oil hits ten month low; prices now below average breakeven for all US oil basins

oil prices fell for the 5th week in a row this week, now the longest losing streak since the summer of 2015, with the new front month price for August oil closing the week at $43.01 a barrel, down 4.4% from its close of $44.97 a barrel the prior week, after seeing its price dip to as low as $42.05 a barrel mid week....in the process, oil prices plumbed levels not seen since November of 2016, when the widely anticipated OPEC production cut was rumored to be on the rocks...this week's price drop thus means that all the price appreciation that OPEC had realized by cutting their production since the beginning of this year has been lost, as prices are now back to the level they were at before their attempt to control the supply of oil was formally announced...we'll include a graph of the daily oil prices over that entire 7 month stretch, so you can see how the price changes transpired, and to save me a lot of words in trying to explain it...

the above graph is a Saturday screenshot of the live interactive oil price graph at Daily FX, an online platform that provides trading news, charts, indicators and analysis of the markets...each bar on the above graph represents oil prices for one day of oil trading between October 10th, 2016 and June 23rd, wherein green bars represent the days when the price of oil went up, and red bars represent the days when the price of oil went down...for green bars, the starting oil price at the beginning of the day is at the bottom of the bar and the price at the end of the day is at the top of the bar, while on red or down days, the starting price is at the top of the bar and the price at the end of the day is at the bottom of the bar...this type of graph, called a candlestick, also shows the range of oil prices outside of the opening and closing price for any given day as a thin 'wick' above or below the "candlestick" part of the graph... 

so, on this graph we can see that oil prices fell to close as low as $43.14 a barrel on Friday November 11th, battered that week by Trump's election, a report of record OPEC production, and the largest US oil output increase in the prior 18 months...while oil prices fell to as low as $42.20 a barrel the next Monday (see the wick on Nov 14?), oil prices rose from there as the markets turned their focus to the end of the month OPEC meeting...oil prices were still as low as $45 a barrel on November 29th, the day before the OPEC meeting, where upon they jumped 14% in the three days following that meeting to approach $52 a barrel...oil prices then stayed roughly between $51 and $54 a barrel over the next three months, before breaking to the downside as US oil stockpiles hit a new record in early March...oil prices attempted to rally in late March and again in early May, but never reached their December to February highs, then finally started into the downturn we're now in after the OPEC ,meeting on May 25th, when they announced a nine-month extension of their ineffective production cuts, sending oil prices tumbling...

with US oil prices currently below $45 a barrel, it should now start to become unprofitable to drill in even the most productive US basins, as we can see by the graphic below, which as the heading tells us, shows us the breakeven prices for drilling new wells:

the above graphic, which i found on twitter, is from the Dallas Fed, and graphs the responses from oil company executives to their survey question, "what oil price does your firm need to profitably drill a new well", which they asked in a Fed survey that took place between March 15th and March 23rd of this year...in the graph, the blue, red, yellow, orange and green bars represent the price range of responses for the Midland, SCOOP/STACK, Eagle Ford, Delaware, and central Permian basins respectively, with the size of the colored bar representing the range of the responses the oil execs gave for each basin, and the black line and dots representing the average of those responses for each basin...thus, what the graphic shows is that in the Permian's Midland basin (blue), 13 oil execs responded that they could break-even with prices as low as $25 a barrel to as high as $65 a barrel, with the average response for those drilling in the Midland basin at $46 a barrel...similarly, for the 8 oil execs drilling in the SCOOP/STACK of central Oklahoma, responses were that they could break even in prices ranging between $35 a barrel and $75 a barrel, with the average response for those drilling in that basin at $47 a barrel....next, four Eagle Ford oil execs said they could break even in a range between $40 and $55 a barrel, with an average breakeven of $48 a barrel; ten drillers in the Permian Delaware said they could break even in a range between $30 and $60 a barrel, also with an average of $48 a barrel; and 13 oil execs who were drilling in the Central Permian said they could break even in a range between $35 and $65 a barrel, with an average of $50 a barrel....next, the purple bar represents responses the Dallas Fed got from oil company executives who were exploring non-shale oil deposits; there were 40 responses from such executives, with some feeling they could break-even at $20 oil, and others saying they needed at least $100 a barrel oil to be profitable...as you can see, the average price needed for non-shale oil was $53 a barrel...lastly, the turquoise bar represents the responses the Dallas Fed got from other shale plays, which would include the Bakken of North Dakota; the eight responses from those other plays were between $45 and $65 a barrel, with an average break-even price of $55 a barrel...

thus, with oil closing this week near $43 a barrel, it's below the average price needed to break-even in all US oil basins, which means that at least half, but not all, of those who were active in the oilfields at the time of this March survey would find themselves unprofitable at today's oil prices...that doesn't mean that they would stop drilling for oil today; most have contracted for the work they'll be doing this month several months ago at higher prices, and even so, many will continue to try to keep the oil flowing even if its unprofitable because that's what they do...estimates are that there is a 3 month to 6 month lag between a change in the price of oil and the associated pace of drilling for it; & that somewhat fits with what we've observed; early this year, for instance, we saw a long period of double digit increases in drilling rig additions that lasted until April 28th, 2 months after the price of oil broke from the $53 a barrel average of February...if that pattern holds, it would  likely take until mid-August or later before we see the slowdown in drilling that should result from the collapse of oil prices that we've seen over the past month...furthermore, considering that there's a 7 month backlog of completed but still unfracked wells in the 4 major US oil basins, US oil production might continue rising until next year, given that the output of many of those still unfracked wells has probably already been contracted for at a price higher than today's..

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering details for the week ending June 16th, showed that US refineries experienced a modest throughput reduction but continued to operate at above seasonally levels, while both our crude oil imports and our crude oil exports were somewhat lower, and hence it was again necessary to withdraw oil from storage for the 10th time out of the last eleven weeks...our imports  of crude oil fell by an average of 149,000 barrels per day to an average of 7,876,000 barrels per day during the week, while at the same time our exports of crude oil fell by 205,000 barrels per day to an average of 517,000 barrels per day, which meant that our effective imports netted out to 7,359,000 barrels per day during the week, 59,000 barrels per day more than during the prior week...at the same time, our field production of crude oil rose by 20,000 barrels per day to an average of 9,350,000 barrels per day, which means that our daily supply of oil from net imports and from wells totaled an average of 16,709,000 barrels per day during the cited week... 

during the same period, refineries reportedly used 17,152,000 barrels of crude per day, 104,000 barrels per day less than they used during the prior week, while at the same time 462,000 barrels of oil per day were being pulled out of oil storage facilities in the US....thus, this week's EIA oil figures seem to indicate that our total supply of oil from net imports, from oilfield production, and from storage was 19,000 more barrels per day than what refineries reported they used during the week...to account for that discrepancy, the EIA inserted a (-19,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the data for the supply of oil and the consumption of it balance out, which they label in their footnotes as "unaccounted for crude oil"...

details from the weekly Petroleum Status Report show that the 4 week average of our oil imports fell to an average of 8,057,000 barrels per day, now just 2.0% above the imports of the same four-week period last year...the 462,000 barrel per day decrease in our total crude inventories came about on a 350,000 barrel per day withdrawal from our commercial stocks of crude oil and a 112,000 barrel per day sale of oil from our Strategic Petroleum Reserve, part of an ongoing sale of 5 million barrels annually that was part of a Federal budget deal 20 months ago....this week's 20,000 barrel per day increase in our crude oil production resulted from a 25,000 barrel per day increase in oil output from wells in the lower 48 states, which was partially offset by a 5,000 barrels per day decrease in oil output from Alaska...the 9,350,000 barrels of crude per day that we produced during the week ending June 9th was 6.6% more than the 8,770,000 barrels per day we were producing at the end of 2016, and up by 7.8% from the 8,677,000 barrel per day output during the during the same week a year ago, while it was still 2.7% below the June 5th 2015 record oil production of 9,610,000 barrels per day... 

US oil refineries were operating at 94.0% of their capacity in using those 17,152,000 barrels of crude per day, which was down from 94.4% of capacity the prior week, but still the 4th highest refinery capacity utilization rate this year...the amount of oil refined this week was also still above the seasonal norm, 3.9% more than the 16,505,000 barrels of crude per day.that were being processed during week ending June 17th, 2016, when refineries were operating at 91.3% of capacity, and roughly 11% above the 10 year average of 15.45 million barrels of crude per day for the 2nd week of June....

even with the modest slowdown in refining, gasoline production from our refineries increased by 320,000 barrels per day to 10,163,000 barrels per day during the week ending June 16th...however, that gasoline output was still 1.2% lower than the 10,289,000 barrels of gasoline that were being produced daily during the comparable week a year ago....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) also increased, rising by 97,000 barrels per day to a near seasonal high of 5,251,000 barrels per day, which was also 6.0% more than the 4,956,000 barrels per day of distillates that were being produced during the week ending June 17th last  year.....  

even with the jump in gasoline production, our end of the week gasoline inventories decreased by 578,000 barrels to 241,866,000 barrels by June 16th, after increasing by 5,420,000 barrels over the prior two weeks...this week's gasoline supplies were reduced because our domestic consumption of gasoline jumped by 547,000 barrels per day to 9,816,000 barrels per day, after falling by 553,000 barrels per day the prior two weeks... meanwhile, our gasoline exports rose by 132,000 barrels per day to 657,000 barrels per day, while our imports of gasoline rose by 339,000 barrels per day to 909,000 barrels per day at the same time...with the week’s modest decrease in our gasoline supplies, our gasoline inventories are still at a seasonal high for this week of the year, 1.8% above the prior seasonal record 237,631,000 barrels that we had stored on June 17th a year ago, 10.7% higher than the 218,494,000 barrels of gasoline we had stored on June 19th of 2015, and 12.5% more than the 214,977,000 barrels of gasoline we had stored on June 20th of 2014…  

with the increase in distillates production, our supplies of distillate fuels rose by 1,079,000 barrels to 152,495,000 barrels during the week ending June 16th, after increasing by 4,683,000 barrels the prior two weeks....factors in the difference of this week's increase in supplies were the amount of distillates supplied to US markets, which rose by 113,000 barrels per day to 4,158,000 barrels per day, and our exports of distillates, which fell by 97,000 barrels per day to 1,026,000 barrels per day, while our imports of distillates rose by 26,000 barrels per day to 87,000 barrels per day....even though our distillate supplies are still virtually unchanged from the 152,314,000 barrels that we had stored on June 17th, 2016, when a glut of heat oil supplies persisted after last year's warm El Nino winter, they're 11.8% higher than the distillate inventories of 135,428,000 barrels that we had stored on June 19th of 2015, following a more normal winter… 

finally, with the continuation of well above seasonal refining, our commercial supplies of crude oil fell for the tenth time in the past 11 weeks, as our oil inventories fell by 2,451,000 barrels to 509,095,000 barrels as of June 16th, as unaccounted for crude oil was not a major factor...however, we still finished the week with 6.3% more crude oil in storage than the 479,012,000 barrels we had stored at the beginning of this year, and 1.8% more crude oil in storage than the 499,994,000 barrels of oil in storage on June 17th of 2016....compared to the same week in prior years, when the oil glut was not so extreme, we ended the week with 18.2% more crude than the 430,837,000 barrels in of oil in storage on June 19th of 2015, and 42.9% more crude than the 356,384,000 barrels of oil we had in storage on June 20th of 2014...    

This Week's Rig Counts

US drilling activity increased for the 23rd week in a row, for the 33rd time in the past 34 weeks, and for the 50th time in the past 52 weeks during the week ending June 23rd, with oil drilling increasing while drilling for natural gas slowed....Baker Hughes reported that the total count of active rotary rigs running in the US increased by 8 rigs to 941 rigs in the week ending Friday, which was 520 more rigs than the 421 rigs that were deployed as of the June 24th report in 2016, and the most drilling rigs we've had running since April 17th, 2015, even though it was still less than half of the recent high of 1929 drilling rigs that were in use on November 21st of 2014....

the number of rigs drilling for oil increased by 11 rigs to 758 rigs this week, which was up by 428 oil rigs over the past year, and the most oil rigs that were in use since April 10th 2015, while it was still far from the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the count of drilling rigs targeting natural gas formations decreased by 3 rigs to 183 rigs this week, which was still 93 more rigs than the 90 natural gas rigs that were drilling a year ago, but way down from the recent natural gas rig high of 1,606 rigs that were deployed on August 29th, 2008....

there was no change in the Gulf of Mexico rig count this week, where drilling continues from 21 platforms, up from 20 a year ago...we also still had drilling from one platform offshore from Alaska this week, which means the total US offshore count is at 22 rigs, up from 21 rigs a year ago, when there was also one rig drilling offshore from Alaska...in addition, drilling also started from a platform on an inland lake in southern Louisiana this week, where there are now 4 rigs working, up from the 3 rigs working on inland waters last year at this time...

the count of rigs that were set up to drill horizontally increased by 10 rigs to 792 horizontal rigs this week, which was up by 467 from the 325 horizontal rigs that were in use in the US on June 24th of last year, while they are still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....at the same time, 3 more directional rigs were also started up this week, increasing the active directional rig count to 72 rigs, which was up from the 43 directional rigs that were deployed during the same week a year ago...however, the vertical rig count was down by 5 rigs to 77 vertical rigs this week, which was still up from the 53 vertical rigs that were deployed during the same week last year...

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf 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 basins...in both tables, the first column shows the active rig count as of June 23rd, the second column shows the change in the number of working rigs between last week's count (June 16th) and this week's (June 23rd) count, the third column shows last week's June 16th active rig count, the 4th column shows the change between the number of rigs running on Friday and the equivalent Friday a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 24th of June, 2016...        :

as you can see, the largest increases this week were in Oklahoma, where 5 rigs were added, including those in the Cana Woodford, the Ardmore Woodford, and the Granite Wash basin near the Texas panhandle, and North Dakota, where the 3 rigs that were added were in the Williston shale....strangely, Texas was almost a no-show this week, unusually quiet in most oil districts, with just one rig added in the Permian and a net no change in the state...just about everything else that changed is obvious from those tables, except for the 3 rig decrease in natural gas rigs...2 of those came out of the Arkoma Woodford in Oklahoma, where there was simultaneously an increase of 2 rigs drilling for oil, resulting in the zero net change we see above, and the other was in another region, not otherwise included in Baker Hughes summary totals...

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The Company Behind the Dakota Pipeline Is Spilling Toxic Fluid in Ohio -- Energy Transfer Partners LP is making a mess of its biggest project since the Dakota Access pipeline.Construction of the $4.2 billion Rover natural gas line has caused seven industrial spills, polluted fragile Ohio wetlands and angered local farmers. The company owes $1.5 million in restitution after demolishing an historic house. The Ohio Environmental Protection Agency is furious and a federal energy regulator has launched a rare public investigation that threatens to delay the pipeline’s scheduled Nov. 1 completion. “We’ve not seen a project in Ohio with spills at this size and scale, and if we can’t even trust Rover to construct this pipeline, how can we trust them to operate it when it’s complete?” said Heather Taylor-Miesle, executive director of the Ohio Environmental Council.Energy Transfer, the Dallas-based company led by billionaire Kelcy Warren, promised part of the 713-mile (1,147-kilometer) pipeline would open in July, but work is stalled on key segments until the company’s responsibility for the spills can be assessed by the Federal Energy Regulatory Commission, or FERC. “We are working with FERC and the OEPA to resolve these issues in a manner that is satisfactory to everyone involved, and most importantly ensures the complete remediation of these areas,” said Energy Transfer spokeswoman Alexis Daniel. Recent developments have not affected the project’s timeline, Daniel said. Any delay would pinch natural gas producers that contracted to ship on the line, which will bring resources from the Marcellus shale to the Midwest. Seven companies havebooked 2.9 billion cubic feet a day, enough to power 51,000 homes for an entire winter, once Rover is completed. The company stands to lose more than $10 million a week if it misses the deadline, according to Bloomberg Intelligence analyst Michael Kay. Gas traders, too, are on alert for work interruptions. When FERC ordered Energy Transfer to halt new construction after the Ohio spills, natural gas futures hit a 14-week high.

Analyst: “Nearly Impossible” for Rover to Get Done on Schedule -- Rover Pipeline, Energy Transfer’s $3.7 billion, 711-mile Marcellus/Utica natural gas pipeline that will run from PA, WV and eastern OH through OH into Michigan and eventually into Canada, will almost certainly not go online in July as originally planned–at least according to an article on The Street evaluating the project and its builder, Energy Transfer. At the heart of the delay is a series of spills that have occurred while drilling underground, horizontally, under rivers and creeks (and other structures) in which drilling mud has spilled. The largest such spill, to date, happened on April 13 when around 2 million gallons of drilling mud spilled close to the Tuscarawas River (see Rover Pipeline Accident Spills ~2M Gal. Drilling Mud in OH Swamp). That spill, plus the others, set off a chain reaction and ongoing fight with the Ohio Environmental Protection Agency (OEPA), who lobbied the Federal Energy Regulatory Commission (FERC) to investigate. Which is now happening (see OH EPA Says Diesel Fuel Found in Rover 2M Gal Drilling Mud Spill). The FERC investigation has stalled forward progress in some (not all) areas. According to an analyst from Genscape quoted in the article, Energy Transfer “seems to have an approach where they stick to the minimum requirements instead of exceeding them” when it comes to drilling and laying pipelines. Energy Transfer strongly disagrees that statement. Regardless, the company’s stock has taken a hit and the article (below) raises concerns about the future of the company’s stock for shareholders…

Wouldn't be a budget debate without some talk of fracking and taxing - New Philadelphia Times Reporter - It wouldn’t be a biennial budget debate without a little final talk of raising taxes on oil and gas produced via horizontal hydraulic fracturing. Not too long ago, fracking was a hot topic of discussion around the Statehouse, with frequent mentions and hopes of big boosts to the state economy, thanks to deep underground fuel deposits in eastern Ohio’s shale deposits. Fracking-related oil and gas has helped that part of the state, with investments from companies in wells and increased production. But fracking talk in general and related tax debates have quieted considerably as of late, with clear indications that the governor and Republican lawmakers haven’t found common ground on whether to raise rates on oil and gas produced through fracking.Gov. John Kasich included his latest severance tax proposal in the executive budget he offered in late January. Republican lawmakers, as they have on multiple occasions before, dutifully removed it and haven’t said a whole lot about it since. That didn’t stop the severance tax from making a brief appearance during Conference Committee, however. “You and I couldn’t have a budget conversation if I didn’t bring up my favorite [topic], the severance tax,” said Rep. Jack Cera, D-Bellaire, in questions to state budget Director Tim Keen. Cera specifically asked about the balance of the severance tax fund and projections for growth moving forward.  Keen answered, “The existing, very low severance tax rates that we have in place in the state have seen annual growth rates that are quite significant because of the additional [oil and gas production] activity. We’ve gone from … annual revenues maybe in the vicinity of $10 million to over $50 million in the last six or seven years.” The latter prompted criticism from Cera, who is among those who think part of those funds should be directed to the  eastern Ohio communities directly impacted by oil and gas production activities. Keen responded, “I would suggest, of course, that general fund services that are provided throughout the state of Ohio, including the shale regions — school funding, funding of the Medicaid program, subsidies for higher education — directly benefit your constituents. In fact, they are benefiting when those services can continue to be provided at levels that are contemplated in this budget.” And that was that, likely leaving the severance tax debate for another time — possibly early next year, if the governor decides to propose another increase as part of his last mid-biennium budget review.

Warren pleased to be addressing Patriot Water discharges into sewers - Youngstown Vindicator -- Patriot Water Treatment, which began operating a commercial wastewater treatment plant on Sferra Drive in 2011, was identified as the source of terrible odors experienced by residents and businesses throughout the north side of the city in recent weeks. Ed Haller, director of the city’s water pollution control department, said perhaps it’s for the best that the odor problem occurred when it did. His department has been waging a battle with the company for a year over chemical compounds Patriot has been sending into the sewers, Haller said. “We can’t continue to allow them to do just anything they want that could be detrimental to greater Warren,” Haller said. Patriot, located on the north end of town, treats wastewater it receives from customers. At the end of the process, the water goes into the sewers and travels to the wastewater treatment plant on the south end of town for treatment with other wastewater. Eventually, the water flows into the Mahoning River. Patriot began as a treatment facility for wastewater produced by the gas and oil industry, an alternative to injection wells. Receiving fracking wastewater has challenges of its own, such as treating barium and salt, Haller said. But Patriot also has permission to accept wastewater from other sources besides the gas and oil industry. Last year, the city experienced problems with Patriot’s discharging high levels of zinc from wastewater, Haller said. Then in May, Water Pollution Control started noticing the presence of dimethyl disulfide in the water, Haller said. According to the Reactor Resources website, dimethyl disulfide is used in the sulfiding process, which removes sulfur and nitrogen from motor fuels. It’s also used as a pesticide and a food additive in cheese, meats, soups, savory flavors and fruit flavors, according to the www.chemicalbook.com website. Its odor has been described as pungent garlic, propane, decaying fish, or decomposing materials, according to the U.S. Environmental Protection Agency. Andy Blockson, president of Patriot Water, said the key for him is that dimethyl disulfide is not regulated by the EPA, so his company is not required to test for it. As a result, he would not know whether the chemical is in any of the loads of waste his company received. “It’s not a pollutant of concern,” he said.

Drilling Costs Rise in Marcellus/Utica; Workforce Becomes Issue -- The petrochemical conference in Pittsburgh earlier this week wasn’t the only event in town. The DUG (Developing Unconventional Gas) East conference and exposition took place at the David L. Lawrence Convention Center, several blocks from the petchem event. The reporting from one session in particular caught our attention. A panel of drillers and service companies (upstream focus) talked about the prices that service companies (that is, oilfield service companies, like Halliburton and Baker Hughes) charge has gone up 10-15% over rates from last year, when service companies had to slash prices. While that’s good for service companies, but not so good for drillers and may, yet again, lead to a decline in active rig counts. The panel also discussed the increasingly critical shortage of workers in the Marcellus/Utica industry…

EQT to pay $6.7 billion for Rice, creating biggest U.S. natgas producer - U.S. oil and gas company EQT Corp said on Monday it would buy Rice Energy for $6.7 billion, a deal that would create the biggest natural gas producer in the United States. This would be the biggest deal ever for EQT as it looks to expand its natural gas business. Rice Energy's shares surged almost 27 percent to $24.95 in afternoon trading, but below the $27.05 per share offered by EQT. EQT's shares were down 7.6 percent. The deal would put the combined EQT-Rice ahead of Exxon Mobil Corp as the nation's biggest gas producer. U.S. energy firms are pumping money into gas-rich states like Pennsylvania, West Virginia and Ohio. The United States should soon become the world's top natural gas exporter. "EQT appears to be empire building," analysts at Mizuho said in a report, noting they expect EQT to begin monetizing Rice's midstream assets by dropping them down to EQT Midstream Partners (EQM.N), which could raise $1.3 billion. EQT said it would be able to drill longer horizontal wells in Pennsylvania after the deal as most of the acquired acreage is next to where EQT already drills or owns land. "EQT is a decade behind in fracking technology used by industry leaders in Marcellus/Utica," said Dallas Salazar, CEO of energy consulting firm Atlas Consulting. "EQT needs a lot, and Rice offers a lot of what it needs." EQT has been buying acreage in the Marcellus shale field, with some of the cheapest gas in the country. Most recently it picked up 53,400 acres in the field from Stone Energy Corp. EQT said the acquisition would increase its 2017 average sales volume by 1.3 billion cubic feet equivalent per day (bcfe/d) and core acres in the Marcellus field by 187,000 to 670,000. The deal would also give the company access to Rice Energy's midstream assets, including a 92 percent interest in Rice Midstream GP Holdings. EQT will take on about $1.5 billion in debt. 

