Sunday, June 4, 2017

record high oil exports, record high refining, leads to largest drop in US oil supplies this year...

oil prices were down more than 4% this week, largely on reports that OPEC oil production increased in May, which was in turn mostly due to increased oil production from Libya and Nigeria, who are exempt from the cartel's agreed to production cuts....after falling last week to $49.80 a barrel on disappointment over OPECs latest agreement, US crude oil for July delivery traded down 19 cents to $49.61 per barrel on Monday, even as US markets were closed for the holiday, as traders focused on further increases in U.S. drilling activity...with US markets open on Tuesday, oil prices slid to as low as $49.03 early on news that Libyan producers had solved a technical problem and expected to return production to 800,000 bpd, but moved back up in the afternoon to close at $49.66 a barrel...oil prices then tumbled to as low as $47.73 on Wednesday after reports that OPEC compliance dropped to 92% in May from 96% in April, and again pared losses late in the day to close at $48.32 a barrel...oil prices then jumped nearly $1 on Thursday after the EIA reported that US oil supplies were down for the 8th month in a row, dropping by the most since December, but retreated just as fast to close at $48.36 a barrel, a gain of just 4 cents on the day...oil prices came under continued pressure Friday, on concerns that President Trump's decision to abandon the Paris climate pact would spark more crude drilling in the US, with WTI crude futures for July falling $1.07, or 2.2 percent, to $47.29 per barrel by 8:48 a.m., again only to recover late in the day and end the week at $47.66, a loss of 70 cents or 1.4% on the day and 4.3% for the week..

meanwhile,  prices for natural gas were down every day this week, losing more than 9% over the period, and ending below $3 per mmBTU for the first time since February...after closing last week at $3.310 per mmBTU, natural gas prices for July fell 16.5 cents on Tuesday, on forecasts for cooler than normal June temperatures for most of the Eastern US, which would reduce the expected electric generation spike for air conditioning...natural gas prices then fell 7.4 cents on Wednesday and 6.3 cents on Thursday, as the EIA reported a larger than expected increase in natural gas inventories....prices then fell another nine-tenths of a cent on Friday to close the week at $2.999 per mmBTU, well below the break even price for most drillers in our area...we'll include a graph of recent natural gas prices so you can see what this week's price trajectory looks like:

June 3 2017 natural gas prices

the above graph shows the daily closing contract price over the last 6 months for a million British thermal units (mmBTU) of natural gas at or contracted to be delivered in July at the Louisiana interstate natural gas pipeline interconnection known as the Henry Hub, which is the benchmark location for setting natural gas prices across the US...as you can see, July natural gas prices had been holding in the $3.25 to $3.50 per mmBTU range over most of the period, and now have taken a dive on the fear that a cool summer might reduce consumption...as we've observed before, natural gas prices in this range are below what the frackers need to break even, as natural gas drilling activity has been on a long downtrend from the 1,606 natural rigs that were deployed on August 29th, 2008, only increasing briefly in late 2009 and early 2010 and again in 2014 in the months after natural gas prices briefly rose above $4.00 per mmBTU...although currently up from just 82 rigs on June 3rd, 2016, today's natural gas drilling remains well below the level seen over the prior 25 years...

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 May 26th, showed that both our refining of crude oil and our exports of it both hit all time highs, while our imports of oil fell at the same time, and as a result the amount of oil that needed to be withdrawn from US storage during the week was the highest since December...our imports of crude oil fell by an average of 309,000 barrels per day to an average of 7,985,000 barrels per day during the week, while at the same time our exports of crude oil rose by 678,000 barrels per day to a record high average of 1,303,000 barrels per day, which meant that our effective imports netted out to 6,682,000 barrels per day during the week, 987,000 barrels per day less than during the prior week...at the same time, our field production of crude oil rose by 22,000 barrels per day to an average of 9,342,000 barrels per day, which means that our daily supply of oil from net imports and from wells totaled an average of 16,024,000 barrels per day during the cited week...

during the same period, refineries reportedly used a record 17,510,000 barrels of crude per day, 229,000 barrels per day more than they used during the prior week, while 1,058,000 barrels of oil per day were being pulled out of oil storage facilities in the US....thus, this week's EIA oil figures seem to indicate that our total supply of oil from net imports, oilfield production, and from storage was 428,000 less barrels per day than what refineries reported they used...to account for that discrepancy, the EIA inserted a +428,000 barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the data for the supply of oil and the consumption of it balance out, which they label in their footnotes as "unaccounted for crude oil"...

details from the weekly Petroleum Status Report show that the 4 week average of our oil imports fell to an average of 8,122,000 barrels per day, 6.6% above the imports of the same four-week period last year...the 1,058,000 barrel per day decrease in our total crude inventories came about on a 918,000 barrel per day withdrawal from our commercial stocks of crude oil and a 140,000 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 22,000 barrel per day crude oil production increase resulted from a 20,000 barrel per day increase in oil output from wells in the lower 48 states, and a 2,000 barrels per day increase in oil output from Alaska...the 9,342,000 barrels of crude per day that we produced during the week ending May 19th was up by 6.5% from the 8,770,000 barrels per day we were producing at the end of 2016, and up by 6.9% from the 8,735,000 barrel per day output during the during the same week a year ago, while it was still 2.8% below the June 5th 2015 record oil production of 9,610,000 barrels per day....since the week did see a new record high set for US oil exports, topping the record of 1,211,000 barrels per day set during the week ending February 17th, we'll include a graph of what that looks like, so you can see how US oil exports have exploded in the year and a half since the oil export ban was lifted:

June 1 2017 crude exports for May 26

notice that since the beginning of the year, our oil exports have jumped up and down from week to week, in a range between 550,000 barrels per day and the past week's 1,303,000 barrels per day...that's largely a function of the timing of tanker loadings and departures...with the largest oil tankers able to carry as much as 2 million barrels of oil at once, the departure of two such large tankers in one week is enough to cause a 570,000 barrel per day increase from a week when no such tanker leave port..

US oil refineries were operating at 95.0% of their capacity in using 17,510,000 barrels of crude per day, which was up from 93.5% of capacity the prior week, and the highest refinery utilization rate since August 2015....since we also set a new record for the amount of oil refined in any one week, breaking the record set just 5 weeks ago, we'll again include a graph here of what that looks like, as compared to our recent refining history...

June 1 2017 refinery throughput for May 26

the above graph comes from a weekly emailed package of oil graphs from John Kemp, senior energy analyst and columnist with Reuters...the graph shows US refinery throughput in thousands of barrels per day by "day of the year" for the past ten years, with the past ten year range of our refinery throughput for any given date shown in the light blue shaded area, and the median of our refinery throughput, or the middle of the 10 year daily range, traced by the blue dashes over each day of the year....the graph also shows the number of barrels of oil refined for each week in 2016 traced weekly by a yellow line, with our year to date oil refining for 2017 represented in red...thus we can see that for most all of 2016 and through most of 2017, US oil refining was either at seasonal record highs or near the top of the average range...we can also see there is normally a seasonal swing for oil refining, with demand for their products typically highest in the summer and again around the holidays; hence the record levels of refining we've been seeing this spring are out of season and completely "off the chart" compared to any US refining activity we've seen previously....the 17,510,000 barrels of crude per day refined during the week ending May 26th beat the previous record of 17,285,000 barrels per day set during the week ending April 21st, 2017 by 1.3%; it was also 8.0% more than the 16,206,000 barrels per day that were being refined during the week ending May 27 of 2016, when refineries were running at 89.8% of capacity, and more than 14% above the 10 year average for the 4th week in May of 15.3 million barrels of crude per day.....

with the record level of refining, gasoline production from our refineries increased by 187,000 barrels per day to 10,430,000 barrels per day during the week ending May 26th, the highest gasoline production ever this early in the year, and just short of the all time record of 10,456,000 barrels per day of gasoline production during the first week of November last year....gasoline production for the week was thus 5.2% higher than the 9,916,000 barrels of gasoline that were being produced daily during the comparable week a year ago....at the same time, refineries' production of distillate fuels (diesel fuel and heat oil) increased by 29,000 barrels per day to 5,226,000 barrels per day, the most distillates ever produced in a week in the Spring and 9.9% more than the 4,757,000 barrels per day of distillates that were being produced during the week ending May 27th last year..... 

however, even with the seasonal record level of gasoline production, our end of the week gasoline inventories decreased by 2,858,000 barrels to 237,024,000 barrels by May 26th, because our domestic consumption of gasoline rose by 118,000 barrels per day to 9,822,000 barrels per day and because our gasoline exports rose by 52,000 barrels per day to 641,000 barrels per day, while our imports of gasoline fell by 22,000 barrels per day to 703,000 barrels per day at the same time...but even with the week’s big decrease in our gasoline supplies, gasoline inventories are currently less than 1% below the 238,619,000 barrels that we had stored on May 27th a year ago, but still 7.6% higher than the 220,293,000 barrels of gasoline we had stored on May 29th of 2015, and 11.9% more than the 211,785,000 barrels of gasoline we had stored on May 30th of 2014…

meanwhile, with the seasonal high in distillates production, our supplies of distillate fuels rose by 394,000 barrels to 146,733,000 barrels during the week ending May 26th, after falling the last four weeks in a row....that increase was mostly because the amount of distillates supplied to US markets fell by 334,000 barrels per day to 4,025,000 barrels per day, while our exports of distillates rose by 242,000 barrels per day to 1,250,000 barrels per day, and our imports of distillates rose by 4,000 barrels per day to 105,000 barrels per day at the same time...even though our distillate supplies are still 1.9% below the 149,623,000 barrels that we had stored on May 27th, 2016, when a glut of heat oil persisted after last year's warm El Nino winter, they're now 10.6% higher than the distillate inventories of 132,612,000 barrels that we had stored on May 29th of 2015, following a more normal winter…

finally, our record level of oil refining, combined with our record level of oil exports, meant that our commercial inventories of crude oil saw their largest withdrawal of oil since December, as our oil supplies fell by 6,428,000 barrels to 509,912,000 barrels as of May 26th....but even though our crude oil supplies are down by more than 25.6 million barrels over the past 8 weeks, we still finished the week with 6.5% more crude oil in storage than the 479,012,000 barrels we had stored at the beginning of this year, and 1.1% more crude oil in storage than the 504,205,000 barrels of oil in storage on May 20th of 2016...compared to equivalent dates in prior years, we ended the week with 14.7% more crude than the 444,464,000 barrels in of oil in storage on May 29th of 2015, and 42.5% more crude than the 357,951,000 barrels of oil we had in storage on May 30th of 2014... 

This Week's Rig Counts

US drilling activity increased for the 20th week in a row and for the 30th time in the past 31 weeks during the week ending June 2nd, even as the size of the weekly increases has tapered off over the past month....Baker Hughes reported that the total count of active rotary rigs running in the US increased by 8 rigs to 916 rigs in the week ending Friday, which was 508 more rigs than the 408 rigs that were deployed as of the June 3rd 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 11 rigs to 733 rigs this week, which was up by 408 rigs over the past year, and the most oil rigs that were in use since April 17th 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, 2014...at the same time, the count of drilling rigs targeting natural gas formations fell by 3 rigs to 182 rigs this week, which was still a hundred more rigs than the 82 natural gas rigs that were drilling a year ago, but way down from the recent natural gas rig high of 1,606  rigs that were deployed on August 29th, 2008...in addition, a single rig considered unclassified remained active, same as last week and as a year ago...

offshore drilling remained unchanged at 23 rigs still this week, with all of those in the Gulf of Mexico, which was up from 20 Gulf of Mexico rigs and up from a total of 21 offshore rigs a year ago...the number of working rigs that were set up to drill horizontally increased by 5 rigs to 771 horizontal rigs this week, which was the most horizontal rigs in use since April 2nd of 2015, and up from the the 319 horizontal rigs that were in use in the US on June 3rd of last year, while it was still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....in addition, a net of 3 directional rigs were added this week, increasing the directional rig count to 68 rigs, which was up from the 44 directional rigs that were deployed during the same week a year ago...at the same time, the vertical rig count was unchanged at 77 rigs this week, which was still up from the 45 vertical rigs that were deployed during the same week last year...

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of June 2nd, the second column shows the change in the number of working rigs between last week's count (May 26th) and this week's (June 2nd) count, the third column shows last week's May 26th 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 3rd of June, 2016...       

June 2 2017 rig count summary

again, there wasn't much change in drilling activity for most states and in the major basins, save for in Texas, where 5 rigs were added this week...and that's pretty much been the story for the past year; of the 508 additional rigs that have started drilling since June 3rd 2016, 287 of them have been in Texas, with 222 of them in the Permian basin of the far western part of the state and 57 rigs in the Eagle Ford in the south...elsewhere, this week's three rig increase in Oklahoma likely includes the new rig in the Mississippian shale on the Kansas border, and two rigs in basins not named in Baker Hughes summaries...there has been quite a bit more activity in those "other basins" of late; maybe it's time for Baker Hughes to initiate coverage of some of those newer basins, and drop those where activity has stagnated, such as the Fayetteville of Arkansas, which had only seen one rig change in the past year and a half...of the states not listed above, Illinois saw a rig added this week, and they now have 3 rigs active, that's up from the single rig that was working in Illinois a year ago...in addition, Florida added a rig, because one of the offshore platforms that had been working in the Gulf in Louisiana waters was moved to offshore of Florida this week, still in the Gulf....that's the first drilling offshore from Florida since January 2015, and except for drilling for three weeks on land a month ago, the only Florida drilling activity in the past year...

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Enviros Fight Fracking in Ohio National Forest - Courthouse News – Four environmental groups sued the U.S. Forest Service and Bureau of Land Management over their authorization of oil and gas leases that allow fracking of shale formations in Ohio’s only national forest.  The Center for Biological Diversity, Sierra Club, Ohio Environmental Council and regional environmental organization Heartwood filed a lawsuit Tuesday in Columbus federal court challenging the legality of the new leases.  The conservation groups say the Bureau of Land Management, or BLM, approved a plan to lease oil and gas companies 40,000 acres of federal land inside Wayne National Forest without taking a “hard look” at the consequences, environmental impacts and adverse effects of its actions. According to the lawsuit, BLM and Forest Service relied on an outdated, decade-old land and resource management plan – as well as a 2012 supplemental information report that was never subject to public notice and comment – when they authorized the new oil and gas leases in October.The conservation groups also claim BLM rushed the preparation of a 2015 environmental assessment and then determined that the plan would “not significantly affect the quality of the human environment” without properly analyzing threats to watersheds, public health, climate and endangered species like Indiana bats. The groups argue that hydraulic fracturing, or fracking, will industrialize Ohio’s only national forest with roads, well pads and gas lines. Such infrastructure, they say, would destroy animal habitats and pollute water supplies.“Both humans and wildlife species such as the endangered Indiana bat, river otter, bobcat, and Cerulean warbler, rely on the Wayne National Forest’s undeveloped woods, streams and rivers, and peace and quiet,” the lawsuit states. They’re also concerned about contamination from fracking chemicals and wastewater transported by trucks and pipelines. In their complaint, the groups highlight four times within the last three years that fracking activity near Wayne National Forest has contaminated streams and harmed wildlife.

Long Term Resistance Camp To Fight Fracking And Pipelines In Ohio | Global Justice Ecology Project: After a three-day long action training conference near the Wayne National Forest in Ohio, organizers from multiple groups have launched a long-term resistance encampment to defend the Wayne National Forest from fracking and fracked gas pipelines. The action training conference was hosted by Southeast Ohio’s Appalachia Resist!, a direct action environmental justice group known for blockading the oil and gas infrastructure that threatens the rural communities where they live, as well as the recent action where a group member shut down an intersection in front of Chase Bank in Columbus to protest the Dakota Access Pipeline. The conference was attended by more than a hundred water protectors, land defenders, organizers and community members from around the state and region, who agreed on the goal to stop Energy Transfer Partner’s accident-ridden Rover Pipeline project, as well as Eclipse Resource’s plan to frack the Wayne National Forest. A wide variety of groups and organizers were represented, such as Keep Wayne Wild, the American Indian Movement of Ohio, Torch Can Do, Earth First!, Camp White Pine, Resist Enbridge Line 5, Radical Action for Mountains and People’s Survival, Tar Sands Blockade, the Buckeye Environmental Network, and the Athens County Fracking Action Network. “People from a lot of different backgrounds, walks of life, and organizing ideas are coming together,” said Crissa Cummings, 45, of New Marshfield. “We are sharing skills and building strategies. Companies like Energy Transfer Partners and Eclipse Resources can expect a wall of resistance.” Trainings included Strategic Direct Action, Environmental Justice and Environmental Racism, and Pipeline Resistance Strategy. Childcare and meals were provided.

