Sunday, November 12, 2017

US oil production at a record high, distillate supplies are becoming critical, turmoil in the Middle East, et al

oil prices spiked to a new two year high on Monday on turmoil in Saudi Arabia*, but even though they drifted lower the rest of the week as the chaotic news was digested, they still ended higher for the fifth consecutive week, in what is now the longest rally this year....US oil prices for December rose $1.71 a barrel, the largest price jump this year, to a 2 year high of $57.35 a barrel on Monday, on a spate of news out of Saudi Arabia, that included the announcement of the coerced resignation of Lebanon's prime minister Saad al-Harir, the interception of a missile from Yemen that had targeted the International Airport in the Saudi capital of Riyadh, and what is being called a purge of the Saudi aristocracy by Crown Prince Muhammed bin Salman, starting with the arrest of dozens of wealthy business elites and 11 of his royal cousins, and including such billionaire notables as Prince Alwaleed bin Talal, known in the US for his playboy lifestyle and his large holdings of Citigroup, 21st Century Fox and chaotic news continued to come out of the region, oil prices climbed to an intraday high of $57.61 a barrel on Tuesday, a 28 month high, before falling to close at $57.20 a barrel, when some of the worst geopolitical fears surrounding the weekend's news dissipated...oil prices then fell 39 cents to $56.81 a barrel on Wednesday after the EIA report showed a surprise increase in crude stocks and record US oilfield production, suggesting the glut might persist longer than previously thought...crude prices then regained most of that loss on Thursday, rising 36 cents to $57.17 a barrel, after the Saudis announced plans to cut their crude exports by 120,000 barrels per day in December while simultaneously ordering their citizens to leave Lebanon, threatening yet another proxy war with Iran...prices continued to rise slowly on Friday morning and were at one point 18 cents higher, but then slid in the afternoon to close down 43 cents at $56.74 a barrel, after Baker Hughes reported that U.S. drillers had added the most oil rigs in a week since June, suggesting that current record output would continue to grow....oil prices thus ended the week $1.10 a barrel, or nearly 2% higher than the prior week's close, in their fifth-straight week of gains...

* NB: there's more than 3 dozen articles on the turmoil in the Middle East linked to at the end of this package

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 November 3rd, showed that even with a substantial increase in our oil refining, and a decrease in oil imports, we still managed to have some oil left for storage, mostly due to a huge drop in our oil exports.....our imports of crude oil fell by an average of 194,000 barrels per day to an average of 7,377,000 barrels per day during the week, while our exports of crude oil fell by 1,264,000 barrels per day to 869,000 barrels per day, which meant that our effective trade in oil worked out to a net import average of 6,508,000 barrels of per day during the week, 1,070,000 barrels per day more than net imports during the prior the same time, field production of crude oil from US wells rose by 67,000 barrels per day to record high of 9,620,000 barrels per day, which means that our daily supply of oil coming from net imports and from wells totaled an average of 16,128,000 barrels per day during the reported week... 

during the same week, US oil refineries were using 16,305,000 barrels of crude per day, 290,000 barrels per day more than they used during the prior week, while over the same period 222,000 barrels of oil per day were being added to 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 and from oilfield production was 399,000 fewer barrels per day than what refineries reported they used and what was added to storage during the account for that discrepancy, the EIA needed to insert a (+399,000) 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, a metric that is labeled 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 fell to an average of 7,639,000 barrels per day, still 0.6% more than the 7,695,000 barrels per day average imported over the same four-week period last year....the 222,000 barrel per day addition to our total crude inventories all went into commercial facilities, as oil stored in our Strategic Petroleum Reserve was unchanged from the prior week...this week's 67,000 barrel per day increase in our crude oil production included a 65,000 barrel per day increase in output from wells in the lower 48 states and a 2,000 barrels per day increase in output from Alaska....the 9,620,000 barrels of crude per day that were produced by US wells during the week ending November 3rd was a new record high for US output, 9.7% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 10.7% more than the 8,522,000 barrels per day of oil we produced during the during the equivalent week a year ago...since we have a new record for US oil output, we'll include a long term graph of that here:

November 9 2017 US oil output for Nov 3rd

the above graph, taken from a post on this week's EIA report at Zero Hedge, shows oil production from US wells in thousands of barrels per day, weekly since 1985, with this week's record high clearly called out...notice that we had hit a three and a half year low in oil production just 4 weeks earlier, when Hurricane Nate shut in Gulf of Mexico and nearby land production, creating that odd jumble at the current end of the graph, not unlike the oil production downturns in 2005 caused by Hurricanes Katrina and Rita, or the 2008 out disruption caused by Hurricane Gustav...

returning to the week ending November 3rd, US oil refineries were operating at 89.6% of their capacity in using those 16,305,000 barrels of crude per day, up from 88.1% of capacity the prior week, a bit stronger than the normal pace for the end of the fall maintenance period...however, the 16,305,000 barrels of oil that were refined this week were still 8.0% less than the 17,725,000 barrels per day that were being refined the week before Hurricane Harvey struck at the end of August, even as they were 3.1% more than the 15,817,000 barrels of crude per day that were being processed during week ending November 4th, 2016, when refineries were operating at 87.1% of capacity, and more than 10% above the 10-year seasonal average...

even with increase in the amount of oil refined, gasoline output from our refineries was little changed, decreasing by 20,000 barrels per day to 10,167,000 barrels per day during the week ending November 3rd, which was also 2.8% lower than the 10,456,000 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 163,000 barrels per day to 5,199,000 barrels per day, which was 8.7% more than the 4,784,000 barrels per day of distillates that were being produced during the week ending November 4th last year....   

with our gasoline production little changed, our gasoline inventories at the end of the week fell by 3,312,000 barrels to 209,537,000 barrels by November 3rd, after falling by 9,476,000 barrels over the prior two weeks, as our domestic consumption of gasoline rose by 35,000 barrels per day to 9,496,000 barrels per day, and as our exports of gasoline fell by 135,000 barrels per day to 732,000 barrels per day, while our imports of gasoline also fell by 135,000 barrels per day to 405,000 barrels per day...with significant gasoline supply withdrawals in 15 out of the last 21 weeks, our gasoline inventories are now down by 13.6% from June 9th's level of 242,444,000 barrels, and 5.2% below last November 4th's level of 220,963,000 barrels, even as they are still roughly 1.0% 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 3,359,000 barrels to 125,562,000 barrels over the week ending November 3rd, the ninth decrease in ten weeks, after falling by just 320,000 barrels the prior week...that was because the amount of distillates supplied to US markets, a proxy for our domestic consumption, jumped by 952,000 barrels per day to 4,486,000 barrels per day, even as our exports of distillates fell by 406,000 barrels per day from last week's record high to 1,279,000 barrels per day, while our imports of distillates fell by 51,000 barrels per day to 86,000 barrels per day...after this week’s decrease, our distillate inventories ended the week 15.5% lower than the 148,602,000 barrels that we had stored on November 4th, 2016, and 6.5% lower than the 10 year average for distillates stocks for this time of the year…we'll also include a chart of what that looks like, since it appears our supplies of distillates are becoming critically low heading into winter...

November 8 2017 distillate supplies as of November 3rd

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 midpoint 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 normally a 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, largely because we have been exporting our distillates at a record pace, with some recent weeks seeing as much as 40% of our production going overseas...but in the US, we never deny the oil companies their profits, even if the margin of safety for our own use gets precariously narrow...thus we are heading into what looks like it will be a colder than normal winter with much lower than normal supplies of heat oil in storage, which is now likely to result in a shortage of heat oil and correspondingly higher prices in the US, sometime before the heating season comes to a close....

lastly, with our oil production at a record high while our oil exports were sharply lower, our commercial crude oil inventories rose for the just the 6th time in the past 31 weeks, increasing by 2,237,000 barrels, from 454,906,000 barrels on October 27th to 457,143,000 barrels on November 3rd...while our oil inventories as of October 27th were still 5.7% below the 485,010,000 barrels of oil we had stored on November 4th of 2016, they were a half percent higher than the 454,822,000 barrels in of oil that were in storage on November 6th of 2015, and 32.1% greater than the 346,150,000 barrels of oil we had in storage on November 6th of 2014, as the buildup of oil supplies was just getting started...   

This Week's Rig Count

US drilling activity increased for the 1st time in 6 weeks and for 4th time in the past 15 weeks during the week ending November 10th, as only oil rigs were added this past week...Baker Hughes reported that the total count of active rotary rigs running in the US rose by 9 rigs to 907 rigs in the week ending on Friday, which was also 339 more rigs than the 568 rigs that were deployed as of the November 11th report in 2016, while it was still well less than half of the recent high of 1929 drilling rigs that were in use on November 21st of 2014....

the number of rigs drilling for oil increased by 9 rigs to 738 rigs this week, in just their 3rd increase in 14 weeks and, which put the count of active oil rigs up by 286 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 was unchanged at 169 rigs this week, which was just 54 more gas rigs than the 115 natural gas rigs that were drilling a year ago, and way down from the recent high of 1,606 natural gas rigs that were deployed on August 29th, 2008...

activity offshore remained unchanged this week, with 18 rigs active in the Gulf of Mexico, down from the 21 rigs drilling in the Gulf a year ago....the count of active horizontal drilling rigs rose by 12 rigs to 764 rigs this week, their first increase in 6 weeks, putting them up by 319 rigs from the 457 horizontal rigs that were in use in the US on November 11th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of addition, the directional rig count was up by 1 rig to 74 rigs this week, which was also up from the 52 directional rigs that were working during the same week last year...on the other hand, the vertical rig count was down by 5 rigs to 57 vertical rigs this week, which was also down from the 59 vertical rigs that were deployed on November 11th of 2016...

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 November 10th, the second column shows the change in the number of working rigs between last week's count (November 3rd) and this week's (November 10th) count, the third column shows last week's November 3rd 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 11th of November, 2016...          

November 10 2017 rig count summary

as you can see from the above tables, most of this week's rig increase was concentrated in Oklahoma's Cana Woodford basin, more popularly known by the acronym of the SCOOP - STACK play...that 7 rig increase was the largest for that basin since February 3rd, as it was not a major participant in this year's first half rig increase, which was led by drilling in the Permian of west Texas...also note that although the Permian did see a 6 rig increase this week, Texas saw a 4 rig decrease, all of which were outside of the major basins highlighted by Baker Hughes...the Permian district in Texas did see a three rig increase, while New Mexico saw an increase of 4 rigs, so one of those seven new rigs in the region was not targeting the Permian...lastly, note that there was also a rig pulled out of the Utica shale, while the Ohio and Pennsylvania rig counts were unchanged at 29 rigs and 31 rigs respectively...the best i can figure as to what happened there was that one rig was shut down in the Marcellus in West Virginia, while one rig was added in the Marcellus of Pennsylvania, while at the same time a Pennsylvania rig targeting the Utica shale was shut down...that would leave both the Marcellus and Pennsylvania rig counts unchanged, while showing one rig decreases in West Virginia and in the Utica, which is what we see...


How Fossil Fuel Allies Are Tearing Apart Ohio's Embrace of Clean Energy - On March 30, Bill Seitz, a charismatic Republican, took to the floor of the Ohio House to make a case for gutting a 2008 law designed to speed the adoption of solar and wind as significant sources of electricity in the state. The law, he warned, "is like something out of the 5-Year Plan playbook of Joseph Stalin."  Most important, Seitz insisted, the government had no business telling anyone what kind of energy to buy. By the time he was done, he had secured a veto-proof majority to undo key parts of the law.What happened to turn lawmakers so decisively against a statute they'd adopted 93-to-1 less than a decade ago? As fossil fuel interests mobilized at the national level to fight proposals to mitigate climate change that would undercut their profits, they made Ohio a priority for fighting clean energy policy at the state level. Beginning in earnest in 2011, a network of coal companies, utilities, think tanks, nonprofit foundations and political action committees coalesced to roll back Ohio's alternative energy initiatives. Industry-supported think tanks provided highly questionable research purporting to show big job losses. An industry group claiming to represent consumers—and accused of using fraudulent tactics before regulatory agencies—advised Seitz's staff on how to water down the definition of alternative energy. And industry sources donated to the campaigns of state politicians, like Seitz, who've kept the repeal-and-replace bills coming, even after Republican Gov. John Kasich vetoed a similar effort.This network includes Americans for Prosperity, a foundation funded by the energy magnates Charles and David H. Koch; the Heritage Foundation, a Washington-based advocacy group known for its criticism of climate change science; and the American Legislative Exchange Council (ALEC), another conservative nonprofit in Washington with Koch ties that frequently spoon-feeds draft legislation to state politicians. Seitz is on ALEC's national board of directors, but he bristles at the suggestion that he relies on the council for guidance. "ALEC doesn't drive me," he told InsideClimate News. "If anything I drive ALEC." Either way, in 2012, ALEC adopted an "Electricity Freedom Act" that reads like a declaration of war against the kind of energy rules on the books in Ohio and calls for the effort to reject them that Seitz leads.

Ohio Sues Pipeline Companies Over Pollution, Residential Construction - After months of conflict, the state of Ohio officially filed suit against Energy Transfer Partners Friday for pollution caused by its Rover Pipeline .  Rover has racked more "noncompliance incidents" than any other interstate gas pipeline and leaked more than two million gallons of drilling mud into protected Ohio wetlands this spring, leading the Federal Energy Regulatory Commission to order a temporary halt to construction.  The Ohio EPA claims that Energy Transfer Partners—which also owns the Dakota Access Pipeline —has refused to pay multiple fines from construction of the 713-mile pipeline and owes the state $2.3 million. Elsewhere in Ohio, the AP reported that legal resistance to an Enbridge/DTE Energy natural gas pipeline is growing, led by the city of Green's mayor Gerard Neugebauer.  "I'm not opposing oil and gas," Neugebauer told the AP. "What I'm saying is that you should not go through populated areas when you put in a pipeline."  "It takes just one judge to say you can't build this here because this is wrong," Neugebauer added. "I hold out hope that this will come."

Ohio sues gas pipeline developer over pollution violations (AP) — Ohio is suing the company building a $4.2 billion natural gas pipeline from West Virginia to Michigan over what it says are numerous water pollution violations during construction. The lawsuit filed Friday says work on the Rover Pipeline flooded a protected wetland with drilling mud and has damaged the environment in more than 10 of the 18 Ohio counties where the pipeline is being built. It also said that Rover Pipeline LLC had violated state laws, rules and permits designed to protect water quality. The twin pipelines are being built across Ohio to carry natural gas from Appalachian shale fields to Canada and states in the Midwest and the South. Much of the 700-mile (1,126-kilometer) pipeline is being built across Ohio and will extend into Michigan, Pennsylvania and West Virginia. Dallas-based Energy Transfer Partners, which also was behind the Dakota Access oil pipeline, is the developer backing the Rover project. The company said in a statement it was disappointed the state decided to sue and that it tried work with the Ohio Environmental Protection Agency "for the past six months to resolve this matter in a way that is satisfactory to all parties involved." The head of Ohio's EPA, though, has said several times that the company has been difficult to deal with and unwilling to negotiate a settlement.

Ohio Sues Rover Pipeline To Collect $2.3 Million for Environmental Damage | WKSU - Ohio Attorney General Mike DeWine is suing the Rover pipeline, accusing it of  “a series of calculated business decisions or complete indifference” that led to millions of gallons of drilling fluids and other pollution being dumped into Ohio waterways and wetlands.  The lawsuit repeats allegations the Ohio EPA has made for months and that the state says Rover has ignored. It says the company has dumped sediment-laden storm water and other wastes into streams, lakes and rivers dozens of times since it started laying the 713-mile pipeline early this year.The biggest spill began on April 13, when Rover is accused of discharging several million gallons of drilling fluids into wetlands in southwestern Stark County.The suit demands Rover pay $2.3 million in fines but does not name Rover’s investors:  Energy Transfer Partners and Blackstone Energy Partners. Last week, former Congresswoman Betty Sutton questioned why DeWine had not yet sued over the uncollected fines. She also noted his past investments in Rover. His spokesman told the Columbus Dispatch that DeWine had divested himself in May, before the first referral was made to the EPA.  Both Sutton and DeWine are running for governor.

Shell starts main construction on Pennsylvania petchem complex - Oil & Gas Journal The main construction phase has begun on Shell Chemical Appalachia LLC’s petrochemical complex in Potter Township, Pa.  The start of work the completion of the site preparation and detailed design and engineering work. The final investment decision was taken in June 2016, with commercial production expected to begin early in the next decade (OGJ Online, Apr. 7, 2017). The early works program included building bridges, relocating a state highway, improving existing interchanges, repositioning a rail line, and preparing foundations for the complex.Shell will now progress to the construction of four processing units: an ethane cracker and three polyethylene units. The ethane cracker will be the largest part of the facility with more than 200 major components and 95 miles of pipe. Shell also will build a 900-ft cooling tower, rail and truck loading facilities, a water treatment plant, an office building, and a laboratory.The site will include a 250-Mw natural gas-fired power plant. About a third of the electricity produced will help supply the local electricity grid.The petrochemicals complex will use ethane from shale-gas producers in the Marcellus and Utica basins to produce 1.6 million tonnes/year of polyethylene.As many as 6,000 construction w orkers will be involved in building the facility. Shell expects to create around 600 permanent employee positions when the complex is completed.

Mariner East II NGL pipeline project completion pushed to 2018 -- Energy Transfer Partners may bring on a joint-venture partner for its Mariner East II NGL pipeline project, which has now officially been delayed until next year due to construction and regulatory hurdles, executives said Wednesday. ETP is sticking to its current timeline for completing its Rover gas pipeline.   The comments during a conference call to discuss the company's third-quarter financial results highlight the challenges ETP and some of its peers have faced finishing major infrastructure designed to boost takeaway capacity from production zones in the Northeast, alleviate downstream constraints and serve increasing demand in other parts of the US and for exports.  ME II, in particular, is expected to be an important conduit for growing supplies of NGLs from the Marcellus and Utica shale plays, adding 275,000 b/d of capacity to move propane and butane from plants in western Pennsylvania, Ohio and West Virginia to the Marcus Hook terminal in eastern Pennsylvania for export. Pennsylvania regulators' suspension of construction of a valve station on a portion of the line due to the release of drilling mud and sediment into streams there has presented a setback for the project.  "We will do everything we can to bring it online sometime in the second quarter," Marshall McCrea, ETP's chief operating officer, said.

Anti-pipeline activists gain ground in local elections - Opponents of Sunoco Pipeline’s Mariner East project won seats on the governing boards of two Chester County townships  Tuesday in elections that had become referendums on the controversial pipeline.  Four Democrats, supported by the political arm of a national environmental group, won races for township supervisor in Uwchlan and West Goshen, which are bisected by the Mariner East system that conveys natural-gas liquids to Sunoco’s terminal in Marcus Hook. The candidates — Mayme Baumann and Bill Miller in Uwchlan, and Mary LaSota and Robin Stuntebeck in West Goshen — vowed to use local zoning regulations to prevent construction of the pipeline they say is too close to occupied structures such as schools and homes.  “I think the people spoke loud and clear and want the township to protect its citizens,” said Baumann, who took 60 percent of the vote in her first run at elected office.Sunoco’s construction of the second of three adjacent Mariner East pipes has aroused opposition from residents. The project has been hampered by a series of spills and contamination of private water wells. Energy Transfer Partners LP, Sunoco’s parent company, on Wednesday announced that completion of the Mariner East 2 pipeline will be pushed back from year’s end to the second quarter of 2018 because of regulatory delays.Sunoco began shipping propane on the Mariner East system nearly three years ago in an 80-year-old repurposed pipeline. Construction began this year on the 20-inch-diameter Mariner East 2, which would quintuple the capacity of the system. Sunoco plans to build an additional 16-inch-diameter pipeline next year. The $2.5 billion project, including upgrades to the Marcus Hook terminal, is aimed at creating an eastern outlet for the production of valuable gas liquids such as propane and ethane from the Marcellus and Utica shale formations. Much of the material will be exported to petrochemical plants in Europe. The insurgent candidates joined a Democratic uprising across Chester County to overcome a Republican voter-registration advantage in the townships.

Atlantic Sunrise pipeline build resumes after court lifts work-stoppage order - Heavy earth-moving equipment lumbered into action Thursday morning along the Atlantic Sunrise natural gas pipeline route in West Hempfield Township following the lifting of a work stoppage order Wednesday evening by a federal appeals court. The lifting of the stay marked the latest turn of events in a week of rapid-fire legal action over the controversial project, whose route includes 37 miles in western and southern Lancaster County. On Monday, the U.S. Court of Appeals in Washington, D.C., had granted pipeline opponents’ request for an emergency stay on construction while the court considered the group’s challenge to the Federal Energy Regulatory Commission’s ruling approving the Atlantic Sunrise.Pipeline builder Williams Partners sought clarification of the order. It lambasted the activists as “opponents of American energy” and asked the court to order them to post security of $8 million a day. At first, the court said Wednesday that Williams could not proceed with further construction. It denied the security bond request.But late Wednesday, the court issued a follow-up order ending the emergency stay.The brief document said pipeline opponents “have not satisfied the stringent requirements for a stay pending court review.”In a statement, Williams said it was pleased by the court’s action.“We will promptly resume construction activities on this important pipeline project, which will leverage existing energy infrastructure to deliver economic growth and help millions of Americans gain access to affordable Pennsylvania-produced clean-burning natural gas,” Michael Dunn, Williams Partners’ chief operating officer, said in a statement.The coalition of pipeline opponents is being represented by the Sierra Club and Appalachian Mountain Advocates. The plaintiffs include the local group Lancater Against Pipelines.In a statement, Lancaster Against Pipelines called the court’s action “highly dubious” and said Williams’ actions show both the vulnerability of the Atlantic Sunrise and the company’s “unjust influence” on courts and government.“We’re not done,” spokeswoman Ann Neumann said.

China energy investment signs MOU for $83.7 billion in West Virginia projects  — China Energy Investment Corp, the world's largest power company by asset value, has signed a memorandum of understanding (MOU) to invest $83.7 billion in shale gas, power and chemical projects in West Virginia, the U.S state said on Thursday. The agreement was the biggest among a slew of deals signed during U.S. President Donald Trump's state visit to Beijing. The total value of the deals done during Trump's trip could be as much as $250 billion. The gas and power agreement marks the first overseas investment for newly founded China Energy, which formed from a merger of China Shenhua Group, the country's largest coal producer and China Guodian Corp, one of its top five utilities. Beijing is supporting and encouraging its power companies to expand globally, and the agreement underscores China Energy's ambition to diversify into natural gas and the refining sector. The touted investment would extend over a 20-year period, covering projects for power generation, chemical manufacturing and the underground storage of liquefied natural gas (LNG), West Virginia's Department of Commerce said in its announcement.The deals will likely help create jobs in West Virginia and lift its economy. With an estimated 326,00 staff, China Energy has a workforce almost four times bigger than the entire U.S. coal-fired power industry for 2016. The Chinese energy conglomerate has an installed capacity that tops 225 gigawatts, eclipsing major international rivals EDF and Enel.