EQT to create biggest U.S. natgas producer with $6.7 bln Rice deal - Nasdaq.com  - EQT Corp was set to leapfrog Exxon Mobil as the largest U.S. natural gas producer after saying on Monday it agreed to a deal to buy fellow Appalachian gas and oil firm Rice Energy for $6.7 billion. The tie-up would join two of the largest players in the Marcellus and Utica Shale formations, which stretch across much of Pennsylvania and Ohio and are ideally situated to supply gas throughout the U.S. Northeast. Rice Energy also provides technological expertise to EQT, which has operated in the Marcellus since 2009. "EQT is a decade behind in fracking technology used by industry leaders in the Marcellus/Utica," said Dallas Salazar, CEO of energy consulting firm Atlas Consulting. "EQT needs a lot, and Rice offers a lot of what it needs." Technology improvements allow companies to drill sideways over a longer distance, making adjacent land with gas deposits more attractive. On average, the acquisition will increase EQT's sideways drilling capacity by 50 percent in two Pennsylvania counties. Controlling production costs is important when U.S. natural gas prices remain low due to abundant supply. The Henry Hub U.S. benchmark's average price of $3.02 per million British thermal units so far in 2017 is well below the 10-year average of $4.42. EQT has identified $2.5 billion of cost savings from the proposed merger, as well as benefits from moving some of Rice's midstream assets into its pipeline business, EQT Midstream Partners . Analysts at Mizuho have estimated those assets to be worth $1.3 billion.The proposed transaction, scheduled to close in the fourth quarter, would be the biggest ever for EQT, increasing its 2017 average sales volume by 1.3 billion cubic feet equivalent per day (bcfe/d) and core acres in the Marcellus field by 187,000 to 670,000.  In a later filing, EQT said Citigroup, its financial adviser, had commited to back the deal with bridge loans worth $1.4 billion. Should the deal collapse, Rice would pay a termination fee of up to $255 million. 

EQT sees $6.7 billion Rice deal boosting production, efficiencies: EQT CEO - EQT's announced $6.7 billion deal for Rice Energy allows the combined US Appalachian Basin shale gas companies to grow production and meet increasing demand, but at a lower cost, EQT CEO Steve Schlotterbeck said Monday. "We can achieve the same growth rate with roughly 7% less capital with the combination than we could as separate companies," Schlotterbeck said in a conference call with analysts after the stock-and-cash deal was disclosed. The deal between EQT and Rice will create the US' largest natural gas producer, they said, and comes as significant new takeaway capacity is being added to move Marcellus and Utica shale production to markets where the power plant and home heating fuel is in increasing demand. It also gives EQT the ability to increase returns through longer laterals on the two companies' contiguous acreage while maintaining moderate overall production growth, the company said. No change to either company's development plans is expected for the balance of 2017; more specifics on 2018 production plans will be released in December, Schlotterbeck said. Even then, production growth is only expected to be moderate, he said. "It is my belief we are in the second phase of the shale gas revolution, and the high growth models of the first phase I don't think are going to work in phase 2," Schlotterbeck said. Schlotterbeck noted that the real value from the deal is in boosting returns by taking advantage of operational efficiencies from the overlap of the two companies' footprints. Assuming a $3/MMBtu NYMEX price and a $2.50/MMBtu local price, returns per well would jump to 70% from 52% in Pennsylvania alone, he said.

Many U.S. underground natural gas storage wells at risk for leaks -- More than one in five of the 15,000 active underground natural gas storage wells in the U.S. appear to be at risk for serious leaks due to obsolete well designs, according to a study by Harvard T.H. Chan School of Public Health researchers. The wells are similar in design to that of the Aliso Canyon gas storage facility in California that leaked for about four months in 2015-16 and is considered the largest single accidental release of greenhouse gases in U.S. history.The study was published May 24, 2017 in Environmental Research Letters.  The study, led by Drew Michanowicz, postdoctoral research fellow in the Department of Environmental Health, and senior author Aaron Bernstein, associate director of the Center for Health and Global Environment at Harvard Chan School, identified more than 2,700 largely unregulated underground storage wells across 19 states with the same design as Aliso Canyon and that were not originally designed for gas storage. These repurposed production wells have a median age of 74 years, and some were constructed more than 100 years ago.“Underground storage of natural gas is a critical part of the U.S. supply chain, and many portions of the country rely on this infrastructure for heating and increasingly for e lectricity generation. As Aliso Canyon and other incidents have demonstrated, the vulnerability of a single well presents a major risk to energy security, greenhouse gas emissions, and to the safety and health of people who live near it,” Michanowicz said in a press release.

Fracking seems to poison groundwater within one kilometer - For almost a decade, residents of some Pennsylvania counties have complained that the natural gas prospectors nearby have contaminated their water. Locals say that after the fracking for gas began, the water made them sick, that it turned brown, even that it became flammable. The industry fought back. Nevertheless, in 2016 the Agency for Toxic Substances and Disease Registry, part of the U.S. Department of Health and Human Services, found related heavy metals and chemicals in quantities high enough to pose health risks. And in December 2016, the Environmental Protection Agency concluded that there is indeed a connection between prospecting for shale gas and contaminated groundwater. But there has been little research on the distance gas drillers should keep from sources of drinking water.  A new paper addresses this research gap. It is also relevant to people living in urban areas, as gas drillers perfect horizontal drilling techniques — boring down and over to reach deposits — allowing them to operate in more densely populated areas. They ended up looking at 54,809 water samples taken over five years, all within 10 kilometers of one well pad. Controlling for temperature and rainfall around the locations where water is sampled, water-intake locations (where water enters the drinking supply), for time of day when the sample was collected, and for the laboratory where the sample was analyzed, Hill and Ma look for traces of chemicals linked to the fracking process. Key takeaways:

• Adding a well pad within 0.5 kilometers of a water-intake location is associated with a 2.7 percent increase in fracking-related contaminants.
• Contaminants fall as the distance increases. A well pad within 1 kilometer is associated with a 1.5 percent increase in contaminants.
• Beyond 1 kilometer, the results are no longer statistically significant.
• A well placed uphill from a water source poses a slightly greater threat, providing “evidence that, unsurprisingly, it is the uphill threats that are disproportionately affecting drinking water quality.”
• An important caveat the authors note is that only 14 percent of Pennsylvania residents are served by groundwater systems, but the potential health effects for this population is “large.” (See this 2013 paper, for example.)

Syfy's 'Blood Drive' Blames Fracking for Its Dystopian America -- Syfy’s new show, Blood Drive, centers itself on a dystopian world destroyed by climate change. As a result, anyone who wants a decent life must partake in a gruesome race using cars powered by human blood. Syfy's description of the show is: “The Future: where water is a scarce as oil, and climate change keeps the temperature at a cool 115 in the shade. It’s a place where crime is so rampant that only the worst violence is punished.”  Wednesday night’s episode, “Welcome to Pixie Swallow,” revealed that fracking is what led to the violent, depraved world that exists in the show. A cyborg that works for the evil corporation that controls every business shows an abducted police officer a video detailing the past horrors that resulted from fracking and how Heart Corporation was able to take over amidst the chaos.

'Rent-a-spy' firm TigerSwan used Standing Rock intel to infiltrate other activist groups - TigerSwan — a private surveillance and intelligence gathering firm with roots in the military conflicts in the Middle East — continued to track and spy on activists from the Standing Rock Anti-Dakota Access Pipeline (DAPL) protests well after they returned home and went about their normal lives. The Intercept reported Wednesday that a number of leaked documents from TigerSwan show that the company compared the protesters who gathered at Standing Rock Reservation to the “jihadist post-insurgency” movement that formed after the Soviet occupation of Afghanistan and gave rise to the Taliban and Osama bin Laden. Surveillance targets included the Answer Coalition in Chicago, anti-Trump protest movements and climate change activists. TigerSwan expanded its spying net to include locations in Arkansas, Florida, Iowa and New York. “They’re trying to make connections where they aren’t. It’s almost like they’re trying to cast conspiracy theories across the entire progressive movement because they’re sympathetic to the NoDAPL movement,” said Answer’s John Beacham to the Intercept. A leaked document calls the dispersing Standing Rock protesters an “anti-DAPL diaspora” and makes the case for tracking individual activists, embedding spies within protest groups and developing sources within progressive groups to enable monitoring and reporting of their plans and movements.A document from February details TigerSwan’s plan to infiltrate the community organizing group Lifted Voices: “This would be a good opportunity for us to get someone inside, become known and gather the most current direct action [tactics, techniques, and procedures]. While Lifted Voices is not a #NoDAPL organization, Kelly Hayes has influenced organizing protest events and has spoken at the last two events in Chicago.” The documents also detail the vast array of spying techniques aimed at protesters during the Standing Rock protests including radio spying, infrared heat tracking, drone flyovers, distance microphones and other military spying techniques. 

Dakota Access-Style Policing Moves to Pennsylvania's Mariner East 2 Pipeline - The Intercept - After months of employing military-style counterinsurgency tactics to subvert opposition to the Dakota Access Pipeline in North Dakota, Iowa, Illinois, and South Dakota, the private security firm TigerSwan is monitoring resistance to another project — the controversial Mariner East 2 pipeline.Like DAPL, Mariner East 2 is owned by Energy Transfer Partners. The pipeline is slated to run for 350 miles, transporting ethane, butane, and propane through Ohio, Pennsylvania, and West Virginia to a hub near Philadelphia for shipment to both domestic and international markets. Internal TigerSwan documents reviewed by The Intercept suggest the company has had a presence in Pennsylvania since at least April. On April 1, the Mariner East 1 pipeline, which runs parallel to the proposed path of ME2, spilled 20 barrels of ethane and propane near Morgantown, Pennsylvania. On the day of the incident, an email provided to The Intercept by a TigerSwan contractor shows the firm was watching social media for signs the spill would become a rallying point for pipeline opponents. “At this time the incident has NOT gained any public interest,” a TigerSwan operative wrote in the email. TigerSwan founder James Reese replied, “We nees [sic] to monitor social media for blow baxk [sic] on the leak.” The company had been monitoring Dakota Access opponents’ social media for months and analyzing press coverage related to that pipeline fight, according to more than 100 internal situation reports leaked to The Intercept. The documents routinely referenced counterinformation efforts to produce and distribute propaganda favorable to the pipeline. TigerSwan apparently carried at least some of these practices to Pennsylvania. It would be weeks before the public learned of the leak of highly explosive natural gas liquids. According to a source with direct knowledge of TigerSwan’s operation, making sure nobody found out about the incident was part of TigerSwan’s mission on the project. Nearby residents were kept in the dark until April 20, when Sunoco, which recently completed a merger with Energy Transfer Partners, confirmed to a local media outlet that the leak had occurred.

FERC Releases 'Utterly Insufficient Review' for Mountain Valley Pipeline - The Federal Energy Regulatory Commission (FERC) released its Final Environmental Impact Statement Friday for the Mountain Valley Pipeline, a controversial 303-mile pipeline that would carry two billion cubic feet of fracked gas per day from West Virginia through Virginia.As has been the pattern at FERC, the review fails to adequately assess whether the pipeline is needed in the first place, while sweeping aside the project's serious threats to water resources, the safety of communities and the climate .Oil Change International research analyst Kelly Trout had the following response to FERC's deeply flawed climate assessment:In this utterly insufficient review, FERC ignores both science and economics to sweep aside the Mountain Valley Pipeline's significant climate impact. FERC severely undercounts climate pollution by ignoring methaneleakage across the gas supply chain, which makes gas as dirty or dirtier than coal , and by omitting emissions from upstream fracking . FERC also wrongly assumes that gas supplied by the project is likely to replace coal, when it's just as likely to lock out the clean energy and efficiency alternatives we urgently need.If FERC was doing its job, it would find the Mountain Valley Pipeline will cause an unacceptable increase in climate pollution and reject this dirty project. A proper analysis shows that this pipeline will cause as much climate pollution as 26 coal plants per year. This project is the last thing we need in the face of worsening heatwaves and flooding , and when clean alternatives are readily available now.Concerned residents continue to fight this dirty pipeline because it's a clear threat to local livelihoods, clean water and our climate. It's time for FERC to completely overhaul its pipeline review process to prioritize the safety of communities and our climate, not the profits of corporate polluters.

PADD 1 refiners fight to keep Laurel Pipeline flowing west. - Refiners in the Midwest and in the Mid-Atlantic states have each experienced good times and bad, both before the Shale Era and more recently. Lately, though, fortune has been smiling on the owners of midwestern refineries, a number of which have been expanded and reconfigured to run cheaper heavy crude from western Canada — changes that have put them at a competitive advantage to East Coast refineries running more expensive light crudes. Now, a proposed refined products pipeline reversal in Pennsylvania would allow more motor fuels to flow east from Petroleum Administration for Defense District (PADD) 2 into markets traditionally dominated by PADD 1 refineries. Today we look at recent developments in Midwest and Mid-Atlantic refining, and at the consequential battle for turf that’s just starting to flare. Over the years we have blogged extensively about the ups and downs experienced by refiners in PADD 1 (the East Coast) and PADD 2 (the Midwest). In Back to Red, which focused on East Coast refineries, we recounted that they can supply only a small portion of PADD 1’s total demand, and that for years they relied almost exclusively on waterborne imported crude for feedstock and therefore had little or no competitive advantage over their European refined-product rivals. Then, when the Great Recession of 2008 whacked East Coast demand for motor fuels, PADD 1 refining margins suffered and a number of refineries there were shut down. Then there was shale, and at first it was a godsend — midstream companies and some PADD 1 refineries developed supply networks to move then relatively cheap Bakken crude by rail to the East Coast, giving them a feedstock-price edge over their international competitors. But by 2015-16, several factors (among them, the build-out of pipeline infrastructure to relieve Midwest congestion, the oil price crash and the end of the ban on most U.S. oil exports) combined to make most crude-by-rail deliveries uneconomic and put PADD 1 refineries back where they were pre-shale — or worse.

Demand To Ship Gasoline On Top US Pipeline At 6-Year Low (Reuters) - The operator of the biggest U.S. fuel pipeline system said on Thursday demand to transport gasoline to the country's populous northeast is the weakest in six years, the latest symptom of a global oil market grappling with oversupply. Summer is typically when gasoline demand peaks in the world's biggest oil consuming country as motorists hit the road for vacation, and keeping their gas tanks full strains the capacity of U.S. refiners and pipelines. This year, so much fuel is stored in tanks in the Northeast that Colonial Pipeline Co said in a notice to customers that demand from refiners and fuel traders to bring gasoline through its pipeline to the region from refining hubs in the South was the worst in six years. For the first time since 2011, demand for the pipeline was below capacity for a five-day period starting early next week, Colonial said on Thursday. The news pushed down gasoline prices in the Gulf region, where the pipeline begins. Benchmark U.S. gasoline prices led the energy complex higher and were up about 2.1 percent shortly after midday, partly boosted by expectations that fewer barrels flowing into the East Coast would alleviate a glut. Typically, demand exceeds the pipeline's space, forcing refiners and traders to supplement delivery with tanker shipments or imports. "The only reason they wouldn't be full is clearly that inventory levels are high enough that there is no incentive to move product to New York," 

Michigan scraps Straits of Mackinac oil pipeline safety study after conflict discovered - The State of Michigan today scrapped an almost-complete risk analysis on the Line 5 oil pipeline below the Straits of Mackinac after discovering an analyst who worked on the study later did work for the pipeline's owner. Det Norske Veritas, or DNV GL, was preparing the safety analysis of Enbridge's 64-year-old, twin, 20-inch pipes under the Straits where Lakes Michigan and Huron meet. The report was to look at financial liabilities from a worst-case-scenario spill in the Straits from the pipelines, which move 23 million gallons of crude oil and natural gas liquids through the Upper and Lower Peninsulas daily. State officials learned within the past month that an employee for DNV who had a "significant" role in the Line 5 risk analysis subsequently worked on another project for Enbridge. That violates conflict-of-interest prohibitions in the company's contract with the state. “The evaluations of Line 5 were supposed to be independent, not tainted by outside opinions or information, but that’s not what happened," Michigan Attorney General Bill Schuette said in a statement. "Instead, our trust was violated, and we now find ourselves without a key piece needed to fully evaluate the financial risks associated with the pipeline that runs through our Great Lakes. This is unacceptable." 

Zinke Targets New England Coral Canyons as Next National Monument to Open Up for Drilling -- Interior Sec. Ryan Zinke , who recently recommended a reduction in the size of the 1.35 million acre Bears Ears National Monument to President Trump , is advocating for more drilling and mining on public lands and waters. Zinke signaled to Reuters that he is likely to make a similar recommendation for the Northeast Canyons and Seamounts Marine National Monument —the first marine national monument in the Atlantic Ocean. . "Energy dominance gives us the ability to supply our allies with energy, as well as to leverage our aggressors, or in some cases our enemies, like Iran."  The monument, which consists of 4,913 square miles of underwater canyons and mountains off the New England coast, was designated by President Obama last September to protect critical ecological resources and marine species, including deep-sea corals, whales, sea turtles and deep-sea fish.  After touring the Canyons monument at the New England Aquarium, Zinke told Reuters he believed "there are legitimate scientific endeavors and research that are recognized and important (around the site), but there are also recognized livelihoods, fishing jobs that are also important." Zinke added he wants to redirect revenue from offshore to fund repairs around America's national parks.

The hunt for offshore oil is killing tiny sea creatures that are key for healthy oceans --A widely used method to find oil and gas for offshore drilling can kill tiny sea creatures that are key for feeding many marine animals like shellfish, fish, and even whales. And the impacts on these tiny, drifting creatures — called zooplankton — are seen in an area much larger than previously thought. The study, published in the journal Nature Ecology and Evolution, adds to the body of evidence that the loud noises produced during oil and gas exploration can disrupt marine life — including whales that use sound to communicate and look for food. It also comes just a few months after President Donald Trump has signed an executive order looking to expand offshore gas and oil drilling in the Atlantic and Arctic oceans.  Oil and gas companies looking for offshore natural resources use seismic airguns to blast compressed air through the water and into the seafloor. The noise produced by these airguns is louder than a Saturn V rocket during launch, according to Nature. So researchers wanted to see what the effects are on the sea’s base of the food chain, the zooplankton. The researchers blasted airguns in the ocean off southern Tasmania, and checked zooplankton populations before and after by using sonar and nets. The abundance of these tiny creatures dropped by 64 percent within one hour of the blast, the study says. Two to three times as many zooplankton were also found dead — and the impacts were recorded as far away as 0.7 miles. Scientists previously estimated that impacts would occur only within 33 feet from the blast. It’s not 100 percent clear how the airguns are causing the die-offs, but it’s possible the blast throws off the receptors the animals use to navigate, disorienting them and causing them to die, according to Nature. Because zooplankton is key for feeding larger marine animals, the die-offs could have serious cascading effects.

US offshore gas production falls at Tropical Storm Cindy nears landfall - Offshore US natural gas production contracted for a second consecutive day Wednesday, though no impact on Gulf Coast hub prices was apparent as Tropical Storm Cindy edged closer to landfall near the Texas-Louisiana border. Production receipts from Louisiana, Mississippi and Alabama were estimated Wednesday at 2.23 Bcf after falling Tuesday to 2.49 Bcf. From the start of this week, storm-related declines have cut offshore output by about 640 MMcf/d or just over 22% compared to the prior five-day average at 2.87 Bcf/d, data compiled by Platts Analytics show. Prices at ANR Louisiana and Trunkline ELA -- two hubs that reflect offshore supply and Southeast regional demand -- edged up just 2 cents/MMBtu Wednesday, trading at $2.79/MMBtu and $2.80/MMBtu, respectively, according to data from the Intercontinental Exchange. At 1 pm CDT (1800 GMT) Cindy was located about 160 miles southeast of Galveston Island, Texas. The storm is expected hit to southeastern Louisiana, southern Mississippi and southern Alabama hardest, making landfall late Wednesday and into Thursday morning. The storm is will bring projected maximum sustained wind speeds of 50mph and rainfall totals of up to 12 inches, according to the National Hurricane Center.

Storm Cindy Bears Down on Gulf Coast After Curbing Oil, Gas - Tropical Storm Cindy, which has already curbed energy production in the Gulf of Mexico, disrupted shipping and forced workers off oil and gas platforms, is now dumping rain on the Gulf Coast. With top winds of 50 miles (80 kilometers) an hour, the system is moving northwest toward the coast and was about 105 miles south of Lake Charles, Louisiana, the U.S. National Hurricane Center said in a 11 p.m. New York time advisory. While Cindy wasn’t forecast to move across southeastern Texas or southwestern Louisiana until early Thursday, heavy rainfall was already affecting the northern Gulf Coast. The storm has shut one-sixth of the oil production in the Gulf of Mexico, halted vessel unloadings at a major oil-import terminal and triggered a force majeure on a system that collects natural gas from offshore platforms. Once Cindy makes landfall, it could threaten to disrupt even more energy operations in a region that accounts for about half of the nation’s oil-refining capacity. “The biggest impact would be on shipping activity which will remain suspended through Friday,” said Andy Lipow, president of Lipow Oil Associates in Houston. “Storm sets off high winds and waves that will impact ability of ships to go through open water.”

Analysis: Haynesville slowdown highlights bearish natural gas outlook - Often considered a bellwether for natural gas producer confidence, drilling activity in the Haynesville Shale last week witnessed the biggest slowdown in nearly 11 months as weakening prices over the last four weeks have continued to weigh on internal rates of return.   On Friday, the rig count in the Louisiana-Texas-Arkansas play fell by two, the largest decline since late-July 2016, data compiled by Baker Hughes show. At 39 though, the rig count in the Haynesville still remains at its highest since February 2015. The recent slowdown in drilling comes as the futures market at the Henry Hub, often used by producers to hedge future production, continues to weaken.The 12-month forward curve, assessed Thursday at $3.11/MMBtu, has fallen by 25 cents, or more than 7%, in the last month.With an estimated breakeven Henry Hub gas price of $3.14/MMBtu according to Platts' Well Economics Analyzer, current market conditions are leaving producers in the Haynesville unenthusiastic about new drilling initiatives. Recent drilling trends in other dry gas plays have been characterized by a similar kind of inertia. Over the last two weeks, rig counts in the Marcellus, Utica, Barnett and the Fayetteville have been unchanged. With benchmark forward prices beyond first-quarter 2018 already below the $3/MMBtu level, dry plays outside of the Northeast may soon become unprofitable.

U.S. refineries are running at record-high levels – EIA - Gross inputs to U.S. petroleum refineries, also referred to as refinery runs, averaged a record high 17.7 million barrels per day (b/d) for the week ending May 26, before dropping slightly to 17.5 million b/d for the week ending June 2 and 17.6 million b/d for the week ending June 9. Product supplied to the U.S. market as well as inventories and exports are also at relatively high levels.Weekly U.S. refinery runs have exceeded 17 million b/d only 24 times since EIA began publishing the data series in 1990, and all of those instances have occurred since July 2015. Despite record-high inputs, refinery utilization did not reach a new record, because refinery capacity has increased in recent years. Refinery utilization reached 95% for the week ending May 26, slightly lower than the levels reached in mid-July through mid-August 2015.U.S. refinery capacity has increased by 659,000 barrels per calendar day (b/cd) since mid-August 2015. Refinery capacity—measured in barrels per calendar day (b/cd)—represents the amount of input that a crude oil distillation unit can process in a 24-hour period under usual operating conditions (averaged over the entire year), accounting for both planned and unplanned maintenance. U.S. refineries have three primary outlets for their products: they can be placed in inventory, provided to end-users to satisfy domestic demand, or exported. Recently, petroleum product inventories, product supplied, and exports have all been higher than previous five-year averages. Total product inventories for the first week of June 2017 were nearly 83 million barrels higher than the five-year average, although they are almost 3 million barrels lower than at the same time last year.   Similarly, product supplied, a proxy for demand, was greater than the five-year average by nearly 600,000 b/d during the first week of June 2017 but 400,000 b/d lower than at the same time last year. Petroleum product exports were also higher than previous levels. EIA has been publishing weekly petroleum product exports based on near-real-time export data provided by U.S. Customs and Border Protection since August 31, 2016. Previously, weekly export estimates were developed from monthly official export data published by the U.S. Census Bureau, roughly six weeks following the end of each reporting month. Petroleum product exports for the first week of June 2017 were 831,000 b/d greater than the June 2016 average.

