Sunday, October 8, 2017

US oil exports hit another record high as US oil continues to sell at a 12% discount

US oil prices were broadly lower this week for the first time since August, but international prices still remain 12% higher for comparative grades of oil, which has now resulted in a second week of record high US oil exports...US prices started the week by falling $1.09 a barrel to $50.58 a barrel on Monday, after a Reuters survey indicated that OPEC had increased their oil output in September....US crude for November delivery then fell another 16 cents to $50.42 a barrel on Tuesday, as speculators continued to cash in their profits after big third quarter gains...oil prices then slipped below $50 a barrel for the first time in more than two weeks on Wednesday, shedding 44 cents to close at $49.98 a barrel, as the EIA report that the US was exporting oil at a record 2 million barrels per day fanned fears that US exports would exacerbate global oversupply...oil prices then recovered and rose 81 cents on Thursday to close at $50.79 a barrel, as indications that Saudi Arabia and Russia would limit production through 2018 pushed prices higher globally....US crude futures then dropped $1.50, or nearly 3%, to $49.29 a barrel on Friday, as yet another hurricane approached the Gulf Coast ports and traders pulled back in advance of Trump's decision next week on the international deal that curbs Iran's nuclear program...US crude thus ended nearly 5% lower for the week, in its first weekly decline in over a month...

however, the problem for US oil remains that despite this week's drop, global oil prices remain roughly 12% higher than those here, which is spurring record exports of US look at how that developed, we'll include a graph that shows the premium price of Brent crude, the global benchmark, over that of West Texas Intermediate (WTI) crude, the US benchmark, right up to Thursday of this week....

October 7 2017 Brent WTI divergence

the above graph was part of a chart book that was linked to in an article by John Kemp at Reuters titled 'WTI discount to Brent reflects logistics constraints: Kemp', published on Friday of this week, and it tracks the premium of the price for North Sea Brent, the global oil benchmark, over that of West Texas Intermediate (WTI), the US benchmark, since the beginning of this year, with both prices quoted for December delivery (because trading for November Brent expired last Friday)...the point that John makes in his article is that even as overall US crude supplies have been falling, they've been increasing in the Midwest, or more specifically in PADD 2, (Petroleum Administration for Defense District 2) a geographic aggregation that includes all the states from Ohio to Oklahoma and North Dakota...since WTI is priced at Cushing Oklahoma, his thinking goes, that Midwest glut is pushing down the price of WTI vis-a-vis the rest of the world...

while that may be true as far as WTI goes, it's hard for me to see how that Midwest glut could be having such an impact on all North American oil publishes daily a list of over 50 different oil prices from around the US and around the globe, and we can see from that table that US oil prices that should not be impacted by the Midwest glut are similarly discounted...Mars crude, which is an index of Gulf of Mexico deepwater crudes, was priced at $50.52 on Friday, $1.23 more than WTI but still $4.10 lower than Brent...furthermore, there's a list of over a dozen grades of Texas crude, with easy access to the Gulf ports, that are all priced below $46 a barrel....Eagle Ford crude at $45.74 a barrel, for instance, is just a stone's throw away from Corpus Christi, the largest US crude export terminal; if the same oil will fetch $55 a barrel on global markets, they'd be foolish not to export it an pocket the profit...even worse, US crude oil has been selling at a price so low that the Saudis, who own the largest US refinery, could buy it, ship it to their country, resell it as their own and still make a 10% profit...and that disconnect will continue until such time as the spread between US prices and international prices closes enough to prohibit it...

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 September 29th, showed a modest decrease in the amount of oil used by refineries and a modest decrease in our oil imports coupled with a big jump in our now record oil exports, and as a result our crude oil supplies fell by the most in four weeks.... our imports of crude oil fell by an average of 213,000 barrels per day to an average of 7,214,000 barrels per day during the week, while at the same time our exports of crude oil rose by 419,000 barrels per day to a record high of 1,984,000 barrels per day, which meant that our effective imports netted out to an average of 5,230,000 barrels per day during the week, 706,000 barrels per day less than during the prior the same time, our field production of crude oil rose by 14,000 barrels per day to an average of 9,561,000 barrels per day, which means that our daily supply of oil coming from net imports and from wells totaled an average of 14,791,000 barrels per day during the reported week... 

at the same time, US oil refineries were using 16,029,000 barrels of crude per day, 145,000 barrels per day less than they used during the prior week, while during the same period 996,000 barrels of oil per day were being withdrawn from oil storage facilities in the US...hence, 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 242,000 fewer barrels per day than what refineries reported they used during the account for that discrepancy, the EIA needed to insert a (+242,000) 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"...

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports inched up to an average of 7,122,000 barrels per day, which was 10.7% below the imports of the same four-week period last year....the rounded 996,000 barrel per day withdrawal from our total crude inventories came about on a 860,000 barrel per day withdrawal from our commercial stocks of crude oil and a 136,000 barrel per day emergency withdrawal of oil from our Strategic Petroleum Reserve, which is still being tapped to address temporary spot shortages caused by Hurricane Harvey...this week's 14,000 barrel per day increase in our crude oil production all came by way of an increase in oil output from Alaska as output from wells in the lower 48 states was unchanged...the 9,561,000 barrels of crude per day that were produced by US wells during the week ending September 29th was the most oil produced in any week since July 17th, 2015, 9.0% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 13.0% more than the 8,460,000 barrels per day of oil we produced during the during the equivalent week a year ago, while it was still a half percent below the record US oil production of 9,610,000 barrels per day set during the week ending June 5th 2015...  

US oil refineries were operating at 88.1% of their capacity in using those 16,029,000 barrels of crude per day, down from 88.6% of capacity the prior week, and down from the 96.6% capacity utilization rate in the week before Harvey struck....the 16,029,000 barrels of oil that was refined this week was still 9.6% less than the 17,725,000 barrels per day that were being refined five weeks earlier, but it was virtually the same as the 16,032,000 barrels of crude per day that were being processed during week ending September 30th, 2016, when refineries were operating at 88.3% of capacity, as they are now slowing down during this time of seasonal maintenance...

with the modest decrease in US oil refining, gasoline production from our refineries was little changed, slipping by just 2,000 barrels per day to 9,853,000 barrels per day during the week ending September 29th, which was 1.4% lower than the 9,988,000 barrels of gasoline that were being produced daily during the comparable week a year ago....on the other hand, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 290,000 barrels per day to 4,929,000 barrels per day, which was 4.5% more than the 4,713,000 barrels per day of distillates that were being produced during the week ending September 30th last year....   

with little change in our gasoline production, our end of the week gasoline inventories rose by 1,525,000 barrels to 217,292,000 barrels by September 29th, just the 5th increase in gasoline inventories in 16 weeks...that increase was mostly because our domestic consumption of gasoline fell by 281,000 barrels per day to 9,241,000 barrels per day, while our imports of gasoline fell by 179,000 barrels per day but remained elevated at 862,000 barrels per day, and while our exports of gasoline rose by 90,000 barrels per day to 640,000 barrels per day...still, with significant gasoline supply withdrawals in 11 out of the last 16 weeks, our gasoline inventories are still down by 9.7% from June 9th's level of 242,444,000 barrels, and 3.7% below last September 30th's level of 227,405,000 barrels, even as they are still roughly 2.3% above the 10 year average of gasoline supplies for this time of the year... 

even with the increase in our distillates production, our supplies of distillate fuels fell by 1,644,000 barrels to 135,439,000 barrels over the week ending September 29th, the 5th weekly drop in a row....that was mostly because the amount of distillates supplied to US markets, a proxy for our domestic consumption, rose by 261,000 barrels per day to 4,007,000 barrels per day, and because our exports of distillates rose by 273,000 barrels per day to 1,366,000 barrels per day, while our imports of distillates fell by 12,000 barrels per day to 72,000 barrels per day...after this week’s decrease, our distillate inventories ended the week 15.7% lower than the 160,718,000 barrels that we had stored on September 30th, 2016, and 5.6% lower than the 10 year average for distillates stocks for this time of the year…since our distillates supplies are now abnormally low for this time of year, we'll again include a graph of what that looks like compared to their recent history:

October 4th distillate supplies as of Sept 29

the above graph comes from a weekly emailed package of oil graphs from John Kemp, senior energy analyst and columnist with Reuters...this graph shows US distillate fuels inventories in thousands of barrels by "day of the year" for the past ten years, with the past ten year range of our distillates supplies on any given day of the year shown in the light blue shaded area, and the median of our distillates inventory, or the middle of the 10 year daily range, traced by the blue dashes over each day of the year...the graph also shows the number of barrels of distillates we had stored for each week in 2016 traced weekly by a yellow line, with our 2017 year to date distillates supplies for each week traced in red...notice in the light blue shaded area that there is an obvious seasonality to distillates supplies, as they're normally built up during the summer when refineries are running flat out, and then drawn down and consumed during the winter months, when demand for heat oil is greatest...however, this summer, when supplies of distillates should have been increasing like they have every other year, they were falling all summer instead, beginning even before the post-Harvey refinery shut downs...we're now heading into a period where refineries will be partially shut down for annual maintenance, so it now looks likely that heat oil supplies will be very tight going into winter...

finally, with the big jump in our oil exports and a decrease in imports, our commercial crude oil inventories fell for the 22nd time in 27 weeks, decreasing by 6,023,000 barrels, from 470,986,000 barrels as of September 22nd to 464,963,000 barrels on September 29th...while our oil inventories as of September 29th were still fractionally below the 469,108,000 barrels of oil we had stored on September 30th of 2016, they were still 8.4% higher than the 429,028,000 barrels in of oil that were in storage on October 2nd of 2015, and 40.7% greater than the 330,380,000 barrels of oil we had in storage on October 3rd of 2014...  

since the major oil story this week is again our record oil exports, we'll include this week's graph of them so you can see how much they've jumped..

October 4th crude exports as of Sept 29

the above graph also comes from that weekly emailed package of oil graphs from John Kemp of Reuters...this graph shows weekly US crude oil exports in thousands of barrels per day over the past 13 months, and also gives us the exact amount of our crude exports in thousands of barrels per day over the past 5 weeks...last week i thought our record oil exports might just be a rebound after the Gulf ports reopened after Harvey's damage was cleared; this week it's clear that our exports are now far and above what any rebound would result in, and that's it's now clear our oil is being exported simply because it's so cheaply priced...

This Week's Rig Count

US drilling activity decreased for 7th time in the past 10 weeks during the week ending October 6th, as it continued the contraction that began in mid-July, following an expansion of activity that ran 23 consecutive weeks earlier this year...Baker Hughes reported that the total count of active rotary rigs running in the US fell by 4 rigs to 936 rigs in the week ending Friday, which was still 412 more rigs than the 524 rigs that were deployed as of the October 7th report in 2016, while it was 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 was down by 2 rigs to 748 rigs this week, their 8th decrease in 9 weeks, which still left active oil rigs up by 320 over the past year, while their count remained 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 2 rigs to 187 rigs this week, which was 93 more rigs than the 94 natural gas rigs that were drilling a year ago, but still way down from the recent high of 1,606 natural gas rigs that were deployed on August 29th, addition, one rig that was classified as miscellaneous continued drilling this week, down from the 2 miscellaneous rigs that were deployed the same week last year..

drilling continued from 22 platforms the Gulf of Mexico this week, unchanged from last week and from a year ago...however, last year there was also a rig drilling in the Cook Inlet, offshore of Alaska, which means this week's total offshore rig count of 22 rigs is down a rig from the 23 rigs of a year addition, another platform that had been drilling on an inland lake in southern Louisiana was shut down this week, leaving an 'inland waters' count of just 1 rig, the same as the inland waters count of a year ago... 

the count of active horizontal drilling rigs fell by 2 rigs to 792 rigs this week, which was still up by 379 rigs from the 413 horizontal rigs that were in use in the US on October 7th of last year, but still down from the record of 1372 horizontal rigs that were deployed on November 21st of the same time, the directional rig count was down by 3 rigs to 79 rigs this week, which was still up from the 50 directional rigs that were deployed on October 7th of of 2016.....on the other hand, the vertical rig count was up by 1 rig to 65 vertical rigs this week, up from the 61 vertical rigs that were deployed during the same week last year...  

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas both tables, the first column shows the active rig count as of October 6th, the second column shows the change in the number of working rigs between last week's count (September 29th) and this week's (October 6th) count, the third column shows last week's September 29th 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 7th of October, 2016...      

October 6 2017 rig count summary


Natural gas drillers spend more than $60 million to woo Pa. legislature - — Over the last seven years, Pennsylvania lawmakers have introduced no fewer than 67 bills to tax natural-gas drilling companies.In nearly every instance, those measures have died.Supporters of a tax say few other interests have managed to thwart legislation in the Capitol so successfully and for so long, earning Pennsylvania the distinction of being the only major gas-producing state without a severance tax. They point to one reason: the industry’s ability to spend tens of millions of dollars on influence.  An Inquirer and Pittsburgh Post-Gazette analysis of lobbying disclosure and campaign finance records since 2010 shows that natural gas drilling companies and their industry groups have spent at least $46.6 million on lobbying and another $14.5 million on political donations — many of the latter going to legislative leaders who control the flow of bills in the Capitol and the heads of committees that regulate their business. That does not include donations from related industries, such as pipeline construction or utilities, which also spend generously on lobbying and political donations. “It’s difficult to walk through the halls of the Capitol on a session day and not see [natural-gas industry] lobbyists there,” said Rep. Greg Vitali (D., Delaware), a longtime supporter of a severance tax. “Their presence is constant.” Last week, Republicans who control the House of Representatives blocked yet another push for a tax on gas drilling, this time with higher political stakes: a $2.2 billion deficit and three months without a complete budget. The drilling industry pushes back, arguing that its companies are unfairly singled out despite a track record of creating jobs and other opportunities in once-depressed communities across Pennsylvania. The advocacy, an industry spokeswoman says , is necessary in part to ensure the industry is “not held hostage by outside special interest groups.”

Police ask landowners along Atlantic Sunrise gas pipeline if they will allow protesters on properties - Lancaster County residents whose land will be crossed by the controversial Atlantic Sunrise pipeline are being asked by police if they intend to allow protesters. And, if they don’t plan to do so, landowners are requested to give police permission to remove protesters and bring criminal charges. The questionnaires were first sent by mail recently to landowners by the West Hempfield Township Police Department. Manor Township police followed suit and Southern Regional police, who patrol Conestoga and Pequea townships, haven’t decided whether to send the questionnaires by mail or to contact landowners in person, Chief John Michener said Thursday."The bottom line is we just want to protect everybody’s rights — both sides. We’re neutral,” said Manor police Chief Todd Graeff. “It’s just a planning stage for us to figure out where we may have protesters and where we probably won’t,” added Mark Pugliese, West Hempfield’s police chief. 

US Northeast gas pipeline capacity increasing, easing flow beyond region -- Natural gas pipeline constraints are easing in the US Northeast as its traditionally high-demand winter heating season approaches, with new infrastructure coming online and better positioning operators to move Appalachian Basin supplies out of the region, according to an S&P Global Platts market outlook released Tuesday. The balancing of supply and demand will help keep a lid on prices over the long term, though there still may be volatility during the coldest months even under normal weather conditions if stockpiles in storage together with existing output are not enough to keep up with consumption. Researchers and analysts gathered Tuesday at Platts' Houston Energy Forum highlighted the importance of being able to move more gas from key producing areas to market as demand increases for exports to Mexico via pipeline and as LNG shipments to other countries via tanker. Pipeline operators, producers and midstream companies will be issuing their own winter forecasts over the next several weeks as they report third-quarter financial results.   The Northeast for several years has been impacted by pipeline capacity constraints, which occur when pipelines reach their upper flow limits and must therefore curtail, in certain cases, significant nominated quantities. This in effect reduces the optionality for where gas from the region may flow, and adds a risk discount to the price of gas as buyers devalue a product that's not guaranteed to be delivered. This has been a primary driver behind deep price discounts at US Northeast supply pools in recent years, and has been on full display this month. Next-day gas at the Tennessee Zone 4-300 leg, for example, settled at just 62 cents/MMBtu for gas day Tuesday, a discount of $2.185 to benchmark Henry Hub, data compiled by Platts Analytics' Bentek Energy show.