Ohio EPA wants to raise fine against pipeline builder (AP) — Ohio’s environmental watchdog agency has increased the proposed penalty for the builder of a high-pressure natural gas pipeline after tests found diesel fuel in drilling mud spilled in a wetland.The Canton Repository reports the Ohio Environmental Protection Agency said Thursday it’s proposing to raise the penalty against Rover pipeline builder Energy Transfer from $430,000 to $914,000. The agency has ordered the company to monitor groundwater near the spill area and a quarry where mud was dumped.The newspaper reports the quarry is near a well that supplies drinking water to 40,000 Stark County customers.The Federal Energy Regulatory Commission said Thursday it wants records related to mud disposal preserved for the $4.2 billion project. An Energy Transfer spokeswoman says the company is cooperating with both agencies.

FERC Announces Investigation into Energy Transfer's Rover Pipeline - The Federal Energy Regulatory Commission (FERC) notified Energy Transfer Partners Thursday that it was conducting an investigation into the construction of the fracked gas Rover Pipeline .  The investigation comes as the Ohio Environmental Protection Agency discovered the presence of petroleum hydrocarbon constituents, which are commonly found in diesel fluid, among the fluid Energy Transfer Partners spilled near the Tuscarawas River during construction. "Energy Transfer has repeatedly proven itself not only incompetent, but an immediate threat to Ohioans and our wetlands and waterways," Jen Miller, Sierra Club Ohio director, said. "While we are encouraged by the announcement of this investigation, Energy Transfer Partners must be required to halt all operations on the pipeline until FERC can thoroughly examine the company's violations and inability to protect Ohioans."  Since news of the 15 violations broke on April 18, Energy Transfer Partners has racked up 16 additional violations , spilled 10,000 gallons of drilling fluid in Harrison County, and failed to pay its 2nd installment of its 401 permit fee. Energy Transfer Partners is currently operating without a Clean Water Act permit in Ohio. Last week, FERC halted the process at eight locations of the 32 where drilling is taking place under Ohio's wetlands and streams.  On Thursday, FreshWater Accountability Project , Michigan Residents Against the ET Rover Pipeline and the Sierra Club sent a letter urging the U.S. Army Corps of Engineers to immediately shut down all construction activity on Energy Transfer Partners' controversial Rover pipeline project.

Rover Pipeline faces more environmental scrutiny - The Ohio Environmental Protection Agency said Thursday it found diesel fuel in the drilling mud Rover Pipeline builders spilled in a local wetland in April.With the discovery, the state EPA raised the proposed penalty against Rover to $914,000 and ordered the pipeline company to monitor groundwater around the spill area and near a quarry where workers have been disposing drilling mud in pits. The quarry is near a well owned by Aqua Ohio, a company that supplies drinking water to some 40,000 customers in Stark County. “The water has been tested by Aqua Ohio and it was clean as of today,” Ohio EPA Director Craig Butler said Thursday. “We’ve also taken samples of private water wells and we will demand that Rover continues to do that to make sure, in the abundance of caution, that their water is safe.” Test results are pending on samples taken from 11 private water wells. Dallas,Texas-based Energy Transfer is building the $4.2 billion Rover Pipeline across Ohio, including parts of Stark, Tuscarawas and Carroll counties. The interstate pipeline will carry natural gas produced by wells in the Utica and Marcellus shales. Where Rover’s route crosses highways and rivers, construction teams drill a path beneath the obstacle.Workers drilling beneath the Tuscarawas River south of Navarre on April 13 inadvertently released 2 million gallons of drilling mud into 6.5 acres of wetland.The spill — one of several environmental violations — prompted FERC to suspend other Rover drilling projects and the commission ordered Rover to have an independent third-party contractor analyze all drilling activity at the Tuscarawas River site.On Thursday, FERC told Rover to preserve all records related to the composition, acquisition, preparation and disposal of the mud. In a joint statement, Acting FERC Chairman Cheryl A. LaFleur and Commissioner Colette D. Honorable said they were troubled by indications that diesel fuel was in the drilling mud, which went against commitments the company made to gain FERC’s approval for the project.

Pennsylvania pipeline fight could upend international oil flows - Refiners from the Midwest United States are fighting for access to a vital Pennsylvania pipeline – a move that could cripple their East Coast competitors and redraw the map for international flows of crude and fuel into coveted coastal markets. The regulatory dispute centers on a proposal by pipeline operator Buckeye Partners’ to that state's Public Utilities Commission. The plan would reverse the flow of fuels on a section of Buckeye’s 350-mile Laurel Pipeline, which currently flows from the East Coast to Pittsburgh. Because pipelines only flow in one direction, the change would effectively block five East Coast refineries from serving Pittsburgh – with Midwest refiners picking up their market share. The commission will decide on whether to allow Buckeye to reverse the flow from Pittsburgh, near the state’s western border, to Altoona, a small city about a hundred miles to the east. For a map detailing the proposal, see: tmsnrt.rs/2qk72Ep   Initially, such a reversal would cost East Coast refiners about $10 million annually, according to a study gasoline marketer Gulf Operating commissioned to include in its objections to the Buckeye proposal. Piping gasoline to Pittsburgh yields some of their highest per-barrel profits. But opponents, including East Coast refiners and some state lawmakers, are far more worried that such a decision would presage a reversal of the entire pipeline. That would take Midwest fuels all the way to Philadelphia on the state's eastern border, where it connects to distribution networks serving the entire eastern seaboard. For Buckeye, the move represents a bet that surging Midwest refiners will be better customers - keeping its pipeline full to capacity - than their struggling East Coast counterparts. The stakes are much higher for the refiners involved. Midwest refiners could gain a huge market opportunity to pipe fuels into the East Coast, the largest U.S. gasoline market.

Oil, gas future looks bright for county - The Steubenville Herald-Star — A panel of oil and gas officials predicted Wednesday that Jefferson County will see a growing interest in the energy industry in the coming months. The quarterly workshop series hosted by the Chamber of Commerce and the Jefferson County Port Authority at Holy Trinity Greek Orthodox Church’s Hellenic Hall saw several energy industry experts discuss the state of oil and gas drilling as well as pipeline projects and a brighter future for natural gas rigs in the county. “After today the mood in Jefferson County should be one of things are looking up. And with the PTT Global cracker plant planned for Belmont County, the downstream effect on this county will be definitely important,” said Mike Chadsey, director of public relations for the Ohio Oil and Gas Association. “There are currently 114 permits in Jefferson County. We haven’t been here a lot lately because of the general slowdown. Right now Carroll County is No. 1 in Eastern Ohio, and Belmont County is second. Jefferson County is eight out of the 10 top counties, but we are seeing signs of an uptick in the local area. Harrison County is also a county to watch,” explained Chadsey. “We are continually behind Pennsylvania, but the interest in the natural gas in Eastern Ohio never really stopped here. It slowed down, but it continued. If we burn the natural gas locally we can turn it into other projects and use it as feed stock for other products and goods. We can also sell it to gas-powered power plants,” continued Chadsey. “Our competition is Texas, Louisiana and the Gulf Coast. But there is a definite advantage for us in the market place,” noted Chadsey.

Gas industry organization hails Duke fracking, well water study - The suburban Pittsburgh-based Marcellus Shale Coalition is hailing results of a three-year Duke University study of drinking water wells in West Virginia. The report centered on more than 100 wells turned up little evidence of contaminated groundwater from hydraulic fracturing, or fracking, operations, although it found that accidental spills of fracking wastewater may pose a threat to surface water, including watersheds for the Ohio, Greenbrier and Monongahela rivers. “This report continues to demonstrate that hydraulic fracturing, a tightly regulated 60-year-old technology that’s helped enable America’s historic energy revolution, does not pose a threat to drinking water resources, which is widely supported by objective, straightforward data and science,” MSC said in a statement Thursday. The peer-reviewed study was funded by the National Science Foundation and Natural Resources Defense Council. It involved a research team from Duke's Nicholas School of the Environment, as well as counterparts from Ohio State, Penn State and Stanford universities and the French Geological Survey. “The bottom-line assessment is that groundwater is so far not being impacted, but surface water is more readily contaminated because of the frequency of spills,” said Avner Vengosh, professor of geochemistry and water quality at Duke's Nicholas School of the Environment. The results were published recently in the European journal Geochimica et Cosmochimica Acta."This is just one of numerous peer-reviewed studies to confirm fracking is not a significant threat (to) drinking water," blogger Seth Whitehead wrote on the energyindepth.org website maintained as part of a research, education and public outreach campaign by the Independent Petroleum Association of America.

Judge rules that environmental group can challenge Sunoco over pipeline eminent domain -- Sunoco Logistics’ use of eminent domain to take private land to build its Mariner East 2 pipeline came into question again on Thursday when a Philadelphia court ruled that an environmental group can argue that the practice is unconstitutional. Judge Linda Carpenter of the Philadelphia Court of Common Pleas denied the company’s request to summarily dismiss a complaint by the Clean Air Council, clearing the way for a trial, possibly at the end of this year. The Clean Air Council argues that Sunoco has no right to take land via eminent domain because the pipeline is carrying natural gas liquids across state lines and is therefore an interstate, not intrastate, pipeline. If Mariner East 2 is deemed an interstate pipeline, it is not entitled to a “certificate of public convenience” from the Pennsylvania Public Utility Commission, the environmental group argues.  That certificate is needed to assert eminent domain to take the land of uncooperative landowners.The ruling follows two other recent decisions from the Commonwealth Court, which ruled in favor of the company in its disputes with individual landowners.On Wednesday, the court rejected an appeal of a lower court ruling in Lebanon County.  That judge had sided against Homes for America, a property developer of low-income housing, in its argument against eminent domain.On May 15, the Commonwealth Court ruled against Stephen and Ellen Gerhart of Huntington County, who have been fighting Sunoco’s plans to build the natural gas liquids pipeline across their land, and argued that the company had no right to use eminent domain because the pipeline is not in the public interest. Once complete, the 350-mile Mariner East 2 pipeline will carry ethane, propane and butane from the Marcellus Shale of southwest Pennsylvania to a terminal at Marcus Hook in Delaware County, near Philadelphia.  Most of the fuel will be exported. Sunoco began construction in February after getting its final permits from the Department of Environmental Protection, but the project continues to be fought by some communities, especially in densely populated Philadelphia suburbs, where opponents argue it poses a risk to public safety.

New York Attorney General: Feds Must Address Bakken Crude Oil Bomb Trains. Feds: Maybe Later? - New York Attorney General Eric T. Schneiderman has joined with attorneys general from California, Illinois, Maryland, Maine, and Washington in calling for limits on the volatility of crude oil transported by rail. The failure of federal regulators and Congress to address this known safety issue has led Schneiderman to continue to pressure regulators on it.“Because of a regulatory loophole, these trains can carry crude oil through some of our most densely populated areas without any limit on explosiveness or flammability — creating ticking time bombs that jeopardize the safety of countless New Yorkers and Americans,” said Attorney General Schneiderman. “It’s time for the federal government to put New Yorkers’ safety first and take immediate action to close this dangerous and nonsensical loophole.”A coalition of environmental groups led by the Natural Resources Defense Council has also submitted comments to regulators urging the creation of volatility limits for crude oil.This current effort to appeal to the Trump administration comes after years of the Obama administration failing to take action. As reported by Reuters, the directive to not regulate the volatility of Bakken oil came from the White House.Volatile crude oil from the Bakken shale region in Montana and North Dakota has been involved in multiple train derailments resulting in large oil spills and fires. The worst such accident happened in the small Canadian town of Lac-M├ęgantic, Quebec. It resulted in the deaths of 47 people and the entire downtown area being destroyed. That accident occurred almost four years ago, but downtown Lac-M├ęgantic r emains a large vacant lot.Despite the dire warning about the dangers of moving the same volatile oil in unsafe tank cars, this practice continues in communities across North America today.

Natural gas special report — US LNG: A benchmark for the future – Platts - We are currently witnessing a paradigm shift in the way LNG is priced and traded around the globe. From the first major shipment from Algeria to the UK in 1964, LNG has typically been sold under long-term contracts, usually between producers and utilities. These long-term contracts were almost always priced off of an oil-indexation linked to North Sea Brent crude or Japan Customs-cleared crude (JCC) because of the liquidity and transparency of these markets. While LNG supply growth increased significantly over the next four decades, the way LNG was traded and sold did not change much at all. By 2000, short-term LNG, defined as transactions under contracts of four years or fewer, only represented 2% of the market1. Since the new millennium, though, short-term LNG trading has increased to become nearly 30% of the market. Spot transactions, defined as trades whereby cargoes are delivered within 12 months of the transaction date, now account for half of these short-term transactions2. This momentum for shorter-term trading, supported by US LNG supplies and a growing number of LNG consumers and traders, is set to fundamentally alter the way LNG is priced and traded. This paper will examine the US LNG market, the distinct characteristics of US LNG, and how the global LNG market is fundamentally changing the way LNG is traded and priced. Destination-flexible US LNG, along with structural changes in global LNG market fundamentals — notably the foreseeable oversupply in the market in the coming years, a corresponding oversupply in the LNG carrier market, the growing importance of traders, and the number of new buyers entering the market that are seeking shorter-term contracts — are some of the key factors that will fuel the transformation of global LNG trading and pricing. 

Inside FERC June US national gas average up 11 cents to $3.01/MMBtu - The June bidweek national average natural gas price rose 11 cents to $3.01/MMBtu, with increased power demand expected as the market moves further into the summer season. The June bidweek price at the benchmark Henry Hub in Louisiana rose 10 cents to $3.42/MMBtu, a 3% increase from May but a more than 65% jump from June of last year. The uptick in Henry Hub prices came as the NYMEX June natural gas futures contract settled at $3.236/MMBtu, up 9.4 cents from the May contract's settlement price. But further upward movement may have been limited as total US production has approached the year-to-date high of 71.9 Bcf/d in recent days, according to data from Platts Analytics' Bentek Energy. Year to date, total US dry gas production has averaged 70.8 Bcf/d, down 1.6 Bcf from the same period a year ago. At the same time a string of weekly gas storage injections above market expectations have likely also lowered bullish expectations. But on the demand side, the latest one-month outlook for June from the US National Weather Service called for an elevated probability of above-average temperatures across much of the country, likely contributing to increased power burn.

Natural Gas Prices Fall As Below Normal Temperatures Set In --July contracts are taking a sizable hit today falling nearly 10 cents for the day and trading around $3.21/MMBtu.The hit on prices came after the weekend weather reports showed much cooler weather forecasts than the previous week for the next 15 days. In addition, CFTC position reporting showed another increase in overall net-long position last week.  Over the last 12 weeks, money managers have increased net long positioning by a total of 1,721 Bcf or a 78% increase. This level of strength in net-long position increasing scared many of the traders we talked to. Position liquidation, as we have warned repeatedly over the last month, can come at any time, and volatility begets volatility. How bearish was this weather update? Not significant to the longer term picture, but speculators don't care about fundamentals in the short-term, and they have very little regard for where the fundamental supported gas price is if they are looking for an exit.Until the dust settles (positioning reverts), it's unlikely we will see traders get excited to take long positions here.