Why the Wall Street Journal Is Wrong About the US Oil Export Boom – Art Berman - The lead editorial in Friday’s Wall Street Journal was pure energy nonsense.’ “Lessons of the Energy Export Boom” proclaimed that the United States is becoming the oil and gas superpower of the world. This despite the uncomfortable fact that it is also the world’s biggest importer of crude oil.The Journal uses statistical sleight-of-hand to argue that the U.S. only imports 25% of its oil but the average is 47% for 2017. Saudi Arabia and Russia–the real oil superpowers–import no oil.The piece includes the standard claptrap about how the fracking revolution has pushed break-even prices to absurdly low levels. But another article in the same newspaper on the same day described how producers are losing $0.33 on every dollar in the red hot Permian basin shale plays. Oops. The main point of the editorial, however, is to celebrate a surge in U.S. oil exports to almost 1 million barrels per day in recent weeks. The Journal calls lifting the crude oil export ban that made this possible “a policy triumph.” What the editorial fails to mention is that exports actually fell after the ban was lifted, and only increased because of Nigerian production outages (Figure 1).Tight oil is ultra-light and can only be used in special refineries, most of which are in the U.S. It must be deeply discounted in order to be processed overseas in the relatively few niche refineries designed for light oil. That’s why Brent price is higher than WTI. It must also displace other light oil such as Nigerian Bonny Light. Civil unrest in the Niger Delta region interrupted oil output and provided a temporary opening for U.S. ultra-light to fill. Nigerian production is now increasing so look for U.S. crude exports to decline. Friday’s editorial goes on to also rejoice in the rising tide of potential U.S. natural gas exports. This is taken by the editors as further evidence that free markets do the right thing. Perhaps they haven’t noticed that international LNG prices crashed along with oil prices, and that U.S. gas prices have almost doubled in the last year. Asian gas demand is saturated and the price for LNG in Europe is only $4.80/mmBtu. The Journal extols Energy Secretary Rick Perry’s approval of more U.S. LNG projects in April but a Wood Mackenzie analysis concluded that “the numbers proposed far exceed what the world realistically needs.” The newspaper has fallen into the trap of mistaking production volumes for profit.  The Wall Street Journal believes that the expansion of U.S. oil and gas exports demonstrates the wisdom of free markets. I think it shows just the opposite.

Study: Oil, gas drilling connected to pollution, earthquakes - Brownsville Herald (AP) — A new study by a nonprofit science organization says oil and gas drilling in Texas is linked to pollution and earthquakes. The Academy of Medicine, Engineering and Science of Texas study found drilling for oil and gas in shale rock pollutes the air, erodes soil and contaminates water, while the disposal of millions of gallons of wastewater causes earthquakes, the Houston Chronicle (http://bit.ly/2siuByn ) reported. The study also found that the shale oil boom has degraded natural resources, overwhelmed small communities and increased the frequency and severity of traffic collisions as workers rush to oil fields with their equipment. The group began its analysis of the environmental and social impacts of drilling and hydraulic fracturing two years ago. It created a task force of attorneys, geologists, seismologists and engineers, including representatives from oil companies and an environmental group. The group reviewed and analyzed hundreds of academic studies, many about Texas oil and gas operations. The study found fracking is spreading rapidly across Texas. The technique is used by the energy industry to extract oil and gas from rock by injecting high-pressure mixtures of water, sand or gravel and chemicals. The report calls for the state to improve monitoring and collecting data about the environmental impacts of shale drilling and fracking.

Fracking Study Links Pollution, Earthquakes to Drilling in Texas Shale - A new analysis of Texas' oil and gas development underscores how there really are two sides to the energy debate. We know that drilling has brought the state billions in wealth, but its vast impacts on the environment cannot be ignored. The Academy of Medicine, Engineering and Science of Texas ( TAMEST )—the state's top scientific community—has released a comprehensive, peer-reviewed report today analyzing the wide-ranging environmental, economic and social impacts of shale oil and gas production in the Lone Star State. "This study aims to help us better understand what is and is not known about the impacts of shale oil and gas development in Texas and it offers recommendations for future research priorities," the report states. The 204-page Shale Task Force report was compiled by representatives from academia, environmental organizations, the oil and gas industry, and state agencies with a focus on six key areas: seismicity , land , air , water , transportation and economic and social impacts . Citing the report, the Houston Chronicle noted that the shale boom has contributed to the state's economic gains but has also "degraded natural resources, overwhelmed small communities and even boosted the frequency and severity of traffic collisions as workers and equipment rush to oil fields." The report also reveals that people living in shale communities feel conflicted over the oil and gas industry. They like its benefits to local, regional and state economies but dislike the impacts on traffic, public safety, environmental concerns and noise. For instance, the report calculated that rural crashes involving commercial vehicles have increased more than 75 percent in some drilling regions in Texas. Also, road damage from oil and gas operations in Texas costs an estimated $1.5 to $2 billion a year Although Texas has not experienced as many human-induced-earthquakes as Oklahoma , according to the report, Texas recorded only two earthquakes a year before 2008. Since then, there have been 12-15 a year. Some of the earthquakes have been linked to wastewater disposal from oil and gas operations.  As for water usage, the report's authors found that while hydraulic fracturing, or fracking , uses 1-5 million gallons of water per well on average, accounting for less than 1 percent of total statewide water use, it could still account for 90 percent of total water use in some rural counties.

Fracking impact? Here's what we need to know, says elite Texas shale task force --A task force set up by the Academy of Medicine, Engineering and Science of Texas released a 204-page report Monday that found both great economic benefits and areas of concern about the latest drilling boom. Despite the uncertainty, study organizers said they hoped the two-year effort would cut through some of the confusion around fracking and how it impacts Texans and the environment.  The report was written by experts in oil and gas, engineering, transportation, medicine, economics and the law. The task force included oil executives, academics, an oil and gas regulator and a representative from an environmental group.Fears about the consequences of drilling, particularly air and water quality, have escalated since Barnett Shale natural gas drillers near Fort Worth started the fracking revolution in the early 2000s.  Texas now leads the nation in oil production and is one of the world's largest producers. The exploration of shale fields — thanks to fracking, other technology and the increasingly important Permian Basin — has contributed to a 50 percent decrease in gasoline prices, provided local governments with billions of dollars and is responsible for nearly 3.8 million Texas jobs, according to the report, titled "Environmental and Community Impacts of Shale Development in Texas." At the same time, drilling and related activities have led to earthquakes, contributed to the increase and severity of traffic accidents near drilling areas and left questions about the long-term health effects of emissions. An industry group pointed to the lack of evidence of groundwater contamination as good news."If fracking were a credible risk to groundwater, we would know about it in Texas, which produces more oil and natural gas than any other state," said Steve Everley, a spokesman for Texans for Natural Gas, in a written statement. "The fact that such an incident hasn't been observed here is further confirmation that fracking is safe and well-regulated." The study also highlighted that power plant emissions statewide have decreased as natural gas replaces more and more coal as the fuel of choice to produce electricity. The report proposes 25 recommendations that include investigating whether Texas needs a law to protect surface owners who don't own mineral rights and more research to better understand the benefits and risk of using brackish or salty water for fracking. Air emissions was also a worrisome area since there was limited information about their health effects, according to one of the authors.

Elite shale task force says fracking adds $2 billion to Texas road repair costs - A task force set up by the Academy of Medicine, Engineering and Science of Texas released a 204-page report Monday that found both great economic benefits and areas of concern about the latest drilling boom. Despite the uncertainty, study organizers said they hoped the two-year effort would cut through some of the confusion around fracking and how it impacts Texans and the environment."In an era of alternative facts, this report is bringing together much or most of the scientific evidence about the actual impacts of shale development," said task force chairwoman Christine Ehlig-Economides, who teaches petroleum engineering at the University of Houston. "There's a lot of misinformation about hydraulic fracturing in particular." The report was written by experts in oil and gas, engineering, transportation, medicine, economics and law, who analyzed existing research rather than conduct new, original research. The task force included oil executives, academics, an oil and gas regulator and a representative from an environmental group.Among other things, the report highlighted a study that looked into the impact of increased use of roads close to drilling sites, especially by trucks. Researchers found that the cost of road repair -- mainly on rural roads not built for such heavy loads -- increased by $1.5 billion to $2 billion annually. And, there was an increase in serious and fatal crashes involving commercial vehicles near drilling areas such as the Eagle Ford Shale and Permian Basin.  The exploration of shale fields — thanks to fracking, other technology and the increasingly important Permian Basin — has contributed to a 50 percent decrease in gasoline prices, provided local governments with billions of dollars and is responsible for nearly 3.8 million Texas jobs, according to the report, titled "Environmental and Community Impacts of Shale Development in Texas." At the same time, drilling and related activities have led to earthquakes, contributed to the increase and severity of traffic accidents near drilling areas and left questions about the long-term health effects of emissions.

Fix shale oil production pollution before it gets worse, study leader says - Scientists, regulators and leaders of Texas' energy industry must identify and understand the environmental risks of shale oil and gas drilling before air pollution or water contamination leads to tighter restrictions that could ultimately derail the rebounding industry, the leader of a broad new study said Monday."We really do thrive on the availability of energy in the United States," said the University of Houston's Christine Ehlig-Economides, a former Schlumberger petroleum engineer and chairman of a shale task force convened by The Academy of Medicine, Engineering and Science of Texas. "Where there are things that could threaten the future for this kind of development, those are the things we really must address." The study, conducted by some the state's top scientists and released Monday, concluded that the shale oil boom, while enriching companies, residents and state coffers, has also caused earthquakes, degraded natural resources, overwhelmed small communities and even boosted the frequency and severity of traffic collisions as oversized trucks rushed to and from the oil field. But oil and gas industry representatives found things to like about the report, pointing to sections that said there was little evidence to tie hydraulic fracturing itself - as distinguished from the other parts of shale operations, such as wastewater disposal - to drinking water pollution or the exponential rise in Texas earthquakes."This study is yet another indication that the campaign to shut down fracking is based on politics, not science," Steve Everley, spokesman for Texans for Natural Gas, said in a statement. "If fracking were a credible risk to groundwater, we would know about it in Texas, which produces more oil and natural gas than any other state." Todd Staples, president of the Texas Oil & Gas Association, acknowledged that oil and gas production, taken as a whole, does cause some pollution. But he lauded the report for identifying which parts of the process were more troublesome - such as surface spills, which contaminate drinking water, methane leaks, which pollute the air, and wastewater injection wells, which can cause earthquakes - and which weren't.  "Fracking is a small part of the process. Yet it's been used loosely and incorrectly by those seeking to stop energy production," he said. "Far and away, oil and gas is having a positive influence on the state."

The most overlooked finding in groundbreaking shale study --One of the most important discoveries from this week’s groundbreaking Texas shale oil and gas report has gone missing from public discussion.The study, by the state’s top scientists, highlighted a litany of findings, some positive — such as the annual gross product from Texas shale drilling of more than $470 billion — and others alarming, such as the unknown effect of air pollution and the marked increase in traffic deaths from oil field trucks.But a key point, the researchers said, was buried in the report’s last chapter:The environmental and social effects of shale oil and gas production in Texas are interconnected. Scientists, regulators and the industry itself cannot continue to consider them independently, and must instead look at how they impact each other. Michael Young, a University of Texas hydrogeologist, associate director at the state Bureau of Economic Geology and member of the research task force, said that’s what makes this report unique.Most studies on oil and gas production focus on one problem, perhaps air pollution, species habitat destruction, water contamination or roadway deterioration. “But these are all connected,” Young said.. Many consider pipelines safer than trucking. What if, however, those pipelines would have to be built through sensitive species habitats? To build a pipeline, companies have to clear-cut a wide right-of-way, dividing animal habitat, disrupting species’ travel and separating animals from food sources, nesting, and each other. “That's known as fragmentation,” Young said.Roadways, on the other hand, are already built.The pipeline may still be better, Young noted. But companies, scientists and regulators should consider all effects before making such such decisions.“All of these things have upsides and downsides,” Young said. “We wanted to have an appreciation for how all those are connected. That to me, is where the report is unique.” For more information, see Table 6-2 in the report, on page 120, and Chapter 9, which starts on page 165.

Industry group to enviros: End fracking rhetoric - -- A top Texas energy official urged anti-fracking activists this week to drop the rhetoric and work with industry to reduce the environmental impact of shale oil and gas development. It doesn’t solve any problems to blame hydraulic fracturing for every spill, earthquake or leak, said Todd Staples, president of the Texas Oil & Gas Association. Scientists, industry and regulators must instead pinpoint problems and work to solve each individually. “Words matter,” Staples said. “Fracking is a small part of the process. Yet it's been used loosely and incorrectly by those seeking to stop energy production."   If methane leaks are polluting the air, then the solution must address those leaks, he suggested. Surface spills that contaminate water, and earthquakes caused by wastewater injection are rare, the association said. But when they happen, they need to be addressed individually, not by simply blaming fracking.“In order to diagnose a problem, you need to know the specifics,” Staples said. “A surface spill is totally different than the concern about groundwater contamination.” A study released earlier this week by some of the state’s top scientists reported that shale development pollutes the air, contaminates water and causes earthquakes. At the same time, the report distinguished fracking — the act of pumping chemicals, sand and millions of gallons of water into well holes under high pressure until the rock cracks, releasing the oil and gas trapped within — from other elements of shale development, like well drilling, production and wastewater disposal. The scientists did not say that fracking can’t contaminate water, nor that it doesn’t cause earthquakes. But they found little to no evidence that it had.

Understanding Gas Takeaway Capacity at the Permian's Waha Hub -- Rising volumes of associated natural gas production from accelerating oil-directed drilling in the Permian, along with growing demand downstream in Mexico and along the Texas Gulf Coast, are placing renewed importance on a key West Texas trading hub and pricing point — Waha. Permian gas production climbed almost 900 million cubic feet/day (MMcf/d) during 2016 to nearly 6.0 billion cubic feet (Bcf/d), and is up another 400 MMcf/d since then. Moreover, the pace of growth shows no signs of slowing. Much of this incremental supply will rely on the pipeline interconnects and takeaway capacity available at the Waha trading hub to get to desirable markets. The questions that arise, then, are, will the capacity at Waha be sufficient and at what point will more be needed? Today we begin a series diving into the infrastructure, gas flows and capacity at Waha.

After Hess Pulls Out, OXY Is Now Dominant US Producer Of Oil Via Carbon Injection -- Reuters -- June 21, 2017 -- Data points:

• Hess will sell its stake in EOR projects in the Permian Basin of West Texas and New Mexico to Occidental Petroleum for $600 million in cash
• the deal cements OXY's status as the dominant US producer of oil via carbon injection
• carbon injection: favored by faux environmentalists and oil producers alike
• carbon injection: could grow if Congress expands tax credits this summer
• OXY also gets complete control of naturally occurring sources of underground CO2
• this naturally occurring source: boosts OXY's bottom line 
• cost of carbon is generally the largest expense in EOR projects

Dallas Fed: Energy indicators see continued increase -- The most recent report from the Federal Reserve Bank of Dallas for June 2017 shows that many indicators for the oil and gas sector continued to increase in May. While WTI crude dropped slightly, production growth continues to stay strong, especially in the Permian basin. Below is a summary of the report from the Dallas Fed. For more details and graphs, be sure to visit their website. The Dallas Fed reported that despite early hopes that production cuts from the Organization of Petroleum Exporting Countries (OPEC) would mean lower global crude inventories, lack of confidence led to a decrease in the average WTI spot price to $48.48 in May from $51.06 in April. Natural gas prices increased by two pennies to $3.10 per MMBtu. The oil and gas industry is gaining new jobs. U.S. employment rose by 3,800 jobs in April. Guess which state accounted for 55 percent? You got it–Texas. Texas oil and gas extraction employed 92,100 jobs with another 122,000 in support activities for mining. Why is this number important? Because it shows that production in the Permian Basin rose in May–again. It’s no surprise to anyone that the number continues to climb. The EIA showed an increase of 53,400 barrels per day to 1.29 million. In the Eagle Ford, production continues to rise as well, although not as much as in the Permian. The Eagle Ford showed an increase of 33,000 barrels per day. The two areas together account for approximately 3.6 million b/d. That’s a heckuva lot of oil. Anyone watching the weekly Baker Hughes rig count knows that the Permian basin consistently adds rigs. Texas, too, is usually leading the reports, despite a small drop last week (June 9). Horizontal rigs account for much of these totals, and the Dallas Fed reported that vertical and directional rig counts in Texas fell by 2 in May. Most expect the rig count in Texas to continue to climb over the next six months.Since the crude export ban was lifted in 2015, the Dallas Fed report shows that it wasn’t until this year that we saw a significant increase in exports. Exports increased from 733,000 b/d in April to 926,800 b/d in May. The Fed attributes some of this to the Ingleside Energy Center Terminal at the Port of Corpus Christi. Partly due to the Mexican government’s energy reform program, the demand for imported gasoline has decreased. PEMEX saw recovery of refined products’ prices in addition to completed refinery maintenance. This mean that there was less need to buy from the United States. The Dallas Fed report showed a substantial low of U.S. exports to Mexico at 273,000 b/d in March, which was almost half of what was exported in December of 2016.

Interior head says public lands can make U.S. a 'dominant' oil power | Reuters: Boosting drilling and mining on America's protected federal lands can help the United States become not just independent, but "dominant" as a global energy force, according to Interior Secretary Ryan Zinke, whose agency manages about one-fifth of U.S. territory. In an interview with Reuters, Zinke outlined his approach to development and conservation in America's wildest spaces, and discussed how that philosophy was guiding his review of which national monuments created by past presidents should be rescinded or resized to make way for more business. "There is a social cost of not having jobs," the former Montana Congressman and Navy Seal said in the interview on Friday. "Energy dominance gives us the ability to supply our allies with energy, as well as to leverage our aggressors, or in some cases our enemies, like Iran," he said. Former President Barack Obama, who oversaw a huge increase in domestic energy production during his tenure while strengthening environmental protections, had advocated reducing U.S. dependence on foreign oil. Obama had also adopted a policy to factor in a "social cost of carbon" emissions from burning fossil fuels - which scientists believe drive global climate change - in making decisions about regulation and land protection. While total U.S. oil production has risen to near records in the past decade, the share produced on federal land has dropped to a fifth in 2015 from more than a third in 2010, according to federal data from the Department of the Interior.

Zinke pledges to enforce Obama-era methane rule amid rewrite — The Trump administration will enforce an Obama-era regulation aimed at restricting harmful methane emissions from oil and gas production, even as it seeks to rewrite the rule to be more industry-friendly, Interior Secretary Ryan Zinke said Tuesday. Zinke told the Senate Energy Committee that Interior will enforce those parts of the methane regulation that have taken effect. The promise comes despite an announcement last week that Interior is postponing parts of the rule that take effect next year. Under questioning from Democratic Sen. Maria Cantwell of Washington state, Zinke said he agreed that burning off, or “flaring,” of excess methane gas at drill sites is wasteful. He said he hopes to design a rule that ensures taxpayers get fair value for the gas while not punishing industry.Asked by Cantwell if he would promise not to “spend the next six months dragging your feet” on a new rule, Zinke replied: “Ma’am, I do not drag my feet.” The methane rule, finalized last November, forces energy companies to capture methane that’s flared at drilling sites on public lands because it earns less money than oil. An estimated $330 million a year in methane is wasted through leaks or intentional releases on federal lands, enough to power about 5 million homes a year, officials say. Methane, the primary component of natural gas, is about 25 times more potent at trapping heat than carbon dioxide, although it does not stay in the air as long. Methane emissions make up about 9 percent of U.S. greenhouse gas emissions that contribute to climate change, according to government estimates.A bid by Senate Republicans to overturn the methane rule failed unexpectedly last month, prompting Interior officials to promise to suspend, revise or rescind the regulation as part of a wider effort by the Trump administration to unravel what it considers burdensome regulations imposed by former President Barack Obama. 

Judge's DAPL Ruling, Reckless Spill Record Pushes Pipeline Company's Shares Below $20 for First Time - Energy Transfer Partners, the company behind the controversial Dakota Access Pipeline and the fracked gas Rover Pipeline, has quite the extensive spill history, a new analysis shows.After crunching the numbers from the Pipeline and Hazardous Materials Safety Administration (PHMSA), TheStreet revealed that the Dallas-based company spilled hazardous liquids near water crossings more than twice the frequency of any other U.S. pipeline company this decade. According to the report: "The company has spilled hazardous liquids five times near water crossings since 2010 when PHMSA started collecting detailed data. The company's spills account for almost 20% of all hazardous liquid spills near water crossings since 2010, primarily because of a 55,000-gallon gasoline spill in 2016 near the Susquehanna River in Lycoming County, Pennsylvania. TheStreet only included onshore spills in its analysis, and included subsidiary companies."Since 2010, the company has spilled hazardous liquids 204 times in all, ranking only behind Enterprise Products Partners LP (EPD) and Magellan Midstream Partners, LP MMP, according to TheStreet's tally."Energy Transfer owns about 71,000 miles of natural gas, natural gas liquids, refined products and crude oil pipelines across the country.Alexis Daniel, an Energy Transfer spokesperson, defended the company's safety record.   "Not only does Energy Transfer Partners adhere to the approved regulatory standards, but it is always Energy Transfer Partners' priority to go above and beyond when building pipelines and is a common practice on all projects," she told TheStreet. "For example on Rover, the pipeline route will be flown every ten days, weather permitting, versus every 14 days which is the current requirement, for visual inspection of the pipeline."

Judge won't allow Trump to be added to pipeline lawsuit   (AP) — A judge says he's inclined to let a group of individual members of American Indian tribes join a lawsuit over the Dakota Access oil pipeline, but only if they agree to not add President Donald Trump as a defendant.Any action against the president whose administration pushed through the pipeline's completion would need to come in a separate lawsuit, U.S. District Judge James Boasberg said. The group's lead attorney said that's still a possibility. The pipeline began shipping oil to customers on June 1.The White House said the administration is confident that federal analysis of the pipeline's environmental impacts "is legally sound."Four Sioux tribes in the Dakotas are suing Texas-based pipeline developer Energy Transfer Partners and the Army Corps of Engineers, which permitted the $3.8 billion project to move North Dakota oil through South Dakota and Iowa to a distribution point in Illinois where it can be shipped to Gulf Coast refineries. The tribes fear environmental and cultural harm, which ETP denies.The lawsuit in federal court in Washington, D.C., has lingered nearly a year. In late February, 13 members of the Standing Rock, Cheyenne River and Oglala Sioux tribes asked to join as individual plaintiffs. They maintain they might be better suited than the tribes as a whole to make some claims against the pipeline because they're personally affected. Boasberg ruled this week that the Corps didn't adequately consider how an oil spill might affect tribal fishing and hunting rights, or whether it might disproportionately affect the tribal community. "Ultimately, this case is about whether individual Native American people are to be subjected to environmental harm," plaintiffs' attorney Bruce Afran said.

Oil to keep flowing in Dakota line while legal battle continues --Oil will continue to flow through the Dakota Access Pipeline through the summer while authorities conduct additional review of the environmental impact, after a judge on Wednesday ordered more hearings in coming months. Last week, U.S. District Court Judge James Boasberg in Washington ruled in favor of Standing Rock Sioux and Cheyenne River Sioux tribes, who said more environmental analysis of the Dakota Access line should have been carried out. The tribes had said the 1,170-mile (1,880 km) line violates their hunting, fishing and environmental rights. On Wednesday, Boasberg set out a schedule of hearings that will decide what will happen to the line while additional review is completed. A lawyer for the U.S. Army Corps of Engineers, which is responsible for environmental review, would not estimate when asked by Boasberg how long additional review would take. The judge could still order the line to be shut at a later date following a series of hearings scheduled through the summer. "Our view has been that the pipeline should be shut down," said Jan Hasselmann, attorney for the tribes. Energy Transfer Partners LP (ETP.N) built the $3.8 billion pipeline to move crude from the Northern Plains to the Midwest and then on to the Gulf of Mexico. The line runs from western North Dakota into Patoka, Illinois, where it hooks up with another line to refiners in the Gulf of Mexico. ETP said on Wednesday it was "pleased with the judge's decision" for pipeline operations to continue while the process "unfolds." 

