Sunday, January 28, 2018

oil prices at 37 month high, oil supplies at 34 month low, natural gas prices at a 12 month high, gas supplies at a record low for the date

oil prices rose to a 37 month high this week, in a strong rally underpinned by a tumbling US dollar, which makes internationally traded commodities more expensive in our currency than in the currencies of other countries...bizarrely, this week's collapse of the dollar was precipitated by US Treasury Secretary Steven Mnuchin, who told a gathering of global elites in Davos Switzerland that "a weaker dollar is good for us as it relates to trade" and then who doubled down on that policy opinion when International Monetary Fund Director Christine Lagarde demanded a clarification...

after falling last week for the first week in five to $63.37 a barrel, oil for February delivery opened 24 cents higher on Monday and then hung on for a gain of 12 cents, after dollar fluctuations and the restart of some Libyan oil fields caused the market to vacillate, with prices testing lower before rallying to close at $63.49 a barrel, as trading in the February oil contract expired...then oil prices for March, which had increased 26 cents to $63.57 a barrel on Monday, rose 90 cents to $64.39 a barrel on Tuesday, as an upwardly revised IMF forecast for world economic growth led to expectations of increasing demand for petroleum products...oil prices then rose $1.14 to $65.61 a barrel on Wednesday, closing above $65 a barrel for the first time since December 2014, after EIA data showed that US oil supplies fell last week, contrary to the market's expectations for an increase...oil prices then turned lower Thursday, shedding 10 cents to close at 65.51 a barrel, as the U.S. dollar rebounded from earlier losses and strengthened at the close...however, as the brief dollar rally faded on Friday, oil prices resumed their rally, closing up another 63 cents to a 37 month high of $66.14 a barrel, for a gain on the March contract for the week of $2.83 a barrel, or 4.5%, the fifth such rise in six weeks..

since oil prices closed the week at a 37 month high, we'll include a graph of the entire duration so you can see how they got here...

January 27 2018 oil prices

the above graph is a Saturday screenshot of the live interactive oil price graph at Daily FX, an online platform that provides trading news, charts, indicators and analysis of the markets...each bar on the above graph represents oil prices for one week of oil trading between November 2014 and the week just ended, wherein green bars represent the weeks when the price of oil went up, and red bars represent the weeks when the price of oil went down...for green bars, the starting oil price at the beginning of the week is at the bottom of the bar and the price at the end of the week is at the top of the bar, while for red or down weeks, the starting price is at the top of the bar and the price at the end of the week is at the bottom of the bar...barely visible in this compressed view, there are also feint grey "wicks" above and below each bar to indicate trading prices during each week that were above or below the opening to closing price range for that week...

on the far left of the above graph we can see the period at the end of 2014, when oil prices were collapsing after OPEC decided on a strategy of flooding the world with oil, in the hopes of driving US frackers out of business...while hundreds of frackers did end up in bankruptcy, their assets for the most part survived reorganization, and many were absorbed by better capitalized companies...this price chart now tells us that OPEC's new strategy of reducing global supplies has been successful, and that since mid-December, oil prices have risen to and stayed above $60 a barrel for the first time in two and a half years...

natural gas prices also rallied this week, closing at their highest level in overa year, as the weekly natural gas storage report showed that withdrawal of gas supplies from storage for the week ending January 19th matched the 2nd largest draw in US history, eclipsed only by the record draw set two weeks earlier, during the week ending January 5th...since that weekly storage report and long term weather forecasts are just about the only things moving natural gas prices, and since there isn't much news on what drives the daily changes anyhow, we'll go right to a graph of natural gas prices:

January 27 2018 natural gas prices

like the oil graph above, this natural gas graph also comes from a Saturday screenshot of the live interactive natural gas price graph at Daily FX, wherein each bar represents natural gas prices for one week of oil trading between the end of 2015 and the week just ended, with green bars representing weeks when the price of natural gas went up, and red bars representing the weeks when the price of natural gas went you can see over the most recent 6 weeks, natural gas prices have been on somewhat of a tear, rising from below $2.60 per mmBTU at the beginning of December to above $3.50 per mmBTU this week, with prices for the February contract rising 4 out of 5 days this week, from $3.185 per mmBTU last Friday to $3.505 per mmBTU at the close of Friday this week...while gas wells that are already in production might be able to take advantage of these currently higher prices, these prices do not offer an opportunity for those planning new drilling to participate, because futures contract prices beyond the end of this winter have not rallied along with the current prices...for instance, contracts to deliver natural gas in June, although up every day this week, closed at $2.925 per mmBTU, actually less than the same June 2018 contract was selling for at the end of November 2017...likewise, contracts to deliver natural gas in November of 2018, ahead of next winter, also only rose to $2.992 per mmBTU, after increasing every day this week, again a lower price than those same contracts were selling for during the last week of November unlike oil prices, where current prices and the futures contracts tend to move in tandem, affording frackers the opportunity to lock in a price for their future output, this rally in natural gas prices has only affected contract or spot prices for this winter, meaning new drilling for natural gas today will be no more profitable than it was two months ago...

as we mentioned earlier, this week's natural gas storage report indicated that the withdrawal of gas supplies from storage for the week ending January 19th would have matched a record draw, had that old record not been eclipsed by more than 25% just two weeks ago...this week's report showed that natural gas in storage fell by 288 billion cubic feet to 2,296 billion cubic feet in the week ending Friday, January 19, 2018, which left our gas supplies 519 billion cubic feet, or 18.4% less than was in storage on January 20th of last year, and 486 billion cubic feet, or 17.5% below the five-year average of 2,782 billion cubic feet for the third week of the year...that withdrawal equaled the withdraw of the week ending January 10, 2014, which had been the record until this a result, the gas in storage this week fell below the 2,424 billion cubic feet of natural gas that was left in storage on January 17th of the "polar vortex" year of 2014, and hence EIA reports that our natural gas supplies are now "below the five-year historical range"...for a visualization of what that means, we have a graph below from John Kemp of Reuters: 

January 25 2018 nat gas inventories as of January 19 via Kemp

the above graph came directly from the Twitter feed of John Kemp, senior energy analyst and columnist with Reuters, and it shows the quantity of natural gas in storage, in billions of cubic feet, in the lower 48 states over the period from January 2015 up to the week ending January 19th 2018 as a red line, the quantity of natural gas in storage in the lower 48 states over the period from January 2014 up until the end of 2017 as a yellow line, and the average of natural gas in storage over the 5 years preceding the same dates shown as a dashed blue the same time, the light blue shaded background represents the range of the amount of natural gas in storage for any given time of year for the 5 years prior to the years shown by the graph…thus the light shaded area also shows us the normal range of natural gas in storage as it fluctuates from season to season, with natural gas in storage underground normally building to a maximum by the middle of October, falling through the winter, and usually bottoming out at the end of March, depending of course on the heating needs during any given John Kemp notes in posting this graph, our supplies of natural gas have now fallen below the previous seasonal minimum, which occurred during winter of 2013-2014, which you can see by the far left of the yellow line...what John doesn't say is how unusual that year was, in that our natural gas supplies bottomed out at 824 billion cubic feet at the end of March of that year...prior to that year, and since, our historical natural gas supplies had never fallen below 1,461 billion cubic feet, so by falling below 2014's level we are on track to hit a low far outside of the historical range...we started the 2017-18 heating season with our supplies roughly 5% below normal at 3,790 billion cubic feet, and with two big drops in the first three weeks of 2018, we are now down almost 1,500 billion cubic feet at 2,296 billion cubic feet, with more than half of the heating season still to go..

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, which covers the details for the week ending January 19th, showed that despite another reduction in operations at US refineries, an increase in our oil imports, and record oil production from US wells, we again saw a withdrawal of crude oil out of storage for the 10th week in a row...our imports of crude oil rose by an average of 91,000 barrels per day to an average of 8,041,000 barrels per day during the week, while our exports of crude oil rose by an average of 162,000 barrels per day to an average of 1,411,000 barrels per day, which meant that our effective trade in oil worked out to a net import average of 6,630,000 barrels of per day during the week, 71,000 barrels per day less than the net imports of the prior the same time, field production of crude oil from US wells rose by 128,000 barrels per day to a record 9,878,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 16,508,000 barrels per day during the reporting week...

during the same week, US oil refineries were using 16,483,000 barrels of crude per day, 392,000 barrels per day less than they used during the prior week, while 119,000 barrels of oil per day were being pulled out of oil storage facilities in the US....hence, this week's crude oil figures from the EIA seem to indicate that our total supply of oil from net imports, from oilfield production, and from storage was 114,000 more barrels per day than what refineries reported they used during the account for that disparity, the EIA needed to insert a (-114,000) 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, essentially a fudge factor that is labeled in their footnotes as "unaccounted for crude oil"...

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 7,904,000 barrels per day, still 2.5% less than the 8,106,000 barrels per day average imported over the same four-week period last year....the 119,000 barrel per day decrease in our total crude inventories came about on a 153,000 barrel per day withdrawal from our commercial stocks of crude oil, which was partially offset by a 34,000 barrel per day addition of oil to our Strategic Petroleum Reserve, likely a return of oil that was borrowed from the Reserve during the post Hurricane Harvey emergency, since the Reserve is not authorized to buy oil at this time....this week's 128,000 barrel per day increase in our crude oil production included a 126,000 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 9,878,000 barrels of crude per day that were produced by US wells during the week ending January 19th was the highest on record, 12.6% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 17.2% above the interim low of 8,428,000 barrels per day that our oil production fell to during the last week of June, 2016...

US oil refineries were operating at 90.9% of their capacity in using those 16,483,000 barrels of crude per day, down from 93.0% of capacity the prior week, and down from the wintertime record 96.7% of capacity three weeks earlier...the 16,483,000 barrels of oil that were refined this week were 6.4% less than the off-season record 17,608,000 barrels per day that were being refined during the last week of December 2017, but were 2.7% more than the 16,047,000 barrels of crude per day that were being processed during the week ending January 20th, 2017, when refineries were operating at 88.3% of capacity....

with the seasonal slowdown in the amount of oil being refined, gasoline production by our refineries was much lower, decreasing by 352,000 barrels per day to 9,358,000 barrels per day during the week ending January 19th, and it has now fallen by 8.7% over the past four weeks....even so, our gasoline production was still 6.0% higher than the 8,825,000 barrels of gasoline that were being produced daily during the week ending January 20th of last the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 249,000 barrels per day to 4,827,000 barrels per day, after falling by 301,000 barrels per day over the prior two weeks...but even after those three big decreases, the week's distillates production was 5.5% higher than the 4,575,000 barrels of distillates per day than were being produced during the the third week of 2017....   

even with the decrease in our gasoline production, our gasoline inventories at the end of the week rose by 3,098,000 barrels to 244,040,000 barrels by January 19th, their eleventh increase in a row...that was as our imports of gasoline rose by 179,000 barrels per day to 575,000 barrels per day, and as our exports of gasoline fell by 121,000 barrels per day to 827,000 barrels per day, while our domestic consumption of gasoline inched up by 29,000 barrels per day to 8,697,000 barrels per day....however, even after eleven consecutive increases, our gasoline inventories are still 3.5% lower than last January 20th's level of 253,220,000 barrels, even as they are roughly 5.6% above the 10 year average of gasoline supplies for this time of the year...      

likewise, even with the week's drop in distillates production, our supplies of distillate fuels grew by 639,000 barrels to 139,840,000 barrels over the week ending January 19th, the fifth increase in distillates supplies in 6 weeks...that was as the amount of distillates supplied to US markets, a proxy for our domestic consumption, dropped by 891,000 barrels per day from last week's record high down to 3,847,000 barrels per day, and as our imports of distillates rose by 104,000 barrels per day to a ten month high of 251,000 barrels per day, even as our exports of distillates rose by 100,000 barrels per day to 1,140,000 barrels per day...but even after this week’s inventory increase, our distillate supplies were still 17.3% lower at the end of the week than the 169,149,000 barrels that we had stored on January 20th, 2017, and roughly 3.5% lower than the 10 year average of distillates stocks at this time of the year… 

finally, even with an increase in our oil imports, a slowdown of US refining and with our crude oil production at a record level, our commercial crude oil supplies still fell for the 35th time in the past 45 weeks, decreasing by 1,071,000 barrels, from 412,654,000 barrels on January 12th to a 34 month low of 411,583,000 barrels on January 19th....while our oil inventories as of that date were thus 15.7% below the 488,296,000 barrels of oil we had stored on January 20th of 2017, and 11.2% lower than the 463,552,000 barrels of oil that we had in storage on January 22nd of 2016, they were still 10.3% greater than the 373,140,000 barrels of oil we had in storage on January 23nd of 2015, at the time when US supplies of oil were just beginning to increase...

This Week's Rig Count

US drilling activity increased for the eleventh time in the past 26 weeks during the week ending January 26th, as rigs drilling for oil increased while those drilling for natural gas decreased....Baker Hughes reported that the total count of active rotary rigs running in the US rose by 11 rigs to 947 rigs in the week ending on Friday, which was also 235 more rigs than the 712 rigs that were deployed as of the January 27th report of 2017, while it was also 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 rose by 12 rigs to 759 rigs this week, which was also 193 more oil rigs than were running a year ago, while the week's oil rig count remained far below the recent high of 1609 rigs that were drilling for oil on October 10, the same time, the number of drilling rigs targeting natural gas formations fell by 1 rig to 188 rigs this week, which was only 43 more gas rigs than the 145 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...

drilling activity from platforms in the Gulf of Mexico decreased by 2 rigs to 17 rigs this week, which was down from 20 rigs in the Gulf of Mexico a year ago and a total of 21 rigs offshore nationally a year ago....the week's count of active horizontal drilling rigs was up by 6 rigs to 808 horizontal rigs this week, which was also up by 229 rigs from the 579 horizontal rigs that were in use in the US on January 27th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of the same time, the vertical rig count rose by 9 rigs to 66 vertical rigs this week, which was still down from the 72 vertical rigs that were in use during the same week of last year....on the other hand, the directional rig count was down by 4 rigs to 73 directional rigs this week, which was still up from the 61 directional rigs that were deployed on January 27th of 2017...

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 the 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 January 26th, the second column shows the change in the number of working rigs between last week's count (January 19th) and this week's (January 26th) count, the third column shows last week's January 19th 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 27th of January, 2017...            

January 26 2018 rig count summary

as you can see from the above, all of this week's drilling increase and then some was concentrated in the Permian basin of western Texas and southeast New Mexico, and that excluding that expansion, drilling in the rest of the country fell by 7's hard to say what brought that on; after seeing its rig count double from 134 rigs in early May of 2016 to 268 on June 2nd of 2017, the Permian seemed like it had gone to sleep over the summer, accounting for only 12 more rigs until November; even after that, new drilling accrued slowly, finally exceeding 400 rigs just two weeks they've added 24 rigs in just two weeks, so it appears a new cycle of expansion in the Permian is again underway..

also notice that drilling work in the Utica shale in Ohio was cut back by another rig this week, after dropping by 4 rigs a week ago....with 23 rigs remaining in the Utica, that puts the drilling here back to the same level as a year ago...on the other hand, activity in the Marcellus increased by 4 rigs, with all of those starting up in West Virginia...West Virginia now has 19 rigs active, as they've more than doubled the 8 rigs that were drilling there a year ago...


Davis-Besse, Perry nuclear plants could close as FirstEnergy inks deal with hedge funds - Four high-powered private investor groups have agreed to sink nearly $2.5 billion into FirstEnergy for 18 months in exchange for helping the company shed its money-losing power plants, or get them returned to regulation and protection from competition.FirstEnergy Solutions owns the Davis-Besse, Perry nuclear power plants in Ohio and the two-reactor Beaver Valley nuclear power plant in western Pennsylvania. The company also owns two large coal-fired plants on the Ohio River.The hedge funds will advise the company on how to re-organize itself and its unregulated subsidiary FirstEnergy Solutions or help transform it, if FirstEnergy Solutions files for bankruptcy protection as expected, the company said.The Akron-based utility Monday announced that the four private investment groups would buy $2.5 billion in FirstEnergy shares -- $1.62 billion in preferred stock and $850 million in common stock. After 18 months, the investors must convert their preferred stock into common stock, which they may sell.The Akron-based utility Monday announced that the four private investment groups would buy $2.5 billion in FirstEnergy shares -- $1.62 billion in preferred stock and $850 million in common stock. After 18 months, the investors must convert their preferred stock into common stock, which they may selThe private funds include affiliates of New York-based multi-billion dollar Elliott Management Corp., Dallas-based Bluescape Resources Co., Singapore-based GIC Private Limited (formerly the Government of Singapore Investment Corp.) and New York City-based Zimmer Partners LP. The announcement sparked a surge of buying on the New York Stock Exchange and FirstEnergy's share price closed up 10.4 percent or $3.05 a share, at $32.45. FirstEnergy Solutions both generates and sells power but cannot always compete with the price of power generated by wind and natural gas.

FirstEnergy executive: Davis-Besse plant headed for premature closure — A FirstEnergy Corp. executive confirmed Thursday what many people have feared for months: The utility’s Davis-Besse nuclear plant is headed for a premature closing. The outlook for FirstEnergy’s coal-fired power plants and its other nuclear plants — its twin-reactor Beaver Valley nuclear plant west of Pittsburgh and its Perry nuclear plant east of Cleveland — is just as bleak, said James Pearson, FirstEnergy’s chief financial officer. While no date has been set for the permanent closing of Davis-Besse or other plants yet, Mr. Pearson said their days under FirstEnergy ownership have become numbered and they are “probably impossible to sell in today’s market,” especially in states such as Ohio and Pennsylvania that have deregulated electricity markets. Both of those states embraced deregulation in 1996, a decade before a global fracking boom brought on by a revolutionary horizontal drilling technique resulted in record-low natural gas prices. That, along with growing investments in wind and solar power that dropped prices for the renewable energy sector, made nuclear and coal non-competitive. “Those units cannot generate enough cash to cover costs,” Mr. Pearson said of FirstEnergy’s nuclear and coal-fired plants. FirstEnergy is one of several utilities heavily invested in nuclear and coal that lobbied government officials on the state and federal levels for special consideration, claiming those industries have unique attributes. Most efforts have been defeated, one of the biggest being a Federal Energy Regulatory Commission ruling earlier this month that denied Trump administration efforts to help out nuclear and coal-fired power plants. Now, with an April 2 deadline looming for a $100 million debt-principal payment, FirstEnergy Solutions has its back against a wall.

Kucinich wants to eliminate oil and gas drilling in Ohio -  Columbus Dispatch - Dennis Kucinich promised a “major announcement” today in Columbus, and he delivered a promised moratorium on fracking and outright ban on injection wells if he is elected Ohio governor.Kucinich told reporters his goal is to eliminate all oil and gas wells — not just those from fracking, or hydraulic fracturing — in Ohio by the end of his four-year term."We’re talking about a brand new day here in Ohio," he said at a press conference on Capital Square.The former congressman and Cleveland mayor said such a radical move is necessary to protect the state’s most precious resource: its water.Under his sweeping plan, Kucinich would order the State Highway Patrol to stop and inspect all trucks hauling fracking waste for disposal in Ohio, and turn them back.He would order free public health screenings for all Ohioans living close to or downstream from fracking sites.And Kucinich would assemble a panel of physicians, scientists and economists to gather data on the impact of fracking and injection wells on Ohio and file a class-action suit against drilling companies and others responsible for pollution and contamination."Those who have poisoned Ohio's people and their land will be made to pay," he said."Ohio taxpayers are facing a future of billions of dollars of debt and destruction as a result of the virtually unregulated nature of this industry. As Ohio’s governor, I will end the corrupt influence of these interests in the state capital. "No longer will Ohio be the designated dumping ground for frack waste from here and other states with unregulated processing facilities operating for private profit at public expense."

Dennis Kucinich calls for end to oil and gas drilling in Ohio - -- Democratic gubernatorial candidate Dennis Kucinich on Thursday unveiled a series of proposals designed to bring a complete end to oil and gas drilling in Ohio.At a news conference in downtown Columbus, the liberal former congressman and presidential candidate said that as governor, he would use eminent domain to acquire and close all existing traditional and fracking-style oil and gas wells in the state. Kucinich pledged to block any new drilling permits and order a statewide injection-well ban.In addition, Kucinich would direct the Ohio State Highway Patrol to stop, inspect, and turn away vehicles found with fracking waste. The state would offer free health screenings to Ohioans living near fracking sites and collect data with an eye toward filing a class-action lawsuit against fracking companies on the scale of the multi-billion-dollar legal settlement that states reach with tobacco companies 20 years ago.Asked whether his proposals were unrealistic given that Republicans dominate the state legislature, Kucinich said he has a history of working with conservatives when he served in the state Senate."If the governor can't take a stand for the health and safety of this state, then why even run?" he asked.Kucinich said he would work to ensure that landowners who have leased land for drilling would receive a separation fee and all royalties they are due. As for the jobs that would be lost from the end of Ohio's oil and gas industry, Kucinich said Ohio would be in a position to "catch a wave" of alternative-energy development.  Mike Chadsey, a spokesman for the Ohio Oil and Gas Association, said in a statement that Kucinich is "still out of touch," given the billions invested in and thousands of people working for Ohio's oil and gas industry."For being the person who touts himself as the candidate for the average guy, he sure is anti-worker and anti-union," Chadsey said. "These bold and unrealistic statements show how desperate his hopeless campaign is."

Democratic Gubernatorial Candidates Weigh In On The Future Of Fracking In Ohio - The Statehouse News Bureau --One of the Democrats running for Governor is calling for an end to oil and gas drilling in Ohio.  While his four primary opponents aren’t embracing that idea, they agree that more needs to be done to protect the environment. Dennis Kucinich says wants to use eminent domain to shut down fracking wells and initiate a class action lawsuit to make fracking companies pay for damage to the environment. “Those who have poisoned Ohio’s people and the land will be made to pay.” Connie Pillich disagrees with Kucinich’s approach. “It is rash. It is naïve. It will take years and will be marred with legal battles and taxpayers are going to have to pay those legal fees.” Bill O’Neill also takes issue with Kucinich’s suggestion. “Ending fracking is not the right answer and initiating another class action lawsuit is clearly not the right answer.” Joe Schiavoni says fracking is important to parts of Ohio but believes the state needs to be a better watchdog. “You put a lot of emphasis on making sure you have people on the ground at ODNR and Ohio EPA.” Richard Cordray agrees strict enforcement is key. “As you know, Jo, when I was Ohio Attorney General, I prosecuted polluters who did not engage in responsible practices.” Republicans dominate Ohio’s legislature so if a Democrat is elected as governor, they’d have to work with conservatives who embrace fracking to make big changes.

Ohio again asks FERC to block drilling for Rover natural gas pipeline project - (Reuters) - Ohio environmental regulators again asked federal energy regulators to order Energy Transfer Partners to cease drilling operations on the Rover natural gas pipeline project under the Tuscarawas River over concern about the potential for a spill. Rover has reported a loss of approximately 200,000 gallons of drilling fluids from the hole ETP is drilling under the Tuscarawas River in Stark County, Ohio, the Ohio Environmental Protection Agency said in a filing with the U.S. Federal Energy Regulatory Commission, which was made available on Wednesday. The Ohio EPA said Rover has ceased operations at the site and is seeking approval from FERC on a plan submitted on Jan. 22 to continue horizontal drilling. “This plan only provides temporary solutions and only suggests ways Rover may minimize expected losses if allowed to proceed,” the Ohio EPA said, noting “Ohio cannot support the plan” and wants FERC to require ETP to cease drilling operations and abandon the drill. That is the same site as a spill last April of 2 million gallons of mostly clay and water used to lubricate drilling blades, which led FERC to temporarily ban ETP from new horizontal drilling in May. Pipeline companies use horizontal drilling to cross under large obstacles like highways and rivers. “We have ceased operations at the Tuscarawas site. However, we are continuing our construction activities at all other locations,” said Alexis Daniel, a spokeswoman for ETP, in an email. The company said it expects to finish Rover by the end of the first quarter and added that it was in compliance with the FERC-approved horizontal drilling plan. Since asking FERC to ban ETP from all horizontal drilling in Ohio in November, the state EPA has already asked FERC a few times in January to stop the company from drilling under the Tuscarawas River. Once finished, the $4.2 billion Rover pipeline will carry up to 3.25 billion cubic feet of gas per day of gas from the Marcellus and Utica shale fields in Pennsylvania, Ohio and West Virginia to the U.S. Midwest and Ontario in Canada. One bcfd can supply about 5 million U.S. homes.

