oil Ministry’s Director of Marketing Ali Al-Riyami said on Oman TV. And so, the surge which made oil the best performing asset class of 2016, driven by expectations of an OPEC production cut, continued following reports that this production cut was being implemented, if only for the time being by nations close to Saudi Arabia, and this unlikely to challenge the Vienna deal: the real question is whether the more "rogue" OPEC members will comply with their part of the bargain and certainly how the non-OPEC members will react.“The new year sees the start of the output cuts that were agreed between OPEC and some non-OPEC producers,” Hamza Khan, head of commodities strategy at ING Bank NV in Amsterdam, told Bloomberg.As a result of the favorable production cut news, West Texas Intermediate gained as much as $1.52 to $55.24 a barrel on the New York Mercantile Exchange and was at $55.05 as of 9:37 a.m. London time. Total volume traded Tuesday was 7% above the 100-day average.  Brent for March settlement climbed $1.33 to $58.15 on the London-based ICE Futures Europe exchange, trading at a $2.22 premium to WTI for the same month. The global benchmark contract rose 52 percent last year, the most since 2009.

Oil Markets Optimistic As Oil Turns Lower - Oil prices have started off the year on a positive note, surging by several dollars per barrel in the first trading days of 2017. WTI was up to $55 per barrel and Brent was edging closer to the $60-threshold, topping $58 per barrel on Tuesday morning, but the rally couldn't last long and oil prices reversed on Tuesday afternoon as result of a dollar breakout. The OPEC deal is now in effect, but it will take a few weeks to assess the progress of the oil cartel in cutting output. But the markets are feeling highly optimistic at the start of the year, a marked difference at this point in 2016. The new session of Congress takes effect today, and with Republicans in full control of both chambers and an ally soon to take the White House, their agenda is chalk full with Republican priorities. While higher-profile controversies will dominate the headlines, such as the repeal of Obamacare, some energy items could move forward quickly and with less fanfare. Nominations to the key agencies will come early on, but other issues are slated to see action as well: a withdrawal from Paris Climate accord; scrapping a suite of Obama-era environmental regulations; and the approval of the Keystone XL and Dakota Access Pipelines, among other items. After spending more than $50 billion to acquire BG Group last year, Royal Dutch Shell says that it will take a breather in 2017 and try to trim its size. The BG purchase was a very large wager on LNG export potential in Australia and East Africa, investments that will take years to come to fruition. It was also a play on offshore oil drilling in Brazil. But the price tag was hefty, and Shell’s total debt has mushroomed to $78 billion, much more than its competitors. As a result, Shell is now in a bind, and while company executives would argue that its growth prospects look good, they also feel the need to cut its debt pile, unload unwanted assets, and reassure investors that its dividend is not at risk. It should be much quieter year this year for the Anglo-Dutch oil major. Issuing new equity can be a risky move. Diluting shareholder value tends not to be received well and it also can be a sign of a company in need of cash. However, companies that issued new shares during the oil bust beat out much of the sector with higher returns for shareholders. The WSJ reports that more than 70 North American oil and gas companies issued about $57 billion in new equity in 2015 and 2016, and while some companies ultimately went bankrupt, the ones that survived offered the juiciest returns. Companies who sold shares over the past two years gained $13 billion in value in 2016, the WSJ reports.

Oil ends at 2-week low; natural-gas prices sink nearly 11% - Oil futures made a sharp turn lower Tuesday, giving up their highest levels in about 18 months to mark their lowest settlement in about two weeks , with traders anxious to find out whether OPEC and other major oil producers will stick to their pledge to cut back output. Natural-gas futures, meanwhile, dropped by nearly 11% on the back of warmer weather forecasts to mark their biggest single-session percentage loss since February 2014. February West Texas Intermediate crude fell by $1.39, or 2.6%, to settle at $52.33 a barrel on the New York Mercantile Exchange, the lowest finish since Dec. 20, according to data from Dow Jones. It had traded as high as $55.24, which would have marked the highest settlement level since July 2015. March Brent on the ICE Futures exchange in London shed $1.35, or 2.4%, to $55.47 a barrel after touching highs above $58. Prices saw a sharp reversal from an early rally and at least part of the reason for the move was technical, Tyler Richey, co-editor of The 7:00’s Report, told MarketWatch. “There was a roughly $1 ‘gap’ between Friday’s primary session close and this morning’s 9 a.m. open and fast money traders chased it lower to ‘fill the gap’,” he said. Strength in the U.S. dollar has also been cited as part of the reason for oil’s losses, he said. A stronger dollar can pressure prices for oil because it is traded in the greenback.

The End Of The Rally- Oil Reverses, Natural Gas Trounced -- After rallying like a mad thing to start the day (month, and year...), crude prices have reversed course, weighed down by a stronger dollar. Natural Gas starts the year with a 12% (!) plunge as weather forecasts predict much warmer winter weather. Volatility looks set to be the theme for this quarter, with prices being pushed and prodded around by OPEC / NOPEC compliance; prices are already getting shaken up like a snow globe. Hark, here are five things to consider in oil and energy markets today:

  • 1) The first few signs of production cut compliance from OPEC members are starting to filter through, with Kuwait and Oman seemingly putting their best foot forward. According to reports citing the Kuwait Oil Company's CEO, it has cut production by 130,000 barrels per day, while Oman has also cut its output. To counter this bullish-tilted news, Russian output in December is said to have held at record highs, while Libyan production is up to 685,000 bpd in recent days, more than double what it averaged in Q3 of last year. As our ClipperData illustrate below, as with most of Arab Gulf producers, Kuwaiti crude exports predominantly head to Asia (>75 percent). South Korea is the leading recipient of Kuwaiti crude, followed by China. The U.S. is also a key destination, with nearly 230,000 bpd of Kuwaiti crude making its way to U.S. shores in 2016.
  • 2) There's been a fairly decent dollop of economic data out, as is the way with a new month. China kicked things off last night, with its manufacturing PMI coming in at its highest since mid-2014 at 51.9. U.S. manufacturing followed suit, coming in mucho better than expected at 54.7. As we know all too well, all paths lead back to energy, hence as oil prices rise, preliminary German inflation data has reached its quickest pace since 2013.
  • 3) Over the past two years, more than 70 North American energy companies have sold some $57 billion in shares, helping them to stave off bankruptcy. These companies have issued stock to help pay down debt and cover costs until oil prices have recovered, ultimately buoying their stock prices.
  • 4) The chart below highlights how the how the Russian economy is inextricably linked to the fortunes of crude oil. Russia relies on oil and gas for approximately half of its fiscal revenues. Hence, as oil prices have risen from a decade low early last year, Russia's default risk has dropped to a two-year low:
  • 5) Finally, the chart below illustrates how the price of solar energy will likely be the lowest-cost option for electricity across the globe within the next decade, dropping below the price of coal.