Maryland becomes third state to ban fracking | NWADG: Maryland will become the third U.S. state to permanently ban hydraulic fracturing today, ending several years of debate over whether to allow the gas-extraction method. Passage of the fracking ban was one of the surprises of the 2017 legislative session in Annapolis, coming after Republican Gov. Larry Hogan announced that he had changed his position on the bill and would support it. It is one of several high-profile laws that take effect in Maryland today. Fracking, which has shown the greatest potential in Garrett and Allegany counties, involves injecting water, sand and chemicals deep into the ground at high pressure to fracture rock formations, thereby releasing natural gas trapped in pockets in the rock. Advocates say the practice provides an energy source that is cleaner than coal, but opponents have raised concerns about the potential for water contamination, greenhouse-gas emissions and earthquakes. New York and Vermont are the other states that have banned fracking, with an executive order and with legislation, respectively. Maryland is the first state with gas reserves to pass a ban through legislative action. 

Disputed East Coast pipeline likely to expand  — Remarks from an energy company executive and interviews with others in the industry suggest that the developers of a disputed natural gas pipeline on the East Coast are considering a major expansion into South Carolina. A Dominion Energy executive told attendees of a clean-energy conference in South Carolina recently that “everybody knows” the project won’t end in North Carolina, as the plans currently describe. Instead, he said it will expand — and could do so in South Carolina, where it could bring in almost 1 billion cubic feet (28 million cubic meters) of natural gas a day. The Associated Press obtained an audio recording of Dan Weekley’s remarks from a conference attendee. A Dominion spokeswoman says no decision’s been made about expanding the about $5 billion project beyond West Virginia, Virginia and North Carolina.

Contrary to original plan, Atlantic Coast Pipeline may extend beyond North Carolina (WUNC) When Dominion Energy applied for approval from the Federal Energy Regulatory Commission to build the Atlantic Coast Pipeline, the publicly-unveiled plan indicated that the natural gas line would end in the middle of a field in Robeson County, North Carolina. But according to a new Associated Press report, developers are considering extending the pipeline through Lumbee territory and into South Carolina. Host Frank Stasio speaks with Triangle Business Journal reporter Lauren Ohnesorge, and Ryan Emanuel, professor in the Department of Forestry and Environmental Resources at North Carolina State University, an enrolled member of Lumbee Tribe, and a member of the North Carolina Commission of Indian Affairs Environmental Justice Committee Member about the economic and cultural impact of the potential change.

The fake news about natural gas - It looks like Russia may be at it again — this time with a different target in mind. Russia is now using some of the same tools and tactics to spur opposition to hydraulic fracturing, or “fracking,” a controversial technology used in the production of natural gas.Russia has run anti-fracking stories on its state-funded news outlet and possibly has purchased anti-fracking online ads. Russia’s efforts have earned the attention of Texas Republican Lamar Smith, who found it necessary to launch a probe into the matter, even though he dismissed Russia’s influence on last year’s election.Here’s why Russia, a natural-gas superpower, is spreading anti-fracking messages and why Smith, who has largely kept mum on Russia, wants to investigate. Russia enjoys the largest reserves of natural gas, and for years it reigned as the world’s top producer. That was until the U.S. natural gas boom. In 2005, natural gas production took off in the United States, thanks to improvements in hydraulic fracturing and horizontal drilling that allowed producers to access previously inaccessible stores of shale gas at low cost. Gas output surged and prices fell. Over the next few years, gas overtook coal as the largest source of electricity in the country, and the United States surpassed Russia as the world’s most prolific producer of natural gas. Russia still ranks as the world’s top gas exporter, supplying around one-thirdof the gas consumed by the European Union. The United States lags behind in exports, trading largely with Mexico and Canada. Because gas must be conveyed by pipeline, both the United States and Russia do most of their business with neighboring countries. Until recently, there was little risk of a turf war. Now, however, the United States is trying to break into the European market by upping exports of liquefied natural gas (LNG), which can by shipped overseas. European countries would certainly welcome another supplier of natural gas, given their history with Russia, which cut exports to Europe amid a 2008 dispute with Ukraine.

Delfin LNG onshore facilities tied to floating terminal get US FERC nod - A project to build the first US offshore LNG export terminal has been given the go-ahead by federal regulators to construct the onshore metering, compression and pipeline facilities that would deliver feedgas to the deepwater production facility.The key milestone for the closely watched Delfin LNG project, notched in an order from the US Federal Energy Regulatory Commission late Thursday, comes as export developers that have facilities that are not expected to come online until early next decade face pressure to prove their financial viability amid persistent talk about a global supply glut. Delfin, owned by Fairwood Peninsula Energy, is proposing a novel approach -- to build four floating gas liquefaction vessels about 40 miles off the coast of Louisiana that would be capable of producing 13 million mt/year, or 1.7 Bcf/d, of LNG. In June, it announced a joint development agreement with floating vessel operator Golar LNG to facilitate the financing, marketing, construction and operation of the project. The tie-up offers the potential for medium-term offtake agreements of roughly 10 years, compared with the traditional 20-year deals that have been hard to come by of late.A final investment decision for the first floating LNG vessel is expected in 2018, with additional units depending on market demand, project officials have said. First LNG from the project is planned for 2021 or 2022. The offshore portion of the project is subject to the jurisdiction of the US Coast Guard and the US Department of Transportation's Maritime Administration, which approved the project in March. Delfin LNG later received US Department of Energy authorization to export to countries with which the US does not have a free-trade agreement.

U.S. refiners struggle to keep up with demand for distillates: Kemp (Reuters) - U.S. refiners are struggling to meet the strong demand for heating oil and other distillates despite operations returning to near normal after Hurricane Harvey.Stocks of distillate fuel oil fell by another 2.6 million barrels to 135 million barrels last week, according to the Energy Information Administration (  Stocks have declined by 27 million barrels since the start of the year compared a 3 million barrel increase in the same period last year and an average rise of 4 million barrels over the last decade.  Inventories, which were 11 million barrels above the prior-year level and 31 million above the 10-year average at the end of January, are now 26 million barrels below 2016 and 8 million below average. Distillate stocks continued to dwindle despite near-record run rates by U.S. refineries as operations returned to normal along the U.S. Gulf Coast. U.S. refiners processed an average of over 16.0 million barrels per day of crude last week, only just under last year's seasonal record of 16.1 million bpd.Refiners ramped up distillate production to more than 4.9 million bpd, only just under last year's seasonal record of 5.0 million bpd.  But with domestic demand running at a relatively high 4.0 million bpd, and exports at almost 1.4 million bpd, refiners were unable to prevent a further slide in inventories.As the winter heating season and peak distillate demand approaches, many traders are speculating heating oil stocks will be tight and prices will rise further. Hedge funds and other money managers had amassed a record net long position of 62 million barrels in heating oil futures and options on the New York Mercantile Exchange by Sept. 26.Hedge funds' long positions outnumbered short positions by a ratio of 4.9:1, according to records published by the U.S. Commodity Futures Trading Commission. Current hedge fund bullishness towards heating oil and other distillates marks a sharp turnaround from the end of June when they held a bearish net short position of 32 million barrels. Refiners now have a strong incentive to maximise distillate production. The gross refining margin for making heating oil from U.S. light crude for delivery in December has climbed to more than $24 per barrel from $15 in June.

Chevron, BHP shut several US Central Gulf of Mexico oil production platforms -  The NYMEX November natural gas futures contract slid 1.7 cents Thursday to settle at $2.93/MMBtu, despite the US Energy Information Administration announcing a smaller-than-expected storage build for last week, which nudged estimated national stocks below the five-year average for the first time since January. Stocks in the week ended September 29 built by 42 Bcf, the EIA estimated, less than the 47 Bcf consensus estimate of analysts surveyed by S&P Global Platts and well below the 91-Bcf build averaged over the past five years. This put estimated national gas stocks at 3.508 Tcf, 0.2% below the five-year average. The prior surplus to the five-year average had been tightening since the beginning of May, with 17 of the past 22 injections coming in below average, according to EIA data. Though the build had a bullish tone, immediate market reaction to the below-average injection was tempered. Prices did not show any noticeable upticks when the number was announced, remaining around levels seen before the news. That tempered reaction took a bearish turn in the afternoon, with the front-month contract ultimately settling at a decline on the day. Daniel Flynn, energy analyst at Price Futures Group, said he was "shocked the market isn't motoring," after the announced injection. Gene McGillian, manager of market research at Tradition Energy, said the bullish build "could have been priced in yesterday," as the market climbed 4.5 cents Wednesday. McGillian also said the latest build "looks to be the last below-average storage injection for a while," adding that with short-term outlooks for mild weather, the "market will find pretty strong resistance near $3[/MMBtu]."

Hurricane Nate Heads For Gulf Coast: Goldman Projects Dramatic Refining Slowdown -- Confirming an earlier projection by Accuweather that showed Hurricane Nate will likely make landfall as a cateogry one storm somewhere between Louisiana and the Florida panhandle on Sunday, the NHC has issued a hurricane warning - the highest-priority of the agency's alert levels - for a broad swath of the Southern US stretching from Grand Isle Louisiana to the Florida-Alabama border. Here are the key messages for Tropical Storm #Nate for Advisory 9. — NHC Atlantic Ops (@NHC_Atlantic) October 6, 2017 As we noted earlier, unlike with Hurricane Irma, most of the models for Hurricane Nate consistently see the storm moving directly north through the Gulf before turning to northeast to follow the eastern U.S. shoreline.  Like they did with Hurricane Harvey, energy traders will be hyper focused this weekend on how the massive network of Gulf drilling platforms might be impacted by the storm.As Goldman Sachs explains, a new storm, Nate, is heading for the US Gulf Coast and is expected to land as a category 1 hurricane in Louisiana on Sunday.While the overall impact on the US oil sector is likely to be more modest than for Harvey (category 4 at landfall), it may have a similar s upply impact given the path threatens more US Gulf Coast platforms. The demand impact is likely to be much smaller than Harvey given the lower intensity of the storm, the smaller amount of downstream capacity at risk and finally the smaller population impacted. On the refining side, 2.4 mb/d of refining capacity is at risk (13% of US capacity).

Upstream oil, gas industry sees little lasting impacts from Hurricane Harvey: analyst - Although Texas upstream oil and gas and oilfield services companies saw their operations negatively impacted in the immediate aftermath of Hurricane Harvey, which struck the Texas Gulf Coast August 25, the negative effects were largely short-lived, an analyst with the Federal Reserve Bank of Dallas said Wednesday. The Dallas Fed included several questions about the impacts that Harvey had on exploration and production and service companies in its quarterly Dallas Fed Energy Survey, which gauges the attitudes of executives of these businesses, Kunal Patel, a senior research analyst with the bank, said. "Respondents reported widespread but generally limited impact on their operations due to Hurricane Harvey and most believe these effects will be gone six months from now," Patel said. The survey received 142 responses from energy company executives in Texas and parts of Louisiana and New Mexico, split about 50:50 between E&P and service companies, he said. Asked whether the hurricane had an impact on their business, 53% of respondents said it had "a slight negative impact on their business, 18% were moderately impacted and 28% were not impacted at all," Patel said. In response to a question as to whether the executives expected a continued impact from the storm within six months, the majority of respondents, 62%, said they expect that their business will not be affected six months from now. Meanwhile, 30% expected it to have a slight negative impact, 7% foresaw an impact that was moderately negative, and only 1% of respondents foresaw an impact that was severely negative. Respondents were also asked whether they thought the broader energy sector -- including the midstream and downstream segments -- would be negatively affected six months from now by Hurricane Harvey. Fifty-five percent of respondents said they expected that the broader energy sector would be affected slightly, 24% said moderately, and 18% said they saw no severe effect at all, while only 2% of respondents said they thought the entire energy complex would still be affected severely by the storm six months out.

Permian pipelines key to production growth -- When Willie Chiang, chief executive officer of Plains All American, rose to address an audience at the Houston Petroleum Club in mid-September, his message was clear: crude production from the Permian Basin will continue to grow and timing will be a critical factor to build pipelines. Delays will result in widening of price discounts for Permian crudes and prove to be counterproductive for producers, he noted. Despite operators reducing breakevens in the Permian, they will always be wary of reducing exposure to wide variations in differentials. Like in August 2014, Midland WTI averaged a $12.10/b discount to Cushing WTI primarily due to a lack of pipeline capacity, compared to a discount of 35 cents/b late last week, according to Platts data. Permian additional pipeline capacity Five pipelines have been proposed by leading midstream players from the prolific basin in southwest Texas to the Port of Corpus Christi in the US Gulf Coast, potentially offering a total of some 2.14 million b/d of new takeaway capacity starting in stages from late 2019/early 2020. The planned major projects include a 650,000 b/d pipeline announced in May by Magellan Midstream; a second phase of the Plains-backed Cactus pipeline to add another 500,000 b/d of throughout; Buckeye Partners’ 400,000 b/d South Texas Gateway pipeline; and the 400,000-b/d EPIC pipeline. Capacity additions are also planned by fellow midstream player NuStar Energy and an expansion of the EPIC pipeline, to name a few, that will add in excess of another 400,000 b/d post-2020. Growth in Permian Basin output has been largely a case of a moving goal post that continues to challenge all forecasts, Chiang said. While 800,000 b/d of new production has already been added between June 2014 and June 2017, the industry will see another 2.3 million b/d being added by 2022 in the Permian, he said.

Crude oil shuttle pipelines in the Permian's Delaware and Midland basins, Part 2. -  Shuttle pipelines in the Permian provide high-volume, straight-shot links between crude oil gathering systems and multiple takeaway pipelines out of the play ­­— giving producers and shippers critically important destination optionality. Assuming the shuttles are well-positioned and tied to increasing production on one end and multiple takeaway pipes on the other, existing intra-basin shuttles are highly valued and being gobbled up by major midstream players. And to keep pace with Permian production growth, existing shuttle systems are being expanded and new ones are being planned. Today, we continue our review of key crude-related infrastructure in the nation’s hottest oil production region. As we said in Part 1, the build-out of Permian crude oil pipelines over the past several decades has occurred in fits and starts, always in response to the dual requirements to move increasing volumes out of the play and to help producers gain the highest possible price per barrel. During the Pre-Shale Era, most of the oil produced in the Permian flowed north (on either Plains All American’s Basin Pipeline or Occidental Petroleum’s Centurion Pipeline) to the crude storage and distribution hub in Cushing, OK. By 2011-12, though, surging crude production in the Bakken and western Canada exceeded Midwest refinery demand and because there was very little pipeline capacity from the Mid-Continent to the Gulf Coast (where half of all U.S. refining capacity resides) supplies started backing up in Cushing. The Cushing supply glut — exacerbated by rising shale production in the Permian itself — resulted in heavy discounting for benchmark West Texas Intermediate (WTI) versus Louisiana Light Sweet (LLS) and other crudes at the Gulf Coast, as well as the development of new pipeline takeaway capacity from the Permian and Cushing to Houston and other coastal destinations.

Drillers choke off dollars to Permian Basin operations - Houston Chronicle: Rising production costs, high acreage prices and a shareholder push for financial discipline have dramatically slowed the land rush in the Permian Basin, one of the world's most active oil fields.Drillers spent $35 billion in West Texas over a nine-month period that ended in early spring. By comparison, the collective value of land deals of the last six months is less than $5 billion, energy research firm Wood Mackenzie reports. Shortly after OPEC announced plans to curb global crude supplies, oil prices rose and drillers made a flurry of acquisitions in the Permian, willing to pay high prices to lease land that sits atop multiple stacked layers of oil-soaked rock that could ultimately yield another 70 billion barrels of crude in coming decades. But that multibillion-dollar push, prodded along by outside investors, couldn't last forever."The market was throwing money at them to buy things," said Greig Aitken, head of upstream oil and gas mergers and acquisitions at Wood Mackenzie.Land prices rose so high that new entrants found it difficult to make returns on their investments, often paying more than $30,000 an acre. As a surge of drilling got underway and companies dispatched more rigs and fracking equipment across the vast plains, labor and equipment costs also began to climb, eating into the industry's bottom line.Plus, companies faced labor shortages after the oil downturn and much of their functioning equipment had been cannibalized for parts. Investors, meanwhile, have grown impatient with an industry that has prioritized rapid growth over returns, and some of those groups have begun pushing companies to spend within their means, rather than relying on debt or other outside capital to drill new wells.