Northeast gas pipeline takeaway capacity set to balloon this winter - Marcellus/Utica natural gas production volumes this past Saturday (November 4) set a record high of more than 23 Bcf/d, according to pipeline flow data. As a result, overall Northeast production flows on the same day also posted a milestone, with volumes approaching a record 25.3 Bcf/d. This is up ~2.7 Bcf/d from where they started the year. These gains have been made possible because of the numerous pipeline projects that have added takeaway capacity from the region, about 2.4 Bcf/d since last winter alone. Moreover, another ~4.3 Bcf/d in new takeaway capacity either was approved for in-service last week or is expected online before March 2018. Even at partial utilization through the winter, that’s a lot of capacity that could flood the market with new supply. Where is all that capacity headed? In today’s blog, we look at recent and upcoming capacity additions that will affect the gas market this winter season. At this time last winter, Northeast gas production had just recovered from its seasonal dip that happens in the fall “shoulder season” — the time of the year when summer cooling demand is waning and winter heating demand has yet to show up. After an initial bump in January and February 2016 to more than 20 Bcf/d, gas production flows from the region, based on pipeline flow data from our friends at Genscape, pulled back to around 19.7 Bcf/d and hung right around there for much of the year. Then, storage constraints and mild demand, along with maintenance-related pipeline outages, pushed volumes down to 19 Bcf/d in October 2016. By November, however, they had recovered to that February 2016 level just above 20 Bcf/d, and over the winter months, through March 2017, regional production grew by a little more than 500 MMcf/d to about 20.8 Bcf/d. That compares to a 2.0-Bcf/d uptick in production during the winter of 2015-16 and more than 1.0 Bcf/d the year before that in the winter of 2014-15.

Appalachia pipeline expansions impact increasingly muted -- The upstream price impact from a series of Appalachian pipeline expansion projects scheduled to enter service this winter will be more muted than previously anticipated. That appears to be the forward market's conclusion heading into the month of November. Over the last 60 days, winter-season forward prices at Appalachia's most liquid production hubs have been on the decline, falling anywhere from 28 cents to 34 cents/MMBtu, Platts M2MS data shows. On Friday weaker forwards, most notably for the January-February-March winter strip, pushed internal rates of return or IRRs in the Utica and the Marcellus to fresh lows. At an estimated 8.3%, half-cycle IRRs in the Utica are now at their lowest in 17 months. In the Marcellus, returns estimated at 10.2% in November are mired just above the 2017-annual low, according to data compiled by Platts Well Economics Analyzer. Weaker forward prices and lower internal rates of return in November come as a handful of pipeline expansion projects targeting upstream production now face delays. On Monday, Columbia Gas announced that its 1.5 Bcf/d Leach Xpress project would be delayed until early January 2018. And following a series of construction mishaps and regulatory delays, developer Energy Transfer Partners recently announced that its planned November-1 startup of Rover Pipeline Phase II would be pushed back to early 2018. Weaker prices and record-low IRRs in the Utica this month have done little to deter production there. With some 30 rigs operating there since late-August, roughly twice the number at this time last year, production has been on a sharp upward trend over the last five months. In October, production was estimated just shy of 5.4 Bcf/d, with sample estimates surpassing 5.7 Bcf/d in just the last two days, Platts Analytics data shows.

Environmentalists just gained a new enemy in the fight against natural gas pipelines –-The electric utility sector’s top lobbying group is teaming up with fossil fuel trade associations as part of an effort to intensify the industry’s campaign against citizen and environmental groups opposed to fracking and new natural gas pipelines.A senior official at the Edison Electric Institute (EEI) said at a recent conference in Pittsburgh that her trade group has grown “very aware of the ‘Keep It in the Ground’ movement” as its member companies have become more reliant on natural gas. These activists are opposed to the extraction of all fossil fuels, not just coal, said Karen Obenshain, senior director of fuels, technology, and commercial policy, according to Matt Kasper, research director at the Energy and Policy Institute, who attended the conference. (Kasper worked at the Center for American Progress from 2012-2014. ThinkProgress is an editorially independent project of CAP.)From Keystone XL to Dakota Access to ongoing efforts to curtail oil and gas drilling, anti-fossil fuel activists caught the attention of energy companies and their representatives in Washington years ago. Aside from only a small number of victories, however, the activists have largely been unable to stop pipelines or slow down fracking. And yet the gas industry isn’t taking any chances; it wants to ensure its winning percentage remains strong.EEI brings to the table a budget of $90 million and a strong lobbying network in Washington and state capitals that can be used to help squelch fossil fuel resistance. The trade group plans to join the American Petroleum Institute, the American Gas Association, and the Interstate Natural Gas Association of America to advocate for natural gas, Obenshain said at Platts’ Coal Marketing Days conference in late September, according to Kasper.EEI and the fossil fuel industry groups, Obenshain said, are in the “early stages” of putting together a campaign to counter opposition to fracking and pipelines. “We’re looking at what advocacy platforms we have out there — that the [natural gas] trades have already — to use and push back against the opposition,” she said, according to Kasper.

Why the Line 5 Oil Pipeline Threatens the Great Lakes -  An aging oil pipeline moves 23 million gallons of oil and natural gas liquids per day along the bottomlands of the Straits of Mackinac, where Lake Michigan and Lake Huron crash into each other in the heart of the Great Lakes.  This pipeline—Line 5, built in 1953—is operated by the same company responsible for one of the largest inland oil spills in North American history: Enbridge. During that pipeline rupture, previously known cracks formed into a 6 foot gash which spilled more than 840,000 gallons of oil into the Kalamazoo River in 2010.  There are numerous places along the underwater section of the pipeline where protective coating is missing, and for much of the history of the pipeline, sections of pipe were not properly supported on the Lake Michigan lakebed—where it gets pummeled by oscillating currents. In fact, those supports were not replaced until video from a National Wildlife Federation dive inspection revealed they were lacking. Recently, Enbridge itself confirmed that part of its outer protection coating was missing from sections of the pipeline, and revealed in October 2017 that it has known about missing sections of coating since 2014 but failed to report the easement violation to state officials .  An April 2017 National Wildlife Federation report revealed that the land-based sections of Line 5 have leaked at least 29 times since 1968, spilling more than 1 million gallons of oil . We cannot risk a spill in the Straits, which a 2016 University of Michigan study estimates could put up to 700 miles of shoreline at risk depending on current and weather conditions, with up to 150 miles impacted in any one spill, risking a 17,000-square mile spill zone. Additionally, the pipeline has been operating without an adequate spill response plan, as required by the Clean Water Act.

Study warns chemicals used in fracking could lead to neurological problems in nearby children - A newly released study found that multiple pollutants in the air and water near hydraulic-fracturing wells are linked to brain problems in children. More than 1,000 studies have looked at possible health hazards from fracking, but this is the first to focus on neurological health of children living near fracked wells. “Researchers focused on five types of pollution commonly found near the sites—heavy metals, particulate matter, polycyclic aromatic hydrocarbons, benzene, toluene, ethylbenzene, xylene and endocrine-disrupting compounds—and scrutinized existing health studies of the compounds’ impacts to kids’ brains,” Brian Bienkowski reports for Environmental Health News. Early exposure to those five types of pollutants is associated with a host of problems, from learning and developmental disorders to neurological birth defects. The study’s lead author, Ellen Webb of the Center for Environmental Health, told Bienkowski that the research on children’s health near oil and gas sites is “slowly emerging” but “It’s only reasonable to conclude that young children with frequent exposure to these pollutants would be at high risk for neurological diseases.” Webb recommends an increase in the required distance (at least a mile, she suggests) between fracking wells and places where children live or go frequently, such as schools, parks or hospitals. She also recommends “more research on low level, chronic exposure, mandatory testing of industrial chemicals used on site, and increased transparency of the chemicals used in drilling,” Bienkowski reports.

Shell Enchilada Oil Platform In Gulf Of Mexico Shut After Fire | Rigzone  - Royal Dutch Shell Plc shut its Enchilada platform in the U.S. Gulf of Mexico on Wednesday after an operational incident that caused injuries to two people.The U.S. Coast Guard said that the platform, along with associated production, was stopped after a fire. It added that the fire had been reduced to a small flame from a pipeline on the platform, located about 112 nautical miles south of Vermilion Bay, Louisiana.Two people were injured and the crew of 46 were evacuated to a nearby platform, the Coast Guard said, adding that there was a report of a light sheen north of the Shell platform.Along with its Enchilada platform, Shell said in a statement that it shut its Salsa and Auger platforms and nearby fields. A 30-inch gas export pipeline was also shut.Shell said it had identified the source of the fire at Enchilada and confirmed it was contained.A spokesman could not immediately be reached for details on the capacity of the platforms.

LOOP Sour becomes heavier, more sour for October -- The US crude blend LOOP Sour was heavier and more sour in October, despite a month-on-month decrease in heavy sour imports of Iraqi and Kuwaiti crude grades. The oil terminal allocates one of its eight underground caverns to a medium sour blend comprised of US Gulf of Mexico grades Mars and Poseidon and a blend of Middle East crudes called Segregation 17, which is comprised of Arab Medium, Basrah Light and Kuwait Export Crude. The LOOP Sour blend in October had an average API gravity of 29.50 degrees and sulfur content of 2.34%. Its minimum-maximum API gravity range was 28.8-30.4 degrees, while sulfur ranged from 1.7% to 3%. API and sulfur are two of many characteristics refiners look at when deciding which crudes to run in order to maximize or minimize production of particular refined products. Other factors include acidity, metals content, presence of asphaltenes and ultimately a distillation curve. More than 1.775 million barrels were delivered ex-cavern in the month, up 525,000 barrels from September and 925,000 barrels from August. LOOP auctions storage in the cavern through monthly capacity allocation contracts, or CACs, sold during an auction. Each CAC gives the owner the right, but not the obligation, to store 1,000 barrels of LOOP Sour in the cavern during the contract month. The cavern holds roughly 7.5 million barrels. LOOP offers up 7.2 million barrels of that amount monthly. LOOP received 6.628 million barrels of crude in October, down 4.616 million barrels from September, according to data from Platts Analytics and the US Customs office.

More U.S. distillate is being exported -- EIA - U.S. distillate exports have continued to increase in 2017, both in volume and as a share of total distillate production. Domestic distillate demand has remained relatively stable, increasing slightly from January through July 2017. Distillate exports from the United States reached a record high in July 2017 of 1.7 million barrels per day (b/d). In August, exports of distillate fell to 1.4 million b/d when Hurricane Harvey resulted in port closures. Based on data through August, distillate exports have accounted for 28% of the total distillate produced in the United States in 2017. U.S. distillate exports in 2017 have been destined primarily for countries in Central and South America, Europe, and North America. The proximity of U.S. Gulf Coast refineries to Mexico and to Central and South America, combined with these regions’ high demand and recent refinery shutdowns, have led to strong U.S. distillate exports to these locations. In addition to increased export demand, the difference between distillate prices and crude oil prices encouraged relatively high refinery runs. The largest single recipient of U.S. distillate exports from January through July 2017 was Mexico (228,000 b/d), followed by Brazil (183,000 b/d) and the Netherlands (102,000 b/d). For North America, although exports to Canada decreased by 15,000 b/d compared with the same months in 2016, exports to Mexico increased by more than 76,000 b/d. January through July distillate exports to Brazil increased by 83,000 b/d from 2016 levels to 183,000 b/d in 2017. Trade press reports indicate that the decision by Brazil’s state-controlled oil company, Petroleo Brasileiro SA, to raise diesel prices in April, combined with competitive tanker rates, supported U.S. exports to Central and South America.  Despite refinery outages in Europe, average U.S. distillate exports to the region decreased in 2017 compared with 2016. January through July 2017 exports to Europe averaged 280,000 b/d, nearly 42,000 b/d lower than the average for the same period last year. According to trade press reports, Europe is receiving distillate from a more diversified group of suppliers. If the United States continues to lose market share among European countries, distillate exports to Central and South America may increase faster than otherwise expected.

U.S. Flexes Refining Muscles to Satisfy Mexico’s Fuel Thirst --- U.S. refiners are setting up for the strongest end-of-year they’ve ever had, and it’s all thanks to Mexico. Nationwide gross oil refinery inputs will rise above 17 million barrels a day before the year ends, according to Energy Aspects, even amid a busy maintenance season and interruptions at plants in the the U.S. Gulf of Mexico that were clobbered by Hurricane Harvey in the third quarter. “We’re going to hit very high runs in the next two months,” Robert Campbell, head of research at Energy Aspects, said by phone. “The balance looks quite bullish. Can the U.S. export it? Yeah. It will.”The chance to skip out on compliance with costly U.S. biofuels regulations by exporting fuel is a huge incentive for overseas sales. Under the Renewable Fuel Standard, refiners aren’t required to buy blending credits called RINs for barrels that are exported. Mexico has potential to demand 600,000 barrels a day of gasoline imports as its own refineries limp. As of last week, total U.S. gasoline stockpiles were about 5 percent lower than the same time last year, and have fallen below the five-year seasonal average. But that’s no reason for Gulf Coast refiners to hold back, according to Campbell. “The U.S. is down 20 million barrels since Hurricane Harvey,” he said, however those draws are showing up in the Midcontinent and East Coast regions. “The capacity is there to supply these markets.”  U.S. gasoline exports rose to a record 936,000 barrels a day last December as Pemex scrambled to buy fuel before its historic energy reform introduced increases in retail prices at the pump.  U.S. refiners can benefit from avoiding the obligation to blend its petroleum-based fuels with biofuels.  The credits for 2017 compliance rose more than 200 percent since the first quarter after President Donald Trump’s perceived promise of relief faded, according to Starfuels Inc. pricing data compiled by Bloomberg. “As long as the price is right, Gulf Coast refiners will favor gasoline exports to Mexico over marginal domestic sales,” . “That’s because exports don’t attract RINs and the volumes are needed to keep refinery throughput at profitable levels.”

The U.S. Export Boom Goes Beyond Crude - The U.S. export boom continues apace. And not only from crude exports, which clambered above 2 million barrels per day in recent weeks, but from the product piece of the pie too. Joining rising gasoline and distillate exports from the U.S. has been LPG. And not just propane or butane, but ethane as well - as our ClipperData illustrate below. With the start up of Enterprise' Morgan's Point terminal on the Gulf Coast last year, as well as Sunoco's Marcus Hook terminal on the East Coast, ethane exports have gradually risen from averaging just under 30,000 bpd in Q3 of last year to nearly 140,000 bpd in Q3 just passed.Ethane production in the U.S is expected to average ~1.45 million bpd this year, up from 1.25 million bpd last year. It is set to maintain its upward trajectory in the coming years, driven by higher domestic consumption (from the petrochemical industry) and increasing demand for exports.  Marcus Hook has export capacity of 35,000 bpd, while Morgan's Point has capacity of 200,000 bpd. The export trade is going so well that Enterprise is planning a second ethane export terminal on the Gulf Coast. India has been the leading destination for U.S. ethane exports this year, followed by the U.K., Norway and Sweden. Propane exports have been on a similar upward trajectory. After averaging just shy of 600,000 bpd in 2015, they rose to 770,000 bpd in 2016, and are currently at 970,000 bpd for the first ten months of the year.   East Asia is the leading destination for U.S. propane, accounting for over 40 percent of exports, with Japan, South Korea and China being the top three recipients of U.S. propane globally. Mexico is fourth. U.S. propane exports have averaged above 1 million barrels per day in five out of ten months of this year.  Gasoline and middle distillate exports join LPG in continuing to push higher. After a blip in September due to hurricane activity, exports of both are on the rise again, pushing to a new combined record. Even with the September blip, exports of the two have averaged over 2.3 million bpd this year, after 2.2 million bpd in 2016, 2.1 million bpd in 2015. As domestic demand ticks higher along with exports, and as imports into the U.S. East Coast drop, total U.S. gasoline and distillate inventories are falling - despite a record year of refinery runs so far in 2017. Gasoline inventories have fallen by 26 million barrels since the start of the year, dropping 11 percent, while distillate inventories have now dropped by 36 million barrels, down 22 percent.  These two retracements make oil's inventory drop of 5 percent drop seem less significant in comparison.

U.S. gasoline and diesel markets look tight: Kemp (Reuters) - U.S. stocks of gasoline and diesel continue to fall, despite record refinery runs, in a sign of strong demand at home and in export markets. U.S. refineries processed a seasonal record 16.3 million barrels per day (bpd) of crude in the week to Nov. 3, according to data published by the U.S. Energy Information Administration ( Refinery runs were 600,000 bpd more than in 2016 and 1.5 million bpd more than the 10-year seasonal average, as they have most weeks since April, with a brief interruption caused by Hurricane Harvey. Despite record runs, refineries are struggling to meet strong demand from gasoline and diesel in the United States and customers in Latin America. Gasoline consumption is being boosted by relatively cheap fuel, strong economic growth, job creation, rising traffic volumes and the purchase of larger vehicles. Diesel is being driven by the rise in industrial activity and freight movements, as well as increases in oil and gas drilling, which relies on off-grid diesel-electric generators. U.S. gasoline stocks fell by 3.3 million barrels compared with the prior week, while distillate stocks were down by 3.4 million barrels. Gasoline stocks have fallen by 27 million barrels since the start of the year, the biggest draw for over a decade, and are now 12 million below year-ago levels. Distillate stocks have fallen by 37 million barrels so far in 2017, compared with a 10-year average of just 4 million, and are now 24 million below the same point in 2016.  Domestic gasoline consumption has been running at record levels most weeks since April, while exports, mostly to Latin America, have remained strong, and spiked higher in recent weeks. Distillate consumption at home has been more mixed but fairly strong and exports have been running at record levels. Stocks of both fuels are now becoming uncomfortably low from an operational perspective once inventories are adjusted for rising demand. If winter temperatures are in line with the long-term average, heating oil consumption will be significantly higher than last winter, but if the winter proves colder than normal, stocks could feel tight.  With refining margins rising steadily, refiners will try to arrest and reverse the decline in fuel inventories by continuing to run at record rates through the end of the year, which should continue to tighten the crude oil market, at least until the end of 2017. 

Major Changes Afoot In Sand Use, Supply And Prices - In the past year, there have been major changes in the frac sand sector. Exploration and production companies in the Permian and other growing areas have significantly ramped up the volume of sand they use in well completions, catching high-quality sand suppliers in the Upper Midwest off-guard and spurring sharply higher frac sand prices due to the tight supply. At the same time, development of regional sand resources has taken off in the Permian — with close to 20 mines announced with upwards of 60 million tons/year of nameplate capacity possible — and, to a lesser extent, in the SCOOP/STACK, Haynesville and the Eagle Ford. That new capacity should begin easing sand-supply shortfalls next year, reducing sand delivered costs and potentially threatening the dominance of traditional Northern White sand. And more changes are ahead in 2018. Today, we begin a new blog series on fundamental shifts in the all-important frac sand market. Frac sand, a primary focus of our recent “Wipe Out!” blog series, is critically important, not only in Shale Era hydrocarbon production, but in production economics. As we said in Part 1 of that series, production in shale plays is founded on a combination of horizontal drilling and the use of proppant (primarily natural sand, but also a bit of ceramics and resin-coated sand) that, when forced out of the horizontal portion of wells at high pressure (using water and other fluids), fractures openings in the surrounding shale. When the pressure is released, the fractures attempt to close but the proppant contained in the fluids keeps them open, making a ready path for oil, gas and NGLs to flow into the well bore.

Texas oil companies hire 30,000 over the past year amid oil price recovery - Houston Chronicle: Texas oil companies have hired more than 30,000 workers over the past year, a sharp turnaround after they laid off a third of the industry's statewide workforce during the oil bust. The number of Texas oil and gas workers reached more than 222,000 in September, up 16 percent from about 192,000 in the same month last year, the lowest point since the Great Recession in 2009. At the peak of the oil boom in 2014, Texas had more 295,000 jobs, according to Karr Ingham, a Texas economist who studies the oil industry. Ingham's Texas Petro Index, a measure of activity in the business of pumping oil from the earth, rose for the 10th consecutive month in September, to 181.4 points, up 21.4 percent than September 2016. "Crude oil prices in Texas have been the essence of stability for more than a year," Ingham said in a statement. "Demand is beginning to show signs of recovery and foreign oil suppliers led by OPEC appear to be committed to maintaining announced production cuts."

Big Oil Has A Diversity Problem : NPR - The U.S. oil industry is trying to find a new generation of workers in a country that is becoming more diverse. But a history of sexism and racism is making that difficult. The oil industry has struggled to solve its diversity problem despite having some big advantages. It's a wealthy industry accustomed to taking on complicated challenges (think deep-water offshore drilling and fracking). And oil and gas companies already have decades of experience operating all over the world in various environments. Still, the diversity problem persists. In the mid-1980s the U.S. Equal Employment Opportunity Commission tried to address one large case of racism and sexism involving a union — Pipeliners Local 798 based in Tulsa, Okla. The union is a big player in the pipeline construction business. It dispatches welders and their helpers to large projects across much of the U.S.   "This was just the most blatant discrimination on a large scale that I can recall seeing since I started working," says Attorney Bob Harwin.  In his decision, Judge H. Dale Cook noted that Local 798 had about 5,200 members at the time but that there were "no black members and there were no female members until the eve of trial, May 1986, when Local 798 admitted a woman into the membership." Harwin says union members were willing to testify against their own leadership because "they wouldn't hire their mother, their sister, their wife — they wouldn't bring them onto union membership or refer them to jobs."  For 20 years, the union was forced to actively recruit and admit women and African-Americans. In 2007, the EEOC agreed to end its oversight of the union — exactly why isn't clear because the commission can't locate some of its records for the case. At around the same time, Charles Simpson joined the union and says that despite the federal oversight, he experienced racism on a regular basis."You'd walk down the pipe and see epithets 'n***** go home' scribbled on the pipe," says Simpson. He also says nooses were left for him and other black co-workers to find. Nooses at work sites have been reported elsewhere, and they show up repeatedly in court records of discrimination cases (two examples are here and here).

Thousands comment on proposed methane rule suspension -- Environmental advocates in New Mexico hand-delivered to five of the state’s Bureau of Land Management field offices this week more than 4,000 letters voicing objections to the federal government’s proposal to suspend Obama-era methane regulations for two years. Monday was the deadline for comments on the proposal, and members of dozens of state environmental groups weighed in, including the Western Environmental Law Center in Taos, the New Mexico Wildlife Federation and the Sierra Club, which submitted more than 36,000 comments nationwide. Many said the methane regulations were designed to provide crucial climate and health protections for state residents and asked that the BLM not overturn them. Proponents of the delay also submitted comments, including the New Mexico Oil and Gas Association, the American Exploration and Production Council, the Western Energy Alliance and the Independent Petroleum Association of New Mexico. The federal methane rules are among a number of environment- and climate-oriented policies targeted for repeal by the Trump administration since early 2017. Methane, an colorless, odorless gas that is the main component in natural gas, is considered the second-most concentrated greenhouse gas after carbon dioxide and a key contributor to global warming. Natural gas contains methane, ethane and other volatile organic compounds that are released during gas production, including benzene, which is linked to cancer. These compounds contribute to smog pollution and public health concerns. New Mexico’s oil and gas production also has contributed to a 2,500-square-mile collection of methane pooled above the Four Corners, detected by NASA satellites in 2014. Interior Secretary Ryan Zinke wants to revise rules finalized under the Obama administration to prevent methane released by oil and gas companies during operations. He proposed to suspend parts of the regulations this fall, which, if enacted, would allow industry to delay compliance with regulations until 2019. 

