Sunday, August 6, 2017

oil prices retreat on rising OPEC output; US burns more gasoline than in any other week in our history

oil prices were up three out of 5 trading sessions last week but still ended fractionally lower than where they started, mostly on a report that OPEC had increased its output....building on last week's 8.6% rally to $49.71 a barrel, the largest price increase this year, WTI oil for September delivery was up another 46 cents on Monday, closing above $50 for the first time in 2 months, and ending July with the largest monthly gain since April 2016, on reports that the US was preparing sanctions against the Venezuelan oil industry...that $50 level didn't hold, however, as oil prices tumbled more than 3% on Tuesday after a Reuters survey found that OPEC oil output was up by 90,000 barrels per day in July to a 2017 high, with US crude ending the day down $1.01 to $49.16 a barrel...oil prices then recovered 43 cents to $49.59 a barrel on Wednesday after the weekly EIA report showed another decrease in US crude oil supplies and the largest weekly burn of gasoline in US history...oil prices then gave up early gains to trade lower Thursday afternoon, after legendary oil trader Andy Hall (known as "God") was forced to shutter his hedge fund due to low oil prices, with light sweet crude for delivery in September falling 56 cents, or 1.1%, at $49.03 a barrel, after trading as high as $49.96 early in the day...oil prices continued falling Friday morning, dropping as low as $48.50 a barrel, but then recovered Friday afternoon to close at $49.58 a barrel, after Baker Hughes reported the largest rig count drop since January of this year, with oil thus ending the week just 13 cents lower, easing less than a third of a percent from last week's close...

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 July 28th, indicated another increase in the amount of oil used by US refineries, but a larger increase in our imports of crude, accompanied by a decrease in our exports of it, which together meant that much less oil was withdrawn from our commercial stocks of crude oil to meet this week's needs than the prior one...our imports of crude oil rose by an average of 209,000 barrels per day to an average of 8,253,000 barrels per day during the week, while at the same time our exports of crude oil fell by 328,000 barrels per day to an average of 702,000 barrels per day, which meant that our effective imports netted out to 7,551,000 barrels per day during the week, 537,000 barrels per day more than during the prior the same time, our field production of crude oil rose by 20,000 barrels per day to an average of 9,430,000 barrels per day, which means that our daily supply of oil coming from net imports and from wells totaled an average of 16,981,000 barrels per day during the cited week... 

during the same week, refineries used 17,408,000 barrels of crude per day, 123,000 barrels per day more than they used during the prior week, while at the same time 218,000 barrels of oil per day were being pulled out of oil storage facilities in the US (down from the withdrawal of 1,030,000 barrels of oil per day the prior week)....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 209,000 fewer barrels per day than what refineries reported they used during the account for that discrepancy, the EIA needed to insert a (+209,000) 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 rose to an average of 7,976,000 barrels per day, which was still 3.8% below the imports of the same four-week period last year...the 218,000 barrel per day decrease in our total crude inventories was all withdrawn from our commercial stocks of crude oil, as the amount of oil stored in our Strategic Petroleum Reserve remained unchanged....this week's 20,000 barrel per day increase in our crude oil production resulted from a 25,000 barrel per day increase in oil output from wells in the lower 48 states, which was partially offset by a 5,000 barrels per day decrease in oil output from Alaska...the 9,410,000 barrels of crude per day that were produced by US wells during the week ending July 21st was 7.5% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 10.5% more than the 8,515000 barrel per day of oil output during the during the same week a year ago, while it was still 2.1% below the June 5th 2015 record US oil production of 9,610,000 barrels per day... 

US oil refineries were operating at 94.5% of their capacity in using those 17,408,000 barrels of crude per day, which was up from 94.3% of capacity the prior week, and above normal for this or any time of year...the amount of oil refined this week was also above the seasonal norm, as it was 3.3% more than the 16,852,000 barrels of crude per day.that were being processed during week ending July 29th, 2016, when refineries were operating at 93.3% of capacity, and roughly 10.5% above the 10 year average of 15.75 million barrels of crude refined per day for the fourth week of July....

even with the increase in refining, gasoline production from our refineries decreased by 98,000 barrels per day from last week's near record level to 10,295,000 barrels per day during the week ending July 28th, which was still 3.0% higher than the 9,992,000 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) rose by 101,000 barrels per day to 5,232,000 barrels per day, which was 5.9% more than the 4,940,000 barrels per day of distillates that were being produced during the week ending July 29th last year....

with nominal decrease in our gasoline production, our end of the week supply of gasoline decreased by 2,517,000 barrels to 227,679,000 barrels by July 28th, the 7th drop in gasoline inventories in a row....a record high level of domestic consumption of gasoline, which rose by 21,000 barrels per day to 9,842,000 barrels per day, continues to be responsible for the drop in gasoline supplies, as our gasoline exports decreased by 83,000 barrels per day to 512,000 barrels per day while our imports of gasoline decreased by 174,000 barrels per day to 549,000 barrels per day at the same time....with the decrease in our gasoline supplies, our gasoline inventories are now 4.4% below last year's seasonal high of  238,190,000 barrels for this week of the year, but are still 5.1% higher than the 216,733,000 barrels of gasoline we had stored on July 31st of 2015, and roughly 5.6% above the 10 year average of gasoline supplies for this week of the year…  

even with the increase in our distillates production, our supplies of distillate fuels still slipped  by 150,000 barrels to 149,414,000 barrels over the week ending July 28th, the 5th drop in six weeks, albeit the smallest ....factors in this week's small decrease in distillates supplies was a 71,000 barrel per day increase to 1,221,000 barrels per day in our exports of distillates, while our imports of distillates fell by 22,000 barrels per day to 108,000 barrels per day, and while the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 236,000 barrels per day to 4,140,000 barrels per day....with this week's decrease, our distillate inventories are now more than 2.4% lower than the 153,155,000 barrels that we had stored on July 29th, 2016, while they remain 3.2% higher than the distillate inventories of 144,812,000 barrels that we had stored on July 31st of 2015, and roughly 8.7% above the 10 year average for distillates stocks for this time of July...

finally, even with the net drop in oil imports, the pickup in oil refining still meant our supplies of oil in storage decreased for the 15th time in the past 17 weeks, as our commercial crude oil inventories fell by another 1,527,000 barrels to 481,888,000 barrels as of July 28th, again the least oil we've had in storage anytime this year...our oil inventories as of July 28th were also 2.0% below the 490,501,000 barrels of oil we had stored on July 29th of 2016, while they were still 13.9% more than the 423,226,000 barrels in of oil that were in storage on July 31st of 2015...compared to historical figures, before our oil glut began to build up,  this week's oil supplies were still 44.2% higher than the 334,167,000 barrels of oil we had in storage on August 1st of 2014, and 43.9% above the 10 year average of oil supplies for this time of year ...     

This Week's Rig Count

US drilling activity decreased for the 3rd time in 6 weeks during the week ending August 4th, following 23 consecutive weeks of increases earlier this year, but it appears this week's drop may have been weather related...Baker Hughes reported that the total count of active rotary rigs running in the US fell by 4 rigs to 954 rigs in the week ending Friday, which was still 490 more rigs than the 464 rigs that were deployed as of the August 5th report in 2016, 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 decreased by a single rig to 765 rigs this week, which was still up by 384 oil rigs over the past year, while it was still far from the recent high of 1609 rigs that were drilling for oil on October 10, the same time, the count of drilling rigs targeting natural gas formations decreased by 3 rigs to 189 rigs this week, which was still 108 more rigs than the 81 natural gas rigs that were drilling a year ago, but way down from the recent high of 1,606 natural gas rigs that were deployed on August 29th, 2008...

the Gulf of Mexico rig count fell by 7 rigs to 16 this week, apparently due to the movement of Tropical Storm Emily through the eastern Gulf...watching the movement of the storm, i saw nothing that i felt would threaten rigs offshore from Louisiana, but i imagine some of those rigs may have been shut down as a precaution...the 16 rigs still active in the Gulf was thus down from the 17 rigs that were working in the Gulf the same week last year, but since there is also a rig drilling offshore from Alaska this year, the total US offshore rig count of 17 rigs is the same as the total offshore last year..

active horizontal drilling rigs fell by 3 rigs to 807 rigs this week, the largest horizontal rig decrease in more than a year...however, this week's horizontal rig count was still up by 445 rigs from the 362 horizontal rigs that were in use in the US on August 5th of last year, while it was also still down from the record of 1372 horizontal rigs that were deployed on November 21st of addition, the directional rig count was also down by 3 rigs to 74 directional rigs this week, which was still up from the 44 directional rigs that were deployed during the same week last year...meanwhile, the vertical rig count was up by 2 rigs to 73 rigs this week, which was also up from the 58 vertical rigs that were deployed on August 5th of last year.... 

as usual, 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 August 4th, the second column shows the change in the number of working rigs between last week's count (July 28th) and this week's (August 4th) count, the third column shows last week's July 28th 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 for the 5th of August, 2016... 

August 4 2017 rig count summary

obviously, with the shutdown of 7 of its Gulf of Mexico rigs, Louisiana saw the largest rig count drop this week, even as two land based rigs were added in the southern part of the state...Texas is back with the largest increase this week, adding 4 rigs despite no net change in the Permian, as the Eagle Ford in south Texas added a net of 2 rigs, its first increase in 10 weeks...the largest drop in any basin was in the Cana Woodford of Oklahoma, where three rigs were shut down, as that area of the state experienced another swarm of earthquakes this week...and despite the decrease of 3 natural gas rigs, both the Utica and Marcellus stood pat, thus meaning no change in drilling activity in Ohio, Pennsylvania, or in West natural gas rig was pulled out of the Eagle Ford, where 3 oil directed rigs were added, and two more natural gas rigs were removed from other basins not individually itemized by Baker Hughes, possibly from the Gulf of Mexico...otherwise, the above table is a pretty good representation of the changes that took place this week...


Anti-fracking group protests rejection of county charter - A group proposing a charter for Athens County has filed a protest with the Ohio Secretary of State against the local elections board’s rejection of the charter for the ballot, a move that a local judge upheld. On Wednesday morning, members of the Athens County Bill of Rights Committee officially filed their protest with the Athens County Board of Elections, addressed to Secretary of State Jon Husted."With the charter petition, the committee of petitioners followed the (state) constitution in exercising their right to propose to change the form of county government, but the Board of Elections and (Athens County Common Pleas) Judge (George) McCarthy have prevented that, we think illegally,” the group said in a statement.The group also filed an appeal of McCarthy’s decision with the Fourth District Court of Appeals on July 28.Last week, McCarthy reversed part of his decision regarding a proposed county charter initiative, ruling that the proposal did in fact have enough valid signatures. However, he upheld the rest of his decision rejecting the charter as invalid.In his decision, McCarthy sided with the county elections board in ruling that a proposed executive council (comprised of county elected officials who aren’t county commissioners) does not meet Ohio Revised Code requirements for a county executive under an alternative form of government.The county Board of Elections rejected the proposed county charter for the third year in a row on July 10, not due to a lack of valid signatures but because board members said it didn’t include a county executive position required under Ohio Revised Code statute for alternative forms of government.

$5.2 million fracking bid sets its sights on Wayne National Forest - New drilling wells may dot the landscape of Monroe County following a $5.2 million bid in March for the rights to explore and drill for oil and gas on 1,180 acres of land in the Wayne National Forest. The Wayne National Forest, which covers over a quarter million acres of Appalachia, has seen such bids before; the U.S. Bureau of Land Management previously leased more than 1,600 acres of the forest to private oil and gas companies in December 2016.  Although the recent bids have been for access to subterranean mineral rights on federally-owned land, almost 60 percent of the subterranean mineral rights below the forest are privately owned. Nearly 65 percent of active wells are found on these areas.  Wayne National Forest Supervisor Tony Scardina stressed the guidelines companies must follow when pursuing oil and natural gas leases.“All requirements are based on the best available science, extensive knowledge and experience of our staff and multiple layers of environmental study,” Scardina said. “At every stage of the oil and gas-leasing process, we apply these requirements, and once drilling is approved, we monitor ongoing operations to ensure requirements are properly implemented.”In 2015, more than 1,200 active vertical wells operated in Wayne National Forest. Currently, 780 of them are private. Proponents such as Shawn Bennett, executive vice president of the Ohio Oil and Gas Association, believe this will be a boon for economic development.“The great thing about this is that property owners who leased their mineral rights finally be able to receive bonus and royalty payments for their lands,” Bennett said in an interview with the Cleveland Plain Dealer. The owners of subterranean mineral rights do not necessarily have to live in the area, however, because mineral rights are often bought and sold separately from surface land.

Protest Challenges Fracking Plan for Ohio's Only National Forest - — Conservation groups have filed an administrativeprotest challenging the U.S. Bureau of Land Management’s plan for a September auction of three parcels in Ohio’s only national forest for oil and gas leasing. The parcels are adjacent to the Rover Pipeline. The protest, filed Monday, targets the BLM’s failure to adequately analyze the impacts of fracking and pipelines on watersheds, forests and endangered species and its decision to open portions of the Wayne National Forest to fracking. Construction of the Rover Pipeline, which could transport fracked gas from the Wayne, has been halted because of spills and numerous safety and environmental violations.“We’re protesting this dangerous fracking plan because drinking water safety and public lands should come before corporate profits,” said Taylor McKinnon with the Center for Biological Diversity. “The Ohio and Little Muskingum rivers provide precious water to millions of people in Ohio and downstream states. Pollution from fracking and faulty pipelines would be disastrous for the people who depend on this water.” Fracking would industrialize Ohio’s only national forest with roads, well pads and gas lines. The infrastructure would threaten or destroy habitat for threatened and endangered species and damage watersheds and water supplies within and beyond the national forest. In 2014 a well pad caught fire in Monroe County, resulting in the contamination of a creek near the forest; wastewater and fracking chemicals spilled into Opossum Creek — an Ohio River tributary — killing 70,000 fish over a five-mile stretch. “The Wayne National Forest is a place for families to hike, hunt, fish, camp and enjoy nature. Toxic air pollution and pipeline corridors don't square with those values,” said Nathan Johnson, public lands director with the Ohio Environmental Council. “Oil and gas development is a threat to the public's enjoyment of this special place, and the Ohio Environmental Council is committed to ensuring the Wayne National Forest is available for future generations of Ohioans.” "The co-conspiring of federal, state and local agencies to do the bidding of fossil fuel and energy companies while abdicating themselves from following federal and state laws is disgusting,” says Tabitha Tripp, spokesperson for Heartwood. "Incomplete and flawed environmental assessments not only place public health and safety at colossal risks, but leave a legacy of morbid consequences to our children and the environment.”

Ongoing Resistance to Wayne National Forest Fracking as September Land Auction Looms - Cleveland Scene - Starting last December, the federal Bureau of Land Management began auctioning land rights within Wayne National Forest, in southeast Ohio. The catch? The bidders could only be oil and natural gas drillers — private companies that will use the forest for non-renewable energy production. It wasn't a one-off thing. Auctions continued into 2017, with the next one slated for Sept. 21. The BLM will sell rights to 141 acres.   We traveled to Athens in January to get a sense of what this means for the region and for the state. For one thing, it meant more earthquakes. A 3.0-magnitude earthquake struck the forest in April, and the government ordered fracking operations halt immediately. (The state is still investigating the quake.) Elsewhere, the drilling process has destroyed wildlife habitat, and the bureaucratic process itself has eroded public trust.  With the September auction looming, The Center for Biological Diversity, Heartwood, Ohio Environmental Council, Sierra Club, The Buckeye Environmental Network and Athens County Fracking Action Network have jointly filed a protest against the event.  A major part of the protest deals with the supply-and-demand cycle that the state of Ohio is accelerating: with more drilling comes more infrastructure, and with more infrastructure comes more drilling. The groups point to the Rover pipeline, traversing Ohio into Michigan and Canada, as an example of how this acceleration can easily go wrong. Rover, which began construction only in March, has spilled millions of gallons of drilling fluid in northern Ohio wetlands.

Energy Transfer to sell stake in Rover pipeline entity to Blackstone (Reuters) - Energy Transfer Partners L.P. (ETP.N) said on Monday it would sell a 32.44 percent stake in a firm associated with the Rover pipeline project to Blackstone funds for about $1.57 billion. The 700-mile Rover pipeline, the biggest natural gas pipeline under construction in the United States, is designed to transport 3.25 billion cubic feet per day of domestically produced natural gas from the Marcellus and Utica Shale production areas to markets across the United States as well as Canada. Construction of the $4.2-billion Rover pipeline has hit several roadblocks in recent weeks. West Virginia's Department of Environmental Protection told the company last week to stop some work, citing environmental violations. The pipeline already faces sanctions for violations in Ohio and a federal ban on drilling activity that has delayed the anticipated startup of the project's first phase to the late summer from July. The Federal Energy Regulatory Commision on May 10 banned Energy Transfer from starting new horizontal directional drilling under waterways and roads following the release of about 2 million gallons of drilling fluid, a clay and water mix, into Tuscarawas River wetlands in Ohio. Blackstone Energy Partners and Blackstone Capital Partners will buy a 49.9 percent interest in ET Rover Pipeline LLC, or HoldCo, according to the agreement. The HoldCo owns a 65 percent interest in Rover Pipeline LLC. The two companies are constructing the Rover pipeline and will be the operator of the pipeline once in service, Energy Transfer said. Energy Transfer, which also operates the $3.8 billion Dakota Access Pipeline, said it planned to use the proceeds to pay down debt and help fund its current projects. 

Billionaire behind the Dakota Access is ‘baffled’ by complaints about his new pipeline -  Billionaire pipeline magnate Kelcy Warren, who just months ago defeated environmentalists to finish his controversial Dakota Access oil pipeline, has stepped into the limelight once again -- this time, to defend a natural gas line being built across the eastern U.S. In a letter to U.S. lawmakers Monday, Warren said he was “baffled” by federal energy regulators’ allegations that his company, Energy Transfer Partners LP, violated rules in building the $4.2 billion, 700-mile (1,127-kilometer) Rover gas pipeline and defended how the project has been constructed. That same day, his company reached a deal to sell a 32 percent stake in its Rover unit to Blackstone Group LP for about $1.57 billion in cash. The letter was a rare public statement for Warren, who has largely stayed out of the spotlight even as Energy Transfer’s pipeline projects became mired in controversy. Thousands of protesters had camped out at the site of the Dakota Access crude pipeline before Warren issued a memo in its defense. Regulators suspended work on portions of the Rover pipeline after Energy Transfer disclosed massive spills of drilling fluids and are investigating the company’s demolition of a historic house in Ohio. Warren was responding to a letter that U.S. Senator Maria Cantwell and Representative Frank Pallone, both Democrats, had written to the Federal Regulatory Energy Commission, calling for an investigation into what they described as “troubling incidents” involving the Rover pipeline. An investigation like that would be “both unprecedented and unnecessary,” Warren wrote in his letter to the lawmakers.  

Proposed Mountaineer XPress gas pipeline clears environmental hurdles --The second-largest natural gas expansion project proposed in the US Northeast reached a key milestone Friday, when the Federal Energy Regulatory Commission released a favorable final environmental impact statement. FERC staff concluded there would be some adverse and significant impacts from Columbia Gas Transmission's 170-mile, 2.7 Bcf/d Mountaineer XPress project running through West Virginia, but that, with various environmental plans, mitigation measures and further staff recommendations, those impacts would be "reduced to acceptable levels." While exact customer subscriptions are not publicly available, the Mountaineer XPress project is expected to substantially boost output capacity for the growing US Northeast region, and the associated 860-MMcf/d Gulf XPress project on Columbia Gulf Transmission is being proposed alongside Mountaineer to expand deliverability into the US Gulf Coast markets. FERC's EIS also covered the Gulf XPress project. Among the significant impacts cited in the EIS were permanent conversion of upland interior forest habitat and affects on large core forest areas, mitigated by collocation of about 22% of the route and additional measures in Columbia's environmental construction standards. Some 490 acres of core forest areas would be affected, and FERC asked the pipeline company to confer with West Virginia regulators to find further ways to reduce forest impacts. Staff also included 34 project specific mitigation measures. The Mountaineer XPress project is roughly 500 MMcf/d shy of Rover Pipeline's 3.25 Bcf/d capacity. While targeting somewhat different geography, Mountaineer is nonetheless in the same vein of producer-backed, supply-driven pipeline projects, which are expected to not only boost production in the Marcellus Shale but also increase deliveries from the US Northeast to neighboring regions, in particular the US Gulf Coast region. In another advance for the project, the West Virginia Department of Environmental Protection this week granted a Section 401 water quality certification for the pipeline. While it found permanent impact to West Virginia streams and wetlands and waters of the US, it mentioned plans for compensation through a credit purchase or fee program, and imposed a series of conditions. While the project entails 1,288 stream crossings, the water permit elicited no public comments in West Virginia, and the FERC docket has a tiny fraction of the comments flooding dockets for the eastbound pipes.

Landowners challenge pipeline developer, saying taking property is unconstitutional --  Virginia and West Virginia residents opposed to the Mountain Valley Pipeline asked a court in Roanoke, Virginia, to block federal regulators from allowing the pipeline’s developers to confiscate private property to build the 303-mile natural gas pipeline. In a lawsuit filed Thursday in the U.S. District Court for the Western District of Virginia, the residents challenge the authority of the Federal Energy Regulatory Commission to allow a private company like Mountain Valley Pipeline, LLC, to confiscate property through eminent domain to build such a project. The residents also are seeking a preliminary injunction so that — even if the FERC grants the company final permission to build the pipeline — the company would not be allowed to use eminent domain until this suit is decided.  The plaintiffs contend that granting Mountain Valley Pipeline the authority to use eminent domain would violate the Fifth Amendment of the Constitution, which requires that private property may only be taken “for public use” and that “just compensation” must be paid.  “The case before the court, in its simplest form, is a constitutional challenge to the eminent domain provisions of the Natural Gas Act … and the resulting unconstitutional acts of FERC and ultimately MVP,” the plaintiffs’ lawyers state in the lawsuit. The Natural Gas Act, passed in 1938, allows the federal government to regulate the interstate transportation and sale of natural gas. All of the the plaintiffs in this case are landowners within the path of Mountain Valley’s proposed 42-inch-diameter natural gas pipeline that will extend from Summers County, West Virginia to Franklin County, Virginia. The landowners want to “protect their constitutional rights to secure their private property from a government-sanctioned land grab for private pecuniary gain,” the lawsuit says.

