Sunday, June 11, 2017

a naval blockade of Qatar in the Persian Gulf, US sees big jump in oil & product inventories, global rig counts, et al

oil prices fell another 4% this week, after falling 4% the prior week, mostly due to a large and unexpected increase in US oil & oil product supplies...after initially moving higher Monday morning, after Saudi Arabia and three other Arab countries cut ties with Qatar, oil prices tailed off in the afternoon, on concerns about the efficacy of the OPEC production pact, with global prices falling 1% and US oil for July delivery ending 26 cents lower at $47.40 a barrel...falling further in overseas trading earlu Tuesday morning, oil prices stabilized by afternoon, and then ran up nearly $1 to close Tuesday at $48.19 a barrel, after the American Petroleum Institute (API) reported a draw of 4.62 million barrels from crude oil inventories, somewhat more than the 3.5 million barrel decrease the market was expecting....oil prices held above $48 a barrel early Wednesday, but then crashed 5% in the afternoon, after the US Energy Information Administration reverse the API estimates and reported large increases in not just crude oil supplies, but in supplies of gasoline, distillates, and other products as well, with US oil prices closing down $2.47 a barrel at $47.72 a barrel...the price weakness continued into Thursday morning, with US oil falling as low as $45.20 on news from Europe, before bouncing back by mid-day to close at $45.68 a barrel...oil prices then rose on Friday, after a hole drilled into a major pipeline forced the shutdown of some production in Nigeria, with U.S. crude futures ending the day 19 cents higher at $45.83 a barrel, still down nearly 4 percent for the week...

although it apparently has had little impact on oil prices so far, a crisis in the Persian Gulf precipitated by the Arab Gulf Cooperation Council's repudiation of Qatar provided an ominous background to this week's other news...following Trump's visit to the Middle East a couple weeks ago, when he threw his weight behind the Saudis as opposed to the other Mideast terrorist sympathizers, the Saudis had become increasingly belligerent about what they claimed was Qatar's support for militants, underscored by Qatar's payment of up to $1 billion to an al-Qaeda affiliate to secure the release of its royal family members who had been kidnapped in Iraq while on a hunting trip...what precipitated Monday's severing of diplomatic relations, however, was a news story that Qatar's Emir had criticized the Saudis hostility to Iran, accused them of adopting an extremist ideology that fosters terrorism. and suggested that Donald Trump would not last long...the Qataris claimed their news agency had been hacked and that the story was fake, but apparently it was believable enough to the Saudis and their allies that the Saudis, Bahrain, Egypt, and the United Arab Emirates severed diplomatic ties with Qatar, closing all land, sea, and air routes into the country, effectively cutting off the country from the rest of the Arabian Peninsula..

now, had the US pushed back against that Gulf dispute right then and there, it might have defused the situation, but President Trump immediately took to Twitter to take credit for the Saudi move against Qatar, echoing Saudi claims that Qatar was responsible tor "funding of Radical Ideology,” apparently unaware that the U.S. has 11,000 troops stationed in Qatar, on a base that is arguably America’s most important military outpost in the Middle with Trump's support, there was subsequently a significant escalation of what had been largely a diplomatic crisis, as the Gulf states then launched a naval blockade of Qatar, and issued a 24 hour ultimatum for Qatar to comply to 10 demands, "or else", demanding, among other things, that Qatar break diplomatic relations with Iran and shut down Al Jazeera news...that escalation forced US Defense Secretary James Mattis and Secretary of State Rex Tillerson to attempt to run damage control, with Tillerson calling on the Saudi coalition to lift its blockade of Qatar, saying that the Gulf standoff interfered with the fight against ISIS...but no sooner than had senior administration officials attempted to make US policy regarding our ally Qatar clear, than Trump doubled down, again slamming our ally Qatar in a Friday press conference with the president of Romania...

so that's where the situation stands going into the weekend, with Iran and Turkey now pledging to help usual, dozens of links relating to this story are at the end of this package, so you can get much more detail there...the price of oil has not been impacted much simply because Qatar is not a major oil producer, with output of just about 600,000 barrels per day, or about 2% of OPEC's total output...but they are the world's largest supplier of LNG, and there has been some concern in the global markets for LNG, but not enough to affect US natural gas prices, which generally traded between $2.98 per mmBTU and $3.09 per mmBTU this week and ended at $3.039 per mmBTU, a gain of just 4 cents over last week's sense of what's going on is that the Saudis have been getting bad press on the terrorist front lately, since they've been implicated in the funding of ISIS in Iraq and Syria, and for the 9-11 attacks on the pentagon and world trade center, with congress recently passing a bill allowing victims of 9-11 to sue Saudi Arabia for damages, and they're trying to shift the, the Saudis are now acting like the bad kid who gets caught with stolen goods, and who then tries to blame the theft on the neighbor kid, who in this case is Qatar....

for his part, Donald Trump is devoid of any real knowledge of the Middle East, so he's believing what the Saudis told him when they threw that great party for him a couple weeks back... it also seems clear that the Saudis believe Trump gave them the go-ahead to take that action against that manner, Trump's involvement seems strangely similar to the miscommunications in the run up to the first Iraq war, when April Glaspie, George Bush's ambassador to Iraq, told Saddam Hussein that it was none of our business if Iraq wanted to take back Kuwait, which ultimately precipitated Saddam's invasion...following that, Bush Sr. moved on Iraq to distract from the media persecution of his young son Neil, who was under fire for losing millions of dollars of depositors money in nighttime poker games in the back offices of Silverado Saving and Loan in Denver...the parallel to today is that Trump's firing of FBI director Comey was not because he threatened Trump personally, because Trump himself is pretty thick skinned, but because Comey's investigation threatened his son-in-law, Jared this point, there's no telling what Trump might do at a time when he feels that the father of his grandchildren is being threatened...

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 2nd, showed that the combination of a large increase of our crude oil imports and a big drop in our crude oil exports led to the largest addition to US oil supplies in 3 months...our imports of crude oil rose by an average of 365,000 barrels per day to an average of 8,341,000 barrels per day during the week, while at the same time our exports of crude oil fell by 746,000 barrels per day to an average of 557,000 barrels per day, which meant that our effective imports netted out to 7,784,000 barrels per day during the week, 1,102,000 barrels per day more than during the prior the same time, our field production of crude oil fell by 24,000 barrels per day to an average of 9,318,000 barrels per day, which means that our daily supply of oil from net imports and from wells totaled an average of 17,102,000 barrels per day during the cited week...

during the same period, refineries reportedly used 17,227,000 barrels of crude per day, 283,000 barrels per day less than the record 17,510,000 barrels per day they used during the prior week, while 234,000 barrels of oil per day were being added to 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 and oilfield production was 359,000 less barrels per day than what refineries reported they used and what oil was reportedly added to account for that discrepancy, the EIA inserted a +359,000 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 rose to an average of 8,303,000 barrels per day, 8.8% above the imports of the same four-week period last year...the 234,000 barrel per day increase in our total crude inventories came about on a 471,000 barrel per day addition our commercial stocks of crude oil, which was partially offset by a 237,000 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 19 months ago....this week's 24,000 barrel per day drop in our crude oil production resulted from a 20,000 barrel per day decrease in oil output from wells in the lower 48 states, and a 4,000 barrels per day decrease in oil output from Alaska...the 9,318,000 barrels of crude per day that we produced during the week ending June 2nd was still up by 6.3% from the 8,770,000 barrels per day we were producing at the end of 2016, and up by 6.6% from the 8,745,000 barrel per day output during the during the same week a year ago, while it was still 3.0% below the June 5th 2015 record oil production of 9,610,000 barrels per day...

US oil refineries were operating at 94.1% of their capacity in using those 17,227,000 barrels of crude per day, which was down from 95.0% of capacity the prior week, but still the 2nd highest refinery capacity utilization rate this year...the amount of oil refined this week was still well above seasonal norms, 4.9% more than the 16,417,000 barrels of crude per day.that were being processed during week ending June 3rd, 2016, when refineries were operating at 90.9% of capacity, and roughly 13% above the 10 year average of 15.2  million barrels of crude per day for the last week in May ....

with the pullback in refining, gasoline production from our refineries decreased by 496,000 barrels per day to 9,934,000 barrels per day during the week ending June 2nd, the largest one week drop in gasoline production since the third week of September last year....gasoline production for the week was thus 1.9% lower than the 10,122,000 barrels of gasoline that were being produced daily during the comparable week a year the same time, refineries' production of distillate fuels (diesel fuel and heat oil) increased by 41,000 barrels per day to 5,267,000 barrels per day, the most distillates ever produced in a week during the Spring and 8.9% more than the 4,838,000 barrels per day of distillates that were being produced during the week ending June 3rd last  year..... 

even with the drop in gasoline production, our end of the week gasoline inventories surprisingly increased by 2,858,000 barrels to 237,024,000 barrels by June 2nd, because all other impacts on our supplies of gasoline were positive....our domestic consumption of gasoline fell by 505,000 barrels per day to 9,317,000 barrels per day, while our gasoline exports fell by 86,000 barrels per day to 555,000 barrels per day and our imports of gasoline rose by 84,000 barrels per day to 787,000 barrels per day at the same time...with the week’s big increase in our gasoline supplies, our gasoline inventories thus are at a seasonal high for this time of year, albeit just fractionally above the seasonal record 239,629,000 barrels that we had stored on June 3rd a year ago, but 10.6% higher than the 217,354,000 barrels of gasoline we had stored on June 5th of 2015, and 12.6% more than the 213,482,000 barrels of gasoline we had stored on June 6th of 2014…  

meanwhile, with a new seasonal high in distillates production, our supplies of distillate fuels rose by 4,355,000 barrels to 151,088,000 barrels during the week ending June 2nd, the largest increase in distillates supplies since the 1st of the year....again, that increase was mostly because the amount of distillates required by US markets fell by 520,000 barrels per day to 3,505,000 barrels per day, while our imports of distillates rose by 47,000 barrels per day to 152,000 barrels per day, and our exports of distillates rose by 42,000 barrels per day to 1,292,000 barrels per day...even though our distillate supplies are still fractionally below the 151,377,000 barrels that we had stored on June 3rd, 2016, when a glut of heat oil supplies persisted after last year's warm El Nino winter, they're now 13.2% higher than the distillate inventories of 133,477,000 barrels that we had stored on June 5th of 2015, following a more normal winter… 

finally, the week's large increase in US oil imports, combined with the big drop in our oil exports, meant that our commercial inventories of crude oil rose for the first time in 9 weeks, as our oil supplies rose by 3,295,000 barrels to 513,207,000 barrels as of June 2nd, the largest increase in 3 a result, we finished the week with 7.1% more crude oil in storage than the 479,012,000 barrels we had stored at the beginning of this year, and 2.3% more crude oil in storage than the 501,844,000 barrels of oil in storage on June 3rd of 2016....compared to the same week in prior years, we ended the week with 17.1% more crude than the 438,447,000 barrels in of oil in storage on June 5th of 2015, and 44.5% more crude than the 355,221,000 barrels of oil we had in storage on June 6th of 2014...  

This Week's Rig Counts

US drilling activity increased for the 21st week in a row and for the 31st time in the past 32 weeks during the week ending June 9th, as both oil and natural gas drilling again increased....Baker Hughes reported that the total count of active rotary rigs running in the US increased by 11 rigs to 927 rigs in the week ending Friday, which was 513 more rigs than the 414 rigs that were deployed as of the June 10th report in 2016, and the most drilling rigs we've had running since April 24th, 2015, even though it was still far from 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 8 rigs to 741 rigs this week, which was up by 413 oil rigs over the past year, and the most oil rigs that were in use since April 10th 2015, while it was still down by more than half from the recent high of 1609 rigs that were drilling for oil on October 10, the same time, the count of drilling rigs targeting natural gas formations increased by 3 rigs to 185 rigs this week, which was a hundred more rigs than the 85 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, addition, a single rig considered unclassified remained active, same as last week and as a year ago...

Gulf of Mexico platforms offshore from Texas and offshore from Florida where drilling had been taking place were both shut down this week, leaving the Gulf of Mexico count at 21 rigs, now all offshore from Louisiana, still up from 20 rigs working in the Gulf of Mexico a year ago...however, drilling restarted on one platform offshore from Alaska, which brought the total US offshore count up to 22 rigs, up from 21 rigs a year ago, when there was also drilling offshore from addition, one rig which had been drilling through an inland lake in Louisiana was also shut down this week, leaving the inland waters rig count at 3, down from the 5 rigs which were drilling on inland lakes last year at this time...

rigs that were set up to drill horizontally increased by 9 rigs to 780 horizontal rigs this week, which was the most horizontal rigs in use since April 2nd of 2015, and up from the the 323 horizontal rigs that were in use in the US on June 10th of last year, while it was still down from the record of 1372 horizontal rigs that were deployed on November 21st of addition, a net of 4 vertical rigs were also added this week, increasing the vertical rig count to 81 rigs, which was up from the 46 vertical rigs that were deployed during the same week a year the same time, the directional rig count was down by 2 rigs to 66 directional rigs this week, which was still up from the 45 directional rigs that were deployed during the same week last year...

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary 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 both tables, the first column shows the active rig count as of June 9th, the second column shows the change in the number of working rigs between last week's count (June 2nd) and this week's (June 9th) count, the third column shows last week's June 2nd 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 10th of June, 2016...        

June 9 2017 rig count summary

unlike last week, when most of the new rigs were set up in Texas, this week Oklahoma showed the largest increase, with 5 new rigs, and New Mexico followed with an increase of 4 rigs, while Texas shows a decrease of 3 rigs....clearly, 4 of the new Oklahoma rigs were set up in the Cana Woodford, while the other addition is likely in the Mississippian shale, which the state shares with Kansas...all 4 of the new Permian basin rigs appear to be in New Mexico, because the Texas district breakdown shows 3 rigs added in District 8 while 3 were taken down in District 8A, which could simply mean those were moved to another location in the same region...other than that, 6 different Texas Districts saw a rig decrease, while 3 saw increases, including the rig added in the Barnett shale of the Dallas Ft Worth area...meanwhile, 2 natural gas directed rigs were added in Ohio's Utica, where there are now 28 rigs, up from just 12 rigs a year ago...the Marcellus also saw a 2 rig increase, both of which were in West Virginia, and two natural gas rigs were also added in the Arkoma Woodford, where 2 oil directed rigs were shut down...the natural gas rigs that were shut down were the one in the Ardmore Woodford, and 4 in "other basins" which are not named in the summary data...other than the states shown above, Mississippi saw an increase from 1 rig to 3 rigs last week, which is also up from the 1 rig that was running in the state a year ago, while Florida saw that lone offshore rig shut down, which left them with none, same as a year ago...

International Rig Count for May

Baker Hughes also released the international rig counts for May this week, which unlike the weekly North American count, is an average of the number of rigs that were running in each country during the month, rather than the total of those rig drilling at month end....Baker Hughes reported that an average of 1,935 rigs were drilling for oil and natural gas around the globe in May, which was up from the 1,917 rigs that were drilling around the globe in April, and up from the 1,405 rigs that were working globally in May of last has been the case for the past year, increased drilling in North America led the global increase, as the average US rig count rose from 853 rigs in April to 893 rigs in May, which was more than double the average of 408 rigs that had been working in the US in May a year ago...Canadian drilling, on the other hand, saw another Spring-thaw related pullback in their activity, as the Canadian rig count fell from 108 rigs in April to 85 rigs in May, which was still up from the 42 Canadian rigs that were deployed in May a year earlier.....outside of Northern America, the International rig count rose by just 1 rig to 957 rigs in May, which was up by just 2 rigs from 955 international rigs a year ago, as increases in drilling in the Middle East, Latin America and Europe were offset by decreases in drilling activity in Asia and Africa..

drilling rigs deployed in the Middle East increased by 2 rigs to 389 rigs in May, up from 384 rigs a year earlier, after Middle East drilling activity had increased by 4 rigs in March and by 3 rigs in April...OPEC member Iraq added 5 rigs for the month and has now added 11 rigs over the past three months, as the Iraqis had 51 rigs deployed in May, up from 43 rigs a year earlier...OPEC member Kuwait, and non-members Pakistan and Israel, each added two rigs in May...those increases brought Kuwait up to 55 rigs, up from 43 rigs a year earlier, brought Pakistan up to 25 rigs, still down from 23 rigs a year earlier, and represented the only drilling activity in Israel, where they also had no rigs deployed last May...on the other hand, Egypt shut down 4 more rigs over the month, after idling 3 in April, which cut them back to 23 active rigs, down from 28 rigs a year earlier...OPEC member Qatar and Oman both cut back 2 rigs, leaving Qatar with 10 rigs, still up from 7 a year ago, and leaving Oman with 54 rigs, down from 69 rigs a year addition, Abu Dhabi of the UAE also idled a rig, leaving them 48 rigs still running, same as a year earlier...

at the same time, drilling activity in the Latin American region was up by a net of 8 rigs to 190 rigs in May, which was up from the 188 rigs working in the region a year earlier...Argentina added 4 rigs during the month, and now has 53 rigs active, still down from 71 rigs a year ago...OPEC member Ecuador added 2 rigs in May, and now has 9 rigs running, up from 2 rigs a year addition, Brazil, Mexico, Columbia and Peru each added a single rig...that brought Brazil up to 16 rigs, up from 15 a year ago, brought Mexico up to 23, also up a rig from last year, brought Columbia up to 20 rigs from 5 rigs a year earlier, and brought Peru, where there were no rigs active last May, up to 3 rigs this May...only OPEC member Venezuela idled 2 rigs, cutting their total back to 54 rigs, down from 60 rigs a year earlier.. .

meanwhile, drilling activity in the Asia-Pacific region was down by 8 rigs to 197 rigs in May, which was still up from the 190 rigs working in the region a year earlier...former OPEC member Indonesia idled 3 rigs and now has 20 rigs active, still up from 19 rigs a year earlier....Malaysia shut down 2 rigs, leaving 3 rigs still running, down from 6 rigs a year ago....Myanmar also shut down 2 rigs and had just 1 rig still active, same as a year ago....others in the region cutting back included Australia, down a rig to 15, Thailand, down a rig to 12, and Papua New Guinea, down a rig to one...regional additions were in Brunei, where they now have 1 rig running, in Vietnam, where their 3 rigs matches their year ago total, and offshore from China, where there are now 20 rigs active, down from 31 offshore rigs a year ago..

drilling activity was also lower on the African continent, decreasing by 5 rigs to 84 rigs in May, which was also down from the 91 rigs that were working in Africa last May...OPEC member Algeria shut down 4 rigs after adding 6 rigs in April, and now has 53 rigs active, down from 55 rigs a year ago...OPEC member Nigeria shut down 2 rigs and had 8 rigs still active, up from 6 rigs a year ago...2 rigs were also shut down in Kenya, where there are now 9 rigs active, down from 11 a year ago....OPEC member Angola idled one rig, after adding two in April, and now has 3 active rigs remaining, down from the 9 rigs they had deployed in May a year ago...but Congo-Brazzaville added two rigs and now has 3 rigs working, up from 1 rig a year ago, and the Ivory Coast started up their first rig since October...

lastly, drilling activity increased in Europe, rising by 4 rigs to 95 rigs in May, which was the same number of rigs that were working in Europe last May...on net, all of the European rig additions were offshore; Norway added two rigs offshore, and now have 18 drilling platforms working, up from 17 a year ago...both the Netherlands and the UK also started offshore platforms; for the Dutch, it was their first drilling after two months of no activity, whereas the Brits now have 10 rigs drilling offshore, up from 9 a year ago...on land, Turkey added 2 rigs and now has 23 rigs working, still down from 29 rigs a year ago, and Italy added a rig and now has 4 active, still down from 5 rigs a year the same time, Romania shut down two rigs and now has 5 rigs running, up from 4 rigs a year ago, and Austria shut down the rig they started up in April, which had been their only drilling in 2 years...finally, note that Iranian, Russian, and Chinese rig counts are not included in this Baker Hughes international data, although we did note that China's offshore area, with an average of 20 rigs active in May, was included in the Asian totals here, apparently based on satellite intel, which is also the way much of the international oil production and export data is collected...


Area officials fear for future of park on Maumee Bay - Toledo Blade -- A month after the height of birding season at Maumee Bay State Park, local leaders gathered there to sound the alarm about the park’s future.  Oregon City Councilman James S. Seaman, Jerusalem Township Trustee Joseph W. Kiss, Jr., and Keith Webb, president of the Maumee Valley Adventurers, discussed an amendment in the House state budget bill that, they said, would endanger parks like Maumee Bay.They were joined by Nicholas Mandros, northwest Ohio regional coordinator for the Ohio Environmental Council.The amendment in question changes the nomination process for the Ohio Oil and Gas Commission, created in 2011. The commission has the authority to authorize leases for fracking and other types of resource extraction from state parks and other state properties. Gov. John Kasich signed the law creating the commission, but did not nominate anyone to join it, effectively imposing a moratorium on fracking in state parks.The budget bill approved by the House would allow the legislature, instead of the governor, to nominate members of the commission.For Mr. Seaman and the others, this presents a danger.The amendment would potentially allow the energy industry to “go into a pristine state park and set up fracking and drilling and turn the wildlife upside down,” Mr. Seaman said. “It would completely be an obstacle to the continued quality of life for all the families and people that enjoy the great outdoors.”

First-ever 'Ohio Human Rights Tribunal' held in Athens - The first human-rights and environmental-justice hearing ever held in Ohio took place in Athens Saturday. The hearing was part of a tribunal process on impacts of fracking as a human-rights issue. Sixteen presenters from around Ohio testified to a panel of four citizen judges at the First United Methodist Church in Athens, providing more than six hours of testimony. The event is part of the Permanent People’s Tribunal on Fracking (, which is gathering testimony from around the world to deliver to the Permanent People’s Tribunal and the United Nations. The Athens hearing, one of two planned for Ohio, was initiated by Teresa Mills, director of Buckeye Environmental Network (the former Buckeye Forest Council), and organized with support from Torch Can Do!, the grassroots group founded by residents living in and near Torch in eastern Athens County, and a grant from the Center for Health, Environment, and Justice (CHEJ). Torch is the site of one of the largest fracking-waste injection facilities in Ohio. A second hearing will be held in northeast Ohio in July, according to a news release from organizers of Saturday’s event. In the release, Mills explained why she’s organizing the hearings. “Ohio communities and grassroots organizations are intervening to try to halt what we believe are clear human-rights abuses by our state and federal governments.” She maintains that Appalachian Ohio being targeted for waste injection is an environmental-justice and human-rights issue. “U.S. EPA is tolerating indisputably inadequate public participation and enforcement in low-income, rural Appalachian Ohio where injection wells and waste storage and disposal facilities are being sited rapidly and recklessly by Ohio Department of Natural Resources (ODNR),” she said in the release.