The Permian Boom Is Coming To An End | - The pressure on shale drillers to throttle back on their aggressive drilling continues to crop up in new places, and there are growing signs that the Permian is slowing down. Shale companies spent just $5 billion on land deals in West Texas in the last six months, a fraction of the $35 billion spent in the prior nine-month period, according to the Houston Chronicle, citing Wood Mackenzie data. It’s the latest piece of evidence to suggest that “Permania” might be easing. The hottest shale basin on the planet has suffered from rising costs as too many companies pour money into West Texas. The crowded field has pushed up the price of land, labor, oilfield services, rigs and more. That has led to a rude awakening for a lot of shale drillers. "It's just taken the edge off the Permian," said Greig Aitken, head of upstream oil and gas mergers and acquisitions at Wood Mackenzie, according to the Houston Chronicle. Many signs suggest that the falling costs of production have stopped falling. In fact, production costs are on the rise again, for a few reasons. First, the low hanging fruit of cost cutting has ended—there’s no fat left to cut and deeper reductions would mean cutting into bone. Second, as mentioned before, there is cost inflation in a lot of areas, including labor, fracking crews and acreage. But arguably the most troubling development for shale drillers would be if the production figures from the oil well disappoint—and there are pieces of evidence that indicate there is cause for concern. Over the summer, Pioneer Natural Resources reported a much higher than expected gas-to-oil ratio (GOR), raising alarm bells for investors worried about Permian production problems. But as The Wall Street Journal notes, the “solution” added an additional $400,000 to each well. In other words, costs are adding up in many places, which will ultimately push up the breakeven price for shale drilling. Meanwhile, other E&Ps have had to lower their production guidance because of the backlog for oilfield services, which are delaying operations. There’s a growing consensus that the pace of shale drilling needs to slow down, or else E&Ps will destroy value. “All these factors are pointing to slower, more methodical development,” said David Pursell, managing director at Tudor Pickering Holt, according to the WSJ. “That needs to happen.”

Texas’ Eagle Ford awaits time in spotlight: (Argus) — Oil investors and producers priced out of the Permian basin could be looking to the neighbouring Eagle Ford as an alternative and future driver of US output growth. But questions surrounding the basin's productivity could prevent it from having its moment in the spotlight. Texas' Eagle Ford is the US' second-largest shale oil basin behind the Permian. The EIA puts Permian October production at 2.64mn b/d, up by 55,000 b/d on the month, driving total US shale oil output to 6.08mn b/d. Eagle Ford produced about 1.27mn b/d for the same month, but with a fall of 9,000 b/d seen as temporary after flooding in the shale caused by Hurricane Harvey. Chesapeake, EOG and others lowered their output guidance for the third quarter as a result of temporary shutdowns. But the Federal Reserve Bank of Dallas says most producers expect only a slight and temporary impact. The Eagle Ford faces bigger concerns over the longer term productivity of its wells. In terms of drilled but uncompleted wells, the Permian accounted for a third of the total in August — up by 133 to 2,297 — increasing the US total by 231 to 7,048. Eagle Ford had the second highest increase, of 47 to 1,401. The gap between the two is unlikely to narrow much, even given concerns surrounding a recent rise in gas output from Permian wells. That is because Eagle Ford productivity has largely held flat from 2013-17, with oil output in its wells' first year of production at around 20 bl for every foot drilled. Well productivity doubled over the period in the Permian's Delaware basin to over 30 bl/ft and from less than 10 bl/ft to around 20 bl/ft in the Permian's Midland basin. In the Bakken shale of North Dakota, oil production has risen to 15 bl/ft from 10 bl/ft.

Fracking Is Green Energy | The Daily Caller: Hydraulic fracturing has done more to cut U.S. carbon dioxide emissions in the last decade than all renewable energy sources and nuclear power combined, according to data from the Energy Department’s statistical arm. The shift from coal to natural gas alone cut CO2 emissions more than 2 billion metric tons in the last decade, which is about 72 percent more than emissions reduced through increased “non-fossil generation.” “Between 2005 and 2016, CO2 emissions declined by a cumulative 3,176 [million metric tons] as a result of these two factors,” the Energy Information Administration notes in a new report on U.S. emissions. Utilities have been investing more in power plants, and converting many coal-fired plants, to burn natural gas in recent years, spurred by the massive increase in shale gas production. Hydraulic fracturing, or fracking, and horizontal drilling has allowed drillers to unlock once out of reach shale gas reserves. The fracking boom collapses the price of natural gas since 2008, giving utilities a low-cost alternative fuel as environmental regulations forced coal plants to install expensive equipment or retire. “It is now clearer than ever that if we are interested in addressing climate change, natural gas must play a significant role,” Steve Everley, spokesman for the industry-backed Texans for Natural Gas, said in a statement. Environmentalists have given natural gas a mixed reception. Many groups see the shift from coal to lower-emitting natural gas as a positive step, but at the same time oppose fracking into shale.

Shale Boom's Dark Secret, Ruined Old Oil Wells in Oklahoma -- Not every oilman is gaining from the U.S. shale boom. Just ask Joe Warren. Warren, a partner at Brown & Borelli Inc., is caught in a historical hiccup, of sorts. More than a third of the 65 to 70 old-line vertical wells his company operates in Oklahoma are negatively affected by horizontal drilling, he says. The new-style wells can run sideways for miles in a shale play, carrying sand, water and chemicals that can leak into older wells, gumming up the works. The cost: For Warren’s company, it’s about $250,000 a year in lost production and $150,000 in added operating expenses, he said. It’s an issue spurring rising anxiety among small drillers. Already, several lawsuits have been filed while a group representing old-guard drillers is gathering data, aiming to force legislation guaranteeing compensation when damages occur. "We should not be sacrificing our property to these guys for horizontal development," Warren said by telephone. "We don’t want to stop horizontal development -- we just want to make the rules fair." Some of Warren’s wells saw a slight drop in output while others, hit multiple times, weren’t salvageable, he said. Warren hasn’t been involved in litigation himself but expects more legal action to occur in the region moving forward, even though cases can be costly and take several years to resolve. Already, a study by the Oklahoma Energy Producers Alliance, the group representing conventional drillers, has found 451 vertical wells in one county that were negatively affected by horizontal drilling, 80 percent of which were located outside of horizontal well unit boundaries. The damage can add costs to replace equipment, clean out water or sand, or address environmental damage, according to Mike Cantrell, a board co-chair for the group. It can also kill a well outright, he said. "I’m afraid when we look into further, we’re going to find out it’s much worse," he said.

BLM proposes suspending implementation of venting and flaring rule - The US Bureau of Land Management proposed a temporary suspension or delay of certain requirements in its 2016 oil and gas methane venting and flaring rule until Jan. 27, 2019. Comments on the proposal, which is scheduled to appear in the Oct. 5 Federal Register, will be accepted through Nov. 7.Officially known as the Methane Waste and Prevention Rule, the Independent Petroleum Association of America and Western Energy Alliance—along with the states of Wyoming, North Dakota, and Montana—legally challenged it in federal court soon after the rule became final on Nov. 18, 2016. The case now is pending in US District Court for Wyoming.The plaintiffs essentially argued that BLM exceeded its authority by imposing regulation of airborne emissions that falls under the US Environmental Protection Agency’s purview. BLM contended that its authority includes controlling and regulating the waste of federal resources, which it said was the rule’s purpose.BLM reviewed the 2016 final rule as part of Sec. of the Interior Ryan Zinke’s Secretarial Order No. 3349, American Energy Independence, which he issued on Mar. 29. The agency found that some parts of it appear to be unnecessarily burdensome on the oil and gas industry. “Our proposal would give BLM sufficient time to review the 2016 final rule and consider revising or rescinding its requirements,” Acting Director Michael D. Nedd said on Oct. 4.As it prepared to review the rule further, BLM said it determined that a temporary suspension or delay of some requirements would avoid making operators pay costs to comply with requirements that may be rescinded or significantly revised in the near future.The proposal would suspend requirements that already are in effect and postpone implementation of requirements that are not until Jan. 27, 2019, while the agency conducts its additional review. “During this time, existing federal, state, and tribal regulations will ensure energy development is done in an environmentally sound, safe and responsible manner,” BLM said.

What The Frack Is Up With BLM’s Fracking Rule? - Last week, the 10th Circuit Court of Appeals dismissed as prudentially unripe appeals of last year’s District Court decision striking down BLM’s 2015 fracking rule.  The District Court ruled that BLM had no authority to issue the rule.  At the time, I thought that the District Court was on shaky ground.  So did BLM and various environmental groups.  They appealed. Now, in a refrain being replayed in what seems like dozens of cases in multiple courtrooms, BLM moved to dismiss the appeals as unripe, because Secretary Zinke has announced his intention to rescind the fracking rule. The Court concluded quite reasonably that there was not much point in litigating BLM’s authority to promulgate the 2015 rule when the current administration has already announced its intention to get rid of the rule. Fair enough, but the Court then had to decide what to do about the District Court’s decision.  Noting the similarity to cases involving mootness, the Court stated that: we generally vacate the district court’s judgment to prevent it “from spawning any legal consequences.”The Court thus vacated the District Court decision and dismissed the underlying case.  That certainly prevents it from “spawning any legal consequences.”  It is now as though the case never happened and the District Court decision carries no weight. Of course, there is one practical legal consequence to the Court of Appeals’ decision.  The 2015 fracking rule – the same one that lost in District Court and that Secretary Zinke has said he wants to rescind – is now, at least temporarily, back in effect. Be careful what you wish for.

Trump Interior Department will delay methane emissions rules for oil and gas industry - The Interior Department will propose a one-year delay to methane emissions rules while it considers weakening or rescinding the oil and gas industry regulations.The rules in question, finalized under President Barack Obama, are meant to reduce leaking, venting and flaring of planet-warming methane from drilling activity. The Trump administration is seeking to roll back the Bureau of Land Management rules as part of a wider agenda of energy sector deregulation.The BLM "wants to avoid imposing temporary or permanent compliance costs on operators for requirements that may be rescinded or significantly revised in the near future," the Interior Department said in a document it will publish in the Federal Register on Thursday.It is also seeking to "avoid expending scarce agency resources on implementation activities ... for such potentially transitory requirements." Among the rules that BLM plans to delay until January 2019 are requirements that oil and gas producers submit plans to cut waste, measure and report gas flared from wells and dispose of gas that reaches the surface during drilling and well completion. The Interior Department says some of the rules impose unacceptable financial costs on oil and gas companies and asserts that several overlap with EPA regulations. The bureau will open a period of public comment on the regulations.Methane accounts for 10 percent of U.S. greenhouse gas emissions, according to the Environmental Protection Agency. It lingers in the atmosphere for a shorter period than carbon dioxide, but its radiation-trapping impact is more than 25 times greater than CO2.Environmentalist groups decried the move to delay implementation. "By suspending the BLM methane rule, Interior Secretary [Ryan] Zinke and the Trump Administration make clear that they're fine with wasting taxpayer dollars and polluting our air so long as it helps their billionaire and lobbyist cronies," Lauren Pagel, policy director at Earthworks, said in a statement.

Congress decided against repealing this climate rule. So the Trump administration is undoing it. -- After Congress failed five months ago to repeal an Obama administration measure meant to mitigate the emissions of a potent greenhouse gas, the Interior Department on Wednesday took a step toward suspending the rule. This week, Interior Secretary Ryan Zinke will issue a proposal to formally delay a Bureau of Land Management (BLM) rule that requires oil and gas companies operating on federal and tribal lands to capture methane that would otherwise be vented or burned off. BLM had already stayed the rule in June, but on Wednesday a federal judge struck down that delay by Interior for violating the Administrative Procedure Act, which governs how agencies write regulations. With its submission to the Federal Register this week, the Interior Department is kicking off the formal rulemaking process needed to permanently rewrite or undo the rule. Methane, the main component of natural gas underground, is a powerful accelerant of climate change. Through rules issued by the Interior Department and the Environmental Protection Agency, President Barack Obama sought to slow methane emissions from natural-gas wells as part of a multipronged effort to meet the U.S. emissions-reduction targets under the Paris climate accord. But President Trump has announced he will pull the United States out of the Paris agreement, while at the same time rolling back many of the regulatory actions the previous administration took to address climate change. Environmentalists who support the BLM rule, which addresses new and existing gas wells on public and tribal lands, say fiscal conservatives should take issue scraping the rule as well. That’s because states, tribes and the federal government get royalty payments from oil and gas firms drilling on publicly owned lands. The more methane that is captured, the more money flows into government coffers. 

These Suburbanites May Have No Fracking Choice -  When Bill Young peers out the window of his $700,000 home in Broomfield, Colo., he drinks in a panoramic view of the Rocky Mountains. Starting next year, he may also glimpse one of the 99 drilling rigs that Extraction Oil & Gas Inc. wants to use to get at the oil beneath his home. There’s little that Young and his neighbors can do about the horizontal drilling. Residents of the Wildgrass neighborhood own their patches of paradise, but they don’t control what’s under them. An obscure Colorado law allows whole neighborhoods to be forced into leasing the minerals beneath their properties as long as one person in the area consents. The practice, called forced pooling, has been instrumental in developing oil and gas resources in Denver’s rapidly growing suburbs. It’s law in other states, too, but Colorado’s is the most favorable to drilling. Now fracking is coming to an upscale suburb, and the prospect of the Wildgrass homeowners being made by state law to do something they don’t want to do has turned many of them into lawyered-up resisters. “It floors me that a private entity could take my property,” says Young, an information security director. Many states require 51 percent of owners in a drilling area to consent before the others have to join.  Despite its founding cowboy ethos of rugged individualism, Colorado has one of the lowest thresholds. “There’s a tension in oil and gas law between allowing private property owners to develop their mineral estates on their own and the state’s desire to ensure that ultimate recovery of oil and gas is maximized,” The rise of horizontal drilling and hydraulic fracturing over the past decade has ushered in a modest oil boom on Colorado’s Front Range by enabling companies to wring crude more cheaply from the stubborn shale that runs beneath Denver’s northern suburbs. From 2010 to 2015, Colorado’s crude output almost quadrupled. This year the state is pumping more than 300,000 barrels a day, most of it from the Wattenberg oil field beneath Wildgrass and beyond.

Brine spill heightens tribe concern about pipeline material | The Olympian: A North Dakota American Indian tribe no longer wants fiberglass-based pipelines on its reservation after recent spills. Last month, a pipeline spilled more than 33,000 gallons of brine in a pasture on the Fort Berthold Indian Reservation. The spill occurred on a segment of pipeline that was scheduled to be replaced. The pipeline is made of a material called Fiberspar LinePipe. That's the same fiberglass-reinforced material tied to two of the largest brine spills in North Dakota history, The Bismarck Tribune reported Sunday. Three Affiliated Tribes Pipeline Authority Travis Hallam said the tribe's business council is no longer allowing fiberglass-based materials for new pipelines that carry waste water, a byproduct of oil production. Instead, the tribe wants coated steel lines, he said. "It was involved in far too many failures to be considered an acceptable material to protect us from the produced water it was transporting," Hallam said. Crestwood Midstream owns the pipeline involved in the Sept. 3 spill on the reservation. Crestwood also owns the pipeline that contaminated Lake Sakakawea in July 2014 after 1 million gallons of brine spilled near Mandaree and is replacing Fiberspar pipelines in environmentally sensitive areas on Fort Berthold. A spokesman for Fiberspar LinePipe, a division of National Oilwell Varco, said the pipeline material is safe for transporting produced water if installed according to the manufacturer's guidelines. The company says improper installation is the main source of damage to the product.

