both oil and natural gas prices crashed 10% this week, as a stock market crash spread to bonds, industrial commodities, cryptocurrencies, and to other major global markets (although one might easily see what happened as a US Treasury bond market crash that spread to stocks and beyond)...technically a "correction", US stock markets have been falling in volatile trading since hitting an all time high on January 26th, with the widely followed Dow Jones Industrial Average dropping more than 2,400 points to end the week at 24,190.90, including a 1,175 point drop on Monday of this week that was the largest point drop in its history, albeit far from the greatest drop percentage-wise...while the connection between dropping stock prices and prices for commodities such as oil and gas is tenuous at best, what underlies it that the fear that a weakening economy that is presumably indicated by falling stocks will ultimately bring on a recession and thereby reduce demand for energy...however, it could also be argued that US stocks had become excessively overvalued anyway (up 45% since Trump was elected), and this recent crash is just bringing their valuations more in line with what they're actually worth..
since it's difficult, if not impossible, to ascertain any specific reasons for this week's drop in energy prices in the midst of the wave of near panic selling that hit the global financial markets, we'll start by just including the most recent graphs of their price trajectories, and then review some of the fundamentals that may have contributed to the price moves...(NB: longer term price graphs for both oil & natural gas were included in this letter and posted online here two weeks ago, when they were both at interim record highs)...we'll start with oil...
the above graph is a Saturday afternoon screenshot of the live interactive US oil price graph at Daily FX, an online platform that provides trading news, charts, indicators and analysis of the markets...each bar on the graph represents oil prices for one day of oil trading between September 1st and February 9th, with green bars representing days when the price of oil went up, and red bars representing the days when the price of oil went down...for green bars, the starting oil price at the beginning of the day is at the bottom of the bar and the price at the end of the day 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 close is at the bottom of the bar...also faintly visible on this "candlestick" style graph are the feint grey "wicks" above and below each bar, to indicate trading prices during each day that were above or below the opening to closing price range for that day...
above we can see that after closing at a 37 month high of $66.14 a barrel two weeks ago, the five week rally in oil prices sputtered last week, closing down about 1% at $65.45 a barrel, before this week's selling kicked in, with the global equity market selloff largely seen as responsible for the subsequent drop in oil prices...further contributing to the oil price drop after Wednesday was the weekly EIA report, which indicated that both U.S. crude and fuel inventories rose during the prior week, while oil production from domestic wells showed an inordinately large jump to a record high (as we'll see, that production jump was largely a data adjustment, but oil traders did not know that)...oil prices were actually attempting to stage a rally on Friday, with crude prices 50 cents higher in the morning, but they then fell $2.70 a barrel in the afternoon to $58.07 after Baker Hughes reported a big jump in new drilling, before recovering to close the week at $59.20 a barrel...for the week, oil prices fell $6.25 a barrel, their largest weekly drop in over a year, after falling 35 cents on the prior Friday for a 6 day loss of just over 10% (btw, the above graph shows a small price increase on Tuesday due to an after hours rally precipitated by an American Petroleum Institute report of a crude oil draw; since that off-hours report was reversed by the EIA data released the next day, that brief Tuesday evening rally did not show up in the NYMEX oil price record, which now indicates oil prices have been down for six days straight...
next, we have a graph of natural gas prices, as quoted daily:
like the oil price graph we posted earlier, the above graph is a Saturday screenshot of the live interactive natural gas price graph at Daily FX, wherein each bar on the graph represents natural gas prices for one day of trading between September 1st and February 9th, with green bars representing days when the price of natural gas went up, and red bars representing the days when the price of natural gas went down...as you can see, natural gas prices continued the crash from their year high levels that began last week, when quotes for natural gas dropped more than 80 cents as the front month contract rolled over from February to March...the first big drop this past week, of 9.9 cents on Monday, seems to have been exacerbated by forecasts of milder weather further out, while the drop of 11.3 cents on Friday followed a modest withdrawal of gas from storage and a sense among traders that the worst of winter was behind them...natural gas prices thus ended the week down 26.2 cents at a 16 month low of $2.58 per mmBTU, after the February contract had been quoted at a 13 month high of $3.66 per mmBTU just nine trading sessions earlier...natural gas prices at these levels now should slow down any preparations that might be being made for spring drilling, at least for the time being...