FERC Again Orders Drilling Halt on Rover Pipeline Site After Another Spill - The Federal Energy Regulatory Commission (FERC) has again ordered Energy Transfer Partners to halt horizontal directional drilling under the Tuscarawas River in Ohio at its troubled Rover pipeline project pending additional review. The move came after Ohio regulators requested FERC order a cease of all drilling on the project after nearly 150,000 gallons of drilling fluids were lost down the pilot hole for the pipeline earlier this month."While our understanding is that no fluid has reached the surface, and no impacts on sensitive resources have been documented, the difficult geology at the crossing warrants investigation into other approaches prior to advancing the [horizontal directional drilling] pilot drill as well as before subsequent reaming passes," FERC Director of Energy Projects Terry Turpin wrote in a letter.The spill occurred at the same site as a spill last April of 2 million gallons of drilling fluid. That incident also led FERC to temporarily ban Energy Transfer Partners from new horizontal drilling.The 713-mile pipeline project, which will carry fracked gas across Pennsylvania, West Virginia, Ohio, Michigan and Canada once complete, is currently under construction by the same Dallas-based company that built the controversial Dakota Access pipeline . In September, Energy Transfer Partners was fined $2.3 million for numerous water and air pollution violations across Ohio. Over the last two years, the Rover pipeline has racked up more "noncompliance incidents" than any other interstate gas pipeline.

Kinder Morgan opens new ethane pipeline in Ohio  - Kinder Morgan on Tuesday placed into service a 270-mile transnational pipeline system that capitalizes on Ohio's productive Utica shale play. The Houston-based pipeline operator developed the $500 million Utopia system to deliver ethane products from eastern Ohio to Windsor, Ontario. The company has a long-term contract with Canada's NOVA Chemicals Corporation, which will use the products as feedstock for plastics production.  The system, which now carries 50,000 barrels per day, could be expanded to transport as many as 75,000 barrels daily. Kinder Morgan, which recently reported lower fourth-quarter earnings thanks to a one-time tax charge, is also eyeing the West Texas shale boom. The company plans to build a $1.7 billion gas pipeline from the Permian basin to the Corpus Christi area in partnership with two other pipeline companies.

Record Ohio gas production spurs new natural gas processing and generation facilities –EIA -  In October 2017, Ohio’s natural gas production reached a new high of 5.5 billion cubic feet per day (Bcf/d), doubling its May 2015 values. Most of Ohio’s natural gas production growth has come from the development of the Utica shale play, and Ohio currently represents 6% of total U.S. production. As the state’s natural gas production expands, Ohio’s natural gas processing capacity and natural gas-fired electric generation capacity have grown as well. With additional projects scheduled to come online in the coming years, growth in capacity for making use of Ohio’s natural gas and its products is expected to continue. At the end of 2017, Ohio had about 4.2 Bcf/d of natural gas processing capacity, up from nearly 3.4 Bcf/d in 2014. According to data from IHS and Bentek Energy, two projects are schedule to come online in 2018 and will add an additional 0.4 Bcf/d to Ohio’s natural gas processing capacity. Both projects have capacities of 0.2 Bcf/d, one being developed by MarkWest Energy Partners and Energy and Minerals Group and the other being developed by Utica East Ohio Midstream LLC. Currently, most of Ohio’s electricity is generated with coal and natural gas. As of October 2017, coal accounted for 16,273 megawatts (MW) (50%) of nameplate electric generation capacity in Ohio, while natural gas provided 12,121 MW (37%). From July 2015 through October 2017, 2,587 megawatts of natural gas generation capacity was added in the state. Two additional natural gas-fired combined cycle electricity generation plants are slated to enter service in 2018. Construction of the 700-MW Carroll County Energy Center was completed at the end of 2017 and is now undergoing startup and commissioning testing. NTE Energy is currently constructing the Middletown Energy Center, a 475-MW natural gas-fired electric generating facility in Middletown, Ohio, which is expected to start up in 2018.

Natural gas production in Pennsylvania, Ohio, West Virginia growing faster than demand – EIA - Significant growth in natural gas production over the past decade—primarily from the Marcellus and Utica shales in the Appalachian Basin—have increased gross natural gas output in Ohio, Pennsylvania, and West Virginia. Production in these three states increased from a combined 1.4 billion cubic feet per day (Bcf/d) in 2008 to nearly 24 Bcf/d in 2017, with their combined share of total U.S. natural gas production reaching 27%, up from just 2% in 2008, based on data through October 2017. Over that same period, natural gas consumption in these three states has also grown but to a much lesser extent. Almost all of the recent growth in natural gas consumption in these states has been in the electric power sector. Natural gas consumption for electricity generation in these states grew from 0.5 Bcf/d in 2008 to 1.9 Bcf/d in 2017, based on data through October. Additions of natural gas-fired electricity generating capacity, higher utilization of existing natural gas-fired plants, and retirements of coal plants have contributed to greater use of natural gas for electricity generation in the region.Prior to 2011, natural gas production in these states was lower than demand, and interstate pipelines moved natural gas into the area primarily from production areas in the Gulf Coast. In recent years, however, increased supply has been able to meet demand within these states and in neighboring states. Existing pipelines have been modified to transport natural gas out of, instead of into, Appalachia, and new pipelines have been announced to link Appalachian supply to downstream markets. Overall, Appalachian production has been displacing Gulf Coast supply, freeing additional U.S. production for export by pipelines and as liquefied natural gas (LNG). Direct pipeline interconnections are planned for Appalachian natural gas to reach Dominion Energy’s Cove Point LNG Terminal, which is undergoing commissioning on the Maryland coastline. Cove Point is designed to process an average of 0.75 Bcf/d of liquefied natural gas for export and expects to commence service in early 2018. The petrochemical industry is another growing consumer of natural gas in the region. Marcellus and Utica natural gas is rich in liquids, including ethane, making the region attractive for chemical manufacturers. Ethylene crackers, for example, convert hydrocarbon feedstocks such as ethane to olefins, the building blocks for plastics and resins. The only operating ethylene cracker in Appalachia, located in Calvert City, Kentucky, consumes an estimated 20,000 barrels per day (b/d) of ethane.  Three new ethylene crackers have been proposed for the region, one each in Pennsylvania, Ohio, and West Virginia. The Shell Chemicals facility, currently under construction in Monaca, Pennsylvania, is planned to consume 90,000 b/d to 100,000 b/d of ethane when completed in the early part of the next decade.

Nonprofit Legal Firm Ordered to Pay for its Defense of Anti-Fracking City Ordinance - Nonprofit Quarterly - Rolling Stone reported earlier this month that a federal judge has issued what could be a groundbreaking sanction on a nonprofit law firm. The Community Environmental Legal Defense Fund (CELDF) was ordered in early January to pay $52,000 to an oil and gas exploration company for defending a rural township’s ban on underground injections of waste from fracking. The Pennsylvania General Energy Company (PGE) and the Pennsylvania Independent Oil and Gas Association sought the sanctions after a six-year battle with Grant Township, a rural Pennsylvania township.CELDF has defended the township’s efforts to pass ordinances preventing an industrial site build. The township’s residents drafted a Community Bill of Rights ordinance in 2014 prohibiting the dumping of toxic frack waste within the community. After a lawsuit by PGE, a federal judge overturned parts of the ordinance that banned frack waste. The township passed a new law, this time through its local constitution. In 2017, Grant Township was again sued, this time by the Pennsylvania Department of Environmental Protection, which said the township rules interfered with state policy. This isn’t the first time that CELDF has tried using community charter laws to help a municipality ban fracking—nor the first time it’s failed. The organization helped Broadview Heights, a city in Ohio, pass a city charter ordinance in 2012. The ordinance was overturned in 2015, with an Ohio court ruling that only the state had the power to permit and regulate oil wells. That case cited another 2015 Ohio case, which firmly laid the authority for gas drilling regulations at the feet of the state.But, while the failure of city ordinances to stand up to state laws isn’t surprising, the sanctions slapped on CELDF have activists worried. The ruling declared CELDF’s lawsuit’s legal argument “frivolous,” and the court wrote that Grant Township “seeks to disavow constitutional rights afforded corporations so as to prevent PGE from the lawful exercise of its right to pursue gas extraction related activities within its borders.” A piece in EcoWatch suggests that, in an era when cities are threatened with sanctions for “sanctuary city laws” and other displays of municipal power, sanctions for fighting oil companies could set a precedent that carries into other legal fields.

FERC approves PennEast gas line (Argus) — The US Federal Energy Regulatory Commission (FERC) has approved the 1 Bcf/d (28mn m³/d) PennEast natural gas pipeline project, despite one commissioner's dissent and statements of concern from two other commissioners. Following the approval, the project's developers released a new in-service date of 2019, with construction beginning this year. The line was originally expected to begin service in 2017 but has been delayed multiple times throughout the regulatory approval process. The 120-mile (193km) pipeline project is designed to deliver Appalachian natural gas to Mercer, New Jersey. It has garnered thousands of public comments after it applied for FERC approval, and was denied a crucial wetlands crossing permit from the state of New Jersey last year. Democratic FERC commissioner Richard Glick dissented on the PennEast approval, saying he does not believe the commission's order properly concludes that the project is needed or that the commission has successfully found that the line's benefits outweigh its harms. . FERC's approval of PennEast is not a guarantee that the line will be built, the New Jersey Conservation Foundation said. The group's campaign director Tom Gilbert pointed to a recent US Second Circuit Court of Appeals ruling that upheld a decision by the New York State Department of Environmental Conservation to deny a water permit for the Constitution pipeline. . PennEast's developers said the need for the pipeline is clear, and that access to additional natural gas supplies will reduce the cost of gas in eastern Pennsylvania and New Jersey, where prices can spike during times of high demand. During the a cold snap earlier this month, natural gas prices spiked 31 times higher in New Jersey than supplies in the Pennsylvania production areas because of "pipeline constraints and inadequate supply to meet demand," PennEast said. 

FERC Approves PennEast Pipeline: Opponents Look to Clean Water Act to Stop 'Dangerous and Unneeded' Project --A controversial natural gas pipeline project with a proposed route through New Jersey can move forward, the Federal Energy Regulatory Commission (FERC) ruled Friday. Owners of the proposed $1.2 billion PennEast Pipeline, which would carry shale gas from Pennsylvania through New Jersey, said they are planning to begin construction this year following the certificate of public convenience granted by FERC on Friday. Opponents of the project say the pipeline still needs to clear several hurdles at the state level, and point to New Jersey Governor Phil Murphy, who campaigned on an environment and clean energy agenda and spoke out against PennEast on the campaign trail. Activists along the nearly 120-mile route vowed to continue fighting against the pipeline, and protests are planned in New Jersey Monday in response to the decision. "FERC is basically working for the pipeline companies rather than for the people they are supposed to represent," Jeff Tittel, New Jersey Sierra Club director, said in a statement. "It's shameful that FERC can approve a pipeline without even applications for state or federal permits. FERC is the 'Federal Expedited Rubberstamp Commission.' "Now the fight begins," he added. "We will organize to stop this pipeline that people vigorously approve. PennEast has a long way to go and many permits to get. We also have a new Governor who opposes the project. We won't stop until we stop this dangerous and unneeded pipeline." As reported by NJ Spotlight : "'Now, the real environmental review begins—the ones that FERC did not do,' said Tom Gilbert, campaign director of ReThink Energy NJ and the New Jersey Conservation Foundation . He particularly cited the state's authority in issuing a 401 permit under the Clean Water Act. 'We don't see any way this pipeline can be built and meet those standards,' said Gilbert, noting the route of the project crosses 38 C-1 streams, the most pristine in the state. 'If they enforce regulations, this project won't pass muster.'"

Opponents mount protests after major natural gas pipeline moves forward. --The Federal Energy Regulatory Commission granted the PennEast Pipeline its certificate of public convenience and necessity on Friday, which also allows the company to acquire land through eminent domain.The proposed $1 billion pipeline would run nearly 120 miles from Pennsylvania to New Jersey and transport up to 1 billion cubic feet of natural gas a day. Its opponents say it would threaten the health and safety of nearby communities and endanger natural and historic resources. Proponents maintain that the pipeline is an economic boon that will lower energy costs for residents.After getting the OK from FERC, the company moved up its estimated in-service date to 2019, with construction to begin this year. But it won’t necessarily be an easy road ahead. The pipeline still needs permits from the State of New Jersey, Army Corps of Engineers, and the Delaware River Basin Commission. And while Chris Christie was a big fan of the pipeline, newly elected Governor Phil Murphy ran a campaign promising a green agenda and has already voiced opposition. Pipeline opponents are demonstrating this afternoon and taking the developers to court. “It’s just the beginning. New Jersey doesn’t need or want this damaging pipeline, and has the power to stop it when it faces a more stringent state review,” Tom Gilbert, campaign director of the New Jersey Conservation Foundation, said in a statement

Anti-pipeline group vows to 'monitor' project — An anti-pipeline organization said Monday it is launching a campaign to "monitor" the upcoming construction of the Atlantic Coast Pipeline. The project is being spearheaded by the Allegheny-Blue Ridge Alliance, a coalition of more than 50 organizations in West Virginia and Virginia. The objective of the Pipeline Compliance Surveillance Initiative, as the monitoring effort is called, is to "ensure strict application of environmental laws and regulations" for the ACP. About 55 miles of the West Virginia-to-North Caroline pipeline will traverse Augusta County. Lew Freeman, a Highland County resident and executive director of the Allegheny-Blue Ridge Alliance, said the group lacks confidence that regulators involved in inspecting the construction will do an adequate job. The surveillance will involve hundreds of volunteer observers in Virginia and West Virginia. Freeman said a portion of those monitoring will be property owners directly affected by the pipeline's construction. "This is an additional layer of surveillance," Freeman said. "We want this pipeline to be built as safely as possible. But we have grave doubts." Freeman said a major focus of the monitoring will be the mountainous areas of the pipeline construction route. "That is where the watersheds begin and where water quality is in the greatest danger," he said. It's not clear how close to the actual construction the group hopes to get its monitors. Due to safety and liability concerns, even relatively small construction sites are off-limits to everyone but workers, foremen and official inspectors and regulators. And a work site of the pipeline's size and scope is sure to have even greater restrictions in place to prevent unauthorized personnel from accessing the site and its immediate surroundings. 

January’s cold weather affects electricity generation mix in Northeast, Mid-Atlantic ›The bomb cyclone weather event in early January 2018 resulted in record levels of U.S. natural gas demand and elevated wholesale natural gas and power prices around the country as reported in a special EIA analysis. A constrained natural gas pipeline network led to a significant increase in oil-fired and dual-fuel generation in New England and New York, and, to a lesser extent, in the Mid-Atlantic.Day-ahead daily average peak-period power prices for January 5, 2018, one of the coldest days of the weather event, reached $247 per megawatthour (MWh) in New England and New York and $262/MWh in the Mid-Atlantic, compared with $30MWh–$50/MWh average prices in the preceding six weeks.  Power markets in the Northeast and Mid-Atlantic have become more reliant on natural gas over the past several years following the retirement of electricity generators that use fuels other than natural gas. However, the relative moderation in power price spikes during this year’s cold snap—despite higher natural gas prices—reflects a host of market rule changes and winter preparedness actions taken by the region’s grid operators to improve winter reliability.In New England, retirements of the Vermont Yankee nuclear plant, the Brayton Point coal plant, and the Salem Harbor coal- and oil-fired plant (which is currently being converted to natural gas), as well as expansions of the natural gas pipeline network, have led the region to become more reliant on natural gas over the past couple years. The Independent System Operator of New England’s (ISO-NE) Winter Reliability Program has provided incentives for generators to procure adequate onsite fuel supplies for winter and spurred 1,774 megawatts (MW) of natural gas-fired generators to add dual-fuel capability, which allows them to switch fuels or co-fire multiple fuels simultaneously. More than one-third of New England’s natural gas capacity has dual-fuel capability with oil as their secondary source, while about 40% of oil capacity can switch to natural gas and about 50% of coal capacity can switch mainly to oil. During the 12-day span from December 28, 2017, to January 8, 2018, oil and coal made up, on average, 29% and 6%, respectively, of ISO-NE’s generation mix. Natural gas dropped at one point to a low of 17%. One of the region’s three nuclear plants, Pilgrim, experienced an unexpected outage for six days during that period.  During the 12-day period from December 28 to January 8, dual-fuel generators burning oil and natural gas accounted for, on average, 30% of New York ISO’s (NYISO) generation mix, while coal and oil-only generators together averaged 5%. The breakout by fuel for dual-fuel generators is not currently reported. Nuclear generators accounted for about 30% of total generation, and dedicated natural gas and renewables accounted for the remaining 35%.

Gas from Russian Arctic to warm homes in Boston - A tanker was crossing the Atlantic on Sunday to warm New England households with natural gas whose sources are thought to include a project in the Russian Arctic under US sanctions.  The US has never before imported LNG from Russia, according to government records. The Gaselys left the UK’s Isle of Grain terminal with a cargo of liquefied natural gas two weeks ago. Engie, the French energy group that owns it, said the tanker was headed for its LNG import terminal at Everett, Massachusetts. The cargo will replenish storage facilities depleted by a record winter cold spell.  Some of the gas originated from Russia’s new Yamal LNG export terminal, which was opened formally by President Vladimir Putin last month, analysts said. Yamal was hit by US sanctions in 2014 following Russia’s annexation of Crimea. Shipments of Russian oil and gas are not subject to sanctions, but “US persons and those in the US” are prohibited from financing Novatek, the lead company in Yamal LNG. Engie said it purchased the cargo on a spot basis to supplement supplies coming from Trinidad and Tobago. The transaction complied with US trade laws, it added. Thanks to the shale boom, the US eclipsed Russia as the world’s largest gas producer and since 2016 has exported LNG to states including Russian neighbours Lithuania and Poland.  The $27bn Yamal project is, meanwhile, central to Russia’s efforts to stay competitive in global markets.

The World’s Most Innovative Gas Field - Appalachian gas production has surged over eighty five percent (from 13,837 bcf/d to 26, 027 bcf/d) since 2014. The region has one the most productive and economic gas acreage in the country, and today it produces more gas than all other shale plays in the United States combined. Now, with the slate of pipeline projects coming on-line in 2018 Marcellus and Utica molecules can finally reach end consumers in larger markets creating a more adequate price equilibrium throughout the United States regions. During cold winter months this will translate into thousands of dollars saved on energy bills for consumers in Midwest and Atlantic Seaboard. Appalachian gas today is well positioned to change long established regional dynamics of gas pricing and flow while transforming the United States energy economy for years to come. It is worthwhile to have another look into why Appalachia matters today more than ever to the United States energy economy.  If there was one defining characteristic of Appalachian gas production, it would be technological innovation and constantly evolving costs. In 2015, an unexpected diversion occurred between rig count and total gas output from the region. As number of operating rigs continued to decline, production per well continued to increase and last month it reached the record high level of 26,027 mcf/day. It defined skeptics who argued that Marcellus and Utica shale operators had exhausted the best rock in the region and output was bound for downward trajectory. Contrary to that argument, a new Marcellus gas well today yields almost twice as much gas as the same well with similar latitude/ longitude in Haynesville field, East Texas (the second largest producing gas region in the United States). See table 1.

Exclusive: Philadelphia Energy Solutions to file for bankruptcy - memo (Reuters) - Philadelphia Energy Solutions LLC, the owner of the largest U.S. East Coast oil refining complex, announced to its employees on Sunday that it plans to file for Chapter 11 bankruptcy, according to an internal memo reviewed by Reuters. The bankruptcy would come six years after private equity firm Carlyle Group LP (CG.O) and Energy Transfer Partners LP’s Sunoco Inc rescued Philadelphia Energy Solutions from financial distress, in a deal that was supported by tax breaks and grants that saved thousands of jobs. Following an agreement with its creditors, the company has secured access to $260 million in new financing, and said it expected the bankruptcy filing to have no immediate impact on its employees, according to the memo, which was confirmed by a spokeswoman for Philadelphia Energy Solutions. The spokeswoman declined to comment further. Philadelphia Energy Solutions owns two refineries, Girard Point and Point Breeze. It can convert about 335,000 barrels of crude oil per day to products such as gasoline, jet fuel and diesel. It employs about 1,100 people. Part of the refiner’s financial troubles stem from a costly biofuels law called the Renewable Fuels Standard, which is administered by the Environmental Protection Agency and requires refiners to blend biofuels into the nation’s fuel supply every year, or buy credits from those who do. Since 2012, Philadelphia Energy Solutions has spent more than $800 million on credits to comply with the law, making it the refiner’s biggest expense after the purchase of crude, according to the memo. 

U.S. refiner PES pins bankruptcy plan hopes on biofuel costs (Reuters) - Philadelphia Energy Solutions, owner of the largest U.S. East Coast refinery, said on Monday its plan to get out of bankruptcy hinges on whether it can shed existing biofuel costs under the country’s renewable fuel laws. The plan revives a debate between U.S. refiners and ethanol producers over the nation’s renewables policy, and could spur actions from other struggling refiners should the U.S. Environmental Protection Administration allow PES to reduce its biofuel obligations. The Trump Administration could also wade deeper into the fray should the Pennsylvania refinery, which has some 1,100 workers, face closure. PES told its employees on Sunday it would file for Chapter 11 bankruptcy, pinning its financial difficulties on renewable fuel laws, Reuters reported. In its bankruptcy filing on Monday, the company said it does not have enough cash to comply with the laws for 2016 and 2017. But PES has also seen its debt grow after its backers took out a $550 million loan used largely for dividend-style payouts to investors along with capital improvements to the plant. The company also invested in a new rail terminal to help take advantage of discounted crude out of the Bakken oil play in North Dakota. PES said its biofuels obligation for 2016 and 2017 totals about $185 million. The company also plans to sell $150 million worth of credits to help emerge from bankruptcy. Regulatory liabilities are hard to shed through bankruptcy. The U.S. Renewable Fuel Standard (RFS) is a Bush-era law that requires refiners to blend biofuels like ethanol into their fuels or buy credits from those who do. Those credits used to trade at a nominal price of just a few cents, but have soared in recent years.  “The EPA will look closely to make sure this is not a sham to leave them holding the bag,” said Lubben. He said a debtor that cannot comply with such rules usually has to liquidate. “If you want to restructure, the business coming out the other side has to comply.” The plan would be in jeopardy if the bankruptcy court forces the company to comply with its existing RFS obligations, PES warned. 

Md. should say no to fracked gas pipeline - Gov. Larry Hogan and his Maryland Department of the Environment (MDE) appear poised to approve a TransCanada fracked gas pipeline that would run through three miles of Maryland, including beneath the Potomac River, which serves as the drinking water supply for residents in the D.C. metro area. This administration, the same one that supported a ban on fracking in Maryland, recently issued a fact sheet about this fracked gas pipeline entitled “What You Need to Know.” But it omitted what they apparently don’t want us to know: the possible harms to public health of constructing this pipeline. As a commissioner on Gov. Martin O’Malley’s Marcellus Shale Safe Drilling Initiative, I observed how state and federal regulatory agencies ignore or minimize public health threats from the oil and gas industry. There are four major omissions to the information presented by MDE in its fact sheet, which minimizes the risk this pipeline poses to Marylanders.