Foes of Obama-era fracking chemical reporting rules ask court to reconsider ruling - -Opponents of some Obama-era oil and gas regulations say a decision by a federal appeals court in Denver could allow those rules to go into effect temporarily, even though the Trump administration plans to revoke them. Four states, two industry groups and a Native American tribe filed documents Friday and Monday asking the 10th U.S. Circuit Court of Appeals to reconsider a decision it issued in September. That decision said it would be a waste of time to rule on whether the regulations are legal because the new administration has already begun to overturn them. But the decision cast doubt on whether the regulations are in force in the meantime. Colorado, North Dakota, Utah and Wyoming asked the court reconsider. Two industry groups — the Independent Petroleum Association of America and the Western Energy Alliance — filed another request, as did the Ute Indian Tribe of the Uintah and Ouray Reservation in Utah. The industry groups said that unless the September decision is changed, the federal government could be forced to enact the rules until they are formally revoked. Energy companies would have to spend time and money complying or risk getting sued, the groups said. 

Bakken Oil Production Rises As Oil Prices Jump -- Crude oil production in the Bakken shale in North Dakota has been experiencing some major challenges lately, but it is firmly on the growth path, said the state’s Department of Mineral Resources Director Lynn Helms in an interview for S&P Global Platts. Helms identified as the biggest challenges growing production in the Permian as well as a hypothetical ending of the OPEC production cut agreement. While the first challenge is very real, with the Permian still being the star of the shale patch, the latter challenge is more likely than not to remain hypothetical for the foreseeable future. Of course with oil, the foreseeable future is usually no longer than a couple of months, but according to Helms, E&Ps in the Bakken will continue to pump more than 1 million bpd but less than 1.1 million bpd until the end of the year and into 2018."We should see oil production in a growth mode, 10-15,000 b/d month on month is where we expect to be," Helms said, adding that the North Dakota shale industry would need WTI at US$60 a barrel to start expanding production beyond the 1.1-million-bpd mark. "That's really the magic number that really begins to push us to 1.6 or 2 mil b/d."Helms was optimistic about the medium term, expecting the Bakken to produce close to 1.2 million bpd by 2019, which implies he expects WTI prices to go beyond the US$60 “magic number”. Yet, competition from the Permian with its lower production costs in the sweetest spots is hampering this production growth in North Dakota. This month, the EIA projects oil production in the Permian will hit 2.7 million bpd.

U.S. shale producers promise both higher output and returns - (Reuters) - U.S. shale producers are telling investors impatient for better returns that they can keep boosting oil output aggressively and do so while still making money for shareholders. Investors have pushed top U.S. shale companies to focus on returns, rather than higher output, a move that threatened to slow the breakneck growth in supply sparked by the shale revolution in the world’s top oil consumer. For the Organization of the Petroleum Exporting Countries, slower shale production gains would have been welcome. The cartel this year put caps on its members’ production to end a supply glut and boost oil prices, only to find U.S. shale gains and record exports muting the impact of their curbs. But in comments during recent third-quarter earnings calls, shale executives signaled they expect to deliver both higher returns and output. At least seven of the largest U.S. shale companies, including Noble Energy and Devon Energy, forecast 10 percent or better production gains this quarter in the Permian Basin of West Texas and New Mexico, the largest U.S. oilfield. Underpinning the effort: Rising global oil demand and crude prices that are up about 30 percent since June lows. Shale producers are also proving they can drive output higher even after several last summer reported some Permian wells had begun delivering more natural gas, a sign of aging fields. Devon plans to boost oil production this quarter by 20 percent from the Permian and Oklahoma shale plays and spend less on each new well. U.S. shale output is expected to hit 6.1 million barrels of oil per day (bpd) this month, up 35 percent from a year earlier, according to the U.S. Energy Information Administration. 

Shale oil boom to peak in 2025, decline from 2030 – OPEC -- Tight oil supply from the US and elsewhere will peak in 2025 and start to decline shortly after, with OPEC crude production expected to rise sharply around the same time, the oil cartel said on Tuesday. Shale and sandstone-derived US oil has become the most significant contributor to non-OPEC crude supply growth, and the country is likely to drive additional volumes of around 4.8m bbl/day in the 2016-2022 period, according to OPEC’s World Oil Outlook report. However, OPEC predicts that “heavily front-loaded” high production rates will be followed by output starting to taper off from 2030. The oil group predicts that demand for oil from its member countries will remain relatively flat at a little over 33m bbl/day over the next eight years, but that this will ratchet up quickly from that volume to 41.4m bbl/day by 2040. This would represent an increase in total OPEC market share from 40% to 46% over the period, the cartel added. “Middle Eastern exports [will] increase significantly after 2025 as other exporting regions are either stagnating or in decline,” the group said. The US is likely to remain by far the dominant producer of tight oil, with OPEC projecting that Canada, Argentina and Russia will also become increasingly prominent through the early 2020s. 

Pembina says Jordan Cove LNG terminal budget to be reviewed in 2018 - The new operator of the proposed Jordan Cove LNG export terminal in Oregon said Friday it has become more positive about its potential with the shorter route it offers to Asia and the interest it continues to receive from prospective buyers of its supply. But Pembina Pipeline cautioned that development and construction costs would play into its decisions about future budgeting for the project. Pembina did not immediately respond to a query for comment on whether the company, which took over the project after acquiring fellow Canadian pipeline operator Veresen last month, is fully committed to seeing Jordan Cove through to completion. "Clearly, it is a huge project and we're looking at it carefully," Pembina CEO Mick Dilger said during a conference call with analysts to discuss third-quarter financial results. "It does have a significant burn rate, and we have to carefully review the risk-to-reward profile." Dilger said that analysis would be done as part of the company's 2018 budget review. Burn rate refers to how quickly a developer spends its development and operating budget for a project, a factor that could lead to cost overruns. Jordan Cove has not yet reached a final investment for the project. Jordan Cove would provide an outlet for Rockies gas producers who have been getting squeezed from all directions as a result of growing Permian production, steadily declining Southwest demand, as well as pushback from US Northeast expansions bringing more gas into the Midwest markets. Basis at Rockies supply hubs has seen steady downward pressure this year as a result of increasing competition from other supply regions, data compiled by Platts Analytics' Bentek Energy show. Basis pricing at the Opal hub in southwest Wyoming averaged a 28 cents/MMBtu discount to Henry Hub through the first 10 months of the year, 10 cents weaker than the same time period in 2016, Platts Analytics data show.

Alaska’s plan to pay for climate change: drill for more oil - With the ground melting beneath them from global warming, Alaskan lawmakers are calling for more oil drilling to deal with the problem.The state is warming nearly twice as fast as the rest of the United States. The permafrost, a layer of frozen soil beneath 85 percent of it, is thawing, causing homes to sink and roads to buckle. Barring a significant reduction in global greenhouse gas emissions, Alaska’s infrastructure will suffer up to $5.5 billion in damages by the end of the century, one study found. The trouble is Alaska is straining even to pay for the immediate toll of climate change on the landscape. State lawmakers were teetering on the brink of a government shutdown this summer, triggered mainly by declining revenue from the oil sector, which provides the state with more than half of its budget and 90 percent of its discretionary spending. (The state has no income tax or a sales tax.)Across the political spectrum, Alaskan officials agree that climate change is real and demands urgent action. But they also believe the best way to shore up the state’s finances is more fossil fuels. In particular, as part of the push to raise $1 billion in revenue for tax reform, they are asking Congress to allow oil and gas drilling in the Arctic National Wildlife Refuge, reigniting one of the longest-running environmental fights in US history. The irony wasn’t lost on Congress members on Thursday at a hearing before the Senate Energy and Natural Resources Committee that featured 12 witnesses, 11 of them Alaskans, across three panels.“Historians will look back at hearings like this and they will ask, ‘What were they thinking about?’” said Sen. Bernie Sanders. “And it is especially surprising that in a beautiful state like Alaska, which has been hit so hard by climate change, that you are not leading the world, leading this country, in telling us the damage that has been done and the need to move away from fossil fuel.”

Alaska Sen. Murkowski Introduces Bill to Drill Arctic Wildlife Refuge - Sen. Lisa Murkowski (R-Alaska) introduced legislation Wednesday night that would open a portion of the Arctic National Wildlife Refuge ( ANWR ) to oil and gas development for the first time. The bill could advance with only 51 votes in the Senate instead of the usual 60 as it complies under Congress' budget resolution instructions for 2018. The Alaskan senator, who chairs the Senate Committee on Energy and Natural Resources, expects her legislation will bring in more than $1 billion in federal revenue over the next decade. "Our instruction is a tremendous opportunity both for our committee and our country," Murkowski said . "The legislation I released tonight will put Alaska and the entire nation on a path toward greater prosperity by creating jobs, keeping energy affordable for families and businesses, generating new wealth and strengthening our security—while reducing the federal deficit not just by $1 billion over ten years, but tens or even hundreds of billions of dollars over the decades to come." ANWR, the largest protected wilderness in the U.S., consists of more than 19 million acres of pristine landscapes and is home to 37 species of land mammals, eight marine mammals, 42 fish species and more than 200 migratory bird species.  Last month , Senate Democrats offered an amendment to the Senate's budget resolution that would block drilling in the Alaskan refuge but the measure failed 48-52 mostly along party lines. Democratic lawmakers and environmental groups criticized the GOP for sneaking the " backdoor drilling provision " through the budget process.

Murkowski bill directs at least 2 major lease sales in Arctic National Wildlife Refuge   - Senate Energy and Natural Resources Committee Chairman Lisa Murkowksi (R-Alaska) released legislation Wednesday that would open Alaska’s Arctic National Wildlife Refuge to oil and gas drilling for the first time in a generation by calling for at least two major lease sales over the next decade. The budget measure directs federal officials to auction off mineral rights in areas encompassing at least 400,000 acres each in the refuge’s coastal plain, also known as its “1002 area.” The measure requires at least a 16.67 percent royalty rate and dictates that the revenue would be evenly split between the federal government and Alaska. Surface development on the coastal plain must not span more than 2,000 acres, according to the bill.  Murkowski, who has scheduled a markup on the bill for Nov. 15, said the measure represents “a tremendous opportunity for both Alaska and our country.” The Congressional Budget Office estimated in a report published Wednesday that such sales, the first of which must take place within four years of the bill’s enactment, would raise nearly $1.1 billion over the next decade. The money would help offset tax cuts Republicans hope to enact as part of a broader tax reform bill. “Estimates of bonus bids for leases in ANWR are uncertain,” the CBO cautioned, noting that potential bidders would compare the opportunity costs of drilling there to other spots around the globe. It added that it did not anticipate the federal government would collect any royalties before 2027, given the time it takes to launch such operations. 

Alaska signs gas pipeline project deal with China (AP) — The state of Alaska will attempt to advance a multibillion dollar natural gas pipeline project with the help of interests from China.Alaska Gov. Bill Walker said the agreement signed late Wednesday is with Sinopec, China Investment Corp. and the Bank of China. Financial terms weren't disclosed.The agreement was signed in Beijing with U.S. President Donald Trump and Chinese President Xi Jinping looking on.Alaska has long dreamed of building a pipeline that would take the vast stores of natural gas on the North Slope and ship it by pipeline 800 miles to the coast, where it would be liquefied and shipped to Asia.  Alaska had previously had a similar agreement with major oil companies to advance the pipeline, but they backed off and let Alaska take the lead.

China signs on for $43bn Alaska LNG development - Three state-owned Chinese companies have signed an agreement to develop liquefied natural gas in Alaska in a move that signals the US may become a key source of energy supply for China. The deal – between China Petrochemical Corp, or Sinopec, China Investment Corporation and Bank of China, the State of Alaska and its Alaska Gasline Development Corporation – was inked while US president Donald Trump visits China president Xi Jinping in Beijing. The Alaskan government said in a brief statement the agreement will see investment of up to $43bn and reduce the trade deficit between the US and Asia by $10bn annually. It was one of a batch of corporate deals with a total face value of $250bn scheduled to be witnessed by the two presidents. The agreement comes as Mr Trump pledged on Thursday to change a US-China trade and economic relationship that he described as “far out of kilter”. Last year the US recorded a $347bn trade deficit in goods with China.

Trump oversees major natural gas deal between Alaska, China -- The state of Alaska has struck a major joint development deal with China on Wednesday to build a natural gas export terminal in the state. The agreement was signed in the presence of President Trump and Chinese President Xi Jinping during his state visit to China on Thursday. The liquefied natural gas project named Alaska LNG will include three trains, or terminals, with the annual capacity of producing 20 million tons of liquefied product for shipment abroad to Asia. The facility will also include an 800-mile-long pipeline, a gas treatment plant on the North Slope of Alaska where much of its energy production takes place. The development corporation and the state government signed the joint liquefied natural gas, or LNG, development agreement with the state-ran China Petrochemical Corporation, or Sinopec, CIC Capital Corporation, and Bank of China. Sinopec said its goal is to help create a “stable” route for purchasing LNG from Alaska.

Analysis: Alaska LNG deal falls short of Trump's Asian ambitions -- With US President Donald Trump's China trip expected to test his administration's "America First Energy Plan", the multi-billion dollar Alaska LNG deal will likely be presented to the electorate at home as a trade success. The non-binding deal does signal the growing role that US LNG plays in Asian energy security, but it is a far cry from the type of commercial agreements the US would need to reduce its trade deficit in goods with Asia and China, in particular. "This kind of commercial agreement allows Trump to portray himself as a master dealmaker, while distracting from a lack of progress on structural reforms to the bilateral trade relationship," Verisk Maplecroft Asia analyst Hugo Brennan said.  Three of China's largest energy and finance companies signed the joint development agreement Wednesday to advance the $40 billion-plus Alaska LNG export project, the parties announced in a statement Thursday.  The agreement was signed by China Petrochemical Corporation or Sinopec, CIC Capital Corporation, Bank of China, Alaska Gasline Development Corporation and the State of Alaska during Trump's China visit.  Alaska LNG is a 20 million mt/year export project comprising three liquefaction trains at Nikiski in south central Alaska, an 800-mile gaspipeline, a gas treatment plant on the North Slope; and various interconnecting facilities to link the Prudhoe Bay gas complex to the treatment plant.

Keystone XL builder optimistic on pipeline’s customer demand | TheHill: The company hoping to build the Keystone XL oil pipeline is optimistic that it has enough demand from potential customers to make it economically viable. TransCanada Corp. executives said Thursday the interest among oil companies in the Canada-to-Oklahoma line is similar to what it was in 2008, when it was first proposed. “Overall, we expect support for the project to be substantially similar to that which existed when we first applied for the Keystone pipeline permit,” TransCanada CEO Russ Girling told investors in a Thursday call. “To be clear, production of Canadian heavy oil continues to grow, and the need for new pipeline transportation capacity remains high.” TransCanada had an “open season” for Keystone XL that ended in October. During that time, it encouraged potential customers to express interest in shipping through the 830,000-barrel-per-day line. The company obtain at least the 500,000-barrel-per-day interest that it judged to be the point necessary to build. “We do have various conditions attached to the interest,” Paul Miller, president of TransCanada’s liquid pipelines business, told investors, adding that the conditions from customers are manageable, related mostly to logistics. “But we’re quite encouraged with the results that we’ve seen.” President Trump approved Keystone XL in March, after the Obama administration rejected it in 2015.The pipeline has long been a flashpoint in national political debates over energy and environmental policy, framed as a choice between increased oil use from a friendly ally and a future with significantly reduced fossil fuel use. But in TransCanada’s last investor call, in July, the company told investors that it has not made the final investment decision to build Keystone XL. Miller told investors that it will likely make that decision as early as December, following a review of customer demand and an approval decision from Nebraska regulators for the route through that state. 

Kinder Morgan Canada denied expedited appeal for oil pipeline (Reuters) - Canada’s National Energy Board (NEB) will take until at least Dec. 4 to review Kinder Morgan Canada Ltd’s appeal over its Trans Mountain oil pipeline expansion, the regulator said on Tuesday, rejecting the company’s proposed “expedited” timeline. The company, a unit of Houston-based Kinder Morgan Inc , last month asked the regulator to intervene after it said it was unable to obtain permits from the city of Burnaby, British Columbia. Burnaby has long opposed the expansion over environmental concerns, and the lack of permits from the city adds to the hurdles facing the C$7.4 billion ($5.9 billion) expansion, as North American energy projects face increasing opposition from activists. Kinder Morgan Canada declined to comment, although in previous regulatory filings it said such cases could result in delays for the expansion, which is scheduled to go online December 2019. In a statement on Tuesday, the NEB said it will hear cross-examinations on affidavits on Nov. 29 and oral summaries on Dec. 4, without saying when it will make a decision. Kinder Morgan had asked for the case to involve only written submissions to the board, and for that process to conclude by Nov. 10. The company had noted a related case was resolved in a month. Canadian oil producers, whose landlocked product trades at a discount to the West Texas Intermediate benchmark, say they need additional pipeline capacity to fetch better prices. The proposed expansion of the Trans Mountain pipeline from Canada’s oil-rich Alberta province would nearly triple its capacity to 890,000 barrels per day and significantly increase crude tanker traffic off the west coast. Alberta and fellow crude-producing province Saskatchewan have since joined Kinder Morgan in its appeal, while British Columbia has joined on the side of Burnaby. 

Fracking firm to give first households £2,000 payouts - A group of residents in Lancashire will soon receive £2,070 each for living near a fracking site, in the first payments made direct to British householders by a shale gas company. Cuadrilla said that 29 households within a 1km radius of the site would get the payment as part of a £100,000 community benefit fund for the second well it is drilling at a site between Blackpool and Preston that has attracted ongoing anti-fracking protests.People in a further 259 properties who live between 1km and 1.5kms away are eligible for a £150 payment, after locals told a consultation they would like the benefit directly rather than have the money paid into a community fund. Francis Egan, Cuadrilla’s chief executive, said: “Our shale gas exploration work continues to progress in Lancashire, helping to strengthen the county’s economy with more than £4.7m invested in the county since operations began, and now nearly 300 households will directly benefit from our community payments.”The community benefit of £100,000 per well is higher than the industry’s agreed standard of £100,000 per site. But at least one resident will be refusing what he said was “shabby behaviour” by Cuadrilla.John Tootill, who owns nearby Maple Farm Nursery within 1km of the site and has supported anti-fracking campaigners, said: “It is absolutely the most appalling thing. How can you give money to compensate for affecting people’s health and spoiling their environment?“What we want is our health. It’s just blood money really, because no amount of money can compensate for somebody’s health being affected. You can’t buy health. Most certainly I wouldn’t take it.”  Keith Taylor, a Green party MEP for the south-east, said: “These proposals are immoral and tantamount to bribery. Britain and the world is on course to miss climate targets. Kickbacks won’t keep catastrophic climate change at bay.”

TTF natural gas contracts bullish on Brent crude oil, cooler temperatures - TTF natural gas contracts gapped higher on Monday's open on the back of firmer Brent crude and temperature forecasts being revised lower boosting pricing across northwest Europe. The TTF day-ahead contract was seen trading at Eur18.725/MWh Monday morning, 47.5 euro cent higher than the assessment from last Friday, with the NetConnect Germany spot up 37.5 euro cent to Eur18.65/MWh. The prompt also found strong support in early exchanges, with the TTF balance-of-month and December contracts climbing to Eur18.60/MWh and Eur18.75/MWh, respectively, up 52.5 euro cent and 50 euro cent from last Friday's assessments. "I think oil must be supporting," said one UK-based gas trader after Brent crude prices rallied late Friday. "Forecasted drop in temperatures from this weekend also supporting." CustomWeather forecasts show temperatures in Germany hovering close to seasonal averages through to Sunday, with temperatures over France and Belgium due to be below average from Tuesday through to Thursday. With Russian gas flows into Germany and Norwegian flows into Emden-Dornum both close to full capacity, there remains little swing in pipeline gas flows available to cover higher heating demand in the region. Dutch gas production fell back below the 100 million cu m/d mark on Saturday for the first time in two weeks before recovering to 103 million cu m on Sunday, according to Platts Analytics' Eclipse Energy.

Peak Oil? Majors Aren't Buying Into The Threat From Renewables  (Reuters) - Two decades ago, BP set out to transcend oil, adopting a sunburst logo to convey its plans to pour $8 billion over a decade into renewable technologies, even promising to power its gas stations with the sun.That transformation - marketed as "Beyond Petroleum" - led to manufacturing solar panels in Australia, Spain and the United States and erecting wind farms in the United States and the Netherlands.Today, BP might be more aptly branded "Back to Petroleum" after exiting or scaling back its renewable energy investments. Lower-cost Chinese components upended its solar panel business, which the firm shed in 2011. A year later, BP tried to sell its U.S. wind power business but couldn't get a buyer."We made very big bets in the past," BP Chief Executive Bob Dudley told Reuters in an interview. "A lot of those didn't work. We're not sure yet what will be commercially acceptable."The costly lesson of the biggest foray yet by an oil major into renewable energy was not lost on rival firms.Even as governments and environmentalists forecast a peak in oil demand within a generation - and China and India say they may eventually ban gasoline and diesel vehicles - leaders of the world's biggest oil firms are not buying the argument that their traditional business faces any imminent threat.A Reuters analysis of clean energy investments and forecasts by oil majors, along with exclusive interviews with top oil executives, reveal mostly token investments in alternative energy. Today, renewable power projects get about 3 percent of $100 billion in combined annual spending by the five biggest oil firms, according to energy consultancy Wood Mackenzie. BP, Chevron, Exxon Mobil, Royal Dutch Shell and Total are instead milking their drilling and processing assets to finance investor payouts now and bolster balance sheets for the future. They believe they can enter new energy sectors later by acquiring companies or technologies if and when others prove them profitable. 

Shell Gears Up For Peak Gasoline - Royal Dutch Shell is hedging its bets over the next two decades with expectations that motor fuel consumption will be diminishing and other markets rising.Since the oil price plummet it 2014, Shell has transitioned its business model over to refining oil, offering other refined oil products, and producing petrochemicals. The oil giant will produce well beyond gasoline to serve other growing economic sectors, and to offset the role EVs will play by the 2030s.Rapid growth in the global economy, especially Asia, will grow demand for other refined oil products and petrochemicals.Asia will see new roads added, with demand creating economically viable substitutes for asphalt. Shell wants to be poised and ready to provide that supply.The oil giant will also be ready to provide the polymers and chemicals that go into plastics used in vehicles and many other products, said Shell’s head of manufacturing Lori Ryerkerk, who is in charge of refining.Shell will double the size of its chemical operations by the mid-2020s with several new plants coming to Louisiana and Pennsylvania that benefit from access to cheap shale gas. Refining oil will be part of the company’s portfolio to an even larger extent than it was years ago.“Refining will continue to be part of our portfolio for decades to come,” Ryerkerk said. Shell expects that gasoline demand will likely reach its peak by the 2030s, with owners switching over to electric vehicles and traditional engines becoming even more efficient. The supermajor has become the most aggressive oil company in its forecast for gasoline demand reaching its peak by the early 2030s.