Senate GOP sets path for Alaska refuge drilling | TheHill: Senate Republicans introduced a budget proposal Friday that could pave the way for allowing drilling in the Arctic National Wildlife Refuge (ANWR) for the first time in decades. The budget blueprint asks the Senate Energy and Natural Resources Committee, which has jurisdiction over the refuge, to develop policies that would save at least $1 billion over the next decade. Lawmakers widely expect that that gap is meant to be filled with the revenues from allowing drilling in ANWR, a federal reserve in northeastern Alaska that was protected in 1960 but has a small coastal area that Congress designated for possible oil and gas drilling.Through the budget reconciliation process, having a $1 billion figure in the budget would allow the refuge to be opened for drilling with a 51-vote majority. Republicans hold 52 seats in the Senate. By contrast, most legislation in the Senate requires 60 votes to overcome a potential filibuster. Sen. Lisa Murkowski(R-Alaska), who chairs the Energy Committee, is a leading proponent of ANWR drilling and has introduced legislation every year to allow drilling in the 1.5 billion-acre coastal area, known as the 1002 area. Murkowski applauded the budget in a statement Friday, though did not say whether she would work to allow ANWR drilling to fulfill the requirement. “This provides an excellent opportunity for our committee to raise $1 billion in federal revenues while creating jobs and strengthening our nation’s long-term energy security. I am confident that our committee is prepared to meet the instruction in this resolution,” she said in a statement. 

TransCanada Terminates Energy East Pipeline -- TransCanada , the same company behind the controversial Keystone XL , is abandoning its proposed Energy East pipeline and Eastern Mainline projects. President and CEO Russ Girling saidThursday morning in Calgary that the company will inform Canada's pipeline regulator, the National Energy Board (or NEB), and Quebec's Environment Department that "we will no longer be proceeding" with the projects. The decision is expected to cost the pipeline giant C$1 billion (US$801 million). "TransCanada was forced to make the difficult decision to abandon its project, following years of hard work and millions of dollars in investment," the Canadian Energy Pipeline Association, an industry group, said in a statement to Bloomberg . "The loss of this major project means the loss of thousands of jobs and billions of dollars for Canada, and will significantly impact our country's ability to access markets for our oil and gas." The shuttering of the Energy East pipeline, however, is a major victory for environmental groups, who have long fought against the so-called Keystone XL on steroids . According to the Natural Resources Defense Council , the US$15.7-billion pipeline would have transported 1.1 million barrels per day of mostly tar sands oil from Alberta to St. John and would bring a significant increase in carbon pollution—equivalent to the annual emissions of as many as 54 million passenger vehicles—and lock in high-carbon infrastructure expected to operate for at least 50 years. Oil Change International estimated that the pipeline's construction would have created up to an additional 236 million tons of carbon pollution each year, multiplied over decades of operation.

Major Canadian Pipeline Project Is Abandoned - — TransCanada, the company behind the Keystone XL pipeline in the United States, on Thursday abandoned a plan for a pipeline that would have sent oil from the province of Alberta in western Canada to Ontario, Quebec and New Brunswick. The company, based in Calgary, Alberta, offered little explanation for its decision beyond citing “changed circumstances” in a brief statement. Terry Cunha, a spokesman for TransCanada, declined to elaborate.But environmental and indigenous groups cheered the demise of the project, which would have cost 15.7 billion Canadian dollars (almost $12.5 billion).“The world is grateful to the Canadians and indigenous peoples who organized against this project,” Bill McKibben, the founder of, an environmental group, said in a statement. “The climate math is sadly simple — the carbon contained in Alberta’s tar sands must stay there.” In addition to facing opposition from advocacy groups, analysts said, the company was probably put off by an expanded review process recently introduced by Canada’s regulator, as well as by the economics of building a pipeline in what seems to be an era of extended, low oil prices.Although the pipeline made economic sense, said Tim Pickering, chief investment officer at Auspice Capital Advisors in Calgary, “it had regulatory layers put on it.”The project, Energy East, would have converted and extended a natural gas pipeline, forming a link between Alberta’s oil sands and refineries in Ontario, Quebec and New Brunswick. The company had anticipated that some of the bitumen shipped from the oil sands would be loaded onto tankers at ports in eastern Canada for shipment to the United States.

New North American On-Shore Conventional Oil Play -- October 4, 2017 -- Data points from Bloomberg via Rigzone:

  • the play is located between Alberta's Nipisi Lake and an area called Marten Hills; along the western edge of the Athabasca Oil Sands region
  • the formation: within the Clearwater shale and sandstone formation
  • location: Alberta, Canada; 125 miles southwest of the Fort McMurray oil sands; near Slave Lake
  • low cost: can be pumped with conventional gear
  • well costs: C$1.1 million to C$1.5 million; will produce as much as four times more crude oil as a conventional horizontal well
  • depth: 2,000 feet (wow -- that is incredibly shallow (middle Bakken, 9,000 feet deep)
  • crude can be produced from the area for about $8/bbl (US dollar)
  • land rush
  • off the radar scope because most drillers are closely held like Deltastream
  • recently, under the name Stomp Energy Ltd, the land company Scott Land & Lease Ltd paid C$10.15 million or C$1,101 per hectare
  • cheap by Permian standards, but it was the most paid for a single section of exploration land in Alberta since December, 2011
  • companies named: Deltastream, Cenovus Energy Inc., and Spur Petroleum Ltd
  • size of play not mentioned
  • small potatoes so far: just 1.46 million bbls in all of 2015 (North Dakota produces that much oil in less than two days)

Panama Canal Authority, shippers work to double LNG capacity - The Panama Canal Authority is working with LNG shippers towards doubling the capacity set aside for LNG vessels by next October, the PCA said Wednesday. The PCA is working towards allowing two LNG vessels a day to transit the canal, from the single slot currently available. "Currently all LNG transits are limited to daylight hours. We are working towards lifting some transit restrictions by the third quarter of next year," the PCA said in a statement, adding that there are currently no transit delays. LNG transit slots have been booked through the third quarter of next year by counter-parties, with offtake from the US Gulf including Shell, Cheniere, Gas Natural Fenosa and Kogas, according to one shipping source. These slots can be canceled with advanced notice at the higher of varying discount percentages to the booking fee of $35,000 or a fixed amount. According to a Panama-based port agent, only one or two LNG vessels have shown up without a booking in anticipation of a canceled slot. Over 171 LNG carriers have so far transited the Panama Canal, or some 8.6% of transits through the Neopanamax locks.

U.S. Shale Isn’t As Strong As It Appears - The extraordinary cost reductions achieved by North American oil and gas companies have likely reached their limit, and any boost in profitability for much of the U.S. shale and Canadian oil sands industries will have to come from higher oil prices, according to a new report from Moody’s Investors Service.Moody’s studied 37 oil and gas companies in Canada and the U.S., concluding that although the oil industry has dramatically slashed its cost of production in the past three years and is currently in the midst of posting much better financials this year, there is little room left for more progress.“After substantially improving their cost structures through 2015 and 2016, North American exploration and production (E&P) companies will demonstrate meaningful capital efficiency to the extent the West Texas Intermediate (WTI) oil price is above $50 per barrel and the Henry Hub natural gas price is at least $3.00 per MMBtu,” Moody’s said. In other words, WTI will need to rise further if the industry is to improve its financial position.The report is another piece of evidence that suggests the U.S. shale industry is perhaps struggling a bit more than is commonly thought. U.S. shale has been portrayed as nimble, lean and quick to respond to oil price changes. And while that is largely true, strong profits remain elusive, despite the huge uptick in production.Shale drillers have substantially lowered their breakeven prices, but further reductions will be difficult to achieve, Moody’s Vice President Sreedhar Kona said in a statement.“Higher than $50 per barrel WTI essential for a meaningful return on capital,” Moody’s said. The findings are important for a few reasons. First, it suggests that if WTI remains stuck at about $50 per barrel, U.S. shale drillers might be forced to reign in their ambitions, because they won’t generate enough cash to reinvest in growth. Second, shale drillers might actually worsen their financial position if they pursue growth. Spending more to produce more—while that could lead to more oil sales—might not necessarily be the wisest strategy.

High Oil Subsidies Ensure Profit for Nearly Half New U.S. Investments, Study Shows  -- Government subsidies to American energy companies are generous enough to ensure that almost half of new investments in untapped domestic oil projects would be profitable, creating incentives to keep pumping fossil fuels despite climate concerns, according to a new study.  The study, in Nature Energy, examined the impact of federal and state subsidies at recent oil prices that hover around $50 a barrel and estimated that the support could increase domestic oil production by a total of 17 billion barrels "over the next few decades."Using that oil would put the equivalent of 6 billion tonnes of CO2 into the atmosphere, the authors calculated. Taxpayers give fossil fuel companies in the U.S. more than $20 billion annually in federal and state subsidies, according to a separate reportr eleased today by the environmental advocacy group Oil Change International. The study in Nature Energy focused on the U.S. because it is the world's largest producer of fossil fuels and offers hefty subsidies. The authors said they looked at the oil industry specifically because it gets double the amount of government support that coal does, in the aggregate. Written by scientists and economists from the Stockholm Environment Institute and Earth Track, which monitors energy subsidies, the study "suggests that oil resources may be more dependent on subsidies than previously thought."   The subsidies fell into three groups: revenue that the government decides to forgo, such as taxes; the government's assumption of accident and environmental liability for industry's own actions, and the state's below-market rate provision of certain services.The authors then assumed a minimum rate of return of 10 percent for a project to move forward. The question then becomes "whether the subsidies tip the project from being uneconomic to economic," clearing that 10 percent rate-of-return threshold.   The authors discovered that many of the not-yet-developed projects in the country's largest oil fields would only be economically feasible if they received subsidies. In Texas's Permian Basin, 40 percent of those projects would be subsidy-dependent, and in North Dakota's Williston Basin, 59 percent would be, according to the study. 

Tax Breaks Make $50 Oil Profitable in the U.S. -  While the U.S. administration is pushing for a tax code overhaul and supports American “energy dominance”, an environmental group suggests in a new study that at the current oil prices of $50, the development of U.S. oil resources may be much more dependent on tax deductions and provisions than previously thought. The study, conducted by researchers at the Stockholm Environment Institute and Earth Track, concludes that at a $50 oil price, around half of discovered and yet-to-be developed oil resources in the U.S. would depend on existing tax deductions to go from unprofitable to profitable. The researchers found that “tax preferences and other subsidies push nearly half of new, yet-to-be-developed oil investments into profitability, potentially increasing U.S. oil production by 17 billion barrels over the next few decades.” The lowest “subsidy dependence” for new projects at $50 oil is found, not surprisingly, in the Permian, where 40 percent of the economic oil resource is “subsidy-dependent”. This compares with 73 percent in the Gulf of Mexico and with 59 percent in the Williston Basin. The high Gulf of Mexico ‘subsidy-dependence’ isn’t a surprise either, considering that mostly integrated oil companies operate there, and they’re not enjoying as much tax deductions as the independent producers that are doing business in shale basins. “About 10 billion barrels of Permian oil are in fields that would be profitable at $50 per barrel even without subsidies, but subsidies bring on enough extra fields to produce an additional 6.5 billion barrels of oil,” the study says. The effects of the tax deductions are highly connected with oil prices. At $30 per barrel oil, almost no new fields would be profitable to develop, even with those tax provisions, the researchers say. Of course, at $100 oil, revenues from new projects would be enough to sanction nearly all developments without any tax provisions. “In such a case, nearly all of the subsidy value would go to extra profits,” the study says. “Our findings show that removal of tax incentives and other fossil fuel support policies could both fulfill G20 commitments and yield climate benefits,” researchers say.

Investors push U.S. shale firms to separate executive pay from drilling (Reuters) - Activist investors are taking aim at U.S. shale producers, the companies most responsible for turning the nation into a global energy powerhouse, pushing them to stop rewarding executives for spending billions of dollars on new wells when crude prices are depressed. U.S. crude output has surged past 9 million barrels a day largely because of the shale sector, whose output this year is up 27.5 percent. The gains are fueled by a boost of about 50 percent in capital spending, benefiting executives come bonus time but crimping shareholder returns. Investors want the higher spending to go to dividends and buybacks, not more drilling. The shift they are seeking could dampen spending on new wells, chilling a shale boom that has benefited U.S. motorists and consumers. It could help the Organization of the Petroleum Exporting Countries, Russia and other producers who are trying to drain a global crude surplus. Booming U.S. shale production has largely thwarted OPEC output cuts aimed at lifting prices. Low oil prices, in turn, have hurt shareholder returns. [O/R] Activists point to the lopsided split between pay and returns. The 10 biggest U.S. shale producers paid their chief executives $2.2 billion over the past decade despite shareholder returns of 1.7 percent. These companies include Apache Corp and Devon Energy Corp. Contrast this with Exxon Mobil Corp and other integrated oil companies that produce, transport and refine oil all over the globe. These companies as a group paid their executives a total of $600 million during the same period and achieved a stronger 3.5 percent return, according to analysts at Evercore ISI. 

ExxonMobil Dethroned As World's Top Energy Company - Gazprom dethroned ExxonMobil as the top energy company in the world, according to the 2017 S&P Global Platts Top 250 Global Energy Company Rankings. The rankings measure the financial performance of energy firms on four key metrics: asset worth, revenues, profits, and return on invested capital. The list only includes companies that have assets greater than $5.5 billion. For 12 years, ExxonMobil was second to none. But that changed this year – Exxon was ejected from the top spot, and fell all the way to ninth place.Gazprom’s surge reflects its state ownership, its captured market in Europe for its natural gas, as well as the fall of some of its peers. But the Russian gas giant’s ability to weather sanctions, regulatory threats from the EU, low oil and gas prices, and the rise of competition from new supplies of LNG is impressive.The reshuffling was the result of some dramatic changes underway in the energy industry, according to S&P Global Platts. Typically, the companies topping the list have been integrated oil companies. But this year, utilities and pipeline companies moved up the list.That, combined with the stumble by Exxon, marks a “changing of the guard, the most profound in the Rankings history,” S&P Global Platts said in a press release.Still, to some degree, the shakeup is not surprising. After all, oil prices have languished for a third year, weighing on the oil industry. That doesn’t necessarily affect utilities and pipeline companies. While oil producers have stumbled, revenues for regulated utilities are pretty stable, and the same is true for pipeline companies that typically ink long-term deals with relatively inflexible pricing.

What Does the Sale of Venezuelan Oil in Currencies Other Than the US Dollar Mean? - The petrodollar is more important for US global domination than either arms exports or Hollywood culture, because it allows the US to be the biggest exporter of the dollar bills the rest of the world, which needs to be able to buy oil. Venezuela has decided to start de-dollarizing its economy.To understand what this means, it’s necessary to look at the geopolitical context in which the move takes place. After President Nicolas Maduro announced last Thursday that every business signing contracts with the Venezuelan State should do so in a foreign currency other than the US dollar, Vice President Tareck El Aissami sought to ensure the country’s productive sector gets the necessary mechanisms via public and private banks to be able to migrate to a new basket of foreign currencies. In a working meeting with business people on the Constituent Plan for Peace and Economic Prosperity, Aissami said, “We have to throw off the yoke of the dollar”, arguing that anyone wanting to bid in auctions of the Floating Exchange Rate System (DICOM) should switch their bank accounts to another currency. Aissami added, “We’re doing no more auctions in dollars, those auctions are over”. He emphasized that these measures are meant to counteract economic sanctions imposed by the US. Aissami also said that Venezuelan citizens promoting the sanctions would face trial, adding that Venezuela is closing existing bank accounts and migrating them to other banks around the world, whom he thanked for their assistance. He reported that, “In the public banking system we already have partner banks in all those countries” (Russia, China, India, Europe).