  • First, the agency never identifies that the owner operator of this transmission line would be TransCanada. Columbia Gas Transmission, listed as the applicant, might be a friendlier name for Marylanders, but TransCanada purchased Columbia Gas and is an operator with a very troubling track record.
  • Second, MDE states that material safety data sheets “indicate” that drilling fluids do not include toxic compounds. Unstated is whether data sheets exist for all compounds that will be used to horizontally drill 114 feet below the Potomac River bed. Chemicals without safety data sheets could be used to drill under a critical drinking water supply for Maryland; in fact, toxicity of one-third of chemicals used by the oil and gas industry in drilling have not been researched, and we do not know their harms.
  • Third, with respect to drinking water, MDE “understands that there may be some private wells in the area of the proposed pipeline regulated by the local health department.” Unmentioned are hundreds of drinking water wells in the Potomac River watershed that could experience contamination, and that these wells draw from groundwater aquifers which communicate with and would affect the Potomac River, which is regulated by MDE.
  • Fourth, MDE states that the “presence of karst geology in the area is not definite.” Unstated is that karst is a network of dissolving rock, with sinkholes, caves and underground drainage systems known to exist in most areas of this proposed pipeline. The reason that presence of karst “is not definite” is because groundwater mapping west of Hagerstown has not been conducted by the state, TransCanada’s own borehole assessment in the Potomac River watershed points to possible routes of groundwater contamination of both the Potomac and the C & O Canal and the lack of “any relevant groundwater table information.”

Offshore Drilling Still on the Table for Florida -  Interior Sec. Ryan Zinke 's controversial decision to take Florida out of his proposed plan to greatly expandoffshore drilling is causing clashes within the administration, according to multiple reports. The head of the Bureau of Ocean Energy Management, which manages offshore leasing, told a Congressional subcommittee Friday that it had "no formal decision" on Florida and that the bureau is keeping Florida in its upcoming review of offshore resources. Axios reported Sunday that Zinke's "rogue" decision on Florida has opened the administration to legal trip wires with its plan and greatly upset President Trump . Trump isn't the only one ticked off at Zinke this week: the Washington Post reported that several coastal governors are impatiently waiting to meet with the interior secretary on his drilling plans following initial phone calls to discuss the matter.As reported by the New York Times :"In a statement, Representative Raúl M. Grijalva of Arizona, the senior Democrat on the subcommittee, which is responsible for energy and mineral resources, criticized the confusion caused by what he called 'an out-of-control administration with incompetent top leadership.''Instead of carefully following laws and regulations, this administration writes policy on a napkin, announces it on social media and calls it a day,' Mr. Grijalva said.The Trump administration's handling of offshore drilling appeared to follow a pattern of seemingly spontaneous decisions that have left policies vulnerable to legal challenges, as has been the case with immigration and the shrinking of national monuments . With his unilateral announcement to exempt Florida from new offshore drilling, Mr. Zinke appeared to be bypassing the public and scientific review of potential offshore resources and environmental impacts that must follow any plan to commence offshore leasing."

Florida waters remain in Trump's five-year oil, gas leasing plan, for now: BOEM - Federal waters off Florida's coast remain in the Trump administration's draft proposed offshore oil and gas leasing plan, the acting head of the agency that developed the plan said Friday.Florida waters "are still part of the analysis until [Interior Secretary Ryan Zinke] gives us an official decision otherwise," Walter Cruickshank, the acting director of the US Bureau of Ocean Energy Management, told a House Natural Resources subcommittee.Following a meeting with Florida Governor Rick Scott, a Republican, on January 9, Zinke announced that he was "removing Florida from consideration for any new oil and gas platforms," in regards to the draft proposed program his agency released the week before. That proposed plan called for 47 sales in federal waters, including 12 sales in the Eastern Gulf of Mexico, three in the South Atlantic and one in the Straits of Florida, over a five-year period. Zinke, who announced his decision in a tweet, has not taken a "formal action" on Florida, Cruickshank said."The secretary's statement stands on its own," Cruickshank said. "We are following the process and the secretary's decisions will be reflected in the proposed program decision."Cruickshank may be stating that Florida waters are still in the Trump administration's 2019-2024 lease sale plan due to a technicality. These waters will likely be removed when the plan moves to its next stage of approval later this year. But House Democrats seized on Cruickshank's comments Friday as evidence that Zinke's decision on Florida, which was announced on Twitter, circumvented federal law and was done for political purposes.Zinke's claims that Florida was out of the offshore plan were "not true," said Florida Representative Darren Soto, a Democrat. "Instead of carefully following laws and regulations, this administration writes policy on a napkin, announces it on social media and calls it a day,"

Bayou Bridge Pipeline begins construction in Louisiana amid protests, legal challenges -- Construction on the Bayou Bridge pipeline has begun, even as opponents pursue multiple legal challenges to block the 163-mile line across southern Louisiana and some have promised to stand in the way of the bulldozers and backhoes. Hailed by oil industry advocates as a needed link in the state’s industrial infrastructure during a boom in the petrochemical sector, the pipeline will carry crude oil between a hub in Lake Charles and a terminal in St. James Parish but also cut through the environmentally sensitive Atchafalaya Basin. The Bayou Bridge pipeline, a controversial crude oil line proposed through the heart of the Atchafalaya Basin, cleared key permitting threshol… "We are excited to be able to conclude the more than 2 year permitting and have begun construction activities," Energy Transfer Partners spokeswoman Alexis Daniel wrote in a Wednesday morning email to The Advocate. The company is the majority shareholder of Bayou Bridge LLC. Energy Transfer has said the line will be an economic powerhouse for Louisiana that will create 2,500 construction jobs and that investors have already paid property owners $106 million for property to build Bayou Bridge. The $750 million project will link an existing section of the Bayou Bridge line that cuts through Texas and far southwestern Louisiana to the Mississippi River. The Bayou Bridge pipeline, which will be able to move up to 480,000 barrels per day when finished, will end up in a section of western St. James Parish that’s already home to oil tank farms and other major crude oil lines that service river and rail traffic, the Louisiana Offshore Oil Port and refineries along the river. It also sends some that oil back toward the nation’s midsection and even Canada. 

Forward Gas Prices Key To Sustaining Haynesville Recovery --After six years of output declines, Haynesville Shale natural gas production surged 25% in 2017, with the lion’s share of the increase coming in a remarkable second-half growth spurt. Preliminary 2018 guidance indicates that producers intend to keep the pedal to the metal, either sustaining or boosting the investment that has brought the play’s output to nearly 8 Bcf/d. Such increased activity indicates that producers have found new advantages in the region. But even though new drilling and completion techniques and producer strategies have significantly enhanced the economic viability of the dry gas Haynesville, it is much more highly dependent on natural gas prices than liquids-rich plays. Today, we continue our series on the rebounding Haynesville play with a look at RBN’s production forecast for the region. . We highlighted the signs of resurgence in this play in April 2017 in Don’t Call It a Comeback, pointing out that new drilling technology and burgeoning Gulf Coast gas markets had changed the dynamics for the “Greater Haynesville” — a region we think of as the Haynesville, Bossier and Cotton Valley formations in northwestern Louisiana and East Texas. The application of horizontal drilling and hydraulic fracturing drove production from less than 4 Bcf/d in 2008 to more than 10 Bcf/d in 2011-12, when the region briefly reigned as the top U.S. gas producing play. But a plunge in gas prices and the lack of natural gas liquids (NGLs) in the production stream led producers to move on to plays rich in NGLs and/or crude oil. The Haynesville rig count fell from a peak of 160 in 2011 to just 11 rigs in April 2016. Then, remarkably, this Lazarus of shale plays suddenly arose from the dead in 2017, with the rig count tripling by April 2017. Three months later, as we detailed in Don’t Call It a Comeback, Part 2, pipeline flow data showed that output from the Haynesville Shale was beginning to rise for the first time in six years, and the rig count continued to increase to 47, the highest total since mid-2012.

EIA forecasts natural gas to remain primary energy source for electricity generation - EIA’s January 2018 Short-Term Energy Outlook (STEO) forecasts that natural gas will remain the primary source of U.S. electricity generation for at least the next two years. The share of total electricity supplied by natural gas-fired power plants is expected to average 33% in 2018 and 34% in 2019, up from 32% in 2017. EIA expects the share of generation from coal, which had been the predominant electricity generation fuel for decades, to average 30% in 2018 and 28% in 2019, compared with 30% in 2017.The mix of energy sources used for producing electricity generation continues to shift in response to changes in fuel costs and the development of renewable energy technologies. Since 2015, the cost of natural gas delivered to electric generators has generally averaged $3.50 per million British thermal units (Btu) or less, and it is expected to remain near this level through 2019.  EIA expects the cost of natural gas for electricity generation to remain relatively competitive with coal-fired electricity over the next two years. The average cost of natural gas delivered to generators in 2018 is forecast to fall 2%, while the forecast delivered cost of coal rises 5%. These relative price changes should increase the share of natural gas generation in 2018. The costs of both natural gas and coal in 2019 are expected to remain relatively unchanged from this year’s forecast prices.  Power plant operators are scheduled to bring 20 gigawatts (GW) of new natural-gas fired generating capacity online in 2018, which, if realized, would be the largest increase in natural gas capacity since 2004. Almost 6 GW of the capacity additions are being built in Pennsylvania, and more than 2 GW are being built in Texas. In contrast, about 13 GW of coal-fired capacity are scheduled to be retired in 2018. These changes in the generating capacity mix contribute to the continuing switch from coal to natural gas, especially in southern and midwestern states.

NYMEX Feb natural gas futures up 2.8 cents on storage prospects - After settling 0.4 cent lower at $3.185/MMBtu Friday, NYMEX February natural gas futures rose overnight ahead of Monday's open as the market drew support from near- to longer-range storage expectations. At 7:15 am ET (1215 GMT) the contract was 2.8 cents higher at $3.213/MMBtu. Following a record-high drawdown for the week to Jan. 5, the EIA said if draws matched the five-year average for the rest of the heating season, working gas stocks would end the titular withdrawal season on March 31 at 1,320 Bcf. But the next storage report showed draws slow as warmer weather replaced the freeze. The EIA showed a 183 Bcf pull from stocks for the week ended Jan. 12, a downside miss against consensus estimates as well as against both the 203 Bcf five-year average drawdown and a 230 Bcf year-ago draw. It took total working gas stocks to 2,584 Bcf, or 368 Bcf below the year-ago level and 362 Bcf below the five-year average of 2,946 Bcf.

NYMEX Feb natural gas extends gains on storage outlooks, up 8.4 cents at $3.308/MMBtu - NYMEX February natural gas futures extended gains ahead of Tuesday's open on expectations of bullish storage data. At 7:05 a.m. ET (1205 GMT) the contract was 8.4 cents higher at $3.308/MMBtu, a level not seen since May. For the week to January 19, traders and analysts are calling for a drawdown around the 260s Bcf, above five-year average and year-ago withdrawals. With the EIA projecting working gas stocks ending the titular withdrawal season on March 31 at 1,320 Bcf, or below the five-year average 1,697 Bcf, should storage draws match the five-year average for the remainder of the heating season, a pull within the range of this week's estimates would pose some concern over end-of-season inventories. Weather continues to dampen bullish sentiments though, as warmer conditions dominate outlooks and suggest diminished heating demand, allowing for the pace of storage erosion to ease again.

US natural gas bears caught by return of winter: Kemp (Reuters) - U.S. natural gas prices have bounced sharply from their lows in December after a sustained spell of exceptionally cold temperatures pushed stocks near to the bottom of their five-year range.Futures prices for gas delivered to Henry Hub in February have risen more than 25 percent since Dec. 21. Prices for deliveries in July are up 10 percent.The tightening calendar spread, with prompt prices rising much faster than those for deferred contracts, is consistent with a market that is undersupplied and trying to conserve remaining stocks.Rising near-term prices should discourage gas consumption by electric generators in favour of coal while sending a signal to gas producers to increase drilling and output ( stocks have been tightening progressively for 10 months, turning a surplus of 400 billion cubic feet (bcf) to the five-year average in March 2017 into a deficit of 200 bcf by the end of the year.Tightening stocks were not enough to support prices, which fell steadily between May and the week before Christmas.Hedge funds and other money managers became steadily more bearish about the outlook even as prices continued to decline.Hedge fund managers cut a net long position in futures and options equivalent to more than 3,900 bcf in May to just 394 bcf by Dec. 19.The ratio of hedge fund long to short positions dwindled from 5:1 in May to just over 1:1 by the middle of last month.The mild start to the winter heating season seemed to encourage increasingly aggressive hedge fund shorting of futures contracts.Hedge fund short positions climbed from a low of 943 bcf in May to peak at 3,204 bcf in the middle of December.The blast of cold weather at the start of January seems to have shaken the market out of this rather complacent view.Gas stocks have fallen by 860 bcf since mid-December, including a record draw of 359 bcf in the first week of January, reflecting temperatures far below normal across the eastern and central United States.In reality, the winter so far has been colder than the previous abnormally warm winters in 2015/16 and 2016/17 but heating demand has been in line with the long-term average.Stocks, however, are now 360 bcf below the five-year seasonal average and close to the bottom of the five-year range, making the market its tightest in over three years. Even this understates the tightness, because structural demand is increasing due to exports of liquefied natural gas and the growing number of gas-fired power plants entering service to replace old coal units.

U.S. natgas futures fall after EIA storage report  (Reuters) - U.S. natural gas futures fell on Thursday despite federal data showing a bigger-than-expected storage withdrawal. Front-month gas futures for February delivery on the New York Mercantile Exchange eased 7.6 cents, or 2.2 percent, to $3.433 per million British thermal units at 10:46 a.m. EST. U.S. utilities pulled 288 billion cubic feet of gas from storage during the week ended on Jan. 19, the U.S. Energy Information Administration reported on Thursday. That was higher than the record 272 bcf draw analysts estimated for that week in a Reuters poll. [EIA/GAS] The withdrawal compares with a year-earlier decline of about 137 bcf and a five-year average decrease of about 164 bcf for that period.

Weekly Natural Gas Storage Report - Two Record Draws In One Month - The EIA reported a -288 Bcf change in storage, bringing the total storage number to 2.296 Tcf. This compares to the -137 Bcf change last year and -164 Bcf change for the five-year average. Going into this storage report, a Reuters survey of traders and analysts pegged the average at -272 Bcf with a range of -248 Bcf to -287 Bcf. We expected -276 Bcf and were 4 Bcf above the consensus. We were off by 12 Bcf on this storage report.As you can see in the forecast track record above, consensus and our estimate have been in a repeat cycle of: overestimation > underestimation > overestimation > underestimation.There is probably a good chance that next week's storage report will see our forecast overestimating the draw reported.Nonetheless, this week was another record draw week for this time of the year, and with the record storage draw week we saw at the start of Jan, this puts two record-breaking draws in the same month.For those watching natural gas prices, the spike in price two days ago was because polar vortex that we wrote about here moved up from the second week of February to the first week of February. You can see this from a tweet from Commodity Wx Group: There are still issues with regard to just how intense the polar vortex is in the first week of February. Are we looking at a monster developing or a paper tiger? For now, most models are showing a very high probability of cold weather spread out from Central to Northeast US. Our preliminary estimate for next week's EIA natural gas storage report is -90 Bcf.

Cheniere's Sabine Pass terminal sees strong winter LNG exports - US LNG exports are stronger so far this winter compared with a year ago, thanks to global demand and two more production trains in use at Cheniere Energy's Sabine Pass terminal in Louisiana, Platts Analytics' Bentek Energy data showed.  The figures show the importance of US supplies in meeting peak demand, not only domestically but also in other countries that rely on imports. A handful of other US export terminals are under construction, while a dozen more have been proposed. Dominion Energy's Cove Point terminal in Maryland has yet to ship its first export cargo.With the ramp up of Train 3, and the onset of Train 4, feedgas volumes to Sabine Pass have nearly doubled compared with this time a year ago. Over the course of the winter season thus far, feedgas volumes have averaged 2.9 Bcf/d, getting as high as 3.3 Bcf/d, which represents full utilization of the facility, Platts Analytics data showed. Since November, 59 ships totaling 204 Bcf of LNG have left Sabine Pass, compared with 28 ships and 91 Bcf of LNG over the same time last year. A Cheniere spokesman declined to comment on the increase in activity.Global LNG demand has been on the rise, increasing global gas prices and creating favorable netbacks to the US Gulf Coast. This, in turn, has  supported the full utilization of Sabine Pass exports. More specifically, systematic market changes in Asia have continued to increase prices at JKM, pushing netbacks as high as $5.24/MMBtu in late December. Much of this has been driven by growth in LNG imports in China as the country attempts to battle air pollution, in part, caused by burning coal for home heating.

When will the Permian need new gas takeaway capacity? -  Natural gas production from the Permian Basin is expected to grow considerably over the next several years, taxing existing takeaway capacity. Nearly 8.0 Bcf/d of takeaway capacity expansions are proposed to help address impending transportation constraints from the region. When will new pipeline capacity be needed and will it be built in time to avert constraints? In today’s blog, we assess the timing of potential constraints based on production growth, existing takeaway capacity and potential future capacity additions. This is Part 4 of our series on emerging takeaway constraints in the Permian and the pipeline projects planned to alleviate them. We started in Part 1 of this series with a look at the factors behind the increasingly tight transportation capacity out of the region, namely rapidly rising crude oil and liquids-rich associated gas production from the basin. Given that breakeven costs in the Permian are some of the lowest in the country, production is expected to only grow from here. In anticipation of rising supply from the region, there are numerous crude and gas takeaway projects that are proposed to be built, with the bulk of the new capacity targeting completion in the 2019-20 time frame. On the oil side, there is about 550 Mb/d of oil takeaway capacity due online in early to mid-2018 — 450 Mb/d from Enterprise Product Partners’ Midland-to-Sealy Pipeline and another 100 Mb/d from Phase I of Energy Transfer Partners’ Permian Express III project. After that, EPIC Pipeline is slated to add 550 Mb/d of crude takeaway capacity in first-quarter 2019. Other projects, detailed in Part 1, are also progressing, but as we discussed in Part 2 of this series, uncertainty lingers in the timing of some of these projects, particularly farther out in the timeline,  introducing the risk for constraints prior to new capacity additions coming online.

'Pretty much everything is on fire': Five people missing and 17 rescued after series of explosions rip through an Oklahoma oil rig : Five people are missing after a fiery explosion ripped through an eastern Oklahoma drilling rig on Monday, sending plumes of black smoke into the air and leaving a derrick crumpled on the ground. More than 20 employees were at the natural gas well site when the blast was reported around 8.45am, Pittsburg County Sheriff Chris Morris said. Aerial footage shows several fires were still burning by midday on the rig and other equipment; the derrick, a towering metal structure above the well, collapsed onto the ground. Emergency crews were pulled away after other explosions at the site, where several tanks are also located, Pittsburg County Emergency Management Director Kevin Enloe said during an afternoon news conference. 'Pretty much everything that is on location is on fire,' Enloe said. The explosion occurred west of the town of Quinton, about 100 miles (161 kilometers) southeast of Tulsa. Enloe said firefighters were letting the blaze burn and weren't putting water on it to keep from spreading possible hazardous materials at the site. Enloe said about 17 workers were pulled from the site following the blast, including one who suffered minor burns and was treated at the scene. 

Oklahoma gas explosion: Five people remain missing - Five people remain unaccounted for following a gas explosion Monday at a drilling rig in Oklahoma. The explosion happened shortly before 9 a.m. Central time in northeast Pittsburg County, Sheriff Chris Morris said at a news conference. Twenty-two employees were drilling a gas well at the site when the explosion occured; 17 of whom were able to get out safely. One person was flown to a hospital, while others had minor or no injuries, officials said. Images and videos taken by local media show several fires burning as thick black smoke blanketed the facility. The explosion, which happened near the town of Quinton, about 140 miles southeast of Oklahoma City, sent black smoke to nearby farmlands.What exactly happened is not yet known. The Occupational Safety and Health Administration, or OSHA, is investigating the incident and interviewing employees. Three of the missing are employees of Houston-based Patterson-UTI Energy Inc., which owns the drilling rig. The company said it has reached out to those people’s families. “At this moment, no one knows with certainty what happened and it would be unwise to speculate,” the company’s president and chief executive, Andy Hendricks, said in a statement. “Well control experts and emergency responders are on site and we will conduct a thorough investigation when the incident is fully contained.” Fires were still burning by Monday afternoon, though they’re no longer spreading, Kevin Enloe, Pittsburg County’s emergency management director, told reporters. Officials plan to let the fire run its course instead of placing fire crews close to hazardous materials, he said. “The fire is pretty much containing itself right now,” Enloe said. “There’s some fire that is jumping off location because of the flame size. It’s getting some gas fires started . . . all we’re doing is combating any fire that leaves the location.”

Authorities Investigating Oklahoma Rig Explosion, Deadliest U.S. Drilling Accident In Years - Federal and state authorities are investigating the cause of the deadly explosion and fire at a natural gas drilling rig in southeastern Oklahoma on Monday. Five workers died in what appears to be one of the country’s deadliest onshore drilling accidents. The well site, located near the town of Quinton, 100 miles south of Tulsa, was operated by Oklahoma City-based Red Mountain Energy. Patterson-UTI Energy, of Houston, owns and operates the drilling rig, which exploded and caught fire about 8:45 a.m. The cause of the explosion and fire is not yet known. The Occupational Safety and Health Administration and the Chemical Safety Board are investigating, as is the Oklahoma Corporation Commission, the state’s oil and gas regulator. A day after the explosion, Oklahoma’s Supreme Court struck down a portion of the state’s workers compensation law, ruling 8-0 that oil and gas companies can be sued when workers are injured or killed. Oklahoma law holds operators responsible for well site safety, not contract drillers or oil-field service companies. A preliminary report from a commission investigator found the fire that engulfed the rig was fed by an “uncontrolled gas release.” A rig worker attempted to activate a device known as a blowout preventer to shut off the well but was unable to, the inspector reported. The fire at the wellhead kept emergency crews at bay for hours and created a black plume of smoke visible for miles. One worker who escaped with burns was taken by helicopter to a hospital and later released; sixteen other workers who fled the burning rig were uninjured.

Driller in Oklahoma Explosion Has History of Deadly Accidents, Safety Violations - The drilling company involved in Monday's natural gas rig explosion in Pittsburg County, Oklahoma that killed five workers has a long record of deadly accidents and numerous safety violations.Ten workers have died within the past ten years at well sites linked to Houston-based Patterson-UTI Energy, the Associated Press reported, citing data from the Occupational Safety and Health Administration.The accidents occurred at drilling sites in Colorado, New Mexico, North Dakota, Pennsylvania and Texas.Patterson-UTI has also been fined nearly $367,000 in the last decade for more than 140 safety violations, including many serious ones.According to the AP:"A 2008 report from a U.S. Senate committee described Patterson-UTI as one of the nation's worst violators of workplace safety laws. The report devoted an entire section to the company and 13 employees who died in Texas rig accidents over a nearly four-year period."A separate AP analysis published in 2008 showed at least 20 Patterson-UTI employees died on the job between 2002 and 2007. No other oil and gas company had more than five fatal accidents during that span."The rig explosion this week appears to be the deadliest since the 2010 Deepwater Horizonexplosion in the Gulf of Mexico claimed the lives of 11 men. “Patterson-UTI has embraced a culture of continuous improvement in safety, training and operations," the company responded to the AP about its safety record. "In recent years, we have invested millions of dollars on training and protective equipment and worked to instill a company-wide culture where safety is the top priority of each employee."The U.S. Occupational Safety and Health Administration is investigating the explosion near the town of Quinton. The U.S. Chemical Safety Board will also consider launching a larger investigation. An initial report indicates an uncontrolled gas release led to the blast. A worker at the scene tried unsuccessfully to shut the well down.