Another Reason to Halt Rover Pipeline: It's a Climate Disaster - As controversy swirls around a string of spills and air and water violations caused by Energy Transfer Partners' construction of the Rover gas pipeline , a study released Wednesday underlines another reason federal regulators should halt the project: It will fuel a massive increase in climate pollution.A new analysis by Oil Change International finds that, if the Rover Pipeline is built, it will cause as much greenhouse gas pollution as 42 coal -fired power plants—some 145 million metric tons per year. The study slams the Federal Energy Regulatory Commission (FERC) for using chronically outdated assumptions to sweep this significant climate impact under the rug in its environmental review of the project.As the biggest new pipeline being built to carry fracked gas out of the Appalachian Basin, the Rover Pipeline is the biggest climate disaster of them all," said Lorne Stockman, senior research analyst at Oil Change International and the lead author of the study."After Trump's malicious pullout from the Paris climate accord, challenging each new pipeline is all the more important," he added. "While FERC remains in a state of denial, it's increasingly clear that gas pipelines are a bridge to climate destruction. They increase access to gas that we can't afford to burn and stall the transition to clean energy and efficiency solutions we need."  The climate findings bolster mounting calls for federal regulators to shut down all construction of the Rover Pipeline and revisit its permit decision by conducting a supplemental environmental review. The project would carry 3.25 billion cubic feet of gas per day from Pennsylvania and West Virginia through Ohio and Michigan, and link up to hubs that service export markets.

Appalachia natural gas production outlook. - For years now, U.S. Northeast natural gas production growth has been paced by the availability of pipeline takeaway capacity out of the Marcellus/Utica shales. Midstream companies have been racing to build the infrastructure to support drilling and rising supply in the region. And, until now, it was safe to assume that as new pipeline projects come online, volumes would grow to fill them in short order. But over the next couple of years, that may flip:  takeaway capacity additions could soon outpace supply increases, and producers might not be able to keep up. Today, we provide an update of RBN’s Northeast gas production scenarios. In this series, we have been revisiting our analysis of Northeast natural gas production compared to takeaway capacity pipeline expansions out of Appalachia. As we noted in Part 1 of this series, a lot has changed since late 2014 when we cataloged the numerous expansions planned to resolve the transportation constraints plaguing Marcellus/Utica producers (see the RBN Drill-Down report “50 Ways to Leave the Marcellus”). At the time, midstream companies were still scrambling to keep up with rising supply and the resulting need for producers to access demand markets outside the Northeast. Since then, more than a dozen pipeline projects have come online and production has climbed nearly 5 Bcf/d to just under 23 Bcf/d in recent months, from about 18 Bcf/d in late 2014. And the Northeast has flipped from net importing gas from other U.S. regions and Canada in 2014 to sending more than 9.0 Bcf/d on average out of the area in the past two months.

U.S. natural gas prices tumble as power producers switch back to coal: Kemp | Reuters : U.S. natural gas prices have tumbled by more than 10 percent since late May as hedge funds start to liquidate a near-record bullish position accumulated in the expectation of a tighter market that failed to materialize.  Prior to the selloff, hedge fund managers held a record ratio of 5 long positions for every 1 short position, a warning sign that their position had become overstretched and was at risk from a reversal. Fund managers have been more bullish on U.S. gas than any other energy commodity in the expectation that increasing exports plus the start up of new gas-fired power plants would tighten gas stocks. But the rise in gas prices over the last 15 months has gradually rebalanced the market by incentivizing more gas production and encouraging power producers to switch back from gas to coal at the margin. The number of rigs drilling for gas is up by 100 from its low in August 2016, according to oilfield services company Baker Hughes, in response to a doubling in gas prices. In addition, the number of rigs drilling for oil has risen by more than 400 since May 2016, and many of these oil wells are producing large volumes of associated gas since February 2016. Gas output is still down compared with year ago levels but the pace of decline has slowed and there are indications that production is about to start rising.At the same time, higher gas prices are rationing consumption by electricity generators, especially owners of combined-cycle plants that operate as baseload and consume large volumes of fuel. 

How This Energy Company's Deep Influence Is Tainting Atlantic Coast Pipeline Approval Process -- There is a growing political scandal in Virginia regarding the ubiquitous influence of the state's largest energy company, Dominion Energy, and it's raising fundamental questions about the integrity of the governor's office and state regulators who will decide the fate of the proposed Atlantic Coast Pipeline . Dominion's longstanding exercise of power and influence in Virginia is no secret—the company is the largest corporate donor to state candidates. But a new report by the Public Accountability Initiative documents in one place the company's extensive, revolving door relationships with the very regulators charged with issuing permits for this controversial, $5 billion fracked-gas project. The Atlantic Coast Pipeline is a joint venture of Dominion, Duke Energy and Southern Company, but Dominion is the leading owner and will operate the pipeline if it goes ahead.  The project, which would source fracked gas from West Virginia, plans to traverse the Allegheny Highlands bordering West Virginia and Virginia, cut a large swath through Virginia to the Hampton Roads area, and branch south into North Carolina. The new report details how Dominion's influence penetrates every level of state government, from Department of Environmental Quality (DEQ) officials, through General Assembly members on both sides of the aisle, to the governor's mansion. These relationships are fundamental to the fate of the pipeline.  

As US energy policy pendulum swings, Trump looks to Arctic and Atlantic drilling (podcast) - Capitol Crude talks to Ali Zaidi, who served for eight years in the Obama administration, about an area where the economic and environmental concerns collide for the oil and gas industry: offshore. Zaidi, senior advisor at Morrison Foerster, most recently served the Obama administration as the White House Office of Management and Budget associate director for natural resources, energy and science. Speaking with senior oil editor Brian Scheid, he touches on the Trump administration's plans to expand offshore drilling and other possible regulatory rollbacks around methane emissions and fracking. Could changes result in nationwide standards, or will a patchwork of state standards continue? And can Obama's energy legacy be affected by changes from the current administration?

Trump proposes seismic tests for Atlantic oil drilling | TheHill: The Trump administration is set to propose allowing several companies to use seismic air guns to search for oil and gas reserves beneath the floor of the Atlantic Ocean. According to a Federal Register notice set for publication on Tuesday, the National Marine Fisheries Service is asking for Marine Mammal Protection Act permits allowing five companies to conduct the seismic surveys with the air guns, which are considered dangerous to certain types of marine wildlife. The Obama administration had blocked that testing. But President Trump signed an executive order in April that aims to open the door to more offshore drilling. Currently, there are no drilling rigs off the east coast of the U.S., and it will take years of testing to locate the oil.Interior Secretary Ryan Zinke followed up on the executive order with an order of his own on May 11 setting in motion the seismic testing. “You should be excited,” Zinke told attendees at an offshore drilling conference in Houston last month. “If you’re in the oil and gas and energy segment in this society … the stars are lined up,” he said. “We’re going to make jobs, we’re going to bring the economy ahead.” Environmentalists, who have long fought against Atlantic drilling, blasted the seismic testing proposal on Monday. The Southern Environmental Law Center called seismic testing “risky” and said it would “pave the way for offshore drilling, which would be a direct hit to our economy, environment, communities and way of life.” “The American people own these Atlantic waters. This is the first step towards drilling them,” 

Trump Names BP Oil Spill Lawyer as Top Environmental Attorney - President Donald Trump announced Tuesday his intention to nominate Jeffrey Bossert Clark —who defended BP in lawsuits surrounding the 2010 Deepwater Horizon oil spill and challenged the Obama administration over greenhouse gas rules on behalf of the U.S. Chamber of Commerce—to head the Justice Department's Environment and Natural Resources Division.  Clark is a partner in the Washington, DC office of Kirkland & Ellis LLP and once served in George W. Bush's administration from 2001 to 2005 as a deputy assistant attorney general for the Justice Department's Environment and Natural Resources Division.   InsideClimate News described Clark as a "climate policy foe" who has "repeatedly argued that it is inappropriate to base government policymaking on the scientific consensus presented by the Intergovernmental Panel on Climate Change [IPCC]."According to the publication, "One of the legal briefs he signed is such a comprehensive compendium of thoroughly debunked denial of the scientific consensus that it stands as a classic of the genre, replete with condemnations not just of the EPA but of the IPCC, whose work the petitioners tried to persuade the court to rule out of bounds. A series of podcasts and papers he has written on The Federalist Society website continue his arguments against the endangerment finding and climate science more broadly." Clark has also criticized the U.S. Environmental Protection Agency (EPA) for concluding in late 2009 that carbon dioxide and other greenhouse gases threatens the public health and the environment and should be regulated under the Clean Air Act. As Clark wrote in a 2010 blog post over the EPA's endangerment finding, "When did America risk coming to be ruled by foreign scientists and apparatchiks at the United Nations?"

Greens sue EPA over paused Obama methane pollution regulation | TheHill: A coalition of environmental groups on Monday sued the Trump administration, saying that it violated the law last week in pausing an Obama administration methane pollution rule for the oil and natural gas industry. The lawsuit to save the Environmental Protection Agency’s (EPA) methane rule is the first court action against a Trump administration policy related to climate change. Groups including the Natural Resources Defense Council (NRDC) and the Sierra Club said the EPA illegally skipped the required process when it put a 90-day halt on the standards to limit methane pollution, a greenhouse gas around 80 times as powerful as carbon dioxide.The greens are asking the Court of Appeals for the District of Columbia Circuit to step in immediately and block the EPA from halting the rule “In its haste to do favors for its polluter cronies, the Trump EPA has broken the law,” Meleah Geertsma, a senior NRDC attorney, said in a statement. “The Trump administration does not have unlimited power to put people’s health in jeopardy with unchecked, unilateral executive action like this,” she said. An EPA spokeswoman declined to comment on the lawsuit, saying it is agency policy not to comment on ongoing litigation. The EPA said last week that it would pause for 90 days the standards mandating pneumatic pumps at oil and natural gas well sites to reduce methane emissions, along with the certification standards for those pumps, while it considers whether to formally repeal the rule entirely. The agency had previously paused the rule’s provision regarding fugitive methane emissions and methane monitoring. The regulation was a piece of former President Obama’s wide-ranging strategy to reduce methane emissions across numerous industries. It included an EPA rule to reduce methane pollution from landfills and an Interior Department rule regarding oil and natural gas drilling on federal land, both of which the respective agencies are working to repeal.

Court asks EPA to justify pausing Obama pollution rule | TheHill: A federal court is asking the Environmental Protection Agency to explain why it has the authority to pause an Obama administration methane pollution rule. The Court of Appeals for the District of Columbia Circuit said Tuesday that it is giving the EPA until June 15 to respond to a lawsuit filed Monday by environmental groups, who say the agency’s action halting the rule was illegal. At issue is a rule the Obama administration made final last year setting standards that oil and natural gas drillers must follow to monitor and reduce emissions of methane from drilling. Methane is a greenhouse gas about 80 times more potent than carbon dioxide and is the main component of natural gas. The lawsuit was the first court challenge of a Trump administration rollback of a climate change regulation. The green groups, including the Environmental Defense Fund and the Sierra Club, say the EPA doesn’t have the authority to halt the regulation, and are asking for an immediate order from the court mandating that the agency not pause it. The EPA said in a Federal Register filing that made the pause official on Monday that it would pause the rule for 90 days while it considers whether to initiate a full regulatory process to repeal it. In the filing, agency officials cited a provision in the Clean Air Act that allows 90-day administrative stays for regulations under certain circumstances.

Worst Hurricane Season In A Decade Threatens Gulf Coast Production --2017 could be an “above-normal” year for large hurricanes, according to the National Oceanic and Atmospheric Administration (NOAA), a potential problem for Gulf Coast oil drillers and refiners.  NOAA puts the odds of an “above-normal” season for hurricanes at 45 percent, while the chances of a normal and below-normal season are at 35 and 20 percent, respectively. In fact, they said that there is a 70 percent likelihood of 11 to 17 named storms, which are storms that have 39 mile-per-hour winds or higher. About 5 to 9 of those could become hurricanes (winds of 74 mph or higher); 2 to 4 of which could become major hurricanes (winds of 111 mph or higher). The average season (which runs from June through November) tends to have just 12 named storms, so the potential for 17 named storms puts the 2017 hurricane season in more treacherous territory."We're expecting a lot of storms this season," Gerry Bell, lead seasonal hurricane forecaster with NOAA’s Climate Prediction Center, told reporters."Whether it's above normal or near normal, that's a lot of hurricanes."Part of the reason for the expected uptick in hurricane activity is because the El Nino phenomenon is not expected to show up. El Ninos tend to suppress hurricanes. Also, sea-surface temperatures are above-average, which contributes to stronger storms. There has been a decade-long lull in major hurricanes that have struck the U.S., but there is a growing probability that that changes this year. That should be cause for concern for the oil and gas industry, much of which is located along the Gulf Coast. In 2005, Hurricanes Katrina and Rita, which struck the Gulf Coast within a couple of weeks of each other, destroyed 115 oil platforms and damaged 52 others, leading to the “near total shut-down of the Gulf’s offshore oil and gas production,” according to the Bureau of Safety and Environmental Enforcement. While the effects were mostly temporary, nine months later as much as 22 percent of oil production and 13 percent of gas production in federal waters remained offline.

Take It to the Limit - More Crude Projects in Corpus, and a Look at Big Ship Access to the Port  -- By the early 2020s, crude oil flows from the Permian to Corpus Christi are likely to increase by at least several hundred thousand barrels a day and may well rise by more than one million barrels a day. That can only happen, though, if new pipeline capacity is in place to move crude from West Texas to the coast and if enough crude-related infrastructure — storage, distribution pipelines, marine docks, etc. — is developed in Corpus to receive, move and load all that oil. Docks and ship-channel depth are particularly important; the bigger the vessels that Corpus marine terminals can handle, the more competitive Permian crude will be in far-away markets like Asia. Today we continue our series on the build-out of crude infrastructure in South Texas’s largest port and consider Corpus’s ability to load Suezmax-class vessels and maybe even Very Large Crude Carriers (VLCCs). The focus of this blog series has been on the ripple effects that burgeoning crude-oil production growth in the Permian’s Midland and Delaware basins in West Texas and southeastern New Mexico are having on Corpus Christi. In Part 1 we discussed the facts that under RBN’s Growth Scenario, Permian production — already at 2.3 million barrels per day (MMb/d) — is forecast to rise by at least another 1.4 MMb/d by 2022, and that most of the new pipeline capacity under development to transport that incremental output is headed straight to Corpus. Why?  Well, for one thing, Corpus is closer than Houston.  And beyond that, many Permian producers believe that their light, sweet crude will likely be more valued in Corpus, where the oil can either feed local refineries or be loaded onto ships destined for export markets.

US oil producers race to build infrastructure while nationwide protests mount - North American oil and gas producers are rushing to build new pipelines as part of a bid to gain more power in the international oil and gas markets, but they are running into fierce opposition at home.Activists may have lost the battle to block the Dakota Access Pipeline (DAPL) — on May 14, thousands of barrels of fracked crude oil began flowing to a terminal in Illinois and then down toward the US Gulf Coast — but Native and climate change activists say the struggle against DAPL was just one battle in a much longer war. At least a dozen more conflicts are erupting across America as companies race to lay pipelines. Campaigners warn the US is becoming a “petrostate.” They say US climate commitments, and the very health of the planet, are at stake. Industry’s determination to build is equally intense. During the DAPL protests in North Dakota, private security companies used surprisingly harsh tactics: dog attacks, hoses that doused protesters in subfreezing temperatures, metal detention cages modeled on dog kennels, plus numbers scrawled on the forearms of the people they arrested. These struck many as tactics from another era or another country. Why was North Dakota so intent on not losing the fight over the pipeline? It turns out, officials were protecting a grand plan worth tens of billions of dollars. In that plan, DAPL is North Dakota’s linchpin. It allows a glut of fracked oil from the massive Bakken formation to flow southeast toward the US Gulf Coast. Bakken oil is part of what boosters call the “North American petroleum renaissance.” The US is now the world’s third-largest producer of crude oil, pumping more than Iran and Iraq combined. North Dakota Republican Congressman Kevin Cramer says that means opportunity. “We have the potential to produce all we need and then some,” Cramer says. “I view us as a North American energy bloc that rivals, if not exceeds, the global market potential of OPEC.” 

Will last year's Dakota Access Pipeline protests affect future projects? -  Energy Transfer Partners reports the Dakota Access Pipeline will have about a dozen employees in each of the four states it operates, including IL. The Dakota Access Pipeline has started shipping oil on Thursday to contractors between North Dakota and IL, the Associated Press reported. Crude oil transported through the pipeline is sourced from six terminal locations in the North Dakota counties of Mountrail, McKenzie and Williams. The Oceti Sakowin camp, the main protest camp closest to the pipeline, was cleared in February following an emergency evacuation order signed by North Dakota Gov. Doug Burgum. It is expected to transport approximately 520,000 barrels of oil daily. The full pipeline, from the Bakken to the Gulf, cost almost $5 billion. ETP said earlier this month that the $3.8 billion pipeline would begin transporting crude on June 1 to fulfill contracts with shippers. Calling themselves the water keepers, protesters noted the potential danger to the Missouri River and its tributaries should the pipeline rupture. "Now that the Dakota Access Pipeline is fully operational, we find it more urgent than ever that the courts and administration address the risks posed to the drinking water of millions of American citizens". But President Trump approved the easement weeks after taking office, spurring Energy Transfer to quickly resume construction.Since then, momentum has swung in the pipeline developer's favor.The start of operations does not mark the end of the legal battle, Archambault said

Oil is flowing in the Dakota Access Pipeline, but Iowa opponents still think they can shut it down -  Although oil has begun flowing through the controversial Dakota Access Pipeline, Iowa activists aren't giving up their battle against the $3.8 billion project.The 30-inch diameter pipeline started commercially shipping oil on June 1 and has a capacity to transport about 520,000 barrels of oil daily.But appeals are still pending with the Iowa Supreme Court that opponents see as offering glimmers of hope that the pipeline can still be shut down."If any of these court rulings go our way, things could change," said Ed Fallon of Des Moines, a former state legislator who heads Bold Iowa, an activist group that opposes the pipeline because of concerns involving the environment, property rights and other issues.The Dakota Access Pipeline route extends 1,168 miles from North Dakota’s Bakken and Three Forks oil-production areas to a distribution hub at Patoka, Ill.The Iowa section runs diagonally for 346 miles through 18 counties from far northwest Iowa to the state's southeast corner.The Davis-Brown Law firm of Des Moines is representing Iowa landowners who have appealed to the Iowa Supreme Court over the use of eminent domain to build the pipeline through their farms.In addition, the Sierra Club of Iowa is appealing to the state's high court over the Iowa Utilities Board's decision to grant a pipeline permit to Dakota Access. Polk County District Judge Jeffrey Farrell ruled against the plaintiffs in a consolidated case decided in February.   But the Iowa Supreme Court has denied a motion by Dakota Access to dismiss the case. The justices are expected to rule later this year or early in 2018.

Still No Approved Route for Keystone XL in Nebraska as Resistance Mounts - "Trump administration approves Keystone XL pipeline," the headlines blared. It was March 24, only two months after he'd taken office, when it appeared that President Trump had cleared the way for the long-contested tar sands conduit with a stroke of his pen.  In reality, summarily declaring that the pipeline is in the national interest—despite a seven-year U.S. State Department review process that had concluded the opposite —won't magically bring it to life. The president, together with TransCanada, the energy company behind the Keystone XL pipeline, still have many obstacles to overcome before Canadian tar sands crude can flow through KXL and into the United States. The first formidable hurdle they face is the state of Nebraska, which TransCanada has treated with contempt in recent years. First, the company drew the pipeline's route through the heart of the state's fragile Sand Hills ecosystem. Confronted by environmental concerns, TransCanada said that rerouting the pipeline would be " impossible ." Mounting resistance, however, forced the oil giant to relent and nudge the proposed route around some of the most sensitive parts of the Sand Hills. The pipeline would still, however, run through the important Ogallala aquifer —one of our largest underground stores of freshwater, which would be at significant risk in the event of a leak. Now that the controversial tar sands pipeline has been reactivated by President Trump's decision, TransCanada must obtain the consent of the Nebraska Public Service Commission and secure easements from the landowners along the proposed route through the Cornhusker State. It will not be smooth sailing. Six weeks after Trump's announcement, Nebraskans flocked in chartered buses to a public hearing the commission convened in York, where opponents steeply outnumbered supporters, as the Omaha World-Herald reported. In August, there will be five additional days of hearings in Lincoln, where formal intervenors, such as landowners along the route, environmental groups and labor unions, will get their chance to testify. (The Nebraska Public Service Commission also has an online form to collect comments.)  If, despite these objections, TransCanada obtains approval from the commission, it will most likely be forced to win easements from landowners through the eminent domain process. Some of the holdouts who have refused to sell permission to build on their properties claim to have turned down offers as high as $300,000 .

Study correlates links between Oklahoma quakes, wastewater disposal - Seismic activity grew in central Oklahoma in the 18 months leading up to Dec. 31, 2015, but declined markedly during the following year as the state began to regulate oil and gas wastewater disposal more aggressively, the US Department of Energy’s Fossil Energy Office (FEO) reported. Decreased oil and gas production in response to falling prices also played a part, it added. FEO’s National Energy Technology Laboratory, the University of Oklahoma, and the Oklahoma Geological Survey (OGS) jointly studied seismic events in the Sooner State, where earthquakes grew markedly from the 1980s through 2008. The final report, which the OGS released on June 6, found that more than 95% of the quakes in 2015 occurred in two main regions representing about 17% of Oklahoma’s total land area:

  • • A central zone east of the major Nemaha Fault comprising parts of nine counties mostly north of Oklahoma City and west of Tulsa.
  • • A northwestern zone west of the same fault, comprising parts of six counties.

