Sunday, July 9, 2017

the great US natural gas exports myth

oil prices rose to a 4 week high on Monday, before the 4th of July holiday, but fell from there to end the week roughly 3.9% lower than where they closed last week...the $1.03 price increase to $47.01 a barrel on Monday was largely attributed to the spate of short-covering that propelled the prior week's rally, but on the holiday prices for August US crude fell sharply in electronic and overseas trading after Russia was reported to oppose any proposal to deepen OPEC-led production cuts, with WTI down $1.94, or 4.1%, to $45.13 a barrel, even though trades made that day did not settle til Wednesday the 5th....prices then jumped to as high as $46.53 a barrel on Thursday after the EIA report indicated major inventory draws across the board, but then collapsed near the close to end the day with a gain of just 39 cents at $45.52 a barrel...Friday brought further price deterioration on reports of higher OPEC exports and a double digit increase in the rig count, with August crude down another $1.29 to $44.23 a barrel, the lowest close since June 26th...

The Great US Natural Gas Exports Myth

Mr Trump was in Europe this week for the annual meeting of the G-20, the heads of government for the world's 20 largest economies...part of Trump/'s agenda on that trip was to promote exports of US natural gas in Europe, with the apparent intention of undermining Russian dominance of natural gas markets on the continent....the groundwork for this natural gas scheme was laid in late June, when the US Senate voted 98 to 2 to impose further sanctions on Russia, with the intention of waylaying the construction of the Nord-Stream 2, a subsea natural gas pipeline planned from Russia to Germany, which international energy firms are involved an extent, the Europeans went along with that scheme, extending their own energy sanctions against Russia to January 31st, 2018.....nonetheless, i found this entire stratagem bizarre and self-defeating; as you may recall, i've previously pointed out that our natural gas supplies are a lot tighter than they appear to be, and there's no way that additional supplies can be developed at the prices that are being promised for these exports...what i'm going to do today is show you the natural gas data that i'm looking at, so you can see how i've come to that conclusion...

the first screenshot below is from the EIA table of US dry natural gas production monthly, which i've lopped off at 8 years because the long history of US natural gas output is not an issue here...we can see that US natural gas production rose each year between 2010 and 2015 as fracking brought on new supplies...but look at the 2016 data starting in March; US natural gas production is lower each month of 2016 after that than the equivalent month of 2015...likewise, for the first four months of 2017 for which there is confirmed production data, our natural gas production was again lower...that means our natural gas production had been falling for 14 months in a row going into April, and since recent natural gas drilling and fracking remains far below that of the boom years, we have every reason to believe that decrease in output has continued to the present...yet even the Reuters article on the Trump promotion of our natural gas exports refers to "fast-growing supplies of U.S. natural gas", a myth that every one in the media seems to believe without's the data; you can see our production is clearly falling:

July 4 2017 natural gas monthly production

next, we'll include excerpts of a few tables on US natural gas exports...first, like the above, is a truncated excerpt of the EIA table of US natural gas surprise here, they've been rising, and now at a much more rapid pace since Cheniere's Sabine Pass natural gas natural gas liquefaction facilities started exporting LNG in May of last year..

July 8 2017 natural gas exports just to put those exports into perspective, we'll include the top of the table of US natural gas exports by country; while you can see which countries our exports are going by looking at the entire table, we dont particularly care where they're going to, as we're including this table because it shows exports by pipeline (which obviously can only go to Canada and Mexico) and LNG exports by vessel, which are going all over the world...

July 2017 US natural gas exports by country

next, we have a truncated excerpt of the EIA table of US natural gas imports...looking closely at the numbers, you'll see that our natural gas imports generally fell between 2010 and 2014 when our production was rising, but that our imports of natural gas started increasing again as our production fell and our exports rose...comparing this table to the export table above, you'll see that during the winter months, when much of the US is using natural gas for heat, our imports of natural gas exceed our exports of it...for instance, in December 2016, we exported over 250 billion cubic feet of natural gas, and imported over 280 billion cubic feet of it...on the other hand, in April, when the US consumption of gas for heating and cooling is moderate, our natural gas exports did exceed our imports by around 9 billion cubic feet...the EIA projects that we will still be a net importer of natural gas in 2017, and not become a net exporter of natural gas until 2018...

July 8 2017 natural gas imports

next, to put our imports in perspective we have the top of the EIA's table of US natural gas imports by country...what you see here is that almost all of our imported natural gas is now coming from Canada...since we are still importing more natural gas than we're exporting, that means that we are, in effect, importing natural gas from Canada to export it through Texas and Louisiana...without Canadian gas coming in to replace what we export, a shortage of natural gas would develop in the should also be clear from what we've shown so far that for us to export any more natural gas to Europe, much less replace what they get from Russia, we'd have to first import more of it from Canada..

July 2017 US natural gas imports by country

next, let's look at a graph of natural gas supplies that we have stored underground:

July 8 2017 natural gas stocks as of June 30

the above graph comes from the twitter feed of John Kemp, senior energy analyst and columnist with Reuters, wherein the red line shows our natural gas supplies in billions of cubic feet from January 2015 to June 30th of this year...the yellow line, for the year prior to the one shown by the red line, thus shows our natural gas supplies in billions of cubic feet from January 2014 to the end of 2016, thus retracing some of what the red line shows...the light blue band then shows the prior 5 year range of our natural gas supplies, and thus from the left shows the range of our natural gas supplies from January 2010 through January 2014, extending to the right where it ends with the range of our natural gas supplies from the end of 2012 through the end of 2016...lastly, the blue dashes show the average of that 5 year range of our natural gas stocks that's indicated by the light blue shading...note the obvious seasonal pattern; surplus natural gas is injected into storage each spring and summer, then withdrawn for use during the heating season...

just from looking at that graph, it appears that our natural gas supplies remain near normal, slightly above the average of the 5 year range...but next, we're going to pull out an old graph from the heating season that will call that simple visual analysis into question....this is a graph we posted on March 26th, showing heating demand for this past winter in red and heating demand for the winter before that in yellow, and the long term average heating demand as a light dashed line...a detailed explanation of what heating degree days are and what this chart shows is included with the original post, but suffice it to say that what this chart shows is that demand for natural gas for heating was 17% below normal in each of the last two winters...with that in mind, look back at the above graph of our natural gas following the red line, we can see that our natural gas supplies were at least at a 5 year high for the time of year from October 2015 through November 2016, with October 2016 being the first time in our history that natural gas supplies topped 4 trillion cubic feet...that's normal, we'd expect a record glut of natural gas with demand for heating 17% below normal...but notice that since December of 2016 our natural gas supplies were falling at a faster rate than normal, despite another warmer than normal winter, and by the end of January had returned to merely average...our supplies then recovered to above average because of a record warm period that led to the first weekly injection of gas into storage in February history, but as of this date they're still nearly 300 billion cubic feet below where they were at the same time in June a year ago....what that means is that at the current pace of natural gas production, we were unable to maintain our surplus from production at a the same pace as last year, even while demand remained below normal....what that suggests is that should domestic demand for natural gas jump to above average levels, either due to increased electrical generation or due to a colder than normal winter, our production plus Canada's imports will be inadequate to meet our export contracts and our own needs at the same time...

March 23 2017 heating demand as of March 17

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 30th, showed an increase in US oil exports, a decrease in our oil imports, and a significant increase in operations at US refineries, which thus resulted in the second largest withdrawal from our commercial stocks of crude this year...our imports  of crude oil fell by an average of 274,000 barrels per day to an average of 7,742,000 barrels per day during the week, while at the same time our exports of crude oil rose by 240,000 barrels per day to an average of 768,000 barrels per day, which meant that our effective imports netted out to 6,974,000 barrels per day during the week, 514,000 barrels per day more than during the prior the same time, our field production of crude oil rose by 88,000 barrels per day to an average of 9,338,000 barrels per day, which means that our daily supply of oil from net imports and from wells totaled an average of 16,312,000 barrels per day during the cited week... 

during the same week, refineries reportedly used 17,141,000 barrels of crude per day, 251,000 barrels per day more than they used during the prior week, and at the same time a net of 957,000 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 128,000 more barrels per day than what refineries reported they used during the account for that discrepancy, the EIA needed to insert a (-128,000) 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 (pdf) show that the 4 week average of our oil imports actually rose to an average of 7,915,000 barrels per day, which was nonetheless 1.0% below the imports of the same four-week period last year...the 957,000 barrel per day decrease in our total crude inventories came about on a 900,000 barrel per day withdrawal from our commercial stocks of crude oil and a 57,000 barrel per day sale of oil from our Strategic Petroleum Reserve, part of an ongoing sale of 5 million barrels annually that was part of a Federal budget deal 20 months ago....this week's 88,000 barrel per day increase in our crude oil production resulted from a 105,000 barrel per day increase in oil output from wells in the lower 48 states as Gulf production came back online, which was partially offset by a 17,000 barrels per day decrease in oil output from Alaska, which was reportedly due to maintenance ...the 9,338,000 barrels of crude per day that we produced during the week ending June 30th was 6.5% more than the 8,770,000 barrels per day we were producing at the end of 2016, and up by 10.8% from our 8,428,000 barrel per day of oil output during the during the same week a year ago, while it was still 2.8% below the June 5th 2015 record US oil production of 9,610,000 barrels per day... 

US oil refineries were operating at 93.6% of their capacity in using those 17,141,000 barrels of crude per day, which was up from 92.5% of capacity the prior week, and well above normal for this time of year...the amount of oil refined this week was also well above the seasonal norm, as it was 2.7% more than the 16,687,000 barrels of crude per day.that were being processed during week ending July 1st, 2016, when refineries were operating at 92.5% of capacity, and roughly 10% above the 10 year average of 15.6 million barrels of crude per day for the last week of June....

with the pickup in refining, gasoline production from our refineries increased by 31,000 barrels per day to 10,365,000 barrels per day during the week ending June 30th, the highest weekly gasoline output this year...that gasoline output was also 3.5% higher than the 10,018,000 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) fell by 144,000 barrels per day to 5,100,000 barrels per day, still a seasonal high for the last week of June and 4.3% more than the 5,100,000 barrels per day of distillates that were being produced during the week ending July 1st last  year.....   

even with the increase in gasoline production, our end of the week gasoline inventories decreased by 3,669,000 barrels to 237,303,000 barrels by June 30th, now almost reversing the gasoline supply increases of early June...this week's gasoline supplies were reduced because our domestic consumption of gasoline increased by 167,000 barrels per day to 9,705,000 barrels per day, and because of this week's 278,000 barrel per day adjustment to correct for the imbalance created by the blending of fuel ethanol and gasoline blending components... meanwhile, our gasoline exports rose by 51,000 barrels per day to 713,000 barrels per day, while our imports of gasoline rose by 168,000 barrels per day to 739,000 barrels per day at the same time....with the week’s decrease in our gasoline supplies, our gasoline inventories are now 0.7% below last year's seasonal high of 238,876,000 barrels for this week of the year, but are still 8.9% higher than the 217,952,000 barrels of gasoline we had stored on July 3rd of 2015, and 10.7% more than the 214,321,000 barrels of gasoline we had stored on July 4th of 2014… 

with the decrease in our distillates production, our supplies of distillate fuels fell by 1,850,000 barrels to 150,422,000 barrels during the week ending June 30th, the second decrease after increasing by 5,762,000 barrels over the prior three weeks....the major factor in this  week's drop in distillates supplies was the amount of distillates supplied to US markets, which rose by 293,000 barrels per day to 4,322,000 barrels per day...meanwhile our exports of distillates fell by 236,000 barrels per day to 1,150,000 barrels per day, while our imports of distillates fell by 21,000 barrels per day to 108,000 barrels per day....despite the drop in supplies, our distillate inventories are still 1.0% higher than the 148,939,000 barrels that we had stored on July 1st, 2016, and 9.4% higher than the distillate inventories of 137,461,000 barrels that we had stored on July 3rd of 2015...

finally, with the drop in imports and pickup of US refining, our commercial supplies of crude oil decreased for the 11th time in the past 13 weeks, as our oil inventories fell by 6,299,000 barrels to 502,914,000 barrels as of June 30th.. however, we still finished the week with 5.0% more crude oil in storage than the 479,012,000 barrels we had stored at the beginning of this year, and 1.9% more crude oil in storage than the 493,718,000 barrels of oil in storage on July 1st of 2016....our supplies of oil also remain well ahead of those of the same week in prior years; with 16.0% more crude than the 433,714,000 barrels in of oil that were in storage on July 3rd of 2015, and 42.9% more crude than the 350,822,000 barrels of oil we had in storage on July 4th of 2014...     

This Week's Rig Counts

increasing drilling activity returned to the US during the week ending July 7th, with both oil and gas rigs higher, after the prior week had seen the first drilling slowdown in 24 weeks....Baker Hughes reported that the total count of active rotary rigs running in the US increased by 12 rigs to 952 rigs in the week ending Friday, which was 512 more rigs than the 440 rigs that were deployed as of the July 8th report in 2016, and the most drilling rigs we've had running since April 17th, 2015, even though it was still less than half of the recent high of 1929 drilling rigs that were in use on November 21st of 2014....

the number of rigs drilling for oil increased by 7 rigs to 763 rigs this week, which was up by 412 oil rigs over the past year, and the most oil rigs that were in use since April 3rd 2015, 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 5 rigs to 189 rigs this week, which was 101 more rigs than the 88 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 total offshore or Gulf of Mexico rig counts this week, where drilling continues from 21 platforms, up from the 18 rigs working in the Gulf and total 19 offshore a year horizontal drilling rigs increased by 12 to 804 rigs this week, up by 461 from the 343 horizontal rigs that were in use in the US on July 8th of last year and the most horizontal rigs in use since March 27th of 2015, while they are still down from the record of 1372 horizontal rigs that were deployed on November 21st of addition, the directional rig count was up by 3 rigs to 74 directional rigs this week, which was also up from the 36 directional rigs that were deployed during the same week last year...meanwhile, the vertical rig count was down by 3 rigs to 74 rigs this week, which was still up from the 61 vertical rigs that were deployed during the same week last year....

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas both tables, the first column shows the active rig count as of July 7th, the second column shows the change in the number of working rigs between last week's count (June 30th) and this week's (July 7th) count, the third column shows last week's June 30th 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 8th of July, 2016... 

July 7 2017 rig count summary

note that this week saw the first decrease in drilling in the Permian basin of West Texas and southeastern New Mexico in 16 weeks; you'll recall that up until just a few months ago, almost half of the new drilling was taking place in that region...hence, Texas was limited to a increase of 2 rigs, which could be accounted for by the increase in the Granite Wash of the panhandle border...of the major shale basins, Oklahoma's Cana Woodford saw the largest increase, with 4 oil rigs added this week, while the Haynesville of northwestern Louisiana saw both an oil and a gas rig added....note horizontal rig increases shown in the table above only add up to 7, so there's 5 fracking rigs unaccounted for; some of those may be in Alaska, where recent news articles describe new drilling and fracking in the HRZ shale on the North Slope...of the states not shown above, rigs were added in both Nebraska and Montana last week; Nebraska has had intermittent drilling over the past year, and also had a rig active the same week a year ago, but that Montana drilling appears to be the first in the state since the oil bust at the end of 2014...


Lawsuit Over Fracking Plan for Ohio's Only National Forest Expanded - Center for Biological Diversity (press release) — Conservation groups today expanded a lawsuit challenging a U.S. Forest Service and Bureau of Land Management plan to permit fracking in Ohio’s only national forest. The groups are challenging a new 1,147-acre March 2017 lease sale in Wayne National Forest and adding claims that the federal fracking plans violate the Endangered Species Act, threatening animals in the forest and downstream.“Federal officials should not be putting corporate profits ahead of endangered species, safe drinking water and public health,” said Taylor McKinnon with the Center for Biological Diversity. “The government is violating its own laws to pave the way for this dangerous fracking plan, and we can’t let that happen.” In May four conservation groups sued the federal agencies in U.S. District Court in Columbus for their failure to analyze impacts to public health, water, endangered species and the climate before opening 40,000 acres of the Wayne National Forest to fracking in 2016, and prior to leasing 670 acres of those lands to the oil industry in December. The expanded lawsuit shows that fracking will threaten endangered mussels downstream from lease parcels, as well as endangered Indiana bats and threatened northern long-eared bats. The bats are already imperiled by forest fragmentation, white-nose syndrome and climate change. Habitat destruction, deadly wastewater pits and water contamination from fracking activities compound these threats. "The Wayne National Forest is home to many species who can't afford to have their habitat damaged by oil and gas development," Fracking will industrialize Ohio’s only national forest with roads, well pads and gas lines, the lawsuit asserts. In addition to destroying Indiana bat habitat, this infrastructure will pollute watersheds and water supplies that support millions of people, and endanger other federally protected species in the area.

Treasury Dept Asked To Investigate Reports That Russia Funneled Millions To US Environmental Groups - House lawmakers have added another twist to the ongoing congressional Russia investigation by asking the Treasury Department to look into allegations Russia secretly funneled money to environmental groups opposed to oil and gas drilling.Top Republicans want the Trump administration to investigate a Bermuda-based shell company that funneled money to a prominent environmental non-profit that’s given millions to anti-fracking activists. Media reports suggest the Bermuda shell company is tied to Russian oligarchs.Republicans on the House Committee on Science, Space and Technology sent a letter to Treasury Secretary Steve Mnuchin asking him to investigate “what appears to be a concerted effort by foreign entities to funnel millions of dollars through various non-profit entities to influence the U.S. energy market.”“If you connect the dots, it is clear that Russia is funding U.S. environmental groups in an effort to suppress our domestic oil and gas industry, specifically hydraulic fracking,” Republican Texas Rep. Lamar Smith said in a statement. Letter signatories Smith and Texas Rep. Randy Weber point to media reports of the U.S.-based environmental group, the Sea Change Foundation, taking $23 million from a Bermuda-based shell company with ties to Russian oligarchs in 2010 and 2011. That same year, Sea Change gave millions to U.S.-based environmentalists, including the Natural Resources Defense Council, the Sierra Club and the League of Conservation Voters. All of those groups oppose hydraulic fracturing, or fracking.

Sulfide-producing bacteria dominate hydraulically fractured oil and gas wells - Phys.Org --Researchers have found that the microbes inhabiting a hydraulically fractured shale formation produce toxic, corrosive sulfide through a poorly understood pathway. The team's findings, published this week in mSphere, an open-access journal of the American Society for Microbiology, reveal that the oil and gas industry may need new ways to monitor and mitigate sulfide-producing bacteria in fractured shales. "This is a pretty inhospitable environment of high pressure, salinity and temperature some 2,000 meters underground. You'd think that microbes introduced during the fracturing process would die, but some of them make a good life for themselves," says Mike Wilkins, an environmental microbiologist at The Ohio State University in Columbus and senior researcher on the study. "The industry spends a fair amount of money trying to keep microbes out of these systems."Hydraulic fracturing, also known as "fracking," involves the high-pressure injection of water, sand, and chemicals into shale formations to create fracture networks that release oil and gas, which are pumped back to the surface and recovered. Practiced for only the last decade, not much is known about the microbial ecosystems in the fracture networks.Sulfide-producing microbes cause multiple problems for drilling operations. Hydrogen sulfide can "sour" a well and must be separated from oil and gas in an expensive process. Sulfides can be toxic to the workers on the drilling pad and can also corrosively degrade metal pipelines. The microbes themselves can gum up the extraction process by filling in the tiny fractures with either biomass or excreted precipitates.

The Economist explains: How fracking leads to babies - A new study by Melissa Kearney and Riley Wilson, two economists at the University of Maryland, looks at the impact of the recent fracking boom in America, which boosted job opportunities for less-educated men. The economists wanted to see how this affected birth rates, both in and outside of marriage. They compared marriage and birth rates in areas where fracking had boosted the local economy with those where it had not had any effect. The researchers found no effect on marriage rates, though fertility rates did rise. On average, they find that $1,000 of extra fracking production per person was associated with an extra six births per 1,000 women.  The result confirms the hypothesis that better economic prospects lead to higher fertility. But it also sheds light on changing social mores in America: good times used to mean more wedding bells and babies, whereas now they just mean the latter. The policy prescriptions are not obvious. Whether or not people get married is their own business. But the finding does offer some comfort to those who worry that declining marriage rates are purely the product of worsening economic prospects for men. Clearly, some other factor is at play. 