Keystone oil pipeline still at reduced pressure: spokesman   (Reuters) - TransCanada Corp’s Keystone crude pipeline is still operating at 20 percent reduced pressure, a spokesman for the company said on Tuesday, more than two months after a leak forced the line to be shut. Calgary-based TransCanada shut the 590,000 barrel-per-day pipeline, one of Canada’s main crude export routes linking Alberta to U.S. refineries, on Nov. 16 after the leak was detected. The pipeline was restarted about two weeks later, but the U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA) ordered TransCanada to operate at reduced pressure after the 5,000-barrel oil leak in South Dakota. Energy data provider Genscape said on Thursday the pipeline flow averaged an estimated 524,000 bpd last week. The reduced flows have contributed to inventory declines at the Cushing, Oklahoma storage hub and pressured Canadian crude differentials, traders said. PHMSA did not immediately comment on when the line would be allowed to return to full capacity. 

Keystone Is Doable Even With New Route, TransCanada CEO Says -- Keystone XL is feasible, though a touch more costly, even after Nebraska regulators imposed an alternative route. That's the message from TransCanada Corp.'s CEO in the latest hint the company is leaning toward building the pipeline that will ship more crude from the oil sands to refineries in the Gulf of Mexico. It doesn't mean the Calgary-based pipeline giant has made a decision. TransCanada's evaluation after the ruling to allow the alternate route was mostly about its legality, he said. "We're comfortable that they came to a decision that was within their jurisdiction and within the law," Chief Executive Officer Russ Girling said in response to questions during a presentation at a Canadian Imperial Bank of Commerce conference in Whistler, British Columbia. "That was what our primary concern was." The alternate route doesn't present major issues for construction, Girling said. The additional cost will be about C$100 million to C$200 million ($80 million-$160 million), and it will add five to 10 miles of pipe, he said. That's a small addition to an $8 billion, 1,200-mile project. "The actual routing, construction and costs, those aren't major issues," he said. TransCanada will now focus on acquiring land along the new path and obtaining the other permits it needs, he said. The company still hasn't made an official decision on whether to build the project, he added. 

ONEOK's plan to boost Bakken and Niobara/DJ Basin NGL takeaway capacity - There has been growing concern regarding NGL pipeline takeaway capacity out of the Williston Basin and the Niobrara — particularly the DJ Basin — over the past year, with one of the major pipes through those regions now running full. Finally, ONEOK has announced plans for the Elk Creek Pipeline, which will have an initial capacity of 240 Mb/d and be expandable to 400 Mb/d. The new pipe will transport mixed, unfractionated NGLs from eastern Montana to the Conway/Bushton fractionation hub in central Kansas, and provide long-term relief for a lot of Bakken, Powder River and Denver-Julesburg (DJ) Basin producers. But with an end-of-2019 in-service date, will the new capacity come soon enough to avert NGL takeaway constraints? Today, we discuss the Elk Creek project, the flows on existing NGL pipes to Conway/Bushton, and the growing significance of ethane as pipelines fill. It has been a while since we blogged about Bakken and Rockies NGL pipeline takeaway capacity. Back in December 2015, we published the first of our Spotlight reports (a joint venture between RBN and East Daley Capital Advisors) and discussed the report’s highlights in No Sleep Till Bushton – Strong Fundamentals Position ONEOK To Leverage Bakken Assets. And way back in 2013, we wrote The Race Is On And It Looks Like ONEOK – Bakken NGLs Production Growth, when ONEOK announced completion of the initial phase of the Bakken NGL Pipeline.Before getting into the potential takeaway issues that might occur between now and late 2019 when ONEOK’s new Elk Creek Pipeline is due to come into service (and possible solutions to handle those issues), let’s look at the project itself, and some of the existing NGL pipes in the broader region.

Oil and Gas Company Sues Environmental Activist for Libel over Facebook Comments -- On November 17, 2016, a Colorado environmental activist named Pete Kolbenschlag used Facebook to  leave a comment on a local newspaper article, the kind of thing more than a billion people do every day.   However, most people don’t get sued for libel over their Facebook comments. (Although some do.)The Post Independent story that Kolbenschlag commented on was about oil and gas extraction on federal lands near his home, in western Colorado’s North Fork Valley. It announced that the Obama administration’s Bureau of Land Management was canceling all oil and gas leases on the iconic Thompson Divide, a large, rugged swath of Forest Service land.In retaliation, the article reported, a Texas-based oil and gas company called SGI Interests (SGI), which owned 18 leases in the Thompson Divide area, was planning legal action against the federal government. The decision to cancel Thompson Divide leases was one of Obama’s last while in office.SGI claimed it had obtained documents that “clearly show” that the decision to cancel the leases “was a predetermined political decision from the Obama administration taking orders from environmental groups.”Kolbenschlag, who has opposed drilling in the region and engaged in environmental advocacy for some 20 years, responded to SGI’s allegations by posting the following comment:“While SGI alleges “collusion” let us recall that it, SGI, was actually fined for colluding (with GEC) to rig bid prices and rip off American taxpayers. Yes, these two companies owned by billionaires thought it appropriate to pad their portfolios at the expense of you and I and every other hard-working American.” Shortly thereafter, SGI sued Kolbenschlag for libel (which generally refers to defamatory written statements).  Kolbenschlag’s comment was in reference to a settlement SGI and Gunnison Energy Company (GEC), another oil and gas firm active on federal lands in the region, signed with the U.S.Department of Justice in 2012.

Trump is tearing up fracking rules on federal lands. Be alarmed. - WaPo Editorial Board -- THE TRUMP administration announced late last month that it was tearing up rules on hydraulic fracturing — better known as fracking — on federal lands. The change satisfies drillers who have long opposed federal regulations on the controversial oil and gas extraction process. But it should alarm everyone else. Though drillers operating on public lands have in recent years fracked extensively, pumping a cocktail of water and chemicals into wells at high pressure to fracture rock formations and free trapped fuel, the Interior Department has not updated its rules in decades. So President Barack Obama’s Interior Department spent several years developing new regulations, ultimately releasing them in 2015, well into Mr. Obama’s second term. The lengthy process resulted in standards that struck a thoughtful balance between economic opportunity and environmental safety. For example, the Obama administration’s rules would have required drillers to test carefully the cement they use to seal off their wells, which would help prevent leakage into the subterranean environment. They would have stipulated careful treatment of wastewater flowing back out of the ground after injection, insisting that it be stored in aboveground storage tanks rather than in pits. Given that many of the most disturbing fracking accidents occurred in the handling of wastewater, the need for rules such as these was glaring. The Obama regulations also would have obliged drillers to disclose publicly the chemicals they added to the water they pumped underground.  At the time, these standards failed to enthuse some on the environmentalist left, who want regulations that crack down so hard as to hobble the industry or effectively ban fracking. Instead, the Obama administration insisted that the rules would pose little challenge to the industry, because compliance costs would be extremely cheap — a relatively tiny $11,400 per well.  The Environmental Protection Agency underscored the importance of a well-balanced fracking policy in a major report on fracking’s safety profile that the agency released at the end of 2016. The EPA found only scattered evidence of harm to drinking water, which is remarkable given the staggering number of wells drilled in the past decade. The agency nevertheless identified several ways in which fracking jobs could go wrong if improperly managed, along with real-world examples of harm.

Hess-Targa Gas Plant to Curb Bakken Flaring -- Hess Midstream Partners LP and Targa Resources Corp. have formed a 50/50 joint venture to build a new 200 million standard cubic feet per day dry gas processing plant near Targa’s existing Little Missouri facility in McKenzie County, North Dakota, Hess Midstream announced Thursday. According to Hess Midstream, Targa will manage construction of the approximately $150 million Little Missouri Four (LM4) plant and operate the facility. Hess TGP Operations L.P. – owned on a 20/80 basis by Hess Midstream and Hess Infrastructure Partners LP (HIP), respectively – will hold Hess Midstream’s 50-percent stake in the gas plant, the company added. In addition to contributing a total of $75 million to the plant’s construction, Hess Midstream said the two Hess units will invest approximately $100 million toward new pipeline infrastructure to gather volumes to LM4. North Dakota Gov. Doug Burgum called the investment “a huge step in the right direction toward continuing to meet our flaring reduction goals and encouraging responsible energy development and infrastructure investment.”. “This processing plant will provide much-needed capacity at a time when North Dakota’s oil production nears record levels and associated natural gas continues to climb.”

Smaller operators push Bakken output outward -- For years, large public companies have produced crude oil in North Dakota largely in an area known as "the core of the core" of the Bakken shale play. Faced with low, stagnant oil prices, the big producers have focused largely on drilling in McKenzie and Dunn counties, Fort Berthold Indian Reservation and other acreage within the southern portion of the Nesson Anticline. But rising prices, along with the start of the Dakota Access Pipeline and well productivity improvements, have pushed new companies, mainly smaller operators backed by private equity firms, into acreage long ignored by the state's prominent producers. While NYMEX WTI prices have nearly doubled over the past two years to around $65/b Wednesday, Bakken differentials have also been on the rise, especially over the past year. Bakken at the wellhead has averaged WTI minus $1.43/b so far in January, compared with discounts of close to $5/b back in January 2016, S&P Global Platts data shows. Better prices have given drillers the opportunity to expand. 

California to sue Trump administration for repeal of fracking rules (Reuters) - California’s attorney general on Wednesday said the state plans to sue the Trump administration over its repeal of Obama-era rules meant to address public safety concerns in hydraulic fracturing, or fracking, on federal lands. The suit, which Attorney General Xavier Becerra said would be filed on Wednesday, marks the latest in a string of court challenges by California against the administration of Republican U.S. President Donald Trump’s policies on a range of issues from immigration to the environment. The federal government’s Bureau of Land Management (BLM) in 2015, under Democratic President Barack Obama, issued rules that would have required companies to provide data on chemicals used in fracking and to take steps to prevent leakage from oil and gas wells on federally-owned land. Fracking involves the injection of large amounts of water, sand and chemicals underground at high pressure to extract oil or natural gas trapped in rock formations. Most fracking takes place on private lands. However, the rules for federal and tribal lands were never implemented because oil and gas industry groups sued to block them, arguing that they were unnecessary and would slow the country’s path to energy independence. That litigation ended when the Trump administration repealed the regulations last year. On a conference call with reporters, California’s Becerra said the new litigation “is going to stand on its own.” “They did nothing at BLM to undo the rule with any justification or factual basis. There is plenty of reason to doubt that the fracking repeal engaged in by the Trump administration would withstand scrutiny in a court,” he added. Several of the environmental groups involved in that earlier litigation, including the Sierra Club, Earthjustice and the Center for Biological Diversity, also planned to file a lawsuit on Wednesday. A BLM spokeswoman declined to comment on the threat of litigation. 

California sues Trump administration over fracking rule: (AP) — California's attorney general is suing the Trump administration for rolling back a fracking rule that he says is designed to protect public health and the environment. Attorney General Xavier Becerra (HAH-vee-air Bah-sehr'-ah) announced the lawsuit as he celebrated his first year as California's top law enforcement official. He says his office has filed 25 lawsuits against President Donald Trump's administration. The latest suit challenges the federal Bureau of Land Management's rollback of a major rule last month governing fracking, which cracks open underground oil and gas deposits with pressurized water, sand and chemicals. The rule would require drilling companies to disclose the chemicals they use for fracking. Advertisement Becerra says the administration broke the law by not following required procedures including getting public comment.

Alaska earthquake could threaten over 500,000 b/d of ANS crude oil shipments -- A 7.9 magnitude earthquake early Tuesday in the Gulf of Alaska has prompted a tsunami warning issued for the coast, which could threaten shipments of Alaska North Slope crude from the Port of Valdez. According to the Alaska Earthquake Center, the quake occurred 166 miles southeast of Kodiak. The Port of Valdez is the southern terminus of the trans-Alaska oil pipeline, through with 548,293 b/d of crude was transported in December, according to the Alyeska Pipeline service company. Neither the Port of Valdez or Alyeska Pipeline could not be reached for comment. ANS crude is consumed largely by US West Coast refiners, and at times has been exported to Asia. The closure of the Port of Valdez or the trans-Alaska pipeline for an extended period would push USWC refiners to seek alternative waterborne exports.

US Coast Guard Adds Cruise Missiles To Ice-Breakers As Battle For The Arctic Begins -- The United States Coast Guard is preparing to equip icebreaker vessels operating in the Arctic region with high-tech cruise missiles for the first time as Washington escalates geopolitical tensions with Russia. Coast Guard Commandant Paul Zukunft confirmed last week that the Coast Guard’s newest fleet of heavy icebreakers would be designed to carry cruise missiles, the Washington Times reported. In recent times, the Coast Guard has suggested that it would adopt heavy weapon systems for its vessels operating in the Arctic, but with the latest announcement from Zukunft, he has now confirmed the weapons race between Washington and Moscow has begun in the fight for the Arctic. “If you look at what Russia is doing, there’s almost a mini arms buildup going on in the Arctic,” USCG Vice Adm. Fred Midgette told CBS in December. Russia operates at least 40 icebreakers with six heavy icebreakers, CBS News reported in December. Former Navy Capt. Jerry Hendrix, a senior associate at the Washington-based Center for a New American Security, said, “this is not just about [new] icebreakers; this is part of a broader competition just below the surface.” Opponents believe the Coast Guard is trying to take advantage of the rising tensions between Washington and Moscow so that it can arm its icebreakers with unnecessary amounts of expensive high-tech weaponry. Zukunft has denied these claims, arguing that natural resources underneath the water are a national security threat if waterways open up allowing other countries to tap into cheap energy. 

U.S. On Track To Unseat Saudi Arabia As No.2 Oil Producer In the World -- New forecasts from the International Energy Agency say the United States is on track to overtake Saudi Arabia as the second-largest oil producer in the world, just behind Russia, according to the organization’s report on Friday."This year promises to be a record-setting one for the US," the IEA wrote in its monthly market report. "Relentless growth should see the US hit historic highs above 10 million barrels per day, overtaking Saudi Arabia and rivaling Russia during the course of 2018 – provided OPEC/non-OPEC restraints remain in place.”OPEC players have been wary of the strength of the American shale market as the nation’s products reach new countries every month."US growth in 2017 beat all expectations ... as the shale industry bounced back, profiting from cost cuts, (and) stepped up drilling activity," the IEA added. "Explosive growth in the US and substantial gains in Canada and Brazil will far outweigh potentially steep declines in Venezuela and Mexico. The big 2018 supply story is unfolding fast in the Americas.”Oil prices are currently at levels at which U.S. production could substantially increase. According to the Q4 Dallas Fed Energy Survey published at end-December, 42 percent of executives at 132 oil and gas firms expect the U.S. oil rig count to substantially increase if WTI prices are between $61 and $65 a barrel.EIA’s latest Short-Term Energy Outlook (STEO) from last week estimated that U.S. crude oil production averaged 9.3 million bpd in the whole of 2017, and 9.9 million bpd in December alone. This year, U.S. crude oil production is seen averaging 10.3 million bpd in 2018, beating a record dating back to 1970. For 2019, the EIA expects U.S. production to increase to an average of 10.8 million bpd, and to surpass 11 million bpd in November next year.

EIA expects 2018 and 2019 natural gas prices to remain relatively flat -- In its latest Short-Term Energy Outlook (STEO), EIA expects the Henry Hub natural gas spot price to average $2.88 per million British thermal units (MMBtu) in 2018 and $2.92/MMBtu in 2019, slightly lower than the 2017 average of $2.99/MMBtu. Lower prices in 2018 and 2019 reflect EIA’s expectation of increased natural gas production and relatively flat consumption.  The confidence interval range for natural gas prices shown in the figure above is a market-derived range that reflects trading in New York Mercantile Exchange (NYMEX) futures and options markets and is not directly dependent on EIA's supply and demand estimates. The values for the upper confidence interval increase during the winter months compared with the rest of the year, reflecting the higher probability of an increase in natural gas consumption for space heating as a result of colder weather.  EIA expects natural gas consumption will increase slightly in both 2018 and 2019. On an annual basis, EIA expects combined residential and commercial natural gas consumption to increase by 1.3 billion cubic feet per day (Bcf/d) in 2018 because of colder weather closer to the recent historical average after a very warm early 2017, then remain nearly the same in 2019. In 2018, the STEO forecasts increasing use of natural gas for electric power generation because of low natural gas prices. Natural gas-fired power generation is also expected to increase in 2019 because of growth in total electricity generation—fueled in part by increased natural gas-fired capacity—and anticipated coal-fired retirements. EIA forecasts dry natural gas production to increase in both 2018 and 2019, exceeding domestic consumption of natural gas for the first time since 1966. EIA projects production growth to be concentrated in Appalachia’s Marcellus and Utica regions and in the Permian region, where oil production results in associated natural gas production.  Increasing pipeline takeaway capacity out of the Appalachia region, expected to increase by 8.4 Bcf/d by spring 2018, will deliver natural gas to end-use markets. Greater pipeline connectivity reduces spot market discounts to Henry Hub, the main price benchmark for natural gas, and is expected to result in higher wellhead natural gas prices and production growth.

E&P profitability deteriorates despite higher oil prices, but what about 2018? - The U.S. exploration and production (E&P) sector roared out of the starting gate in 2017 with a new optimism that fueled a more than 40% surge in capital investment. First-quarter results were strong, but an ebb in oil prices and some operational headwinds significantly lowered results in subsequent quarters. When final 2017 results are tallied in the next few weeks, the industry is on track to record its first profitable year since 2013 after posting more than $160 billion in losses in the 2014-16 period. The critical question is whether E&Ps are regaining the momentum that could drive a steady increase in profitability in 2018. Today, we analyze the clues contained in third-quarter 2017 results. We have been intensely tracking the financial performance of a representative group of U.S. E&Ps for more than a year now. In our in-depth Piranha! study, we examined the strategies that our universe of 43 top U.S. oil and gas producers adopted to thrive in a world of lower oil and gas prices. We reviewed the promising results of those strategies in the first quarter of 2017 in Recovery and subsequent blogs focused on our three peer groups: Oil-Weighted, Diversified, and Gas-Weighted E&Ps. We tracked the disappointing second-quarter performance of those companies in another blog series beginning with Roller Coaster. And last month, in Ready To Run, we updated our forecasted 2017 capital spending and production projections based on the companies’ third-quarter earnings releases and reviewed announcements by 13 E&Ps of their preliminary 2018 capital spending budgets, which indicated that oil and gas producers are likely to boost spending once again. Today’s review of third-quarter results from all 43 of the companies in our universe will provide insights into whether that continued optimism is justified.

Sharp Rise in Oil, Gas Industry Confidence in 2018 - There has been a sharp rise in industry confidence in 2018, according to a new study by DNV GL, a technical advisor to the oil and gas sector.DNV GL’s latest industry outlook report, which surveyed 813 senior industry professionals and executives globally, found that 63 percent of poll participants were confident about growth in the industry this year. This figure stood at 32 percent in DNV GL’s report a year ago.Europe had the most improved outlook for the oil and gas sector, according to DNV GL’s research, up from 25 percent last year to 64 percent, with Latin America at 77 percent (46 percent in 2017) and Asia Pacific at 57 percent (30 percent in 2017). Confidence in North America rose from 49 percent to 57 percent.“A combination of two things have brought confidence back to the industry,” Maria Moræus Hanssen, the newly appointed CEO and chairman of the management board of DEA Deutsche Erdoel AG (DEA), was quoted as saying in the report.“The first, of course, is oil and gas prices. Short-term prices seem to drive a lot of sentiment about longer-term perspectives for the industry – it’s always been like that. And second, costs have come down, both running costs and investment costs,” Hanssen added.The report highlighted that two thirds (66 percent) of respondents said their company will maintain or increase capital spending in 2018, compared to 39 percent last year, and that 62 percent expect their organization to maintain or increase headcount in 2018, compared to 43 percent in 2017.Strict discipline is expected to remain in the oil and gas sector, however, with half of respondents suggesting they were steadfast in their efforts to increase cost control measures in 2018. This was consistent with 2017 (51 percent). Close to two-thirds (62 percent) believe that these are permanent changes, mirroring the results from last year’s survey (63 percent).

Big Oil flush with cash again, but no party yet (Reuters) - The world’s top oil companies are expected to generate more cash in 2018 than at any other time this decade after three painful years of cuts, but it isn’t party time yet. The shift in sentiment has been rapid as crude prices have risen by more than 50 percent over the past six months to reach $70 a barrel, a level not seen since the crash year of 2014, thanks to global supply cuts led by OPEC. Only a year ago, many investors still fretted over the sustainability of the sector’s lavish dividend payouts in a weak energy market. Now the focus on company boards is gradually switching from slashing jobs and investment to boosting shareholders’ returns and growth. With memories of the 2014 price collapse still fresh and oil forecast to recover only slowly, frugality remains high on the agenda of boards and investors to ensure that the energy majors produce enough cash to pay dividends while reducing debt that ballooned during the downturn. “The companies will need to demonstrate over time that lower capital spending can be sustained and that their dividends will remain fully covered,” s “We are cautiously optimistic on their ability to do this, given the dramatic cost reductions in the industry.” Oil majors responded to the crisis by transforming their businesses, nearly halving spending, culling tens of thousands of jobs and diluting share value. In 2017, most companies showed they can adapt to a world of lower prices and even generate thin profits with oil at $50-$55 a barrel, without borrowing. This year, when prices are expected to hold around $60 a barrel, the majors will generate more cash than they did in 2011 when a barrel of crude traded at an average of $112, according to BMO Capital Markets analyst Brendan Warn. Dutch Shell appears the strongest performer among the group in terms of organic free cash flow - money available to return to shareholders in dividends and share buybacks after deducting capital spending, excluding revenue from disposals. 

More oil and gas firms expect to hike capital spending in 2018 (Reuters) - More global oil and gas firms expect to increase capital spending this year as confidence picks up after crude prices climbed above $70 a barrel in January for the first time in the three years, according to a survey by DNV. DNV, a technical adviser to energy industry sector, reported that 66 percent of the 813 senior oil and gas professionals surveyed said their company would maintain or increase capital spending this year, compared to 39 percent last year. Confidence that the industry would grow rose to 63 percent this year from 32 percent last year, the survey found. Many companies, including oil majors BP and Shell, cut capital expenditure and costs in 2016 after the price of Brent oil fell to a 12-year low of under $30 a tonne. Capital expenditure in global oil production fell to $200 billion in 2016 from an all-time high of around $520 billion in 2014 as companies tried to save cash, according to consultancy firm McKinsey. The price of Brent, the global benchmark, has slowly recovered since then, helped by output curbs by the Organization of the Petroleum Exporting Countries, Russia and others. The pact began in January 2017 and expires at the end of 2018. “Our research indicates that the oil and gas industry is becoming more confident that its successful focus on cutting costs and building new efficiencies into the value chain will last,” DNV Oil & Gas Chief Executive Liv Hovem said. “Intentions to increase capital and innovation spending in 2018 come alongside a clear signal that oil and gas industry costs will not return to pre-2014 norms,” she said in a statement. Half of the survey respondents said they would maintain efforts to increase cost control measures this year, and nearly two thirds believe these changes would be permanent. Just 37 percent of those surveyed said the oil price was a barrier to growth this year, compared to 64 percent a year ago, the DNV survey found. 