Oil and gas wastewater disposal in the two regions increased considerably from July 1, 2014, to Dec. 31, 2015, as the number of seismic events grew, researchers found. Earthquakes with magnitudes greater than 3.0 rose from 579 in 2014 to 903 in 2015, then decreased to 623 in 2016, they reported. The reduction in seismic events correlated to decreased wastewater injection, partly due to Oklahoma Corporation Commission regulatory actions and partly because oil and gas production declined from 2015 to 2016 in response to falling prices, the study said. Using a denser network of seismometers and high-resolution gravity and magnetic measurements, researchers could detect and locate more precisely all 2.0 magnitude or greater earthquakes in Oklahoma, FEO said. Accurate locations are critical, since 50% of the earthquakes that occur in Oklahoma are on faults that were not identified previously, including one that the team discovered near Cushing.

Another Fracking Time Bomb Lurks Beneath U.S. --You've heard about the earthquakes, the controversial claims of flammable tap water, the potential contamination of streams, lakes and drinking water aquifers, but the system that's supposed to pay for these calamities may itself be a pending disaster. Most states protect taxpayers from cleanup costs by requiring oil and gas producers to buy a surety bond that will pay in the event of a disaster. But those bond amounts, nearly everywhere in the U.S., are woefully inadequate to pay likely cleanup costs, said Ryan Kellogg, a professor of public policy at the University of Chicago. "In just about any state the bond amounts are absolutely laughable," Kellogg said Friday, calling the system a sham. "The bond amounts are minuscule compared to what reclamation costs often turn out to be." And reclamation projects are likely to multiply in coming decades as the more than 1.7 million fracked wells in the United States age. The Mineral Leasing Act requires a bond of $10,000 for a single lease on federal land. With an average of five wells per lease, that comes to $2,000 per well. That number was set in 1960 and has never been increased, according to economists, even to adjust for inflation. Yet a well blowout can cost tens of millions of dollars to clean up, according to various studies of this issue. A well that's merely orphaned—abandoned without being properly sealed—costs about $13,000 to reclamate. Sometimes, the responsible party disappears by the time cleanup costs become evident. 

Minnesota to open 22 meetings on disputed Enbridge pipeline — Minnesota regulators are getting ready to open a series of 22 public meetings on an oil pipeline project that opponents have dubbed the next Dakota Access pipeline struggle. Enbridge Energy is seeking approval to replace its aging Line 3 pipeline across northern Minnesota. The meetings along the proposed route are meant to give the public a chance to comment on the draft environmental review for the project, which was released last month. The first two meetings are scheduled for Tuesday, and a final decision from Minnesota isn’t expected until next year. Calgary, Alberta-based Enbridge built Line 3 in the 1960s to carry Canadian crude to its terminal in Superior, Wisconsin. It runs from Hardisty, Alberta, to Enbridge’s terminal in Clearbrook in northwestern Minnesota, to Superior. Most of the U.S. portion of the route is in Minnesota, though it also clips a corner of North Dakota. Enbridge proposed the $7.5 billion replacement project because the deteriorating pipeline is now restricted to 390,000 barrels per day. The replacement would restore the original capacity of 760,000 barrels per day. The company says the existing Line 3 is in an already crowded corridor. It says the best way to replace it is to follow the existing path as far as Clearbrook, then take a new more southerly route to Superior. The draft review looks at the proposed route as well as four alternative paths but does not recommend one over the other. The new route would cut through Mississippi River headwaters region and the pristine lake country of northern Minnesota where Native Americans harvest wild rice and hold treaty rights.Tribal groups say Enbridge’s preferred route risks oil spills in sensitive areas, and the six Ojibwe bands in the Minnesota Chippewa Tribe are preparing their own environmental impact statement. Environmental groups also oppose the project because Line 3 carries Canadian tar sands crude, which takes more energy to produce than conventional oil. 

Trump says infrastructure plan will speed approvals, cut regulations -- US President Donald Trump said Wednesday that he was focused on reducing "burdensome" federal regulations and streamlining the approval and permitting process for oil and natural gas pipelines and other infrastructure projects. "They're getting approved so fast," Trump said during a televised speech in Cincinnati, Ohio.Trump credited his administration with approving the Keystone XL and Dakota Access pipelines. "Nobody thought any politician would have the guts to approve that final leg," said Trump, claiming that he has received no "heat" for approving the Dakota Access pipeline.Joined by US coal, steel and petroleum industry executives, Trump gave his speech along the banks of the Ohio River with barges carrying "West Virginia coal" in the background.The speech was intended to detail his administration $1 trillion infrastructure plan, but Trump offered few details. "America wants to build," he said.

North Dakota oil industry shows signs of a rebound | Star Tribune: North Dakota’s oil country boomed to unprecedented heights earlier this decade, transforming the state, beckoning legions of workers from Minnesota and rippling in other ways across the economy of the upper Midwest. Then, as swiftly as it erupted, it crashed, victim of steps by Saudi Arabia and other countries to boost their production. Prices dropped from around $100 a barrel in 2014 to $30 early last year, bringing big financial losses for companies that had invested heavily in North Dakota production and bankrupting some of them outright. Jobs vanished. Now there are strong signs of a rebound. Drillers are bringing rigs back. Some companies are scrounging to find enough workers, an about-face for an industry that shed almost half its jobs during the bust. “I don’t think it’s as robust as we’d like it to be. But it is definitely improving.” The optimism remains tentative, as price and production levels would need to rise a lot more to rival the days of the boom. Newer fields in Texas and New Mexico are the hot spots in U.S. shale oil right now, drawing investment that might otherwise flow to North Dakota, the nation’s No. 2 oil producing state. Nonetheless, North Dakota players that survived the crash started getting more active last fall, when major oil-producing nations agreed to output cuts that pushed prices back over $50 a barrel. Companies have worked to boost productivity, getting leaner to cope with current price levels.There are now 51 drilling rigs in North Dakota — well below the high of 218 in December 2012 — but up from a low of 27 in May 2016. 

Five High-Intensity Fracks Reported Over The Weekend -- A Reader Suspected This -- June 5, 2017 - I will come back to this later when I have a bit more time, but here's the "raw" data. This is quite spectacular. Four EOG wells and one CLR well:

  • 31756, 1,163, CLR, Maryland 5-16H, Catwalk, 38 stages, 17 million lbs; TD, 23,027 feet, t12/16; cum 80K 4/17;
  • 32512, 1,505, EOG, Mandaree 30-0706H, Squaw Creek, 37 stages, 17 million lbs sand; TD, 20,495 feet, t12/16; cum 157K 4/17; (19004)
  • 32513, 1,910, EOG, Mandaree 24-0706H, Squaw Creek, 44 stages, 28 million lbs sand; TD, 20,483 feet, t12/16; cum 228K 4/17; 19004)
  • 28435, 871, EOG, Fertile 55-0333H, Parshall, Fertile 55-0333H, frack data not yet available, t12/16; cum 60K 4/17;
  • 32514, 1,355, EOG, Mandaree 31-0706H, Squaw Creek, 46 stages, 29 million lbs; TD, 20,914 feet, t12/16; cum 247K 4/16; (19004)

Standing Rock Sioux Tribe Wins Prestigious Award + $1 Million Investment to Transition Away From Fossil Fuels -- The Wallace Global Fund awarded the inaugural Henry A. Wallace Award and a $250,000 prize to the Standing Rock Sioux Tribe for its unyielding courage in the fight against the Dakota Accs Pipeline , and its dedication to transitioning to renewable energy . In addition to the $250,000 prize, the tribe will receive up to a $1 million investment from the Wallace Global Fund to support its transition toward fossil fuel independence. The award was presented to Tribal Chairman David Archambault II at an award ceremony in New York on Thursday; a donor and investor lunch briefing followed the ceremony to highlight solar and wind energy projects underway at the Standing Rock Reservation. The Henry A. Wallace Award was established in 2017 by the Wallace Global Fund to lift up the extraordinary courage and will it takes to stand up to oppressive corporate and political power. Henry A. Wallace was a visionary and progressive advocate who served as the 33rd vice president of the U.S. under President Franklin D. Roosevelt. "Our foundation is guided by my grandfather's framing of a mighty struggle that continues to this day: protecting the interests of what he called the 'common man'—ordinary people—against the oppressive combination of corporate and governmental power. Democracy, he said, 'must put human beings first and dollars second,'" said Scott Wallace, co-chair of the Wallace Global Fund.  "This award in his honor is intended to recognize the type of extraordinary courage that ordinary people can summon to fight such abuses of power. No one represents such courage better than the Standing Rock Sioux Tribe. And never has such courage been more essential to the health of our democracy than right now."

88 Energy shares jump as it prepares for Icewine#2 fracking after completing log analysis - 88 Energy Limited saw its shares jump 11% higher today on news the AIM-listed firm is preparing for the artificial stimulation or fracking of its Icewine#2 well in Alaska and flow testing after successful completing log analysis. The company said it no longer needs to carry out micro stimulation after gaining enough insights in to the stress profile and pore pressure of the HRZ shale, which appears higher than previously expected..  Artificial stimulation is scheduled to take place on 17 June with the flow testing by the end of the month or early July.88 Energy said the fracking would test whether complex artificial fracture systems can be created within the HRZ via the proposed stimulation.These complex fracture systems are evident in the best performing shale plays as they result in maximised stimulation rock volume, which directly impacts potential flow rates.Similarly, whilst substantial work has been done on thermal maturity, the exact gas oil ratio is difficult to predict prior to a flow test.The company interprets that the vast majority of the HRZ sweetspot has been captured irrespective of any uncertainty, due to the large acreage position.  Icewine-2 is expected to provide further insight into the scale of the HRZ shale discovery. Significantly, it will be fracked and flow tested to determine the commercial potential of the shale, which is estimated to hold billions of barrels of oil.

EIA STEO highlights: US oil output nears new record -- US crude oil production will, for the first time in nearly 50 years, climb to 10 million b/d by March 2018, the US Energy Information Administration said Tuesday. Such a level would mark the highest daily US production rate since November 1970, when production climbed to nearly 10.05 million b/d and averaged about 9.64 million b/d for that year, according to government data. The November 1970 figure remains the all-time high."Increased drilling activity in US tight oil basins, especially those located in Texas, is the main contributor to oil production growth, as the total number of active rigs drilling for oil in the United States has more than doubled over the past 12 months," Howard Gruenspecht, the EIA's acting administrator, said in a statement.In its latest Short-Term Energy Outlook, EIA said it sees US crude output averaging 9.33 million b/d this year and 10.01 million b/d in 2018."Growth in US production has been the largest contributor to the 800,000 b/d of non-OPEC liquids supply growth from January through May 2017," the EIA said in its report. "Continued increases in drilling activity in US shale basins, particularly a recent resumption in production growth from the Eagle Ford region in Texas, support production growth throughout the forecast," it said. The number of US oil-directed active rigs fell as low as 316 in May 2016, but has since more than doubled to 733 rigs this month.

Oil-Weighted E&Ps Profit from Higher Prices, Shifts in Strategy -- After posting significant pretax operating losses in 2015-16, U.S. oil-weighted exploration and production companies returned to profitability in the first quarter of 2017. The 180-degree turnaround in peer group results was driven not only by higher oil prices, but by major strategic and operational shifts. Most of the 21 E&Ps we’ve been tracking responded to the plunge in revenue that started nearly three years ago by optimizing their portfolios, shedding properties with higher breakeven costs to focus on core unconventional plays and implementing operational efficiencies that led to sharply lower drilling and completion costs. Today we discuss how, with higher cash flows and profits, crude oil producers are ramping up their 2017 capital spending to generate long-term production growth. We analyzed in depth the ongoing transformation of the U.S. E&P sector in Piranha!, a new market study of 43 U.S. E&Ps. Of that universe of companies, 21 focus on oil (60%+ liquids reserves), nine are gas-weighted producers (60%+ natural gas reserves) and 13 are diversified producers. All major U.S. shale/unconventional plays are represented in the combined portfolios of these firms. After examining the 2017 capital spending plans of our three peer groups in a series of blogs, we reviewed the turnaround in financial results we saw across our 43-company universe in Recovery - U.S. E&Ps Return to Profitability After Posting Massive Losses in 2015-16. Now, we analyze the first-quarter financial results of the 21 companies that make up our Oil-Weighted U.S. E&P peer group.

Grains of sand: How fracking has caused a surge in demand for one of the world’s oldest commodities -- Of the million-odd horizontal wells scattered around North America, most use frac sand that comes from a rich seam of so-called “white silica” sand that cuts beneath the Great Lakes region in Wisconsin. It is prized for the superior quality of its grains, which are said to more effectively lodge themselves into shale rock fractures, allowing producers to boost well performance. “You need sand that’s very round, very hard and very pure,” says Thomson, whose company owns a mine and processing facility in Wisconsin. “There’s sand everywhere in North America but generally it lacks one of those three characteristics.” Thomson estimates Wisconsin white silica, sometimes called “Ottawa White,” supplies roughly 90 per cent of the Canadian frac sand market. And all of that sand is meets tight specifications: Samples are sent to far-off laboratories to be tested for crush resistance, consistency, shape and the concentration levels of quartz minerals, all according to specific American Petroleum Institute (API) standards. Demand for frac sand is expected to double in the coming years as oil producers focus on wringing as much oil and gas as possible from every well. That has kicked off a race among sand suppliers to take advantage, either by developing new mines in Canada or by shipping product from the U.S. Midwest.While chronically low commodity prices have reduced drilling activity in recent years, producers continue to squeeze tremendous volumes of oil and gas from hard rock formations. That has placed more attention on the market for frac sand, which is expected to total between US$850 and US$950 million in Canada in 2017, according to IHS Markit. In the Montney Formation of northern B.C. and Alberta, producers in 2013 used an average of around 500 pounds of sand per foot of a horizontal well; today that number is closer to 1,000 pounds, according to research by RS Energy Group. And wells are getting longer: horizontal wells now stretch around 9,000 feet, compared to 5,000 feet just four years ago. 

Are Super Rigs The Driver Behind The New Shale Boom? -- Cost cuts and efficiency—the two key ingredients of the U.S. shale’s recipe for surviving the worst of the downturn—have led to drillers now employing a growing number of rigs capable of reducing the time needed for drilling a well and for moving from one area to another.The U.S. shale patch has been increasingly using the so-called super-spec rigs, a more advanced type of drilling machine, since the shale resurgence began at the end of last year, helped—inadvertently—by OPEC’s production cut deal that pushed oil to a more stable, around-US$50, price. The market was particularly unimpressed with OPEC extending the output cuts into March next year, while U.S. shale continues to increase production by the week, having found ways to get more bang for the buck and be profitable at a US$50 oil price. “OPEC’s market influence is highly questionable,” While OPEC is trying to ‘fix’ the price of oil and the level of global inventories and assert its influence on the market, the number of active oil and gas rigs in the United States rose for the nineteenth straight week as of the last count on May 26. Combined, the total oil and gas rig count in the US stands at 908 rigs, or 504 above the count a year ago. Tulsa-based Helmerich & Payne, for example, said in its latest results release that its U.S. land operations’ contracted rig count increased by 41 rigs from December 31, 2016 to March 31, 2017, to stand at 177 rigs. Helmerich & Payne has just bought Motive Drilling Technologies in a push toward automation, and possibly, autonomy. A number of the U.S. active rigs are of the super-spec kind, like one of Houston-based oilfield services company Patterson-UTI Energy that can drill a well in under ten days, or a week less than the average shale patch drilling time back in 2010. The rig can support a fully-loaded Boeing 747, and can ‘walk’ the dozen feet between well sites on its four 10-ton feet.

US exports record LNG volume in May, despite low profits -- US LNG export volumes climbed to a record high in May which came in spite of exceptionally low profit margins on spot cargoes sold into consumer markets in Europe and Asia. Last month, the US exported 17 LNG cargoes carrying the liquefied equivalent of 58.3 Bcf of gas, data compiled by Platts Analytics showed. Over roughly the same period, the profit margin for traders selling spot cargoes to West India and Northeast Asia fell to record lows at minus 26 cents/MMBtu and 4 cents/MMBtu, respectively, Platts Analytics data show. Compounding the puzzling coincidence, at least seven of the cargoes exported last month now appear to be sailing toward destinations in Northeast Asia, West India and the nearby Middle East region. Historical data collected by Platts Analytics on US export trends show offtakers Shell, Cheniere Marketing, Gas Natural and others having delivered large volumes to India, China, Jordan, Japan, Turkey and South Korea, implying that some of last month's deliveries to the Middle East and Asia were used to fulfill contractual obligations. Another six cargoes shipped from Sabine Pass in May appear to be en route to destinations in South America and Mexico, where shorter shipping distances may have provided exporters with a more robust margin for profit. In May, Platts' DES Brazil netforward price, which provides a price indication for demand in the South Atlantic, averaged $5.57/MMBtu, roughly on par with the prompt-month JKM price, Platts data show. Record-high export volumes in May come as Cheniere Energy continues to ramp up liquefaction capacity at the Sabine Pass terminal, which currently stands at 2.1 Bcf/d with Trains 1-3 having all reached substantial completion. Feedgas deliveries to the Louisiana Gulf Coast terminal, which exceed liquefaction capacity due to operational losses, have surpassed 2.4 Bcf/d on two occasions in April and May. Last month, gas deliveries to Sabine Pass averaged just below 2.1 Bcf/d, due in part to lower feedgas volumes from mid-to-late month. In late May, Cheniere requested authorization from the Federal Energy Regulatory Commission to begin introducing feedgas and refrigerants to Train 4, which is one of the final milestones before bringing a liquefaction facility into commercial operation.

Japan LNG buyers pay $5.70/MMBtu for spot cargoes contracted in May: METI  - Japanese LNG buyers paid an average $5.70/MMBtu for spot cargoes contracted in May, unchanged from $5.70/MMBtu in April, the Ministry of Economy, Trade and Industry said Friday. The ministry does not disclose the delivery months of the cargoes. JKM averaged $5.589/MMBtu in May, reflecting spot deals for June and July delivery cargoes. METI also said the average price of cargoes delivered into Japan in May was $5.70/MMBtu, down from $5.90/MMBtu in April. The JKM for May delivery cargoes averaged $5.454/MMBtu. JKM meandered throughout the assessment period, starting at $5.55/MMBtu on March 16 and ended at $5.525/MMBtu on April 13.

Crude Export Habits Could Factor Into OPEC's Oil Balancing Act -- Although crude exports figure heavily in its namesake, the Organization of Petroleum Exporting Countries may be oblivious to their relevance now that the United States is back in the market.After a 40-year absence, the United States began shipping its crude around the world in January 2016, but the importance of the occasion is something OPEC hasn’t quite grappled with, experts say. Rather, OPEC’s focus remains on revenue, if not market share, to keep the world’s crude supply and demand in balance. And once the nine-month extension of production cuts expires next March – and if global oil benchmarks still haven’t busted through to remain above $50 for a significant period of time – the club may see that it was simply not enough.More than 1 million barrels of oil are leaving U.S. ports each day, noted Jamie Webster, senior director at the BCG Center for Energy Impact. Petroleum product exports are north of 3 million barrels of oil per day.“Right now, it’s not something they want to bring into their general discussions, even if it is the reality,” he said. “One thing about OPEC you have to always understand is that they are a low consensus organization – they are just like the U.S. Congress in that – and they are reactive versus proactive. They don’t generally start making moves seeing that something is going to be changing X or Y; they make a move after something pushes them.”And for its own exports, OPEC loads only started to slow in May, said Antoine Halff, senior research scholar at the Center of Global Energy Policy at Columbia University, in his commentary, ‘OPEC’s Catch 22?’ “April loadings were at a peak, and overall shipments since January have failed to indicate any significant drop compared to October levels,” he noted, reflecting on figures from ClipperData. “Exports are generally assumed to broadly track production level, though,” Halff said. “Regardless of production levels, OPEC’s success in conveying a narrative of market control since last fall seems at variance with its impact on physical crude supplies.”

U.S. Begins Importing Iraqi Oil After Saudis Cut Exports -- The United States has begun importing Iraqi oil at a rate of 1.1 million barrels per day toreplace export cuts announced by Saudi Arabia late last month, new figures compiled byBloomberg show. New data from the Department of Energy suggests that during the first week of June, Iraqi oil entered the U.S. at the quickest rate in the past five years – marking the first time the nation’s exports exceeded those from Saudi Arabia over the same time period. In late May, Riyadh announced its plans to purposely reduce exports to the United States to force a reduction in the latter’s sizeable inventories, which are preventing a greater rise in global oil prices, according to Saudi Oil Minister Khalid Al-Falih. Earlier that same month, Saudi Aramco said it would cut crude supplies to China, South Korea, and South East Asia by 1 million barrels each. The nations exports to Indian buyers in June were set to decline by just over 3 million barrels, and supplies to Japan will drop by just under 1 million barrels this month, according to a Reuters’ source. The Organization of Petroleum Exporting Countries’ (OPEC) deal to reduce production does not set limits on the amount any member country can export to its customers. This is why Saudi cargoes to the U.S. in recent months have totaled 1.21 million barrels a day – the highest rates since 2014, the year of the oil price crash. As the de facto leader and largest producer of OPEC, Saudi Arabia has cut its production the most of any member of the bloc. But stubbornly high fossil fuel inventories - which have been maintained worldwide, but are most readily measured in the U.S. due to open customs data – have prevented the measures from buttressing oil prices in a lasting way. Importer nations have opted to take advantage of low oil prices to stock up for the future.

Canadian oil and gas could trump Trump in NAFTA talks -- Canadian oil and gas could become a “trump card” in Canada’s renegotiation of the North American Free Trade Agreement with the United States, former Canadian ambassador to the United States Derek Burney said in Calgary Friday. Burney, who has been advising Justin Trudeau’s government on NAFTA along with former Prime Minister Brian Mulroney, told shareholders of TransCanada Corp., of which he is member of the board of directors, that “there will be no surrender” by Canada to the administration of Donald Trump despite his insistence the U.S. will get a better deal, or will tear up the pact altogether. Speaking to reporters after the meeting, Burney said U.S. refiners would rather import heavy oil from Canada than from unstable suppliers like Venezuela, even as American production of oil and gas from shale formations is growing. That makes Canadian energy a “strength” that bolsters its negotiating position.

Mexico Oil, Gas Reserves Drop 6% In 2016 -- Mexico’s hydrocarbon reserves shed 6 percent last year to 16.77 billion barrels of oil equivalent, the country’s energy industry regulator CNH said yesterday, as quoted by Reuters. The decline came in spite of an increase in crude oil discoveries because of a drop in new gas deposit discoveries, CNH said.The 6-percent decline concerns so-called P2 reserves – proven and probable. P3 reserves, which also include possible oil and gas content in prospective deposits, also fell in 2016, by 1.1 percent to 25.86 billion barrels of oil equivalent.At the moment, Reuters notes, Mexico is pumping a bit more than 2 million barrels of oil daily and needs a 100-percent replacement rate of its reserves to just maintain it. The country, however, has plans to boost this to more than 2.6 million barrels – the rate, at which Brazil was pumping oil as of last October. As part of these plans, earlier this month Mexico’s deputy energy minister Aldo Flores Quiroga announced that the ministry has invited oil companies to suggest offshore deposits they would like to develop. The nominations are due to be announced in June, and the blocks will be tendered in December—a year after Mexico awarded exploration licenses for nine offshore blocks to companies such as Chevron, BP, Exxon, and the China National Offshore Oil Corp., as well as Statoil and Petronas.