Natural Gas Price Dips on Larger-Than-Expected Inventory Rise - 24/7 Wall St.: The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks increased by 81 billion cubic feet for the week ending May 26. Analysts were expecting a storage injection of 74 billion cubic feet. The five-year average for the week is an injection of 97 billion cubic feet, and last year’s storage injection for the week totaled 80 billion cubic feet. Natural gas inventories rose by 75 billion cubic feet in the week ending May 19. Natural gas futures for June delivery traded up about 1.3% in advance of the EIA’s report, at around $3.07 per million BTUs, and slipped to around $3.04 shortly thereafter. The highest close for the past five trading days was registered last Friday at $3.31. The 52-week range for natural gas is $2.81 to $3.64. One year ago the price for a million BTUs was around $2.95. Analysts at S&P Global Platts note that last week’s injection marked the fourth consecutive week of additions to storage that fell below the five-year average. This week’s injection kept that streak alive. Demand for the next week is expected to be moderate largely due to expected cooler temperatures into the weekend across the northern United States. Temperatures are expected to be warmer than normal in the central, southern, and western portions of the country. Stockpiles fell week over week to 12.8% below last year’s level, but remain 9.8% above the five-year average. The EIA reported that U.S. working stocks of natural gas totaled about 2.525 trillion cubic feet, around 225 billion cubic feet above the five-year average of 2.300 trillion cubic feet and 370 billion cubic feet below last year’s total for the same period. Working gas in storage totaled 2.895 trillion cubic feet for the same period a year ago. 

Wisconsin Supreme Court upholds rejection of fracking permit - (AP) - A divided Wisconsin Supreme Court has upheld a Trempealeau County decision denying a permit to open a new sand mine for use in hydraulic fracking. The Supreme Court on Wednesday ruled against Iowa-based AllEnergy Corporation. It had argued that a Trempealeau County environmental and land use committee in 2013 wrongly denied its permit to open the 550-acre sand mine and processing plant. A state appeals court and circuit court had affirmed the county committee's action. The Supreme Court agreed on Wednesday with four justices saying the permit was rightfully denied and three dissenting. County officials denied AllEnergy's application for a number of reasons, including concerns over the mine's environmental impact and health risks of nearby residents.

Where Refiners Are Allocating Their 2017 CapEx Dollars -- From an expenditure perspective, the refining side of the U.S. oil sector couldn’t be more different from the exploration and production side. Sure, both demand a lot of capital, but while E&P companies’ capex can ramp way up or way down year-to-year, reflecting shifts in hydrocarbon supply, demand and (mostly) pricing, refiners’ spending tends to be more consistent over time. Refiners focus primarily on maintaining existing assets and on making the incremental enhancements needed to refine new grades of crude, to expand refining capacity and to comply with ever-tightening environmental regulations. Today we review historical capital spending by a few of the largest refining companies in the U.S. and examine several of the larger projects where refiners’ dollars are being invested today. Refining is a costly business. It involves large, expensive equipment using specialized technology (and associated plumbing) to convert crude oil into saleable petroleum products like motor gasoline, diesel and jet fuel. These refining units must be meticulously maintained to make sure they operate around the clock in the safest, most efficient and most productive manner. Further, over the past 40-plus years, refiners have been called on again and again by federal (and California) regulators not only to reduce their own emissions, but to reconfigure their operations to enable the production of cleaner gasoline and diesel. As a result of all this, a large portion of a refiner’s budget is spent on simply staying in business — that is, keeping things running and staying in compliance with the latest environmental rules.

Taiwan set to import first cargo of US Gulf Coast Crude -- Platts Snapshot video -- 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. In this video, Daniel Colover, associate editorial director, Asia & Middle East oil markets, talks about the latest purchase of US crude involving yet another Asian refiner as the region diversifies from traditional crude slates.

Gas Production From The Permian Basin Is Likely To Triple By 2020 - From The Wall Street Journal: The oil play that could flood the natural-gas market. Gas output from the Permian basin is likely to surge by 2020, rivaling production from Appalachian Marcellus.The oil-rich Permian Basin is emerging as a major source of new natural gas, a development that could deepen an existing glut and pressure gas prices for years. The West Texas region has become the most prolific spot for horizontal oil drilling and fracking. The new oil wells also produce natural gas, making it a nearly free byproduct that energy companies can then sell on top of the more-sought-after crude. Gas production in the Permian Basin is likely to triple by 2020 from its 2010 levels, analysts say. The region is poised to rival new gas output from the Appalachian Marcellus Shale, the U.S.’s biggest gas-producing region. The numbers: Gas production in the Permian is expected to increase by 5.5 billion cubic feet a day from the end of last year to reach 12.5 billion cubic feet by the end of 2020, according to energy investment bank Tudor Pickering Holt & Co. in Houston.  The Marcellus, which has long been the fastest-expanding gas field, is likely to add 6.1 billion cubic feet during the same period, not much more than the Permian, though its total production will be two times that of Permian by 2020.

Crestwood boosting Permian gas infrastructure with processing plant, pipeline -- Eight months after forming a pact with Royal Dutch Shell to feed a new natural gas gathering system in the Permian Basin, midstream operator Crestwood Equity Partners is building a processing plant and pipeline that will attract flows from that system and a second one. The new infrastructure will provide producers in the region greater access to markets in the US West, along the Gulf Coast and Mexico. In search of higher returns and boundless growth opportunities, billions of dollars are being pumped into the shale play that stretches across West Texas and southeastern New Mexico. While some analysts have cautioned the basin is at risk of becoming saturated, which could drive up costs, the flurry of activity has continued, with investors securing acreage, bolstering drilling operations and adding new facilities. Crestwood, a master limited partnership based in Houston that is involved in the gathering, processing, storage, transportation and marketing of natural gas, NGLs and crude oil, said Wednesday that its 200 MMcf/d processing plant will be constructed near Orla, Texas, through a joint venture with private equity firm First Reserve. The project also includes a 33-mile, 20-inch pipeline connecting its existing Willow Lake gathering system in Eddy County, New Mexico, to the Orla plant, which will offer liquids handling and multiple residue and NGL interconnects. The expansion, with an initial capital budget of $170 million, is expected to be in service in the second half of 2018. Crestwood's goal is to "create a supersystem that spans over 2 million acres located in the heart of the most active development counties" in the Permian's Delaware Basin sub-territory, said Robert Phillips, CEO of the operator's general partner.

New Infrastructure to Help Corpus Keep Pace with Permian Growth - Crude oil exports out of Corpus Christi have increased sharply in the past few months, hitting a record 11.5 million barrels (MMbbl) in April 2017. And that may be just the beginning; the volume of crude put on ships in the Shining City by the Sea is likely to rise new Permian-to-Corpus pipeline capacity is completed and as new storage capacity, distribution pipes and marine docks being planned to accommodate a flood of Permian oil come online. Today we continue our series on the build-out of crude-related infrastructure in South Texas’s largest port and refining center with a look at rising crude exports and the new projects being planned. Hydrocarbon production growth in the Permian play in West Texas and southeastern New Mexico hasn’t missed a beat during the downturn in oil prices that started three years ago. Permian crude oil production now tops 2.3 million barrels/day (MMb/d) and is likely to rise by at least another 1.4 MMb/d by 2022, according to RBN’s latest Growth Scenario for the region, which we discussed in our recent Drill Down Report, With a Permian Well, They Cried More, More, More. Even faster growth is a distinct possibility — the multistack hydrocarbon resources and production economics in the Permian’s Midland and Delaware basins are that good, and exploration and production companies have placed big, expensive bets on the play’s success.

Has Permian Productivity Peaked? - The U.S. shale industry might have just received a huge windfall with the nine-month extension of the OPEC cuts. Shale output was already expected to come roaring back this year, but the extension of the cuts provides even more room in the market for shale drillers to step into. The sky is the limit, it seems. However, there are growing signs that the U.S. shale industry could be reaching the end of the low-hanging fruit. Or, more specifically, drilling costs are starting to rise and the enormous leaps in production that can be obtained by simply adding more rigs also appears to be running into some trouble. According to the EIA’s Drilling Productivity Report, productivity (as opposed to absolute production) is set to fall next month in the Permian Basin. In other words, the average rig will only be able to produce an estimated 630 barrels per day of initial production from a new well, down 10 b/d from the 640 b/d that such a rig might have produced in May. That is convoluted way of saying that the ever-increasing returns on throwing more rigs at the problem might be hitting a ceiling. This is a very notable development – it is the first time that the EIA predicts falling well productivity per rig since it began tracking the data several years ago. Still, because the rig count has increased so much, there will still be more production coming out of the Permian. It’s just that as drillers gobble up all the best spots to drill, it will become more and more difficult to find easy pickings. Moreover, simply drilling the wells is only one part of the equation. As Collin Eaton of Fuel Fix notes, companies are drilling wells at a faster pace than contractors can frac them. The shortage of completion crews means that the backlog of drilled but uncompleted wells (DUCs) has shot up over the past year, rising by more than 60 percent to 1,995 in April 2017 from a year earlier.

Scientists Link Fracking to Explosion That Severely Injured Texas Family - Scientists have determined that methane from a fracked well contaminated a Texas family's water supply and triggered an explosion that nearly killed four members of the family.  The family's ranch in Palo Pinto County is located only a few thousand feet away from a natural gas well. In August 2014, former oil field worker Cody Murray, his father, wife and young daughter were severely burned and hospitalized from a "fireball" that erupted from the family's pump house. A year later, the family filed a lawsuitagainst oil and gas operators EOG Resources and Fairway Resources, claiming the defendants' drilling and extraction activities caused the high-level methane contamination of the Murrays' water well. "At the flip of the switch, Cody heard a 'whooshing' sound, which he instantly recognized from his work in the oil and gas industry, and instinctively picked his father up and physically threw him back and away from the entryway to the pump house," the complaint states. "In that instant, a giant fireball erupted from the pump house, burning Cody and [his father], who were at the entrance to the pump house, as well as Ashley and A.M., who were approximately twenty feet away."As the Texas Tribune detailed, the studies found that methane and drilling mud chemicals had escaped from a poorly sealed Fairway gas well and traveled through underground fractures and eventually into the Murrays' water supply. The experts include Thomas Darrah, a geochemist at Ohio State University; Franklin Schwartz, an Ohio State University hydrologist; Zacariah Hildenbrand, chief scientific officer at Inform Environmental; and Anthony Ingraffea, a civil engineering professor at a Cornell University with expertise in fracking. "The timing is undeniable, the location is undeniable, the chemistry of the gas is undeniable," Chris Hamilton, the Murray's attorney, told news station WFAA. "This is not naturally occurring gas. This is gas that came from 4 to 6-thousand feet below the ground."

Quake-Prone Kansas Hit By Dozens Of Temblors Since March (AP) — The U.S. Geological Survey says two earthquakes were recorded in Kansas during the Memorial Day weekend, bringing the total to nine earthquakes in May.The agency says an earthquake with a magnitude of 2.5 was recorded Monday about 10 miles west of Belle Plaine in Sumner County, and a 2.6 earthquake was reported Sunday 8 miles west of Belle Plaine.Another 2.6 magnitude earthquake was reported Thursday 10 miles west of Belle Plaine.Earthquakes also were reported in Jewell and Harper counties in May. Kansas recorded 13 earthquakes in April, and 11 in March. Scientists say an increase in earthquakes in Oklahoma, Kansas and Texas is linked to the injection of wastewater from hydraulic fracturing, or fracking, into the ground after oil and gas drilling.

Buy Low, Sell High: Anadarko Execs Buy up Depressed Stock After Deadly Colorado Explosion -- Steve Horn - Buy low, sell high. It's a maxim taught to stock traders from day one and one which Anadarko Petroleum's upper-level management seems to have taken to heart in the aftermath of the April gas line explosion thatblew up a Colorado home , leaving two dead and one badly injured. Since the explosion, five members sitting on either Anadarko's board of directors or executive officer team have purchased a combined $2.6 million worth of company stock, totaling more than 46,700 shares,according to data on InsiderInsights.com and first reported by investor analyst site SeekingAlpha.com. Anadarko's stock price has fallen nearly $10 per share since the April 17 blast. However, the trouble may have just begun for the Texas-based company at the center of Colorado's frackingboom. On May 25, an Anadarko oil well exploded just a few miles from the mid-April gas line explosion site. That incident, also in Firestone, Colorado, left one dead and three others injured . "We felt like a shaking and the dishes shook. I asked my son and he said, 'Mommy I think it's thunder.' Then we walked out to our breezeway and saw smoke," Tiffany Kampmann, a Firestone resident, told Inside Energyof the incident. Earlier in May, Colorado's Democratic Gov. John Hickenlooper issued an order to have all oil and gas operations statewide reviewed for safety compliance following the Firestone home explosion. "Public safety is paramount. We are assessing whether these operations were conducted in compliance with state law and the Colorado Oil and Gas Conservation Commission's rules," said Hickenlooper. "Inspections of existing flowlines within 1,000 feet of occupied buildings must occur within 30 days and tested for integrity within 60 days. Lines that have been either abandoned or are not in use must be inspected within 30 days and abandoned under current rules within 60 days."

EPA halts Obama-era methane emissions rule for oil and gas industry - The Trump administration’s Environmental Protection Agency ordered a halt on Wednesday to an Obama-era rule created to reduce methane leaks from new and modified oil and natural gas drilling wells. The action places a 90-day stay on portions of the rule, set in 2016, that require oil and gas companies to detect and repair leaks of methane and other air pollution at new operations. Scientists have found that in the United States, methane leaks and venting have nullified any emissions benefit from transitioning the electricity sector from coal to natural gas-fired power plants. In fact, the EPA recently found that the problem of escaping methane is even worse than initially feared. The United States currently gets a third of its electricity from natural gas, up from 24 percent in 2010. With its latest action, however, the EPA wants to give the oil and gas industry a second chance to comment on the rule. The companies will not need to comply with certain requirements of the rule while the three-month stay is in effect, the agency said. Oil and gas producers opposed the rule, saying they were already subject to state rules on methane emissions and had a financial incentive to capture methane and put it onto the market. EPA Administrator Scott Pruitt’s decision to order the delay is in line with President Donald Trump’s so-called Energy Independence Executive Order, which directed the agency to review the oil and gas rules, the agency said. Pruitt wrote a letter to several oil and gas industry associations in April promising to postpone the June 3 deadline for the rule. In the letter, Pruitt indicated he intended to exercise the EPA’s authority under the Clean Air Act to issue the stay of the requirements to find and fix equipment leaks, promising that “sources will not need to comply with these requirements while the stay is in effect.”

U.S. oil rig count to peak soon unless WTI prices rise: Kemp (Reuters) - U.S. exploration and production companies have hired an extra 400 rigs to target oil-bearing formations since the end of May 2016, according to oilfield services company Baker Hughes. The number of active oil-directed rigs has more than doubled over the last year, from 316 to 722, in one of the most remarkable recoveries on record, coming after one of the deepest slumps during the previous two years.But the recovery in oil prices has stalled since February and prices are now no higher than they were a year ago. Experience indicates the rig count will stop rising within a few months (http://tmsnrt.rs/2sd4syJ). The active rig count is likely to peak in June or July unless the price of benchmark West Texas Intermediate (WTI) crude starts rising again above $50 per barrel. Drilling activity and WTI prices each exhibit a pronounced cycle and are closely correlated (http://tmsnrt.rs/2qF8Ap6). Price changes typically lead changes in the number of rigs employed, with an average lag of between 16 and 22 weeks (http://tmsnrt.rs/2ravHeF).In 2014, oil prices turned lower in the middle of June and the rig count started to fall 16 weeks later, in mid-October. In 2016, prices turned higher from the middle of January and the rig count began to recover 19 weeks later, from the end of May (http://tmsnrt.rs/2qFlMKI). But prices stopped rising in late February 2017 and have since drifted sideways or slightly lower, which suggests the rig count is likely to peak between mid-June and the end of July. In recent weeks, exploration and production companies have added rigs at a slower pace than earlier in the year, which could be a sign that drilling is already starting to level off. Baker Hughes BHI.N reports that an average of six oil rigs were added each week in May, down from more than 13 per week in March (http://tmsnrt.rs/2sdCJhB).Prominent shale producers have told investors they can drill new oil wells profitably at prices well below the current level of almost $50 a barrel. But further increases in the rig count are likely to require a further increase in prices to make them sufficiently attractive.