The Latest US Oil Data from the EIA
this week's US oil data from the US Energy Information Administration, covering the week ending February 2nd, indicated a big jump to new record in oil production from US wells and a big increase in operations at US refineries, while at the same time a decrease in oil imports was mostly offset by a drop in exports, leaving crude left over for storage for the second week in a row...our imports of crude oil fell by an average of 538,000 barrels per day to an average of 7,892,000 barrels per day during the week, while our exports of crude oil fell by an average of 478,000 barrels per day to an average of 1,287,000 barrels per day, which meant that our effective trade in oil worked out to a net import average of 6,605,000 barrels of per day during the week, 60,000 barrels per day less than the net imports of the prior week...at the same time, field production of crude oil from US wells rose by 332,000 barrels per day to a weekly record high of 10,251,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 16,856,000 barrels per day during the reporting week..
during the same week, US oil refineries were using 16,797,000 barrels of crude per day, 784,000 barrels per day more than they used during the prior week, while at the same time 337,000 barrels of oil per day were being added to oil storage facilities in the US....hence, this week's crude oil figures from the EIA seem to indicate that our total supply of oil from net imports and from oilfield production was 278,000 barrels per day less than what refineries reported they used during the week plus what was added to storage...to account for that disparity, the EIA needed to insert a (+278,000) 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"...(how this weekly data is gathered, and the reason for that "unaccounted" oil, is explained here)
further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 8,078,000 barrels per day, 4.5% less than the 8,463,000 barrels per day average we imported over the same four-week period last year....the 337,000 barrel per day increase in our total crude inventories came about on a 271,000 barrel per day addition to our commercial stocks of crude oil and a 66,000 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 332,000 barrel per day increase in our crude oil production included a 315,000 barrel per day increase in output from wells in the lower 48 states, and a 17,000 barrels per day increase in output from Alaska...the 10,251,000 barrels of crude per day that were produced by US wells during the week ending February 2nd was the highest week on records going back to 1983, 14.2% more than the 8,978,000 barrels per day we were producing on February 3rd of last year, and 21.6% above the interim low of 8,428,000 barrels per day that our oil production fell to during the last week of June, 2016...
meanwhile, US oil refineries were operating at 92.5% of their capacity in using 16,797,000 barrels of crude per day, up from just 88.1% of capacity the prior week, but still down from the wintertime record 96.7% of capacity just five weeks earlier...the 16,797,000 barrels of oil that were refined this week were 4.6% 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 5.7% more than the 15,893,000 barrels of crude per day that were being processed during the week ending February 3rd, 2017, when refineries were operating at 87.7% of capacity....
with the big increase in the amount of oil being refined, gasoline production by our refineries was also much higher, increasing by 518,000 barrels per day to 10,085,000 barrels per day during the week ending February 2nd, after increasing by 209,000 barrels per day the prior week....as a result, our gasoline production was 2.9% higher than the 9,804,000 barrels of gasoline that were being produced daily during the week ending February 3rd of last year....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) jumped by 516,000 barrels per day to 5,129,000 barrels per day, after falling by 979,000 barrels per day over the prior four weeks...after that big increase, the week's distillates production was 6.8% higher than the 4,802,000 barrels of distillates per day than were being produced during the the fifth week of 2017....
with the big increase in our gasoline production, our gasoline inventories at the end of the week rose by 3,414,000 barrels to 245,474,000 barrels by February 2nd, their twelfth increase in 13 weeks...that was as our domestic consumption of gasoline rose by 66,000 barrels per day to 9,110,000 barrels per day, and as our imports of gasoline rose by 137,000 barrels per day to 746,000 barrels per day, while our exports of gasoline rose by 214,000 barrels per day to 829,000 barrels per day....but even after twelve increases in thirteen weeks, our gasoline inventories are still 4.2% lower than last February 3rd's level of 256,217,000 barrels, even as they are roughly 4.7% above the 10 year average of gasoline supplies for this time of the year...
similarly, with the week's jump in distillates production, our supplies of distillate fuels rose by 3,926,000 barrels to 141,826,000 barrels over the week ending February 2nd, the sixth increase in distillates supplies in the past eight weeks...that was as the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 692,000 barrels per day to 3,778,000 barrels per day, even as our imports of distillates fell by 271,000 barrels per day to 313,000 barrels per day, and as our exports of distillates rose by 99,000 barrels per day to 1,103,000 barrels per day...but even after this week’s inventory increase, our distillate supplies were still 16.9% lower at the end of the week than the 170,746,000 barrels that we had stored on February 3rd, 2017, and roughly 1.4% lower than the 10 year average of distillates stocks at this time of the year…
finally, even with the big increase in the amount of oil used by our refineries, the jump in our weekly crude oil production meant that our commercial supplies of crude oil rose for the second time in 12 weeks and for the 12th time in the past 47 weeks, increasing by 1,895,000 barrels, from 418,359,000 barrels on January 26th to 420,254,000 barrels on February 2nd ....but even with back to back increases, our oil inventories as of that date were still 17.4% below the 508,592,000 barrels of oil we had stored on February 3rd of 2017, and 10.7% lower than the 470,676,000 barrels of oil that we had in storage on February 5th of 2016, even they were still 9.5% greater than the 383,800,000 barrels of oil we had in storage on February 6th of 2015, at a time when US supplies of oil had just begun to increase...
