Sunday, July 2, 2017

oil prices rise 7%, but are still down more than 14% in 2017, in the largest first half price drop in 19 years...

oil prices rose every day this week, capped by a big jump on Friday afternoon that was propelled by the first drop in the rig count in 24 weeks...the rally, which actually started on Thursday of last week, has been underpinned by short covering hedge funds, who had amassed a near record short position in the five main futures and options contracts linked to crude oil as oil prices fell going into last week....what that means is that they were contracting to sell oil that they didn't own, in the expectation that prices would fall further, and they could then buy oil at a lower price later to fulfill their contracts and make a profit...however, once prices began to rise, some of them were forced to buy oil to close their positions, hence forcing even further increases in the price of oil and hence more force buying...since the latest data on those trades are as of last Tuesday, their positions as of this weekend are unknown, but such a short covering rally might yet last another week or more, meaning oil prices could continue to rise without a fundamental reason for doing so (just as prices previously fell as the hedge funds sold short, gambling on a further decline...)

after closing last week at $43.01 a barrel, up from the prior Wednesday's intraday low of $42.05, US oil for August delivery rose another 37 cents to close at $43.38 a barrel on Monday, in what was largely seen as bargain hunting buying...oil prices then rose nearly two percent on Tuesday, ending the session at $44.24 a barrel, on the aforementioned short covering, and expectations that crude inventories would decline for a third consecutive week, further bolstered by a weak dollar, which makes commodities priced in dollars more expensive...while the expected drop in crude inventories did not materialize (both the American Petroleum Institute and the EIA indicated small increases in oil supplies) oil prices rallied again anyway on Wednesday, as the EIA data did show an unexpected drop in gasoline supplies, and the largest drop in US oil field production since August of last year, with front month oil futures ending the day up another 50 cents, or 1.1%, at $44.74 per barrel....on the heels of that report of a drop in production, oil prices ran up to a two week high of $45.45 a barrel on Thursday morning, before falling back in the afternoon and ending Thursday's session at $44.93 a barrel....while up a bit in overseas trading Friday morning, oil was mostly unchanged on Friday until Baker Hughes reported the first decrease in oil drilling in 6 months, after which oil prices rallied throughout the afternoon, and ended Friday's trading $1.11 higher at $46.04 a barrel, a gain of 2.5% for the day and 7 percent for the week....oil prices have hence risen seven days in a row, the longest rally this year, following on the heels of a 5 week slump, which had been the longest losing streak since the summer of 2015...thus, despite 8 percent recovery in oil prices over the last 7 days of June, oil prices still ended the month 14.3% lower than where they started the year, which turned out to be the largest first half price drop since 1998...

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering details for the week ending June 23rd, showed a modest increase in US oil imports and a larger than normal sale of oil from the Strategic Petroleum Reserve, which were accompanied by a rather large pullback in operations at US refineries, resulting in an addition to our commercial stocks of crude for only the 2nd time out of the last twelve weeks...our imports  of crude oil rose by an average of 140,000 barrels per day to an average of 8,016,000 barrels per day during the week, while at the same time our exports of crude oil rose by 11,000 barrels per day to an average of 528,000 barrels per day, which meant that our effective imports netted out to 7,488,000 barrels per day during the week, 129,000 barrels per day more than during the prior the same time, our field production of crude oil fell by 100,000 barrels per day to an average of 9,250,000 barrels per day, which means that our daily supply of oil from net imports and from wells totaled an average of 16,738,000 barrels per day during the cited week... 

during the same period, refineries reportedly used 16,890,000 barrels of crude per day, 262,000 barrels per day less than they used during the prior week, while at the same time a net of 184,000 barrels of oil per day were being pulled out of oil storage facilities in the US....thus, this week's crude oil figures from the EIA seem to indicate that our total supply of oil from net imports, from oilfield production, and from storage was 32,000 more barrels per day than what refineries reported they used during the account for that discrepancy, the EIA inserted a (-32,000) 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 slipped to an average of 7,484,000 barrels per day, now 2.3% above the imports of the same four-week period last year...the 184,000 barrel per day decrease in our total crude inventories came about on a 201,000 barrel per day sale of oil from our Strategic Petroleum Reserve, part of an ongoing sale of 5 million barrels annually that was negotiated in a Federal budget deal 20 months ago, while our commercial stocks of crude oil increased by 17,000 barrels per day at the same time...this week's 100,000 barrel per day decrease in our crude oil production resulted from a 55,000 barrel per day decrease in oil output from wells in the lower 48 states, likely due to tropical storm Cindy disruptions of output in the Gulf, and a 45,000 barrels per day decrease in oil output from Alaska, which was due to maintenance ...the 9,250,000 barrels of crude per day that we produced during the week ending June 23rd was still 5.5% more than the 8,770,000 barrels per day we were producing at the end of 2016, and up by 7.3% from the 8,622,000 barrel per day output during the during the same week a year ago, while it was still 3.7% below the June 5th 2015 record oil production of 9,610,000 barrels per day... 

US oil refineries were operating at 92.5% of their capacity in using those 16,890,000 barrels of crude per day, which was down from 94.0% of capacity the prior week, and closer to normal for this time of year...the amount of oil refined this week was still above the seasonal norm, however, 1.2% more than the 16,695,000 barrels of crude per day.that were being processed during week ending June 24th, 2016, when refineries were operating at 93.0% of capacity, and roughly 9% above the 10 year average of 15.6 million barrels of crude per day for the 3rd week of June....

even with the slowdown in refining, however, gasoline production from our refineries increased by 171,000 barrels per day to 10,334,000 barrels per day during the week ending June 23rd, the third highest weekly gasoline output in US history...that gasoline output was thus 3.8% higher than the 9,959,000 barrels of gasoline that were being produced daily during the comparable week a year the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) slipped by 7,000 barrels per day to 5,244,000 barrels per day, still near a seasonal high and 4.4% more than the 5,021,000 barrels per day of distillates that were being produced during the week ending June 24th last  year.....   

the increase in gasoline production notwithstanding, our end of the week gasoline inventories decreased by 894,000 barrels to 240,972,000 barrels by June 23rd, the 2nd modest drop after two large builds...this week's gasoline supplies were reduced because our imports of gasoline fell by 338,000 barrels per day to 571,000 barrels per day, which more than offset a decrease of 278,000 barrels per day to 9,538,000 barrels per day in our domestic consumption of gasoline while the 5,000 barrels per day increase to 662,000 barrels per day in our gasoline exports had little impact on the weekly change...with the week’s modest decrease in our gasoline supplies, our gasoline inventories are still at a seasonal high for this week of the year, 0.8% above the prior seasonal record 238,998,000 barrels that we had stored on June 24th a year ago, 11.2% higher than the 216,737,000 barrels of gasoline we had stored on June 26th of 2015, and 12.7% more than the 213,742,000 barrels of gasoline we had stored on June 27th of 2014…   

even with little change in our distillates production, our supplies of distillate fuels fell by 223,000 barrels to 152,272,000 barrels during the week ending June 16th, after increasing by 5,762,000 barrels over the prior three weeks....factors accounting for the difference of this week's distillates supplies were our exports of distillates, which rose by 360,000 barrels per day to 1,386,000 barrels per day, while our imports of distillates rose by 52,000 barrels per day to 139,000 barrels per day, and while the amount of distillates supplied to US markets fell by 129,000 barrels per day to 4,029,000 barrels per day....nonetheless, our distillate supplies are still 1.2% higher than the 150,513,000 barrels that we had stored on June 24th, 2016, and 12.1% higher than the distillate inventories of 135,820,000 barrels that we had stored on June 26th of 2015...

finally, with slowdown of US refining, our commercial supplies of crude oil rose for only the 2nd time in the past 12 weeks, as our oil inventories inched up by 118,000 barrels to 509,213,000 barrels as of June 23rd... we thus finished the week with 6.3% more crude oil in storage than the 479,012,000 barrels we had stored at the beginning of this year, and 2.7% more crude oil in storage than the 495,941,000 barrels of oil in storage on June 24th of 2016....compared to the same week in prior years, before our oil glut became so extreme, we ended the week with 17.5% more crude than the 433,223,00 barrels in of oil that were in storage on June 26th of 2015, and 44.2% more crude than the 353,229,000 barrels of oil we had in storage on June 20th of 2014...     

This Week's Rig Counts

US drilling activity decreased for the first time in the past 24 weeks, and for the 3rd time in the past 52 weeks, during the week ending June 30th, with oil drilling pulling back and drilling for natural gas inching up....Baker Hughes reported that the total count of active rotary rigs running in the US decreased by a net of 1 rig to 940 rigs in the week ending Friday, which was 509 more rigs than the 431 rigs that were deployed as of the July 1st report in 2016, but still less than half of the recent high of 1929 drilling rigs that were in use on November 21st of 2014....

the number of rigs drilling for oil decreased by 2 rigs to 756 rigs this week, which was still up by 415 oil rigs over the past year, while it was still far from the recent high of 1609 rigs that were drilling for oil on October 10, the same time, the count of drilling rigs targeting natural gas formations increased by 1 rig to 184 rigs this week, which was 95 more rigs than the 89 natural gas rigs that were drilling a year ago, but way down from the recent natural gas rig high of 1,606 rigs that were deployed on August 29th, 2008....

there was no change in the Gulf of Mexico rig count this week, where drilling continues from 21 platforms, up from the 18 rigs working in the Gulf a year ago...however, the drilling platform that had been working offshore from Alaska was shut down this week, so the total US offshore count fell to 21 rigs, up from 19 rigs a year ago, at which time there was one rig drilling offshore from Alaska in addition to those in the horizontal drilling rigs were unchanged a 792 rigs this week, still up by 460 from the 332 horizontal rigs that were in use in the US on July 1st of last year, while they are still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....the vertical rig count was also unchanged at 77 rigs this week, which was up from the 61 vertical rigs that were deployed during the same week last year....on the other hand, the directional rig count was down by 1 rig to 71 directional rigs this week, which was still up from the 38 directional rigs that were deployed during the same week last year...

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas both tables, the first column shows the active rig count as of June 30th, the second column shows the change in the number of working rigs between last week's count (June 23rd) and this week's (June 30th) count, the third column shows last week's June 23rd 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 1st of July, 2016...        : 

June 30 2017 rig count summary

there's not much to see here, in what has to have been the quietest week for rig changes this year...only three states saw any change in their count at all; Alaska and Colorado both saw one rig shut down, while Texas saw one added.....the district details on Texas do indicate some movement of 4 rigs in the 3 districts of the Eagle Ford, and one more rig than what was added in the Permian, but elsewhere everything was unchanged...if you're curious, the lone new natural gas rig was added in the Arkoma Woodford of Oklahoma, as the rig added in the Haynesville was targeting oil, in the first oil drilling in that natural gas basin since last July...


Avon Lake council supports wind project - Chronicle-Telegram — City Council approved a resolution Monday supporting a wind energy project off the coast of Cleveland. City Council also changed a portion of the Planning and Zoning Code which removes limitations on wind energy system capacities. The city first submitted in 2013 a resolution in support of the Lake Erie Energy Development Corporation’s “Icebreaker,” a project to build six wind turbines seven miles off the Cleveland coast. City Council had to tweak its 2013 resolution as the project has developed, at-large Councilman John Shondel, who chairs the Environmental Committee, said. Icebreaker had originally been slated for completion this year, Shondel said, but now is slated for an October 2019 completion. Councilwoman Jennifer Fenderbosch, 2nd Ward, said LEEDCo has secured $10 million from the U.S. Department of Energy and is finalizing plans with the Ohio Power Siting Board to receive a $40 million investment from the federal government. Last month the board kicked back LEEDCo’s request to certify construction, the Plain Dealer reported, and asked the nonprofit for more information about the project’s impact on birds, bats and fisheries. LEEDCo officials were reported as saying they intend to file new documents in the coming weeks that they expect will lead to board approval. Fenderbosch said LEEDCo also must supply the board with updated documentation from cities that support the project, which is why Avon Lake revisited the 2013 resolution. Shondel said the Planning and Zoning Code changes were made because previous legislation set a limit that systems could not have capacities of more than 1.5 megawatts, which would have needed amending once Icebreaker moves forward. Icebreaker will create more than 500 jobs, according to Avon Lake’s updated resolution, and lead to an industry that employs 8,000 by 2030.  

Committee submits anti-fracking charter petitions to county Board of Elections - For the third year in a row, the Athens County Bill of Rights Committee will seek to place the question of turning the county into a charter form of government before voters in November. The group submitted petitions for a ballot initiative Tuesday morning to the Athens County Board of Elections. With 32 petitioners, the group submitted 2,415 signatures, well over the 1,441 minimum number of valid signatures required. As with the other initiatives, this charter proposal doubles as an effort to keep oil and gas horizontal hydraulic fracturing (fracking) out of Athens County, through the use of local water for fracking operations. It also would prohibit future fracking waste-injection wells, of which Athens County already has several in operation. Last September, for the second year in a row, the Ohio Supreme Court ruled that a proposed anti-fracking charter amendment for Athens County would not appear on the county’s general-election ballot. The amendment, in addition to setting up a charter form of government, and containing drilling/fracking-related prohibitions similar to those submitted Tuesday. The provision prohibiting the use of local water would substantially curtail or prevent any future local fracking, which uses an immense amount of water. So far, the deep-shale oil-and-gas boom hitting other parts of eastern Ohio in recent years hasn’t extended into Athens County, and it’s an open question whether it ever will. The same Ohio Supreme Court decision also tossed out similarly crafted charter amendment petitions for Meigs and Portage counties. The high court did the same thing in 2015 to charter amendment petitions for Athens, Meigs and Fulton counties, but for different reasons. Both years, the cases reached the Supreme Court (and before that, lower courts) after appeals of decisions by county boards of elections and the state Secretary of State rejecting the petitions. In its majority decision last September (with one dissenting vote), the Supreme Court ruled that boards of election in each county with a proposed charter, as well as Ohio Secretary of State Jon Husted, were within the law to reject charter petitions. The rejections, the court ruled, were not based on substantive issues, which would not be a legal rationale, but rather on the charter initiatives’ failure “to meet threshold requirements for inclusion on the ballot.” 

Ohio's fracking taxes debated again - - Ravenna Record Courier - - It wouldn't be a biennial budget debate without a little final talk of raising taxes on oil and gas produced via horizontal hydraulic fracturing. It was toward the end of the first gathering of the Conference Committee, the panel that will spend coming days haggling over a final version of the two-year spending plan, that there was a mention of the fracking and taxing issue. Not too long ago, fracking was a hot topic of discussion around the Statehouse, with frequent mentions and hopes of big boosts to the state economy, thanks to deep underground fuel deposits in eastern Ohio's shale deposits. Fracking-related oil and gas has helped that part of the state, with investments from companies in wells and increased production. But fracking talk in general and related tax debates have quieted considerably as of late, with clear indications that the governor and Republican lawmakers haven't found common ground on whether to raise rates on oil and gas produced through fracking. Gov. John Kasich included his latest severance tax proposal in the executive budget he offered in late January. Republican lawmakers, as they have on multiple occasions before, dutifully removed it and haven't said a whole lot about it since.  That didn't stop the severance tax from making a brief appearance during Conference Committee, however.  "You and I couldn't have a budget conversation if I didn't bring up my favorite [topic], the severance tax," said Rep. Jack Cera (D-Bellaire), in questions to state budget Director Tim Keen.  Cera specifically asked about the balance of the severance tax fund and projections for growth moving forward.  It's grown pretty substantially even at the low severance tax that we have," he said.

Enbridge wants to install 22 anchors on Line 5  - Enbridge Inc. is seeking permission to install 22 new screw anchor supports on its Line 5 pipeline under the Straits of Mackinac this year.The U.S. Army Corps of Engineers and the Michigan Department of Environmental Quality are reviewing the application, which is open to public comment until June 29. (click here to comment)The state is not required to hold a public hearing on the application, but it may schedule a meeting if there's enough public interest.Last year, the state received more than 4,000 comments on Enbridge's similar application to install four anchor structures on unsupported spans along the twin pipeline under the straits west of the Mackinac Bridge between McGulpin Point and Point La Barbe."This is the summer of Enbridge," said Joe Hass, district supervisor with the DEQ Water Resources Division office in Gaylord."The sooner we make a decision on having a meeting, the better."Enbridge calls the anchors are a preventative maintenance measure for its nearly-geriatric pipeline, which critics say poses to much risk to the Great Lakes and should be decommissioned before it ruptures and spills light crude oil.Enbridge says the 64-year-old line can operate indefinitely if maintained and points to recent high marks from a federal review of its past inspection reports as well as two successful pressure tests this month as evidence of its overall integrity.The structures clamp the pipeline to the lakebed in a location of tremendous currents between Lake Michigan and Lake Huron, which change the landscape of the bottom and wash away large areas of dirt under the pipes. Enbridge only got serious about addressing the erosion in 2001 after allowing unsupported spans of 140 feet or more to go unchecked for years, according to federal documents. The state's easement mandates support across any span longer than 75 feet. The company says it has installed 128 supports since 2002. Inspection reports show there have been numerous times the pipeline was out of compliance with the easement, as recently as last year.