Enbridge, lacking financing options, suspends New England gas pipeline project -- Lacking viable financing options, Enbridge has pulled its proposed Access Northeast natural gas pipeline in New England from Federal Energy Regulatory Commission review, saying it could be revived if the region develops policies that would support pipeline development to serve power plants. The $3.2 billion project called for bolstering the Algonquin Gas Transmission system in New York, Connecticut, Rhode Island and Massachusetts and included an expanded liquefied natural gas facility near Boston. Eversource Energy and National Grid backed the project, which was designed to deliver 925,000 Dt to power plants totaling about 5,000 MW. New England governors, ISO New England and others have been pressing for more gas pipeline capacity to supply the region, which is increasingly reliant on gas-fired power plants. There have been price spikes in the winter, when generators compete for gas with homes and businesses that use gas for heating. The proposal depended on New England states allowing electric distribution companies to contract for pipeline capacity and then releasing the capacity to gas-fired power plants who hesitate entering into firm contracts for pipeline capacity. The Massachusetts Supreme Judicial Court and state utility regulators rejected the framework, saying that it violated state rules deregulating the electric utility sector. ‘

State receives first fracking application -  Four years after former Gov. Pat Quinn signed legislation that cleared the way for fracking in Illinois, the state has received its first application for a drilling permit. Woolsey Companies Inc. is looking to drill a well near Enfield in southeastern White County. The company is based in Wichita, Kansas. Illinois Department of Natural Resources spokesman Tim Schweizer says the original paperwork was received on May 22, but the company is expected to submit an amended application to correct a few problems. That will extend the window for officials to consider the proposal. “It appears now we’ll have until August 31 to (decide),” Schweizer said. “The Illinois Oil and Gas staff here at the Illinois Department of Natural Resources will be reviewing the permit application and will ultimately make the decision on whether it is approved or denied.” In the meantime, the public is invited to weigh in with comments about the possible fracking site. “Comments can be submitted in writing and mailed to the Department of Natural Resources here in Springfield,” Schweizer said. “There’s also an opportunity to comment online or you can send in email comments.”

Trump’s administration pursues radical expansion of offshore drilling - Despite spill risks, bipartisan opposition, Trump’s Department of Interior is moving forward with offshore drilling plans. New offshore oil drilling in Atlantic, Arctic, and Pacific waters may be the next phase in President Donald Trump’s new “energy dominance” strategy, based on an official federal notice published Monday. Following pledges last week by Trump and Secretary of the Interior Ryan Zinke to seek “energy dominance” through large increases in fossil fuel extraction, the Trump administration issued a formal notice that it has begun a process it hopes will dramatically expand offshore oil and gas drilling throughout United States waters.  By publishing the “request for information” from coastal and ocean stakeholders in the Federal Register, the Interior Department initiated what it says will be a two-to-three year long process to develop a new five-year plan for offshore drilling. The Interior Department is legally required to publish five-year plans that specify where and when sales of offshore drilling leases — and therefore future drilling activity — will occur. The expansive new planning effort largely duplicates work by the previous administration, which finalized a five-year plan for 2017 to 2022. That plan, which is currently active, took three years to develop and incorporated more than one million public comments submitted to the Interior Department. Under the plan, 10 lease sales in the Gulf of Mexico and one in the Cook Inlet in southwest Alaska were scheduled over the five-year period. David Hayes, a former Deputy Secretary and Chief Operating Officer of the Interior Department, noted the potential internal impact of the decision, within the context of the Trump administration’s proposed federal budget cuts. “At the same time that the [Interior] Department is proposing to cut 2,000 National Park Service jobs, it is committing money, time, and personnel to overturn an offshore plan that is not due to expire until 2022,” he said. The launch of the fossil fuel “dominance” oriented re-do of the five-year plan indicates the Trump administration officials are set to ignore existing analysis and large blocs of opposition, and instead attempt to follow through on earlier suggestions that their goal is new lease sales and new drilling throughout these highly controversial ocean areas.

Interior opens public review of offshore drilling plan | TheHill: The Interior Department on Monday began accepting public comments on a new five-year offshore drilling plan, an early step toward rewriting the blueprint for drilling in federal waters. Interior published a “request for information” in Monday’s Federal Register, seeking comment from the public and stakeholders on the potential for drilling in the 26 areas of the Outer Continental Shelf (OCS) leased for oil and natural gas production by the federal government. The 45-day comment period is the first step in the lengthy, years-long process of rewriting the program. The procedure involves assessing the economic and environmental impact of drilling, and the effects it would have on ocean features, wildlife and local communities.President Trump announced last Thursday that the public review process would begin this week as part of his agenda of opening up more American offshore areas for oil and gas development. “Under the previous administration, so much of our land was closed to development. We’re opening it up. The right areas, we’re opening it up,” Trump said. “America will be allowed to access the vast energy wealth located right off our shores.” Trump in April ordered Interior Secretary Ryan Zinke to reconsider the five-year offshore drilling plan instituted by President Obama last year. Interior said it will implement that plan, which limits lease sales to the Gulf of Mexico and waters off of south-central Alaska, while reviewing and eventually rewriting it. Interior has also proposed allowing seismic testing for oil and gas in the Atlantic Ocean, the first step toward potential drilling in the area. 

Trump called 'threat to every coastline' as he pushes ocean drilling plan --  Environmentalists have condemned Donald Trump as a “threat to every ocean and coastline in the country”, after the president pushed forward plans to expand oil and gas drilling in the Arctic and Atlantic oceans as part of what he called a new era of “American energy dominance”. The Trump administration has taken the first steps to rewrite a five-year plan, put in place under Barack Obama, that banned drilling along the Atlantic seaboard and in large swaths of the Arctic. The interior department is opening a 45-day public comment period for a new plan that it says will help grow the economy. Green groups have promised in response to mobilize the coastal communities that successfully implored the Obama administration not to open up new areas to drilling, due to fears over the effect of potential oil spills and noise pollution upon livelihoods and wildlife. “Trump’s appalling actions threaten every ocean and coastline in the country,” said Kristen Monsell, an attorney at the Center for Biological Diversity. “We’ll be fighting tooth and nail to make sure his disgraceful administration doesn’t endanger polar bears, whales, local economies and our climate with more dirty drilling.” US crude oil and natural gas production have soared in recent years and several analysts have voiced doubts that many companies will be interested in offshore extraction, given the low cost of a barrel of petroleum and the falling cost of drilling on land. However, in a speech on Thursday, Trump again promised to “unleash” American fossil fuels. The event was part of what has been touted by the administration as “energy week”, although the week was instead dominated by the healthcare debate and the president’s tweets about a TV host’s face. “America will be allowed to access the vast energy wealth located right off our shores,” Trump said. “And this is all just the beginning – believe me. The golden era of American energy is now under way. And I’ll go a step further. The golden era of America is now under way. Believe me.” . 

Existing and planned natural gas pipelines out of the Permian.- The pace of production growth in the Permian’s Midland and Delaware basins will be influenced by many factors, including the degree to which the market price for crude oil exceeds the play’s breakeven prices and the ability of midstream companies to add incremental pipeline takeaway capacity as that capacity is needed. While the pursuit of crude oil is driving drilling and production activity in the Permian, rapid growth in crude output is accompanied by large volumes of associated gas and NGLs that also must be dealt with. Fortunately, the Permian has been a major production area for decades — a lot of gas and NGL pipeline infrastructure is already in place. But it won’t be enough. Today we begin a blog series on the existing networks’ ability to move natural gas to market and the enhancements that will be needed to keep the Permian’s growth on track. It’s official: as of today, more Americans are talking about the Permian than the Kardashians and former FBI director James Comey ­­— combined! OK, maybe not, but sometimes it seems that way, doesn’t it? The U.S.’s hottest shale play, covering more than 70,000 square miles in West Texas and southeastern New Mexico, is widely viewed as an unstoppable force, a runaway train that by the early 2020s will account for one-third of total U.S. crude oil production as well as more than almost 12 billion cubic feet/day (Bcf/d) of natural gas for domestic consumption and export (to Mexico via pipelines and everywhere else as liquefied natural gas, or LNG).

New crude, condensate offtake deals signed for Permian producers by Trafigura, Enterprise -- Two midstream deals -- providing new pipeline takeaway capacities from the Gulf Coast -- were unveiled Wednesday, further reflecting a growing global appetite and competitiveness of light sweet crude and condensates from the Permian Basin in Texas.Commodity trader Trafigura said it signed a long-term deal with Plains All American Pipeline for the offtake of 100,000 b/d of crude oil and condensate from Midland in the Permian Basin to an export outlet at Corpus Christi on the Gulf Coast.Also, Enterprise Products said it had signed up additional shippers on its crude oil pipeline in the Permian Basin that is designed to provide 450,000 b/d of takeaway capacity to an export outlet in the Gulf Coast starting late 2017. The Trafigura deal, which comes into immediate effect, will enable the company to buy crude oil from producers in the rapidly-growing basin and also receive condensate for use in its splitter and export terminal at Corpus Christi, Trafigura said in a statement.

Shale’s super rigs getting bigger paychecks in the oil patch - U.S. oil companies are spending more money on so-called super-spec rigs, machines that churn out wells much faster than older models that led the first shale boom.   Xtreme Drilling Corp., a Canadian rig supplier, said this week it has locked in more than $24 million in revenue over the next year with three contracts for upgraded super-spec rigs, pushing the rig day rates toward $22,000 a day.  And Nabors Industries, a rig contractor in Houston, recently said it has contracted some super-spec drilling rigs at prices of up to $23,500 a day, almost 20 percent higher than spot rates in places like the Permian Basin and the Eagle Ford Shale in Texas."Operators are clearly growing concerned with the availability of super-spec equipment," said James West, an analyst at investment bank Evercore ISI. That's why some U.S. producers have been willing to boost rig contract prices by 10 percent to 20 percent, West said.These super-spec rigs – built with a bigger load capacity and faster drilling systems – can drill an oil well in less than 10 days, shaving more than a week from the average drilling time in 2010, and allowing companies to drill a greater number of wells each year. Matt Porter, president and CEO of Xtreme, said these higher rates show operators will pay a premium for more efficient drilling even though oil prices have slumped in recent weeks. West said it's possible if oil prices stay cheap next year, the U.S. rig count could drop by 20 percent from a 2017 exit rate of about 1,000. But the bigger rigs, he said, could still "enjoy robust utilization" in 2018.

Court rejects Trump administration move to delay methane regulation | Reuters: The U.S. Environmental Protection Agency cannot freeze implementing a rule requiring oil and gas companies to fix methane leaks in their equipment, a federal appeals court ruled on Monday in a setback for President Donald Trump's push to cut environmental regulations. The EPA on June 5 announced a stay in the rule, which would have required drillers and transporters to start reporting and fixing any methane leaks they found in wells and transfer stations, after EPA Administrator Scott Pruitt wrote in an April 18 letter the agency intended to reconsider imposing it. But the U.S. Court of Appeals for the District of Columbia Circuit said the agency did not have the authority to halt the rule during those deliberations. The EPA's stay "is essentially an order delaying the rule's effective date, and this court has held that such orders are tantamount to amending or revoking a rule," Judges David Tatel and Robert Wilkins wrote. The third member of the three-judge panel, Judge Janice Rogers Brown, dissented. "We are reviewing the opinion and examining our options," an EPA spokeswoman said in a statement to Reuters.The court's ruling came in response to a lawsuit filed June 5 by green groups that opposed the EPA's stay of the rule. The groups, including the Natural Resources Defense Council, Environmental Defense Fund, Sierra Club and other environmental organizations, argued the EPA did not follow procedures detailed in the 1970 law known as the Clean Air Act when it froze the rule.

EPA must enforce methane emissions rules immediately after court decision -  The Trump administration suffered a legal blow on Monday when the US Court of Appeals for the District of Columbia ruled (PDF) that the Environmental Protection Agency (EPA) must enforce methane emissions rules that were finalized by the Obama administration in mid-2016.The rules established performance standards for new drilling operations, and they required many oil and gas companies to conduct an initial survey of methane leaks by June 3, 2017. Changing finalized rules is often a lengthy and painstaking process, and Trump’s EPA Administrator Scott Pruitt announced his intention to start the reconsideration process for the rules in April. Pruitt, who sued the EPA as attorney general of Oklahoma over these rules, also announced a stay on the EPA’s enforcement of certain parts of the rules that could have lasted up to two years. Specifically, Pruitt said the EPA would not, for the time being, enforce four items specified in the rules, including regulation of low-production wells and the requirement that a professional engineer certify well vent system designs.  Environmental groups—including the Environmental Defense Fund, Natural Resources Defense Council, Environmental Integrity Project, Earthworks, the Clean Air Council, and the Sierra Club—challenged the EPA’s stay in court, however. The EPA argued that the stay was reasonable because the previous administration hadn’t given all stakeholders due opportunity to comment on certain parts of the rules’ final wording.  But two judges on the three-judge appeals court panel agreed with the environmental groups on Monday. “The administrative record thus makes clear that industry groups had ample opportunity to comment on all four issues on which EPA granted reconsideration, and indeed, that in several instances the agency incorporated those comments directly into the final rule,” the judges wrote. The judges noted that the EPA can start the reconsideration process for the methane emissions rules at any time, but the agency still has to enforce those rules until they’re overturned. “As we have explained, ‘an agency issuing a legislative rule is itself bound by the rule until that rule is amended or revoked’ and ‘may not alter [such a rule] without notice and comment.’” In a comment to Ars Technica, an EPA spokesperson noted, “We are reviewing the opinion and examining our options.”

Secretary Zinke met with industry officials shortly before delaying methane rule -- Interior Secretary Ryan Zinke held meetings with officials from fossil fuel companies and powerful industry trade groups less than a month before the Department of the Interior postponed compliance dates for a rule designed to limit methane waste from drilling sites on public lands. On May 22, for instance, Zinke met with officials from the American Petroleum Institute, an oil and gas trade group that opposed the Obama administration’s implementation of the methane waste rule, according to a redacted copy of his schedule obtained by Politico. Two days after that, Zinke participated in a video call with Newfield Exploration Co., the largest oil producer in Utah. A large portion of Newfield’s drilling operations in Utah are conducted on federally managed lands. The secretary also called into the May 25 board meeting of the U.S. Oil & Gas Association, an industry group whose members hold oil and gas leases on federal lands. Earlier in May, Zinke held video conference calls with two conservation-oriented organizations: the Land Trust Alliance, a national land conservation group based in Washington; and the Partnership of Rangeland Trust, a Colorado-based association of agriculture land conservation organizations. A few weeks after Zinke’s meetings with oil and gas industry officials, the Bureau of Land Management (BLM), a division of the Interior Department, entered a notice into the Federal Register stating it would delay compliance with the methane rule, finalized last November by the Obama administration. 

Native Americans Sue Frackers Over Manmade Earthquakes - National Geographic - Oklahoma has become one of the world’s most notorious earthquake hubs. In fact, in 2014 for the first time, the number of magnitude 3 or greater quakes in the state surpassed California’s total.  Though Oklahoma typically experienced zero to a couple magnitude 3 or greater quakes annually, the rate shot up to 20 in 2009. In 2013, the state had 109 such earthquakes followed by 579 in 2014, 903 in 2015, and 623 in 2016. In other words, the state went from some two sizable quakes a year to two or three a day.  Hydraulic fracturing, or fracking, has been a lightning rod for the blame, but it’s not so much the fracking itself as the cleanup afterwards that’s inducing these temblors. To dispose of this dangerous waste, companies pump it down a different opening deeper under the shale to rest permanently in a well of porous rock. The thing is, when these wastewater injection wells are continuously filled, pressure builds up on geologic faults—enough to cause earthquakes when the two sides of a fault slip past each other, the U.S. Geological Survey acknowledges. In 2009, companies in Oklahoma pumped 849 million barrels of wastewater into wells. By 2014, that number hit 1.5 billion.  That’s been a problem for Oklahoma’s Pawnee Nation and their advocate Erin Brockovich, the famed environmental activist lawyer, given that the tribe has endured some of the most devastating earthquakes in the state. On September 3, 2016, a magnitude 5.8 quake hit right near the town of Pawnee—Oklahoma had never experienced one more powerful—and was felt from Texas to South Dakota. Then on November 6, 2016, a 5.0 earthquake hit nearby Cushing. Exacerbating the danger, Cushing is the storage site of 60 million barrels of oil, the largest supply of crude in the world—a sticking point of concern for the Department of Homeland Security.

Trump administration looks to speed drilling permits | TheHill: The Trump administration wants to speed permits to drill for oil and natural gas on federal land and hold more auctions for drilling rights leases. Interior Secretary Ryan Zinke signed a secretarial order Thursday to advance those two priorities, formally ordering the Bureau of Land Management (BLM) to reduce permitting times and hold more frequent lease sales. Zinke said it’s part of the Trump administration’s “energy dominance” agenda, in which federal officials want to increase domestic production of fossil fuels and other energy sources and increase exports worldwide. The Thursday actions also fit with the administration’s rollbacks of numerous environmental standards, with a focus on rules affecting fossil fuel industries. “There’s a reason why our energy revolution from 2008 forward has been primarily on private lands and state lands, and not federal lands. We have been particularly, I think, punitive in some ways,” Zinke told reporters Thursday. His order asks the BLM to try to make permitting decisions for oil and gas drilling on federal land in 30 days. That’s the time frame required by law, but the actual time frame averaged 257 days last year, Zinke said, citing the agency’s data.

Another Big Gift to Oil & Gas: Zinke Fast Tracks Drilling on Public Lands -- In another gift to big polluters, Interior Sec. Ryan Zinke signed an order Thursday directing the Bureau of Land Management (BLM) to hold quarterly oil and gas lease sales and to issue new oil and gas drilling permits within only 30 days from application. The move is part of the Trump administration's efforts to allow dirty oil and gas polluters to dominate public lands that belong to the American people. The oil and gas industry doesn't need any more special favors or giveaways. The fossil fuel industry has received taxpayer handouts for decades. The BLM already makes the vast majority of federal lands available for oil and gas development. For example, BLM has classified more than 90 percent of lands it manages in 11 western states as available for oil and gas leasing. In contrast, conservation proposals have historically had to overcome greater institutional hurdles, and renewable energy projects on federal lands face much more stringent environmental standards than oil and gas development. Zinke's quest for faster permitting ignores the fact that delays are often the fault of industry and operators, not the BLM. From FY 2005 to FY 2015, it took operators an average of 133 days to resolve deficiencies in permit applications they filed with BLM, according to the Center for American Progress . Oil and gas drilling and fracking on public lands comes with a long list of threats to clean air, clean water, human health, wildlife and local communities. Federal oil and gas development with intensive industrial land disturbance and toxic chemicals has harmed human health, wildlife, sacred lands, drinking water sources and local economies focused on agriculture, tourism and outdoor recreation. It is the source of toxic air pollution that harms nearby communities where people live, work, and go to school . It destroys vital wildlife habitat. It generates massive amounts of toxic waste. And these impacts last for generations. We don't have time for 19th Century energy p olicies.

Erie may consider fracking as 'public health and safety’ concern  -  Erie officials in July will weigh an emergency ordinance amending the town's "public health and safety" code to consider complaints against oil and gas odors, officials announced earlier this week. The decision signals the latest in a string of calls for heightened local regulation by Erie officials, who amid gridlock at the state Capitol have begun to ask themselves, how — if even possible — should oil and gas be locally governed? It's a question that has spurred the town, split between county lines — it straddles Boulder and Weld counties — and a perpetually divided Board of Trustees to explore a variety of ordinances aimed at more local control over oil and gas activity in recent months. Under the new protocol's umbrella, if approved, resident complaints regarding odors from oil and gas activities would be investigated by local police. Such complaints could ultimately result in a summons or a ticket for companies in violation; a relatively unique approach to mitigate oil and gas effects on surrounding neighbors, officials said. If approved, the ordinance could force oil and gas companies to answer to a potential slew of violations in municipal court (every violation under Erie code within a 24-hour period is a separate charge), according to Shapiro, an approach typical of how the town addresses code violations.