Fast-growing global trade is boosting fuel demand: Kemp -  (Reuters) - Freight movements in the United States and around the rest of the world are growing at some of the fastest rates this decade, which should provide a big boost for diesel consumption in 2018.  In the United States, the volume of freight moved by road, rail, pipeline, barge and air between September and November was around 6 percent higher than in the same period a year earlier. Freight volumes are growing at some of the fastest rates since 2011, according to the freight transportation services index compiled by the U.S. Bureau of Transportation Statistics (  Freight movements are being driven by an increase in coal deliveries to power plants, as well as increases in oil and gas drilling. U.S. businesses have also finally managed to get their inventories of raw materials, unfinished work-in-progress and finished items under control. The ratio of inventories to sales has fallen to 1.33, down from a peak of 1.46 in April 2016, and the lowest for three years, according to the U.S. Census Bureau. The continued draw down in inventories is unsustainable and has left manufacturers, distributors and retailers boosting new orders to stop the erosion of their stock levels. One result is a nationwide shortage of trucks and a scramble by shippers to secure enough freight capacity. Freight rates and shipment backlogs have been rising sharply as spare capacity inherited from the slowdown in cargo movements in 2015 and 2016 is used up.  The pattern is being repeated worldwide, with global trade growing at the fastest rate since 2011, according to the Netherlands Bureau of Economic Policy Analysis.The global economy is experiencing the strongest synchronised growth since the start of the decade with all the advanced economies in a cyclical upswing.The rise in oil and other raw materials prices is also starting to produce an upswing in the commodity-dependent developing countries that were hit hardest when commodities prices started tumbling in 2014.   The current global expansion is expected to continue throughout 2018 and into 2019 which should support further rapid growth in freight volumes. Since almost all freight is moved by trucks, railroads, barges, ships and aircraft that use diesel or jet fuel made from middle distillates, the economic expansion should provide a big boost for distillate demand in 2018.

The Dark Side of America’s Rise to Oil Superpower - The last time U.S. drillers pumped 10 million barrels of crude a day, Richard Nixon was in the White House. The first oil crisis hadn’t yet scared Americans into buying Toyotas, and fracking was an experimental technique a handful of engineers were trying, with meager success, to popularize. It was 1970, and oil sold for $1.80 a barrel.Almost five decades later, with oil hovering near $65 a barrel, daily U.S. crude output is about to hit the eight-digit mark again. It’s a significant milestone on the way to fulfilling a dream that a generation ago seemed far-fetched: By the end of the year, the U.S. may well be the world’s biggest oil producer. With that, America takes a big step toward energy independence.The U.S. crowing from the top of a hill long occupied by Saudi Arabia or Russia would scramble geopolitics. A new world energy order could emerge. That shuffling will be good for America but not so much for the planet.  For one, the influence of one of the most powerful forces of the past half-century, the modern petrostate, would be diminished. No longer would “America First” diplomats need to tiptoe around oil-supplying nations such as Saudi Arabia. The Organization of Petroleum Exporting Countries would find it tougher to agree on production guidelines, and lower prices could result, reopening old wounds in the cartel. That would take some muscle out of Vladimir Putin’s foreign policy, while Russia’s oligarchs would find it more difficult to maintain the lifestyles to which they’ve become accustomed. President Donald Trump, sensing an opportunity, is looking past independence to what he calls energy dominance. His administration plans to open vast ocean acreage to offshore exploration and for the first time in 40 years allow drilling in the Arctic National Wildlife Refuge. It may take years to tap, but the Alaska payoff alone is eye-popping—an estimated 11.8 billion barrels of technically recoverable crude. It sounds good, but be careful what you wish for. The last three years have been the hottest since recordkeeping began in the 19th century, and there’s little room in Trump’s plan for energy sources that treat the planet kindly. Governors of coastal states have already pointed out that an offshore spill could devastate tourism—another trillion-dollar industry—not to mention wreck fragile littoral environments.

Saudi Arabia's energy minister says IEA overhyped US shale boom - Saudi Arabia’s energy minister took a rare sideways swipe at the International Energy Agency on Wednesday, accusing the body of overhyping the impact of US shale growth on the oil market. In a retort to remarks by IEA head Fatih Birol, Khalid Al Falih said at an energy panel in Davos that the agency was failing to put the scale of US production increases into context. “I was not disputing the amazing revolution of shale . . .[but] in the overall global supply demand picture it’s not going to wreck the train,” said Mr Falih. “We should not be scared,” he added, at the World Economic Forum’s annual conference on Wednesday. “That’s the core job of the IEA, not to take it out of context.”  Mr Falih appeared alongside his Russian counterpart Alexander Novak and US energy secretary Rick Perry, who together now represent countries pumping more than a third of the world’s crude. The appearance of a US representative on a panel of traditional producer nations illustrates the transformative effect the shale boom has had on global energy markets.The IEA said last week US crude production was on course to overtake Saudi Arabia and rival Russia, with the body revising 2018 growth forecasts for the US higher to output of more than 10m b/d. The Saudi minister said US output would be “absorbed” just as rising supplies in the 1980s were eventually needed by the market. His comments may raise eyebrows because the boom in North Sea and Alaskan output at that time led to two decades of relatively low prices and is seen as a major factor behind the eventual collapse of the Soviet Union.

KunstlerCast 299 — What Happened to Peak Oil — a Chat with Art Berman --Kunstler - Arthur Berman has been an independent oil analyst for 17 years after an earlier 20 year career with the Amoco Oil Company. He’s a regular commentator at NBC, CNN, CBC, BNN,, Bloomberg, Platt’s, Financial Times, and New York Times. He is a Director of ASPO-USA (Association for the Study of Peak Oil & Gas USA). He was a Managing Director and  frequent contributor at The Oil Drum, and is an associate editor of the American Association of Petroleum Geologists Bulletin. He was past editor of the Houston Geological Society Bulletin (2004-2005) and past Vice-president of the Society (2008-2009). He has published more than 100 articles on geology, technology, and the petroleum industry during the past 5 years. His blog commentary  can be found at

Rising Canadian production, takeaway constraints and WCS price discounts - The recent collapse in the price of Western Canadian Select (WCS) versus West Texas Intermediate (WTI) and the 12-day shutdown of the Keystone Pipeline in November 2017 put the spotlight on a major issue: Alberta production is rising, pipeline takeaway capacity out of the province has not kept pace, and pipes are running so full that some owners have been forced to apportion access to them. Storage and crude-by-rail shipments have served as a cushion of sorts, absorbing shocks like the Keystone outage and the apportionments, but with more production gains expected in 2018-19, that cushion seems uncomfortably thin and unforgiving. With all this going on, we decided that it’s time for a deep-dive look at Western Canadian production, takeaway options and WCS prices — the whole kit and caboodle. Today, we begin a new series on Canadian crude and bitumen production, the infrastructure in place (and being planned) to deal with it, and the effects of takeaway constraints on pricing. Western Canadian crude oil production has grown from about 2.5 MMb/d in 2011 to almost 4.0 MMb/d by the end of 2017. Despite these gains — most of which came from Alberta’s oil sands region — times are tough in the Canadian oil patch. While other North American producers have been enjoying the gradual rise in WTI pricing over the past year, Canadian producers have suffered through declining prices for WCS, the Canadian heavy blend crude benchmark — especially over the past few months. Figure 1 shows that WCS maintained a pricing discount to WTI of around $10/bbl through most of 2017 (all in U.S. dollars). Beginning in late summer, however, the WCS discount to WTI began to grow, initially to around $11-12/bbl during September and October, and then crashing during November and December to around $25/bbl.

Canadian city argues Trans Mountain pipeline route harmful (Reuters) - The proposed route of Kinder Morgan Canada’s C$7.4 billion ($5.9 billion) Trans Mountain pipeline expansion will pass through a conservation area in Burnaby, British Columbia, potentially harming sensitive ecosystems, the city argued on Tuesday. The Vancouver suburb also questioned, in an often testy exchange during its first day of route hearings in front of Canada’s national energy regulator, the company’s efforts to consult with the city prior to choosing its final path. “There’s been absolutely no consultation here,” Burnaby’s lawyer, Gregory McDade, told reporters outside the hearings, adding: “At the very least, we shouldn’t allow the pipeline company to come in and steal our parks and green spaces as the easy way to build their pipeline.” In response, Kinder Morgan said Trans Mountain would run between an existing rail line and highway adjacent to the conservation area, adding it had done extensive in-person and online consultation in the city. “What we’ve chosen is the route that we think is the least disruptive for the community,” spokeswoman Ali Hounsell told Reuters. Burnaby, a city of 233,000, is a staunch opponent to the proposed twinning of the Trans Mountain oil pipeline and is hoping to use the National Energy Board (NEB) route hearings to block the construction of the project. While the expansion was approved by the Canadian government in 2016, the hearings are to help determine the exact route of the 1,147-kilometer (712 mile) pipeline. The project entails building a second pipeline largely along the route of the existing one, though it will follow a new path through the Vancouver area, which has grown more dense in the decades since the original line was built. Burnaby has been sparring with Kinder Morgan for years over the project, which would nearly triple capacity to 890,000 barrels per day on the line from Alberta’s energy heartland to a marine terminal in the city. The city has repeatedly used its municipal permitting power to delay work related to the project. Last week, Kinder Morgan pushed back the startup of the expanded line to December 2020, adding another three months to a previous nine-month delay it has blamed on the permitting difficulty. 

Earthquakes Linked to Completion Volume and Location of Hydraulic Fracturing -- The volume of hydraulic fracturing fluid and the location of well pads control the frequency and occurrence of measurable earthquakes, new Alberta Geological Survey and UAlberta research has found. Ryan Schultz has been studying earthquakes in the Fox Creek, Alberta area since they started in December 2013. The seismologist—who works at the Alberta Geological Survey (a branch of the Alberta Energy Regulator) and with the University of Alberta—wanted to better understand what was causing the quakes. Schultz and his colleagues found that when increased volumes were injected in susceptible locations (i.e., in connection with a nearby slip-ready fault), it transmits increased pressure to the fault line, leading to more numerous measurable earthquakes. It's not as simple as more volume equals more earthquakes, though-a link that scientists have long identified in the history of induced seismicity, dating back to the 1950s. There is another factor at play in the Fox Creek area, and it's all about location, explained Schultz. "If there is a pre-existing fault, but you're not connected to it by some sort of fluid pathway, you can hydraulically fracture the formation, and you're probably not going to cause a significant earthquake," said Schultz. "It's conceptually quite simple, but actually determining those things underground is really hard to do in practice." Since 2013, there has been a marked increase in the rate of earthquakes near Fox Creek, ranging up to magnitude 4s. While other research has pointed to industry activity as contributing to the quakes, this study is the first to identify specific factors causing the seismic activity. 

Rail Workers Acquitted in Trial on Deadly Lac-Mégantic Oil Train Disaster - The train engineer and two additional rail workers who faced charges for the deadly July 2013 oil train accident in Lac-Mégantic, Quebec, were acquitted on Friday after the jury deliberated for nine days. If convicted of all charges, they potentially faced life in prison.The end of the trial of these three employees for their role in the Canadian oil train disaster that resulted in 47 deaths and the destruction of much of downtown Lac-Mégantic appears to have brought some closure to residents of the still-recovering town — although most are still waiting for justice.As the trial began, the BBC reported the sentiments of Lac-Mégantic resident Jean Paradis, who lost three friends in the accident and thought the wrong people were on trial.“It’s clear to me the main shareholder, MMA, are not here. Transport Canada is not here. Transport Canada have let cheap companies run railroads in Canada with less money for more profit…” Paridis told the BBC. Transport Canada is the Canadian regulatory agency with rail oversight. Another resident, Jean Clusiault, who lost his daughter in the disaster, told the CBC that after the decision, “I felt relieved because these are not the right people who should be there.”

Oil's Heavy Hitters Line Up to Dive Into Mexico's Deep Waters  - If you’re a super-major oil explorer, Mexico says it’s got a bargain for you. The once-giant crude nation whose output plunged in the past decade is enticing the world’s richest explorers with cut-rate prices for drilling rights to its most coveted offshore fields. The Jan. 31 auction for access to 29 deep-water tracts comes as $70-a-barrel crude lifts foreign drillers from the worst market slump in decades.Exxon Mobil Corp., Royal Dutch Shell Plc and Chevron Corp. are among the 21 entrants registered to bid next week, the National Hydrocarbons Commission, known as CNH, announced Thursday in a webcast. The sale will be Mexico’s biggest, in terms of fields and expected investment, since government-controlled Petroleos Mexicanos’s monopoly ended in 2013. Mexico’s demand for low upfront bonus payments probably accelerated interest in the auction, Horacio Cuenca, an analyst at Wood Mackenzie Ltd., said in an interview in Rio de Janeiro. The blocks also don’t require large initial investment commitments.  “Mexico has done all it could to attract companies,” he said. “It’s going to drive interest. The blocks are very cheap.” Pemex, as the state-owned oil producer is known, is set to bid individually and as a partner in six groups with companies such as Chevron and Shell. Malaysia’s Petroliam Nasional Bhd also qualified as a lone bidder and as a part of five consortium groups with partners such as Cnooc Ltd. and Repsol SA. “This is good news,” Hector Acosta, CNH commissioner, said during Thursday’s webcast. “The fact that we have so much variety in the integration of the consortium groups -- 17 bid groups and nine individual bidders -- seems like good news and that we will have a good presentation of offers for the different blocks.”

Mexico's Drug Cartels Steal Billions In Oil, Threaten To Collapse Nation's Refineries - In a new mind-numbing report from Reuters, Mexico’s drug cartels are increasingly diversifying beyond narcotics and have recently entered into the petroleum business.Cartels have jumped into the fuel theft game stealing billions of dollars worth of oil from pipelines controlled by the state oil company Pemex, which at current rates could paralyze the country’s top refineries.  Organized crime gangs are taking advantage of Mexico’s deteriorating oil infrastructure that is suffering from years of underinvestment and declining production by tapping into pipelines to steal tremendous amounts of crude products. If that fails, cartel members resort to bribing and or threatening Pemex employees for critical information about operations. Some Pemex employees have fled the country following unbearable death threats, while others have been found mutilated for not complying. While President Enrique Peña Nieto has been unable to govern the country amid the out of control cartel violence, fuel theft is turning into a national security threat draining revenue from the federal government. Reuters reports that fuel thefts have cut more than $1 billion in annual revenue from state coffers, along with creating an unfriendly environment that is deterring foreign investment to revamp the aging refineries. Its been reported that the federal government generates about one-fifth of its income from Pemex. Serious issues are emerging as the declining oil revenue could lead to funding concerns for the government, therefore jeopardizing the fight against cartels. The Federal Police, under the authority of the Secretariat of the Interior, recently launched offensives across the country that toppled drug kingpins turning 16% of the states into a Level-4 classification via the U.S. State Department, meaning that the areas are on par with a war-zone in the Middle East. Cartels have been fractured but are still cash-strapped as their decision to enter the petroleum business is cheap and it implies less risk than drug trafficking. “The business is more profitable than drug trafficking because it implies less risk,” said Georgina Trujillo, a ruling party congresswoman who heads the lower house energy commission. “You don’t have to risk crossing the border to look for a market,” she added. “We all consume gasoline. We don’t all consume drugs.”

Great Groningen: Politics may trump economics at giant Dutch gas field - For the residents of the surrounding region, the production of gas from the Dutch Groningen field has turned into a never-ending nightmare, with the continued threat of serious earthquakes creating a climate of fear. “It was like a bomb going off,” one resident said following the 3.4-magnitude earthquake that hit Groningen on January 8. The quake — like those that came before it — was triggered by gas production from the giant onshore field that has been supplying gas to households and industry in the Netherlands and elsewhere in Northwest Europe since 1963. The biggest since 2012, the quake made gas extraction at Groningen the most pressing challenge for the coalition government that has only held the reins of power since October. The starkest reaction to the quake — which has already led to more than 3,000 insurance claims for damage to property — has come from Prime Minister Mark Rutte who said that the safety of residents was “the only thing” to take into account when deciding a new policy. Economy minister Eric Wiebes was more circumspect, pointing out that citizens could not be left to freeze and companies go bust — security of supply and jobs in the Dutch gas sector had to be considered. But it is difficult to see how the government can come up with a policy that works for everyone. Another big quake, with the potential to cause loss of life, for example, would be a major political blow to the government, so a “do-nothing” policy is out of the question. But forcing a significant reduction in production at Groningen would hurt the Dutch treasury, whose revenues from gas production have fallen to under Eur2 billion in 2017 from an estimated Eur13 billion in 2013, and leave the Netherlands (and its neighbors which are supplied with Groningen’s low-calorific gas) scrambling for alternative sources of supply. And let’s not forget — there are no guarantees that reducing production will mean no more earthquakes. The January 8 quake came despite the fact that Groningen output was slashed to just 24 Bcm/year in 2017 from as much as 54 Bcm as recently as 2013.

Britain to tighten financial checks on fracking firms - (Reuters) - Britain is tightening controls on firms hoping to carry out hydraulic fracking in parts of the country by adding a financial health check to the application process, the government said on Thursday. Substantial amounts of shale gas are estimated to be trapped in underground rocks and the British government wants to exploit them to help offset declining North Sea oil and gas output, create jobs and boost economic growth. No fracking - which involves extracting gas obtained from rocks broken up or fractured at high pressure with water and chemicals - has taken place in the country in the past 7 years after operations were halted at the first British site following earth tremors. The government has since imposed several environmental and technical requirements which must be met before any company can carry out the process. Energy minister Greg Clark said on Thursday that additional financial criteria must also be met. “An equivalent assessment should be undertaken of the financial resilience of companies proposing to carry out hydraulic fracturing operations so that stakeholders can have confidence in the company’s ability to meet its commitments,” he said in a in a written statement on parliament’s website. “We will therefore look at the financial resilience of all companies wishing to carry out hydraulic fracturing operations alongside their application for Hydraulic Fracturing Consent,” he said. Third Energy, 95-percent-owned by Barclays is waiting for final sign off by Clark, to begin test fracking at its Kirby Misperton site in Ryedale, Yorkshire, northern England. Clark said he was satisfied Third Energy had met the technical requirements but is seeking further financial information about the company to help make his final decision. Several firms hope to use hydraulic fracking in Britain, including shale gas developer Cuadrilla and petrochemicals group Ineos.

Norway Aiming For Oil & Gas Output To Reach Record Highs By 2022 -- Now that oil prices has begun to rise again, Norway’s oil and gas development and output will as well — with output perhaps eclipsing the earlier high of 2004 by as soon as 2022, according to a new report from the Norwegian Petroleum Directorate (NPD). To word that differently, Norwegian oil and gas investment is expected to begin climbing again in 2018, after 4 years of decreases. Contrary to the situation in 2004, though, oil and gas investments this go around will be roughly equal, rather than slanted towards oil. “This is very good news, because everybody is talking about a phasing out of the Norwegian petroleum activity and, at least in the next 10 years, we don’t see that,” explained NPD Director General Bente Nyland in an interview with Reuters. Yes, very good news indeed — keep the oil flowing, while talking enthusiastically about the “green” future. That seems to be the path that Norway is now following. 

Is This The World’s Most Critical Pipeline? - The Southern Gas Corridor, connecting Azerbaijan to the world’s largest economic block, is one of the most important infrastructure pipeline projects worldwide, bringing Caspian gas into Europe.  Europe wants to become less dependent on Russian gas and use more clean energy, taking advantage of the technological advances made in the renewables sector, along with the use of natural gas.After 2016’s 7 percent growth, European gas consumption continued to rise through 2017. Consumption levels showed a year-on-year increase of 6 percent in the first quarter, supported by low temperatures.The Southern Gas Corridor is around 80 percent finalized, with the first gas flow for Europe expected around 2020. That’s great news not only for Europe, but also for the Azerbaijan economy, which stands to benefit from improved exported gas volumes, with the oil and gas sector accounting for up to 45 percent of their GDP and around 75 percent of state revenues.Europe’s natural gas import needs will continue to increase through the next 10 years, a result of the Netherlands and United Kingdom’s shift from gas exporters to importers, and Norway’s energy policy to freeze new oil and gas offshore projects. Azerbaijan will play an essential role in European energy security, not only as a European partner with a stable economy, but also a supplier with growing export potential of the much-needed commodity in a world of rising energy prices. And while the Southern Gas Corridor won’t replace Europe’s need for Russian gas, it will, however, be an outstanding actor for Southern European countries supplied by liquefied natural gas (LNG) carrying higher shipping costs. With gas traders exploiting the price arbitrage between the global LNG market and piped gas coming through the Southern Gas Corridor, we forecast that LNG’s market shares will continue to increase in Europe, as new fields were funded in Israel and Egypt.

Paradise Papers Reveal U.S. Selling Russian LNG In Europe -- The new massive data leak that has been making headlines for several days now has revealed that a company with U.S. ownership has been buying Russian gas and selling it in Europe at higher prices.   According to a report in Belgian daily Le Soir, taken up by other media outlets, such as The Guardian and Eurasia Review, Wilbur Ross holds a 35-percent interest in Navigator Holdings, a shipping company registered in the Marshall Islands.  According to the leaked documents, four cargo carriers owned by Navigator Holdings were used to load Russian natural gas at the port of Ust Luga before heading to the Anwerp LNG terminal in Belgium.The documents suggest that a company with U.S. ownership is buying Russian gas from petrochemical giant Sibur, and then selling it—at a profit, of course—to the European Union, which is in a rush to build as many LNG terminals as it can in a bid to reduce its dependence on Russian gas.If the reports are true, the situation is an ironic one for Europe: while trying to reduce its dependence on Russian gas it is inadvertently increasing it and is even paying more for it than it would if it bought the extra loads directly from Gazprom.  One might wonder how a U.S. company is able to do business with a Russian one. It’s simple: Wilbur Ross himself said earlier this week that Sibur is not a subject to sanctions, so for Navigator Holdings and the petrochemical giant, everything is business as usual.  Meanwhile, Gazprom is showing no concern whatsoever about potential challengers of its market share in Europe. Recently, the executive in charge of Gazprom’s export division, Elena Burmistrova, told media that there is nothing that can get in the way of Gazprom’s supplies of natural gas to the continent, even U.S. LNG, which some European gas consumers have hailed as a much needed alternative to Gazprom gas.

Nord Stream 2 Is A Game Changer For Gazprom -- It’s difficult to imagine an energy company that’s more hated and more closely monitored than Gazprom…    Nevertheless, defying most trends, 2017 will go down in history as one of Gazprom’s successful years: for the first time in history, its share in Europe’s gas consumption reportedly reached 40 percent. Despite seemingly crippling U.S. sanctions specifically targeting Gazprom’s European endeavors and the EU’s hastily engineered gas rules, the construction of Nord Stream 2 has been going forward as planned, moreover, the project’s European partners (Shell, Engie, OMV, Uniper, Wintershall) wholly fulfilled their financial obligations. Gazprom increased gas sales to almost all its buyers in Europe. Germany’s intake reached a historic maximum of 53.4 BCm (Nord Stream-I utilization rate was equally at an unseen high of 93 percent). Turkey took in 29 BCm (18 percent growth). France totaled 12.3 BCm (7 percent growth). A combination of cold weather, low price and shrinking domestic gas output in Europe led Gazprom to a spectacular increase in production, too — its year-on-year growth amounted to 52 BCm/year. Despite regularly occurring 'fake news' that Gazprom is running short of gas, the gas giant is still keeping idle at 100-120 BCm/year of surplus production, mostly on the Yamal peninsula. So technically it can increase its supplies even further, but the real question is whether there will be sufficient demand to meet it. Further dramatic Europe-bound increases are unlikely until Nord Stream 2 gets onstream. The next few winters might not be as cold as previous ones; oil-pegged gas prices start to appreciate and demand is constrained by existing supply routes. Still, once a pipe dream, now Nord Stream 2 increasingly stands out as Gazprom’s future claim on further European consolidation. The European Commission antitrust enquiry is effectively retracted from the DG Comp’s agenda after Gazprom agreed not to object to cross-border sales of resold Russian gas and make destination clauses flexible.