Iraq begins cuts to oil production: oil minister -  Iraq began reducing its crude oil production from the turn of the year in line with its OPEC commitments, oil minister Jabbar al-Luaibi said in a statement Thursday. "Iraq reaffirms its commitment to the decision by OPEC, which was adopted at the last meeting in Vienna by putting in place a deliberate plan to reduce output from the country's fields with the beginning of the New Year, and that Iraq is dealing wisely with this issue", Luaibi said in a statement on the oil ministry website. The statement did not provide any further details on current production r how the cuts will be spread across Iraq's numerous oil company partners and the autonomous Kurdistan Regional Government. Iraqi prime minister Haider al-Abadi said Tuesday the KRG was exporting more than its allocated share of oil, despite Baghdad's efforts to comply with the OPEC's decision in November to hold the group's total production at 32.5 million b/d. S&P Global Platts estimates Iraq produced at an average of around 4.6 million b/d in December, up 50,000 b/d from November.

OPEC Deal Non-Compliance Begins: Iraq Accuses Kurds Of Pumping More Than Permitted -- Back on December 15, two weeks ahead of the day the OPEC production cut agreement was set to begin, which was supposed to remove 1.2 million barrels per day in oil production from OPEC member states, a report emerged that contrary to its mandated production cut of 210Kbpd, Iraq was actually preparing to boost its exports by 7%. As the WSJ first reported, instead of cutting its crude production by 4% as it "promised" it would do in the Vienna November 30 meeting, Iraq instead planned to increase crude-oil exports in January, according to government records, immediately raising questions about its commitment to the OPEC’s landmark production agreement. Iraq’s national oil company, the State Organization for Marketing of Oil, or SOMO, had plans as of December 8, nine days after agreeing to cut production, to instead increase deliveries of its Basra oil grades by about 7% compared with October levels, according to a detailed oil-shipment program viewed by The Wall Street Journal. Those oil shipments represent about 85% of Iraq’s exports. And while that story quietly disappeared, and was promptly replaced with the more optimistic narrative of OPEC production cut compliance by Kuwait, which as noted earlier today reportedly cut output by 130,000 barrels a day to about 2.75 million a day, while Oman was said to cut 45,000 barrels a day from 1.01 million, it appears that the Iraq overproduction "issue" isn't going away; it does, however, have an interesting narrative to go with it. As Reuters reports, while Iraq's Prime Minister Haider al-Abadi refused to indicate if his country had cut production in compliance with the Vienna deal, he did accuse the autonomous Kurdish region of exporting more than its allocated share of oil "as the country seeks to comply with an OPEC output cut." As a reminder, as part of the deal, Iraq, OPEC's second largest producer, agreed to reduce output by 200,000 bpd to 4.351 million bpd.However, a hurdle has emerged: Kurdistan."The region is exporting more than its share, more than the 17 percent stated in the budget,” Abadi said.Oil exports from the Kurdish region have long been a point of contention with Baghdad, which claims sole authority over sales of all the country's crude, however which is unable to implement caps on Kurdish production, in effect having to deal with a "rogue, non-OPEC" producer within its borders.

This "Rogue" Oil & Gas Nation Just Set A Slew Of Output Records - With 2016 now closed out, we’re getting the first looks at year-end data. And numbers from one nation in the energy space have been particularly eye-catching this week. Over the last 15 years, Russia vaulted upwards in oil and gas production — challenging for the world’s top producer of crude. A fact that’s especially critical given this big producer is a “rogue” nation that lies outside the purview of OPEC. And 2016 was another big year for Russian oil output. With stats showing the country’s production rose again this past year — to an average 10.96 million barrels per day, up from 10.72 million barrels per day in 2015. That came on the back of strong national production in December, where Russian producers pumped 11.21 million barrels per day — marking the highest output level in nearly 30 years. That’s a very important data point for energy markets, showing that Russian supply is continuing to surge even as other big producers like Saudi Arabia are seeking production cuts. And it isn’t just oil where Russia is having a major impact on global markets. Recent stats show the nation also had a banner year for natural gas output. Russian natgas giant Gazprom said this past week that it increased 2016 production levels to 419 billion cubic meters, or 14.8 trillion cubic feet. A mark that exceeded Gazprom’s own forecasts for the year by 2.7 percent.That rising production translated into higher exports, with Gazprom shipping 179 billion cubic meters to Europe during 2016 — marking a record yearly total.It’s not just pipeline gas that’s surging either. Russia’s burgeoning LNG exports also saw a1.1 percent rise during 2016, to 14.69 billion cubic meters, according to government reports this week.In fact, Russian LNG has been picking up speed even in the past few weeks, with December exports up 10.8 percent, to a total 1.47 billion cubic meters. That puts Russia’s LNG shipments on pace for a 20 percent rise this coming year.