Dakota Access pipeline developer to keep fighting Indian artifacts case - Houston Chronicle: A dispute over whether the Texas-based developer of the Dakota Access oil pipeline improperly reported the discovery of American Indian artifacts in North Dakota will linger into the fall, as the company continues to fight a relatively minor violation and small fine.Energy Transfer Partners has been battling since November when state regulators filed a complaint and proposed a $15,000 fine, which pales in comparison to the $3.8 billion cost of the pipeline that began moving oil last month. The complaint came after the Public Service Commission, which oversees pipelines, was notified by a third-party inspector that pipeline crews last October had diverted construction of the pipeline around Native American artifacts. The company had obtained the approval of the State Historic Preservation Office but not of the commission.The artifacts weren't disturbed, and ETP maintains it didn't intentionally do anything wrong. A public hearing on the issue was scheduled for Aug. 16, but the company requested that written arguments be made first. The PSC has agreed to a briefing schedule with a final deadline of Sept. 22. The hearing will be rescheduled after that, Commissioner Julie Fedorchak said.The commission also is looking into whether the company removed too many trees while laying pipe in the state. An Aug. 17 public hearing is still scheduled. There is not yet a formal complaint in that matter, and "briefs on that at this point would be premature," Fedorchak said. The company could face fines of up to $200,000 if found to have violated state rules in either case, though it could contest any fines in state district court. 

Dakota Access developer drops private security accused of working without license - The developer of the disputed Dakota Access oil pipeline said Wednesday that it no longer has private security personnel in North Dakota, including a firm that state regulators say operated illegally without a license. "We continue to have security measures in place in North Dakota, just no longer need boots on the ground," Energy Transfer Partners spokeswoman Vicki Granado said in an email to The Associated Press. North Dakota's Private Investigative and Security Board last week asked a state judge to block North Carolina-based TigerSwan's armed workers from continuing to monitor the pipeline system. The board said TigerSwan had no license during the height of the protests and continued operating after being denied one. Granado said in her email that TigerSwan stopped providing security services in the "last couple of weeks." TigerSwan said it ended work with Dallas-based ETP near the end of June. TigerSwan was founded by retired military special forces members. The regulatory board alleges in court documents that TigerSwan employees with semi-automatic rifles and handguns protected workers and equipment at construction sites, conducted intelligence on protesters including placing or trying to place undercover agents within the protest groups, and even monitored traffic on a state highway. The board also said TigerSwan continued to provide round-the-clock security along the pipeline in the state.

Minn. oil pipeline fight stokes threats, fears of Standing Rock -  Each day for decades, five pipelines have quietly pumped more than 2 million barrels of Canadian crude oil below northern Minnesota's forests, lakes and rivers to refineries around the Upper Midwest.   The lines were built in an era with no federal environmental law requiring studies or public hearings, keeping opposition to a minimum. Those days are gone, replaced by a massive multi-year permitting process that requires transparency and public input — and an environmental movement determined to make its voice heard. That was never clearer than last year when what began as a small protest over the route of an oil pipeline near North Dakota's Standing Rock Reservation mushroomed into a months long international incident. Protesters ultimately lost that fight after Donald Trump became president.  Many of those same activists, though, are focusing now on Minnesota where Enbridge Energy hopes to build a new pipeline to replace its aging Line 3. Activists are pressing Minnesota officials now to deny the permit and kill the project. State officials and company executives working to head off a confrontation say they're doing more than ever to listen to the concerns of those in the pipeline's potential path. That may not be enough to stop a confrontation."If that permit is issued, you can be sure you will have Standing Rock in Minnesota. I will tell you that," White Earth tribal member and Honor the Earth executive director Winona LaDuke said prior to one of 22 public meetings state regulators recently held across northern Minnesota."We've been very clear with the state representatives, and the governor of Minnesota, that if they approve this line, there will be tens of t housands of people in Minnesota."

Renewed slide in oil price will test U.S. shale profits: Kemp (Reuters) - U.S. independent oil and gas producers came close to breaking even during the first quarter of 2017 thanks to aggressive cost cutting and improvements in well productivity.Some shale producers claim they can drill wells profitably at prices well below $50 per barrel and in some cases below $40. But Harold Hamm, chief executive of Continental Resources, a major producer in North Dakota and Oklahoma, has said oil prices need to be above $50 to be sustainable.Prices below $40 would force producers to idle rigs again, he said in a recent interview (“Harold Hamm warns oil prices below $40 will idle U.S. drilling”, CNBC, June 28).The renewed drop in oil prices, unless quickly reversed, looks set to put these conflicting claims to the test. Fifteen independent producers with operations focused on the United States reported a combined net loss of $3.7 billion in the first three months of 2017 ( most of the losses were attributable to Marathon Oil, which reported a net loss of $4.9 billion, mostly as a result of an impairment charge linked to its Canadian oil sands businesses.The other fourteen companies in the sample reported total net income of almost $1.3 billion, up from a loss of $9.9 billion in the first quarter of 2016. Shale producers have benefited from a combination of cost reductions, improvements in drilling efficiency and well productivity, and a significant increase in oil and gas prices.The average price of WTI, the domestic benchmark, rose from $33 per barrel in the first quarter of 2016 to $52 in the first quarter of 2017.Unless there are further exceptional write-downs, the sample group may be able to increase their net income in the second quarter despite the fall in prices.Many, though not all, shale producers have hedged the price of their output for the remainder of 2017 which gives them some protection in the short-term against the downturn. But very little production has been hedged so far for 2018. The current calendar strip means hedging is only possible for 2018 at a WTI price of around $47 - and many shale producers will actually receive less.

Has U.S. Shale Wrecked Its Own Recovery? --Operational improvements in shale and non-shale oil drilling, on top of lower expenses for oilfield services and access to pipeline capacity, have driven down the costs of producing the fossil fuel since the 2014 market crash. But the increase in output has forced barrel prices into a deeper bearish market, causing further damage to corporate bottom lines.This trend is mapped clearly in the MSCI’s World Energy Index, which measures the progress of large and medium sized companies in 23 oil-producing countries on a quarterly basis. ExxonMobil, Chevron, Total, Royal Dutch Shell, and British Petroleum are the five biggest players on the index, which includes 85 other majors. Together, they have lost $115 billion in market value since the beginning of April, Bloomberg reports, according to World Oil.  Post-crash downsizing caused over 350,000 job losses, with oilfield services (OFS) companies taking the biggest hit, according to data from Houston’s Graves and Co. published last year. Since then, major energy markets, notably Texas, have begun rehiring workers at a snail’s pace. It seems the recovery will not be anything televise-able.As the number of rigs in the Permian basin climbs, so does the demand and cost of securing essential oilfield services. Oil majors took to scrapping major projects and liquidating assets after the 2014 and 2016 price crashes to balance the books, giving the producers the upper hand in negotiating services contracts for their remaining projects. Now, OFS companies are taking their revenge, and it’s beginning to show. S&P Global Platts predicts that OFS contracts will be 20 percent more expensive by the end of the year, partly because the best drilling spots have already been taken by the 900+ rigs already online across shale country. The slowdown in production showed on Friday, when Baker Hughes reported the first decline in active U.S. rigs in 24 weeks. The difference was only a single rig, but the end of the massive streak sent a clear message: prepare for a production plateau. In short, there isn’t any leeway left in the oil price to sustain additional capacity while guaranteeing a profit and avoiding a deep dive in barrel prices. U.S. shale output can only go down from here.

More LPG To Be Railed To The Pacific Northwest And Shipped To Asia --  Plans are afoot to double and maybe triple the liquefied petroleum gas (LPG) export capacity of the Pacific Northwest — British Columbia, Washington State and Oregon — giving the region an enhanced role in what has been a booming business. Volumes being shipped to Asia out of the Ferndale marine terminal in northwestern Washington State are at near-record levels, and AltaGas and Royal Vopak are building a 40-Mb/d (and expandable) export facility in northwestern BC that is planned to come online in early 2019. Further, Pembina may be only months away from committing to the construction of a 20-Mb/d LPG marine terminal, also in BC. Today we continue our series on the expanding role of Western Canada in LPG exports with a look at plans for new propane/butane marine-dock capacity in BC. In Part 1 of this series we discussed the fact that propane and butane — the two natural gas liquids (NGL) products generally referenced as LPG — are produced by the processing of natural gas to yield mixed NGLs and the fractionation of those NGLs into purity products. Refineries also produce LPG, but it is increased production of wet natural gas (with its high volumetric content of propane, butane and other NGLs) that has really been driving the market. As we said in Come on Down to My Boat, the U.S. five years ago flipped from its long-time status as a net LPG importer to a net exporter; by 2016 net exports averaged 785 Mb/d — several times where they stood in 2012.

“Explosive methane will create two million jobs!” - The American Petroleum Institute has trotted out a commissioned study claiming an increase of two million jobs in 2040 off a base of four million (in 2015). First, these are not people working with development or distribution of natural gas. 44% are “end user” workers, that is, someone someplace who works to “… convert natural gas and its associated liquids to electricity, petrochemical and other products and the industries that manufacture, sell, install and maintain gas-fired appliances and equipment used in the residential, commercial, vehicle and industrial sectors”. (API, “Key Observations and Findings”) The implication is that if natural gas went away, so would these 44% of jobs. That is not correct. The report further defines these as The largest NAICS codes associated with the end-use segment are Chemical Manufacturing, Gas-fired Electric Power Generation, Power Boiler and Heat Exchanger Manufacturing, Household Appliance Repair and Maintenance, and Industrial Process Furnace and Oven Manufacturing. The end-use segment also includes portions of the jobs related to Industrial Equipment and Machinery Repair and Maintenance, Industrial Construction, Freight Trucks, Turbine and Turbine Generator Set Manufacturing, Iron and Steel Pipe and Tube Manufacturing, and Freight Rail. While it is not clear what “largest” means here, nevertheless there is no notion of substitution or displacement. The natural gas industry is really responsible for jobs in “Household Appliance Repair and Maintenance” and “Chemical Manufacturing”? Second, 30% of the claimed jobs are in fact directly associated with natural gas mining, production and distribution. These are fully tied to natural gas. Third, 25% of the claimed jobs consist “…of oil and gas production companies and their suppliers of goods and services…”, or, to quote their NAICS descriptions, The largest NAICS Codes primarily associated with the production segment include Support Activities for Oil and Gas Operations, Crude Petroleum and Natural Gas Extraction, Drilling Oil and Gas Wells, and Oil and Gas Field Machinery Manufacturing. Natural gas can be credited with all of these jobs?

U.S. gas market rebalances as power producers return to coal: Kemp -  (Reuters) - The U.S. natural gas market has rebalanced with higher prices steadying production while reducing demand from electricity generators and making room for increased exports.  Higher prices have averted the stock crunch many analysts feared in 2017 as a result of rising exports and the start up of a large number of new gas-fired combined cycle power plants. During the first six months of 2017, prices for next-month delivery at Henry Hub were almost $1 per million British thermal units or 46 percent higher than in the first half of 2016. Gas prices paid by electricity producers were up $1 per million British thermal units or 39 percent in the first four months of the year, according to the U.S. Energy Information Administration. But gas-fired generation was down 15 percent compared with the same period in 2016 while the volume of gas consumed fell by 14 percent ( By contrast, total electricity generation from all sources was down by less than 2 percent compared with the prior year. Coal-fired power plants were the main beneficiaries from higher gas prices, increasing their electricity generation by almost 7 percent. Coal-fired plants operated at an average of 49 percent of their maximum output between January and April compared with 44 percent in the same period in 2016. By contrast, gas-fired combined-cycle units operated at 48 percent of their maximum output, down from 53 percent in 2016. Higher gas prices seem to have arrested the slide in gas production, with output down by 4 percent compared with the previous year but showing signs of stabilising. The ramp up in oil drilling since May 2016 in response to higher oil prices has also boosted associated gas output. Stabilising gas output and reduced consumption by electricity generators has freed up gas for export while leaving inventories at comfortable levels.U.S. gas exports increased nearly 50 percent to 1,045 billion cubic feet in the first four months, while gas imports were up just 6 percent to 1,063 billion cubic feet.As a result, net imports shrank from 303 billion cubic feet in January-April 2016 to just 18 billion cubic feet in January-April 2017.Working gas stocks in underground storage stood at 2,816 billion cubic feet on June 23, which was 313 billion below 2016 but 183 billion above the five-year seasonal average.Storage injections have been broadly tracking the normal seasonal trajectory, especially once adjusted for the slightly wa rmer-than-average start to the cooling season.

US BSEE approves plan to combine Beaufort Sea leases; could renew exploration -- A federal agency has approved a plan to unitize, or combine, former Shell leases in Alaska's Beaufort Sea that are now held by a subsidiary of an Alaska Native-owned corporation, the first step toward resumed exploration in the area, officials said Monday.The area is in the US Outer Continental Shelf, about 15 to 20 miles off the northern Alaska coast. Mark Fesmire, Alaska director of the US Bureau of Safety and Environmental Enforcement, said ASRC Exploration Inc., a subsidiary of Arctic Slope Regional Corp., now has an approved unit and has also applied for a Suspension of Operations on the former Shell leases. This is an action that temporarily halts the pending expiration of the lease terms, Fesmire said. If granted, the suspension would allow ASRC Exploration to conduct exploration, and if a discovery is made, the leases are automatically extended.ASRC purchased Shell's Beaufort Sea lease holdings in late 2016 after Shell withdrew from active Arctic exploration the previous year.  “The unit approval includes 20 Outer Continental Shelf leases that will now be grouped and administered as one unit. The advantage of unitization is that it allows an operator to do work on one lease and have that count as a development action in holding the entire group," Fesmire said.

Apache exits Canada in three deals worth $713 million - Apache Corp. will exit Canada in three separate transactions worth a combined $713 million, much of which it plans to plow into the Permian Basin and other fields, the company said late Thursday.The Houston driller's deals continue the oil industry's exodus from the Canadian oil sands business, after European and U.S. rivals Royal Dutch Shell, Statoil, ConocoPhillips and Marathon Oil Corp. announced similar asset sales earlier this year.Apache has inked a deal to sell its Canadian subsidiary, which owns property in Alberta and British Columbia, to Paramount Resources for $459.5 million. That deal is expected to close next month. Calgary-based Paramount has also agreed to merge with fellow Canadian producer Trilogy Energy Corp. Last month, Apache also sold off oil assets in Alberta to an undisclosed company and, in a separate deal, sold other holdings in Saskatchewan and Alberta to Cardinal Energy in Calgary.In 2016, about 11 percent of Apache's oil and gas output came from Canada, where it had about 13 percent of its proved reserves, according to regulatory filings.Apache said it would redirect a portion of the proceeds to its drilling programs in the Permian Basin and other areas in the United States, the U.K. North Sea and Egypt.  The rest of the funds will go toward paying down debt and other uses. The company had previously set aside $125 million to develop its assets in Canada, but now it plans to spend that capital elsewhere.

After $3 billion spent, Keystone XL can’t get oil companies to sign on --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, say people familiar with the matter.TransCanada Chief Executive Russ Girling remains committed to completing Keystone XL and believes it will prove profitable in the long term, say two people familiar with his thinking. But it may be years before the company recoups its investment in the pipeline, these people say.TransCanada has spent $3 billion to date on Keystone XL, much of it on steel pipe, land rights and lobbying. Completed, the pipeline would travel 1,700 miles from Alberta to Steele City, Neb., where it would link up with existing pipelines that run to the Gulf Coast.The lack of interest has put the pipeline's fate in jeopardy. The company, based in Calgary, Alberta, has said it wants enough customers to fill 90% of Keystone's capacity before it proceeds. It started to aggressively court potential customers earlier this year as it seeks to meet that target, according to people familiar with the situation. TransCanada expects the pipeline, which would carry up to 830,000 barrels of oil a day, to cost $8 billion, compared with its initial estimate of $7 billion. The company took a $2 billion write-down related to the pipeline last year. The uncertain outlook for Keystone XL stands in contrast to Mr. Trump's upbeat rhetoric in March. The president invited Mr. Girling to the Oval Office and announced he was reversing an Obama administration move to block construction, declaring, "It's going to be an incredible pipeline, greatest technology known to man."

Has Keystone XL Become Obsolete? -- Keystone XL may have become obsolete before it was even built, at least according to some sources close to TransCanada, which has gone on a hunt for clients. A Wall Street Journal analysis quotes these sources as saying Canadian producers and U.S. refiners are just not interested in the pipeline that is supposed to carry 830,000 barrels daily of Alberta heavy crude to Gulf Coast and Midwest refineries. This lack of interest seems to be driven by TransCanada’s quest for long-term commitments, with producers and refiners seemingly unwilling to make such commitments in the current price environment. Also, according to the WSJ, Canadian crude comes at a higher cost than alternative heavy crude blends, which is contributing to the lack of enthusiasm for long-term commitments. That is likely to change over the long term, however, when declining imports from Mexico and Venezuela will benefit Canadian crude. The company behind the project itself seems upbeat. Already having spent US$3 billion on the project and planning to spend another US$5 billion before it is completed, TransCanada remains confident that it will find enough customers to fill Keystone XL at 90 percent of capacity over the next few months. For the time being, producers and refiners are moving the oil by rail – a much more expensive and riskier option than pipelines. Oilprice wrote last month about a looming pipeline capacity crisis in North America, which is likely to result in an increase in railway oil shipments. If Goldman Sachs is any indicator, railways have a bright future as an alternative to pipelines, although its long-term sustainability at current oil prices is questionable. What is unlikely to change, though, is U.S. Gulf Coast refineries’ need for a combination of light and heavy crudes to operate. Canadian crude may not be their only choice, but as producers north of the border focus on bringing down production costs just as much as their peers south of the border, it may become more competitive. Keystone XL still needs the green light from Nebraska before construction begins. The state’s Public Service Commission held a public hearing on the project last month, saying it would make its final decision by November 23 at the latest.

Canada Undermines Targets for Protecting Oceans by Increasing Oil Exploration -- naked capitalism -  Jerri-lynn Scofield - This Real News Network interview with Sabine Jessen, National Director of the Oceans Program for the Canadian Parks and Wilderness Society, discusses the Trudeau government’s plans to increase offshore oil exploration even though such a policy will undermine protection targets included in international agreements Canada has signed.

Fracking site entrance blocked in protest against drilling process - Protesters have blockaded the entrance to a fracking site as part of a month of action to resist the controversial drilling process. The group of 13 protesters, including three local councillors, arrived at the site on Preston New Road in Fylde, Lancashire, in the early hours of Monday morning and locked themselves to objects in an attempt to prevent vehicles entering the site. Lancashire county councillor Gina Dowding said: "It's abundantly clear that when it comes to fracking, local councils have been rendered weak and helpless. I feel I need to be here with the community to say that we won't roll over and accept this. "We are putting our bodies on the line because our voices haven't been heard." Kirkham town councillor Miranda Cox said: "When your community and family is threatened, you are often left with little choice but to take direct action. "As a councillor and member of this community, I have been left with no more alternatives. "I feel our way of life locally is under attack by an industry that, backed by a distant central government, is seeking to turn Fylde and Lancashire into the largest gas field in Europe. I cannot stand by and allow this mass industrialisation to happen." 