Michigan official calls for shutting down oil pipeline - ABC News: Michigan's attorney general on Thursday called for shutting down twin oil pipelines beneath the waterway where Lakes Huron and Michigan meet, as the state released a consultant's report outlining alternative scenarios for the future of oil transport in the ecologically sensitive tourist destination. Republican Bill Schuette said a "specific and definite timetable" should be established for decommissioning the nearly 5-mile-long (8-kilometer-long) section of Enbridge Inc.'s Line 5 in the Straits of Mackinac, which environmental groups want removed but the Canadian pipeline company insists is in good shape. "The safety and security of our Great Lakes is etched in the DNA of every Michigan resident," Schuette said, adding that "the final decision on Line 5 needs to include a discussion with those that rely on propane for heating their homes, and depend on the pipeline for employment." The segment is part of Enbridge's sprawling Lakehead pipeline network, which transports oil and liquid natural gas to markets in the U.S. Midwest, East Coast and eastern Canada. Line 5 runs underground from Superior, Wisconsin, across Michigan's Upper Peninsula to the straits area, where it divides into two 20-inch pipes that rest on the lake floor. It continues south through the state's Lower Peninsula to Sarnia, Ontario, carrying about 23 million gallons (87 million liters) of light crude oil and liquid natural gas daily. Enbridge, based in Calgary, Alberta, says the pipeline delivers crucial supplies of oil for gasoline, propane and other refined products and is closely monitored.

First permit application revives 'fracking' debate in Illinois - The first application for a drilling permit has renewed the fracking debate in Illinois four years after the controversial practice was approved. Woolsey Companies Inc., based in Wichita, Kan., is seeking permission to drill a mile-deep well near the southeastern Illinois community of Enfield, in White County. A second public comment period on the application is expected after the Illinois Department of Natural Resources found a well-location error in the original filing in May. The application is the first since then-Gov. Pat Quinn signed the state "fracking" law in June 2013. Regulations were not finalized until November 2014 following an extended fight involving the department, environmentalists and energy companies.DNR spokesman Tim Schweizer said Monday that Woolsey has indicated the application would be resubmitted with the corrected well location and other project details sought by the agency. "They are going to resend the application, and that restarts the clock," said Schweizer. "Other than that, it's gone pretty smoothly." In addition to correcting the location, the department has asked for more information on the operations plan, management of fracking chemicals, well safety and containment measures, traffic management at the site, restoration and topsoil preservation and project security bonds. Woolsey vice president of business development Mark Sooter said company officials expected the process to take time, especially since Woolsey is the first to apply in Illinois. "We plan on going forward with the permitting process," said Sooter. "There are 27 different forms and plans you have to submit, and there were some things we need to correct." 

Twenty-Five Tanker Cars Derail In Plainfield, Causing Crude Oil Spill (CBS) — A freight train derailment Friday evening tied up traffic in southwest suburban Plainfield and caused a crude-oil spill. Several tankers of a Canadian National Ry. freight train derailed in “accordion” fashion at Illinois Route 59 and Riverwalk Court around 6:30 p.m. Plainfield Police Sgt. Mike Fisher says 25 cars carrying crude oil were involved, and three were leaking an estimated 40,000 gallons of crude. Emergency crews have been able to cordon off the spilled material and keep it from reaching the nearby DuPage River, he said. No one is believed to be in danger, though residents may smell the petroleum product, Fisher said. The Plainfield Fire Protection District has called in hazardous materials teams and foam trucks to minimize the chances of an explosion on the former Elgin, Joliet & Eastern Ry. freight line. The derailment does not impact Metra operations. There are a number of road closures because of the derailment, including Route 126 and Naper-Plainfield Road. The Plainfield Police Department tweeted that motorists should steer clear of the area.

Clogged oil arteries slow U.S. shale rush to record output | Reuters: A gallon of gasoline that allows a driver on the U.S. East Coast to travel about 25 miles has already navigated thousands of miles from an oil field to one of the world's largest fuel markets. If its last stop is one of the region's struggling refineries - an increasingly unlikely prospect - the crude used to produce the gas would have probably arrived by tanker from West Africa. That's because the region's five plants have no pipeline access to U.S. shale fields or Canada's oil sands. Or the journey to an East Coast gas pump might start instead in North Dakota's Bakken shale fields - which means it could take up to three months, including a stop at a Gulf Coast refinery. The same trip would have been even longer a month ago, before the opening of the controversial Dakota Access Pipeline. That line was nearly derailed last year by protesters. Its arduous path to approval provides one case study in the oil industry's struggle to open up a bottleneck holding back resurgent domestic oil production - an outmoded U.S. distribution system. The equally divisive Keystone XL pipeline provides a more poignant example: First proposed in 2008 to connect Canada's oil sands to Gulf Coast refineries, the line may now never get built - despite the enthusiastic backing of U.S. President Donald Trump. As permitting dragged on for years, oil prices crashed, dimming the prospects for investment in the oil sands. Top firms have since written down or sold off billions of dollars in Canadian production assets and decamped for U.S. shale fields. Pipeline construction often lags production booms by years - if proposed lines are built at all - because of opposition from environmentalists and landowners, topographic obstacles, and permitting and construction challenges. That forces drillers to limit output or ship oil domestically, usually by rail - which is more costly and arguably less safe. The crimped production, in turn, costs the economy jobs, keeps prices higher for consumers and stymies the nation's long-held geopolitical goal of reducing dependence on foreign oil. 

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

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

Trump to call for US `dominance’ in global energy production  — Donald Trump will tout surging US exports of oil and natural gas during a week of events aimed at highlighting the country’s growing energy dominance. The president also plans to emphasise that after decades of relying on foreign energy supplies, the US is on the brink of becoming a net exporter of oil, gas, coal and other energy resources. As with previous White House policy-themed weeks, such as a recent one focusing on infrastructure, the framing is designed to draw attention to Trump’s domestic priorities and away from more politically treacherous matters such as multiple investigations into Russian interference in the 2016 election. With “Energy Week,” Trump is returning to familiar territory — and to the coal, oil, and gas industries on which he’s already lavished attention. Trump’s first major policy speech on the campaign trail, delivered in the oil drilling hotbed of North Dakota in 2016, focused on his plans for unleashing domestic energy production. The issue has also been a major focus during Trump’s first five months in office, as he set in motion the reversal of an array of Obama-era policies that discourage both the production and consumption of fossil fuels. Plans for the week were described by senior White House officials speaking on condition of anonymity because the details hadn’t yet been formally announced

Trump pushes 'energy week' and goal of exporting resources - The Blade: — With U.S. exports of oil and natural gas surging, President Donald Trump says the U.S. is on the brink of becoming a net exporter of oil, gas and other resources. The White House is launching its “energy week” with a series of events focused on jobs and boosting U.S. global influence. The events follow similar policy-themed weeks on infrastructure and jobs. The previous weeks were largely overshadowed by ongoing probes into whether Trump campaign officials colluded with Russia to influence the 2016 election, as well as scrutiny over Trump’s firing of James Comey as FBI director. Drawing fresh attention now is the Republican bid to scuttle the health care law despite a rebellion within Senate GOP ranks. Energy Secretary Rick Perry said Monday the Trump administration is confident officials can “pave the path toward U.S. energy dominance” by exporting oil, gas and coal to markets around the world, and promoting nuclear energy and even renewables such as wind and solar power. “For years, Washington stood in the way of our energy dominance. That changes now,” Perry told reporters at the White House. “We are now looking to help, not hinder, energy producers and job creators.” The focus on energy began at a meeting between Trump and India’s Prime Minister Narendra Modi, with U.S. natural gas exports part of the discussion. Trump is expected to talk energy Wednesday with governors and tribal leaders, and he will deliver a speech Thursday at the Energy Department..

US Energy Secretary Perry pushes plan to boost oil, gas production -- US Energy Secretary Rick Perry on Tuesday accused the Obama administration of hindering US fossil energy production and pushed the Trump administration's energy policy agenda focused on US "energy dominance." In a speech at the US Energy Information Administration's annual energy conference, Perry said that during the Obama administration production on federal lands and waters declined while oil and natural gas permits "were slow-walked or slow-talked and then they were left to wither on the vine." "Those days are over," Perry said. "We're done with that type of approach." During a White House press briefing later, Perry said that the Trump administration was "ending the bureaucratic blockade that has hindered American energy creation." Perry's statements Tuesday seem at odds with the oil and gas shale boom which took place under the last administration. During Obama's presidency, for example, US dry gas production climbed from about 20.6 Tcf in 2009 to a peak of nearly 27.1 Tcf in 2015, according to EIA data. US crude oil production climbed from about 5.35 million b/d in 2009 to a peak of nearly 9.42 million b/d in 2015, according to EIA.

Trump says the Atlantic, Arctic could soon be open to oil drilling - The White House is making a bid to overturn the Obama administration’s five-year plan forbidding oil and gas exploration in the Arctic and Atlantic oceans and will examine opportunities to drill almost anywhere off the U.S. coast.Interior Department officials said Thursday that opening most of the outer continental shelf to leasing is part of President Trump’s strategy to make the United States a global leader in energy production, stimulate coastal activity and create thousands of jobs. But as onshore oil and natural gas production has surged from horizontal drilling, helping to lower the price of petroleum, interest in offshore drilling has fallen.A barrel of petroleum sells for less than $45, and many oil companies balk at the massive investment in equipment needed to drill offshore when the price is lower than $85, analysts say. Vincent DeVito, Interior’s counselor for energy policy, said a 45-day comment period will start Monday with a request for public comment in the Federal Register. DeVito said stakeholders, such as state governors, would be contacted for their input, as will the Department of Defense, which frowns upon exploration near bases and areas where ships conduct training exercises.  Royal Dutch Shell suspended drilling in the Arctic about two years ago when its oil exploration there produced a dry hole. The company said the result didn’t justify the massive risks and expense of drilling in the environmentally sensitive Arctic frontier.DeVito said the Obama administration’s plan, to keep more than 90 percent of the outer continental shelf off limits, isn’t feasible given a recent Trump administration analysis showing oil production there could create 300,000 jobs.“Our country has a massive energy economy, and we should absolutely wear it on our sleeves, rather than keep energy resources in the ground,” he said in a statement. “This work will encourage responsible energy exploration and production, in order to advance the United States’ position as a global energy force and foster security for the benefit of the American citizenry.”

White House announces plan to tap Glick for FERC post - In a move that could enable faster Senate action on pending nominees needed to restore a quorum at the US Federal Energy Regulatory Commission, the White House late Wednesday announced its intent to tap Democrat Richard Glick to serve on the commission. Glick is currently minority general counsel for the Senate Energy and Natural Resources Committee and has previously served as vice president of government affairs for Iberdrola's renewable energy, electric and gas utility, and natural gas storage businesses in the US. His likely nomination was quickly welcomed by Senate Minority Leader Chuck Schumer, Democrat-New York. "Richard Glick is a great pick and I'm glad the administration accepted our recommendation," Schumer said in a statement. "Once he is confirmed by the Senate, I look forward to working with him to support 21st century energy infrastructure, promote transparency, and encourage stakeholder input into FERC decision-making." Senator Maria Cantwell of Washington, the top Democrat on the Senate energy panel, echoed this sentiment. "Rich Glick has had an accomplished career working on many of the cutting-edge issues associated with the transformation of our energy sector. He will make an excellent addition to the Federal Energy Regulatory Commission," she said in a statement Thursday. Two Republicans previously nominated by President Donald Trump to serve at FERC were confirmed by the Senate energy panel but are idling in a queue of other nominees. Democrats had signaled their desire for a nominee from the minority to move alongside the two Republicans previously named.

A Look at Energy Markets After the First Five Months of Trump - As the White House kicks off “Energy Week,” here’s a look at how energy markets are faring so far this year -- and how the Trump administration stands to change them:

  • COAL: President Donald Trump has killed a stream-water protection rule that threatened to curb coal operations, directed the Interior Department to lift a moratorium on new coal leases on federal land, and started chipping away at environmental regulations that made coal-fired power plants increasingly expensive to run. U.S. coal production is up in 2017 from the same period a year ago amid supply cuts in China and Australia that spurred a price rally for metallurgical coal (the kind used to make steel).
  • CRUDE: Oil prices are tanking this year, in part because U.S. production keeps rising. West Texas Intermediate, the American benchmark, reached a high of $54.45 in February before sinking into a bear market last week amid concerns that a supply glut may stick around for years. Rigs drilling for oil in the U.S. are at their highest since April 2015, and more shale supplies are heading abroad than ever before. The Trump administration cleared the way for the controversial Dakota Access oil pipeline to start service, and granted a permit to build the Keystone XL crude pipeline from Canada into the U.S.
  • NATURAL GAS: With Cheniere Energy Inc.’s liquefied natural gas export terminal in Louisiana now online, the U.S. is sending record volumes of the heating and power-plant fuel to countries including Mexico, China, Japan, Turkey and Spain. The White House has been ramping up efforts in recent months to promote overseas sales. POWER: Trump’s decision to withdraw from the Paris climate accord and gut the centerpiece of the Obama administration’s climate policy hasn’t stopped clean power from continuing to grow. While the White House works to dismantle the Clean Power Plan, which would’ve required electricity generators across the U.S. to curb emissions, solar and wind farms now make up 10 percent of America’s power supplies, their highest share yet and up from about one percent a decade ago.

U.S. exports of crude oil and petroleum products have more than doubled since 2010 -- U.S. crude oil and petroleum product gross exports have more than doubled over the past six years, increasing from 2.4 million barrels per day (b/d) in 2010 to 5.2 million b/d in 2016. Exports of distillate, gasoline, propane, and crude oil have all increased, but at different paces and for different reasons.  Restrictions on exporting domestically produced crude oil were lifted in December 2015, and in 2016, the United States exported an average of 520,000 b/d. U.S. crude oil exports reached 1.1 million b/d in February 2017, the highest monthly level on record. While Canada remains the largest destination for U.S. crude oil exports, Canada’s share of total U.S. crude oil exports has declined, dropping from 92% in 2015 (427,000 b/d) to 58% in 2016 (301,000 b/d). Other leading destinations for U.S. crude oil exports in 2016 included the Netherlands, Curacao, China, Italy, and the United Kingdom.  Beyond the lifting of crude oil export restrictions, other factors such as favorable price differentials, lower shipping costs, and rising domestic production have increased U.S. crude oil exports. U.S. production fell through the first nine months of 2016, but increased at the end of 2016 and has continued to increase through the first five months of 2017. U.S. crude oil exports in 2016 were 55,000 b/d greater than exports in 2015—a slower rate of growth compared with year-over-year changes in 2015 and 2014.  U.S. exports of distillate also experienced slower year-over-year growth compared with recent years. In 2016, the United States exported 1.2 million b/d of distillate, the country’s largest petroleum product export. Between 2010 and 2016, U.S. exports of distillate grew by 81% (534,000 b/d), but most of this growth occurred between 2011 and 2013. The largest destination for U.S. distillate exports in 2016 was Mexico, averaging 182,000 b/d, followed by Brazil (125,000 b/d) and the Netherlands (108,000 b/d).  U.S. exports of total motor gasoline have more than doubled since 2010, growing from 335,000 b/d in 2010 to 761,000 b/d in 2016. The growth in gasoline exports took place while domestic consumption, as measured by product supplied, was also increasing. Mexico is the top destination for U.S. motor gasoline exports, and the volume of gasoline trade is significant to U.S. refineries. Over the past five years, U.S. exports to Mexico accounted for between 44% and 53% of total U.S. gasoline exports.

Cheniere Gets Ready for ‘Next Round’ in Global Gas Export Market - Sixteen months after finishing a terminal and sending the first cargo of U.S. shale gas overseas, Cheniere Energy Inc. is already preparing for its next round of export projects. Cheniere is looking at new ways to finance more terminals that chill gas to a liquid and ship it across the globe, including skipping banks altogether and seeking out other capital sources, Chief Executive Officer Jack Fusco said in an interview at the company’s headquarters in Houston. The company has room to grow: It’s leased additional acres at its flagship Sabine Pass terminal in Louisiana and has the option to purchase more land at a Corpus Christi, Texas, site, where another export project is under construction.   Cheniere’s looking to build more LNG plants even as supplies from the U.S. to Australia are flooding the global market, expanding a glut of the fuel and prompting investors to back new export facilities at the slowest pace since 1999. But a second round of projects is emerging on speculation that the slowdown will lead to a post-2020 construction boom that’ll benefit low-cost producers offering flexible contracts.“Our goal is to leverage the existing infrastructure to build whatever the next round requires,” Fusco said Monday. “We can do a better job financing and getting our financing costs down in the capital markets. We’re evaluating all those things to try to get ourselves much more competitive.”  Fusco said the company is open to building LNG plants smaller than the ones operating at Sabine Pass, which can each produce 4.5 million tons of the fuel a year. Cheniere’s potential move to scale down has to do with “speed to market and what the customer needs,” he said.

In disaster's wake, BP doubles down on deepwater despite surging shale -- About 300 BP workers commute 150 miles here by helicopter, from the Louisiana coast to a deep-sea drilling platform that can produce more oil in a day than a West Texas rig can pump in a year. On the deck of Thunder Horse, they work two-week shifts, drink seawater from a desalination plant, and eat ribs and chicken ferried in by boat. On the ocean floor, robots provide remote eyes and arms as drills extract up to 265,000 barrels per day. "There's a whole city below us," said Jim Pearl, Marine Team Leader on the platform. This is just one of the four Gulf of Mexico platforms on which BP has staked its future in U.S. oil production. Seven years after its Deepwater Horizon explosion and oil spill, BP is betting tens of billions of dollars on the prospect that it can slash the costs of offshore drilling by half or more - just as shale oil producers have done onshore. The firm says it can do that while it continues to pay an estimated $61 billion in total costs and damages from the worst spill in history - and without compromising safety. BP's Gulf platforms are key to a global strategy calling for up to $17 billion in annual investments through 2021 to increase production by about 5 percent each year, Chief Executive Officer Bob Dudley recently told investors. "Our strategy is to take this investment that we spent so much money building, and keep it full" to the platform's capacity, Richard Morrison, BP's regional president for the Gulf of Mexico, told Reuters during the first tour of a BP Gulf drilling platform since the disaster. "We're also exploring for larger pools of oil."BP's deepwater double-down is all the more striking for the contrast to its chief competitors, who have cooled on offshore investments in light of the lower costs and quicker returns of onshore shale plays.