Dallas Goldtooth: The Fight Against DAPL Is Not Over -- Oil will continue to flow through the Dakota Access Pipeline this summer and into the fall, despite the ruling from a federal judge last week that the Trump administration must conduct additional environmental review of the project. A U.S. Army Corps of Engineers lawyer told Washington, DC District Court Judge James Boasberg Wednesday that the Corps had "no timeframe" for the newly-ordered environmental review. Lawyers for the tribes bringing suit against the project told press they anticipate a decision by September, and expressed anxiety that the tribes will not be allowed to comment on the new environmental review. As the DAPL project moves through court, the pipeline's owner, Energy Transfer Partners (ETP), has been keeping busy: a new investigation from The Intercept shows that a private security firm employed by ETP to use "military-style counterterrorism measures" against NoDAPL protesters is now monitoring another ETP pipeline project in Pennsylvania. "The fight against Energy Transfer Partners and its Dakota Access pipeline is not over, nor is it an easy fight ahead," said Dallas Goldtooth, lead national organizer for the Indigenous Environmental Network . "We know that we face an uphill legal battle to victory, but we remain committed to the protection of the water and the power of our movement to keep fossil fuels in the ground."  A rally was held Wednesday at U.S. District Courthouse to support the Standing Rock Sioux and Cheyenne Sioux tribes. "Their battle is on behalf of all of us who share this planet," said Rising Hearts founder Jordan Marie Daniel. "The fight against placing corporate interests above the health, safety and well-being of entire communities and the quest to end the assault against the earth we share moves forward."

West Coast alternatives for exporting LPG to Asian markets.  The Pacific Northwest will never be a Houston or even a Marcus Hook when it comes to liquefied petroleum gas (LPG) export volumes, but the region — British Columbia, Washington State and Oregon — is finally poised to get a second marine terminal dedicated to loading propane and butane, the two LPG family members. When AltaGas and Royal Vopak’s planned 40-Mb/d LPG export terminal on BC’s Ridley Island comes online in the first quarter of 2019, it will join Petrogas’s 30-Mb/d terminal in Ferndale, WA, in offering time-saving, straight-shot LPG deliveries to Asia, which has emerged as a leading destination for North American-sourced propane and butane. Other LPG export terminals in the Pacific Northwest have been proposed. Today we begin a blog series on propane and butane exports from Ferndale and the prospects for regional export growth. Propane and butane — the two natural gas liquids (NGL) products generally referenced as LPG  — are produced by the processing of natural gas yielding mixed NGLs and the fractionation of those NGLs into purity products (see Talkin’ ‘Bout My F-f-fractionation for more). Refineries also produce LPG. U.S. production of propane and butane has skyrocketed during the Shale Era, largely because of rising production of wet natural gas, which contains significant volumes of NGLs. As result (and as we said in Come on Down to My Boat), the U.S. five years ago flipped from its long-time status as a net LPG importer to a net exporter. By 2016, net U.S. exports had risen to an average of 855 Mb/d, more than 15 times the exporting pace in 2012, and in the first six months of this year, LPG exports averaged just above 1.0 MMb/d, according to the June 20 (2017) issue of RBN’s NGL Voyager Report, which analyzes ship-tracking data to determine how much LPG is exported out of each U.S. terminal and where it ends up.

It Won't Take a Red-Hot Summer to Wipe Out the U.S. Gas Glut - A supply glut that’s weighed on the U.S. natural gas market for most of the past two years may vanish before the winter, even if a sweltering summer fails to materialize.  Inventories of the power-plant fuel may reach 3.4 trillion cubic feet by the end of October, the lowest since 2008 for the time of year, according to report from Bloomberg New Energy Finance. That’s about 10 percent below the five-year average for the period. Even as forecasts show unusually cool early-summer weather curbing gas consumption in the eastern U.S., bullish traders may have cause for optimism. Exports of the fuel are heading to Mexico and overseas buyers at a record clip, siphoning off stored supplies, and production from America’s shale basins has yet to recover to early 2016 levels after last year’s price rout. Gas stockpiles dipping below the five-year average could bode well for a market rally in 2018.  "If we have low inventory and a normal winter, that basically sets up the stage for a bullish market in 2018," during spring and summer, when supplies are added to storage, Tai Liu, an analyst at Bloomberg New Energy Finance, said in a phone interview Thursday.  U.S. natural gas inventories totaled 2.77 trillion cubic feet as of June 16, 8.1 percent above the five-year average, U.S. Energy Information Administration data show.  Gas bulls aren’t giving up on summer yet, despite the mild weather outlook. Seven of 12 traders and analysts surveyed by Bloomberg News see prices rebounding from a recent 15-week low. Two were bearish and the rest expect futures to hold steady.

Global refinery capacity additions and their effect on US refiners - Worldwide, refiners expect to add significant capacity over the next five years, mostly in the Middle East and the Asia Pacific region. While only a small amount of crude processing capacity additions are expected in the U.S. and Canada, the capacity additions elsewhere could have major product-trade and utilization effects on U.S. refiners — especially in PADD 1 (East Coast). Today we analyze expected near-term refinery capacity additions, global demand projections, and potential effects in the U.S. Until a few years ago, the U.S. stood as a major net importer of refined products; but thanks to the recent boom in domestic crude supply and an abundance of low-cost natural gas (cheap thermal energy, power and hydrogen), U.S. refiners now rank among the lowest-cost producers of transportation fuels worldwide. Despite lackluster demand growth within the U.S., low-cost American refiners have maintained record-setting outputs, boosting refined product exports to new highs. However, with new refining capacity under development in major international markets, is the high domestic capacity utilization sustainable? Well, it depends. 

Falling prices, equipment and labor constraints could slow drilling surge - The U.S. drilling surge could begin to plateau soon as operators grapple with both falling prices and growing constraints on equipment and labor.  Unless the oil market reverses course quickly, analysts said, the recent drop in crude prices to less than $43 a barrel could prompt operators in less prolific oil plays like the Bakken Shale in North Dakota to shed rigs.Producers in more lucrative regions like the Permian Basin in West Texas may only slow the pace of the rig count growth if the market turmoil persists. But drillers there are also running low on rigs with high-horsepower systems that plow larger wells into the region's dense rocks, and it has become increasingly difficult to find new oil field workers in the region, said Paul Mosvold, president and chief operating officer of Houston rig contractor Scandrill. "We're going to go flat on the rig increase because of the lack of available shale-ready rigs," Mosvold said. And as prices fall, "are we going to see a dramatic slowdown in the Permian? I don't think so. But in the peripheral areas, we could." U.S. crude prices fell 3 percent on Tuesday to $42.85 a barrel in New York as traders reacted to news that Libya's oil production will rise to its highest level in four years.That drop could eventually slow the U.S. rig count, particularly in regions outside the Permian Basin, but it won't stop the flood of oil coming from the nation's shale plays. At this point, oil prices would have to fall into the low $30-a-barrel range to squeeze U.S. shale plays enough to force drillers to reduce oil production, analysts said. Several U.S. oil companies locked in $50-a-barrel oil prices for this year's batch of crude production, and they'll keep pumping crude into the oversupplied market, keeping a lid on prices."This bust phase is going to last longer than anyone expected," said Bob McNally, president of consultancy Rapidan Group in Washington D.C. "There has been this false hope that shale or OPEC will return to a swing producer role."

For investors in shale drilling, the party's over - Houston Chronicle: Wall Street appears to have lost its taste for the resurgent U.S. shale industry as oil prices tumble and energy share prices fall. Oil companies have only raised $3 million this month through selling new shares to investors, a dramatic drop in the public equity offerings that have helped fuel the return of drilling rigs across the nation this year. It's a stark shift in investor sentiment after last month, when producers like Kosmos Energy and RSP Permian collected a combined $1 billion from stock-market investors. That was before U.S. oil prices took a month-long tumble of around 20 percent to $43.15 a barrel on Friday. Some investor groups have said "they had little-to-no interest in providing a second lifeline to the industry," Houston investment bank Tudor, Pickering, Holt & Co. said in a note to clients on Friday. "It's like you're having a party, and it's awesome, and then the parents come home, and the party's done," said David Pursell, head of macro research at Tudor Pickering. "There's no appetite to fund further growth. Oil prices went from the mid-$50s to the low $40s. It's a big change and it happened quickly." The once-vibrant public equity markets had poured $8 billion into U.S. shale drillers in the three months after OPEC announced it would cut oil production, and the number of active U.S. drilling rigs boring has more than doubled since last summer. But the in wake of the recent slump in oil prices, the oil companies that raised billions of dollars this year have seen their shares drop by 22 percent this year. If investors keep pulling back, the surge in drilling could slow sharply, Pursell said. And why wouldn't they? Other industries are performing much better than energy. 

Oil bear market separates strong, weak U.S. shale producers - Crude oil's bear market is highlighting the haves and have nots among U.S. shale producers, with the stronger promising to keep pumping even as prospects dim for some of their financially strapped peers. Crude prices have dropped more than 20 percent since late February, in part because of rising U.S. shale production that is offsetting OPEC's efforts to tame global stockpiles. On Wednesday, prices fell more than 2 percent to $42.58 after touching a 10-month low during the day. The price tumble has dragged down shares of oil and natural gas producers and raised the specter of trims to drilling budgets set when oil was trading around $50 a barrel. Oil producers' average capital spending was previously projected to rise by 50 percent this year over depressed levels of 2016. Analysts say prices that stick between $40 and $45 a barrel could trigger some companies to quietly scale back planned drilling activities. But industry-wide, major changes to capital spending budgets likely will not be announced until later this summer as quarterly results are released. "Companies will try to push that back as long as possible," said Dan Katzenberg, an oil industry analyst at Baird. A Wall Street sell-off of energy stocks largely has spared those shale producers with strong balance sheets, hedged production and significant operations in the Permian basin. Investors are treating them as likely not only to survive but thrive at below $45 a barrel. The Permian Basin of West Texas and New Mexico, America's largest oilfield, can produce profitably even if oil prices drop below $40 per barrel. "Investors are starting to make that separation between companies that were already outspending cash flow and those that weren't,"

Day Of Reckoning in 2018? US Rig Count Poised For Loss -- Unless they’re missing something – and really, that’s pretty unlikely – analysts at Barclays believe U.S. oil and gas will lose as many as 100 onshore rigs by the end of the year.As of June 16, there were 933 rigs at work in the United States – that’s up 270 rigs since January. But as rigs efficiency reverses and oilfield service costs trend upward, fewer rigs will remain active during the remainder of the year, Barclays said in a June 20 note to investors. In fact, for the rig count to linger above 900, exploration and production (E&P) companies would have to increase spending by 70 percent this year and well costs would have to flip and actually decline. Neither is a likely scenario. “The math all points in the same direction … down,” Barclays said, adding that the downward trend could last several quarters.Most of the publicly traded E&Ps and majors have met their rig targets for the year, and with oil prices faltering, additional spending is doubtful.As Barclays explained, high-grading the characterized the downturn is wearing off and operators are now drilling longer laterals, which can take twice as long to complete a well as it does to drill it. That’s especially the case in the Permian where operations are moving into the Delaware, where pad drilling is used less than elsewhere in the basin. “Well costs are arguably the biggest point of contention between E&Ps touting structural cost gains and service companies clawing back pricing,” they said. “Overall, well costs appear fairly flat this year, though signs of increases are starting to build.” All of which doesn’t really change much this year. Completions, which make up about up two-thirds of the well cost, need to catch up to a rig count that got ahead of itself. Meanwhile, E&P budgets haven’t changed, a key metric to gauge service costs. To be sure, E&Ps appreciated the lower well costs during the leanest months, and that fueled the boom in activity. But with a rig count that grew perhaps too fast, it’s setting up a challenging year ahead. “It has also led to a false narrative that shale is economic below $50 per barrel,” Barclays said. “We think that day of reckoning comes in 2018 as oil inflation rears its head, budgets get pinched and E&Ps become more discerning in growth programs.”

Oil firms could waste trillions if climate targets reached -report | Reuters: Energy giants including Exxon Mobil and Royal Dutch Shell risk wasting more than a third of their budgets on projects that will not be needed if climate targets are to be met, a thinktank report shows. More than $2 trillion of planned investment in oil and gas projects by 2025 could be redundant if governments stick to targets to lower carbon emissions to limit global warming to 2 degrees Celsius, according to a report by the Carbon Tracker thinktank and institutional investors. It compared the carbon intensity of oil and gas projects planned by 69 companies with requirements needed to meet the warming target set by the 2015 Paris agreement, which will require curbing fossil fuel consumption. It found Exxon, the world's top publicly-traded oil and gas company, risks wasting up to half its budget on new fields that will not be needed. Shell and France's Total would see up to 40 percent of their budgets misspent. Fossil fuel producers have come under growing pressure from investors to reduce carbon emissions and increase transparency over future investment. Sweden's largest national pension fund, AP7, one of the authors of the report, said last week it had wound down investments in six companies, including Exxon, which it said had violated the Paris agreement. Top energy companies have voiced support for the Paris agreement reached by nearly 200 countries. Many of them have urged governments to impose a tax on carbon emissions to support cleaner sources of energy such as gas.

Innovators toil to revive Canada oil sands as majors exit | Reuters: In the boreal forests and on the remote prairies of Alberta, a handful of firms are running pilot projects they hope will end a two-decade drought in innovation and stem the exodus of top global energy firms from Canada's oil sands. They are searching for a breakthrough that will cut the cost of pumping the tar-like oil from the country's vast underground bitumen reservoirs and better compete with the booming shale industry in the United States. If they fail, a bigger chunk of the world's third-largest oil reserves will stay in the ground. Canada's oil sands sector has become one of the biggest victims of the global oil price crash that began in 2014 when top OPEC producer Saudi Arabia flooded the market with cheap crude to drive out high cost competitors. This year alone, oil majors have sold over $22.5 billion of assets in Canada's energy industry, and been lured south to invest in the higher returns of U.S. shale. Joseph Kuhach is among the entrepreneurs in Canada hoping they can turn the tide. He runs a small Calgary-based firm, Nsolv, that is testing the use of solvents to liquefy the bitumen buried in the sands and make it flow as oil. Kuhach says using solvents can cut 20 to 40 percent from the cost of producing the oil. The technique currently used is to use steam to heat the sands underground to extract the oil. It's a hard sell, he said, to Canadian producers struggling with low oil prices. They are reluctant to invest in a multi-million dollar technology that is unproven on a commercial scale, he said.

Judge OKs deposition of tar sands employee in Exxon climate fraud probe -  A judge on Friday approved a request by the New York Attorney General's office to grill several ExxonMobil employees as part of its widening probe into whether the oil giant misled investors about its risks from climate change. Justice Barry R. Ostrager refused a request by Exxon to block two of the depositions at a hearing in which he ordered the two sides to meet outside of court to hash out their differences over New York Attorney General Eric Schneiderman's demand for more documents. The contentious hearing did little to resolve the ongoing dispute between Exxon and the attorney general's office, which is investigating whether the company committed financial fraud involving what it told investors about climate change risk.. Ostrager declined to rule on whether Exxon would have to produce additional documents that were subpoenaed Schneiderman in May. Exxon had asked the judge to throw out the requests. Instead, Ostrager told Exxon and the attorney general's office they should work together outside of court to agree on specific questions for the company to answer about the details of its climate accounting. Those questions, together with the depositions, would provide a quicker resolution to the case, he said. "If you had done that on day one," he told state lawyers, "you'd be 1,000 yards ahead of where you are today." The judge did hand Schneiderman one victory. Ostrager ordered Exxon to provide testimony of an employee of its Canadian affiliate, Imperial Oil. The employee had been involved in evaluating the future costs of potential climate regulations for a project in the tar sands, and Exxon apparently told him not to apply the estimates contained in the company's corporate directives, but instead to use the much lower levels of Alberta's provincial carbon tax, according to documents filed by the attorney general.

Dirty money: Scots councils under fire for fracking funds – HeraldScotland -- TEN Scottish local authorities pension funds have invested more than £400 million in 23 fracking companies. Glasgow, Edinburgh, Aberdeen, Dundee, Falkirk and other councils put their pension money in multinational shale gas firms blamed for causing climate pollution. A new report by Friends of the Earth Scotland discloses council pension investments in Shell, BP, Exxon, Chevron, Occidental and many other companies it says are involved in fracturing underground rocks to extract shale gas. Campaigners say the fracking industry is “completely irresponsible” and are calling for money to be invested in clean energy instead. But councils say they have a duty to pensioners to invest where they can make the most money. The biggest investor is the Strathclyde Pension Fund, administered by Glasgow City Council, which has put £142m into 21 companies. Two of them are said to have breached environmental laws in the US. Over the last two years US authorities have fined Range Resources $13 million for pollution breaches in Pennsylvania. Cabot Oil and Gas, based in Houston Texas, was reported for 494 environmental violations in Pennsylvania between 2009 and 2013.

Britain's Reliance On Imported Gas To Jump As Giant Storage Site Axed (Reuters) - Britain is set to lose its largest natural gas storage site, increasing the country's reliance on imported energy, after British Gas owner Centrica, said it would close its ageing Rough facility.Wholesale gas prices will become more volatile and more vulnerable to price spikes, analysts and traders said.Britain already imports around half of its gas from Norway, continental Europe, and from Qatar in the form of liquefied natural gas (LNG).This figure is expected to rise as its own supplies from the UK Continental Shelf decline.And if Britain cannot call on stored reserves when demand rises in winter, it will need to import even more. Rough covered a tenth of Britain's peak winter demand."The loss of Rough will create uncertainty, volatility and leave (Britain) exposed," said Wayne Bryan, an analyst at consultancy Alfa Energy."If we experience a 2-3 week cold snap, the loss of Rough will see us reliant on imports, namely LNG," Bryan said.Storage provides security and flexibility of supply. Gas injected in the summer at times of low demand and low prices is there to meet demand when consumption rises in the winter.With the closure of Rough, Britain loses about 70 percent of its storage capacity."The market will be more exposed to international price fluctuations as more imports will be required to balance Britain's gas market when cold," said Katrina Oldham, an energy trader at Inenco.Reflecting the British market's vulnerability to imports, prices for July gas jumped earlier this month after doubts were raised about delivery of two Qatari LNG cargoes. The two tankers eventually declared they would come to Britain, but via a different route, sending prices back down.

Norway bans use of heating oil in buildings -- Norway will be the first country in the world to prohibit the use of fossil-based oil to heat buildings. The ban will cover both new and old buildings including private homes and businesses as well as publicly owned facilities. Recent statistics show that 80,000 Norwegian homes and an additional 20,000 non-residential buildings are heated with fossil-based oil. They will have more than two years to replace their equipment before the ban comes into effect in 2020. The Norwegian Government hopes that the upcoming ban will result in a reduction of the country's carbon dioxide emissions by 340,000 tons per year, compared to overall national emissions of 53.9 million tonnes in 2015.  Environment Minister Vidar Helgesen said: Those using fossil oil for heating must find other options by 2020. Recommended alternatives to oil-based products include heat pumps, electricity from the country's hydroelectric grid and even special stoves burning wood chips. Additional measures could include limitations on the use of natural gas for heating.

Analysis: LNG glut delayed, but only slightly -- The great LNG glut predicted for 2016, as new Australian and US LNG projects came on stream, didn't quite materialize -- with disruptions to existing LNG output in Yemen, Libya, Egypt and Angola, combined with underperformance from some of the new producers meaning less LNG on the market than expected -- but it has just been delayed, according to Anne-Sophie Corbeau, research fellow at the King Abdullah Petroleum Studies and Research Center. Corbeau was speaking Tuesday at the International Association for Energy Economics international conference in Singapore. Corbeau said LNG trade expanded by only 27 million mt/year between 2014-16, despite 65 million mt/year of new capacity nominally coming into operation. However, Corbeau sees 100 million mt/year of new capacity starting up between 2017-2020, 85 million mt/year of that by 2019. Ken Koyama, chief economist at the Institute of Energy Economics, Japan, said the LNG supply/demand balance did shift into oversupply in 2016, but not by as much as anticipated, with supply at 304 million mt and demand at 286 million mt, compared with 266 million mt and 267 million mt respectively in 2015. How long the glut will last is a matter of conjecture, but perspectives on the issue are important because they will determine when developers sanction new, multi-billion dollar, LNG projects.

Nord Stream 2: with Europe already divided, the US adds a new layer of geopolitical complexity - When Gazprom officially launched plans to build the second Nord Stream gas pipeline system to Germany in June 2015, the accusations that Gazprom’s main aim was to increase its dominance over European gas came thick and fast. When five European majors from five EU member states (Austria, France, Germany, the Netherlands and the UK) all joined the Nord Stream 2 project, it left Europe essentially divided — those in northwest Europe who supported the pipeline and those strongly opposed, mostly countries in eastern Europe.  The previous US administration was notionally opposed to the project, with former Secretary of State John Kerry warning of its impact on the countries of eastern Europe — and in particular Ukraine — given the anticipated fall in transit revenues and concern over the fact that so much Russian gas could be delivered to Europe via just one route. But now the US has joined the complex geopolitical web being spun around Nord Stream 2 with concrete action, the Senate last week proposing sanctions against companies that invest in Russian energy pipelines. The sanctions are not a done deal yet by any means, but the reaction from Germany and Austria — home to Nord Stream 2 financiers Wintershall, Uniper and OMV — was as fierce as it was immediate.A joint statement the day after the Senate vote included — very unusually — no fewer than four exclamation points, proof if any were needed of how strongly the two governments felt. “We cannot accept the threat of sanctions against European companies that want to contribute to the expansion of European energy supplies!” “Europe’s energy supply is a matter for Europe, not for the US!” “Foreign policy interests must in no way be linked to economic interests! There is still enough time, and opportunity, to prevent this!” These are clearly not comments that could be open to misinterpretation, and have triggered a new diplomatic spat. Germany and Austria said the potential US sanctions had brought a “new and very negative” quality to US-Europe relations and there has even been talk already in Berlin of reciprocal sanctions against the US.

Are Russia And The Saudis Planning A Natural Gas Cartel? -- The fledgling production cut strategy of OPEC (Saudi Arabia) and non-OPEC (Russia and the FSU) shows that a new strategy is needed to counter the ongoing doubts in the markets. At the same time, Russia and Saudi continue to give indications of a possible OPEC 2.0 scenario, in which a possible Russian membership is on the table. This would confront the market with a renewed and stronger oil cartel, although the overall strategies need to be adjusted. At the same time, Saudi Arabia, via its oil giant Aramco has openly stated to be interested in global gas investment opportunities, starting in Russia’s Siberian region. While the media still looks at the current discussions as a pure crude oil cooperation strategy, some see another development on the horizon. The real power of OPEC, non-OPEC cooperation would increase if they would not only include a crude oil production cut, but also integrate the other (hidden) cartel, the Gas Exporting Countries Forum (GECF). An OPEC 2.1, including gas exporters, would really block any negative developments in the market, even shale oil and gas. At present, international analysts and media sources are hyping the story about Saudi Arabia’s multi-billion dollar investments in Russia’s oil and gas sectors. Statements made by Saudi minister of petroleum Khalid Al Falih are only making headlines at present if he indicates that oil giant Aramco will be targeting natural gas projects and even LNG in future. Certain analysts think that Aramco is taking the same road as Shell, BP and other oil majors, have taken, diversifying away from oil and into gas. The ‘Golden Age of Gas’, as reported by the IEA has not yet become reality. Riyadh now seems interested in becoming a convert of the gas era, but reality is not as simple. There is more between the lines than currently is being discussed in the media.

France to stop granting oil exploration licences - energy minister | Reuters: French energy minister Nicolas Hulot said on Friday the government planned to present a draft law this autumn that would stop granting licences for oil and gas exploitation in France and overseas territories. "There will be no new licence granted for exploration of hydrocarbons, we will pass the law this autumn," Hulot said on his Twitter account following an interview on BFM-TV, Hulot, an environmental campaigner before he became a minister last month, also said diesel and petrol taxes would converge in the not-too-distant future, as laid out in plans by the previous Socialist government.