Dakota Access pipeline expected to begin shipping oil Thursday - — The developer of the Dakota Access oil pipeline, which is expected to begin shipping oil on Thursday, will face scrutiny later this summer on whether it violated North Dakota rules during construction. The three-member North Dakota Public Service Commission is looking into whether Texas-based Energy Transfer Partners removed too many trees and shrubs along the pipeline route, and whether it improperly reported the discovery of Native American artifacts. No artifacts were disturbed. ETP maintains it didn't intentionally do anything wrong in either case. If the commission ultimately decides differently, the company could be subject to tens of thousands of dollars in fines, though it could fight them in state court. Regulators decided during a Wednesday meeting to hold hearings on back-to-back days in either July or August. A decision on fines would come sometime after that.

Leaked Documents Reveal Counterterrorism Tactics Used at Standing Rock to “Defeat Pipeline Insurgencies” -- A shadowy international mercenary and security firm known as TigerSwan targeted the movement opposed to the Dakota Access Pipeline with military-style counterterrorism measures, collaborating closely with police in at least five states, according to internal documents obtained by The Intercept. The documents provide the first detailed picture of how TigerSwan, which originated as a U.S. military and State Department contractor helping to execute the global war on terror, worked at the behest of its client Energy Transfer Partners, the company building the Dakota Access Pipeline, to respond to the indigenous-led movement that sought to stop the project.Internal TigerSwan communications describe the movement as “an ideologically driven insurgency with a strong religious component” and compare the anti-pipeline water protectors to jihadist fighters. One report, dated February 27, 2017, states that since the movement “generally followed the jihadist insurgency model while active, we can expect the individuals who fought for and supported it to follow a post-insurgency model after its collapse.” Drawing comparisons with post-Soviet Afghanistan, the report warns, “While we can expect to see the continued spread of the anti-DAPL diaspora … aggressive intelligence preparation of the battlefield and active coordination between intelligence and security elements are now a proven method of defeating pipeline insurgencies.” More than 100 internal documents leaked to The Intercept by a TigerSwan contractor, as well as a set of over 1,000 documents obtained via public records requests, reveal that TigerSwan spearheaded a multifaceted private security operation characterized by sweeping and invasive surveillance of protesters.

The Great U.S. Energy Debt Wall: It’s Going To Get Very Ugly - While the U.S. oil and gas industry struggles to stay alive as it produces energy at low prices, there’s another huge problem just waiting around the corner. Yes, it’s true… the worst is yet to come for an industry that was supposed to make the United States, energy independent. So, grab your popcorn and watch as the U.S. oil and gas industry gets ready to hit the GREAT ENERGY DEBT WALL. So, what is this “Debt Wall?” It’s the ever-increasing amount of debt that the U.S. oil and gas industry will need to pay back each year. Unfortunately, many misguided Americans thought these energy companies were making money hand over fist when the price of oil was above $100 from 2011 to the middle of 2014. They weren’t. Instead, they racked up a great deal of debt as they spent more money drilling for oil than the cash they received from operations. As they continued to borrow more money than they made, the oil and gas companies pushed back the day of reckoning as far as they could. However, that day is approaching… and fast. According to the data by Bloomberg, the amount of bonds below investment grade the U.S. energy companies need to pay back each year will surge to approximately $70 billion in 2017, up from $30 billion in 2016. That’s just the beginning…. it gets even worse each passing year:As we can see, the outstanding debt (in bonds) will jump to $110 billion in 2018, $155 billion in 2019, and then skyrocket to $230 billion in 2020. This is extremely bad news because it takes oil profits to pay down debt. Right now, very few oil and gas companies are making decent profits or free cash flow. Those that are, have been cutting their capital expenditures substantially in order to turn negative free cash flow into positive. Unfortunately, it still won’t be enough… not by a long-shot. If we use some simple math, we can plainly see the U.S. oil industry will never be able to pay back the majority of its debt: 

Oil, natural gas industry projects spending uptick belies growing list of delayed FIDs: Rystad - More delayed major oil and gas upstream projects have been sanctioned so far this year than during the whole of 2016, but the list of delayed projects since the 2014 oil price slump continues to grow, Norwegian oil consultancy Rystad Energy said Friday. Noting Eni's final investment decision Thursday on its Coral LNG project in Mozambique, Rystad estimates that 17 delayed upstream projects have been launched since the second half of 2014, accounting for an estimated $78 billion of development spending. Notable project FIDs since 2014 include Tengizchevroil's Tengiz oil field expansion in Kazakhstan last year, and more recently, BP's Mad Dog 2 deepwater development in the Gulf of Mexico and Noble Energy's Leviathan gas project off Israel. But despite the positive momentum on project FIDs, Rystad said the total list of delayed projects has continued to grow, with 105 currently delayed FIDs compared with 39 in mid 2015 and 62 in early 2016. "The ongoing results of the oil price pain is clear to see. Still over 100 projects delayed, accounting for nearly 35 billion barrels of oil equivalent and $300 billion spend estimate delayed," Rystad research analyst Readul Islam said in a note. The list of delayed FIDs has grown across the board, Rystad estimates, bar Canadian oil sands projects which are "confined to one province in Canada." The highest number of delayed projects are currently in the deepwater and onshore sectors, it said. Rystad is among a number of oil analysts which have warned of a severe impact on future production volumes from the huge industry spending cuts in the wake of the oil price collapse.

U.S. shale booms and depresses oil prices again: Kemp (Reuters) - U.S. oil production continues to rise relentlessly, frustrating efforts by OPEC and non-OPEC oil exporters to rebalance the global market and secure an increase in the price of crude.After a devastating slump in 2015 and 2016, the U.S. oil industry has returned to strong growth, with drilling and output rising rapidly (http://tmsnrt.rs/2qJXDCG).U.S. production is now forecast to grow by an average of 440,000 barrels per day (bpd) in 2017 and another 650,000 bpd in 2018, according to the U.S. Energy Information Administration (EIA).U.S. crude and condensates output rose by 62,000 bpd month-on-month to almost 9.1 million bpd in March (“Petroleum Supply Monthly”, EIA, May 2017).Production has increased by more than 530,000 bpd from its recent low of less than 8.6 million bpd in September, adding to an already well-supplied global market and delaying a drawdown in stocks.Weekly estimates prepared by the agency indicate output continued to increase in April and May and now stands at around 9.3 million bpd (“Weekly Petroleum Status Report”, EIA, May 19).While the weekly estimates are considered less reliable than the more comprehensive monthly numbers, they have generally provided a good guide to trends in the monthly data (http://tmsnrt.rs/2reYzCF).Most of the extra output between September and March came from oilfields in the Gulf of Mexico, where production increased by 257,000 bpd, and Alaska, where output was up by 74,000 bpd.But production from fields in the Lower 48 states excluding the Gulf of Mexico, most of which comes from onshore shale plays, also rose, by 200,000 bpd (http://tmsnrt.rs/2qJOnyN). In March alone, production in the Lower 48 states excluding the Gulf of Mexico rose by 35,000 bpd to its highest level in nearly a year (http://tmsnrt.rs/2qJT5fH). U.S. shale output will almost certainly rise substantially in the rest of 2017 and into 2018 given the typical six-month lag between spudding new wells and the beginning of their commercial production. Reported output for March mostly reflects wells started before the end of September 2016, when there were fewer than 425 rigs drilling for oil in the United States, according to oilfield services company Baker Hughes. The number of active oil rigs has now increased to 722, and thousands of extra wells have been drilled in the meantime, with many still waiting on completion services before starting to flow.

OPEC ponders how to co-exist with U.S. shale oil | Reuters: First, they ignored each other. Then, they went into a bruising fight. Finally, they are talking, albeit with opposing agendas. The history of the relationship between OPEC and the U.S. shale oil industry has evolved a great deal since the cartel discovered it had a surprise rival emerging in a core market for its oil around five years ago. U.S. shale bankers came to Vienna this week and OPEC is readying a trip for its top officials to Texas in a bid to understand whether the two industries can co-exist or are poised to embark on another major fight in the near future. "We have to coexist," said Khalid al-Falih, Saudi Arabia's energy minister, who pushed through OPEC production cuts in December, reversing Riyadh's previous strategy to pump as much as possible and try to kill off U.S. shale with low oil prices. OPEC and non-OPEC countries led by Russia agreed on Thursday to extend oil output curbs by nine months to March 2018, keeping roughly 2 percent of global production off the market in an attempt to boost prices. But OPEC now realises supply cuts and higher prices only make it easier for the shale industry to deliver higher profit after it found ways of slashing costs when Saudi Arabia turned up the taps three years ago. In the Permian Basin - the largest U.S. oilfield - Parsley Energy Inc, Diamondback Energy Inc and others are pumping at the fastest rate in years, taking advantage of new technology, low costs and steady oil prices to reap profits at OPEC's expense. OPEC's latest calculus acknowledges the global clout of shale but seeks to hinder its growth by keeping just enough supply on the market to hold prices below $60 per barrel.

Saudi Arabia's Falih dismisses US shale threat -- Saudi energy minister Khalid al-Falih played down the threat of rising US shale production in Moscow on Wednesday, especially in light of the deepening strategic relationship between Saudi Arabia and Russia and the extension of the OPEC and non-OPEC crude production cut deal agreed in Vienna last week. Falih, who was meeting with Russian energy minister Alexander Novak and OPEC Secretary General Mohammed Barkindo, outlined four drivers at play in the market: robust oil demand growth, the natural decline in legacy oil fields, investment cuts of $3 trillion over the last few years with a continued lack of sizable investments in long term projects, and the OPEC-led agreement to balance the market. "When these factors are taken together I can only conclude that the supplies coming from marginal barrels including shale production will not be sufficient to meet the future need for incremental capacity the mid-term," Falih said. "The market balance is already pointing in that direction," he added. "We have made tremendous progress in rebalancing the market and giving the market strong direction through our determined actions and high degree of conformity," Falih said of the agreement among producers to cut output by 1.8 million b/d in November 2016. This was followed up by high levels of compliance by most of the countries involved, with the OPEC/non-OPEC monitoring committee overseeing the deal pegging compliance among the deal's 24 members at 102% for April. 

Saudi Arabia To Trim Oil Exports To US To Force Inventories Lower -- Riyadh 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.Just one day after OPEC announced a nine-month extension to its November production cut deal, the top oil official told reporters on Friday that “exports to the U.S. will drop measurably.”Two sources close to the matter told Bloomberg that starting next month, Saudi crude supplies to American importers will be reduced to below one million barrels a day next month – a 15 percent decrease from the monthly average so far in 2017.The Organization of Petroleum Exporting Countries’ (OPEC) deal 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.The Energy Information Administration reports that American crude inventories have been on a downward trajectory in recent weeks, so the lower shipments may have a magnified impact as they are doled out. Bloomberg also noted that Saudi Arabia generally has less oil to supply to the U.S. in summer months due to amplified domestic demand for cooling needs during the scorching desert summer.

Now There's Another Source of Oil That's Starting to Get Cheap - Reports of deep-sea drilling’s demise in a world of sub-$100 oil may have been greatly exaggerated, much to OPEC’s dismay. Pumping crude from seabeds thousands of feet below water is turning cheaper as producers streamline operations and prioritize drilling in core wells, according to Wood Mackenzie Ltd. That means oil at $50 a barrel could sustain some of these projects by next year, down from an average break-even price of about $62 in the first quarter and $75 in 2014, the energy consultancy estimates. The tumbling costs present another challenge for the Organization of Petroleum Exporting Countries, which is currently curbing output to shrink a glut. In 2014, when the U.S. shale boom sparked oil’s crash from above $100 a barrel, the group embarked on a different strategy of pumping at will to defend market share and throttle high-cost projects. Ali Al-Naimi, the former energy minister of OPEC member Saudi Arabia, said in February 2016 that such producers need to either “lower costs, borrow cash or liquidate.” “There is life in deep-water yet,” said Angus Rodger, director of upstream Asia-Pacific research at Wood Mackenzie in Singapore. “When oil prices fell, many projects were deferred, but the ones that were deferred first were deep-water because the overall break-evens were highest. Now in 2017, we’re seeing signs that the best ones are coming back.” The falling costs make it more likely that investors will approve pumping crude from such large deep-water projects, the process for which is more complex and risky than drilling traditional fields on land. That may compete with OPEC’s oil to meet future supply gaps that the group sees forming as demand increases and output from existing wells naturally declines. Saudi Arabia’s Al-Naimi left his post shortly after his speech targeting high-cost producers, and his successor Khalid Al-Falih organized production cuts by OPEC and some other nations that are set to run through March 2018. In a speech in Malaysia this month, Al-Falih bemoaned the lack of investment in higher-cost projects and said he fears the lack of them could cause demand to spike above supply in the future. Warnings from OPEC of a looming shortage are “overstated and misleading,” Citigroup Inc. said in a report earlier this month. The revolution in unconventional supplies like shale is “unstoppable” unless prices fall below $40 a barrel, and deep-water output could grow by more than 1 million barrels a day by 2022, according to the bank.

Worth Re-Posting -- Global Crude Oil Supplies Increased First Three Months Of 2017 -- June 2, 2017 --A gazillion stories on the oil sector will be reported this month (as every month). It's hard to sort out the most important story or data point among all those stories. It's hard to think there's a bigger or more important data point than this one from the IEA: global crude oil inventories actually increased during the first three months of 2017.The second most important data point, or possibly even more important: it is expected that  US shale will more than make up for an OPEC / non-OPEC cut through March, 2018. From that same link:The US could add up to 1.5m barrels per day to global oil production next year, nullifying the impacts from the deal, which was extended by nine months in May, according to Igor Sechin.  The story that could be bigger before the end of 2017: the OPEC / non-OPEC pact begins to show signs of cracking.

Canada proposes methane pollution standards for oil and gas drilling - Canadian regulators are formally proposing rules to reduce methane pollution from the oil and natural gas sector. The Thursday announcement from Environment and Climate Change Minister Catherine McKenna came despite the Trump administration’s actions in the United States to reverse course on methane regulations written by former President Barack Obama. In proposing the rules, McKenna specifically cited the examples of California, Colorado and North Dakota as jurisdictions that Canada wants to emulate on methane regulation. “By better detecting and patching leaks, companies will be able to save and sell that natural gas and do their part to fight climate change. And this will support more modern technology and good new jobs in the oil and gas sector,” McKenna said in a statement. The rules target methane leaks in the drilling process, leaks from equipment, venting unused gas at wells and at compressor stations, among other places.

Trudeau claims climate champion role while embracing Big Oil -- Canada’s Prime Minister Justin Trudeau has offered himself as a global leader on climate change, unveiling an ambitious new environmental plan that includes phasing out coal-fired power plants, a tax on carbon, and big investments in renewable energy. But at the same time, Trudeau has promised to help expand Canada’s role as an energy exporter. He’s backed controversial pipeline projects including Keystone XL that would cross into the United States and is pushing for big new investments in the tar sands oil fields of northern Alberta. Trudeau insists that he’s striving for a kind of third way, embracing big oil while also acknowledging the imminent threat of climate change and respecting aboriginal sovereignty. Critics say he’s making promises that contradict each other and risks alienating the progressive voters who elected him in 2015.

Shell to Divest Canadian Natural Stake Worth $3 Billion - According to a recent report on Reuters , integrated oil company Royal Dutch Shell plc intends to sell roughly $3 billion worth stakes of Canadian Natural Resources Ltd. in order to withdraw its focus from the oil sand business in Canada. The decision by the company complements its strategy to divert its attention towards renewable energy. Shell will use the proceeds from the transaction to reduce its debt burden, which was incurred during previous year’s acquisition of British oil and gas company, BG Group plc. The $54 billion buyout was a part of the company’s strategy to focus on cleaner fossil fuel. Shell sold assets worth $20 billion over the last two years for financing the transaction. Also, Shell is likely to dispose more properties valued almost $10 billion by next year.