A Note on US Oil Production Figures
before we move on, we should explain that big increase in our oil production, which quite obviously put our oil output at a new record high...as we've pointed out on several occasions, this weekly oil data from the EIA that we cover is preliminary, and it will typically be more than 2 months before the final confirmed figures, published monthly, are released...despite the likelihood of some inaccuracy in this this weekly data, we follow it because it's what the oil traders follow, and hence it moves oil prices and ultimately decisions on the part of exploitation companies to start drilling for oil...
so, last week the confirmed monthly oil production data for November was released, and it showed that US crude oil production had increased to 10.038 million barrels per day in November, a big jump from the confirmed 9,654,000 barrels per day of oil production they reported for October...the graph below shows that increase, and the US oil production record over the entire period that monthly records of US oil production have been kept:
the above graph comes from the February 1st post on the EIA's blog "Today in Energy" and it obviously shows US crude production over the period from January of 1920 to November of 2017....the big increase in our November output meant we had topped 10 million barrels per day for just the third time in our history, coming in just a fraction below the 10.044 million barrels per day record production of November 1970...
now, here's the issue; each week of the past several we've stated that our oil production was at a new high, right up until last week when we said "the 9,919,000 barrels of crude per day that were produced by US wells during the week ending January 26th was the highest week on records going back to 1983"....and that has been accurate; up until this week, the preliminary weekly data had never showed our production higher...so along came the monthly report last week, which showed that the previously published weekly oil production data for November, which we have been quoting, was seriously off the mark...so this week, when the EIA came to estimating the new oil production data for the week ending February 2nd, they incorporated what they learned from the monthly report for November...the result of that is illustrated quite well in the following graph showing both monthly and weekly oil production:
the above graph, from the weekly OilPrice Intelligence Report, shows the history of confirmed monthly oil data from January 2015 to November 2017 in blue, and then the weekly estimates up until the current week in yellow after that period...we can see that up until the November report was released, the yellow line had been nearly contiguous with the blue one, or at least not different enough by a magnitude that would matter...however, after the publication of the monthly report for November, it became clear that the weekly estimates in yellow have been too low...hence, this week the EIA rebenchmarked their weekly production data to the newly released November data to estimate that for the week ending February 2nd, our crude oil production rose to a new record high of 10,251,000 barrels per day, suddenly 332,000 barrels per day more than they reported the prior week....so our production did not really "jump" by that much; rather it was just recomputed to reflect the new, confirmed data.....for more on how this weekly data is gathered and estimated, here's the fact sheet titled "Estimated domestic crude oil production in EIA’s Weekly Petroleum Status Report (WPSR)" (pdf)
This Week's Rig Count
US drilling activity increased for just the twelfth time in the past 28 weeks during the week ending February 9th, but this week's increase was the most in over a year and brought the total rig deployment to the highest level since April 10th, 2015....Baker Hughes reported that the total count of active rotary rigs running in the US was up by 29 rigs to 975 rigs in the week ending on Friday, which was also 234 more rigs than the 741 rigs that were deployed as of the February 10th report of 2017, while it was still down by nearly half from 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 26 rigs to 791 rigs this week, which was also 200 more oil rigs than were running a year ago, while the week's oil rig count still remained well below the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the number of drilling rigs targeting natural gas formations rose by 3 rigs to 184 rigs this week, which was only 35 more gas rigs than the 149 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 was unchanged at 16 rigs this week, which was down from the 20 rigs deployed in the Gulf of Mexico a year ago and the total of 21 rigs offshore nationally a year ago....the week's count of active horizontal drilling rigs was up by 24 rigs to 832 horizontal rigs this week, which was also up by 225 rigs from the 607 horizontal rigs that were in use in the US on February 10th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, the vertical rig was up by 4 rigs to 70 vertical rigs this week, which was 2 more than the 68 vertical rigs that were in use during the same week of last year....in addition, the directional rig count was up by 1 rig to 73 directional rigs this week, which was also up from the 66 directional rigs that were deployed on February 10th 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 basins...in both tables, the first column shows the active rig count as of February 9th, the second column shows the change in the number of working rigs between last week's count (February 2nd) and this week's (February 9th) count, the third column shows last week's February 2nd 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 10th of February, 2017...