CSX sees surge in shipments of gas byproducts in West Virginia - The Exponent Telegram — CSX has seen an uptick in business from the oil and gas industry that is helping to offset a decline in revenue from coal shipments in West Virginia, Pennsylvania, Ohio and New York.Scott Freshwater, president of the Independent Oil and Gas Association of West Virginia, said the industry he represents means more to the state than just money for landowners via royalties and governments via taxes. “It is part of the trickle-down effect. All of our production runs through processing plants, and from those plants, there are various heavier liquids that come out of the gas stream. Those liquids are shipped via rail and/or trucking to where it is processed into final products,” Freshwater said. “Some go to local fractionation plants, and the byproducts are then shipped again via rail.” Ethane, propane and butane are taken out of natural gas as liquids. The gas phase, or dry gas, goes back into the pipeline after it’s been treated. It then goes on to end users, Freshwater said. “CSX has seen a surge in shipments of products related to the natural gas sourced from the Marcellus and Utica Shale formations located in West Virginia, Pennsylvania, Ohio and New York. On the CSX network, shipments of frac sand and natural gas byproducts like LPG have both increased in 2017,” he said. The uptick is a sure sign the oil and gas industry is ramping back up in this region, officials say.

U.S. lower 48 gross natgas output rises in May - EIA - Times of India:  (Reuters) - U.S. gross natural gas output in the lower 48 states increased by over 0.3 billion cubic feet per day (bcfd) to a nine-month high of 80.2 bcfd in May, the U.S. Energy Information Administration (EIA) said on Friday in its monthly 914 production report. Big gains in Texas, the largest gas-producing state, offset small declines in Pennsylvania and Oklahoma, the second and third biggest producers in the lower 48. Output in Texas increased by almost 0.4 bcfd in May to 21.5 bcfd, its biggest monthly gain since February. Production in Pennsylvania and Oklahoma, meanwhile, slipped by about 0.1 bcfd each to 14.8 bcfd and 6.7 bcfd, respectively. The biggest percentage increase was in West Virginia, which rose by almost 0.2 bcfd, or 4.6 percent, to a record high 4.3 bcfd. Gas production declined in 2016 for the first time since the start of the shale revolution a decade ago as low energy prices reduced drilling activity. Next-day gas prices at the Henry Hub benchmark in Louisiana averaged $2.49 per million British thermal units in 2016, the lowest annual average since 1999. That compared with $2.61 in 2015 and a five-year average (2012-2016) of $3.18.Before 2016, U.S. dry gas production last dropped in 2005 when Hurricanes Katrina and Rita slammed into the Gulf Coast, damaging energy infrastructure along the Gulf of Mexico, which had been supplying more than 20 percent of the nation's gas. 

Inside FERC Henry Hub August index slides 9 cents to $2.97/MMBtu - The S&P Global Platts Inside FERC Gas Market Report August bidweek national average natural gas price fell 9 cents to $2.64/MMBtu as expectations for milder weather across much of the country weighed heavily on the market. The August bidweek price at benchmark Henry Hub fell 9 cents to $2.97/MMBtu, a nearly 3% decline from the July bidweek price. The slide in August prices came as the US National Weather Service's official August forecast called for average to below-average temperatures across key demand areas in the Midwest and Southeast. Year on year, the Henry Hub index fared better, rising 30 cents, or around 11%, from August 2016 as an overall tightening of supply-and-demand fundamentals have offered some support to the market. Toward markets in the Northeast, August bidweek prices at Transcontinental Gas Pipe Line Zone 6 New York shed 7 cents from July to average $2.30/MMBtu. In New England, Algonquin Gas Transmission city-gates fell even further, dropping 22 cents to $2.45/MMBtu. Upstream in the Northeast production regions, Dominion Appalachia prices fell 8 cents during August bidweek to reach $1.73/MMBtu. The fall in Northeast production area prices came as data from Platts Analytics' Bentek Energy showed regional production set several production records during July, including a new all-time high of 24.8 Bcf/d July 23.

White House sends key FERC nominations to Senate - The US Federal Energy Regulatory Commission may be on the verge of regaining its quorum. In a move that bolsters prospects for fast floor action on two nominees to FERC that have stalled in the Senate, the White House late Wednesday sent over the formal nomination of the pick favored by Democrats, Richard Glick, general counsel to the minority on the Senate Energy and Natural Resources Committee. Snapshot video: US coal prices could rally later this year if stockpiles continue declining President Trump had announced his intent to nominate Glick in late June, but a holdup on sending over his paperwork was complicating efforts to get agreement between the parties to clear for floor action the two nominees already advanced out of committee: Neil Chatterjee, a long-time energy staffer to Majority Leader Mitch McConnell, and Robert Powelson, a Pennsylvania utilities commissioner. Confirmation of Chatterjee and Powelson would bring the number of sitting commissioners to three, the minimum needed for FERC to conduct the bulk of its business. Timing of action on FERC nominees has been very closely watched because the commission has been without a quorum for six months, and the timelines of a number of key infrastructure projects are hinging on approvals from the agency in the coming weeks. Separately late Wednesday, the White House also formally nominated Kevin McIntyre, who heads the energy practice for Jones Day, for a seat on the commission. McIntyre, a Republican, is expected to be tapped as chairman. The formal nominations of Glick and McIntyre bolstered hopes Wednesday evening that Chatterjee and Powelson could be voted out before the Senate recesses for its August break.

Senate confirms two energy commission nominees, restoring quorum | TheHill: The Senate voted Thursday evening to confirm two of President Trump's nominees to the Federal Energy Regulatory Commission (FERC), paving the way for the commission to have its first quorum in six months. Neil Chatterjee and Robert Powelson were confirmed by unanimous consent and are slated to join the five-member board, which has seen its action paused since February following a pair of retirements. FERC is responsible for permitting decisions on energy projects like natural gas pipelines and export terminals. The lack of a quorum has left FERC unable to move such projects forward, inaction that has led to frustration in the energy, manufacturing and business communities. Neither Chatterjee nor Powelson was considered a controversial pick. Chatterjee is an energy aide to Senate Majority Leader Mitch McConnell (R-Ky.), and Powelson is a Pennsylvania utilities regulator. The Senate Energy and Natural Resources Committee advanced both nominations in June on 20-3 votes. Democrats, though, had been hesitant to bring their nominations to the floor for confirmation votes until they were assured a Democratic nominee would receive a vote as well. The White House filed paperwork for Democrat Richard Glick’s nomination on Wednesday. Energy and Natural Resources Committee Chairwoman Lisa Murkowski (R-Alaska) announced Thursday she would hold a September hearing for Glick’s nomination and that of Kevin McIntrye, whom Trump has picked to be chairman of the commission. Democrat Cheryl LaFleur is the only current member of FERC. Former Commissioner Colette Honorable and former Chairman Norman Bay left the commission earlier this year. 

Trump now has the votes to feed US fracking frenzy with new gas pipelines - Miami Herald -  Before leaving town, the U.S. Senate handed President Donald Trump and the oil industry two long-sought regulatory appointments that could expedite construction of natural gas pipelines nationwide. Since February, the Federal Energy Regulatory Commission has lacked a quorum to decide on new projects, frustrating the oil and gas industry, which lobbied Trump and the Senate to fill vacant seats. Just before its August recess, the Senate delivered, approving the nominations of Republicans Neil Chatterjee and Robert Powelson to serve on the commission, commonly known as FERC. Energy lobbyists were giddy following the vote, optimistic the commission will quickly act on a backlog of multi-billion-dollar gas pipelines proposed in states such as Ohio, Pennsylvania, the Virginias and North Carolina. “The long day’s journey into night for energy infrastructure is over,” said Scott Segal, director of the Electric Reliability Coordinating Council, a coalition of energy industries. With FERC’s quorum restored, “It will be time to get back to work!” he added.  Property rights advocates and some environmental organizations were less gleeful, fearful that Chatterjee and Powelson will rubber-stamp new pipelines with little regard to safety or landowner concerns. Chatterjee has served an an energy aide to Senate Majority Leader Mitch McConnell of Kentucky, and Powerson is a member of the Pennsylvania Public Utilities Commission, a panel known to be friendly to the oil and gas industry.“Its unfortunate,” said Lynda Farrell, director of the Pipeline Safety Coalition, a group based in Pennsylvania, where a web of pipelines crisscross the state, with many more proposed. “There’s no representation on the commission that will approach pipeline approvals differently than they have in the past.” These are boom times for pipeline developers, partly because of the enormous volumes of natural gas being fracked from the Marcellus Shale formation of West Virginia, Ohio and Pennsylvania. Supporters say this fracking could boost production of gas-fired electricity, bringing down prices and allowing utilities to switch from coal to a cleaner-burning fuel.

FERC Confirmations Threaten to Continue Agency's Status Quo as Rubber-Stamp for Pipelines - The Senate voted to confirm Donald Trump's nominees on Thursday for the Federal Energy Regulatory Commission (FERC), Neil Chatterjee and Rob Powelson. Chatterjee has a long track record of advocating on behalf of the fossil fuel industry. In his time working for Sen. Mitch McConnell, he spearheaded the push for Senate approval of the controversial Keystone XL pipeline , sought to undermine U.S. leadership on the Paris climate accord , led McConnell's campaign to convince states to oppose the Clean Power Plan , and worked to lift the ban on crude oil exports. As a member of the Pennsylvania Public Utilities Commission, Rob Powelson has at times been supportive of clean energy policies. However, he has shown a deep allegiance to the gas industry throughout his tenure, and has recently compared anti-gas activists to terrorists . "It is disappointing to see the Senate confirm FERC Commissioners who have lengthy track records of prioritizing the interests of the fossil fuel industry over those of the American people," Lena Moffitt, senior director of the Sierra Club's Our Wild America Campaign, said. "As the gas industry is threatening a massive expansion of fracked gas projects , it is more important than ever that our FERC Commissioners put the health and safety of the public and our climate first, not rubber stamp any project the industry puts in front of them."  "Based on their records, we remain concerned that Chatterjee and Powelson will continue FERC's status quo, approving unneeded fracked gas pipelines that take private land for corporate gain and lock Americans into higher electricity rates while increasing our dependency on fossil fuels for decades to come," Moffitt continued. "While they may have moved through the confirmation process with ease, these nominees will be met with firm resistance from communities across the country who have fought against the buildout of fracked gas."

Feds investigating freight train derailment, tank car fire in PA | TheHill: Federal investigators are being sent to probe a freight train derailment and tank car fire that occurred in a small Pennsylvania town early Wednesday morning. The National Transportation Safety Board (NTSB) said that three investigators will arrive on the scene in Hyndman, Pa., on Wednesday, with two more arriving Thursday and one arriving Friday. A CSX freight train carrying hazardous materials was en route to Chicago from Selkirk, New York, when it partially derailed about 100 miles outside of Pittsburgh. A total of 32 cars derailed from the tracks, including one containing liquefied petroleum gas and another containing molten sulfur, which leaked and caught on fire, according to the Associated Press. The derailed cars also struck a residential garage. No injuries have been reported, but emergency responders evacuated all the homes within a half-mile radius of the scene. Some of the train cars were still burning hours after the derailment, according to the AP. It’s unclear what caused the derailment, but federal investigators on the site will issue a report determining the cause and offering recommendations for the future. 

Exclusive: Philadelphia oil refinery taps debt restructuring adviser - sources… (Reuters) - Philadelphia Energy Solutions LLC, the owner of the largest U.S. East Coast oil refining complex, has hired an investment bank to help tackle its debt burden, as it struggles with low profit margins, people familiar with the matter said on Tuesday. The move underscores the challenges facing some East Coast refineries, which used to enjoy a competitive advantage when oil prices were high because they were able to secure supplies cheaply by rail. The crash in oil prices has changed that. Philadelphia Energy Solutions' latest woes come five years after private equity firm Carlyle Group LP and Energy Transfer Partners LP's Sunoco Inc rescued the refinery owner from bankruptcy, in a deal supported by tax breaks and grants that saved thousands of jobs. The refinery complex is still one of the region's largest employers, and U.S. energy officials have warned that its closure could lead to price spikes at the pump and even threaten the national security interests. Philadelphia Energy Solutions has tapped investment bank PJT Partners Inc for advice on dealing with its near-term debt maturities, including a $550 million loan that comes due in 2018, said the sources, who spoke on condition of anonymity because the hiring has not been made public. The company also has a revolving credit line that comes due in 2019."Philadelphia Energy Solutions is currently assessing its capital structure with the goal of improving financial flexibility in light of current market and regulatory challenges that have affected the company's profitability," the company said in a statement to Reuters. 

Now that oil and gas jobs are in demand again, will workers return? - Cautiously, things appear to be turning up again, leaving companies scrambling for workers and wondering if those they have let go will return. If those former employees don’t come back, will the industry known for bluster, swearing and endless hours away from home be able to recruit the hot-shot smarts it needs to move forward? At the end of each cycle, about 30 percent of the workers who lose their jobs don’t come back, said Tony Angelle, a vice president with Halliburton. His company is thinking about ways to attract talent now that activity is picking up again after a two-year slump. They “don’t want anything to do with the oil and gas business,” he said at the Developing Unconventional Gas East conference in Pittsburgh in June. Another fraction of the former workforce comes back reluctantly, still bitter about having been laid off, he said. There are people who fall in love with the business and never want to leave, said Jared Oehring, vice president of technology with U.S. Well Services. But if the business — cycles and all — is to be made worthwhile for more than just the die-hards, the tradition of oilfield culture needs an upgrade. “If times are tough and supervisors are yelling and cursing, like the old-school oil business,” it will repel many workers, Oehring said. As oil and gas companies are starting to negotiate what work-life balance means in the context of their business, even those that choose to remain are thinking differently about their work.

Dominion eyes first Cove Point LNG shipments amid commissioning -- Dominion Energy's Cove Point LNG export terminal in Maryland may be ready to ship its first commissioning cargo by end-September, with construction nearly complete and the company reaching a deal with a third-party shipper to take its initial production, CEO Thomas Farrell said Wednesday.After the power provider and gas pipeline operator released second-quarter financial results earlier Wednesday that showed a profit decline, Farrell suggested that another key project, the Atlantic Coast Pipeline, could face a construction delay depending on when a voting quorum is restored at the US Federal Energy Regulatory Commission.The developments come amid high anticipation for new takeaway capacity for  increasing volumes of shale gas from the Northeast and for new outlets for that gas in the form of boosting LNG shipments to foreign markets where it is used to heat homes and produce electricity. Timing for the new infrastructure, especially Cove Point as Dominion looks to become the second US exporter of LNG produced from shale gas following Cheniere Energy, is being closely watched. "As we work toward commercial in-service later this year, we will bring the project to a status of ready for startup this quarter," Farrell said about Cove Point during a conference call with analysts. "We have received authorization from the Department of Energy to export LNG produced during commissioning. We have an agreement with a third party to provide the commissioning natural gas and export LNG from the facility."

This pipeline could jeopardize Washington's water supply, environmentalists say -— The pipeline that TransCanada wants to build is short, 3.5 miles, cutting through the narrowest part of Maryland. It would duck briefly under the Potomac River at this 1,500-person town, bringing what business leaders say is much-needed natural gas to the eastern panhandle of West Virginia. But environmentalists say that brief stretch could jeopardize the water supply for about 6 million people, including most of the Washington-metropolitan area. That’s why dozens of protesters have gathered each weekend this summer at various points along the upper Potomac, part of a growing national movement that opposes both oil and natural gas pipelines and wants businesses and governments to embrace green energy instead. Inspired by the Dakota Access oil pipeline protest at Standing Rock, N.D., and the broad wave of demonstrations that has energized the left since President Trump’s inauguration, the protesters hope to convince Maryland Gov. Larry Hogan (R) and his energy secretary to stop the pipeline, which got an enthusiastic green light from West Virginia. “It’s got me worried,” said Andy Billotti, 53, “If something were to happen, that fracked poison would come down the river . . . right into our wells.”  The activists want Hogan, who earlier this year banned fracking in Maryland, to deny TransCanada a water quality permit to cross the Potomac. Environment Secretary Ben Grumbles said the state has sought additional information about the project from the company and will schedule a public hearing on the permit application in coming weeks.

Louisiana pipeline cutting through wetlands and 'cancer alley' faces growing protest  - Bayou Bridge is operated by the same company as Dakota Access, threatens water supplies for indigenous communities, and poses a risk to the local environment. There’s another similarity, too: Opponents of the Louisiana pipeline, which include indigenous groups, environmentalists, and a local community in the path of the pipeline, aren’t backing down from a fight.  “There’s a growing realization across the country that these pipelines have incredibly significant impacts on communities and our environment, and we can’t keep building more and more of this infrastructure,” said Cherri Foytlin, state director of Bold Louisiana, a group fighting to protect the state’s natural resources.“ The Dakota Access pipeline, which ships oil from the Bakken region from North Dakota to Illinois, ignited fervent opposition and a months-long protest camp at the Standing Rock Sioux Reservation. The camp has since been razed and, after President Trump gave his approval in January, now has oil running through it. The Bayou Bridge pipeline, meanwhile, is a 162-mile proposed project that would carry 280,000 to 480,000 barrels of oil per day from Lake Charles to St. James, located on opposite sides of the state. It would connect with the broader Dakota Access pipeline network through a pipeline starting in Nederland, Texas and traveling east. Bayou Bridge has received one permit from the state Department of Natural resources — a decision the agency is now being sued over — and is awaiting decisions from two more agencies required for construction: a permit from the Army Corps of Engineers and a water quality certificate from the state Department of Environmental Quality. While the project awaits these decisions, activists across the state are taking action.

Pipeline Payday: How builders win big, whether more gas is needed or not - The real fight over America's energy future isn't in coal, despite the Trump administration's public focus on a mining revival. Rather, dozens of pipeline projects, making up one of the largest expansions of natural gas infrastructure in U.S. history, are where the fossil fuel action is.At a cost of billions of dollars, these pipelines will tap the rich reservoir of fracked natural gas flowing out of the Marcellus-Utica shale basin that lies under much of Pennsylvania, Ohio and West Virginia.The Trump administration and its allies, energy-dominance manifestoes in hand, are eager to see these projects approved as soon as the president's nominees to the Federal Energy Regulatory Commission (FERC) are confirmed by the Senate.But are all these new gas pipelines really needed?Critics say that the financial interests of gas and electric companies—not market demand—are driving most of the new pipelines proposed for the region. Those profits are approved by FERC, an agency that is charged with ensuring public interests, but that nurtures "an exceptionally cozy relationship" with industry, as described in a comprehensive investigation published last month by the Center for Public Integrity and StateImpact Pennsylvania, with National Public Radio."At every turn, the agency's process favors pipeline companies," the review found after the groups interviewed more than 100 people, reviewed FERC records, and analyzed nearly 500 pipeline cases.It also noted another cozy relationship: the tight corporate links between the companies building the pipelines and those buying the natural gas, either to deliver it to homes and businesses or to use it to make electricity.One example of this is in Missouri, where Spire STL Pipeline LLC, an interstate pipeline company, and Laclede Gas Company, a local gas utility, have proposed to build a $220 million pipeline that would deliver Marcellus shale gas to St. Louis.Laclede and Spire are owned by the same parent company. Project opponents say this incestuous business arrangement between the customer, Laclede, and its supplier, Spire, puts the interest of shareholders above those of ratepayers. If the project is approved, shareholders of Spire, Inc., the parent company, will make a 14 percent annual return on the equity they invest in the project. Laclede's captive ratepayers would probably have to pay higher gas rates to finance the new pipeline.

Fracking-Related Water Problems Raise Issues in West Texas: A West Texas land baron and oilman is on the verge of pumping 5.4 million gallons of water a day from far under the desert mountains here and piping it 60 miles to the nation’s most bountiful oil field, the Permian Basin, where hydraulic fracturing has fueled a renaissance of U.S. oil and gas production. The Houston Chronicle reports with water in short supply and high demand, Dan Allen Hughes Jr., one of the largest landowners in the United States and president of his father’s eponymous oil company, plans to tap an aquifer under his 140,000-acre Apache Ranch.But Hughes has run into a wall of opposition from West Texas farmers, ranchers, residents and environmentalists, who worry he will steal water from their cattle, dry up their crops and deplete the spring that feeds the famous pool at Balmorhea State Park. “That’s a lot of water,” said Bill Addington, a rancher and conservationist from neighboring Sierra Blanca. “Believe me, there’s many people who have plans to sue if this goes forward. We will sue.” Hughes’ project may well just be the start of a much larger fight – over the ownership of West Texas water, the future of oil and gas production and fate of agricultural lands and ecologically sensitive habitats. It’s a feud that runs throughout the history of the West, between farmers and ranchers, conservationists and industry, neighboring cities, adjacent states. Whiskey is for drinking, they say. Water for fighting. “The Permian Basin is basically a desert, and that immediately presents challenges in finding adequate water,” “You can do without a lot of things. But you can’t do without water.” At least three other companies in the region are selling or planning projects to sell water to energy companies that use it by the billions of gallons to crack shale rock and release oil and gas. Water use in the Permian has risen six-fold since the start of the shale oil boom, from more than 5 billion gallons in 2011 to almost 30 billion last year. Energy research firm IHS Markit predicts demand will double by the end of this year, to 60 billion gallons, and more than triple by 2020, to almost 100 billion. 