Norway's Oil Sector Faces Existential Crisis - Oil companies have recently focused on frontier exploration drilling in the Barents Sea offshore in Norway, neglecting the powerhouse of the Norwegian oil industry, the North Sea. Exploration activity in the North Sea - the most mature area of Western Europe’s biggest oil producer - is at an 11-year low this year, which is a concern for the industry’s regulator, the Norwegian Petroleum Directorate (NPD). Following a continual decline between 2001 and 2013, Norway’s crude oil production rose last year for the third year running, but according to the Norwegian Petroleum Directorate (NPD), oil production this year would be nearly half the volume from the peak in 2000-2001.Two huge fields discovered in 2010 and 2011, Johan Sverdrup in the North Sea, and Johan Castberg in the Barents Sea, are expected to start operations in 2019 and 2022, respectively, and will lift Norway’s oil production in the early 2020s compared to expected declines in 2018 and 2019.But after 2025, production and activity are expected to significantly drop off unless there are new discoveries, according to oil major Statoil.   Norway’s Ministry of Petroleum and Energy, and NPD say:“Production from new fields that come on stream will compensate for the decline in production from ageing fields. However, in the longer term, the level of production will depend on new discoveries being made, the development of discoveries, and the implementation of improved recovery projects on existing fields.” Encouraged by recently opened areas and potentially huge yet-to-be-discovered resources, oil companies launched a record exploration drilling campaign in Norway’s Barents Sea this year. But the drilling campaign was a flop, and even the most promising wildcat yielded no oil.

Exclusive: Venezuela's PDVSA misses debt payments to India's top oil producer  (Reuters) - Venezuelan state oil-firm PDVSA has not made debt payments to India’s top oil producer ONGC  for six months, and has previously used a Russian state-owned bank and another Indian energy company as intermediaries to make payments, two sources familiar with the transactions said on Wednesday.ONGC Videsh, the overseas investment arm of ONGC, confirmed that PDVSA had fallen behind on the payments, but declined to give details on the delays. “They have got certain challenges at this stage,” ONGC Videsh said in an emailed response to Reuters’ questions. “They have assured that they are working on it (payment of dues). In due course it will be settled and follow up steps will be undertaken.” “We have a good working relationship with PDVSA,” ONGC said. PDVSA declined to comment. But the two sources, who requested anonymity, said PDVSA has made no payment since April on what was a $540 million backlog of dividends owed to ONGC for an investment the Indian firm made in a an energy project in Venezuela. Venezuela’s President Nicolas Maduro said last week that the country planned to restructure some $60 billion of bonds, much of it held by PDVSA, as the country struggles to meet debt repayments. 

CNPC Plans to Cut Gas Supplies to Industrial Users-State Media (Reuters) - China National Petroleum Corp (CNPC) plans to reduce natural gas supplies to industrial users as it expects shortages this winter after millions of residential households were switched to gas for heating under a government programme to reduce pollution.CNPC, one of China's top three gas producers, said it will cut supplies to industrial clients by a range of 3 percent to 10 percent, the state-run China Youth Daily reported on Monday citing several unidentified sources. The article was also posted on CNPC's main website.The company did not respond to requests for comment.CNPC expects a 12-percent jump in gas consumption from a year ago because of the residential switch.The oil and gas producer and importer will boost purchases of spot liquefied natural gas (LNG) cargoes and further lift the capacity of LNG receiving terminals, China Youth Daily reported. The company will also try to increase imports from Central Asian countries, such as Kazakhstan.Analysts expect Kazakhstan to supply 1 billion cubic metres (bcm) of gas before the end of the year as part of a supply deal through the Central Asia-China pipeline network operated by CNPC and local partners.CNPC said it can only provide about 76.5 billion cubic metres (bcm) of gas even if it runs its gas fields and LNG terminals at full capacity and fully stocks its underground storage. This is below its expected current demand of 81.3 bcm.CNPC is the first natural gas producer to reduce supplies as China faces a potential supply crisis after the central government switched millions of residents to gas heating rather than coal this winter. Under the new rules, residential users will have priority over industrial users in cases of supply curtailments.

Oil Production Vital Statistics October 2017 - Last month I drew attention to the fact that the WTI-Brent spread had opened to $7 and that this could be a bullish signal for the oil price. A strong rally in Brent has since continued and the price now stands close to $64 / bbl while the spread remains at $6.50 (Figure 3). The main reason for this sustained recovery is that the oil market has been brought back into balance thanks to a high level of compliance in the OPEC-Russia+others production cuts and continued growth in global demand for oil. There are several other factors discussed below which suggest that the oil price rally may continue. The chart below from the October 2017 IEA OMR shows how in the course of 2017 the oil market has been brought back into balance. There is still a vast >3 billion barrels of crude and refined products in storage within the OECD, but the very fact that storage capacity no longer has to grow is bullish since this avoids the scenario where tanker loads have nowhere to go (full storage) which can dump the price. One reason it has taken so long for the production cuts to work is that production in both Libya and Nigeria have recovered from lows (Figure 17), caused by civil unrest, adding over 1 Mbpd to OPEC supply. Both are now on cyclical highs and are unlikely to rise much further. Indeed, the normal direction post-high is downward. At worst, the Libya – Nigeria market drag should now become neutral. According to the IEA, OPEC compliance with the agreed cuts is running at 88% while the non-OPEC countries that were party to the deal are 125% compliant. Talks between Saudi Arabia and Russia about extending the deal, should they come to fruition, will underpin the oil price through 2018. It needs to be noted that Russia and several other countries exercised a production spurt ahead of the October 2016 datum month. Cuts have simply undone that spurt. Thus it will cost Russia little to agree an extension since this simply means Russia proceeding along the pre-deal plateau (Figure 19). With 898 operational oil+gas rigs, US oil production is now trending sideways suggesting that a form of equilibrium has been reached between new supply and declines. While it is impossible for US corporations to participate formally in a production restraint deal, it is possible that a form of voluntary market / price led restraint may prevail. It seems the frackers are now waiting for higher price. The following totals compare September 2016 with September 2017:

  • World Total Liquids 97.21/97.31 +100,000 bpd
  • OPEC 12: 32.65/32.33 -320,000 bpd
  • Russia + FSU 14.21/14.21 ±000 bpd
  • Europe OECD 3.03/3.45 +420,000 bpd
  • Asia 7.35/7.31 -40,000
  • North America 19.23/19.59 +360,000 bpd

OPEC pumps 32.57 mil b/d in Oct, down 90,000 b/d from Sep: Platts survey  - OPEC oil output in October fell 90,000 b/d from the previous month as declines were observed in six member countries, an S&P Global Platts survey of OPEC and oil industry officials and analysts showed Wednesday.OPEC's 14 members saw their collective October output fall to 32.57 million b/d from 32.66 million b/d in September, owing to sharp declines in Iraq and Nigeria, along with slight falls in Algeria, Venezuela, Iran and Qatar.That is some 650,000 b/d above its declared ceiling of about 31.92 million b/d, when Equatorial Guinea, which joined in May, is added in and Indonesia, which suspended its membership from December 2016, is subtracted.Steep falls in Iraq and Nigeria were the main two reasons for a decline in OPEC output, with Iraqi oil output falling to its lowest level since March 2016, taking the country just 3,000 b/d above its OPEC output quota of 4.351 million b/d.Iraq produced an average of 4.38 million b/d of crude in October, a fall of 120,000 b/d from the previous month, as output from the fields controlled by the Kurdistan Regional Government fell sharply from October 17 onwards.Production from the semi-autonomous Kurdistan region in Iraq dropped mid-month as Iraqi federal forces captured the key disputed Kirkuk fields, dragging pipeline exports to Ceyhan down significantly.

OPEC seeks consensus on duration of oil cut pact before meeting | Reuters: OPEC is seeking to achieve consensus agreement before a meeting on Nov. 30 on how long to extend a global pact to curb oil production, OPEC’s secretary general said on Tuesday, with no country unwilling to prolong the accord. The Organization of the Petroleum Exporting Countries, plus Russia and nine other producers, are cutting oil output by about 1.8 million barrels per day (bpd) until March 2018 in an effort to eradicate a supply glut that has weighed on prices. The comments indicate an increasing chance that the deal will be extended further into next year at the Nov. 30 meeting. Oil prices are trading at a more than two-year high, but an overhang of stored oil has yet to be fully eradicated. “Extensive consultations are currently ongoing to reach some consensus before Nov. 30 on the duration beyond the March 2018 deadline,” OPEC’s Mohammad Barkindo told reporters. “I have not heard so far any participating country that is violently objecting to extending the decision.” The producers are in the process of inviting other countries to the Nov. 30 meeting, Barkindo said, with a view to joining the deal. He declined to name the countries concerned. Reuters reported last month, citing OPEC sources, that producers are leaning towards extending the deal for a further nine months, though the decision could be postponed until early next year depending on the market. Barkindo, who was speaking at a press conference for OPEC’s latest World Oil Outlook, said the recent rise in prices reflected improved market fundamentals and producers’ high adherence to the supply pact. “As a result of the high level of conformity of the 24 participating countries in the declaration of cooperation, the market has also responded very positively,” he said. 

OPEC's War Against Shale Is Far From Over -- Despite the recent market rally and current bullish streak in oil prices, the years-long competition for market share between OPEC and U.S. shale producers shows no sign of abating, and will likely continue for the next several years at least. That was OPEC’s conclusion in the group’s World Oil Outlook released this week. OPEC believes U.S. shale production will grow faster than previously expected, reaching 7.5 million bpd by 2021, an increase of 56 percent from the group’s estimate last year.According to OPEC calculations, current shale production in North America is approximately 5.1 million bpd—an increase of 25 percent from a year ago.Despite low prices, shale has shown remarkable resilience and an ability to bounce back from downturns.OPEC expects shale to finally taper off by 2025 and decline by 2030, by which point OPEC will have increased output by eight million bpd, from 33 million bpd to 41.4 million bpd.By 2021, oil demand will increase by 2.3 million bpd, a fairly bullish projection. OPEC expects fierce competition with North American shale producers for market share, particularly when regulations on shipping fuel take effect in 2020, increasing refinery demand for fuels that shale producers will be well-positioned to provide.  Total U.S. production will increase by 3.8 million bpd by 2022, chiefly on the back of increased shale output, equal to seventy-five percent of production growth outside the fourteen members of OPEC. That growth will be front-loaded, says OPEC, as drillers seek out new fields and aggressively exploit current shale deposits. Yet OPEC admitted that shale will capture more market share in the short term, likely out-competing OPEC output.

Saudi Arabia to cut crude exports by 120,000 barrels per day (Reuters) - Saudi Arabia plans to cut crude exports by 120,000 barrels per day (bpd) in December from November, reducing allocations to all regions, a spokesman for the energy ministry told Reuters on Thursday. Crude exports to the United States will be more than 10 percent lower than November levels, he said. The world’s top oil exporter said it planned to ship slightly more than 7 million bpd this month, up from low levels during summer when domestic demand was at its peak. Seasonal drops in domestic crude demand free up more oil for export during the winter months. The Organization of the Petroleum Exporting Countries, along with other non-member oil producers led by Russia, agreed to cut output by around 1.8 million bpd from Jan. 1 this year until March 2018.  OPEC is seeking to achieve consensus among the participating countries ahead of its next meeting in Vienna on Nov. 30 on how long to extend the deal beyond March.

Russian energy: playing the long game -- Commodity Pulse video  - Russia has got a seat at the head of the OPEC table, while it continues to deepen ties with Saudi Arabia and appears to be coping with sanctions. Platts editors discuss the outlook for the world's biggest crude oil producer.

Dramatic Footage: Bahrain Oil Pipeline Explodes, Bursts Into Giant Flames -- An oil pipeline in Bahrain exploded, and burst into giant fireball, as numerous videos posted on social media showed. According to the Saudi Gazette, an explosion caused a fire in an oil pipeline near Buri village. It adds that no injuries have been reported, and that civil defense teams are extinguishing the fire. More from Al-bilad Press (google translated): A large explosion of one of the oil pipelines near the area of ??Buri overlooking the market Waqif, and evacuate all houses near the scene of the explosion. The Waqif market was completely closed so firefighters could control the fire. The Ministry of the Interior through its official account on the site "Twitter" there is no casualties at the scene. It also announced the cutting off of traffic on the Crown Prince's road towards Hamad City.The representative of the "country" from the heart of the pipe fire in the village of Buri that a huge fire block devoured a group of cars parked off the village and Souq Waqif.The delegate added that the civil defense mechanisms rushed to the scene of the incident from the area centered in the village of Damastan and began to block the flames of escalating fire and has been strengthened from the number of other centers.Residents of the houses adjacent to the fire site were reported to have been evacuated.

Hedge funds go all-in on oil: Kemp (Reuters) - Hedge funds have built record or near-record bullish positions in almost all parts of the petroleum complex anticipating that prices will keep rising.Hedge funds and other money managers had amassed a net bullish position in crude and refined products amounting to more than 1 billion barrels of oil as of Oct. 31 ( investors held a net long position in the five major petroleum futures and options contracts amounting to 1,022 million barrels, according to records published by exchanges and regulators on Friday.The net long position in the five major contracts covering Brent, WTI, gasoline and heating oil has surged by almost 720 million barrels since the end of June and is now just 3 million below the record of 1,025 million set in February.Bullish records or multi-year highs are being set all over the place:Long positions in Brent are at a record 587 million barrels.Net long position in Brent is at a record 530 million barrels.Long positions in gasoline are at a record 107 million barrels. Net long position in gasoline is the highest since April 2014.Long positions in heating oil are at record 84 million barrels.Net long position in heating oil is at a record 68 million barrels.Fund managers have continued adding to bullish positions even as benchmark Brent prices have climbed to the highest level since July 2015.Most investors appear to believe prices are moving into a new and higher trading range and want to ride the rally until the new price ceiling is discovered.The concentration of long positions creates a significant risk of a sharp price reversal if and when portfolio managers attempt to realise some of their profits.But the bulls can cite some fundamental factors that might drive prices higher first. Global demand is growing strongly. Inventories of both crude and products are declining rapidly. And the U.S. rig count is declining.

BP, Shell, Statoil join forces to develop blockchain-based trading platform - Energy majors BP, Shell and Statoil are to co-develop a blockchain-based digital platform for energy trading. The investor group, which includes trading houses Gunvor, Koch Supply & Trading, and Mercuria, plus banks ABN Amro, ING and Societe Generale, aims to "modernize and transform post-transaction management of physical energy commodities trading," the companies said in a joint statement Monday. The platform is to be managed and operated as an independent entity. It is expected to be operational by the end of 2018. The goal is to create a secure, real-time blockchain-based digital platform to manage physical energy transactions from trade entry to final settlement. Pending regulatory clearance, the platform will be open to the whole commodity industry after it has been tested by the investors. "The intent is to move away from traditional and cumbersome paper contracts and operations documentation to secure, smart contracts and authenticated transfers of electronic documents," the group said. The platform should reduce administrative operational risks and costs of physical energy trading. It should also improve reliability and efficiency of back-end trading operations for all supply chain users, "while also opening the door to innovative funding and financing solutions," the group said. Over time, the venture intends to lead the migration of all forms of energy transaction data to the blockchain, the companies said. In June, BP and Italy's Eni completed a pilot program for European gas trading using blockchain technology developed by Canada's BTL Group.

"We’ll See Some Initial Panic": World Reacts To Billionaire Alwaleed's Stunning Purge -- A shocked world is gradually responding to the stunning news of the Saudi "countercoup" purge that took place overnight - the second in six months -  and which led to the arrest of 11 princes, 38 current and former senior officials on corruption charges from a newly established anti-corruption committee headed by Crown Prince Mohammed bin Salman, and which most notably resulted in the detention of Prince Alwaleed bin Talal, the billionaire Clinton Foundation donor with significant stakes in Citigroup and Twitter, and who famously feuded with president Donald Trump, calling him a "disgrace not only to the GOP but to all America" back in December 2015. Predictably, initial focus has fallen on bin-Talal massive net worth, and specifically his investments. As Bloomberg calculates, the Saudi (ex?) prince is ranked the world’s 50th richest person with a net worth of about $19 billion; he is the founder of Kingdom Holding Co., a Riyadh-based investment company that has holdings in real estate, hotels and stocks such as Apple around the world. A list of bin-Talal's assets compiled by Bloomberg shows that in addition to his equity holdings, the prince also owns $284 million in jewelry, $225 million worth of "plane and yacht", and $120 million in "furniture and fixtures.":

Oil Jumps To $56, Highest Since July 2015 Following Saudi Turmoil - With the launch of electronic trading, WTI crude has jumped from the highest close since July 2015 amid Saudi turmoil which over the weekend included a crackdown on 11 Saudi princes - including billionaire Alwaleed - and dozens of current and former ministers as Saudi Crown Prince Mohammed bin Salman, i.e. MbS, who’s backed policy of capping oil output to raise prices, consolidates power with anti-graft probe, and shortly after a helicopter that carried 8 high-ranking Saudi officials inexplicably crashed near the Yemen border.  As shown in the chart below, December WTI briefly touched $56, and was up +0.5% to $55.87/bbl shortly after 6pm ET, the highest price since July 6, 2015...

Oil prices are surging as a Saudi political purge sparks 'runaway market' -- Oil prices surged to their highest levels since the summer of 2015 on Monday as a major political shakeup in Saudi Arabia underpinned a rally fueled by geopolitical risk, analysts said. Crude futures hit the new highs overnight after the powerful Saudi Crown Prince Mohammad bin Salman coordinated the arrest of several princes and ministers, ostensibly as part of crackdown on corruption.Prices pulled back in morning trade as the market digested a wealth of analysis on the Saudi purge, but futures suddenly shot higher at midday. International benchmark Brent crude oil topped $64 a barrel for the first time since June 2015. Meanwhile U.S. West Texas Intermediate crude broke above $57, a level the market has not seen since July 2015.WTI finished Monday's session $1.71 or 3.1 percent, higher at $57.35. Brent was trading up $2.04, or 3.3 percent, at $64.11 by 2:27 p.m. ET.Analysts cautioned against pinning the surge on any one headline, or even the Saudi arrests alone. Instead, they said a growing cloud of geopolitical uncertainty was unleashing animal spirits in an already bullish market."You can grab all sorts of different headlines when you have a runaway market, and this is a runaway market right now," said Tom Kloza, global head of energy analysis at Oil Price Information Service.In this kind of environment, "people throw caution to the wind, and this is like the grand finale of fireworks," he said. On Monday, Nigeria's oil minister signaled his country might be ready to contribute to OPEC-led output cuts to help bolster the market. OPEC has aimed to keep 1.8 million barrels a day off the market this year to shrink brimming global crude stockpiles. Nigeria, OPEC'a biggest African producer, was exempt because a wave of attacks sidelined much of its oil supply last year.

Oil prices up sharply after Saudi arrests - Oil prices rose sharply on Nov.6 against the backdrop of arrests in Saudi Arabia. The price for January futures of the North Sea Brent oil mix has increased by 0.66 percent to $62.48 per barrel as of 08:26 (EST). This is while the price for December futures of WTI oil rose by 0.56 percent to $55.95 per barrel. On Nov.4, a number of high-profile arrests were made in Saudi Arabia in the wake of the formation of a new anti-corruption committee headed by Crown Prince Mohammed bin Salman (known in diplomatic circles as MbS). A formal list of those arrested has not been released, but is reported to include prominent investor Prince Alwaleed bin Talal and former Finance Minister Ibrahim al-Assaf. At the same time, a minor government reshuffle took place. Notably, Prince Miteb bin Abdullah, son of the late King Abdullah and once considered to be a future king, was sacked as head of the National Guard. Economy Minister Adel Faqih was replaced by his deputy, Mohammed al-Tuwaijri.

U.S. Oil Prices Edge Down From Near Two-And-a-Half Year High — U.S. oil prices edged lower on Tuesday after posting the biggest gains in six weeks a day earlier, buoyed by moves by Saudi Arabia's crown prince to tighten his grip on power and a drop in U.S. drilling rigs. U.S. West Texas Intermediate (WTI) crude slipped 13 cents, or 0.2 percent, to $57.22 a barrel by 0028 GMT. The contract surged 3 percent on Monday, the biggest percentage gain since late September. Brent crude futures were yet to trade. On Monday, they closed 3.5 percent higher, also their biggest percentage gain in about six weeks. Both benchmarks hit their highest since mid-2015 during the session. Saudi Crown Prince Mohammed bin Salman moved to shore up his power base with the arrest of royals, ministers and investors, including billionaire Alwaleed bin Talal and the powerful head of the National Guard, Prince Miteb bin Abdullah. The arrests, which an official described as part of "phase one" of the crackdown, are the latest in a series of dramatic steps by Prince Mohammed to tighten his grip at home. Analysts said they do not see Saudi Arabia, the world's largest oil exporter, changing its policy of boosting crude prices for now. Saudi Energy Minister Khalid al-Falih said that while there is "satisfaction" with a production-cutting deal between the Organization of the Petroleum Exporting Countries and other producers led by Russia, the "job is not done yet." OPEC is expected to extend a cut of around 1.8 million barrels per day into the whole of 2018. U.S. drillers cut eight oil rigs last week, the biggest reduction since May 2016, helping to support prices.

Did Oil Markets Overreact To The Saudi Purge? -Saudi Arabia’s powerful crown prince led a massive purge over the weekend, ousting around a dozen royal cousins in a bid to consolidate power. The removal and detentions of so many members of the royal family were ostensibly the outgrowth of an anti-corruption campaign, but the actions put the top security institutions under the control of the king and the crown prince after having been distributed among different family factions for decades. In essence, Crown Prince Mohammed bin Salman (aka, MBS) has ended decades of tradition and has consolidated power in his own hands, making him the most powerful figure the country has seen in generations. MBS also removed one of his rivals for the throne, Prince Miteb bin Abdullah, son of the late King Abdullah. Many analysts expect the octogenarian King Salman to abdicate the throne in the coming months, and the ouster of Miteb paves the way for MBS to take over.The purge also took down the richest Saudi investor, Prince Alwaleed bin Talal, a move that “would be like arresting Warren Buffet or Bill Gates in the United States,” Robert Jordan, former U.S. ambassador to the kingdom, told CNBC. Favorable interpretations of what is playing out in Riyadh view the actions as a way to push forward with economic reforms. “The new leadership is committed to modernizing the economy and diversifying the economy and addressing the issue of over-reliance on oil,” Khatija Haque, head of Middle East research at Emirates NBD PJSC, told Bloomberg. “What this signals is that the crown prince is strengthening his position to continue with pushing forward with the reforms that are needed.”  But analysts say the actions by MBS could undercut one his own top priorities: Attracting international investment, specifically for the IPO of Saudi Aramco. The arrests without due process “sends a chill down the spine of foreign investors,” Bernard Haykel, a professor at Princeton University, told the New York Times in an interview. Moreover, a Saudi Aramco board member and former finance minister was actually included in the series of detentions.