The Next Big Offshore Boom Is About To Happen Here - Say what you will about offshore oil and gas exploration, but it’s still alive and kicking—high production costs and all. The latest demonstration of the viability of deepwater projects, even in the post-2014 oil industry era, comes from none other than Brazil.On Wednesday, the country’s National Petroleum Agency put 287 oil and gas blocks up for auction, and only 37 found buyers. Too few, it might seem at first. But the proceeds came in at more than US$1.2 billion—a hefty share of this pledged by heavyweight Exxon. The NPA’s expectations for the proceeds were much more modest, at $157 million.The 287 blocks auctioned are just the first portion of a number of deposits that hold an estimated 10 billion barrels of crude in proven reserves. No wonder, then, that as many as 30 companies took part in the bidding round—the first of a total nine rounds, to take place between now and 2019. The auction was closely watched as a gauge of sentiment towards Brazilian oil exploration projects after a decade of Petrobras’ reign in the country’s continental shelf. After the oil price collapse and a huge corruption scandal, Petrobras has struggled to stay afloat, let alone find the billions of investments needed to develop new deposits. Some Big Oil majors are already in Brazil, including Statoil, Shell, and Total. The Norwegian state oil company is developing the Carcara field—part of the prolific Santos Basin. Shell is a strategic partner of Petrobras in the pre-salt layer, holding minority interests in the Libra and Lula fields and in other areas such as SapinhoĆ”, Lapa, and Iara, all of which are located in the Santos Basin. Total is partner of Shell, Petrobras, and CNPC in the Libra field, also in the Santos Basin and considered one of the biggest offshore discoveries in the Brazilian pre-salt zone. Related: $60 Oil Could Revive The Eagle Ford Exxon will now join these fellow supermajors in the Brazilian shelf, partnering with Petrobras on six of the ten licenses it won. This should be indication enough that Brazil’s deposits hold enough appeal for an industry that has suffered a worrying shortage of new discoveries in the last few years. Wood Mackenzie estimated the capital spending cuts for the global oil and gas industry at a stunning $1 trillion, and that estimate was made in the middle of last year.

Scotland's papers: Scottish government 'to ban fracking'  -- The Scottish government is set to announce a permanent ban on fracking in Scotland, replacing the moratorium started in January 2015, according to the Sunday Herald.Scottish Conservatives leader Ruth Davidson is to criticise the UK for being "far too London-centric", claiming Scotland must get more out of being part of the Union, reports Scotland on Sunday.The University of St Andrews has suspended a student and disciplined six others in an investigation into an acid attack threat, says the Sunday Mail.The Sunday Times says Buckingham Palace was left "infuriated" with Theresa May after the general election result plunged the prime minister into a personal "crisis of confidence".Middle class Scots could see their council tax "more than double" under proposals for a new land value tax which is being "driven forward" by the SNP, according to The Scottish Mail on Sunday.Elvis impersonator Anthony Bradley has said he "forgives" Hibs striker Anthony Stokes for the headbutt that "ruined his career", but is demanding compensation, reports the Scottish Sun on Sunday. And The Sunday Post says Ryanair has been "secretly" training pilots after cancelling the travel plans of thousands of Scots.

Scotland Rejects Fracking, Citing Overwhelming Public Opposition  (Reuters) - Scotland will block fracking indefinitely after a public consultation found overwhelming opposition to the practice, the British region's energy minister said on Tuesday in a victory for environmentalists. Scotland imposed a moratorium on fracking, the process of fracturing underground shale rock to release gas and oil, in 2015 and that will now remain for the foreseeable future. "The decision taken today means fracking cannot and will not take place in Scotland," Paul Wheelhouse told the Scottish parliament in Edinburgh. "Taking account of available evidence and the strength of public opinion, my judgment is that Scotland should say 'no' to fracking." The method has run into stiff opposition in many countries. Environmentalists say it causes problems including pollution of the water table, and residents of areas where fracking is being considered fear increased noise, traffic and other impacts. Britain is estimated to have substantial amounts of shale gas trapped in underground rocks but despite support from the central government in London, progress has been slow as environmentalists and local communities lobby against fracking. The London government approved a shale gas fracking permit for a site in Lancashire, northern England, a year ago, using new powers that allowed it to overturn a local authority decision against the permit the previous year. In Scotland, advocates of fracking say it could offset the decline in North Sea oil reserves and boost the Scottish economy. But Wheelhouse told parliament the government's consultation had attracted more than 60,000 responses, of which about 99 percent were to oppose fracking.

Scotland and fracking: How did we get here? - BBC News: The Scottish government has confirmed that it wants to effectively ban fracking in Scotland. Energy Minister Paul Wheelhouse told the Scottish Parliament that the current moratorium on fracking will be continued indefinitely - which he said means that fracking "cannot and will not take place in Scotland". Here's a look at the background to the announcement.Hydraulic fracturing, or fracking, is a technique used to recover gas and oil from shale rock by drilling down into the earth before directing a high-pressure water mixture at the rock to release the gas inside. Fracking allows drilling firms to access difficult-to-reach resources of oil and gas, and has been credited with significantly boosting US oil production. But opponents point to environmental concerns raised by the extensive use of fracking in the US. They say potentially carcinogenic chemicals used in the process may escape and contaminate drinking water supplies around the fracking site, although the industry argues any pollution incidents are the results of bad practice, rather than an inherently risky technique. There have also been concerns that the fracking process can cause small earth tremors. And campaigners say the transportation of the huge amounts of water needed for fracking comes at a significant environmental cost. According to a British Geological Survey report published in 2014, there are "modest" shale reserves under east Glasgow, North Lanarkshire, South Lanarkshire, West Lothian, Midlothian, north Edinburgh, East Lothian and Fife - many of which include some of Scotland's largest towns.There was estimated to be about 80 trillion cubic feet of shale gas in central Scotland compared to 1,300 trillion cubic feet in the north of England.The report also said the amount of oil and gas which could be commercially recovered was likely to be substantially lower. Ineos, which operates the huge Grangemouth petrochemical plant in central Scotland, holds fracking exploration licences across 700 square miles of the country.

Nicola Sturgeon: 'Fracking will be banned in Scotland - end of story' - HeraldScotland: Nicola Sturgeon has insisted that fracking is being banned in Scotland “end of story” as she made her personal opposition to the practice clear. The First Minister had previously said she was “highly sceptical” about the process. After Scottish Energy Minister Paul Wheelhouse announced on Tuesday that the Scottish Government would extend its moratorium into a permanent ban, the SNP leader told MSPs she did not believe it should be permitted. Supporters, including the Scottish Conservatives, highlight the economic opportunities fracking could bring to Scotland, where the North Sea oil and gas sector is in decline. But the SNP move was also backed widely, including by Friends Of The Earth and Hollywood actor Mark Ruffalo. Ms Sturgeon made her views clear after Green MSP Mark Ruskell challenged Holyrood ministers to go further and “get this ban properly over the line” by legislating to outlaw hydraulic fracturing. 

Roman Catholics show support at Preston New Road fracking site - Fleetwood Weekly News: Around 50 Roman Catholics staged a procession and service at the Preston New Road fracking site to show their support for the ongoing protest there. The group, including two priests, was at the gas drilling site to call for fossil fuels to be left in the ground to prevent further global warming and the potentially devastating effects on the planet this could have. Pope Francis has written on the subject in his Laudato Si papal circular letter and has called on all people of the world to take ‘swift and unified global action’.The Catholic campaigners said they were following his example. Fr Hugh Pollock from Kendal and a member of the Lancaster Diocesan Faith and Justice Commision, said: “Today is the feast day of St Francis of Assisi and it is fitting that we should be doing this to protect the Earth and Creation. “Pope Francis has called us to heed the cry of the Earth and the cry of the poor and where the Earth is damaged in any way he calls us to protect and to heal where possible. “We do not accept that any more extraction of fossil fuels is necessary and we have to change our ways of life to live in a more sustainable way in harmony with creation rather than further damaging it.” One of the organisers of the event from the Catholic Climate Movement, Bob Turner a parishioner from St Alban’s in Blackburn said: “People are already suffering the effects of global warming because of the way we have misused the resources on the planet. “Pope Francis in Laudato Si has told how bad things are. People want everything to be all right and to carry on as we are, but we cannot, we have to stop further fossil fuel extraction and at this site here we must keep the gas in the ground.” 

Onshore fracking to begin in UK 'within weeks' | The Independent: Fracking for shale gas will begin in the UK within weeks, the company undertaking it for the first time has announced. Third Energy said it plans to complete five fracks in North Yorkshire before the end of 2017. The controversial technique involves injecting liquid into underground rock at high pressures in order to create cracks that release trapped gas. This is then collected and used to generate electricity.Fracking has been vocally opposed by environmental campaigners but permits to use the technique have been approved by government ministers. Alan Linn, Third Energy’s technical director, said the final sign-off needed for fracking to begin was “imminent”. He said: "We're beginning to prepare for the work-over phase of the well and that should commence shortly. It will probably take us about two weeks. Once we've completed that successfully then we would begin to move into the frack. "We can't do that until we've got our final regulatory approvals in place and we hope those will happen imminently. We expect to be finished and wrapped up with the actual fracking before the end of the year.” 

Victoria, NSW penalized for outlawing fracking under Grants Commission plan | Newcastle Herald: States that fail to permit coal seam gas mining would be penalised under a fresh proposal from the Grants Commission to change the method of distributing goods and services tax revenue.The adjustment would hurt Victoria, New South Wales, Western Australia, Tasmania and the Northern Territory, each of whom has complete or partial bans on coal seam gas exploration or development or has a moratorium on fracking. The proposal, in a position paper prepared for the commission's review of the principles behind the GST distribution, is to treat royalties from coal seam gas in the same way as taxes on gambling. It would apply from 2020.  States that choose not to allow poker machines and collect poker machine revenue are regarded as having voluntarily forgone income and not compensated for earning less than the states that do. The commission wants to consider whether "similar considerations arise in certain potential mineral and energy developments". "In these circumstances, the commission could take the view that all states that have coal seam gas have the opportunity to exploit it and whether they do or not solely reflects policy choice," the position paper says. Victoria imposed a moratorium on coal seam gas exploration in 2012. NSW banned all activity within 2 kilometres of residential areas in 2013. The Victorian decision was taken by the Coalition government of Ted Baillieu. The NSW decision was taken by the Coalition government of Barry O'Farrell. The Baird government in NSW temporarily froze new exploration in 2015 while implementing a report designed to ensure the safety of coal seam gas mining by the NSW chief scientist Mary O'Kane. "The idea that Victorians are going to have to pay the cost of shipping gas from the Middle East or from Louisiana or from north-west Australia because they have a government that is not prepared to access the gas resources in Victoria is extraordinary," Prime Minister Malcolm Turnbull said.

LNG's Asian price rally may become victim of its own success (Reuters) - The spot price of liquefied natural gas (LNG) in Asia is enjoying its traditional surge ahead of peak winter demand, and the near 40 percent rally over the past six weeks probably has further to go. While exporters of the super-chilled fuel will no doubt be trying to maximise the number of spot cargoes they offer, of more interest to them may be how steep the post-winter drop is likely to be. Much of the current boost to prices is due to stronger-than-expected Chinese demand, as Beijing expands use of the cleaner-burning fuel in place of coal for winter heating. The government is spending huge amounts to build out its natural gas infrastructure to change some 4 million homes from coal to natural gas heating, with consultants Wood Mackenzie estimating that China’s natural gas demand could be boosted by 10 billion cubic metres this winter, equivalent to about 5 percent of last year’s total consumption. China’s LNG imports for the first eight months of the year are up a massive 44.3 percent to 22.1 million tonnes, according to customs data, increasing every month since May. China still ranks third behind Japan and South Korea in global LNG imports, although it is the country with the fastest growth, and the most potential for steadily rising demand. Spot LNG prices LNG-AS have responded to the increased demand from China, jumping 39 percent to end at $8.40 per million British thermal units (mmBtu) for the week to Sept. 29, up from a recent low of $6.05 for the week ended Aug. 25. By way of comparison, the spot priced surged 86 percent between September last year and the winter peak of $9.75 per mmBtu, reached in the first week of January this year.

China's Oil Demand Is Far Ahead Of Last Year's Pace -  OPEC recently released its Monthly Oil Market Report which covers the global oil supply and demand picture through July. OPEC crude oil production decreased by 79,000 BPD in August to average 32.8 million BPD.This marks the first OPEC production decline since April and was primarily driven by sizable outages in Libya.The cartel revised global oil demand growth for 2017 upward by 50,000 barrels per day (BPD) to 1.42 million BPD. The group reports strong growth from the OECD Americas, Europe, and China. Global oil demand for 2018 is expected to grow by 1.35 million BPD, an upward revision of 70,000 BPD from the previous report. Growth next year is expected to be driven by OECD Europe and China. China’s oil demand rose by 690,000 BPD in July, marking a 6 percent year-over-year (YOY) increase. China’s total oil demand reached 11.67 million BPD in July. Year-to-date data indicates an average growth of 550,000 BPD, more than double the 210,000 BPD growth recorded during the same period in 2016.China’s gasoline demand was higher by around 0.10 million BPD YOY, driven by robust sports utility vehicle (SUV) sales, which were around 17 percent higher than one year ago.China’s overall vehicle sales in July rose by 4 percent YOY, with total sales reaching 1.7 million units.The numbers from China are interesting given the constant refrain of weakening Chinese demand. This seems to be wishful thinking based on China’s investments in clean technology. China is the world’s top market for electric vehicles, and they recently announced that they have started “relevant research” and are working on a timetable for implementation of a ban on vehicles powered by fossil fuels. That news followed previous announcements by France and the U.K. that they would ban the sale of vehicles powered by fossil fuels by 2040.  China may indeed join the ranks of countries banning fossil fuel vehicles. This news helps drive the narrative that the age of oil is nearing its end, but China is a long way from reining in its oil consumption growth.

China crude oil import data show winners and losers from rebalancing (Reuters) - China’s imports of crude oil offer a picture of which exporters are doing the heavy lifting of reducing supplies, and which countries are benefiting the most from the efforts of OPEC and its allies to rebalance the market. While looking at customs data from the world’s biggest crude importer isn’t a definitive study of global oil market dynamics, it’s important as exporters are well aware that China has been leading demand-growth in recent years, a trend likely to continue. China imported 281.1 million tonnes of crude in the first eight months of this year, equivalent to 8.44 million barrels per day (bpd), according to customs data. This is up 12.3 percent on the same period in 2016, or about 950,000 bpd. This makes China the major contributor to global demand-growth so far this year, given that the International Energy Agency expects world oil consumption to rise 1.6 million bpd in 2017 from 2016. The breakdown of the Chinese import numbers shows who is gaining market share and who is not. Saudi Arabia was China’s leading supplier in the first eight months of 2016, but has slipped to third place behind Russia and Angola in the January-August period this year. The kingdom’s exports to China were 1.03 million bpd in the first eight months, down 1.7 percent from the same period last year.While this looks like a relatively small decline, it becomes far more significant if you assume that the Saudis had been able to grow their exports at the same pace as overall imports by China. If China’s imports of Saudi crude were up at the 12.8 percent overall growth rate, it would have meant that the kingdom supplied 1.18 million bpd. 

Oil Production Vital Statistics September 2017 - Drilling activity as measured using rig counts remains close to a cyclical high in OPEC. The return of drillers in the USA has stalled with US total rigs on 940 on 29th September, well up from the recent low of 469 seen in May last year but still well below the high of >2000 seen in December 2011. Drilling activity everywhere else remains firmly stuck in the doldrums. The following totals compare August 2016 with August 2017:

  • World Total Liquids 96.77/97.67 +900,000 bpd
  • OPEC 12: 32.54/32.36 -180,000 bpd
  • Russia + FSU 13.61/14.14 +530,000 bpd
  • Europe OECD  3.36/3.31 -50,000 bpd
  • Asia 7.30/7.37 +70,000
  • North America 19.34/19.91 +570,000 bpd

With global total liquids production up 0.9 Mbpd on a year ago despite OPEC+Russia cuts, it is little surprise that the oil price remains depressed. There are four main reasons for the continued growth in supply: 1) the return of US drillers and frackers to work that has pushed US production higher, 2) Russia ramped up production in September last year in anticipation of the October production datum, 3) higher production from Libya and Nigeria that was not included in the OPEC+ production constraint deal  and 4) global biofuels are on an annual cycle high (chart below). Each of these factors is now running out of the system. This combined with 3 years of low investment in non-OPEC oil will see a swift rebalancing in the year ahead and a rise in oil price muted by the actions of US drillers.