West Texas water pipeline to oilfield gets approval | The Herald: A 60-mile (96.56-million kilometer) pipeline intended to carry 5.4 million gallons (20.44 million liters) of water daily from a West Texas desert aquifer to the Permian Basin oilfield has won approval despite objections of ranchers, farmers and environmentalists. The Culberson County Groundwater Conservation District on Wednesday voted to allow the multimillion-dollar Agua Grande project proposed by Dan Allen Hughes, who owns the 140,000-acre (56657.22-million hectare) Apache Ranch near Van Horn and runs his father's San Antonio-based oil company, Dan A. Hughes Co. The water would be used in fracking operations in the oil- and gas-rich Permian Basin. The Houston Chronicle reports Hughes has said ranch and farm wells won't be depleted and the company will monitor aquifer water levels. Some opponents have said they'll file lawsuits to block the project.

EOG Resources touts data-driven U.S. oil exploration - EOG Resources has seven U.S. exploration teams using big data systems to generate new drilling prospects in lower-cost regions, CEO Bill Thomas said Wednesday. Oil and gas exploration, which Thomas told investors is a "key sustainable advantage" for the Houston oil producer, is a side of the oil business that has stayed far from the limelight in recent years as low crude prices pushed drillers to cut back on looking for new rocks to drill. Thomas said the company is using huge amounts of data streaming from the oil patch to learn how different types of dense oil-bearing rocks respond to hydraulic fracturing and horizontal drilling. It uses that information, he said, to capture new acreage in exploration plays to add to what the company calls its premium drilling locations. "Our multi-decade database and learning curves gives us a huge advantage in identifying the best rock to add new and better drilling potential to the company," Thomas said. On Tuesday, EOG said it would not cut its capital expenditures this year, despite lower oil prices and a flurry of rival independent drillers scaling back activity. Instead, it raised the projection of its annual oil production growth, from 18 percent to 20 percent. "We are committed to returns and living within our means,"

7 earthquakes struck Oklahoma in 28 hours for a disturbing reason - In less than 28 hours, Oklahoma has been pummeled by earthquakes. The wave started on Tuesday night, when five quakes struck the central part of the state, and extended into the early hours of Thursday as two more hit, according to the United States Geological Survey. All of the earthquakes were between magnitude two and five and no significant damage was reported. However, the shaking is part of a troubling recent phenomenon. The disposal of wastewater from hydraulic fracturing (also known as fracking), appears to have spiked the likelihood of earthquakes in Oklahoma, potentially raising the state to the same earthquake threat level as California, according to a recent USGS forecast.Until recently, earthquakes in Oklahoma were few and far between. In 2010, the state experienced just 41 tremors. By comparison, each year the southern California area alone has about 10,000 earthquakes. But "seismic activity has surged in [Oklahoma] in recent years," reporter Joe Wertz of StateImpact Oklahoma told NPR on Thursday. In the last few years, Oklahoma has weathered hundreds of significant quakes each year, along with parts of several other Midwestern states. "Scientists link the quake boom to the widespread oil industry practice of pumping waste fluid into underground disposal wells," Wertz told NPR. The rise in earthquakes, in other words, can be attributed to the injection of large quantities of wastewater into wells deep below the Earth's surface. According to USGS, the majority of the underground wastewater comes from oil and gas operations — it is created when clean water mixes with dirt, metals, and other toxins below the Earth's surface during extraction operations.

Oklahoma quake series hits on known fault; temblors less frequent this year (Reuters) - A series of earthquakes near a northern Oklahoma City suburb struck along a known fault line and damaged two power substations, resulting in about 5,000 residents temporarily losing electricity, officials said on Thursday. The quakes on Wednesday night near Edmond included one with a magnitude of 4.2, and came after the state imposed guidelines to reduce the risk of quakes caused by man-made activity related to hydraulic fracturing, or fracking, in its oil-rich shale formations. The number of quakes rattling Oklahoma has fallen after the state guidelines went into effect late last year. New fracking activity has also declined, officials said. The Edmond quake was the state's fourth this year with a magnitude of 4 and above, while last year, there were 15. "We are optimistic that the seismicity rate has gone down but we still believe that the seismic hazard is still significant in Oklahoma," said Jake Walter, state seismologist for the Oklahoma Geological Survey. He said the Edmond quakes took place on a mapped fault and included one of the strongest recorded quakes to hit the area. Seismologists and state officials have said an increase in the frequency of quakes over the past few years in Oklahoma has been tied to the disposal of wastewater from fracking. The Oklahoma Corporation Commission, a state regulatory agency for the energy industry, said it was investigating the Edmond quake series. It added that the quakes took place in an area where the commission has instituted volume reduction in disposal well operations. In 2016, there were nearly 2,200 earthquakes with a magnitude of 2.5 or above in Oklahoma, against slightly more than 600 as of the end of July this year, according to the Oklahoma Geological Survey.

Keystone XL Pipeline in Limbo: Developer May Not Build as Landowners Put Solar Array on Proposed Route -- Keystone XL owner TransCanada told investors Friday that the company was still assessing demand for the project with oil companies, increasing speculation that the controversial pipeline may not see the light of day.  On an investor call, a TransCanada executive called for an "open season" on the Keystone project to attract investor bids, and said the company would assess interest and make a decision on the pipeline by November. As reported by Politico : "It was the strongest acknowledgment from TransCanada to date that the nearly decade-long Keystone saga may end in failure—despite President Donald Trump's overwhelming support for the project, which he green-lit as one of his first acts in office."  TransCanada is also still awaiting approval from Nebraskan regulators to finalize the pipeline's proposed route through the state. A final Nebraska Public Service Commission hearing on Keystone last week showcased the depth of opposition to the pipeline in the state, while a local farmer has attracted attention for installing American-made solar panels on his land to protest the project. Jim Carlson said he rejected offers as high as $307,000 from TransCanada Corporation to lay pipe across his land. "They'll have to go under it, around it or tear it down to get their dirty oil from Canada to the Gulf of Mexico," Carlson told NBC Nebraska . Carlson is a pipeline fighter with Bold Nebraska , a grassroots organization opposing Keystone XL. Jane Kleeb, the group's founder, told NTV that they've raised more than $40,000 to install solar projects in the path of the proposed pipeline.  "We're not just out in the streets protesting with signs, but we're actually building the type of energy we want to see," Kleeb said.

Keystone XL Foes Don’t Mention Climate in Red State Pipeline Battle - You won’t hear the C-word coming from Keystone XL foes as they argue against TransCanada Corp.’s push to get the final state approval needed to build the pipeline.C, as in climate. Instead, even as the company seeks to limit objections, they’re spotlighting TransCanada’s use of eminent domain, which Republicans traditionally oppose in support of landowner rights. Supporters, meanwhile, are pressing another issue close to Republican hearts: Jobs.As Keystone XL faces its final hurdle in Nebraska, the starkly different political landscape under President Donald Trump versus Barack Obama is bringing new shape to a debate that will be overseen by the state’s Republican-dominated Public Service Commission, set to hear a week of arguments starting Monday. With Trump in the White House, a positive nod from Nebraska could remove the final regulatory barrier.Property rights "might be the thing that stops this," said Art Tanderup, who owns farmland on the pipeline’s route that’s been in his wife’s family for 100 years. Even some pipeline supporters say the company shouldn’t be able to "take their land away," he said. Still, the jobs issue carries weight among Republicans as well, particularly in the age of Trump, who has focused on the energy industry’s ability to spark the U.S. economy. While the 2016 Republican platform says the Supreme Court’s 2005 ruling in support of eminent domain undermines the Constitution’s Fifth Amendment, Trump has in the past praised the decision.

Critical Keystone XL Testimony Denied in Last-Minute Decision -- The Nebraska Public Service Commission (NPSC)—the Republican-dominated state board deciding the fate of TransCanada's long-delayed Keystone XL pipeline—have barred experts and homeowners from testifying over potential spills or whether the tar sands pipeline is even necessary during final hearings next week. The Omaha World-Herald reports that former Lancaster County District Judge Karen Flowers, who was hired by NPSC to conduct the hearings, issued more than 30 rulings based on objections filed by TransCanada. She ruled that issues such as safety or if the U.S. even needs Canadian oil are out of the commission's scope of authority. "The (Nebraska Major Oil Pipeline) Siting Act specifically prohibits the commission from considering safety considerations, including the risk of spills and leaks," Flowers wrote in her ruling. Nebraska law requires the NPSC to approve a pipeline construction application if it is "in the public interest." The commission—made up of four Republicans and one Democrat—will mainly consider issues that impact the local economy such as jobs and revenues. Pipeline opponent Oil Change International spoke out against the hearing officer's ruling, as it bars the testimony of 15 outside experts and more than 25 landowners. For instance, the decision barred the planned testimony of Lorne Stockman , senior research analyst at Oil Change International. Stockman's testimony, which was submitted ahead of the hearings and thus part of the official record, would have stressed how changing market conditions and realities in the tar sands industry negates the need for Keystone XL pipeline.  "There is simply no need for the Keystone XL pipeline based on the current market conditions, which even TransCanada has admitted ," he said, noting recent statements by TransCanada representatives who have cast doubt in finding sufficient shippers to fill the pipeline.

Montana Eased Regulations for Keystone XL After Lobbying by TransCanada – Steve Horn - As President Trump's State Department took steps to approve the Keystone XL pipeline, the project's owner, TransCanada, lobbied on two bills in Montana which will ease the company's regulatory burden in the state.  Those bills, HB 365 and SB 109, moved along in the state's legislature with no media coverage despite the state being the first crossed in the pipeline's proposed journey from Alberta, Canada to Steele City, Nebraska. HB 365, which passed in May, will allow TransCanada to escape civil liability for any potential damages suffered by its contracted land surveyors. Meanwhile, SB 109 would have required environmental reviews for infrastructure projects in Montana to consider impacts beyond state lines, but failed to pass. TransCanada spent $4,348 on its Montana lobbying efforts for the 2017 session, according to its post-session disclosure form, including $830 wining and dining the 10-member Montana American Indian Caucus. The slated 830,000 barrel-per-day oil pipeline would pass near the Fort Peck Indian Reservation and cross the Missouri River, a water source for 7,000 Assiniboine and Sioux tribe members. Keystone XL has come under fierce opposition by Montana's Native American Tribes, who have signed resolutions in opposition to Keystone XL. The original Keystone pipeline, which carries tar sands oil through North Dakota, South Dakota, and Nebraska, has spilled over a dozen times. Its most recent incident occurred in 2016 when 16,800 gallons spilled in South Dakota. Keystone XL would also cross the Yellowstone River, a tributary of the Missouri River which also saw two pipelines spill over 100,000 gallons of oil into its waters since 2011.

    4 Proposed Tar Sands Oil Pipelines Pose a Threat to Water Resources - Greenpeace --A new analysis from Greenpeace USA finds that the three companies proposing to build tar sands pipelines have a legacy of pipeline spills, and that tar sands pipelines pose a threat to water resources. Summary Findings:

    • Oil spills anywhere pose serious risks to human health and the environment, and oil spilled into bodies of water is difficult to fully clean up. Diluted bitumen transported from Canada’s tar sands fields represents a particular threat to water resources along the routes of proposed pipelines.
    • Analysis of public data shows that the three companies proposing to build four tar sands pipelines — TransCanada, Kinder Morgan, Enbridge, and their subsidiaries — have seen 373 hazardous liquid spills from their U.S. pipeline networks from 2010 to present.
    • These spills released a total of 63,221 barrels of hazardous liquids during that time period — including Enbridge’s 20,082 barrel diluted bitumen spill into the Kalamazoo River in 2010.
    • The U.S. crude oil pipeline system as a whole has averaged one significant incident and a total of ~570 barrels released per year per 1000 miles of pipe, over the past 10 years.
    • Assuming these rates, the Keystone XL pipeline could expect 59 significant spills over a 50-year lifetime. Similarly, the Line 3 Expansion could see 51 significant spills over a 50-year lifetime.
    • Studies have found that a diluted bitumen spill into water is even more difficult to clean up than a conventional crude oil spill, due to the fact that bitumen sinks in water.

    Progress On Increasing Access To Federal Lands - It’s a positive step – for U.S. energy, economic growth, consumer benefits and climate progress – for the Bureau of Land Management (BLM) to begin rescinding its 2015 hydraulic fracturing rule – one that we argue duplicates existing and effective state regulation and risks delaying energy development, potentially impacting consumers. The Interior Department’s Katharine S. McGregor explains:“Maintaining positive, productive working relationships with our state and tribal partners is a top priority of this Administration. We are committed to working collaboratively with them to ensure the safe and environmentally responsible development of our Nation’s energy resources. Our proposal to rescind the 2015 final rule responds to the President’s call to reduce regulatory burdens, foster job growth, and serve the energy needs of America’s families, small businesses, and manufacturers.”And this from Interior’s Vincent DeVito: “The Department of the Interior’s approach toward overseeing wells is to be better business partners and environmental stewards, which is in alignment with the Trump Administration’s across-the-board prioritization of domestic energy production.” Both statements make important, encouraging points about the future of U.S. energy development. First, the early actions of new leadership in Washington recognize the vast good that can result from safe and responsible development of America’s energy wealth. Also, we see Interior acknowledging that eliminating unnecessary regulation will help advance the country’s energy interests and expedite energy’s benefits to U.S. consumers, businesses and manufacturers.

    Court tells Trump’s EPA to enforce methane rule for oil and gas drillers - A federal appeals court ruled late Monday that the Environmental Protection Agency must enforce Obama-era restrictions on greenhouse gas emissions from the oil and gas industry. The leak detection and repair provisions of the 2016 rule were set to take effect — and “begin delivering significant benefits”— on June 3. But on June 5, EPA Administrator Scott Pruitt “unlawfully stayed these and other requirements of the rule retroactively from June 2 until August 31, 2017,” the court said. Pruitt and his industry allies “have not offered any support for the proposition that compliance” with the 2016 rule “would cause significant hardship to regulated entities that had a year’s lead time to prepare,” the court argued. At the same time, the EPA’s stay of the rule “is causing substantial additional methane, ozone-forming [volatile organic compounds], and hazardous air pollutants such as benzene and formaldehyde to be released into the air of communities near these wells,” the court explained in its Monday order.

    North Dakota still seeking to recoup pipeline protest costs  (AP) -- North Dakota is continuing to seek federal funding to help pay state law enforcement bills related to months of protests over construction of the Dakota Access pipeline, despite being rejected on its first attempt. The state has applied for nearly $14 million in funding from a Justice Department program that helps pay costs related to law enforcement emergencies around the country. The state in late June applied to the Emergency Federal Law Enforcement Assistance Program, according to U.S. Sen. Heidi Heitkamp. The North Dakota Democrat sent a letter to Attorney General Jeff Sessions on Monday, urging his agency to "expeditiously review and approve" the state’s request. A decision is expected by the end of September. The $3.8 billion pipeline built by Texas-based Energy Transfer Partners began moving oil from North Dakota to a distribution point in Illinois in June. The project is still being contested in federal court by American Indian tribes who fear a leak could endanger their water supply, and protests from August to February resulted in a large-scale police response and 761 arrests. Gov. Doug Burgum in late April asked President Donald Trump for a disaster declaration to pave the way for federal aid to help recoup the $38 million spent by the state policing the protests and spare taxpayers the expense. The Federal Emergency Management Agency denied the request in May. Such declarations typically involve natural disasters, and the governor’;s office acknowledged last month that the request was a "longshot." The state did not appeal.

    Natural gas production takes front seat in the oil-driven Bakken shale as rigs return. --For as long as producers have been drilling in the Bakken Shale — the oil-rich formation straddling North Dakota and Montana (plus Saskatchewan and Manitoba in Canada) — associated natural gas, an inherent byproduct, has taken a back seat to crude oil production from the play. In fact, at one point nearly 50% of Bakken’s produced natural gas was being flared, in large part due to limited midstream capacity to gather, process and move the gas to market. But that’s changed in the past couple of years. Substantial midstream capacity has been built. Flaring has eased considerably, and with the shift in drilling activity to the best, most productive acreage, the gas-to-oil output ratio has increased. Add to that rising rig counts and productivity gains in those sweet spots and that phenomenon becomes amplified. The result is that while oil production has largely stagnated this year below peak levels, associated gas volumes from the play climbed to a record high this past May. But will this trend be sustained, and, if so, what will it mean for gas flows, takeaway capacity and gas-on-gas competition at the Canadian border? Today, we begin a blog series looking at gas production trends in the Bakken and implications for gas pipeline flows as well as competing supplies.

    Companies Fracking North Dakota Wells Recover More Oil (AP) — Oil industry leaders say companies' process of applying new fracking techniques to older wells in North Dakota's Bakken oil patch has the potential to recover more oil without increasing the footprint on the land. The Bismarck Tribune ( reports that operators are targeting wells drilled between 2008 and 2010, the early years of Bakken development before fracking technology advanced. The energy industry uses the technique to extract oil and gas from rock by injecting high-pressure mixtures of water, sand or gravel and chemicals. Justin Kringstad is the director of the North Dakota Pipeline Authority, which recently analyzed the wells. He says most of the 140 wells in the Bakken that have been refractured saw an increase in oil production from 200,000 to 250,000 barrels.

    California’s Aliso Canyon natural gas storage facility cleared to resume partial operation --Aliso Canyon, California’s largest underground natural gas storage facility, was cleared on July 19 by the California Public Utilities Commission (CPUC) and Division of Oil, Gas, and Geothermal Resources to increase injections above earlier imposed limits. The facility has been undergoing extensive testing since a leak was detected in October 2015 and stopped in February 2016. Owned and operated by the Southern California Gas Company (SoCalGas), Aliso Canyon has a total working storage capacity of 86 billion cubic feet (Bcf) of natural gas, or about 64% of the SoCalGas total. After the leak was detected, the storage level allowed by the CPUC was reduced to 15 Bcf, with any further withdrawals requiring regulatory approval.  Once Aliso Canyon resumes limited operations, the facility’s maximum working gas storage level will be limited to a maximum of 23.6 Bcf, about 28% of the facility’s maximum capacity prior to the October 2015 leak. SoCalGas can withdraw natural gas when all three conditions are met: when natural gas is needed for reliability, after the other fields are at full usage, and after other steps have been taken to reduce or shift demand. As of July 23, those fields were collectively about 80% full, based on data provided by SoCalGas.  Each of the 114 wells at the Aliso Canyon facility has been reviewed since the leak was contained. About 60% of the wells have been taken out of operation and isolated from the facility. The remaining wells are subject to several safety measures, including real-time pressure monitors, daily infrared leak detection, routine aerial monitoring for methane, and new steel tubing and seals inside the wellbore.

    U.S. shale boom less potent than expected, new data shows -  New data shows the surge in shale drilling hasn't lifted U.S. oil production as much as expected.In a monthly report on Monday, the Energy Department said the nation's daily output rose 0.6 percent to 9.17 million barrels in May, well below its original forecast of 9.32 million for that month.Texas outpaced the rest of the country, boosting output by 2.3 percent, or 78,000 barrels a day, as the oil fields in the Permian Basin surged. In New Mexico, parts of which share the Permian, production rose by 14,000 barrels a day. Colorado put out an extra 10,000 barrels a day.But other oil-rich states stalled out. In Alaska, Louisiana, Oklahoma, North Dakota and Wyoming, oil production collectively dropped nearly 45,000 barrels a day in May. It's another sign the oil industry's uneven recovery has left several U.S. oil fields behind as drillers focus on the prolific Permian. At the end of each month, the Energy Department releases a report on U.S. oil production that is based on a survey of producers. The agency's more frequent, weekly report – its first pass at calculating U.S. oil production – is widely considered less accurate than its monthly data because it is based on a formula rather than a survey. In this case, the monthly report showed U.S. oil production came in roughly 150,000 barrels a day lower than the weekly figures.

    U.S. shale producers cutting budgets as oil prices lag  (Reuters) - U.S. shale producers have started to trim their 2017 capital spending budgets, a tacit acknowledgement that such plans were too aggressive when crafted months ago before commodity prices weakened. This week alone, Anadarko Petroleum Corp, ConocoPhillips, Whiting Petroleum Corp and Hess Corp cut a combined $750 million from their capex plans, each citing weaker-than-expected oil prices. The quartet are just the first in a wave of oil industry earnings results expected over the next two weeks, with many analyst expecting peers including Noble Energy Inc and Marathon Oil Corp to cut their own spending in order to appease Wall Street's demands for fiscal restraint. "We sincerely believe the volatility of the current operating environment requires financial discipline," Anadarko Chief Executive Al Walker told investors on Tuesday. "Pursuing growth without adequate returns is something we will avoid." The cuts partly seem designed to appease Wall Street's fixation on cash flow, even though some companies have strong balance sheets. Shares of Conoco rose 1.6 percent on Thursday, with shares of Anadarko up 1.5 percent. Hess, for instance, cut $100 million from its 2017 spending plans despite having $2.5 billion in cash stored away. Anadarko cut $300 million, but has more than $6 billion in the bank. "In the current low price environment, we continue our efforts to reduce both capital and operating costs," Hess Chief Executive John Hess told investors on Wednesday.

    Shale Drillers Aren’t As Safe As You May Think -- It’s been the main headwind for OPEC’s oil output cut deal. Rising shale oil production in the U.S. has been making headlines for almost a year now. While initially the trend was met with understandable enthusiasm by lenders exposed to the industry, now both banks and analysts are beginning to worry about a repeat of what happened in 2014 and 2015 to shale oil, when unsustainable debt levels sank a lot of companies in the field.CNBC’s Tom DiChristopher reports that the average debt level of 38 U.S. drillers has fallen from more than 8 times EBITDA in the second quarter of last year to about 3 times EBITDA in Q2 2017, which is no doubt great news - but it doesn’t appear to have convinced analysts that the danger of more bankruptcies is behind us.DiChristopher quotes Stifel analysts as cautioning in a note from last week that “U.S. onshore growth is unsustainable in the $40-$45/bbl price environment and that activity would need to be reduced to better balance corporate cash flows and" capital expenditures.” This doesn’t really fit the sub-US$30-per barrel production-cost picture that drillers have been painting in the last months after the OPEC agreement boosted prices for a while and everyone rushed to drill more.Another analyst, Timothy Rezvan from Mizuho, said that some shale drillers may prefer to continue playing chicken with OPEC, as they insist they need to spend more to boost future earnings. But that may not be the wisest game, as they would need a consistent price rally to justify this spending. There is no guarantee of such a rally in the medium term, which is what makes this game so very risky. These warnings are not new. In May this year, S&P Platts analyst Nicole Leonard warned that shale drillers with heavy debt loads won’t be able to survive another price crash. Leonard forecast that prices will rebound to US$60 a barrel as OPEC extends its cut agreement and driving season prompts hefty inventory draws. Both these things did happen, but prices have just now ticked above US$50 a barrel after OPEC announced yet another meeting to try to improve compliance rates, and after Washington indicated further sanctions against Venezuela are becoming increasingly certain.