Why Russia Expects $40 Oil This Year --Budget deficit is a fascinating thing. It can turn around economies if it’s large enough or it can highlight their resilience, if it turns out to be not as large as expected. The thing is, no government can be 100 percent certain in advance what budget deficit it will have to contend with in any future fiscal year.Russia is a case in point as it recently approved its 2017 budget, which envisages a deficit of 3.2 percent of GDP – a figure comparable to the United States’ 2.6 percent estimated for 2017. According to some analysts, however, such as Mauldin Economics’ Jacob Shapiro, this 3.2 percent is enough to make life difficult for Moscow over the next 12 months, which is why the Kremlin should hope for higher oil prices.In fact, Shapiro says Russia needs oil prices to be 30 percent higher just to break even.But Moscow is in no rush, and indeed appears unfazed. Finance Minister Anton Siluanov said at the end of last year that under the three-year budget plan approved by the Duma and the President, Russia should break even in 2019, as long as oil prices remain at between $40 and $45. The 2017 budget even stipulated an oil price of $40 a barrel, with $45 per barrel earmarked for 2019. Of course, it’s generally unwise to take government officials’ words at face value, but given that Russia survived 2016 with a deficit of 3.7 percent and that non-oil exports apparently compensated for much of the lower oil revenues, chances are it will also survive 2017 without emptying its reserve fund. In fact, this is what seems to be the consensus of 47 analysts polled by Bloomberg, as cited by TASS. The consensus stance is that inflation in Russia will fall to 5.1 percent from 2016’s 5-6 percent, and the budget deficit will fall to 3 percent. The analysts also believe GDP growth will be 1.1 percent this year, up from a contraction of 0.5 percent, according to data from the Economic Development Ministry.

Goldman Sachs: Oil Prices To Remain Under $60 In H1 2017 -- On the back of OPEC cuts, Goldman Sachs expects WTI oil prices to rise to US$57.50 in the first half this year as reduced supply would move the market into deficit and draw down the current large oversupply, ZeroHedge reports, citing Goldman’s Allison Nathan view of “what keeps Goldman up at night” about this year’s commodity and currency markets and global political and economic policy developments.Brent prices are seen peaking at US$59 per barrel in the first half with the cuts implemented. The cuts would also push the oil market to a deficit in the first quarter, Goldman says, expressing a more optimistic view on the drawdown of oversupply than OPEC, which expects the market to rebalance in the second half, than the International Energy Agency (IEA) which sees the cuts likely moving the market into deficit in the first half by an estimated 600,000 bpd. In Goldman’s view, the deficit in the first quarter would move the market into backwardation by the summer. However, U.S. shale is also expected to respond to higher oil prices, which implies limited upside above the high-$50s, Goldman Sachs says. Commenting on U.S. production, the bank said: “We continue to believe shale productivity gains allow for substantial US production growth at oil prices of $50-$60/bbl and that E&P companies reaping these production gains are not being sufficiently rewarded.”

API Reports A Major Crude Oil Draw | The American Petroleum Institute (API) has reported a sizable draw on U.S. crude oil inventories, down 7.4 million barrels over the previous week—a much larger draw that expected, and the fifth draw in seven weeks. Analysts expected a draw of around 1.7-2.2 million barrels for the week, and right ahead of the API data dump, oil prices responded upwards nearly 2 percent, in anticipation of a draw on a smaller scale. Last week, the Energy Information Administration (EIA) showed a build of 4.25 million barrels of crude. This week’s 7.4-million-barrel draw is the biggest draw since September. It’s not all good news, though. On the flip side of this, gasoline and distillates experienced massive stockpile builds—the biggest in a year. Gasoline saw a 4.25-million build, against an expected build of only 1 million barrels. Distillates stockpiles were up even more—reporting a 5.24-million-barrel build.At Cushing, crude oil inventories were up, but less than expected, with a 482,000-barrel build, against the anticipated 900,000-barrel build.Crude oil prices would have responded more wildly to the massive draw-down in inventory, however, the huge builds in gas and distillates negatively offset this picture.Tuesday saw oil prices crash again, then slightly recover at the open of trading today and then dipping once again until climbing back up right before and after the API crude inventory data release. Just before the API release, West Texas Intermediate was around US$53.20. Immediately after the release, WTI was at US$53.36 and Brent was at US$56.49. Oil prices were also responding to increasing news indicating that the top oil exporters in the world not cheat on output cuts promised in the 30 November OPEC deal.

Crude Confusion As Gasoline, Distillates See Biggest Inventory Build In A Year - Crude prices remain lower since last week's inventory data indicated a surprise (albeit small) build (but bounced today). With expectations for a 2mm draw this week, API reported crude inventories plunged 7.431mm last week - the most since September. However,Gasoline and Distillates saw huge inventory builds (biggest since Jan 2016) and WTI prices whipsawed. API:

  • Crude -7.431mm (-2mm exp)- biggest draw since Sept 2016
  • Cushing +482k (+900k exp)
  • Gasoline +4.25mm (+1mm exp)- most since Jan 2016
  • Distillates +5.244mm (-800k exp) - most since Jan 201

Crude kneejerked higher on the print but dropped quickly on the product builds only to rebound to unch...

Oil prices fall on big build in U.S. gasoline, distillate stocks | Reuters: Oil prices slipped on Thursday after a surprisingly large increase in U.S. inventories of gasoline and distillates, slamming the brakes on an early rally on news that Saudi Arabia had started talks with customers about reducing crude sales. U.S. crude stocks fell sharply to end the year, the Energy Information Administration said, with a draw of 7 million barrels, but stocks of gasoline and distillates surged as refiners ramped up production to reduce crude inventories, a typical year-end practice to avoid higher taxes. Refining runs increased sharply, particularly on the U.S. Gulf Coast, the main refining hub in the United States. While end-year refinery activity tends to increase, this was larger than expected. "The magnitude of the products changes were much larger than expected and overwhelming somewhat supportive crude data," said Scott Shelton, energy specialist at ICAP in Durham, North Carolina. The big boost in product inventories was seen as bearish, wiping out a rally that had pushed U.S. crude prices to a high of $54.12 on the day, and dropped U.S. gasoline margins to two-week lows. As of 11:42 a.m. ET, West Texas Intermediate crude was down 24 cents, or 0.5 percent, to $53.02 a barrel. Brent crude was off 20 cents, or 0.4 percent, to $56.30 a barrel, after hitting a high of $57.35 earlier in the session. Oil has rallied 23 percent since mid-November and speculators have jumped on the bandwagon, loading up on long positions in crude futures in recent weeks in anticipation of OPEC's supply cuts. U.S. government data showed futures speculators as of last week had a bigger net long position in U.S. crude than at any time since mid-2014. Some analysts suggested the rally could fizzle out soon, particularly if the Organization of the Petroleum Exporting Countries struggles to meet expected production cuts. OPEC output in December was substantially higher than the level from where it agreed to lower output by 1.2 million barrels a day, according to a Reuters survey. That could make it harder to reach its target.