Battle over pipeline to divide Canada's left, weigh on Trudeau | Reuters: Messy political infighting over a pipeline threatens to divide Canada's left just as it gears up to name a new leader to face Prime Minister Justin Trudeau, jeopardizing the New Democrats' chances of gaining power-broker status in the 2019 election. A New Democratic Party-led alliance set to take power in Canada's Pacific province of British Columbia vowed on Tuesday to block Kinder Morgan Inc's plans to expand an oil pipeline, setting up a fight with energy-rich Alberta and the federal government. [nL1N1IW0KU] The brewing battle between the only two provincial NDP governments in Canada is bad news for the party, which should have been basking in a surprise ascent to power in the country's third most populous province. Instead, it has exposed the party's gulf over energy and the environment, setting the stage for a potential pitched battle between two sides of a party that must unite if it hopes to unseat Trudeau's Liberals or become, at least, kingmakers. "This could be the key dividing line between passionate environmentalists and economic pragmatists in the party," said pollster Nik Nanos of Nanos Research. While both Trudeau and the Alberta NDP government support the project, the NDP divide runs up the party line to Ottawa, where six candidates vying for leadership of the third-place federal NDP have varied views on pipelines and the economy. The party will elect its new leader in October.The western battle over the pipeline expansion, designed to carry crude from Alberta's oil sands to the west coast, also poses potential risks to Trudeau, who had scored a rare political victory with a pipeline policy that balanced demands of energy-dependent Alberta and the environmentalists in his party. 

Kinder's Canadian woes deepen with pipeline foes on brink of power -- Kinder Morgan Inc.’s setbacks in Canada just got more complicated. British Columbia’s New Democratic and Green parties on Tuesday signed a power-sharing agreement that will allow them to oust Premier Christy Clark as early as next month. A top pledge: Block Kinder’s C$7.4 billion ($5.5 billion) Trans Mountain pipeline expansion in the Pacific Coast province. "The idea that somehow a pipeline for a market -- which doesn’t exist -- is going to create jobs in British Columbia is nothing more than a myth," Green Party leader Andrew Weaver, 55, said of sales of Canadian crude to Asia as nations seek to meet climate commitments. At a news conference with his NDP counterpart John Horgan, 57, Weaver also mocked projects like Petroliam Nasional Bhd’s proposed $27 billion gas export terminal as "unicorns in all our backyards"The Greens, with just three seats, hold the balance of power in the province -- both the birthplace of Greenpeace and the terminus of the Trans Mountain line from Alberta’s oil sands. In exchange for support to form a government, the NDP agreed to push ahead on about a dozen issues dear to the Greens, ranging from electoral reform to public transit. Just hours earlier, the Canadian unit of Houston-based Kinder Morgan had raised C$1.75 billion to help pay for the expansion in one of the nation’s largest initial public offerings. It fell 4.5 percent in its trading debut as the new political alliance vowed to "employ every tool available to the new government to stop the expansion of the Kinder Morgan pipeline."

U.S. is now a net exporter of energy to Mexico -- Mexico is now the U.S.’s primary oil and gas export destination, outpacing Canada, according to the EIA. The U.S. has exported a larger amount of crude and petroleum products to Mexico than Canada since August 2016, and averaged a total of 950 MMBOPD in February. Exports to Mexico have been rising gradually over the last few years, and the U.S. has been a net exporter of crude oil and petroleum products to the country since 2015. The country is in the process of deregulating its fuels market, most recently by phasing out mandated gasoline prices. Demand in Mexico is growing by 3% per year, outpacing growth in supply. Gasoline prices rose by 20% in the country in January as the government raised maximum rates. The Mexican supply imbalance has made it an attractive destination for refined products, a situation companies are looking to take advantage of.

Fracking could be ‘the new asbestos’ warns report into risks to workers -- ALLOWING fracking in Scotland could pose “serious risks” to the health of workers, according to a new analysis by campaigners.  Over 150 studies have linked fracking chemicals to health problems, they say. US experts warn that silica dust from the fracking industry can cause permanent lung damage.  More than 40,000 objections to introducing fracking are expected to be lodged with the Scottish Government before its public consultation comes to an end on May 31. Ministers say they will decide whether or not to ban the industry before the end of the year.  Fracking involves pumping fluids down boreholes to hydraulically fracture rocks deep underground to release tiny pockets of shale gas. The gas can be used to heat homes or to make plastics.  The petrochemical giant, Ineos, imports gas from US fracking fields to its complex at Grangemouth. The company is also bidding to frack large areas of central Scotland and the north of England and has recently being buying up major parts of the North Sea oil industry. The UK government backs fracking in England but the Scottish Government has had a moratorium on the industry since January 2015. The Scottish Parliament voted narrowly in favour of banning fracking in June 2016. New research from the digital campaign group 38 Degrees says that fracking workers can be exposed to toxic chemicals. One is benzene, which the American Cancer Society links to leukaemia.  If silica dust from the sand used in the fracking process is inhaled it can damage lungs and in the long term cause silicosis. The US National Institute for Occupational Safety and Health concluded there was “an inhalation health hazard” for fracking workers. Researchers from the University of Missouri examined more than 150 studies on the health effects of fracking chemicals. They concluded that there was “evidence to suggest there is cause for concern for human health.”

Leave oil rigs in the North Sea, say conservationists   - Conservationists want oil companies and regulators to consider leaving more old rigs in the North Sea rather than removing them, with the savings paid into a fund to protect sealife. After the Brent Spar debacle in 1995 when Shell provoked public outrage with plans to sink an old storage buoy, international regulations were imposed that work on the presumption that operators will remove rigs. Exemptions can be granted but are rare and on limited grounds. The Scottish Wildlife Trust says a rethink is needed of how the Ospar rulesare applied, due to the multibillion-pound cost of decommissioning rigs – and because in some cases it would be better for the environment to leave platforms to become artificial reefs for marine life. Jonathan Hughes, the chief executive of the trust, said: “In the past, the natural reaction when you think of dumping a load of metal in the ocean is to throw your hands up in horror but when you look into it, it’s much more complicated. You could save money and have good environmental outcomes.” The trust said the savings for oil firms and the government – which has also been criticised over tax relief on decommissioning costs – could be ploughed back into a marine stewardship fund, as a form of compensation for leaving rigs in-situ. Hughes cited the example of MCP-01, a decommissioned North Sea rig owned by France’s Total that would have cost £387m for full removal or £11.7m to be made safe and left. The intervention by the trust, which has more than 40,000 members and manages a network of 120 wildlife reserves across Scotland, comes as Shell starts work on one of the region’s most high-profile decommissioning jobs. This month the world’s biggest ship removed one of the four platforms from Shell’s Brent field and delivered it to a Hartlepool scrapyard for recycling. The Anglo-Dutch oil firm recently awarded a contract to the oil services company Wood Group for the removal of a second Brent rig platform, Bravo. The Scottish Wildlife Trust said it did not want to be prescriptive about what the fund could pay for, but said examples could include enforcement of marine protected areas, cleaning up plastic rubbish in UK waters and supporting marine science research.

Dong Energy Divests Its Oil and Gas Business to Focus on Renewables --Denmark’s largest power producer, Dong Energy, agreed to sell its complete upstream oil and gas interests to global petrochemical manufacturer INEOS for $1.05 billion plus contingent payments, concluding an effort announced in October. This marks an existential reversal for Dong, whose very name abbreviates Danish Oil and Natural Gas. The Danish state created the company in 1972 to extract fuels from the North Sea. A few decades down the road, Dong moved into electricity production, and renewable generation in particular. Meanwhile, oil and gas drilling in the North Sea became relatively expensive due to the basin’s maturity. “The transaction completes the transformation of Dong Energy into a leading, pure play renewables company,” CEO Henrik Poulsen said in a statement this week. The sale still awaits regulatory approval, but is expected to close in Q3 of this year. It would include the transfer of 440 of Dong's 6,500 employees to Ineos.

Indonesia looking to increase crude imports from Nigeria: NNPC -- Indonesia is looking to increase its crude purchases from Nigeria, state oil firm Nigerian National Petroleum Corp. said Wednesday. Harry Purwanto, Indonesia's ambassador to Nigeria, said during a meeting with NNPC group managing director Maikanti Baru in Abuja that the Asian country was seeking to increase crude imports to meet its surging energy needs, the NNPC said in a statement. "The Indonesia ambassador disclosed that his country looked forward to lifting crude oil directly from Nigeria, rather than through a third party as is currently the case," NNPC said. The southeast Asian country is a keen consumer of Nigerian crude, buying around 30,000 b/d every month, according to S&P Global Platts estimates.

Iran eyes 5.3 Bcf/d of additional natural gas production from South Pars phases 17-21 = South Pars development phases 17-21 will add more than 150 million cubic meters/d (5.3 Bcf/d) of new gas production from the giant Iranian offshore field when they achieve full operating capacity, oil ministry news agency Shana reported Saturday quoting the CEO of National Iranian Oil Company, Ali Kardor. "We are now witnessing their completion and operation," Kardor said, referring to the five phases inaugurated in April, according to a transcript Shana published of an interview by Iran Petroleum. In a separate Shana report, Iran Petroleum put South Pars' current gas output at 540 million cu m/d, up from 280 million cu m/d in 2013, when Hassan Rouhani first became president. Development of the field started 15 years ago and has accelerated under Rouhani's administration, Iran Petroleum reported. To date, eight new South Pars phases have been brought on stream by the Rouhani administration. Rouhani was elected May 19 to his second term in office. Project phases 12, 15 and 16 were completed earlier. Iran's petroleum ministry has assigned top priority to the development of South Pars, which has gas reserves estimated at about 500 Tcf, not only because of the Persian Gulf field's huge size but also because it extends across Iran's maritime border with Qatar. Qatar calls its side of the gas deposit North Field and estimates the gas reserves at roughly 900 Tcf.

Analysis: Trump visit highlights continued US appetite for Saudi crude oil - During US President Donald Trump's first official overseas visit to Saudi Arabia earlier this month, oil was supposed to take a back seat -- or so analysts said ahead of the event. However, the fanfare in Riyadh over hundreds of billions of dollars of business deals signed between Saudi and US companies, including $55 billion of pledged investments by Saudi Aramco, revealed that oil could never have been far from anyone's mind. Of all the Middle East's oil producers, Saudi Arabia has enjoyed a special relationship with the US as a major crude supplier, which continues to this day. US oil imports have been shrinking for over a decade due to the shale boom, but figures from the Energy Information Administration show the US still imports significant amounts of Saudi crude, averaging over 1 million b/d, as has been the case in every year save one for more than the past quarter century. The 1.097 million b/d of Saudi crude the US imported in 2016 was nearly 36% off the all-time peak of 1.726 million b/d hit in 2003, but the Saudi share of US crude imports has slipped by only four percentage points over the same period to about 14%. Saudi Arabia remains the largest shipper of crude by sea to the US and its second largest crude supplier overall, after Canada. The general trend since 2009 of an eastward shift in trade flows of Persian Gulf crudes has been bucked by Saudi-US oil trade, and last year nearly 120,000 b/d more Saudi crude were delivered to the US than in 2009. The uptick has continued into this year, with EIA data showing US imports of Saudi crude averaged 1.338 million b/d in February.

Saudi Aramco signs deals to build gulf's biggest shipyard (Reuters) - Saudi Aramco plans to build the Gulf's largest shipyard through a joint venture with three companies that it announced on Wednesday, a $5.2 billion project aimed at helping reduce the economy's reliance on oil. Low oil prices have drastically slowed Saudi Arabia's economy so it is trying to create manufacturing jobs and produce goods and services which traditionally it has imported. Its strategy is to use large amounts of government money and the procurement budgets of big state-run enterprises, such as national oil firm Aramco, to attract foreign expertise to develop strategic industries. Aramco said it had signed a shareholder agreement with National Shipping Co of Saudi Arabia (Bahri), a state-controlled firm which ships oil for Aramco, London-listed United Arab Emirates engineering firm Lamprell Plc, and South Korea's Hyundai Heavy Industries Co. The 4.3 square kilometre (1.7 square mile) shipyard will be located at Ras Al Khair on Saudi Arabia's east coast. "The directors expect that the Maritime Yard will be the largest in the Arabian Gulf in terms of production capacity and scale," Lamprell said in a statement. Major production is expected to start in 2019 with the yard hitting full capacity by 2022. It will be able to work on four offshore rigs and over 40 vessels a year including three very large crude carriers (VLCCs), Aramco said. The government will cover about $3.5 billion of the total cost, with the remainder funded by the joint venture, said Lamprell, which will invest up to $140 million and own 20 percent of the venture. Aramco will own 50.1 percent, investing as much as $351 million.

Crude Export Habits Could Factor Into OPEC's Oil Balancing Act | Rigzone -- 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. Deon DaughertyDeon Daugherty, Senior Editor, RigzoneSenior Editor, Rigzone 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. 

Saudi Prince Mohammed Meets With Putin To Discuss Oil, Syria -- Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman is meeting Russian President Vladimir Putin today to discuss the extension of OPEC’s agreement with 11 other oil producers to extend the cuts approved last November, as well as the situation in Syria. Earlier in the day, Russia’s Energy Minister Alexander Novak met with his Saudi counterpart, Khalid al-Falih, to discuss, Reuters said, the situation on global oil markets. Despite the meeting, Russian-Saudi relations are not strained. The two support opposing sides in the Syrian civil war, and they are rivals in the Asian oil market. Yet, they have been thrown together by the 2014 oil price crisis, and more or less forced to collaborate on ways to prop up prices. While Russia, albeit with a budget deficit, has proved to be more resilient to the effect of what many observers saw as a price war waged by OPEC on U.S. shale, Riyadh has found it hard to withstand the blow and has become the most active advocate of the cuts in production. In the 2016 oil production cut agreement, Russia made a better bargain than Saudi Arabia: it boosted its production to more than 11 million bpd in November, which was taken as a basis month for the cuts, and only agreed to cut 300,000 bpd from its output.Saudi Arabia, on the other hand, undertook the biggest portion of the cut, and as of late May this year, according to Bloomberg, has cut production by 600,000 bpd, although its quota called for cuts of less than 500,000 bpd. As for Syria, bilateral relations have been strained. Back in 2015, Prince Mohammed said at a meeting with Putin that Riyadh was concerned with Moscow’s military involvement in support of President Bashar Assad and warned this involvement could have “dangerous consequences”.”. The outcome of today’s meeting, which should also include the signing of four cooperation agreements between Russia and Saudi Arabia, will be particularly interesting to see in the context of heightened tensions between Riyadh and Tehran as well as a flare-up of tension within the Gulf Cooperation Council. The latter was caused by friendly remarks from Qatar’s Sheikh about Iran on state media, which were later removed and attributed to “fake news”.

'Axis of love': Saudi-Russia detente heralds new oil order | Reuters: A meeting between the two men who run Russia and Saudi Arabia's oil empires spoke volumes about the new relationship between the energy superpowers. It was the first time that Rosneft boss Igor Sechin and Saudi Aramco chief Amin Nasser had held a formal, scheduled meeting - going beyond the numerous times they had simply encountered each other at oil events around the world. Their conversation also broke new ground, according to two sources familiar with the talks in the Saudi city of Dhahran last week who said the CEOs discussed possible ways of cooperating in Asia, such as Indonesia and India, as well as in other markets. The sources did not disclose further details, but any cooperation in Asia between Russia and Saudi Arabia - the world's two biggest oil exporters - would be unprecedented. State oil giant Aramco confirmed the meeting took place but declined to give details of the closed-door talks, which took place on the same day as OPEC kingpin Saudi Arabia and non-OPEC Russia led a global pact to extend a crude output cut to prop up prices. Kremlin oil major Rosneft declined to comment. The meeting - which also saw Nasser give Sechin a tour of Aramco's HQ, according to the sources - gives an insight into the newfound, unexpected and fast-deepening partnership between the two countries. It is one that will be closely watched by big oil consumers around the world which have long relied on the hot rivalry between their top suppliers to secure better deals. Such a detente between Moscow and Riyadh would have been almost unthinkable in the past. Up until a year ago, the two sides had virtually no dialogue at all, even in the face of a spike in U.S. shale oil production that had led to a collapse in global prices from mid-2014. Sechin was strongly opposed to Russia cutting output in tandem with OPEC.