Qatar sees stampede for gas projects to help beat crisis (Reuters) - U.S. and European oil majors are piling in with offers to help Qatar develop new gas projects, the country’s energy minister said, despite a protracted crisis in the Gulf region and pressure on firms to chose between Qatar and its neighbors. Mohammed al-Sada told Reuters Doha had seen unprecedented interest from majors as Qatar seeks to expand its gas capacity to 100 million tonnes a year from the current 77 million to cement its position as the world’s largest exporter. “Both U.S. and EU majors have shown great interest. We did expect this, but they surprised us on the upside by the degree of keenness,” said al-Sada, when asked whether firms had expressed concerns about potential pressure from Saudi Arabia and the United Arab Emirates (UAE) not to cooperate with Qatar. OPEC kingpin Saudi Arabia and the UAE cut ties with Doha in June, saying Qatar backed terrorism and was cosying up to rival Iran. Qatar rejected the accusation. Reuters reported last year that Qatar’s traditional partners ExxonMobil, Royal Dutch/Shell and Total, which helped turn the country into a gas superpower, had all shown interest in new projects. The companies are also heavily present in the UAE and Saudi Arabia. “We have newcomers too,” said al-Sada. Saudi Arabia and the UAE have presented demands which, Qatar says, would amount to surrendering its sovereignty if implemented. The dialogue between the former allies has been effectively frozen over the past six months despite mediation attempts by the United States. “We are happy to sit down with everyone, but with one message in mind - preserving our sovereignty is a paramount condition,” said al-Sada. The crisis has prompted Qatar to abandon plans to supply more gas to Saudi Arabia and the UAE. It is now looking for new markets for its liquefied natural gas (LNG). 

Feb NYMEX natural gas up 5.1 cents ahead of options expiry - After ending Thursday down 6.2 cents at $3.447/MMBtu, NYMEX February natural gas futures climbed overnight ahead of Friday's open and options expiry at the close of business, with unsettled fundamentals.At 7:10 am ET (1210 GMT) the contract was up 5.1 cents at $3.498/MMBtu. Natural gas inventories equaled the second-largest withdrawal since records began in the latest storage report week ended Jan. 19, for which the EIA outlined a net 288 Bcf drawdown.This beat the full range of estimates ahead of the day as well as both the 164 Bcf five-year average pull and a 137 Bcf year-ago withdrawal.  Total working gas stocks are currently 2,296 Bcf, or 519 Bcf below the year-ago level and 486 Bcf below the five-year average of 2,782 Bcf.Weather during the storage report period bolstered heating demand, but conditions have since moderated, with the EIA's latest report showing weekly average temperature in the contiguous US rising to 40 degrees Fahrenheit in the week to Jan. 24 from 35 degrees F in the week earlier.

NYMEX February gas rolls off board 5.8 cents higher at $3.505/MMBtu - The NYMEX February natural gas futures contract continued its surge Friday, as the February contract expired at $3.505/MMBtu, up 5.8 cents compared with Thursday's close.  Friday's price jump caps a week that saw the February contract spike 32 cents over the past five trading sessions.  Friday is the final day with February as the front-month contract. March will take over as the prompt-month contract Monday. NYMEX March gas settled Friday at $3.175/MMBtu, up 7.6 cents.John Woods, president of JJ Woods Associates, said the market is "overdone on the top side," adding that "going into the tail end of winter, prices are going to fall."Cooler weather appears to be on the horizon, with the most recent eight- to 14-day outlook from the National Weather Service calling for a likelihood of lower-than-average temperatures across much of the Midcontinent and parts of the Northeast, likely driving up demand as the market moves to February.S&P Global Platts Analytics projects US demand to average 94.8 Bcf/d over the next eight to 14 days, a jump from the 84.1 Bcf expected Friday.Despite cooler weather spurring demand, Woods said the forecast "has already been built in [to prices]."Possibly adding support to prices are well-below-average storage stocks. Energy Information Administration data show US stocks at an estimated 2.296 Tcf, a 17.5% deficit to the five-year average.In the face of increasing demand, US dry production is expected to remain steady, averaging 77.3 Bcf/d over the next 14 days, according to S&P Global Platts Analytics.

Platts JKM: Asia March LNG prices retreat to $10.325/MMBtu on easing supply concerns - The Platts JKM for March LNG deliveries slipped 22.5 cents/MMBtu over the week to end at $10.325/MMBtu Friday, as prices edged down on the prompt due to expected recovery from affected production facilities.However, cold snaps sweeping across Northeast Asia brought back bullish expectations of a price rebound later in the week. Market participants noted that gradually depleting inventory levels as well as US supply issues could trigger a wave of spring buying.Easing supply concerns over Russia's Sakhalin, Malaysia's Bintulu and Angola LNG projects exerted downward price pressure on prompter cargoes. End-users however also cited potential headwinds coming from additional prompt supply as well as eager sellers hoping to clear away March cargoes before a steep downward correction in April prices.Japanese utility Tohoku Electric's buy tender for an H2 March cargo was heard awarded to a portfolio player at around $10.10/MMBtu on Wednesday. South Korea's POSCO issued a tender Wednesday seeking a March 2-5 cargo for delivery into Gwangyang terminal. The tender closes January 29, with validity until January 30. But there was continued supply uncertainty during the week when potential issues at a US project was reported. In a critical notice Tuesday, Creole Trail Pipeline, which supplies natural gas feedstock to the Cheniere Energy's Sabine Pass liquefaction facility, said that an unscheduled maintenance would reduce transmission capacity through a critical compressor station from Wednesday to Friday. In an updated notice Wednesday morning, the pipeline announced an adjustment to the maintenance restriction, modestly easing flows on the pipe through the remainder of the event.

China's 2017 natural gas production rises 7.7%, Dec up 2.3% - China's domestic natural gas output rose 7.7% year on year to reach 147.42 billion cubic meters in 2017, according to the National Bureau of Statistics of China (NBS). Domestic gas output has been rising through the current decade, registering a 56% jump from 94.48 Bcm in 2010. In December alone, gas production stood at 13.61 Bcm, up 2.3% year on year and 7.8% on month and the highest monthly figure since 2010. The growth in natural gas usage has accelerated in recent years against the backdrop of coal-to-gas switching policies spurred by the Chinese government designed to combat pollution. Meanwhile, robust winter gas demand and widespread shortages in northern China have pushed average domestic trucked LNG prices in China up nearly 50% since mid-November, according to Shanghai Petroleum and Natural Gas Exchange, which monitors trucked LNG transactions from 50 LNG terminals and factories. Domestic trucked LNG prices in the colder northern regions hit a record high of nearly Yuan 10,000/mt due to severe regional supply imbalances and infrastructure bottlenecks, according to sources. However, the domestic price surge did not last long, with a rapid downward correction seen after the government eased restrictions on thermal coal usage for power generation coupled with the resumption in pipeline gas flows from Central Asia. Average domestic trucked LNG prices in China reached a peak at Yuan 7,472/mt on December 22, 2017, before plunging 24.3% to Yuan 5,660/mt on January 19, according to Shanghai Petroleum and Natural Gas Exchange.  

50 South East Asian Fields 'Likely' to be Approved for Development to 2020 -- Fifty oil and gas fields in South East Asia (SEA) will likely be approved for development during the three-year period from 2018 through 2020, according to Rystad Energy.These fields, which are said to hold a collective 4 billion barrels of oil equivalent resources, will require $28 billion of capital expenditure (CAPEX) from final investment decision (FID) to first production, Rystad revealed.With 19 fields, Indonesia has the largest count in the SEA FID forecast, although Malaysia dominates the tallies for both the resources developed (37 percent) and required CAPEX (42 percent).Gas makes up 85 percent of the resources reaching FID over the full period, Rystad highlights, with the largest gas ‘kick’ in 2018 coming from Vietnam.“Strong economic growth has led to burgeoning domestic gas demand throughout the region,” Readul Islam, research analyst at Rystad Energy, said in an organization statement.“The resulting uptick in local gas prices as well as the pollution profile of the fuel compared to alternatives means both operators and governments are incentivized to push natural gas projects,” Islam added.Several of the 50 projects are later phases of earlier developments, with the largest infrastructure already in place, Rystad stated.

Ban on dirty oil residue is billion-dollar worry for refiners - Scraping the bottom of the oil barrel for cheap fuel may be turning into a multi-billion-dollar headache for India’s largest crude refiner. The South Asian nation’s battle against pollution has left Indian Oil Corp. searching for alternative markets to sell petroleum coke, the cheapest and dirtiest among the oil products. A host of new limits on the fuel’s use in India, including bans and increased taxes, have been adopted after refiners in the fastest growing oil consumer built plants to process the “bottom of the barrel” fuel. . With tighter emissions controls from China to Indonesia, oil processors across Asia are being rocked by constantly changing rules on what they can produce as governments strive to breathe clean air into some of the world’s most polluted cities. Petcoke took off in India after the government began limiting coal use to reduce carbon emissions. Consumption of the oil residue has quadrupled since 2011, with the fuel being used by cementmanufacturers, captive power generators, and small manufacturing industries who see it as a low-cost coal alternative. Last year, India used 25 million tons of petcoke, making the country the world’s biggest market for the crude waste product, with imports from the U.S. to China surging. “Since coal can be substituted by petcoke, the usage in cement industries increased in India, especially after imported coal prices rose in the recent years,” said Satnam Singh, director for energy at CRISIL Infrastructure Advisory. During that time, Indian Oil built the world’s largest delayed-coker unit with the ability to produce as much as 1.3 million tons of petcoke a year. The state-run refiner now has similar units across seven of its nine refineries and is investing $480 million to add another in eastern India. The plants enable Indian Oil to process the heavy, high-sulfur crude, or the worst of the oil, and turn it into higher quantities of a more valuable product. The fuel contains more sulfur than in coal and natural gas, exposing people to the risk of stroke, heart disease and lung cancer. Pollution in New Delhi skyrocketed last year, with the level of deadly carcinogenic pollutants roughly 10 times than in Beijing. As public opposition mounted, India’s top court banned the use of petcoke in Delhi and three neighboring states in October, with the Supreme Court adding it would like to see its use prohibited across the country. The government also removed tax exemptions and raised the levy on its imports last month.

Sunken Iranian tanker could cause 'irreversible' environmental damage after leaving oil slick the size of Paris --An Iranian oil tanker that sank in flames off the east coast of China is thought to be leaking heavy bunker fuel, raising fears of an environmental disaster. Experts warned “irreversible” damage to marine wildlife was possible after the ship sank on Saturday, leaving behind an oil slick the size of Paris. The Sanchi had drifted ablaze for eight days after a collision with a freighter in the East China Sea, one of the worst oil ship disasters in decades. The tanker’s crew of 30 Iranians and two Bangladeshis are all believed to have died. At the time of the crash, the Sanchi was carrying 136,000 tons – almost one million barrels – of condensate, an ultra-light, highly flammable crude oil. The Chinese State Oceanic Administration (SOA) said five oil slicks with a collective area of 101sq km had been spotted on Wednesday, although they had shrunk to about a quarter of the size by the next day. Authorities said bunker fuel, a heavy oil used in ship’s engines, was now also believed to have leaked from the vessel since it sank. The Sanchi is thought to have been carrying about 1,000 tons of bunker fuel, which is toxic to marine organisms and difficult to remove from the sea once spilled. Experts said the scale of the environmental damage would not be clear until the volume of leaked fuel was known, but warned fisheries and marine life could be impacted for years to come. Paul Johnson, research fellow at Greenpeace International’s Science Unit at the University of Exeter, said bunker fuel was “particularly dangerous to birds and other wildlife”, and could sometimes be fatal if encountered by whales, dolphins and porpoises. He told The Independent: “The major impact is going to be living marine organisms that are exposed to the oil slick, which is quite a big one now. It’ll taint fish, it’ll kill fish. If cetaceans encounter it they could be at very severe risk of doing themselves some serious damage.” 

An Oil Slick Off the Coast of China Has Tripled in Size - The spill from a sunken Iranian tanker off China's east coast has more than tripled in size, just over a week after the ship sank in a ball of flames. Authorities spotted three oil slicks with a total surface area of 332 square kilometers (128 square miles), compared to 101 square kilometers reported on Wednesday, the State Oceanic Administration said in a statement late Sunday. The Sanchi, which was carrying 111,000 metric tons of light crude oil from Iran, collided with Hong Kong-registered bulk freighter the CF Crystal in early January, setting off a desperate race by authorities to search for survivors and stave off a massive environmental catastrophe. The amount was revised down from the original estimate of 136,000 metric tons, the Ministry of Transportation said Friday. The bodies of only three of the ship's 30 Iranian and two Bangladeshi crew members have been found. Three coast guard vessels were on the scene Sunday night assessing the spill, the oceanic administration said. The type of condensate oil carried by the Sanchi does not form a traditional surface slick when spilt, but is nonetheless highly toxic to marine life and much harder to separate from water. The area where the ship went down is an important spawning ground for species like the swordtip squid and wintering ground for species like the yellow croaker fish and blue crab, among many others, according to Greenpeace. It is also on the migratory pathway of numerous marine mammals, such as humpback and grey whales. While the accident is unlikely to have a significant impact on the coastal ecology, it has already had an effect on marine life, said Liu Hongbin, a professor at Ocean University of China. "But, it is necessary to do more observation to know how big the concrete impact will be," Liu said.

Peak Oil Demand Is A Slow-Motion Train Wreck - The precise date at which oil demand hits a high point and then enters into decline has been the subject of much debate, and a topic that has attracted a lot of interest just in the last few years. Consumption levels in some parts of the world have already begun to stagnate, and more and more automakers have begun to ratchet up their plans for electric vehicles.But the exact date the world will hit peak demand kind of misses the whole point, argues a new report, which is notable since it is coauthored by BP’s chief economist Spencer Dale, along with Bassam Fattouh, the director of The Oxford Institute for Energy Studies.They argue that the focus shouldn’t be on the date at which oil demand peaks, but rather the fact that the peak is coming at all. “The significance of peak oil is that it signals a shift from an age of perceived scarcity to an age of abundance,” they wrote. In other words, oil won’t be on the only game in town when it comes to fueling the global transportation system, which will have far-reaching consequences for oil producers and consumers alike.The exact date is unknowable, and in any event, the year in which the world does hit peak consumption won’t result in some abrupt “discontinuity of behavior,” the report argues. Demand growth will slow and then decline, but probably won’t fall off a cliff. So, the exact date of peak oil demand is “not particularly interesting.” Nevertheless, the implications of a looming peak in oil consumption are massive. Without an economic transformation, or at least serious diversification, oil-producing nations that depend on oil revenues for both economic growth and to finance public spending, face an uncertain future. And slowing demand growth is occurring at a time when supply is less of a concern than it used to be, in large part because new drilling technologies have led to a wave of supply from shale. “The world isn’t going to run out of oil. Rather, it seems increasingly likely that significant amounts of recoverable oil will never be extracted,” the authors wrote.

Oil producers will cooperate beyond 2018, says Saudi Arabia -(Reuters) - Global oil producers are in agreement that they should continue cooperating on production after their deal on supply cuts expires at the end of this year, Saudi Arabia’s energy minister Khalid al-Falih said on Sunday. It was the first time Saudi Arabia, the world’s top oil exporter, had publicly stated OPEC and non-OPEC producers would keep cooperating after 2018. The exact mechanism for cooperation next year has not yet been decided, Falih said, but if oil inventories increase in 2018 as some in the market expect, producers might have to consider rolling the supply cut deal into next year. “There is a readiness to continue cooperation beyond 2018... The mechanism hasn’t been determined yet, but there is a consensus to continue,” Falih said after a meeting of the joint ministerial committee which oversees implementation of the cuts. The committee comprises Saudi Arabia, Kuwait, Venezuela and Algeria, plus non-OPEC producers Russia and Oman. The United Arab Emirates was also present on Sunday as it holds the presidency of OPEC. Before the meeting, Falih said extending the cooperation framework beyond 2018 wouldn’t necessarily mean sticking to countries’ current production targets. The agreement was launched last January and Saudi Arabia has accounted for by far the largest share of the output cuts. Falih said a deal on production levels after 2018 would be about “assuring stakeholders, investors, consumers and the global community that this is something that is here to stay. And we are going to work together.” Kuwait’s oil minister Bakheet al-Rashidi said Sunday’s meeting focused on compliance with the current agreement on output cuts, and discussion of the deal’s future was expected to occur in June, when OPEC and other producers led by Russia are next scheduled to meet on oil policy. Oman’s oil minister Mohammed bin Hamad al-Rumhi said producers would discuss in November whether to renew their supply agreement or enter a new type of agreement. Oman is in favor of a new deal, he said without elaborating. 

Prospect of shale wave looms over resurgent oil prices - While oil prices continue their claw back this month, there is concern in the industry that as the market rebounds, some producers in the U.S. will turn on the taps and flood the market with oil and once again stymie the recovery.The North American benchmark for crude oil opened at over $60 US per barrel at the start of the year and has continued to hover comfortably above that mark through January.While higher oil prices may not be welcomed by consumers, it's good news for a sector that has laboured under a massive supply glut which weighed mightily on the market until recently. But still looming over the recovery is United States shale oil, which played a key role in helping create the glut and was blamed for killing a short-lived rally early last year.The concern is that the current resurgence will renew interest in more costly, second-tier shale projects that were shelved after prices tanked in 2014."Prices over US$60 per barrel will lead to more U.S. shale production," said a research note from TD Economics this month."With production on the rise in the U.S. — in addition to increases in Canada, Brazil and the North Sea — it is unlikely that prices will stay above that threshold on a sustained basis. "What's more, with such a high level of speculation in the market, the risks for prices are heavily skewed to the downside." American energy reports released in recent days suggest U.S. shale production is gaining momentum. On Tuesday, the U.S. Energy Information Administration forecast said U.S. shale oil production will grow by 111,000 barrels a day to nearly 6.6 million in February. That's good news for the U.S. economy, which continues to churn and consume energy, drawing down domestic stockpiles. For some, the question now is whether the shale sector can continue at this pace. The rapid growth has stirred concerns that the industry is already peaking and that production forecasts are too optimistic.

Oil Traders Have Never Been This Bullish -- Net long bets on WTI and Brent hit over 1 billion barrels last week. Speculators are apparently falling over themselves to pour money into these two futures. And prices are reacting as they usually do when large amounts of money are betting on these two contracts or pulling out of them. Is this good news for producers, though?According to some authors, such as Bloomberg Gadfly’s Liam Denning, it’s pretty good news for U.S. shale drillers, who are hedging their production at higher prices, and it should be good news for OPEC and Russia as well. OPEC has a habit of complaining about speculators’ clout on the oil market, but now, Denning argues, the cartel should be grateful to the money managers for supporting prices.  They should be grateful not just because Brent is now hovering around US$70 a barrel, but also because near-dated contracts are now more expensive than longer-dated ones, and OPEC sells most of its crude on the spot market.Yet, as Oilprice wrote earlier this week, there are those who don’t believe the current level of oil prices is something that OPEC is happy about. Prices, analysts argue, have soared too high for OPEC’s comfort, and now the cartel may be looking for ways to “talk the price down,” as Citi’s Ed Morse told Bloomberg. In other words, OPEC has no reason to be grateful to speculators about their record-high number of long positions. On the contrary, it has a reason to be angry at them.  But, some observers of events on the oil market note, why would OPEC, or rather Saudi Arabia, want to talk prices down ahead of Aramco’s IPO? It doesn’t make sense to actively try and push prices down when Riyadh is going all in on a massive economic reform program that will be funded with the proceeds from the IPO.

Hedge fund trade in oil becomes very crowded – Kemp (Reuters) - Hedge funds added to their record bullish positions in petroleum in the week to Jan. 16, continuing the recent wave of buying, but the extra long positions were almost entirely confined to U.S. crude rather than Brent or refined fuels.Hedge funds and other money managers increased their net long position in the six most important futures and options contracts linked to crude and fuels by a total of 41 million barrels.The net long position in Brent, NYMEX and ICE WTI, U.S. gasoline, U.S. heating oil and European gasoil contracts has surged by a massive 1,130 million barrels since the end of June 2017.Since the start of the year, however, most of the increase has come from WTI rather than Brent or refined fuels, according to position data released by regulators and exchanges ( net long positions in petroleum have risen by 109 million barrels in the two most recent weeks, with WTI accounting for 87 million barrels.The remainder has mostly come from U.S. gasoline, where hedge funds have boosted their net long position by almost 15 million barrels.Net positions in Brent, U.S. heating oil and European gasoil are near record highs but have changed little since the start of the year.There is an element of catching up in the position-building in WTI, which has traded at a large and persistent discount to Brent since July and was shunned by portfolio managers until recently.The hedge funds’ net long position in WTI increased from 455 million barrels to 542 million barrels between Jan. 2 and Jan 16 compared with only a minor increase in Brent.As a result, the net position in WTI has now risen by 385 million barrels since the end of June, comparable to the increase of 371 million barrels in Brent.WTI position-building has corresponded with a narrowing of the prompt Brent-WTI premium, which has fallen from a high of almost $6.50 per barrel towards the end of last year to less than $5.30.But across the petroleum complex as a whole, hedge fund positions look increasingly stretched, with fund managers holding almost 10.5 long positions for every short one.Experience suggests such lopsided positions, either long or short, are normally followed by a sharp reversal in prices when some portfolio managers attempt to realise their profits.

Crude oil futures find support from OPEC, non-OPEC meeting - Crude oil futures were largely steady in European morning trading, Monday, garnering support from comments at the OPEC, non-OPEC monitoring committee meeting in Oman on Sunday after falling over the course of last week. At 1215 GMT, March ICE Brent futures were down 7 cents (0.10%) from Friday's settle at $68.54/b, and the NYMEX February WTI contract was down 2 cents (0.03%) at $63.35/b. Comments from Saudi Arabia's energy minister Khalid al-Falih backing OPEC and its non-OPEC partners continuing their output pact beyond 2018 were supportive "We need to see the confidence level of investors within the companies and financial community improving about the long-term prospects of the market, and that is why my guidance to my colleagues is that we should not limit our efforts to 2018," Falih said. A framework for cooperation remains to be defined and could come in a different format than the production caps and targets agreed in 2016, he added. Falih's comments were backed his Russian counterpart, Alexander Novak, who said he believes that "there is benefit to everyone in continuing dialog and interaction." "We believe that it can stay in consultations or in a different framework which will benefit all the consumers and the market," Novak said. OPEC and its 10 non-OPEC partners dismissed rumors that the group is planning to revise or end its deal to curb production before it is due to expire at the end of 2018. "We still have more than 100 million barrels [of oil inventories] to remove, so prior to doing that let's not jump the gun," UAE Energy Minister Suhail al-Mazrouei said.