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Nuclear Reactors, Bankrupting Their Owners, Closing Early - On January 22, FirstEnergy Corporation announced that its faulty and nearly-self-destructed Davis-Besse power reactor east of Toledo, Ohio, will be closed well before its license expires. But the shutdown is not because the reactor represents reckless endangerment of public health and safety. FirseEnergy was fine with that. No, the old rattle trap can’t cover its costs any more, not with the electricity market dominated by cheaper natural gas, and renewable wind and solar. CFO James Pearson of FirstEnergy Nuclear Operating Co., the corporate division in charge of the wreck, said the reactor will close if lawmakers don’t approve a taxpayer bailout. FirstEnergy had said the financial sky was falling in March 2017. Chief nuclear officer Sam Belcher [his real name] told the Toldeo Blade then — as the firm was floating the bailout measure (SB 128) through the Ohio legislature — “In the absence of something happening, [taxpayer-funded handout to the private, investor-owned firm] we’re going to have to make some tough decisions.” So far, state lawmakers have refused to save the decrepit reactor with state taxes. Serious accidents at David-Besse in 1977, 1985, 1998, and 2002 endangered its neighbors. The most hair-raising was the discovery in 2002 that corrosion had eaten through more than 6-inches of the reactor head’s carbon steel. The corrosion went undetected by federal and company inspectors for decades. Having gouged a hole in the reactor cover the size of a football, the corrosion left only 3⁄8 inch of steel holding back the high-pressure coolant. A break would have caused a massive loss-of-coolant accident and out-of-control overheating, resulting in catastrophic uranium fuel melting (known as a “meltdown”) and massive radiation releases. Repairs took two years and cost $600 million, during which the Department of Justice penalized FirstEnergy over operating and reporting violations. FirstEnergy paid $28 million in fines. Yet the NRC allowed the company to restart David-Besse in 2004, and then to run the rust bucket for 40 reckless years, even after the company tacked on another $600 million in repairs in 2014.
Trump administration is weighing emergency aid for some coal plants - After failing to win a bailout for cash-strapped coal plants, some Trump administration officials are considering emergency orders that could keep at least some coal generators online, people familiar with the discussions said.The approach would require Rick Perry to use his authority as U.S. energy secretary to spur emergency compensation for coal plants run by FirstEnergy Solutions that may be at risk of shutting, said the people, asking not to be identified because the information isn’t public. Some Energy Department officials are weighing this option after federal regulators rejected a proposal by Perry last month to pay coal plants more for their “resilience,” they said. FirstEnergy hasn’t formally requested the aid, one of the people said. When asked to confirm the talks, agency spokeswoman Shaylyn Hynes said “that is not correct information” but declined to provide further detail. The Energy Department’s press department later posted on Twitter that sources were “misinformed” on the consideration. The FirstEnergy Solutions plants in question were at the heart of the Trump administration’s plan to compensate nuclear and coal generators more for their power. The proposal was rejected last month by members of the Federal Energy Regulatory Commission that President Donald Trump appointed. They said it would violate U.S. law. Coal mogul Bob Murray, an outspoken advocate for the bailout plan and a Trump supporter, warned that his company, which supplies some of the units, may face default if they shut.
Ohio and Iowa Are the Latest of Eight States to Consider Anti-Protest Bills Aimed at Pipeline Opponents - The Intercept -- Lawmakers in Ohio and Iowa are considering bills that would create new penalties for people who attempt to disrupt the operations of “critical infrastructure” such as pipelines. The bills make the states the latest of at least eight to propose legislation aimed at oil and gas industry protesters since Donald Trump’s election.The bills were proposed less than a week after the right-wing American Legislative Exchange Council, which has close ties to the fossil fuel industry, finalized a model policy titled the “Critical Infrastructure Protection Act,” which calls for more severe punishment for those who trespass on facilities including oil pipelines, petroleum refineries, liquid natural gas terminals, and railroads used to transport oil and gas.Iowa is one of four states through which the Dakota Access pipeline passes, and it was a center of anti-pipeline protests in 2016 and 2017. The state saw several incidents of property destruction carried out by pipeline opponents, but more common were trespassing arrests during demonstrations meant to halt construction.The Iowa bill — developed by a group that includes Dakota Access pipeline parent company Energy Transfer Partners — creates a new felony, “critical infrastructure sabotage,” punishable by up to 25 years in prison and a $100,000 fine.The Ohio bill includes clauses specifically dedicated to barring drones from flying over infrastructure projects. During the height of protests against the Dakota Access pipeline, a small number of Native American drone pilots used drones to monitor the progress of construction and the activities of police, as well as to publicly document an indigenous aerial perspective of events. Ohio is home to the controversial Rover pipeline, which is also owned by Energy Transfer Partners. Rover’s builders have repeatedly spilled massive quantities of clay-based drilling mud as they’ve bored under waterways, leading environmental regulators to halt construction multiple times. The bills are part of a nationwide trend of states pushing legislation to quiet disruptive protests that beyond fossil fuel development, have centered on themes including police violence, white supremacy, and anti-immigrant policy. According to a database created by the International Center for Not-for-Profit Law, 56 bills that would restrict people’s right to peaceful assembly have been introduced in 30 states since the 2016 election.