Bayou Bridge Pipeline opponents aim to build Standing Rock-like protest camp  - Environmental advocates opposing the proposed Bayou Bridge Pipeline, have begun seeking building materials, sleeping bags and food supplies to create a protest camp like an encampment in opposition to the Dakota Access Pipeline.The Bayou Bridge project would be at the tail end of a network of pipelines designed to carry oil from North Dakota to Illinois and down to Texas and Louisiana. It would be built by the same company that built the Dakota Access line, Energy Transfer Partners. The pipeline plans call for the Dakota Access pipeline to run through Patoka, Ill, down to Nederland, Tex., and across to Lake Charles. New construction would carry the line across south Louisiana to St. James Parish.The protest group is modeling their new camp after the one established near the Standing Rock Sioux Tribe reservation in North Dakota, said Cherri Foytlin, with Bold Louisiana, an environmental advocacy group. The camp opened Saturday in Louisiana along the route of the proposed pipeline. Protesters are not disclosing the exact location of the camp."A camp is basically a tool in order to pool people together in a heartfelt, prayerful way and build community," Foytlin said. "We want to support the communities that would be affected by this pipeline should it come through."  Permits through the state Department of Environmental Quality and the U.S. Army Corps of Engineers are still pending for the Bayou Bridge Pipeline's construction. In response to a request for comment about the protest, an Energy Transfer Partners spokeswoman emailed the following statement Monday (June 26): "As with building any infrastructure project, we respect there will always be a range of different opinions and concerns. It is always our goal to work closely with affected landowners, governments and the neighboring communities to foster long-term relationships and build the pipeline in the safest, most environmentally friendly manner possible."

Gas Takeaway Constraints Pose Challenge for Crude --  Drilling, well completions and multibillion-dollar investments in the Permian are being driven by the region’s potential for producing vast quantities of crude oil. But the Permian juggernaut isn’t only about crude — far from it. Over most of the past 12 months, the fastest-growing energy commodity in the Permian wasn’t crude oil, it was natural gas. And consider this: The U.S. play with the lowest breakeven prices for natural gas is not the Marcellus/Utica. It’s the Permian, where many of the most prolific areas have negative natural gas breakeven prices. And perhaps most important, constrained gas takeaway capacity poses a bigger threat to Permian crude production growth than constrained crude takeaway capacity, because if the gas produced in the play can’t be transported to market, crude production may need to be curtailed. Today we discuss highlights from RBN’s new Drill Down Report, which focuses on the all-important gas side of the U.S.’s hottest hydrocarbon production region. It’s easy — and perfectly understandable — to focus on the crude oil side of the Permian story. As we said in Part 1 of our Drill Down Report series on the Permian, With a Permian Well, They Cried More, More, More - Part 1, for the past two years the super-hot play has been the engine propelling U.S. crude oil production upward. The 70,000-square-mile Permian region in West Texas and southeastern New Mexico has the most favorable production economics of any U.S. play, and half of all the rigs drilling for crude in the U.S. are doing so within the Permian. Crude production there now tops 2.3 million barrels per day (MMb/d), or about one-quarter of total production in the Lower 48.

Understanding Permian Gas Takeaway Capacity at Waha Hub, Part 2 - Permian natural gas production has climbed 1.75 Bcf/d, or nearly 40%, in the past three years to more than 6.3 Bcf/d in 2017 to date, and it’s poised to grow to nearly 12 Bcf/d over the next five years. Note that’s a “dry” or “residue” gas number; gross gas production is a couple of Bcf/d higher. As Permian production growth occurs, pipeline takeaway capacity from the primary trading hub in the area — the Waha Hub — will become increasingly constrained, a trend that will drive pricing and flow dynamics into the early 2020s. How full are the takeaway pipelines now and how quickly will constraints emerge? Today we continue our series on the Waha Hub with a look at current takeaway capacity and flows from the hub.

Understanding Permian Gas Takeaway Capacity at Waha Hub, Part 3 -- Booming Permian natural gas production has increasingly stressed pipeline takeaway in recent months as volume rose to more than 6 billion cubic feet per day (Bcf/d) — up almost 1 Bcf/d from the year-ago level. The production surge has broadened price spreads not only between Waha and other regional hubs, but also within the Permian between Waha and its sister hub, the El Paso Pipeline-Permian price pool. Creative midstream solutions are aimed at relieving these constraints, both in the form of long-haul takeaway and intrabasin pipelines. Of the latter form, few projects have moved with the speed and size of WhiteWater Midstream’s Agua Blanca. Today we continue our series on the Waha Hub with a look at intrabasin Permian midstream gas flows and how Agua Blanca is expected to keep them moving.

Analysts: Water Needs, Spend To Escalate - -- Horizontal drilling and upsized completions have fast-forwarded the oil and gas industry’s demand for water. At the same time, the lower for longer oil price recovery has placed ever more pressure on operators to cut costs, including for water, according to a new report, “Water for U.S. Hydraulic Fracturing,” from Bluefield Research.The report forecasts that at a flat rig count of 650, 20.8 billion barrels (bbl) of water will be required for hydraulic fracturing from 2017 through 2026. Last year, fracturing consumed more than 1.3 billion bbl of water and produced 574 million bbl of water for disposal. Investors and industry players are positioning to play a role in this growing water market.With operators drilling faster, and employing longer laterals, completions now require as much as 12 million bbl of water per frack—triple the volumes of five years ago, the Bluefield authors said. They project that water management, including water supply, transport, storage, treatment and disposal, will total $136 billion from 2017 to 2026 for the U.S. hydraulic fracturing sector.  High reuse rates in the Marcellus and scaling Permian activity—where water per frack ratios are the highest—drove treatment spending to about $198 million in 2016 with an annual spend of $307 million expected for 2017.  […] Texas and Oklahoma led the U.S. completed horizontal well count from 2011 to 2017, making them the most active markets for hydraulic fracturing and water demand. Bluefield excluded DUCs (drilled but uncompleted wells) from its forecasts; at the end of March 2017, 5,512 DUCs remained, according to DOE estimates. In Texas, oil prices, financial stress and rain have “eased the regulatory pressures in some instances,” the report said, making cost of transport the top concern. Some producers are tapping alternative supplies to enhance sustainability. In Oklahoma, earthquake concerns due to salt water disposal practices are fueling recycling efforts.Annual water demand by basin is led by the Permian, with 45% overall, the Eagle Ford, 12%, the Marcellus, 12%, the Cana Woodford, 8%, and the Haynesville, with 8%.In basins with plentiful access to saltwater disposal wells, like those in Texas and Oklahoma, treatment and reuse remains below 10%. Pennsylvania and Ohio, which have limited disposal well options and more challenging topography, have seen transportation and disposal costs rise as high as $20/bbl, according to Bluefield. This has prompted E&Ps to buy injection well assets, and another “key area of investment” has been the networking of disposal wells with pipelines across shale plays. E&Ps are investing in projects connected to wastewater plants, water recycling facilities and pipeline transport.

Dallas Fed Energy Survey - - Business activity increased in the second quarter, albeit at a slightly slower pace, according to oil and gas executives responding to the Dallas Fed Energy Survey. The business activity index—the survey’s broadest measure of conditions facing Eleventh District energy firms—remained robust at 37.3, slightly below the 41.8 reading last quarter. Despite some deceleration, most other indexes also reflected expansion on a quarterly basis. Responses among oilfield services firms were particularly strong. Oil and gas production increased for the third quarter in a row, according to executives at exploration and production (E&P) firms. The oil production index was 10.2, down from 13.1 last quarter, and the natural gas production index declined seven points to 10.6. This suggests oil and gas production is rising at a slower pace than last quarter. The business activity index for oilfield services firms edged up to 49.3—its highest reading since the survey began in first quarter 2016. Utilization of oilfield services firms’ equipment increased, with the corresponding index at 45.4, up from 26.0 last quarter. Measures of selling prices and input costs suggested some pressure on margins for oilfield services firms. The index of prices received for oilfield services fell to 9.1 from 18.3, while the index of input costs surged to 37.0 from 23.6. Labor market indexes point to rising employment, employee hours, and wages and benefits. Growth in employment was driven primarily by oilfield services firms. The employment index was 40.3 for services firms versus 5.7 for E&P firms. The employee hours indexes showed a similar gap: 43.3 for services firms versus 8.7 for E&P firms. The aggregate wages and benefits index moved up again, to 22.8 from 17.1. The company outlook index posted a fifth consecutive positive reading but fell 25 points to 20.3. Uncertainty regarding the outlook rose again. Over 46 percent of firms reported increased uncertainty about the future, up from 33.8 percent last quarter. On average, respondents expect West Texas Intermediate (WTI) oil prices to climb to $48.79 per barrel by year-end, with responses ranging from $30 to $65 per barrel. Respondents expect Henry Hub natural gas prices will end the year at $3.01 per million British thermal units (MMBtu). For reference, WTI spot prices averaged $43.80 per barrel and Henry Hub spot prices averaged $2.89 per MMBtu during the survey collection period.  

Dallas Fed: Business Activity for OFS Highest It's Been In 5 Quarters - Business activity for oilfield services companies increased in 2Q 2017 to its highest reading since 1Q 2016, according to findings from the Federal Reserve Bank of Dallas’ quarterly energy survey, released June 28. Survey respondents represented 138 energy firms (70 E&P and 68 oilfield services) in the Eleventh District (Texas, northern Louisiana and southern New Mexico). Labor market indexes overall (for oil and gas exploration and production firms and oilfield services firms) increased. This includes rising employment, employees hours, wages and benefits. Employment growth was driven by oilfield services firms.   Through a set of special questions, the survey also revealed:

  • 67 percent of respondents expect the oil market to come into balance in 2018 or sooner
  • 55 percent of respondents believe OPEC will continue to limit its oil production beyond March 2018; 45 percent believe OPEC will not
  • On average, respondents expect OPEC will produce 32.3 million barrels of crude oil per day in 2H 2017
  • 87 out of 115 executives said they are looking to use their internal cash flow to finance increased activity

On average, respondents expect WTI crude oil prices will be $48.79 at year-end. This projection is lower than the Dallas Fed 1Q 2017 survey, in which respondents expected the price to be 453.49. WTI crude oil closed at $44.24 per barrel June 27. 

U.S. shale producers are drilling themselves into a hole: Kemp (Reuters) - U.S. shale firms are drilling themselves into a deep hole despite warnings from industry leaders about the risk of flooding the market with too much crude.Drilling and production are rising. Prices are declining. Companies are barely breaking even or losing money. Costs are starting to rise. And share prices are sliding.Current oil prices are not sustainable according to Harold Hamm, the chief executive of Continental Resources, said in an interview on June 28.Prices need to be above $50 per barrel to be sustainable and below $40 would force producers to idle rigs, Hamm said ("Harold Hamm warns oil prices below $40 will idle U.S. drilling", CNBC, June 28)."While this period of adjustment is going on, drillers don't want to drill themselves into oblivion. Back up, and be prudent and use some discipline," he urged rival chief executives.Many of Continental's leases are in North Dakota's Bakken and Oklahoma, where wells are typically more expensive to drill and yield less oil than some other shale plays.The resurgence in shale drilling over the last year has been concentrated in the Permian Basin of Texas and New Mexico, where costs are much lower and yields higher.There are now almost 370 rigs drilling for oil in the Permian compared with 50 in the Bakken, according to oilfield services company Baker Hughes.The number of rigs drilling in the Permian has almost tripled since the end of April 2016, and the Permian now accounts for almost half of the rigs drilling for oil in the United States.But even in the Permian, shale firms have struggled to make money with oil prices stuck below $50, raising questions about the sustainability of the drilling boom.Many shale drillers claim they can drill wells profitability even with benchmark WTI prices below $50 as a result of significant cost reductions and improvements in efficiency. But most shale firms were still losing money or at best breaking even in the first quarter of 2017, even before the renewed slump in prices.

Fracking rarely linked to rise in seismic tremors, U of A study suggests - - Hydraulic fracking has almost no connection to seismic tremors in North America, except in one region, a study from the University of Alberta suggests. Researchers examined more than 50 years of earthquake-rate statistics from the top oil-producing regions in the United States and Canada, and found little correlation between rising oil production and rates of seismic activity.The two-year study revealed only one exception. In Oklahoma, where seismic rates have changed dramatically in the last five years, researchers found a strong link between increased fracking activity and a rise in tremors in the region.  What we need to know first is where seismicity is changing as it relates to hydraulic fracturing or saltwater disposal," said geophysicist Mirko Van Der Baan in a media release. "The next question is why is it changing in some areas and not others. If we can understand why seismicity changes, then we can start thinking about mitigation strategies." Van Der Baan and his team compared seismic rates from the top hydrocarbon-producing states in the United States and the top three provinces by output in Canada: Oklahoma, North Dakota, Ohio, Pennsylvania, Texas, West Virginia, Alberta., B.C. and Saskatchewan.The study found no correlation between seismicity and increased oil and gas production, despite eight- to 16-fold i ncreases in production in some regions, challenging other studies which have found a definitive link.

With All the Fracking Going On, How Much Methane Is Leaking? - Natural gas is often considered the cleanest fossil fuel, but could it actually be dirtier than coal ?  Watch as New York Times reporter Mark Bittman, in the above Year's of Living Dangerously video, investigates how much methane is leaking at fracking wells. Find out how the natural gas industry's claims compare to what scientists are reporting.  See what happens when Gaby Petron, an atmospheric scientist with NOAA, converts her van into a mobile methane detector and sets out across northeastern Colorado for two years, taking thousands of readings to uncover the truth.

A New Problem for Keystone XL: Oil Companies Don’t Want It - Wall Street Journal - Keystone XL is facing a new challenge: The oil producers and refiners the pipeline was originally meant to serve aren’t interested in it anymore. Delayed for nearly a decade by protests and regulatory roadblocks, Keystone XL got the green light from President Donald Trump in March. But the pipeline’s operator, TransCanada Corp., is struggling to line up customers to ship crude from Canada to the U.S. Gulf Coast..

Another Pipeline Connection To The DAPL -- Watford City Area -- June 26, 2017 -- A "tip of the hat" to a reader for sending me this link to a press release: American Midstream Notice of Binding Open Season for Crude Oil Deliveries to Dakota Access Pipeline at Watford City. Data points:

  • open season
  • a newly constructed delivery point interconnecting into the DAPL in Watford City
  • capacity: to accept over 40,000 bbls/day
  • to commence service in August, 2017

“Timing way off” – BHP chair regrets $20bn US fracking spree  – BHP Billiton Ltd. Chairman Jacques Nasser said the timing of its $20 billion spree into U.S. shale in 2011 was a misstep and that if the miner could turn the clock back it wouldn’t have invested in the assets. The comments from Nasser, who will pass over the chairman’s baton to its youngest director Ken MacKenzie on Sept. 1, follow similar remarks from Chief Executive Officer Andrew Mackenzie, who said in May the deals were poorly timed. “In terms of shale, if you had to turn the clock back, and if you knew what we knew today, you wouldn’t do it,” Nasser, who took up his role in 2010, said at a Sydney lunch briefing. “The timing was way off.” The world’s largest mining company has been been peppered with criticism since April, when restive investor Elliott Management Corp. went public with demands for a independent review of its oil division and castigated management decisions the fund claims have destroyed about $40 billion in value. BHP is considering further sales of its U.S. shale gas assets amid heightened scrutiny of the unit from shareholders. “We acknowledge that the acquisitions that took us into this business were poorly timed, that we paid too high a price, and that early on the very rapid pace of development was not optimal,” Mackenzie said on a call last month. “It was too quick. And we’ve learned that lesson. 

After a Long Night, Gas-Weighted U.S. E&Ps See a New Dawn of Profitability --  After posting huge pretax operating losses in 2015-16, the nine U.S. natural gas-focused exploration and production companies (E&Ps) we’ve been tracking returned to profitability in the first quarter of 2017. This reversal of fortunes in peer group performance was driven mostly due to higher natural gas prices, which ended a massive flow of red ink that had principally resulted from big reserve write-downs. Now, with higher profits and cash flows, these producers are ramping up their 2017 capital budgets and planning for long-term production growth. Today we continue our series on the financial performance of 43 U.S. E&Ps, this time zeroing in on companies whose hydrocarbon reserves are mostly natural gas. We recently did an in-depth analysis of the ongoing transformation of the U.S. energy production sector in Piranha!, a market study of 43 U.S. E&Ps. Of that universe of companies, 21 focus on oil (60%+ liquids reserves), 13 are diversified producers (rough balance of liquids and gas reserves) and nine are gas-weighted producers (60%+ gas reserves). All major U.S. shale/unconventional plays are represented in the combined portfolios of these firms. After examining the 2017 capital spending plans of our three peer groups in a series of blogs, we reviewed the turnaround in financial results we saw across our 43-company universe in Recovery. Then, in Feelin’ Stronger Every Day, we cataloged the 180-degree turnaround in financial results for the Oil-Weighted peer group. Next, we drilled out into the performance of the Diversified E&P peer group in Back in Black. Today we turn our attention to the first-quarter 2017 financial results of the nine companies that make up the Natural Gas-Weighted peer group.