Hedge funds amass record bullish position in distillates: Kemp (Reuters) - Hedge funds have accumulated a record bullish position in middle distillates such as diesel, heating oil and gasoil, anticipating stocks will be relatively tight this winter.Hedge funds and other money managers held a record net long position in U.S. heating oil futures and options equivalent to 62 million barrels on Sept. 26, according to regulatory data ( managers’ net position has risen by almost 95 million barrels over the last 13 weeks, transforming a position that was net short by 32 million barrels as recently as June 27.Fund managers have also established a record net long position in European gasoil futures and options equivalent to almost 18 million tonnes, up from less than 1 million tonnes at the end of June.Stocks of mid-distillates have been dwindling since February as refinery problems and a strong synchronised upturn in industrial activity and freight demand around the world has caused consumption to exceed supply.After two exceptionally mild winters in North America in 2015/16 and 2016/17, the coming winter is likely to be colder, on the balance of probabilities, in which case heating oil stocks could prove tight.But hedge fund positions now appear stretched, with fund managers holding almost 5 long positions in heating oil and 19 long positions in gasoil for every short position.Big concentrations of positions often precede an abrupt price reversal when fund managers try to realise some profits by closing them out (“Predatory trading and crowded exits”, Clunie, 2010).Adding to the danger, refinery processing has picked up significantly over the last week as refineries along the U.S. Gulf Coast have returned to near-normal operations.Margins remain exceptionally high which provides a strong incentive to maximise crude throughput and the yield to distillates.Heavy run rates, if sustained, should reduce the prospect of distillate shortages this winter. The main unknown is the weather. In response to the same refining problems and strong demand, fund managers have also amassed a large net long position in U.S. gasoline futures and options.

Oil drillers, not forecasters, are responsible for WTI weakness: Kemp  (Reuters) - The U.S. Energy Information Administration (EIA) is distorting oil prices by being far too optimistic in its forecasts for U.S. production, according to Harold Hamm, the chief executive of Continental Resources. Hamm, who also chairs the Domestic Energy Producers Alliance (DEPA), a lobbying group, blames EIA for both the outright decline in U.S. oil prices and their underperformance compared with Brent since June. Hamm faults EIA for being too optimistic about U.S. production, creating an impression there will be surplus of crude and depressing futures prices for West Texas Intermediate (WTI). EIA currently forecasts U.S. crude production will climb to 9.69 million barrels per day (bpd) by December while DEPA predicts output will total no more than 9.35 million bpd ("They need to get it right. If they don't we see distortion happen. And we are seeing distortion happen right now," Hamm said in an interview with Argus ("Continental CEO says EIA forecast caps WTI", Sept. 27). Hamm reiterated his view that prices below $50 are not sustainable and producers would need prices closer to $60 to meet rapidly growing global demand. So is Hamm right to blame EIA for the decline in WTI prices and the big discount to Brent which emerged in the third quarter of 2017?The relationship between front-month WTI and Brent prices was fairly stable between January and June, with WTI trading at a discount of around $2. As recently as June 30, WTI was trading at a discount of just $1.88. Since then, however, the discount has widened consistently to reach $6.80. On Sept. 25, U.S. producers were receiving just $52.22 for benchmark crude while their counterparts in the North Sea were realising $59. But it is not obvious that the market has reacted to EIA forecasts or that the agency should be blamed for the weakness of WTI.There has been little change in EIA forecasts since June. In fact, EIA has recently trimmed its predictions for output in both 2017 and 2018.

Oil falls more than two percent on signs of higher output (Reuters) - Oil fell more than $1 a barrel on Monday as a rise in U.S. drilling and higher OPEC output put the brakes on a rally that helped prices notch their biggest third-quarter gain in 13 years. Iraq announced its exports rose slightly in September while a Reuters survey showed OPEC overall boosted output. [OPEC/M] U.S. drillers added six oil rigs in the week to Sept. 29, bringing the total count to 750, data from General Electric Co’s Baker Hughes energy services firm showed on Friday. “We’ve seen them add rigs for the first time in seven weeks, so that changes sentiment as well,” said John Tjornehoj, energy market analyst at CHS Hedging. Brent crude, the global benchmark, settled down 67 cents or 1.2 percent to $56.12 a barrel. It had notched a third-quarter gain of about 20 percent, the biggest increase for that quarter since 2004, and traded as high as $59.49 last week. U.S. crude closed down $1.09 or 2.1 percent to $50.58. The U.S. benchmark posted its strongest quarterly gain since the second quarter of 2016. Oil prices climbed last week on tension in Iraqi Kurdistan after the region’s independence vote. “The big short-term risk is obviously the pipeline,” said James Williams, president of energy consultant WTRG Economics. “So far Turkey hasn’t closed the Kurdish pipeline.” The rally had also been driven by signs that a three-year crude glut is easing, helped by a production cut deal among global producers led by the Organization of the Petroleum Exporting Countries. But a Reuters survey on Friday found OPEC oil output rose last month, mostly because of higher production in Iraq and also Libya, an OPEC member exempt from cutting output.

Traders Are Betting On $100 Oil In 2018 - While oil industry executives are preparing to live and profit in the world of $50 oil over the next few years, some enthusiast investors have been betting on $100 oil for December 2018 options.Open interest in $100 call options for December 2018 has tripled in one week to exceed 30,000 lots, according to Reuters. Open interest in that contract is now equal to the most active contract of the December 2017 options—$60 call options. The $100 December 2018 options is the largest strike for all of 2018. Although bullish reports over the past few weeks point to stronger-than-expected oil demand growth, and although global oversupply has reduced over the summer, the bets for $100 oil at the end of next year are still way above estimates and forecasts. But that hasn’t stopped some traders from shooting the moon.After oil prices entered bull-market territory at the beginning of this week, analysts started weighing in again on the future price of oil: How much could it rise? Could the increase be sustained?Over the past week alone, we’ve seen one analyst predict prices of $80 per barrel. A panel of several other analysts forecast a price drop if OPEC were to end its production cut deal as planned in March 2018.Citi added its two cents: whatever OPEC does, supply will likely get tighter next year, suggesting that prices would head upward.  Three years of low oil prices have constrained investments in conventional projects, and the IEA has just recently reiterated its warning that an oil price spike is in the cards in 2020, citing growing demand for oil that could outstrip the pace of new conventional supply.

Oil Markets Fear An OPEC Compliance Collapse - Oil prices have retreated in recent days, with Brent pulling back after hitting $58 per barrel. By midday trading on Tuesday, Brent was hovering around $55 per barrel and WTI had fallen back to $50.  Last week Reuters reported that OPEC’s production likely ticked up in September above the group’s production target, rising to 32.86 million barrels per day. Oil prices likely suffered some downward pressure from the report. “One can only conclude that unless OPEC approaches the original production target of its 14 members of just below 32 million barrels per day, rebalancing will suffer a major and possibly prolonged setback,” Tamas Varga, analyst at brokerage PVM, told the WSJ.  A Wall Street Journal poll in September of 15 major investment banks found another dip in expectations for oil prices. The average price in the forecasts for Brent crude in 2018 fell to just $53 per barrel, down $1 from a month earlier. It was the fifth consecutive month that the banks lowered their forecasts. They expect WTI to average just $50 per barrel in 2018. “We think the demand forecasts are, perhaps, a little too optimistic and as a result we are left with all the bearish factors that come from the supply side,” Harry Tchilinguirian, head of commodity strategy at BNP Paribas, told the WSJ. Many of the banks see the recent run up in prices as potentially self-defeating if it brings more shale supply online.. Moody’s Investors Service says that even as the finances of much of the shale industry have improved over the past year, any further progress will likely only come from higher oil prices. In other words, the “efficiency gains” are bumping up against their limits, and for shale companies to post meaningful returns on capital invested, they will need oil prices to move higher than $50 per barrel. The report offers some warnings to investors expecting huge profits from shale. According to Reuters, a group of activists investors are trying to change the incentives for shale companies, separating out CEO compensation from aggressively drilling. As Reuters notes, U.S. oil production is surging, aided by a 50 percent increase in capital spending. While shale executives rake in hefty bonuses, shareholders are only earning a pittance on this model because it is not one that prioritizes profitability.

Oil Prices Under Pressure After API Reports Large Gasoline Build -- The American Petroleum Institute (API) reported a draw of 4.079 million barrels in United States crude oil inventories, compared to more modest analyst expectations that inventories would draw only 756,000 barrels for the week ending September 29. Gasoline inventories, on the other hand, delivered a blow with a larger than expected build of 4.19 million barrels for the week ending September 29, against an expected build of only 1.088 million barrels. Last week, too, saw a large gasoline build.Both WTI and Brent benchmarks fell again on Tuesday after a bad Monday, both down more than a dollar week on week as reports that OPEC raised production in September by as much as 120,000 barrels per day, according to a Bloomberg survey. WTI hitting a 7-month high last Monday at $52.22.At 2:56pm EST, WTI was trading down 0.04% (-$0.02) at $50.44, while Brent crude traded down 0.27% (-$0.15) at $55.97.Gasoline was trading up on Tuesday, at $1.56, down .44% on the day, but down almost 8 cents from last week. While the inventory draws keep piling on the United States, the global supply/demand situation for crude oil is still not balanced, and fears are that OPEC’s currently proposed end date of March 2018 for the cuts will prove to be too soon. For the US, the total draw for crude oil in 2017 now stands at just shy of 26.5 million barrels, according to API data. EIA data show a 15-million-barrel draw for year-to-date 2017, through last week’s report.

WTI/RBOB Extend Losses After Another Big Gasoline Inventory Build -- WTI and RBOB have trended lower since last week's inventory data hit and today's API inventory prints (showing a decent crude draw but a relatively large gasoline build -biggest since January compared to DOE data) sparked some more weakness in both oil and gasoline prices. API

  • Crude -4.079mm (-500k exp)
  • Cushing +2.048mm (+1.8mm exp) - biggest build since March
  • Gasoline +4.19mm (+1mm exp) - biggest build since Jan
  • Distillates -584k

After last week's surprise build in gasoline, things got a little worse this week with another major build, biggest since January (and restocking at Cushing, biggest since March).  WTI had drfted back from recent highs to hover around $50.50 which seems like a comfortable range for crude for now (even as RBOB has tumbled)... Both WTI and RBOB are extending losses after the API data but the move is small...

OPEC/non-OPEC bloc recruiting up to 16 oil producers to join output cuts: Venezuela - The OPEC/non-OPEC coalition will try to recruit at least 10 and up to 16 more oil producing countries to join in output cuts to bolster market rebalancing efforts, Venezuelan oil minister Eulogio del Pino said Wednesday. If the coalition is able to get more participants, that could obviate the need to extend the production cut agreement or implement deeper cuts, as ministers are discussing, he said. "Maybe we don't need to expect another extension, we could have actions to accelerate that balancing," Del Pino told reporters on the sidelines of the Russian Energy Week conference. "But that's something we need consensus on among all the countries." The current deal, which runs through March, calls on OPEC and 10 non-OPEC countries led by Russia to cut a combined 1.8 million b/d. Del Pino said that he had talked with Egypt on Tuesday, and fellow OPEC member Equatorial Guinea was recruiting seven African countries, including Uganda, Chad and Congo. Russian energy minister Alexander Novak on Tuesday said Turkmenistan could join. Russian President Vladimir Putin on Monday led a delegation to Turkmenistan, where officials discussed cooperation on gas production and marketing. The countries that the coalition is targeting have a combined production of some 24 million to 25 million b/d, Del Pino said. That would be on top of the approximately 50 million b/d that the 24 current members of the OPEC/non-OPEC coalition currently produce, more than half of global supply.

Huge Decline In US Crude Oil Inventories; Re-Balancing Drops To 41 Weeks -- October 4, 2017 –- US crude oil inventories: the original estimates were way off (posted last night). The EIA weekly petroleum report (a dynamic link) shows that there was a significant decline in US crude oil inventories: declining by 6.0 million bbls. The number of weeks to "re-balance" decreased from 46 weeks to 41 weeks with that data:   Other data from the weekly report:

  • refineries are still operating well below maximum capacity; currently at 88.1%
  • gasoline production virtually unchanged at almost 10 million bbls/day
  • again, distillate fuel production increased, average almost 5 million bbls/day
  • US crude oil imports were down a bit but more than 10% below last year
  • at 465.0 million bbls of crude oil in US inventories, this is in the upper half of the average range
  • distillate fuel inventories are in the lower half of the average range despite increased production

WTI/RBOB Jump After Big Crude Inventory Draw, Exports Hit Record High --WTI/RBOB prices recovered from their drop after API reported a big surprise gasoline build overnight ahead of the DOE data which showed a major crude draw (and smaller than API-reported build in gasoline). Along with no change in production, this sparked buying in both WTI/RBOB as the kneejerk reaction. DOE:

  • Crude -6.023mm (-500k exp) - biggest draw since August
  • Cushing +1.525mm (+1.8mm exp) - biggest build since March
  • Gasoline +1.644mm (+1mm exp) - biggest build since August
  • Distillates -2.606mm

Major draw in crude (considerably larger than API and expectations) is dominating the headlines but the continued restocking in Cushing and another big build in gasoline is likely weighing on prices.

US ULSD monthly exports hit highest point recorded by EIA – US ultra low sulfur diesel exports surged 5.075 million barrels in July, driven mainly by demand in Europe and Latin America, according to the most recent Energy Information Administration data. The July export total of 45.882 million barrels, released by the EIA on Monday, represents the highest mark reported by the agency, which tracks the data back to January 2009. It bested a previous monthly high of 40.807 barrels in June. From June to July, exports to Finland rose 300,000 barrels, France rose 1.556 million barrels, Germany rose 302,000 barrels and the Netherlands rose 3.239 million barrels. Exports to Italy and the UK, however, fell by 407,000 barrels and 435,000 barrels respectively. The 7.144 million barrels exported to the Netherlands is the most the country has taken from the US since 8.744 million barrels in October 2013. Comparatively, the July Netherlands exports are nearly as much as April, May and June exports to the country combined, 7.282 million barrels. The surge to Europe slightly predated an upset at Shell's 404,000 barrels refinery in Pernis, the Netherlands, the largest refinery on the continent. A fire shut the refinery on July 29. It began the restart process on August 24. US volumes rarely make it past the Adriatic, tending to discharge into the West Mediterranean. July exports to Peru rose 698,000 barrels, Panama rose 316,000 barrels, Mexico rose 415,000 barrels, Honduras rose 359,000 barrels, Guatemala rose 1.101 million barrels, Brazil rose 629,000 barrels and Chile rose 1.645 million barrels.

NYMEX Nov gas slides 1.7 cents despite storage falling below 5-year average - Chevron and BHP said late Thursday they have shut several deepwater US Central Gulf of Mexico oil production platforms in advance of Tropical Storm Nate, including the former's Jack/St Malo and Tahiti facilities and BHP's Shenzi and Neptune. Earlier Thursday, Chevron said it was preparing to shut its Blind Faith and Petronius platforms as Nate moved along a track that would place it ashore in eastern Louisiana, along the central US Gulf Coast, this weekend, according to the National Hurricane Center. Later Thursday, the company began to shut the Genesis, Tahiti and Jack/St Malo platforms, and evacuate all associated personnel, Chevron spokeswoman Veronica Flores-Paniagua said in a statement. Total daily production from the Jack and St. Malo fields in 2016 averaged 94,000 barrels of liquids and 14 million cubic feet of natural gas, Chevron has said. Tahiti in 2016 averaged a total of about 56,000 b/d of liquids and 22,000 Mcf/d of natural gas. In addition, BHP is "in the process of shutting in and securing our Green Canyon production platforms, Shenzi and Neptune," BHP spokesman Jimmy Baker said late Thursday. "We intend to fully evacuate tomorrow morning and our crews will remain onshore until the storm has passed." At 5 pm EDT Thursday, Nate's center was over eastern Honduras and was expected to move near or over the northeast Yucatan Peninsula in Mexico, still as a tropical storm, late Friday or Friday night, and move into the US Gulf on Saturday, the NHC said. It is forecast to reach the northern Gulf Coast this weekend as a hurricane.