The Oil Supply Glut Is Here To Stay In 2017 -- It has become painfully obvious that the much-hyped OPEC agreement to reduce global oil production by close to 2 million bpd won’t have the effect that its initiators had hoped for. True, crude has jumped above US$50 but failed to pass the US$55 barrier and move closer to US$60, which would have solved a lot of problems for some of the world’s biggest producers. This price increase, however, has spurred optimism among some producers and motivated them to plan output ramp-ups, which will in turn dampen the upward potential of crude more effectively than growing doubts about top producers’ willingness to stick to their commitments under the historical agreement. Let’s look at shale boomers, for instance: according to Tom Kloza, the global chief of energy analysis at the Oil Price Information Service, shale producers can add as much as half a million bpd to their output this year. They don’t even have to want to add so much – they may well have to, prompted by their lenders. Then there is that doubt that the parties to the production cut agreement will be tempted to cheat and won’t be able or willing to resist the temptation. The three most likely cheaters seem to be Iraq, Iran, and Saudi Arabia. Iraq, because it is still locked in its fight with the Islamic State and needs all the petrodollars it can get its hands on. Iran, because it is in a rush to revive its energy industry and has made it clear repeatedly it has no intention to dance to any tune that Saudi Arabia plays. Then there is Saudi Arabia itself, which spearheaded the latest attempt by OPEC to give prices a big push upwards. Saudi Arabia and Iran are regional archrivals. Now, with most sanctions lifted, Iran is eager to re-enter global oil markets, targeting some of Saudi Arabia’s biggest clients, such as China and India. It’s hard to believe, as Osama Rizvi noted in an article for Oilprice, that Riyadh will sit idly by, watching Tehran take a bite out of its market share. Of course, markets also have to contend with the two exempted OPEC members, which are both doing their best to increase their output. Libya says it’s close to reaching a milestone of 900,000 bpd, on track to restore its production to pre-war levels. By the end of 2017, Libya plans to pump 1.1 million bpd. Nigeria is also slowly but surely raising production even though it is still fighting with militants in the Niger Delta and the Boko Haram terrorist group. The country, however, has managed to raise its output to 1.6 million bpd and, according to President Buhari, should further improve it to 2.2 million bpd.

OilPrice Intelligence Report: Oil Gains On Early Signs of OPEC Compliance: Oil prices are set to end the week slightly up from where it started, following a few rocky days of trading. After a sharp correction earlier in the week, oil regained ground on a steep fall in crude oil inventories. Still, the gains would have been much larger if not for the fact that U.S. gasoline stocks rose sharply. Nevertheless, oil is starting off the year on a positive note, and early signs of OPEC compliance (more below) are buoying the market. The EIA released its Annual Energy Outlook 2017, with projections out through 2050. The report estimates that the U.S. will become a net-energy exporter in the years ahead under most of its possible scenarios. That is largely due to falling oil imports and rising natural gas exports. The higher energy prices go, the quicker the U.S. becomes a net-exporter.  Saudi Arabia offered encouragement to oil traders this week when it announced that it is lowering its output to 10.058 million barrels per day (mb/d) in January, complying with its promised cuts laid out in the November OPEC deal. OPEC members are required to bring their six-month average production levels to the targeted range, but Saudi Arabia said it will meet that level immediately. The announcement adds credibility to the deal and raises the likelihood that other members will comply with their targets.  The second quarter of 2017 appears to be the period of time in which the global oil market will experience its tightest conditions: Other OPEC members will ratchet down their production levels to comply with the deal; non-OPEC countries including Russia will lower output; U.S. refineries will begin to ramp up operations to meet summer driving demand; Middle East countries such as Saudi Arabia and Iraq burn more oil in warmer months; inventories will decline as supply drops; plus underlying growth in oil demand continues to soak up excess supply. Many oil analysts expect oil prices to rise the most in the first two quarters of 2017, with the market easing in the second half of the year, potentially leading to lower prices in late 2017.  Oil speculators continued to add bullish bets on oil prices at the end of 2016. For the week ending on December 27, bullish positions rose by 7 percent to 358,573, with the current makeup the most net-long since 2014. Long bets outnumbered short positions by a factor of 35 to 1, the WSJ reports. That sets up the market for downside risk if bearish news emerges in the coming weeks. If speculators get spooked, they could begin to unwind their positions rapidly, leading to a sharp correction in oil prices.

Will OPEC Deliver Its Output Cut Deal? Here’s How We’ll Know -- The promise of production cuts from OPEC and its partners sent oil rallying in 2016. Now traders want proof they’re delivering on those vows. It won’t come easy. The challenge: Building a coherent picture from the morass of data that emerges at each step along the process, from the wellheads where the oil is produced, to the tankers that carry it, and the depots that store it. Unlike in the U.S., where output is published weekly, members of the Organization of Petroleum Exporting Countries can take months to disclose their production. Beyond that, their data can be at odds with independent surveys, and countries have been known to cheat on such deals. With a rising U.S. rig count offering a bearish undertone, each new hint on the accord’s implementation can be expected to swing prices. "The market could be whipsawed more by data and headlines than in the past,". "Data lags will be the primary problem in tracking cuts." Brent crude, the global benchmark, has surged 23 percent since Nov. 29, the day before the deal was sealed among OPEC’s members. The grade rose 21 cents to $57.10 a barrel Friday, the highest close since July 2015. Future price increases for crude will depend on a wide variety of signposts. Here’s a breakdown on what to look for: 1. Upstream The first indications will come at the start of next month, when media outlets such as Bloomberg, Thomson Reuters and Platts publish surveys of production. Estimates from institutions such as the International Energy Agency and U.S. Energy Information Administration arrive a week or two later. As “no one’s counting barrels at Abqaiq,” the Saudi oil-processing facility, these have to be modeled on computers, Barclays’ Cohen says. “While we consider official production data published by OPEC governments, we come up with our own estimates,” said Lejla Villar, an analyst who estimates OPEC output at the EIA, part of the U.S. Energy Department. “We look at crude oil loadings, estimated domestic consumption and refinery runs, storage, and whatever else might be relevant.”