Trump’s anti-NAFTA stance is on a collision course with natural gas  — Of all the industries thrown into question by President Trump’s promise to upend free trade with Mexico, natural gas is easily one of the most important. More than a quarter of Mexico’s electricity is powered by American natural gas, leaving it especially vulnerable to any upheavals from a trade battle with the United States. But selling natural gas to Mexico is also a godsend for the American energy industry, which is lobbying the White House to emphasize just how crucial the relationship with Mexico is. With billions of dollars at stake and zigzagging administration stances on trade, American energy companies are taking no chances. They are also setting their sights on an old friend in a unique position to help: Rick Perry, the former governor of Texas, who recently served on the board of a pipeline company that ships natural gas to Mexico and who is now Mr. Trump’s energy secretary.  Under the North American Free Trade Agreement, which Mr. Trump has threatened to terminate unless he can get a “fair deal” for the United States, the authorization of natural gas exports is virtually automatic. But if the United States pulls out of the agreement, it will be up to the Energy Department to approve future gas exports considered to be in the national interest. That places Mr. Perry in a pivotal role at a tense time, and there is good reason to consider him a friend of the industry. As governor of Texas, he defended contentious practices like fracking to promote his state’s oil production and natural gas exports. Under his watch, production of natural gas in the state soared 50 percent. After he left office, Mr. Perry joined the board of Energy Transfer Partners, a company that has completed four gas pipelines to Mexico in the last two years. And when he ran for president in 2016, the company’s chief executive became the single biggest contributor to Mr. Perry’s ill-fated campaign.   Kelcy Warren, Energy Transfer’s chief executive, donated more than $6 million of the $16.7 million raised by the 2016 Perry presidential campaign, according to Federal Election Commission data compiled by the Center for Responsive Politics. Most of the money was then returned to Mr. Warren when Mr. Perry dropped out of the race.

Trump's ANWR Move Could Spawn Epic Oil, Natural Gas Battle - Oil majors thirsty for reserves likely to line up for any lease sale. President Trump has uncorked yet another controversy over energy vs the environment and itpromises to be a heavyweight battle.The White House budget proposal includes a revenue line of almost $2 billion from selling oil and gas leases in the richly oil-prospective northeastern coastal plain of the Arctic National Wildlife Refuge (ANWR) in Alaska.Until the climate change debate came along, leasing and drilling in the ANWR (pronounced an-war) Coastal Plain was arguably the most ferociously contested item on the oil and gas industry’s wish list at the national level.Trump’s budget cites $2 billion in potential revenues from leasing the Coastal Plain, but given the dearth of onshore elephant-scale prospects worldwide and their dwindling oil and gas reserves bases, it’s likely that major oil companies would be scrambling to throw even more money than that at ANWR leases.Since the majors thrive on megaprojects like Kashagan, Prudhoe Bay and deepwater Gulf of Mexico, ANWR could be a perfect fit for them.It would also be an expensive venture and that likely will keep the smaller players from making much of an impact in ANWR. There is little doubt of the potential for oil on the ANWR Coastal Plain. The region lies between and is geologically analogous with two of the world’s most prolific oil and gas provinces, Alaska’s North Slope and Canada’s Mackenzie Delta.The US Geological Survey, in a 1998 estimate, reckoned that the Coastal Plain contains 4.3 billion to 11.8 billion barrels of technically recoverable oil and as much as 11 Tcf of natural gas, with a mean estimate of 7.7 billion barrels and 3.5 Tcf.Industry contends these are very conservative estimates. As much as 32 billion barrels of oil is in place.

LNG price row between India, US crimps Trump's export aims | Reuters: India's biggest importer of U.S. liquefied natural gas (LNG) is trying to re-negotiate prices with the U.S. seller, sources said, undermining plans by U.S. President Donald Trump to export more gas to the fast-growing Asian nation. At a joint news conference with Indian Prime Minister Narendra Modi at the White House this week, Trump said the United States looked forward to exporting more energy, including new major long-term contracts to purchase American natural gas. The effort is part of Trump's policy of seeking to assert power abroad through a boost in natural gas, coal and petroleum exports. He said on Thursday that the "golden era" of the U.S. energy business was now underway. But any new LNG agreements with India will depend on how GAIL and Cheniere of the United States deal with a long-term supply contract signed in 2011 for an estimated $22 billion. India's GAIL has deals to buy 5.8 million tonnes of U.S. LNG per annum for 20 years, mostly with Cheniere, but is now asking to re-negotiate the price. A commissioning cargo was sent last year, but supplies in earnest will only likely start in 2018. Two sources at state-run GAIL said they were trying to re-negotiate the contract. "At current U.S. prices, the landed cost of the LNG (in India) is not very attractive," said one of the sources on condition of anonymity, as he was not cleared to speak to media. Neither source gave any details on what price GAIL was seeking.

NYMEX July gas settles up 1 cent as rally continues on bullish weather -- The NYMEX July natural gas futures contract settled 1 cent higher at $3.037/MMBtu on Tuesday, as a bullish weather outlook continued to drive up prices. David Thompson, executive vice president of brokerage firm PowerHouse, said the increase was "most likely weather driven, as hotter waves [are] to be factored in." The most recent eight- to 14-day weather outlook from the National Weather Service called for warmer-than-average weather for most of the US, falling in line with its most recent three-month outlook, which projected a warmer-than-average summer for the entire country. US dry gas production dropped to 71.4 Bcf/d Tuesday, down 500 MMcf/d from Monday, according to data from Platts Analytics' Bentek Energy. The overall decline reflects day-on-day dips in production in the Rockies, Northeast, Southeast and Southwest regions. Dry gas production was expected to average 71.55 Bcf/d over the next 14 days, relatively in line with the 71.5 Bcf/d month-to-date average, according to Platts Analytics. 

As Alberta oil production ramps up, worries grow about a ‘pipeline pinch’ | Calgary Herald -- While plans by Canadian companies from Suncor Energy Inc. to Canadian Natural Resources Ltd. to boost oil output are racing to fruition, the construction of three pipelines needed to move that product to market, including the infamous Keystone XL, is lagging years behind. The end result: Producers have little choice but to move those extra barrels by train, with costs two to three times higher than pipeline shipping. It’s an unwelcome added expense after oil plunged about 20 percent from this year’s peak. Futures prices have settled in below US$45 a barrel after many predicted it would rise to $60. “We’re not going to see significant new pipeline capacity until late 2019 or 2020,” said Nick Schultz, vice president for pipelines and regulatory matters at the Canadian Association of Petroleum Producers. In the meantime, the extra expense for shipping “impacts royalties and other things that impact the public.” During the Barack Obama administration, oilsands producers feared a future when they would have to rely heavily on costly railway shipments if he didn’t approve Keystone XL. That may start this year. Pipelines in Western Canada, which holds the world’s third-largest oil reserves, can carry about 3.3 million barrels of crude a day, according to CAPP. Meanwhile, the area is expected to produce 3.92 million barrels a day this year and 4.2 million next year as a number of large oil-sands projects come online. The looming bottleneck adds a new urgency to the industry’s calls for more capacity and may lend credence to its argument that the lack of lines hurts the nation’s economy. 

Alberta a black hole for up-to-date fracking information - CBC News: There have been more than 1,000 hydraulic fracturing operations in Alberta since January. But finding out what's happening in any region of the province right now is next to impossible. Numbers provided to the CBC by the Alberta Energy Regulator (AER) show between January 2017 and June 30, 2017, there have been 1,127 fracking operations conducted. The AER says the holder of a drilling licence must inform the AER about its intentions to frack an oil or gas well five days before starting the work. But the industry-funded regulator doesn't disclose where current fracking operations are occurring on its website. Some of that information is available on the website, but only 30 days after the operation has wrapped up. The site is a project of the BC Oil and Gas Commission, and according to information on the site, it is "intended to provide objective information on hydraulic fracturing, fracturing fluids, groundwater and surface water protection and related oil and gas activities in Canada."AER spokesperson Ryan Bartlett said it would be difficult to maintain an up-to-date list of Alberta fracking activity on the AER website because the length of time needed to frack a well varies from as little as "a couple of hours or multiple days" at a stretch. "The exact start and finish dates tend to be dependent on a number of factors," said Bartlett. "It could be the weather, it could be availability of equipment." 

Study claims fracking demand for water could violate First Nations’ rights - — The Canadian Centre for Policy Alternatives has released a study that claims that oil and gas exploration companies and their need for water is harming the environment and violating the rights of area First Nations. According to the study, Northeast B.C. has seen a sharp increase in water-intensive, natural gas fracking operations, and that those operations use more water than anywhere else on earth. The study cites an incident in August 2015, when Progress Energy used more than 160,000 cubic metres of water during a fracking operation, which triggered a 4.6 magnitude earthquake. In addition, the study adds that the amount and frequency of water use for fracking will increase if an LNG industry emerges in B.C. The study points out that industrial water use in Northeast B.C. has increased by approximately 50 percent since 2012. J. David Hughes, a former geoscientist with the Geological Survey of Canada, said in another CCPA report that if five LNG plants were to be operating in B.C., that the natural gas industry would need approximately 55 million cubic metres of water every year. That quantity is the equivalent of roughly half of the City of Calgary’s annual water consumption. The study also points to an incident in the Spring of 2010, when Apache Canada was found to have possibly bypassed water meters on pumping equipment to take industrial water from a lake northeast of Fort Nelson. Members of the Fort Nelson First Nation filed several requests for information with the OGC, which responded by requiring more frequent and stringent reporting of water use by industry. Shortly thereafter, the First Nation learned that Apache was part of a number of companies that applied with the NEB to export LNG from B.C. Appearing before the NEB panel, Fort Nelson First Nation leaders noted how increased gas industry activities “may result in signicant harm to freshwater and groundwater resources, delicately balanced muskeg ecosystems, and wildlife habitat and populations,” thereby harming the “traditional way of life” of FNFN members 

Mexico leases ten offshore blocks -The National Hydrocarbon Commission of Mexico awarded 10 out of the 15 exploration blocks that were in its Round 2.1 lease auction this week. The awarded leases cover prospective oil and gas acreage in Mexico’s shallow waters in the Gulf of Mexico. “This was good news for Mexico, considering that Mexico was competing with many other countries bidding out 42 PSC blocks, like China, India, Malaysia, Indonesia, Egypt, and others,” said Haynes and Boone’s Ricardo Garcia-Moreno. “This round showed a lot of interest from majors around the world. Mexico is offering competitive terms and contracts, and people are responding.” Reuters reported that Russia’s Lukoil also took a block in this latest auction, as did a consortium of France’s Total SA and Royal Dutch Shell Plc. Energy Minister Pedro Joaquin Coldwell said in a press conference that the potential output from the blocks auctioned could total 170,000 BOEPD, and investments could eventually reach $8.2 billion, according to Reuters.

US Says It Has Issued Permits for Three US-Mexico Pipelines | Rigzone - The United States has issued permits for three NuStar Logistics, L.P. pipelines crossing the U.S.-Mexico border, the State Department said in a statement on Thursday. The permit for the New Burgos Pipeline authorizes construction, operation and maintenance of a new pipeline capable of delivering up to 108,000 barrels per day of refined petroleum products, crossing the U.S.-Mexico border near Peñitas, Texas, the State Department said. Two other permits were issued for existing pipelines crossing the border near Laredo and Peñitas, Texas to reflect a name change and authorize transport of a broader range of petroleum products, the State Department said. The U.S. Acting Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs Judith G. Garber issued the permits. NuStar Logistics is a subsidiary of NuStar Energy L.P. , an American pipeline operator.

Trump Approves US-Mexico Pipeline 'That'll Go Right Under the Wall' -- President Donald Trump has approved the construction of a new U.S.-Mexico pipeline that will go "right under" the controversial border wall .  According to The Hill , the New Burgos Pipeline will carry up to 108,000 barrels per day of refined petroleum products per day and cross the border between McAllen, Texas and Reynosa, Tamaulipas, Mexico. The project is a joint venture between NuStar Energy LP and PMI, an affiliate of Mexico's state-owned oil and gas company Petroléos Mexicanos.  Trump made the remarks during his speech at the Department of Energy's "Unleashing American Energy" event on Thursday. Vice President Mike Pence , Interior Sec. Ryan Zinke , Energy Sec. Rick Perry and U.S. Environmental Protection Agency Administrator Scott Pruitt also stood on stage with the president.  "[The pipeline] will further boost American energy exports, and that will go right under the wall, right?" Trump said, as he glanced over to his cabinet members and made a swooping motion underneath the imaginary structure with his arm. Some in the audience clapped and laughed at the gesture.  "We have to dig down a little deeper under that section," he added.   Trump's 17-minute speech centered around the theme of America's "energy dominance." But as Newsweek reported, he did not once mention the rapidly growing renewable energy sector, not even his now-infamous "solar" border wall proposal. Rather, he touted "clean, beautiful coal," reducing restrictions on natural gas, and expanding offshore oil and gas development. He dismissed concerns about fossil fuels as "a big beautiful myth" and "fake."  Additionally, POTUS touted his executive order to push the Keystone XL and Dakota Access pipelines forward while falsely claiming that there was no opposition to his decision. He underscored his decision to withdraw the U.S. from the "one-sided" Paris climate agreement .

Argentina's YPF Says Technology Lowering Its Shale Costs (Reuters) - Longer horizontal wells and technology improvements will help Argentine state-run oil company YPF SA lower costs at its most productive shale field, but better infrastructure is still needed in the remote Vaca Muerta play, an executive said. The breakeven price at the Loma Campana field is $43 per barrel and falling while development costs are $12.90 per barrel and expected to fall to $10 next year, said Pablo Bizzotto, executive manager at YPF's unconventional resources unit. "Ten dollars is world-class compared with the Permian" shale field in Texas, he told reporters this week during a tour of windswept Loma Campana, where YPF produces 40,000 barrels of oil equivalent per day and co-investor Chevron Corp produces another 20,000. "If we can get there in Vaca Muerta, we're competitive," he said, referring to Argentina's Belgium-sized shale formation of which Loma Campana was the first productive field. The cost cuts are good news for Argentine President Mauricio Macri, who has sought to attract investment to Vaca Muerta to help close Argentina's costly energy deficit since taking office in late 2015. While the play is thought to have some of the world's largest shale oil and gas reserves, just two of its 19 concessions have moved from the pilot to production stage amid investor concerns over high labor costs and logistical difficulties in the distant Patagonian province of Neuquen. To address that, the government plans to invest $1.2 billion to renovate the 1,300 km (807.78 miles) of railroad tracks connecting Atlantic ports in Buenos Aires and Bahia Blanca to Anelo, the closest town to the oil fields, located in an isolated, flat desert region where materials needed for production arrive by truck. "It's much needed," Bizzotto said of the train, adding that logistics account for 50 percent of the cost of sand needed for hydraulic fracturing. "It will lower logistical costs for things that should not be transported via truck, like sand and tubes."

North Sea spot crude market suggests oil outlook may be too glum | Reuters: The North Sea crude oil market is finally showing signs of long-lost strength, suggesting that some of the pessimism that has driven down oil futures by 5 percent this month and created a record bet against a price rise may be unjustified. On Thursday, about 6 million barrels of North Sea Brent crude were being stored on ships, down from four-month highs of as many as 9 million last week, and trading sources said it seemed now refineries were starting to take in more cargoes. The uptick in demand has tilted the physical Brent market has into backwardation, where prices for prompt-loading cargoes were trading above those for delivery further in the future. This typically suggests the supply of oil for immediate delivery is harder to come by, but the North Sea market has been dogged in the last month by persistent oversupply that has seen traders store oil on ships rather than sell it. The floating fleet is starting to shrink partly because of a shift in the derivatives market that has made it more attractive to sell cargoes now, rather than hold out for higher prices further ahead. "Sentiment in the oil market remains morbid even though the physical market is perhaps showing some signs of emerging green shoots, thanks to Chinese teapots (refiners) slowly starting to come back to the market for crude," consultant Energy Aspects said. The Brent crude futures price has risen by 8 percent to two-week highs above $47 a barrel in the last six days, its longest stretch of gains since April, even though concern about rapidly expanding global supply has prompted a number of market watchers to urge caution over the longevity of this move upward. 

UK wants to revive gas extraction in oldest part of North Sea oil basin - Britain wants oil and gas drillers to recover pockets of gas that are more difficult to reach in a part of the North Sea where drilling for fossil fuels started over 50 years ago. Britain’s oil regulator, the Oil and Gas Authority (OGA), said on Thursday that some 3.8 trillion cubic feet (tcf) of tight gas remain in the southern North Sea, one of the world’s oldest offshore gas extraction areas that has produced more than 40 tcf. The basin is estimated to have billions of barrels of oil left for extraction, worth around 200 billion pounds ($250 billion) for British government coffers, which the government is keen to see developed. The regulator on Thursday published an eight-step programme it wants oil companies to follow to tap the southern North Sea tight gas deposits, which were traditionally unpopular among explorers because they were difficult to access and therefore more expensive to develop. New technologies allowing extraction in less permeable geologies and efforts by explorers to share equipment mean tapping these resources is now more economic.