    Analysts Rake Over the Oil Patch, Chop Price Targets - When West Texas Intermediate (WTI) crude oil futures closed above $50 a barrel on Monday, after rising nearly 9% in the month of July, it seemed that the benchmark level might be able to hold. Those hopes were splintered when crude dipped below the $50 level on Tuesday and fell below $49 on Wednesday.Credit Suisse last week even cut its long-term price forecast for WTI from $62.50 to $57.00 a barrel in 2020. The bank doesn’t even think the market will return to supply-demand balance until 2019. Societe Generale analyst Irene Himona cut her forecast for Brent crude from $55 a barrel by the end of this year to $50, implying a WTI price about $2 to $3 below that level. These reduced forecasts for prices not only affect producers. The outlook for oilfield services firms and other oil patch players also has dimmed. A number of stocks saw lowered earnings estimates and price targets this morning from several analysts. Here’s a brief summary.

    Macroeconomic risks for the oil industry: Kemp (Reuters) - The global oil industry now appears to be in the early stages of a cyclical expansion which is likely to see prices rise over the next few years, slowly at first but then accelerating later.Deep and long cycles in oil prices have been the defining characteristic of the industry since the 1860s ("Crude volatility: the history and the future of boom-bust oil prices", McNally, 2017).The boom-bust cycle which started in late 1998, with prices briefly below $10 per barrel, and was only briefly interrupted by the recession of 2008/09, ended in January 2016, with prices briefly below $28.In the 18 months since then, the industry has returned to an expansion phase, with a gradual increase in prices and drilling activity, much of it centered on the shale plays of North America.Most of the industry’s cyclical indicators (production, consumption, stocks, investment, employment, prices, costs) point to a sustained upswing in activity that is likely to continue in the short and medium term. Forecasting future movements in oil prices will always be subject to an enormous amount of uncertainty owing to the complex and non-linear dynamics of the oil market and all its sub-systems. “We’ve never been any good at predicting these cycles, neither when they occur nor their duration. We don’t spend a lot of time even trying,” Rex Tillerson observed in 2016, when he was still chief executive of Exxon. Price predictions have proved a regular graveyard for the reputations of even the most skilled oil analysts. But with the oil industry just emerging from the deepest slump in a generation, cyclical positioning strongly suggests that prices are more likely to move higher rather than lower in the next few years ( The main uncertainty centres on how far and how fast oil prices and the industry’s costs will rise in the years ahead.

    Vladimir Putin opposes US fracking because it threatens Russia's energy exports - Canada Free Press - Russian connections to anti-fracking activism in the United States underscore Russian President Vladimir Putin’s dedication to keeping Eastern Europe dependent on the oil and natural gas which flows from its state-owned energy giant, Gazprom. Russia has successfully stopped fracking efforts in Eastern Europe through phony environmentalist and media campaigns, and is now attempting to disrupt the surge in American natural gas production that is quickly bringing the U.S. into energy independence, and creating threatening unwanted competition for the Russian energy in Europe. Exports from the U.S. via the oil and natural gas extraction process known as hydraulic fracturing – or “fracking” – poses a clear danger not only to Gazprom, but to the Russian government. One quarter of the regime’s revenues come from taxes paid by the energy giant, in which the government is a majority stakeholder. It is not surprising, then, that Gazprom is the only major energy company in the world to oppose the development of shale gas. For years its executives have claimed that fracking poses severe environmental risks; Alexander Medvedev, Gazprom’s executive chairman and head of Gazprom Export, has vowed that the Russian state and Gazprom are ready “to wage [ ] war on shale.” While many former Soviet bloc countries in Eastern Europe have joined NATO and the European Union in an attempt to distance themselves from their Moscow, their overwhelming dependence on Russian energy imports has prevented them from achieving complete independence. Gazprom supplies 30 percent of the European Union’s natural gas, and during a 2009 dispute with Ukraine showed the world that it can make Europe shiver if it turns the spigots off.

    TransCanada seeks additional commitments on Keystone pipeline system | Reuters: (Reuters) - TransCanada Corp launched an open season on Thursday for additional commitments for the transportation of crude oil on the Keystone pipeline system, according to a company statement. The open season will close on Sept. 28. The Keystone system, including the Keystone and Keystone XL pipelines, moves oil from Hardisty, Alberta, to markets in Cushing, Oklahoma, then onto the U.S. Gulf Coast. While the original Keystone is already operating, the controversial Keystone XL was delayed for years before being rejected by the administration of former U.S. President Barack Obama. In May, TransCanada's chief executive said lower oil prices and alternative export routes were complicating negotiations for shipper commitments on the XL pipeline project. He said the company did not have a firm deadline for concluding those talks. In March, President Donald Trump's administration approved Keystone XL. The expansion increases the capacity of the current Keystone system from Canada's oil-producing Alberta province to the Gulf of Mexico.

    Too soon to say whether Keystone XL will be built, TransCanada exec says - POLITICO: The company behind the Keystone XL pipeline has not yet determined whether there is enough demand for the project to justify actually building it, a top executive said today. It was the strongest acknowledgment from TransCanada to date that the nearly decade-long Keystone saga may end in failure — despite President Donald Trump's overwhelming support for the project, which he green-lit as one of his first acts in office. The company says it remains confident in the project. But it has been struggling to find enough customers, and it still needs approval from Nebraska regulators for the pipeline's route, which landowners and activists in the state have been fighting since the project was first proposed.TransCanada on Thursday called for an “open season” on Keystone XL, a process in which potential customers are invited to bid for contracts to ship oil on the pipeline, which would connect oil sands in Alberta with refiners and export opportunities in the U.S. The open season will last until September, TransCanada Executive Vice President Paul Miller said during the company’s second-quarter earnings call today. A decision on whether to follow through with construction of the $7 billion pipeline will come later, he said. "In November, we’ll make an assessment of commercial support and [Nebraska] approval," Miller said. "In the event we do decide to proceed on the project, we’ll need six to nine months” before construction could start. It would be another two years once construction begins before the project comes online, Miller added.

    Developer might not build Keystone XL pipeline | TheHill: The company that obtained a permit to build the controversial Keystone XL oil pipeline might decide not to build it. A TransCanada Corp. executive told investors Friday that it is still assessing interest in Keystone among the oil companies that would pay to use the Canada-to-Texas line, as well as seeking remaining regulatory approvals, and it will likely decide in November or December whether to build. The disclosure means that one of President Trump’s signature energy policy promises — to approve Keystone and get it built — may fall victim to commercial pressures and not get done. Trump approved Keystone’s permit to cross the border with Canada in March. It ended a significant chapter in the decadelong saga, ending years of delay under former President Barack Obama Barack ObamaObama team pushing Deval Patrick presidential run North Korea targeted emails of Clinton advisers: report Putin tests Trump with counterpunch on sanctions MORE — and a rejection of the permit in late 2015 — that the oil industry and Republicans frequently criticized. But Paul Miller, president of TransCanada’s liquid pipelines business, told investors in a quarterly earnings call that Keystone XL is far from certain. He said the Canadian company is launching an “open season” to actively seek out contracts for the $7 billion pipeline with a capacity of 830,000 barrels, through September. The company also needs approval from Nebraska for its route through that state. “Our assessment of these factors will really drive our investment decisions when we get into that November-December time frame,” he said.

    TransCanada eyes late 2017 for final decision on Keystone XL: official - TransCanada will take an investment decision this "November or December" on its long-proposed Keystone XL pipeline, with two key processes being completed within that timeframe, the president of its liquids pipelines unit, Paul Miller, said Friday. The Nebraska Public Service Commission is reviewing the company's regulatory application on the final route and the next hearing is in August, Miller said on an earnings call. The commission is due to take a decision by November, he said, on the 1,179-mile, 36-inch-diameter pipeline that will ship 830,000 b/d of crude from Hardisty, Alberta to Steele City in Nebraska. Also by November, TransCanada will assess shipper commitments for a binding open season now under way for Keystone XL and the existing Keystone pipeline, he said. The 600,000 b/d Keystone pipeline -- often referred to as the southern leg of Keystone XL -- gives Western Canadian producers an option to ship their crude directly to the US Gulf Coast from Hardisty. The Keystone pipeline will take Canadian barrels from Nebraska to Cushing, Oklahoma, from where it can be shipped to Nederland, Texas."These are the last two items we are left with," Miller said.  Based on talks with potential shippers, TransCanada is hopeful of taking a positive investment decision for Keystone XL later this year as "we see a growing demand" for Canadian heavy crude in the USGC, he said.

    Keystone XL: low oil prices, tar sands pullout could kill pipeline plan -  It will be close to three years, at least, before oil could possibly be moving through the controversial Keystone XL pipeline—if the pipeline is completed at all. Company officials now concede that after battling protests and regulatory hurdles for nearly a decade, market forces could scuttle the project. Canadian pipeline giant TransCanada first proposed the 1,700-mile project in 2008 to ship tar sands oil from Alberta to the Gulf Coast.  During the prolonged dispute, the price of oil fell from more than $130 a barrel to roughly $45 a barrel today, undercutting the prospects for production growth in the Canadian tar sands, which were used to justify the Keystone XL project at its outset. Along with changing market conditions, the emergence of competing pipelines scattered TransCanada's customer base. Now it's uncertain whether the company can sign enough new commitments from Alberta's beleaguered oil patch to move forward.The company recently embarked on an "open season" for Keystone XL, inviting commitments from companies to ship tar sands crude (or, alternatively, lighter oil from the U.S. Bakken fields, in North Dakota and Montana). At the same time, regulators in Nebraska are weighing the concerns of landowners, environmental organizations and indigenous groupswho oppose the pipeline. The state's Public Service Commission will hold a week-long hearing starting Aug. 7 on whether or not to approve the pipeline's proposed route through Nebraska.

    Environmentalists prepared to fight new oil and gas regulations in Quebec - Opponents of oil and gas development in Quebec say they’re prepared to ramp up their fight amid expectations that the provincial government could release new regulations on resource extraction in the coming weeks. In May, Natural Resources Minister Pierre Arcand said rules governing that activity would be released a month later and since then, both industry and opponents have been eagerly waiting for them. Carole Dupuis of the Regroupement vigilance hydrocarbures Quebec said her group will take their battle to communities in an effort to prevent an energy industry from taking off in the province. Patrick Bonin, a climate and energy campaigner for Greenpeace, said the push towards fossil fuel development runs counter to the province’s global commitment to combat greenhouse gas emissions.While the province may be better known for its wealth of hydroelectricity, it has plenty of natural gas. According to both the Quebec Oil and Gas Association and Canadian Association of Petroleum Producers, it’s believed to have enough natural gas to meet its needs for at least a century.

    Rio - How CFE's Nueces Header Will Dance Gas To Mexico - The current phase of Mexico’s natural gas pipeline buildout, led by the country’s Comisión Federal de Electricidad (CFE), is nearing completion. With 22 new pipelines built or under construction, the effort has dramatically reshaped Mexico’s natural gas supply portfolio. The capacity of the pipeline network within Mexico has been tripled with the addition of 18 new pipelines, while four new pipelines on the U.S. side of the border will add almost 6 Bcf/d of export capacity by late 2018. As part of the building spree, CFE also initiated development of two new gas headers to be built in Texas: a 6-Bcf/d header at Waha in West Texas that was recently completed by a consortium of Carso Energy, MasTec, and Energy Transfer and the 5-Bcf/d Nueces Header, now under construction by Enbridge at Agua Dulce in South Texas. Today, we discuss CFE’s Nueces Header and its role in moving more gas south. We last looked at CFE’s pipeline buildout in Part 4 of our Waha blog series, “It Was Good Living With You, (W)aha.” In that blog, we reviewed the current status of the gas pipelines within Mexico and the header system CFE initiated in the Permian. Earlier this year, we posted a series of blogs focused on Agua Dulce in conjunction with our “I Saw Miles and Miles of Texas” Drill Down series. Today, we shift our focus back to South Texas and the 5-Bcf/d Nueces Header being built by Enbridge at CFE’s request.

    Why US LNG won't face Australia's natural gas supply problem.  The U.S. and Australia have been ramping up their LNG exports — Australia already is the world’s second-largest LNG exporter after Qatar and the U.S. will soon rank third. Two recent events highlight the difference between the two countries and their natural gas markets. First, in June the Australian prime minister acted to curtail LNG exports next year because of gas-supply shortages affecting domestic consumers. Second, on July 19, the Potential Gas Committee released its biennial analysis of recoverable gas resources in the U.S.; its findings support the view that U.S. LNG exports can continue growing without causing domestic supply constraints. Today we review the PGC report and the Australian LNG/supply situation, then compare the two markets. There are real similarities — and noteworthy differences — between the U.S. and Australia. They’re similar in size (Australia’s land mass is slightly smaller than the Lower 48).  Big differences stand out, though. Australia’s population is only 24 million, an astounding 300 million fewer than the U.S. — heck, Texas alone has four million more people than The Land Down Under. And, as we will discuss today, there appears to be a big gap between the U.S. and Australia in the respective capacity of their natural gas sectors to accommodate a big ramp-up in LNG exports.

    Seasonality of U.S. distillate consumption and stock levels is declining  --Changes in demand trends, trade patterns, and fuel specifications have significantly reduced the role of traditional seasonal factors in driving U.S. distillate markets. Historically, distillate use in the United States was highly seasonal because of its use as a home heating fuel. In recent years, use of distillate as a heating fuel has decreased significantly, while its use as a transport fuel has remained relatively flat (Figure 1). Distillate stocks, which were traditionally drawn down during winter in recent years, have shown little change or even have built over the October-March winter heating season (Figure 2). However exports of distillate fuels, a growing portion of the overall disposition of U.S. distillate production, have actually become more seasonal in recent years, but because the net export peak occurs in the summer months, this change serves to offset the winter peak in domestic heating demand (Figure 3). Distillate fuel has a variety of uses (Figure 1), primarily on-highway transportation for both light- and heavy-duty vehicles. Distillate fuel is also used as a heating fuel in homes and businesses; as a fuel for certain industrial processes, agriculture, and farming; and, to a lesser extent, as a fuel for electricity generation. While use of distillate for home heating has decreased, the share of distillate used for transportation has increased. U.S. consumption of distillate went from 2.9 million barrels per day (b/d) in 1985 to 4.0 million b/d in 2015. In 1985, 504,000 b/d (18%) of U.S. distillate sales/deliveries were to residential customers, presumably for home heating use, and 1.1 million b/d (40%) of sales/deliveries were to on-highway transportation customers. In 2015, the residential customer sales/deliveries were down to 260,000 b/d (7%), while on-highway transportation sales/deliveries increased to 2.5 million b/d (64%).

    Trump Signs Russia Sanctions Bill. Will It Impact Oil and Gas Development? --   On Wednesday, Trump was forced to sign a new sanctions bill. As Congress had voted for the bill in such large numbers, the president could not veto it.  Therefore Trump grudgingly signed signed the bi-partisan bill "for the sake of national unity," while attacking it as "seriously flawed" and "unconstitutional."   He said, "The bill remains seriously flawed—particularly because it encroaches on the executive branch's authority to negotiate. Congress could not even negotiate a healthcare bill after seven years of talking."  The president added, "By limiting the Executive's flexibility, this bill makes it harder for the United States to strike good deals for the American people, and will drive China, Russia, and North Korea much closer together."  In typical Trump fashion, he also bragged, "I built a truly great company worth many billions of dollars. That is a big part of the reason I was elected. As president, I can make far better deals with foreign countries than Congress."  But Trump was not the only one who criticized the legislation, according to the Financial Times . The Russians also attacked Trump as demonstrating "complete impotence, in the most humiliating manner."  The oil and gas industry was not happy, either. The paper noted, "International oil and gas companies have warned that the new sanctions, if signed into law, could cause unintended harm to billions of dollars worth of projects, due to the potentially broad interpretation of some clauses in the bill." The decision to expand sanctions to cover oil and gas export pipelines could now undermine some $4.75 billion worth of funding for projects, such as Gazprom's Nord Stream 2 gas pipeline from Russia to Germany, and Chevron's $37 billion expansion of the Tengiz project in Kazakhstan, whose oil flows through Russia to the Black Sea, according to the FT.

    U.S. considering some sanctions on Venezuela oil sector - (Reuters) - The Trump administration is considering imposing U.S. sanctions on Venezuela's vital oil sector in response to Sunday's election of a constitutional super-body that Washington has already denounced as a "sham" vote, U.S. officials said. The measures, which could be announced as early as Monday, are not expected to include a ban on Venezuelan oil shipments to the United States -- one of the harshest options -- but could block sale of lighter U.S. crude that Venezuela mixes with its heavy crude and then exports, the officials told Reuters. While no final decisions have been made, the officials, who spoke on condition of anonymity, said the United States could also target further senior Venezuelan officials. But the timing of any new individual sanctions, such as those imposed on 13 Venezuelan figures last week, remained uncertain. Other options still under consideration, the officials said, include various measures to restrict access by the Venezuelan government and state oil company PDVSA to the U.S. banking system, the sources said. But it was not clear whether the U.S. administration was ready to take such action or would instead hold it in reserve if further escalation is deemed necessary following the Venezuelan ballot, which was widely boycotted and sparked deadly protests. Washington has backed the Venezuelan opposition's view that the vote is intended to cement dictatorship. The new round of sanctions is intended to make good on President Donald Trump's threat of "strong and swift economic actions" if Venezuelan President Nicolas Maduro went ahead with Sunday's election of a controversial new congress, the officials said. But the U.S. response, though expected to be the toughest yet against Maduro's leftist government since Trump took office, is also being calibrated to avoid causing further suffering to the Venezuelan people or seriously damaging U.S. economic interests, the officials said.

    US Treasury preps Venezuelan oil export sanctions: source - The US Treasury Department is crafting sanctions which would prohibit the import of Venezuelan crude oil into the US, one of several sanctions options the White House is considering in response to an expected vote Sunday in Venezuela, an administration source said Tuesday. But the Trump administration, which has studied the impact of the potential crude oil import sanctions on the US refining sector, is not expected to impose Venezuelan oil sanctions, at least in the near term, the source said. "Treasury is preparing them, but that doesn't mean they'll implement them," the source said. The Trump administration has yet to decide on its expected sanctions response to the Sunday vote called by Venezuelan President Nicolas Maduro to elect a constituent assembly to redraft the country's constitution, sources, both in and outside the administration, said Tuesday. Several sources said they expect the initial response from the Trump administration would be to sanction individuals and some institutions within Venezuela. The administration may also move to restrict some US exports of petroleum products, including gasoline and distillate fuel oil, one source said.

    U.S. Oil Sanctions Could Push Venezuela To The Brink -- On July 30, Venezuela’s government moved forward with an internationally-criticized special assembly that will rewrite the constitution, a move widely seen as an attempt to neuter the opposition and consolidate power. As many as 12 people died in street protests and clashes with police. The vote was called a “sham” and a “step toward dictatorship” by the U.S., and it has deepened an already acute political and economic crisis for the South American nation.The U.S. had threatened to levy penalties against the Venezuelan government in the lead up to the vote, and last week it slapped sanctions on 13 top Venezuelan officials, a move seen as a more mild option since it did not target Venezuela’s oil industry.But after proceeding with the vote, the U.S. has decided to step up the pressure. The Trump administration pushed off potentially catastrophic measures targeting Venezuela’s oil sector, but only for now. The U.S. imports about 800,000 barrels per day (bpd) of Venezuelan heavy crude; cutting that off could potentially lead to full-on collapse in Venezuela and would likely also deepen the already terrible humanitarian crisis.Venezuela produces a little under 2 mb/d, but aside from the exports to the U.S., the bulk of the remaining production is earmarked for a handful of countries for little cash or below-market prices. Venezuela has to send large volumes to China as repayment for past loans, and it also sells oil on the cheap to Cuba and other Caribbean countries as part of the increasingly irrelevant Petrocaribe program. In other words, selling oil to the U.S. is where the Venezuelan government makes most of its money. So, putting an embargo on Venezuelan oil into the U.S. could push the country into default. The U.S. Treasury Department has considered this option, but so far it has opted not to take this route

    Venezuelan sanctions would tighten already tight USGC sweet/sour spreads -- US Gulf Coast refiners expect heavy crudes to become more valuable as slowing crude flows from some OPEC producers are felt, particularly if sanctions are enacted against Venezuela, company executives said Thursday.Imports of heavy crudes in the USGC from some key suppliers like Saudi Arabia have dropped as they rein in output to support higher crude prices. Venezuela, however, remains a key exporter of heavy crude into the USGC, and any cutback in supply would raise crude prices."Obviously the Venezuelan crude coming into the Gulf Coast is important. We participate in that, we certainly buy heavy spot cargoes from Venezuela during most months," said Mike Palmer, Marathon Petroleum's head of supply on the company's second-quarter results call Thursday."While we have had no difficulty replacing the crude that OPEC has cut, there is not as much sour crude into the Gulf as there had been before OPEC cuts," he said. "If that crude was no longer available because of sanctions then we would have to replace that crude from somewhere else." Marathon is the third-largest US refiner with 1.8 million b/d of refining capacity in seven refineries, including three on the USGC with a capacity of 1.1 million b/d. It also has moved Venezuelan crude up the Capline pipeline to its 273,000 b/d Catlettsburg, Kentucky, refinery on occasion. Marathon in Q2 processed 1.147 million b/d at its USGC plants, of which 74% was sour crude.  Venezuela supplied in April 21.3 million barrels, or 710,000 b/d, to USGC refiners, out of a total of 65.8 million barrels of imported into the region during the month, Energy Information Administration data showed.