U.S. Rig Count Rises To Highest Point In 1 Year - Oilfield services provider Baker Hughes is ringing in the new year with a 7-rig increase this week to the number of active oil and gas rigs in the United States, bring the total number of active oil and gas rigs in the United States to 665, with the oil rig count up to its highest point in a year.This week marks 11 straight weeks of oil rig increases, and 9 straight weeks of gas rig increases.The final week of 2016 saw the number of oil and gas rigs increase by 7, with oil rigs accounting for 4 of the 7. That week saw 525 total oil rigs in production compared to 536 oil rigs operating in the last week of 2015, erasing almost completely the substantial losses earlier in the year when the oil rig count plummeted to 316 in May. Although the recovery in the last quarter of 2016 erased earlier losses from earlier in the year, the oil rig count is still tragically below 2014 figures, when the number of oil rigs sat comfortably above 1,500. 2016’s rig count recovery was largely inspired by OPEC’s successful drive to lift oil prices out of the doldrums to near $55 by promising to curb production, with U.S. drillers equally enjoying higher oil prices—although the term “higher” is relative, with oil prices still well below the over-$100 per barrel price tag last seen in mid-2014.Drillers in the United States have been slowly increasing the number of active drilling rigs, commiserate with the rebounding oil price, most notably since the OPEC agreement on November 30 that saw OPEC agree to cut back production to 32.5 million bpd. WTI was trading up .52% at $54.04 an hour before the data release, with Brent at $57.10, up 0.37%. Immediately after the rig count release, WTI was sitting at US$53.97, and Brent at US$57.

Permian Basin again drives rig count growth -  West Texas’ Permian Basin again led the growth of the nation’s drilling rig activity, with Texas and New Mexico each adding three more rigs to oil fields. The Permian extends into southeastern New Mexico.The total rig count started 2017 by tacking on seven more rigs nationwide — four primarily seeking oil and three drilling for gas — with oil prices now hovering near $54 a barrel in the U.S. The growing Permian activity accounts for more than half of all the nation’s active oil rigs with 267 rigs drilling in the basin, according to weekly data collected by the Houston-based Baker Hughes oilfield services firm.However, the Granite Wash basin in the Texas Panhandle and Oklahoma lost five rigs, keeping the total rig count from growing more.The Gulf of Mexico added one offshore rig, while Louisiana represented two of the three gas rigs brought on thanks to more activity in the Haynesville Shale.The total rig count is now at 665 rigs, up from an all-time low of 404 rigs in May, according to Baker Hughes. Of the total tally, 529 of them are primarily drilling for oil.After the Permian, the next most active area is Texas’ Eagle Ford shale with just 47 rigs. Despite this week’s jump, the oil rig count is down 67 percent from its peak of 1,609 in October 2014, before oil prices began plummeting. The price of U.S. oil hit a low $26.21 on Feb. 11 before beginning to rebound.

US crude settles at $53.99, up slightly this week as traders parse signs OPEC is cutting output - Oil traded higher on Friday as investors bought futures ahead of the weekend, but a strong U.S. dollar limited gains, as did lingering doubts about whether all OPEC producers would cut output in line with an agreement. Trading was choppy, and market players cited end-of-week position-squaring and relatively low volumes during the first trading week of the year. Brent crude futures, the benchmark for international oil prices, were up 11 cents at $57 per barrel at 2:35 p.m. ET (1935 GMT), having swung from a high of $57.47 to a low of $56.28. In the United States, West Texas Intermediate (WTI) crude futures settled up 23 cents at $53.99 a barrel, recovering from a session low of $53.32 and off a high of $54.32. The contract rose about 0.5 percent on the week, marking the fourth straight weekly gain. The dollar gained broadly against major currencies after the U.S. non-farm payrolls report showed a slowing in hiring in December but an increase in wages, setting the economy up for further interest rate increases from the Federal Reserve this year. A stronger greenback makes oil more expensive for holders of other currencies. Top crude exporter Saudi Arabia and fellow Gulf members Abu Dhabi and Kuwait showed signs they were cutting production in line with an agreement by OPEC and other producers, yet market watchers have doubts about overall compliance. Saudi Arabia's state oil producer Saudi Aramco has started talks with customers globally on possible cuts of 3 percent to 7 percent in February crude loadings.

Libya To Re-Open Last Major Oil Export Terminal --Libya is about to re-open the last major oil terminal that has been shut due to factions fighting in a move that would allow it to further increase oil exports, potentially putting pressure on oil prices and on fellow OPEC members that have just started cutting output in a bid to stabilize prices and speed up the drawdown of the inventory glut. Libya’s Zawiya export terminal is getting ready to restart its exports after the pipeline carrying crude to it was re-opened, Bloomberg reports, quoting an official at the National Oil Corporation (NOC). The imminent re-opening of the Zawiya export terminal means that all nine major oil ports in the country will be shipping oil. At the end of December, the NOC said that the pipelines connecting the Sharara oil field to Zawiya refinery, and the El-Feel (Elephant) oil field to the Mellitah complex, had been re-opened. The Sharara field - operated by a joint venture between NOC and a consortium of Repsol, Total, OMV and Statoil - has a production capacity of about 330,000 bpd, while El-Feel field is operated by a joint venture between Italy’s Eni and NOC with a production capacity of around 90,000 bpd.  Earlier this week, NOC said that Libya’s total crude oil output had hit 685,000 bpd as of the start of January, thanks to the resumption of pipeline operation from the Sharara and Elephant fields