Oil Rally Halts As Saudi Purge Continues - Oil prices surged on Monday to their highest levels in more than two and a half years. Brent was up more than 3 percent to $64 per barrel, and WTI jumped to $57 per barrel. Crude prices fell slightly on Tuesday afternoon as markets cooled down a bit. Oil prices are at multiyear highs as a confluence of events have accelerated the rebalancing process, adding to bullish momentum. The U.S. rig count continues to fall even as oil prices have gained strength. The steep drop in oil rigs last week pushed up crude prices. The purge in Saudi Arabia (more below) also added some geopolitical anxiety. The surprise purge of top royal figures in Saudi Arabia has led to a tight consolidation of power in the hands of the crown prince Mohammed bin Salman. The move puts the most powerful institutions in the hands of the young prince, who many expect to claim the throne in the coming months if the current King abdicates. The power grab does not necessarily mean much for the kingdom’s oil policy. If anything, it removes dissent to the crown prince’s policies, which include extending the OPEC deal, aimed at raising oil prices in advance of the Saudi Aramco IPO. The oil market has a renewed sense of bullishness, and energy analysts see $70 oil much more likely for Brent than $50. Strong demand, lower inventories and the OPEC deal have all left the market might tighter than at any point in years. Saudi Arabia also seems intent on boosting prices further ahead of the Aramco IPO, and the purge only adds weight to that sentiment. "The Saudi Situation means $70 before $50," Roberto Friedlander, head of energy trading at Seaport Global Securities, wrote in a research note. "The Saudis CAN'T afford a renewed decline in prices or a decline in oil revenues," Friedlander said, adding "they would certainly prefer to risk tightening the oil market too much and see prices hit $70, rather than risk letting them slip back to $50."

Oil prices step back while investors eye tensions in Saudi Arabia —Traders who have steadily boosted crude since the month began took a deep breath Tuesday, with prices dropping on concerns of an overbought market and rising shale production. On Monday, prices jumped 3.1 per cent, breaching $57 (U.S.) a barrel as arrests of senior officials in Saudi Arabia raised questions about instability there. Prices fell back 0.3 per cent Tuesday as the market lingered at overbought levels, and OPEC said U.S. shale output will soar to 7.5 million barrels a day in 2021, 56 per cent higher than forecast a year earlier. Strength in the dollar also acted as a downward force. “There’s no doubt that we got a little bit overbought,” “The dollar is higher, so that’s acting as a bit of a headwind to prices as well.” Investors remain focused on tensions in Saudi Arabia, as “the market pays more attention to geopolitical risk.” The U.S. benchmark’s 14-day relative strength index hovers above 70, a level that signals the commodity is overbought. Saudi Arabia said it has only frozen the bank accounts of individuals and not those of the companies they own or manage, as the kingdom seeks to ease tension among global investors over a crackdown that’s seen princes and billionaires arrested. “It seems like what you really had was the first time in a while that traders in the crude market (were) nervous enough to cover shorts on a political event, which hasn’t happened in a while,” 

WTI/RBOB Drop After Surprise Gasoline Build -- WTI held above $57 heading into the API print on the heels of Saudi chaos but both WTI/RBOB kneejerked lower after API reported a lower than expected crude draw and a surprise gasoline build.  API:

  • Crude -1.562mm (-2.45mm exp)
  • Cushing +812k
  • Gasoline +520k (-1.85mm exp)
  • Distillates -3.133mm

Following the previous week's big gasoline draw and notable crude draw, the last week  - according to API - saw a surprise gasoline build and smaller than expecred crude draw. Also of note was a big build in stocks at Cushing.

WTI Crude Prices Aren't Going With The Global Oil Flow -  This piece I wrote last week on the dislocation between benchmark U.S. and international oil prices missed something important.While I emphasized the differences in speculative money flows to the Nymex West Texas Intermediate, or WTI, and Brent crude oil contracts, I didn't give the role of logistics the prominence it deserved. So here goes. To recap, the spread between WTI and Brent crude prices began widening in late July and has recently blown out to about $6 or $7 a barrel: Hurricane Harvey's disruptive impact in late August helped push that spread beyond $5. But it had been opening ahead of that and hasn't shown signs of closing since. Besides Brent's international benchmark, Nymex WTI is suddenly trading at wide discounts to other benchmarks within the U.S., too: Those premiums of roughly $5 to $6 for Louisiana Light Sweet and WTI delivered in Houston are big flags that something is up with the way oil is flowing within the U.S. The Nymex WTI contract is settled physically at the pipeline and storage hub in Cushing, Oklahoma, which is hundreds of miles inland from the refining and export facilities along the Gulf Coast. The other barrels, closer to the coast -- and, therefore, global markets -- are priced more in-line with Brent. Their premiums versus Nymex WTI jumped at the end of August as Hurricane Harvey's disruption kept barrels bottled up in Cushing. But their continued strength and that other line on the chart above -- for barrels priced in North Dakota -- hint at other, more structural issues. John Coleman, a senior analyst at Wood Mackenzie, points to the start-up of the Dakota Access pipeline in June. Dakota Access takes barrels from the Bakken down to Patoka, Illinois -- where they compete with barrels coming from Cushing.  Cushing is also being squeezed from the west, where the Permian basin -- the engine of U.S. oil-supply growth -- shows little sign of faltering.  This localized glut has suppressed WTI prices inland at Cushing, even as WTI at Houston sells for about $5 more per barrel. That is more than double the cost of piping oil from Cushing to the coast, a pretty sure sign of bottlenecks A similar, though less pronounced, pricing mismatch affects Permian barrels priced at Midland, Texas, indicating production has outpaced pipeline capacity and created a glut there, too. Meanwhile, the recent surge in U.S. oil exports tells you that any barrel that can make it to the coast, and international pricing, is going there.

Large oil traders escape EU's MIFID II trading rules, for now (Reuters) - Less than two months before strict European Union rules on derivatives come into force, most large oil traders have persuaded regulators to exempt them for now from limits on the positions they can hold, arguing they are not speculators. The EU’s revamped Markets in Financial Instruments Directive (MIFID), known as MIFID II, aims to curb speculative trading and make markets more resilient. It comes into force in January and includes position limits on the volume of commodity derivatives a trader can hold, such as Brent oil futures. Oil majors have repeatedly called on EU regulators to refrain from imposing strict capital requirements and greater disclosure measures on oil trading. Sources at major traders such as Shell, BP. Glencore and Vitol said their firms have so far not registered with Britain’s Financial Conduct Authority, saying they have argued they trade derivatives to hedge large physical positions rather than for speculative purposes. Under the new rules, a firm can be exempt from such limits provided that their paper positions are ancillary, in other words, necessary to support physical trades. But proving who is trading what and for which purposes has long been one of the key debates in the industry. 

Oil Prices Slip After Surprise Build In Crude Inventories - After Brent and WTI both fell yesterday as traders started taking profit on the latest price rally, the EIA reported that U.S. crude oil inventories went up in the week to November 3, by 2.2 million barrels, rejecting API estimates of a 1.562-million-barrel draw.Analysts polled by S&P Platts had forecast a 2.7-million-barrel draw in crude inventories, as well as a 2.25-million-barrel decline in gasoline stockpiles. The EIA said gasoline stockpiles did indeed decline, by 3.3 million barrels, which should provide some support to bulls, especially with the surprise build in crude oil inventories.Gasoline production last week averaged 10.2 million bpd, an increase on the previous week, with refineries operating at 89.6 percent of capacity and processing 16.3 million barrels of crude oil daily.It won’t be surprising if we soon see a greater rise in production and, possibly exports. While WTI continues to trade at a comfortable discount to Brent, buyers will prefer it over  Brent-linked grades. What’s more, with both benchmarks at two-year highs, there is a strong motivation for drillers to drill more.The current rally may prove to be a lasting one, unlike the recent price spike after a variety of comments from both OPEC and Russian energy officials. But this time, the game is different: it’s a Middle Eastern version of Game of Thrones, and even if things don’t come to a head, the hostile exchange of threats would be enough to support oil prices at least until November 30. Both sides in the Saudi-Iran conflict would benefit from higher oil prices, but it would be more meaningful to the Kingdom as it plans to list its national oil company in H2 2018—whether it could keep threatening Iran until then is doubtful, so the possibility of an open conflict is a real one.

WTI Extends Losses After Surprise Build, Crude Production Jumps To Record High -- WTI/RBOB extended losses post-API data overnight, but DOE data sparked some algo chaos as a surprise crude build (+2.24mm vs -2.45mm exp) was offset by a bigger than expected gasoline draw (exactly opposite what API reported). In addition, US crude production jumped to a new all-time high - take that OPEC! DOE: 

  • Crude +2.24mm (-2.45mm exp)
  • Cushing +720k
  • Gasoline -3.31mm (-1.85mm exp)
  • Distilates -3.359mm

Last night's API data showed smaller crude draw and a surprise gasoline build, but DOE surprised with a big crude build and bigger gasoline draw (and a notable build in Cushing stocks)...

Shale Oil Surge Still Hammering OPEC Push to Drain Glut -- U.S. crude output skyrocketed to levels not seen in more than three decades, putting an exclamation point on OPEC’s forecast for untrammeled expansion in American shale fields. The output surge and a surprise jump in U.S. crude stockpiles spooked the market Wednesday, dropping prices below $57 a barrel and spurring dire worries that the historic OPEC-led supply curbs set to expire in March may need to be sustained for an extended period to pierce the market glut. Even as American drillers embrace the new religion of profits-over-production, OPEC’s latest long-term forecast focused on the ability of shale explorers to thrive regardless of prices. On Wednesday, a U.S. government tally showed weekly output at its highest since at least 1983. Meanwhile, ConocoPhillips, the world’s biggest independent explorer, pledged to devote $1 billion more to drilling next year, a 22 percent increase. Although the Organization of Petroleum Exporting Countries’ output limits have fueled a 42 percent price rally since late June, OPEC Secretary-General Mohammad Barkindo on Tuesday signaled the producers’ determination to stay the course through the end of 2018. The bogeyman haunting the Saudis, Russians and other major suppliers: U.S. shale, which shows no signs of backing off until at least 2025. The U.S. rig fleet may be shrinking, but production isn’t. It’s risen 9.7percent this year, on track for its steepest annual increase since 2014. Daily production averaged 9.62 million barrels last week, the highest since the federal government began tracking the data in that format in the early 1980s. That said, monthly government assessments considered by many to be more accurate snapshots showed a slightly higher production tally -- 9.626 million a day -- for April 2015. OPEC surprised investors on Tuesday by boosting its long-term estimate for growth in North American shale production by 56 percent from a year earlier. The 12-nation group now expects output from the continent’s shale wells -- which weren’t even a blip on worldwide markets a decade ago -- to reach 7.5 million barrels a day in four years. 

NYMEX December gas settle 2.5 cents higher, unfazed by storage data -- The NYMEX December natural gas futures contract largely was unfazed by a larger-than-expected US Energy Information Administration build to gas storage stocks Thursday, ultimately holding to pre-report levels and settling at $3.20/MMBtu, up 2.5 cents. The prompt-month contract traded between $3.152/MMBtu and $3.217/MMBtu Thursday. For the week that ended November 3, US gas inventories rose 15 Bcf, EIA said Thursday morning, a build slightly above the 12-Bcf injection a consensus of analysts that S&P Global Platts surveyed expected. As the end of injection season nears, stocks totaled 3.790 Tcf, about 2% below the five-year average. Below-average temperatures in the key Midcontinent market have supported a 28-cent rise in the prompt-month contract over the past six sessions. Midcontinent demand levels hit 17.5 Bcf/d, about 4.3 Bcf/d above the previous seven-day average, according to Platts Analytics' Bentek Energy data. Overall US demand is expected to hit 88.65 Bcf/d Thursday, a level not seen since March 16, when demand topped 90 Bcf/d in the final weeks of the winter season. Demand levels throughout the first 10 days of November averaged 76.5 Bcf/d, nearly 9.7 Bcf/d above the same strip in November 2016, putting the market in the position to see a withdrawal in the upcoming storage report.

U.S. natural gas prices rise as traders reassess gloomy outlook: Kemp (Reuters) - U.S. natural gas prices have bounced by almost 10 percent since the start of the month as traders reassess their earlier bearish view this winter amid signs sentiment had become far too gloomy. Futures prices on the New York Mercantile Exchange for gas delivered to Henry Hub in January 2018 have risen to almost $3.30 per million British thermal units from $3.00 on Nov. 1 ( Prices for January, at the height of the winter heating season, now command a premium of almost 32 cents over April, up from just 16 cents at the start of the month. Both prices and calendar spreads have been in a downtrend since May, with the decline accelerating from the middle of September, but the rally this month has reversed some of the most recent losses. Until recently, hedge funds had become progressively less optimistic about the outlook for gas prices this winter. Hedge funds and other money managers cut their net long position in the two main futures and options contracts by almost half to 1,408 bcf by the end of October from 2,693 bcf in September. Portfolio managers held just 1.58 long positions for every short on Oct. 31, compared with 2.93 on Sept. 19, and the lowest ratio for almost a year. But there appears to have been a reappraisal since the start of the month amid signs this positioning had overshot on the bearish side. Part of the reassessment has come from recent weather patterns which have been mildly positive for gas demand. Significantly warmer than average temperatures in late September and early October, followed by a slightly colder than average late October and early November, have boosted cooling and heating demand respectively. But stocks have been tightening fairly consistently compared with the five-year average since the first week of March in a sign the market is persistently undersupplied. Working stocks in underground storage have built more slowly than the five-year average in 21 out of the last 31 weeks.   The market is tighter than it appears because the underlying demand for gas is much higher than five years ago as a result of LNG exports and the growing number of gas-fired power plants. 

Oil prices rise on supply cuts and political tensions in Saudi Arabia | Reuters: - Oil prices rose nearly 1 percent on Thursday, supported by supply cuts by major exporters as well as continuing concern about political developments in Saudi Arabia.Brent crude oil LCOc1 settled up 44 cents or 0.7 percent at $63.93 a barrel, still close to Tuesday’s intra-day high of $64.65, which was the highest since June 2015. U.S. light crude was up 46 cents or 0.8 percent at $57.27, just shy of this week’s more than two-year high of $57.69 a barrel. “The move is driven by developments in Saudi Arabia in recent days and anticipation that the consolidation of power by King Salman and the Crown Price will continue,” said Abhishek Kumar, Senior Energy Analyst at Interfax Energy’s Global Gas Analytics in London, “Meanwhile, Saudi comments on Lebanon have also highlighted rising tensions between the kingdom and Iran.” “Growing confidence in the market that the upcoming OPEC meeting will result in an extension to the output-cut agreement is also supporting prices,” he said. Saudi Arabia plans to cut crude exports by 120,000 barrels per day in December from November, slashing allocations to all regions, a spokesman for the energy ministry told Reuters. Several traders said prices got a boost from unconfirmed rumors that Saudi King Salman would relinquish the throne to his son Crown Prince Mohammed Bin Salman. Similar rumors were spread in September and October. Prices got a boost this week from a crackdown on corruption by the Saudi crown prince. Still, traders expressed caution that the oil price rally may have run its course after pushing up Brent more than 40 percent since July. 

As Mideast tensions soar, supertanker tells oil's real story » Seventy miles south-east of the Strait of Hormuz — the world’s most prominent chokepoint for oil supplies as the narrow waterway separating the Sunni Gulf States from Iran — the journey of one of the world’s largest ships shines a light on why many energy traders think oil’s rally may endure, even if the political temperature should cool.The Seaways Laura Lynn, a supertanker as long as the Empire State building is high, has sat laden with oil off the coast of Oman for more than two years, carrying a cargo of more than 3m barrels of crude.This rare vessel has always been a triumph of size over sense. Almost 50 per cent larger than the second biggest (and far more common) size of supertanker, the Seaways Laura Lynn is one of only two ultra-large crude carriers (ULCC) still in ocean-going service, with its unwieldy brethren long ago converted into fixed-position storage and offloading service vessels for offshore oilfields. But its rareness gives it a special place in the oil market, with its movements offering clues to how some of the most powerful traders view the health of supply and demand. Vitol, the private trading house run by British-based executive Ian Taylor, was quick to charter the ship when the oil glut intensified in early 2015, as prices spiralled from above $100 a barrel to below $30 a year later. The trading house parked it near the Strait of Hormuz and stuffed its giant tanks with 3m barrels of cheap crude, with a view to storing it until prices recovered, locking in huge profits in the futures market as similar floating storage plays proliferated in oil hubs across the globe. Two years on, with Opec and Russia having cut 1.8m barrels a day of supply since January from the market in a bid to finally bring the oil glut to an end, most crude stored at sea has since been drawn down as the market has slowly tightened. Vitol, however, had hung on, keeping the Seaways Laura Lynn fully loaded just off the coast of the UAE and Oman, even as the tightening market made it less profitable to store oil — and suggesting they were not yet convinced oil’s recovery in 2017 had solid foundations. This week though, Vitol has finally blinked. The tanker, according to satellite tracking of its movements and draft, shows the trading house has suddenly unloaded the majority of its oil, raising its 380m-long hull out of the water.

OilPrice Intelligence Report: Are Oil Markets Immune To U.S. Shale? - Oil prices showed some weakness mid-week on news that U.S. oil production jumped, but benchmark prices firmed up on Thursday, putting WTI and Brent on track for their fifth consecutive weekly advance. While the Friday rig count build did knock oil prices down, they are still closing in on the longest streak of weekly gains in more than a year.  OPEC released its annual World Oil Outlook this week, in which the group dramatically upgraded its expectations for U.S. shale. OPEC sees U.S. shale output ballooning from 5.1 million barrels per day (mb/d) this year to 7.5 mb/d by 2021. That is an upward revision of more than 50 percent – last year OPEC predicted U.S. shale output would erode under the weight of low oil prices, dipping to just 4.8 mb/d by 2021. In other words, OPEC has essentially acknowledged that it won’t be able to kill off U.S. shale by flooding the market.  In OPEC’s World Oil Outlook, it estimated that oil demand will rise by more than 15 mb/d through 2040, dismissing the growing number of predictions regarding peak demand in the next decade or two. The political upheaval in Riyadh has given a jolt to oil prices this week, with crown prince Mohammed bin Salman purging his rivals and consolidating power. Oil analysts see this as increasing the odds of an extension of OPEC’s production cuts. “While the likelihood of a disruption to supply remains low, we believe the events raise the probability of Saudi Arabia taking a more aggressive stance on production curbs. The risks now lie towards curbs remaining in place longer than expected,” Daniel Hynes, an analyst at Australia & New Zealand Banking Group, told Bloomberg. Saudi Arabia also said that it would slash oil exports from November to December by 120,000 bpd.  As part of U.S. President Trump’s visit to China, he secured a commitment from China Energy Investment Corp. to invest an estimated $83.7 billion in shale gas development and chemical manufacturing projects in West Virginia, an amount that would be spread out over two decades. The deal is a non-binding memorandum of understanding, but it details investments in power generation, chemical manufacturing and underground storage of natural gas liquids.

Baker Hughes: US rig count breaks downward trend, jumps 9 units - The US rig count ended a 5-week streak of declines with a surprise 9-unit jump to 907 during the week ended Nov. 10, data from Baker Hughes indicate. The cumulative increase reflects gains in land-based and oil-targeting rigs.Sixty rigs had gone offline through the week ended Nov. 3 after a recent peak of 958 on July 28 (OGJ Online, Nov. 3, 2017). In the 15 weeks since that peak, the count has dropped 11 times, and the decline had accelerated over the past few weeks.A 9-unit increase in oil-directed rigs brought their tally to 738, down 30 units since their recent peak on Aug. 11. Gas-directed rigs were unchanged at 169.Onshore rigs now total 888, with rigs drilling horizontally up 12 units to 776, down 34 units since July 28. Rigs drilling directionally rose a unit to 74, while rigs drilling vertically dropped 4 units to 57.Oklahoma led the major oil- and gas-producing states with a 6-unit gain to 123, down 13 units since its recent peak on July 7. The Cana Woodford spiked 7 units to 73, its highest point in Baker Hughes data.New Mexico increased 4 units to 69, while the Permian climbed 6 units to 386. Both New Mexico and the Permian matched their highest count since February 2015. Alaska rose a unit to 6.   West Virginia and the Utica each fell a unit to 12 and 29, respectively. Texas dropped 2 units to 442, down 14 since Aug. 4. The Eagle Ford, however, rose 2 units to 67, down 19 units since June 2. Canada gained 11 units to 203. Oil-directed rigs climbed 8 units to 108, gas-directed rigs rose 4 units to 95, and the country’s only rig considered unclassified went offline.

Oil prices slide after U.S. drillers add rigs | Reuters: - Crude was down slightly on Friday as expectations that OPEC and other producers will extend their production cut agreement were offset by U.S. drillers adding the most oil rigs in a week since June, indicating output will continue to grow.U.S. energy companies added nine oil drilling rigs this week, the second increase in three weeks, bringing the total count up to 738, General Electric Co’s Baker Hughes energy services firm said in its closely followed report. Brent futures fell 41 cents, or 0.6 percent, to $63.52 a barrel, while U.S. West Texas Intermediate crude settled down 43 cents at $56.74 per barrel. Earlier in the week, Brent rose to $64.65, its highest since June 2015, and WTI hit $57.92, its highest since July 2015. Both contracts were rose more than 2 percent this week, which was the fifth consecutive increase. Traders said higher prices in recent weeks were the result of efforts led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia to tighten the market by cutting output, as well as strong demand and rising political tensions. There are also expectations in the market that OPEC’s next meeting on Nov. 30 will agree to extend cuts beyond the current expiry date in March 2018. “Market participants expect OPEC to extend the production cuts beyond March 2018 and stocks to decline further,” analysts at Commerzbank said, noting, however, that “the higher price level should lead to a further rise in U.S. shale oil production.” U.S. production was forecast to rise to 9.2 million barrels per day (bpd) in 2017 and a record 10.0 million bpd in 2018 from 8.9 million bpd in 2016, according to federal energy projections this week. Output peaked at 9.6 million bpd in 1970. 