Fracking Companies Hoped They'd Get Away With It -- When Cuadrilla, Ineos and other fracking companies set their sights on turning the English countryside into major gas fields a few years ago, they were relying on the fact that this would stay mostly below the radar, and they could simply get on with getting the drills in and raking in profits. Several years on, this couldn't be further from the truth, as an unprecedented month-long Rolling Resistance kicks off in Lancashire this July. Organised by Reclaim the Power, hundreds of people from all across the country are making their way to a camp set up near Preston New Road. They are joining and amplifying the efforts of an incredibly strong and battle-hardy community which has dug in their heels in ever since the threat first appeared in Lancs. Rapidly formed groups like Frack Free Lancs and Preston New Road Action Group continue to cause fracking giant Cuadrilla costly delays and clear frustration. The resistance to fracking here doesn't just centre on the fact that fracking is a dirty, polluting and dangerous industry which threatens communities, our climate and health. On top of the environmental issues, the profound insult to democracy is that the people of Lancs already said no to fracking. In 2015, residents followed proper procedure to convince Lancashire county council to reject fracking. But then a year later, as local councillor Miranda Cox notes, the "ironically named Communities Secretary Sajid Javid" overruled this decision in Westminster, and decided to force fracking on a local area that is firmly opposed.

Ireland becomes third European country to ban onshore fracking - The Republic of Ireland has become the third EU member state to ban onshore fracking, after President Michael D. Higgins signed the bill into law yesterday. The Petroleum and Other Minerals Development (Prohibition of Onshore Hydraulic Fracturing) Bill 2016 was first introduced as a private members bill by Fine Gael party TD backbencher Tony McLoughlin last year, and received widespread support from across the political spectrum. The Taoiseach - Ireland's parliament - passed the bill in May before it was finally signed into law by the President yesterday in a historic move that has been praised by green campaigners and described by McLoughlin as "one of the proudest moments in my political career".Its done! Weve made history & become the 3rd state in the EU to ban #Fracking. One of proudest moments in my political career. Thanks to all — Tony McLoughlin TD (@TonyMcLTD) June 28, 2017McLoughlin added in a statement that if fracking had been allowed in Ireland it would "pose significant threats to the air, water and health and safety of individuals and communities here"."This law will mean communities in the West and North West of Ireland will be safeguarded from the negative effects of hydraulic fracking," he said. "Fracking must be seen as a serious public health and environmental concern for Ireland."Friends of the Earth Ireland also welcomed the news yesterday as "a day to celebrate".

Fracking in Colombia: What the frack? - The Bogotá Post - Hydraulic fracturing – or simply ‘fracking’ – is a method of extracting oil and gas which has made its way from the US across most of South America and fracking in Colombia is in its exploratory stages. Much lauded as the second most biodiverse country in the world, Colombia faces difficult questions as the government tries to balance both economic and environmental needs. The anti-fracking group, Alianza Colombia Libre de Fracking – an umbrella organisation of regional campaign groups – is demanding a complete ban on fracking in Colombia for a host of reasons, especially the environmental dangers that it poses to the country’s water sources. However, exploratory drilling is already taking place in 43 zones and the group fears these will pave the way for full fracking licences, which up until now have not been issued. The Alianza used International Water Day on March 22 to publish an open letter to President Santos outlining their concerns. Their spokesperson, Carlos Andrés Santiago, explained to us: “The US Environmental Protection Agency have rigorously documented the negative effects of fracking on drinking water sources.” Fracking is an ‘unconventional’ drilling method capable of extracting resources that ‘conventional’ or ‘traditional’ methods can’t. Much of the world’s oil and gas resources are trapped in reservoirs beneath the Earth’s surface, making it possible to simply drill down and tap them. ‘Unconventional’ resources are those which are not trapped in large pockets, but rather are found in millions of small ‘pores’ in the ground, requiring more complex extraction techniques. Fracking involves releasing these oil and gas deposits by forcing a mixture of sand, water and chemicals at high pressure into the deep rock where they are found. To fully understand the scope of the environmental dangers of fracking, we must look at the entire process, from transportation to extraction and waste disposal.

Brazil plans to test unconventional oil, natural gas production in 2018 - Brazil's government wants to start up a pilot project tapping unconventional oil and natural gas reservoirs next year, likely in the state of Bahia, as part of broader efforts to expand onshore output, a Mines and Energy Ministry official said. Latin America's biggest country is well behind the curve in development of unconventional resources such as shale and tight oil and gas formations when compared with the US and neighboring Argentina. But much of the damage has been self-inflicted, with the government and regulators slow to respond to criticisms and lawsuits against current development policies. "The idea is to bring everybody to the table to gain a broader understanding about the benefits and risks of non-conventionals," Joao Vicente de Carvalho Vieira, the ministry's director of oil and gas exploration, said on the sidelines of an industry event in Rio de Janeiro late Friday. "There are a lot of negative reactions to the technique of hydraulic fracturing, but nobody knows the potential of these resources." Brazil could hold as much as 250 Tcf of gas and 5.4 billion barrels of oil in unconventional deposits, according to a study by the Energy Economics Institute at the Federal University of Rio de Janeiro. Public resistance against unconventional exploration is strong in Brazil, despite the country's history of onshore and offshore oil production. Exploration of Brazil's onshore unconventional resources has been blocked by a series of lawsuits, including concessions granted during the country's 11th and 12th bid rounds. The government will host a workshop with ministries, federal and state government agencies, regulators, and officials from the National Petroleum Agency, or ANP, in August, Vieira said.

Unique coral reef at risk as oil companies plan to drill near Amazon river -- Oil companies planning to drill near a vast coral reef at the mouth of the Amazon river have calculated that the unique ecosystem has a 30% chance of being affected in the event of an oil spill. The unique reef system astonished marine biologists when its existence was widely revealed last year, and is believed it could be the home for dozens of previously unknown species. But activists warn that an oil spill could irreparably damage the 1,000 kilometre-long ecosystem before scientists have even had a chance to study it.“It’s unlike any other reef that we know about,” said Sara Ayech, an oil campaigner at the London offices of Greenpeace. “If the companies drill there’s a risk of an oil spill and if an oil spill hits the reef, then we could see parts of it destroyed before we even document them.”The Brazilian government has estimated that the Foz de Amazonas, or Amazon Mouth area, could hold 15.6bn barrels of oil. A consortium of oil companies led by French giant Total, and including BP and Brazil’s state-run oil company Petrobras, snapped up five exploration blocks in the area when they were auctioned off in 2013.   In January, Total said it had begun moving equipment to the Amazon area and planned to start drilling this year. The oil reservoirs it hopes to reach are situated in 1,900 metres of water, nearly 200 kilometres from the coast.Scientists from Greenpeace examined the publicly-available Environmental Impact Study Total submitted to the Brazilian authorities and found references to the possibility of an oil spill reaching the reef.  Reef structures in the area to be drilled “present possibilities of being impacted by oil”, the study said. In winter that possibility could be as high as 30.33%, while in summer, 20.93%, the study produced for Total by companies Proceano and AECOM said. In February BP told the Guardian it planned to start drilling a block it controls by August 2018. Brazilian company Queiroz Galvão also has a block it expects to start drilling from next year.

China may finance Russia’s natural gas pipeline to Europe - Gazprom’s Nord Stream 2 pipeline may get Chinese financing if European companies are forced out of the project by the latest round of US sanctions, business daily Vedomosti reports. Russian officials have already contacted Chinese banks, sources have told the media. “Nord Stream 2 has a good rate of return and low risks for creditors. Chinese banks may be interested,” explains Aleksey Grivach, deputy CEO at Russia's National Energy Security Fund.The extension will double the existing pipeline which delivers natural gas to Germany under the Baltic Sea and is estimated to cost €9.5 billion.  Initially, Engie, OMV, Royal Dutch Shell, Uniper, and Wintershall were to get a 50 percent stake minus one share in Nord Stream 2. However, red tape at the European Commission made Gazprom and its partners come up with another financing option. Under this plan, European companies will each provide an equal long-term loan to Gazprom, which will fully own the pipeline.  Financing of Nord Stream 2 may be affected by new US sanctions which target firms investing in Russian gas and oil projects. According to the new bill passed by the US Senate, and currently, before the House of Representatives, companies will be forbidden from making investments of over $1 million in the Russian energy sector.

Trump to promote U.S. natgas exports in Russia's backyard - President Donald Trump will use fast-growing supplies of U.S. natural gas as a political tool when he meets in Warsaw on Thursday with leaders of a dozen countries that are captive to Russia for their energy needs. In recent years, Moscow has cut off gas shipments during pricing disputes with neighboring countries in winter months. Exports from the United States would help reduce their dependence on Russia. Trump will tell the group that Washington wants to help allies by making it as easy as possible for U.S. companies to ship more liquefied natural gas (LNG) to central and eastern Europe, the White House said. Trump will attend the "Three Seas" summit - so named because several of its members surround the Adriatic, Baltic and Black Seas - before the Group of 20 leading economies meet in Germany, where he is slated to meet Russian President Vladimir Putin for the first time. Among the aims of the Three Seas project is to expand regional energy infrastructure, including LNG import terminals and gas pipelines. Members of the initiative include Poland, Austria, Hungary and Russia's neighbors Latvia and Estonia. Trump's presence will give the project a lift, said James Jones, a former NATO Supreme Allied Commander. Increased U.S. gas exports to the region would help weaken the impact of Russia using energy as a weapon or bargaining chip, said Jones. "I think the United States can show itself as a benevolent country by exporting energy and by helping countries that don’t have adequate supplies become more self-sufficient and less dependent and less threatened," he said. 

Trump Hopes To Quietly Steal Russia's Natgas Dominance Over Europe --One month ago, after the shocking collapse of the Gulf nation status quo with the announcement of the diplomatic, naval and financial blockade of Qatar by the Saudi alliance, we said that while it is unclear how this latest political fiasco plays out, one thing was certain: with Saudi Arabia and Qatar suddenly adversaries, any likelihood of a Qatari natural gas pipeline crossing Syria - the fundamental cause behind the Qatar proxy war in the first place - was gone.But one key question remained: why would Europe vacate all hopes of an alternative provider of cheap, copious LNG and concede the role of quasi-monopolist supplier of this critical for Europe resource to Gazprom, and thus Russia whose leverage over the continent would only grow as a result. We now have the answer: none other than Donald Trump has been hoping to "steal" Russia's European natgas relationships and clients, in hopes of making the US become the dominant supplier of LNG to Europe. According to Reuters, Trump "will use fast-growing supplies of U.S. natural gas as a political tool when he meets in Warsaw on Thursday with leaders of a dozen countries that are captive to Russia for their energy needs."

Trump Takes Advantage of Europe's Fossil Fuel Dependence  - After President Trump's speech last week promoting a dark and dystopian vision—U.S. fossil " energy dominance "— it is no surprise that his visit to Poland centers on promoting U.S. exports of fracked gas. Beyond such bluster, reality tells a different story. U.S. exports of liquefied natural gas (LNG) are expensive . For the economics to work, U.S. production costs have to be low while prices in importing countries stay high. In India, a major importer of U.S. LNG is now finding itself at the mercy of contracts that locked in high prices for U.S. LNG, relative to other sources of gas. This is how energy dominance will play out for those at the receiving end. Consumers in LNG exporting countries are also getting pinched. In Australia, for example, " extreme " levels of LNG exports have caused economic disruptions. While the Industrial Energy Consumers of America's call for a moratorium on LNG exports is prudent, Trump is not known for his prudence. The fracking industry dominates the Trump administration , and it wants more pipelines to support more exports. The U.S. government is allowing pipeline companies to forcibly take land away from property owners through eminent domain—not to benefit the general public, but to increase the amounts of U.S. oil and gas brought to the surface and burned, and increase industry profits. In short, we are witnessing the transformation of the U.S. into a petrostate. Former ExxonMobil CEO Rex Tillerson is running the State Department, and oil and gas cheerleaders Rick Perry and Scott Pruitt are at the Department of Energy and the U.S. Environmental Protection Agency.

Australia's east coast LNG exports second highest on record in June -- Australia's east coast LNG export hub Gladstone, shipped its second largest monthly volume in June, while China took the most it ever has from the port in a single month, data from Gladstone Ports Corporation showed Thursday.Total exports crept 1% higher month on month to 1.71 million mt in June, from 1.68 million mt in May, which made it the port's second biggest month for LNG exports, beaten only by the all-time record of 1.75 million mt set in December, the data showed.  Exports from six LNG trains are shipped out from Gladstone port. They are: the 9 million mt/year Australia Pacific LNG, the Santos-led 7.8 million mt/year Gladstone LNG, and the 8.5 million mt/year Queensland Curtis LNG, each with two trains. All six trains have been up and running since APLNG brought its second train online last October. And the June export figure is 14% stronger than June last year when 1.49 million mt of LNG was shipped.

Indian refiners tap spot crude market to feed increased capacity | Reuters: Indian companies have stepped up purchases of high-sulphur crude oil from the Middle East and Russia in the spot market to feed demand from expanded refining capacity, trade sources said. Four refiners in the world's third largest crude importer bought 9 million barrels of Middle East and Russian crude loading in July-August via spot tenders last month, drawing down excess supplies in the market after China's demand slowed. Refiners such as Indian Oil Corp (IOC) and Bharat Petroleum Corp Ltd (BPCL) have opted to buy more spot crude as they gradually ramp up output, rather than increase long-term crude supplies, the sources said. IOC expects to run its new 300,000-bpd Paradip refinery at full capacity this year, while BPCL plans to ramp up output at its Kochi refinery to 310,000 bpd by September after an expansion, they said. "Refiners are buying heavier grades to increase middle distillate and fuel oil yields," Ehsan Ul Haq, director at London-based consultancy Resource Economics said, as refining profits for these products have strengthened. Indian refiners have also increased room for spot purchases during a period of abundant supplies, allowing them to react quickly to market changes and pick up cargoes when prices are competitive. IOC said in May it plans to buy 68 percent of its oil needs from term suppliers, down from 80 percent earlier.

Pakistan Fines Shell $2.6 Million For Oil Tanker Explosion That Killed 218 --Pakistan has ordered Shell Pakistan to pay at least $2.6 million in compensation after more than 200 people were killed when one of its tankers overturned and exploded in a devastating inferno last month.The tanker contracted by Royal Dutch Shell's local subsidiary crashed on a main highway in central Punjab Province while carrying some 50,000 liters of fuel from Karachi to Lahore on June 25. It exploded minutes later, sending a fireball through crowds from a nearby village who had gathered to scavenge the spilled fuel, despite warnings by the driver and police to stay away.The death toll from the debacle has risen steadily as dozens of people taken to hospitals with severe burns after the accident later died. It stood at 218 people on July 7, with 38 victims still in the hospital, some in critical condition.The fines ordered by Pakistan's oil and gas regulator include a 10 million-rupee ($95,000) penalty on Shell Pakistan, 1 million-rupee ($9,400) compensation for the families of each deceased, and 500,000 ($4,700) rupees for each person injured. That puts the total of fines at $2.48 million for the families of the dead so far. It was not immediately clear how many wounded would receive compensation.

Japan to raise crude storage capacity for Saudi Aramco -- Japan said on Friday that it was preparing to raise the crude oil storage capacity that it lends for free to Saudi Aramco by 30 percent from this summer. The extra storage will help Saudi Arabia, the world's biggest oil exporter, as it battles to keep customers in northern Asia amid a global glut and relatively low prices. In return for providing free storage, Japan gets a priority claim on the stockpiles in case of emergency. Japan is Saudi Arabia's biggest market for crude, but oil stored at the site on the southern islands of Okinawa has also been supplied to South Korea and China. Storage available to Saudi Arabia will be increased by 1.9 million barrels to 8.2 million barrels (1.3 million kl) as part of an agreement last October to extend the storage to 2019, a Japanese trade ministry official said. Work is underway to have additional tanks ready this summer at a storage facility in Uruma City in Okinawa, the official added. State-owned Saudi Aramco has stored crude in Okinawa since February 2011 at no cost. Japan has a similar deal with Abu Dhabi National Oil Co (ADNOC), under which ADNOC can store up to 6.29 million barrels (1 million kilolitres) at Kiire oil terminal in southern Japan's Kagoshima. As Japan gas a priority claim on the stockpiles, it treats the crude oil stored by Aramco and ADNOC as quasi-government oil reserves, counting half of the barrels as national crude reserves. Aramco and ADNOC need to fill at least half of the storage space at all times. Japan has extended the storage deals with Aramco and ADNOC to the end of December 2019.

Iran to sign new IPC gas deal with Total for South Pars on Monday - Iran plans to sign a new contract to develop its giant South Pars gas field with France's Total and China's CNPC on Monday, the first major Western energy investment since sanctions against Tehran were lifted, an Iranian oil ministry official told Reuters on Sunday. A spokesman for Total confirmed the company will sign the contract to produce gas for the Iranian market from 2021, adding that the 20-year deal with will be the first Iranian Petroleum Contract (IPC) signed in Iran. Total holds a 50.1 interest in the South Pars project with state-owned China National Petroleum Corporation owning 30 percent and Iran's Petropars 19.9 percent. The offshore field was first developed in the 1990s and Total was one of the biggest investors in Iran until the international sanctions were imposed in 2006 over suspicions that Tehran was trying to develop nuclear arms. Total has decided to return and develop Phase 11 of the South Pars project, which will cost up to $5 billion. "The international contract for development of Phase 11 of South Pars in the framework of IPC (Iranian Petroleum Contract) will be signed on Monday, July 3, at 14:30, at a ceremony in Tehran attended by Iranian oil minister Zanganeh and senior officials from France’s Total, China’s CNPCI and Iran's Petropars," the Iranian oil ministry official said. Total's Chief Executive Patrick Pouyanne told Reuters last month that the group would make an initial $1 billion investment after the United States extended sanctions relief under the 2015 agreement.

Qatari LNG development to extend LNG surplus into mid-2020s - The Barrel Blog - Qatar’s announcement Tuesday that it will double the size of its proposed new development on the giant North Field to 4 Bcf/d and use the gas for LNG exports will throw off course multiple new LNG projects elsewhere in the world. According to the International Gas Union, there were 879 million mt/year of proposed LNG projects waiting in the wings at the start of 2017. Qatar has said that the new project will raise its LNG capacity from 77 million mt/year to 100 million mt/year, an addition of 23 million mt/year, and that the project will take five to seven years to complete. 4 Bcf/d gas is the equivalent of 30 million mt/year of LNG, suggesting that some of the gas will be used either for domestic consumption or to support existing LNG capacity. However, the LNG market already expects a glut of new supply and is uncertain how it will be absorbed. Over the course of 2017, 42.45 million mt/year of new liquefaction capacity is expected to come on-stream, primarily in Australia and the US, but this year also witnesses the start-up of the first train at Yamal LNG in Russia, which will be Russia’s second LNG plant. The additions in 2017 come on top of 42.2 million mt/year in 2015 and 2016 combined and a further 32.6 million mt/year and 34.2 million mt/year respectively in 2018 and 2019. The project pipeline then starts to run dry, with 6.8 million mt/year added in 2020 and none in 2021. Overall global LNG capacity will have expanded from 304.4 million mt/year in 2015 to 459.15 million mt/year in 2020; a 50% increase in five years. This supply wave is expected to depress spot LNG prices. In turn, in markets which have both LNG and pipeline import options, cheap LNG is expected to create a ceiling price, depending on the level of infrastructural and contractual flexibility within markets to arbitrage between LNG and pipeline supplies.

OPEC's rising oil exports put output cuts to the sword -- OPEC's attempt to bolster crude oil prices by cutting output are now largely an exercise in self-deception, with recent production and export numbers laying bare the group's shortcomings. While the Organization of the Petroleum Exporting Countries may be able to claim relatively high compliance with its plan to lower output by 1.2 million barrels per day (bpd), this is ultimately just a smokescreen. Of far more importance is evidence that the group actually exported more crude in the first six months of this year than it did in the first half of 2016. OPEC exports jumped to 25.92 million bpd in June this year, up 450,000 bpd from May's 25.47 million bpd, according to vessel-tracking and port data compiled by Thomson Reuters Oil Research. Over the first six months of this year OPEC exports averaged 25.02 million bpd, up 290,000 bpd from the same period in 2016, according to the data. OPEC may be able to claim a small win insofar as the group's exports have dropped from the second half of 2016, when they averaged 25.14 million bpd. But this is a tiny reduction from what was a period of near record output for the group, and in some ways actually only underscores the lack of success OPEC has had so far this year in restricting exports. The rise in OPEC exports in the first half does look at odds with the cuts the group has made to production, with the 11 members that committed to lowering output achieving 92 percent compliance with their targets in June, according to a Reuters survey. But the vessel-tracking data show the crude market is getting as much oil from OPEC as it had been prior to the November deal.