It's nonsense to say fracking can be made safe, whatever guidelines we come up with -- Can fracking be safe? A new study suggests how fracking – the process of extracting oil and gas trapped in rocks deep underground by blasting water into the rock at high pressure – can be conducted without causing earthquakes, which is one of the most well known concerns. While this kind of research can help produce guidelines to reduce the risks associated with fracking, ultimately, it makes no sense to talk of fracking being entirely "safe". You might as well ask whether you can ensure your journey to work is safe. There are rules designed to reduce the risks, such as speed limits and the highway code, but there will always be the chance of human error or equipment failure. Venturing onto the roads is an inherently unsafe business. Of course, that doesn't mean we should never do it. The risks involved in any industrial activity mean that we need to think carefully about to manage them, rather than trying to claim it is safe or not. Fracking or hydraulic fracturing involves pumping up to 16 Olympic swimming pools' worth of water, chemical additives and sand into shale rocks lying between 2km and 3km underground. This creates a dense network of small fractures in the rocks, releasing gas or oil that moves into the water stream and is pumped or carried to the surface.  Earthquakes can occur when fracking takes place near a geological fault.  If frack fluid is pumped into a geological fault, it can also slip more easily. Fracking can also change the stress on the fault, causing it to release, and a big enough fault shift will be felt as an earthquake. The new paper, published in Geomechanics and Geophysics for Geo-Energy and Geo-Resources, tries to predict how far from a geological fault it is safe to frack a well without causing an earthquake. Such research is important as it could lead to areas of land being ruled out for fracking, prevent earthquakes and, of course, save the fracking industry from a PR disaster.

Dutch Quakes Rattle Exxon, Shell -- WSJ  -- For decades, the giant Groningen gas field beneath the flat, green farmland in the north of this country counted among the greatest prizes for Exxon Mobil Corp. and Royal Dutch Shell PLC. Then the earthquakes started. The exploitation of Groningen -- the biggest gas field in Europe -- has been causing tremors for over two decades, rattling a bucolic province with no previous history of quakes and exposing two of the world's biggest energy companies to a criminal probe and rising reconstruction bills. Amid a public outcry, the Dutch government has imposed increasingly strict limits that have more than halved Groningen's gas production since 2013. Now, authorities are proposing another 10% cut in hopes of further reducing earthquakes. And a Dutch public prosecutor is preparing to open a criminal investigation into responsibility for the earthquakes. Shell and Exxon are pushing back through their joint venture, Nederlandse Aardolie Maatschappij or NAM. The venture says cutting output even more is "out of proportion and not effective," and would create uncertainty about the legal framework for its operations. It warns that continuous changes to the production level may ultimately threaten the business's profitability.   NAM said it is considering formally contesting the government's decision. It also expressed surprise at the Dutch court order to the prosecutor to open a criminal investigation this year, since the authorities had previously found no grounds for such action. The state will take a decision on whether to prosecute once the investigation is complete. Groningen was expected to be one of the world's largest gas producers for decades to come. Last year, it made up almost 10% of both Exxon and Shell's total gas production globally and its reserves are among the companies' largest undeveloped resources. Moreover, the field's profits have been lucrative for the Dutch government, which not only collects taxes from NAM but is also a 40% stakeholder in the field. Since production began, the field has generated almost EUR300 billion ($335 billion) for Dutch coffers. Exxon named restrictions on Groningen as a factor contributing to a nearly 4% decline last year in its global natural-gas output. Shell said Groningen issues were largely responsible for a decline of 636 billion cubic feet in proven reserve estimates for its European joint ventures, equivalent to nearly 2% of the company's total gas reserves at the end of 2016.

Dutch Groningen operator NAM appeals against 10% natural gas quota cut -- NAM, the operator of the Netherlands' Groningen natural gas field, has appealed to the Council of State, the country's top administrative court, against the government's decision last month to cut the field's annual quota by a further 10% to 21.6 Bcm from Gas Year 2017. "It is not acceptable that [the decision] allowed us to proceed with production, while indicating that it can not be determined that [production] is compliant with safety standards...This creates fundamental ambiguity," NAM director Gerald Schotman said in a statement Wednesday. "Therefore, NAM has asked the Council of State to review the decision on this point. It is crucial for us to know within what framework we must continue in our role as a producer," he added. The Administrative Jurisdiction Division of the Council of State is scheduled to hear the appeal July 13-14, alongside a slate of other appeals against the government's previous Groningen gas extraction policy. Economic Affairs Minister Henk Kamp made the decision to cut the Groningen quota by a further 10% in Gas Year 2017 (October 1, 2017-March 31 2018) from the 24 Bcm ceiling applying in the current gas year as a response to an unexpected upturn from October 2016 in earthquake activity within the field complex. The 10% quota reduction also applies to the cold-winter flex quota on the Groningen natural gas field, which has been cut to 27 Bcm from 30 Bcm. NAM, which is a Shell-ExxonMobil joint venture, is also facing an investigation into whether it has been criminally negligent in causing earthquakes in the Groningen region.

Europe set to be natural gas kingmaker as LNG booms  (Reuters) - It's probably not quite here yet, but the trend is unmistakable; the world is moving to a globally-linked natural gas market and the rise of liquefied natural gas (LNG) is the key driver. Much of the increase in LNG capacity is because of the rapid boost to plants in Australia and the United States, as both countries take advantage of abundant local reserves of natural gas to muscle in on a market that until recently had been dominated by a few established producers and buyers.But it is perhaps ironic that while the action on the capacity side of LNG is an Australian and American story, the ultimate controlling player of the emerging global natural gas market is likely to be Europe.This is because Europe is likely to act as a "clearing house" for surplus LNG cargoes, given it has excess re-gasification capacity and the ability to use the fuel for a variety of purposes, from power generation to manufacturing to household heating.Europe is also the only region that can effectively arbitrage between LNG and pipeline prices, given its connection to Russian and other Eastern natural gas via pipelines.The continent is also best-placed to use market forces to find a price level for natural gas versus its competitors, given it still has substantial coal-fired power in some countries as well as being a leader in renewables such as wind and solar. LNG has traditionally been an opaque and tightly-controlled market, where a small number of exporters signed long-term, oil-linked contracts with an equally small number of buyers, who were more concerned about energy security than price. The major producers included Qatar, Indonesia and Malaysia, while the top buyers were concentrated in North Asia, namely Japan and South Korea, and also in Europe.It was inevitable that this situation would be disrupted once global energy giants such as Chevron, Royal Dutch Shell, ConocoPhillips and Exxon Mobil decided to pour some $200 billion into developing eight new LNG projects in Australia.Three of these are ground-breaking ventures based on using coal-seam gas as feedstock, one is the biggest floating LNG project and the rest are conventional offshore gas to onshore liquefaction plants.When the last of these new plants is operating, most likely by 2018, Australia will have around 80 million tonnes of annual LNG capacity, overtaking Qatar as the top exporter of the fuel. Not far behind Australia on the development scale is the United States, with 16 million tonnes of LNG capacity already operating at the Sabine Pass facility in the Gulf of Mexico.A further 60.5 million tonnes of annual capacity is under construction, and will arrive from late in 2017 to the end of 2019, with the bulk scheduled to be commissioned in 2018.

U.S. thirst for European gasoline stalls, casting shadow on demand | Reuters: Europe's steady exports of gasoline to the United States have slowed substantially this year as tanks filled in the world's largest consumer nation and once-meteoric demand growth slowed. The drop in gasoline shipments to the densely populated U.S. East Coast is forcing European exporters to turn to less steady buyers in West Africa and compete with refineries elsewhere in the United States to export to Latin America and Asia. Deliveries to the U.S. Atlantic Coast from Northwest Europe this month are set to fall 35 percent compared with the 400,000 barrels per day (bpd) that sailed on the route in June 2016, according to U.S.-based ship-tracking firm ClipperData. May imports, at 246,000 bpd, were down nearly 20 percent versus year-earlier levels. "Fears of a replay of last year's gasoline glut are deterring U.S. importers," said Matt Smith, director of commodity research at ClipperData. "This trend looks set to continue, at least through early July, leaving higher volumes of gasoline to remain within Northwest Europe, as well as ticking higher to Asia." Starting in 2015, U.S. gasoline demand grew substantially, clocking in 260,000 bpd higher that year and expanding by another 130,000 bpd last year, according to the U.S. Energy Information Administration. But demand was down 2.7 percent in the first quarter of this year, and the four-week average was also lower year-on-year despite hitting all-time highs in two of the past five weeks.In another sign of the slowdown, three oil tankers, the Atlantic Pegasus, the Ardmore Seavantage and the CPO China, are ballasting - or sailing with no product inside them - from Europe to the United States. Tankers often sail empty from one market to another when freight rates in the destination are strong, but it is highly unusual for the United States not to need European gasoline over the peak-demand summer months. 

'We've Made History': Ireland Joins France, Germany and Bulgaria in Banning Fracking  - Ireland is set to ban onshore fracking after its Senate passed legislation on Wednesday that outlawed the controversial drilling technique.The Petroleum and Other Minerals Development (Prohibition of Onshore Hydraulic Fracturing) Bill 2016 now awaits Irish President Michael D. Higgins' signature. The president is expected to sign it into law " in the coming days ."The Emerald Isle will join three other European Union member states, France, Germany and Bulgaria that have banned the practice on land.Fine Gael TD Tony McLoughlin introduced the private member's bill—meaning it was not introduced by the government—last year. The bill passed Ireland's Parliament in May. 'We've made history," McLoughlin tweeted after the vote and called it one of the "proudest moments in my political career."

Nord Stream 2: US sanctions threat raises the stakes for European Gas Relations (video & transcript) Germany and Austria called on the US to stay out of European energy matters after the US Senate proposed new sanctions against investors in Russian energy pipelines. In this video,Stuart Elliott looks at how the controversy around Nord Stream 2 has moved to a new, unprecedented level, and how the natural gas pipeline is likely to be built regardless of interference from Washington.

European Gas Security 2017 | Energy Matters --On 22nd June, The Telegraph published an interesting article called Germany’s gas pact with Putin’s Russia endangers Atlantic alliance where Ambrose Evans-Pritchard made many of the correct observations but also managed to make some odd comments too. The article focussed on proposals to build Nord Stream II that would pipe more Russian gas directly into Germany, bypassing Belarus and Ukraine. This will clearly enhance German and European gas security, and yet Evans-Prichard manages to say:The Nord Stream 2 venture creates a sweetheart arrangement with Germany while undermining the security and economic interests of Eastern and Central Europe, and leaves Ukraine at the mercy of Kremlin blackmail. “It does nothing whatsoever to supply the EU with gas. It deprives the East Europeans of political leverage and rewards an aggressor state,” said Professor Alan Riley from the Institute for Statecraft.I find these comments to be totally bizarre. Evans-Prichard seems to have forgotten that it was Ukraine stealing gas that crossed its territory that led Russia to periodically cut supplies to the whole of Europe. And I seem to recall that it was Western meddling in the Ukrainian elections that led directly to the civil war. Bypassing land pipeline routes that cross either Ukraine or Belarus of course improves European gas security. Evans-Prichard goes on to say:What the project does is to erode Ukraine’s $2bn revenue from pipeline fees and to leave the country vulnerable to a Gazprom squeeze. It stops Ukraine transporting gas to Slovakia and then buying it back at EU prices to escape punitive tariffs. It enables Russia to play a divide-and-rule game that splits the EU, and that sweetens Germany with preferential pricing. It really is a bizarre 1939-style pact. I wanted to use the Evans-Prichard article to set the scene for an evolving geopolitical game in Europe where energy and the behaviour of Germany takes centre stage. There are two main themes: 1) Europe’s indigenous gas supplies are in decline, and 2) gas imports from “unsavoury countries” are on the rise. Let me begin by looking at indigenous European gas supplies. All charts are from Global Energy Graphed, BP Gas Europe, are based on the BP 2017 Stat Review and are produced by Neil Mearns.

EU prolongs energy sanctions against Russia to January 31, 2018 --The EU has again prolonged energy, financial and other economic sanctions against Russia for its role in the conflict in Ukraine, this time to January 31, 2018, the EU Council said Wednesday. The EU imposed energy sanctions in July 2014 when it limited Russia's access to European technology and services for developing Arctic, deepwater and unconventional oil resources. In September it expanded these to target Russia's largest oil producer Rosneft, Gazprom's oil subsidiary Gazprom Neft, and national pipeline operator Transneft, restricting the companies' access to EU capital markets. EU sanctions normally expire after a year, and can be reviewed and changed at any time if all 28 EU countries agree. EU leaders decided in March 2015 to keep the sanctions in place until the Minsk peace deal to resolve the conflict is implemented fully. This had been expected by the end of 2015, but has not yet happened.

3 Out Of 4 US Energy Firms Were Hacked In 2016 -- Hackers have targeted Russian oil giant Rosneft, the company said on Tuesday, just as Deloitte released a report on cyber-attacks targeting U.S. oil companies.  A “powerful hacker” attacked the company’s server in an assault that, according to TASS news agency, could be related to ongoing legal proceedings. A Russian court recently froze assets of a holding company called Sistema as part of a suit lodged by Rosneft and Bashneft. The two companies are trying to recover $2.9 billion lost during Sistema’s 2014 restructuring. Russian companies are not the only ones facing the new frontier in corporate espionage. U.S. consulting major Deloitte released a report on Monday that said American energy companies showed “limited strategic appreciation” for cyber-threats. Analysts said three of every four U.S. oil and gas companies experienced a cyber-attack in 2016, but only a few firms said the computerized attacks posed a major security risk. "Whether hackers use spyware targeting bidding data of fields, malware infecting production control systems, or denial of service that blocks the flow of information through control systems, they are becoming increasingly sophisticated and, specifically alarming, launching coordinated attacks on the industry," the report said. Low crude prices have caused energy companies to focus their spending on operations that maximize value for shareholders, instead of investing in protective cyber security measures.On the most vulnerable aspects of the oil and gas supply chain, Deloitte wrote:“Among the upstream operations, development drilling and production have the highest cyber risk profiles; while seismic imaging has a relatively lower risk profile, the growing business need to digitize, e-store, and feed seismic data into other disciplines could raise its risk profile in the future.”

Shell lifts force majeure on Nigerian Bonny Light crude oil exports - Shell has lifted the force majeure on exports of Nigeria's main export crude, Bonny Light, a company spokesman said Friday. Related Platts price assessment: West African crude oil price Shell had declared the force majeure on Bonny Light liftings on June 8 following the shutdown of the Trans Niger Pipeline after a sabotage attack on the line by suspected oil thieves. "The force majeure on Bonny Light exports was lifted effective 12:00 hrs [local time] on Wednesday, June 28, after the repair of the sabotage leak on the SPDC JV's Trans Niger Pipeline," the spokesman said. Bonny Light is produced in Nigeria from Chevron and Shell concessions. Cargoes are loaded from the Shell-operated Bonny Light terminal, which can accommodate VLCCs. Bonny Light has an API gravity of 35.3 degrees and sulfur content of 0.15%. The resumption of Bonny Light exports would push Nigeria's output to more than 2 million b/d, coming on the back of the resumption of deliveries from the Forcados oil terminal in late May after being out for several months. Oil theft in Nigeria has remained a major headache for both Nigeria and the producers in the area, even as the government has been able to check the activities of militants in the main producing Niger Delta region through peace talks.

Oil Tanker Inferno Kills at Least 140 - A lorry carrying fuel has burst into flames near the Pakistani city of Ahmedpur East, killing at least 150 people, local officials say.Villagers had gathered, reportedly to collect fuel leaking from the crashed tanker, when it caught fire. Dozens are being treated in hospital.It appears the tanker blew a tyre while rounding a sharp bend in the road.The fire was sparked by a passer-by lighting a cigarette, a rescue services spokesman told the BBC."The incident, which was a minor [one], turned into a major blast," Jam Sajjad said.Prime Minister Nawaz Sharif is cutting short a visit to London in response to the incident, the Pakistani government news agency, APP, reported.Army helicopters were dispatched to ferry casualties to hospitals, army spokesman Maj Gen Asif Ghafoor said in a tweet. There are fears that the death toll could rise further.Some of the victims may only be identified by DNA sampling, as the bodies were so badly burned in the incident, reports say. Police sources told APP that the tanker had been transporting 25,000 litres (5,500 gallons) of fuel from Karachi to Lahore.

China's Natural Gas Output, Imports Surge, Beating Target --China is ramping up both imports and domestic production of natural gas, with the combined rate of growth running well ahead of the government's target for boosting the use of the cleaner-burning fuel. Official data for domestic production, imports via pipelines and imports of liquefied natural gas (LNG) show the total amount of natural gas available in China in the first five months of the year was the equivalent of 72.01 million tonnes of LNG. This was up nine percent, or 5.94 million tonnes, on the 66.07 million tonnes that were either pumped domestically or imported in the first five months of 2016. China has set a target of increasing the share of natural gas in energy consumption from 5.9 percent in 2015 to 10 percent in 2020, an average annual increase of 4.1 percent. So far this year, China's output and imports of the fuel are running at more than double the annual rate needed to reach the official target. The biggest gainer has been imports of LNG, which are up 38.4 percent in the first five months of 2017 to 12.86 million tonnes, while pipeline imports have dropped 4.4 percent to 12.65 million tonnes. Domestic natural gas production has been a strong gainer, rising almost 7 percent in the January to May period to 62.88 billion cubic metres, equivalent to 46.5 million tonnes of LNG. The rise in natural gas output stands in sharp contrast to the decline in crude oil production, which fell to the lowest on record in May as output declines from older fields. Natural gas has also outperformed coal, with domestic output of the polluting fuel up 4.3 percent to 1.4 billion tonnes in the first five months of the year. 