White House Considers Sanctions Against Venezuela Oil Sector --Washington is studying options for imposing sanctions against Venezuela’s energy sector as a way of pressuring the South American country’s government to step down. No decision has been made yet, however, two sources from the Trump administration told Reuters. It may never be made, given all the questions surrounding such a move. For one thing, sanctions may well have the opposite effect and solidify Maduro’s power – the Venezuelan president is accusing the U.S. of working with the opposition to topple the government. For another, if the U.S. imposes sanctions, this will almost certainly lead to a humanitarian crisis, which nobody wants. There are also practical considerations, centering on the fact that the U.S. imports oil from the Venezuela. In March, it accounted for 8 percent of total crude imports, third after Canada and Saudi Arabia. For Venezuela, the U.S. is the biggest buyer of its oil.  According to Reuters, the shape the sanctions could take range from a blanket ban on crude oil imports from Venezuela, which will quickly put Venezuela’s oil industry in a coma, to banning PDVSA from doing business in the U.S., and to only banning it from taking part in U.S. government tenders. The latter option is the softest.  The U.S. has already imposed sanctions on certain individuals from the government of Nicolas Maduro, including his vice president, and eight justices from the Supreme Court. There are also grounds for wider ones: corruption and indirect human rights abuse, the White House officials told Reuters.

Three new natural gas deals for BP underscore move toward low-carbon future - British oil major BP continues to shift toward natural gas, on Friday announcing three different deals to boost gas production. The first, off the coast of Trinidad & Tobago, unlocked about 2 trillion cubic feet of gas in place. The second sanctions development of four wells and production of about 600 million cubic feet of gas per day in BP’s new Angelin project off the southeast coast of Trinidad. Then the company announced a deal with the Russian energy giant Rosneft to cooperate on the exploration, production, sale and purchase of gas in Europe. BP continues to transition to what it sees as a low carbon future. On Wednesday, the company’s number-two executive, deputy CEO Lamar McKay, extolled the importance of the shift. BP, McKay said, wants to see a price on carbon, the expansion of natural gas production and renewable energy, investment in low-carbon innovation and technology start-ups, and more energy-efficient industry and consumer behavior. “BP has long believed that energy production and environmental protection are not mutually exclusive,” McKay said at the fourth annual Greater Houston Partnership State of Energy address.

Norway braces for strike; oil, natural gas output of 443,500 boe/d would be hit -- Norway is set to see oil and gas production of some 443,500 b/d of oil equivalent shut in from Sunday should talks to avert a workers' strike fail, the Norwegian Oil and Gas Association said Friday. Talks are now underway between the association and the Lederne union over pay and conditions. Production at six fields would be affected if the talks fail to resolve the deadlock. The fields are: Draugen, Goliat, Gudrun, Oseberg East, Kvitebjorn and Valemon. "All these installations will have to shut down in the event of a conflict, causing a total loss of 443,500 boe/d," the association said. "A possible strike cannot begin until Sunday at the earliest," it said. The impact on Norway's gas production from the strike would be around 30 million cu m/d, according to Platts Analytics' Eclipse Energy. That is around 8.5% of Norway's current daily gas production of around 350 million cu m/d. The biggest impact would be to gas output at Kvitebjorn and Valemon, which produce some 20 million cu m/d and 7 million cu m/d, respectively. Earlier in the week, talks between the Norwegian Oil and Gas Association and another union, Industri Energi, representing a much bigger body of members, reached a deal on pay and conditions. Norwegian workers have in recent years gone out on strike on several occasions, hitting its oil and natural gas production. The association's lead negotiator, Jan Hodneland, said the industry was still in a challenging environment because of lower prices.

US, Brazil and North Sea ‘benefitting most’ from Opec cuts - Last week, Opec prolonged to March 2018 an original November deal that saw the cartel and non-cartel members reduce production by 1.8m barrels a day. As Opec cuts take effect, non-Opec countries have been filling the growing gap in Asian oil demand, said Vortexa chief executive Fabio Kuhn. Crude oil exports to Asia from the US, Brazil and the North Sea have jumped 55% in the first four months of 2017, according to analysis by Vortexa, the oil markets analytics platform. US crude exports to Asia have increased almost sevenfold compared to the same time period last year, with the US now averaging 222,000 barrels per day, according to data from the platform. Brazilian exports have seen a more than 50% increase for the same time period, now supplying an average of 588,000 barrels a day to the region. “Asia’s demand for oil has also taken a significant amount of North Sea barrels away from their traditional European market, with an average of 398,000 barrels a day going to Asia in the first four months of 2017,” Kuhn said. “If the Americans are satisfied that they can have energy independence on their own, I am not going to dispute that,” Burney said. “I don’t buy it. I don’t see it. And I don’t think the refiners see it that way. I think they would prefer the kind of commitments they are negotiating already” with Canada. Burney was a key player in both NAFTA and the U.S.-Canada Free Trade Agreement.

Taiwan set to import first cargo of US Gulf Coast Crude - Opportunities to export US crude to new destinations are now emerging as logistics constraints ease, making arbitrage economics more and more favorable. Higher exports come as OPEC and non-OPEC members have recently agreed to extend their production cuts by another nine months from June.The lifting of the ban on US crude exports at the end of December 2015 has seen US crude exported far and wide over the last year and a half. Opportunities to export US crude to new destinations are now emerging as logistics constraints ease, making arbitrage economics more and more favourable. These higher exports come as OPEC and non-OPEC members have recently agreed to extend their production cuts by another nine months from June, taking the export reductions until March 2018.In February, the US exported a record-high 1.1 million b/d of crude oil, 30% of which went to China. In March, data for which is the latest available, this fell slightly to 834,000 b/d although it was still significantly higher than the roughly 470,000 b/d of outflows in 2015 when the US still had a crude export ban before the ban was lifted at the end of 2015.Since the latest OPEC agreement was reached, the Middle East crude complex has moved steadily higher as the market priced in the prospect of cuts in term crude supplies from OPEC producers.The premium of benchmark Dubai crude over WTI has widened in recent months. Coupled with the inverted spread between WTI and Dubai have been relatively low freight rates further stimulating arbitrage economics. This in turn has led to Asian refiners looking even closer at buying US crude.

China's May crude oil imports soar on increased buying by state-owned refiners - Buying by state-owned refiners pushed up China's crude oil imports in May 15.4% year on year to 37.2 million mt, or 8.8 million b/d, but analysts said they expected crude inflows to ease in June due to high stocks. Imports in May rose 4.7% month on month, preliminary data released Thursday by the General Administration of Customs showed. The imports are the second highest level ever after 9.21 million b/d imported in March this year. "The increase was mainly from state-owned refiners as crude arrivals for independent refiners declined from April," said Hou Rui, an analyst with S&P Global Platts' China Oil Analytics. Independent refineries in China's eastern Shandong and Hebei provinces imported 8.43 million mt, or 1.99 million b/d, of crude oil in May, down 3% from April despite a 46% year-on-year increase, Platts data showed. He added that most of the cargoes for the state-owned refiners were booked in March when oil prices were low. The monthly average Platts Dated Brent and Platts Dubai crude assessments were $51.56/b and $51.20/b respectively in March, a four-month low. "Refinery outages remained high in May, so the incremental barrels are likely to flow into storage for use in June," Hou said.

Analysis: OPEC/non-OPEC deal unlikely to alter crude strategy for Asia - The deal by OPEC and non-OPEC countries to extend output cuts is unlikely to lead to any fall in crude inflows into Asia from the region's main suppliers, who will ensure they keep their key markets well supplied as they strive to maintain market share and limit the prospect of the region being flooded with arbitrage cargoes. Market participants and experts were of the view that the move by OPEC and 11 non-OPEC producers to extend production cuts by nine months -- a move that would keep nearly 1.8 million b/d of crude oil off the market through March 2018 -- would not be big enough to throttle the supply strategy of major exporters and prevent them from meeting the needs of their traditional Asian buyers. Takayuki Nogami, chief economist at Japan Oil, Gas and Metals National Corp (Jogmec), said some OPEC producers in the Middle East won't be able to afford to reduce supplies to Asia -- instead they may boost shipments to meet peak demand needs. "We may see an increase in supplies, even without an increase in production in the summer," he added.  Some traders said that it could be a testing moment for OPEC producers to maintain their output cuts as agreed, as they battle for market share in Asia amid the approaching peak demand season.

Rosneft ready to step up crude output if Opec deal falters  - Russia’s largest oil company has served notice that it will step up production in the event of a sudden end to the agreement among major crude producers to curb output in an effort to prop up prices.  In a rare interview, Igor Sechin, Rosneft’s chief executive, said the company was closely monitoring output from US shale producers, amid debate in the oil market over whether the Opec-led agreement’s effectiveness is waning.  “Well, if the question is how Opec is going to exit from these arrangements: abruptly,” Mr Sechin said. “We will also be prepared. If something goes wrong, we will not let them occupy our markets. We’ll defend ourselves.”

Saudis Blowing Smoke - It was a dismal day for OPEC when it met in Vienna to extend its output deal. Despite an agreement to limit supply for another nine months -- a move it had signaled well in advance -- the price of crude fell by around 5 percent. The one bright moment came when Saudi Energy Minister Khalid Al-Falih announced that his country would cut crude sales to the U.S. Prices rallied briefly, adding as much as 50 cents. But a closer look at his comments reveals they may lack teeth. Unless the Saudis get serious about depriving customers of crude they want to buy, pessimism on OPEC's ability to rebalance the market is warranted. Here's what he actually said during the press conference after the meeting between the group and its friends on May 25: "As a result of certain marketing developments, including separating the assets of Motiva and Aramco focusing on the Port Arthur refinery, you will see a marked decline of Saudi Aramco exports into the U.S."  The Motiva assets were a joint venture between Saudi Aramco and Shell that was actually dissolved at the start of May, with Aramco retaining the Port Arthur refinery in Texas and Shell taking the Norco and Convent plants in Louisiana. The split leaves Shell free to source feedstock for its refineries from anywhere it wishes, but Norco and Convent process very little Saudi crude anyway. U.S. Department of Energy data show that imports by the two plants averaged just 33,000 barrels a day over the year to March, less than 3 percent of total U.S. crude purchases from the kingdom. So changed marketing arrangements there won't do much to dent the flow of Saudi exports to America.The Port Arthur refinery is a different story. Its imports over the same period averaged 238,000 barrels a day, or 21 percent of all Saudi crude sales to the U.S. However, it is unlikely that Saudi Aramco will switch its diet to other grades given that it's geared to processing its own crude. After all, as Al-Falih also said in that same press conference: "The U.S. market is a key market for Saudi Aramco...So we cannot, and will not, withdraw completely from the U.S."

Oil Bears Can't Look to Libya as Expat Exodus Slows Recovery | Rigzone The rapid increase in Libya’s oil production is heading toward a hard ceiling. Crude output in the politically fragmented country has more than doubled in the past year to exceed 800,000 barrels a day, according to the state-run National Oil Corp., as fighting and labor unrest at ports and fields have subsided. But with foreign staff of international companies staying away, analysts from Energy Aspects Ltd. to Wood Mackenzie Ltd. say Libya’s ability to pump more oil will soon reach a limit -- and won’t be enough to upset an oversupplied market. “You’ve got a cumulative buildup of technical issues, shortages of equipment, and increasingly reports of damage to facilities,” Richard Mallinson of London-based Energy Aspects said by phone. The North African country will struggle to push production above 900,000 barrels a day in the coming months, he said. “Without bringing in the expertise to carry out deeper maintenance, there’s only so much local teams are able to do.” Libya was exempted from output cuts that the Organization of Petroleum Exporting Countries and allied producers agreed to in an effort to curb a global glut and support prices. The nation has announced plans to boost production to 1.3 million barrels a day by the end of the year. Output and exports collapsed after the 2011 revolt against former leader Moammar Al Qaddafi, when the country with Africa’s largest crude reserves pumped about 1.6 million barrels a day. Crude prices rebounded early on Monday after a Saudi-led coalition cut diplomatic ties with Qatar, escalating a crisis that started over the Persian Gulf emirate’s relationship with Iran. Benchmark Brent crude gained as much as 1.6 percent, reversing a slump last week amid concern that rising U.S. output would undercut supply curbs by OPEC and its partners. Brent later surrendered gains, falling 66 cents to $49.29 a barrel at 2:48 p.m. in London. 

OPEC to assess need for deep oil output cuts in July: Saudi's Falih - OPEC and non-OPEC producers have only just agreed to extend their crude oil production cut deal through to March next year, but one of the key architects of the agreement, Saudi Arabia's Khalid al-Falih said Saturday he will consider the need for deeper output cuts in July. Falih was optimistic that the deal struck between OPEC and non-OPEC producers May 25 would begin to start bearing fruit by the end of June. "I think we have to wait. We have to see the market and I think by the end of June, in July we will see that the action we have taken has a big impact," "If for some reason we need to do more, we will consider to do more including extension ... bigger cuts," Falih said, adding "Nothing is off the table but today nothing is on the table either." Saudi Arabia and Russia played a key role in negotiations between OPEC and non-OPEC producers to cut output by 1.8 million b/d from January 1. On May 25, the 24 producing countries participating in the deal agreed to extend it through March 2018. The aim is to bring global crude oil stock levels back down to their five-year average. A five-country monitoring committee overseeing the deal will meet in Russia over July 22-24. The next OPEC and non-OPEC meeting is set for November 30. Falih said he hoped compliance to the agreement in May would be even better than April, when the committee reported 102% overall adherence to the cuts. "I know that Russia achieved more than 100% [by cutting 305,000 b/d]. We are more than 100%," Falih added. The pair are the world's two biggest oil producers with a combined output of around 20 million b/d.

Russia, Saudi Arabia energy ties heading to new level – podcast - Russian and Saudi relations are emerging in the wider energy sphere and how these deepening ties feed into the whole OPEC/non-OPEC cooperation is begging the question as to whether one is a precursor to the other, according to associate editorial director Paul Hickinand managing editor Nadia Rodova. Meanwhile, the pain of political barriers on the European side is often little talked about and is a new theme, with the focus usually on Russia, which seems to be coping with them so far.

Hedge funds keep it cagey on oil drawdown prospects- Hedge fund managers continued to square up positions after the OPEC meeting on May 25 left oil production allocations unchanged for another nine months. Money managers increased their combined net long position in the three main Brent and WTI futures and options contracts by 20 million barrels in the week to May 30. Fund managers also increased their net long position in U.S. gasoline by 7 million barrels and in U.S. heating oil by 6 million barrels, analysis of position data published by regulators and exchanges showed. But most of these position changes were driven by the closure of previous bearish short positions rather than the creation of new bullish longs. Short positions in crude, gasoline and heating oil were cut by 27 million barrels, 6 million barrels and 8 million barrels respectively for a total decrease of 41 million barrels. By contrast, long positions in crude and heating oil were cut by 8 million and 2 million barrels respectively, while gasoline longs rose by a mere 1 million barrels, making for a total reduction of 9 million barrels. Hedge fund positions in crude and refined products are fairly close to neutral (allowing for the persistent long bias among money managers as a whole, especially in crude). Fund managers hold 3.4 long positions in crude for every 1 short position, up from a recent low of 2.35 but well down from the mid-April high of 5.8, let alone the record 10.3 reached in mid-February. It has been a tough start to the year for most fund managers, with big bullish positions in February and April repaid only with a painful decline in prices. Crude oil prices have generally remained under pressure in recent days, with little sign of concerted buying despite plenty of bullish talk. Most fund managers have therefore retreated to the market sidelines, waiting to see if the long-promised drawdown in global stocks will eventually materialise in the third quarter.

Oil prices finish lower after Middle East countries cut Qatar ties - Oil prices finished lower Monday as Saudi Arabia and three other countries cut ties with Qatar, raising uncertainty about Middle East oil production. Saudi Arabia, Egypt, Bahrain, and the United Arab Emirates all severed diplomatic ties with Doha on Monday, accusing it of meddling in their internal affairs and backing terrorism, which the country denies. On the New York Mercantile Exchange, July West Texas Intermediate crude fell 26 cents, or 0.6%, to settle at $47.40 a barrel. August Brent crude on London's ICE Futures exchange slipped 48 cents, or 1%, to $49.47 a barrel. The settlements for both benchmark crudes were the lowest in just under a month. Oil prices had reversed a gain of more than 1% seen earlier in the European session and in Asian trading. “Generally, increased tensions in the Middle East props up oil prices with a fear bid, but the dynamic of this Qatar issue is different because it is largely between Saudi Arabia and Iran,” Tyler Richey, co-editor of the Sevens Report, told MarketWatch. “The likelihood of military action between the two major OPEC members is pretty slim which means that the chances of production outages is also low,” he said. “The rift, however, is jeopardizing the global production agreement as rising tensions between OPEC members could result in the entire quota-policy-deal falling apart.” 

Oil falls 1 percent on fears Mideast rift could harm OPEC cuts --Oil prices fell nearly 1 percent on Monday on concerns that the cutting of ties with Qatar by top crude exporter Saudi Arabia and other Arab states could hamper a global deal to reduce oil production. Saudi Arabia, the United Arab Emirates, Egypt and Bahrain closed transport links with top liquefied natural gas (LNG) and condensate shipper Qatar, accusing it of supporting extremism and undermining regional stability. The news initially pushed Brent crude prices up as much as 1.6 percent as geopolitical fears rippled through the market. But August Brent prices ended the session 48 cents or 0.96 percent lower at $49.47 a barrel. U.S. West Texas Intermediate futures settled 26 cents or 0.55 percent lower at $47.40. U.S. gasoline futures led the energy complex lower, falling about 2.5 percent to settle at $1.5381 a gallon, on technical selling, brokers said. With production capacity of about 600,000 barrels per day (bpd), Qatar's crude output ranks as one of the smallest among the Organization of the Petroleum Exporting Countries, but tension within the cartel could weaken the supply deal aimed at supporting prices. "While we would not want to read too much into this in terms of looming trouble for OPEC, the fact that Qatar's stance towards Iran is a key element in this issue does make for a potentially more complicated setup at future meetings should the issue not have been resolved in due time," JBC Energy analysts said in a note. The deal has shown little indication of significantly denting exports. While OPEC supplies dipped between February and April, a report on Monday by Thomson Reuters Oil Research said OPEC shipments likely jumped to 25.18 million bpd in May, up over 1 million bpd from April. Brent futures have fallen more than 8 percent from their open on May 25, when OPEC opted to extend production cuts into 2018. Outside of OPEC, South Sudan will drill 30 new wells this year and significantly boost oil output as it chases a peak 350,000 bpd target by mid-2018, the petroleum minister said on Monday.  

Bearish News Mounts For Oil Markets - In a seemingly contrarian move, oil prices have fallen 5 percent since OPEC member states agreed to a 9-month extension on production cuts. And as Libya ramps up production, the U.S. pulls out of the Paris Climate Agreement and Qatar is excluded from the GCC, the market is awash with bearish news.  The U.S. oil and gas markets all slipped lower-- near the 2017 low of $46--after Saudi Arabia, Egypt, Bahrain, Yemen, Libya and the Maldives severed diplomatic ties with Doha over allegations of meddling with their internal affairs and supporting several terrorist groups. There are widespread fears that Qatar might retaliate by disrupting the latest oil production deal. That, however, remains to be seen because Qatar ships just 618k bbl/day, or ~2 percent of OPEC output. Qatar though is the world's largest exporter of liquified natural gas, shipping one-third of global LNG supply. The dispute has so far not caused any disruptions in the region's energy sector since Qatar's gas supplies are still going through the 3.2B cf/day Dolphin pipeline. In a seemingly bizarre move, oil prices plunged as much as 4 percent after OPEC and non-OPEC members, including Russia, agreed to extend the current oil production cuts through March 2018. The price action though is not as strange as it first looks. OPEC is merely interested in keeping a floor under prices and appears satisfied with current production levels which have yielded a considerable revenue improvement for cartel members. The market, however, was looking for deeper cuts so as to bring down inventory levels and offer solid ground for a sustained recovery. U.S. rig count climbed for the 20th consecutive week, a record for the industry, according to the latest weekly survey by Baker Hughes. Oil rigs increased by 11 to 733 while gas rigs fell by 3 to 182. That's more than double last year's comparable readings of 325 and 82 active oil and gas rigs, respectively. There are growing fears that increasing U.S. output will frustrate efforts by OPEC to lower global inventory levels.   The U.S. is, however, not the only country that OPEC has to contend with in its efforts to control production. Libya, an OPEC member itself, has been ramping up oil exports, and could hit 1 million barrels per day in a matter of weeks. Sustained production at that level will offset at least one-third of OPEC cuts, implying that it might take considerably longer than the targeted nine months to bring down inventories to acceptable levels. With some luck, the country's decaying infrastructure and fragile peace might prove enough to limit its ability to continue beefing up production.

WTI/RBOB Drop After Biggest Gasoline Build In 5 Months --Following last week's biggest crude build since 2016, API reports another large crude draw (seemingly confirming refinery run rates remain high), but WTI/RBOB prices slipped lower on an unexpectedly large build in Gasoline (and Distillates). Genscape reported a 750k draw at Cushing last week... API:

    • Crude -4.62mm (-3.25 exp) -0 9th weekly build in a row :
    • Cushing -1.56mm (-593k exp) - biggest draw since Oct '16
    • Gasoline +4.08mm (-50k exp) - biggest build since Jan '17
    • Distillates +1.75mm

    Following last week's biggest build since 2016, API reported a 9th weekly draw in Crude but Gasoline saw its biggest build since Jan 2017, very much against the recent trend... Notably WTI rallied back today (on weak dollar) to recover the post-Qatar losses...(despite EIA upping its 2018 US Crude output estimate above 10mm b/d for the first time...EIA sees US crude production at 9.81mbpd (was 9.74) in December 2017 and at 10.29mbpd in December 2018...) but once the API data printed both WTI and RBOB started to fade...