Russian Energy Minister: Deeper Cuts Still On The Table -- Deeper cuts to OPEC’s oil production are not out of the question, but their implementation will depend on how things unfold with the current OPEC agreement, Russia’s Energy Minister Alexander Novak said in an interview with CNBC. “You know, we have the capability to react to any situation that might arise on the market. And to this end we have a technical committee working on this every month,” the minister said, adding that it was his opinion that in the next couple of months, stockpiles globally will continue to decline. In two months, the committee that was set up to monitor compliance and inventory developments during the agreement will meet in Moscow to discuss how the extension is going.Oil prices tumbled 5 percent after OPEC made its announcement yesterday, signaling the market expected more than just an extension of the current rate of cuts: it expected OPEC, combined with its non-OPEC collaborators, to deepen these to more than 1.8 million bpd.Yet, it seems that OPEC and Russia are for now comfortable with their quotas; or perhaps they are just not willing to risk losing further market share by cutting deeper. The latter is particularly likely for bigger OPEC producers such as Saudi Arabia and Iraq. The former has already lost some market share in Asia to the latter, to Iran, and to Russia. Iraq and Iran’s top oil men are also fine with the current arrangement, even though Iraq had as of the end of April still not sufficiently cut its output to meet its assigned quota. Energy Minister Jabar al-Luaibi, however, said at the OPEC meeting that Iraq is now compliant, producing 210,000 bpd less than in November. Iran’s Bijan Zanganeh said before the meeting that he considered both the six-month and nine-month extension scenarios “acceptable,” without elaborating. When asked if Iran would join the cuts if it is asked to, the oil minister refrained from a direct answer.

OPEC Can Still Do What It Takes to Prop Up Oil - “We’re going to do what it takes,” Khalid Al-Falih, Saudi Arabia’s energy minister, said in March. But by agreeing to an unexciting extension of cuts on May 25, the Organization of Petroleum Exporting Countries is merely tinkering. Unless the group acts decisively, it faces a slow process of attrition in rebalancing the market. But it can act decisively in two directions: much deeper cuts, or a longer-term commitment to higher output to scare off competitors. As Bloomberg’s Julian Lee notes, the current cut is minor compared to past episodes. Previous reductions of 4 million to 5 million barrels per day compare to a commitment of 1.7 million bpd this time. It is even less impressive when considering that this is the first time the cartel has had real (if partial) cooperation from significant non-OPEC producers. The last three major cuts occurred under different circumstances, though. All were in response to recession-led slumps in demand -- the 1998 Asian crisis, 2001 dot-com crash and 2008-2009 global financial meltdown. The current situation more closely resembles the mid-1980s, when rising output from new basins outside OPEC (the North Sea, Mexico and Alaska) meant that the group’s production cuts -- in practice, largely Saudi -- simply progressively ceded market share while failing to defend a price target. Proposals have been offered for a manipulation of the market, such as Goldman Sachs’ plan to try to flip it into backwardation. But these require impossible precision and coordination. Within OPEC, Libya and Nigeria cannot control their production levels or make any credible commitments, but rising Nigerian output has brought the country under pressure to consider a cap at some point. After the decisive re-election of President Hassan Rouhani, Iran is set to tender its giant new Azadegan field for international investors. Iranian output will not rise much for now, but it is certainly not willing to consider additional cuts. Iraq is chafing at its limits, with development resuming at some key fields. And the two leaders of the new (N)OPEC group, Saudi Arabia and Russia, have to herd the non-OPEC members who have joined, while there is still suspicion over Russia’s full compliance with the agreed limits. There is no prospect of bringing in any more significant producers -- Norway, Canada or Brazil. Other adherents to the agreement, such as Kazakhstan and Mexico, have new production in the works, sooner or later.

Russia's Economy Minister: "We Can Live Forever At $40 Oil" -- (video) The OPEC/non-OPEC deal is working, and the current underlying key assumption of Russia’s economic policies—oil prices at US$40—can allow it to live forever at that price or below, Russia’s Economy Minister Maxim Oreshkin told Bloomberg in an interview on the sidelines of the St. Petersburg International Economic Forum on Thursday.OPEC and Russia are already achieving what they intended to achieve with the deal—a decline in crude oil inventory levels around the globe, the minister said.Arguing that OPEC “has not failed at all” in its attempt to drive oil prices up, Oreshkin said that the price of oil is now much higher than it was this time last year, before the cartel and 11 non-OPEC producers led by Russia struck the initial output cut deal."We are targeting tighter short-term end of the curve,” the minister said, noting that hedge funds are currently taking risks with medium-term prices a year or two ahead.From a Russian economy perspective, the key assumption on which all Russian monetary and fiscal policies are based is oil at US$40, Oreshkin said. Russia is not as dependent on the price of oil as it was five or ten years ago, the minister noted, and said: “We are actually ready to live forever at oil prices $40 or below.” On Wednesday, Saudi Energy Minister Khalid al-Falih said—after meeting with his Russian counterpart Alexander Novak—that OPEC and non-OPEC producers are committed to do “whatever it takes” to draw the global crude oil inventories down to their five-year average. Last week, just a day after the output cut deal was extended as-is until March 2018, Novak said in an interview with CNBC that deeper cuts to OPEC’s oil production were not out of the question, but their implementation would depend on how things unfold with the current agreement.

Pre-OPEC short covering left oil price poised to fall: Kemp (Reuters) - Hedge fund managers had already closed out many of their bearish short positions in crude oil before OPEC and non-OPEC ministers met in Vienna on May 25, according to data from regulators and exchanges. The bout of short-covering explains why oil prices rose consistently in the run up to the meeting, then sold off sharply afterwards when ministers decided to leave output quotas unchanged.Hedge funds and other money managers raised their net long position in the three main Brent and WTI futures and options contracts by the equivalent of 89 million barrels in the week to May 23 (http://tmsnrt.rs/2qBEJ0J).The net long position increased for a second week running, after rising 6 million barrels the previous week, but only after it had fallen by 308 million barrels during the three weeks prior to that (http://tmsnrt.rs/2s9DrvZ).Nearly all the most recent increase came from a sharp reduction in the number of short positions, which fell by 87 million barrels, rather than an increase in long positions, which were up by just 2 million barrels.Hedge fund managers gradually accumulated short positions between mid-April and mid-May amid growing doubts about whether output cuts by OPEC and non-OPEC would be enough to rebalance the oil market.But as the OPEC meeting approached, many of those short positions were closed as a precaution in case ministers decided to surprise the market by announcing a second round of cuts (http://tmsnrt.rs/2s9jXaL). Past experience shows oil prices rise when OPEC cuts its production quotas but tend to decline if OPEC decides to leave them unchanged. So once the meeting finished with a decision to roll over existing cuts rather than deepen them, a fall in prices became highly likely and self-fulfilling. Hedge fund short positions in Brent and WTI more than doubled from 161 million barrels on April 18 to a peak of 356 million barrels on May 16. But by May 23, two days before the OPEC meeting, many fund managers had squared up or at least reduced their bearish positions and the number of shorts had been reduced to just 269 million barrels. With so many short positions eliminated in the run up to the OPEC meeting, mostly for tactical reasons, it was no surprise oil prices tumbled afterwards when ministers did not deliver a surprise cut (http://tmsnrt.rs/2qBv1vF).

Oil slips as more US drilling outweighs OPEC-led cuts: Oil prices slipped on Monday as further increases in U.S. drilling activity undercut an OPEC-led push to tighten supply. Trading was subdued due to public holidays in China, the United States and Britain, but concerns lingered over whether OPEC action would be enough to stem the tide of oversupply. Brent crude futures were trading down 19 cents at $51.96 per barrel at 0857 GMT. The contract ended the previous week down nearly 3 percent. U.S. West Texas Intermediate (WTI) crude futures were also down 19 cents at $49.61 per barrel.The Organization of the Petroleum Exporting Countries and some non-OPEC producers pledged last week to extend production cuts of around 1.8 million barrels per day (bpd) until March 2018. An initial agreement, in place since January, would have expired in June this year. Commerzbank analyst Carsten Fritsch called Monday's price moves little more than "intraday noise" but said hints of deeper cuts or a longer extension from OPEC left the market deflated after the final decision. "They increased expectations to such an extent that nine months was a disappointment," Fritsch said. High compliance with the cuts so far was unlikely to last, he said, adding to worries about whether the pledge would dent physical oil stockpiles that remain near record levels. "The pain for OPEC will increase to such a point that 100 percent compliance is unrealistic," Fritsch said. 

Oil Markets Worry OPEC Has No Exit Strategy -- Oil prices fell on Monday on another gain in the rig count, even though it was only a small increase. Analysts still wonder if the soft oil price is here to stay, or if it is short-term “noise.” Even though OPEC extended its production cuts last week, the market had already expected such a move, leading to a selloff in prices. Now, going forward, traders will want to see real and sizable declines in inventories as proof that the deal is working. The one worry is that the longer the oil price fails to rally, the less likely that OPEC will be able to keep all participants complying with their promised cuts.  Analysts are also concerned that OPEC has no exit strategy. The cuts work so long as they are in place, but what happens when inventories are back to their five-year average? Will OPEC go back to producing at maximum levels? That could quite possibly crash prices all over again. The lack of a strategy after the nine-month period offset what OPEC thought would have been bullish news when they extended the cuts last week.   Goldman has been one of the most consistently optimistic voices on oil prices, routinely arguing that the market is heading towards balance. But the investment bank capitulated to poor conditions by lowering its forecast to $52.39 per barrel this year, down from $54.80 previously.  Oil analysts expect that with the OPEC extension finalized, the drawdown in crude oil inventories will accelerate this year. The U.S. has already seen a drop off in storage, but the weekly declines could grow larger. Some traders, according to Reuters, predict that the drawdowns could jump as high as 10 million barrels per week, while those that are more cautious suggest declines on the order of 3 to 4 million barrels. “I think we'll easily get below 500 million barrels over the next six to eight weeks, or eight to 10 to be conservative,” Andrew Lebow, senior partner at Commodity Research Group, told Reuters. That would be down from the record high of 533 million barrels hit in March.

Ignore OPEC, It's China That Dictates Oil Prices -- The OPEC deal will lead to an ongoing tightening of the crude oil market, putting a floor beneath crude prices in the $50s per barrel in the second half of 2017, according to Helima Croft of RBC Capital Markets. She said that prices should ultimately “grind higher into the $60s” by the fourth quarter, with an average price for WTI expected at $61. Political and economic pressure surrounding Saudi Aramco’s IPO and Russian elections – both of which are slated for 2018 – will ensure that OPEC and non-OPEC does “whatever it takes” to keep oil prices stable and on the rise. But there are a lot of factors outside of OPEC’s control. High up on that list is the role of China, a country that has received little attention in the oil world as of late amid all the furor over the OPEC vs. U.S. shale debate. But China could make or break the oil market this year and next, depending on what happens with its economy. "If you wanted to know where the downside risk is, it is not in OPEC's decision or in U.S. driving demand or in global inventories rebalancing. I think China is the big source of concern," Prestige Economics President Jason Schenker told CNBC. Moody’s Investors Service downgraded China’s credit rating on May 24 to A1 from Aa3,explaining that the Chinese government might try to juice the economy with higher spending levels, which will lead to ballooning debt. The decision from Moody’s is ominous as it is the first credit downgrade for China in nearly three decades. Moody’s expects economic growth to continue to slow in China, putting a heavier burden on government stimulus when debt has already started to become a concern. "It's really the size of the leverage, the trends in leverage as well as the debt servicing capacities of the institutions that have that debt. When growth slows, then that points toward slower revenue growth, probably slower profitability and somewhat weaker debt servicing capacity," Marie Diron, senior vice president for Moody's sovereign rating group, said on CNBC's “Street Signs.” A softer Chinese economy has enormous implications for the oil market. China is the largest crude oil importer in the world and it is expected to account for one of the largest sources of demand growth this year – the IEA expects Chinese oil demand to expand by 400,000 barrels per day to 12.3 million barrels per day (mb/d). "Without China, the oil market cannot survive,"Fereidun Fesharaki, founder of FGE, told CNBC.

Despite OPEC/non-OPEC producers extending cuts, oil market fundamentals remain bearish -- Platts Snapshot video -- OPEC and its non-OPEC partners agreed May 25 to maintain crude oil production cuts, yet prices tumbled. James Bambino explains why doubts remain about the balance of global markets and examines whether the commitment to output cuts is enough to reverse the bearish state of the spot oil market. Refined product stocks, displaced barrels and healthy refining margins all play a part in the market, and it will be important to keep a close eye on fundamentals. For more on why the crude market rally has fizzled, read a detailed analysis from James Bambino on The Barrel blog.

Oil prices slide on worries Libya output will feed glut --Oil prices fell about 1 percent on Tuesday, on signs of resurgent crude output in Libya and concerns that extended production cuts by leading exporting countries may not be enough to drain a global glut that has depressed prices for almost three years. Brent crude LCOc1 ended the session 45 cents, or 0.9 percent, lower at $51.84 a barrel, while U.S. light crude CLc1 fell 14 cents, or 0.3 percent, to $49.66. "This is a rangebound market until you get something breaking out that tells you a longer term story," said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management. "For now the story is just one of an oversupplied market with the lower end of prices being defended by OPEC." Libya's oil production was at 784,000 barrels per day (bpd) because of a technical issue at the Sharara field, but was expected to start rising to 800,000 bpd on Tuesday, the chief of the state-run National Oil Corporation said. The Organization of the Petroleum Exporting Countries and other oil producers, including Russia, agreed last week to maintain output cuts of about 1.8 million barrels a day for nine months longer than originally planned. Still, prices tumbled after the OPEC deal was announced. The cutbacks have yet to drain crude inventories significantly.

Is This Saudi Arabia's Newest Strategy To Boost Oil Prices? -- OPEC’s new strategy to balance the oil market is to cut oil exports to the U.S., a move intended to drain near-record-high crude oil inventories. OPEC originally thought that six months of combined production cuts would be sufficient to balance the oil market, but the market still looks oversupplied. Not everyone agrees on this. The IEA has argued that we probably have already reached “balance,” which is to say, demand has caught up with supply. The energy agency says that the market is moving into a supply deficit situation in the second half of this year, if it hasn’t already. But the problem is that the one metric that OPEC officials themselves have held up as the key barometer to watch is the level of global crude oil inventories, rather than the immediate supply/demand balance. And on that front, they sort of shot themselves in the foot by ramping up exports just ahead of the implementation of the cuts late last year.Elevated exports in November and December meant that huge volumes of oil started reaching U.S. shores in January. It is no wonder that U.S. inventories surged in the first quarter. The flood of oil set back OPEC’s efforts right off the bat, and even close-to-100-percent compliance on the production cuts was not enough to drain inventories at the speed needed to declare victory by June.The huge increase in U.S. inventories means that OPEC needs six months just to get inventories back to where they started at the end of last year. “Producers unintentionally accelerated activities that would ultimately obstruct, and for a period reverse, the very rebalancing they were trying to accelerate,” Ed Morse, head of commodities research at Citigroup, said in April.

Oil Falls Amid Doubts OPEC Curbs Will Counter Shale Production - Oil fell amid doubts that prolonged cuts by OPEC and its allies will succeed in clearing a surplus while U.S. output remains so resilient. Futures pared losses after falling as much as 3.9 percent. While Saudi Arabia’s Energy Minister Khalid Al-Falih said the cuts are working and predicted global inventories will fall to the five-year average in early 2018, American drillers continue to add rigs to shale fields. American supplies fell 8.67 million barrels last week, the American Petroleum Institute was said to report. The market’s initial reaction to increased output from Libya was tempered as OPEC and Russia affirmed the goal of tackling the global glut, said John Kilduff, a partner at Again Capital, a New York-based hedge fund that focuses on energy. “Competing commentary from the Saudis and Russia" on "keeping up the good work" offset the response, he said. “At some point, the verbal interventions do work." Even with U.S. crude stockpiles forecast to show declines for an eighth week, West Texas Intermediate for July delivery settled at $48.32 a barrel on the New York Mercantile Exchange, down $1.34. The contract lost 14 cents to $49.66 on Tuesday. WTI traded at $48.79 at 4:40 p.m. after the API report was released. Brent for July settlement, which expired Wednesday, dropped $1.53, or 2.6 percent, to $50.31 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $2.16 to WTI. The deal is coming across as ineffective to investors as more barrels enter the market from the U.S. and Libya

WTI Crude Tumbles To $47 Handle As OPEC-Compliance Drops --Crude oil prices have retraced 50% of their pre-OPEC-deal hope rally and dropped back below $48 as JBC Energy reports OPEC compliance dropping to 92% in May from 96% in April. Additionally, Bloomberg notes: *OPEC-14 OUTPUT ROSE 370K B/D TO 32.5M B/D IN MAY: JBC ENERGY“There continues to be considerable skepticism about the effectiveness of the production cuts,” Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said in a report.“Oil prices are still trending towards weakness.”