China pumps cash into African floating LNG projects in strategic push | Reuters: China plans to pour almost $7 billion into floating liquefied natural gas (FLNG) projects in Africa, betting on a largely untested technology in the hope that energy markets will recover by the time they start production in the early 2020s. Western banks are wary due to the depressed state of the shipping and gas markets, as well as the technical difficulties of pumping gas extracted from below the ocean floor, chilling it into liquid form on a floating platform and transferring it into tankers for export. China, however, is making a strategic push into FLNG, aiming to become the lowest cost seller of the complex floating plants and lead the global rollout of a technique that remains in its infancy, with only one project in commercial production so far. The country needs gas as a cleaner alternative to coal under a drive to improve air quality in its cities, and has already lent $12 billion to Russia's conventional Yamal LNG project in the Arctic as U.S. sanctions scared away Western banks. It has also lent or committed almost $4 billion to three FLNG schemes off the African coast. In two more African projects costing a total of $3 billion, it plans not only to provide the funding, but also build the production platforms. "We see a real commitment to FLNG in China both from the construction side and from the LNG consumption side where decreasing costs mean potentially lower cost LNG," said Steve Lowden, chairman of Jersey-based NewAge which is planning FLNG projects off Congo Republic and Cameroon. China already dominates the global market for solar panels and is a major supplier of coal-fired power plants, aided by easy money, cheaper labour and state support.Now, with Beijing pushing President Xi Jinping's "Belt and Road" vision of expanding trade links between Asia, Africa and Europe, it is turning to FLNG to bring high technology work to its shipyards and create jobs - a strategic priority. 

PAJ chief dismisses likelihood of OPEC to make additional oil output cut soon - Petroleum Association of Japan president Yasushi Kimura said Monday that he does not expect OPEC to make an additional production cut soon as the group should be monitoring oil markets, following its May decision with non-OPEC producers to extend their agreement by nine months. "Even if OPEC makes additional cuts right now, it would not have much impact," Kimura told a press conference in Tokyo. "Without a clear impact, it would be difficult for OPEC to move... Judging from the current situations, they would likely be monitoring situations for the time being as they just extended it [the output cut deal] by nine months." Kimura's comments came as Iranian oil minister Bijan Zanganeh said Wednesday that OPEC ministers had already been holding discussions about increasing the cuts given the state of the oil market, although some members maintain that the recent extension of the deal needs more time to play out. Kimura also said that global oil demand growth, however, should exceed supply growth as current oil price levels should support steady growth in oil demand -- another factor OPEC is monitoring closely. "At this price level, global oil demand should steadily increase," said Kimura, adding that the speed of global oil demand growth should exceed the pace of incremental production from the US and others.

Hedge funds abandon all hope in OPEC: Kemp -- Hedge funds and other money managers appear to have entered their own special version of hell and abandoned all hope that OPEC will rebalance the oil market, slashing formerly bullish bets on crude futures and options.Hedge fund managers cut their net long position in the three main futures and options contracts linked to Brent and WTI by 109 million barrels in the week to June 20 ( have cut their net long position by a total of 161 million barrels over the last three weeks, taking it down to just 389 million barrels, the lowest since Aug. 9, 2016 ( managers now hold just two long positions for every one short position, which ranks among the most bearish positions since oil prices started to tumble in the middle of 2014 ( bearishness extends to refined fuels, where hedge funds have a net short position of 27 million barrels in U.S. heating oil and a near-record net short position in U.S. gasoline of 21 million barrels.The hedge fund community placed enormous faith in OPEC’s ability to accelerate oil market rebalancing through cuts announced late in 2016 in association with key non-OPEC producers.Fund managers accumulated a record net long position of almost 1 billion barrels by the middle of February only to suffer a sharp reversal in prices starting early the next month.The accumulation of long positions for a second time in April was similarly rewarded with a brutal sell off in oil prices, leaving many fund managers struggling with large losses for the year.OPEC’s decision to leave production unchanged last month, rather than cut more deeply, has sparked a third sell off, and extinguished any remaining bullishness and emboldened short sellers.Hedge funds have embarked on a new cycle of short-selling in Brent and WTI, the eighth since the start of 2015, which has added to the downward pressure on prices.Fund managers have added 77 million barrels of extra short positions in WTI and 59 million barrels in Brent since June 6, according to data from regulators and exchanges. Hedge funds have added short positions faster and more aggressively than during any previous short-selling cycle in the last three years (

Hedge funds hold near-record short positions in petroleum: Kemp (Reuters) - Oil prices have been rising gently during the past four trading sessions despite concerns about the continued rise in the U.S. rig count and enormous excess inventories.Front-month Brent futures prices are up by about $2 a barrel since touching a low of $44 on June 21, which could herald a break in the downtrend that had been in place since late May.Rising prices most likely reflect hedge funds covering some short positions rather than a fundamental reappraisal of the outlook for supply, demand and inventories.Hedge fund managers have become progressively more bearish about petroleum prices in recent weeks ( June 20 hedge funds had amassed 480 million barrels of short positions in the five main futures and options contracts linked to crude, gasoline and heating oil, up from only 350 million barrels on June 6.Fund managers have only held a larger number of short positions in petroleum once before, in January 2016, when their combined shorts in the five contracts totalled 484 million barrels.The position in January 2016 coincided with the trough of the oil price cycle and marked the start of the recovery.The question is whether the large number of shorts now will mark a similar turning point. In crude, hedge fund long positions still outnumbered short positions by a ratio of 2.1 to 1 on June 20, but this was one of the lowest ratios recorded in recent years ( and ratio of long to short positions has often been correlated with the rise and fall in oil prices ( and attempt to accumulate a large number of long positions tends to push prices higher, while efforts to accumulate short positions has the opposite effect.But once the positions have been established, the existence of large concentrations of long or short positions and a stretched ratio have often signalled the price trend is about to reverse. With so many shorts now in crude, gasoline and heating oil, the risk of a short-covering rally when fund managers attempt to lock in some of their profits has increased significantly.And with relatively few long positions left to close, the downside threat from further liquidation has been reduced. From a pure positioning perspective, the balance of risks in the oil market has therefore shifted to the upside, with the probability of a short-covering rally now much greater than further liquidation-driven price falls.

Oil up almost 2 percent on weaker dollar, short-covering --Oil prices rose nearly 2 percent and hit a one-week high on Tuesday, boosted by a weaker dollar, short covering and expectations that crude inventories in the United States may decline for a third consecutive week. It was the fourth straight session of gains for oil, which also got some support after the chief executive of U.S. shale oil producer Pioneer Natural Resources Co said Saudi Arabia likely will move to boost oil prices to prop up its finances. Prices pared gains after hours when an industry group's reported an unexpected rise in U.S. crude inventories. With the end of the quarter approaching, brokers said investors were covering short positions. Brent crude futures, the international benchmark for oil prices, gained 82 cents, or 1.79 percent, to settle at $46.65 per barrel. U.S. crude futures ended the session up 86 cents, or about 1.98 percent, at $44.24 per barrel. Brent touched a one-week high of $47.06. U.S. crude hit its highest since June 19 at $44.44. "I think in the market, over the last four weeks or so, every news item has been uniformly bearish, even the technical situation has been bearish and a lot of the entrenched bulls were really throwing in the towel," said Andrew Lebow, senior partner at Commodity Research Group in Darien, Connecticut. "The downside momentum was clear and today it just got to a level where it's been arrested for the time being." After settlement, American Petroleum Institute data showed U.S. crude inventories rose 851,000 barrels in the week to June 23 to 509.5 million. Analysts had forecast a decline of 2.6 million barrels.

WTI/RBOB Tumble After Unexpected Inventory Builds --"There is still hope that inventories will draw and crude runs will remain high," noted one research director ahead of the API data as WTI rose for a 4th day (back above $44), the longest rally in over a month. With tropical storm Cindy likely impacting the data, API showed asurprise crude build (exp -2.25mm) and notable gasoline build which sent WTI/RBOB prices reeling. API

  • Crude +851k (-2.25mm exp)
  • Cushing -678k
  • Gasoline +1.351mm (unch exp)
  • Distillates +678k (+350k exp)

Figures will be tricky to interpret because of impact from tropical storm Cindy, but taken as reported the biggest headline was the surprise build in crude and gasoline is most worrisome for the bulls... Following last week's API/DOE data - which showed modest draws - the initial reaction was a kneejerk higher before tumbling. WTI was limping lower into tonight's print...

Oil stays below $47 as U.S. inventory report revives glut worries - Oil edged lower toward $47 a barrel on Wednesday after an industry report said U.S. inventories increased, reviving concerns that a three-year supply glut is far from over. The American Petroleum Institute (API) said on Tuesday U.S. crude inventories rose by 851,000 barrels last week, while analysts expected a decline. Inventories of gasoline and distillates also increased, the API said. "There appears to be no end to the bearish news on the oil market," said Carsten Fritsch, analyst at Commerzbank. "This is likely to add fuel to doubts that any process of market tightening is underway." Brent crude was down 9 cents at $46.56 a barrel at 1033 GMT. It reached a seven-month low of $44.35 on June 21. U.S. crude fell 17 cents to $44.07. A rise in U.S. stocks would suggest global supplies are still ample despite the effort led by the Organization of the Petroleum Exporting Countries to cut output by 1.8 million barrels per day (bpd) from January 2017. Top exporter Saudi Arabia and the other producers are trying to get rid of a supply glut which prompted prices to slide from above $100 a barrel in mid-2014. "The U.S. crude oil stock build is not huge but it is still a build and that does not go in the direction of the Saudi rebalancing," 

U.S. shale CEO sees Saudi Arabia moving to lift oil prices | Reuters: Saudi Arabia likely will move to boost oil prices after a recent drop in order to prop its own national finances, the chief executive of U.S. shale oil producer Pioneer Natural Resources Co said on Tuesday. Oil prices have tumbled in recent weeks despite moves by Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries last month to quell a global supply glut brought on in part by resurgent U.S. shale output. "I personally believe (the oil price) where we are right now is not sustainable. It comes in the form of two words: Saudi Arabia. They cannot have a scenario, which is $43 or $44 (per barrel) oil, and sustain their national budgets," Tim Dove, Pioneer's CEO, said at the JPMorgan Energy Equity Investor Conference in New York. Despite the supply glut, Pioneer has no plans to stop drilling new wells, Dove said. "We're not going to not drill, because this very well may be the time where the well costs are as low as they're ever going to be," he said. Pioneer, one of the largest oil producers in the Permian Basin of West Texas and New Mexico, has hedged most of its 2017 oil production but has not been about to hedge more than roughly a third of is 2018 output since OPEC's meeting last month, Dove said. "We can pare away and still be profitable even in a $45 (per barrel) environment," he said. "We may just dial back at the margin in that scenario and not be a significant over-spender." 

OPEC: Deeper crude oil output cuts? -- OPEC and its associated non-OPEC producers’ decision in May to extend their production cuts for an additional nine months through to end-March 2018 has not been met with overwhelming enthusiasm by the oil market. In fact, quite the contrary; the price of Dated Brent sunk from above $53/barrel in May to just $44.46/b June 23, although it has rebounded slightly in recent days to $46.47/b June 28. If this slump is sustained, it may prove enough to stem the rise in the US oil rig count, although it is too soon to see any impact. Yet this is hardly the dynamic that OPEC wished to set in motion. Related podcast: Saudi Arabia’s new crown prince and the outlook for the kingdom’s oil sector If the rise in the US rig count does stall, it will merely reaffirm the responsiveness of US shale production to the oil price. If OPEC decides further cuts are necessary, and prices firm again, there is little to suggest that US rigs will do anything other than return to the field. The number of US drilling rigs targeting oil rose by another 11 in the week ending June 23 to 758, according to Baker Hughes data, the highest level since October 2015, when drilling activity was contracting sharply. As a result, the current outlook, according to the US Energy Information Administration, is for an increase in non-OPEC production this year of 700,000 b/d and then 1.4 million b/d in 2018. Moreover, there is more bad news from within, although it represents good news for the two countries concerned. Neither Nigeria nor Libya are subject to output restrictions because of their internal security situations. Both have seen a rebound in oil production and Libya’s looks particularly robust, at least in volume terms.

OPEC should let oil prices rebalance the market: Kemp  -If all oil producers try to maximise their output, the result is a glut of crude that depresses prices and proves ruinous for everyone. If one producer acts as swing producer and restricts output unilaterally, others increase their production to fill the gap, and the only result is a loss of market share. The only rational strategy is to avoid trying to manage production and allow prices to adjust to rebalance the market. Saudi Arabia would likely move to boost oil prices to protect its own finances, according to Tim Dove, chief executive of Pioneer Resources (“U.S. shale CEO sees Saudi Arabia moving to lift oil prices”, Reuters). Despite the glut, Pioneer has no plans to curb its own drilling. “We’re not going to not drill because this very well may be the time where the well costs are as low as they’re ever going to be,” Dove said. "We can pare away and still be profitable even in a $45 (per barrel) environment," he said. "We may just dial back at the margin in that scenario and not be a significant over-spender." The gist of his argument was that someone would have to cut production to lift prices, but it would not be Pioneer, one of the most prominent shale drillers in the Permian Basin. Similar logic holds for all producers, but if they all carry on drilling, the result will be continued oversupply and a decline in prices. Dove seemed to think Saudi Arabia would act as a swing producer again, and in the process deliver a windfall for shale firms in the form of higher prices. But acting as a swing producer simply to protect rival shale firms from a renewed price drop would not be a rational strategy for Riyadh. The only rational strategy is to eschew the swing producer role and allow prices to decline to the point where the shale drilling boom is curbed. In this game, acting as a swing producer is futile, and the only winning move is not to play - as Saudi Arabia discovered the hard way during the 1980s and is rediscovering now. Since the start of the year, Saudi Arabia has given up market share, only to watch other producers increase their own output, and end up with prices no higher than before. Further production cuts by Saudi Arabia and the rest of OPEC would likely result in the same self-defeating outcome. 

Why The Oil Price Implosion Didn’t Drag Global Markets Down - Energy stocks have been the worst performing sector in the S&P 500 index so far this year. Last week, oil slipped into a bear market, but the benchmark U.S. index is holding up, and has gained 8 percent year to date. The correlation between the S&P 500 and oil prices has dropped to the lowest since January this year, mainly because energy stocks have lost much of their significance in the index. The oil price crash that started in 2014 wiped out much of the profits of oil and gas companies, dragging down their share prices and erasing billions of the energy firms’ market capitalizations. Thus, the energy sector’s importance and weighting in the S&P 500 dropped earlier in June to below 6 percent, the lowest level since 2004, Bloomberg data shows. According to Siblis Research, energy accounted for 12 percent of the S&P 500 sector weightings in the years 2010 and 2011. Energy stocks’ importance started to drop, touching a 6.5 percent weighting in 2015 when the oil price crash was in full swing. Last year, the energy sector’s influence inched up to around 7.5 percent of the S&P weightings. Now it is below 6 percent, the lowest in more than a decade. The energy sector now has less influence in the S&P 500 index than the combined weights of Apple and Alphabet, CNBC has calculated. Meanwhile, the S&P 500 has gained more than 8 percent year to date, at a time when the WTI 1st front-month contract has shed more than 22 percent since the beginning of the year.  In its market commentary on U.S. equities performance in May 2017, S&P said that the S&P 500 posted seven new closing highs, and gained 1.16 percent in May, bringing the year to date return to 7.73 percent. By sector, “energy was again the big decliner, falling 3.96% in May as oil prices closed the month down. Year-to-date, the sector was off 13.58%, the worst of any group, as its one-year return was in the red, off 3.49%,” S&P said in its market overview for last month. The energy sector’s influence in S&P 500 is so low now that the industry’s projected earnings are expected to have little impact on the S&P 500 earnings, S&P Global portfolio manager Erin Gibbs said on CNBC’s ‘Trading Nation’ last week.

$30 Oil Could Spark Contagion In Energy Markets - If oil prices continue to fall, the financial damage could start to become a concern.  A new analysts from Deutsche Bank finds that the high-yield energy market could start to suffer from contagion if oil prices drop to the mid-$30s. At $35 per barrel, for example, the debt-to-enterprise value jumps to over 55 percent for a lot of high-yield energy companies. The result could be a surge in yields that put a lot of pressure on companies. Yields are already up 1 percentage point over the past month, corresponding with the plunge in oil prices. But if prices fall further, yields could rise to more worrying levels. For now, the recent gains in oil prices from the ten-month lows hit last week could ease concerns. But if oil traders are just taking a breather before another downturn, then there could be trouble ahead for the high-yield market. The pain suffered by sub-investment grade energy companies could bleed over into broader junk bonds. “Oil weakness to this point is problematic directly to energy valuations but is not yet a cause for credit-loss concerns in energy or the broader high-yield market,” Deutsche Bank analysts said in a recent research note. “We are getting closer to the point where this narrative could begin to change.” The investment bank went on to add: “We would become mindful of implications for the broader high-yield market if oil were to drop under $40, and particularly if it were to head toward $35.” If yields spike, it will be a lot more difficult for struggling energy companies to access the debt markets. Ultimately, that could put them in a bind. “The high-yield bond market is waking up,” Ryan Kelly of PGIM, the investment management arm of Prudential Financial Inc., told the Wall Street Journal. “There’s been a change in tone.”