France's Total to go ahead with major Iran gas project: CEO | Reuters: Total will go ahead with development of a giant Iranian gas field this summer, its CEO told Reuters, in the first major western energy investment in the country since Tehran signed an international nuclear deal. Chief Executive Patrick Pouyanne said the French group would make an initial $1 billion investment after the United States extended sanctions relief for Iran under the 2015 agreement. Washington has warned that it could cancel the sanctions waivers if it believes Tehran is not curbing its nuclear program in line with the deal with world powers. "It is worth taking the risk at $1 billion because it opens a huge market. We are perfectly conscious of some risks. We have taken into account (sanctions) snap-backs, we have to take into account regulation changes," Pouyanne said in an interview. The offshore field was first developed in the 1990s, and Total was one of the biggest investors in Iran until the international sanctions were imposed in 2006 over suspicions that Tehran was trying to develop nuclear arms. Total has decided to return and develop phase 11 of the South Pars project in the Gulf, which will cost up to $5 billion, at a time when President Hassan Rouhani has faced criticism at home over a lack of economic revival following the easing of sanctions under the nuclear deal. Though one of the world's largest oil and gas producers, most major international giants including Royal Dutch Shell and BP have so far shown limited appetite to invest in Iran, due to uncertainty over contract terms and a sharp drop in global oil prices. U.S. President Donald Trump's hard line on Iran has further cooled the investment climate, even though his administration extended the wide sanctions relief last month. "The U.S. waivers have been renewed and they will be renewed every six to eight months. We have to live with some uncertainty," 

Sabha in the spotlight: the city where migrants are sold as slaves -- Deep in the Libyan desert at the confluence of several migration routes from sub-Saharan Africa, this oasis city of 130,000 hit the headlines earlier this year. The United Nations migration agency reported that some new arrivals at this staging post to Tripoli and the Mediterranean coast, 400 miles north, were being “sold” at modern day slave auctions. It’s a worrying development for Sabha – always liable to become involved in the modern refugee crisis by its position – and World Refugee Day 20 June serves as a reminder of how vulnerable migrants are in places like this semi-lawless enclave, caught between tribal and political factions in post-revolution Libya. At least half of the 180,000 migrants who arrived in Italy via Libya last year passed through Sabha. “The majority of west African migrants come through Agadez in Niger, then through Qatroun. And the east Africans come up from the border with Chad,” explains Ashraf Hassan, at the UN’s International Organisation for Migration. Then through people-smugglers migrants negotiate further passage north – or not, if the slavery allegations are true. Ashraf Hassan “Sabha is not the place that drives the people-smuggling... it’s just the initial assembly point,” explains Ashraf Hassan, at the UN’s International Organisation for Migration. Currently the local municipality are too under-resourced to regulate the situation. For the situation to improve in favour of empowering migrants rather than smugglers requires a complete change in Libyan fortunes, adds Hassan: “The country in general needs to be stabilised before Sabha can support the integration of migrants.” 

India natural gas: A 5-year outlook on supply and demand – Platts video - With India's domestic gas production set to rise to 37 Bcm by 2021 and consumption to hit 72 Bcm over the same period, additional gas demand will have to be met by rising LNG imports. In this video, analyst Max Gostelow looks at India's LNG supply-demand gap, the competition faced by Indian importers, and how S&P Global Platts has updated its methodology to help improve transparency in India's LNG market.

Challenges, opportunities for Russian oil in wake of OPEC extended deal - Commodity Pulse video - Ahead of the Platts Moscow Oil & Energy Forum being held June 20, Andrew Bonnington,Nadia Rodova and Gillian Carr discuss some of the key issues impacting the Russian and other CIS states in the wake of the extended OPEC and non-OPEC agreement to extend crude oil production cuts until March 2018. They also touch upon some of the challenges facing Russia in terms of increasing global competition to it in refined product export markets.

Oil market fundamentals heading in right direction – Saudi’s Falih ---Saudi Energy Minister Khalid al-Falih said the oil market is heading in the right direction but still needs time to rebalance, the London-based newspaper Asharq al-Awsat reported on Monday. "In my opinion, market fundamentals are going in the right direction, but in light of the large surplus in stockpiles over the past years, the cut needs time to take effect," he told the newspaper, referring to a global deal to curb oil production. "Current expectations indicate the market will rebalance in the fourth quarter of this year, taking into account an increase in shale oil production," he said. Asked about the recent drop in oil prices, Falih said: "Markets determine prices but are themselves driven by unpredictable variables beyond the control of producing nations." "Short-term volatility is mostly a reaction to short-term factors ... as well as the role of speculators in stock markets that increase market volatility." Oil prices dipped on Monday, weighed down by a continuing expansion in U.S. drilling that has helped to maintain high global supplies despite an OPEC-led initiative to tighten the market by cutting production. The price of oil is down around 14 percent since late May, when producers led by the Organization of the Petroleum Exporting Countries extended their pledge to cut output by 1.8 million barrels per day (bpd) by an extra nine months. Falih said there was a relatively big draw of around 50 million barrels from floating storage and a drop in industrialised nations' onshore storage of 65 million barrels compared to July last year..

Hedge funds sour on crude oil and fuels: Kemp(Reuters) - Hedge fund managers have become very bearish about the outlook for oil prices as production from countries outside OPEC grows and threatens to undermine the effectiveness of OPEC’s output controls.Hedge funds and other money managers cut their combined net long position in the three major futures and options contracts linked to Brent and WTI by 51 million barrels in the week to June 13 (http://tmsnrt.rs/2rMOh9T).Fund managers cut their net long position for the second week running by a cumulative total of 91 million barrels, according to data published by regulators and exchanges (http://tmsnrt.rs/2shCOmq).Portfolio managers also cut their net position in gasoline by 13 million barrels and heating oil by 19 million barrels last week (http://tmsnrt.rs/2shNukU and http://tmsnrt.rs/2rMooXW).Hedge funds have discounted the fact oil prices are already under than $50 per barrel and reassurances from OPEC ministers that global oil stocks will draw in the second half of the year.Instead they have focused on the continued rise in the number of rigs drilling for oil in the United States and signs gasoline and diesel demand may not be growing fast enough to absorb the record fuel being produced by U.S. refineries.The U.S. Energy Information Administration predicts global oil stocks will draw down in the third quarter of 2017 as a result of OPEC’s output cuts.But global stocks are expected to rise again through 2018 as OPEC compliance deteriorates and supply from non-OPEC sources increases.Bearish sentiment among oil traders has triggered a wave of short selling, with hedge funds adding 45 million barrels of extra short positions in crude, as well as 15 million in gasoline and 16 million in heating oil.There are signs hedge funds may have embarked on the eighth cycle of short-selling in WTI since the start of 2015, though it is still too early to tell.The only supportive factor for oil prices in the short term is that so many short positions have been established and there are relatively few long positions left to liquidate. Conditions are in place for an eventual short-covering rally but the rebound may not come until there are clear signs global stocks are falling and U.S. shale drilling is levelling off.

Analysis: Rising US crude oil exports complicate rebalancing efforts - One reason for the bearish narrative gripping the oil market of late has been that draws in US crude stocks have essentially come at the expense of the rest of the world. US crude exports have surged this year -- averaging more than 1 million b/d in April, the second most on record -- driven by the significant discount of US crude prices relative to global benchmarks. The weakness of ICE Brent's term structure compared with NYMEX crude can be seen as a symptom of the glut that has been exported out of the US to the rest of the world that, in turn, has weighed on the oil complex. The recent plunge in oil prices that began May 25 saw crude futures drop roughly $7/b through last week, while the contango widened across time maturities for ICE Brent and NYMEX crude. Moreover, the contango for ICE Brent has now become wider than that of NYMEX crude, which for later-dated contracts had not been the case since late November when OPEC announced a deal to cut supplies starting January 1. ICE Brent's front-month/12th-month spread averaged minus $1.84/b last week, which was 35 cents wider than the same spread for NYMEX crude. Over the five trading sessions ending May 24, that ICE spread averaged minus 46 cents/b, compared with minus 92 cents/b for NYMEX crude. That switch in relative strength from ICE Brent to NYMEX crude came amid a drop in US crude stocks that lasted eight straight weeks through May 26. Analysts surveyed Monday by S&P Global Platts expect crude stocks fell 2 million barrels last week. But the same analysts expected a 3.5 million-barrel decline for the prior week, only to be surprised by a 3.3 million-barrel build for the week ended June 2. 

Shale's Record Fracklog Could Force Crude Prices Even Lower - There’s yet another concern growing as oil prices continue to erode: A record U.S. fracklog.There were 5,946 drilled-but-uncompleted wells in the nation’s oilfields at the end of May, the most in at least three years, according to estimates by the U.S. Energy Information Administration. In the last month alone, explorers drilled 125 more wells in the Permian Basin than they would open. That represents about 96,000 barrels a day of output hovering over the market.If OPEC thought shale was a thorn in its side before, just wait until U.S. explorers turn their spigots on full blast. Wells waiting to be fracked and flowing are an overhang that could mean a burst of new supply in the second half of the year and into 2018,  ."Even though rig counts have gone through the roof in the Permian, we really haven’t even felt the full production implications,"  "We’ve only felt 70 percent of the rise in drilling."  Explorers generally start the drilling process with contractors such as Helmerich & Payne Inc. and Nabors Industries Ltd., using rigs to dig a vertical shaft that can drop 5,000 feet or more. They then build in a bend to extend the shaft sideways into a promising shale layer, a process that overall can take weeks. Other service companies such as Schlumberger Ltd. and Halliburton Co. complete the process, using high-pressure machines that push in sand, water and chemicals to free up oil and natural gas that’s pumped to the surface. Until that final step occurs, the well is known as a DUC, a drilled-but-uncompleted asset, part of the so-called fracklog.   Last week was the 22nd in a row in which U.S. explorers boosted their rig count, the longest stretch of uninterrupted growth in more than three decades.  Prices fell 1.4 percent to $44.13 a barrel at 2:26 p.m. in New York. Explorers can afford to keep drilling with oil under $50, once considered a key price point for expansion, partly because of hedging, price insurance bought by companies when oil neared $55 at the end of last year. Explorers have also cut the cost of drilling using new systems that make the process more efficient. In some shale plays, like the Permian, that’s dropped the break-even price to about $35. That new efficiency, though, has overwhelmed fracking firms.

U.S. Drillers Are Hammering OPEC’s Plans - Oil fell, extending four weeks of declines, as U.S. drillers continue adding rigs and Libya boosts output, blunting OPEC-led efforts to re-balance an oversupplied market. Futures dropped 1.2 percent in New York after capping the longest run of weekly declines since August 2015. U.S. drillers targeting crude added rigs for a 22nd straight week, the longest uninterrupted stretch of growth in three decades, according to data from Baker Hughes Inc. on Friday. Libya is producing the most oil in four years after a deal with Wintershall AG enabled at least two fields to resume production. Oil plunged below $45 a barrel last week after the U.S. Energy Information Administration said gasoline supplies surged to the highest level since mid-March at a time when summer demand should be bringing inventories down. The Organization of Petroleum Exporting Countries and its allies have sought to reduce bloated oil stockpiles to the five-year average, but increasing numbers of drilling rigs in America, as well as rising output in Libya, are putting that target in jeopardy. "We cannot afford to have another build in crude or gasoline," "The market’s just dying for a reason to buy this thing, but you can’t really do that before" Wednesday’s data on stockpiles. West Texas Intermediate for July delivery, which expires Tuesday, closed at $44.20 a barrel on the New York Mercantile Exchange, down 54 cents. Futures have fallen 18 percent this year. Brent for August settlement fell 46 cents to settle at $46.91 a barrel on the London-based ICE Futures Europe exchange, after dropping 1.6 percent last week. The global benchmark crude traded at a premium of $2.48 to August WTI. 

Oil Tanker Storage Hits a 2017 Record Despite OPEC's Cuts - Oil traders are resorting to storing more and more oil at sea amid swelling output in the Atlantic region, a sign the market is far from the kind of re-balancing that OPEC would have hoped for when the group set out last year to bring down global stockpiles. The amount of oil stored in tankers reached a 2017 high of 111.9 million barrels earlier this month, according to Paris-based tracking company Kpler SAS. Higher volumes of storage in the North Sea, Singapore and Iran account for most of the increase. The build-up occurs even as the Organization of Petroleum Exporting Countries and 11 other nations led by Russia cut supplies. Since the beginning of the year, those nations have attempted to trim nearly 1.8 million barrels a day from the market, though higher output in the U.S. and Africa and sluggish demand in Asia have all helped to undermine their efforts. “If anything, it shows that OPEC cuts still aren’t having enough of an impact,” Olivier Jakob, managing director of consultant Petromatrix GmbH, said of the buildup at sea. “The pressure is coming from the Atlantic Basin,” where there are additional supplies, he said. Companies including Trafigura Group and Vitol Group have recently chartered older supertankers for as long as eight months, and some of the vessels are likely to be used for floating storage, according to a research note Monday from Pareto Securities AS. As a result of the persisting surplus, spot prices for oil are being pushed lower than those for supplies months and years into the future. Such a structure, known as contango, can make it profitable for traders to store oil in tanker ships for delivery later, although data compiled by Bloomberg and E.A. Gibson Shipbrokers Ltd. indicate that’s not the case yet. As recently as May 1, the average volume was about 74 million barrels, according to Kpler. Floating storage in Singapore has risen by 23 percent this year and 32 percent in the North Sea, it estimates. 

Oil Plunges To November Lows On Sudden Volume Spike --Oil dropped to the lowest in seven months, with both Brent and WTI sliding to prices not seen since November, following a burst of volume just after 6am, amid a revival in output from Libya and rising volumes of fuel held in floating storage, although today's move was likely yet another hedge fund capitulating and liquidating long positions. As a reminder, Pierre Andurand was down 17.3% through end of May. Brent hit new year-to-date low at $45.85, after a one-minute burst of volume of a day-high 5,208 lots at 6:04am, taking out a 38.2% Fib support, after a one-minute spike in volume to a day-high 5,208 lots just after 6am. The move could spur a move toward the $44.66 measured support line according to Bloomberg technician Sejul Gokal. West Texas Intermediate for July delivery, which expires Tuesday, was down 90 cents at $43.30 a barrel, the lowest since Nov. 14, having dropped as low as $43.22. The more-active August contract fell 85 cents to $43.58. Trading volume +61% vs 100-day average. August Brent dropped -87c to $46.04/bbl; sliding as much as $1.06 to $45.85, lowest since Nov. 18. Brent is trading at a premium of $2.45 to August WTI."It’s just ongoing negative market sentiment,” Commerzbank analyst Carsten Fritsch told Bloomberg. “The trend is your friend” unless of course you are a bull. Fritsch added that the market would need “a massive bullish surprise” from inventory data this week for sentiment to reverseAmong the reasons cited for the drop by Bloomberg, none of which are new, is that Libya is pumping the most crude in four years after a deal with Wintershall AG enabled at least two fields to resume production. Additionally, offshore stores is rising with the amount of oil stored in tankers reached a 2017 high of 111.9 million barrels earlier this month, according to Paris-based tracking company Kpler SAS. With traders again storing more crude at sea amid swelling production in the Atlantic region and a widening contango, this confirms the market is far from rebalancing.Ahead of tomorrow's EIA report, consensus is that U.S. inventories probably shrank by 1.2 million barrels last week. Look for an API headfake after today's close. Crude stockpiles remain more than 100 million barrels above the five-year average, according to data from the EIA. American production has climbed to 9.33 million barrels a day through June 9, near the highest since August 2015.

Is $40 Oil On The Horizon? - Oil prices broke fresh seven-month lows on Tuesday, with WTI dropping below $44 per barrel and Brent dipping below $46. Renewed and heightened pessimism over the pace of rebalancing has sunk in as OPEC is struggling to induce inventory drawdowns. U.S. shale continues to grow production and Libya is also adding large volumes of supply back onto the market at the worst possible time. The North African OPEC member is now producing 900,000 bpd and is aiming to top 1 million barrels per day by next month.  The Wall Street Journal reports that most in the oil industry are resigned to low prices for years to come, recognizing that a range of $50 to $60 might be a semi-permanent equilibrium. After going through rough waters in the early part of the downturn – between 2014 and 2015 – which saw the bankruptcies of an estimated 105 oil producers and 120 oilfield service companies, the survivors are settling in to turn a profit at today’s prices. Some drillers are actually hoping that oil does not return to $100 per barrel for fear of sparking another boom and bust.  Oil producers are no longer hedging their production because prices have fallen too much. As a result, major consumers are the ones now doing the hedging. Bloomberg reports that options prices are now being driven by airlines and shippers hoping to lock in cheap fuel. “This is a significant shift in the relative producer-consumer hedging behavior,” David Schenck, a cross-commodity strategist at Societe Generale, said in a note. “While consumers may try to lock in low prices, most producers will simply refuse to lock-in loss-making prices.”  A flurry of security events took place in the Middle East on Monday, raising fears of an escalating political crisis that has been described as the worst in decades. Iran launched missiles into Syria, targeting ISIS. It was the first Iranian military attack in another country in three decades. Also, the U.S. shot down a Syrian government plane, a move that sparked a warning from Russia. Russia said any U.S. plane flying west of the Euphrates River would be treated as a target. Meanwhile, Saudi Arabia said it has detained three members of Iran’s Revolutionary Guard Corps, which it says was approaching the Saudi offshore oil field of Marjan. The events come as tensions have spiked over the suspension of diplomatic relations with Qatar. There is a lot going on, but for now, the oil markets are shrugging off the tension. In the past, events like these would cause an immediate price spike of a few dollars per barrel. But with oil inventories at record levels, traders are hardly worried about a disruption.

WTI/RBOB Unch After API Signals Another Week Of Product Builds - With WTI/RBOB prices tumbling to 7-month lows intraday (not helped by Libya production), oil bulls hope for a bounce after API is not coming true despite a bigger than expected crude draw, both gasoline and distillates saw notable builds and oil prices could not make their mind up. API

• Crude -2.72mm (-1.2mm exp)
• Cushing -1.269mm
• Gasoline +346k (+500k exp)
• Distillates+1.837mm

At a time when Gasoline demand should be rising and inventories dropping - neither happened the last two weeks and once again, according to API, gasoline built (as did distillates)... Libya pumps most oil since 2013 as Wintershall fields resume (and Nigeria production rising) did not help...but the machines could not make their minds up after the API data...

OPEC, non-OPEC compliance with oil cuts hits highest in May: source -- OPEC and non-OPEC oil producers' compliance with a deal to cut global output has reached its highest in May since they agreed on the curbs last year, reaching 106 percent last month, a source familiar with the matter said on Tuesday. OPEC compliance with the output curbs in May was 108 percent, while non-OPEC compliance was 100 percent, the source said. Another source confirmed compliance by all producers in May was 106 percent. "This is the highest compliance since the beginning of the deal," one of the sources said. The Organization of the Petroleum Exporting Countries and allies agreed to cut supply by about 1.8 million barrels per day (bpd) starting in January to get rid of a supply glut. A technical committee of OPEC and non-OPEC producers met in Vienna on Tuesday to monitor compliance with the pact. The producers agreed at a May 25 meeting to extend the accord until March 2018. But oil has declined sharply since then, with Brent crude falling to a seven-month low near $45 a barrel on Tuesday on persistent over-supply concerns. With recovering production from Nigeria and Libya - OPEC members exempted from supply cuts due to losses caused by unrest - adding to supplies, some OPEC delegates are questioning whether the agreement is enough. But oil ministers, including Saudi Energy Minister Khalid al-Falih, are of the view that the market is heading in the right direction and needs time to rebalance.

Bank Of America: Expect $30 Oil -- Oil prices hit on Tuesday their lowest levels since mid-November last year, with WTI entering a bear market, and analysts now see the price of oil sliding further down to below US$40 and even into the US$30s, as rising output from Libya and Nigeria adds to the persistent concerns over global oversupply.As of 2:21pm EDT, WTI Crude had tumbled 3.11 percent to US$43.05, while Brent Crude had plunged 2.79 percent at US$45.60.According to analysts, the slide will continue, and oil prices could drop to levels they hadn’t seen in more than a year.“Oil is in a downtrend and risks trending into the $30's,” Paul Ciana, a technical strategist at Bank of America Merrill Lynch, said in a note on Tuesday, as quoted by Business Insider.  Oil prices have now dropped to the levels they traded before OPEC and 11 non-OPEC producers agreed to a production cut deal in an effort to kill the glut and push prices up. The nine-month extension to the deal, until March 2018, failed to lift oil prices, with analysts and traders questioning if OPEC’s cuts have had or would have an effect on global supply, given the U.S. shale resurgence, rising output from other producers that are not part of the deal, and increased production within OPEC, where exempt Libya and Nigeria, and non-complying Iraq, have recently increased output.

US oil falls 3%, hits lowest level since August - Oil prices fell on Wednesday despite a larger-than-expected decline in U.S. crude and gasoline inventories, as investors remained concerned about high global crude output and the nagging supply glut. Brent crude futures fell $1.43 at $44.59 a barrel. U.S. crude futures fell $1.24 to $42.47, briefly falling 3 percent, a 10-month low. The U.S. Energy Information Administration said crude inventories declined by 2.5 million barrels, exceeding expectations for a 2.1 million-barrel drop. This data supported prices only briefly. "Updated inventory balances don't represent a game changer," "Particularly while lower 48 crude production rose 25,000 barrels per day." Iranian oil minister Bijan Zanganeh said OPEC members were considering deeper cuts in output, but should wait until the effect of the current level of production was clear. Other delegates were said to be skeptical of such measures. "Market fundamentals have not changed," said Abhishek Kumar, senior energy analyst at Interfax Energy's Global Gas Analytics in London. "U.S. crude and gasoline stockpiles are significantly higher compared with their five-year averages, which will weigh on prices. Meanwhile, oil output in the country is still rising." So far this year, oil has slid 20 percent, its weakest performance since 1997 for the first half of the year, a period when oil has tended to perform well. Brent has risen in the first half of the year in all but six years over that period. 

WTI/RBOB Pump'n'Dump After Gasoline Build, Production Surge - Following API's reported build in gasoline (and distillates), oil prices have chopped around amid Saudi headlines and OPEC jawboning, as all eyes are focused on gasoline inventories in the DOE report. An unexpedted draw in Gasoline (and Crude draw) sent prices higher initially, but another surge in production capped some of the gains and prices fell back. API:

• Crude -2.72mm (-1.2mm exp)
• Cushing -1.269mm
• Gasoline +346k (+500k exp)
• Distillates +1.837mm

DOE:

• Crude -2.45mm (-1.2mm exp)
• Cushing (-579k exp)
• Gasoline -578k (+500k exp)
• Distillates +1.08mm (+500k exp)

Opposing API's reported build,. DOE reports a Gasoline draw in the last week (while distillates built for the 4th week) and crude drew more than expected... Crude exports fell to the lowest level this year, at 517k barrels a day. But notably, Gasoline inventories dropped in the face of a big surge in gasoline imports...

Cheaper gasoline should give limited boost to U.S. fuel consumption: Kemp - (Reuters) - Cheaper gasoline prices should spur an increase in driving in the United States and provide a limited boost for gasoline consumption over the summer, after a slow start to the year.Gasoline consumption depends on the volume of traffic (vehicle-miles travelled) and the average fuel-economy of the cars on the road.Traffic volume in turn depends on demographic and economic factors (population, household formation, car ownership, urbanisation, average incomes and employment) and to a more limited extent gasoline prices at the pump.Gasoline prices influence fuel consumption primarily through consumer choices about fuel-economy when purchasing new vehicles and choices about the amount of discretionary driving.Rising gasoline prices tend to be associated with slower growth in traffic volumes and slower growth in gasoline consumption (as measured by the volume of gasoline supplied to domestic U.S. customers).Experience shows that prices have a relatively small impact on traffic and gasoline consumption (although the precise relationship remains fiercely controversial among researchers).  As a rough approximation, changes in traffic volume and fuel consumption are an order of magnitude smaller than price changes. The slump in gasoline prices between the middle of 2014 and early 2016 coincided with a marked acceleration in the growth of both vehicle-miles travelled and fuel consumption (http://tmsnrt.rs/2syyOhf).  The rate of growth in both miles-driven and gasoline consumption slowed during the second half of 2016 and the first two months in 2017. More recently, however, gasoline prices have stabilised and even fallen, which should remove one of the factors inhibiting gasoline consumption growth.