Ohio bill would target pipeline protests - A proposed Ohio bill, introduced in the Senate by Frank Hoagland, mirrors attempts in seven other states to target pipeline protestors. Ohio, of course, is home to both the Nexus and Rover pipelines, which have faced stiff opposition from residents and which have already produced damaging environmental effects.Hoagland, a Republican representing District 30, is on the Ohio Senate Energy and Natural Resources Committee. In announcing the bill during the last week of January, a release from Hoagland's office claimed “a number of reports of tampering with valves and controls at pipeline facilities that can create extremely dangerous situations.” Senate Bill 250 — short title: Protect critical infrastructure facilities from mischief — would "prohibit criminal mischief, criminal trespass, and aggravated trespass on a critical infrastructure facility," and "impose fines for organizations that are complicit in those offenses, and impose civil liability for damage caused by trespass on a critical infrastructure facility." If that all sounds like an attempt to deter protestors, and possibly unduly punish those that protest anyway, you're not alone. Following Trump's election and protests of the Dakota Access Pipeline, lawmakers are keen on tamping down the opposition.Also, as The Intercept notes:The bills were proposed less than a week after the right-wing American Legislative Exchange Council, which has close ties to the fossil fuel industry, finalized a model policy titled the “Critical Infrastructure Protection Act,” which calls for more severe punishment for those who trespass on facilities including oil pipelines, petroleum refineries, liquid natural gas terminals, and railroads used to transport oil and gas. Energy Transfer Partners, the company that owns the Rover pipeline, was part of the group that crafted a similar bill in Iowa.
A Toxic Tour Through Underground Ohio -- We begin on the wraparound porch of Michele Garman, who lives with her husband Tom and teenage son Dominic in the rural Ohio community of Vienna. Just 200 feet from the family’s house is a narrow shaft that the oil and gas industry uses to pump waste riddled with toxic chemicals deep into the earth, one of Ohio’s 217 active Class II injection wells … Garman is staring at a series of tanks, where the waste is temporarily held before being shot down the injection well. “The biggest thing,” she sighs, “is the worrying. What am I not hearing? What am I not seeing? What is being released into the air? The water? The soil? What does this mean for our health years down the road? That is the stuff that really eats away at me constantly.” Michele Garman and her family are not alone. We journey 200 miles south, to a land of low wooded hills not far from the Ohio River, where Phyllis Rienhart, 66, lives with her 78-year-old husband Ron in a stick frame house that Ron built with their son. The house is 1,800 feet from a mammoth injection well. Unlike Michele Garman, she has never heard an alarm. Instead, her injection well clangs. “One day we were outside here on the porch and I was thinking, it’s raining, because the bird bath was vibrating,” says Phyllis. “I went in the house but could still hear the noise — clang, clang, clang, clang, clang, clang — and it just got louder.” In 2016, she and some neighbors staked out the injection well for a period of 24 hours. They observed 108 tanker trucks come and go. The trucks discharge their fracking wastewater into holding tanks. Hydrocarbons in the waste emit flammable vapors that accumulate in the tanks and are vented off the tops. In April 2016, lightning struck an injection wastewater storage tank in Greeley, Colorado, “heating the metal to thousands of degrees, which ignited the vapors inside,” reported the local paper. “The tanks subsequently exploded, shooting up hundreds of feet into the air.” The thought of a similar fireball erupting in her backyard keeps Phyllis up at night. She fears thunderstorms. She sees a neurologist. “I have anxiety,” she says. Phyllis is trying to figure this thing out, but it is bigger than her. “What if they got it wrong?” she wonders. “What is it doing to our earth? What is it doing to our water? Not to mention the air that we breathe. I mean it is waste for god sakes, it is chemicals…And I ask them, are you going to have enough hazmat suits for all of my grandchildren? These people are dealing with paper and statistics, I am dealing with my family. They say it’s good for the economy, but I can’t find anything it is good for. And these things are popping up everywhere. There are more, and more, and more…”