Crude oil prices rise above peak gains Oil prices climbed on Monday, pushed higher by Saudi Arabia’s comment that cooperation between oil producers currently withholding supplies would continue beyond 2018. Strong global economic growth and a drop in U.S. drilling activity also supported crude oil price, traders said. Brent crude futures were at 68.89 dollars a barrel at 0315 GMT, up 25 cents, or 0.4 per cent from their last close. Brent on Jan. 15 rose to 70.51 dollars, its highest since December 2014. U.S. West Texas Intermediate (WTI) crude futures were at 63.61 dollars a barrel, up 24 cents, or 0.4 per cent, from their last settlement. WTI climbed to 64.89 dollars on Jan. 16, also its highest since December 2014. Saudi Arabia, the world’s top oil exporter and de-facto leader of the Organization of the Petroleum Exporting Countries (OPEC), said on Sunday that major oil producers were in agreement that they should continue cooperating on production after their deal on supply cuts expires this year. “There is a readiness to continue cooperation beyond 2018…The mechanism hasn’t been determined yet, but there is a consensus to continue,” Saudi Arabia’s Energy Minister Khalid al-Falih said in Oman. A group of oil producers including OPEC and Russia, started to withhold production in January last year to prop up prices. The deal is set to expire at the end of 2018. In the United States, declining drilling activity for new oil production further supported crude. U.S. drillers cut five oil rigs in the week to Jan. 19, bringing the count down to 747, energy services firm Baker Hughes said on Friday. 

OPEC Drives Oil Prices Back Up - Oil prices have recovered after suffering losses late last week. Statements emerging from the OPEC meeting in Oman seemed to shore up confidence in the group’s efforts this year, after a long list of oil analysts raised the prospect of wavering compliance and cohesion. Saudi oil minister Khalid al-Falih said over the weekend that the coordination among OPEC and with Russia and other non-OPEC partners should continue beyond this year. “We should not limit our efforts to 2018. We need to be talking about a longer framework for our cooperation,” he said. The comments eased fears of faltering compliance with the production cuts. But al-Falih said his desire was to solidify long-term coordination to bolster confidence among the oil industry to invest in new upstream projects. The comments suggest that OPEC and Russia, at a minimum, could keep the cuts in place into 2019. “Keeping some level of production cuts into 2019 is the kind of thing that makes sense,” Robin Mills, CEO of Qamar Energy, told Bloomberg. “Just abandoning the deal at the end of 2018 would put a lot of oil back on the market.”  Adding another voice to the peak oil debate, Bank of America Merrill Lynch predicts that the world will hit peak oil demand by 2030. At that point, EVs will account for 40 percent of auto sales. “Electric vehicles will likely start to erode this last major bastion of oil demand growth in the early 2020s and cause global oil demand to peak by 2030,” the analysts wrote in an emailed report.  China’s switch from coal to natural gas is adding a lot of demand to the global gas market, pushing up LNG prices to three-year highs. China has made significant headway in shutting down dirty coal plants, but as gas consumption ramps up, the country has had trouble finding enough gas. As China gobbles up more LNG cargoes, LNG prices are rising quickly. “We were optimistic on the opportunity in China, but the magnitude surprised us,” Anatol Feygin, chief commercial officer at U.S. LNG exporter Cheniere Energy told the Wall Street Journal. LNG prices in Asia rose to $11.70/MMBtu, the highest price since November 2014.

Crude oil futures edge up on IMF global growth forecast - Crude oil futures were moving higher in European trading on Tuesday on figures showing an improved global economic outlook, but remained rangebound as the market awaited more definitive data such as US crude stocks, which are due for release later in the day. At 1200 GMT, ICE March Brent crude futures were up 24 cents from Monday's settle at $69.27/b, while the new front-month NYMEX March light sweet crude contract was up 21 cents at $63.78/b. "We are taking a breather around the $70/b mark, and you have the US dollar index decline halted but still weak -- so the question is, have we reached the top?" chief commodities analyst at SEB bank Bjarne Schieldrop said. He pointed to US oil inventory data as being a key factor which could halt the bullish price sentiment at the moment. "Looking at inventories over the last year, the deep draws were in the middle of last year and and now it's more of net draw, which could be a reflection that the US production accelerated strongly from August to December, if you extrapolate it," he said, adding that US shale production rises continued to be the counterbalance to the production cuts enacted by OPEC and non-OPEC countries in an effort to reduce global crude stocks. The first batch of US crude and product stocks data for the week is due for release by the American Petroleum Institute later Tuesday and the more definitive numbers from the US Energy Information Administration on Wednesday.

WTI/RBOB Slide After Surprise Crude Inventory Build -- Oil closed at a 3-year high heading into tonight's inventory data, but WTI/RBOB faded after API reported a surprise crude build (after 9 straight weekly draws). Gasoline inventories rose for the 11th week as Cushing stores fell again.Underpinning the price rally were also assurances from Russian and Saudi Arabian oil chiefs that a historic production accord by the world’s largest producers will endure.The comments from Saudi Arabia and Russia quell investors’ “concerns about OPEC discipline deteriorating. That should be welcome news,” Paul Crovo, a Philadelphia-based oil and equity analyst at PNC Capital Advisors LLC, said by telephone. “Inventories continue to go down. That’s all good news.” API:

  • Crude +4.755mm (-2mm exp) - biggest build since September
  • Cushing -3.572mm(-2.2mm exp)
  • Gasoline +4.117mm (+2.2mm exp) - 11th weekly draw in a row
  • Distillates -1.28mm (-1.1mm exp)

The streak of crude draws ends at 9... If this data holds up for DOE tomorrow, this will be the 11th weekly gasoline build in a row...

Oil Pares Gains After API Reports Surprise Crude Inventory Build -- The American Petroleum Institute (API) reported a surprise build of 4.755 million barrels of United States crude oil inventories for the week ending January 17, ending the streak of seven large draws in the previous seven weeks, according to the API data. Analysts had expected a drawdown of 1.6 million barrels in crude oil inventories.Last week, the American Petroleum Institute (API) reported a huge draw of 5.121 million barrels of crude oil, along with an increase in gasoline inventories of 1.782 million barrels.This week, the API is reporting another build in gasoline inventories of 4.117 million barrels for the week ending January 17. Analysts had expected a smaller 2.486-million-barrel build.The WTI and Brent benchmarks both saw big gains on Tuesday as the IMF painted a rosy picture of the global economy for 2018 and 2019. At 3:27pm EST, WTI was trading up 1.75% (+$1.11) at $64.68. The Brent benchmark was trading up 1.52% ($1.05) at $70.08—the over-$70-threshhold being a significant psychological level to break through, and a new multi-year high for the closely watched international benchmark.Distillate inventories saw a decrease this week of 1.280 million barrels, largely in line with the forecast for a 1.471-million-barreldecline.Inventories at the Cushing, Oklahoma, site decreased by 3.572 million barrels this week. While US crude oil inventories are up for the week, production for week ending January 12 is also up, coming in at 9.750 million bpd.

Largest Oil Consumers Not In A Rush To Hedge Crude -- Four major airlines have said they have no plans to hedge fuel deliveries despite higher oil prices. These include Delta, American, United, and Dubai’s Emirates. This may suggest the airlines do not believe the current price increase will be a resilient, long-term one. On the other hand, for at least one of the airlines, it’s just how they do business.“We have not hedged since the merger and our philosophy has not changed. We are the largest purchaser of jet fuel and we think we would be bidding against ourselves. The market is quite thin beyond 12 months,” said American Airlines’ managing director and assistant treasurer, Amelia Anderson, speaking at a panel during the Airline Economics conference in Dublin.AirAsia’s CEO Tony Fernandes shares the sentiment. In a Bloomberg interview he said that after airlines have had to deal with WTI at over US$100 a barrel, WTI at US$66 is “still a honeymoon period.” Fernandes added that the airline is not worried about the future price developments because of the strong U.S. shale production, the oil demand outlook, and the gas demand outlook. The comments of the airline executives come on the heels of IMF’s latest world economic outlook, which forecast the world’s economy will grow by 3.9 percent, a 0.2-percentage-point upward revision.

OPEC Supply Cut Target: Stop Trying To Guess The End - Speaking Tuesday on the sidelines of the World Economic Forum in Davos, Saudi Arabia's energy minister, Khalid Al-Falih, said OPEC needed to extend its cooperation with several non-OPEC producers on managing supply "beyond the current agreement." As for Saudi Arabia's recently established alliance with Russia, Al-Falih sees this lasting "decades and generations." Al-Falih was echoing comments he made last weekend in Muscat, when -- apart from urging members of the so-called Vienna Group of OPEC and non-OPEC members to consider cooperating beyond this year -- he also raised questions about the target they should be pursuing. Right now, it's the five-year average of commercial oil inventories in the OECD. But, as he said, that's a dynamic target influenced by the very glut OPEC seeks to eliminate (something I pointed out here). He held out the possibility that any extended agreement might target different levels of production or inventories. The original six-month agreement announced in November 2016 has now been running for more than a year and was extended recently to the end of 2018. Now, though, there appears to be a new timescale: forever.

Crude oil futures steady ahead of US EIA stock data Crude oil futures were largely steady in European morning trade Wednesday, as markets awaited a fresh update from the the US Energy Information Administration on weekly US crude and product inventories. At 1130 GMT, the March ICE Brent futures contract was down 5 cents/b (0.07%) from Tuesday's settle at $69.91/b, while the new front-month NYMEX March contract had gained 19 cents/b (0.29%) and was trading at $64.66/b. Crude oil markets will be watching US stock data expected later Wednesday in order to get a sense of direction. So far this week, front-month ICE Brent futures have swung between Monday's low of $68.39/b and a high of $70.24/b Tuesday. Market sentiment could soften if last week's rise in US crude oil stocks reported by the American Petroleum Institute appear to be validated by the EIA's official data. API data released Tuesday showed a surprise 4.8 million-barrel increase in US crude inventories, the first rise reported after seven weeks of draws. "If the official inventory data of the US Department of Energy were also to show an inventory build when published this afternoon, this would even be the first in ten weeks," Commerzbank analysts said in a report. "Crude oil processing by US refineries is likely to decrease further in the coming weeks. This points to rising US crude oil stocks and is likely to prompt speculative financial investors to reduce their record-high net long positions," the Commerzbank report said, concluding that "oil prices should then come under pressure." Prices were buoyed this week by comments that OPEC and its allies could extend their efforts and continue to monitor crude oil production beyond the end of their ongoing deal.

Weekly Petroleum Report -- EIA -- January 24, 2018 ---Data at this link:

  • crude oil drawdown: 1.1 million bbls; now at 411.6 million bbls; still at the middle of the range for this time of year
  • Cushing crude stocks fell 3.15 million bbls to 39.2 million bbls; this is a huge drop; nearing the 10-year median
  • refineries: operated at 90.9% operable capacity (way down)
  • motor gasoline supplied over last four weeks: 8.7 million bpd, up 5%
  • distillate fuel product supplied: 4.0 million bpd, up over 15% (can you say "cold snap in New England?)
Natural gas prices:

WTI Tops $65 For First Time Since Dec 2014 After Crude Draw, Production Record - After API reported a surprise crude build overnight, all eyes are on the DOE data this morning which showed a smaller than expected crude draw (-1.07mm vs 2.32mm exp) but still a draw (for the 10th week in a row) compared to API's build.As Bloomberg's Julian Lee notes, cold weather and a growing list of refineries undergoing maintenance probably cut crude intake for a third week. Along with rising production, this could be enough to halt the downward trend in inventories - at least for now. DOE

  • Crude -1.07mm (-2.32mm exp)
  • Cushing -3.15mm (-2.2mm exp)
  • Gasoline +3.1mm (+2.2mm exp)
  • Distillates +639k (-1.1mm exp)

DOE data flipped the narrative from API and saw the 10th weekly crude draw in a row (though smaller than expected) and 11th weekly gasoline draw in a row..

US oil prices top $65 a barrel for the first time since December 2014 - U.S. crude prices topped $65 a barrel for the first time in more than three years on Wednesday after government data showed the tenth straight weekly drop in U.S. stockpiles of crude oil. U.S. West Texas Intermediate crude futures ended Wednesday's session up $1.14, or 1.8 percent, at $65.61 a barrel. The settlement marked the highest closing level since Dec. 5, 2014.International benchmark Brent crude rose 59 cents, or 0.8 percent, to $70.55 by 2:28 p.m. ET. The contract also touched a new three-year high on Wednesday.Oil prices turned higher after the U.S. Energy Information Administration reported that U.S. commercial crude stockpiles fell by 1.1 million barrels in the week through Jan. 19. That put total inventories at 411.6 million barrels, the lowest since February 2015, according to Reuters. That was below analyst estimates for a drop of 1.6 million barrels in a Reuters poll, but the report eased traders' worries after industry data released on Tuesday suggested that stocks rose by 4.8 million barrels. The report was further evidence that production limits by OPEC, Russia and several other oil-producing nations are achieving their goal of shrinking stockpiles in developed countries.The drop also comes at a time of synchronized global economic growth that is raising hopes about demand for oil. Exports of U.S. crude have mostly held above 1 million barrels a day since the end of September.The EIA report "was decent enough in terms of the oil drawdowns at the key points in the Gulf Coast and Cushing," the delivery hub for WTI, said John Kilduff, partner at energy hedge fund Again Capital."Underpinning this is this weakened dollar," he added. "It's an incredible move in the dollar that's propping up commodity prices in general."

Futures: Crude back on 2014-high on EIA data, weaker US dollar -- Front-month ICE Brent and NYMEX crude oil futures spiked overnight, breaching the $70/b and $66/b levels, respectively, and extended their bull run Thursday morning in Asia on a weaker US dollar and lower US crude stocks. At 10:57 am Singapore time (0257 GMT), ICE March Brent crude futures were up 40 cents/b (0.57%) from Wednesday's settle to $70.93/b, while the NYMEX March light sweet crude contract was up 54 cents/b (0.82%) at $66.15/b. US crude inventories fell for the 10th consecutive week by 1.071 million barrels to 411.583 million barrels in the week ended January 19, Energy Information Administration data showed Wednesday. Analysts surveyed by S&P Global Platts had expected a 1.6-million-barrel draw. US distillate stocks rose 639,000 barrels to 139.84 million barrels in the same week. Distillate stocks were expected to have declined by 2.5 million barrels. US gasoline stocks increased 3.098 million barrels to 244.04 million barrels, versus analysts' expectations of a 2.1-million-barrel build, EIA data showed. US exports rose 162,000 b/d last week to 1.411 million b/d, helping to drawdown stocks. Higher exports have created an outlet for US production, which averaged 9.878 million b/d last week, up 917,000 b/d year on year. In additional to the EIA release, a weaker dollar may spur buying interest as crude is priced against the US dollar, industry source said. "Currency markets were in focus today, with US Treasury Secretary Mnuchin sparking a dollar sell-off after comments the US would be comfortable with a lower USD," ANZ bank said in its morning report Thursday. 

OPEC's output restraint tightens oil inventories and spreads (Reuters) - OPEC and its allies insist more needs to be done to reduce global oil inventories but the market already shows unmistakeable signs of becoming very tight. Brent futures have moved into the largest and most sustained backwardation since June and July 2014, before the slump began and when the spot price was still trading above $100 per barrel. The six-month calendar spread closed in a backwardation of $2.50 per barrel on Jan. 24, up from a contango of $1.85 twelve months ago ( ). Brent spreads regularly cycle between contango and backwardation as the global oil market alternates between periods of over- and under-supply. Contango is associated with periods of high and rising stocks while backwardation is associated with low and falling inventories. The current six-month spread is already in the 83rd percentile of the entire distribution from 1990 through 2018, a sign traders think stocks are tight and will tighten further. Until recently, spreads in U.S. crude (WTI) lagged behind Brent, reflecting the high levels of stocks around the WTI contract's delivery point at Cushing in Oklahoma. But stocks at Cushing have drawn down sharply over the last two and a half months, from more than 64 million barrels to just 39 million barrels. Cushing crude stocks are now 26 million barrels below the same point in 2017, according to an analysis of data from the U.S. Energy Information Administration (EIA). Cushing stocks are less than 2 million barrels above the 10-year average, down from almost 30 million barrels over the seasonal average at the start of November. Over the same period, the six-month WTI calendar spread has swung into a backwardation of more than $2.50, from a small contango 12 weeks ago, catching up with Brent. Tightening stocks and spreads on U.S. crude have narrowed the discount between WTI and Brent spot prices to less than $5 per barrel from more than $7 late last year. 

Weak Dollar Drives The Oil Rally - Defying gravity, WTI and Brent soared to new heights this week, pushed along by an unlikely ally: U.S. Treasury Secretary Steven Mnuchin.  Mnuchin surprised reporters when he seemed to express support for a weaker U.S. dollar, which flies in the face of longstanding U.S. government policy supporting a strong greenback. The dollar dropped sharply on the news, raising fears of a campaign by the U.S. to push down its currency to gain an edge in exports.There has long been a solid link between the direction of the U.S. dollar and oil prices. Because oil is denominated in dollars, a weaker dollar makes oil more attractive to all other currencies. That helps stoke demand for crude, so when the dollar drops, oil tends to rise. As such, the decline of the dollar helped push WTI and Brent to new multi-year highs this week.Mnuchin tried to slightly walk back his comments on Thursday, clarifying that there was no policy change. “There are benefits of where the dollar is and there are costs of where the dollar is,” Mnuchin said at the World Economic Forum in Davos. “It’s not a shift in my position on the dollar at all. It is perhaps slightly different from previous Treasury secretaries.” The timing was also notable. The comments came just days after the Trump administration slapped tariffs on solar panels, which stoked concern about tit-for-tat protectionism. And when asked, U.S. Secretary of Commerce didn’t exactly shoot down questions about a brewing trade war. "Trade wars are fought every single day," Secretary of Commerce Wilbur Ross said in Davos. "So a trade war has been in place for quite a little while, the difference is the U.S. troops are now coming to the rampart."

The Oil Rally Continues Unabated - Oil prices rose this week on the back of a weakening dollar – thanks to comments from the U.S. Treasury Secretary supporting a weaker greenback – and ongoing declines in U.S. inventories. Saudi oil minister accuses IEA of overhyping shale. Saudi oil minister Khalid al-Falih made headlines on Thursday when he said at the World Economic Forum that the IEA had an “oversized focus” on U.S. shale growth. He implied that the IEA was hyping the threat of U.S. shale. “I was not disputing the amazing revolution of shale . . .[but] in the overall global supply demand picture it’s not going to wreck the train,” al-Falih said in Davos. “We should not be scared,” he added. “That’s the core job of the IEA, not to take it out of context.” The statement prompted retorts from top IEA officials that shale was indeed one of the biggest “game changers” in the energy industry in the past decade. Al-Falih noted that it was highly unlikely that OPEC would abandon the production cuts before the end of the year.  Energy stocks lagged the broader S&P 500 last year, but are up more than 20 percent in the past six months. With demand rising, some market analysts see more gains ahead, even if oil prices fail to move higher. Because of the poor performance last year, energy stocks have some catching up to do and could continue to outperform the broader market. “[W]e don’t think oil needs to move higher,” Ben Kallo, energy analyst at Baird, told the WSJ. “Rather, oil just needs to avoid another correction.” Russian authorities ordered to return to previous lower production limits at its Sakhalin-1 project in Russia’s far east, according to Reuters. The justification was not exactly clear, but likely it was the result of Russia trying to maintain compliance with the OPEC production cuts. Exxon had initially received approval to ramp up production from 200,000 bpd to 250,000 bpd, but Russian authorities ordered the company to scale it back.

US Rig Count Rises As Oil Holds Firm - The number of active oil and gas rigs rose this week, according to Baker Hughes data, increasing by 11 total rigs. This brings the total number of oil and gas rigs to 947, which is an addition of 235 rigs year over year.The number of oil rigs in the United States rose by 12 this week after falling last week. The number of gas rigs decreased by a single rig. The number of oil rigs stands at 759 versus 566 a year ago. The number of gas rigs in the US now stands at 188, up 145 a year ago.At 11:19am EST, the price of a WTI barrel was trading up $0.47 (+0.72%) to $65.98—almost $2.00 above this same time last week. The Brent barrel, on the other hand, was trading down $0.03 (-0.04%) to $69.94.US crude oil production rose again, to 9.878 million bpd, from 9.750 million bpd the week before, setting another new high.  Canada has seen severe swings in its active oil and rig count in weeks past. But the last three weeks have seen steady gains. In the two weeks prior, Canada added more than 200 oil and gas rigs. This week, Canada added another 13, bringing its total to 338, although the rigs are still down year over year. Canada’s oil and gas rig count from a year ago was 345. While oil rigs are up 20 year over year, gas rigs in Canada are down 27.The Permian basin rig count accounted for much of this week’s gains, increasing by 18 rigs this week, now standing at 427 rigs versus 291 rigs a year ago this week. The Marcellus basin a lso added 4 rigs, with Granite Wash adding one. Barnett, Cana Woodford, Eagle Ford, Haynesville, Mississippian, and Utica all lost rigs.

Texas adds 13 rigs as US rig count rises to 947 - ABC News: The number of rigs exploring for oil and natural gas in the U.S. rose by 11 this week to 947. That exceeds the 712 rigs that were active this time a year ago. Houston oilfield services company Baker Hughes reported Friday that 759 rigs drilled for oil this week and 188 for gas. Among major oil- and gas-producing states, Texas added 13 rigs, West Virginia increased by four, and New Mexico increased by three. Oklahoma lost four rigs, Louisiana lost three rigs, and Ohio and Utah each lost a single rig. Alaska, California, Colorado, North Dakota, Pennsylvania and Wyoming were unchanged. The U.S. rig count peaked at 4,530 in 1981. It bottomed out in May of 2016 at 404.

Oil settles higher, posts weekly gain as weak dollar underpins- Oil prices settled higher on Friday after hitting three-year highs, with crude also posting a weekly gain as a weaker U.S. dollar underpinned prices. Brent crude futures settled up 10 cents, or 0.1 percent, at $70.52 per barrel after hitting a session high of $70.83. On Thursday, the contract climbed to as high as $71.28, its highest since 2014. U.S. West Texas Intermediate (WTI) crude futures closed at $66.14 a barrel, up 63 cents, or nearly 1 percent. On Thursday, they also reached their highest since December 2014, at $66.66. Brent posted a nearly 2.7 percent weekly gain, while WTI reached a weekly gain of 4.3 percent. “Technically, crude is a little overbought but it’s not causing a huge sell-off right now,” said Mike Sabo, senior market strategist at RJO Futures in Chicago. Both contracts strengthened after support from a weakening dollar, which hit three-year lows against a basket of currencies. [USD/] As oil is priced in dollars, a weaker greenback can boost oil demand, making prices less expensive for buyers using other currencies. “The dip in the dollar raises our expectations for Brent to remain at $70 for a little while longer,” said Bill O‘Grady, chief market strategist at Confluence Investment Management in St. Louis, Missouri. On the supply side, U.S. oil production was expected to soon hit 10 million barrels per day (bpd), putting it on a par with top exporter Saudi Arabia. U.S. oil drillers added 12 rigs this week, the biggest weekly increase since March, General Electric Co’s Baker Hughes energy services firm said in its closely followed report on Friday. Meanwhile, hedge funds have been increasing long positions steadily on expectations that tightening supply will keep prices buoyant. Money managers raised their net long U.S. crude futures and options positions in New York and London by 7,612 contracts to 549,602 in the week to Jan. 23, a new record high, the U.S. Commodity Futures Trading Commission (CFTC) said.