OPEC: Deeper crude oil output cuts? - The Barrel Blog - 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. 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 Looks Totally Bewildered by the Oil Market - It may be too soon to write OPEC’s obituary, but the oil producer club appears in urgent need of late-life care. It shows little understanding of where it is, how it got there or where it’s going. While it still manages to collect new members here and there, its core group looks more fragile than at any point in nearly 30 years.  The historic output agreements, put together so painstakingly last year, are failing. Nearly 12 months of shuttle diplomacy culminated in two deals that would see 22 countries cut production by nearly 1.8 million barrels a day. Implementation has been better than for any previous output cut, with compliance put at 106 percent in May. A resounding success? Hardly. We're now in the final month of those deals and oil prices are lower than when they were agreed. Not only have producers sacrificed volume, but they earn less for each barrel they do produce. Having failed to use the good times to invest for a future of low oil prices, OPEC is facing a crisis of old age. It is falling apart internally, confounded by the world and increasingly irrelevant.The recent extension of the deals just leaves output restraint in place for another nine months, the best response OPEC could muster. Deeper cuts were barely mentioned. Assertions to do "whatever it takes" ring hollow. Indeed, there's no appetite for the big cuts that would demand real sacrifices in countries such as Russia, where normal seasonal factors helped it lower production in the first half of the year. Just sticking to current output levels could be difficult for the rest of 2017: early maintenance work has helped several OPEC members meet their targets but that can't continue. Then there's the problem of recovering output from Libya and Nigeria, both exempt from the cuts.

Two things are getting in the way of OPEC's scheme to boost oil prices: OPEC wants higher oil prices. But the same things keep getting in the way. Ever cheaper U.S. shale oil production and growing crude supplies are foiling the plans of the Organization of the Petroleum Exporting Countries to support prices with an export cut designed to remove 1.8 million barrels a day from the market through March 2018. U.S. shale producers keep making their costs cheaper while Nigeria and Libya — two OPEC countries exempted from the cuts — keep producing more, said Dan Yergin, vice chairman of market research firm IHS Markit. "It looked like the world was making progress toward rebalancing, but (these) two things have really pushed out rebalancing," added Yergin to CNBC's Squawk Box. Small, independent producers can churn out shale for $40 — or less — a barrel, he added."We are seeing that people can operate in the $45 range when people thought it was going to be in the $50s, because people keep figuring out how to push down the cost," said Yergin. This is as producers learn how to be more efficient in the growing industry. Data analytics and automation also help, he added. "Forget that world of $100 — that was not the new normal; that was an aberration," Yergin said of prices before 2014, when oil prices crashed. Although they have recovered from their lowest below $30 a barrel last year, prices are still below $50 barrel on Thursday. Oil futures were slightly higher on Thursday in Asia, with U.S. crude moving around $45.40 per barrel while European Brent was around $48 per barrel. 

Oil Production Vital Statistics June 2017 -- In June, the oil price succumbed to gravity and fell to $45 / bbl (Brent) but has since recovered to $50. OPEC 10 (excluding Libya, Nigeria and Gabon) produced 29.64 Mbpd in May, down 1.34 Mbpd on October 2016 and remains compliant with the agreed cuts. But adding in Nigeria and Libya, where production is rising, the cut is reduced to 1.04 Mbpd. Russia has cut 280,000 bpd and is largely compliant, but this merely undoes a sharp production ramp leading into the Ocober datum month. The real damage to the oil price comes from the USA where production is rising once again. Production in the USA is up 670,000 bpd on October 2016, undoing much of the OPEC constraint.OPEC have agreed to extend their cuts until March 2018. I have said all along that the magnitude of the cut is insufficient to support price when confronted with large over-supply and large inventories in storage. Large OECD projects continue to mature and come on line, for example the Kraken Field in the UK North Sea has just come on and will produce 50,000 bpd. The oil price will only begin to make a genuine and sustained recovery when non-OPEC supply begins to fall in response to low price. And that may not happen until late 2019.OPEC drilling remains close to a cyclical high (Figure 9) while US drilling continues to recover. Total US rigs stood at 940 on 30th June, up 32 for the month, though there are signs the rig count growth is slowing. Drilling remains stuck on a cyclical low everywhere else. Canadian production traditionally hits a seasonl low in June and this year is no exception with production down 700,000 bpd since February. Recovery from this seasonal low will will produce further head winds for the oil price for the remainder of this year. The following totals compare May 2016 with May 2017:

  • World Total Liquids 95.34/96.69 +1,350,000 bpd
  • OPEC 12: 31.82/31.88 +60,000 bpd
  • Russia + FSU 13.95/14.31 +60,000 bpd
  • Europe OECD  3.41/3.48 +70,000 bpd
  • Asia 7.50/7.41 -90,000
  • North America 18.60/19.62 +1,020,000 bpd

With global total liquids production up 1.35 Mbpd on a year ago despite OPEC+Russia cuts, it is little surprise that the oil price is significantly depressed. One reason for the large YOY increase was the Fort McMurray wild fire last year that shut down a large part of Canadian oil sands production. The following totals compare October 2016 with March 2017 and monitor compliance with the OPEC + others’ production cuts.

  • OPEC 10: 30.98/29.64 – 1,340,000 bpd
  • Russia + FSU 14.51/14.31/ -200,000 bpd
  • Oman 1.02/0.98 -40,000 bpd
  • Total -1.58 Mbpd – compliance has slipped a little

Hedge funds walk into bear trap in oil: Kemp (Reuters) - Hedge fund managers had amassed a record number of short positions in petroleum futures and options by the start of last week, which primed the oil market for a sharp short-covering rally at the end of the month.Hedge funds and other money managers held short positions in the five major contracts on crude, gasoline and heating oil amounting to 510 million barrels on June 27, according to regulatory and exchange data.Fund managers have added 200 million barrels of extra short positions since the end of May and 377 million barrels since crude prices peaked in the middle of February ( funds were even more pessimistic than in January 2016, with more short positions than when oil prices were touching their cyclical lows below $30 per barrel.Overall, fund managers were running net short positions of 20 million barrels in gasoline and 32 million barrels in heating oil on June 27 ( and still had a net long position of 357 million barrels in crude but it had been cut from 589 million barrels on May 30 and a record 951 million barrels on Feb. 21 ( doubts about the effectiveness of OPEC’s production cuts, coupled with increases in crude output from Libya, Nigeria, Canada and the United States have prompted a wave of short-selling.And concerns about the health of gasoline demand and high level inventories in the United States have added to the bearishness within the hedge fund community.Fund managers have ramped up short positions in NYMEX WTI by 86 million barrels over the last four weeks, in the most aggressive short-selling cycle since the start of 2015 ( the sheer number of short sales left the market looking imbalanced and vulnerable to a short-covering rally (“Hedge funds hold near-record short positions in petroleum”, Reuters, June 27). Crude prices have now risen for seven consecutive trading sessions as the pace of short sales slows and some hedge fund managers have been emboldened to start adding long positions in anticipation of a rally. Fund managers are likely to have closed out at least some of their short positions as prices have risen consistently over the last week.

US crude posts best winning streak since 2012 -  Oil prices rose for an eighth day on Monday, marking its longest stretch of daily gains in more than five years after data pointed to moderating U.S. output. U.S. West Texas Intermediate (WTI) crude futures ended Monday's session $1.03, or 2.2 percent, higher, at $47.07 per barrel. That marked a four-week closing high, adding to last week's 7 percent gain. Brent crude futures climbed 92 cents, or 1.9 percent, to $49.69 per barrel by 2:35 p.m. ET (1835 GMT), after jumping 5.2 percent last week, its first weekly gain in six weeks. Brent traded at its highest intraday level in more than three weeks on Monday. Crude posted its longest unbroken stretch of gains since February 2012."Its all about market sentiment," said Commerzbank senior oil analyst Carsten Fritsch. He cited a 100,000 barrel per day drop in U.S. production due to tropical storms and maintenance, as well as a decline in U.S. rig count. "These... (temporary) factors outweigh the sharp increase in OPEC oil production in June... and the continued increase in Libyan and Nigerian output at least at the moment," he said. Speculators in Brent crude futures and options raised their bets against a sustained price rise to the highest level on record in the latest week. Drilling activity for new oil production in the United States fell for the first time since January, dropping by two rigs, while U.S. government data showed crude output fell in April for the first time this year. 

Oil prices fall on U.S. holiday after eight days of gains - Oil prices fell on Tuesday, halting a run of eight straight days of gains on signs that a persistent rise in U.S. crude production is running out of steam. Brent crude futures fell by 22 cents to $49.46 per barrel by 0927 GMT.U.S. West Texas Intermediate (WTI) crude futures were trading down 20 cents at $46.87 a barrel. The falls came after both benchmarks recovered around 12 percent from their recent lows on June 21. Many traders closed positions ahead of the U.S. Independence Day holiday on July 4, while Brent also faced technical resistance as it approached $50 per barrel, traders said.Despite this, the market's outlook has shifted somewhat.Late May and most of June were overwhelmingly bearish as U.S. output rose and doubts grew over the ability of the Organization of the Petroleum Exporting Countries (OPEC) to hold back enough production to tighten the market.But sentiment began to shift toward the end of June, when U.S. data showed a dip in American oil output and a slight fall in drilling for new production."The fact that prices have not come under any noticeable pressure of late points to a shift in sentiment," Commerzbank said on Tuesday. "This may be related to the fact that most of the 'shaky hands' have withdrawn from the market by now," the bank added.'

Markets Overcome The Crash: Oil Rally Continues -Oil prices continued to rally, retracing a good chunk of the losses made over the past month. Brent is flirting with $50 oil while WTI has moved above $45. The gains have largely been attributed to a spate of short-covering, but the gains have damped down some of the panic that the market suffered from two weeks ago. . Even as oil entered bear market territory only recently, a growing number of analysts see the selloff as going too far. Now some argue that there is a better chance of more price gains than there is in another downturn. The logic is the same as it was earlier this year: despite short-term volatility, the market is still heading towards balance, even if that is occurring at a painfully slow pace. “We thought this market was actually a bit oversold. We think the fundamentals are better than where the price was earlier,” Helima Croft, global head of commodity strategy at RBC Capital Markets, told CNBC. Other analysts agree. "Given that all these bearish headlines have been priced into the market, if you're going to have any sort of risk of a large outside move, I think it would be to the upside at this point," Stephen Schork, editor of The Schork Report, said to CNBC.. The rig count fell for the first time since January. Oil rigs were down by 2 for the week ending on June 23, and while it is only one week’s worth of data, the decline raises the prospect of the U.S. shale boom running out of steam as oil prices dropped into the low-$40s.

Crude Tumbles After Russia Opposes Deeper Production Cuts -  Crude oil fell sharply, ending the longest winning streak this year, as Russia was said to oppose any proposal to deepen OPEC-led production cuts. Futures dropped 4.1 percent in New York, the most in four weeks, after eight straight sessions of gains. Russia doesn’t want to change the current deal because any further supply curbs would send the wrong message to the market, according to government officials. The U.S. dollar strengthened, reducing the appeal of commodities denominated in the currency.Russia "pretty much threw cold water" on rumors of additional cuts,  The Bloomberg Intelligence index of independent exploration and production companies fell as much as 4.6 percent. Baker Hughes plunged as much as 37 percent on its first day of trading as a unit of General Electric Co.While crude prices surged last week, futures are down 16 percent for the year amid concerns that rising global supply will offset the output cuts from the Organization of Petroleum Exporting Countries and its partners. Libya and Nigeria, which are exempt from the agreement, accounted for half of the group’s production boost last month, according to data compiled by Bloomberg.  West Texas Intermediate for August delivery settled $1.94 lower at $45.13 a barrel on the New York Mercantile Exchange. Tuesday’s transactions will be booked Wednesday for settlement purposes because of the U.S. Independence Day holiday. Prices gained almost 11 percent in the eight days through Monday. Brent for September settlement closed at $47.79 a barrel on the London-based ICE Futures Europe exchange, down $1.82. The contract fell 0.1 percent to $49.61 on Tuesday, the first decline in nine sessions.

Oil brings 8-session rally to a screeching halt with biggest drop in a month - Oil prices suffer their largest drop in a month on Wednesday, snapping their longest run of gains since 2010 after news that Russia ruled out any proposals to deepen the global production cuts and reports of higher monthly exports from OPEC. August West Texas Intermediate oil lost $1.94, or 4.1%, to settle at $45.13 a barrel on the New York Mercantile Exchange, posting its first loss in nine sessions. That was the largest dollar and percentage loss since June 7. The contract only traded electronically and didn’t settle on Tuesday due to the Independence Day holiday in the U.S.  On Monday, WTI ended higher for an eighth straight trading day, scoring its longest streak of wins since January 2010, when the market rose for 10 straight sessions, according to data from WSJ Market Data Group. Over the period, it gained just over $4.50 a barrel, or roughly close to 11%. September Brent slumped $1.82, or 3.7%, to $47.79 a barrel Wednesday on ICE Futures Europe. Futures prices had traded in tight ranges earlier in Wednesday’s session, but were sent sharply lower after Bloomberg reported that Russia opposes any further restrictions on oil supply other than the ones already agreed. The Organization of the Petroleum Exporting Countries and a group of non-cartel members—including Russia—in May extended a deal to cut production into the first quarter of 2018. “Following a strong rally in just eight days, the market is taking stock with news apart from those stemming from the U.S. having been mostly price-negative during the past week,” That news includes “rising OPEC production due to Libya and Nigeria combined with Russia shooting down any hopes of further cuts.” “$50 on Brent proved one bridge too far to cross at this stage,”

Nigerian oil output recovery adds to surplus - traders | Reuters: Nigerian crude for August loading is proving slow to find buyers amid rising supply, oil trading sources said on Wednesday, a sign that an expected second-half rebalancing of the global market is getting off to a slow start. An increase in production in Nigeria and Libya, where conflict and unrest had curbed output earlier this year, is adding to the volume of light, sweet crude looking for buyers in the Atlantic Basin, despite an OPEC-led supply cut aimed at getting rid of a surplus. Oil traders say there are at least 40 unsold August-loading Nigerian cargoes looking for buyers, the equivalent of almost half of daily world demand and a higher volume than at similar points in earlier months. "It's starting to clear but there are still 40 plus left," said a trader, who said the excess supply for August loading was higher than earlier months as production has increased. "It's more because there is a much bigger programme in August. It's slow on Nigerian." Lingering cargoes of crude from Nigeria, Africa's biggest exporter, have been a feature of the market this year , weighing on prices since Nigeria's crude is sold in relation to Brent, the global benchmark.. Such signs of excess should start to be less visible in coming months if, as analysts like the International Energy Agency forecast, the global market tightens in the second half of the year helped by the OPEC cut. But Nigerian exports are set to exceed 2 million barrels per day (bpd) in August, a 17-month high, and on Tuesday the head of the IEA said further increases by key producers could hamper the rebalancing. ‘

WTI Bounces On Biggest Crude Draw Since 2016 --Having broken its win-streak with the biggest drop in 4 weeks today following Russia comments, crude prices hovered around $45 as API reported a massive 5.8mm barrel crude draw (most since 2016) and 5.7mm gasoline draw (most in 4 months). API:

  • Crude -5.764mm (-2.5mm exp)
  • Cushing -1.4mm
  • Gasoline -5.7mm
  • Distillates +375k

After last week's product draws (and small crude build), we suspect the effects of tropical depression Cindy may be impacting the data as the draws are very significantly away from expectations...

The Global Oil Demand Driver That Is Being Ignored -- When looking at oil demand, oil market analysts focus overwhelmingly on passenger vehicles. One of the hottest debates today is over the prospect of peak oil demand: whether or not electric vehicles along with general trends towards more fuel efficiency will ultimately lead to a peak and decline of total oil demand worldwide. But the conversation often overlooks the role that heavy trucks and freight play in driving demand. The International Energy Agency just published a report arguing that the world needs to get a handle on fuel efficiency for freight, or else oil demand will continue to rise, regardless of how many Tesla’s are on the road. Freight transit is crucial for economic growth, and indeed, it tends to be correlated with GDP. The IEA says that only four countries – Canada, the U.S., China and Japan – have fuel efficiency standards for heavy trucks, one-tenth of the 40 countries that have rules for passenger vehicles. “For far too long there has been a lack of policy focus on truck fuel efficiency. Given they are now the dominant driver of global oil demand, the issue can no longer be ignored if we are to meet our energy and environmental objectives” Dr. Fatih Birol, the IEA’s Executive Director, said in a press release.Since 2000, heavy trucks have accounted for 40 percent of the total growth in oil demand, on par with the share for passenger vehicles. Trucks burn about 17 million barrels of oil per day (mb/d), or about one-fifth of total global demand. Crucially, demand is still growing…rapidly.

OPEC can’t save oil market alone—the U.S. has to step in, says Morgan Stanley - OPEC and other major oil producers have taken on an ambitious battle to rebalance the oversupplied oil market, but despite the best intentions their efforts aren’t enough, Morgan Stanley warns. In a Thursday research report, the Wall Street bank called on U.S. shale-oil producers to join in efforts to tackle the global supply glut that has pummeled prices since the summer of 2014. “If OPEC doesn’t balance the market, the oil price will have to force it somewhere else, most likely in U.S. shale. For a chance of a balanced market in 2018, the U.S. rig count can no longer grow and possibly needs to contract ~150 rigs. Given current break-evens, this requires WTI between $46-50,” the Morgan Stanley analysts said in the report. Cementing their downbeat assessment of the oil market, they significantly downgraded their 2017 forecasts for both West Texas Intermediate and Brent. They now see WTI trading at $48 a barrel at the end of the year, down from $55 expected previously. For Brent, they cut their forecast to $50.5 from $57.5. Crude oil for August delivery most recently traded at CLQ7, -2.83% $44.81 a barrel on Thursday, while Brent for September LCOU7, -2.95% was at $47.45 a barrel. Oil prices have been volatile in recent months, even as the Organization of the Petroleum Exporting Countries and other major producers—including Russia—have eased output. They initially agreed to a six-month pact running from January until the end of June, but as prices remained stubbornly low, they extended the accord into the first quarter of 2018. The OPEC and non-OPEC members have signed up to cut output by a collective 1.8 million barrels a day, hoping it will bring global oil inventories to a five-year average. The Saudi Arabian and Russian oil ministers have even pledged to do “whatever it takes” to balance the market. However, there may be a limit to “whatever it takes,” according to the Morgan Stanley analysts. “Although compliance has been healthy, OPEC’s production cuts have so far made little dent in inventory levels, which are still roughly as high as a year ago,” they said. “To support prices in the mid-$50s, OPEC-12 would probably need to lower production by another 200,000-300,000 barrels a day and extend the output agreement to end-2018. We find this unlikely,” they added. 