Oil and gas association, environmental group team up on capping idle, abandoned wells - Toledo Blade --Ohio has more than 700 oil and gas wells that have never been plugged or were improperly plugged years ago, resulting in safety risks to children and environmental risks to groundwater and area streams. Nearly a third of them are in northwest Ohio, with most of the other problem areas near Cleveland and southeast Ohio.Now, two groups often at odds with each other believe they have come up with a solution. Their biggest challenge appears to be convincing the Ohio Senate and Gov. John Kasich they aren’t being overly ambitious.The Ohio Oil and Gas Association and the Ohio Environmental Council are solidly behind House Bill 225, which sailed through the Ohio House of Representatives by a 92-0 vote last month.It would require 45 percent of a state fund used for oil and gas programs to be dedicated to capping idle and abandoned wells — an increase from the current level of 14 percent. The bill also calls for multiple other changes intended to streamline Ohio Department of Natural Resources operations and reporting requirements, all with the goal of plugging wells faster.Fund revenue grew from $3.1 million in 2008 to $52 million in 2017, an upward spiral driven by taxes collected as the modern era of horizontal fracking took hold. The latest fracking technique has opened previously inaccessible Marcellus and Utica shale in eastern Ohio, bringing the state its biggest drilling frenzy since the 1800s. “We’ve got a unique opportunity to eradicate all idle and orphan wells across the state of Ohio,” Ohio was America’s leading oil-producing state from 1895 to 1903, preceding Texas.
Kucinich wants to eliminate oil and gas drilling - In the first major policy rollout of his gubernatorial campaign, Dennis Kucinich promised “a brand new day here in Ohio” with a goal of eliminating every last oil or gas well in the state. “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,” the former congressman and Cleveland mayor said at a Columbus press conference. In a multi-faceted proposal, Kucinich pledged an immediate moratorium on hydraulic fracturing — a horizontal drilling process better know as fracking — and an outright ban on injection wells if he is elected. He said such a radical move is necessary to protect the state’s most precious resource: water. Such a proposal certainly would run into both ridicule and a solid wall of opposition from a GOP-controlled legislature so friendly to oil and gas interests that they wouldn’t even grant Republican Gov. John Kasich a modest increase in the severance tax on Ohio wells. Kucinich said he 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 set up 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 for a class-action suit against drilling companies and others responsible for polluting and contaminating the state. “Those who have poisoned Ohio’s people and their land will be made to pay,” he said. “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.” Kucinich would use state’s power of eminent domain to acquire existing drilling sites, settle royalties, close the wells and assess severance fees on oil and gas companies.
Seneca Nation opposes proposed fracking plan - The Seneca Nation is calling upon the Pennsylvania Department of Environmental Protection (PA DEP) to reject permit applications for a destructive water quality management and discharge plan at the headwaters of the Allegheny River that would have severe impacts on the Nation’s Allegany Territory, located 65 miles downstream from the project.In a letter to PA DEP officials, Seneca Nation President Todd Gates called for the denial of the proposed plan by Epiphany Allegheny, LLC (Epiphany) and the Coudersport Area Municipal Authority (CAMA) that would allow for the transport, treatment and release of thousands of gallons of dangerous wastewater from hydraulic fracturing (fracking) into the Allegheny River. “Allowing this plan to move forward would permit poisonous contaminants to travel downstream into New York State and onto the sovereign ancestral lands of the Seneca Nation, which sit upon the Ohi:yo (Allegheny River),” President Gates said. “The Seneca people have a deep spiritual connection with the land and we depend on our natural resources, including native plants, trees, wildlife, fish and water. These resources are critical components of our culture. We will zealously defend and protect what remains of our territories and our natural resources, which would be further threatened by this dangerous plan.” The current plan by Epiphany calls for wastewater created by fracking, a practice not legal in New York State nor authorized on Seneca Nation lands, to be transported to the CAMA wastewater plant in Eulalia Township, where it would be treated and released into the Allegheny River system. The proposed treatment facility would discharge up to 42,000 gallons of treated fracking water, with insufficient removal of radioactivity, into the river each day, although the plant can process between 20,000 – 80,000 gallons daily. Water used for fracking in Pennsylvania contains high levels of radiation.