    Oil Prices Rise Following Another Big Inventory Draw --The American Petroleum Institute (API) reported a draw of 4.62 million barrels in United States crude oil inventories, compared to analyst expectations that markets would see a draw of only 3.5 million barrels for the week ending June 2. This week’s draw, according to the API, is the seventh week of draws in the last 10 weeks, with a total draw of almost 27 million over the last ten weeks. Oil markets have been, for the last couple of weeks, cautious and slow to react to the positive news of crude oil inventory draws. This week, the news comes on the back of uneasiness in the oil market as Saudi Arabia and a few other Arab nations—which include OPEC members UAE and Libya—severed diplomatic ties with LNG heavyweight Qatar, citing that the country had sponsored terrorism and destabilizing the region.While analysts predict that the action taken by the Arab nations against Qatar will have little effect on the oil industry as it was unlikely to disrupt the status quo of the oil production cuts of which Qatar is a part of, it has created logistical concerns, and there are reports that LNG buyers are changing shipping plans to avoid the blacklisted country. Still, WTI barrel prices failed to go much beyond $48.  WTI was trading at $48.10 at 2:30pm EST, up 1.48 percent on the day—with Brent trading at $50.05 per barrel, or 1.17 percent up since open. Both benchmarks are below last week’s levels.The upward movement on gasoline inventories was a disappointment, climbing 4.08 million barrels this week, according to the API. Distillate inventories also rose this week by 1.75 million barrels, while inventories at the Cushing, Oklahoma, site fell by 1.56 million barrels.

    WTI/RBOB Tumble After Surprise Builds Across Entire Energy Complex - WTI/RBOB extended their losses after API's surprise gasoline build headlines overnight, and DOE data was even worse with surprise builds in crude, gasoline, and the biggest distillates build in 5 months. Production in the Lower 48 fell for the first time in 17 weeks (but very marginally). The reaction in oil and gasoline prices was abrupt... So far this week... Genscape reported a 750k draw at Cushing last week...  DOE reported:

    • Crude +3.925mm (-3.25 exp) - biggest build in 3 months
    • Cushing -1.444mm (-450k exp) - biggest draw in 4 months
    • Gasoline +3.324mm (-50k exp) - biggest build in 2 months
    • Distillates +4.355mm (+650k exp) - biggest build in 5 months

    After last week's biggest crude draw since 2016, expectations continued to point to more draws but API's overnight build in gasoline surprised many. High refining processing rates have eaten into the crude glut, but they risk moving it downstream into products, and DOE confirms that is now backing up the chain once again... with major builds in crude, gasoline, and distillates...

    Oil prices fall on surprise rise in US crude stockpiles: Oil prices slid nearly 5 percent on Wednesday after the U.S. government reported an unexpected increase in crude inventories, fanning fears that output cuts by major world oil producers have not drained a global glut very much. Crude stocks in the United States grew 3.3 million barrels to 513 million barrels, according to the U.S. Energy Information Administration (EIA). That confounded forecasters who had predicted a drop of 3.5 million barrels, especially a day after preliminary data from the American Petroleum Institute indicated an even bigger drop. Gasoline inventories also unexpectedly rose, imports increased, and exports dropped, the EIA data showed. Brent crude prices were at $48.27 per barrel at 2:35 p.m. ET (1835 GMT), down $1.85, or 3.7 percent. U.S. light crude prices were at $45.72 per barrel, down 5.1 percent.Gasoline stocks rose by 3.3 million barrels, compared with analysts' expectations in a Reuters poll for a 580,000 barrels gain. Distillate stockpiles, which include diesel and heating oil, rose by 4.4 million barrels, versus expectations for a 281,000 barrels increase, the EIA data showed.The EIA data also showed a drop in gasoline demand of about a half million barrels a day, a surprising development given that the data reflected the start of the summer driving season following the Memorial Day holiday.U.S. gasoline futures fell about 3.7 percent after the data was released.Oil futures had already been lower earlier on Tuesday on renewed concerns about the efficacy of OPEC-led production cuts, as tensions rose within the export group over Qatar and U.S. output continues to grow.The U.S. Energy Information Administration (EIA) said on Tuesday U.S. crude oil production could hit a record 10 million bpd next year, up from 9.3 million bpd now, putting it nearly on a par with top exporter Saudi Arabia. In the nearer term, with fuel production and consumption largely balanced according to the EIA, the market is focused on inventories, which remain bloated.

    Oil futures tumble after EIA data shows across-the-board builds --Oil futures fell sharply Wednesday after US Energy Information Administration data showed weekly builds in crude, gasoline and distillate stocks, with NYMEX July crude down $2.47 to settle at $45.72/b. After eight straight weekly draws, crude stocks rose 3.295 million barrels last week to 513.207 million barrels, raising the surplus to the five-year average to 109.847 million barrels. Analysts surveyed Monday by S&P Global Platts were looking for crude stocks to have declined 3.5 million barrels last week. American Petroleum Institute data released Tuesday evening showed crude stocks drawing 4.6 million barrels last week. "The market was primed for another sizable US crude stock draw but then the DOE reported a large crude stock build instead," DNB Bank oil market analyst Torbjorn Kjus said in a note.ICE August Brent settled $2.06 lower Wednesday at $48.06/b.Crude runs fell by 283,000 b/d last week to 17.227 million b/d, while imports rose 356,000 b/d to 8.341 million b/d, pushing stocks higher."It was clearly a bearish report mitigated a little bit by the first drop in US production in some time, but that's more likely a temporary glitch than long-term drop," said Kyle Cooper, consultant at ION Energy. Output from the Lower 48 states fell 20,000 b/d to 8.815 million b/d, EIA estimated. That was only the second weekly decline so far this year. The oil complex's drop Wednesday "comes after recent volatility in response to a fresh diplomatic rift between Qatar and a coalition of countries led by Saudi Arabia, and skepticism over the [nine-month] OPEC cut extension," Citi Research analysts said in a note.

    JP Morgan Slashes Its 2018 Oil Price Forecast By $11 - Major banks have started slashing their oil price forecasts for this year and next, as the six-month OPEC deal failed to rebalance the markets and cuts were extended into March 2018. U.S. shale production is expected to continue growing through this year and into next year. Meanwhile, JP Morgan sees OPEC’s extension deal as having no exit strategy, with the cartel not communicating what its end game is.“Neither the length of the extension, nor the compliance rate of its participants, concerns me as much as OPEC’s lack of an exit strategy. If OPEC really has the courage behind their convictions, then the optimal decision would have been to extend cuts through the end of 2018,” Ebele Kemery, head of energy investing at JP Morgan, said on the day on which OPEC announced they would roll over the cuts.  Last week, Goldman Sachs cut its Brent price forecast for this year to US$55.39 per barrel from its previous estimate of US$56.76 a barrel. It also revised down its WTI projections to US$52.92 from US$54.80 a barrel. Just days before that, Goldman said that it sees the oil glut returning after OPEC’s deal expires.For 2018, it was JP Morgan that made the most drastic cut to its oil price projections, expecting not only U.S. shale to continue roaring back at OPEC, but also the cartel’s deal falling apart by the end of this year.  JP Morgan slashed its 2018 WTI forecast by US$11—from US$53.50 to US$42. The price projection for Brent was also axed, by US$10, from US$55.50 to US$45.  “We assume that the OPEC/non-OPEC deal collapses at the end of 2017, as cheating becomes untenable for core OPEC members. Consequently, the 2018 oil market balance now points to rapid builds in inventories which, absent continued OPEC support, should depress oil prices,

    Oil's plunge hints at broader market signal: slow down, shale -- Oil prices edged up a few cents early Thursday, but still languished below $46 a barrel after plunging the previous day on rising U.S. fuel stockpiles. Market observers pegged Wednesday's 5-percent plunge on the unexpected increase in oil and gasoline storage tanks, which overshadowed tensions in the Middle East, the attack in Iran and disastrous economic conditions in Venezuela, an OPEC producer. But some analysts note that even over the past few weeks, with U.S. oil inventories steadily declining – a bullish new development – oil prices had trouble staying above $50 a barrel for long. They're beginning to interpret the bearish sentiment as a broader message about rising oil production in the U.S. shale plays. "If the market's telling you anything, it's saying, 'E&P guys, slow down,'" said David Pursell, an analyst at investment bank Tudor, Pickering, Holt & Co. "Investors are more worried about whether the market can absorb this slug of growth from U.S. shale." Tudor Pickering projects U.S. oil production will grow by 1.2 million barrels a day in 2018. But would the market prefer something more like growth of 800,000 barrels a day? "A lot," Pursell said. At this point, with U.S. oil-production growth already baked in for 2017, it would take a sustained drop in oil prices in the range of $40 to $45 a barrel to slow next year's gains, the analyst said.

    Is $50 Oil Still Realistic? - Oil prices have plunged back to levels not seen since OPEC announced its original production cut deal last November. Prices have been falling since the group extended their cuts for another nine months, a two-week slide that puts WTI back in the mid-$40s.The underlying factors for the price drop are the same as before: U.S. shale production continues to rise; inventories remain elevated; and the markets are concerned that the OPEC cuts are not doing enough to drain the surplus.But, in fact, the outlook has grown a bit darker more recently, as downside risks to the market have grown.The immediate spark to the sharp percent selloff in crude oil prices on Wednesday came from the unexpectedly bearish EIA inventory report, which surprised market analysts. The report was especially bad news because both crude oil and gasoline inventories increased by 3.3 million barrels each at a time when stocks typically decline heading into the driving season. The increase ended several consecutive weeks of drawdowns and poured cold water on any hopes of swift rebound in prices – WTI and Brent dropped roughly 5 percent.That comes after the EIA issued a statement saying that it is growing more confident that U.S. oil production will surge past 10 million barrels per day (mb/d) by 2018, which would be an all-time record for the United States. Piling on, the EIA said that it expects relatively unimpressive drawdowns in inventories this year, projecting declines of just 0.2 mb/d worldwide in 2017. And in what should be very worrying for OPEC and other oil bulls, the EIA also sees inventories rising again in 2018 by 0.1 mb/d.But the oil market also has some other immediate problems. Nigeria has presented downside risks to oil prices for quite some time, although the threat was latent for most of this year. Everyone knew that Nigeria’s disrupted pipelines and export terminals could come back at some point.That day has finally arrived. Royal Dutch Shell just lifted its force majeure on its Forcados oil shipments on Tuesday, paving the way for a flood of new supply. The Forcados shipments – an estimated 250,000 barrels per day – have been offline for more than a year. Nigeria is set to add the equivalent of one-fifth of the size of the OPEC cuts back into the market.  One wildcard over the past few days was the severing of diplomatic ties by several Gulf States with Qatar over the latter’s support for terrorism. Saudi Arabia, the UAE, Bahrain and Egypt cut diplomatic ties with Qatar, a move that temporarily rattled the oil market. The initial reaction from market analysts was that any tension in the Middle East is always bullish for crude. If Qatari shipments were disrupted for some reason, that would erase some supply. But the flip side is that hostility between fellow OPEC members could undermine mutual trust, threatening to derail compliance with the production cuts. That would be decidedly bearish for oil prices.

    OPEC compliance 117% over Jan-May among members with caps: Platts survey -  OPEC crude output in May rose 270,000 b/d to 32.12 million b/d, according to an S&P Global Platts survey released Tuesday, driven by sharp output recoveries in Libya and Nigeria, both of which are exempt from the organization's production cut agreement. May production rose despite very high compliance from both Saudi Arabia and Angola, as Iraqi output also rose steeply. This was the first time since October that OPEC observed a month-on-month rise in production, as output from Libya and Nigeria surged to multi-year highs. Libya and Nigeria's combined January-May average output of 2.312 million b/d is now 101,000 b/d higher than their October levels, the benchmark month against which the rest of OPEC members' cuts are determined, according to the Platts survey.With production in these countries expected to continue to grow this summer as they recover from militancy-related outages, OPEC faces a tricky period in its attempt to accelerate the market's rebalancing.

    Pessimism Sweeps The Oil Markets -  Oil prices got crushed mid-week after the EIA reported a surprising increase in both crude oil and gasoline inventories, a terrible sign that points to ongoing problems with oversupply. WTI and Brent dropped by 5 percent, with WTI sinking back into the mid-$40s. The selloff slowed at the end of the week, but oil traders seem to be looking for some direction.   The OPEC cuts probably put a floor beneath prices, with few analysts predicting substantial price losses from here, but there is also not a lot of confidence that a rally is imminent. “Unless data are released that make the latest inventory build appear an anomaly, oil prices are hardly likely to make any lasting recovery,” Commerzbank wrote in a note. PVM Oil Associates strategist Tamas Varga also sounded downbeat. “I've been quite bullish for the second half of this year, based on supply and demand balances and I would still not give up on that idea, that rebalancing is going to start in the second half,” Varga said this week. “But if Nigerian and Libyan production is picking up as well as they are now, then slowly, I am probably going to have to start changing my mind.” "If the market's telling you anything, it's saying, 'E&P guys, slow down,'" said David Pursell, an analyst at investment bank Tudor, Pickering, Holt & Co."Investors are more worried about whether the market can absorb this slug of growth from U.S. shale." The investment bank says that shale is probably on its way to strong growth this year, but if prices stay between $40 and $45 then it could derail the production growth in 2018. "That $10 makes a big difference," Pursell said. The severing of ties by several Gulf States with Qatar raised concerns about supply interruptions. But Royal Dutch Shell and ExxonMobil said that exports of LNG from Qatar have not been affected. The row between Qatar and its neighbors over the alleged support of terrorism, at this point, does not appear to be a major risk to the oil and gas market. 

    Analysis: Oil-rich Texas really isn't the new Saudi Arabia  - It is a time of crisis, or at least near-crisis, in the Persian Gulf. An alliance led by Saudi Arabia has cut ties with and blockaded neighbor Qatar, in part for being too friendly with Iran. Terrorists have struck in Tehran, and Iran's Revolutionary Guard Corps blamed the Saudis. The longtime protector/hegemon of the region, the U.S., has been giving conflicting signals, its leadership preoccupied with other matters back home. You might think oil markets would be freaking out about all this. They're not. Oil prices are down about 4 percent since the Qatar news broke early Monday. Explaining the short-term moves of the oil market (or the stock market, or the bond market) is generally a pointless endeavor. In this case, a U.S. Energy Information Agency report showing higher-than-expected inventories of gasoline and oil has gotten most of the credit/blame for the price drop. But the fact that markets haven't freaked out about the tensions in the Gulf fits well with a longer-run narrative: that the U.S. shale oil industry has supplanted Saudi Arabia as the key swing producer in the oil market. That is, it's producers in Texas and a few other states that are setting oil prices with their decisions to stop or start drilling, not Organization of Petroleum Exporting Countries oil ministers with their decisions to raise or lower production quotas. And lately, U.S. producers have been doing a lot of drilling.  If they can make a profit, they'll drill -- and oil markets seem to have increasingly come to expect that they will compensate for any cuts in supply from elsewhere. So they yawn at a crisis in the Persian Gulf. It's an understandable enough response. But it should probably make us all a little uneasy. Whenever everybody in the oil business agrees that the world works one way, it tends to start working differently. Production increases from the U.S. may have been enough to make up for cutbacks by Saudi Arabia, but the U.S. is in no position to take over Saudi Arabia's overall role in the world oil market. The U.S. produces a lot of oil these days, but it still consumes more than twice that amount -- and most of the world's other major economies are even more dependent on oil imports. Bloomberg Gadfly's Liam Denning had a wonderfully disconcerting column last week on the role that the U.S. Navy has played since World War II in making the global oil market possible. If American politicians decide to stop underwriting that extremely useful service, strange things could start happening. They may even be happening now.

    Oil rises as Nigerian pipeline leak overshadows supply worries | Reuters: Oil prices rose on Friday after a pipeline stoppage in Nigeria, but crude still ended the week down nearly 4 percent on persistent worries about global oversupply. Brent crude oil settled up 29 cents at $48.15 a barrel. U.S. crude futures rose 19 cents to $45.83 a barrel. Both benchmarks posted weekly declines of nearly 4 percent, pressured by big U.S. inventories and heavy worldwide flows. "I don't think it's anything more than a temporary stabilization," said Gene McGillian, manager of market research at Tradition Energy in Stamford, Connecticut, adding that traders were short-covering ahead of the weekend. "The increases in production will still drag us lower," he said. The Shell Development Company of Nigeria declared force majeure on Nigerian Bonny light crude oil after someone drilled a hole into the Trans Niger Pipeline, causing a leak. Nigeria has typically been Africa's largest oil exporter but rebel activity and government mismanagement have caused slowdowns and stoppages. The leak shows "the production trend in Nigeria is far from stable," said Carsten Fritsch, senior commodity analyst at Commerzbank. Oil markets have been under pressure in part because Nigeria and Libya, the two members of the Organization of the Petroleum Exporting Countries exempt from output cuts, were boosting production.

    U.S. oil-rig count posts another weekly climb, up 21 weeks in a row -- Baker Hughes on Friday reported that the number of active U.S. rigs drilling for oil climbed by 8 to 741 this week. That marked a 21st weekly rise in a row. The total active U.S. rig count, which includes oil and natural-gas rigs, increased by 11 to 927, according to Baker Hughes. Traders showed little reaction to the data, with July West Texas Intermediate crude  up 31 cents, or 0.7%, at $45.95 a barrel on the New York Mercantile Exchange, nearly unchanged from $45.97 before the data.

    BHI: Oklahoma, New Mexico leaders in 11-unit US rig count gain -  Oklahoma’s Cana Woodford and the New Mexico Permian served as the primarily catalysts behind the 21st consecutive US rig count increase.Baker Hughes Inc.’s tally of active rigs for the week ended June 9 jumped 11 units to 927, up 523 since a nadir in recent BHI data on May 20-27, 2016, and its highest level since May 1, 2015. Since May 27, 2016, the count has risen in all but 5 weeks (OGJ Online, June 2, 2017). Over the past 21 weeks, it has climbed 268 units.Oil-directed rigs rose 8 units to 741, up 425 since May 27, 2016, and its highest point since Apr. 10, 2015. Gas-directed rigs increased 3 units to 185, up 104 since last Aug. 26 in their own rebound. One rig considered unclassified remained drilling this week.US oil production during the week ended June 2 declined 24,000 b/d to average 9.32 million b/d, according to data from the US Energy Information Administration. The Lower 48 fell 20,000 b/d while Alaska dropped 4,000 b/d.In the June edition of its Short-Term Energy Outlook, however, EIA said this week that it expects US oil production in 2018 to average 10 million b/d, surpassing the previous annual production record of 9.6 million b/d set in 1970 (OGJ Online, June 7, 2017).Production is forecast to ramp up in particular during this year’s fourth quarter with a quarter-over-quarter expansion of 330,000 b/d. The agency maintains a forecast of 9.3 million b/d for 2017.The rising production through 2018 is supported by continued increases in drilling activity in shale regions, particularly in Texas where the Permian remains red hot and the Eagle Ford has resumed output growth, EIA said.Onshore rigs gained 13 units this week to 902, bolstered as usual by rigs drilling horizontally, which increased 9 units to 780, up 466 since May 20-27, 2016. Horizontal rigs now represent 84.1% of the total rig count. Rigs drilling directionally declined 2 units to 66. Offshore rigs and those drilling in inland waters each dropped 1 unit to 22 and 3, respectively.

    New US Shale Play Emerges As Rig Count Rises For 21st Week In A Row --Crude production from the Lower 48 dropped marginally last week, despite rising rig counts...  And in the last week oil rig counts rose once again (21st week in a row) up 8 to 741 - highest since April 2015 - notably given the lagged response to prices, we might expect the rig count rises to slow here. But, while the Permian has dominated the conversation in recent months,'s Irinia Slav explains the next big US shale play... Media coverage of the U.S. shale oil and gas industry makes it sound like the Permian is the only place where things are happening. Everybody is buying acreage in the Permian, selling acreage in other shale plays, and production costs are falling the fastest in that same Permian.True as this may be, this shale play is by no means the only one where production is growing. In fact, oil and gas output across the shale patch has been growing, as the Energy Information Administration’s latest drilling productivity report shows. And that’s not all because there is a new actor on stage: Powder River Basin in Wyoming. Now, in its May drilling productivity report the EIA confirmed what media have been saying: the Permian is the hottest spot in the shale patch, with a 71,000-bpd increase in output in April. This hottest spot was followed by the Eagle Ford, which some see as a declining play but if we are to believe EIA data, it is far from a decline: drillers there added 36,000 bpd to total output in April.  Bakken, which the EIA last year said will become the largest source of tight oil and gas in the U.S., added 6,000 bpd to daily production, with Niobrara added 7,000 bpd. Even the Marcellus and Utica plays, which are more famous for their gas, are yielding more crude, with both adding 1,000 bpd to overall output in April. Now for the new player in the field, which is in fact not new at all. Bloomberg’s Alex Nussbaum callsWyoming’s (and Montana’s) Powder River Basin “a home to cattle ranches and coal mines.” Yet until the 2014 price crash, the PRB was one of the shale oil basins that were growing at the fastest rate. Then prices tanked and drillers started getting out.Now drillers are returning to the PBR. Crude oil production in the basin jumped to 1,000 bpd of oil equivalent over the last 12 months from less than 800 barrels and a major drilling expansion is on the way. EOG, Chesapeake, and Devon Energy are planning to spend a combined US$600 million in that part of Wyoming, and pipeline operators are eager to expand in that direction. The reason: land prices are much lower than those in the Permian, for the moment. It’s all about early birds catching worms, and the earlier a bird is the better because prices in Powder River are already rising. A year ago, Nussbaum says, drilling permits went for less than US$1,000 per acre. Now, an acre costs US$17,000.