WTI/RBOB Jump After Major Inventory Draw Despite Biggest Production Surge In 6 Months --Oil bounced notably overnight after a surprisingly large crude build reported by API, but there was some selling in QTI/RBOB into today's DOE data, but that ended quickly as DOE reportedmajor inventory draws across the board sending WTI spiking above $46. However, after last week's drop, US crude production (in the Lower 48) soared by its most in 6 months. DOE:

  • Crude -6.299mm (-2mm exp)
  • Cushing -1.334mm (-700k exp)
  • Gasoline -3.669mm (-1.8mm exp)
  • Distillates -1.85mm (+500k exp)

Draws across the board... “Attention is likely to be focused not only on inventory trends, but also on gasoline demand in the run-up to the Fourth of July, as well as on U.S. oil production”: Commerzbank

Oil settles slightly up; rally on U.S. inventory draw fades -- Oil futures settled up slightly on Thursday, well off session highs, after a sharp but short-lived boost from a much bigger-than-expected decline in U.S. inventories of crude oil and gasoline. Oil has not sustained gains for more than a couple of weeks as investors have grown more worried about the stubborn global crude glut. U.S. crude stocks fell 6.3 million barrels, the U.S. Energy Information Administration (EIA) said, citing stronger refining activity and reduced imports. That was much more than the draw of about 2.3 million barrels analysts had forecast, and it took total crude inventories to 502.9 million barrels, the lowest since January. Crude prices gave back gains in the early afternoon. After hitting a high of $46.53 a barrel, U.S. futures settled up 39 cents to $45.52 a barrel. Brent futures hit a high of $49.18 a barrel after the inventory figures were released, but settled up 32 cents to $48.11 a barrel. "There's a lot of bearishness out there now," said Phil Flynn, analyst at Price Futures Group in Chicago. "The market is still believing supplies are not going to be in balance globally." Investors believe the Organization of the Petroleum Exporting Countries will need to make further output cuts to offset thriving shale production in the United States. U.S. gasoline stocks dropped 3.7 million barrels in the most recent week, far exceeding the expected drop of 1.1 million barrels. Still, gasoline inventories remain about 6 percent above seasonal averages, so investors will watch for July data to see if demand is strong enough to whittle down stocks. The price of oil has tumbled from one-month highs just below $50 on increased production from OPEC, even as the group has pledged to cut output.

Brent Tumbles To $46 Handle After US Crude Production Surge --Yesterday's "bullish" slump in inventories (and record demand) was offset by a resurgence in US crude production and along with Russia's lack of enthusiasm for more production cuts, is weighing heavily on oil prices this morning Today's rig count data will be a key catalyst for signals that US shale production growth may be topping.“The market’s trying to pin it on the production increase but that seems overstated,”says Warren Patterson, commodity strategist at ING. “There was some strong [Brent] resistance at $50 and since the failure there it seems to have been one way” “The market did get a bit ahead of itself before the numbers so we are seeing some correction as a result of that”As Bloomberg Intelligence's Philipp Chladek notes, Russia and Kazakhstan's rejection of further oil production cuts that could be proposed by OPEC will hurt crude prices in 2H. Russia, with the lion's share, is leading a group of 11 non-OPEC nations committed to reduce output by 558,000 barrels per day. But Russian compliance has been weak thus far. That's also true of Kazakhstan, which started its multi-billion dollar 370,000 barrel Kashagan field. Non-OPEC cuts are voluntary and OPEC doesn't have a mechanism in place to prevent any breach.Additionally WSJ is now reporting that OPEC is mulling production caps for Libya and Nigeria, the market is unimpressed for now.

BHI: US rig count rises by 12 - Last week’s slight decline in the US rig count may have been more of fluke than a sign of an impending plateau in drilling. Baker Hughes Inc.’s tally of active rigs was back up double-digits during the week ended July 7, rising 12 units to 952, up 548 units since the bottom of the drilling downturn on May 20-27, 2016, and its highest point since Apr. 17, 2015.Last week’s single-unit drop ended 23 consecutive weeks of increases (OGJ Online, June 30, 2017). The count has fallen just six times since the drilling rebound began.  US oil-directed rigs, down 2 last week, gained 7 units this week to 763, up 447 units since May 27, 2016, and their highest point since Apr. 2, 2015. Gas-directed rigs rose 5 units to 189, up 108 units since Aug. 26, 2016, as part of their own resurgence.  All 12 units were onshore, bringing that tally to 927. Rigs engaged in horizontal drilling climbed 12 units to 804, up 490 units since May 20-27, 2016. Directional drilling rigs rose 3 units to 74. According to preliminary weekly estimates from the US Energy Information Administration, US crude oil production during the week ended June 30 jumped 88,000 b/d to 9.338 million b/d, nearly making up the losses from the previous week’s dive caused by preparations for Tropical Storm Cindy and maintenance in Alaska. Lower 48 output spiked 105,000 b/d while Alaska fell 17,000 b/d. However, EIA late last week reported that US production posted its first monthly decline of the year in April, shedding 24,000 b/d to 9.083 million b/d, a departure from its early weekly estimates for the month that showed higher output. Gulf of Mexico production dived 101,000 b/d primarily due to maintenance work, more than offsetting increases in major producing states Texas, New Mexico, Colorado, and North Dakota. In news this week impacting US operators, US Interior Sec. Ryan Zinke signed an order aimed at reducing drilling permit delays on federal onshore lands and holding lease sales at least quarterly (OGJ Online, July 6, 2017). The average time to process a drilling permit application in Fiscal 2016 was 257 days.  Oklahoma and its Woodford shale again bolstered the major oil- and gas-producing states and regions this week. The Sooner State gained 4 units to 136, up 82 units since its recent low on June 24, 2016, and its highest point since Mar. 20, 2015. The Cana Woodford also climbed 4 units and now totals 63, up 39 since June 24, 2016. The Arkoma Woodford rose 1 unit to 10. The Mississippian dropped 1 unit to 6. Alaska’s count doubled to 8. Texas, quiet as of late, gained 2 units to 463, up 290 units since May 20-27, 2016. Louisiana also rose 2 units and now counts 69. The Haynesville, which stretches from North Louisiana into East Texas, climbed 2 units to 43, up 30 units since Sept. 30, 2016. The Granite Wash, which stretches from western Oklahoma into the Texas Panhandle, increased 2 units to 14. New Mexico and Utah each lost 1 unit to 59 and 7, respectively. The Permian basin of West Texas and southeastern New Mexico recorded its first decline in 16 weeks, edging down 1 unit to 369.

US Oil Rig Count Rises But "Must Drop 150 For Oil Markets To Balance" -- After falling for the first time this year last week, Baker Hughes reports US oil rig count rose once again (as perhaps Cindy impacted drilling last week) for the 23rd week in the last 24. *U.S. TOTAL RIG COUNT UP 12 TO 952 , BAKER HUGHES SAYS.   This week saw a resurgence in US crude production (as Cindy's effects wear off)...This is the highest Lower 48 production since Aug 2015... And it is that production spike that poured coled water on the short-lived rally after DOE showed inventories dropping. However, as's Tsvetana Paraskova notes, the rig count needs to drop drastically further if any equilibrium in the global oil market is possible... Analysts and investors have been growing increasingly concerned that the OPEC-led production cuts would not be enough to bring the oil market back to balance, and now one investment bank, Morgan Stanley, is saying that if the market stands any chance of rebalancing next year, U.S. shale possibly needs to drop around 150 rigs.“If OPEC doesn’t balance the market, the oil price will have to force it somewhere else, most likely in U.S. shale. For a chance of a balanced market in 2018, the U.S. rig count can no longer grow and possibly needs to contract ~150 rigs. Given current break-evens, this requires WTI between $46-50,” Morgan Stanley analysts said in a research report on Thursday, as quoted by MarketWatch. According to Morgan Stanley, despite OPEC’s cuts, global inventory levels are currently around the same high as they were last year.

Oil prices drop 3 percent on rising global supplies | Reuters: Oil prices settled nearly 3 percent lower on Friday as rising U.S. production as OPEC exports hit a 2017 high cast doubt over efforts by producers to curb global oversupply. Brent crude LCOc1 settled down $1.40, or 2.9 percent, at $46.71 a barrel, after falling to $46.28, its lowest in more than a week. U.S. West Texas Intermediate (WTI) crude futures CLc1 finished $1.29, or 2.8 percent, lower at $44.23 a barrel, after trading as low as $43.78. Both benchmarks posted a sixth weekly decline in the past seven weeks with WTI down 3.9 percent on the week and Brent off 2.5 percent. "The stream of relentless supply continues," said Matt Smith, director of commodity research at Clipperdata. He said OPEC exports were 2 million barrels per day (bpd)higher in June than in 2016, despite of an extension of a 1.8 million bpd production cut deal led by the Organization of the Petroleum Exporting Countries. "We've seen exports last month from OPEC much stronger than they were in April and May, seemingly indifferent to the OPEC production cut deal," Smith said. Reuters oil data showed OPEC production is now at the highest level this year.

Oil prices drop to lowest finish in more than two weeks - Oil prices ended sharply lower Friday to tally a loss of nearly 4% for the week, as a rise in U.S. crude production and a weekly climb in oil rigs provoked concerns that OPEC-led efforts to bring balance the market are doomed. The number of active U.S. oil rigs climbed by 7 to 763 rigs this week, according to data from Baker Hughes released Friday. The data contradicted some expectations that the rig count would continue to fall, following the previous week’s retreat, which marked the first decline since January.  That combined with the weekly rise in total U.S. crude production reported by U.S. Energy Department Administration Thursday to pull benchmark U.S. oil prices toward their lowest finish in nearly two weeks. August West Texas Intermediate crude tumbled $1.29, or 2.8%, to settle at $44.23 a barrel on the New York Mercantile Exchange. That was the lowest finish since June 26, according to FactSet data.  For the week, prices were down roughly 3.9% to mark their sixth such loss in seven weeks.  September Brent on London’s ICE Futures exchange, dropped $1.40, or 2.9%, to $46.71 a barrel, with the contract about 4.2% lower on the week. “No surprise that more rigs were added this week, and it would take a prolonged period of $35 to $40 per barrel prices to really put the brakes on this,” Richard Hastings, macro strategist at Seaport Global Securities, told MarketWatch.  On Thursday, the EIA reported that crude levels in U.S. storage fell by 6.3 million barrels in the week ended June 30, but total domestic production also edged up by 88,000 barrels to 9.338 million barrels a day.Hastings said the rebound in U.S. crude production last week is a key reason why oil prices headed lower Friday. “Some observers maybe thought the big decline in production in the EIA data two weeks ago was all about low prices ruining the production party,” he said. “That might be the case in a few months from now, assuming we continue to see very low $40s.” But “continued news that auto makers are swapping into EVs and hybrids only, and the news from France regarding the gradual phasing out of internal combustion engines should not be underestimated,” said Hastings.

Analysis: Russian oil producers may abandon restraint if prices stay low -- Despite Russia being a leading member of the OPEC/non-OPEC production cut coalition, its producers face significant uncertainty as to whether participation will continue to be profitable and provide the impetus they need to keep their crude output restrained. Lower-than-expected oil prices and a stronger-than-expected ruble, coupled with seasonal factors and a hike in drilling rates in spring, are posing a significant likelihood of output increases toward the end of the year, which could lead to a lower compliance level by Russia overall with its obligations under the production cut deal that was extended in May to the end of March 2018. Russia achieved its target of reducing crude output by 300,000 b/d in late April, and maintained compliance at slightly above 100% in May and June, according to data from the energy ministry. So far, the production cut has had no major impact on oil producers' financial operations as they have mainly been reducing output from less profitable wells and increasing output from more profitable reservoirs. Due to seasonal factors, however, Russia usually produces less crude at the start of the year and gradually increases production toward the end of the year. Therefore, questions remain as to whether oil producers will be able to fulfill their cut obligations later in the year. Over the last 12 years, average daily output has typically risen by around 170,000 b/d from April to October, according to calculations by Sberbank CIB analysts. The task could be complicated further by a rise in drilling operations seen this spring, after a significant drop in February, which may result in an increase in output at the end of the year. In April, production drilling jumped by 9.8% year on year, contributing to a 6.1% increase for the first four months of the year, and drilling volumes in the next couple of months could be an indicator of the potential output dynamic later in 2017.

Ships Exporting Iranian Oil Go Dark, Raising Sanctions Red Flags -  Fox - Ships chartered by two oil traders responsible for a significant share of Iran's fuel exports last year failed to transmit their location and the origin of their cargo -- red flags for governments seeking evidence of evasion of sanctions on Tehran. Continue Reading Below The ships' radio-signal tracking systems were often not in use and occasionally indicated the ships had sailed from countries other than Iran, a Wall Street Journal investigation found. The U.S. government is analyzing movements of ships in the Persian Gulf for any attempts to circumvent bans on funding Iran's weapons programs or clearing payments for Iranian oil through the U.S. financial system, a U.S. official said. U.S. officials said they weren't familiar with the particular shipments identified by the Journal. This scrutiny come amid uncertainty in the U.S. about the future of the 2015 multinational agreement in which Iran pledged to scale back its nuclear program in return for the lifting of most international sanctions. President Donald Trump has cast doubt on whether his administration will continue to support his predecessor's commitment to the deal. U.S. officials said the White House is reviewing its Iran policy and considering stiffer measures. Shortly after Mr. Trump took office, the administration imposed new sanctions related to Iran's defense and ballistic-missile programs. While the nuclear agreement lifted many obstacles to doing business with Iran, the U.S. maintains sanctions that make it difficult to trade Iranian oil. A ban on clearing payments through the U.S. financial system hinders trade because oil is mostly bought and sold in dollars. The U.S. also prohibits doing business with blacklisted entities including the Islamic Revolutionary Guard Corps, a military division that is dominant in Iran's economy.

OPEC June crude oil output 32.49 mil b/d, up 220,000 b/d from May: Platts survey -- OPEC's crude oil production has risen 500,000 b/d in the last two months, as the continued recoveries of Nigeria and Libya pushed the bloc's output to 32.49 million b/d, according to the latest S&P Global Platts OPEC survey released July 6.The June output figure, an increase of 220,000 b/d from May, is a six-month high for the organization, complicating its efforts to hasten the oil market's rebalancing through production cuts that went into force January 1. The production rises in Libya and Nigeria, which were exempted from the agreement as they recovered from militancy, have sent the organization's collective output almost 600,000 b/d above its stated ceiling of around 31.9 million b/d when new member Equatorial Guinea is added in and suspended member Indonesia is subtracted. This comes even as compliance among OPEC's 12 countries with quotas under the agreement remains robust at 116%, according to an average of January through June production, as seven countries led by largest member Saudi Arabia have cut more than required. Saudi Arabia saw its output rise in the month to 9.97 million b/d, according to the survey, as the kingdom's crude exports rose significantly and the onset of summer drove domestic consumption of oil to power air conditioning. But that is still far below its quota under the deal of 10.06 million b/d. Second largest member Iraq grew production slightly to 4.45 million b/d, remaining the least compliant country in terms of output above its quota, which is 4.35 million b/d. Iran, OPEC's third largest producer, also saw a slight increase in output to 3.8 million b/d, right at its quota under the deal.

Don’t Hold Your Breath For Deeper OPEC Cuts  - According to Reuters data, OPEC exports jumped again in June, the second consecutive month of rising exports. Everyone tends to pay attention to the production data, but the volume of exports is arguably much more important. Reuters says that OPEC’s oil exports rose to 25.92 million barrels per day (mb/d) in June, an increase of 450,000 bpd from May. More importantly, OPEC’s exports are actually 1.9 mb/d higher today than they were a year ago, despite the highly-touted compliance rate with the collective production cuts. Reuters columnist Clyde Russell calls OPEC’s efforts to balance the oil market “an exercise in self-deception.” It appears that OPEC is exporting just as much oil as it was before the November deal was announced, according to a Reuters analysis of oil tanker data. The UAE, for example, exported 2.8 mb/d in the first six months of 2017, higher than the 2.52 mb/d the country averaged in the same period a year earlier. Iran too is exporting more than last year. Then, of course, there are the countries exempted from the deal – Libya and Nigeria – where exports are rising quickly. Libya’s exports only averaged 243,000 bpd in the first half of 2016, a figure that doubled to 553,000 bpd this year. Libya’s production recently topped 1 mb/d, so its exports are surely set to rise further.Ultimately, this means that OPEC’s oil exports are not all that different from last year’s figures even though it has claimed success with the collective cuts. That raises the question about whether or not OPEC should make deeper cuts, an approach that a growing number of analysts say is needed to balance the market. And as Bloombergrecently noted, another cut would be consistent with OPEC’s own history. In the past, OPEC conducted multiple cuts over a short period of time, tweaking their output levels in order to achieve a targeted outcome. However, the one major reason why a follow-up cut would be more difficult is the presence of rapid-response U.S. shale. Shale drillers have already brought back a lot of production since last year, so deeper cuts could simply open up more room for them. While some analysts are pointing to the possibility of shale production starting to slow, that would support the notion that the industry responds very quickly to changing market dynamics. That responsiveness takes away some leverage from OPEC and undercuts the rationale for steeper cuts.

Saudi GDP falls for first time since financial crisis as oil output cut | Reuters: Saudi Arabia's gross domestic product shrank from a year earlier in the first quarter of 2017 for the first time since the global financial crisis, but the private sector strengthened gradually, official data showed on Friday. GDP, adjusted for inflation, shrank 0.5 percent year-on-year between January and March, its first fall since 2009. That was almost entirely because of a 2.3 percent contraction in the oil sector, as Saudi Arabia cut its crude output under a global deal among producing countries to prop up prices. The non-oil government sector of the economy shrank 0.1 percent, showing Riyadh continued to keep a tight rein on state spending as it tried to cut a big budget deficit caused by low oil prices. But the non-oil private sector grew 0.9 percent, accelerating from a revised 0.5 percent in the fourth quarter of last year. It was the fastest private sector expansion since the fourth quarter of 2015. Private businesses have been hit hard by government austerity measures, including higher domestic energy prices and delays in the government paying its debts to companies. Late last year, however, Riyadh began settling its debts more promptly, boosting the private sector. The outlook for growth in the rest of this year is murky. In recent weeks Riyadh has eased its austerity drive slightly, restoring financial allowances to public sector employees, and this should help consumption slightly.Also, the government plans to introduce a 5 percent value-added tax at the start of 2018, so there may be a consumption mini-boom in the preceding months as Saudis make big-ticket purchases to avoid the tax. But some austerity steps are going ahead this year, such as higher residence fees for expatriates, who make up about a third of the population. Also, the oil output deal extends through the end of 2017, so the oil sector will continue to drag on growth. 

Inside Saudi Arabia’s Big Bet on Plastics -  Under a tent in the Saudi desert, Ziad Al-Labban’s showing off his vision for the world’s largest oil supplier—and it looks like an Ikea store. Al-Labban has spent his career helping Saudi Aramco meet about 10 percent of global crude demand, but right now all he wants to talk about are all the petrochemicals used in the modern home he’s replicated at Sadara, the sprawling new $20 billion complex he runs in the industrial hub of Jubail. The mattress in the bedroom, the plates in the kitchen, even the Chevrolet Caprice in the driveway—he’s too excited reeling off the vast array of products enhanced by his chemicals to notice the scorching heat. At 46 degrees Celsius (115 Fahrenheit), it’s way hotter than most places have ever been. “Do you see that plasma TV?” “We will produce the chemical coating that goes into that screen.” Al-Labban has managed Aramco units before, including in the U.S., but this one is like no other. Sadara, a venture with Dow Chemical Co., emblazons its website with “Game Changer!” for a reason. The facility’s completion is key to the kingdom’s efforts to diversify the economy, develop new industries and create jobs for millions of youth. It’s the largest plant of its kind ever built in a single phase, taking more than 60,000 workers five years to assemble. Peak production is just weeks away, which is good news for Crown Prince Mohammed bin Salman. With the economy flatlining and the budget strained, he’s put next year’s initial public offering of shares in Saudi Arabian Oil Co., as Aramco’s formally known, at the center of his “Vision 2030” blueprint for life after oil. Some royals expect a $2 trillion valuation, which would let them raise $100 billion by selling just 5 percent, though many analysts expect half that. 