Oil ends strong week on a sour note as rig counts rise - Oil futures ended a strong week on a down note Friday, maintaining losses after data showed U.S. drillers added rigs. Still, geopolitical worries and continued expectations that members of the Organization of the Petroleum Exporting Countries and other major producers will extend output curbs when they meet at the end of the month helped to lift crude futures to healthy weekly gains. Earlier in the week, oil futures hit levels last seen in June 2015. On Friday, Brent crude UK, the global oil benchmark, fell 41 cents, or 0.6%, to end at $63.52 a barrel on the ICE futures exchange. The contract saw a 2% rise for the week, according to WSJ Market Data Group On the New York Mercantile Exchange, West Texas Intermediate crude oil futures CLZ7 -0.47% , the U.S. benchmark, declined 43 cents, or 0.8% to $56.74 a barrel. For the week, WTI rose 2.3%. Both Brent and WTI logged their fifth straight weekly rise. Oil was buoyed this week after Saudi Arabia detained 201 individuals including princes, businessmen and government officials after a three-year investigation, alleging that an estimated $100 billion of state funds have been embezzled. The actions helped to push oil prices to more than two-year highs this week. Analysts said investors were already pricing in an extension to ongoing production cuts from major producers working in concert with OPEC.  Oil remained lower after oil-field services firm Baker Hughes said the number of U.S. oil rigs rose by 9 this week to a total of 738. Compared with the same time last year, the number of rigs is up by 286. While geopolitical turmoil has provided some lift to the market, “concerns surrounding increasing U.S. production, export levels, and drilling rates will likely provide resistance to rising oil prices in the coming months,” wrote analysts at Tradition, in a Friday note. In other energy markets, Nymex December gasoline futures fell 0. 73 cent, or 0.4%, to $1.8124 a gallon, while logging a 1.1% weekly rise, with futures gaining for five consecutive weeks. December heating oil declined 1.2 cents, or 0.6%, to end at $1.9349 a gallon, marking a 2.6% weekly gain and booking its fifth weekly climb in a row. December natural gas rose 1.3 cents, or 0.4%, to close at $3.213 per million British thermal units, contributing to a weekly gain of 7.7%, marking its second straight weekly advance. 

Aramco oil reserves audit two-thirds complete, may not be finished in 2017: sources - (Reuters) - An audit of Saudi Aramco’s oil reserves is unlikely to be completed before the end of 2017 because of the huge scale of the task, sources familiar with the matter said, a later timeframe than previously indicated. The audit has so far confirmed the reserves figures earlier given by Saudi Arabia, the sources said, an important part of the state oil company’s preparatory work for its planned initial public offering next year. Saudi Arabia’s reserves of easily recoverable oil have long been considered the world’s largest. But there have also been questions about their volume and quality, and the audit seeks to provide internationally recognized figures for investors. “It’s a huge task,” a source familiar with the matter said, commenting on the progress of the reserves audit. “They are about two-thirds of the way through. It’s all going well and smoothly - no surprises.” For nearly 30 years - despite rising production, large swings in oil prices and improved technology - Riyadh has annually reported the same number for reserves of 261 billion barrels, according to BP’s statistical review.. Baker Hughes, involved in the auditing, declined to comment on the progress of the work, while DeGolyer did not respond to a request for comment.  Asked to comment, Aramco said: “We do not comment on rumors and speculation. Investors will receive relevant information in due course in connection with the IPO.”  An industry source had told Reuters in March that Aramco aimed to have one of the two reserves auditors wrap up the review this year, long before the planned listing. But this now looks unlikely.

UK to provide Saudi Aramco with $2 billion credit guarantees | Reuters: (Reuters) - Britain will provide $2 billion in credit guarantees to Saudi Aramco so it can buy British goods and services more easily, but denied it was part of efforts to persuade the energy giant to list its shares in London.The loan agreement comes as London Stock Exchange, with backing from Prime Minister Theresa May, competes to host part of Saudi Aramco’s initial public offering (IPO), which is expected to be the biggest float ever. “This builds on previous support for UK exports as part of Saudi Aramco joint venture projects,” the government said in a statement. A spokesman for Britain’s finance ministry said the guarantees were not part of the country’s attempt to secure the IPO for London. The guarantees announced on Thursday were relatively big. Over the past five years combined, previous guarantees have totalled 14 billion pounds ($18 billion), a government spokeswoman said. Asked what specific projects the guarantees would back, the spokeswoman said Britain would work with the company to identify initiatives which could include British exports. Saudi officials have said domestic and international exchanges, including New York, London, Tokyo and Hong Kong, have been considered for a partial listing of the state-run firm. Britain’s financial regulator has proposed new rules to allow sovereign-controlled entities like Saudi Aramco to have their own “premium listing” category while being exempt from requirements such as how much of a company has to be floated. The government and the City of London are keen to win the listing as a boost to the country’s capital markets just as Britain is preparing to leave the European Union. 

Satellite Images Reveal Saudis May Be Lying How Much Oil They Have In Storage -- A little over a year ago, specialized satellite imaging company Orbital Insight which uses its proprietary imaging and algorithms to track above-ground oil storage, confirmed something we had alleged earlier in the year: that China was vastly under-representing the amount of oil it had stored in its Strategic Petroleum Reserve (with significant implications for prices).  The resultant doubt about China's true purchasing capacity was one of the several factors that led to the subsequent swoon in oil prices which OPEC was unable to overcome until nearly a year later, when the market became increasingly confident that the OPEC strategy of eliminating excess inventory, was working and pushed the price of WTI and Brent to two year highs, above $57 and $63 respectively. As the FT's David Sheppard writes, "while the oil market’s attention has been gripped this week by the corruption purge in Saudi Arabia and its tensions with Iran, from miles above the earth’s crust one company is highlighting a different kind of intrigue."  He is, of course, referring to Orbital Insight, whose analysis of Saudi crude inventories in recent months has thrown up an "interesting anomaly.' One can call it an "anomaly", but a better explanation of what the company has done is to catch the Saudi kingdom in lying about its inventories. Here is the official narrative:The kingdom, which has led Opec and Russia in co-ordinated output cuts since January, has for months been reporting to official agencies that its oil held in storage has been falling, which alongside lower production has been one factor that has helped propel Brent crude oil back above $60 a barrel. There is just one problem: it's a lie: "Orbital’s analysis of satellite imagery suggests that Saudi Arabia’s above-ground tanks — whose floating roofs allow them to see when oil inventories are rising or falling by measuring shadows cast across the top of the tanks — have seen no real change in the past 18 months.   How much? Here's the FT's punchline: "While Saudi Arabia has reported to Jodi that its oil stocks have declined by about 70m barrels since early 2016, the Orbital analysis suggests the above-ground tanks have actually seen inventories rise marginally over the same period."

Leaked Documents Expose Stunning Plan to Wage Financial War on Qatar — and Steal the World Cup - A plan for the United Arab Emirates to wage financial war against its Gulf rival Qatar was found in the task folder of an email account belonging to UAE Ambassador to the United States Yousef al-Otaiba and subsequently obtained by The Intercept. The economic warfare involved an attack on Qatar’s currency using bond and derivatives manipulation. The plan, laid out in a slide deck provided to The Intercept through the group Global Leaks, was aimed at tanking Qatar’s economy, according to documents drawn up by a bank outlining the strategy. The outline, prepared by Banque Havilland, a private Luxembourg-based bank owned by the family of controversial British financier David Rowland, laid out a scheme to drive down the value of Qatar’s bonds and increase the cost of insuring them, with the ultimate goal of creating a currency crisis that would drain the country’s cash reserves. Rowland has long had close relationships with UAE leadership, particularly with Abu Dhabi Crown Prince Mohammed bin Zayed, known as MBZ. The bank is currently in the process of creating a new financial institution in cooperation with the UAE’s sovereign wealth fund, Mubadala, according to contracts and correspondence obtained by The Intercept outlining the terms of the deal. That project is separate from the Qatar operation, but it reflects the close relationship between the bank and the UAE. The Qatar debt project would be grandiose in its ambitions. “Control the yield curve, decide the future,” reads the planning document, referring to a standard financial-industry graph showing a country’s borrowing costs for debt that is due at different dates. The height and shape of the yield curve is thought to be a reflection of how healthy an economy is and influences what financing options are available to a country. Targeting a nation’s economy using financial manipulation would be a dramatic break from traditional norms of diplomacy and even warfare. 

Saudis Intercept Ballistic Missile Over Capital Riyadh --Just hours after the previously reported unexpected, and shocking resignation of Lebanon's pro-Saudi prime minister Saad al-Hariri, Saudi defense forces said they had intercepted a ballistic missile over the capital Riyadh, which was fired from Yemen. According to Yemen's Houthi-controlled Defense Ministry, the Yemeni Air Force targeted King Khalid International Airport in the Saudi capital of Riyadh on Saturday with a ballistic missile.Al-Arabiya reported that the missile was intercepted over north-east Riyadh, Saudi Arabia's Ministry of Defense said in a statement, even as Yemen's Defense Ministry said the missile attack "shook the Saudi capital" and the operation was successful.The Riyadh-based newspaper Al Riyadh released a video on its Twitter account showing the interception of a missile. Some analysts have speculated that the ballistic missile could be Iran's response to Hariri's resignation.Al Jazeera reported that Yemen's Houthi rebels claimed responsibility for the attack, saying they launched the Yemeni-made, long-range ballistic missile Burqan 2-H (with a range of 500 kilometers) from the Saudi-Yemeni border before being intercepted.Earlier on Saturday, there were reports of a blast at the King Khalid International Airport in Riyadh, with some twitter users noting that pieces of a missile crashed onto the tarmac. Photos, allegedly pieces of the intercepted missile, have also emerged on the web.

Saudis Call Missile Attack "Blatant Act Of Aggression" By Iran, "Could Be Considered Act Of War" -- This weekend's chaos in the middle east just got considerably more serious. Yesterday we detailed reports that the Saudis intercepted a ballistic missile over the nation's capital Riyadh... At the time, Al Jazeera reported that Yemen's Houthi rebels claimed responsibility for the attack, saying they launched the Yemeni-made, long-range ballistic missile Burqan 2-H (with a range of 500 kilometers) from the Saudi-Yemeni border before being intercepted. But tonight, according to a statement from the Saudi coalition carried by the state-run Saudi Press Agency, the missile that targeted Riyadh has been called "a direct military aggression" by Iran against Sauid Arabia,  that "could rise to be considered an act of war." Furthermore, the Saudi-led coalition has closed all Yemen's land, sea and air ports after missile targeted Riyadh. The Coalition's command considers the Iranian regime's action in supplying the Houthi militias that it commands with these missiles to be a blatant violation of the United Nations Security Council (UNSC) Resolutions that prohibit nations from arming these militias, specifically UNSC Resolution (2216). Further, Iran's role and its direct command of its Houthi proxy in this matter constitutes a clear act of aggression that targets neighboring countries, and threatens peace and security in the region and globally. Therefore, the Coalition's Command considers this a blatant act of military aggression by the Iranian regime, and could rise to be considered as an act of war against the Kingdom of Saudi Arabia, and thus affirms the legitimate right of the Kingdom to defend its territory and people in accordance with Article (51) of the U.N. Charter. The Coalition Command also affirms that the Kingdom reserves its right to respond to Iran in the appropriate time and manner, in accordance with international law and based upon the right of self-defense, including the defense of its territory, its people, and its vital interests, which is enshrined in international agreements and conventions including the UN Charter. The timing is fascinating. What better way to get the price of oil up before an Aramco IPO - which President Trump just happened to mention out of the blue.

In Shocking Purge, Saudi King Arrests Billionaire Prince Bin Talal, Others In "Anti-Money Laundering" Crackdown -- In a shocking development, Saudi press Al Mayadeen reported late on Saturday that prominent billionaire, member of the royal Saudi family, and one of the biggest shareholders of Citi, News Corp. and Twitter - not to mention frequent CNBC guest - Al-Waleed bin Talal, has been arrested for corruption and money laundering charges, along with several other top officials. Among those arrested are also two sons of late King Abdallah, head of national royal guards and former Emir of Mecca (full details below).Mass arrests in Saudi Arabia, among those arrested former King Abdallah chief of staff, prince AlWalid Bin Talal, and head of MBC to Saudi media they were arrested for being involved in corruption and money laundering— Ali Hashem ??? ???? (@alihashem_tv) November 4, 2017As the local press further adds, the supreme committee chaired by Crown Prince and billionaire stops "on charges of money l aundering."   The arrested prince is perhaps best known for his recurring on and off spats with president Trump: […] Others arrested include Meteib Bin Abdullah; Walid bin Talal; Khaled Tuweijri; AlWalid Ibrahim; Turki Bin Naser; Adel Fakih

Osama Bin Laden’s Brother Arrested In Saudi Crackdown -- Among the numerous high-profile figures arrested overnight in Saudi Arabia on “anti-corruption” charges, in addition to the shocking detention of prince Alwalaleed bin-Talal another unexpected name has emerged: that of Bakr bin Laden, chairman of Saudi Binladin Group and brother of Osama bin Laden. The Binladin Group is one of the biggest construction companies, with an annual turnover of $30 billion. It was carrying out the expansion of the Kaaba complex. The family rejected al-Qaeda's former leader, Osama Bin Ladin, because he was involved in terrorist activities in the 1990s. A quick primer on the Binladin Group from the WSJ:Based in Jeddah and [ZH: formerly] favored by Saudi Arabia's royal family, Saudi Binladin Group derives billions in annual revenue from a wide range of enterprises, including mosque construction, telecommunications and selling Snapple soft drinks in Saudi Arabia. Although the family's U.S. spokesman says Saudi Binladin Group is wholly owned by the extended bin Laden family, not including Osama, he said he could provide no information on exactly which members have an equity interest in the company.

Saudi Helicopter Carrying 8 High-Ranking Officials & Prince Bin-Muqrin Crashed - All Dead The shocking latest twists in what has been a chaotic weekend in Saudi Arabia is news that a helicopter transporting 8 high-ranking Saudi officials has crashed in the south of the Kingdom.Sky News Arabia confirms an earlier report from Al-Watan news..."Newsletter: loss of a helicopter carrying a number of officials in the southern Asir, Saudi Arabia" Details are few for now but some headlines report that the high-ranking officials aboard included Crown Prince Mansour bin-Muqrin.  The crash site is reported near Abha, in the south of The Kingdom.  There are sources saying all aboard have died... Just what is going on in Saudi Arabia.

Saudi Crown Prince Consolidates Power With Anti-Corruption Arrests -- Everybody is against corruption, so it has become the new cool way to concentrate power in dictatorial societies to engage in an anti-corruption drive, as Putin and Xi Jinping have done.  Actually corrupt people may well be arrested, but somehow included in the set of those arrested are rivals of the leader who are conveniently disposed of. So we now see it in Saudi Arabia, where Crown Prince Muhammed bin Salman has been leading a special anti-corruption committee approved of by the Saudi ulama, and now it has arrested 11 princes accused of corruption.   As in other countries, many of them, possibly all of them are guilty, but included among them are some rivals of Muhammed’s for power, and, indeed the full set of names has not been released.The most important in terms of being a rival is the now former commander of the SANG, the Saudi Arabian National Guard, which was long commanded by Prince Meti bin Abdullah, son of the long time former King Abdullah.  Before Meti commanded SANG, Abdullah did so for decades and had the HQ of SANG on his own palace grounds within a wall.  SANG has long been the rival military in Saudi Arabia to the regular military under the Defense Department, which has been under the control of the crown prince since his father became king, succeeding Abdullah.  SANG has a base among the tribes, and it was SANG that finally defeated the Muslim Brotherhood (Ikhwan) uprising in 1979 that had led them to seizing control of the Grand Mosque in Mecca.  Abdullah was SANG commander at that time, and he had the reputation of having excellent relations with tribal leaders.  His sone was clearly a threat and rival to the crown prince, and now he is out.  The commander of the Saudi navy has also been replaced, although not clear if he has been arrested.

Saudi Arabia – This ‘Night Of The Long Knives’ Is A Panic-Fueled Move -- Yesterday the ruling Salman clan in Saudi Arabia executed a Night of the Long Knives cleansing the state of all potential competition. The Saudi King Salman and his son Clown Prince Mohammad bin Salman initiated a large arrest wave and purge of high ranking princes and officials. Part of this internal coup was the confiscation of huge financial estates to the advantage of the Salman clan. The earlier forced resignation of the Lebanese Prime Minister Saad al-Hariri is probably related to the last night's events. The Israeli Prime Minister Netanyahoo endorsed the resignation. This guarantees that Hariri will never again be accepted in a leading role in Lebanon. In Saudi Arabia eleven princes, including sons of the deceased King Abdullah, more than thirty former and acting ministers as well as the heads of three major TV stations were taken into custody or put under house arrest. The National Guard Commander Prince Mitieb Bin Abdullah was relieved from his post and replaced with Prince Khalid Bin Abdulaziz al Muqrin. The National Guard was the last intelligence and security power center held by the Abdullah branch of the al-Saud family.  The purged officials were replaced with stooges of the ruling Salman clan. The Salman branch of the current king and clown prince has now eliminated all of potential internal competition. This goes against the consensus model that had been the foundation of the Saudi family rule over the last century. Tens of thousands of clans and people depended on the patronage of the removed princes and officials. They will not just sit back as their fortunes evaporate. One effect of the purges will be the concentration of Saudi wealth in the hands of the Salmans. One of the arrested persons is the allegedly sixth richest man of the world, Prince Al-Waleed Bin Talal (video). He has (had?) an estimated net-worth between $18 and $32 billion. Al-Waleed had publicly clashed with U.S. President Donald Trump. (Al-Waleed is (was?) the largest shareholder of Citygroup which selected Barack Obama's cabinet before receiving a huge government bailout.) Another casualty is Bakr bin Laden, brother of Osama Bin Laden, chairman of the Saudi Binladin Group and fifth richest man of the country.

Saudi Crown Prince’s Mass Purge Upends a Longstanding System — A midnight blitz of arrests ordered by the crown prince of Saudi Arabia over the weekend has ensnared dozens of its most influential figures, including 11 of his royal cousins, in what by Sunday appeared to be the most sweeping transformation in the kingdom’s governance for more than eight decades.The arrests, ordered by Crown Prince Mohammed bin Salman without formal charges or any legal process, were presented as a crackdown on corruption. They caught both the kingdom’s richest investor, Prince Alwaleed bin Talal, and the most potent remaining rival to the crown prince’s power: Prince Mutaib bin Abdullah, a favored son of the late King Abdullah.Prince Mutaib had been removed from his post as chief of a major security service just hours before the arrests announced late Saturday night.All members of the royal family were barred from leaving the country, American officials tracking the developments said on Sunday. With the new detentions, Crown Prince Mohammed, King Salman’s favored son and key adviser, now appears to have established control over all three Saudi security services — the military, internal security services and national guard. For decades they had been distributed among branches of the House of Saud clan to preserve a balance of power in Saudi Arabia, the Middle East’s biggest oil producer and an important American ally.  In the same stroke, the crown prince has cowed businessmen and royals across the kingdom by taking down the undisputed giant of Saudi finance. And over the last several weeks he has ordered enough high-profile arrests of intellectuals and clerics to frighten the remainder of the academic and religious establishment into acceding to his will as well.Apolitical scholars who used to speak freely in cafes now look nervously over their shoulders, as Crown Prince Mohammed has achieved a degree of dominance that no ruler has attained for generations. The history of the House of Saud was sometimes punctuated by violent intrafamily strife in the decades before the founding of the modern dynasty, in 1932. Since then, the family has maintained its unity in part by spreading its top government roles and vast oil wealth among different branches of the sprawling clan. Most important was the division of the three main security services, which constitute the hard power on the ground.

Saudi Purge Caps Murky Developments in West Asia that Presage Escalation of Conflict -  Saturday, November 4, was an extraordinary day: it witnessed three developments which, taken together, suggest a major escalation in the armed conflict in West Asia is in the offing, even as the region is already groaning under the violence of bloody wars in Syria, Yemen and Iraq, in which half a million people have been killed and several million have been displaced.  Saudi Arabia is at the heart of all these developments. First, in a dramatic coup within the royal family, engineered by King Salman and his son, Crown Prince Mohammed bin Salman, 11 princes have been detained, along with four sitting ministers and several former ministers and officials.  Prince Miteb bin Abdullah, the commander of the National Guard, the country’s powerful domestic security force, has been summarily dismissed, so that force has now also come under the control of the crown prince. The instrument used to effect these changes is the anti-corruption committee set up by the king on Saturday, with the crown prince as its chairman. The second development was the sudden announcement in Riyadh by the Lebanese prime minister, Saad Hariri, that he was resigning. Hariri had taken charge only in December 2016 after entering into a power-sharing agreement with President Michel Aoun. In his public remarks, Hariri said that Iran had planted “disorder and destruction” in his country and had made Hezbollah a “state within a state” in Lebanon. Hariri’s announcement has plunged Lebanon into a fresh crisis, when it has barely recovered from the two-year impasse earlier when it could not agree on a president until Aoun, said to enjoy the backing of Hezbollah, took over in a compromise arrangement and later got Hariri on board. Hariri’s resignation means that the power-sharing arrangement has collapsed, setting the stage for a deep national divide between Hezbollah and its Iranian sponsor on one side and Hariri, with Saudi backing, on the other.  As Saturday came to an end, there was news that the Houthis in Yemen had fired a missile at Saudi Arabia’s international airport in Riyadh. The kingdom announced that the missile had been intercepted by US-supplied Patriot missiles and destroyed before it could do any damage. Houthi sources said the missile was a Burkan-2H, a home-made variant of the Scud missile, which is available to the Houthis in large quantities. Later that day, Saudi airstrikes were launched at Sanaa, the first night attack in several weeks.

Saudi purge takes kingdom into unpredictable new era: Kemp (Reuters) - The wave of arrests and ministerial changes in Saudi Arabia at the weekend has fundamentally transformed the structure of the state as it has existed since the 1960s. Saudi Arabia has practised a form of collective leadership since the death of the founder King Abdulazziz in 1953 and especially since the abdication of his son King Saud in 1964.The crown has descended among the younger sons of Abdulazziz, with each son and his family tending to control one element of the state.Prince Faisal and then his son controlled the foreign ministry for decades. Prince Sultan controlled the defence ministry; Prince Nayef, the interior ministry and security forces.Prince Abdullah controlled the National Guard, a well-armed militia recruited from the royal family’s traditional tribal supporters. And Prince Salman served as governor of Riyadh.The system was intended to avoid the concentration of too much power in any one branch of the family and give all the sons of the founding king a stake in it.While formal power has always resided with the monarch, in practice the king was expected to consult with other senior members of the royal family and rule by consensus.The Saudi system of government has been more prime-ministerial than presidential. In fact, the king has always been concurrently the prime minister, while the crown prince has served as deputy prime minister, and other senior princes have served as ministers in a formal cabinet. For the first time, all three power ministries (defence, interior and National Guard) are under the direct control of one branch of the royal family.Personnel changes for lower-ranked cabinet positions, sub-cabinet posts and provincial governors over the last three years have all removed independent power brokers and reinforced the concentration of power. Control over all elements of the state has steadily consolidated power in the hands of King Salman and Crown Prince Mohammed bin Salman. Saudi Arabia’s internal power dynamics are also changing in other important ways.  The cardinal rule has always been that disputes are settled quietly within the royal family, without the involvement of outsiders. Princes were expected to show loyalty to the king and avoid overt calls for change in the system. In exchange, their personal security and wealth were respected.Corruption has been rife in Saudi Arabia for decades and has drained fabulous amounts of wealth from the state into private hands, with much of it ending up abroad.But corruption exists as part of a vast patronage system which ties together the royal family, the state bureaucracy and large parts of society in patron-client networks.The anti-corruption campaign and decision to arrest senior ministers and even princes is therefore targeting the very structure of the Saudi state.