    Egypt, Saudi Arabia, UAE and Bahrain cut ties with Qatar over terror links -  Four Arab nations have cut diplomatic ties to Qatar, further deepening a rift among Gulf Arab nations over that country's support for Islamist groups and its relations with Iran. Bahrain, Egypt, Saudi Arabia and the United Arab Emirates all announced they would withdraw their diplomatic staff from Qatar, a gas-rich nation that will host the 2022 FIFA World Cup and is home to a major US military base. Saudi Arabia also said Qatari troops would be pulled from the ongoing war in Yemen. The countries also were ejecting Qatar's diplomats from their territories. The Qatari government has not responded to the severing of diplomatic ties, though it has previously denied funding extremist groups. All the nations also said they planned to cut air and sea traffic. Saudi Arabia said it also would shut its land border with Qatar, effectively cutting off the country from the rest of the Arabian Peninsula. It wasn't immediately clear how the announcement would affect Qatar Airways, one of the region's major long-haul carriers that routinely flies through Saudi airspace. On 27 May, Qatar's ruling emir, Tamim bin Hamad Al Thani, called Iranian President Hasan Rouhani to congratulate him on his re-election. The call was a clear, public rebuttal of Saudi Arabia's efforts to force Qatar to fall in line against the Shiite-ruled nation, which the Sunni kingdom sees as its No. 1 enemy and a threat to regional stability. Qatar shares a massive offshore gas field with the Islamic Republic. Qatar is also home to the sprawling al-Udeid Air Base, which is home to the US military's Central Command and some 10,000 American troops. It wasn't clear if the decision would affect American military operations. Central Command officials and the Pentagon did not immediately respond to a request for comment. Saudi Arabia said it took the decision to cut diplomatic ties due to Qatar's “embrace of various terrorist and sectarian groups aimed at destabilising the region” including the Muslim Brotherhood, al-Qaeda, Isis and groups supported by Iran in the kingdom's restive eastern province of Qatif. Egypt's Foreign Ministry accused Qatar of taking an “antagonist approach” toward Egypt and said “all attempts to stop it from supporting terrorist groups failed.” 

    Trump Blows Up The Gulf Cooperation Council (GCC) Well, maybe it has blown itself up, but Trump’s supposedly triumphant visit to Saudi Arabia looks to have exacerbated underlying tensions within the six-member Gulf Cooperation Council (GCC), whose members include Saudi Arabia (KSA), Kuwait,Qatar, Bahrain, the United Arab Emirates (UAE), and Oman. This was the part of Trump’s overseas trip that most US media has accepted as being a nearly great performance without any goofups (the trip steadily going downhill after that), with him getting over $100 billion in arms sales to the Saudis, and, aside from theatrics like sword dancing and holding glowing globes, getting to lecture 50 Muslim Arab leaders about what to do about terrorism, while also supporting their Sunni animus against Iran, this last part being what has led to the most recent problems. According to Francis Ghiles of OpenDemocracy, the split has opened up dramatically thanks to Trump siding strongly with the most hawkishly anti-Iran members of the GCC. Those nations happen to be Saudi Arabia and the UAE, both of which are actively involved in the disastrously bogged-down war in Yemen, where evidence is weak that Iran is even providing anything significant to the Houthis who currently control northern Yemen and the capital of Sana’a and are Zaydi Shia. Many reports show a major humanitarian disaster unfolding in that nation, which appears to be in the process of splitting into at least three, if not four, failed pieces, with the UAE apparently supporting South Yemen secessionists who recently took control of the airport in Aden (not clear what Saudis think of that,; this last bit not in any of the linked posts). The key players are Saudi Deputy Crown Prince, Mohammed bin Salman (MbS), and the Abu Dhabi Crown Sheikh Mohammed bin Zayed (Abu Dhabi one of the 7 emirates in the UAE), both of whom have gotten close to Jared Kushner. Another nation more or less in their camp, if not quite as close to Kushner, is Bahrain, home to a US naval base, where the ruling minority Sunni monarchy killed a bunch of peacefully demonstrating Shia a few days after Trump left Riyadh, having promised not to “lecture” them about human rights (although he was prepared to lecture US allies in Europe about all sorts of things). So the big news that Ulrichsen presents is a bizarre campaign in various social media and regular media, especially in KSA and UAE against Qatar, claiming that its Emir Tammim made a speech on May 23 to a graduating group of military cadets in which he supposedly said that Iran was a “stabilizing presence in the Gulf,” that Hama was the legitimate ruler of Gaza, and complained about “tense” relations with the Trump administration.. A serious irony is that to the extent this is all about Qatar being insufficiently anti-Iran, especially in Yemen, Qatar sent 1000 troops to Yemen in 2014 at the special request of Mohammed bin Zayed (MbZ), who apparently personally lobbied Tammim hard on this.

    Trump Says Arab Leaders Accused Qatar of Funding Extremism -- President Donald Trump said Mideast leaders he met last month accused Qatar of financing extremism, remarks that analysts say may deepen Doha’s isolation as it faces unprecedented punitive measures from a Saudi-led alliance. “During my recent trip to the Middle East I stated that there can no longer be funding of Radical Ideology,” Trump said on Twitter Tuesday. “Leaders pointed to Qatar - look!” Trump’s comment came a day after the White House said the president wanted to “de-escalate” the crisis and is committed to holding talks with all parties. The kingdom and three regional allies -- the United Arab Emirates, Egypt and Bahrain -- accused their fellow Gulf Cooperation Council member of supporting a range of violent groups, from proxies of Shiite Muslim Iran to the Sunni militants of al-Qaeda and Islamic State. They suspended flights and sea travel to Qatar, ordering Qatari diplomats and citizens out.  “Trump’s “tweet fuels more conflict, increases tensions and will be used by those who are trying to demonize Qatar,” Qatar has dismissed the Saudi charges as baseless, and said the Saudis are seeking to dominate the region. The crisis pits U.S. allies against each other, disrupting trade, flights and business activity in one of the world’s most strategically important regions. The Saudi-led action has prompted some analysts to openly speculate about the possibility of regime change in Qatar, the No. 1 exporter of liquefied natural gas, whose sovereign wealth fund owns stakes in global companies from Barclays Plc to Credit Suisse Group.Qatar’s influence goes beyond money. It’s also a home to the forward headquarters of CENTCOM, the U.S. military’s central command in the region. “It’s not a coincidence for the spat between Qatar and Saudi Arabia to erupt right after Trump’s visit to the region,” Sinan Ulgen, a visiting scholar at Carnegie Europe, said by phone. “Saudi Arabia and the U.A.E. have decided to put pressure on Qatar, which so far has seemed to refrain from pursuing equally harsh policies toward Iran. Trump’s latest tweet is a reflection of his anti-Iran stance.”

    Arab powers sever Qatar ties, citing support for militants | Reuters: The Arab world's biggest powers cut ties with Qatar on Monday, accusing it of support for Islamist militants and Iran, and reopening a festering wound two weeks after U.S. President Donald Trump's demand for Muslim states to fight terrorism. Saudi Arabia, Egypt, the United Arab Emirates and Bahrain severed diplomatic relations with Qatar in a coordinated move. Yemen, Libya's eastern-based government and the Maldives joined later. Transport links shut down, triggering supply shortages. Qatar, a small peninsular nation of 2.5 million people that has a large U.S. military base, denounced the action as predicated on lies about it supporting militants. It has often been accused of being a funding source for Islamists, as has Saudi Arabia. Iran, long at odds with Saudi Arabia and a behind-the-scenes target of the move, blamed Trump's visit last month to Riyadh and called for the sides to overcome their differences. "What is happening is the preliminary result of the sword dance," tweeted Hamid Aboutalebi, deputy chief of staff to Iranian President Hassan Rouhani, referring to Trump's joining in a traditional dance with the Saudi king at the meeting. Closing all transport links with Qatar, the three Gulf states gave Qatari visitors and residents two weeks to leave, and Saudi Arabia, Bahrain and Egypt banned Qatari planes from landing and forbade them from crossing their air space. Qatar's stock market index sank 7.3 percent, with some of the market's top blue chips hardest hit, and some Egyptian banks said they were suspending dealing with Qatari banks. The UAE and Saudi Arabia stopped exports of white sugar to Qatar, a potential hit to consumers during the holy month of Ramadan, when demand is high. Some residents in Qatar began stockpiling food and supplies, an expatriate said.

    The $1bn hostage deal that enraged Qatar’s Gulf rivals - Qatar paid up to $1bn to release members of its royal family who were kidnapped in Iraq while on a hunting trip, according to people involved in the hostage deal — one of the triggers behind Arab states’ dramatic decision to cut ties with the government in Doha.Commanders of militant groups and government officials in the region told the Financial Times that Doha spent the money in a transaction that secured the release of 26 members of a Qatari falconry party in southern Iraq and about 50 militants captured by jihadis in Syria. By their telling, Qatar paid off two of the most frequently blacklisted forces of the Middle East in one fell swoop: an al-Qaeda affiliate fighting in Syria and Iranian security officials. The deal, which was concluded in April, heightened concerns among Qatar’s neighbours about the small gas-rich state’s role in a region plagued by conflict and bitter rivalries. And on Monday, Saudi Arabia, Egypt, the United Arab Emirates and Bahrain took the extraordinary step of cutting off diplomatic ties and transport links to Qatar, alleging the country fuels extremism and terrorism.  “The ransom payments are the straw that broke the camel’s back,” said one Gulf observer.

    The GCC States Led By Saudi Arabia Will Collapse Into Oblivion -- Emboldened by U.S. backing Saudi Arabia launched a campaign to finally subjugate Qatar into client state status. The plan has now reached a high point. A few hours ago Bahrain, Egypt, the United Arab Emirates and Saudi Arabia severed all ties with Qatar. All sea- and airspace have been closed for Qatari traffic and the land-routes severed. All Qataris will have to leave those countries within 14 days. Qatari diplomats were given just 48 hours.The immediate consequences are huge. Some 37 million passengers cross through Doha each year. But Qatar Airways now has to fly through Iranian, Iraqi and Turkish airspace to reach Europe. (If the situation persists the UAE owned Emirates Airways will likely order a huge bunch of new planes.) Half of the food in Qatar comes via Saudi Arabia through Qatar's only land border. 600-800 trucks per day can no longer pass. The 19 flights per day between Doha and Dubai are called off.  Oil prices rose some 1.6% and the Qatari stock exchange tanked. The reasons for the immediate spat are manifold. It has only little to do with Iran.  The Saudis accuse Qatar of supporting terrorists. That is like Britain accusing the U.S. of imperialism, or the mafia cutting ties with the mob over gangsterism. As Joe Biden remarked (vid) when still Vice President, both Wahhabi countries, Qatar and Saudi Arabia, have been funding and fueling terrorism in Syria, Iraq and elsewhere. But the Saudi view is that the more "liberal" Qatar is simply supporting the "wrong" kind of terrorists. The Qatari government and its mouthpiece Al-Jazeera installed and supported the Muslim Brotherhood government in Egypt. The Saudis put that government down by financing a military coup against it. Qatar is supporting the Muslim Brotherhood government of Turkey. It is supporting the Palestinian Hamas, also a Muslim Brotherhood affiliate. Qatar is financing various al-Qaeda aligned groups in Libya, Syria and Afghanistan. The Taliban have their only diplomatic mission in Doha. Until recently the Saudis have been financing ISIS. They are now mainly back at financing various other Jihadi groups in Syria under CIA control. The UAE is sponsoring the Libyan general Hiftar who is fighting Qatari supported al-Qaeda aligned groups. The Saudis are making nice with Israel and have no interest in the Palestinian cause which Qatar supports. There are diverting interests in hydrocarbons. Qatar is the world's biggest exporter of natural gas - a serious competition to Saudi oil exports. It has recently intensified its relations with other producers and customers in the Gulf region and beyond.

    The Qatar Turmoil Fallout: Flights, Food, Football And More --Today's stunning expulsion of Qatar from the Saudi "circle of friends" prompted some analysts to ask if in Qatar's immediate futures is a departure from OPEC. In a note by Mitsubishi UFJ, the bank notes that “a full-fledged confrontation will, without any doubt, put pressure on the current compliance rate of OPEC members to the adherence of the 9-month agreement to cut production" and adds that "whilst Qatar’s pledge was only to cut 30,000 barrels to 628,000 barrels (as part of the OPEC agreement), there are potential risks of Qatar leaving OPEC which could significantly impact oil prices." That said, the political fallout for Qatar, and its remaining allies, could have broader implications than merely the collapse of the already dying oil cartel; as MUFJ notes “a rapprochement between Iran and Qatar would be a vast security risk to the U.S. military" while closure of land/sea/air contacts could have adverse "implications for the airlines, shipping and road freight industries." According to analysts and pundits cited by the BBC, the biggest threats facing the tiny but rich nation, with a population of 2.7 million, include food, flights, construction, people, trade and... football.  As reported overnight, Abu Dhabi's Etihad Airways and Dubai's Emirates are suspending all flights to and from Doha, starting from Tuesday morning. Both carriers operate four daily return flights to Doha. Budget carriers FlyDubai and Air Arabia are also cancelling routes to Doha, with other airlines, including Bahrain's Gulf Air and Egyptair expected to follow suit. It comes after Saudi Arabia, the UAE, Bahrain and Egypt all said they would stop flights in and out of Qatar, and close their airspace to the country's airline, Qatar Airways.

    Qatar's dispute with Arab states puts LNG market on edge | Reuters: Saudi Arabia and key allies on Monday cut ties with Qatar, the world's top seller of liquefied natural gas (LNG), stoking concern over any supply disruptions to neighboring countries spilling over into global gas markets. Saudi Arabia, along with the United Arab Emirates and Egypt - both highly reliant on Qatari gas via pipeline and LNG - and Bahrain said they would sever all ties including transport links with Qatar, an escalation on past diplomatic spats. They accuse Qatar, which supplies roughly a third of global LNG - natural gas that has been converted to liquid form for export - of supporting extremism. U.S. Secretary of State Rex Tillerson, who accompanied President Donald Trump on his trip to Saudi Arabia last month, was CEO of Exxon Mobil - Qatar's key Western partner in building its giant LNG export plants. As the rift lifted oil prices, LNG traders took a wait-and-see approach, alert to potential disruption of regional energy flows but erring on the assumption that any trade shocks could be contained given well supplied global markets.Qatar's top clients in Japan and India quickly received reassurances that supplies would continue as usual. Within hours of the diplomatic break, the UAE barred all vessels coming to or from Qatar using its popular anchorage point off Fujairah. The ban impacts about six LNG vessels linked to Qatar now anchored in the Fujairah zone which may need to be moved out, according to shipping data on Thomson Reuters. But there was little sign yet of LNG supply being hit. "I cannot see this impacting exports of Qatari LNG outside the Arab world at all and it won't likely impact LNG and gas pipeline exports within the Arab world either," Morten Frisch, an independent LNG and gas industry consultant, said. Still, traders startled by the development began to plan for all eventualities, especially any upsets to piped gas supplies from Qatar to the UAE. The UAE consumes 1.8 billion cubic feet/day of Qatari gas via the Dolphin pipeline, and has LNG purchase agreements with its neighbor, leaving it doubly exposed to tit-for-tat measures, industry sources and traders said.So far flows through Dolphin are unaffected but traders say even a partial shutdown would ripple through global gas markets by forcing the UAE to seek replacement LNG supply just as its domestic demand peaks. 

    LNG traders evaluate impact of Saudi-led diplomatic blockade of Qatar - LNG traders are bracing for potential disruption following moves by Saudi Arabia, Bahrain, Egypt, Libya, Yemen and the UAE to cut diplomatic ties with Qatar, the world's largest LNG supplier.Saudi Arabia's decision early Monday to break diplomatic ties, consular relations as well as land, air and sea contacts with Qatar over terrorism and extremism funding claims were followed by similar moves from the other five countries, according to media reports.
    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. Any disruption to Qatari LNG supply could have a significant impact on pricing, regional trade flows and energy security in Egypt, which imports most of its LNG from Qatar, a Singapore-based trader said.More than 60% of Egypt's LNG imports in 2016 -- 4.61 million mt of a total 7.26 million mt -- were sourced from Qatar and delivered as part of supply contracts between Egyptian Natural Gas Holding, or EGAS, and several traders and portfolio sellers."Cargoes would have to come from somewhere, including the Atlantic or Australia," the trader said."We might see some increase in prices for Egypt deliveries, whereas Qatar might have some additional volumes that can be shown into other Middle East countries and the Far East, but that would upset some shipping arrangements in the near future," the trader added. The impact on Qatar would be less severe, an Atlantic trader said, because it could cope with possible sanctions on its LNG exports into Egypt and the UAE by lifting the destination restrictions currently banning its FOB offtakers from delivering Qatari volumes into its long-term markets in Asia.

    Saudi Arabia's power play leaves Qatar with little room to maneuver - The Saudi dispute with Qatar is rooted in the region’s two biggest power plays. That a usually reluctant Riyadh would choose to open a highly public feud with the tiny Gulf state so soon after hosting Donald Trump and 40 other world leaders stems from a deliberate calculation within the ruling House of Saud that now is the time to consolidate its status.  Trump’s visit marked a return to business as usual for a bilateral relationship that had remained solid until Barack Obama’s second term. Until then, the US had underwritten the regional order for almost 70 years, assessing – contentiously – that the Saudi leadership had been a plank of regional stability. The pivot to Iran, which offered Tehran regional legitimacy in return for agreeing to wind back its nuclear programme, changed all that. For three years, a troubled Riyadh felt as though its wings had been clipped.  Unable to guarantee the backing of a superpower, it looked on as Iran made gains in Syria, Iraq and Lebanon while also reaching out to other allies such as Egypt – and Qatar Successive US administrations had known what they were going to get with the Saudis and most of the Gulf. That has increasingly not been the case with Qatar. The former British protectorate, now the world’s wealthiest country per capita, had not played by the same rules, especially vis a vis its approach to Iran and the Muslim Brotherhood. Riyadh and Abu Dhabi viewed both as subversive threats and its complaints about Qatar’s ongoing dealings had routinely been rebuffed. Doha had also dabbled with Israel, Hamas, al-Qaida and the Taliban, keeping a stake in many of the region’s troublespots – ostensibly to maintain relevance – while assuming a disproportionate clout that might act as a safeguard if cornered.

    German Foreign Minister Voices Support for Qatar, Bashes Trump - Germany’s Foreign Minister Sigmar Gabriel criticized the treatment of Qatar by other major Arab nations in an interview with Handelsblatt, likening it to a “Trumpization” of relations. “Apparently, Qatar is to be isolated more or less completely and hit existentially,” Mr. Gabriel said. “Such a Trumpization of treatment is particularly dangerous in a region already plagued by crisis.”The foreign minister and German vice chancellor warned of a further worsening of the conflict, which saw several Arab countries sever ties with Qatar in a coordinated action on Monday, accusing the Gulf state of supporting Iran and Islamist groups. “A further escalation would serve nobody. The Middle East is a political and a military powder keg. Religious, ethnic, political and ideological conflicts are now also dividing the Gulf monarchies,” Mr. Gabriel said, adding that he was very concerned over the “situation’s dramatic escalation” and its impact on the entire region.Saudi Arabia, Egypt, the United Arab Emirates and Bahrain severed relations with Qatar and closed their airspace to commercial flights on Monday, in the worst split between powerful Arab states in decades. Qatar vehemently denies the accusations against it. US President Donald Trump on Tuesday took to Twitter, saying Arab states had told him about their disputes with Qatar during a recent trip abroad. “During my recent trip to the Middle East I stated that there can no longer be funding of Radical Ideology. Leaders pointed to Qatar – look!,” Mr. Trump tweeted.Mr. Gabriel criticized the US president’s Middle East policy. “The latest gigantic military deals by US President Trump with the Gulf monarchies are exacerbating the risk of a new arms build-up,” he said. “That is the completely wrong policy approach and certainly not that of Germany.” Mr. Trump had sealed a $110 billion arms deal with Saudi Arabia when he visited the kingdom in May as part of his first trip abroad. Mr. Gabriel said the nuclear deal with Iran, brokered by Germany and its allies in 2015, had averted the risk of an arms race in the region for the time being. He added that Berlin counted on talks to resume soon, allowing for a diplomatic resolution of the conflict in light of the region’s severe challenges, such as the fight against extremist group Islamic State, the Syrian War, the impact of climate change and the demographic development. “A profound fight among neighbors is actually the last thing anyone needs in this situation,” the foreign minister, who will soon meet his Saudi Arabian colleague, Adel Al-Jubeir, said.

    The Saudi Prince, the Sheikh and a Gulf Renegade - The choreographed statements by Saudi Arabia and three allies to quarantine Qatar at just after 6 a.m. on June 5 were not signed, but there was no mistake about who was behind them. The move to halt air and sea transport and shut the tiny Gulf nation’s only land border carried the fingerprints of two of the Arab world's most powerful leaders: Saudi Arabia’s young deputy crown prince, Mohammed bin Salman, and Sheikh Mohamed bin Zayed, the de facto head of the United Arab Emirates. The coordinated action underscores the growing authority of both men, whose countries control vast amounts of oil wealth and buy weapons from the U.S. They’ve been using both to mold the Middle East in recent years by supporting leaders and groups they like and opposing those they don’t. And now they have the explicit backing of President Donald Trump as he tries to toughen the U.S. stance on Iran. The stated aim was to crack down on the “Iranian sponsored terrorism” they said Qatar helps finance. Trump said on Twitter on Tuesday that Middle East leaders essentially told him as much during his visit to Saudi Arabia last month. Turning the screws on the world’s richest country per capita thanks to its abundant reserves of natural gas put the Saudis and Emiratis in direct confrontation with a country that remains a key American ally, and which hosts the U.S. Central Command. It also allows Bin Salman and Bin Zayed to send a clear message to their 37-year-old Qatari counterpart, Sheikh Tamim bin Hamad Al Thani: In this neighborhood, we run the show. 

    "Forget Terrorism": The Real Reason Behind The Qatar Crisis Is Natural Gas --According to the official narrative, the reason for the latest Gulf crisis in which a coalition of Saudi-led states cut off diplomatic and economic ties with Qatar, is because - to everyone's "stunned amazement" - Qatar was funding terrorists, and after Trump's recent visit to Saudi Arabia in which he urged a crackdown on financial support of terrorism, and also following the FT's report that Qatar has directly provided $1 billion in funding to Iran and al-Qaeda spinoffs, Saudi Arabia finally had had enough of its "rogue" neighbor, which in recent years had made ideologically unacceptable overtures toward both Shia Iran and Russia.  However, as often happens, the official narrative is traditionally a misdirection from the real underlying tensions. The real reason behind the diplomatic fallout may be far simpler, and once again has to do with a long-running and controversial topic, namely Qatar's regional natural gas dominance.Recall that many have speculated (with evidence going back as far back as 2012) that one of the reasons for the long-running Syria proxy war was nothing more complex than competing gas pipelines, with Qatar eager to pass its own pipeline, connecting Europe to its vast natural gas deposits, however as that would put Gazprom's monopoly of European LNG supply in jeopardy, Russia had been firmly, and violently, against this strategy from the beginning and explains Putin's firm support of the Assad regime and the Kremlin's desire to prevent the replacement of the Syrian government with a puppet regime.