Muhammed Bin Nayef Bin Abdulaziz Al Sa’ud Confined To His Palace - In Jidda, according to the New York Times today.  So the story about the now deposed 57-year old former Crown Prince of Saudi Arabia and former Minister of the Interior, Muhammed bin Nayef (MbN), putting out a video supporting his own removal appears to be phony propaganda.  The Saudis instead have been broadcasting a video of the new Crown Prince, 31-year old Muhammed bin Salman (MbS) kissing the hand of (MbN).  Presumably he did that back in the day when MbN was the Crown Prince and MbS was his supposed loyal deputy. We have no video of MbN kissing the hand of MbS. As it is, the story also reports that when MbS’s elevation was announced, MbN returned to his palace to find his guards replaced by ones loyal to his successor.  He and his daughters have since been confined to the palace and also forbidden to leave the country, although the latter would seem to be impossible if they cannot leave the palace. MbN has been replaced as Minister of the Interior by his nephew, Muhammed bin Saud bin Nayef, whose father is governor of the Eastern Province.  Reportedly US intelligence officials are “outraged” at this, having worked long and well with MbN, who was reportedly the key figure behind squashing al Qaeda in Saudi Arabia,  He is viewed by these people as very competent, and his successor has apparently no experience at all in the area.  Wonderful.  But these people are constrained from speaking openly because of the clear support by President Trump and his son-in-law, Jared Kushner, of the elevation of MbS, as well as his aggressive warmongering in Yemen, against Qatar, and also against Iran Of course, we have also seen the spectacle of SecState Rex Tillerson repeatedly making it clear that he at least does not support the diplomatic and economic moves against Qatar.  SecDef Mattis has laid lower on the matter, but has also made it clear that the US intends to maintain its major CENTCOM air base in Qatar and is engaging in actions such as selling Qatar fresh fighter jets that go completely against the Saudi-led move that has been pushed by the warmongering and irresponsible new Crown Prince, Muhammed bin Salman, so stupidly supported by our lunatic president.

Qatar Ready for Consequences of Blockade Showdown, Minister Says  -- The Qatari government, under a Saudi-led blockade of its air, sea and land links, is unwilling to concede any demands that threaten its sovereignty or violate international law, said Foreign Minister Mohammed Al Thani. Qatari stocks fell. The small Gulf emirate is prepared to let pass the deadline for complying with 13 demands set down by the bloc, including shutting the Al Jazeera television network and cutting back ties with Iran, he said Saturday in Rome, where he met with his Italian counterpart.“There is no fear from our direction. We are ready to face the consequences,” Al Thani said. “There is an international law that should be respected and not violated.” Qatari stocks declined as the rift showed no sign of easing head of a crucial Monday deadline. The QE Index, which resumed trading after a one-week public holiday, lost 1.8 percent as of 9:48 a.m. in Doha, led by Industries Qatar QSC’s 2.6 percent loss.  Al Thani repeated that Qatar is willing to sit down and negotiate under the right circumstances. The ultimatum issued June 23 was made to be rejected, he said. Saudi Arabia, Bahrain, the United Arab Emirates and Egypt severed commercial links with Qatar almost a month ago, saying they were isolating the sheikdom over what they see as its tolerant attitude to Iran and support for Islamist groups. The group’s demands also include Qatar severing relations with the Muslim Brotherhood and ending Turkey’s military presence in the country. Qatar was given 10 days to respond.

One Day Before The Saudi Ultimatum Expires, A Defiant Qatar Is "Ready To Face The Consequences"  --Two days ago, when previewing the showdown in the Qatar "diplomatic quagmire", we reminded readers that "Qatar only has until July 3 to comply with the 10-day ultimatum of 13 demands imposed by the Saudi-led bloc", a list which the Saudis described as non-negotiable, with Riyadh's foreign minister Adel al-Jubeir saying Doha must “amend its behavior” or “remain isolated."Fast forward to just one day before the Saudi ultimatum expires, when Qatari Foreign Minister Mohammed Al Thani said his nation is unwilling to concede to any demands that threaten its sovereignty or violate international law. The small but wealthy Gulf emirate said it wasprepared "to let pass the deadline for complying with 13 demands set down by the bloc", including shutting down Al Jazeera and cutting back ties with Iran, Al Thani said in Rome quoted by Bloomberg, where he met the Italian foreign minister. “There is no fear from our direction. We are ready to face the consequences,” Al Thani said. “There is an international law that should be respected and not violated.”And while Al Thani repeated that Qatar is willing to sit down and negotiate under the right circumstances, he repeated that the ultimatum issued June 23 was made to be rejected.As a reminder, nearly a month ago, Saudi Arabia, Bahrain, the U.A.E and Egypt severed commercial, diplomatic and financial links with Qatar saying they were isolating the sheikdom over what they see as its tolerant attitude to Iran and support for Islamist groups, which is ironic since Saudi Arabia is widely acknowledged as the world's premier supporter of offshore terrorism. The group’s demands also include Qatar severing relations with the Muslim Brotherhood and ending Turkey’s military presence in the country. On June 23, Qatar was given 10 days to respond.Meanwhile, not mincing his words, Al Thani accused the blockading nations - it's clear who he was referring to here - of themselves having ties to groups and individuals accused of terrorism.“As for the countries that accuse Qatar of financing terrorism, they have the same problems as Qatar, more so, they are on top of the list in that area,” he said. “There are financial institutes in these countries involved in financing terrorist organization and financing terrorist operations in western countries.”

Saudi-Led Bloc Extends Qatar Deadline on Demands for 2 Days -- A Saudi-led coalition that has cut air, sea and land links with Qatar over accusations the country is supporting terrorism agreed to a two-day extension of its deadline for Qatar to meet its demands, the state-run Saudi Press Agency reported.The decision was made at the request of the emir of Kuwait, which has been acting as a mediator, Kuwait News Agency reported. Qatar would submit its official response to the demands to Kuwait on Monday, it said. The Saudi-led bloc will deliver a full response after a complete reading of the Qatari government’s answer, Saudi Press Agency reported later.Qatari Foreign Minister Mohammed bin Abdulrahman Al Thani on Saturday said his country wouldn’t concede any demands that threaten its sovereignty or violate international law, and was prepared to let pass Monday’s deadline for complying with the bloc’s 13 demands. Those include shutting the Al Jazeera television network and cutting back ties with Iran.“There is no fear from our direction. We are ready to face the consequences,” Al Thani said Saturday in Rome, where he met with his Italian counterpart. “There is an international law that should be respected and not violated.”Foreign ministers of Egypt, Saudi Arabia, Bahrain and United Arab Emirates are expected to meet on July 5 in Cairo to discuss the latest developments on relations with Qatar, the Egyptian foreign ministry said in an emailed statement. Al Thani repeated on Saturday that Qatar is willing to sit down and negotiate under the right circumstances. The ultimatum issued 10 days ago was made to be rejected, he said. Saudi Arabia, Bahrain, the United Arab Emirates and Egypt severed commercial links with Qatar almost a month ago, saying they were isolating the sheikhdom over what they see as its tolerant attitude toward Iran and support for terrorist groups. The group’s demands include Qatar severing relations with the Muslim Brotherhood and ending Turkey’s military presence in the country.

The Palace Intrigue at the Heart of the Qatar Crisis -- Who is the real leader of Qatar? On paper, it is Emir Tamim bin Hamad Al Thani, the 37-year-old son of Sheikh Hamad bin Khalifa Al Thani, who abdicated in Tamim’s favor in 2013. But the leaderships of Saudi Arabia and the United Arab Emirates, who have become involved in a messy diplomatic squabble with Qatar, think it is actually Sheikh Hamad, now known as the “father-emir,” who is still pulling the strings. The truth could dictate the outcome of the Gulf crisis, where the United States is trying to broker an early settlement while Iran watches mischievously from the sidelines.  There are a variety of judgments of who is really in control in Doha, none of which are particularly complimentary to the Al Thanis, the onetime desert tribe that number a mere few thousand but effectively own the world’s third-largest reserves of natural gas. “Hamad dislikes the Emiratis and the Bahrainis, but completely loathes the Saudis” was the opinion of a former diplomat who lived in Doha for several years, who insisted that the father is still the driver of Qatari diplomacy. The 65-year-old Hamad apparently takes a historical and “intensely personal” perspective. Hamad, in the judgment of a onetime insider, is “forceful” and “dangerous.” Those with a less intimate acquaintance with the Al Thani family take a more benign view. “Tamim is willful, but his father is a restraining force” is the judgment of one European official involved in Qatar’s 2022 hosting of the World Cup, which involved billions in infrastructure building on top of the alleged bribes paid to be chosen as a venue, estimated by a European intelligence agency at $180 million. Such an amount is almost pocket change for Doha. Qatar’s gas has given it the highest gross domestic product per capita in the world. During his reign, Hamad leveraged that wealth to set up Al Jazeera, the region’s first satellite television network, which dramatically increased Qatar’s influence — while upsetting its neighbors because it provided a platform to opposition voices and troublesome preachers like Islamist cleric Yusuf al-Qaradawi.

Behind the Scenes at the Saudi-Qatari Pissing Contest - Saudi Arabia, with the bellicose support of President Trump, has launched a diplomatic and partial economic offensive against the ridiculously small state of Qatar and is dragging its allies, the United Arab Emirates in particular, into a potential major headache. You see the de facto capital of the Emirates is Abu Dhabi which uses Qatari natural gas to generate half of its electricity via the Qatar-Abu Dhabi-Oman pipeline. So if Qatar really felt threatened it would pull the plug, and at least for a month or so, challenge the very survival of Abu Dhabi, for how many Emiratis let alone expats would be able to last +40c/105f temperatures without electricity? The Emirates capital city would have to import Liquified Natural Gas (LNG) which it doesn’t have the infrastructure prepared for as well as convert its electrical generators to LNG from natural gas, something that could take over a month to get up and running, no matter the $Billions the Emirates have to throw at the problem. So the Saudis picking a fight with their long time villains, the Qatari’s, could crash the Emirates economy and put a serious strain on the so called “coalition of the willing”, that is those still committed to the quagmire in Yemen and its assorted crimes, another source of strain between the two allies. The Emirates hate the Qatari’s, not without reason, and we know that the Emirates foreign legion has been concocting nasty plans against them in league with a pro-Israel PR Hit Squad in the USA. Still, the Emirates are dependent on Qatari gas so the shit could really hit the fan if the young newly crowned Saudi Prince and de facto commander in chief steps over the line and provokes a Qatari response.  Reality is the Emirates have much more serious trade relations with Iran than Qatar. Oman on the other hand, has even closer economic and political ties with its ancient fraternal brothers and sisters in the land of the Persians and the Saudi’s aren’t attacking the Omanis, so why the pissing match with Qatar?

Qatari minister cites 'aggression' as Gulf states consider sanctions --Qatar's Foreign Minister accused four Arab neighbors of "clear aggression" against his country as they met in Cairo to weigh further measures against a state they accuse of fostering terrorism in the region. Sheikh Mohammed bin Abdulrahman al-Thani said charges cited by Saudi Arabia, Bahrain, the United Arab Emirates and Egypt in cutting diplomatic and transport links a month ago "were clearly designed to create anti-Qatar sentiment in the west". "Qatar continues to call for dialogue despite the violation of international laws and regulations, despite the separation of 12,000 families, despite the siege that is a clear aggression and an insult to all international treaties, bodies and jurisdictions," he told a meeting at London's Chatham House think-tank. The rift between Qatar and its Gulf neighbors has aroused deep concern among Western allies who see the region's ruling dynasties as key partners in energy and defense. Qatar has invested heavily in infrastructure projects in Western states and maintains close diplomatic collaboration with the United States over the conflict in Syria. "Reading between the lines, the blockading countries were demanding that we have to surrender our sovereignty to end the siege, something which ... Qatar will never do," he said. As Sheikh Mohammed spoke, foreign ministers of the four states were meeting in Cairo to consider Qatar's response to 13 demands they have made in return for ending sanctions.The Arab countries have demanded Qatar curtail its support for the Muslim Brotherhood, shut down the pan-Arab al Jazeera TV channel, close down a Turkish military base and downgrade its ties with regional arch-rival Iran. 

Qatar shows mettle, offers compromise as Gulf states prepare meeting - Qatar announced plans for a steep rise in Liquified Natural Gas (LNG) production capacity on Tuesday that suggested it was ready for a protracted dispute with Gulf neighbors, but Doha said it was doing all it could to reach agreement. Saudi Arabia, the United Arab Emirates, Egypt and Bahrain were due to meet on Wednesday to decide whether to continue sanctions they imposed on Qatar on accusations it was aiding terrorism and courting regional rival Iran. Doha denies the charges and has submitted to mediator Kuwait replies to 13 demands that the gathering will consider. "What Qatar has given in goodwill and good initiative for a constructive solution, based on dialogue, we believe should be sufficient (to show) we have carried out our duties from our side," Qatari Foreign Minister Sheikh Mohammed bin Abdulrahman al-Thani told a news conference in Doha. "There is a lot of progress that has been made on that front (countering terrorism financing)... but of course there is always room for improvement," he said, describing the sanctions as illegal steps under the pretext of fighting terrorism. The three Gulf states and Egypt have severed diplomatic and transport ties with Doha in a dispute that has raised concern across the Middle East and beyond. Western states fear a lengthy dispute, besides threatening political instability, could upset supply chains in a region vital for energy supplies. German Foreign Minister Sigmar Gabriel told the same Doha news conference he felt Qatar had shown restraint in the row which began on June 5 when the Gulf states severed diplomatic and transport ties. "We hope others will respond in a similar spirit."

Qatar Blockade To Continue After Arab States Slam "Negative" Response To Ultimatum -- Foreign ministers from Egypt, Saudi Arabia, the United Arab Emirates and Bahrain released statements following a meeting in Cairo on Wednesday, after the latest deadline they had set to Qatar expired on Tuesday night.  The four Arab nations, locked in a diplomatic crisis with Qatar, dismissed Doha’s response to their demands as “not serious” and pledged to continue to keep the Gulf state under political and economic sanctions until it changes its policies. They also “expressed regret with regards to the negative response from Qatar, which showed complacency and non-seriousness to deal with the root of the problem and reconsider their policies and practices.” Speaking to reporters, Egyptian Foreign Minister Sameh Shukri said that Qatar’s response to the four Arab states’ list of demands, which was passed on via intermediary Kuwait on Monday, was “generally negative” and failed to “lay the foundation for Qatar's reversal of the policies it pursues.”He added that Qatar’s reply "lacked content", and that it was no "longer possible to tolerate Qatari acts." Shukri also accused Qatar of failing “to realize the gravity of the situation,” according to AP.Separately, the Saudi Foreign Minister Adel bin Ahmed Al Jubeir says the alliance will weigh more measures against Qatar, and reserves the right to take action when appropriate.He also said that the Boycott will continue until Qatar changes policy, adding that it was no surprise that Iran is trying to get closer t o Qatar, while expressing hopes that Turkey will remain neutral.

Exclusive: Energy giants court Qatar for gas expansion role despite crisis | Reuters: The West's three biggest energy corporations are lobbying Qatar to take part in a huge expansion of its gas production, handing Doha an unintended but timely boost in its bitter dispute with Gulf Arab neighbors. The chief executives of ExxonMobil, Royal Dutch Shell and France's Total all met the emir, Sheikh Tamim bin Hamad al-Thani, in Qatar before it announced a plan on Tuesday to raise output of liquefied natural gas (LNG) by 30 percent. Company and industry sources told Reuters that the CEOs had expressed interest in helping Qatar with its ambition to produce 100 million tonnes of LNG annually - equivalent to a third of current global supplies - in the next five to seven years. The companies already have large investments in countries on both sides of the dispute, and are keen to remain neutral after Saudi Arabia, the United Arab Emirates, Bahrain and Egypt severed ties with Doha on June 5. Spokespeople from all three firms declined comment. However, a top executive from one energy major looking into expanding in Qatar said the huge business opportunity was worth the considerable political risk. "There is only one policy here – you have to behave like a commercial corporation," the executive told Reuters. "You have to make your choices purely economically and be Qatari in Qatar, Emirati in the Emirates." Energy sales have powered Qatar's rapid rise as a regional player since the late 1990s, and the oil majors' interest in the LNG expansion underline its longer-term economic muscle during the political row with its neighbors.

The Saudi-Qatar Spat – Qatar And Iran Are Winning – MbZ, MbS Lose Face -- The Saudi/UAE campaign against Qatar quickly turned into a mess. Qatar did not fold as had been expected. There was no plan B. The instigators of the plan have now to fear for their head.  Saudi Arabia, the United Arab Emirates, Bahrain and Qatar have all build up and pamper extremists groups fighting in other countries. They supply money, weapons and political and media support to various kinds of murderous Takfiris. Unlike the other three, Qatar not only supported arch-conservative Salafists but also groups aligned with the Muslim Brotherhood. The MB do not accept the primacy of the Arab absolute monarchs. They provide an alternative way of governing by adopting some democratic participation of the people. That makes them an imminent danger to the Saudis and other family dictatorships.  In the view of the Saudis and the other three Qatar had to be reigned in. While its media arm Al-Jazeerah Arabic promotes the sectarian and anti-Iran positions the Saudis support, it also promotes the Muslim Brotherhood. That needed to be stopped. On June 5 the four countries launched a boycott and blockade of Qatar. Three weeks later they issued a list of demands to Qatar which could be summed up as "surrender your sovereignty or else ...". The "offer" was designed to be refused. It practically demanded total capitulation while threatening more sanctions and even war. As MoA predicted on June 7, two days after the spat started, Qatar did not fold. It has hundreds of billions in monetary reserves, international support from its liquefied gas customers and allies, and it secured supplies and support from Turkey and Iran. It simply did not response to the "offer" in time for the ultimatum's end. The Saudis blinked first. On Sunday the ultimatum was prolonged for two days. Yesterday Qatar responded with its own demands which were, like the "offer", designed to be refused. It also announced that it would increase its liquefied gas exports by a third which threatens to take market share and income away from the Saudis. It reminded the UAE that 80% of its electricity supplies depend on natural gas delivered from Qatar.Today the Saudis, the UAE, Egypt and Bahrain met to discuss further consequences and new measures against Qatar. The Gulf media predicted more sanctions. But the gang of four decided to do ... nothing:

Qatar Cash Crisis Looms As Interbank Rates Hit Record Highs --We warned previously that Qatar was running out of cash, and it appears that is very much the case as the cost of interbank borrowing (liquidity provision) hits a record high.  To boost their hard currency reserves, Qatar banks are now offering a premium of as much as 100 basis points over LIBOR to attract dollars from regional banks, some 80 bps higher compared to the rate they offered prior to this crisis. And the soaring cost of interbanking liquidity provision suggests its not working... As Arqaam Capital analysts Jaap Meijer and Janany Vamadeva note in a recent report...A prolonged conflict between Qatar and its neighbors may leave the country’s banking sector "vulnerable” because of its reliance on foreign funding. They reiterate underweight rating on the sector.Arqaam doesn’t rule out renewed sanctions as Arab nations disappointed with Qatar’s response to list of 13 demands, and notes that the Qatari banking sector is "highly dependent on foreign funding (wholesale debt and deposits) with low operational relationships."The banking sector relies on foreign markets for 43% of its funding needs,with non-resident deposits making up 46%, interbank 43% and wholesale debt 11%.Qatar Islamic Bank has the highest share of funding coming from the Gulf Cooperation Council at 24%, Qatar National Bank the least at 5%, though has the highest dependency on foreign funding at 57%. As we noted previously, despite the spike in interbank rates, S&P is confident that Qatari banks are strong enough to survive the pullout of all Gulf money and then some. The ratings agency ran two hypothetical scenarios of capital flight, and concluded that Qatar’s lenders could survive the withdrawal of all Gulf deposits plus a quarter of the remaining foreign funds the banks keep. Still, that did not prevent S&P from lowering Qatar’s long-term rating by one level to AA- last week.