Second Saudi Prince Confirmed Killed During Crackdown -- Following the death of Prince Mansour bin-Muqrin in a helicopter crash near the Yemen border yesterday, the Saudi Royal Court has confirmed the death of Prince Abdul Aziz bin Fahd - killed during a firefight as authorities attempted to arrest him. The death has been confirmed by the Saudi royal court. The Duran and Al-Masdar News both report that the prince died when his security contingent got into a firefight with regime gunmen attempting to make an arrest. Prince Aziz (44) who was the youngest son of King Fahd. The Duran's Adam Garrie points out that Prince Abdul Aziz was deeply involved in Saudi Oger Ltd, a company which until it ceased operations in the summer of this year, was owned by the Hariri family. Former Lebanese Prime Minister Saad Hariri was punitively in charge of the company until it ceased operations. Prince Abdul Aziz’s strange and sudden death which is said to have occurred during an attempted arrest, sheds light on the theory that the clearly forced resignation of former Lebanese Prime Minister Saad Hariri had more to do with internal Saudi affairs than the Saudi attempt to bring instability to Lebanon. The Saudi Royal family has now lost two princes in 24 hours. As Al Jazeera notes, in this Saudi version of 'Game of Thrones', the 32-year-old Bin Salman shows that he is willing to throw the entire region into jeopardy to wear the royal gown. His actions have already all but destroyed the Gulf Cooperation Council (GCC); Yemen can no longer be referred to as a functioning state; Egypt is a ticking time bomb; and now Lebanon may erupt. There's a lot to worry about.

Saudi Banks Begin Freezing Accounts Of Arrested Royals, Private Jets Grounded -- Two days after the most stunning purge in recent Saudi history, the so-called "anti-corruption probe" - which was really a countercoup - that led to the arrest of dozens of Saudi Arabian royals, ministers and businessmen allowing Mohammed to further cement control over the Kingdom, appeared to be widening on Monday when, as Reuters reports, Saudi banks begun freezing the accounts of those arrested. The Saudi central bank ordered commercial banks to freeze the accounts of people under investigation in the probe, the Reuters sources said, adding that the number of accounts affected could run into the hundreds, although the names of those affected have yet to emerge. “The freezing of accounts has already happened,” said another source. “The freezing is a precautionary measure that will end as soon as the suspects are either charged or pronounced innocent.” Considering that prince Alwaleed alone has over $19 billion in assets, including nearly a billion dollars in jewelry, plans, yachts, furniture and cash..... the local central banks may have "accidentally" found an unexpectedly efficient way of refilling Saudi's dwindling foreign reserve account.At the same time, fears of a broader crackdowns were spreading, and as Bloomberg reported this morning, the Olayan family, which runs one of Saudi Arabia’s biggest conglomerates, is putting plans to sell shares in some of its local assets on hold "amid slow economic growth in the kingdom." What it means is that right now it is a good idea to keep a very low profile.

Saudi Arabia Is About To Confiscate $33 Billion From Four Of Its Richest People -- Earlier today, when discussing the Saudi bank account and asset freeze (and confiscation) of dozens of princes and ministers, we said that just the haul of billionaire prince Alwaleed's $19 billion in various holdings, including nearly a billion dollars in jewelry, plans, yachts, furniture and cash.... would be an efficient way of refilling Saudi's rapidly declining foreign reserves. And refilling they need: as shown in the chart below, Saudi reserves have declined from their peak in 2014 by over a quarter trillion dollars as a result of the roughly 50% drop in gas prices in the past 3 years. Of course, it's not just Alwaleed whose net worth is at risk of becoming nationalized. As Bloomberg writes, "the stunning series of arrests has implicated three of the country’s richest people, including Prince Alwaleed bin Talal, who’s No. 50 on the Bloomberg Billionaires Index ranking of the world’s 500 richest people, with $19 billion. Also being held are the kingdom’s second- and fifth-wealthiest people, as well as a travel-agency mogul and Bakr Binladin, a scion of a one of the country’s biggest construction empires." He is also, of course, Osama bin Laden's brother as discussed yesterday. All told, up to $33 billion in (arrested) royalty wealth is at risk of confiscation.

Saudi Corruption Purge Snares $33 Billion of Net Worth in Riyadh -- Crown Prince Mohammed bin Salman’s crackdown on some of Saudi Arabia’s richest and most powerful men has put $33 billion of personal wealth at risk. The stunning series of arrests has implicated three of the country’s richest people, including Prince Alwaleed bin Talal, who’s No. 50 on the Bloomberg Billionaires Index ranking of the world’s 500 richest people, with $19 billion. Also being held are the kingdom’s second- and fifth-wealthiest people, as well as a travel-agency mogul and Bakr Binladin, a scion of a one of the country’s biggest construction empires.The arrests, which the crown prince said are part of a fight against corruption, reportedly have led the government to freeze the accounts of the more than three dozen men detained and believed to be held at the Riyadh Ritz-Carlton.

Alwaleed bin Talal, $19 billion
  • Owns stakes in Twitter Inc., News Corp. and Citigroup Inc.
  • Nephew of the late Saudi ruler, King Abdullah. Son of Prince Talal and Princess Mona El-Solh, daughter of Lebanon’s first prime minister, Riad El-Solh.
  • Made his first billion dollars trading land and acting as a point man for multinational companies seeking local contracts.
Mohammed Al Amoudi, $10.1 billion
  • Controls an empire that has investments across Africa, Europe and Saudi Arabia. 
  • Born in Ethiopia to a Saudi father and Ethiopian mother.
  • Moved to Saudi Arabia as a young man and made his first billion in the late 1980s through construction, aided by an early government contract to help build the country’s underground oil storage facility.
  • Assets include Sweden’s largest oil refiner, Preem AB, real estate and numerous contracting businesses. In Ethiopia, where he’s said to be the biggest private investor, he owns hotels and a gold mine, and has invested hundreds of millions of dollars in large-scale farms growing coffee and rice.
Saleh Kamel, $3.7 billion
  • Self-made finance and healthcare entrepreneur started running bus services for Hajj pilgrims and later founded the kingdom’s first driving school. 
  • Regarded as one of the pioneers of Islamic finance, a method of banking that complies with Islamic law and is today a $2.2 trillion industry.
  • Kamel founded Manama, Bahrain-based Albaraka Banking Group, an Islamic bank with $23.4 billion in assets at the end of 2016.
  • Carved out an early niche for himself by becoming the first non-government company to sell services to consumers. 
  • Jeddah-based holding group, Dallah Albaraka, owns more than a dozen businesses, spanning hospital operator Dallah Healthcare Company, real estate developments and snack-food factories.

Purge of Saudi princes, businessmen widens, travel curbs imposed (Reuters) - A campaign of mass arrests of Saudi Arabian royals, ministers and businessmen expanded on Monday after a top entrepreneur was reportedly detained in the biggest anti-corruption purge of the kingdom’s affluent elite in its modern history. The reported arrest of Nasser bin Aqeel al-Tayyar followed the detention of dozens of top Saudis including billionaire investor Prince Alwaleed bin Talal in a crackdown that the attorney general described as “phase one”. The purge is the latest in a series of dramatic steps by Crown Prince Mohammed bin Salman to assert Saudi influence internationally and amass more power for himself at home. The campaign lengthens an already daunting list of challenges undertaken by the 32-year-old since his father, King Salman, ascended the throne in 2015, including going to war in Yemen, cranking up Riyadh’s confrontation with arch-foe Iran and reforming the economy to lessen its reliance on oil. Both allies and adversaries are quietly astounded that a kingdom once obsessed with stability has acquired such a taste for assertive - some would say impulsive - policy-making. “The kingdom is at a crossroads: Its economy has flatlined with low oil prices; the war in Yemen is a quagmire; the blockade of Qatar is a failure; Iranian influence is rampant in Lebanon, Syria and Iraq; and the succession is a question mark,” wrote ex-CIA official Bruce Riedel. “It is the most volatile period in Saudi history in over a half-century.” The crackdown has drawn no public opposition within the kingdom either on the street or social media. Many ordinary Saudis applauded the arrests, the latest in a string of domestic and international moves asserting the prince’s authority. But abroad, critics perceive the purge as further evidence of intolerance from a power-hungry leader keen to stop influential opponents blocking his economic reforms or reversing the expansion of his political clout. 

Saudi banks freeze more than 1,200 accounts in probe, number still rising: sources (Reuters) - Saudi Arabian banks have frozen more than 1,200 accounts belonging to individuals and companies in the kingdom as part of the government’s anti-corruption purge, bankers and lawyers said on Tuesday. They added that the number is continuing to rise. Dozens of royal family members, officials and business executives have been detained in the crackdown and are facing allegations of money laundering, bribery, extorting officials and taking advantage of public office for personal gain. Since Sunday, the central bank has been expanding the list of accounts it is requiring lenders to freeze on an almost hourly basis, one regional banker said, declining to be named because he was not authorized to speak to media. The banker did not name the companies affected but said they included listed and unlisted firms across many sectors. He added that if the freezes stayed in place for long, they could start to hurt day-to-day business activities such as paying staff and creditors or making other transactions. A second banker said, however, that most of the frozen accounts belonged to individuals rather than companies, and that banks were being allowed by the regulator to continue to fund existing commitments. A central bank spokesman was not available to comment.

Real Motive Behind Saudi Purge Emerges: $800 Billion In Confiscated Assets --- From the very beginning, there was something off about the unprecedentedcountercouppurge unleashed by Mohammad bin Salman on alleged political enemies, including some of Saudi Arabia's richest and most powerful royals and government officials: it was just too brazen to be a simple "power consolidation" move; in fact most commentators were shocked by the sheer audacity, with one question outstanding: why take such a huge gamble? After all, there was little chatter of an imminent coup threat against either the senile Saudi King or the crown prince, MbS, and a crackdown of such proportions would only boost animosity against the current ruling royals further. Things gradually started to make sense when it emerged that some $33 billion in oligarch net worth was "at risk" among just the 4 wealthiest arrested Saudis, which included the media-friendly prince Alwaleed. One day later, a Reuters source reported that in a just as dramatic expansion of the original crackdown, bank accounts of over 1,200 individuals had been frozen, a number which was growing by the minute. Commenting on this land cashgrab, we rhetorically asked "So when could the confiscatory process end? As we jokingly suggested yesterday, the ruling Saudi royal family has realized that not only can it crush any potential dissent by arresting dozens of potential coup-plotters, it can also replenish the country's foreign reserves, which in the past 3 years have declined by over $250 billion, by confiscating some or all of their generous wealth, which is in the tens if not hundreds of billions. If MbS continues going down the list, he just may recoup a substantial enough amount to what it makes a difference on the sovereign account."

Saudi Arabia Charges Iran With ‘Act of War,’ Raising Threat of Military Clash — Saudi Arabia charged Monday that a missile fired at its capital from Yemen over the weekend was an “act of war” by Iran, in the sharpest escalation in nearly three decades of mounting hostility between the two regional rivals. “We see this as an act of war,” the Saudi foreign minister, Adel Jubair, said in an interview on CNN. “Iran cannot lob missiles at Saudi cities and towns and expect us not to take steps.” The accusation, which Iran denied, came a day after a wave of arrests in Saudi Arabia that appeared to complete the consolidation of power by the crown prince, Mohammed bin Salman, 32. Taken together, the two actions signaled a new aggressiveness by the prince both at home and abroad, as well as a new and more dangerous stage in the Saudi cold war with Iran for dominance in the region. “Today confrontation is the name of the game,” said Joseph A. Kechichian, a scholar at the King Faisal Center for Research and Islamic Studies in Riyadh, Saudi Arabia, who is close to the royal family. “This young man, Prince Mohammed bin Salman, is not willing to roll over and play dead. If you challenge him, he is saying, he is going to respond.” The accusations raise the threat of a direct military clash between the two regional heavyweights at a time when they are already fighting proxy wars in Yemen and Syria, as well as battles for political power in Iraq and Lebanon. By the end of the day Monday, a Saudi minister was accusing Lebanon of declaring war against Saudi Arabia as well. 

Saudi Arabia has united with Israel against Iran – and a desert storm is brewing - Until last weekend, the Ritz-Carlton in Riyadh’s exclusive Diplomatic Quarter was colloquially known as the Princes’ Hotel. It was a luxurious retreat from the heat, where royals could engage in the kind of wheeling and dealing with the global business elite that had made them millionaires on the back of the 1970s oil boom. No deal could be brokered without paying a bribe to at least one prince. Last Saturday that era of boundless opportunity and total impunity came to a dramatic end. The VIP guests were booted out, the front doors were shuttered, and heavily armed security forces took up positions around the perimeter. A Saudi who lives nearby sent me a message about what he thought was an unfolding terrorist incident. That’s one way of describing the extraordinary, chaotic events. We have seen a mini-wave of terror orchestrated by the all-powerful 32-year-old heir to the throne, Crown Prince Mohammad bin Salman, who has been given day-to-day control of the kingdom’s affairs by his ailing father, King Salman, 81. Bin Salman’s ascent and methods now promise to change Saudi Arabia forever. Bin Salman’s power grab is in itself spectacular. But the wider significance of this can only be fully understood in conjunction with events in Israel. The Jewish state is hardly a natural ally for Saudi Arabia, but they have long shared a common enemy: Iran. Both fear the latter is exploiting the opening created by the fall of Isis, and the triumph of the Assad regime in Syria, to dominate the region. Iran and its proxies — whether the Houthi rebels in Yemen or Hezbollah in Lebanon — are in the ascendant, and neither Israel nor Saudi Arabia are going to sit on the sidelines. So the two have been working together: close diplomatic cooperation, intelligence sharing and perhaps more. Israeli media recently reported that a senior Saudi prince, possibly Bin Salman himself, paid a secret visit to the Jewish state. The idea of a Saudi-Israeli alliance is still deeply controversial in both countries, but details are starting to leak out.

The Israeli-Saudi alliance beating the drums of war - Over the past 24 hours, the drumbeat of war in the Middle East has risen to a fever-pitch. Saudi Arabia hasprovoked both an internal domestic, and a foreign crisis to permit Crown Prince Mohammed bin Salman to realise his grandiose vision of the Saudi state.Internally, Salman suddenly created an anti-corruption commission and within four hours it had ordered the arrest of some of the highest level royal princes in the kingdom, including at least four sitting ministers and the son of a former king.The most well-known name on the list, and one of the world's richest men, was Alwaleed bin Talal. Just a few hours earlier, after being summoned to Saudi Arabia for consultations, Lebanese Prime Minister Saad al-Hariri told a Saudi TV audience that he was quitting his job due to "death threats" against him. Why the prime minister of a country would resign in the capital of a foreign nation is inexplicable.Coverage of Hariri's statement noted that he spoke haltingly into the camera and looked off-camera several times, indicating that the statement may have been written for him and that he may have delivered it under duress. Given the strong-arm tactics used by bin Salman to both secure his own title as crown prince, and the subsequent arrest of scores of prominent Saudis deemed insufficiently loyal to him, it would not be at all out of character to summon the leader of a vassal state and offer an ultimatum: either resign or we will cut you off (literally).

Iran Slams Saudi, US Claims It Ordered Ballistic Missile Attack From Yemen -- On Tuesday Iran slammed Saudi and US claims that it was supplying Yemen's Houthi rebels with advanced ballistic missiles that Saudi Arabia says targeted Riyadh international airport on Saturday - which would be a violation of a UN resolution which ensures conformity to the Iran nuclear deal. Iran's state-run IRNA news cited a letter sent to the UN Security Council signed by Iranian ambassador Gholamali Khoshroo, saying that Iran “categorically” rejects Saudi Arabia’s“baseless and unfounded accusations and considers it as destructive, provocative and a ‘threat to use of force”’ against a UN member state in defiance of the UN charter. Iran's foreign minister further called the Saudi claims "contrary to reality and dangerous". Though Saudi Arabia has mounted an aggressive aerial bombing campaign of deeply impoverished and disease-ridden Yemen for over the past two years, killing and woundingtens of thousands of civilians, it is Iran that is coming under intense pressure this week. Yesterday Saudi Arabia charged its regional rival Iran with "an act o f war" while stating through its military coalition executing Yemen operations that, “Iran’s role and its direct command of its Houthi proxy in this matter constitutes a clear act of aggression that targets neighboring countries, and threatens peace and security in the region and globally.” However, the Iranian ambassador's letter to the UN responded directly to the charges with, “Such provocative statements by the Saudis are nothing but an attempt to shift the blame and to distract attention from its war of aggression against Yemen.” Other Iranian officials, according to various reports, called the Saudi claims "fake news".

Setting The Stage For War: US Air Force Says Missile Targeting Saudi Capital Was Iranian - One day after Saudi Arabia and Kuwait ordered their citizens to evacuate Lebanon - a move many suggested telegraphed an imminent "military intervention" - the mainstream media has begun building the case for a new mid-east war, one which will involve Iran and Hezbollah (and potentially Russia, not to mention other Shia Muslims) on one hand, and Saudi Arabia and Israel on the other.For that, it got help from the US Air Force today, and as AP reports this morning, "the ballistic missile fired by Yemeni rebels that targeted the Saudi capital was from Iran and bore “Iranian markings,” the top U.S. Air Force official in the Mideast said Friday." Lt. Gen. Jeffrey L. Harrigian, who oversees the Air Forces Central Command in Qatar, made the comments at a news conference in Dubai.The narrative is familiar: just as European terrorists conveniently commit suicide andalways dutifully bring along their passports so they can be identified, so Iran always makes sure it leaves identifying marks when it illegally sells its weapons to Houthi rebels in Yemen.No really: after the Nov. 4 strike near Riyadh, Saudi Arabia’s Foreign Ministry said investigators examining the remains of the rocket found evidence proving “the role of Iranian regime in manufacturing them.” It did not elaborate, though it also mentioned it found similar evidence after a July 22 missile launch. French President Emmanuel Macron similarly this week described the missile as “obviously” Iranian. "Obviously."

There Are Now 895,000 Cases of Cholera in Yemen - Yemen’s cholera epidemic has now spread to more than 890,000 cases: Already struggling to cope with a dire humanitarian crisis, war-torn Yemen is now facing the fastest-growing cholera epidemic ever recorded, with some 895,000 suspected cases as of 1 November, the United Nations relief wing reported Thursday.  While the epidemic has started to slow somewhat, it remains by far the worst and fastest-spreading cholera outbreak on record. There are still millions of malnourished Yemenis at risk of dying from starvation and preventable disease. The Saudi-led coalition war and blockade continue to deprive the civilian population of essential food and medicine. Yemen’s humanitarian crisis is still the worst in the world, and tens of millions are in need of aid. Even if the cholera epidemic has started waning for now, Yemen’s need for for an end to war and a massive relief effort is as great as ever.

Yemeni Journalist: Saudi Arabia's Total Blockade on Yemen Is "Death Sentence" for All - Democracy Now! - Video Interview with transcript - United Nations officials say Yemen will face the world's largest famine in decades if the Saudi-led coalition refuses to lift its blockade on deliveries of aid. On Monday, the coalition shut air, land and sea routes into Yemen after Houthi rebels fired a missile that was intercepted near the Saudi capital, Riyadh. Saudi Arabia says its blockade is needed to stop Iran from sending weapons to the rebels. The UN says aid agencies were given no prior notice of the Saudi decision to shut down all land, air and seaports in Yemen. Meanwhile, medical experts warn the clampdown will worsen Yemen's cholera epidemic, which has sickened more than 900,000 people. We are joined by Afrah Nasser, an independent Yemeni journalist who is the founder and editor-in-chief of the Sana'a Review. Facing death threats, she is in exile from Yemen but continues to report on human rights violations, women's issues and press freedom there. She is here in the US to receive the International Free Press Award from the Committee to Protect Journalists. Yemen Rebels Threaten Saudi, UAE Ports and Airports -  Yemen's Iran-backed Huthi rebels on Tuesday threatened retaliation against the ports and airports of the United Arab Emirates and Saudi Arabia, which this week closed the Yemeni land, sea and air borders."All airports, ports, border crossings and areas of any importance to Saudi Arabia and the UAE will be a direct target of our weapons, which is a legitimate right," read a statement released by the rebels' political office. Allied with Yemen's government, a military coalition led by Saudi Arabia has been battling the Huthis on Yemeni land since 2015.  The Huthi's statement comes the day after the coalition announced it had closed all of Yemen's borders, after Saudi forces intercepted a ballistic missile headed for the kingdom's international airport in Riyadh. The Huthis have claimed the missile attack.  The United Nations on Monday reported the Saudi-led coalition had prevented two humanitarian aid flights from flying to the war-torn country.

Saudi Arabia says Lebanon declares war, deepening crisis  (Reuters) - Saudi Arabia accused Lebanon on Monday of declaring war against it because of aggression by the Iran-backed Lebanese Shi‘ite group Hezbollah, a dramatic escalation of a crisis threatening to destabilize the tiny Arab country. Lebanon has been thrust to the center of regional rivalry between Saudi Arabia and Iran since the Saudi-allied Lebanese politician Saad al-Hariri quit as prime minister on Saturday, blaming Iran and Hezbollah in his resignation speech. Saudi Gulf affairs minister Thamer al-Sabhan said the Lebanese government would “be dealt with as a government declaring war on Saudi Arabia” because of what he described as aggression by Hezbollah. Faulting the Hariri-led administration for failing to take action against Hezbollah during a year in office, Sabhan said “there are those who will stop (Hezbollah) and make it return to the caves of South Lebanon”, the heartland of the Shi‘ite community. In an interview with Al-Arabiya TV, he added: “Lebanese must all know these risks and work to fix matters before they reach the point of no return.” He did not spell out what action Saudi Arabia might take against Lebanon, a country with a weak and heavily indebted state that is still rebuilding from its 1975-90 civil war and where one-in-four people is a Syrian refugee. There was no immediate comment from the Lebanese government. Hezbollah is both a military and a political organization that is represented in the Lebanese parliament and in the Hariri-led coalition government formed last year. Its powerful guerrilla army is widely seen as stronger than the Lebanese army, and has played a major role in the war in neighboring Syria, another theater of Saudi-Iranian rivalry where Hezbollah has fought in support of the government. 

Where’s Saad Hariri? Lebanon Wants to Know - — Lebanon is used to affronts to its sovereignty. Israel occupied part of the country for years. Syrian troops stayed even longer. Then the Lebanese militant group Hezbollah fought a war with Israel, and waged another in Syria, as the Lebanese government watched. The United States, France and Britain have, over the past century, done their share of meddling. But no one has seen anything quite like the spectacle that has played out over the past few days. Saad Hariri, the prime minister, who had previously shown no signs of planning to quit, unexpectedly flew to Saudi Arabia and announced his resignation from there, to the shock of his own close advisers. He has not been back since, and no one is sure when, or if, he is returning. Hours after Mr. Hariri’s announcement — televised Saturday on a Saudi-controlled channel — Saudi Arabia’s assertive new crown prince, Mohammed bin Salman, presided over the roundup of some 500 people, including 11 princes, on corruption charges. Lebanon broke out the popcorn. In a country where political analysis is a near-universal hobby, and where political power is — to oversimplify a bit — divided between Mr. Hariri’s Sunni, Saudi-backed party and the Shiite, Iran-backed Hezbollah, speculation was immediate that Mr. Hariri was also being held against his will. He holds dual Lebanese and Saudi citizenship and has extensive business dealings in the Persian Gulf kingdom. A front-page headline in Al Akhbar, a newspaper that leans toward Hezbollah, called the Saudi-backed Mr. Hariri a “hostage.” Even his advisers and allies were unwilling to declare unequivocally that he was free to return on his own schedule. Mr. Hariri, perhaps seeking to retake control of the narrative, posted photos on Twitter of his meetings with Saudi Arabia’s new ambassador to Lebanon and later with the king. But Lebanese social media commenters — and the Lebanese-British satirist Karl Sharro — were quick to poke fun, comparing the images to hostage proof-of-life photos.