    U.S. oil refiners pare exposure to Venezuelan crude imports --U.S. refiners are shifting away from processing heavy crude, lessening the potential impact on their businesses and motorists of any supply disruptions from Venezuela as the Trump administration considers new sanctions on the country. Deliveries of Venezuelan crude to Citgo Petroleum, the U.S. refining arm of state-run Petroleos de Venezuela slipped to about 70,000 barrels per day (bpd) last month from an average of some 200,000 bpd earlier this year. Phillips 66, the fourth-largest importer of Venezuelan crude this year, received about half its expected supply in June. U.S. imports of Venezuelan crude fell 32 percent in June to a 13-year low of 491,000 bpd, according to Reuters data. PDVSA’s exports have declined this year as production and shipping problems cut its ability to meet commitments. Valero, the largest importer of Venezuelan crude oil in June, plans to shift its U.S. refineries this quarter to run the maximum amount of light sweet crude possible, its officials said, as heavy oil becomes more expensive due to less availability of OPEC-supplied crudes. That has narrowed the discount versus lighter grades in recent months. Gulf Coast refiners, which can process up to 9.6 million bpd, traditionally preferred heavy, sour crudes. But OPEC output cuts, less supplies coming from Latin American producers and growing supplies of shale oil have improved the economics of running lighter crudes. Heavy oil producers Mexico and Colombia also have reduced shipments this year amid declining output. Venezuela, Mexico and Colombia combined trimmed production by almost 10 percent to 5.38 million bpd in the first five months of 2017 versus the same period of last year, according to official figures.

    OPEC cuts hurt US refiners but help Canada’s oilsands - As supplies of lower priced heavier crude blends with higher sulphur content exported by OPEC have waned, the key price differential between benchmark light Western Texas Intermediate (WTI) crude and heavier crude blends entering the U.S. market has narrowed. The differential between WTI and Western Canadian Select, the benchmark for Canadian heavy crude, has shrunk to about $10/bbl from the $15/bbl range earlier this year as U.S. crude inventories contracted to 483 million barrels on July 26, down from 532 million barrels in April, according to the U.S. Energy Information Administration. As stronger heavy oil prices benefit Canadian oilsands and heavy oil producers, they also cut into the profit margins of U.S. Gulf Coast refiners. The narrow differential is a welcome development for Canadian heavy oil producers and could get even better in the near-term if the Trump administration blocks imports from Venezuela, which predominantly exports heavy crude to the U.S.

    Canadian heavy oil plugs gap left by OPEC, Latam  (Reuters) - Canada's struggling oil market has found something of a lifeline as traders scramble for heavy crude due to OPEC production cuts and sinking Latin American output. Output has fallen in Organization of the Petroleum Exporting Countries and non-OPEC Latin American countries such as Mexico and Colombia, leading refiners as far away as China to look to Alberta's oil sands to fill the gap. The interest has boosted the price for heavy Western Canada Select (WCS) oil, which is within range of its tightest discount to U.S. crude ever. Canadian heavy oil is an easy substitute for Middle Eastern and Latin American grades, and the rising demand represents a rare bright spot for the oil sands, which have been hit hard by falling prices and the high cost to produce and blend Alberta's heavy, tar-like bitumen. "We've been seeing a structural change (in the market) since OPEC cut medium sours, and Canadian heavy fits beautifully in there," one trader at an oil sands company said. OPEC is attempting to rebalance global markets by cutting sour crude output, keeping light sweet barrels flowing as U.S. shale producers are pumping at record levels. Output in Venezuela, an OPEC member, fell 11 percent in the first five months of the year to a 27-year-low due to underinvestment and infrastructure problems. And as political turmoil mounts there, the United States could impose sanctions that would hinder Venezuela's ability to sell crude. Mexico's production fell 8 percent in the first five months of 2017 from a year ago as a result of long-running natural production declines in aging oilfields. Colombia's dropped 11.5 percent as a consequence of rebel attacks on pipelines. Venezuela, Mexico and Colombia produce about 5.3 million barrels per day, while OPEC has cut about 1.8 million bpd in supply, most sour crude.

    Taxpayers Give Billions in Fossil Fuel Subsidies, Lose Trillions to Related Health Costs - Health campaigners said the energy policies of the world's richest countries are inflicting a double burden on their citizens, not only using their taxes to pay fossil fuel subsidies, but also loading huge health costs on them. The work of the Health and Environment Alliance, HEAL , the report said that although fossil fuel combustion causes deadly air pollution and climate change , virtually all governments spend vast sums of public money—their citizens' taxes—on supporting the oil, gas and coal industry in fossil fuel energy production. A report by HEAL said the health costs associated with fossil fuels are more than six times higher than the subsidies the industry receives in the G20 group of the globe's leading industrialized countries. The G20 agreed in 2009 to phase out the subsidies , but HEAL said that on average, in countries belonging to the bloc, the health costs associated with fossil fuels are far greater than the subsidies: $2.76 trillion against $444 billion. HEAL cited a 2015 report by the UK-based think tank the Overseas Development Institute (ODI), which found that "G20 country governments' support to fossil fuel production marries bad economics with potentially disastrous consequences for climate change."  HEAL's own report said the subsidies support an industry that causes premature deaths, ill-health and huge health costs worldwide, in stark contrast to the 2015 Paris agreement . It urged policymakers to end subsidies and use the public money saved to support healthy energy or health care investments instead.

    Britain Announces Fresh Bidding Round For North Sea Oil & Gas Blocks - The British Oil and Gas Authority has announceda fresh bidding round for 813 oil and gas blocks in the North Sea. This is the 30th offshore licensing round for local hydrocarbon deposits and it will focus on mature fields, the authority said in a press release.The total area that will be tendered stands at 114,426 sq km or over 28 million acres, and includes prospects as well as discoveries that have remained undeveloped.Bids will be accepted until November 21 and the blocks will be awarded in the second quarter of 2018, OGA said, adding that the 30th round follows an auction organized earlier this month, in which 10 bidders won 12 exploration licenses in the British continental shelf.In March this year, in the 29th licensing round, the authority awarded 25 exploration licenses for 111 blocks and part blocks to 17 companies. That round focused on frontier, or untapped, areas in the British sector of the North Sea. As Reuters reported at the time, the 29th bidding round attracted meager interest from investors. In fact, bids were the fewest in the last 14 years due to the high production costs for oil and gas exploration in the North Sea. In that round, the greatest number of licenses went to Big Oil players with an established presence in the North Sea, such as Shell, Statoil, and BP.

    Fracking giant Ineos gets protest injunction - The courts handed a big present to Ineos, the largest shale gas exploration company in Britain, on Monday. The High Court granted the giant firm an interim injunction against potential anti-fracking protesters. It covers eight named locations. They included two proposed shale gas sites in Derbyshire and Rotherham, as well as company offices and property belonging to site landowners. It also applies more widely than injunctions sought by previous oil and gas companies. It covers routes to the proposed exploration sites and to activities undertaken by Ineos employees and members of its supply chain. This includes any depot, equipment, people and operations. It even outlaws actions such as slow-walking. Ineos Shale also recently threatened the National Trust with legal action over access to land in Nottinghamshire. The company wants to carry out seismic testing there and said, “The National Trust is taking an overtly political position.” As the injunction was granted, direct action protests continued at Cuadrilla’s Preston New Road shale gas site near Blackpool. The coordinator, Reclaim the Power, said there had been disruptive action every working day in July. More than 70 people have been arrested. 

    Public support for fracking in the UK at record low, official survey reveals --Public support for fracking has reached a record low, according to the latest government research. A survey by the Business and Energy Department showed just 16% supported the controversial process of shale gas extraction, down from 21% last year and the lowest since the study was launched five years ago. Just 13% of the 2,000 people questioned said they knew a lot about fracking, with just under half knowing “a little.” Groups opposed to fracking said the findings showed that the industry was pulling energy policy in the wrong direction. Elisabeth Whitebread, energy campaigner at Greenpeace UK, said public opinion on fracking continued to “freefall”, adding: “Communities don’t want the unnecessary industrialisation of our countryside for shale gas we don’t need. “More than three-quarters of people support renewables, so the government should listen to their own opinion polls, stay true to their manifesto promise and support offshore wind and solar instead of a new fossil fuel industry. “Concern about climate change is at its highest since 2012, and to meet our climate targets, we must leave fossil fuels in the ground. The fracking industry is pulling UK energy policy in entirely the wrong direction and the public is right to be concerned.” Rose Dickinson, Friends of the Earth campaigner, said: “This makes bad reading for the industry because they know they are desperately fighting an unwinnable battle for support. “The extent to which this industry has failed to win over the public is undeniable. Opposition is increasing not only where fracking is proposed, but across the whole country.” A Business and Energy Department spokesman said: “There are a lot of myths about the alleged risks of fracking that are not backed up by evidence, and this survey shows that the vast majority of people asked said that they do not know a lot about it. 

    OPEC and the oil barons face a slow death by electrification - Opec, Russia and Big Oil thought they had half a century to prepare for the end of the internal combustion engine. At best they have a decade before the threat turns deadly serious.The twin announcement by France and Britain – within two weeks of each other – to ban sales of petrol and diesel cars by 2040 is an earthquake in the energy world.Others are moving in parallel. A non-binding resolution of the German Bundesrat [its upper house of parliament] has called for a prohibition by 2030. Norway already has such a target by 2025 and the catalytic effect is spectacular: sales of electric vehicles (EVs) reached 42 per cent of all cars in July.China’s new plan stipulates that zero-emission vehicles must make up 8 per cent of total sales next year, rising to 10 per cent in 2019, and 12 per cent in 2020. This is an even bigger earthquake. Those German and Japanese manufacturers that do not yet produce EVs – or not enough – face being shut out of the world’s largest car market.Once governments reset policy in this fashion, markets rush to take advantage. They accelerate the timetable. The inevitability factor turns against the status quo and shifts with pent-up force in a new direction. Morgan Stanley expects EVs to capture 70 per cent of the European market by mid-century. On the one hand it costs ever more to develop fossil-fuel cars that meet tightening rules on CO2 emissions and particulates (NOx). On the other, the cost of electric batteries keeps falling.

    Analysis: First signs of stronger physical oil market in the Atlantic Basin start to emerge - The first signs of a sturdier physical oil market are beginning to emerge as evidenced by the healthier state of light sweet crudes in the Atlantic Basin, buoyed by robust demand from global refiners supported by healthy margins and refined product cracks. Traders told S&P Global Platts that the fundamentals in the oil market are strengthening as these light sweet crudes are suddenly selling swiftly, as a stronger middle distillate and gasoline complex are making such crude more appealing to refiners. The beleaguered light sweet barrels, especially those from Nigeria, which over the past few years have been selling sluggishly compared to their sour and heavier counterparts, are suddenly seeing a temporary lease of life. Traders have said the pace of trading for the September Nigeria loading program has been noticeably quicker than in previous months, as refiners from a number of regions scramble to take advantage of buoyant margins before the onset of autumn maintenance. "The Nigerian market is getting into shape," said a WAF trader. "The overhang has been reducing every month and the Indians, Americans and Brazilians have all been buying. The market has strengthened on lights and sweets across the Atlantic Basin." Differentials for light sweet crude in Nigeria have mirrored the strength in the Mediterranean and North Sea in the past few weeks, with grades such as Qua Iboe rising to the highest levels of the year this week. Qua Iboe was assessed at a $1/b premium to forward Dated Brent Thursday, its highest level since mid-December last year. This is also being reflected on the oil futures market along with the bullish factors that include the steady drawdown in US crude stocks and a recent pledge by Saudi Arabia to limit exports to 6.6 million b/d in August. There is a very narrow contango in the front two to three months of the ICE Brent curve but there is a brief backwardation in the back end amid ciphers of tightening fundamentals.

    BP's Q2 2017 European natural gas price realization slips to $4.48/Mcf -- BP said Tuesday its average realized natural gas price in Europe slipped to $4.48/Mcf ($4.36/MMBtu) in the second quarter of 2017, a fall of 17% on the previous quarter and of 3% year on year, as European gas wholesale prices dipped compared with the first quarter. BP -- which is more exposed to gas prices in the US than in Europe -- also said its global realized gas price was down quarter on quarter, but up on Q2 last year at $3.19/Mcf as its US realized price rose year on year. European majors were seeing a steady improvement in realized gas prices in Q4 2016 and Q1 2017 as wholesale prices recovered from multi-year lows over the course of 2016. But gas prices in Europe slipped in Q2 compared with Q1 on milder temperatures and robust supply. According to Platts assessments, the average Dutch TTF day-ahead price in Q2 was $5.04/MMBtu and the equivalent UK NBP price was $4.84/MMBtu. That compares with $5.77/MMBtu on the TTF in Q1 and $6.00/MMBtu on the NBP. BP's realized European price had fallen to a multi-year low in Q3 2016 of just $3.94/Mcf. US GAS PRICE RECOVERY In the US, BP's Q2 realized gas price averaged $2.32/Mcf, a significant improvement from just $1.53/Mcf in the same period of 2016. It was, however, lower than than the $2.50/Mcf realized in Q1.

    Stopping Nord Stream 2 -- Encouraging developments took place this week in Ukraine’s quest to get European nations to back out of a partnership with Russia to build the Nord Stream 2 pipeline. The $10 billion pipeline would transport up to 55 billion cubic meters of gas under the Baltic Sea, from Russia to Germany, and bypass Ukraine’s gas transportation network. Nord Stream 2 could be completed by the end of 2019. Morally, it’s wrong to be helping Russia’s economy while hurting Ukraine’s simultaneously. But Europe also needs economic reasons to ditch the project. This is where U.S. help in supplying liquified natural gas and encouragement of other, renewable energy sources will help. It was heartening to read the comments of Roderich Kiesewetter, the point person for German Chancellor Angela Merkel’s bloc in parliament’s foreign affairs committee on July 27. As reported by Bloomberg, Kiesewetter said Nord Stream 2 “mustn’t come at the expense of Ukraine or Eastern Europe” and welcomed the U.S. Congress adoption of sanctions on Russia to rein in U.S. President Donald J. Trump.

    Ban lift on German OPAL line will let Russian gas flow - Auctions for new partially regulated transport capacities of the German OPAL gas pipeline restarted on August 1 as the German Federal Network Agency (Bundesnetzagentur)‏ lifted its ban in line with Court of Justice of the European Union (CJEU) and Düsseldorf Higher Regional Court.This allows OPAL Gastransport, which operates the 470-kilometre pipeline running in a southerly direction from the Nord Stream landing point in Lubmin near Greifswald as far as the Czech Republic, to market the previously mostly unused OPAL capacities. Along the route, the natural gas pipeline with a transport capacity of 36 billion cubic metres of gas per year crosses the federal states of Mecklenburg-Vorpommern, Brandenburg and Saxony.“Lifting the suspension of auctioning of OPAL’s non-exempted capacity, means that the 2016 EC exemption decision will remain in force at least until 2019, when CJEU is expected to make a judgement,” Katja Yafimava, a senior research fellow at the Oxford Institute for Energy Studies, told New Europe on August 1.She explained that restart of auctions, which were suspended for half a year as a result of provisional suspension by the courts of the 2016 European Commission exemption decision in response to Polish request, means that Russian gas giant Gazprom would be able to book at least 80% of OPAL capacity and potentially up to 100% should there be no interest from third parties thus allowing higher utilisation of capacity in Nord Stream-1. “Gazprom would be able to do so at least until when CJEU makes a judgement in 2019. Should the CJEU uphold the 2016 EC exemption decision – which I believe it will – Gazprom would be able to continue to do so afterwards,” Yafimava said, adding that higher utilisation of Nord Stream-1 would indicate that there is demand on part of Gazprom for additional export capacity, for example Nord Stream-2.

    Exclusive: Sanctions gap lets Western firms tap Russian frontier oil | 4-Traders: A gap in U.S. sanctions allows Western companies to help Russia develop some of its most technically challenging oil reserves, and risks undermining the broad aim of the measures, a Reuters review of company results and media releases has found. When Washington imposed the sanctions on Moscow in 2014 over its annexation of Crimea and role in the Ukraine conflict, the U.S Treasury said it wanted to "impede Russia's ability to develop so-called frontier or unconventional oil resources". The restrictions were designed to prevent Russia countering declining output from conventional wells by tapping these hard-to-recover reserves which require newer extraction techniques like fracking, an area where it relies on Western technology. Three years on, however, Norway's Statoil is helping Kremlin oil giant Rosneft (>> NK Rosneft' PAO) develop unconventional resources, while British major BP (>> BP) is considering a similar project. Statoil is not breaching sanctions and nor would BP be doing so, but the cooperation highlights how sanctions have only been partially effective in curbing Western energy investment. The United States, having itself experienced a spike in oil output from tapping shale rock over the past decade, worded the measures to prohibit Western companies from helping Russia develop "shale reservoirs". It did not mention other lesser-known forms of unconventional deposits.

    Global trade recovery lifts diesel demand: Kemp (Reuters) - World trade is growing again which will give a big boost to middle distillates such as diesel used in the high-power engines that move almost all freight. World trade volumes grew by 5 percent in the three months to May compared with the same period a year earlier, according to the Netherlands Bureau for Economic Policy Analysis (CPB).Trade growth came close to a standstill in the first quarter of 2016 but has been accelerating gradually since then especially from the fourth quarter onwards ("World Trade Monitor", CPB, May 2017).Volumes are now rising at the fastest rate for six years though growth is still comparatively slow in historical terms ( Growth has accelerated in all regions, with the exception of Africa and the Middle East, where economic activity is still depressed owing to low oil prices. Slumping commodity prices between the middle of 2014 and early 2016 hit consumer spending and business investment in most developing countries hard.The result was a sharp slowdown in trade as household incomes fell and new oil, gas and mining projects were postponed or cancelled ("Commodity slump stalls global trade growth", Reuters, Oct 2016). But the stabilisation and increase in commodity prices, including oil, is now helping support faster trade growth in 2017. Mid distillates account for around 35 million barrels per day of global oil consumption, most of which is used to transport freight ("Statistical Review of World Energy", BP, 2017).Worldwide distillate consumption fell by 0.5 percent in 2016, the first annual decline since the global financial in 2009 and only the third since 1990 ( was hit by a combination of the trade slowdown and back-to-back mild winters in much of the northern hemisphere in 2015/16 and 2016/17.Distillate demand grew more slowly than oil consumption as a whole, which was up 1.6 percent in 2016, and much slower than gasoline, up 2.4 percent.

    Maritime chokepoints are critical to global energy security - The U.S. Energy Information Administration has released its 2017 World Oil Transit Chokepoints report. Chokepoints are narrow channels along widely used global sea routes for oil transport, with some so narrow that restrictions are placed on the size of the vessel that can navigate through them.   The inability of oil tankers to transit a major chokepoint, even temporarily, can lead to substantial supply delays and higher shipping costs, resulting in higher world energy prices. While most chokepoints can be circumvented by using other routes that add significantly to transit time, no practical alternatives are available in some cases. Chokepoints may also expose oil tankers to theft from pirates, terrorist attacks, political unrest, and shipping accidents.  By volume of oil transit, the Strait of Hormuz (leading out of the Persian Gulf) and the Strait of Malacca (linking the Indian and Pacific Oceans) are the world's most important strategic chokepoints. The Cape of Good Hope, near the southern tip of Africa, is a major oil trade route and potential alternate route to certain chokepoints. Ships carrying crude oil and petroleum products transiting certain chokepoints are in some cases limited by size restrictions. The global crude oil and refined product tanker fleet is typically classified using the Average Freight Rate Assessment (AFRA) system that was first established by Royal Dutch Shell many years ago and is now overseen by an independent group of shipping brokers.  The AFRA system classifies tanker vessels according to deadweight tons—a measure of a ship's capacity to carry cargo. The approximate capacity of a ship in barrels is determined using an estimated 90% of a ship's deadweight tonnage, which is multiplied by a barrel-per-metric-ton conversion factor specific to each type of petroleum product and crude oil, because liquid fuel densities vary by type and grade.

    Nigeria's NNPC in funding deals with foreign partners to develop oil fields -- Nigerian National Petroleum Corp said Thursday it had agreed new funding arrangements with four foreign partners to develop new oil fields in the Niger Delta that will substantially increase Nigerian reserves and daily production. The first of the deals, with US major Chevron Corp., is for development of two offshore oil blocks OMLs 91 and 91 and is expected to add 211 million barrels of oil and 1.9 Tcf of gas to Nigerian reserves, and potential output of 30,000 b/d of oil equivalent, the NNPC added. The second agreement was signed with the Shell, Total and Eni joint venture partnership for the development of several onshore and offshore oil fields that had long been delayed due to a lack of funds. "The deal (Project Santolina) is for an accelerated upstream production comprising of 156 development activities across 12 OMLs and 30 fields in the Niger Delta," NNPC said. Lack of funds has been a major stumbling block for NNPC, which manages the Nigerian government's average 57% interest in joint ventures business with foreign oil companies, in its efforts to bolster Nigeria's oil output. In June, NNPC singed a deal with indigenous company First Exploration and Production and oil service giant Schlumberger to provide $700 million to develop two shallow water fields that will add 50,000 b/d of crude to Nigeria's output. Also last December, Nigeria negotiated a deal with NNPC partners, Shell, ExxonMobil and Chevron, for the repayment of over $6 billion debt owed to the companies for funding oil and gas projects.

    Government vows to halt oil production if cost remains high -- International Oil Companies (IOCs) and their indigenous counterparts may soon be forced to halt operation, as the cost of producing a barrel of crude oil remains high. The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, says there is no way the country can keep producing, while the prices of crude remain low. The minister said that the oil sector has suffered infrastructural deficit of over $15 billion (N4.59 trillion) as many investment has been put on hold due to the low oil prices. At an international conference and exhibition organised by the Society of Petroleum Engineers in Lagos, he said it is better for Nigeria to stop crude oil production than to produce at a high cost. The minister said that government is compelled to work towards drastic reduction of cost of production because “there is no way this country will produce oil at this sort of swelling prices that we see; there will be no margins left for this country.”He said unlike other countries that have managed to reduce their production cost over the years, the cost of producing crude oil in Nigeria has remained high.Kachikwu said only companies that could drive down costs would be given favourable consideration in the oil sector. Besides, the President of Dangote Group, Alhaji Aliko Dangote, has said that the country will be able to retain over $7.5 billion (N2.295 trillion) yearly through import substitution from the construction of the Dangote Refinery.