Oil recoups some recent losses following a second-straight weekly fall in U.S. supplies - Oil finished modestly higher Thursday, with a second weekly decline in U.S. crude supplies helping prices recoup some of their recent losses. But prices were still stuck in a bear market, defined as a decline from a recent peak of at least 20%, on lingering worries about strong domestic production growth. August West Texas Intermediate crude advanced 21 cents, or 0.5%, to settle at $42.74 a barrel on the New York Mercantile Exchange. It fell 2.3% on Thursday to $42.53, the lowest most-active futures price settlement since Aug. 10, according to FactSet data. Brent crude for August delivery on London’s ICE Futures exchange added 40 cents, or 0.9%, to $45.22 a barrel. Prices fell Wednesday as data from the Energy Information Administration showed a weekly climb in U.S. crude production, feeding concerns that efforts by other major producers to cut down global supplies down to a five-year average will fail. The report, however, also showed that crude stockpiles declined for a second week in a row. Tariq Zahir, managing member of Tyche Capital Advisors, said he believes oil prices “can get weaker or at least we feel rallies will be sold into” because of several reasons, including a continued rise in U.S. production, poor demand for gasoline and gains in active U.S. oil-rig counts.On Nymex Thursday, July gasoline tacked on 2.4 cents, or 1.7%, to $1.435 a gallon and July heating oil added under a cent, or 0.5%, to $1.372 a gallon. Data show U.S. shale-oil producers churning out 9.35 million barrels last week, almost 8% higher than the same period last year. While production growth rates showed signs of petering, the data reaffirmed market fears that U.S. producers have become more efficient to weather low prices. 

Oil traders hunt for shale's pain threshold: Kemp (Reuters) - Crude prices are likely to remain under pressure until there are signs the number of rigs drilling for oil in the United States is stabilising or reversing lower. U.S. exploration and production firms have hired 530 extra drilling rigs since the end of May 2016 - 431 to target oil and 99 to focus on gas - according to oilfield services firm Baker Hughes. As a result, U.S. crude and natural gas liquids production is forecast to increase by 780,000 barrels per day (bpd) in 2017 and by more than 1 million bpd in 2018, according to the U.S. Energy Information Administration (EIA).  The prospect of a renewed rise in OPEC output and global oil inventories during 2018 has thrown oil prices onto the defensive over the last four months. A continued rise in U.S. output during the rest of this year is unavoidable given the large number of extra rigs put to work in the first half. The lag between spudding a new well and first commercial production averages about six months, so extra rigs in the first half will ensure continued growth in output during the second half. But the fall in prices, if sustained, will eventually cause the rig count to stabilise, curbing growth in output next year. The breakeven price for drilling new wells varies considerably among shale plays and even between different parts of the same play. But a recent survey of producers in the major shale plays conducted by the Federal Reserve Bank of Dallas showed most needed U.S. crude prices of $45-50 to break even (“Dallas Fed Energy Survey”, March 29.  West Texas Intermediate (WTI) crude prices have already declined more than $11 per barrel, over 20 percent, since their recent peak and are now below $44 per barrel. Exploration and production firms have added an extra 145 oil-focused rigs in the last 16 weeks even as WTI prices have fallen. (http://tmsnrt.rs/2rUnVCT)But the oil rig count typically responds to changes in WTI prices with an average lag of 15-20 weeks so it should stabilise and turn lower within the next four weeks (http://tmsnrt.rs/2sSBGH9 and http://tmsnrt.rs/2tsrYIE). Until the rig count starts to stabilise, however, oil traders are likely to continue driving prices lower to try to uncover the pain threshold that forces shale firms to scale back drilling. 

OPEC mulls deeper cuts due to higher than expected US oil output: Zanganeh -- OPEC countries are discussing deepening their production cut agreement, Iran oil minister Bijan Zanganeh said Wednesday, even as some members say the recent extension of the deal needs more time to play out. "The US oil production increase was unpredictable and this increase is more than what OPEC members had foreseen," Zanganeh was quoted as saying by state broadcaster IRIB news agency. "We are in consultation with OPEC members to prepare ourselves for a new decision. But making a decision in this organization is very difficult because any decision will mean an output cut by the members." Zanganeh, speaking on the sidelines of a cabinet meeting, said he personally felt that OPEC should "wait a while and see how the market will form." Some members "believe that it's not [been] long since OPEC decided to cut production, and the impact of this decision has not practically kicked in in the market yet," he added. A meeting of the OPEC/non-OPEC Joint Ministerial Monitoring Committee is scheduled in Russia in late July, with the exact venue and date still to be determined. The committee, composed of ministers from Kuwait, Russia, Venezuela, Algeria and Oman, is empowered to recommend further cuts or any other adjustments to the deal, as it sees fit, officials have said. Saudi energy minister Khalid al-Falih and Russian energy minister Alexander Novak, who represent the largest producers in the OPEC/non-OPEC coalition, have said in recent days that they saw no need to change the production cut agreement, with stock drawdowns expected to accelerate in the next three to four months.

Is There Still Hope For Higher Oil Prices? Oil prices have cratered in recent weeks, dipping to their lowest levels in more than seven months and any sense of optimism has almost entirely disappeared. All signs point to a period of “lower for longer” for oil prices, a refrain that is all too familiar to those in the industry.WTI dipped below $44 per barrel on Tuesday, and the bearish indicators are starting to pile up.Libya’s production just topped 900,000 bpd, a new multi-year high that is up sharply even from just a few weeks ago. Libyan officials are hoping that they will hit many more milestones in the coming months. Next stop is 1 million barrels per day (mb/d), which Libya hopes to breach by the end of July. U.S. shale is arguably the biggest reason why prices are floundering again. The rig count has increased for 22 consecutive weeks, rising to 747 as of mid-June, up more than 100 percent from a year ago. Production continues to rise, with output expected to jump by 780,000 bpd this year, according to the IEA. Ultimately, the shale rebound appears to havekilled off yet another oil price rally, the latest in a series of still-born price rebounds since the initial meltdown in 2014.Hedge funds and other money managers slashed their bullish bets on crude oil futures in the latest data release. Sentiment is profoundly pessimistic at this point, and because the IEA, OPEC and EIA recently published very downbeat assessments about the pace of rebalancing, a grim mood will be sticking around for a little while. The next reports from those energy watchers won’t come out for almost another month.In the meantime, the weekly EIA data on production and inventories will have outsized importance, mainly because it is one of the few concrete indicators that comes out on a routine basis. Analysts are now worried that a string of bearish data could push prices down even further. "We cannot afford to have another build in crude or gasoline," Bob Yawger, director of futures at Mizuho Securities USA Inc., told Bloomberg before the latest data release. "The market’s just dying for a reason to buy this thing, but you can’t really do that before" the EIA publishes its next batch of weekly data on Wednesday. Gasoline demand also looks weak, just as the summer driving season in the U.S. gets underway, a period of time that typically sees demand rise.

WTI Crude Tops $43 After More Noise From Saudi 'Officials' -- The machines are stil programmed to insta-bid on any and every headline from "Saudi officials" it would appear... even if the effects are fading in their efficacy. As Citi notes, WSJ headlines explain the uptick in oil, suggesting that Saudi is targeting a $60 barrel oil price for its bigger picture strategy...  While that reads well and all, Citi notes that the full story concludes that Saudi's leverage might be limited unless it shows other OPEC members that it too will take on a large share of the production cuts.

Natural-gas prices pare gains as U.S. supplies rise more than expected - Data from the U.S. Energy Information Administration Thursday showed that domestic supplies of natural gas rose by 61 billion cubic feet for the week ended June 16. Analysts surveyed by S&P Global Platts forecast a build of 58 billion cubic feet. Total stocks now stand at 2.770 trillion cubic feet, down 324 billion cubic feet from a year ago, but 207 billion cubic feet above the five-year average, the government said. July natural gas NGN17, +0.17% up a penny, or 0.4%, from Wednesday's settlement to $2.903 per million British thermal units. It traded at $2.917 before the data.

COLUMN-Oil market flashes warning about stock levels in 2018: Kemp (Reuters) - Oil traders have become increasingly doubtful that OPEC will manage to cut crude stocks down to the five-year average in 2018 and keep them there.Calendar spreads for Brent futures throughout the rest of 2017 and 2018 have weakened significantly since OPEC agreed to roll over its production allocations at the end of May.Calendar spreads (price differences between futures contracts for delivery in different months) are closely linked to the expected level of oil inventories.Physical traders and refiners use spreads to hedge oil stored at tank farms and refineries as well as onboard ships in transit or acting as floating storage.But spreads can also be used by traders and specialist hedge funds to speculate on the level of global oil stocks in future.High and/or rising inventories are normally associated with a contango structure, where the price for oil delivered in future is higher than for immediate delivery.Low and/or declining global inventories are normally associated with a backwardation, where the price for future deliveries is below the spot price.  The shift in Brent spreads between contango and backwardation has mirrored the build up and draw down in inventories since the 1990s.  Brent spreads have therefore become one of the favourite ways for speculative traders to express a view on the outlook for oil production, consumption and stocks.Spreads for the remaining months of 2017 have moved into an increasingly wide contango since May 25 (http://tmsnrt.rs/2rZ7llh).Spreads for 2018 have seen an even more startling move from a small backwardation into a broad contango over the same period (http://tmsnrt.rs/2stXAzc).On May 24, the day before OPEC last meeting, Brent futures for December 2017 were trading at a premium of 99 cents per barrel over contracts for December 2018. By June 21, December 2017 futures were trading at a discount of $2.69, a shift in the spread of more than $3.50 per barrel in less than a month (http://tmsnrt.rs/2stKbak).

Nigeria's cut exemption at risk from oil revival -Nigerian oil output has recovered to its highest level in more than a year as militant attacks have declined substantially, along with the return of key export grade Forcados. Including crude and condensate, output from OPEC's biggest African producer plummeted to near 30-year lows of around 1.2 million b/d in 2016, from 2.2 million b/d previously, as attacks on oil facilities in the Niger Delta rose at an alarming pace due to resurgent militancy. But Nigerian crude oil production in May jumped to 1.73 million b/d, up 80,000 b/d from April, its highest level since March 2016, according to the most recent S&P Global Platts OPEC survey. Since then, the Forcados restart has boosted flows and production is expected to increase even further this summer, according to recent loading programs. Exports of crude oil and condensate are set to jump to over 2 million b/d in August, making it the longest loading program in 18 months, according to Platts estimates. With output of crude and condensate now near its full capacity of 2.2 million b/d, Nigeria, which is exempt from the current OPEC cuts, could be asked to join the deal if the recovery continues. In late May, the country's oil minister Emmanuel Kachikwu acknowledged that Nigeria has a "responsibility" to join in the OPEC-led output cuts should its crude production return to 1.8 million b/d. With Nigeria's production of condensate averaging around 300,000-400,000 b/d, it looks like this milestone might be hit sooner than he and his government expected. 

OPEC Has Few Escape Routes From Another Bear Market in Oil --Oil’s back in a bear market and investors remain unmoved by last month’s agreement to prolong supply cuts, leaving OPEC and its allies with few remaining tools to boost prices. As Saudi Arabia, Russia and their allies reduce output, supply that’s beyond their control keeps rising. Libya and Nigeria -- OPEC members exempt from the curbs -- and U.S. shale producers are resurgent, undermining efforts to tame a global glut. Prices are back below where they were when the Organization of Petroleum Exporting Countries first struck its historic deal last year. Cutting even deeper -- an idea rejected just a month ago -- still looks unlikely. For now at least, the Saudi pledge to do “whatever it takes” to stabilize prices looks like not much at all. Further curbs could be necessary, but reaching a consensus will be difficult, Iran’s Oil Minister Bijan Namdar Zanganeh said Wednesday on state radio. A committee meeting in Vienna this week gave only cursory attention to the possibility of deepening the existing cuts, according to delegates familiar with the matter, focusing instead on the problem of rising output in Libya and Nigeria. Russia has indicated on several occasions that it’s opposed to any additional reductions, said one delegate. “Deepening the cuts is one good option” for OPEC’s immediate difficulties, but would create longer-term problems, said Hasan Qabazard, the former head of research at the group. “This will come at the expense of OPEC’s market share. Do they want to lose share? I don’t think so, because many countries have invested in raising capacity recently." 

Oil Markets Unmoved By Brewing Conflict In The Middle East - The political standoff in the Middle East between Qatar and other powers in the Middle East enters its third week, and the conflict shows no signs of abating.On June 5, Saudi Arabia, Egypt, the UAE and Bahrain cut diplomatic ties with Qatar and also tried to close off entry to Qatar by land, sea and air. They argued that Qatar is a major funder of terrorism.U.S. President Donald Trump backed the move. “The nation of Qatar, unfortunately, has historically been a funder of terrorism at a very high level, and in the wake of that conference, nations came together and spoke to me about confronting Qatar over its behavior,” Trump said on June 9. “I decided, along with Secretary of State Rex Tillerson, our great generals and military people, the time had come to call on Qatar to end its funding -- they have to end that funding -- and its extremist ideology in terms of funding.”Of course, there is much more to the spat than Qatar’s terrorism links – the tension between Qatar and Saudi Arabia goes much deeper. Qatar supported the Arab Spring uprisings in 2011, sparking the intense ire of the various monarchies and authoritarians in the region. Qatar has a friendly relationship with Iran, a major rival of Saudi Arabia. There is also just a plain old competition for power in the region. Needless to say, it’s complex.Tensions are heating up. In a show of force, Qatar held military exercises on June 19 with Turkish troops.As is often the case with the Trump administration, there have been mixed signals from Washington. President Trump has strongly supported the isolation of Qatar over its alleged funding of terrorism, ignoring the fact that although the relationship is complicated, Qatar is an ally of the U.S. in many ways. Not only does the U.S. have a large military base in Qatar, Qatar is also home to the U.S.’ regional Central Command headquarters. The location is critical to the U.S.’ campaign to fight ISIS, among other security objectives. Moreover, the Pentagon just signed off on a $12 billion weapons deal to Qatar last week. Shortly after Trump’s public comments, the Pentagon felt the need to issue a statement thanking Qatar for hosting 10,000 U.S. troops.

OilPrice Intelligence Report: All Eyes On OPEC As Oil Prices Sink: Oil prices hit ten-month lows this week, pushing crude oil well into bear market territory. Hopes of the OPEC deal balancing the market are fading fast. The plunging price took a breather on Thursday and Friday, hovering at the lowest levels since the third quarter of 2016. There is a growing consensus that the OPEC cuts won’t be enough to drain inventories, so there are murmurings about the possibility of deeper cuts.  Iran’s oil minister suggested the idea on state radio earlier this week. But that seems like a remote possibility at this point. Russia has previously dismissed the idea, and very few other producers have shown any interest. The prospect of deeper cuts would help prices but also cede even more OPEC market share to rival drillers. As a result, OPEC is likely to let the market sort itself out for the time being. Meanwhile, the head of Macquarie predicts that the agreement will expire and fall apart at the end of the compliance period in March 2018. "We actually see this OPEC agreement breaking up towards the middle of next year. In that case, we're going to see a huge amount of extra oil on the market next year," Macquarie’s head of European oil and gas research, Ian Reid warned. Oil prices falling to the low-$40s has raised a number of questions about the viability of U.S. shale below the $40 threshold. Mathew Kaleel of Janus Henderson told CNBC that shale production below $40 per barrel is “problematic,” and that a lot of it would be “loss-making.” Other analysts agreed with that sentiment, while also predicting that there is a good chance prices dip below the $40 threshold soon. At the same time, Kaleel noted that prices would have to move higher in the medium-term to encourage more production.

US Oil Rig Count Rises For 23rd Straight Week But High Costs Drive Investors Out Of The Permian -- The number of oil rigs in America has now risen for 23 straight weeks (and 50 of the last 52 weeks), up 11 to 758 in the last week - the highest since April 2015. "It’s becoming bearish mania," said Phil Flynn, senior market analyst at Price Futures Group Inc. in Chicago. "If we keep going down, we’re not going to be adding rigs in a few months, we’re not going to be adding production"  And we suspect, given the lagged reaction to prices, that inflection point in rig counts is close... And the last chance for the week for the bulls just left... US crude production (in the Lower 48) has been on a tear (with one brief interruption) tracking the lagged rise in rig counts almost perfectly... And the rising rig count has been driven mainly by The Permian... But as Oil & Gas 360 notes, high acreage costs beginning to affect economics in the Delaware, driving investors away from The Permian. The Permian has enjoyed a rush of capital since oil prices began to recover from a low of $26.21 in February of last year.The play is home to some of the best economics in the country, making it a prime target for E&P companies looking to maximize profit in a lower price environment. But the surge in land costs is leaving little room for new investors to profit.The Delaware basin, the Permian’s hottest zone, is beginning to become a victim of its own success. EnerCom Analytics’ well economic models indicate that the internal rates of return (IRRs) in the Delaware are now lower than those seen in the Midland due to the high cost of land.At $45 WTI, EnerCom’s well economics models show IRRs in the Midland of 22.8 percent compared to 21.5 percent in the Delaware when acreage costs are included in the equation. The cost per-acre in the Delaware is 65 percent higher than in the Midland at an average of $33,000 per acre.) Economics in every basin are expected to see pressure as oil prices remain in the low- to mid-$40 range and oilfield service providers, who are in high demand for well completions and drilling, look to increase their prices. Combined with the high premiums in the Permian, this barrage of pressuring factors is making it more difficult for new investors to enter the play, and those with exposure are beginning to pull back. Service costs are expected to increase between 10 percent and 15 percent, according to EnerCom Analytics, with some E&P companies saying they could increase as much as 20 percent. In EnerCom’s March Energy Industry Data & Trends, the firm found that most basins could absorb even the high-end of those estimates at $50 per barrel WTI, but with prices floating around $45 per barrel, it will be much more difficult for E&Ps to continue generating 20 percent IRRs or better.

U.S. Oil Producers Won't Stop Drilling: Baker Hughes Rig Count Up 11 - Commodity prices have faltered, yet U.S. oil and natural gas producers continue to bolster drilling activity, adding eight more rigs over the course of the past week to bring Baker Hughes' official tally to 941.  In the 23rd consecutive week of U.S. rig additions, the oil rig count rose by 11 to 758, while the natural gas rig count fell by three to 183. Offshore rigs remained level at 22 and are up one year over year. The U.S. rig count is up 520 rigs year over year when it stood at 421, with oil rigs up 428, gas rigs up 93 and miscellaneous rigs down one to zero.  Notably, the current drilling rig recovery represents the fastest industry recovery in history, G. Allen Brooks, a managing director of energy-focused investment bank PPHB, wrote in a report issued earlier this week.   But as Brooks pointed out, this recovery has not yet reached the levels of the recoveries of 1979 and 2009. And the current weakening of crude oil prices is likely to cut short the current recovery below levels reached in those earlier comebacks, he argued.  Still, oil prices have now fallen 20% year to date, and the count of drilling rigs has increased by 283 in that period.And what's perhaps worse for the oversupplied oil industry is that drilled but uncompleted wells, or DUCs, are now at 5,946, according to the U.S. Energy Information Administration, and they have been at record levels for the past two weeks, .As Seaport Global Securities reported earlier this week, though, oil prices hovering around $40 per barrel for an extended period of time could force U.S. producers to pull back. If they don't, the firm suggested the industry could face another period of commodity prices in the $20-per-barrel range early next year.West Texas Intermediate crude contracts for August delivery were up less than 1% to slightly more than $43 a barrel Friday around 1 p.m. ET "The current hedging numbers and declining crude prices indicate the rig count is going to need to slow at some point," Quigley wrote in an email to TheStreet. "Something's gotta give."

Saudi Arabia's Mohammed bin Salman elevated to Crown Prince | Reuters: Saudi Arabia's King Salman made his son his successor on Wednesday, removing his nephew as crown prince and giving the 31-year old almost unprecedented powers as the world's leading oil exporter implements transformational reforms. A royal decree appointed Mohammed bin Salman crown prince and deputy prime minister. He retains defense, oil and other portfolios. It said Crown Prince Mohammed bin Nayef, a counter-terrorism chief admired in Washington for putting down an al Qaeda campaign of bombings in 2003-06, was relieved of all positions. Although Mohammed bin Salman's promotion was expected among close circles it came as a surprise at a time the kingdom is facing heightened tensions with Qatar and Iran and is locked in a war in Yemen. The royal decree said the decision by King Salman to promote his son and consolidate his power was endorsed by 31 out of 34 members of the Allegiance Council, made up of senior members of the ruling Al Saud family. Always intent on dispelling speculation of internal divisions in the Al Saud ruling dynasty, Saudi television was quick to show that the change in succession was amicable and supported by the family. Throughout the early morning it aired footage of Mohammed bin Nayef pledging allegiance to the younger Mohammed bin Salman who knelt and kissed his older cousin's hand.Analysts said the change ends uncertainty over succession and empowers Prince Mohammed bin Salman to move faster with his plan to reduce the kingdom's dependence on oil, which includes the partial privatization of state oil company Aramco. 

Saudi Arabia's new crown prince and the outlook for the kingdom's oil sector -- Global Oil Markets podcast --Saudi Arabia's King Salman has appointed his son Mohammed bin Salman as his successor, giving the young prince a free hand to carry out his ambitious economic reforms. S&P Global Platts editors Adal Mirza and Tamsin Carlisle discuss what the announcement means for the kingdom's National Transformation Plan, which includes the sale of up to 5% of state-owned oil company Saudi Aramco through an IPO.

Trump, new Saudi crown prince share hardline views on Iran but risks abound | Reuters: Saudi Arabia's new crown prince and likely next king shares U.S. President Donald Trump's hawkish view of Iran, but a more confrontational approach toward Tehran carries a risk of escalation in an unstable region, current and former U.S. officials said. Iran will almost certainly respond to a more aggressive posture by the United States and its chief Sunni Arab ally in battlefields where Riyadh and Tehran are engaged in a regional tussle for influence. Saudi King Salman made his son Mohammed bin Salman next in line to the throne on Wednesday, handing the 31-year-old sweeping powers, in a succession shake-up. Prince Mohammed, widely referred to as "MbS," has ruled out any dialogue with arch rival Iran and pledged to protect his conservative kingdom from what he called Tehran's efforts to dominate the Muslim world. In the first meeting between Trump and MbS at the White House in March, the two leaders noted the importance of "confronting Iran's destabilizing regional activities." But that could have unintended consequences, said some current and former U.S. administration officials. The greatest danger for the Trump administration, a longtime U.S. government expert on Middle East affairs said, was for the United States to be dragged deeper into the Sunni-Shi’ite conflict playing out across the Middle East, a danger that could be compounded by Trump’s delegation of responsibility for military decisions to the Pentagon.If the administration gives U.S. commanders greater authority to respond to Iranian air and naval provocations in the Gulf and Strait of Hormuz, things could easily spiral out of control, the official said. 

Israel Deployed 18 Fighter Jets To Saudi Arabia To "Prevent A Coup": Fars --While according to the official narrative, the Saudi power transition on Wednesday, when King Salman bin Abdulaziz announced his decision to replace Crown Prince Mohammed bin Nayef bin Abdulaziz with his own son, Mohammed bin Salman, went smooth and by the numbers, what took place behind the scenes is more interesting.Here, events were decidedly more interesting, because as Fars News reports (so take it with a grain of salt), after the decision was announced, the Israeli air force sent 18 of its fighter jets, including F16-I, F15-CD and F16-CD, along with two Gulfstream aircraft, two tanker airplanes and two C130 planes, special for electronic warfare, to Saudi Arabia at the demand of the new crown prince bin Salman to block his cousin (bin Nayef)'s possible measures.On the surface, such close ties between the existing Saudi regime and Israel would appear a stretch, although it is far more plausible after this week's WSJ report that when it comes to the Saudi proxy war, Israel and Saudi Arabia had been alligned from the onset of the Syrian conflict, with Israel secretly supplying Syrian rebels near its border with cash as well as food, fuel and medical supplies for years, "a secret engagement in the enemy country’s civil war aimed at carving out a buffer zone populated by friendly forces."  If true, the Fars report would be rather striking because, in addition to other geopolitical implications, Israel and Saudi Arabia do not have formal diplomatic relations.