Russia may back Aramco IPO, enhance OPEC ties (Reuters) - Russian pension funds are considering investing in Saudi Arabian state oil major Aramco when it lists its stock in a move to strengthen the partnership between the world’s two top oil producers, Russia’s top state investment officer said. The head of Russia’s Direct Investment Fund, Kirill Dmitriev, told Reuters on Tuesday that Moscow and Riyadh should be coordinating oil policies for many more years. “We see great interest in the Aramco IPO from Russian pension funds as well as from our Chinese partners,” said Dmitriev, who two years ago was the first Russian official to suggest the possibility of a joint oil output deal with OPEC. He said he could not disclose the names of the funds or the amount they were prepared to invest. Sources told Reuters last year Chinese state oil companies were willing to become cornerstone investors in the Aramco IPO which could become the world’s biggest, valuing the firm at up to $2 trillion and raising more than $100 billion. “Russia already has significant positions in the oil business so it is hard to expect us taking a very significant stake during the IPO,” Dmitriev said on the sidelines of the World Economic Forum in Davos. He added that the deal would help strengthen growing cooperation with Riyadh. “Extending such cooperation for many more years would be very useful for the market. It has proven its efficiency, when we were targeting balancing supply and demand rather than targeting a particular oil price,” said Dmitriev. OPEC has said it wanted global oil stocks to return to a five-year average and the group’s officials have said that target could be reached by the middle or end of 2018. S But even when the target is reached, OPEC has insisted it would exit from cuts gradually in order not to shock the market. “Future mechanisms of cooperation and concrete tools could differ,” said Dmitriev. He said oil producers had generated an extra $600 billion in revenues thanks to oil cuts and higher prices over the past year, which allowed them to resume investments and guarantee no supply shortages in the future. 

Saudi corruption probe: Settlements expected to reach $100 billion -- SAUDI Arabia’s state coffers are set to receive a $124 billion boost with dozens of high-profile figures caught up in a corruption purge paying a high price for freedom. About 95 ministers, businessman and members of the Royal family remain detained at the glizty Ritz-Carlton, which has served a makeshift prison following the anti-corruption purge took last November. One official cited by Bloombergsaid authorities were hoping to finish talks with suspects as part of the probe by the end of this month. However, those who don’t reach a settlement deal will face prosecutors. The Saudi Government now looks set to reap the massive windfall from compensation payments, it has emerged. Attorney-General Sheikh Saud Al Mojeb said charges were due to be dropped against 90 of those held in the hotel. He said those who expressed remorse and agreed to settle will have criminal proceedings against them dropped. The Attorney-General also confirmed most of those detained had struck monetary settlements in exchange for their freedom and the settlements could boost state coffers by $US100 billion. Saudi daily Okaz, which has ties to the monarchy, also quoted an unnamed source as saying a number of high-profile detainees had been released from the Ritz-Carlton over the past 48 hours “after reaching settlements”. 

The Crown Price and the New Saudi Economy - When Prince Mohammed announced his highly ambitious national transformation plan in 2016, he promised to privatize state assets, create 1.2 million jobs in the private sector and cut unemployment to 9 percent by 2020. It was rehashing an old panacea — weaning the kingdom off its addiction to oil.Prince Mohammed has made progress. He has lowered obstacles to women’s participation in the work force, cut subsidies on utilities and raised indirect taxes. On Jan. 1, he increased fuel prices by over 80 percent and imposed a new 5 percent sales tax. But his outreach to the private sector, on which his plan depends, has been stymied by a lack of capacity and institutional experience, and, increasingly, his hubris. His oppressive conduct is alienating the very sources he should be trying to attract. Rather than plod on with austerity measures, he seems mesmerized by ambitious vanity projects and fattening his personal portfolio. The Public Investment Fund is supposed to be Saudi Arabia’s sovereign wealth fund, but the prince, who heads its board, runs it like his own business. In April, it acquired 129 square miles of state land for a sports and entertainment city. In August, it announced plans for a tourist resort bigger than Belgium. And in October, Prince Mohammed unveiled Neom, his $500 billion robot city, at an international conference. Once again, the Public Investment Fund led the way. Few, if any, Saudi princes and businessmen were tempted to invest their largess — sometimes ill gotten — into these ventures. Many have learned from bitter experience. The prince’s uncle Abdullah, the previous king, planned six economic cities, including the King Abdullah Economic City on the Red Sea. But though the project’s cost, $27 billion, was barely 5 percent of Neom’s, it is expected to be ready only in 2035. Saudis saw another herd of white elephants on the stampede and shied away. Undeterred, Prince Mohammed has resorted to arrests, asset seizures and shakedowns. In the process, he has turned the House of Saud — whose various branches once shared wealth, power and decision making — into a one-man state. Far from diversifying wealth, he seeks to centralize it in his hands. Scores of princes who were arrested in November have been transferred from imprisonment in Riyadh’s Ritz-Carlton hotel to its high-security jail. An additional 11 princes were hauled in this month, dashing hopes that the November arrests were a one-off.

Smog Choking Iran's Oil Belt Tests Leaders Hit by Protests - Iranian authorities are scrambling to stem a growing crisis over air pollution in the province that produces a major share of the country’s oil, showing a sensitivity to people’s demands not always visible before anti-government protests raged earlier this month. A yellow smog has enveloped the southwestern Khuzestan region ever since a severe dust storm struck on Friday, shutting schools and offices and prompting criticism of the administration across local media. So far, 1,530 people have been hospitalized with breathing problems, according to state-run television. When pressed on the public-health implications on live television, President Hassan Rouhani said he was dispatching senior officials to the area. Supreme Leader Ayatollah Ali Khamenei on Tuesday approved $100 million to “combat particles” in Khuzestan. Authorities’ quick decision-making is “a product of these protests,” said Dina Esfandiary, a fellow at the Centre for Science and Security Studies at King’s College London. While capping pollution can’t be swift, “there are a number of PR stunts they can carry out quickly to show the population, ‘We heard you and we’re gonna do whatever we can to fix theses issues,’” Esfandiary said. Khuzestan has suffered from poor air quality and other environmental blights for years. But changes in the region’s climate and the depletion of rivers and wetlands due to poor water management are making it unlivable. Strong winds blow dust from the surrounding dry plains into cities, compounding the impact of industry and traffic. Ahvaz, the provincial capital, has in previous years been ranked by the World Health Organization as among the most polluted cities in the world. Residents of the province publicly backed Rouhani during last year’s presidential campaign, state TV anchor Reza Rashidpour told him in the live segment on the problem. “Now they’re posting messages saying ‘Khuzestan can’t breathe.’ How long should they be told to wait for change?” 

Assad's Victory: What Comes after War in Syria? - SPIEGEL ONLINE: The shell slammed into the roof of the mosque behind the "Eastern Gate," or Bab Sharqi, one of the seven entrances to the old city. "Why are they firing at us? There are only civilians left here," asks Loutfi. What she doesn't know is that the government is waging a campaign of heavy airstrikes on the rebels here in southeastern Syria, and that the attack on the old city represents the trapped rebels' last gasp before their inevitable defeat. In military terms, the war has already been decided -- for Assad and the Syrian regime. Nevertheless, the country is still far from peace.The fighting in Damascus is worse than it has been in a long time. It's as if the constant sound of the explosions were the drumfire for the newly announced peace negotiations between the Syrian government and the opposition, negotiations that have failed repeatedly, as they did recently at a meeting in Geneva under the leadership of United Nations Special Envoy Staffan de Mistura. Russian President Vladimir Putin paid a visit to Syria's dictator Bashar Assad in early December. The message he conveyed was that the military struggle will be over soon, and that some of the Russian troops will be withdrawn. Russia now wants to initiate its own peace process in the new year and persuade the West to provide reconstruction aid to help the country get back on its feet. Shortly after Putin's visit, it was revealed that Russia wants to expand its air base in the country. Meanwhile, the bombs continue to fall on East Ghouta, the suburban belt in southeastern Damascus, one of the last rebel strongholds. There is also shooting in Jarmuk, a Palestinian enclave in the middle of the capital. In the northern city of Idlib, on the Turkish border, fighters with the extremist Al-Nusra front and other rebels are gathering for the final battle with pro-Assad forces. 

The next Kurdish war is on the horizon – Turkey and Syria will never allow it to create a mini-state -- Colonel Thomas Veale - “Public Affairs Director at Combined Joint Task Force, Operation Inherent Resolve” – was quite open about the creation of another new and largely Kurdish force which will, in theory, control tens of thousands of square kilometres of Syria. Arab members of the same 30,000-strong “Border Security Force” will man checkpoints further south along the Euphrates river valley. To quote the good colonel, “recruiting is done in such a manner as to build a force reflecting the populations they serve; both in gender and ethnicity”. And there you have it. The Kurds will look after the Kurds, the Arabs (largely Sunnis, though there aren’t many of them) will run the non-Kurdish bits of this new enclave which will, in the north, run right along the Turkish border – an invitation to further civil war, if ever there was one. For an indication of just how equivocal this US decision is, we only have to witness the unprecedented if brief alliance it has created between the Syrian regime – anxious to regain every square foot of the nation which was under attack by Isis, al-Qaeda and various Western and US-armed military outfits for the past seven years – and Turkey, which has over exactly the same period been trying to overthrow Syrian President Bashar al-Assad. Recep Tayip Erdogan has promised to “suffocate” this latest American proxy “terror army”, regarding it as a Kurdish force effectively controlled by the “terrorist” Kurdish Workers Party, the PKK. Assad’s government called the enlistment of the new militia a “blatant assault” on Syria’s sovereignty. Russia warned of partition. Unfortunately for Colonel Veale, Turkey is right to suspect that the PKK controls local Kurdish fighters, Assad is correct in identifying the “Border Security Force” as an attack on Syria’s sovereignty – whoever rules the state itself – and Russia, no stranger to the partition of the Ukraine, knows how to recognise similar US skulduggery. Its origins go back to the start of the war, when the local Kurdish “People’s Protection Units” (YPG) were encouraged by the authorities in Damascus to oppose Isis, al-Qaeda (later Nusrah) and other jihadi groups who were trying to seize the Syrian state. The Syrian army handed the YPG thousands of weapons to defend themselves. In the early days, Assad himself even praised the Kurds for resisting the “terrorist” forces of Isis and al-Qaeda.

Turkey Slams 'Allies' For Sending "Planeloads Of Arms" To Terrorists Ahead Of Emergency UN Session - Turkish President Recep Tayyip Erdogan has turned on Ankara’s allies, insinuating that the US in particular has been providing massive military support to Kurdish YPG in Syria. In a speech to his ruling AK Party, RT reportsthat Erdogan said that ‘some allies’ of Turkey had provided the YPG Syrian Kurdish militia with 2,000 planeloads and 5,000 truckloads of weapons.“Now, apart from 5,000 trucks, there are weapons and ammunition from around 2,000 planes.” the Turkish leader said.He also accused Ankara’s allies of dishonesty when they say that they do not provide weapons for “terrorists,” referring to Kurdish-linked YPG forces.It was not just Washington that Turkish officials were accusing, they specifically accused France of supporting terrorism ahead of an emergency UN session set for Monday..."Anyone who opposes Turkey’s operation in northern Syria’s Afrin region is siding with terrorists and will be treated accordingly," Turkish Foreign Minister Mevlut Cavusoglu said on Sunday. "We hope France will support Turkey's operation against terrorists in Syria," the minister added in reference to what Turkey has dubbed 'Operation Olive Branch'.After the Turkish military invaded northwest Syria over the weekend in an operation that President Recep Tayyip Erdoğan described as cleaning out Kurdish "terror nests", France called for an emergency meeting of the United Nations Security Council. FM Çavuşoğlu's words were given in warning to French politicians who say they will take up the issue of Turkish aggression at the UN. France has urged Turkey to exercise restraint in its air and land assault targeting US-backed Kurdish forces in Afrin, near Turkey's border.

Turkey launches airstrikes in Syria against U.S.-backed Kurdish fighters — With airstrikes and artillery fire, Turkey on Saturday defied U.S. appeals and opened a long-anticipated offensive on ­Afrin, an enclave in Syria for Kurdish militias backed by the United States. Turkish officials have framed the offensive as part of a wider battle against Kurdish separatists, known as the Kurdistan Workers’ Party, in Turkey’s southeast. Turkey also fears any gains in strength by the Syrian Kurds, whose territory runs along some of Turkey’s southern border. But the United States has opted to back the Syrian Kurds as proxy fighters against the Islamic State and as a buffer to keep the militants from trying to reclaim territory. The military action immediately raised concerns that it could spark conflicts among the assortment of foreign military powers present, in proximity, across northern Syria. They include Turkey, Russia and the United States. All have the Islamic State as a common foe, but, individually, they back different factions among the various armed groups in Syria. The latest flash point also highlighted the shifting disputes and conflicting agendas that have complicated any efforts toward ending nearly seven years of conflict in Syria. The Turkish military action came amid intensifying violence in the northern Syrian province of Idlib, where Syrian government forces are on the offensive against al-Qaeda-aligned rebels in the east of the province. Turkish troops entered Syria on Jan. 21, to fight Kurdish militias in the start of "Operation Olive Branch." [2:40 PM] (Reuters) Recent statements by U.S. military officials about plans to train border security forces that would protect a Kurdish enclave in Syria also provoked Turkey’s ire. “We are taking these steps to ensure our own national security,” President Recep Tayyip Erdogan said in comments carried by the semiofficial Anadolu agency. Yet Turkish incursions could carry risks. The government of Syrian President Bashar al-Assad had warned that it was prepared to fire on Turkish warplanes in the event of an attack on Afrin. 

Erdogan: Operation in Syria’s Afrin has begun -- Turkey says it has launched a much-awaited air and ground offensive against the Kurdish-controlled enclave of Afrin in northern Syria.After days of shelling, Turkish fighter jets on Saturday carried out air raids on the border district targeting positions held by the Syrian Kurdish PYD and YPG groups.The heavy bombardment began as units of pro-Ankara rebels known as the Free Syrian Army (FSA) started moving into Afrin, according to the state-run Anadolu news agency. Turkish President Recep Tayyip Erdogan said on Saturday that the operation in Afrin would be followed by a push in the northern town of Manbij, which the US-backed Kurdish forces captured from ISIL in 2016.Turkey considers Syria's Kurdish Democratic Union Party (PYD) and its armed wing, the YPG, "terrorist groups" with ties to the banned Kurdistan Workers' Party (PKK), which has waged a decades-long fight inside Turkey.The US has previously armed the YPG, viewing it as the most effective ground force in its fight against the Islamic State of Iraq and the Levant (ISIL, also known as ISIS) armed group.Erdogan said that all Kurdish armed groups "are all the same" and that changing their names "does not change the fact that they are terror organisations". According to estimates, there are between 8,000 to 10,000 Kurdish fighters in the Afrin area.

Turkish Tanks Cross Into Syria As Ground Offensive Against US-Backed Militia Begins - Early on Sunday, Turkish ground forces crossed the border and pushed into northern Syria’s Afrin province on Sunday, Ankara said after launching artillery and air strikes on a U.S.-backed Kurdish militia it aims to sweep from its border. Turkey sent armored divisions into northwest Syria after a day of airstrikes as part of 'Operation Olive Branch' which bombed Kurdish YPG forces ("People's Protection Units") in and around Afrin to drive the US-allied Kurdish militia from the area. Turkish-backed Free Syrian Army fighters along with Turkish troops are now moving into the area, according to state-run Anadolu news agency.1/ The ground offensive against Afrin enclave has indeed started. Clashes now inside Afrin province. Kurdish YPG claims it destroyed at least 1 Turkish tank. See video.— Jenan Moussa (@jenanmoussa) January 21, 2018 "Our jets took off and started bombing. And now, the ground operation is underway. Now we see how the YPG ... are fleeing in Afrin," President Tayyip Erdogan said. "We will chase them. God willing, we will complete this operation very quickly." Quoted by Reuters, Erdogan also accused some of Turkey’s allies of providing the YPG with 2,000 plane shipments and 5,000 truckloads of ammunition; the comments were clearly aimed at the United States. According to the local military, Turkish forces forces started the ground phase as part of ‘Olive Branch’ in the north-western Syrian region of Afrin, with Hurriyet reporting that the Turkish military has so far faced no serious resistance from Kurdish forces, which has retreated to towns and villages. Video released by Turkish Armed Forces purportedly shows air strike on tunnel in Kurdish-controlled city of #Afrin in northern Syria — CGTN (@CGTNOfficial) January 21, 2018 Turkish Prime Minister Binali Yildirim confirmed that tanks and military vehicles had begun to cross the Syrian border, according to Haberturk. They were said to advance roughly five kilometers into the Afrin region. Yildirim also said the Turkish military, NATO’s second-largest, would create a 30-km (19-mile) “safe zone” in the  region.

Syria – Turks Attack Afrin, U.S. Strategy Fails, Kurds Again Chose The Losing Side -- After negotiations between Russia/Syria and the Kurds of Afrin had failed, the Russian side made a deal with Turkey. Now Turkey attacks Afrin while everyone else looks aside. The main impetus for this development was the announcement of a U.S. occupation in north-east Syria with the help of the Kurdish YPG/PKK. The occupation strategy is already failing. The Kurds made the false choice. They will be the losers of this game. We had wrongly predicted that Turkish threats against the Kurdish held north-west area of Afrin were empty: Turkey is now attacking the Afrin canton in full force. With help from one George Orwell the operation was dubbed "Olive Branch" The Turkish operation to go after Afrin was triggered by two events. The more important one was the U.S. announcement of a permanent occupation of north-east Syria with the help of a 30,000 men strong SDF "border protection force" consisting of mainly Kurds and some Arabs who earlier fought under ISIS. We had noted at that time:The Turks were not consulted before the U.S. move and are of course not amused that a "terrorist gang", trained and armed by the U.S., will control a long stretch of their southern border. Any Turkish government would have to take harsh measures to prevent such a strategic threat to the country. The U.S. move was amateurish. It ignored the security needs of its NATO ally Turkey in exchange for an illegal and unsustainable occupation of north-east Syria. Secretary of State Tillerson tried to calm the Turks by claiming that the "border protection force" was not for border protection. Reports from the training ground expose that as a lie:

Turkey expects swift campaign against US-backed Kurds in Syria (Reuters) - Turkey shelled targets in northwest Syria on Monday and said it would swiftly crush U.S.-backed Kurdish YPG fighters in an air and ground offensive on the Afrin region beyond its border. The three-day-old campaign has opened a new front in Syria’s multi-sided civil war, realigning a battlefield where outside powers are supporting local combatants. While Washington and other Western capitals expressed concern, Turkish President Tayyip Erdogan said he had secured a go-ahead for the campaign from Russia, principal backer of Syrian President Bashar al-Assad, long Turkey’s foe. Turkey sees the YPG presence on its southern border as a domestic security threat. Turkish forces and their Syrian anti-Assad rebel allies began their push on Saturday to clear the northwestern border enclave of Kurdish YPG fighters. Ankara considers the YPG to be allies of insurgents that have fought against the Turkish state for decades. The United States, meanwhile, has armed and aided the YPG as its main ground allies against Islamic State. Senior U.N. officials briefed the United Nations Security Council behind closed doors on Monday, at the request of France, on the humanitarian and political situation in Syria. “With respect to the situation in Afrin, it was of course part of the conversation,” said French U.N. Ambassador Francois Delattre after the meeting, adding that it was mentioned by most of the 15 council members. “France calls on Turkey for restraint in the volatile environment that we all know in Syria.” But Erdogan said Turkey was determined to press ahead.   U.S. Secretary of State Rex Tillerson said Washington had proposed working with Turkey and forces on the ground in Afrin to “see how we can stabilise this situation and meet Turkey’s legitimate concerns for their security.” But Turkey said Washington must end its support for the Kurdish YPG militia before any proposal for cooperation: “If they want a cooperation, we are ready for this cooperation. As the first step to take, they can stop arming terror groups and take back weapons already given,” Deputy Prime Minister Bekir Bozdag told reporters after a cabinet meeting. 

Syria offensive: Turkish troops 'capture villages' in Afrin - BBC News: Turkish forces have captured a number of villages in north-western Syria, on the third day of an offensive to oust Kurdish fighters, Turkish media report. Troops, accompanied by allied Syrian rebels, reportedly seized control of several areas in Afrin on Monday. Turkish President Recep Tayyip Erdogan said he would not "step back" in the assault following talks with Russia. Turkey considers the Kurdish YPG militia it is targeting in the region to be a terrorist group. "We are determined, Afrin will be sorted out," Mr Erdogan said in a live television broadcast in Ankara on Monday. "We will take no step back," he said, adding: "We spoke about this with our Russian friends; we have an agreement."The YPG, which controls much of north-eastern Syria, is believed by Turkey to be an extension of the Kurdistan Workers Party (PKK), which has fought for Kurdish autonomy in Turkey for three decades. The YPG denies any direct links and is a crucial part of a US-backed alliance battling Islamic State (IS) jihadists in Syria. Ankara has condemned the US for supporting the YPG and this latest development in the Syrian civil war puts Turkey on a collision course with its Nato ally. 

The politics behind Turkey’s Afrin operation -- In recent years, parallel to Turkey effectively giving up on toppling the government of Syrian President Bashar al-Assad, the primary goal of Turkey's foreign policy in Syria has been to keep the Syrian Kurdish enclave fragmented and landlocked.This has underpinned Turkey's previous two military operations within Syria: the Euphrates Shield Operation of August 2016 and Turkey's military entry into Idlib as a result of it cutting a deal with Russia and Iran on de-escalation zones.With the former operation, Turkey prevented the creation of territorial continuity between Syrian Kurdish cantons, while with the latter operation it effectively stopped the YPG’s expanding any further westward towards the sea. But in these two operations, though Turkey indirectly and strategically targeted the Syrian Kurds' growing territorial presence in northern Syria, it nevertheless did not target the PYD–YPG directly.  With this recent operation, Turkey is directly targeting the PYD–YPG and is initiating a pushback strategy against the territorial gains of the Syrian Kurds. Plus, it also aims to send a message to the Syrian Kurds that the presence of superpowers US and Russia in Syria might not prove sufficient to shield them against Turkey.  It is now public knowledge that Turkey's Afrin operation was facilitated by Russian consent, and it is equally well known that the reason why Turkey chose the path of engaging with Russia was a result of its disillusionment with US policy in Syria and its partnership with the Kurds.  Syria has been a major point of friction between Washington and Ankara in recent years. During the initial phase of the Arab uprisings, Turkey's major complaint vis-à-vis the US was related to the US's indecisiveness and inaction on the question of the regime change in Syria. However, in recent years, it has been US policy towards the Syrian Kurdish PYD within the framework of the war on the Islamic State (IS) that has been the main stumbling block in bilateral relations.In fact, the Syrian crisis and the fight against IS have shown that there is a growing gap between Turkish and American threat perceptions and their formula to deal with them.

America’s Syrian humiliation is worse than it looks | Asia Times: Turkey’s “Olive Branch” incursion against Kurdish positions in Northern Syria this week looked bad for Washington. It’s worse than it looks: Turkey cemented a new set of strategic and economic relationships after defying the United States, its erstwhile main ally. Ankara now has financial backing from China and Qatar and the strategic acquiescence of Russia and Iran. Most of all, it has the financial backing to pursue its regional ambitions. Turkey reportedly killed several hundred Kurdish and allied Arab fighters this week, reducing an American-supported force that had done most of the fighting against ISIS in Syria. US-Turkish relations are at an all-time nadir, but Turkey’s financial markets remain unruffled. Washington has hard words for Turkey, but no sticks and stones.Money is the decisive variable for Turkish President Recep Tayyip Erdogan, whose domestic position depends on his ability to hand out economic benefits in the traditional style of third-world dictators. During 2016, Erdogan spurred Turkish banks to increase their lending to business and consumers, and set in motion a credit boom that inevitably led to a bigger trade deficit.Import booms driven by credit-fueled demand have been the undoing of Turkish markets in the past. This time is different. Turkish stocks have risen during the past month, right through the week of the “Olive Branch” offensive, and the cost of hedging the Turkish currency’s exchange rate has remained relatively low. The US-traded Turkish equity ETF, TUR, has climbed back to just below its high point of last August, while the cost of options on the Turkish lira (or implied volatility) remains at the low end of the range.