    Global refiners brace themselves as China cements its oil market dominance (Reuters) - China is on pace to overtake the United States as the world's biggest oil importer this year, cementing its status as Asia's most pivotal oil market actor that will increasingly dominate the region's fuel trade. For the first time, China imported more crude oil in the first half of the year than the U.S., government statistics showed. China averaged 8.55 million barrels per day (bpd) versus 8.12 million bpd in the U.S., a trend that is expected to last.  The shift highlights the change in the center of gravity in global oil markets from West to East. Chinese state-run oil trader Unipec is now the world's biggest physical oil trader. By drawing more of the world's oil to its shores, China, the second-biggest oil consumer after the U.S., will play a crucial role in setting the global price of the commodity, especially as the crude futures market in Shanghai develops. China's import surge is being driven by the expansion of its refinery capacity. But, as the domestic demand has not materialized to soak up the fuel supply, China's exports of gasoline and diesel have climbed to record highs. This flood of products has caused headaches for competitors across Asia and depressed diesel profit margins to multi-year lows in 2016. "China is putting a lot of pressure on the traditional export hubs of Taiwan, Korea and Singapore to capture the market share within Southeast Asia and Australia," said Joe Willis, senior research analyst, Asia refining, at energy consultancy Wood Mackenzie.

    Saudi Arabia Growing Nervous Over OPEC Compliance - OPEC officials are hoping to limit the production of both Libya and Nigeria, as fears grow that the two exempted members are undermining cuts from the rest of the cartel. Saudi Arabia is also promising to lower its oil exports in order to take more supply off of the market. Saudi Arabia’s energy minister Khalid al-Falih reportedly cut short his vacation in order to attend the OPEC monitoring meeting in St. Petersburg on Monday, an unexpected move that put more weight on the details of the gathering. His attendance suggests OPEC is worried about the pace of rebalancing in the oil market, and also raises speculation about what OPEC might do next. OPEC’s Secretary-General Mohammad Barkindo said al-Falih decided to attend because of the meeting’s “strategic importance” and because of “the high expectations of the times,” the Wall Street Journal reported.The WSJ also said that al-Falih was “very nervous,” and he spent the weekend on the phone with various OPEC officials.There is a growing urgency from some members of the production cut deal to pressure Nigeria and Libya to agree to a cap on their oil production, as both countries have succeeded in ramping up lost output. “I think that as soon as these countries reach a stable production level, they must join other responsible producers and make their contribution to the measures aiming to rebalance the market,” Russia’s energy minister Alexander Novak said, according to TASS. Russia is not an OPEC member but joined in the pact to cut productionThe WSJ reported that one OPEC official said Nigeria would agree to cap output once it r  eaches 1.8 million barrels per day (mb/d). However, the significance of that is undermined by the fact that Nigeria still has room to grow production up to the supposedly agreed upon 1.8 mb/d cap. Nigeria’s output stood at 1.6 mb/d in June and it will take some effort to grow production by another 200,000 bpd.

    Saudi Oil Minister Met With Top Commodity Hedge Funds  -- Khalid Al-Falih, Saudi Arabia’s energy minister, met in private with some of the world’s top commodity hedge funds in July, taking the unusual step of personally canvassing investor views on the state of the market.  In the past, Saudi Arabian officials have disparaged hedge funds as unhelpful speculators that undermined OPEC’s quest for market stability. Last month’s meetings, described by people familiar with the encounters, signal the world’s largest exporter has reassessed the role of financial investors in the global oil market. Al-Falih met the oil investors and traders in London days before traveling to St. Petersburg where OPEC and non-OPEC ministers discussed the market, the same people said, asking not to be identified because the talks were private. Although Saudi officials have met in the past with hedge funds representatives, it’s the first time meetings involving the minister have been reported. Al-Falih met Pierre Andurand, the founder of an eponymous fund with more than $1 billion in assets, and Jonathan Goldberg, the former Goldman Sachs Group Inc. trader who founded BBL Commodities LP, the people said. He also met with traders including Alex Beard, the head of oil at Glencore Plc, the world’s largest commodities house.Al-Falih asked the oil traders why the Organization of Petroleum Exporting Countries had achieved only partial success reviving the market and what else the group could do to push prices higher. He also sought views on suggestions from some Wall Street banks that Saudi Arabia should target forward prices to end contango, the market structure where people pay less for oil delivered today than barrels supplied in the future. Contango has allowed some U.S. shale producers to hedge forward production and lock in profits, making it more difficult for OPEC to wrest back control of the oil market.

    OPEC Has a Crippling Problem: Its Members Can’t Stop Pumping - OPEC, the once powerful oil cartel, is struggling to hold the line in a make-or-break fight to limit oil production, prop up crippling low prices and prove its relevance. Why? Its members are addicted to oil. Eight months after the Organization of the Petroleum Exporting Countries announced a plan for its 14 members and 10 allied... OPEC ministers met last week in St. Petersburg to discuss reining in output. Above, Russia’s Alexander Novak, left, and Saudi Arabia’s Khalid al-Falih.Photo: Kovalev Peter/Zuma Press OPEC, the once powerful oil cartel, is struggling to hold the line in a make-or-break fight to limit oil production, prop up crippling low prices and prove its relevance. Why? Its members are addicted to oil. Eight months after the Organization of the Petroleum Exporting Countries announced a plan for its 14 members and 10 allied countries to withhold almost 2% of the world’s oil every day to boost prices, seven of the 11 OPEC members that pledged to cut appear to be producing more oil than promised. Crude prices have actually fallen, by 7.6% to $52.52 a barrel, since the beginning of the year—half what the cartel called a fair price just three years ago and a level that some say is here for the long term.  Previously, low production costs meant OPEC members profited even when oil prices fell. These days, members have ramped up government spending to keep populations happy and cover military expenses, and don’t have a cushion to let oil revenues slip. Their strained budgets can be covered only through increasingly high prices per barrel, and if prices are low they need to produce more. The inability to control output poses a potentially existential threat to OPEC’s influence. The longer prices remain low, “the harder it is to make the case to the most cash-strapped producers that they are ‘better together.’

    OPEC’s Existential Sucker Punch - You wait decades for an existential crisis, then two come along at once. At least that's how it must feel for OPEC's beleaguered ministers. In the short term the market for their oil is being eroded by rising production outside their control. Looking further ahead, oil demand itself is under threat from the electrification of road transport. OPEC may not yet be dead, but its days are surely numbered.The most obvious short-term threat to the group comes from the rapid rise in U.S. shale oil, but the risks have expanded to include other areas like Brazil's prolific sub-salt discoveries and more recent finds further north along the east coast of South America. An increasing volume of U.S. crude is finding its way to markets in Asia that used to be the preserve of the group's Middle Eastern powerhouses. China was the biggest foreign buyer of U.S. crude in April -- the most recent month for which EIA data are available -- overtaking Canada for the second time this year. And Indian refiners are finding an appetite for heavier U.S. grades that compete directly with Middle Eastern crudes. This is a particular worry for OPEC producers whose initial output cuts were said to target buyers in Europe and the Americas while sales to key customers in Asia were to remain untouched. Add to this that there's been little letup in U.S. oil production. The American surge began late last year, just as OPEC ministers were edging toward a deal to cut output after a two-year production free-for-all that saw WTI crude fall to little more than $26 a barrel. This shows little sign of running out of steam -- output from the Lower 48 states, which includes offshore activity in the Gulf of Mexico, edged above 9 million barrels a day in the third week of July, its highest level for almost two years, according to weekly data from the Energy Information Administration. Outside the shale patch, big oil is learning to live with lower prices again. Royal Dutch Shell Plc "is getting fit for the $40s," Chief Executive Officer Ben van Beurden said on Thursday's second-quarter earnings call,  Van Beurden also articulated the second existential threat, when he said in an interview with Bloomberg TV not only that his next car would be electric, but that he could see demand for liquid fuels peaking in the 2030s. A political trend towards growing electrification of transport poses a real, long-term problem. Nobody in their right mind is suggesting that oil is suddenly going to stop being the world's transport fuel of choice, but its market share will come under increasing pressure. Four countries in Europe have now proposed bans on the sale of gasoline and diesel-fueled cars by 2040 at the latest. Between them they account for around a third of all the passenger vehicles in use in Europe.

    OPEC/non-OPEC coalition seeks to shore up oil output cut compliance at Abu Dhabi meeting - Faltering compliance with oil output cuts has moved the OPEC/non-OPEC producer coalition to call a meeting of technical experts next week in Abu Dhabi to discuss ways to firm up member commitments to uphold their quotas. The meeting, to be held August 7-8, follows pledges by the coalition's monitoring committee to demand better compliance from flagging members and another warning from OPEC's de facto leader Saudi Arabia that it would not tolerate any country to "free ride." "Although conformity with the production agreement remains strong at the aggregate level, some countries continue to lag, which is a concern we must address head on," Saudi energy minister Khalid al-Falih said at a meeting of the monitoring committee in St Petersburg last week. Iraq, for example, averaged 69,000 b/d above its quota from January through June, according to data from the S&P Global Platts OPEC survey, one of six secondary sources used by the coalition to monitor OPEC production. That is the largest amount by which any member of the bloc is exceeding its target. Iraqi minister Jabbar al-Luaibi will be meeting with Falih in the coming days, as well as with Iran oil minister Bijan Zanganeh, according to the Iraqi oil ministry. "Our friends had some viewpoints and gave some explanations," Zanganeh was quoted by Iran's Shana news service as saying. "They had justifications for their actions. We will continue talks with them." Luaibi has insisted for months that the deal concerns exports, not production, contrary to the text of the agreement on OPEC's website, and as the deal was being negotiated last fall, he complained that OPEC's secondary sources were not accurately reflecting Iraq's production levels. Other countries have likewise complained about secondary sources, but in almost every case, secondary source production estimates have been lower than what OPEC members have directly reported to the secretariat.

    The Oil Trader Known as ‘God’ Is Closing Down His Main Hedge Fund - Andy Hall, the oil trader sometimes known in markets as “God,” is closing down his main hedge fund after big losses in the first half of the year. The capitulation of one of the best-known figures in the commodities industry comes after muted oil prices wrong-footed traders from Goldman Sachs Group Inc. to BP Plc’s in-house trading unit. Hall’s flagship Astenbeck Master Commodities Fund II lost almost 30 percent through June. Hall shot to fame during the global financial crisis when Citigroup Inc. revealed that, in a single year, he pocketed $100 million trading oil for the U.S. bank. His career stretches back to the 1970s and includes stints at BP and legendary trading house Phibro Energy Inc., where he was chief executive officer. “Andy Hall is one of the grandees of oil trading,” said Jorge Montepeque, a senior vice president of trading at Italian energy major Eni SpA. Hall is the latest high-profile commodity hedge-fund manager to succumb to the industry’s low volatility and lack of trending markets. At least 10 asset managers in natural resources have closed since 2012. Goldman Sachs reported its worst-ever result trading commodities in the second quarter. [One reader of the blog frequently suggested GS was often talking its own book, seemingly trying to move the market for its benefit, not necessarily the benefit of the customer.] Oil hedge funds such as Astenbeck wagered earlier this year that production cuts led by Saudi Arabia and Russia would send prices climbing. Yet, their bets backfired as U.S. shale producers boosted output and Libya and Nigeria recovered from outages caused by domestic disturbances and civil war. [And the fact that Saudi Arabia simply emptied some of its above-ground storage and never did cut exports -- until recently?] 

    Hedge fund short covering lifts oil prices: Kemp - (Reuters) - In recent weeks short covering, rather than long building, has driven oil prices higher, which suggests fund managers are becoming less bearish about prices rather than more bullish.Hedge funds and other money managers continued to reduce their short positions in crude and refined fuels in the week to July 25, pushing prices higher.Hedge funds reduced total short positions in the five major futures and options contracts linked to crude, gasoline and heating oil by 71 million barrels, according to data published by regulators and exchanges.Total short positions have been cut by 231 million barrels over the last four weeks to the lowest since the end of April ( funds now have short positions in crude, gasoline and heating oil totalling 279 million barrels, down from a record 510 million barrels on June 27.By contrast, total long positions have increased by only 41 million barrels over the same four-week period.The prevalence of short covering rather than long building was apparent in four of the five major contracts in the week to July 25.Hedge funds cut short positions in Brent by 27 million barrels but left long positions unchanged.Funds cut short positions in NYMEX and ICE WTI by a total of 23 million barrels while long positions actually fell by 6 million barrels.Short positions in gasoline were cut by 11 million barrels while just 2 million barrels of new long positions were added.Only in heating oil was the reduction in short positions of 5 million barrels roughly matched by an increase in long positions of 6 million barrels.But with so many short positions now closed, the short-covering rally has now probably run its course. Short positions in crude and gasoline are well below the level at the start of June when the latest wave of selling began.

    WTI Jumps Above $50 On Report US Prepping Sanctions Against Venezuela Oil Industry --After both Brent and WTI rose above their respective 50DMAs on Friday, capping 2017's best weekly rally for oil, the rising tide is accelerating as the latest CFTC COT data confirmed, when net specs boosted bullish Nymex WTI crude oil bets by 27K net-long positions to 423K, the highest in two months, as producers continued to cover short hedges, sending their net position to the most bullish since the summer of 2015. Meanwhile, oil started the Sunday session jumping out of the gate, with WTI rising above $50 for the first time since May in early Asian trading, following the usual non-material weekend chatter and "noise" out of OPEC (which to exactly nobody's surprise "can't stop pumping"), however what has attracted traders' attention, is a WSJ report that following last week's latest round of sanctions, and after today's vote to overhaul Venezuela's constitution further entrenching Maduro's unpopular regime, US government officials are considering announcing sanctions against Venezuela's oil industry as early as Monday, although as the WSJ notes, a full-blown "embargo against Venezuelan crude oil imports into the U.S. is off the table for now."

    Oil surges higher, posts biggest monthly rise since April 2016 - Oil futures erased an early loss, surging into the closing bell as traders finished out July with the biggest monthly percentage gain since April 2016. On the New York Mercantile Exchange, West Texas Intermediate crude for delivery in September CLU7, -3.01% rose 46 cents, or 0.9%, to $50.17 a barrel, its highest close since May 24. For the month, the U.S. benchmark advanced 9%. September Brent crude UK:LCOU7 rose 13 cents, or 0.3%, to settle at $52.65 a barrel and notched a monthly gain of 9.9%, its largest since December. Oil had drifted lower amid choppy trading conditions in earlier activity as investors weighed the potential for the U.S. to impose sanctions against Venezuela — a member of the Organization of the Petroleum Exporting Countries and a major exporter of oil to the U.S. — after a referendum over the weekend. “This could result in a shortage of heavy oil for U.S. refineries given that Saudi Arabia is already shipping less oil to the U.S. Ultimately, however, all these factors led to an increase in speculative positions on rising oil prices,” analysts at Commerzbank said in a Monday note. The U.S. Treasury on Monday afternoon announced sanctions against Venezuelan President Nicolás Maduro, freezing his assets in U.S. jurisdictions. The Trump administration hasn’t yet imposed new sanctions on Venezuela’s oil industry.

    OPEC oil output jumps to 2017 high on further Libya recovery - (Reuters) - OPEC oil output has risen this month by 90,000 barrels per day (bpd) to a 2017 high, a Reuters survey found, led by a further recovery in supply from Libya, one of the countries exempt from a production-cutting deal.  A dip in supply from Saudi Arabia and lower Angolan exports helped to boost OPEC's adherence to its supply curbs to 84 percent. While this is up from a revised 77 percent in June, compliance in both months has fallen from levels above 90 percent earlier in the year.  The extra oil from Libya means supply by the 13 OPEC members originally part of the deal has risen far above their implied production target. Libya and Nigeria were exempt from the cuts because conflict had curbed their production. A gain in Libyan and Nigerian output has added to the challenge the OPEC-led effort is facing to get rid of excess supply on world markets. To address this, ministers at a July 24 meeting moved to cap Nigerian output and officials are holding talks next week on improving compliance. "There is a need to align all countries to achieve full compliance," a source close to OPEC said of the compliance talks, which will be held on Aug. 7-8 in Abu Dhabi.  As part of a deal with Russia and other non-members, the Organization of the Petroleum Exporting Countries is reducing output by about 1.2 million bpd from Jan. 1, 2017 until March next year.

    Prompt NYMEX crude tops $50/b as US imposes sanctions on Maduro -- Crude futures climbed further Monday after US sanctions were imposed directly on Venezuelan President Nicholas Maduro, while a fire at Europe's largest refinery supported product futures. NYMEX September crude settled 46 cents higher at $50.17/b. ICE September Brent settled up 13 cents at $52.65/b on expiry. ICE October Brent rose 50 cents to settle at $52.72/b. Related Capitol Crude podcast episode:Making sense of sanctions: The US, Venezuela, Russia, energy and oil flows Market participants were eager to see if crude futures could build upon last week after prices rose by the most on a weekly basis this year. Early action suggested the rally was showing signs of exhaustion until news broke that the US Treasury Department had added Maduro to its Specially Designated Nationals list. That decision comes after Sunday's controversial election that gave Maduro the right to replace the country's National Assembly with a new legislative body tasked with rewriting the country's constitution. A weaker dollar also helped support crude prices Monday, with the dollar index sinking to 92.786, its lowest level since May 2016. Refined product futures were stronger than crude Monday after Shell took a number of units at the 404,000 b/d Pernis refinery offline because of a fire late Saturday, the company said Sunday.

    Bulls Crushed As Oil Crashes Again - WTI hit $50 per barrel for the first time since May this Monday, but the benchmark then crashed on Tuesday morning as OPEC exports surged. Crude prices appeared to have firmed up this month and there was a greater sense of optimism in the oil market, but the Tuesday morning crash suggests volatility is still the defining feature of today’s markets.   In the past, growth-at-all-costs was the name of the game. But with few expecting a strong rebound in prices, investors are increasingly pushing oil companies to focus on profitability, even if that means forgoing drilling. After Venezuela moved forward with its “constituent assembly,” a vote intended to defang the opposition to President Nicolas Maduro, the U.S. responded with another round of sanctions, this time targeting the President himself. Again, it was seen as the milder option on the table for the U.S., although news reports indicate that the U.S. Treasury Department has explored oil-related sanctions, either targeting oil imports from Venezuela, or barring PDVSA from doing financial business with U.S. dollars, or barring exports of U.S. refined products to Venezuela.   OPEC is struggling to hold onto market share while also attempting to boost prices. Everyone seems to agree that if OPEC really wanted to drive U.S. shale out of business, it would have to pump full-tilt and let prices crash for an extended period of time. That might have worked in the past, but OPEC members are no longer strong enough financially to survive a lengthy downturn. That’s because public spending needs have skyrocketed since the Arab Spring. For example, according to the WSJ, the UAE can produce oil for $12 per barrel, but really needs oil prices at $67 per barrel to cover its budget. The story is similar for many Gulf Arab countries, as spending needs have spiked in response to an increasingly restless and restive population. The upshot is that OPEC is not willing or capable of enduring another price downturn.

    Oil Prices Slip As OPEC Oil Exports Creep Higher - OPEC’s crude oil exports reached 26.68 million bpd last month, energy data provider Kpler said, on the back of higher shipments from Libya, Nigeria, and the UAE. The figure was up by almost 388,000 bpd from June. The UAE led the increase, shipping 326,000 bpd more in July than in June. Yet, Kpler notes, the June average was lower than usual, so the total for July, at 2.6 million bpd, was basically flat on May. Libya, which has ramped up its crude oil output to above 1 million barrels, exported an average daily of 907,000 bpd in July, up 182,000 bpd on a monthly basis. Nigeria’s exports rose by 130,000 bpd thanks to higher loadings through the Forcados terminal, to a total of 1.884 million bpd. Kuwait was the OPEC member whose exports shrunk the most last month, with shipments down by 241,000 bpd to 1.977 million bpd. Angola was next, exporting 98,000 bpd less in July than in June, at 1.66 million bpd. Saudi Arabia’s shipments of crude fell by 45,000 bpd last month to 7.155 million bpd. The Kingdom has pledged to cut its oil exports further, to 6.6 million bpd from this month.Meanwhile, Reuters reported that OPEC oil output rose by 90,000 bpd in July, thanks to higher production in Libya and Nigeria. The dip in Angolan exports and Saudi production, however, kept compliance with the production cut deal in the cartel at a respectable 84 percent, up from 77 percent in June.