Platts JKM Weekly: Nov LNG at $8.60/MMBtu extends weekly gains on firm demand -- The Platts JKM for LNG cargo deliveries in November ended the week at $8.60/MMBtu, up 20 cents/MMBtu on the week and its highest level since January, as steady demand from end-users and traders helped support prices. Portfolio players were reported to be scouring the market to fill short positions in North Asia while demand from India bolstered the market's bullish sentiment. Offers remained around $8.70/MMBu for H2 November throughout the week while bids were seen at around $8.50/MMBtu for H2 November. The results of a few buy tenders underlined the bullishness of the market. China's CNOOC was heard later in the week to have more than four cargoes initially reported, draining the Q4 spot supply pool. The Association of Southeast Asian Nations is set to have a significant impact on energy and commodities in the coming decades, as the region’s demand climbs due to favorable geography and demographics. Download our latest special report to read about the challenges and opportunities in ASEAN's commodity landscape The top Chinese importer had purchased up to seven cargoes from mostly trading houses and portfolio players, multiple sources said. Expectations that Chinese buyers would continue to show strong appetite after their long holiday also offered support. LNG importers from India moved back into the spot market after the end of the country's monsoon season. Reliance was seeking October and November cargoes while Gail was looking for November and H1 December cargoes. Both were heard this week awarded their tenders, although details remained unknown. Market sources said Indian buyers were tapping the spot market, driven by power demand growth post-monsoon as well as replacements for coal power generation as domestic coal mining production had been hampered by the monsoon rains.

Oil supply, demand divergence 'now broken': Saudi minister Falih - The divergence between oil supply and demand had been "markedly broken," and the market had moved into backwardation less than a year into OPEC's agreement with major non-OPEC producers to curtail oil output, Saudi oil minister Khalid al-Falih said Thursday. Related article -- No pressure on Iran to join OPEC output cuts: Zanganeh Inventories were steadily being reduced, and it was now clear supply is less than demand, Falih told delegates at the Russian Energy Week conference in Moscow. "Floating inventories have almost vanished. The structure of the forward curve has flipped into backwardation," Falih said. After saying he was no more optimistic on oil market fundamentals than he had been for the last two or three years, Falih added that OPEC would continue to look at supply, demand and inventories as the three "key controllables." Demand had increased by 1.5 million b/d in 2017, and this would be sustained into 2018, Falih said, adding that this was a "good planning basis." He also welcomed the contribution of US shale oil to global output, but warned that it was unreasonable to expect shale oil production to "somehow spring up at certain places and grow exponentially." This had been proven to be unrealistic, he said, and "we are well over the hump." As the world's two largest oil producers, Saudi Arabia and Russia have led the 24-country OPEC/non-OPEC coalition in its 1.8 million b/d supply cut, which is scheduled to end in March. Falih paid tribute to his Russian counterpart, Alexander Novak, for his role in "bringing the industry towards understanding that this is not a zero- sum game." The agreement had breathed life back into OPEC, Falih said, with the group previously finding itself unable to cope with surging supplies and rising global inventories.

WTI Tumbles Below $50 To 3-Week Lows --On the heels of continued dollar strength, output increases by OPEC (and US production at 2 year highs), and Libya restarting its biggest oilfield, WTI prices are tumbling for the 3rd time this week, back below $50 to their lowest in 3 weeks... As Bloomberg notes, while oil rallied into a bull market last month on the prospect of stronger demand, prices struggled to hold above $52 a barrel as supply grew from the U.S. and two members of the Organization of Petroleum Exporting Countries that are exempt from making cuts. Saudi Arabia and Russia reaffirmed their cooperation during a visit from King Salman bin Abdulaziz this week, with President Vladimir Putin saying he is open to extending the agreement with OPEC until the end of 2018 if required. “Higher OPEC production in September as well as the prompt return of supplies from Libya after the brief closure of their biggest field weighed on oil futures this week,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich. The result is clear - 3 legs lower and back to 3-week lows... Companies from BP Plc to Chevron Corp. are shutting platforms in the Gulf of Mexico to prepare for Tropical Storm Nate, which is forecast to become a hurricane south of Louisiana on Saturday.

WTI discount to Brent reflects logistics constraints: Kemp (Reuters) - Even as crude stocks decline elsewhere in the United States, stocks are rising in the Midwest, especially around the delivery point for the New York Mercantile Exchange’s light sweet crude contract at Cushing in Oklahoma. Crude stocks at Cushing hit a low of 56 million barrels on July 28 but have since risen by almost 7 million barrels, according to the U.S. Energy Information Administration (EIA). In the rest of country, commercial crude stocks stood at 426 million barrels on July 28 but have since fallen by almost 24 million (“Weekly Petroleum Status Report”, EIA, Oct. 4).Stocks on the U.S. Gulf Coast, which includes the major refining centres, have declined by 13 million barrels over the same period. Stocks on the East and West Coasts have each fallen by 4 million barrels. Crude stocks on the East, West and Gulf Coasts, where refineries are mostly supplied by sea, have all fallen in line with the tightening of the global oil market. But the landlocked Midwest, which is mostly supplied by domestic shale producers as well as pipelines from Canada, has behaved differently ( The diverging regional trend in crude stocks since late July has coincided with the emergence of a big discount in WTI futures prices compared with Brent.The discount for front-month WTI futures compared with Brent, which had been stable at about $2-$3 a barrel between April and July, began to increase sharply from the end of July and is now almost $6. While Brent futures have moved into backwardation, indicating a tightening market, WTI prices began to diverge from late July and have remained in contango. But the stocks build-up at Cushing, and to a lesser extent in the rest of the Midwest, is real and a more likely explanation for the disconnect between WTI and Brent.  Spot prices and calendar spreads point to local oversupply in the Midwest and specifically around Cushing while the rest of the global market is tightening. The price disconnect has proved surprisingly long-lived, despite a surge in crude exports from the U.S. Gulf Coast in recent weeks, which suggests logistical constraints are preventing the Midwest glut from clearing quickly. The Brent-WTI gap is another example of the periodic disconnect between landlocked WTI and seaborne Brent, rather than the result of flawed forecasts.

U.S. Oil Rig Count Falls As Prices Falter - The number of active oil and gas rigs in the United States fell this week by 4 rigs.The total oil and gas rig count in the United States now stands at 936 rigs, up 412 rigs from the year prior, with the number of oil rigs in the United States decreasing by 2 this week and the number of natural gas rigs decreasing by 2. The oil rig count now stands 320 above the count one year ago.The spot price for WTI fell earlier on Friday as traders feared further rises in U.S. crude oil inventories as refineries in the US once again brace for stormy weather, preparing evacuations and shuttering in anticipation—this time—of Tropical Storm Nate. Prices were weighed down a day earlier as well, after the EIA reported that US oil exports had reached an all-time high of 1.98 million bpd for week ending September 29.WTI is down 2.91% to the ever-important $50 mark, at $49.31 at 12:18pm EST on Friday—still more than $2 under over last week’s price of $51.67. Brent crude was trading down today at 2.79% on the day at $55.41— more than $1 under last week.Oil rigs in the United States now number 748—320 rigs above this time last year. Although the number of oil rigs are still up significantly year on year, the increases slowed in the Q2 2017, and have reversed in Q3. The first quarter 2017 saw 137 oil rigs added in the United States, while the second quarter 2017 saw 97 rigs added. Q3, on the other hand, saw a net decrease in the active number of rigs, ending the quarter down by 6. Q4 is now starting off in the red as well.Related: Oil Prices May Hit $60 By End Of 2017Still, US crude oil production is continuing its ascent, now at 9.561 million barrels per day for the week ending September 29, 2017—with almost new 2017 highs with each week except for a couple of weeks that had stumbled due to Hurricane Harvey. At 10 minutes after the hour, WTI had fallen further and was trading at $49.24. Brent crude had rallied somewhat, trading at $55.53 but still down 2.58% on the day.

WTI /RBOB Plunge On Saudi, Russia Comments; Rig Count Resumes Decline -- WTI and RBOB are plunging following comments from the Saudi minister that "he doesn't know" if November meeting will agree on a production cut deal extension, and Russia's Novak confirmed that there is "no clarity" on a deal extension.Saudi Arabia will work with Russia to reach a consensus in the next few weeks before the Nov. 30 OPEC/non-OPEC meeting in Vienna, Saudi Energy Minister Khalid Al-Falih says at a meeting with Russian counterpart Alexander Novak in Moscow.OPEC and non-OPEC producers will discuss “what to do beyond March” at that meeting: Al-FalihBoth ministers say it’s too early to say whether or not the November meeting will yield an agreement to extend the production cutsAmid higher OPEC production and the prompt return of supplies from Libya, futures prices are under pressure.After last week's surprise rise (+6) in the rig count, the US Oil rig count declined by 2 this week to 748...   Technically, WTI just plunged below its 200DMA ($49.53) for the first time since September... There was a feeling that some refiners could be shut but as the forecast for Nate shifts to the East, it doesn’t seem as though many refineries will be affected as it shifts “away from generally the bulk of production, so you have the corresponding pull-back here,”according to Bob Yawger, director of the futures division at Mizuho Securities USA.  Saudi Energy Minister Khalid Al-Falih concluded: “Our job is not done and there are still uncertainties and headwinds in global oil markets. We have to keep our eyes clearly on the road” to proceed with rebalancing the market.

Oil Markets Brace For Another Hurricane - Tropical storm Nate is making its way through the Gulf of Mexico, forcing a range of oil producers to shut in production and evacuate staff. Nate is expected to strengthen into a hurricane before it makes landfall in Louisiana this weekend. About 15 percent of U.S. Gulf of Mexico production was forced offline, or a little more than 250,000 bpd. An estimated 6.4 percent of the Gulf’s natural gas was also idled. Disruptions and/or evacuations were reported by Royal Dutch Shell, BP, Chevron. Anadarko. ExxonMobil, and Statoil.  The Washington Post reports that President Trump could announce his plans to decertify the Iran nuclear deal next week. That move will kick the issue to the U.S. Congress, which would have 60 days to decide to reimpose sanctions on Iran, ultimately leading to the unraveling of the deal. But Trump is reportedly also supposed to announce a new strategy intended to confront Iran next week. The move will likely leave the U.S. isolated even from its key allies on the deal because there is not a lot of evidence to suggest Iran is violating the terms of the accord.. The U.S. Department of Interior tried to delay enacting Obama-era regulations on methane emissions from public lands, but a U.S. District Court said the agency violated federal law by doing so. As a result, the regulations will go into effect immediately, forcing oil and gas companies operating on federal land to capture their methane emissions. Interior had tried to delay the rules until 2019. LNG prices typically rise ahead of winter months, but demand is much stronger than expected due to fuel switching underway in China. Spot LNG prices were up 39 percent to $8.40 per MMBtu at the end of September, compared to just $6.05/MMBtu in August.  OPEC cohesion has been bolstered by the inclusion of Russia in the production cuts, and the growing relationship between two of the world’s largest oil producers suggests coordination will continue through next year. OPEC and Russia have refrained from endorsing a course of action, but the first state visit by a Saudi monarch to Russia highlights the degree to which they are working together. Russian President Vladimir Putin said this week that if the group decides to extend the cuts, it should extend through the end of 2018. The two countries also signed a range of deals that will deepen their energy relationship, including cooperation on drilling technology between Saudi Aramco and Gazprom Neft, as well as preliminary agreements on sizable investments in petrochemical projects.

Oil Cuts Add to Saudi Pain as GDP Contracts for Second Quarter - Saudi Arabia’s economy contracted for two quarters in a row for the first time since the global financial crisis, as the kingdom grapples with low oil prices and its businesses struggle to cope with economic reforms. The kingdom’s gross domestic product shrank 1 percent in the second quarter from the same period a year earlier, when it expanded 0.9 percent, according to official data released on Saturday. The economy had contracted 0.5 percent in the first three months of 2017. Crown Prince Mohammed Bin Salman is leading the push to transform the biggest Arab economy at a time when crude prices are at about half their 2014 peak. But as authorities seek to reduce the kingdom’s reliance on oil, they’re also leading efforts among OPEC members and some other major producers to bolster prices by cutting output. The kingdom’s oil GDP shrank 1.8 percent in the second quarter, weighing on overall activity. The data also showed how non-oil industries are still struggling with efforts to overhaul the economy and shore up public finances. The non-oil GDP, the main engine of job creation, expanded below 1 percent, driven mainly by the government sector, the data show.   The Saudi economy hasn’t contracted for two quarters in a row since at least 2010, official data show. The kingdom doesn’t publish quarterly seasonally-adjusted data, which is used by some economists to define a recession. 

Wheels And Deals: Trouble Is Brewing In The House Of Saud - Suddenly, the ideological matrix of all strands of Salafi-jihadism is being hailed by the West as a model of progress – because Saudi women will finally be allowed to drive. Only next year. Only some women. And still subject to many restrictions. The diversionary tactic masks serious trouble in the court. A Gulf business source with intimate knowledge of the House of Saud, having held a number of personal meetings with members, told Asia Times that “the Fahd, Nayef, and Abdullah families, the descendants of King Abdulaziz al Saud and his wife Hassa bin Ahmed al-Sudairi, are forming an alliance against the ascendancy to the Kingship of the Crown Prince.”No wonder, considering that the ousted Crown Prince Mohammed bin Nayef – highly regarded in the Beltway, especially Langley – is under house arrest. His massive web of agents at the Interior Ministry has largely been “relieved of their authority”. The new Interior Minister is Abdulaziz bin Saud bin Nayef, 34, the eldest son of the governor of the country’s largely Shi’ite Eastern Province, where all the oil is. Curiously, the father is now reporting to his son. MBS is surrounded by inexperienced thirty-something princes, and alienating just about everyone else.Former King Abdulaziz set up his Saudi succession based on the seniority of his sons; in theory, if each one lived to the same age all would have a shot at the throne, thus avoiding the bloodletting historically common in Arabian clans over lines of succession. Now, says the source, “a bloodbath is predicted to be imminent.” Especially because “the CIA is outraged that the compromise worked out in April, 2014 has been abrogated wherein the greatest anti-terrorist factor in the Middle East, Mohammed bin Nayef, was arrested.” That may prompt “vigorous action taken against MBS possibly in early October.” And it might even coincide with the Salman-Trump get together.

U.N. blacklists Saudi-led coalition for killing children in Yemen : (Reuters) - The United Nations blacklisted a Saudi Arabia-led military coalition on Thursday for killing and injuring 683 children in Yemen and attacking dozens of schools and hospitals in 2016, even as it said the coalition had taken action to improve child protection. The blacklist attached to the U.N. annual report on children in armed conflict also named the Iran-allied Houthi rebel group, Yemen government forces, pro-government militia and Al Qaeda in the Arabian Peninsula for violations against children in 2016. The U.N. report said the Houthis and affiliated forces killed and injured 414 children in 2016. The report from U.N. Secretary-General Antonio Guterres was submitted to the Security Council on Thursday and seen by Reuters. A draft of the blacklist was reported by Reuters on Tuesday. The actions of the Saudi-led coalition “objectively led” to it being blacklisted for killing and injuring 683 children and for 38 attacks on schools and hospitals last year, the report said, adding that all incidents were verified by the U.N. The coalition had been briefly added to the blacklist in 2016 and then removed by then-U.N. chief Ban Ki-moon pending review. At the time, Ban accused Saudi Arabia of exerting “unacceptable” undue pressure after sources told Reuters that Riyadh threatened to cut some U.N. funding. Saudi Arabia denied threatening Ban. 