WTI/RBOB Jump On Gasoline Draw As US Crude Production Tumbles Most Since August - Last night's unexpected API builds kneejerked prices lower but a weaker dollar helped levitate WTI/RBOB into the DOE print. While tropical depression Cindy may have affected the data, DOE reports a small build in crude (expectations for a draw) but all eyes were on gasoline which drew 894k, well below API's build levels and expectation of no change. Production in the Lower 48 fell 55k b/d - the biggest drop since Aug 2016 (likely impacted by Cindy). DOE:

  • Crude +118k (-2.25mm exp)
  • Cushing -297k (-600k exp)
  • Gasoline -894k (unch exp)
  • Distillates -223k (+934k exp)

Figures will be tricky to interpret because of impact from tropical depression Cindy,and notably the Colonial Pipeline shipping demand fell to its lowest level in six years indicating the East Coast is well-supplied and the economics to ship from the Gulf Coast are unattractive.The levels are de minimus for sure...but enough to spike WTI/RBOB withg their extreme positioning...  As Bloomberg's Javier Blas notes, forget about crude oil, look at gasoline. The glut in crude appears to be shifting into products as refiners run their plants at record pace. As the 10-year seasonal chart below shows, U.S. gasoline stocks remain above the highest level for this time of the year. But demand for gasoline continues to slide - very unseasonably...  Tropical Depression Cindy will likely have had some impact on U.S. oil production last week, as Bloomberg's Brad Gilbert notes that shutting in about 3 percent of the most recently reported lower 48 production number on 06/21 and 06/22. That being said, the impact should still be small and against increasing production, lower 48 production this weeks looks like it could drop by about 60,000 barrels a day as a result.   And it did - Lower 48 Production fell 55k b/d last week - the biggest drop since Aug 2016...

Goldman Sachs slashes oil price projection amid US shale surge: show chapters Goldman Sachs slashes oil price projection amid US shale surge 12 Hours Ago | 00:55 Goldman Sachs has downgraded its forecast for oil prices over the next quarter amid a sudden uptick in shale drilling and an unexpected surge in production from Libya and Nigeria. The investment bank now points to a three-month average of $47.50 per barrel for WTI crude, down from its previous estimate of $55.00 a barrel. "The fast ramp-up in shale drilling and the unexpectedly large rebound in Libya/Nigeria production are on track to slow the 2017 stock draws," Goldman Sachs analysts said in a research note published late Wednesday. The rebound in production from Libya and Nigeria — two countries which were exempt from OPEC's historic November deal to curb output – could offset inventory declines in the third quarter of this year, the Goldman analysts warned. "This creates risks that the normalization in inventories will not be achieved by the time the OPEC cut ends next March. We expect this will leave prices trading near $45 (a barrel) until there is evidence of a decline in the U.S. horizontal oil rig count, sustained stock draws or additional OPEC production cuts," they said in the note.OPEC delegates have indicated they will not rush to implement further cuts to crude output. However, pressure from investors amid a relentless global supply overhang could prompt the group to consider further steps to support the market at its upcoming meeting in Russia next month. The U.S. Energy Information Administration (EIA) reported crude stocks increased by 118,000 barrels last week. Meanwhile, production levels fell by 100,000 barrels per day in what was the largest decline in weekly output in almost a year. 

Oil futures rise after EIA data shows less US output, product draws -- Oil futures rose Wednesday, with NYMEX August crude up 50 cents to $44.74/b as traders focused on a weekly decline in US production estimates and data showing fewer crude imports coming from Saudi Arabia this month. Energy Information Administration data released Wednesday showed US crude stocks rose 118,000 barrels to 509.213 million barrels. Analysts surveyed Monday by S&P Global Platts expected a draw in US crude stocks of 3.25 million barrels in the week that ended June 23. US crude stocks would have drawn by 1.4 million barrels if barrels from the Strategic Petroleum Reserve hadn't been released into the commercial system, said Jenna Delaney, senior oil analyst at Platts Analytics. One bullish factor contained in the EIA data was imports from Saudi Arabia, which have fallen this month, she said. "The market had been watching for production cuts in Saudi Arabia to show up in lower imports to the US, which is viewed as a constructive factor in bringing the global market into balance," Delaney said. The four-week moving average of US crude imports from Saudi Arabia fell 114,000 b/d to 856,000 b/d, the lowest level so far this year. 

Oil extends gains to sixth day on dip in U.S. output - Oil futures ended slightly higher on Thursday, extending crude's rally to a sixth straight session after a decline in weekly U.S. crude production temporarily eased concerns about deepening oversupply. U.S. crude futures CLc1 settled up 19 cents at $44.93 a barrel after hitting a two-week high of $45.45 in late-morning trading. The market retreated from highs after Societe Generale became the third investment bank to cut its outlook for oil prices in the last week. Crude prices hit a 10-month low last week but have rebounded more than 5 percent, stretching their bull run to the longest since April. Brent crude futures LCOc1 ended up 11 cents at $47.42 a barrel, after touching a two-week high of $48.03 earlier in the session. "After the steep drop in oil prices of recent weeks, I believe that especially hedge funds saw nice buying momentum and lower U.S. crude production was the trigger to act," said Hans van Cleef, senior energy economist at ABN Amro. Analysts were not sure whether bearish sentiment had abated in the oil market, given larger-than-usual inventories in the United States for both crude oil and key products like gasoline. "It does feel as if a wave of selling has ebbed for now," wrote analysts at Credit Suisse. They added, however, that the rebound in prices reflected technical buying rather than a change in fundamentals. In recent weeks, funds have been unloading long speculative positions, reducing bets on higher prices while brokerages including Goldman Sachs and Societe Generale have cut their 2017 forecasts for crude prices.

Citi: Oil Prices Have Bottomed And Are Now Set To Soar - One day after Goldman issued a confused, rambling note in which the bank cuts its 3-month WTI price target by $7.50 from $55 to $47.50 saying "Spot WTI oil prices at $43/bbl are now back to November pre-OPEC deal levels, down from $52/bbl just a month ago and vs. our prior 3-mo $55/bbl forecast. How did it go so wrong?" yet kept a bullish long-term outlook (underscored by a bullish follow up note by Goldman's commodity head, Jeffrey Currie because Goldman is always hedged) and on the same day that Socgen likewise cut its Q3 and Q4 Brent forecasts by $7.50 to $50 and $52.50 (and 2018 by $6 to $54) on a weaker supply-demand outlook, oil bulls were in urgent need of reassurance. So, courtesy of Citi, the one bank that will never stray too far from its bullish bets on crude (perhaps due to its role as OPEC's impresario to the hedge fund world), and its head technician Tom Fitzpatrick, here is the explanation why oil is now due for a rebound, or as Citi puts it...  "Oil hits the floor and is now set to soar!"

  • o We believe that WTI Crude has posted a short term bottom. Previous short term bottoms have typically seen strong upside follow through with an average low to high rally of 22% over three weeks.
  • o The present price action on WTI Crude is also very similar to that seen in October/November of last year and in that instance, we saw a rally of nearly 23% in the 3 weeks after the low was posted.
  • o We are very focused on the price action seen in October and November of last year where we fell for 5 weeks from a high of $51.93 to a low of $42.20. This time, we also fell for 5 weeks from a high of $52.00 and hit a low of $42.05 last week.
  • o The bounce after the November low saw WTI rally to $51.80 over three weeks and a similar move this time around looks likely to us. Such a move would also be consistent with the rebounds off prior lows.
  • o Previous short term bottoms in WTI Crude have been followed by aggressive rebounds in the 3 weeks that follow. On average these rebounds have resulted in a move higher by 22%. If last week’s low is a short term bottom (which is our bias), a bounce like the average one see over the last 18 months would suggest a move up to $51.29, in line with what we would expect to see if we follow the November 2016 bounce highlighted above.

Analysis: No OPEC solace in tight medium sour crude oil market, as light sweet glut weighs -- Saudi Arabia's energy minister Khalid al-Falih, as well as his predecessor Ali al-Naimi, has long maintained -- in the face of criticism and even ridicule in some corners -- that the kingdom does not consider US shale producers as direct competitors in a finite oil market. In terms of the physical market, the ministers are correct. US shale oil is typically light and sweet, while Saudi Arabia and most of OPEC's key Middle East members largely produce grades that are sourer and heavier, and many refineries worldwide are not technically nimble enough to drastically alter their crude slates. But even as supplies of the heavier sour grades have tightened substantially following OPEC's production cut agreement, the recent output surge in the US, in addition to Libya, Nigeria and even Kazakhstan, has left the world awash in light sweet oil, which now serves as the swing barrel in the global market. Major futures benchmarks ICE Brent and NYMEX crude are based on relatively light sweet grades from the North Sea and the US, respectively, but often stand in as the global oil price. Given this, OPEC and its 10 non-OPEC partners in the 1.8 million b/d production cut agreement face a dilemma, as those benchmark prices continue to languish, without reflecting the tightness in the medium sour market. A further cut, as some ministers have begun to discuss, would seem to only expand the heavy/light imbalance in the market, particularly if Saudi Arabia were to take on the bulk of the cuts, as it has under the current OPEC/non-OPEC cut agreement. And it would risk further deterioration of OPEC's Middle Eastern members' global market share. To wit: China's refineries in May imported record amounts of crude from Russia and Angola, according to state data, as observers said the country appears to be moving away from heavy Middle Eastern grades due price rises following the OPEC cuts.

Libya's oil output nears 1 million bpd, highest in four years: source | Reuters: Libyan oil production is fluctuating between 950,000 barrels per day (bpd) and "close to" 1 million bpd, rising from around 935,000 bpd earlier this week, a Libyan oil source with direct knowledge of the matter told Reuters on Thursday. Production has been fluctuating mainly due to technical and power generation problems, the source said, declining to be named because he was not authorized to speak to the media. At near one million bpd, Libya has succeeded in beating a production target the National Oil Corp (NOC) announced recently by a month, the source added. The source said that production should stabilize at the higher end of the range "very soon". Also on Thursday, oil began to be pumped from storage tanks at Al-Majid field, which has been closed for eight months because of power problems, said Omran al-Zwai, a spokesman for Arabian Gulf Oil Company (AGOCO), an NOC subsidiary that operates the field. The field, with an output of about 5,000 bpd, is expected to reopen fully on Saturday, Zwai said. Oil from Al-Majid is pumped to Zueitina, one of three eastern terminals that was blockaded until September last year. Libya, a member of the Organization of the Petroleum Exporting Countries, has been exempted from OPEC-led supply cuts as it tries revive its battered oil industry. It had produced more than 1.6 million bpd before a 2011 uprising, and average production has not exceeded 1 million bpd since July 2013.

OilPrice Intelligence Report: How Real Is This Oil Price Rally? - Oil prices posted strong gains this week, largely from speculators closing out short bets. Hedge fund and other money managers had built up a record volume of bearish bets on crude over the past month, and it appears that a liquidation of them has driven crude prices higher. The big question is whether or not that gains will continue. Dennis Gartman of The Gartman Letter told CNBC that the latest rally is a “dead cat bounce” that won’t last. But others are hoping that the recent selloff went too far and that the gains are here to stay.  The weekly EIA data provided a huge boost to the morale of oil bulls this week, showing a massive drop in U.S. oil production by 100,000 bpd. To be sure, the release is one data point, and should be taken with a grain of salt. But if the EIA posts successive production declines in the weeks ahead, it would go a long way to easing the fear among oil traders. The production decline allowed traders to look past the lack of an inventory drawdown – oil prices moved up on the news.   This week, Goldman Sachs lowered its three-month estimate for WTI prices from $55 per barrel to $47.50, citing higher production from Libya and Nigeria, as well as the ramp up in U.S. shale drilling. Nonetheless, the investment bank says that the oil market is still moving towards balance, even if slowly. Inventories are falling, demand is rising, and OPEC could do more to cut – and Goldman says it should.   . Reuters reports that low prices are likely to lead to higher crude purchases from Asia. Oil has piled up in the Atlantic Basin, leading to fears of too much supply, but lower prices will spark greater demand. It is a small sign that things might not be as bad as they seem. Libya’s output has broken a new multi-year high, rising above 950,000 bpd, according to Reuters. That’s up from 935,000 bpd last week. A Libyan source told Reuters that production is fluctuating and coming “close to” 1 million barrels per day. Rising Libyan output is undermining the effectiveness of the OPEC deal.

Baker Hughes U.S. Rig Count Falls for First Time in 6 Months - As oil prices hover above $45 per barrel, the count of active drilling rigs in the United States has fallen by one to 940, with oil-directed rigs dropping by two to 756 units and natural gas-directed rigs climbing by one to 184, Baker Hughes (BHI) reported Friday, June 30. The drop in Baker Hughes count is the first in 24 weeks, or six months and comes at a time when oil has felt significant pressure due to a persisting global oversupply and dangerously high levels of U.S. shale activity. West Texas Intermediate crude contracts for August delivery were trading up about 1.3% around the time of the 1 p.m. Baker Hughes report to $45.51 a barrel, while global benchmark Brent crude futures were up slightly less than 1% to $47.85. Baker Hughes total U.S. rig count is up 509 rigs from this time last year when it stood at 431, with oil rigs up 415, gas rigs up 95 and miscellaneous rigs down one. Meanwhile, the U.S. offshore count is down one rig from last week to 21 overall. The offshore count is up two rigs year-over-year.

US Oil Rig Count Drops For First Time In 24 Weeks As Trump Unveils US-Mexico Petroleum Pipeline -- Last week saw US crude production decline by the most since Aug 2016 (perhaps affected by 'Cindy') and given the lagged response to WTI prices, many expected the oil rig count to drop this week. As WTI heads for its 7th up-day in a row - the longest streak in 6 months - it is supported as the US oil rig count dropped 2 to 756, the first drop in almost 6 months. “Is it possible we’d have our first negative number in 24 reports? Unlikely but it’s possible” when you see production down 3 of the past 7 weeks,  Bob Yawger, director of the futures division at Mizuho Securities USA in New York, says by telephone


Lower 48 Production fell 55k b/d last week - the biggest drop since Aug 2016... Total U.S. crude output dropped 100k b/d to 9.25m b/d last week, biggest drop in almost a year and 3rd decrease in the last 7 weeks, according to EIA report Wednesday We suspect the drop is related to shut-ins from tropical depression Cindy and will recover quickly. It appears President Trump is confident that the Lower 48 will keep pumping's Tsvetana Paraskova reports, to boost American energy exports, the administration of U.S. President Donald Trump has approved the construction of a new petroleum pipeline from the U.S. to Mexico that “will go right under the wall,”President Trump said on Thursday.

Oil Caps Longest Rally This Year as Oversupply Anxiety Eases - Oil posted the longest run of gains in six months after U.S. shale explorers paused a record drilling expansion in a sign the boom may be slowing down. Futures added as much as 2.7 percent in New York, advancing for a seventh session. Shale explorers broke the longest stretch of uninterrupted growth in three decades as rigs targeting crude fell by 2 this week, bringing the total to 756, according to Baker Hughes Inc. data reported Friday. The rig count has more than doubled from a low of 316 in May. While prices have surged this week, oil in New York and London are still set for a loss in June -- a month in which prices typically gain. Crude futures tumbled into a bear market last week on concerns that rising global supply is offsetting cuts from the Organization of Petroleum Exporting Countries and its partners. Bank of America Corp. became the latest in a string of banks to cut its outlook for prices this year and next. "I don’t think everyone’s quite ready to write off the OPEC/non-OPEC accord just yet,"   "And given how far we’ve fallen, you’re seeing bargain hunting by some."West Texas Intermediate for August delivery gained $1.11 to settle at $46.04 on the New York Mercantile Exchange. Oil is down about 9 percent this quarter. Brent for August settlement, which expires Friday, closed 50 cents higher at $47.92 a barrel on the London-based ICE Futures Europe exchange. The global benchmark is down about 9 percent this quarter and traded at a premium of $1.85 to WTI. The rig count drop follows a report Wednesday that U.S crude output fell by the most in almost a year last week amid field maintenance in Alaska and tropical storm Cindy, while gasoline inventories fell for a second week. OPEC and its partners aren’t worried about the market recovery and don’t plan to discuss deeper cuts, said United Arab Emirates Energy Minister Suhail Al Mazrouei.

Only $60 Oil Can Save the Aramco IPO --The OPEC deal is in crisis. All oil price gains derived from the 1.2 million-barrel cut’s initial announcement and implementation have been wiped out, and No. 1 OPEC producer Saudi Arabia’s attempt to draw down American inventories has fallen flat, due in part to insubordination from the No. 2 producer, Iraq, along with upticks in production from Nigeria, Libya, and U.S. shale.The KSA had a clear opportunity to drastically change the direction of oil prices last month, when the Organization of Petroleum Exporting Countries (OPEC) met in Vienna to discuss the duration and scope of the output cut extension. Though Riyadh agreed to continue the deal three months longer than analysts expected (the new deal ends in March 2018, as opposed to December 2017 as many expected), the bloc leader did not heed recommendations to deepen the cuts, keeping production at 32.5 million bpd.In addition, Nigeria and Libya got a pass that allows them to produce as much as they can for the next nine months, despite the African duo’s booming recovery worth hundreds of thousands of barrels.In April and May, Saudi Arabia cut exports despite the fact that the OPEC deal does not limit export volumes. But new ClipperData says that June numbers could reveal a reversal in that downward trend, as KSA appears ready to ship more oil.The royal family – especially newly crowned heir to the throne Mohammed bin Salman – needs oil prices near $60 for Saudi Aramco’s 2018 IPO to generate the income it needs. At the time of this article’s writing, Brent was trading up at $47.78.One month after OPEC’s failure to toughen production quotas, the bloc remains uncertain about deeper cuts. Reuters reported on Tuesday that the monitoring committee for the deal, plus Saudi Arabia and Russia, would officially discuss the deal’s progress next at the end of July. That’s an extra two months of market standstill.The IPO isn’t moving along as quickly as originally planned. Riyadh’s financial planners are behind in preparing Aramco and world markets for what is expected to be the largest IPO in history. The team was supposed to reach a decision on a foreign bourse for the listing by the end of Ramadan, but Eid-ul-Fitr passed days ago, and the victor has yet to be named—just murmurs that Bin Salman is at odds with top planners who prefer London over New York. And while the Saudis may not be deliberately procrastinating on the listing, holding out for higher oil prices, the current low oil prices certainly aren’t rushing things along.