    Oil is tanking 3% on another report of rising output from Saudi-led oil cartel - Oil prices plunged back below $49 a barrel on Tuesday after another report that OPEC's output rose last month despite the cartel's deal to slash production. A survey of analysts conducted by Bloomberg News suggested OPEC's July output rose by 210,000 barrels a day to 32.87 million barrels a day. That was a bigger jump than the 90,000 barrels-a-day rise that a survey conducted by Reuters showed on Monday. U.S. West Texas Intermediate crude prices tumbled $1.58, or 3.2 percent to $48.59, by 11:58 a.m. ET (1558 GMT). The contract hit a nearly 10-week high at $50.43 earlier in the session, after breaking above the key $50 level for the first time in two months on Monday. Essam Al-Sudani | Reuters People work at the Halfaya oilfield in Amara, southeast of Baghdad, Iraq.Oil prices plunged back below $49 a barrel on Tuesday after another report that OPEC's output rose last month despite the cartel's deal to slash production. A survey of analysts conducted by Bloomberg News suggested OPEC's July output rose by 210,000 barrels a day to 32.87 million barrels a day. That was a bigger jump than the 90,000 barrels-a-day rise that a survey conducted by Reuters showed on Monday. U.S. West Texas Intermediate crude prices tumbled $1.58, or 3.2 percent to $48.59, by 11:58 a.m. ET (1558 GMT). The contract hit a nearly 10-week high at $50.43 earlier in the session, after breaking above the key $50 level for the first time in two months on Monday. International Benchmark Brent crude futures were trading down $1.61, or 3.1 percent, at $51.11 per barrel, after earlier slipping from a nearly 10-month high just below $53 a barrel.  The rise in OPEC production was not unexpected following Monday's Reuters survey, he said, but the sharp drop on Tuesday indicates that investors perhaps bid up oil too much after Saudi Arabia vowed export cuts last week. "People keep taking them at their word and giving it to much credit, and then the rug gets pulled out," 

    WTI Tumbles After Surprise Crude Inventory Build --Following the ugliest day in a month for WTI (on OPEC production increase survey), bulls hopes rest on tonight's API data confirming the recent trend of inventory draws but that was not to be. Against expectations of a 3.1mm draw, API reported crude inventories built by 1.78mm barrels last week. The kneejerk reaction was clear - down hard.  API:

    • Crude +1.78mm (-3.1mm exp)
    • Cushing +2.562mm (-700k exp)
    • Gasoline -4.827mm (-1mm exp)
    • Distillates -1.225mm

    The recent trend in draws (for crude, gasoline, and distillates) was stymied last week with the biggest crude draw in 2 months, and a huge build at Cushing...  “This race to rebalance supply and demand--it’s a marathon and lot of people are entering it thinking it’s just a quick sprint,” Mark Watkins, a regional investment manager at U.S. Bank Wealth Management, which oversees $142 billion in assets, told Bloomberg. “But, this rebalancing is going to take a lot longer than a month, or six months or even a year.”

    Oil: OPEC vs shale to cap prices at $50 or lower in third quarter - Growth in U.S. oil production is slowing, but will continue to blunt OPEC's efforts to cut supply and normalize global inventories, keeping benchmark prices capped at around $50 a barrel this quarter, according to a CNBC poll of energy strategists, traders and economists. De facto OPEC leader Saudi Arabia is leading calls to deepen production cuts as it battles perceptions of falling compliance. Doubts over OPEC's commitment to supply curbs tipped benchmark oil futures into a bear market in June. Elsewhere, OPEC is also squaring off against familiar rivals. Attempts to prop up the price of oil by the producer group have encouraged U.S. suppliers to put more oil onto an already over-supplied market. But bulls say that's changing as American production shows signs of leveling out and recent declines in U.S. inventories point to market re-balancing. "It's still sheikhs versus shale," said John Driscoll, director of JTD Energy Services in Singapore and a former oil trader whose career spans nearly 40 years. "I would put an average price for [the third quarter] at just under $50. In the past year it's like Brent was following the U.S. speed limit: 55 max." The "wild card" for oil markets, Driscoll said, remains output from tight oil formations such as the Permian Basin in the U.S. southwest. Brent crude will average $50 a barrel in the July to September period, according to the median response in CNBC's survey of 21 strategists, traders and economists. The lowest call was for $40 oil, while the highest was $56. Brent — the benchmark for two-thirds of the world's oil — averaged $50.79 in the second quarter. 

    "Lower-Forever" Oil Isn’t Forever-Ever - Ask the CEO of an oil company where they think the price of their main product is going, and the usual response is a deeply unsatisfying variation on "I dunno."That isn't the main reason why Royal Dutch Shell PLC's chief executive drew a collective gasp with his "lower forever" comment about the market last week. But it is worth remembering when it comes to interpreting what Ben Van Beurden meant.There's a good reason why oil chiefs tend to shy away from public prognostications on the subject: They can get it embarrassingly wrong.So it shouldn't be a surprise that when Van Beurden talked about oil being "lower forever", he didn't actually mean forever-ever:Lower forever; yeah, that's the mindset. Yeah, to be perfectly honest, I do think we will have quite a bit of movement in the oil price going forward, and there is a better than 50-50 chance that we will see oil prices trend up ... But that's not the mindset that we want to have in the organization. We do not want to have the mindset that higher oil prices are around the corner to help us out. Yeah, could go down, could go up, could stay about the same, right?Van Beurden wasn't trying to predict the oil price. He was trying to do something much harder: instill a culture of thrift inside a giant oil and gas company. This is about resilience, not clairvoyance. 

    WTI Slides After Disappointing Crude Draw & Production Surge - WTI prices dumped on last night's surprise crude build but have limped back above $49 heading into the DOE prints this morning (although Russia sanctions headlines dipped it). DOE did not help as the report was a disappointment for the bulls with production rising to a new cycle high, crude inventories drawing less than expected but total U.S. oil inventories (that's crude plus all products, including the often volatile "other oil" category) rose by 1.1 million barrels last week. DOE":

    • Crude -1.53mm (-3.1mm exp)
    • Cushing -39k (-700k exp)
    • Gasoline -2.52mm (-1mm exp)
    • Distillates -150k

    API's surprise crude build was offset by DOE's draw - but it was a disappointingly small draw... and gasoline's draw was smaller than API's... Gaoline demand rose to a new record high 9.84mm b/d.  Crude Production (in the Lower 48) topped 9mm last week for the first time since July 2015, and this week it rose once again to a new cycle high...WTI bounced back from the API surprise plunge but dropped into the DOE print on Russia sanctions headlines... and then extended its losses - back to API lows - on the production surge and total inventoiry build... Nitesh Shah, a commodities strategist at ETF Securities told Bloomberg: “The headlines from Saudi Arabia’s export cuts a few days ago pushed prices over $50 but when you scratch under the surface there’s still a lot of bearishness out there.”

    Is The EIA Exaggerating U.S. Oil Production? - Oil is back at $50 per barrel, restoring some semblance of confidence in the market. But that is just about as much as we can expect in terms of a rally, according to most analysts, with momentum likely to dissipate from here.But not everyone agrees. Many are worried that oil prices will crash again next year as OPEC scrambles for an exit strategy, but there is actually a bullish case for oil that is not outlandish.First, crude oil inventories continue to fall. The EIA just released another week’s worth of data, showing another drawdown in inventories. It was a bit more modest last week – 1.5 million barrels – compared to previous four weeks, but the drawdowns continue. U.S. crude oil inventories are now down more than 50 million barrels from the peak hit in March, with stocks back within the five-year range.But a larger reason why oil prices could deviate from expectations and actually rise quite a bit is because the market is poetically assuming a lot more oil is set to come online than might actually be the case. As Andy Lipow, president of Lipow Oil Associates, notes in a CNBC column, the market has already factored in further production gains from Libya and Nigeria, a major reason why market pessimism really spread in the month of June. But because that assumption is baked into today’s price, if those two countries – beset with violence and instability – fail to come through, then a lot less oil will reach the market than is generally assumed.  Moreover, the U.S. could also disappoint. As discussed in previous articles, the shale drilling boom is starting to slow. A bottleneck of services is held back the completion of some wells, while many shale companies have actually started to throttle back on their spending and drilling activity. In the past few weeks, a list of companies have announced cuts to spending plans for this year, including Anadarko Petroleum, ConocoPhillips, Whiting Petroleum, Hess Corp., and Pioneer Natural Resources. Those five companies alone have slashed a combined $850 million in spending. The cuts, coming in response to the recent dip of oil prices into the mid-$40s, will likely translate into much lower production next year. As a result, the projection from the EIA that shale will hit 10 million barrels per day (mb/d) in 2018, or even the more recent downward revision to just 9.9 mb/d, could be hard to reach.

    Oil prices rise amid record U.S. gasoline demand (Reuters) - Oil prices edged higher on Wednesday, as surging U.S. fuel demand and strong refinery runs offset data from the Energy Department that showed crude inventories did not fall as much as expected last week. Crude inventories in the United States USOILC=ECI fell by 1.5 million barrels in the week to July 28, the Energy Information Administration said, about half the decline analysts had expected. However, the report also showed estimated weekly gasoline demand at a record high 9.842 million barrels. [EIA/S] Brent crude futures LCOc1 ended the session up 1.1 percent, or 58 cents, at $52.36 a barrel after hitting a session low of $51.18. U.S. West Texas Intermediate crude CLc1 rose 0.9 percent to settle at $49.59 a barrel, after falling to a low of $48.55 earlier in the session. Strong refinery runs continued to boost demand for crude. Refinery crude runs USOICR=ECI rose by 123,000 barrels per day last week, EIA data showed. "I would expect the bulls to re-assert control over the market after the initial knee-jerk lower," David Thompson, executive vice president at Powerhouse, an energy-specialized commodities broker in Washington. "Despite the week-to-week move lower in distillate demand, comparing the rolling four-week average of this year to last, distillate demand is running a whopping 14.5 percent over the same period last year."

    Oil retreats on concerns about OPEC oversupply (Reuters) - Oil prices fell on Thursday, as cautious buying dried up after U.S. crude rose to near $50 a barrel, with concern about high crude supplies from producer club OPEC offsetting the previous day's data showing record U.S. gasoline demand. Benchmark Brent crude LCOc1 settled down 35 cents a barrel at $52.01 a barrel. U.S. light crude CLc1 was 56 cents lower at $49.03. U.S. crude traded at a session high of $49.96 a barrel. OPEC crude oil exports rose to a record high in July, driven largely by soaring exports from the group's African members, according to a report by Thomson Reuters Oil Research. U.S. light crude has remained below $50 a barrel, capped by robust domestic supplies. "The market needs continuing signs of improvement in the inventory picture to really drive the prices higher," said Gene McGillian, director of market research at Tradition Energy in Stamford, Connecticut. Strong demand in the United States has been supporting prices. The U.S. Energy Information Administration reported record gasoline demand of 9.84 million barrels per day (bpd) for last week and a fall in commercial crude inventories of 1.5 million barrels to 481.9 million barrels C-STK-T-EIA. That was below levels seen this time last year, an indication of a tightening U.S. market. But traders said high production by the Organization of the Petroleum Exporting Countries was limiting price gains. OPEC and other producers including Russia have promised to restrict output by 1.8 million bpd until the end of March 2018 to help support prices and draw down inventories.

    Oil prices end lower as hedge-fund closure, OPEC unknowns add to bearish view - Oil futures gave up early gains to trade lower Thursday afternoon, as buying appetite faded and as investors awaited a highly anticipated OPEC meeting next week. News of the closure of an oil-linked hedge fund and doubts about sanctions against oil exporter Venezuela also contributed to the slump in crude. On the New York Mercantile Exchange, light, sweet crude futures for delivery in September fell 56 cents, or 1.1%, at $49.03 a barrel, after trading as high as $49.96 during the session. October Brent crude on London’s ICE Futures exchange lost 35 cents, or 0.7%, to $52.01. Although there was no fundamental catalyst for the retreat, the downturn occurred as news surfaced that prominent oil trader Andy Hall was shuttering his energy-focused hedge fund after wrongway bets that oil prices would climb faster resulted in 30% losses in 2017, first reported by Bloomberg News.   Oil has been stuck in a range for the past several months. Some investors speculated that the unwind of Hall’s Astenbeck Master Commodities Fund II may result in more oil contracts hitting the market, driving prices lower.

    Oil prices fall as OPEC oil exports rise - Oil prices edged lower on Friday and were on track for weekly losses, weighed down by rising OPEC exports and strong output from the United States. Brent crude futures,  the international benchmark, were trading at $51.76 a barrel at 1141 GMT, 25 cents below the last close and heading for a fall of close to 1.5 percent on the week. U.S. West Texas Intermediate (WTI) crude futures were 30 cents lower at $48.73 per barrel and were set to drop by around 2 percent for the week. Analysts said prices were pressured by rising output, although strong demand limited the losses. "Increasing OPEC production and increasing OPEC exports are the reason the market has been trading lower," said PVM Oil Associates analyst Tamas Varga. While the Organization of the Petroleum Exporting Countries is leading cuts of 1.8 million bpd along with some non-members such as Russia, its July exports rose to a record high, according to a report by Thomson Reuters Oil Research. July's exports of 26.11 million barrels per day (bpd) was a rise of 370,000 bpd, with most coming from Nigeria. A Reuters survey also showed OPEC oil output at 2017 highs in July, led by Libyan gains. Both Libya and Nigeria were exempt from OPEC's output cut deal. Output in Russia is also high. Russia's largest oil producer Rosneft (ROSN.MM) said its crude oil output grew by 11.1 percent year-on-year in the second quarter. In the United States, oil production has hit 9.43 million bpd, the highest since August 2015 and up 12 percent from its most recent low in June last year.

    OilPrice Intelligence Report: Oil Price Rally Ends As Banks Slash Forecast - Oil prices stagnated this week, suggesting the rally over the past month might be losing momentum.   An array of investment banks have slashed their expectations for oil prices yet again. A Wall Street Journal survey of 15 investment banks revealed the third consecutive month of declining expectations for oil prices. An average of those forecasts sees Brent averaging $53 per barrel this year, down $2 per barrel from the June survey. They also forecast Brent at $55 per barrel in 2018, also down $2 from June. “In the very near term, we are cautious about prices, especially in September and October, when the seasonality of crude and product demand turns bearish,” Michael Wittner, chief oil analyst at Société Générale, wrote in a report. WTI stalled out this week on several pieces of bearish data. U.S. oil production ticked up to 9.43 mb/d in the most recent EIA release, the highest production level in two years. Also, OPEC’s production rose again in July to its highest point in 2017. The Nigerian government has agreed to legalize small refineries in the Niger Delta, a key demand of community leaders. The Niger Delta is rife with illegal refining, but the government has agreed to grant small modular refineries in an effort to forge a stronger peace with militants in the region. The progress in peace talks bodes well for the country in its effort to bring more oil production back online. Nigeria is targeting 2 million barrels per day this month, up sharply from earlier this year.   Andy Hall, a notable oil trader, has decided to shut down his hedge fund because of steep losses it has incurred on oil trades. Astenbeck Master Commodities Fund II lost 30 percent of its value through June. The hedge fund bet that oil prices would climb this year on the back of the OPEC cuts. But the rebound of production from U.S. shale, as well as the return of Libyan and Nigerian production, has prevented a rally from occurring. Bloomberg says at least 10 asset managers trading in the energy and natural resources space have shut down funds since 2012.

    Oil Prices Rise As The U.S. Rig Count Falls -- The number of active oil rigs in the United States fell this week by 1 rig as drillers in the United States proceed more cautiously than earlier in the year.  Combined, the total oil and gas rig count in the US now stands at 954 rigs, up 490 rigs from the year prior, with oil rigs in the United States decreasing by 1 and gas rigs decreasing by 3.Canada, which added 14 oil and gas rigs the week prior, lost 3 rigs this week, with the number of oil rigs falling by 5 and gas rigs increasing by 2.Prices lost a bit of ground on the week as signs point to the resilience of US oil producers who continue to take low oil prices on the chin. While down $0.13 week over week, WTI was trading up 0.84% on the day at $49.44 at 12:16pm. Brent crude trading up 0.73% on the day at $52.39.The rise in the number of active rigs in the US has slowed in recent weeks, but US crude oil production is not, with average production averaging 9.43 million barrels per day for the week ending July 28, according to the Energy Information Administration (EIA), who expects US production to reach an average of 9.9 million barrels per day in 2018. While flat this week, the Permian basin has proven most resilient in the low oil price environment boasting lower production costs and higher productivity, as well as a fair amount of hedging by Permian players at prices above $50.

    Rig Count Drops For 3rd Time In 6 Weeks As US Shale Heavyweights Boost Production -The pace of US oil rig count growth has slowed dramatically in the last six weeks as the lagged response to oil prices indicated. While US oil production continues to trend higher, in lagged response to the rise in rigs, it is also nearing its apex. However, four U.S. shale companies recently reported second-quarter production that beat targets and increased their respective full-year output growth guidance.This is the 3rd weekly drop in the US oil rig count in the last six weeks...Crude Production (in the Lower 48) topped 9mm last week for the first time since July 2015, and this week it rose once again to a new cycle high...but judging by the slowdown in rig count growth, production may be set to slow.However, despite the slowdown in US oil rig count growth,'s Tsvetana Paraskova notes that US shale heavyweights are set to boost production this year.In a sign that the U.S. shale patch is boosting output that has been keeping a lid on oil prices,four U.S. shale companies reported second-quarter production that beat targets and increased their respective full-year output growth guidance.   EOG Resources reported on Tuesday Q2 total crude oil volumes rising 25 percent to 334,700 barrels of oil per day, setting a company oil production record. The company raised its full-year 2017 U.S. crude oil growth target to 20 percent from 18 percent and total company production growth target to seven percent from five percent, keeping capital spending plans intact.  Devon Energy beat its midpoint guidance with Q2 net production averaging 536,000 oil-equivalent barrels per day, and said that it was on track to achieve its full-year 2017 production targets. The company cut full-year capital outlook by US$100 million, citing “strong capital efficiencies” and saying it is keeping planned drilling activity for the year. Diamondback Energy reported Q2 2017 production 25 percent higher than in Q1 2017, and raised full-year production guidance by 5 percent. Newfield Exploration Company also beat its production targets and increased the mid-point of its full-year 2017 domestic production outlook. Newfield Exploration now estimates that its year-over-year domestic production growth, adjusted for prior-year asset sales, will be around 8 percent.

    Baker Hughes: US rig count drops for third time in 6 weeks - The overall US rig count has recorded its largest decline since before the drilling rebound commenced in late May-early June of 2016.  Baker Hughes’ tally of active rigs in the US dropped 4 units during the week ended Aug. 4 to 954. However, this week’s downward movement was primarily supplied by gas-directed rigs, which also lifted last week’s count (OGJ Online, July 28, 2017). The overall count is still up 550 units since the bottom of the drilling dive on the weeks ended May 20-27, 2016.US oil-directed rigs edged down a unit to 765, also their third drop of the past 6 weeks, during which time they’ve added just 7 units. They’re still up 449 units since May 27, 2016.Gas-directed rigs fell 3 units to 189, mostly stagnant since May but still up 108 units since last Aug. 26. Three units started work on land. However, the tally of rigs drilling horizontally declined for the just the second time in 38 weeks, shedding 3 units to 807, still up 493 units since May 20-27, 2016. The offshore count dived 7 units to 17. US crude oil production, meanwhile, continues to rise according to preliminary estimates from the US Energy Information Administration. Output during the week ended July 28 rose 20,000 b/d to 9.43 million b/d, up 970,000 b/d year-over-year. The Lower 48 contributed 25,000 b/d while Alaska dropped 5,000 b/d. Despite the overall US declines for the week, Texas recorded a 4-unit jump in its rig count and now totals 466, up 293 since May 20-27, 2016. Texas drilling growth has been mostly stagnant since May.The recently struggling Eagle Ford posted its first increase in 10 weeks, rising 2 units to 78, down 8 units since June 2 but up 47 units since last Oct. 14.Alaska gained a unit and now totals 6. Elsewhere, the DJ-Niobrara edged up a unit to 30.New Mexico and North Dakota each dropped a unit to 60 and 53, respectively. Accordingly, the Williston also was down a unit and counts 53.Oklahoma lost 2 units to 132, still up 78 units since June 24, 2016. The Cana Woodford relinquished 3 units to 60, still up 36 units since June 24, 2016. The Arkoma Woodford and Mississippian each rose a unit to 10 and 7, respectively.Reflecting the offshore dive, Louisiana led the major oil- and gas-producing states with a 5-unit drop

    OPEC July oil output hits 2017 high of 32.82 mil b/d on Libya recovery: Platts survey - Libya's continued dramatic recovery from civil strife pushed OPEC's July output to yet another 2017 high, with the bloc producing 32.82 million b/d, according to the latest S&P Global Platts OPEC survey.  Libya, exempted from OPEC production cuts that began January 1, averaged 990,000 b/d in July, up 180,000 b/d from June.  Fellow exempt member Nigeria averaged 1.81 million b/d, a 30,000 b/d increase on the month, according to the survey. The two exempt countries, along with increased output from Saudi Arabia as the peak summer air conditioning season is now in full swing, have sent OPEC's collective output about 920,000 b/d above its nominal ceiling of around 31.9 million b/d, when new member Equatorial Guinea is added in and suspended member Indonesia is subtracted.Saudi Arabia produced 10.05 million b/d in July, according to the survey. Not including Libya and Nigeria, compliance among OPEC's 12 members with quotas under the production cut agreement remains robust at 114%, down slightly from 116% in June, based on an average of January through July output. That illustrates the challenge OPEC faces in rebalancing the market through its output deal, which also involves 10 non-OPEC producers, as the two exempt countries' recoveries, tenuous though they may be, threaten to undo a large portion of the group's collective cuts.The combined output of Libya and Nigeria in July was 590,000 b/d above October levels, the month on which OPEC based its production cuts and quotas. Most of Libya's key oil fields have now been brought back online, contributing to output growth in recent months, though some technical issues persist.In late-July, Libya's two main rival centers of power tentatively agreed a ceasefire, raising hopes that production could reach state-owned National Oil Company's 1.25 million b/d target by the end of 2017.Nigerian output has continued its upward trend despite the ongoing force majeure on exports of key crude grade Bonny Light due to pipeline issues.Output of another key Nigerian crude, Forcados, continued to ramp up last month, and tanker tracking data also showed a steady rise in exports month-on-month.Sabotage attacks on the key pipelines in Niger Delta in July, however, showed that the Nigeria's forward prospects continue to be riddled with uncertainty because of political tensions. OPEC officials have, at least publicly, dismissed the notion that Libya and Nigeria are undercutting their efforts, saying they are happy for the two countries.

    Winter is coming, so is this summer OPEC's last and best chance to rebalance the oil market? – Platts OPEC Outlook Podcast - On this episode of the S&P Global Platts OPEC Outlook podcast, senior writer and Game of Thrones newbie Herman Wang takes a look at market fundamentals and what they might mean for the OPEC/non-OPEC production cut agreement going forward, as winter is coming. Herman also recaps the action from the recent St Petersburg meeting of the monitoring committee overseeing the deal, where OPEC's de facto leader Saudi Arabia acknowledged that exports, in addition to production, may need to be tracked, to convince a skeptical market that its efforts to rebalance the market are working.