Saudi Arabia eases austerity just as oil prices decline: Kemp (Reuters) - Saudi Arabia’s decision to reverse some of last year’s austerity measures coincides with a renewed decline in oil prices and complicates the financial and economic outlook for the kingdom.All allowances, bonuses and financial benefits for civil servants and military personnel cancelled, amended or suspended in September 2016 have been restored and backdated by a royal decree issued by King Salman ("Saudi Arabia slashes ministers' pay, cuts public sector bonuses", Reuters, Sept. 26, 2016). The decision coincides with the alteration of the succession in favour of the king’s son Mohammad bin Salman and relieves the previous crown prince of all his posts.The distribution of largesse to coincide with changes in the succession is common in monarchical systems to cement loyalty to the ruler and the chosen heir.Saudi successions have normally been accompanied by generous financial packages for employees on the government payroll and distributions have also been made at other times of political stress.The government has been gradually relaxing some austerity measures in recent months and signalling it would go further.The decision to pair the change in succession with a relaxation of austerity is not surprising but there are questions about its affordability in the medium term.Austerity measures were introduced by the government in response to the sharp drop in oil prices and revenues (http://tmsnrt.rs/2sTgvoG).Saudi Arabia’s earnings from petroleum exports shrank to $134 billion in 2016, from $322 billion in 2013, the last full year before oil prices slumped (“Annual Statistical Bulletin”, OPEC, 2017).As spending outstripped income, the country’s foreign reserves were depleted by $116 billion in 2015 and another $81 billion in 2016, according to statistics from the Saudi Arabian Monetary Agency. Saudi Arabia’s official foreign assets have fallen by a third to $500 billion at the end of April 2017, from a peak of $746 billion in August 2014 (“Monthly Statistical Bulletin”, SAMA, April 2017).The combination of spending controls, increases in taxes and utility fees, and higher oil prices at the end of 2016 and in early 2017 narrowed the budget deficit and stemmed the depletion of reserves.But austerity has provoked complaints from Saudi citizens and a broad slowdown in the private-sector economy, which relies heavily on government spending and oil revenues as the ultimate source of almost all activity.

Saudi Arabia's oil reserves jump on tax move ahead of IPO: Rystad - Saudi Arabia effectively grew its recoverable oil resources by 73 billion barrels this year after lower tax rates for state producer Saudi Aramco boosted the country's estimated prospective resources, Norwegian oil consultancy Rystad Energy said Tuesday. The new recoverable contingent resources took Saudi Arabia's total recoverable oil resources to 276 billion barrels, regaining the global top spot for oil resources, Rystad said in its annual review of global oil resources. Saudi Arabia cut Aramco's company tax rate to 50% in March from 85% as part of moves to attract private investors ahead of its planned initial public offering in 2018. "[Saudi Arabia's] revised fiscal regime should incentivize more aggressive exploration and development drilling in the country," Rystad said.The only other oil-producing countries to increase their reserves last were Kazakhstan and the US, Rystad said, citing its estimates for prospective resources which includes risked estimates from undiscovered fields. In the US, recoverable oil resources rose 13 billion barrels with unconventional shale oil making up over half of the country's total oil resources, estimated at 263 billion barrels. If natural gas liquids (NGLs) were included in the review, Rystad said the US would surpass Saudi Arabia by more than 50 billion barrels of recoverable oil and petroleum liquids. Globally, the world's total recoverable oil resources have risen 29 billion barrels since 2016 to 2.2 trillion barrels, Rystad said, or 73 times the current annual production rate.Rystad's baseline oil resources estimates use a broader definition of reserves than those from BP's wide-widely referred to estimates of produced oil reserves.BP estimated last week the world's total proven oil reserves stood at 1.7 trillion barrels at the end of 2016, based on recoverable oil from discovered fields under current economic conditions. Rystad's oil resources figures include proven and probable reserves as well as contingent reserves from unsanctioned projects and prospective recoverable resources.

US-Led Coalition Shoots Down Syrian Army Aircraft – Reports - US-led anti-terrorist coalition has reportedly shot down a Syrian government forces' aircraft. Syrian Arab Army announced that the US-led anti-terrorist coalition had brought down its aircraft in southern Raqqa countryside, Syrian media reported citing a statement by the Syrian Defence Ministry.  According to the report, the Syrian jet fighter was carrying out military tasks fighting Daesh terrorist organization. “Our aircraft was downed at lunch time today near the [Syrian] city of Raqqa, when it was fulfilling its mission against the IS,” the ministry said in a statement, adding that the US-led coalition was responsible for downing the aircraft. The ministry noted that the coalition’s “actions are aimed at halting the Syrian army and its allies in the fight against terrorism, whereas our army and allies make great progress.”According to the ministry, the pilot of the aircraft has not been found to date.This is not the first time the US-led coalition's activities in Raqqa cause casualties. Syrian media reported earlier that at least 43 civilians were killed as a result of the US-led coalition airstrike in the region. The Syrian Foreign Ministry condemned the airstrikes and sent two letters the UN secretary general and the head of the UN Security Council, in which the coalition's actions were compared to Daesh crimes. Just a few days later, the Lebanese media reported that the coalition's airstrikes killed more than 30 civilians more near Raqqa.

Russia warns US its fighter jets are now potential target in Syria -- The threat of direct Russian-American confrontation in Syria escalated on Monday after Moscow said it would treat any plane from the US-led coalition flying west of the Euphrates river as a potential target. Russia said it was responding to US planes shooting down a Syrian air force jet on Sunday. The US said its planes had acted to defend US-backed forces seeking to capture the Islamic State capital of Raqqa in north-east Syria. It was the first such US attack on a Syrian warplane since the start of the country’s civil war six years ago. Russia’s deputy foreign minister, Sergei Ryabkov, said the US strike “has to be seen as a continuation of America’s line to disregard the norms of international law. “What is this if not an act of aggression? It is, if you like, help to those terrorists that the US is fighting against, declaring they are carrying out an anti-terrorism policy.” The Russian foreign ministry also said it would respond to the attack by suspending its communications channel with US forces, which is designed to prevent collisions and dangerous incidents in Syrian airspace. The top US general, Joseph Dunford, sought to play down the repercussions of the incident, insisting the hotline established eight months ago between US central command in Qatar and its Russian equivalent in Syria was still open and functioning on Monday morning and would be used try to defuse the situation. “I’m confident that we are still communicating between the coalition operations centre and the Russian operations centre,” Dunford, chairman of the joint chiefs of staff told the National Press Club in Washington. “I think the worst thing any of us could do would be to address this with hyperbole.” He added: “I’m also confident that our forces have the capability to take care of themselves.” The Russian military threatened to close the hotline, known as the “deconfliction channel”, in April after President Trump ordered a missile strike against a Syrian air base allegedly involved in a chemical weapons attack. However, Moscow did not fulfill the threat and the channel remained open. 

Australia Suspends Military Flights Over Syria, Citing "Potential Threats" From Russia --Russia’s Monday decision to suspend a memorandum of cooperation with the US-led coalition in retaliation after a US jet shot down a Syrian Army plane has rattled some US allies, who fear escalating tensions between Russia and the coalition. In what it called a "precautionary measure," Australia became the first coalition member to suspend flights in Syria, claiming it's too dangerous for its planes to fly without the agreement, according to BBC.“As a precautionary measure, Australian Defense Force (ADF) strike operations into Syria have temporarily ceased,” Australia’s Department of Defense said in a statement, adding its operations in Iraq would continue as part of the coalition.”“ADF personnel are closely monitoring the air situation in Syria and a decision on the resumption of ADF air operations in Syria will be made in due course.”“Australian Defense Force protection is regularly reviewed in response to a range of potential threats,” the Department of Defense said.Australia has deployed about 7 80 military personnel as part of the US-led coalition fighting the Islamic State in Iraq and Syria

Pentagon working to re-establish 'deconfliction' line with Russia | TheHill: Chairman of the Joint Chiefs of Staff Gen. Joe Dunford on Monday said the United States will try “in the next few hours” to re-establish deconfliction arrangements between Russia and the United States following the U.S. downing of a Syrian military jet over the weekend. “An incident occurred, we have to work through the incident, we have a channel to be able to do that and I think it’s going to require some diplomatic and military engagement in the next few hours to restore the deconfliction that we’ve had in place,” Dunford said at a forum at the National Press Club in Washington. The deconfliction arrangement — first established with Russia in 2015 to avoid mid-air collisions in Syria as both sides fight militant groups — was broken after a U.S. Navy F/A-18E Super Hornet on Sunday shot down a Syrian warplane in the southern part of the Islamic State in Iraq and Syria's (ISIS) stronghold in Syria. The Pentagon said the strike — which happened after the U.S.-backed Syrian Democratic Forces (SDF) reportedly came under attack from forces in favor of Syrian President Bashar Assad — complied with the “rules of engagement” and was in self-defense. Dunford stressed that “the worst thing any of us can do right now is address this thing with hyperbole.” But the incident drew condemnation from Russia, a key ally of Assad. Dunford said the U.S. was still communicating with the Russians as of this morning despite the conflict. 

US Jet Shoots Down Syrian Army Drone In "Dangerous Escalation" - A US F-15E fighter jet shot down a Syrian regime drone on Monday near At Tanf, Syria, the third downing of a pro-regime aircraft this month, CNN reported. The downing of the drone comes a day after a US jet shot down a regime aircraft that was engaging a fleeing ISIS convoy, according to the Syrian government. Here’s CNN:"The drone was downed just outside the 55 kilometer de-confliction zone, according to the officials.It was an Iranian-made Shahed 129 and was thought to be armed and in firing range of US troops.One official said that the drone was shot down because it was 'assessed to be a threat.'That drone was shot down after it dropped one of several weapons it was carrying near a position where coalition personnel are training and advising partner ground forces in the fight against ISIS."According to Fox News, this is the second time the US has shot down an Iranian drone in less than a month. It also marks the fifth time since late May the U.S. military has bombed pro-Syrian forces in southern Syria. Connecticut Sen. Chris Murphy described the attack as “a dangerous escalation" of tensions between the US and the main backers of the Syrian regime, Russia and Iran. Murphy told CNN that if the US doesn't stop the attacks, the situation could escalate into an armed conflict between the two sides, who both claim to be fighting ISIS.

The US seems keener to strike at Syria's Assad than it does to destroy Isis | The Independent: The extraordinary destruction of a Syrian fighter jet by a US aircraft on Sunday has precious little to do with the Syrian plane’s target in the desert near Rasafa – but much to do with the advance of the Syrian army close to the American-backed Kurdish forces along the Euphrates. The Syrians have grown increasingly suspicious in recent months that most Kurdish forces in the north of Syria – many of them in alliance with the Assad government until recently – have thrown in their lot with the Americans. Indeed, the military in Damascus is making no secret of the fact that it has ended its regular arms and ammunition supplies to the Kurds – it has apparently given them 14,000 AK-47 rifles since 2012 – and the Syrian regime was outraged to learn that Kurdish forces recently received an envoy from the United Arab Emirates. There is unconfirmed information that a Saudi envoy also visited the Kurds. This, of course, follows the infamous Trump speech in Riyadh, in which the US President gave total American support to the Saudi monarchy in its anti-Iranian and anti-Syrian policies – and then later supported the Saudi-led isolation of Qatar. On the ground, the Syrian army is now undertaking one of its most ambitious operations since the start of the war, advancing around Sueda in the south, in the countryside of Damascus and east of Palmyra. They are heading parallel with the Euphrates in what is clearly an attempt by the government to “liberate” the surrounded government city of Deir ez-Zour, whose 10,000 Syrian soldiers have been besieged there for more than four years.If they can lift the siege, the Syrians will have another 10,000 soldiers free to join in the recapture of more territory. More importantly, however, the Syrian military suspects that Isis – on the verge of losing Raqqa to US-supported Kurds and Mosul to US-backed Iraqis – may try to break into the garrison of Deir ez-Zour and declare an alternative “capital” for itself in Syria. 

Everything You're Not Being Told About The US War Against ISIS In Syria -- It’s time to have a sane discussion regarding what is going on in Syria. Things have escalated exponentially over the past month or so, and they continue to escalate. The U.S. just shot down yet another Iranian-made drone within Syrian territory on Tuesday, even as authorities insist they “do not seek conflict with any party in Syria other than ISIS.”Col. Ryan Dillon, chief U.S. military spokesman in Baghdad, seemed to indicate that the coalition would avoid escalating the conflict following Russia’s warning that it will now treat American aircraft as potential targets. He stated:  “As a result of recent encounters involving pro-Syrian regime and Russian forces,we have taken prudent measures to reposition aircraft over Syria so as to continue targeting ISIS forces while ensuring the safety of our aircrews given known threats in the battlespace.” So what is really going on in Syria? Is the U.S. actually seeking an all-out confrontation with Syria, Iran, and Russia? The first thing to note is that a policy switch under the Trump administration has seen the U.S. rely heavily on Kurdish fighters on the ground as opposed to the radical Gulf-state backed Islamist rebels, which the U.S. and its allies had been using in their proxy war for over half a decade. Even the Obama administration designated the Kurds the most effective fighting force against ISIS and partnered with them from time to time, but Turkey’s decision to directly strike these fighters complicates the matter to this day. Further muddling the situation is the fact that the U.S. wants the Kurds to claim key Syrian cities after ISIS is defeated, including Raqqa. However, the reason this complicates matters is that, as Joshua Landis, head of the Middle Eastern Studies Center at the University of Oklahoma explains, the Kurds have “no money” nor do they have an air force. “[T]hey’ll be entirely dependent on the US Air Force from now to eternity, and the United States will be stuck in a quagmire, defending a new Kurdish state that America had partnered with to defeat [ISIL],” Landis said, as reported by Quartz.

Caught On Video: Russian Ships, Sub Fire Cruise Missiles At ISIS Targets In Syria -- A little more than a week after launching the strike that reportedly killed ISIS leader Abu Bakr Al Baghdadi, Russian navy ships and a submarine launched six cruise missiles at ISIS targets in Syria’s Hama province, destroying an ISIS command center and ammunition depot,according to Russia Today. The missiles were launched from the eastern Mediterranean by Russian Navy frigates the Admiral Essen and the Admiral Grigorovich, the Defense Ministry said. The cruise missile strike follows a similar attack by Russian forces on May 31, when a nearly identical arrangement of Russian warships and a submarine also struck ISIS targets near Palmyra.  The strike hit a large ammunition depot near the town of Aqerbat, which detonated after being hit. Russia warned Israel and Turkey about the strikes via a military-to-military hotline.“[The ships] targeted an area east of Palmyra, where the militants’ heavy weaponry and manpower were located. The militants had moved there from Raqqa. All targets were destroyed,” the defense ministry said.The strike was launched after a large Islamic State convoy, comprising 39 vehicles and 120 militants, was spotted outside the city of Raqqa.

Iran Launches Missile Strikes Against "Terror Bases" In Eastern Syria -- In a major escalation of the Syrian proxy war, Iran's Revolutionary Guard said it launched multiple missile strikes from IRGC missile bases in provinces of Kermanshah & Kordestan, targeting "terror bases" in Deir ez-Zor in eastern Syria in retaliation for ISIS-claimed attacks in Tehran.  Footage of the moment the IRGC fired the missiles is shown below:  As reporter Anshel Pfeffer observes, this is a "major development" and constitutes the "first operational use of mid-range missiles by Iran since war with Iraq."Major development. First operational use of mid-range missiles by Iran since war with Iraq. https://t.co/3oxXw4PvzX— Anshel Pfeffer (@AnshelPfeffer) June 18, 2017According to the AP, the "Guard's website as well as the Tasnim semi-official news agency, reported the strikes Sunday on Deir el-Zour, Syria. The Guard’s website said it launched surface-to-surface medium-range missiles targeting the area.  It did not immediately offer other specifics, other than to say the missiles were launched from Iran."Tasnim adds that the IRGC announced that a high number of terrorists have been killed by the IRGC missile attack at Deir ez-Zor.Such an attack is rare in Syria’s long-running civil war, in which Iran is backing embattled Syrian President Bashar Assad. The attack is reportedly in response to the previously reported attack in which five ISIS-linked terrorist stormed Iran’s parliament and a shrine to revolutionary leader Ayatollah Ruhollah Khomeini this month, killing at least 17 people and wounding more than 50. Iran blamed Saudi Arabia for the attack, claiming its support for ISIS terrorist had made it possible.  The launch takes place just hours after Iran held a joint naval drill with Chinese warship in the Straits of Hormuz, as reported previously.

The Growing U.S.-Iran Proxy Fight in Syria -- On Sunday evening, a U.S. warplane shot down a Syrian jet after it bombed American-backed rebels in northern Syria.  Russia, for its part, angrily condemned the U.S. action and threatened on Monday to treat all coalition planes in Syria as potential targets. But the dangers are perhaps particularly acute when it comes to Iran, which made dramatic battlefield moves of its own on Sunday, when it launched several missiles from inside Iran against ISIS targets in eastern Syria. Officially, Iran’s Revolutionary Guards said the volley of missiles fired at Deir Ezzor province was a response to a pair of attacks by ISIS in Tehran on June 7, which killed 18 people and wounded dozens; the attacks marked the first time that ISIS had struck inside Iran. But the Iranian regime had several less-dramatic means to exact revenge against ISIS targets in Syria—after all, there’s no shortage of Iranian allies operating in the war-ravaged country. Instead, Iran’s fiery act of vengeance seemed to be a message aimed at both the Trump administration and Saudi Arabia. (The six ballistic missiles used by Tehran against ISIS, with a range of 700 kilometers, could reach major Saudi cities.) The kingdom has become emboldened regionally and escalated its anti-Iran rhetoric thanks, in part, to Trump’s message of seemingly unconditional support. At the same time, Trump’s apparent willingness to use military force against Syrian President Bashar al-Assad and his chief supporters risks sparking a widening confrontation, while distracting from what he insists is his top priority: defeating ISIS in Iraq and Syria. This, from a president who campaigned, in part, on a pledge to avoid direct U.S. involvement in the Syrian conflict. Now, Trump has become a major player in an exploding regional proxy war that could determine the Middle East’s post-war dynamics.

Five takeaways from Iran’s missile strike in Syria | Asia Times: At its most obvious level, Iran’s missile attack on the Islamic State command centre in the Syrian city of Dier Ezzor on Sunday may be regarded as the demonstration of an extraordinarily innovative military capability. Iran says it fired six ground-to-ground missiles from Islamic Revolutionary Guards Corps (IRGC) bases in Kermanshah and Kurdistan provinces, both in Western Iran, and that they “hit the targets in Deir Ezzur with high precision after flying through the Iraqi airspace.” The footage shows that at least one of the missiles was of the Zolfaqar class and at least one more was of the Qiam class, both indigenously developed missiles. Zolfaqar is the latest generation of Iran’s mid-range missiles. It can hit targets up to 700 kilometres away and is capable of carrying a Multiple-Entry Vehicle payload. Qiam is a surface-to-surface cruise missile. From all accounts, the missiles hit their target with devastating precision. Simply put, Iran has notified the US that its 45,000 troops deployed in bases in Iraq (5,165), Kuwait (15,000), Bahrain (7,000), Qatar (10,000), the UAE (5,000) and Oman (200) are highly vulnerable. The Chief of Staff of Iran’s armed forces, Gen. Mohammad Hossein Baqueri, said on Monday: “Iran is among the world’s big powers in the missile field. They (read the US and its allies) don’t have the capability to engage in conflict with us at present, and of course, we don’t intend to involve in clashes with them, but we are in permanent rivalry with them in different fields, including the missile sector.”

Saudi says captures three Iranian Revolutionary Guards from boat  (Reuters) - The Saudi navy has captured three members of Iran's Revolutionary Guard Corps (IRGC) from a boat seized last week as it approached the kingdom's offshore Marjan oilfield, the Saudi information ministry said on Monday. Relations between the two countries are at their worst in years, with each accusing the other of subverting regional security and support opposite sides in conflicts in Syria, Yemen and Iraq. "This was one of three vessels which were intercepted by Saudi forces. It was captured with the three men on board, the other two escaped," a statement from the ministry's center for international communications said. "The three captured members of the Iranian Revolutionary Guard are now being questioned by Saudi authorities," it said, citing a Saudi official. The vessel, seized last Friday, was carrying explosives and intended to conduct a "terrorist act" in Saudi territorial waters, it said. An earlier report from the Saudi Press Agency said the Saudi navy had fired warning shots at the two boats that managed to escape. Iran's Tasnim news agency said on Saturday that Saudi border guards had opened fire on an Iranian fishing boat in the Gulf on Friday, killing a fisherman. It said the boat was one of two Iranian boats fishing in the Gulf that had been pushed off course by waves. Tensions between Iran and Saudi Arabia have steadily deteriorated. On June 5, Riyadh and other Arab governments severed ties with Qatar, citing its support of Iran as a reason.

IS has 100,000 civilians as 'human shields' in Mosul's Old City: UN -(AFP) - The UN said Friday that Islamic State group jihadists may be holding more than 100,000 Iraqi civilians as human shields in the Old City of Mosul. Iraqi forces are fighting to retake Mosul from IS, after the jihadist group overran the city in 2014, imposing its brutal rule on its inhabitants. The UN refugee agency's representative in Iraq, Bruno Geddo, said IS had been capturing civilians in battles outside of Mosul and had been forcing them into the Old City, one of the last parts of the city in their grip. "More than 100,000 civilians may still be held in the Old City," Geddo told reporters in Geneva. "We know that ISIS moved them with them as they left… locations where the fighting was going on," he said, using another acronym for IS, which is also known as Daesh or ISIL. "These civilians are basically held as human shields in the Old City." With virtually no food, water or electricity left in the area, the civilians are "living in an increasingly worsening situation of penury and panic," he said. "They are surrounded by fighting on every side."

ISIS Blows Up Historic Grand al-Nuri Mosque In Mosul - The Islamic State on Wednesday night destroyed the famous Grand al-Nuri Mosque located in Mosul, best known for its leaning minaret, known as the "hunchback" and one of Iraq’s most famous landmarks. The entire structure has been destroyed, Reuters reported on Tuesday, citing an Iraqi military statement. The mosque is where the Islamic State leader, Abu Bakr al-Baghdadi, ascended a pulpit in 2014 and declared a caliphate after his fighters took control of Mosul and swept through other areas of northern Iraq and Syria, according to the NYT.The landmark structure, which was built in the 12th century, had already been targeted by the Islamic State when it first occupied the Iraqi city in 2014.According to Radio Sawa's Zaid Benjamin, the photo below shows the remains of the structure after the explosion.Shortly after the military’s report, the terrorist group used its news agency to claim that the mosque had actually been destroyed by an American airstrike. The Pentagon has not yet commented.The destruction of the mosque and minaret, pictured on Iraq’s 10,000 dinar bank note, is another blow to the city’s rich cultural heritage and its plethora of ancient sites that h ave been damaged or destroyed during three years of Islamic State rule.