4 Wildly Different Oil Price Scenarios For 2020 - One school of thought is that the severe cuts to upstream spending that have stretched into a third year are sowing the seeds of a supply shortage around 2020. The IEA is probably the most recognizable forecaster that falls into this camp. The agency has repeatedly pointed to the fact that new oil discoveries are at their lowest level in 70 years."There were no discoveries because there is no money for exploration. You find something if you look for it," the IEA’s executive director Fatih Birol said earlier this year. The IEA says the industry must step up spending if they are to avoid a supply crunch in a few years’ time. “[W]e are emphasising an important message: more investment is needed in oil production capacity to avoid the risk of a sharp increase in oil prices” by the early 2020s, the IEA wrote in a March report.But other analysts have an entirely different view, expecting oil prices to remain low for the foreseeable future, although for varying reasons.Some focus on peak demand, which mainly comes down to alternatives to oil. The most fervent believers in both electric vehicles and autonomous vehicles argue that oil demand is nearing a peak, so there is little chance of another major bull run. Even if more mainstream oil forecasters don’t see such a dramatic scenario on the horizon, they do see some supply-side forces that prevent an oil price spike. Namely, improving technology and falling breakeven prices for shale production could put a ceiling on the price of crude for the next few years. Goldman Sachs agreed with that sentiment a few weeks ago, stating that they are growing more confident that longer-term oil price range is “drifting lower.” Goldman says it sees lower prices over the next five years because of the “growing visibility on the sources of future supply.” And they also pointed to the resilience of U.S. shale as a principle reason for oil prices remaining low not just for the near-term but into the 2020s.

OPEC oil output rises in May as cut-exempt Nigeria, Libya pump more | Reuters: OPEC oil output rose in May, the first monthly increase this year, a Reuters survey found on Wednesday, as higher supply from two OPEC states exempt from a production-cutting deal, Nigeria and Libya, offset improved compliance with the accord by others. A drop in output in Angola and Iraq and continued high compliance from Gulf producers Saudi Arabia and Kuwait helped lift OPEC's adherence with the supply cut deal to 95 percent from 90 percent in April, according to Reuters surveys. The Organization of the Petroleum Exporting Countries pledged to reduce output by about 1.2 million barrels per day (bpd) for six months from Jan. 1 as part of a deal with Russia and other non-members. Oil prices has gained some ground but an inventory glut and rising supply by outside producers has kept prices below the $60 a barrel that Saudi Arabia wants. A sustained output rise from Libya and Nigeria poses further challenges. To provide additional support for prices, the producers decided at a meeting last week to prolong the deal until March 2018. They discussed whether to include Nigeria in the output cap but decided against for now, OPEC delegates said. Nigeria and Libya were exempted because their output has been curbed by conflict. However, supplies from both nations staged a partial recovery in May, lifting overall OPEC output by 250,000 bpd to 32.22 million bpd. The biggest increase came from Nigeria, where the Forcados production stream began loading cargoes for export. The Forcados pipeline had been mostly shut since it was bombed by militants in February 2016.

WTI/RBOB Jump After Biggest Crude Draw Since September -- Libya production updates and weak economic data weighed on crude ahead of the API print tonight but as the data hit showing a bigger than expected crude draw (8th week in a row), both WTI and RBOB jumped higher. This was the biggest crude draw since Sept 2016.  API

  • Crude -8.67mm (-3mm exp)
  • Cushing -753k
  • Gasoline -1.726mm (-1.5mm exp)
  • Distillates +124k

If this holds for tomorrow's DOE data, this is the 8th weekly crude draw in a row (and this week's 8.67mm draw is the largest since Sept 2016)

Oil Falls Amid Doubts OPEC Curbs Will Counter Shale Production - Oil fell amid doubts that prolonged cuts by OPEC and its allies will succeed in clearing a surplus while U.S. output remains so resilient. Futures pared losses after falling as much as 3.9 percent. While Saudi Arabia’s Energy Minister Khalid Al-Falih said the cuts are working and predicted global inventories will fall to the five-year average in early 2018, American drillers continue to add rigs to shale fields. American supplies fell 8.67 million barrels last week, the American Petroleum Institute was said to report. The market’s initial reaction to increased output from Libya was tempered as OPEC and Russia affirmed the goal of tackling the global glut, said John Kilduff, a partner at Again Capital, a New York-based hedge fund that focuses on energy. “Competing commentary from the Saudis and Russia" on "keeping up the good work" offset the response, he said. “At some point, the verbal interventions do work." Even with U.S. crude stockpiles forecast to show declines for an eighth week, West Texas Intermediate for July delivery settled at $48.32 a barrel on the New York Mercantile Exchange, down $1.34. The contract lost 14 cents to $49.66 on Tuesday. WTI traded at $48.79 at 4:40 p.m. after the API report was released. Brent for July settlement, which expired Wednesday, dropped $1.53, or 2.6 percent, to $50.31 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $2.16 to WTI. The deal is coming across as ineffective to investors as more barrels enter the market from the U.S. and Libya

WTI/RBOB Mixed After Biggest Crude Draw Since 2016, Production Hits 21-Month Highs --- Oil prices have roller-coastered since last night's API report of the biggest crude draw since September (hurricane-impacted), but kneejerked higher after DOE confirmed a big crude draw (though less than API), the largest since Dec 2016 and 8th weekly draw in a row. Distillates saw a surprise build and production rose again to its highest since Aug 2015. DOE:

  • Crude -6.43mm (-3mm exp)
  • Cushing -747k (-500k exp)
  • Gasoline -2.86mm (-1.5mm exp)
  • Distillates +394k (-700k exp)

8th weekly crude draw in a row and biggest since Dec 2016... surprise build in distillates

U.S. refiners process record volume of crude as demand climbs: Kemp  (Reuters) - U.S. oil refineries are processing record volumes of crude but stocks of refined fuels remain well contained thanks to strong exports and demand at home.U.S. refineries processed 17.5 million barrels per day (bpd) of crude in the week ending on May 26, according to the U.S. Energy Information Administration ("Weekly Petroleum Status Report", EIA, June 1).Throughput was more than 1.2 million bpd higher than at the same point in 2016 and 2.2 million bpd above the 10-year seasonal average.Record refinery runs have helped pull down U.S. crude stocks by 31 million barrels since the end of March, with inventories drawing down much faster and earlier in the year than normal.But despite fears that record processing would result in a build up of unsold products, stocks of gasoline and diesel have generally moved in line with normal seasonal patterns.Part of the explanation lies in the strength of exports, mostly to markets in Central America, South America and the Caribbean, where ageing and inefficient refineries have struggled to meet growing demand from consumers.U.S. refineries are increasingly geared towards meeting demand from the rest of the hemisphere rather than just the United States.U.S. refiners and traders exported 640,000 bpd of gasoline in the week ending on May 26, and a near-record 1.25 million bpd of distillate fuel oil.Fuel consumption at home is also now running at record or near-record levels, according to an analysis of EIA data.Gasoline supplied to domestic customers in the United States hit a record 9.8 million bpd last week, an increase of roughly 330,000 bpd compared with the same period in 2016. Distillate supplied averaged 4.1 million bpd, significantly higher than in 2016, though still below the record set in 2007.

Oil mixed; global crude glut drags despite big U.S. inventory draw - Oil prices were mixed on Thursday, with Brent crude down on concerns that key producers were still adding to the global crude glut but U.S. crude up slightly after a larger-than-expected domestic inventory drawdown.U.S. crude futures CLc1 settled up 4 cents at $48.36 a barrel, while Brent LCOc1 ended down 13 cents at $50.63. After settlement, both benchmarks fell, failing to sustain the lift from the morning news of declining U.S. crude and gasoline stocks.Eight straight weeks of declining crude and the market is barely up," said Gene McGillian, manager of market research at Tradition Energy in Stamford, Connecticut. “The market is telling us that unless we have significant inventory draws, the idea that we’re going to have stronger prices doesn’t look to be realistic.”Weekly data from the U.S. Energy Information Administration (EIA) showed crude inventories dropped 6.4 million barrels, exceeding the 4.4 million-barrel drop forecast. Gasoline inventories also dropped sharply ahead of the start of the summer driving season, the EIA said.On Wednesday, a Reuters survey found output from the Organization of the Petroleum Exporting Countries (OPEC) rose in May, the first monthly increase this year, as higher supply from two states exempt from a production-cutting deal, Nigeria and Libya, offset improved compliance with the accord by others.. U.S. production increased, and the expectation is that ongoing activity in U.S. shale will continue to boost output, offsetting OPEC efforts. OPEC and other producers, including Russia, have agreed to restrict output by 1.8 million bpd to drain stockpiles that are close to record highs in many parts of the world. U.S. production is closing in on levels from top producers Russia and Saudi Arabia. It hit 9.34 million bpd last week, highest since August 2015.  In Libya, output has recovered to 827,000 bpd after technical problems were resolved at the Sharara field.

Oil drops 2% as US climate withdrawal compounds glut concerns: Brent crude oil tumbled below $50 on Friday, heading for a second straight week of losses, on worries that U.S. President Donald Trump's decision to abandon a climate pact could spark more crude drilling in the United States, worsening a global glut. Benchmark Brent crude futures were trading at $49.52 a barrel at 8:48 a.m. ET (1248 GMT), down $1.11, or 2.2 percent. U.S. West Texas Intermediate crude futures fell $1.07, or 2.2 percent, to $47.29 per barrel. Both contracts were on track for weekly losses of more than 5 percent. The U.S. withdrawal from the landmark 2015 global agreement to fight climate change drew condemnation from Washington's allies - and sparked fears that U.S. oil production could expand even more rapidly.U.S. crude production last week was up by nearly 500,000 barrels per day (bpd) from year-earlier levels, straining OPEC's efforts to reduce global oversupply. "This could lead to a drilling free-for-all in the U.S. and also see other signatories waver in their commitments," said Jeffrey Halley, senior market analyst at futures brokerage OANDA. He added that the move could complicate the market outlook in a way that "would not be favorable to oil prices." "I think we will see a United States that is about to go crazy in terms of producing fossil fuels," said Matt Stanley, a fuel broker at Freight Services International in Dubai, adding other producers could do the same. "Why wouldn't they ramp up production when producers like the U.S. have an open invite to do as they please?"

U.S. oil-rig count posts weekly climb, up 5 months in a row -- Baker Hughes on Friday reported that the number of active U.S. rigs drilling for oil climbed by 11 to 733 rigs this week. That marked a 20th weekly rise in a row, or roughly five months. The total active U.S. rig count, which includes oil and natural-gas rigs, climbed by 8 to 916, according to Baker Hughes. Oil prices appeared unfazed in the wake of the data. July West Texas Intermediate crude was down 51 cents, or 1.1%, to $47.85 a barrel on the New York Mercantile Exchange, little changed from its level before the data.

Oil Prices Fall As U.S. Rig Count Rises For 20th Straight Week - The number of active oil and gas rigs in the United States rose for the twentieth straight week, Baker Hughes reported on Friday—this time by 8, as drillers in the US make do with current barrel prices even below $50.The number of oil rigs in operation increased by 11, while gas rigs decreased by 3. Combined, the total oil and gas rig count in the US now stands at 916 rigs—more than double the number of rigs in operation a year ago, when WTI barrel prices were about $49.05—higher than today’s price per barrel for WTI. Say what they will about rebalancing the oil market—even if they say it again and again—OPEC and its non-OPEC counterparts have been unable to swing prices (and keep them) near $60 per barrel. Undeterred and even seemingly satisfied with the current pricing environment, shale players in the US are showing no signs of stopping, adding 256 oil rigs since December 2, shortly after OPEC announced its agreement. These weekly US rig count increases may soon taper off if oil prices continue to go nowhere—an event that may itself lift prices, triggering another round of investments in the shale patch. At 12:40pm EST on Friday, WTI was trading down .99% for the day at $47.88—almost $1.50 lower than last week’s pre-rig count price at $49.39. Brent Crude was trading down 0.91% at that time at $50.17, down $1.65 from last week’s $51.82 price. By basin, the Permian added 2 rigs, and now boasts 364 rigs in operation—222 rigs over a year ago. DJ-Niobrara, Utica, and Williston basins all added a rig, while Marcellus and Mississippian lost 2 and 1 respectively.

BHI: US rig count climbs for 20th straight week - Oil & Gas Journal -- The number of active drilling rigs spread across the US has increased in 20 straight weeks, according to data compiled by Baker Hughes Inc. The overall US count gained 8 units during the week ended June 2 to 916, up 512 since a low point in recent BHI data on May 20-27, 2016, and its highest point since Apr. 24, 2015. Over the past 20 weeks, the tally has surged up 257 units (OGJ Online, May 26, 2017). Oil-directed rigs jumped 11 units to 733, up 417 since their recent bottom on May 27, 2016. Gas-directed rigs, which led last week’s US gain, dropped 3 units to 182, still up 101 since Aug. 26. One rig considered unclassified remains drilling in the US. All 8 units to come online are land-based, bringing that count to 889. Rigs drilling horizontally increased 5 units to 771, up 457 since May 20-27, 2016. Rigs drilling directionally rose 3 units to 68. Offshore rigs and those drilling in inland waters remained at 23 and 4, respectively, this week. US Energy Information Administration data for the week ended May 26 shows US crude oil production increased 22,000 b/d to 9.34 million b/d. Of the increase, 20,000 b/d came from the Lower 48 and 2,000 b/d from Alaska. Analysts at Rystad Energy believe US oil production could reach 10 million b/d before Dec. 31, approaching the record high posted in November 1970. In the industry consulting firm’s monthly report on oil market trends, the analysts see US output rising 95,000 b/d each month this year propelled by shale drilling, with modest growth from Gulf of Mexico deepwater fields offsetting declines from other conventional fields.  More than half of all active US rigs reside in Texas, where the count collected 5 more units during the week to 463, an increase of 290 since May 20-27, 2016. The Permian did its usual part to supply the rebound with a 2-unit gain to 364, up 230 since May 13, 2016. Oklahoma rose 3 units to 126, up 72 since June 24, 2016. The Mississippian, however, declined a unit to 8. North Dakota, Colorado, and Ohio each increased a unit to 46, 35, and 25, respectively. Accordingly, the Williston, DJ-Niobrara, and Utica also each rose a unit to respective totals of 46, 28, and 26.  New Mexico and Pennsylvania each dropped 2 units to 55 and 33, respectively. Primarily pushing down the overall US gas-directed rig count, the Marcellus lost 2 units to 43, still up 22 since Aug. 12.

Saudi Reserves Dip Below $500 Billion as BofA Sees Headwinds - Saudi Arabia’s net foreign assets dropped below $500 billion in April for the first time since 2011 even after the kingdom raised $9 billion from its first international sale of Islamic bonds. The Saudi Arabian Monetary Authority, as the central bank is known, said on Sunday its net foreign assets fell by $8.5 billion from the previous month to about $493 billion, the lowest level since 2011. That brings the decline this year to $36 billion. “Didn’t really see any major driver for such a huge drop, especially when accounting for the sukuk sale,” said Mohamed Abu Basha, a Cairo-based economist at EFG-Hermes, an investment bank. Even if the proceeds from the sale weren’t included, “the reserve decline remains huge,” he said. Saudi Arabia’s foreign reserves have dropped from a peak of more than $730 billion in 2014 after the plunge in oil prices, prompting the International Monetary Fund to warn that the kingdom may run out of financial assets needed to support spending within five years. Authorities have since embarked on an unprecedented plan to overhaul the economy and repair public finances. But the pace of the decline in reserves this year has puzzled economists who see little evidence of increased government spending, fueling speculation it’s triggered by capital flight and the costs of the kingdom’s war in Yemen. Finance Minister Mohammed Al-Jadaan said in April that the government didn’t withdraw from its central bank reserves during the first quarter. He said the decline could be attributed to local contractors paying overseas vendors after the government settled its arrears.