Exclusive: Iran capitalizes on OPEC oil cut to sell millions of barrels - sources | Reuters: Iran has sold more than 13 million barrels of oil that it had long held on tankers at sea, capitalizing on an OPEC output cut deal from which it is exempted to regain market share and court new buyers, according to industry sources and data. In the past three months, Tehran has sold almost half the oil it had held in floating storage, which had tied up many of its tankers as it struggled to offload stocks in an oversupplied global market. The amount of Iranian oil held at sea has dropped to 16.4 million barrels, from 29.6 million barrels at the beginning of October, according to Thomson Reuters Oil Flows data. Before that sharp drop, the level had barely changed in 2016; it was 29.7 million barrels at the start of last year, the data showed. Unsold oil is now tying up about 12 to 14 Iranian tankers, out of its fleet of about 60 vessels, compared with around 30 in the summer, according to two tanker-tracking sources. The oil sold in recent months has gone to buyers in Asia including China, India and South Korea and to European countries including Italy and France, according to the sources and data. It was unclear which companies bought the oil. Iran is also looking to use the opportunity to push into new markets in Europe, including Baltic and other central and eastern European countries, said separate oil industry sources, though it was not clear if any oil had been sold there. The state-run National Iranian Oil Company (NIOC) could not be reached for comment. Tanker group NITC, which operates most of the country's fleet, could also not be reached. Tehran scored a victory when it was exempted from the OPEC deal agreed in November to reduce production by 1.2 million barrels per day for six months, an accord aimed at addressing the global oversupply and bolstering low oil prices. The country successfully argued it should not limit its production which was slowly starting to recover after the lifting of international sanctions in January last year.

Iran Sold Over 13 Million Barrels Of Oil Held On Tankers In Post-Deal Price Jump  -- Remember when back in April we showed a strange map of the Iranian oil tanker armada, which according to Windward data was storing as much as 50 million barrels offshore, yet which was just sitting on anchor going nowhere? As a reminder, Iran has lacked sufficient land storage facilities to store its oil and, to enable it to keep pumping crude, has relied on its tanker fleet to park excess stocks until it can find buyers. Well, we can now close the book on what happened to all those tankers full of oil, because according to Reuters, capitalizing on the run up in oil prices following the OPEC output deal which exempted Iran from a production freeze, Iran has sold more than 13 million barrels of oil that it had long held on tankers at sea as it scrambled to sell at higher price levels in its attempt to regain market share. Citing industry sources, Reuters notes that in the past three months, in the window provided since the Algiers deal, Tehran sold almost half the oil it had held in floating storage, which had tied up many of its tankers as it struggled to offload stocks in an oversupplied global market. As a result of the rush to dump its offshore-held oil, unsold oil is now tying up only 12 to 14 Iranian tankers, out of its fleet of about 60 vessels, compared with around 30 in the summer.Who bought it? Mostly China and Europe:The oil sold in recent months has gone to buyers in Asia including China, India and South Korea and to European countries including Italy and France, according to the sources and data. It was unclear which companies bought the oil. Having demonstrated good faith during the recent sales, Iran is now looking to cements its market share gains and is using the deal exemption to push into new markets in Europe, including Baltic and other central and eastern European countries. As part of the Vienna OPEC deal meant to address excess oil inventory, Iran was exempt from production cuts. The country successfully argued it should not limit its production which was slowly starting to recover after the lifting of international sanctions in January last year. While the deal did not come into effect until the beginning of 2017, industry sources said Tehran had already been offering aggressive discounts, aiming to coax buyers globally into stocking up for winter in anticipation of the OPEC cut. Reuters further notes that in another sign of the rising activity, Iran's oil ministry news agency SHANA reported in late December that the number of tankers able to berth at major terminal Kharg Island had reached a record in 2016 of 10 vessels at the same time.

Millennial princes snatch at power in Gulf | Reuters: - For ageing monarchs in the Gulf, handing more power to a younger generation of princes makes sense. The task of diversifying their economies away from dependence on oil exports and implementing tricky social reforms requires an infusion of vigour and fresh ideas. The overdue generational shift is already underway. Saudi Arabia’s octogenarian king set an example in 2015 when he sidelined an entire generation of older royals in favour of elevating his 30-something son, Deputy Crown Prince Mohammed bin Salman. After leapfrogging his older uncles, cousins and half-brothers in the House of Saud, the prince has pushed through the biggest shake-up in the kingdom’s economy in the last 50 years. Other ageing hereditary rulers in the region will have taken note. The prince’s grand economic plan, known as Vision 2030, aims to provide more jobs and opportunities for Saudis under the age of 25. Although this group accounts for over half the Saudi population, their opportunities have been restricted by a system that places too much value on seniority and experience ahead of promoting youth and new ideas, especially in the upper echelons of government. The monarchs and sheikhs of the Gulf Cooperation Council ignore the needs of their younger subjects at their peril. Youth unemployment in the oil-rich region is high partly due to a lack of opportunities outside the energy industry and a dependence on imported labour. Despite efforts to improve education and skills in the local workforce, joblessness among young people is twice the overall rate in the GCC, according to World Bank data. Allowing a large disaffected youth to fester without positive role models in positions of authority could be dangerous if that helps extremists, who often prey on the vulnerable.There are also dangers in thrusting a new generation of untested princes who lack sufficient experience into positions of power. Mohammed bin Salman’s necessary economic reforms have caused some unease in the kingdom, while his military adventures in Yemen and sabre-rattling towards Iran have looked rash.