Green Group Rebuked by Judge for Attempt to Block Fracking With Rights of Nature Argument - Instead of working through normal legal channels of permitting and suing, the new strategy seeks to enshrine a doctrine recognizing the fundamental right of community self-governance over their own natural resources,” explains Mark Hand of Think Progress. A key component of this approach is a curious legal strategy which attempts to argue that ecosystems have rights. Lawyers making the argument contend that if corporations have rights, then so should forests and streams. They compare it to children, who cannot file a lawsuit on their own, but can have guardians appointed to file one on their behalf. These environmental lawyers, including, most prominently Thomas Linzey of the Community Environmental Legal Defense Fund (CELDF), argue that natural ecosystems should be recognized as “people” that also have protected rights to flourish. In practice, these legal slights of hand do little to stop energy development and frequently end up costing businesses and taxpayers tens of thousands in legal costs. More recently, courts have begun to push back on these strategies. In Pennsylvania, a federal judge issued a striking condemnation from the bench in one case, recommending that Linzey be referred to the Disciplinary Board of the Supreme Court of Pennsylvania.In her opinion, Judge Susan Baxter lambasted the attorneys for pursuing a lawsuit which they understood was legally tenuous.“This Court has determined that Attorneys Linzey and Dunne have pursued certain claims and defenses in bad faith. Based upon prior CELDF litigation, each was on notice of the legal implausibility of the arguments previously advanced,” she wrote. The judge also ordered CELDF to pay $52,000 in legal fees to the company they had sued. That firm had been trying to drill a fracking waste injection well.
Oil and Gas Industry’s 2017 Suing Spree Could Set Speech-Chilling Precedents -- In 2017, while the Trump administration absorbed media attention with its cries of “fake news,” the oil and gas industry was busy launching private legal actions across the U.S., attacking critics who presented information and opinions to the public.Those lesser-noticed legal maneuvers, if successful in 2018, could create chilling new precedents, keeping important facts away from the public eye and making it more expensive and risky to talk about the fossil fuel industry’s real and potential impacts on human health and the air, land, and water.The past year brought some of the most aggressive lawsuits by the oil and gas industry against environmentalists in recent decades. They included legal moves aimed at preventing researchers from discussing their findings, motions painting political movements as for-profit conspiracies, and even a $5 million dollar lawsuit brought against a cancer patient whose tap water, state investigators determined years ago, was contaminated by gas drilling — by the company that is now suing him.That lawsuit, filed by a shale gas drilling company, claims that a Pennsylvania landowner violated a non-disclosure agreement by talking to the press about his fouled drinking water, his home’s plummeting property value, the impacts of truck traffic on his community, the poor air quality around his home since drilling and fracking began in the area, or other problems he believes the company itself caused.These oil and gas industry cases — involving novel uses of conspiracy, defamation, and even wire fraud laws — represent new and concerted efforts by large corporations to make individuals and groups pay for presenting information and opinions to the public.
Pennsylvania pipeline work to resume; Sunoco fined $12M — Pennsylvania regulators are fining Sunoco more than $12 million for problems with a massive natural gas pipeline project, but letting work resume under a consent agreement. The Department of Environmental Protection said Thursday that Sunoco Pipeline has made changes since work on the $2.5 billion Mariner East 2 pipeline was halted Jan. 3. The 350-mile project has been plagued by spills and leaks of drilling fluid and improper construction methods. In stopping the work, the state agency said Sunoco demonstrated it couldn’t or wouldn’t comply with Pennsylvania’s clean streams law and other regulations. The company didn’t immediately respond to messages seeking comment. The 20-inch pipeline will move natural gas liquid products from Marcellus Shale drilling fields in western Pennsylvania to a terminal in Philadelphia. It’s scheduled for completion by summer.
Penneast proposal to use land for gas pipeline rejected — New Jersey's attorney general rejected a proposal for use of state-controlled land for a $1.1 billion natural gas pipeline, slowing the years-long effort by the company to break ground on a project strongly opposed by environmental groups. Attorney General Gurbir Grewal said in a letter Friday that PennEast was "patently misleading" when it referenced multiple attempts at negotiating over the use of the land. PennEast has said it anticipates construction on the roughly 120-mile (193-kilometer) pipeline from northeastern Pennsylvania to Mercer County, New Jersey, could start this year and take about seven months. But the denial means that the company has not yet acquired rights for all the land in New Jersey it needs for the project. PennEast spokeswoman Pat Kornick said the latest communication from the state is a "step in the right direction" and PennEast is confident a settlement will be reached. The New Jersey Department of Environmental Protection Friday also rejected the company's application for water permits, citing missing information. Grewal said that PennEast's claim made in a letter to the state last month that it has "attempted on multiple occasions to negotiate an easement agreement" is "not true" and that the state has had no communication on specific property rights. The attorney general also cites a separate court challenge to the company's federal certificate of necessity as a reason for rejecting the company's offer to compensate the state for use of New Jersey's land. It's unclear what the company offered the state. Among the other areas of concern mentioned in the state's letter is a request from PennEast to keep details about the land use — known as a right of way — confidential. The letter asks that the provision be deleted because it's "contrary to public policy and numerous 'Sunshine' laws."