    As Saudi King's Health Wanes, War Architect Bin Salman Set To Become King -- While his health and even sanity have been in doubt for years, fresh rumors are spreading that King Salman of Saudi Arabia’s physical condition has further deteriorated.According to Saudi sources cited by Oil Price, Salman’s health will likely forced him to abdicate the throne in the next few months.Though it was long believed that Mohammed bin Nayef, the king’s nephew and the country’s Minister of the Interior, would assume the throne, bin Nayef’s sudden ouster as Saudi Crown Prince during Ramadan definitively changed that, with King Salman’s son and the current Crown Prince, Mohammed bin Salman, now positioned to take control. Bin Nayef’s ouster was initially reported by international media as having gone “smoothly.” However, it soon emerged that bin Salman had planned the entire affair and that the former Crown Prince, following his acquiescence of the title, was essentially under house arrest. Since then, rumblings have emerged that many in the Saudi royal family, which has long been guided by deference to elders and group consensus, are none too happy with the sudden turn of events in the normally stable kingdom. Now, with King Salman on vacation in Morocco for an entire month, the ambitious Crown Prince has been left in charge, promising a taste of things to come for the oil-rich kingdom. Already, speculators are stating that the kingdom’s balance of power is “on a knife-edge.” One such indication that there is trouble brewing within the royal family is the King’s recent string of drastic policy changes that stripped the Interior Ministry, formerly headed by bin Nayef, of many of its key mandates, including counter-terrorism. These functions have now been transferred to a new entity called the Presidency of State Security, which is under the direct command of the King, who also serves as Prime Minister.

    Shocking Footage Of Saudi Siege Against Own Citizens --The Saudi regime is in the midst of an extreme and brutal crackdown against its own citizenry in the country's Eastern province - a situation now spiraling out of control with rising civilian deaths, entire neighborhoods turned to rubble, and new reports that water and electricity have been cut to the now completely besieged town of Al-Awamiya. Though local activists continue to upload shocking ground level videos to social media revealing that entire districts have been leveled, international and US media have remained largely silent. Tensions have been simmering in the heavily Shia populated Qatif governate throughout the past year, especially after the January execution of prominent Shia cleric and Al-Awamiya native Nimr al-Nimr. Additionally, 14 Shia citizens, among them young Mujtaba al-Sweikat - a student enrolled at Western Michigan University - currently await execution upon the signature of King Salman. The torture and mass trial of the group, charged with "protest-related" crimes has further inflamed tensions in the region. Large protests against the Saudi monarchy and security services have been frequent in Qatif going all the way back to the start of the so-called "Arab Spring" - though major international media outlets have tended to ignore such protests occurring under US/UK friendly regimes.

    Qatar accuses Saudis of hampering Mecca pilgrims -  (AFP) - The Qatari authorities have accused Saudi Arabia of jeopardising the annual hajj pilgrimage to Mecca by refusing to guarantee the safety of those taking part. Saudi Arabia and its allies have been boycotting Qatar since June 5, accusing it of backing extremist groups and of ties to Shiite Iran, in the region's worst diplomatic crisis in years. On July 20, Riyadh said that Qataris wanting to perform this year's hajj would be allowed to enter the kingdom for the pilgrimage, but imposed certain restrictions. The Saudi hajj ministry said Qatari pilgrims arriving by plane must use airlines in agreement with Riyadh. They would also need to get visas on arrival in Jeddah or Medina, their sole points of entry in the kingdom. The Qatari Islamic affairs ministry, in a statement published by the official QNA news agency on Sunday, said the Saudi side had "refused to communicate regarding securing the pilgrims safety and facilitating their Hajj". The ministry accused Riyadh of "intertwining politics with one of the pillars of Islam, which may result in depriving many Muslims from performing this holy obligation". According to the statement, 20,000 Qatari citizens have registered to take part in this year's hajj. The ministry said it denied Saudi claims that Doha had suspended those registrations. "The distortion of facts is meant to set obstacles for the pilgrims from Qatar to Mecca, following the crisis created by the siege countries," the Qatari ministry added, referring to Saudi Arabia and its allies.

    Saudi Arabia says that calls for internationalization of holy sites 'a declaration of war' (Reuters) - Saudi Arabia's foreign minister called what he said was Qatar's demand for an internationalization of the Muslim hajj pilgrimage a declaration of war against the kingdom, Saudi-owned Al Arabiya television said on Sunday, but Qatar said it never made such a call. "Qatar's demands to internationalize the holy sites is aggressive and a declaration of war against the kingdom," Adel al-Jubeir was quoted saying on Al Arabiya's website. "We reserve the right to respond to anyone who is working on the internationalization of the holy sites," he said. Qatari Foreign Minister Sheikh Mohammed bin Abdulrahman al-Thani said no official from his country had made such a call. "We are tired of responding to false information and stories invented from nothing," Sheikh Mohammed told Al Jazeera TV. Qatar did accuse the Saudis of politicizing hajj and addressed the United Nations Special Rapporteur on freedom of religion on Saturday, expressing concern about obstacles facing Qataris who want to attend hajj this year. Saudi Arabia, the United Arab Emirates, Egypt and Bahrain previously issued a list of 13 demands for Qatar, which included curtailing its support for the Muslim Brotherhood, shutting down the Doha-based Al Jazeera channel, closing a Turkish military base and downgrading its relations with Gulf enemy Iran. On Sunday, foreign ministers of the four countries said they were ready for dialogue with Qatar if it showed willingness to tackle their demands.

    The energy factor in the GCC crisis - As top diplomats from various countries flock to the Gulf in an attempt to solve the GCC rift, major energy companies continue to vie for competitive projects in the oil and gas fields in the region. The latest of these projects is the development of the South Pars/North Field, the world's largest natural gas field, which is owned by both Iran and Qatar. This field plays a central yet often underrated role in the development of foreign and national policies in both Qatar and Iran. In light of this, any attempt for isolation or pressure on either country to alter select policies is futile insofar as it disregards this fact.As several experts have previously noted, the tension arose briefly after the Riyadh Summit, when US President Donald Trump assured Saudi Arabia of his commitment to the region in the face of the "Iranian threat". The US' hope of forging an impenetrable GCC shield against Iran fails to appreciate the centrality of the energy question and exhibits a narrow sightedness based on the pursuit of self-interest. It is, therefore, predestined to fail. Similarly, the ensuing Saudi-led blockade against Qatar is destined to eventually subside and give way to normalised relations in spite of the current tension. As a sign, perhaps, that energy trumps political antagonism, it is noteworthy that shortly after the rift, Qatar announced it would not disrupt liquefied natural gas (LNG) exports to the United Arab Emirates (UAE), which runs through the Dolphin pipeline.  The UAE receives about two billion cubic feet on a daily basis from Qatar. Egypt, similarly, will continue receiving Qatari LNG shipments which it secured till the end of 2017. Qatar's LNG ships continue to make their way unhindered to Asia through the Hormuz Strait and to Europe through the Suez Canal.

    North Field gas keeps Qatar crisis stalemated -- The world’s largest gas field is at the nexus of a political stalemate between Qatar and three of its immediate Arab neighbors in the Persian Gulf region—Saudi Arabia, Bahrain and the UAE, along with Saudi ally Egypt. Qatar’s huge offshore gas and condensate field, known in that country as North Field, straddles its maritime border with Iran, which calls the field South Pars. Together, the two sides of the field contain as much as 1.4 Tcf of proven gas reserves, making it the world’s largest conventional non-associated gas field. Iran, Saudi Arabia’s regional arch-enemy, is very much a factor in the dispute between Qatar and the four Arab states that have recently started calling themselves the Anti-Terror Quartet. The so-called ATQ has accused both Qatar and Iran of funding terrorist groups and vociferously disapprove of Qatar’s friendly relations with Iran. But because of North Field’s shared status, Doha is obliged to engage with Tehran. Moreover, because of North Field’s importance to global energy supplies neither Riyadh nor Abu Dhabi can realistically tell major international partners to choose between doing business with them or Qatar, quashing all hope of squeezing Qatar financially and economically. On the basis of North Field reserves, tiny Qatar has grown its LNG exports from 1.9 million mt in 1997 to a record 78.7 million mt last year.

    Blockaded Qatar Takes Saudi, UAE to WTO - Of course Qatar knows the WTO. The current [?] WTO negotiations were initiated in the capital of Doha. I am fascinated with the blockade on Qatar by fellow Gulf Cooperation Council (GCC) countries Saudi Arabia, the United Arab Emirates, and Bahrain, supposedly for supporting "terror." For the country where most 9/11 attackers came from and which has funded fundamentalist education throughout the world, Saudi Arabia is particularly noteworthy. My belief is closer in line with those who believe Qatar acts more as a neutral ground for those wary of Middle East authoritarianism--even if these folks may include Hamas and Hezbollah who have representative offices in Qatar. There is also the not-so-small issue of broadcast network al-Jazeera, which is widely viewed not just in the region but throughout the world. Its continuous criticism of other GCC countries rankles the others, and I must also point out that Qatar is not entirely faultless in its media coverage. After all, Qatar is just like the rest of them: As yet another absolute monarchy, Qatar is hardly a bastion of democracy. As al-Jazeera viewers would note, Qatar's leaders--who set up the network in the first place--are never criticized. Having failed so far diplomatically in resolving this dispute--the United States which has bases in Qatar but nonetheless was bashed by Trump as a state sponsor of terror has been of little use--Qatar now turns to international organizations to help its cause: Qatar has lodged a formal complaint with the World Trade Organisation against the “illegal siege” imposed by four Arab neighbours that have accused the Gulf state of sponsoring terrorism. The complaint, lodged with the WTO’s dispute-settlement body, described the embargo as “unprecedented”, accusing Saudi Arabia, the United Arab Emirates, Egypt and Bahrain of “violating the WTO’s core laws and conventions on trade of goods and services, and trade-related aspects of intellectual property,” the ministry of economy and commerce said in a statement on Monday.

    The Hacking Wars Are Going to Get Much Worse - Reports this month that the United Arab Emirates orchestrated the hacking of a Qatari news agency, helping to incite a crisis in the Middle East, are as unsurprising as they are unwelcome. For years, countries — in particular Russia — have used cyberattacks and the dissemination of disinformation through social media and news outlets to provoke protests, sway elections and undermine trust in institutions. It was only a matter of time before smaller states tried their hand at these tactics. With few accepted rules of behavior in cyberspace, countries as big as China or as small as Bahrain can be expected to use these kinds of attacks. And they may eventually spill over into real-world military conflicts. The hacking attacks in the Gulf seem to follow a typical pattern of going after the media and the email accounts of prominent individuals. According to American intelligence officials, in late May, hackers supported by the United Arab Emirates infiltrated Qatari government news and social media sites. The attackers planted quotations falsely attributed to Sheikh Tamim bin Hamad al-Thani, Qatar’s leader, praising Iran, Hamas and Israel. t’s unclear if the Emirates undertook the hacking or hired freelancers to do the dirty work. (Emirati officials have denied playing any role.) But either way, the objective was achieved. The Emirati government, along with Saudi Arabia, Bahrain and Egypt, used the planted quotations as a pretext to ban Qatari news outlets and to break off diplomatic and trade relations with Qatar. The hacking and disinformation attack on Qatar is not unprecedented. In August 2012, for example, the Indian government accused Pakistani hackers of trying to provoke communal violence. One part of the cyberassault involved posting pictures on websites of corpses described as people killed by Muslims in India’s northeast. (In fact, they were manipulated photos of casualties from an earthquake in Tibet.) The hackers also sent text messages warning that an attack on students and workers from northeastern India living in Mumbai and Bangalore was imminent. Thousands of migrants began a panicked flight back to their homes.

    Dubai's "Torch Tower", World's Fifth Tallest Residential Building, Is Engulfed In Flames -- A massive fire has engulfed the fifth tallest residential building in the United Arab Emirates, the 86-story Dubai Torch Tower - the same building which was also damaged in a major blaze in 2015 -  where social media footage showed flames spreading up much of building and burning debris falling down. According to BBC, civil defence officials have "successfully evacuated" the building and are now working to bring the fire under control. Firefighting brigades from four stations have been sent to battle the flames at the Torch Tower, the fifth tallest residential building in the world.It was not immediately clear what caused the blaze in one of the world's tallest buildings. The fire is believed to have started on the ninth floor before ascending towards the top stories: “It's big fire started on 9th floor. Civil defence and police in the scene now to control the fire,” a Dubai police spokesperson told Gulf News. Dubai’s Civil Defence Director General and Police Commander are at the scene coordinating the rescue efforts. “No injuries have been reported so far in the Torch Tower fire incident,” Dubai's media office said in a latest tweet. The 79-story skyscraper opened in 2011, and it was the world's tallest residential building at its opening, but has since been surpassed by several others.  The Torch Tower is said to be the 32nd tallest building in the world, according to the Skyscraper Centre. It has 676 apartments.

    New Cease-Fire in Syria Holds, Observers Report -- A cease-fire held Thursday in parts of Syria's Homs province, observers said, giving civilians a chance to start putting their lives back together. The British-based Syrian Observatory for Human Rights reported no violations, while reporters on the ground said fruit and vegetable markets reopened and children were back on the streets in the city of Homs. The quiet will also give humanitarian workers the chance to bring in badly needed aid. "It's important that people can live again," an opposition activist told The Associated Press. Russian defense officials and representatives of the Syrian rebels worked out the details of the cease-fire in northern Homs last week in Cairo. Russian Defense Ministry spokesman Igor Konashenkov said the truce would affect an area that has a population of more than 147,000 people. 

    Summer Of "Mass Displacement" Continues: 1.3 Million Libyans In Need Of Emergency Assistance - Though Western media and much of the entire world have long forgotten about Libya, we never will. While the Nobel Peace Prize winning "humanitarian" minded architect of the 2011 US-NATO intervention (and author of Libya's current hell) continues to pen his presidential memoir in the midst of an epic retirement tour of yachts, golf courses, and hidden celebrity islands, Libya still burns out of control.As we've recently noted, the mass flow of migrants and asylum seeking refugees is not going away and remains a political flashpoint for European front line countries reeling from the immigrant wave. In an updated situation report on Libya issued earlier this summer, the United Nation's World Food Program (WFP) published some shocking numbers:Civilians in Libya continue to suffer as a result of conflict, insecurity, political instability and a collapsing economy. According to the 2017 Humanitarian Response Plan, 1.3 million people are in need of emergency humanitarian assistance. This means 20% of the entire Libyan population (estimated at 6.4 million according to the UN) is still in dire need of basic necessities of life such as food and housing. The WFP further notes on its main Libya page that Africa's fourth largest country enjoyed economic stability and independence until 2011 - the year Gaddafi was overthrown and murdered at the hands of NATO sponsored militants (bold emphasis is WFP's):At that time Libya, as one of the world’s most prolific oil-producing nations, maintained large trade surpluses. Although the country’s oil wealth did not percolate down to the wages of ordinary citizens, until 2011 the cost of food at household level was offset to some extent by a welfare state that offered free education and healthcare. Now, the country has a trade deficit and is gripped by a civil war opposing tribal groups, Islamist groups, various other militias and administration forces. Libya’s population is suffering a major humanitarian crisis. This involves poverty, insecurity, gender-based violence, mass displacement, shortages of food and cash in banks, and frequent power cuts.

    Yemen: more than one million children at risk of cholera – charity More than one million malnourished children aged under five in Yemen are living in areas with high levels of cholera, the charity Save The Children warned on Wednesday as it began sending more health experts to the worst hit areas.The scaling up in response came after latest figures show that a deadly cholera epidemic that started in April 2015 has infected more than 425,000 people and killed almost 1,900. Save the Children said children under the age of 15 are now accounting for about 44 percent of new cases and 32 percent of fatalities in Yemen where a devastating civil war and economic collapse has left millions on the brink of starvation.“The tragedy is both malnutrition and cholera are easily treatable if you have access to basic healthcare,” said Tamer Kirolos, Save the Children’s Country Director for Yemen. “But hospitals and clinics have been destroyed, government health workers haven’t been paid for almost a year, and the delivery of vital aid is being obstructed.“ Cholera, which is spread by ingestion of food or water contaminated by the Vibrio cholerae bacterium, can kill within hours if untreated. The cholera outbreak prompted the United Nations last week to revise its humanitarian assessment and it now calculates 20.7 million Yemenis are in need of assistance, up from the previous figure of 18.8 million in a population of 28 million.  Oxfam has projected the number of people infected with cholera could rise to more than 600,000 - “the largest ever recorded in any country in a single year since records began” - exceeding Haiti in 2011.

    Culture of concealment: The UK government’s brazen duplicity in Yemen - Last month, on the last day of the current UK parliamentary session before its summer recess, a particularly obnoxious new British tradition called "take out the trash day" was enacted. The UK government is obliged to issue all its public reports before the end of the parliamentary year, but to avoid scrutiny from MPs, the government now regularly withholds any potentially embarrassing reports until the very last day of that session. It can then release them safe in the knowledge that there will be no time left for MPs to examine them, and no opportunity to question ministers over them.   So having issued very little information over the preceding weeks, as MPs were heading back to their constituencies, the government took the opportunity to release dozens of reports and ministerial statements detailing everything from cuts to police, to the revolving door between cabinet ministers and private corporations, to the millions in legal fees the government spent attempting to prevent parliamentary scrutiny of Brexit. Buried deep among them was a Foreign Office report on the state of human rights in 30 countries deemed to be of "priority concern". What makes the report embarrassing to Britain, however, is that 20 of these countries are major customers of British arms exports, with Saudi Arabia, of course, topping the list.

    China-Japan oil, gas field dispute flares up again: China has rejected Japanese protests to its oil and gas prospecting in the East China Sea, saying the operations occur in areas "indisputably" under its jurisdiction. Foreign Minister Fumio Kishida said Tuesday said Japan had lodged a protest with China over its apparent deployment of drilling rigs near the median line separating the two countries’ economic zones in the East China Sea. Japan also urged China to swiftly resume stalled negotiations to cooperate over oil and gas resources in the area. Those talks began in 2008 but broke down two years later amid rising tensions. Both countries claim the East China Sea islands which are controlled by Japan. Tokyo says China has built oil and gas extracting structures on its side of the median line, which may siphon off resources from beneath the Japanese side. A Japanese government official said Tuesday China’s mobile drilling ships had been spotted in the region, and were believed to have been boring for gas. It was "extremely regrettable that China is unilaterally continuing its development activity" near the median line, Japan's top government spokesperson Yoshihide Suga told reporters. China's Foreign Ministry on Wednesday dismissed the remarks, saying “the so-called issue of 'unilateral exploitation' does not exist."

    The South China Sea’s untapped oil and natural gas are back in focus - The contested South China Sea has large deposits of oil and natural gas. Perhaps luckily for the environment, drilling for these resources has been discouraged by political tension among nations in the region. In particular, energy companies worry about China’s ongoing insistence that everything within its infamous nine-dash line—which marks off nearly the entire sea—is its own territory, despite an international tribunal invalidating the sweeping claim last year. The uncertainty has made it hard for energy companies to justify the hefty investments needed to extract carbon resources from below the sea floor. Recently, though the carbon resources have started to make headlines again, with Vietnam, Indonesia, and the Philippines—and, of course, China—all involved. Reed Bank is one of the major prizes in the South China Sea. Located near the Philippines coast, it is believed to hold large reserves of oil and natural gas. According to the nine-dash line, Reed Bank belongs to China. When the Philippines has tried to explore there, China has stopped it. Now, Reed Bank is back in focus. On July 12, a Philippine energy official said drilling at Reed Bank could resume before year’s end, with Manila getting ready to offer new blocks to investors via bidding in December. In May, Philippine president Rodrigo Duterte said his Chinese counterpart Xi Jinping had warned him there would be war if Manila tried to enforce last year’s tribunal ruling and drill for oil in disputed areas. Vietnam recently stopped a gas drilling operation located about 400 km (250 miles) off its southeast coast after receiving threats from China, according to a BBC report this week. While Vietnam had leased the area to one company, China had leased it to another. China threatened to attack Vietnamese bases in the Spratly islands unless the drilling stopped, according to the report.

    The Week Donald Trump Lost the South China Sea -  Hanoi has been looking to Washington for implicit backing to see off Beijing’s threats. At the same time, the Trump administration demonstrated that it either does not understand or sufficiently care about the interests of its friends and potential partners in Southeast Asia to protect them against China. Southeast Asian governments will conclude that the United States does not have their backs.  In June, Vietnam made an assertive move. After two and a half years of delay, it finally granted Talisman Vietnam (a subsidiary of the Spanish energy firm Repsol) permission to drill for gas at the very edge of Hanoi’s exclusive economic zone (EEZ) in the South China Sea. Under mainstream interpretations of the U.N. Convention on the Law of the Sea (UNCLOS), Vietnam was well within its rights to do so. Under China’s idiosyncratic interpretation, it was not.  On July 25, Chinese Foreign Ministry spokesman Lu Kang would only urge “the relevant party to cease the relevant unilateral infringing activities” — but without saying what they actually were. . China may be claiming “historic rights” to this part of the sea on the grounds that it has always been part of the Chinese domain (something obviously contested by all the other South China Sea claimants, as well as neutral historians.  An international arbitration tribunal in The Hague, however, ruled these claims incompatible with UNCLOS a year ago. China has refused to recognize both the tribunal and its ruling. In mid-June, Talisman Vietnam set out to drill a deepwater “appraisal well” in Block 136-03 on what insiders believe is a billion-dollar gas field, only 50 miles from an existing Repsol operation. The Vietnamese government knew there was a risk that China might try to interfere and sent out coast guard ships and other apparently civilian vessels to protect the drillship. Reports from Hanoi (which have been confirmed by similar reports, from different sources, to the Australia-based analyst Carlyle Thayer) say that, shortly afterward, the Vietnamese ambassador in Beijing was summoned to the Chinese Foreign Ministry and told, bluntly, that unless the drilling stopped and Vietnam promised never to drill in that part of the sea ever again, China would take military action against Vietnamese bases in the South China Sea.

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