Dana Gas and an Existential Crisis for Islamic Finance -- The very foundations of the Islamic finance world were shaken a few weeks ago when Dana Gas declared that $700 million of its Islamic bonds (sukuk) were invalid and obtained a preliminary injunction against creditor enforcement from a court in the UAE emirate of Sharjah. Like Marblegate on steriods, Dana made this announcement as a prelude to an exchange offer, proposing that creditors accept new, compliant bonds with a return less than half that offered by the earlier issuance.Dana shockingly claimed that evolving standards of Islamic finance had rendered its earlier bonds unlawful under current interpretation of the Islamic prohibition on interest and the techniques Dana had used to issue bonds carrying an interest-like investment return. I had expected to read that Dana had used an aggressive structure like tawarruq (sometimes called commodity murabahah) that pushed the boundaries of what the Islamic finance world generally countenanced, but no. The structure Dana had used was totally mainstream, a partnership structure called mudarabah. Dana asserted that the mudarabah structure had been superseded by other structures, such as a leasing arrangement called ijarah, though in Islamic law as in other legal families, there are often multiple permissible ways of achieving a goal, not just one. And when an issuer prepares an Islamic finance structure like this, it invariably gets a sign-off from a shariah-compliance board of respected Islamic law experts (sometimes several such boards). For Dana Gas to suggest that its earlier board was wrong to the tune of $700 million, or worse yet that Islamic law had somehow changed in a few years through an abrupt alteration of opinion by the world of respected Islamic scholars is ... troubling.

Deposed Saudi Prince Is Said to Be Confined to Palace — The recently deposed crown prince of Saudi Arabia, Mohammed bin Nayef, has been barred from leaving the kingdom and confined to his palace in the coastal city of Jidda, according to four current and former American officials and Saudis close to the royal family. The new restrictions on the man who until last week was next in line to the throne and ran the kingdom’s powerful internal security services sought to limit any potential opposition for the new crown prince, Mohammed bin Salman, 31, the officials said, speaking on the condition of anonymity so as not to jeopardize relationships with Saudi royals. It was unclear how long the restrictions would remain in place. An adviser to the Saudi royal court referred queries to the Information Ministry, whose officials could not immediately be reached for comment on Wednesday. A senior official in the Saudi Foreign Ministry reached by telephone on Wednesday night described the account as “baseless and false.” The Saudi monarch, King Salman, shook up the line of succession last week with a string of royal decrees that promoted his favorite son, Mohammed bin Salman, to crown prince and removed Mohammed bin Nayef, 57, from the line of succession. The elder prince was also replaced as interior minister by a 33-year-old nephew, marking the end of a career that had won him deep respect in Washington and other foreign capitals for his work dismantling Al Qaeda’s networks inside the kingdom after a string of deadly bombings a decade ago.

Egypt's Sisi hands control of two Red Sea islands to Saudi Arabia (Reuters) -Egyptian President Abdel Fattah al-Sisi has ratified a maritime demarcation agreement that sees the country cede sovereignty over two uninhabited Red Sea islands to Saudi Arabia, the government said on Saturday. The Red Sea islands deal has become political sensitive for Sisi, who counts on Saudi Arabia as a key ally, after the proposed agreement fueled widespread public criticism and street protests among Egyptians angered over national sovereignty. Egypt's parliament last week backed the plan that cedes control of Tiran and Sanafir islands to Saudi Arabia, but the deal has also become subject to a legal tussle between different courts over jurisdiction. "President Abdel Fattah al-Sisi has ratified the maritime demarcation agreement between the Arab Republic of Egypt and the Kingdom of Saudi Arabia," the cabinet said in a statement. This week the constitutional court chief temporarily suspended all court decisions on the agreement until the constitutional court makes a ruling on which institution has the final say in the matter. Sisi's government last year announced the maritime agreement with Saudi Arabia, an ally which has given billions of dollars of aid to Egypt. The Egyptian and Saudi governments say the islands are Saudi but have been subject to Egyptian protection.Google Maps Saudi Arabia helped Sisi with aid since he toppled President Mohamed Mursi of the Muslim Brotherhood in 2013.

UAE sees 'parting of ways' if Qatar does not accept Arab demands | Reuters: A senior United Arab Emirates official said on Saturday that if Qatar did not accept an ultimatum issued by fellow Arab states which imposed a boycott this month on the tiny Gulf Arab nation, there would be a "parting of ways". The 13-point list of demands from Saudi Arabia, Egypt, Bahrain and the UAE include closing the Al Jazeera satellite television network, curbing relations with Iran, shutting a Turkish base in Doha and paying reparations. The demands are apparently aimed at dismantling Qatar's two-decade-old interventionist foreign policy, which has reflected the clout generated by its vast natural gas and oil wealth but incensed conservative Arab peers over its alleged support for Islamists they regard as mortal threats to their dynastic rule. Doha said it is reviewing the list of demands and that a formal response will be made by the foreign ministry and delivered to Kuwait, but added that the demands are not reasonable or actionable. "The alternative is not escalation, the alternative is parting of ways, because it is very difficult for us to maintain a collective grouping," UAE Minister of State for Foreign Affairs Anwar Gargash told reporters. He said diplomacy with Qatar remained a priority, but added that mediation efforts to resolve the dispute had been undermined by the public disclosure of the demands. "The mediators' ability to shuttle between the parties and try and reach a common ground has been compromised by this leak," he said. "Their success is very dependent on their ability to move but not in the public space." Gargash said that if Qatar fails to comply within the 10-day timeline set out in the ultimatum, it will be isolated. But he did not make clear what more could be done since the four Arab nations have already cut diplomatic relations with Doha and severed most commercial ties.

Furious Qatar Balks At Saudi Ultimatum As UAE Warns Of "Parting Of Ways" - One day after Saudi Arabia and its Gulf ally states finally released a long-awaited, 10-day ultimatum containing 13 demands from Qatar as a precondition for the resumption of diplomatic ties and an end of Qatar's economic and naval blockade, the small Gulf nation balked and said the ultimatum is neither "reasonable" nor "realistic", and infringes on its sovereignty and foreign policy.  “This list of demands confirms what Qatar has said from the beginning – the illegal blockade has nothing to do with combating terrorism, it is about limiting Qatar’s sovereignty, and outsourcing our foreign policy” said Sheikh Saif Al Thani, director of Qatar’s government communications office, in a statement to Bloomberg. As a reminder, the full list contained such demands as reducing diplomatic representation with Iran, shutting down the Turkish military base that is being established (Turkey has already balked at the threat), severing ties with terrorist organization, shutting down Al Jazeera and all affiliated channels, and so on. The demands are explicitly aimed at dismantling Qatar's two-decade-old interventionist foreign policy, which has reflected the clout generated by its vast natural gas and oil wealth but incensed conservative Arab peers over its alleged support for Islamists they regard as mortal threats to their dynastic rule.Al Thani dismissed the demands and said that while the list is "currently under review", it is only “out of respect for our brothers in Kuwait” whose emissary delivered the Saudi-led demands Friday. Al Thani said that the demands do not meet the US and UK criteria for “reasonable and realistic measures.”  “The State of Qatar is currently studying this paper, the demands contained therein and the foundations on which they were based, in order to prepare an appropriate response,” the ministry told Channel News Asia.

Middle East At Point Of No Return As Saudi-Qatar Rift Deepens --Saudi King Salman’s decision to appoint his son Mohammed Bin Salman (MBS) as the new crown prince did not come as a surprise. For months, the power struggle between former crown prince Mohammed Bin Nayef (MBN) and MBS happened in plain sight, and a confrontation was imminent. However, King Salman made his own calculations and decided to remove MBN in favor of MBS, providing a continuation of his own family line in the future. Over the last week, the media has been overwhelmed with assessments of the House of Saud and the role MBS will play or has been playing. The family feuds in the House of Saud are notorious, whenever a king dies an internal power struggle will emerge, regardless of what strategies have been implemented before.At present, the Young Prince of Riyadh, Mohammed Bin Salman, has been given the key to power. This has happened at a very difficult time for not only the Kingdom, but also for the whole Gulf region and its neighbors. The choice made by King Salman to promote his son is a remarkable one but could, from a Saudi perspective, be the only viable choice. The need for a 180 degree change in the economic and social policy which keeps Saudi Arabia a strategic regional player is essential. Without radical changes, such as those presented in Vision 2030 or the Aramco IPO project, the Kingdom’s future could be bleak, as the era for “Rentier States” is over.The challenges MBS faces are enormous. Due to lower hydrocarbon revenues, he will need to change an oil-based economy into a more open, liberal and high-tech economy, capable of taking on global competition in these fields. By opening up the Kingdom via Vision 2030 and the expected billions of dollars from IPO revenues, this could become a reality, not a fata morgana.

No negotiations over Qatari demands: Saudi FM - Saudi Arabia said on Tuesday there will be no negotiations over the demands made to Qatar to stop supporting extremism, Al-Ekhbariya TV reported.Saudi Foreign Minister Adel Al-Jubeir was referring to a list of demands Qatar would need to fulfill to ease concerns of Arab states over the country’s role in extremism funding.Al-Jubeir reiterated Saudi Arabia's demands as US Secretary of State Rex Tillerson held talks with the Qatari foreign minister on the Gulf states crisis.Saudi Foreign Minister Adel Al-Jubeir, who was also in Washington, was unbudging amid attempts by US and Kuwaiti diplomats to mediate the row which has left Qatar isolated under a trade and diplomatic embargo set by its Gulf Arab neighbors.“Our demands on Qatar are non-negotiable. It’s now up to Qatar to end its support for extremism and terrorism,” Jubeir said via Twitter.Riyadh has laid down a list of 13 demands for Qatar, included the closure of Al-Jazeera, a downgrade of diplomatic ties with Iran and the shutdown of a Turkish military base in the emirate. Shortly after Jubeir’s comments, Tillerson met with Qatar’s top diplomat Sheikh Mohammed bin Abdulrahman Al Thani. He was to meet later with Kuwait Foreign Minister Sheikh Sabah Khaled Al-Sabah, who has sought to work resolve the standoff. State Department Spokeswoman Heather Nauert said talks would continue through the week. 

By demanding the end of Al Jazeera, Saudi Arabia is trying to turn Qatar into a vassal state - So serious has the Saudi-Qatar crisis now become that the Qatari Foreign Minister is reportedly planning an emergency trip to Washington in the next few days in the hope that the Trump regime can save his emirate. For Mohamed bin Abdulrahman Al-Thani knows very well that if Qatar submits to the 13 unprecedented – some might say outrageous – demands that Saudi Arabia, Bahrain, the United Arab Emirates and Egypt have made, it will cease to exist as a nation state. Al Jazeera television editors, supported by a phalanx of human rights and press freedom groups, have denounced the 10-day warning that the Qatar satellite chain must close – along with Middle East Eye and other affiliates – as a monstrous intrusion into freedom of speech. One television executive compared it to a German demand that Britain closes the BBC. Not so. It is much more like an EU demand that Theresa May close the BBC. And we know what she would say to that. But the British Prime Minister and her Foreign Secretary, while obviously anxious to distance themselves from this very dangerous – and highly expensive – Arab dispute, are not going to draw the sword for Qatar. Nor are the Americans, when their crackpot President decided that Qatar was a funder of “terrorism” a few days after agreeing a $350bn arms deal with Saudi Arabia. But surely, say the Qataris, this can’t be serious. They don’t doubt that Field Marshal President al-Sisi of Egypt, who loathes Al Jazeera, is principally behind the demand that it close down, but one of the four Arab states must have deliberately leaked the list to Reuters and the Associated Press. If so, why would Qatar’s enemies wish to reveal their hand so early? Surely such demands would be only the first negotiating position of the four Arab nations. It’s hard to see how the Qataris can respond. If they really did close their worldwide television network and other media groups, break off relations with the Muslim Brotherhood – al-Sisi’s target, although his real enemy is Isis – and the Taliban and Hezbollah, downgrade their relations with Iran, close Turkey’s military base and expose their account books for international Arab scrutiny for the next 12 years, then Qatar becomes a vassal state. 

Saudi Arabia Is Weakening US Influence In The Middle East --  In a series of almost unprecedented events among Washington's regional allies, the crisis between Saudi Arabia and Qatar seems to worsen by the day. The long-awaited list of demands presented to Doha by Riyadh seem to be intentionally impractical, as if to oblige Qatar to plead guilty to the crimes alleged by the Saudi kingdom or face the consequences, still unknown. The surreal requests start with demands to close the international television network Al Jazeera, as well as halt the financing of the Muslim Brotherhood. At the heart of the issue remains the question of political and diplomatic relations with Iran, the bane of the Saudi royal family’s existence. The House of Thani that controls Qatar has until July 3 to accept all the demands presented. At the moment, Doha seems to be sending mixed messages, announcing that it wants to evaluate the Saudis’ proposals, but also letting it be known that most of the demands are «not reasonable». Another interesting tidbit concerns the removal of Muhammed bin Nayef by the Saudi king as his successor to the throne. Prince Mohammad bin Salman, the young 31-year-old nephew, replaces Muhammed bin Nayef, the former Crown Prince and major ally of the CIA and European and American governments. Mohammad bin Salman is currently the most controversial figure in the Middle East. Responsible for the devastating war in Yemen and the desperate financial state of Riyadh’s finances, he oscillates between his Vision 2030 and an anti-Iranian preoccupation that is likely to bring his kingdom to bankruptcy. In Yemen, he waged a military campaign costing in the tens of billions of dollars, only to lose against the poorest Arab country in the world. His irrational anti-Iranian stance has even led him to risk a conflict within the GCC (thanks to the precious lobbying role of the UAE ambassador to the US, Yousef al-Otaiba) over the excessive freedom of Doha's foreign policy.

Qatar Looks to Iran and Iraq - For decades, Qatar has carefully navigated the geopolitical dynamics shaping relations among its three larger neighbors: Saudi Arabia, Iran, and Iraq. Qataris have usually perceived one of these three Persian Gulf powers as the primary threat and responded by growing closer to the other two. At this juncture amid the Qatar crisis, Doha will likely deepen its relations with Iran and Iraq to counter-balance pressure from Saudi Arabia and other Sunni countries that took action against the Arabian emirate in early June. On June 29, Qatar’s Foreign Minister Sheikh Mohammed bin Abdulrahman Al Thani told reporters in Washington that Iran is the Gulf state’s neighbor, so Doha and Tehran must invest in a constructive bilateral relationship. In the list of 13 demands issued by Saudi Arabia, the United Arab Emirates (UAE), and Bahrain was a requirement that Qatar sever relations with Iran. The Qataris’ deeply rooted foreign policy strategy of hedging bets on both Saudi Arabia and Iran has irked Riyadh and other Arab capitals in the Gulf to a point where these Gulf Cooperation Council (GCC) members are telling the peninsula nation that its neutrality is unacceptable and it must demonstrate fidelity to the kingdom. Qatar has thus far signaled that it has no intention of capitulating to Saudi/UAE demands. Riyadh and Abu Dhabi, meanwhile, have threatened to uphold their actions until Doha complies with their requirements for restored diplomatic and economic relations. To offset the Saudi/UAE-led action, Qatari officials must assess the potential benefits and risks of shifting closer to Tehran’s orbit of regional influence. 

Bizarre Tanker Cooperation Prompts Questions If Qatar, Saudi Feud Is Staged -- Either the blockade of Qatar by Saudi Arabia and its allies (recall the Saudi ultimatum expires on July 3) and the whole Qatar "crisis" is the most staged and produced diplomatic stunt since last summer's Turkish "coup", or for some unknown reason, the worse the diplomatic relations between Qatar and Saudi Arabia get, the more they cooperate in the only industry that matters for Saudi Arabia. According to a Bloomberg report, even as Saudi Arabia leads three other Arab nations in accusing Qatar of links to terror groups and being too close to Iran, one thing has become increasingly clear in the oil market: tensions have yet to reach a point where the world’s biggest crude exporter is disrupting its tiny neighbor’s shipments. Specifically, despite the sudden feud, Qatar has maintained longstanding practice of loading crude onto tankers with Saudi Arabia and U.A.E. tracking of tankers compiled by Bloomberg shows. The number of tankers that are filling with Qatari crude along with that of Saudi Arabia or the United Arab Emirates has actually increased since tensions escalated on June 5, according to Bloomberg calculations. The three countries’ joint loadings of crude remain largely unaffected since the dispute that broke out June 5. Since then, 17 tankers have loaded crude in Qatar and either Saudi Arabia or the U.A.E., or both. There were 16 over an equal period before June 5. The full table of co-loadings is shown below, courtesy of Bloomberg data:]

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