Saudi king heads to Russia, with oil, investment and Syria on agenda (Reuters) - The leaders of Saudi Arabia and Russia, the world’s biggest oil exporters, are expected to discuss cooperation on oil production and differences over Syria and Iran on Thursday during the first visit to Moscow by a reigning Saudi Monarch. A slew of investment deals, including on a liquefied natural gas project and petrochemical plants, could also be signed during King Salman’s trip and plans for a $1-billion fund to invest in energy projects are likely to be finalised. The visit, including talks in the Kremlin with President Vladimir Putin, reflects a rapid deepening of ties between Russia and Saudi Arabia, driven by a mutual need to stem a drop in global oil prices. The two countries helped secure a deal between OPEC and other producers to cut output until the end of March 2018, but back competing sides in Syria’s civil war. Riyadh supports rebels fighting President Bashar al-Assad’s forces while Russian troops and Iranian militias have sided with Assad. This leaves Moscow aligned with Saudi Arabia’s arch-rival Iran, whose influence Riyadh fears is growing in the region. “The Saudis want help on Iran, and Russia wants trade and investment,” said Mark N. Katz, an expert on Russia-Middle East relations at George Mason University. “In the Saudi mind, they’re definitely linked and the Russians are going to try to separate these.” Billboards have been erected on the road from the airport to central Moscow welcoming King Salman in Arabic and Russian. His son, Prince Mohammed bin Salman, visited in May just before his elevation to crown prince, and in 2015 the countries’ sovereign wealth funds agreed to $10 billion in investments.

Putin Hosts Saudi King on ‘Landmark’ Russia Visit - Russia and Saudi Arabia struck a deal on weapons sales during an historic visit to Moscow by King Salman bin Abdulaziz as the two energy superpowers also consider extending a pact to curb oil supplies. President Vladimir Putin said the Kremlin talks on Thursday with King Salman, the first monarch of the Gulf kingdom to come to Russia, were a “landmark event.” The king told him that Saudi Arabia wants to continue cooperation with Russia in order to maintain stability on the oil market. Russia signed contracts to provide advanced S-400 air-defense systems as well as anti-tank weapons and multiple-rocket launchers, Saudi Arabian Military Industries said in an emailed statement Thursday. The two countries will also set up a joint military-technical cooperation commission, Russian Foreign Minister Sergei Lavrov said. King Salman’s journey to Moscow, ahead of planned talks with President Donald Trump in Washington early next year, is a recognition by Riyadh of the changing political balance in the Middle East after Putin successfully countered indecisive U.S. efforts to topple Syrian leader Bashar al-Assad. The Saudi courtship of Russia also reflects a convergence of interests between the world’s two largest oil exporters as output cuts negotiated by the Organization of Petroleum Exporting Countries and non-OPEC producers has spurred a recovery in crude prices. “Is there really anything in the world that’s absolutely permanent?” Putin told an energy forum in Moscow on Wednesday, in response to a question about whether Saudi Arabia will always align with the U.S. on geopolitical issues. “It seems to me, on the contrary, that everything’s changing.” King Salman, who arrived for the four-day state visit late Wednesday, called Russia a “friendly” country. He told Putin, who accepted the king’s invitation to visit Saudi Arabia, that their talks will boost the global economy as well as aid international stability and security. Putin said Wednesday that Russia may agree to extend the oil-supply agreement with OPEC to the end of 2018, though he’ll wait to make a decision until nearer the expiry of the existing pact in March. 

One Day After Historic Saudi-Russian Summit, US Suspends Military Exercises With "Arab Allies" -- Russia no longer even has to lift a finger (or buy a few thousands dollars worth of Facebook ads) to steal influence from the US in key geopolitical hotspots: the US can do so on its own. According to the WSJ, the Pentagon halted military exercises with Gulf allies in a symbolic rebuke to countries caught in the ongoing diplomatic spat with Qatar that has eroded counterterrorism cooperation in the region, soured relations between historical allies, and allowed outside powers to establish substantial footholds in the region Having failed at direct diplomacy, the US has decided to take a "passive aggressive" approach, and U.S. Central Command said that some exercises would be suspended in an effort to send a signal that the U.S. military seeks to work together with other nations in the region and encourage them to do so as well.“We are opting out of some military exercises out of respect for the concept of inclusiveness and shared regional interests,” said Col. John Thomas, a Centcom spokesman.What is even more ironic, is that having initially sent a signal of support for the Gulf nations, and isolated Qatar as an "evil sponsor of terrorism", the Pentagon has now flipflopped, and its latest move to curb military drills in the region represents a shift for the U.S., which initially threw its qualified support behind the Gulf nations in an attempt to put pressure on Qatar. As reported here previously, that attempt failed.Top U.S. officials have tried to coax Arab allies to end a blockade of Qatar, which began in June and has been led by Saudi Arabia, the United Arab Emirates and Bahrain. The blockade has closed off the energy-rich country’s land borders and its air and sea routes, squeezing its economy.Yet the four countries at the heart of the dispute each host some of the Pentagon’s largest military bases outside the U.S. The Pentagon relies on cooperation between its Gulf allies for its global counterterrorism efforts and to check Iran’s influence in the region.

Putin Is Filling the Middle East Power Vacuum - The Israelis and Turks, the Egyptians and Jordanians -- they’re all beating a path to the Kremlin in the hope that Vladimir Putin, the new master of the Middle East, can secure their interests and fix their problems. The latest in line is Saudi King Salman, who on Wednesday is due to become the first monarch of the oil-rich kingdom to visit Moscow. At the top of his agenda will be reining in Iran, a close Russian ally seen as a deadly foe by most Gulf Arab states. Until very recently, Washington stood alone as the go-to destination for such leaders. Right now, American power in the region is perceptibly in retreat -- testimony to the success of Russia’s military intervention in Syria, which shored up President Bashar al-Assad after years of U.S. insistence that he must go. “It changed the reality, the balance of power on the ground,” said Dennis Ross, who was America’s chief Mideast peace negotiator and advised several presidents from George H. W. Bush to Barack Obama. “Putin has succeeded in making Russia a factor in the Middle East. That’s why you see a constant stream of Middle Eastern visitors going to Moscow.” Success brings its own problems. As conflicting demands pile up, it’s not easy to send all those visitors home satisfied. “The more you try to adopt a position of dealing with all sides, the more you find that it’s hard to play that game,’’ Ross said. 

Why Despite Threats, Turkey Won't Impose Sanctions On Kurdistan After The Referendum - High-ranking sources in Kurdistan (Erbil) said that the Kurdish leader Masoud Barzani “expected the sanctions already announced by Baghdad and expects many more sanctions to come in the future”. Nevertheless, “the referendum was an essential step to undertake,” otherwise Barzani would no longer be considered the Kurdish leader. “We are not afraid of Turkish sanctions because Ankara would lose more than it will gain if the common borders are closed. The Turkish representative promised us (months before the referendum) that harsh political measures will be adopted against Kurdistan but that no economic sanctions would be seriously considered. After all it is up to Turkey to stop sending its oil tankers to recover our oil production at a cheap price if Erdogan considers it a practical move within his own economy,” said the source.  The Erbil leadership knows that the Kurds lived through hunger and genocide throughout the years, sometimes living in the mountains for decades. Therefore, although any threat to their existence won’t be taken lightly, it cannot affect the process of independence that has been put on their desired track. The Kurdish leaders will agree to allow Baghdad to control airports (Erbil and Suleymaniyeh) as requested by Prime Minister Haidar Abadi, and would like to reestablish good neighbor relationships with all surrounding countries, particularly since the declaration of independence may require two or three years to put into concrete effect.

Iran Deploys Tanks To Border With Iraqi Kurdistan  ---Days before last week's Kurdistan referendum, Iran took steps to isolate and punish the Iraqi Kurdistan region and the government in Erbil (KRG). This included closing Iranian airspace to northern Iraq's two international airports and sending Iran's elite Revolutionary Guard forces to conduct drills along the northwest border with Kurdistan, but in the early hours of Monday Iran dramatically escalated its military build-up along the border by deploying dozens of tanks supported by artillery - this according to a Kurdish government official and Iranian state television.The Kurdish official confirmed the tank build-up, saying "The tanks can be seen from the Kurdish side.” And Iranian state TV on Saturday indicated that Iran and Iraq would cooperate in joint drills and the establishment of heightened border security, to the point that Iran would "receive Iraqi forces that are to be stationed at border posts”.#Iran|ian military drill on Kurdistan Region border (Haji Omaran Crossing Border) despite business being conducted as usual.— Kurdistan 24 English (@K24English) October 2, 2017  Iranian government officials had warned just prior to last week's referendum that, “The republic of Iran has opened its legitimate border gates on the premise of the consent of the federal government of the Iraqi state. If such an event [referendum] happens, these border gates from the perspective of the Islamic Republic of Iran would lose its legitimacy." It appears Iran is now making good on its threats as it worries that an independent Kurdistan at its border would be a destabilizing force concerning Iran's own sizable Kurdish minority.

Iran, Iraq, And Turkey Unite To Block Kurdish Oil Exports - Iraq, Iran, and Turkey are taking a unified stance against Kurdistan’s oil sector after the region elected to seek independence from Baghdad in a referendum in September, according to a new report by Rudaw.“In the case of northern Iraq; Iran, Iraq and Turkey will form a tripartite mechanism and will decide on shutting down the oil,” Turkish President Recep Tayyip Erdogan said after a meeting with leaders from the other two nations on Thursday.A day before the vote, the Iraqi central government issued a statement calling on “neighboring countries and countries of the world” to stop buying crude oil directly from Kurdistan and only deal with Baghdad.Turkey’s Ceyhan port provides an outlet for the Kurdish Kirkuk oil to meet international markets without interference from Baghdad. Erdogan, Tehran and other members of the international community had censured Erbil for proceeding with the independence referendum as Iraq recovers from a three-year war against the Islamic State (ISIS). The Turkish leader had previously threatened to cut Kirkuk off from Ceyhan, but did not provide details on how such a measure would be carried out.Russia’s oil majors side with Kurdistan in its quest for an independent fossil fuel establishment. Rosneft signed off on a $1 billion gas pipeline deal with the Kurdistan Regional Government (KRG) a week prior to the historic vote, signaling Moscow’s approval of a hypothetically separate Kurdistan.Both Iran and Turkey house sizeable Kurdish populations, so the referendum raises fears that Kurds from other nations may seek similar political solutions. Kurdistan produces around 600,000 bpd of crude oil, or about 15 percent of Iraq’s total output. After the votes were counted, the KRG said that the ‘Yes’ to independence option won at the polls, with 92.73 percent of voters opting to grant Erbil its own regime.

Kurdish Referendum Roils the Mideast – One week after Kurdish leader Masud Barzani held his referendum on Kurdish independence from Iraq (with both the referendum and independence being contrary to the Iraqi constitution), the blowback has been fierce, angry and almost universal. What may have been conceived as a clever ploy by Masud’s eldest son, Masrour, to bolster the Barzani family’s flagging popularity by posing as a nationalist leader looks increasingly like a misstep. (Michel Rubin of AEI, has noted that “some [U.S.] Congressional staff and leaders with whom [Masrour] has met, came away from their meeting convinced that Masrour sought independence more to be heir apparent, in what will become hereditary [Kurdish] leadership, than out of sincere nationalistic concerns.”)And now, presidential and parliamentary elections — hastily called in the wake of the Oct. 3 death of former Iraqi President and Kurdish political leader Jalal Talibani — have descended into a mess. Rather than settle “the succession” upon his eldest son, Masud Barzani may instead have opened a wider struggle over leadership of the Kurdish people. Yes, the KRG is reported as being a democracy, but in practice it is run, explains, Michael Rubin, as a (corrupt) family enterprise in which “both the Barzanis (and Talabanis) confuse personal, party, and public funds.” Rubin explains: “Masud Barzani is president and lives in a palace complex in a resort inherited from Saddam Hussein. His nephew, Nechirvan Barzani, is prime minister. His uncle, Hoshyar Zebari, was Iraq’s foreign minister and is now finance minister. Masud’s eldest son, Masrour Barzani, leads the intelligence service; and his second son, Mansour is a general, as is Masud’s brother Wajy. Barzani’s nephew Sirwan owns the regional cell phone company which, while purchased with public money, remains a private holding. Barzani’s sons are frequently in Washington D.C … [where] Masrour Barzani has acquired an $11 million mansion in McLean, Virginia”.

If US reimposes sanctions, Iran's major oil consumers could sway success - What happens if the US reimposes sanctions on Iran's oil sector without the support of Europe, China and Russia — all big players in the international energy landscape? Elizabeth Rosenberg, director of the energy economics and security program at the Center for New American Security, talks with Capitol Crude about the possible implications. Rosenberg, a former Treasury Department adviser on sanctions, tells senior oil editors Meghan Gordon and Brian Scheid that it would be difficult to enforce reimposed sanctions. Further, it could damage the US' economic leverage on a global stage, especially in light of other sanction situations, such as with North Korea, Russia and Venezuela.

The UAE Secretly Picked Up the Tab for the Egyptian Dictatorship’s D.C. Lobbying -- The emails obtained by The Intercept also show Otaiba lecturing journalists and think tank staffers on the benefits of repressive leader Abdel Fattah el-Sisi’s rule, acting as a sort of de facto second ambassador for the country.   Sisi, as chief general of the Egyptian army, led a 2013 coup against then-President Mohamed Morsi. The military man was elected president with 97 percent of the vote in a 2014 election that was largely decried as undemocratic. The UAE and Saudi Arabia were chief backers of the military takeover, providing billions of dollars in support to Egypt.When Politico’s Michael Crowley penned a piece titled “Trump to welcome Egypt’s dictator” in April 2017 with quotes from human rights experts about Sisi’s brutal crackdown, Otaiba wrote him an email accusing him of having “something against Sisi,” despite being “one of the smartest and most thoughtful journalists in the business.”He specifically objected to Crowley’s citation of Tom Malinowski, a former Obama administration diplomat who also served as Human Rights Watch’s Washington director from 2001 to 2013. (Human Rights Watch has issued several damning reports about Egypt in recent years, including one that called for an investigation into Sisi’s role in the 2013 mass killings of more than 1,000 protesters in what “probably amounts to crimes against humanity.” Sisi was Egypt’s minister of defense at the time of the killings.) Crowley pushed back, warning that Sisi’s crackdowns against Egyptian civil society could produce more radicalization. The two went back and forth, and when they concluded, Otaiba forwarded the email chain to U.S. Deputy National Security Adviser Dina Powell. “FYI. This is generally what we’re up against,” he wrote. Crowley declined to comment on his exchanges with Otaiba.

Russia Military Accuses U.S. Of Supporting ISIS - Two week after Russia released a set of satellite photos from Syria, which allegedly showed US special ops located in immediate proximity to ISIS positions, the Russian defence ministry doubled down on Wednesday and again accused the United States of supporting Islamic State jihadists, enabling them to mount counter-offensive attacks in eastern Syria. "The main thing preventing the final defeat of ISIS in Syria is not the terrorists' military capability but support and pandering to them by American colleagues," Russian military spokesman Igor Konashenkov said in a statement.Quoted by AFP, he said recent attacks on Syrian regime forces were all made "from a 50-kilometre zone around At-Tanf on the Syrian-Jordan border" where the US-led coalition is operating a garrison.As we first noted at the end of September, in recent weeks Moscow has repeatedly accused the US of hindering the offensive in the east of the country against IS jihadists mounted by Syrian regime forces with the support of Russian airstrikes and special forces on the ground.The Russian military also said the regime forces "neutralised mobile IS groups on the road from Palmyra to Deir-Ezzor" and freed the captured villages. "If the US side views such operations as unforeseen 'accidents', Russian aviation in Syria is ready to begin complete eradication of all such 'accidents' in the zone they control," Konashenkov said.Russia has been flying a bombing campaign in Syria since 2015, when it stepped in to support the regime of President Bashar al-Assad and tipped the conflict in his favour.  Two weeks ago, the Russian Defense Minister released a trove of photos which were meant to demonstrate the cooperation between the US and the Islamic State in Syria.

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