Economists Puzzled By Unexpected Plunge In Saudi Foreign Reserves -- The stabilization of oil prices in the $50-60/bbl range was meant to have one particular, material impact on Saudi finances: it was expected to stem the accelerating bleeding of Saudi Arabian reserves. However, according to the latest data from Saudi Arabia’s central bank, aka the Saudi Arabian Monetary Authority, that has not happened and net foreign assets inexplicably tumbled below $500 billion in April for the first time since 2011 even after accounting for the $9 billion raised from the Kingdom's first international sale of Islamic bonds. As the chart below shows, according to SAMA, Saudi net foreign assets fell by $8.5 billion from the previous month to $493 billion the lowest in six years, bringing the decline this year to $36 billion. Over the past three years, Saudi foreign reserves have dropped by a third from a peak of more than $730 billion in 2014 after the plunge in oil prices, prompting the IMF to warn that the kingdom may run out of financial assets needed to support spending within five years,according to Bloomberg. Analysts were puzzled by the ongoing sharp decline in Saudi reserves, especially since Saudi authorities recently embarked on a very public and "unprecedented" plan to overhaul the economy and repair public finances. Quoted by Bloomberg, Mohamed Abu Basha, a Cairo-based economist at EFG-Hermes said that he "didn’t really see any major driver for such a huge drop, especially when accounting for the sukuk sale." He added that even if the proceeds from the sale weren’t included, “the reserve decline remains huge."Adding to the confusion, the pace of the decline in reserves this year "has puzzled economists who see little evidence of increased government spending, fueling speculation it’s triggered by capital flight and the costs of the kingdom’s war in Yemen." Of course, the recent purchase of $110 billion in US weapons will be an even greater drain on Saudi finances, and begs the question whether the Saudis can even afford it.

Selective tax from June 10 | Saudi Gazette: — Saudi Arabia announced on Saturday that the selective tax will be implemented from June 10 and the value-added tax (VAT) from January 1. The announcement was made by the General Authority of Zakat and Tax based on a decision taken by the General Secretariat of Gulf Cooperation Council (GCC) on May 23. The selective taxes that will be implemented by all Gulf countries target several items, including tobacco products and power drink by 100 percent and fizzy drinks by 50 percent. The Zakat Authority is responsible for collecting VAT and ST, ensuring that all taxpayers comply with relevant laws and that no one evades taxes. It applies international standards for tax collection and uses state-of-the-art technology to ensure precision and accuracy. If registered people (traders, importers etc.) fail to present a tax declaration to the General Authority of Zakat and Tax, then they will be penalized by a fine ranging between 5% and 25% of the tax value. Those who withhold information or violate regulations or obstruct Zakat Authority’s employees from carrying out their duties will be fined up to SR50,000. Those who import or produce commodities liable to selective tax and don’t register the required information with the Authority will be considered as tax evaders.

Clash Between Qatar And The Saudis Could Threaten OPEC Deal - The cohesion of the Gulf Cooperation Council (GCC), which includes all Arab Gulf countries,seems to be cracking. UAE Minister of State for Foreign Affairs, Anwar Gargash, openly stated that the GCC was facing a major crisis, as Qatar seems to be opening up to Iran. Gargash made his comments on Twitter less than a week after Saudi Arabia and the UAE signaled frustration at Qatar. The simmering conflict between the UAE and Saudi Arabia on one side and Qatar on the other has again been heating up after the Qatar’s News Agency (QNA) was purportedly hacked, spreading remarks by Qatari Emir Tamim bin Hamad al-Thani which criticized Gulf rhetoric against Iran and suggested strains between the Emir and U.S. President Donald Trump. Qatar has vehemently denied these quotes, but the Saudi, Emirati and Egyptian governments have reacted by blocking Qatari news sites and TV stations, including Al Jazeera. The crisis between Qatar and its GCC neighbors, Saudi Arabia, UAE and Bahrain, emerged shortly after Tamim bin Hamad Al Thani, the Emir of Qatar, visited Saudi Arabia for the meeting between the heads of state of most Islamic countries and U.S. president Trump. During these meetings, as indicated by Arab sources, Sheikh Tamim has called Iran a force of stability. The latter is remarkable as most statements made to the press during the Riyadh Summit indicated that all attending countries agreed to keep Iran in political and economic quarantine. At the same time, the participants agreed to counter the Muslim Brotherhood, which is blacklisted by Saudi Arabia, UAE and Egypt. The Muslim Brotherhood however is well protected in Qatar. At present, the ideologue of the Brotherhood, Yusuf Al Qaradawi, is a celebrity in Doha, and has access to the Emir and the Emir’s father and predecessor, Hamad bin Khalifa al-Thani.

Millions of Yemenis face hunger during Ramadan - Al Jazeera -- While Muslims worldwide celebrate Ramadan with special meals and tasty treats, millions of Yemenis are suffering from an acute lack of food as the country's two-year war rages on.According to aid agencies, 17 million people do not have enough to eat, in what the UN calls the "largest humanitarian crisis in the world".Typically, people shop throughout Ramadan, but Yemeni storekeepers have nothing to celebrate."Sales are the lowest from years past. Every year is worse than before," Yahya Hubar, a shopkeeper in Hodeidah, a coastal city in western Yemen, told Al Jazeera.More than two million children are acutely malnourished in Yemen, where a child under five dies every 10 minutes of preventable diseases, according a report by UNICEFpublished in December. In addition, the country is facing a cholera outbreak, which so far has infected more than 29,000 people. As many are scrambling to get their hands on food necessities, no longer are people talking about the special foods prepared and enjoyed during the festive Ramadan month. "Our situation is very hard. We haven't been paid for several months. Essential needs are hard to get and the prices are high. We're looking at goods we can't buy," Nabil Ibrahim, another Hodeidah resident, told Al Jazeera.

'Nearly 600 cholera deaths' in Yemen over past month | Yemen News | Al Jazeera: An estimated 70,000 cases of cholera have been reported by UNICEF in Yemen, with nearly 600 people dying over the past month, as the disease continues to spread at an alarming rate.The UN agency, which provides humanitarian and developmental assistance to children and mothers in developing countries, said on Friday that the already dire situation for children in Yemen was quickly turning into a disaster."Cholera doesn't need a permit to cross a checkpoint or a border, nor does it differentiate between areas of political control," said Geert Cappelaere, UNICEF regional director, following his visit to the country, according to a statement on the agency's website. He gave warning that "the number of suspected cases is expected to reach 130,000 within the next two weeks" in the Arabian Peninsula country.UNICEF said at least 10,000 cholera cases were reported in the past 72 hours alone.Cappelaere described harrowing scenes of children who were barely alive - tiny babies weighing less than 2kg, fighting for their lives at one of the few functioning hospitals he visited."But they are the lucky ones. Countless children around Yemen die every day in silence from causes that can easily be prevented or treated like cholera, diarrhoea or malnutrition," he said.

Cholera, Famine and Girls Sold Into Marriage for Food: Yemen’s Dire Picture NYT - Cholera deaths in war-torn Yemen have surged into the hundreds, more than a quarter of Yemenis face famine, and parents are selling girls into marriage to buy food, the United Nations said on Tuesday. The description of Yemen by the top United Nations aid official, Stephen O’Brien, the under secretary general for humanitarian affairs and emergency-relief coordinator, was perhaps his most dire yet in a series of alarming updates on the crisis.“If there was no conflict in Yemen, there would be no descent into famine, misery, disease and death — a famine would certainly be avoidable and averted,” Mr. O’Brien told the United Nations Security Council.He depicted the crisis as man-made, implicitly placing part of the blame on the Saudi Arabia-led military coalition that has been bombing Yemen’s Houthi rebels and their allies for over two years. He also blamed the Houthis. “The people of Yemen are being subjected to deprivation, disease and death as the world watches,” he said. Mr. O’Brien also implored the Saudis to avoid an attack on Hodeidah, the only port in Yemen that can still handle shiploads of food and medicine. Virtually all of the basic needs in Yemen, the Arab world’s poorest country, must be imported. Saudi Arabia and its Arab allies have vowed to crush the Houthis, seeing them as proxies for Iran’s influence in the region. The Saudis have pledged to retake all territory seized by the Houthis, who are from the north of Yemen, and reinstate the Saudi-backed government that was forced to flee the capital, Sana, in 2015. Although widely criticized for indiscriminate bombings in Yemen, the Saudis have also suggested they are in no rush to end a war that has ravaged their neighbor, leaving roughly 10,000 Yemenis dead and millions destitute and at risk of disease.  Mohammed bin Salman, the deputy crown prince and defense minister of Saudi Arabia, said in a televised interview on May 2 that his side could just exhaust the Houthis and starve them of supplies.

Villagers Say Child Was Shot As He Tried to Flee U.S. Navy SEAL Raid -- Five civilians including a child were killed and another five were wounded in the latest U.S. Navy SEAL raid in Yemen, according to eyewitness accounts gathered by The Intercept. The raid by U.S. commandos in the hamlet of al Adhlan, in the Yemeni province of Mareb on May 23, also destroyed at least four homes. Navy SEALs, with air support from more than half a dozen attack helicopters and aircraft, were locked in a firefight with Yemeni tribesmen for over an hour, according to local residents. Details from five eyewitnesses in the village conflict with statements made by the Department of Defense and U.S. Central Command, which have not acknowledged that civilians were harmed. Official military reports claimed seven militants from the Yemen-based Al Qaeda branch, Al Qaeda in the Arabian Peninsula, were killed “through a combination of small arms fire and precision airstrikes.” Two commandos were also reportedly lightly wounded in the gunfight. Pentagon spokesman Jeff Davis told reporters on May 23 there were “no credible indications of civilian casualties.” Yet village residents gave a list of 10 names of civilians killed and wounded during the raid. Fifteen-year-old Abdullah Saeed Salem al Adhal was shot dead as he fled from his home with women and children. Another child, 12-year-old Othman Mohammed Saleh al Adhal, was injured but survived.

U.S. Starts Shipping Weapons To Syrian Kurds - Just three weeks after reports first emerged that the Trump administration was considering arming the Syrian Kurd militia caught in the crossfire between Turkish and Syrian army forces, NBC reported that the American military has started shipping weapons and equipment to the Kurdish fighters of the Syrian Democratic Forces, also known as YPG, a key US ally on the ground in Syria. Citing an unnamed official, NBC adds that the U.S. began providing the equipment in the last 24 hours. Details were scarce, with no specifics about what weapons and supplies the US is sending the Syrian Democratic Forces or how those items are being delivered however when the report first emerged, the U.S. military announced it would provide the YDF with ammunition, rifles, armor, radios, bulldozers, vehicles, and engineering equipment. Earlier this month US officials said that Trump had signed off on a plan “to equip Kurdish elements of the Syrian Democratic Forces” in the fight to retake the Syrian city of Raqqa from ISIS. "The SDF, partnered with enabling support from U.S. and coalition forces, are the only force on the ground that can successfully seize Raqqa in the near future,” Pentagon spokeswoman Dana White said in a statement. The announcement is guaranteed to send Turkey's president Erdogan into another fit of rage. Earlier this month Erdogan condemned Trump’s decision to arm Syrian Kurds whom Turkey considers to be terrorists and an extension of outlawed Kurdish insurgents within its borders. Three weeks ago Erdogan said: “I hope very much that this mistake will be reversed immediately,” adding that "we want to believe that our allies would prefer [to] be side by side with ourselves rather than with the terror groups.”

Stratfor looks at Afghanistan and sees a Conflict With No Time Limit -- Summary: Stratfor has been one of the few geopolitical research shops that has seen the madness of our war in Afghanistan. So their new report deserves attention. But it will be ignored. We prefer advice from “experts” who have been consistently been wrong. Phase two of the war begins soon. The body bags will arrive soon. Only our soldiers and their families will care. Forecast Highlights.

  • The Pentagon’s move to deploy more troops to Afghanistan, should U.S. President Donald Trump approve it, would be aimed at empowering the Afghan National Security Forces to eventually inflict enough casualties on the Taliban to encourage them to negotiate.
  • Until the factors that contribute to the conflict — including the Afghan forces’ weakness and Pakistan’s support for the Taliban — have been addressed, the prospects for ending the war will be dim.
  • Lax border enforcement between Afghanistan and Pakistan will ensure that militants continue launching attacks into both countries from the border regions, further complicating efforts to end the war.

Analysis: The invasion routes into Afghanistan are well worn at this point in history. The pathways leading out of the country, on the other hand, are far less clear. This is the predicament U.S. President Donald Trump faces as he weighs the Pentagon’s proposal to send up to 5,000 troops to Afghanistan to support the struggling Afghan National Security Forces (ANSF) in their 15-year war against the Taliban. If Trump approves the measure, Washington will escalate its involvement in a conflict that has so far lasted through two presidencies. The move would entail granting U.S. troops greater authority on the battlefield, and may well invite a commensurate personnel contribution from Washington’s allies in the North Atlantic Treaty Organization.  But as much as the Afghan military could benefit from reinforcements — the Taliban are intensifying their attacks as part of the group’s annual spring offensive — Washington understands that more troops will only accomplish so much. The reasons for the war’s endurance are much deeper and more complicated than the number of boots on the ground. And until these underlying factors are addressed, peace will continue to elude Afghanistan.

Russia And Iran Sign Oil-For-Goods Barter Deal; Escape Petrodollar --Iran signed an agreement with Russia under which it has broken free from the petrodollar, and will "sell", or rather barter crude oil to Russia in exchange for products. The announcement was made by Iran’s Oil Minister Bijan Zanganeh, as reported by Russia’s RIA and TASS news agencies."The deal has been concluded. We are just waiting for the implementation from the Russian side. We have no difficulties; we signed the contract, everything is coordinated between the parties. We are waiting for Russian oil companies to send tankers,” he said, as quoted by Russian news agencies. While sanctions against Iran have been lifted, restrictions on trade in US dollars for the country's banks remain, making it difficult to sell oil on the open market.As reported here just over three years ago, the $20 billion agreement was initially signed in April 2014 when Iran was under Western sanctions over its nuclear program. Russian traders were to participate in the selling of Iranian oil. In exchange, Iran wanted essential goods and technology from Russia. This is what Reuters reported in April 2014 when the deal was first announced: The White House has said such a deal would raise "serious concerns" and would be inconsistent with the nuclear talks between world powers and Iran.   Russia and Iran discussed energy, electricity, nuclear energy, gas and oil, as well as cooperation in the field of railways, industry, and agriculture.  Novak had announced in February that Russia’s state trading enterprise Promsirieimport has been authorized by the government to carry out the purchase of Iran’s oil through the oil-for-goods program under study by both countries. Meanwhile, Zanganeh had been quoted by the media as saying that Iran would be paid in cash for half of the oil that would be sold to Russia.  The due payments for the remaining half would be made in goods and services, the Iranian minister had said.

Russia Expects China To Help Resolve Syrian Crisis, "Restore The Country" -- Last summer, when the Syrian conflict was near its peak under the Obama administration,China unexpectedly warned it was ready to enter the proxy war when in a stunning announcement, Xinhua reported that Beijing was prepared to side with Syria - and Russia - and against the US-led alliance, and that Xi and Assad had agreed that the Chinese military will have closer ties with Syria and provide humanitarian aid to the civil war torn nation.  A high-ranking People's Liberation Army officer also said that the training of Syrian personnel by Chinese instructors has also been discussed: the Director of the Office for International Military Cooperation of China's Central Military Commission, Guan Youfei, arrived in Damascus on Tuesday for talks with Syrian Defense Minister Fahad Jassim al-Freij, Xinhua added. Guan said China had consistently played a positive role in pushing for a political resolution in Syria. "China and Syria's militaries have a traditionally friendly relationship, and China's military is willing to keep strengthening exchanges and cooperation with Syria's military," Xinhua quoted Guan.

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