Pentagon Admits US Airstrike On Hospital "May Have Killed Civilians" -- Adding to concerns about the civilian toll of the US air war against ISIS targets, the Pentagon yesterday admitted that they carried out an airstrike against the parking lot of a Mosul hospital, conceding that they “may have killed civilians” in the attack. The Pentagon’s Combined Joint Strike Force said in a statement that they were after a van they suspected of carrying ISIS fighters, and they blew it up in the parking lot of what “was later determined to be a hospital.” The US has previously insisted all hospital sites in Mosul were well known and that they were taking extreme care not to hit civilians. Yet this is the second time this month the US-led coalition has bombed a hospital’s property, with a previous attack deliberately targeting the city’s main hospital complex at the behest of the Iraqi government. The Pentagon insisted at the time they “did not have any reason to believe” they killed any civilians, but conceded they had no idea if there were even patients at the hospital. The Pentagon has made a habit of dramatically underreporting civilian casualties in the ISIS war, with some reports suggesting that the actual toll of civilians killed by the US may be as many as ten times the “official” figures. This is the result of the Pentagon largely not investigating allegations of large figures they deem “not credible,” and revising downward the numbers slain in already well-documented incidents by the time they get around to putting them in the reports.

The U.S. dropped more than 25,000 bombs, mostly in Syria and Iraq, last year - The U.S. dropped 26,171 bombs last year, 3,027 more than 2015.According to an analysis of Defense Department data from the Council on Foreign Relations, a non-partisan think tank, the majority of the bombs were dropped in Iraq and Syria. The U.S. leads an international coalition fighting the Islamic State group in both countries and has carried out air operations in attempt to reduce the area controlled by the terrorist organization.  Nearly the same amount of bombs were dropped in Syria (12,192) and Iraq (12,095) last year. Despite pushes from within his administration to commit U.S. military forces to the civil war in Syria, Obama kept U.S. military action in the country focused on the Islamic State group. He was widely criticized for failing to follow through on the “red line” he set over Syrian President Bashar Assad’s use of chemical weapons against his own people.The U.S. dropped 79 percent of the anti-Islamic State group coalition bombs in Syria and Iraq, totaling 24,287. That figure, along with others analyzed by CFR, is likely lower than the actual number dropped because one airstrike can involved multiple bombs. Obama did authorize a troop surge in Afghanistan — a conflict he pledged to end during his campaign — where the U.S. dropped 1,337 bombs in 2016. There are currently 8,400 U.S. troops left in the country, more than Obama initially wanted to keep there at the end of his term. The U.S. only dropped 947 bombs in Afghanistan in 2015. The U.S. also dropped more bombs in Libya in 2016 than it did in 2015. Nearly 500 bombs were dropped in the North African country that has essentially been ungoverned since the fall of dictator Muammar Gaddafi in 2011.

More than 2,000 Iraqis a day flee Mosul as military advances | Reuters: More than 2,000 Iraqis a day are fleeing Mosul, several hundred more each day than before U.S.-led coalition forces began a new phase of their battle to retake the city from Islamic State, the United Nations said on Wednesday. After quick initial advances, the operation stalled for several weeks but last Thursday Iraqi forces renewed their push from Mosul's east toward the Tigris River on three fronts. Elite interior ministry troops were clearing the Mithaq district on Wednesday, after entering it on Tuesday when counterterrorism forces also retook an industrial zone. Federal police advanced in the Wahda district, the military said on Wednesday, in the 11th week of Iraq's largest military campaign since the U.S.-led invasion of 2003. As they advanced, many more civilian casualties were also being recorded, the U.N. said. Vastly outnumbered, the militants have embedded themselves among residents and are using the city terrain to their advantage, concealing car bombs in narrow alleys, posting snipers on tall buildings with civilians on lower floors, and making tunnels and surface-level passageways between buildings. "We were very afraid," one Mithaq resident said. "A Daesh (Islamic State) anti-aircraft weapon was positioned close to our house and was opening fire on helicopters. We could see a small number of Daesh fighters in the street carrying light and medium weapons. They were hit by planes."

ISIS Will Lose the Battle of Mosul, But Not Much Will Remain: Winners and losers are beginning to emerge in the wars that have engulfed the wider Middle East since the US and UK invaded Iraq in 2003. The most striking signs of this are the sieges of east Aleppo in Syria and Mosul in Iraq, which have much in common though they were given vastly different coverage by the Western media. In both cities, Salafi-jihadi Sunni Arab insurgents were defending their last big urban strongholds against the Iraqi Army, in the case of Mosul, and the Syrian Army, in the case of east Aleppo.The capture of east Aleppo means that President Bashar al-Assad has essentially won the war and will stay in power. The Syrian security forces advanced and the armed resistance collapsed more swiftly than had been expected. Some 8,000 to 10,000 rebel fighters, pounded by artillery and air strikes and divided among themselves, were unable to stage a last stand in the ruins of the enclave, as happened in Homs three years ago, and is happening in Mosul now.Isis is proving a tough opponent in Iraq and Syria and in December was able to recapture Palmyra, which the Syrian Army, strongly backed by Russia, had taken amid self-congratulatory celebrations in March. An important event that did not happen in 2016 was the defeat of Isis, whose continuing ability to set the political agenda was bloodily demonstrated when a stolen lorry mowed down people at a Christmas fair in Berlin on 18 December. A more substantive sign of Isis’s strength is the ferocity and skill with which it has fought for Mosul. The Iraqi army and Kurdish offensive started on 17 October, and Mosul city was reached on 3 November. Since then progress has been slow and at the cost of heavy casualties. The Iraqi security forces, including the Shia paramilitaries, lost 2,000 dead in November according to the UN. Isis is using hundreds of suicide bombers, snipers and mortar teams to slow their enemy’s advance, which has so far only taken 40 per cent of east Mosul. Some of the battalions in the elite 10,000-strong “Golden Division” are reported to have suffered 50 per cent losses. In the longer term, the Iraqi government will probably take Mosul, though by then it may not look much different from east Aleppo.