Saad Hariri’s Saudi Resignation: Good News for Iran and Hezbollah - At the end of October, Sunni Prime Minister of Lebanon Saad Hariri, an ally of the West and of Saudi Arabia, went to Riyadh for an official visit. On November 1, back in Beirut, he announced that the visit was successful, and that the Saudi regime maintains its support for the Lebanese government. This government was established a year ago, after two-and-a-half years of a harsh power struggle between Sunnis and Shias, an institutional crisis that had previously made experts fear the worst for Lebanon. On November 2, Prime Minister Hariri hosted Ali Akbar Velayati, senior foreign policy advisor to Ayatollah Khamenei. After saying that Saad Hariri was “a respectable man,” Velayati reaffirmed Tehran’s support for the Lebanese government and the country’s stability. But on November 3, Hariri indicated that he had to return that same night to Riyadh to meet King Salman. In a detail that turned out later to have a major significance, he was asked by the Saudis to come alone, without his staff, not even with his chief of cabinet. The next morning, Saad Hariri announced his official resignation as prime minister. In an address given live from Riyadh, he stated that he refused to see Lebanon placed under “external and internal” guardianship. His announcement was followed by a strong speech against Hezbollah and Iran, with a hostility that the Lebanese hadn’t heard from him for more than a year. He also threatened to “cut the hands” of Hezbollah and Iran, while also accusing them of plotting to assassinate him. This announcement came as a blow to politicians in Beirut. Even in Hariri’s own party, major political figures denied having any clue of what had just happened. The army, the General Security Directorate, and even the police (who usually benefit from Hariri’s patronage) all denied the rumor of an assassination attempt. Hariri’s attitude was even more confusing because of his lack of communication. Except for a few Sunni radicals, many feared for the country’s stability. Even Hariri’s political allies officially regretted his resignation and expressed a firm refusal to go back to the years of tense rivalry between the various political actors.

Defeated Elsewhere, Saudi Tyrant Declares War On Lebanon -- The Saudi clown prince Mohammed bin Salman is purging all potential internal resistance and solidifies his dictatorial position. (The move includes a huge money grab. All assets of those accused of corruption are confiscated by the state which, in Saudi Arabia, is the tyrant himself.) The internal consolidation of power is the prelude for a larger external venture.At the same time as the internal purges proceed, MbS implements an extremely aggressive foreign policy agenda targeted at Iran and its allies. Having been defeated in Iraq and Syria and at stalemate in Qatar and Yemen the Saudi ruler decided to try his luck in Lebanon. The Saudi declares war on Lebanon and will put enormous economic and political pressure on it. But all of that will be to no avail. The war will only cause Lebanon to move deeper into the "resistance" camp an join its forces with Syria, Iran and Russia.The Saudi plans are well coordinated with the United States and have the full support of the Israeli government. The point man in the Trump administration for all Middle East issues is Trump's son-in-law (and arch Zionist) Jared Kushner. He made three trips to Saudi Arabia this year, the last one very recently. The Washington Post's David Ignatius brown noses:[L]ast month, Jared Kushner, Trump’s senior adviser and son-in-law, made a personal visit to Riyadh. The two princes are said to have stayed up until nearly 4 a.m. several nights, swapping stories and planning strategy. A week ago the Saudi minister (and extremists) Thamer al-Sabhan called for toppling Hizbullah and promised "astonishing developments". Friday night the Lebanese Prime Minister Saad al Hariri was ordered back to his home-country Saudi Arabia and pressed to read a resignation statement on a Saudi TV station. None of his advisors in Lebanon knew that this was coming. It is claimed that Hariri did not voluntarily resign and is now under house arrest. There is even a Free Hariri Clock counting the hours, minutes and seconds of his ordeal. The Lebanese President has not accepted the PM's resignation and demands that Hariri returns to Lebanon. We called the resignation The Opening Shot Of The Saudi War On Hizbullah.

Lebanon's prime minister was reportedly coerced by Saudi Arabia into quitting — and he still hasn't been home to explain himself (Reuters) - Lebanese Prime Minister Saad al-Hariri visited the United Arab Emirates on Tuesday, his first trip outside Saudi Arabia, as regional tensions aggravated by his surprise resignation escalated into a domestic crisis. Hariri, an ally of Saudi Arabia, flew to Abu Dhabi and then returned to Riyadh, his office said. His Future TV channel said he would also visit Bahrain. His resignation has thrust Lebanon back into the frontline of a Middle East rivalry pitting a mostly Sunni bloc led by Saudi Arabia and allied Gulf monarchies against Shi'ite Iran and its allies. On Monday, Saudi Arabia accused Lebanon of declaring war against it because of aggression by Iran's Lebanese ally Hezbollah, dramatically escalating the crisis and threatening to destabilize Lebanon. Lebanese politicians and Hezbollah were on Tuesday silent about the escalation in Saudi rhetoric after a series of consultations with President Michel Aoun, a Hezbollah ally. Hariri's resignation collapses a national unity government agreed last year in a political deal that united Lebanon's opposing sides and led to the country's first budget since 2005 and agreement on a new law for parliamentary elections, which could be derailed by the crisis. Aoun has said he will not accept Hariri's resignation until he returns to Lebanon to explain his thinking -- a move widely seen as a stalling tactic. Hezbollah and its allies will struggle to form a government without Hariri or his blessing. The post of prime minister must be filled by a member of Lebanon's Sunni community, among which he is the most influential politician.  

Saudi Arabia Orders Its Citizens Out of Lebanon, Raising Fears of War — Saudi Arabia ordered its citizens to leave Lebanon on Thursday, escalating a bewildering crisis between the two Arab nations and raising fears that it could lead to an economic crisis or even war. The order came after Saudi Arabia had stepped up its condemnations of Hezbollah, the Iran-backed Shiite militia that is the most powerful political and military force in Lebanon, and asserted that Lebanon had effectively declared war on Saudi Arabia. The developments plunged Lebanon into a state of national anxiety, with politicians, journalists and even parents picking up their children at school consumed with the question of what could come next. While analysts said a war was unlikely — because Saudi Arabia was not capable of waging one and Israel did not want one now — they worried that with so many active conflicts in the region, any Saudi actions that raised the temperature increased the risk of an accidental conflagration.  “There are so many fuses, so little communication, so many risks of something exploding, that there’s little chance of something not going wrong,”  “Everything needs to go right to maintain calm.” The backdrop to the crisis was a series of steps by Saudi Arabia in recent days to confront its ascendant regional rival, Iran, and the surprise arrests of about 200 Saudis, including 11 princes, in what the government describes as an anti-corruption campaign but which critics see as a consolidation of power by the Saudi crown prince, Mohammed bin Salman.Lebanon had already been drawn into the crisis in two ways: After a rocket was fired from Yemen at the Saudi capital, Riyadh, on Saturday, Saudi officials accused Hezbollah and Iran of aiding in the attack. And they declared that the attack amounted to a declaration of war by Lebanon, a leap given that the weak Lebanese state does not control Hezbollah. At the same time, the Lebanese prime minister, Saad Hariri, unexpectedly flew to Riyadh and declared his resignation there on Saturday. Suspicions were growing among officials and diplomats in Beirut on Thursday that he had not only been pressured to do so by Saudi Arabia but was being held there against his will.

Kuwait orders its nationals to leave Lebanon immediately 00 Kuwait’s foreign ministry ordered its nationals to leave Lebanon immediately, according to a statement on Thursday carried by state news agency KUNA. The decision came hours after Saudi Arabia warned its citizens against traveling to Lebanon and asked those in the country to leave as soon as possible. A foreign ministry source, quoted by state news agency SPA, also called on Saudis not to travel to Lebanon. "Due to the situation in the Republic of Lebanon, the kingdom asks its nationals visiting or living in Lebanon to leave as soon as possible, and advises its citizens not to travel there," the source said. Last Sunday, Bahrain urged its citizens to avoid traveling to Lebanon and advised those already in the country to leave immediately for their safety.  It warned its citizens to avoid traveling to Lebanon “for their own safety and to avoid any dangers they might encounter.” Its warning came a day after Lebanese Prime Minister Saad Hariri announced his resignation. Speaking from the Saudi capital Riyadh, Hariri cited Iran’s “grip” on the country and threats to his life. His surprise withdrawal from a government that also includes Lebanese Shiite movement Hezbollah risked plunging the already fragile country deeper into turmoil. Manama has declared Hezbollah a terrorist group and repeatedly accused it of involvement in violent attacks in the tiny Gulf kingdom.

The US and EU back Lebanon after Saudi Arabia said it had declared war - (Reuters) - The European Union on Wednesday affirmed support for Lebanon following the resignation of Prime Minister Saad al-Hariri, echoing U.S. backing for the Beirut government which Saudi Arabia has accused of declaring war. Statements of support from EU ambassadors to Lebanon and the U.S. State Department on Tuesday struck a sharply different tone to Saudi Arabia, which has lumped Lebanon together with the Iran-backed Lebanese group Hezbollah as parties hostile to it. Lebanon has been pitched into deep crisis since the Saudi-allied Hariri resigned on Saturday in a speech delivered from Saudi Arabia in which he accused Hezbollah and Iran of sowing strife in the Arab world and cited fear of assassination. The circumstances surrounding Hariri's sudden resignation have given rise to speculation in Lebanon that he had been caught up in a high-level anti-corruption purge in Saudi Arabia, where his family made their fortune, and coerced into resigning. Saudi Arabia has denied this along with reports that it has put Hariri under house arrest. It says he quit because Hezbollah was calling the shots in the government. The move has pulled Lebanon back to the forefront of a regional struggle between the Sunni monarchy of Saudi Arabia and the Shi'ite Islamist government of Iran, a rivalry which has also swept through Syria, Iraq, Bahrain and Yemen.In a statement, the EU ambassadors said they reaffirmed "their strong support for the continued unity, stability, sovereignty, and security of Lebanon and its people". 

Stratfor explains this week’s coup in Saudi Arabia - Three days of palace intrigue in Riyadh have captivated Saudis and foreign observers alike as dozens of princes, ministers and former officials were swept up in an anti-corruption campaign led by young Crown Prince Mohammed bin Salman. The crackdown is certainly driven by the legitimate motives of restructuring the royal family’s patronage networks and curtailing corruption. However, it is also designed to cement the powerful prince’s status at the top of the country’s economic and political hierarchy. For years bin Salman and his father, King Salman, have meticulously planned the young ruler’s rapid ascent to the throne. But their quest to consolidate power is as much a product of Saudi Arabia’s geopolitical environment as it is of their personal ambition. The Salmans’ attempt to amass power has been years in the making. Because Saudi Arabia’s founder, King Abdulaziz, had 36 sons, much of the kingdom’s contemporary history has been characterized by competition — and alliance-building, often along maternal lines — among the family’s various branches. Control of certain positions or institutions would often go to specific bases of royal influence. For instance, former Crown Prince Sultan bin Abdulaziz led the Defense Ministry for nearly 50 years before passing it to his brother, the current king. In much the same way, former King Abdullah eventually handed the reins of the Saudi Arabian National Guard to his son. Some princes even managed to carve out their own roles in the kingdom’s economy, though certain sectors, including the all-important oil industry, remained in the hands of technocrats. This patchwork power structure created an informal system of checks and balances that prevented any single royal faction from dominating the country. As a result, sweeping change in Saudi Arabia has historically required consensus among the ruling family. But that system now seems to have run its course. The sons of the kingdom’s founder are aging, and his grandsons are eager to claim their birthright. As they do, King Salman has taken it upon himself to restructure the House of Saud and the balance of power within it.

Saudi Arabia could seize $800bn in assets | Daily Mail Online: Saudi Arabia could seize $800 billion in assets from the kingdom's elite as part of its anti-corruption purge. So far at least 11 princes and 38 former government ministers have been detained in the crackdown ordered by Crown Prince Mohammed bin Salman, though there are said to be more names on the hit list. They have all had their bank accounts frozen and risk having their assets and properties seized by the government as it attempts to flush out fraud in Saudi Arabia. As the net is cast wider by government officials, the hierarchy are said to be eyeing up cash and assets worth around $800billion, according to Wall Street Journal who quoted sources close to the matter. It is believed the number of those detained has now reached more than 60, but that the government is watching more notable figures.  Prince Al-Waleed bin Talal is one of the men who has been detained Saudi billionaire Prince Al-Waleed bin Talal - who is one of the richest men in the world and owns the British capital's top hotel the Savoy - is one of the men who has been detained.He also owns the huge Kingdom Tower in Riyadh - a 99-storey skyscraper which features a Four Seasons hotel, luxury apartments and a shopping maul. The Saudi information ministry stated the government would seize any asset or property related to the alleged corruption, meaning London's Savoy hotel could become state property in the kingdom.Meanwhile, in an astonishing move, Saudi Arabia princes fleeing the purge have been offered asylum in Yemen by the same rebels they are bombing. Houthi rebels have made the offer of political asylum to princes and a source told Al Jazeera on Tuesday that any Saudi prince or national seeking refuge would be 'welcomed' by Yemen, their 'brotherly neighbour'. 'We are ready to offer sanctuary to any member of the Al Saud family or any Saudi national that wants to flee oppression and persecution,' the source said. 

Kingdom Of Fear: Saudi Arabia On Lockdown -- Events in Saudi Arabia are unfolding at a blinding pace, with a radical shift taking place within the upper echelons of government. Last weekend, King Salman announced the set-up of a special anti-corruption force that wasted no time in rounding up more than a dozen government officials—both former and current—five members of the royal family, and several businessmen. Since then, the list has been growing, to more than 60 as of today. Now there are reports about the Riyadh Ritz-Carlton being turned into a luxury prison for the detainees. There are rumors—which Riyadh has denied—that one of the targets of the purge, Prince Abdulaziz bin Fahd, was killed while resisting arrest. There are also reports that the purge could fill the state coffers with as much as US$800 billion in assets seized from those arrested—all members of the Saudi elite.Speculation abounds and there is growing worry that the situation could spiral out of control. There is a constant flow of new information coming from Saudi Arabia, such as that one of the Arab world’s leading broadcasters, MBC, has been put under government control. Part of its management was removed and the owner detained. News is also emerging that even the former Saudi Energy Minister Ali al-Naimi, Saudi Arabia’s media face for decades, has been forcibly confined to his quarters.There is talk that a travel ban has been issued for a number of government officials, including executives from Aramco. That’s on top of reports that Aramco board member Ibrahim al-Assaf, a former Finance Minister in the Kingdom, was also among those arrested. Naturally, in oil industry circles this raises the question over the safety of Aramco’s IPO and, more than that, what will happen to oil prices if the instability intensifies. For now, the news is all bullish for prices. The purge is widely seen as a pre-emptive strike and power grab by Crown Prince Mohammed bin Salman, head of the new anti-corruption agency and heir to the throne, as well as the champion of the Vision 2030 reform program.

Saudi Billionaires Scramble To Move Cash Offshore To Escape Asset Freeze -- Over the weekend, Saudi King Salman shocked the world by abruptly announcing the arrests of 11 senior princes and some 38 ministers, including Prince Al-Waleed bin Talal, the world’s sixty-first richest man and the largest shareholder in Citi, News Corp. and Twitter. The purge was orchestrated by a new “supreme committee” to investigate public corruption created by King Salman but under the control of Crown Prince Mohammed bin Salman, who chairs the committee and is widely suspected of being the driving force behind the purge. In addition to the arrests, two Royals have died since the purge began. Prince Mansour bin-Muqrin reportedly perished in a helicopter crash near the Yemen border earlier this week, and Prince Abdul Aziz bin Fahd - killed during a firefight as authorities attempted to arrest him. For all the chaos, Saudi Arabia is benefiting from the climb in oil prices over the past week. However, signs of stress are showing up elsewhere in regional markets, as Bloomberg points out in a recent piece. Many of the kingdom’s millionaires and billionaires - at least those who haven’t already seen their domestic and foreign accounts frozen by the government - fear that they might be next after WSJ revealed that MbS’s purge may be nothing more than a naked cash grab, as the paper reports that the kingdom is aiming to confiscate cash and assets worth as much as $800 billion. So, they’re doing what any reasonable rich person would do given the circumstances; they’re liquidating their assets as quickly as possible and stashing their cash offshore until things quiet down.  Some Saudi billionaires and millionaires are selling investments in neighboring Gulf Cooperation Council countries and turning them into cash or liquid holdings overseas, the people said. They spoke on condition of anonymity because of the sensitivity of the matter. In Saudi Arabia, some are in talks with banks and asset managers to move money outside the country, the people said.Until the surprise arrests of dozens of people last weekend, Saudi Arabia’s elite was the target of Deutsche Bank AG, UBS Group AG, Credit Suisse Group AG and other global banks seeking to manage their wealth. They now find themselves on the run in the face of a campaign that has targeted some of the kingdom’s most prominent princes, billionaires and officials. To be sure, SAMA - the Saudi Monetary Authority and de facto central bank - has asked lenders in the kingdom to freeze the accounts of dozens of individuals who aren’t under arrest, as well as the assets of those being detained, people familiar with the matter said. The Saudi attorney general said in a statement released Monday that the weekend arrests were only “phase one” of the crackdown.

Why the Saudi “Purge” Is Not What It Seems to Be - This past weekend, Saudi Arabia detained numerous members of the royal family, as well as current and former ministers and prominent businessmen, on charges of corruption. Many argued that the detentions constitute a thinly veiled attempt by the Kingdom’s Crown Prince Mohammed bin Salman (MBS) to consolidate political power. However, this narrative misses the mark; the “purge” is not about removing political rivals who threatened MBS’s position as heir apparent but rather about sending a message to political and economic elites that their entitlement to extreme wealth and privilege, and their impunity, is coming to an end. In insular nondemocratic systems, trumped-up corruption charges are often used as a pretext to eliminate political opponents. . However, a careful examination of the list of detainees belies this assertion. With the exception of Minister of the National Guard Prince Mutaib bin Abdallah, the detainee list is made up entirely of individuals who had no capacity to challenge the succession. Indeed, many of those arrested, such as Prince Waleed, had gone out of their way to publicly express their support for the Crown Prince and curry favor with the new leadership. As for Prince Mutaib, despite leading the national guard, he posed no political threat to the Crown Prince. Saudi watchers have consistently misread a royal family member’s command of key military apparatuses, specifically, the Ministry of Interior, the Ministry of Defense, and the national guard, as something that gives that family member independent control over his respective organization. This is a flawed interpretation. These ministries have always behaved as part of the extended government bureaucracy that looks to the King, rather than to the individual minister, as the ultimate source of authority. This is why no elements in the Ministry of Interior or in the national guard resisted or reacted to the removal of Prince Mohammed bin Nayef (MBN) or Prince Mutaib. For these two men, their individual authority over the entities they were responsible for ended with the loss of their command. Whatever authority they enjoyed had been delegated to them by the king, and once this was withdrawn, that authority ended. In actuality, Saudi Arabia completed its political transition last June when King Salman replaced MBN with MBS as heir to the throne. The transition (mislabeled a coup by some) saw the elder MBN being relieved of all government responsibilities, swearing an oath of allegiance to his younger cousin, and exiting politics. MBN’s removal was swiftly followed by the appointment of a new generation of young princes and technocrats to key ministerial posts and governorates.

Saudi "Deep State" Prince Bandar Bin Sultan Among Those Arrested In Purge: Report = According to a new report by Middle East Eye, Prince Bandar bin Sultan - Saudi Arabia's most famous arms dealer, longtime former ambassador to the US, and recent head of Saudi intelligence - was among those detained as part of Crown Prince Mohammed bin Salman's (MBS) so-called "corruption purge" that started with the initial arrests of up to a dozen princes and other top officials last weekend. If confirmed, the arrest and detention of Bandar would constitute the most significant and high profile figure caught up in the purge - even above that of high profile billionaire investor Prince Alwaleed Bin Talal - given Bandar's closeness to multiple US administrations and involvement in events ranging from Reagan's Nicaraguan Contra program (including direct involvement in the Iran-Contra scandal), to making the case for the Iraq War as a trusted friend of Bush and Cheney, to directing US-Saudi covert operations overseeing the arming of jihadists in Syria. Middle East Eye issued the report based on multiple contacts "inside the royal court" and indicates further that the scale of MBS' aggressive crackdown is much larger than previously reported, and even involves the torture of "senior figures" among those detained:

The Intrigue At The Heart Of The Beijing-Riyadh-Washington Triangle - China is currently the world’s biggest oil importer, knocking the US out of its former first-place position. China is also the Saudi oil industry’s biggest customer, and Beijing does not want to pay extra for that black gold using American currency. A number of oil exporters that sell to China have already partially or entirely transitioned to settling their accounts in renminbi. Topping that list are Nigeria and Iran. Russia has also recently begun to sell some oil to China for renminbi (although only small percentage as yet). Riyadh now finds itself caught between a rock and a hard place. It’s hard to imagine what Saudi Arabia could be hit with from across the Atlantic, should it sell even one barrel of oil for Chinese currency. After all, that would be a direct challenge to the petrodollar, which was born right there in Saudi Arabia in the 1970s, midwifed by the negotiations between Henry Kissinger and King Faisal. Washington has sternly warned Riyadh to refrain from any ill-considered move to replace the dollar with the renminbi in its transactions with China, lest other players in the oil market follow suit (oil might then be traded for rubles, rupees, rials, etc.) And tomorrow that epidemic of transitioning to national currencies could infect other commodity markets. Incidentally, this year Beijing will begin to trade oil futures priced in renminbi on its commodity exchanges and claims that this is only the first step.Voices have already been heard within the US president’s entourage that suggest blocking the listing of Saudi Aramco shares on the New York Stock Exchange. Signs have emerged of an organized campaign to short-sell the Saudi oil company. In light of that development, Riyadh has announced that it will put off its share listing until a later date. But its problem isn’t going to go away - Saudi Arabia will still have to make a choice between the dollar and the renminbi.Although Beijing is upping its pressure on Riyadh, it is also simultaneously offering to directly buy out 5% of Saudi Aramco, while allowing the Saudis to forgo the usual ritual of listing shares on Western stock markets. And China is prepared to shell out a “fair” price (about $100 billion). The Chinese government has already announced that it is forming a consortium of energy and finance companies, plus China’s sovereign wealth fund, in order to purchase a “chunk” of the Saudi company. The Chinese media reports that that consortium is ready to become a cornerstone investor in Saudi Aramco. Beijing’s winning move in its chess game against Washington has neutralized the US threat to disrupt the sale of Saudi Aramco, while simultaneously pushing Riyadh toward a decision to transition Saudi oil sales to the renminbi.

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