Qatar crisis: Saudi-led bloc vows new measures - BBC News: The four Arab states leading a boycott against Qatar have condemned its rejection of their demands and warned of unspecified new measures against it. Saudi Arabia, Bahrain, Egypt and the United Arab Emirates said Doha was intent on continuing a "policy aimed at destabilising security in the region". New measures would be enacted in an "appropriate and timely manner". They cut links with Qatar in June over its alleged support of terrorism and ties with Iran. It denies wrongdoing. The oil- and gas-rich nation was presented with a list of demands, including shutting down the Al Jazeera news network, closing a Turkish military base, cutting ties with the Muslim Brotherhood, and downgrading relations with Tehran. Qatar vigorously denied supporting terrorism, and insisted it would not agree to any measures that threatened its sovereignty or violated international law. The air, sea and land restrictions have caused turmoil in the country, which is dependent on imports to meet the basic needs of its population of 2.7 million. In a joint statement issued late on Thursday, the four countries expressed their "deep surprise over the unjustified refusal by the Qatari government to the legitimate list and logical demands" aimed at fighting terrorism, combating extremism and safeguarding Arab and international security.  They stressed that the list of demands was now "null and void" and vowed to take further "political, economic and legal measures" in a manner that "preserves their rights, security and stability towards a hostile Qatari government policy".

Saudis Are After the Muslim Brotherhood, and Turkey’s in the Way -- A crisis over the Gulf state of Qatar had U.S. allies at loggerheads. More than that, it showed that there aren’t just two power blocs in the region. There are at least three. An alliance led by Saudi Arabia apparently enjoys Trump’s full support. Iran heads a coalition of America’s enemies. But a third bloc, looser and harder to classify, is at the heart of the dispute in the world’s oil repository. It includes Qatar, which hosts a major U.S. military base; Turkey, a NATO member; and the stateless, beleaguered yet resilient group that both nations support: the Muslim Brotherhood. The 90-year-old Islamist movement has been in the crosshairs of the Saudis and other Gulf monarchies since the Arab revolts at the start of this decade, when it briefly held power after winning elections in Egypt, and seemed set to repeat the feat elsewhere. “They see the Brotherhood as the only organized, transnational movement that offers a different model of political activity and legitimacy,” said Shadi Hamid, a senior fellow at the Brookings Institution who worked at the think-tank’s Doha center. “They see that as a threat. That’s why the Muslim Brotherhood is so divisive. Because it captures this fundamental divide over the Arab Spring.” That agenda was apparent in the demands presented to Qatar. Placed under a partial blockade, the small, gas-rich nation was told to cut back ties with Iran and end its alleged support for al-Qaeda and Islamic State, the groups that top most Western terror lists. But it was also ordered to stop supporting the Brotherhood, which Western countries don’t classify as terrorist; to shut down the Brotherhood-friendly broadcaster Al Jazeera; and to kick Turkish troops out of their new base in Qatar. 

Turkey Warns It's Ready For Military Intervention In Syria, Accuses US Of Creating A "Terrorist Army"  --Speaking in an interview with France 24, in which Turkish president Recep Erdogan lashed out at Germany for not allowing him to address the Turkish community there and preventing him from bringing his bodyguards to the upcoming G20 meeting in Hamburg, Erdogan warned that Turkey is ready to intervene militarily in north Syria to repel Syrian Kurdish forces there, forces which recall are armed and supported by the US but are seen as a terrorist organisation by Turkey. He also said that to avoid military intervention, a de-escalation zone could soon be established by Turkish and Russian troops in the region.  Separately, Turkey's deputy Prime Minister Numan Kurtulmus told Reuters on Wednesday that Turkish military preparations in northwest Syria are "legitimate measures against a threat from Kurdish forces in the Afrin region, and Turkey will retaliate against any hostile move." He added in an interview that "This is not a declaration of war. We are making preparations against potential threats" adding that "It's ... a legitimate measure so that we can protect our independence. We cannot remain silent against those sending missiles from Afrin." Kurtulmus was responding to the head of the Syrian Kurdish YPG militia, who told Reuters that Turkish military deployments near Kurdish-held areas of northwestern Syria were a declaration of war which could trigger clashes within days.   Adding to the absurdity of the situation, last month the Turkish defence ministry said that the Pentagon had sought to give assurances that Washington would retrieve weapons provided to the YPG after Islamic State fighters were defeated. Clearly this was a ludicrous assertion and Turkey slammed it as such:  "There has never been an incident where a group in the Middle East has been armed, and they returned the weapons," Kurtulmus said. The United States "have formed more than a terrorist organization there, they formed a small-scale army." It will hardly be the first time the US has formed a terrorist organization.

Russia promises to respond should the US attack Syria - Fort Russ: Russia will respond adequately and in proportion if the US implement its threats against Damascus for allegedly preparing a chemical attack, as stated by Russian Foreign Minister Sergei Lavrov. "I very much hope that this time the United States will be guided by the need to really protect the non-proliferation of chemical weapons and not to speculate on the alleged intelligence, which comes from "secret sources". They cannot create pretexts for another blow to the forces of the Syrian army"- Lavrov said. The Minister confirmed that, during the recent telephone conversation between US Secretary of State Rex Tillerson, the US has information about the upcoming Damascus chemical attack. Earlier, Washington threatened Syrian President Bashar Assad, in the case of such an attack, that he will pay a high price.

Russia may deploy military in Syrian buffer zones within weeks | Reuters: Russia may deploy its military to police the borders of planned de-escalation zones in Syria within two to three weeks after finalizing an agreement with Turkey and Iran, Russian negotiator Alexander Lavrentyev said on Tuesday. Moscow hopes to sign the final documents with Ankara and Tehran on Wednesday, he told reporters after a series of meetings in the Kazakh capital, Astana. Russia and Iran, which back President Bashar Assad's government, and Turkey, which supports some of the rebels, agreed in principle to create four "de-escalation zones" in Syria in a previous round of talks in May, but put off a planned June meeting where they were supposed to work out the details. Since the May agreement was announced, the rebel-held stronghold of Idlib province in the northwest of Syria has been mostly calm. But fighting has continued on other frontlines in western Syria, including Eastern Ghouta of Damascus and the southwestern city of Deraa, where government forces and their allies are trying to crush remaining pockets of rebellion. Lavrentyev told reporters that Moscow and its partners were still discussing detailed maps and other conditions related to the Idlib and southern zones, while the borders of two other zones, in Homs province and near Damascus, had been agreed. "Overall, (the agreement) provides for the presence of Russian military police in the buffer zones, but once again this matter has not been agreed yet," he said. "Depending on when the documents on safe zones are signed, I think one should expect concrete measures on the deployment of forces within 2-3 weeks."

Tillerson: Russia Should Decide Assad's Fate - And so, three months after the US State Department famously flip-flopped, when first at the end of March Rex Tillerson said at a news conference that “the longer term status of President Assad will be decided by the Syrian people" adding that "our priority is no longer to sit and focus on getting Assad out" only to follow one week later with Tillerson's warning to Russia that "coalition steps are underway to remove Assad" which in turn segued into the first US attack on Syrian soil with the launch of no less than 59 cruise missiles, the US has done it again and according to Foreign Policy, Secretary of State Rex Tillerson has once again told the U.N. Secretary General Antonio Guterres that the fate of Syrian leader Bashar Al-Assad now lies in the hands of Russia, and that the Trump administration’s priority is limited to defeating the Islamic State. The striking reversal was announced during a private State Department meeting last week, according to three diplomatic sources cited by FP.And, as FP adds, "the remarks offer the latest stop on a bumpy U.S. policy ride that has left international observers with a case of diplomatic whiplash as they try to figure out whether the Trump administration will insist that Assad step down from power. Nearly three months ago, Tillerson had insisted that Assad would have to leave office because of his alleged use of chemical weapons." And a startling admission by the website owned by the Slate Group: Tillerson’s position reflects a recognition that Syria’s government, backed by Russia and Iran, is emerging as the likely political victor in the country’s six year long civil war. It also marks a further retreat from the 2012 U.N.-brokered Geneva Communique — signed by Russia, the United States, and other key powers — which called for the establishment of a transitional government with members of the regime and the opposition. The Geneva pact, according to the Obama administration and other Western allies, was to result in Assad’s departure from power.

Over 500,000 Syrian Refugees Return To Government-Controlled Areas Of Syria --Crucial to the Western narrative of the Syrian conflict is the assertion that Syrian President Bashar al-Assad is a brutal dictator who has taken to killing his own people over the course of Syria’s six-year-long conflict. This allegation has been the crux of the “humanitarian” justification for foreign military intervention in Syria that would seek to depose Assad’s government, a justification frequently used by the U.S. and its allies prior to an invasion or the toppling of an extant regime.While this narrative has been pervasive in media coverage of the Syrian conflict, it is now being debunked by the very Syrian refugees that the media purported were fleeing Assad in the first place. According to a recent statement from Andrej Mahecic, a spokesman for the UN High Commissioner for Refugees, an estimated 440,000 displaced Syrians who remained in the country have returned to their homes since the year began. In addition, 31,000 refugees in neighboring countries also returned to Syria in the first half of the year, with 260,000 having returned to Syria from other nations since 2015.UN Refugee Agency: Almost 500,000 Syrian refugees have returned home. Find out why: #UNHCR #standwithrefugees— UNA-USA San Diego (@UNASanDiego) July 1, 2017  Though Mahecic noted that these refugees represent only a “fraction” of the five million Syrian refugees living in neighboring countries, what is notable is that nearly all of those who have decided to come back are settling in areas of Syria controlled by the government or where the Syrian government has made major territorial gains against ISIS and US-backed militants like al-Nusra Front in recent months – namely Aleppo, Hama, Homs and Damascus.

Syrian Army Set To Recapture Oil Field Near Palmyra From ISIS - Syria’s army is advancing against ISIS militants in the central Homs province, and has encircled terrorists in the al-Hael oil field near the ancient city of Palmyra, Syrian state news agency SANA reported on Wednesday. Army units are currently less than a mile away from the al-Hael oil field, and are closing in on ISIS militants in the field from the west, south, and southeast, SANA quoted a military source as saying. Separately, Syrian Army forces have targeted ISIS hideouts west of the eastern city of Deir Ezzor, killing many terrorists. Last month, the army recaptured the Ark oil field, some 25 miles northeast of Palmyra, from the Islamic State terrorists. The Ark region is of strategic importance to Syria’s economy as it has many oil wells, according to a field commander who spoke to SANA then. On the larger front, the Syrian Democratic Forces (SDF), backed by a US-led coalition, are about to make ISIS give up its de facto ‘capital’ of Raqqa, in northern Syria. The terrorists claimed Raqqa as their ‘capital’ three years ago, but now the US-backed alliance of Kurdish and Arab forces is close to driving ISIS out of Raqqa as the Islamist militants are in retreat in both Syria and Iraq. Coalition forces supported the SDF advance into the most heavily fortified portion of Raqqa, by opening two small gaps in the Rafiqah Wall that surrounds the old city, the U.S. Department of Defense said on Tuesday, quoting Combined Joint Task Force Operation Inherent Resolve officials.

China Joins Russia In Calling For Official Probe Into Use Of Chemical Weapons In Syria -- If there was any confusion whether in addition to Moscow, Beijing was also behind Assad, today all doubts were laid to rest when both Russia and China called on all involved parties "to support the efforts of the OPCW and the United Nations in investigating the alleged use of chemical weapons in Syria," according to a joint statement by Russian and Chinese leaders on the current international situation posted on Kremlin website on Tuesday, following a meeting between Putin and China's president Xi Jinping. "The sides emphasize that in matters of chemical weapons in Syria, all parties, with respect to Syrian sovereignty, must support the efforts of the Organization for the Prohibition of Chemical Weapons [OPCW] and relevant UN structures to conduct an independent and comprehensive investigation in order to obtain irrefutable evidence, establish genuine circumstances and draw conclusions that are capable of withstanding the verification by facts and time." Additionally, in the document Russia and China both "strongly condemn any use of chemical weapons anywhere and by anyone. The statement came days after the White House claimed last week that a new attack involving chemical weapons was being prepared by the Syrian government, however, failed to and declined to present any evidence. Washington vowed to make Syrian authorities "pay a heavy price" in case of chemical weapons use. Commenting on the White House's statement, the Kremlin said that it considers US threats against Syrian legitimate leadership to be "unacceptable." Damascus also denied the information. Furthermore, after a bilateral meeting between Russian President Vladimir Putin and his Chinese counterpart Xi Jinping, the two sides called for respecting the sovereignty and territorial integrity of Syria, as well as for a political solution to the Arab country's crisis through an inclusive dialogue.

5 Maps That Explain The Modern Middle East -- If geopolitics studies how nations behave, then the nation is singularly important. Nation-states are the defining feature of the modern political era. They give people a collective identity and a pride of place… even when their borders are artificially drawn, as they were in the Middle East. Constantly in conflict with the notion of nationalism, especially in such a volatile region, are transnational issues. These are issues like religion and ethnicity that cannot be contained by a country’s borders. Arab nation-states are now failing in the Middle East, and though their failure is primarily due to their governments’ inability to create viable political economies, transnational issues—especially the competition between the Sunni and Shiite sects of Islam, as well as the struggle within the Sunni Arab realm—are expediting the process. (see maps)

The fall of Mosul is a defeat for Isis, but it remains a deadly force | The Independent: The battle for Mosul is a ferocious struggle that has now been going on for 256 days, or two months longer than the battle of Stalingrad. The fighting between Iraqi government forces and Isis is much smaller in scale than in Russia 75 years ago, but is comparable in its savagery and the importance with which both sides regard the outcome of the battle. Iraqi Prime Minister Haider al-Abadi is declaring “the end of the Isis state-let” as Iraqi forces capture the ruins of the al-Nuri mosque where Abu Bakr al-Baghdadi, who may himself be dead, declared the caliphate three years ago. Isis wanted to avoid the humiliation of seeing the Iraqi flag replacing their own colours on the top of the famous minaret. Wars in Iraq have seen many exaggerated declarations of victory since the US-led invasion in 2003, but this one has more substance than most, even if it is a little premature. Isis fighters still hold part of the Old City of Mosul where the ancient close-packed housing and narrow alleyways are ideal for their style of making war.Whatever the precise moment when the last Isis resistance is extinguished in the city, the Islamic State as a geographical unit in northern Iraq and western Syria is being smashed up. It still holds some big enclaves in the Tigris and Euphrates valleys, but it has lost almost its urban centres aside from Raqqa in Syria and Tal Afar west of Mosul. Isis is rooted in the five or six million strong Sunni Arab community in Iraq which has endured devastating losses since it lost power with the fall of Saddam Hussein in 2003. There is no doubt about the importance of the victory won by the Iraqi government forces. It could not have happened without the devastating US-led air strikes, but it was Iraqi ground troops which were decisive in defeating a fanatical but militarily skilful enemy which inflicted heavy losses on them. 

Dramatic Drone Footage Shows What Mosul Looks Like After 8 Months Of Fighting -- Despite being outnumbered 15-1, ISIS forces swiftly captured the Iraqi city of Mosul in 2014, before declaring their monstrous caliphate. It was the victory that put them on the map, and it left hundreds of thousands of refugees in its wake. But three years later, Iraqi forces have nearly finished retaking the city, and are in the process of mopping up the few remaining ISIS fighters who are clinging to several acres of territory along the Tigris river. It’s taken 8 months of near constant fighting, but the city of Mosul, which was once the largest city ruled by ISIS, has nearly fallen. So what does a city look like after being fought over for nearly a year? Recently released drone footage has revealed the extent of the damage, most notably the destruction of the Grand Al-Nuri Mosque, which used to look like this: But now looks like this after ISIS detonated the building just before it could be captured by Iraqi forces:As you can see however, the rest of the city looks pretty bleak as well. That’s because the population has declined from roughly 1,800,000 people to 664,000 people over the past three years. Take note. This is what a city really looks like when the SHTF.

Islamic State fights fiercely in shrinking Iraqi and Syrian strongholds | Reuters: Western-backed forces edged into the final redoubts of the two capitals of Islamic State's self-declared caliphate in Iraq and Syria on Tuesday, hampered by fierce resistance from the militants and the presence of human shields. Iraqi commanders have predicted final victory in Mosul this week after a grinding eight-month assault on the once two-million-strong city pushed Islamic State into a rectangle no more than 300 by 500 meters beside the Tigris river. In Raqqa, Islamic State's headquarters in northern Syria from where it plotted attacks around the world, U.S.-backed militia were fighting inside the historic Old City after coalition air strikes breached its walls in two places. Victory over the hardline militants in both cities would mark the effective end of the three-year-old caliphate, although a few towns and large rural areas of Iraq and Syria remain under their control. But their centers are a maze of narrow alleyways packed with civilians and planted with multiple explosive devices by the militants, who are also using drones and suicide bombings. "The presence of civilians has affected the troops' advance a lot," said a commander in Mosul from the Rapid Response Division, an elite Interior Ministry unit, estimating there were 10,000 civilians, including some brought in as human shields. Iraqi commanders called in air strikes on targets just 50 meters away from them and fighting got close enough at one point for the militants to throw a hand grenade at the troops. 

Facing defeat in Mosul, Islamic State mounts diversionary attack to the south | Reuters: Islamic State militants attacked a village south of Mosul, killing several people including two journalists, even as they were about to lose their last redoubt in the city to an Iraqi military onslaught, security sources said on Friday. The assault on Imam Gharbi village appeared to be the sort of diversionary, guerrilla-style strike Islamic State is expected to employ as U.S.-backed Iraqi forces regain control over cities IS captured in a shock 2014 offensive. Security sources said IS insurgents had infiltrated Imam Gharbi, some 70 km (44 miles) south of Mosul on the western bank of the Tigris river, on Wednesday evening from a pocket of territory still under their control on the eastern bank. Two Iraqi journalists were reported killed and two others wounded as they covered the security forces' counter-attack to take back the village on Friday. An unknown number of civilians and military were also killed or wounded. The fighting forced the U.N.-affiliated International Organization for Migration to suspend relief operations at two sites where it houses nearly 80,000 people near Qayyara, just north of Imam Gharbi, a U.N. statement said. With water trucks no longer able to reach the sites, the displaced people could run short of water at a time of midsummer temperatures well over 40 Celsius (104 Fahrenheit), it said.

At least 1,500 people killed by cholera in Yemen: WHO - Al Jazeera -- The World Health Organization (WHO) says that cholera outbreak in Yemen has claimed 1,500 lives and sickened about 246,000 people since April.The WHO representative in Yemen, Nevio Zagaria, said in a news conference on Saturday in the Yemeni capital Sanaa that the epidemic has hit 21 provinces out of Yemen's 22 provinces, stressing that the number of suspected cholera cases has multiplied tenfold in the last two months. UNICEF's acting representative Sherin Varkey, for his part, said a quarter of the fatalities from the outbreak were children.  The death toll rose from 1,300 announced two weeks ago by WHO, which put the number of suspected cases at over 200,000 at the time and said that number is growing by 5,000 a day. UN agencies have repeatedly warned that the three-year-long fighting in Yemen had destroyed the country's health sector, making it difficult to deal with the epidemic. Impoverished Yemen has remained in a state of civil war since 2014, when Houthi rebels overran much of the country, including Sanaa.

Migrants in Libya are being rounded up and sold into slavery, UN says - After leaving everything they know behind to risk their lives in search of a better life, hundreds of African migrants are being forced into a system of "modern slavery" in Libya, a United Nations spokesman says. "Facing all those risks and dangers in a foreign country, you can imagine that you are trying to do whatever you can just to survive yourself and send some money back home and support your family — and you end up with the hands of those smugglers, and you end up working for free," Othman Belbeisi, head of the UN International Organization for Migration's (IOM) Libya mission, told As It Happens host Carol Off. The IOM released a report on Tuesday detailing the system in which hundreds of people — many from Nigeria, Senegal and Gambia — are either rounded up in the streets by armed groups, or held captive by the very smugglers who brought them to the country in the first place.The IOM interviewed dozens of West Africans who recounted being sold in garages and car parks in the southern city of Sabha, one of Libya's main migrant smuggling hubs. The trade mostly targets men, Belbeisi said, but the IOM has also heard stories of women being sold into sexual slavery. The stories are all different, he said, but the common thread in all of them is violence and hunger. 

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