Does America Share Responsibility For the Rise of ISIS? --  Riaz Haq - Did the Obama administration enable ISIS, also known as Daesh, to unleash its reign of terror in Iraq and Syria? Have the policies of successive prior US administrations contributed to rising wave of global terrorism today? Is the American filmmaker Oliver Stone right when he says "we are not under threat. We are the threat"? Let's examine answers to these questions in light of available facts and evidence. A recently declassified DIA (Defense Intelligence Agency) document of August 2012 said that “the Salafist, the Muslim Brotherhood, and AQI (Al- Qaeda in Iraq) are the major forces driving the insurgency in Syria” being supported by “the West, Gulf countries and Turkey.” The document DIA declassified under the Freedom of Information Act (FOIA), analyzed the situation in Syria in the summer of 2012 and predicted: “If the situation unravels, there is the possibility of establishing a declared or undeclared Salafist principality in eastern Syria… and this is exactly what the supporting powers to the opposition want, in order to isolate the Syrian regime.” In an interview with Mehdi Hasan of Al Jazeera, former head of DIA and President-elect Donald Trump's National Security Advisor General Michael Flynn confirmed that it was a "willful decision" of the Obama White House to transfer arms to the Salfists and Al Qaeda in 2012 to defeat the Assad regime in Syria. Here's what General Flynn told Mehdi Hasan: "I don’t know if they turned a blind eye. I think it was a decision (US arms transfers to Salafis and Al Qaeda fighting in Syria in 2012). I think it was a willful decision....Well, a willful decision to do what they're doing, which, which you have to really – you have to really ask the President (Obama), what is it that he actually is doing with the, with the policy that is in place, because it is very, very confusing? I’m sitting here today, Mehdi, and I don’t, I can’t tell you exactly what that is, and I've been at this for a long time. ...I think it was a strategic mistake. I think history will not be kind. It was a strategic mistake"

Veteran misses simpler time fighting unwinnable war against enemy he unknowingly helped create — While US advisers slog their way across northern Iraq with sub-standard Iraqi forces and US troops once again deploy to the region, some veterans are reflecting on their own fighting of an un-winnable war against an ambiguous enemy they, unwittingly or otherwise, helped create. “Yes, I can grow a beard, start my own t-shirt, coffee, flip-flop, or humor website, or even become a Fox News analyst, but the grass isn’t always greener,” said Jared Glossner, an Operation Iraqi Freedom veteran who was honorably discharged in 2007 with a four-year engineering degree and nearly a dozen job prospects. “The days of executing vague strategic directives with little to no accountability or tangible benefit to most Americans are but a distant memory.” Glossner, a former platoon leader and executive officer with the 10th Mountain Division, has been gainfully employed the last nine years and admittedly happily married to his high-school sweetheart. While he tells everyone he meets he is “blessed,” Glossner told reporters that he secretly yearns to go back to fighting a faceless, nameless enemy for questionable-at-best reasons while being responsible solely for keeping his [containerized housing unit] swept. “Man, I wish I could arbitrarily distribute hundreds of millions of dollars in funds for infrastructure improvements that may or may have not been directly funneled to extremist groups,” said Glossner writing a check for one of his family’s multiple annual vacations. “Even if the money was going to Iran, or Syria, or Russia, or the CIA, my paycheck was still deposited into my checking account.” Read more:

Turkey Threatens To Block US From Using Incirlik Airbase - In the immediate aftermath of the failed Turkish "coup" of July 2016, the immediate concern to the US was not the fate of the Erdogan regime, but whether the US would maintain access to Incirlik Air Base, a strategic output for the US airforce, allowing it fast and easy access to most of the Middle East and part of Russia even in the immediate absence of an aircraft carrier. It explains why when Erdogan said he felt snubbed by the US, he cut off the power to the US troops stationed at the airbase, and kept them in the dark for a considerable period of time, perhaps to remind Washington that in Turkey he is the boss. Fast forward to this week, when on Wednesday, Turkish officials again made a veiled threat to ground U.S. warplanes at Incirlik Air Base over the U.S. denial of air support for the Turkish military inside Syria. The officials questioned the value of having the U.S. fly missions out of Incirlik in southeastern Turkey against ISIS targets in Syria and Iraq while Turkish forces are struggling to take the ISIS-held Syrian town of El Bab. "This is leading to serious disappointment in Turkish public opinion," Turkish Defense Minister Fikri Isik said, adding that "this is leading to questions over Incirlik," Turkey's Anadolu news agency reported. He then once again treatened the US, when he said that to avoid repercussions that could affect Incirlik operations, the Defense Minister called on the U.S. to "start to provide the aerial support and other support that the [Turkish military] needs" to take El Bab, which would also drive a wedge between Syrian Kurdish militias supported by the U.S. in actions against the Islamic State of Iraq and Syria. U.S. Air Force Col. John Dorrian said Wednesday than any actions by Turkey to shut down or limit U.S. air operations out of Incirlik would be disastrous for the U.S. anti-ISIS campaign now focused in Syria on the drive by a mixed Syrian Kurdish and Arab force against Raqqa, the self-proclaimed ISIS capital. What he meant to say is that it would disastrous for the U.S., period, as it would deprive the US of one of its most critical military outputs in the MENA region.

Analysis: Manufacturing helps China oil demand post fastest growth in 15 months -  China's apparent oil demand surged more than 4% year on year in November, the fastest pace of growth in 15 months, buoyed by a sharp expansion in manufacturing activity, which helped to drive the country's appetite for gasoil to a year's high and LPG consumption to record levels. The surprise acceleration in manufacturing to hit the highest level in a year lifted demand for goods transport, pushing up gasoil consumption. LPG demand was driven by consumption by propane dehydrogenation plants. Together, it more than offset a 5% year-on-year drop in apparent demand for gasoline. "The positive growth momentum should continue on the back of fiscal support. With the economy having just emerged out of deflation, and with the recovery still looking quite uneven, policy support should remain in place until the recovery becomes more broad-based," HSBC said in a research note. The 4.1% year-on-year growth in total apparent oil demand to 11.44 million b/d in November was the second consecutive monthly increase since October when demand rose 1.1%, data compiled by S&P Global Platts using official numbers showed. November demand was also up 2.8% from October, and higher than the average of 11.07 million b/d over the first 11 months. Manufacturing investment grew at the fastest pace in a year at 8.4% in November, with broad-based recovery becoming increasingly visible in heavy industries, machinery and auto, data from the National Bureau of Statistics showed. Industrial production grew 6.2% year on year in November, compared with 6.1% in October. PMI also climbed to 51.7 in November from 51.2 in October. All this improved the outlook for oil demand.

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