    Gulf States Launch Naval Blockade Of Qatar - In what has emerged as the most significant escalation to result from the Qatar diplomatic crisis - which pits two of OPEC’s largest oil producers, Saudi Arabia and the UAE, against the world’s biggest exporter of liquefied natural gas and further disrupts stability in the region -  the biggest Middle East oil and container ports banned all vessels sailing to and from Qatar from using their facilities. According to a notice posted on the website of Inchcape Shipping, Saudi Arabian and Bahraini authorities closed off all of their ports to Qatari-flagged vessels or ships traveling to or coming from the Persian Gulf state, in what can be described as a quasi-naval blockade.  As Bloomberg adds, container and oil terminals in the United Arab Emirates also closed off traffic to any ships touching Qatar. Saudi Arabia’s eastern coast is home to the port of Ras Tanura, which state-owned Saudi Arabian Oil Co. says is the biggest crude terminal in the world. Jebel Ali port, the region’s biggest container terminal, will be restricted from Tuesday until further notice, its operator Dubai’s DP World Ltd. said in an emailed statement according to Bloomberg. In the U.A.E., DP World operates Jebel Ali along with Dubai’s Mina Rashid and Mina Al Hamriya ports. Elsewhere, government-owned Abu Dhabi National Oil closed its crude and refined-product ports to any vessels to or from Qatar. The port at Fujairah, a main oil transit and refined product hub, said Monday it was closed to Qatar-linked traffic. For now, shipping at Egyptian ports was operating normally as of Tuesday, according to Inchcape. The company also said the Suez Canal Authority has advised that there aren’t restrictions on vessels in the waterway since it is an international route. Separately, Bloomberg also reported that A.P. Moller-Maersk A/S, which owns the world’s biggest container line, said it can no longer get cargo to Qatar as a result of the Saudi-imposed blockade of transport to and from the Gulf state. Though the situation remains “very fluid,” with updates expected throughout the coming hours, Maersk Line expects “disruptions to our Qatar services,” spokesman Mikkel Elbek Linnet said in an emailed statement on Tuesday. For now, “we have confirmation that we will not be able to move cargo to or from Qatar,” he said.

    Saudis issue 24hr Ultimatum for Qatar to comply to 10 demands, or else -- Shortly after imposing a naval blockade in the immediate  aftermath of the Qatar diplomatic crisis, one which left the small Gulf nation not only politically isolated and with severed ties to its neighbors but potentially locked out of maritime trade and crippling its oil and LNG exports, on Tuesday SkyNews Arabia reported that Saudi Arabia has given Qatar a 24 hours ultimatum, starting tonight, to fulfill 10 conditions that have been conveyed to Kuwait, which is currently involved in the role of a mediator between Saudi and Qatar.  According to media report, among the key demands by Saudi Arabia is that Qatar end all ties Muslim Brotherhood and Hamas. While there was little additional information on the Ultimatum and more importantly what happens should Qatar not comply, Al Jazeera reported that Kuwait's emir, Sheikh Sabah Al Ahmad Al Jaber Al Sabah, left Saudi Arabia on Tuesday after holding mediation talks with the Saudi King Salman bin Abdul Aziz to try to defuse an escalating crisis between Arab countries and Qatar. No details were given on the talks.  n addition to Saudi Arabia's aggressive approach, Egypt's Foreign Ministry accused Qatar of taking an "antagonist approach" towards Cairo and said "all attempts to stop it from supporting terrorist groups failed". Qatar denied the allegations, with a Foreign Ministry statement describing them as "baseless" on Monday.  peaking to Al Jazeera, analyst Giorgio Cafiero of Gulf State Analytics, a geopolitical risk consultancy based in Washington, DC, said: "I think the Kuwaitis as well as Omanis ... fear the prospects of these tensions escalating in ways which could undermine the interest of all six members of the GCC. He added that if tension escalates, some have warned of a "military confrontation".

    These are the 10 Saudi demands, according to Al Jazeera’s Faisal Edroos:

    1. Immediately break diplomatic relations with Iran.
    2. Expel all Hamas members.
    3. Freeze bank accounts of Hamas members and stop dealing with them.
    4. Expel all Muslim Brotherhood members from Qatar.
    5. Expel anti-GCC elements.
    6. End support of ‘terrorist organisations.’
    7. Stop interfering in Egyptian affairs.
    8. Cease broadcasting the Al Jazeera news channel.
    9. Apologise to all Gulf governments for ‘abuses’ by Al Jazeera.
    10. Qatar must pledge that will not carry out any actions that contradict the policies of the GCC and adhere to its charter.

    UAE Threatens 15 Years Jail Time For Publishing Statements Sympathetic To Qatar -- The United Arab Emirates declared on Wednesday that anyone publishing statements sympathetic to Qatar could be punished with up to 15 years in prison, and said it would deny entry to anyone with a Qatari passport or resident visa. UAE officials denounced Qatar’s alleged support for state-sponsored terrorism, in keeping with the official narrative of the crisis. UAE Minister of State for Foreign Affairs Anwar Gargash threatened more curbs if necessary, according to Reuters, saying Qatar needed to make "iron-clad" commitments to change policies on funding militants. Qatar denies any connection with terrorism."Strict and firm action will be taken against anyone who shows sympathy or any form of bias towards Qatar, or against anyone who objects to the position of the United Arab Emirates, whether it be through the means of social media, or any type of written, visual or ver bal form," UAE Attorney-General Hamad Saif al-Shamsi said.On top of a possible jail term, offenders could also be hit with a fine of at least 500,000 dirhams, the newspaper said, citing a statement to Arabic-language media. Since the diplomatic row erupted, slogans against and in support of Qatar have dominated Twitter in Arabic, a platform used widely in the Arab world, particularly in Saudi Arabia.The Saudis continue to pile pressure on Qatar with Foreign Minister Adel Al-Jubeir on Wednesday said Qatar must deliver on the promises it made during the 2014 situation.“We want to see Qatar implement the promises it made a few years back with regard to its support of extremist groups, to its hostile media and interference in affairs of other countries” he told reporters in Paris as cited by Al Jazeera.

    Qatar Puts Armed Forces On Highest State Of Alert Over Fears Of Imminent Military Incursion -- Yesterday's news that Saudi Arabia has issued an ultimatum to Qatar, listing ten demands among which that Qatar end all ties with the Muslim Brotherhood and Hamas, has prompted a dramatic response by the small Gulf nation, and according to a just released report by Arabic CNN (and confirmed locally) US officials have said they have observed increased Qatari military activity as the country placed its forces "on the highest state of alert" over fears of an imminent military incursion. The sources add that the Qatari military has brought up 16 Leopard tanks out of storage in Doha in preparation for a potential military incursion by surrounding Gulf states. Furthermore, the Qatari Ministry of Defense reportedly also sent a letter to Saudi, UAE and Bahraini governments, saying they would fire on any naval ships from those countries that enter into its waters, a US official said. US officials have said the situation in Qatar has not affected US military operations and security in Qatar. The escalation comes at the same time as president Donald Trump allegedly changed course on Qatar, a day after praising a move by other Gulf nations to sever diplomatic relations with Doha, which hosts a US military base crucial to the fight against ISIS. CNN reports that in a phone call with the Qatari Emir, Trump "extended an olive branch," offering to help the parties resolve their differences by inviting them to a White House meeting if necessary.In a description of the Wednesday call, the White House said Trump "emphasized the importance of all countries in the region working together to prevent the financing of terrorist organizations and stop the promotion of extremist ideology."Trump's latest flip flop echoed that of his secretaries of Defense and State, who emphasized Tuesday the need for Gulf unity and the importance of the US partnership with Qatar, home to the Al Udeid Air Base, the main regional center for air missions against ISIS.

    The Saudis Demand Total Surrender But Qatar Will Not Fold - Many people believe that Qatar will soon give in to recent Saudi demands and threats. I first thought so too but have changed my opinion. Qatar will likely hold out way longer than anyone assumes and fight more intensive and much longer than foreseen. The Saudi "young leader" has now given Qatar 24 hours to submit to 10 demands. These include (unconfirmed) the dismantling of Al Jazeera, breaking off of all diplomatic relations with Iran and (the Israeli demand of) ending all support for the Muslim Brotherhood and especially Hamas. The Saudis threaten with a military invasion.  But Qatar is not like Bahrain where 1,000 Saudi troops could easily take over to save a dictator from a mostly unarmed uprising of its people. It has way more resources and capable allies on its side and recent news shows that it knows how to use them. Two days ago we extensively described the complex conflict between Qatar and some of its neighbors that has recently been escalating. Saudi Arabia and the United Arab Emirates are the main forces on one side, joined yesterday by Donald Trump but not by the Pentagon. On the other side is Qatar, geographically isolated and seemingly without any real allies even though it hosts a very large U.S. command center and air-base. The conflict has been simmering for years. Qatar has a strong media arm with Al Jazeera TV and other prominent news outlets. Qatar and its media support the political Islam of the Muslim Brotherhood which won elections in Egypt before being kicked out in a Saudi financed military coup. The ruling Turkish AK Party is a Muslim Brotherhood branch as is Hamas in Palestine. Muslim Brotherhood parties have thereby proven that it's possible to have an Islam(ist) aligned government without a hereditary dictatorship. Their pure existence de-legitimates the al-Saud clan and other dictatorial family enterprises in the wider Middle East. The Saudis currently lack money. Oil prices are too low to finance the needs of its 26 million people and the exorbitant expenditures of its ruling family. The Qatari gas fields would be a very profitable extension of their oil empire. The UAE would like to take over strategic Qatari islands in the Gulf (and the hydrocarbon fields around them). Taking over Qatar would bring both countries into a better position to fight their presumed enemy in Iran.

    Turkey Lines Up Behind Qatar as Gulf Crisis Fault Lines Deepen - Turkey criticized Saudi-led efforts to isolate ally Qatar, deepening the fault lines in a crisis that has engulfed one of the world’s most strategically important regions.In defending Qatar, President Recep Tayyip Erdogan joined a growing list of Middle East nations resisting Saudi Arabia’s push for a united regional front against the gas-rich emirate, whose maverick policies have vexed the kingdom for years. On Wednesday, the head of NATO’s second-largest army offered to try to mend the rift, which has created havoc at airports and seaports, and added new tinder to the already combustible Middle East by challenging the authority of Qatar’s ruler, Sheikh Tamim bin Hamad Al Thani.“I’d like to say that we don’t find sanctions against Qatar right,” Erdogan said at a gathering in the Turkish capital, Ankara, late Tuesday. “The most appropriate way for the Gulf Cooperation Council countries to solve their internal issues is through dialogue.”“We are ready to do everything to resolve other countries’ problems with Qatar,” he added.Turkey and Qatar have close ties, and Erdogan has sided with the emirate against Saudi Arabia in supporting the Muslim Brotherhood in Egypt and Hamas militants in the Gaza Strip. Qatar is a major investor in Turkey’s $857 billion economy, with interests in media, financial and defense companies, and Turkey is building a base in the emirate.

    Turkey Fast-Tracks Bill Approving Troop Deployment To Qatar --In the ongoing diplomatic crisis between Qatar and its Gulf/Arab peers, which is either the result of Saudi nat gas envy or - for those who watch CNN - Russian hacking, Turkey has emerged as a vocal  supporter of the small but wealthy state.  On Tuesday, Turkish President Recep Erdogan defended Qatar, saying he personally would have intervened if accusations that the tiny Gulf emirate supports "terrorism" were true and said he intends to "develop" ties with the embattled Gulf state hit by sanctions from Saudi Arabia and its allies.    "Let me say at the outset that we do not think the sanctions against Qatar are good," Erdogan said in a speech in Ankara."Turkey will continue and will develop our ties with Qatar, as with all our friends who have supported us in the most difficult moments," he added in reference to last year's failed coup. The support puts Turkey in a complicated position because while the NATO member has close ties with Qatar it also has good relations with the other Gulf states, especially Saudi Arabia.   Turkey's support for Qatar also has ideological reasons as in the past both both have provided support for the Muslim Brotherhood in Egypt and backed rebels fighting to overthrow Syrian President Bashar al-Assad.Erdogan was careful not to criticise Riyadh, calling on the member nations of the Gulf Cooperation Council to "resolve their differences through dialogue".

    Revealed: Secret details of Turkey’s new military pact with Qatar - According to the news outlet Intelligence Online, the head of Turkey's National Intelligence Organisation made multiple trips to Doha in December to cement a secret pledge that Ankara would protect Qatar from external military threats. In return, Doha would help offset Ankara's strained relations with Moscow following Turkey's downing of a Russian jet. Qatar would shore up the Turkish economy due to the loss of Russian tourists – estimated at some $3bn - as well as provide gas export guarantees if Moscow turns off the taps.While the economic assistance is a typical sweetener by Gulf states securing bilateral agreements, it is the defence pledge that is of greatest significance. Whether the pledge has been actually signed has not been reported outside of Intelligence Online. There is no mention of it in the comprehensive agreement that was signed in December, but talks are reportedly ongoing.“Turkey and Qatar are in the process of devising a possible 'Status of Forces Agreement'. In the deliberations that are said to be under way, the two sides would have discussed the incorporation of a casus foederis ["case for the alliance"] clause in the agreement,” said Dr Eyup Ersoy, an international relations expert at Turkey's Bilkent University.“However, first, this clause, if agreed upon, could be confidential and may not be revealed to the public. Second, the substance of the clause, again if agreed upon, would be qualified. For example, it may read that Turkey will provide diplomatic and military assistance to the extent possible in case of armed aggression against Qatar. In other words, it may not be unequivocal and unconditional.”As such, the agreement may not be overly different from unwritten pledges by the UK and the US to aid the Gulf states in the advent of an attack, last evidenced in the 1990 Gulf War. What is clear from the comprehensive agreement is that the Turkish base will be under Qatari control, with the possibility for Qatar to establish a base in Turkey.While the agreement states that Turkey is to cover the Qatari base's expenses, there are no details about overall costs. “Since the base is to be under Qatari military structure, it is simply a Qatari base put to the use of the Turkish military, so Doha will bear the financial costs of it,” said Ersoy.

    The Qatar Crisis  --The Qatar crisis soon may become even more dangerous: Turkey’s parliament is expected to fast-track on Wednesday a draft bill allowing its troops to be deployed to a Turkish military base in Qatar, officials from the ruling AK Party and the nationalist opposition said.The move appears to support the Gulf Arab country as it faces diplomatic and trade isolation from some of the biggest Middle Eastern powers. Meanwhile, Qatar is negotiating with both Iran and Turkey for food and water supplies in response to the Saudi-Emirati-led attempt to blockade and isolate the country. Iran’s foreign minister is in Ankara to meet with President Erdogan today. Both governments have an incentive to help Qatar out of its present jam. Iran stands to gain influence and improve its ties with Qatar while frustrating the designs of the Saudis and Emiratis, and Turkey has an interest in keeping Qatar’s support for the Muslim Brotherhood in place, and both have their own reasons to be opposed to Saudi-led power plays in any case. The Saudi-led bloc may have assumed that it could present Qatar with a fait accompli and force it to make concessions without much difficulty, but if these moves are any indication Qatar’s government is not going to capitulate so easily. Once again, the Saudis and their allies have assumed they could rack up an easy victory and haven’t considered how things could go wrong. Turkish and Iranian support for Qatar raises the prospect of a prolonged standoff with increasing risks for all parties. The possible deployment of Turkish forces is presumably intended to discourage Saudi adventurism, but it might very well precipitate the escalation it is meant to deter.  Qatar has been given a list of demands that it has to meet to end the blockade, but it can’t agree to all of those demands (including the shuttering of Al Jazeera) without suffering complete humiliation. If Qatar can count on support from some other regional governments, it isn’t likely to bow to pressure. The U.S. should oppose any attempt to resolve the crisis with force. Unfortunately, the president has already given the Saudis and Emiratis so many green lights to do whatever they want that it may now be too late to rein them in.

    Why Saudi Arabia and Its Allies Suddenly Cut Ties to Qatar - Qatar is unexpectedly under siege from its neighbours. Led by Saudi Arabia and the United Arab Emirates, supported by Egypt, Bahrain and Yemen, the five Arab states have cut diplomatic relations with Qatar, severed land, air and sea travel and are expelling Qatari citizens who have 48 hours to depart.The Saudis and their allies are demanding, in effect, that Qatar end its independent foreign policy and tame or close down its television station, Al Jazeera. They claim that Qatar is complicit with Iran in supporting terrorism, though Qatar is one of the loose coalition of Sunni states supporting forces hostile to Iran in Syria and Yemen. Saudi Arabia and Qatar have long been rivals and, despite Qatar’s small size, its great wealth and vast gas reserves have given it great influence. It backed the Arab Spring with its wealth and media outlets, supporting the Muslim Brotherhood in Egypt and Hamas in Gaza.  What has changed in the Gulf to precipitate a crisis now? The answer is that the Trump wrecking ball passed through the region last month and the US President’s unreserved backing for Saudi Arabia, and in particularly for deputy Crown Prince Mohammed bin Salman, has disturbed the regional balance of forces. It has already emboldened the Sunni monarchy in Bahrain to crush the last Shia resistance to its dominance, killing five protesters in one village and closing down the only remaining independent newspaper.Much more seriously, Mr Trump’s unqualified support for the Sunni monarchies and autocrats during his two-day visit to Riyadh emboldened the kingdom to start a second and, it hopes, final round in its confrontation with Qatar. Mr Trump may not have intended to touch off this latest crisis when he aggressively and inaccurately demonised Iran and by implication the Shia as the source of all terrorism in the Middle East and North Africa. But his words were interpreted by the Saudis as enabling them to move against Qatar though it is home to a major US base. It will be difficult for Qatar to withstand what amounts to a form of siege. Under Mr Trump, the degree of protection it can expect from the US is uncertain and Prince Mohammed bin Salman, eager to secure his own path to the Saudi throne, cannot afford a failure. He may even want to go the limit and eliminate Qatar as an independent state, the first time this has happened in the Gulf since Saddam Hussein invaded Kuwait in 1990.

    Qatar in talks with Turkey and Iran to provide food, water: official | Reuters: Qatar is in talks with Iran and Turkey to secure food and water supplies amid concerns of possible shortages two days after its biggest suppliers, the United Arab Emirates and Saudi Arabia, cut trade and diplomatic ties with the import-dependent country. "We are in talks with Turkey and Iran and other countries," said the official, who spoke on condition of anonymity due to the sensitivity of the subject, adding that the supplies would be brought in through Qatar Airways cargo flights. The official said there were enough grain supplies in the market in Qatar to last four weeks and that the government also had large strategic food reserves in Doha.

    Qatar crisis grows as Arab nations draw up terror sanctions list - Saudi Arabia and its Gulf allies have sanctioned a dozen organisations and 59 people it accuses of links to Islamist militancy – a number of them Qataris or with links to Qatar – escalating the diplomatic crisis in the region.The publication of the sanctions list comes amid increasing efforts by Saudi Arabia, the United Arab Emirates, Egypt and Bahrain to diplomatically and physically isolate the tiny but wealthy Gulf state of Qatar, which has been subjected to a series of co-ordinated measures in the past five days. The move was announced as Turkey’s president, Recep Tayyip Erdoğan, approved new legislation – rushed through the Turkish parliament the day before – for increased military cooperation with Qatar, including the potential deployment of Turkish troops. Turkey’s Hurriyet newspaper reported that the initial deployment would be a military assessment team arriving in the coming days to consider reinforcing a 90-strong mission already based in Doha. On Friday, Qatar’s foreign minister described the blockade as a violation of international law and said there was an attempt to mobilise international opinion against the Gulf emirate.  “These procedures that were taken have clear violations of international law and international humanitarian law. They will not have a positive impact on the region but a negative one,” Sheikh Mohammed bin Abdulrahman al-Thani told a joint news conference with his German counterpart during a visit to Germany.The previous day al-Thani gave a defiant interview with al-Jazeera, repeatedly denying that his country funded extremists and vowing not to back down in the face of the Saudi-led campaign.“We are not ready to surrender, and we will never be ready to surrender the independence of our foreign policy,” he said, adding that Qatar’s residents need not fear food shortages.Al-Thani also rejected any notion of shutting down the Qatar-based al-Jazeera satellite news network, suggested as a demand of the Arab nations.  Included on the sanctions list – which was denounced as “baseless and without foundation in fact” by Qatar – are the Qatari-funded Qatar Charity and Eid Charity and several prominent figures including businessmen, politicians and senior members of the ruling family, one a former interior minister.

    Qatar crisis grows as Arab nations draw up terror sanctions list - Saudi Arabia and its Gulf allies have sanctioned a dozen organisations and 59 people it accuses of links to Islamist militancy – a number of them Qataris or with links to Qatar – escalating the diplomatic crisis in the region. The publication of the sanctions list comes amid increasing efforts by Saudi Arabia, the United Arab Emirates, Egypt and Bahrain to diplomatically and physically isolate the tiny but wealthy Gulf state of Qatar, which has been subjected to a series of co-ordinated measures in the past five days. The move was announced as Turkey’s president, Recep Tayyip Erdoğan, approved new legislation – rushed through the Turkish parliament the day before – for increased military cooperation with Qatar, including the potential deployment of Turkish troops. Turkey’s Hurriyet newspaper reported that the initial deployment would be a military assessment team arriving in the coming days to consider reinforcing a 90-strong mission already based in Doha. On Friday, Qatar’s foreign minister described the blockade as a violation of international law and said there was an attempt to mobilise international opinion against the Gulf emirate. “These procedures that were taken have clear violations of international law and international humanitarian law. They will not have a positive impact on the region but a negative one,” Sheikh Mohammed bin Abdulrahman al-Thani told a joint news conference with his German counterpart during a visit to Germany.The previous day al-Thani gave a defiant interview with al-Jazeera, repeatedly denying that his country funded extremists and vowing not to back down in the face of the Saudi-led campaign.“We are not ready to surrender, and we will never be ready to surrender the independence of our foreign policy,” he said, adding that Qatar’s residents need not fear food shortages.Al-Thani also rejected any notion of shutting down the Qatar-based al-Jazeera satellite news network, suggested as a demand of the Arab nations.  Included on the sanctions list – which was denounced as “baseless and without foundation in fact” by Qatar – are the Qatari-funded Qatar Charity and Eid Charity and several prominent figures including businessmen, politicians and senior members of the ruling family, one a former interior minister.