Syrian "Rebels" In Turmoil After Qatar Crisis --The ongoing Qatar crisis has had an unexpectedly adverse outcome among the Syrian "rebels", in many cases formerly known as al-Qaeda, who expect the crisis between two of their biggest state backers - Saudi Arabia and Qatar - to deepen divisions in the opposition to President Bashar al-Assad. Together with Turkey and the United States, Qatar and Saudi Arabia have been major sponsors of the insurgency, arming an array of groups that have been fighting to topple Syria's Iran-backed president. However, in recent weeks the Gulf support has been far from harmonious, fuelling splits that have set back the revolt.Quoted by Reuters, Mustafa Sejari of the Liwa al Mutasem rebel group in northern Syria said "god forbid if this crisis is not contained I predict ... the situation in Syria will become tragic because the factions that are supported by (different) countries will be forced to take hostile positions towards each other.""We urge our brothers in Saudi Arabia and Qatar not to burden the Syrian people more than they can bear" he said magnanimously, when what he really meant is that he needs Saudis and Qatar on the same page so that the supply of weapons and cash can resume.To be sure, for the terrorists rebels the Qatar crisis comes at the worst possible time: the opposition to Assad has been losing ground to Damascus ever since the Russian military deployed to Syria in support of Assad's war effort in 2015. As Reuters adds Assad now appears "militarily unassailable", although rebels still have footholds near Damascus, in the northwest, and the southwest. These are unlikely to hold without a continued infusion of support from the feuding Gulf states. The splintering within the "fund flows" to rebels has further angered Saudi Arabia: in the fractured map of the Syrian insurgency, Qatari aid has gone to groups that are often Islamist in ideology and seen as close to the Muslim Brotherhood - a movement that is anathema to Saudi Arabia, the United Arab Emirates and Egypt. At the same time, Turkey, which has swung firmly behind Qatar in the Gulf crisis, has backed the same groups as Qatar in northern Syria, including the powerful conservative Islamist faction Ahrar al-Sham which in the past has cooperate with the al-Nusra front, also known as al-Qaeda.

Qatar, US navy exercise wraps up amid PG tensions: The Qatari and US naval forces have concluded a three-day joint military exercise in the Persian Gulf in the wake of a recent move by a number of Arab countries to sever their diplomatic relations with Doha, and close their borders and airspace with the gas-rich kingdom. The vessels, which took part in the drill off Qatar's east coast, included gunboats as well as coastguard and supply vessels. Four ships from the US Navy had participated in the joint exercise. Two US Navy vessels arrived in Doha on Wednesday. The development came on the same day that the United States and Qatar have signed a deal for the purchase of F-15 fighter jets with an initial cost of 12 billion dollars. The aircraft purchase was completed by Qatari Minister of Defense Khalid al-Attiyah and his US counterpart Jim Mattis in Washington DC. The Pentagon said in a statement that the deal would “increase security cooperation and interoperability between the United States and Qatar.” Qatari Staff Commander Mohammed Desmal al-Kuwari said the joint naval exercise was requested by the US Navy “a few weeks back.” He added that military drills, involving Qatar and its allies, would continue.

Qatar won't cut gas to UAE: Qatar Petroleum CEO | Reuters: Qatar will not cut off gas to the United Arab Emirates despite a diplomatic dispute and a "force majeure" clause in its contract, the chief executive of Qatar Petroleum told Al Jazeera network, two weeks after some Gulf Arab states severed ties with Doha. CEO Saad al-Kaabi said that although there was a "force majeure" clause in the agreement on the Dolphin gas pipeline, which links Qatar's giant North Field with the UAE, Qatar would not stop supplies for other reasons. "The siege we have today is a force majeure and we could close the gas pipeline to the UAE," he said. "But if we cut the gas, it does great harm to the UAE and the people of the UAE, who are considered like brothers ... we decided not to cut the gas now," he told the Doha-based channel in an interview aired on Sunday. The Dolphin gas pipeline links Qatar with the UAE and Oman and pumps around 2 billion cubic feet of gas per day to the UAE. The chief executive of Sharjah National Oil Corp said earlier on Sunday he did not expect flows of natural gas from Qatar to the United Arab Emirates to be interrupted by the diplomatic dispute in the region.

Qatargas, Shell sign new five-year LNG deal from 2019 - Qatargas has agreed to sell 5.5 million mt of LNG to Shell, amid uncertain demand from its Asian long-term buyers and building diplomatic tensions with its trading partners in the Middle East. Under the sales and purchase agreement, the state-owned producer will supply Shell with 1.1 million mt/year of LNG over five years from 2019, according to a statement released by Qatargas Sunday. The LNG will be sourced from the Qatargas 4 project, a joint venture between Qatar Petroleum (70%) and Shell (30%), and delivered to the UK's Dragon LNG terminal and the Netherlands' Gate LNG terminal, where Shell has access. "This deal provides Qatargas with access to Shell's gas sales portfolio in the United Kingdom and continental Europe, as well as the flexibility to manage LNG deliveries to our global client portfolio," Qatargas CEO Khalid Bin Khalifa Al-Thani said. The agreement comes amid growing uncertainty over demand from Qatar's long-term buyers in northeast Asia. Close to one third of the LNG produced by Qatar, the world's largest supplier of the fuel, is now sold under spot or short-term deals, as rising global supplies have forced the exporter to offer buyers more flexible terms. And a big share of its existing contracts are due to expire by 2021, including 7 million mt contracted with Japanese utilities, which are seeking more control via shorter, more flexible agreements, amid growing competition from their newly deregulated downstream markets. Qatargas has also seen its LNG strategy affected by the recent diplomatic crisis in the Middle East, with four countries having broken diplomatic ties with Qatar, including two of its LNG customers, over claims it funds extremism and terrorism. Although the break in diplomatic ties has not been accompanied by a break in commercial relations, buyers may now attach a risk premium to Qatari LNG supplies, offering opportunities to other LNG producers, according to PIRA Energy, a unit of S&P Global Platts. Qatar exported 78.8 million mt of LNG in 2016, more than 30% of a total global supply of 257.8 million mt, according to Platts Analytics, and an increasing share of its production is being delivered to emerging Middle Eastern buyers, including Egypt, Jordan and the UAE.

Doha yet to see demands from Riyadh and allies | Qatar News | Al Jazeera: Qatar has yet to see any demands from Saudi Arabia and its allies as they continue an embargo on the country, according to Sheikh Mohammed bin Abdulrahman Al Thani, Qatar's foreign minister.Kuwait is working to mediate the dispute between Gulf Cooperation Council (GCC) states that began nearly two weeks ago."So far Kuwait hasn't received any demands from any GCC nations or even a list of the so-called accusations," Sheikh Mohammed bin Abdulrahman said on Saturday in an interview with Qatar TV."We're just confused about what these demands could be. "The fact that they don't even have clear demands ready shows that all of their accusations are baseless."Saudi Arabia, the UAE, Bahrain, along with Egypt, cut diplomatic and transport ties with Qatar on June 5, accusing the flw country of supporting "extremism" and their regional ally Iran - charges that Qatar has repeatedly denied.The three Arab Gulf countries also ordered Qatari nationals to leave within 14 days, while Saudi, UAE and Bahraini citizens were also given the same timeframe to leave Qatar.They later issued a list of 59 people and 12 groups with links to Qatar, alleging that they have ties to "terrorism".The list included several prominent Qatari charities that carry out life-saving work across the Middle East and elsewhere, including in Syria, Yemen, Sudan and Palestine.

Saudi Arabia demands Qatar shut down Al-Jazeera, cut ties with Iran | TheHill: Saudi Arabia and several other Arab nations have demanded that Qatar shutter the broadcasting network Al-Jazeera, cut diplomatic ties with Iran, and close Turkey's air base in the country, the Associated Press reported Thursday night. The list of demands was released by Kuwait, which is helping mediate the dispute. The list demanded that Qatar end all military cooperation with Turkey as well as an unspecified sum of money. According to the document, the country has 10 days to meet the list of demands. The U.S. has been pushing Saudi Arabia and the other nations to release their demands. The U.S. has been pushing Saudi Arabia and the other nations to release their demands. On Tuesday, the State Department said it was "mystified" that the countries had not been more forthcoming with demands after implementing the blockade. "The more the time goes by, the more doubt is raised about the actions taken by Saudi Arabia and the UAE," State Department spokeswoman Heather Nauert said. "At this point, we are left with one simple question: Were the actions really about their concerns regarding Qatar's alleged support for terrorism, or were they about the long-simmering grievances between and among the GCC countries?" she said, referring to the Gulf Cooperation Council.

Qatar Won't Negotiate Under Saudi-Led Sanctions, Minister Says - Qatar has yet to receive formal demands from the Saudi Arabia-led group of Arab neighbors that imposed sanctions on the gas-rich country, and won’t bargain away what it sees as its sovereign rights, according to the foreign minister. “Negotiations should be done in a civilized way and should have a solid basis,” Mohammed Al Thani told reporters in Doha. “They have to lift the blockade and start negotiations.” Saudi Arabia, the United Arab Emirates and Bahrain severed diplomatic and transport links with Qatar on June 5, accusing their fellow Gulf Cooperation Council member of supporting terrorism. The move split families apart, disrupted trade, and threatens to alter long-standing geopolitical alliances. There are no signs of a quick resolution as the crisis enters its third week. Below are some highlights from  Al Thani’s briefing:

• “Any crisis is resolved politically -- this has been our approach from the beginning. We prefer dialogue. Whether this is a crisis that involves Qatar directly or not. In regards to the mediators, there is only one, it is Kuwait.”
• “Any enemy of theirs is called a terrorist” and they “now see Qatar as the key supporter of terrorism,” the minister said. “We see no basis for these accusations. If there was any evidence, they would have highlighted it. Fourteen days have passed with no evidence provided to us, although they are claiming that we have been doing what they are accusing us of for 20 years.”
• “The internal front in Qatar is very solid. The Qatari people are loyal to their nation and emir. They are not affected by the false allegations they hear through the media.”
• “We disagree with Iran on some areas that are related to the region, and we also disagree with it on areas that are related to the Gulf. Relations must be built on sound, positive pillars. It is a neighboring country and there has to be a positive dialogue. This is not just a Qatari policy but the whole GCC agreed on it, so no one can claim we have a deeper relationship with Iran.”
• “The GCC country with strongest economic ties with Iran is the U.A.E., Qatar is the fifth. So how come we have special, bilateral relations with Iran? The GCC countries didn’t take similar measures to the ones taken against us, against Iran.”
• “They are claiming we are violating the Riyadh Agreement which took place in 2014. The agreement has a clear arbitration mechanism -- which is to discuss any issue bilaterally. If it is not solved, it goes to the ministerial council for the GCC, and if it’s not solved there it goes to the summit to be sorted out.”
• “Al-Jazeera is a Qatari affair. Qatar’s foreign policy on regional issues is Qatar’s affair, and we are not going to negotiate our own affairs. Anything is subject to negotiation when it relates to them, anything which doesn’t relate to them is not subject to negotiation.”

Arab states issue ultimatum to Qatar: close Jazeera, curb ties with Iran | Reuters: Four Arab states that imposed a boycott on Qatar have issued an ultimatum to Doha to close Al Jazeera television, curb ties with Iran, shut a Turkish base and pay reparations, demands so far reaching it would appear to be hard for Doha to comply. Saudi Arabia, Egypt, Bahrain and the United Arab Emirates have sent a 13-point list of demands apparently aimed at dismantling their tiny but wealthy neighbor's two-decade-old interventionist foreign policy which has incensed them. Kuwait is helping mediate the dispute. A Qatari government spokesman said Doha was reviewing the list of demands and that a formal response would be made by the foreign ministry and delivered to Kuwait, but added that the demands were not reasonable or actionable. "This list of demands confirms what Qatar has said from the beginning – the illegal blockade has nothing to do with combating terrorism, it is about limiting Qatar’s sovereignty, and outsourcing our foreign policy," Sheikh Saif al-Thani director of Qatar's government communications office, said in a statement. A Qatar semi-government human rights body said the demands were a violation of human rights conventions and should not be accepted by Qatar. Foreign Minister Sheikh Mohammed bin Abdulrahman al-Thani had said on Monday that Qatar would not negotiate with the four states until economic, diplomatic and travel ties cut this month were restored. The countries that imposed the sanctions accuse Qatar of funding terrorism, fomenting regional unrest and drawing too close to their enemy Iran. Qatar rejects those accusations and says it is being punished for straying from its neighbors' backing for authoritarian hereditary and military rulers. The uncompromising demands leave little prospect for a quick end to the biggest diplomatic crisis for years between Sunni Arab Gulf states, regional analysts said.

Arab States Issue 13 Demands To Qatar - Include Unfriending Iran, Shutting Down Al-Jazeera And Nixing Turkish Base --Two days after the US State Department formally inquired about WTF is going on between Arab States and Qatar, the countries of Egypt, Saudi Arabia, Baahrain, and the UAE sent a list of 13 demands to the tiny Gulf nation to be met within 10 days in order to lift their total blockade of the country. Among them - reducing diplomatic ties with Iran, shutting down broadcaster Al Jazeera (and  affiliates), and immediately cease working to open a Turkish military base announced in May of 2016. Also interesting is the demand that Qatar give up their intel on terrorist groups they have supported and "provide all databases related to oppositionists..." (Scroll down for full list of demands) This formal list comes on the heels of a June 6th rumor that Arab States issued a list of 10 demands to be fulfilled within 24 hours, however Qatar said they never received them according to Al Jazeera journalists who are now dusting off their resumes. On June 5th, news broke that Bahrain, the UAE, Saudi Arabia, and Egypt had cut off diplomatic ties with Qatar over accusations of 'spreading chaos' by 'funding terrorism and supporting Iran' - shutting down all land, sea, and air crossings with the tiny energy-rich nation that has the highest per capita income in the world. Qatari visitors and residents were given two weeks to leave - while diplomats had just 48 hours.  While Qatar has been friendly with Iran for years, the prelude to the embargo began after a broadcast which showed Qatari Emir Tamim bin Hamad Al Thani speaking with no audio - and scrolling text at the bottom of the screen which stated his support for Iran and terrorist groups. Qatar claims the broadcast was 'hacked.' After the broadcast, Saudi Arabia and the UAE blocked Qatari news organization Al-Jazeera.

Why Saudi Arabia hates Al Jazeera so much - If you want to understand why many Arab world leaders hate Al Jazeera, consider “Sharia and Life.” For years, the call-in show was one of the network’s most popular, reaching tens of millions. Viewers would call in and pose their faith questions to Yusuf al-Qaradawi, an Egyptian cleric and a spiritual leader of the Muslim Brotherhood. People would ask all kinds of things: Is it all right to smoke during Ramadan? Does a female Palestinian woman have to wear a hijab while carrying out a suicide bombing? Before Al Jazeera, a show like this would have been unusual in the Arab world, where media is tightly controlled. But the Qatari-owned network has a mandate to produce ambitious journalism on a wide range of subjects (some taboo). It offers, too, a broader range of opinions than most Arab media. These qualities have made it the most popular network in the Middle East. It’s also attracted a lot of enemies. Rulers in places such as Saudi Arabia and Egypt resent the station’s broad reach and its willingness to rile up opposition. They don’t like its Islamist bent, and they’re angry that their populations are exposed to reporting critical of their regimes (and supportive of the Qatari agenda). Saudi Arabia, the United Arab Emirates, Egypt and Bahrain cut ties to Doha in early June. Now an official says they've compiled a list aimed at ending the worst Gulf Arab crisis in years, but only if Qatar complies. (Reuters) For years, they’ve called on the station to evolve, or go away. Saudi Arabia, Egypt and Jordan have kicked Al Jazeera bureaus out of their countries. Saudi Arabia has also banned hotels from offering the channel. And now Qatar is embroiled in a diplomatic war with a group of Arab states, and shuttering Al Jazeera appears to be one key demand. 

Turkey to Move More Troops, Food to Qatar - Turkey has deployed 23 additional military personnel to Qatar and sent a cargo ship carrying food to the tiny Gulf state. Three weeks ago, Saudi Arabia, Egypt, Bahrain and the United Arab Emirates cut diplomatic and economic ties with Qatar over concerns that the nation was supporting terrorist groups – accusations Qatar denies.Turkey has stood behind Qatar during the dispute, providing the desert nation with food and pledging military support. After an initial run on grocery items in Qatar, Turkey stepped in to fill the shelves.In the last three weeks, 105 Turkish cargo planes filled with food have made the trip to Qatar. The cargo ship leaving Thursday carries 4,000 tons of dry food, fruits and vegetables, and is expected to reach Doha in about 10 days.Turkey has maintained a military presence in Qatar since 2014. On June 7, the Turkish parliament approved legislation to allow more troops to be stationed in Qatar.  Thursday's deployment of 23 soldiers and five armored vehicles brings the number of Turkish military personnel in Qatar to 111. Turkey eventually could place more than 1,000 troops in the country, according to the Hurriyet newspaper.

Analysis: The implications of the Qatar-Turkey alliance - Al Jazeera -  Shortly after Saudi Arabia, Egypt, Bahrain and the United Arab Emirates severed diplomatic relations with Qatar and closed their airspace to commercial flights, Turkey condemned the blockade against Qatar, sent food stocks to stave off possible shortages in the country, and fast-tracked legislation through parliament to deploy Turkish troops on Qatari soil. On June 7, Turkey's parliament ratified two bills; one allowing the deployment of Turkish troops in Qatar and another approving an accord between the two countries on military training cooperation. "A very grave mistake is being made in Qatar, isolating a nation in all areas is inhumane and against Islamic values. It's as if a death penalty decision has been taken for Qatar," Turkish President Recep Tayyip Erdogan told members of his ruling Justice and Development Party (AKP) in Ankara last week. Both agreements were drawn up before the spat between Qatar and its neighbours erupted and were brought to parliament by AKP MPs in an extraordinary session.  A key ally of Qatar, Turkey is setting up a military base in the country - the first Turkish overseas military installation in the Middle East. Qatar also hosts the largest US airbase in the Middle East, Al-Udeid, where around 10,000 military personnel are stationed. The defence cooperation between Doha and Istanbul dates back to 2014, when the two nations signed an agreement aimed at helping them confront "common enemies".  Both nations have provided support for the Egyptian uprising and condemned the military coup that brought the country's current leader, Abdel Fattah el-Sisi, to power. They have both also refused to classify the Muslim Brotherhood movement and Hamas as "terrorist organisations" and backed rebels fighting to overthrow President Bashar al-Assad in Syria.  Besides allowing for a Turkish military base in Qatar, which would primarily serve as a venue for joint training exercises, the deal also gave Qatar the option of setting up a similar facility in Turkey.

How the Qatar crisis could turn into a disaster for Beijing -- South China Morning Post: The recent row between Qatar and its Arab neighbours puts a big question mark over the feasibility of Beijing’s plans to promote connectivity and build a China-centred trade network among Eurasian countries. The diplomatic rift will interrupt Beijing’s efforts to manage its multitrillion-dollar projects under the Belt and Road Initiative, as the crisis in the Gulf region might mark the beginning of a new round of chaos, and perhaps military conflicts, in the wider Middle East. On June 5, Saudi Arabia, the United Arab Emirates, Bahrain, Yemen and Egypt broke off ties with Qatar, accusing Doha of supporting terrorism. They imposed air, land and sea blockades on the gas-rich nation, which is using its wealth to bankroll its regional and global ambitions and fund the influential pan-Arab broadcaster Al-Jazeera and 2022 Fifa World Cup. A few more Arabian nations joined in the Saudi-led sanctions, while Turkey and Iran voiced their support for their Muslim brethren in Qatar. All six members of the Gulf Cooperation Council (GCC) – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE – involved in the row have much at stake, economically and geopolitically, in China’s Belt and Road economic corridor.

Iran, China Conduct Joint Naval Drills In Strategic Straits Of Hormuz -- Last summer, when the Syrian conflict was near its peak under the Obama administration, China unexpectedly warned it was ready to enter the proxy war when in a stunning announcement, Xinhua reported that Beijing was prepared to side with Syria- and Russia against the US-led alliance, and that Xi and Assad had agreed that the Chinese military will have closer ties with Syria and provide humanitarian aid to the civil war torn nation. A high-ranking People's Liberation Army officer also said that the training of Syrian personnel by Chinese instructors has also been discussed: Then last month, as the lingering Syrian proxy war dragged on, we reported that Moscow was hoping "for China's help in solving the Syrian crisis and restoring the country."  And while the Syrian conflict has taken a back seat in recent weeks to the latest crisis to grip the Gulf region, namely the economic and territorial blockade of Qatar by its Arab neighbors, overnight China made an unexpected appearance, not surprisingly perhaps siding with the biggest supporter of the Assad regime, when as AP reported Iran's navy conducted a joint exercise with a Chinese fleet near the strategic Strait of Hormuz in the Persian Gulf. It was only the second time the Chinese flotilla has visited the Iranian port of Bandar Abbas since 2014, and comes at a tense moment as the Senate last week passed a new round of sanctions against Tehran. According to Iran's official IRNA news agency, Sunday's drill included an Iranian warship as well as two Chinese warships, a logistics ship and a Chinese helicopter that arrived in Iran's port of Bandar Abbas last week, and adds that the scheduled exercise "came before the departure of the Chinese fleet for Muscat, Oman."

India asks Qatar to invest in power plants as condition for LNG deals | Reuters: India on Tuesday said it would sign future long-term liquefied natural gas (LNG) purchase deals with Qatar if only Doha agrees to acquire stakes in the South Asian nation's power plants, oil minister Dharmendra Pradhan said. India is the latest major LNG buyer to seek concessions from Qatar, the world's biggest LNG exporter, in order to re-sign long-term supply contracts. Amid a global glut of LNG and a slump in prices, other buyers have sought more flexible contracts, including clauses that would allow them to resell gas they do not consume.[ nL3N1IY03M] "Yesterday, we have given a firm proposal to Qatar. If they want to have a long-term off-take assurance, there is a window. They can deal with our stranded power plants, from end to end they can give some solution," Pradhan told Reuters on Tuesday. India is suffering from natural gas shortages that have required power plants with capacity of as much as 25,000 megawatts to shut down or run as lower rates. Qatar's RasGas is India's biggest LNG supplier. "It won't be quid pro quo but mutual interest...They can share the profit of those power plants," said Pradhan, adding New Delhi wants to expand its ties with Doha beyond simply buyer and supplier. India wants to gradually move to a gas-based economy and has plans to raise its annual LNG import capacity to 50 million tonnes in the next few years from 21 million tonnes now. India is also open to granting stakes to Qatar in local oil and gas companies and LNG terminals, should the Gulf emirate make such a proposal, said Pradhan. India's biggest gas importer Petronet LNG annually buys 8.5 million tonnes under a long-term contract. It also buys additional volumes from Qatar under spot deals.

New Cold War in the Indian Ocean | Asia Times: A new Cold War is brewing in the Indian Ocean, with an informal alliance of the United States, India, Australia, Japan on one side and China on the other. While tensions in the ocean are not yet as pitched as in the hotly contested South China Sea, the potential for conflict is unmistakably rising in the high stakes strategic theater. More than 60% of the world’s oil shipments pass through the Indian Ocean, largely from the Middle East’s oil fields to China, Japan and other fuel-importing Asian economies, as does 70% of all container traffic to and from Asia’s industrialized nations and the rest of the world.While traffic across the Atlantic has diminished in recent years and that which crosses the Pacific is mainly static, trade through the Indian Ocean is fast growing. Maintaining the security of that trade and other navigation is the ostensible reason for the annual Malabar naval exercises between India, Japan and the United States. For the first time in modern history, China is making its own inroads into the Indian Ocean region to protect its trade routes and energy supplies. Although this may appear innocuous on the surface, it is has put China on what could become a collision course with the US and its regional allies — hence the new informal, anti-China oriented alliance in the region. Strategic ripples are gathering. At Obock in Djibouti, situated on the Horn of Africa and overlooking the southern gateway to the Red Sea and the Suez Canal, China has established its first foreign military base, ostensibly to fight piracy. Yet the facility is located next to a key US military facility, also in Djibouti. More importantly, it is also close to other bigger US bases in the region, including a huge facility at Diego Garcia just south of the Equator in the Indian Ocean, as well as US installations in Gulf countries. China’s main regional rival, India, has always considered the Indian Ocean as its “own lake” in South Asian sphere of influence. As such, New Delhi is known to be extremely worried about China’s growing forays into the region, especially as security officials have observed Chinese submarine activity uncomfortably close to its Andaman and Nicobar Islands.