    Saudis Have a Lot to Lose in Qatar Fight, Even If They Win -  Saudi Arabia dwarfs Qatar on almost any measure, yet there are plenty of ways the tussle between the Gulf neighbors could end up hurting the world’s biggest oil exporter -- even if it wins. All week the Saudis and their allies have ratcheted up pressure on Qatar, cutting diplomatic ties and imposing a blockade by land, sea and air. The stated goal is to force Qatar to stop cozying up to Saudi Arabia’s rival Iran and bankrolling Islamist groups across the region. Qatar says it’s being punished for things it didn’t do, and the U.S. signaled Friday that it wants the embargo eased. The disagreement over Qatar is longstanding. The scale of the current crisis is new, and it’s erupted into a Middle East already polarized by war. Saudi Arabia has struggled to impose its will in Syria and Yemen. Now discord has spread to the inner circle of Gulf monarchies, at a time when the Saudis and their young Prince Mohammed bin Salman are urgently seeking foreign investment to modernize an oil-dependent economy. “Most worrying is that Saudi Arabia and the U.A.E. may repeat the mistakes that were made when the Saudi leadership decided to launch a war in Yemen,” “They had no clear political strategy, based their action on false assumptions, have incurred heavy financial costs and a growing human toll, and are probably now worse off in terms of their security.” As in other regional clashes, external powers are being drawn into the Gulf quarrel, not all of them on Saudi Arabia’s side. Turkey has accelerated pre-existing plans to deploy some troops to Qatar, and Iran offered alternative transport routes and supplies of staple goods that can no longer be imported from Saudi Arabia. Their backing reduces the chance of a quick Saudi victory. 

    In "Clear Escalation", Arab Countries Release List Of Terrorists Supported By Qatar -- In what commentators have dubbed a "clear escalation", moments ago Arab states including Saudi Arabia, UAE, Egypt and Bahrain, have released a list that designates 59 individuals and 12 entities in Qatar as terrorist. The complete list of those named includes Qataris, Jordanians, Egyptians, Kuwaitis, Libyans.The four countries released the names in “light of their commitment to fighting terrorism, drying up their sources of funding, combating extremist ideology and its dissemination and working together to eradicate it and immunize communities,” according to a statement made available to Al Arabiya.“As a result of the continued violation by the authorities in Doha of the obligations and agreements signed by them, including the pledge not to support or harbor elements or organizations that threaten the security of states and to ignore the repeated contacts that they called upon to fulfill what they had signed in the Riyadh Agreement of 2013, its implementing mechanism and the supplementary agreement in 2014; The four States have agreed to classify 59 individuals and 12 entities on their prohibited lists of terrorists, which will be updated in succession and announced,” the statement added.  Which is ironic because as some have point out, we now live in a world in which terrorist are ratting out other terrorists, and all because of Trump's recent trip to the middle east. The list of designated individuals:

    How Saudi Arabia and allies strong-armed Qatar, blindsided U.S. | Reuters: One of the first signs of the crisis in which four Arab states have cut ties with Qatar came in a phone call from an anxious government adviser to a Reuters journalist early on May 24. In the 6.00 a.m. call, he denied Qatar's emir made comments reported by the state-run news agency criticizing hostility to Iran, sympathizing with three Islamist groups, accusing Saudi Arabia of adopting an extremist ideology that fosters terrorism and suggesting Donald Trump may not last long as U.S. president. The adviser repeated a statement released hours earlier which said the news agency had been hacked, seeming unaware that Reuters had already reported the denial. The unusual timing of the call and the adviser's haste to get the message across pointed to Qatar's deep concern about the impact the remarks attributed to the emir could have. As anger mounted in Saudi Arabia and the United Arab Emirates, Qatar's foreign minister tried to limit the fallout. Sheikh Mohammed bin Abdulrahman al-Thani told a news conference that Qatar, host to the biggest U.S. military base in the Middle East, wanted to maintain brotherly ties with its powerful neighbors in a region critical to world energy supplies. To outside observers, it was unclear whether the Qatar News Agency had indeed been hacked or whether an editor had published remarks which the emir later regretted saying. But to Qatar's neighbors the question was irrelevant: the comments reflected the broad lines of Qatar's independent-minded foreign policy, which critics say has destabilized the region through its alliance with Islamist armed groups and cordial ties with Iran. Officials in the Gulf say the comments marked a turning point, prompting Saudi Arabia, Egypt, Bahrain and the United Arab Emirates to cut relations with Qatar in the biggest diplomatic shock in the region for years.

    Qatar crisis: The deep diplomatic tensions behind the row -- The underlying tensions between Qatar and three of her Gulf neighbours in particular have been visible for two decades. This is a region largely of absolute monarchs - kings or emirs - who have in common a very firm grip on politics at home, to head off any dissent which could represent a threat to their individual regime survival.But the emir of Qatar pursues a series of policies which simply don't fit into the rigid orthodoxy expected by most of the others, notably Saudi Arabia, the superpower of Sunni Islam.His unconventional foreign policy is seen as a threat to Sunni solidarity, particularly because the emir and his ministers promote dialogue and a search for good relations with the rival regional superpower, Shia Muslim Iran.Saudi Arabia is deeply hostile to that approach and now feels empowered to turn that hostility to action, in the certain knowledge that a new president, Donald Trump, is at Saudi King Salman's side.The core charge laid against Qatar as justification for this week's new and punitive blockade is the country's alleged funding of religious extremists, including the secret arming of some jihadi groups.Those are charges rejected by Qatar's government and similar ones have also been levelled in the past at many of those now condemning the country, notably Saudi Arabia. But the single most powerful motive behind the blockade may be a quite different one: the desire to rein in, or even to close down, one of the emir of Qatar's most cherished projects - the global television news channels of Al-Jazeera.  He sees Al-Jazeera as an agent of positive change across the Arab world, opening up political debate, reporting on the challenges from ordinary people from the street, so evident during the "Arab Spring". However odd, even hypocritical it may seem for an absolute monarch in Qatar, a country devoid of elected politicians, to champion the cause of disaffected citizens demanding change elsewhere, that is a large part of what drives this emir, set on what he regards as a path of Middle East modernisation. His fellow autocrats see things quite differently, in Egypt as well as the Gulf. There, President Sisi drove the Muslim Brotherhood out of elected government and to near oblivion, branding them as intolerable Islamists. Al-Jazeera was painted as a propagandist for the Brotherhood. That's a portrayal other leaders who have been challenged by the station are happy to endorse, leaving the broadcaster as now another substantial target of the action against Qatar.

    Terror in Tehran, Qatar Spat, and Race for Syria-Iraq Border: the Washington ‘Swamp’ Gives Green Light for Saudi Arabia’s Jihad Agenda - This week’s attacks in Tehran, for which the Islamic State (ISIS) promptly claimed responsibility, are at this writing the latest incidents to roil the troubled waters in an increasingly turbulent «Broader Middle East». They will not be the last. The terror in Tehran comes as the threats from Saudi Arabia against Qatar on the surreal charge of supporting terrorism have reached a fever pitch. Observers openly discuss the possibility of a coup against the ruling Sheikh Tamim bin Hamаd al-Thani, or even a Saudi invasion. Regarding a possible regime change, Saudi media note that Tamim’s father, Hamаd, came to power in a coup against his father; coups are not rare in Qatari history, and there’s always another al-Thani brother, cousin, or nephew who could be installed as a suitable puppet for Riyadh. As for an invasion, keep in mind that Qatar was a part of the first and second Saudi states (defunct in 1818 and 1891, respectively) and could end up that way again. Given depressed oil prices and Qatar’s massive natural gas reserves, the Saudis would welcome a quick and lucrative diversification of their portfolio. Qatar has placed its armed forces on the highest state of alert. Meanwhile, in Syria, on June 6, U.S. planes for the second time put in an airstrike on pro-government forces near the al-Tanf border crossing with Iraq, near Jordan. The stated purpose was to protect U.S.-supported «moderate» jihadists in a «de-confliction zone» unilaterally declared by Washington. The U.S. also has reportedly established a presence at al-Zkuf, another border point to the north and east, with the obvious aim of blocking any link-up of Syrian and Iraqi forces fighting against ISIS. This coincided with announced launch of an offensive to capture ISIS’s nominal capital at Raqqa, spearheaded by the U.S.-sponsored Syrian Democratic Forces – of which the main element by far is the Kurdish YPG, denounced as PKK terrorists by America’s unreliable NATO ally Turkey.All three of these destabilizing developments stem from a common root: the agenda of Saudi Arabia to further its Wahhabist agenda of violence and intolerance, which are notorious even by the inhumane standards prevailing in the Islamic world.  Worse, that agenda has gotten a major boost from U.S. President Donald Trump’s ill-advised visit to Riyadh last month, where he pledged what amounts to unlimited military and political support to 31-year-old Minister of Offense Defense and Deputy Crown Prince Muhammad bin Salman, who is effectively the country’s ruler in the name of his doddering father, King Salman.

    The Pivot? Qatar Foreign Minister To Visit Moscow On Saturday --With Gulf tensions still rising, and culminating with last night's report on Arabia CNN that Qatar has put its armed forces on the highest military preparedness level, the small nation may be preparing to unveil its "Eastern pivot": moments ago Russia's RIA news agency reported that the Qatari foreign minister Sheikh Mohammed bin Abdulrahman bin Jassim Al-Thani will Visit Moscow on Saturday where he will hold talks with Russian Foreign Minister Sergei Lavrov."Negotiations will be held on Saturday," a Russian foreign ministry official said. However, Kremlin spokesman Dmitry Peskov said that Vladimir Putin does not yet plan to meet with al-Thani.  Meanwhile according to a Nomura research reports, Russia and the U.S. may become the biggest beneficiaries among LNG producers from the dispute between Qatar and its Gulf neighbors. Nomura's Gordon Kwan writes that a big part of Qatar’s finances come from international investors, indicating the spat in Mideast may negatively affect sentiment of new projects or expansions based in Qatar.That may put some Qatar LNG projects on hold as foreign investors may opt to put their finance on hold, as reported by Bloomberg. At the extreme, Egypt can shut off the Suez Canal and allow only some ships to pass through, impacting Qatar vessels loaded with gas on route to Europe, at a time when consumption is picking up for gas in the region. As demand rises in Europe, the region will likely need to buy more gas from other nations, with Russia and U.S. likely to become biggest beneficiaries as the two nations are more reliable suppliers of gas.

    Yemen cholera cases pass 100,000 amid 'unprecedented' epidemic -The number of suspected cases of cholera resulting from a severe outbreak in Yemen has passed 100,000, the World Health Organization says. A total of 798 deaths associated with the disease have been recorded in 19 out of 22 provinces since 27 April. The charity Oxfam said the epidemic was killing one person almost every hour. Yemen's health, water and sanitation systems are collapsing after two years of war between government forces and the rebel Houthi movement. Cholera is an acute diarrhoeal infection caused by ingestion of food or water contaminated with the bacterium Vibrio cholera. Most of those infected will have no or mild symptoms but, in severe cases, the disease can kill within hours if left untreated. The authorities in the rebel-controlled capital Sanaa, which has recorded the highest number of cases, declared a state of emergency on 14 May. More than half of the country's health facilities are no longer functioning, with almost 300 having been damaged or destroyed in the fighting. Health and sanitation workers have not been paid for eight months; only 30% of required medical supplies are being imported into the country; rubbish collection in the cities is irregular; and more than 8 million people lack access to safe drinking water and proper sanitation. The OCHA said the risk of the epidemic spreading further was compounded by the rainy season, widespread food insecurity and malnutrition. The war has left 18.8 million of Yemen's 28 million people needing humanitarian assistance and almost 7 million on the brink of famine. 

    Turkey and Baghdad condemn 'irresponsible' Iraqi Kurdistan referendum | Middle East Eye: Turkey's prime minister has denounced an "irresponsible" decision by Iraqi Kurdistan to hold an independence referendum in September. The Kurdistan Regional Government (KRG), with which Turkey is otherwise a close regional ally, announced this week that it would vote on whether to split from the rest of Iraq and form an independent region. The move has alarmed Turkey, which has long been worried about the effect of an independent Kurdish state on their own restive Kurdish population. "We have enough problems in our region. We believe it is not correct to create a new area of conflict," Binali Yildirim told reporters. "We believe this is a decision that has been made irresponsibly." In his statement, the Turkish foreign ministry said it was committed to preserving Iraq's territorial integrity and political unity "We believe that the announcement by the (Iraqi Kurdish region) to hold an independence referendum on September 25... will constitute a grave mistake," it added. Turkey has been engaged in a guerilla war with the Kurdistan Workers Party (PKK) since 1984 which has claimed over 40,000 lives. Although the PKK is ideologically opposed to the Kurdistan Democratic Party (KDP), the biggest party in the Kurdistan Regional Government - and the PKK no longer officially supports an independent Kurdish state - Ankara stills fears the possible outcome of Kurdish self-determination. Baghdad also rejected the legitimacy of the unilateral referendum call. "No party can on its own decide the fate of Iraq, in isolation from the other parties," government spokesman Saad al-Hadithi said in a statement on Friday. "Iraq is constitutionally a democratic, federal country with full sovereignty (..) Any measure from any side in Iraq should be based on the constitution.'' The decision to hold the referendum was taken on Wednesday, during a meeting between KRG President Massoud Barzani and other political leaders. However, both the anti-corruption Gorran movement and Islamic Group, which combined have 30 seats out of the 111-seat KRG parliament, boycotted the meeting. 

    Saudis storm social media in support of Kurdistan Independence: On Friday, Saudi Arabi social media users initiated the #SaudiforKurdistan hashtag to express their support for the upcoming referendum in Kurdistan Region. September 25, 2017, was set on Wednesday as the date for Kurdistan Region independence referendum. Even though governments of neighboring countries have disapproved of the move, people around the world expressed support for the Kurdish cause on their social media accounts. Some believe that launching the #SaudiWithKurdistan campaign was in response to the Turkish support for Qatar. In the meantime, top Kurdish politician Ilham Ahmed, who is currently on a visit to Washington to discuss the ongoing Raqqa operation expressed Syrian Kurds' support for Saudi Arabia. “Saudi Arabia is an important power in the region and it must play its role in promoting stability in Syria. We are ready to cooperate with Saudi,” she said. The United States stated on Thursday that it appreciates the "legitimate aspirations" of the people in Iraqi Kurdistan. Germany warned on Thursday against Erbil taking a unilateral decision. Iraq disapproved of the decision. “Any decision that concerns the future of Iraq must take into consideration the constitutional texts as it is an Iraqi decision,” Saad al-Hadithi, the spokesperson of PM Abadi said. Turkey also called the decision a grave mistake. Turkish Prime Minister Binali Yildirim told reporters on Friday that holding the referendum is irresponsible, and that the region had enough problems. Kurds are arguably the largest stateless nation in the world. Estimated to be over 40 million, Kurd's ancient land after the first world war was divided between several countries, mainly Turkey, Iraq, Iran, and Syria. The creation of a Kurdish state has long been a dream for almost all Kurds around the world. 

    At Least 12 Killed in Pair of Terrorist Attacks in Iran - Armed assailants, including some disguised as women, stunned Iranon Wednesday with brazen attacks on the Parliament building and the tomb of its revolutionary founder, the worst terrorist strike to hit the Islamic republic in years. At least 12 people were killed and 46 were wounded in the near-simultaneous assaults, which lasted for hours, clearly took Iran’s elite security forces by surprise and shattered the self-proclaimed image of calm in a turbulent region. The six known attackers also were killed, official news media said, and five suspects were reported detained. Their identities were not made clear. “We will avenge the blood of those martyred in today’s terrorism attacks,” said Brig. Gen. Hossein Salami, deputy commander of the Islamic Revolutionary Guards Corps, the country’s powerful paramilitary force.In a statement, the Revolutionary Guards appeared to blame Saudi Arabia and the United States for the assaults even as responsibility for them was asserted by the Islamic State, the Sunni extremist group that has taken credit for terrorist attacks around the world in the past few weeks.If the Islamic State’s claim is true, that would be its first successful attack in Iran, which is predominantly Shiite Muslim and regarded by Sunni militants as a nation of heretics. Iranian-backed forces in Iraq and Syria are helping battle the Islamic State.Eleven people died in the Parliament building assault, and one at the mausoleum of Ayatollah Ruhollah Khomeini, father of the 1979 revolution, whose shrine is a magnet for visitors. Four of the assailants were killed at the Parliament building, official news media said, and two at the mausoleum. Five were men, and one mausoleum assailant was a woman.The audacity of the assaults, and the hours it took to end them, suggested that Iranian security officials had been caught unprepared — especially for what seemed like a coordinated plan conceived well in advance.

    Patrick Cockburn: U.S. & Russia Bomb Syria’s Civilians When They Could Help End its War - naked capitalism - Jerri-Lynn here: This Real News Network interview with veteran Middle East correspondent Patrick Cockburn of The Independent analyzes the latest developments in Syria and says the war could end if the U.S., Saudi Arabia, Russia, and Iran were willing to make an agreement. That seems to say the least, unlikely, given what occurred during Trump’s recent orb-grasping, sword-dancing visit to Riyadh– especially the record arms deal. But I always make time for Cockburn, who has been reporting for decades from the Middle East. (video & transcript)

    US defies Moscow, strikes Syrian Army in Syria: The US military has again struck at the Syrian army in Syria. US jets attacked a group of Syrian armored vehicles. By their own claims they destroyed or damaged all of them. This is the fourth time US forces have attacked Syrian government forces in Syria, the third time since Donald Trump became president, and the second time since the current stand off over US presence in southern Syria at al-Tanf developed. The US claims the Syrians were within 55 kilometers of the US base at al-Tanf, Syria which made them a fair target. But the 55 kilometer exclusion zone is a unilateral American invention. It has no grounding in law or common sense. What is worse—as the US air force was bombing the Syrian army—US-backed rebels were bragging about attacking Syrian forces sitting just outside the 55 kilometer perimeter with their artillery. For some reason the unilaterally-proclaimed "deconfliction zone" cuts only one way — the Syrian army may not drive past it, but the CIA-backed rebels may come as close to the government forces as they please. Russia warned the first time the US struck at the Syrians in the al-Tanf region that such attacks were "absolutely unacceptable". Apparently its warning was not taken seriously. Bottom line is that US has de facto now carved out a piece of Syria as its occupation zone where government forces will be kept from, but which US-paid "rebels" may use as staging points for attacks against the army.

    Why are U.S.-led coalition airstrikes killing friendly troops? - It was nearly midnight Oct. 5, and the air was thick with smoke from fires militants had set at nearby oil fields. The Sunni fighters, allied with the U.S.-led coalition fighting to drive the jihadis out of Mosul, withdrew to an abandoned house to regroup.   The last thing Ali Hussein Khalaf remembers was another fighter asking him for more ammunition. Khalaf reached for the bullets, and a week and a half later he woke up in a hospital. The house had been hit by friendly fire from a coalition airstrike. Everyone on the 19-man unit had been killed except for Khalaf.   “It was so difficult for me to hear that. We were like one family, sharing the same mattress, fighting on the front lines,” Khalaf, 26, said last month at his home near Khara’ib Jabr, a village of 2,000. He said he always felt comfortable with air support from the coalition. “We trust them,” he said. Although there has been widespread debate over hundreds of civilian casualties associated with coalition airstrikes in Iraq and Syria, little is known about so-called friendly fire deaths and injuries. The coalition does not release monthly information about them, as it does strikes that kill civilians.  The London-based nonprofit monitoring group Airwars said it found 40 reported friendly fire strikes in Iraq and Syria since 2014. Although Islamic State may have tried to inflate the numbers through propaganda, at least 19 of the strikes have been reported by multiple sources, Woods said.

    Why Qatar matters to China, in spite of Gulf isolation | South China Morning Post: Qatar may be just a small, gas-rich peninsula in the Middle East, but it’s been making waves this week after eight nations announced they would cut diplomatic ties with the country, citing its terrorism links. The move has the potential to hurt Chinese president Xi Jinping’s ambitions in the region for his massive “Belt and Road” trade plan, and could disrupt the travel plans of mainland tourists. But the links between Qatar and China run much deeper than the modern Silk Road. Ongoing problems with the Gulf states could end up impacting broader trade, investment and infrastructure planning. China is working to negotiate a free trade agreement with the Gulf Cooperation Council, which includes Qatar. Unfortunately for China, which first started negotiating the agreement back in 2004, the bloc also includes Bahrain, Saudi Arabia and the United Arab Emirates, all of which cut diplomatic ties with Qatar on Monday. If the members can’t sort out their differences, the China-GCC trade deal will be groundless.Total two-way trade between China and Qatar tripled between 2008 and 2013 to about US$11.5 billion, according to Reuters. Last year, Qatar supplied 19 per cent of China’s imports of liquefied natural gas, according to IHS Fairplay, making Qatar China’s second-largest supplier of gas after Australia. In 2015, Qatar imported US$3.77 billion in goods from China, much of it consumer, machinery or electrical goods, according to the World Bank. Statistics from the Central Intelligence Agency show China accounted for 11.9 per cent of Qatar’s trade in 2015, making the Middle Kingdom Qatar’s top trading partner. 

    Pressured by Trump, missile tests, China finally cuts off all North Korean coal imports (AFP) - North Korea's global coal exports sunk to zero in April, UN data showed, as China choked off imports from Pyongyang to ramp up pressure on its nuclear-armed neighbour. China -- the North's sole major ally and economic lifeline -- announced in February a suspension of coal imports from the North, choking-off a key source of hard currency for Pyongyang, which has rattled the region with an increasingly aggressive weapons programme. Data recently updated on the United Nations Security Council website showed a sharp fall in coal shipped from the North to one unnamed country, plunging from 1.4 million tonnes, worth $126 million, in January to zero in April. The data, based on member states' voluntary reports, did not explicitly name China. But it may assuage the administration of US President Donald Trump, which has leant heavily on Beijing to help rein in Pyongyang.Tension is high on the Korean peninsula as the North has staged two atomic tests and dozens of missile launches since the beginning of last year, showing gradual upgrade in its missile capabilities. The UN Security Council last Friday unanimously adopted a US-drafted resolution imposing new targeted sanctions on a handful of North Korean officials and entities, a move Pyongyang said was "mean". China supported that decision but has made it clear that a push for talks -- and not more sanctions -- is its priority, calling for a resumption of six-party negotiations that have been dormant since 2009. Washington says it is willing to enter into talks with Pyongyang, but only if it halts its missile and nuclear tests. Under UN resolutions North Korea is barred from using nuclear and ballistic missile technology. The North is already under layers of sanctions for past violations of the resolutions.

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