US northeast becomes a net exporter of natural gas to Canada -- In 2017, the U.S. Northeast sent more natural gas to Canada than it received, making the region a net exporter for the first time on an annual average basis. That marks another milestone in the ongoing flow reversal happening in the Northeast, led by the growth of local gas supply from the Marcellus/Utica shales. For now, the region still relies on Canadian gas during the highest winter demand months, but imports from Canada in all the other months are increasingly unnecessary as Northeast gas production balloons further. Today, we look at evolving dynamics at the U.S.-Canadian border in the Northeast. This is Part 2 of a series updating our analysis of changing gas flows along the U.S.-Canada border, a topic we first covered in-depth in the Return To Sender blog series back in 2013. In Part 1 of this update series, we began with a macro view of total U.S. gas flows across the Canadian border. As we noted, Canadian gas production last year rebounded to the highest level in 10 years, spurred on by rising gas demand from gas-fired power generation, as well as the oil sands production in Alberta, which depends on large volumes of steam. At the same time, Canadian producers are facing ever-increasing competition from soaring U.S. gas supply, led by enormous growth in the Marcellus/Utica shales in the Northeast. Not only is that supply growth continuing to put the squeeze on any remaining inbound flows of supply to the Northeast from other regions, including Canada, but as inbound pipeline capacity is reversed and new capacity built (see our In a Northeast Minute series), it is increasingly overtaking market share of demand in other U.S. regions, as well as north of the border in Ontario, where gas-fired power generation demand has been growing.
More Oil And Natural Gas Invalidate 'Keep It In The Ground' Movement - There is a destructive "keep it in the ground" movement arising from environmental groups to block oil and natural gas development and the pipelines required to transport them. The center of this opposition is in New York and the New England states, where numerous policymakers seek to artificially constrain energy supply. Yet, despite producing none themselves, their reliance on gas electricity has surged. ISO New England now gets about 50% of its power from gas, versus 10% to 15% a decade ago. New York sits in the same boat: gas now generates ~45% of the state’s electricity, doubling its market share since 2005. It's no wonder, then, that blocking energy development and pipelines has established home power rates in New England and New York that are at least 50% higher than the national average. Industrial rates are more than double, and encourages companies to leave the area. This is unfortunate and illogical since U.S. natural gas prices have been at historic lows. There is not enough non-fossil-fuel energy transported to the region to satisfy the needs of businesses and families. For example, Massachusetts has nearly 20 times more gas power capacity than wind and solar capacity combined. Not surprisingly, the "keep it in the ground" movement has no explanation on why those states with the most aggressive renewable energy goals are increasingly using more natural gas. In stark contrast, of course, I've already clearly explained it. Policies intended to reduce oil and gas consumption are dubious: Even if they work in the short term, over time they just lower oil and gas prices and encourage more usage. I've already clearly explained it. Oil and gas are so obviously ingrained in the U.S. and global economies, supplying over 60% of all energy. In the real world, this means that more economic growth ultimately means more oil and gas demand. That's why year after year demand continues to grow. There is no significant substitute for oil whatsoever. And know that natural gas power plants don't get retired with more wind and solar power, but get built even more because gas is flexible backup required.
China Is Financing a Petrochemical Hub in Appalachia. Meet its Powerful Backers. – Steve Horn - Over the past year, oil and gas industry plans to build a petrochemical refining and storage hub along the Ohio River have steadily gained traction. Proponents hope this potential hub, which would straddle Pennsylvania, Ohio, West Virginia, and Kentucky, could someday rival the industrial corridor found along the Gulf Coast in Texas and Louisiana.Those plans center around creating what is known as the Appalachian Storage Hub, which received a major boost on November 9 during a trade mission to China attended by President Donald Trump and U.S. Secretary of Commerce Wilbur Ross. At that trade mission, also attended by Chinese President Xi Jinping, the China Energy Investment Corp. announced the signing of a memorandum of understanding (MOU) to invest $83.7 billion into the planned storage hub over 20 years. For comparison, West Virginia's gross domestic product (GDP) in 2016 was $72.9 billion.Though called the Appalachian Storage Hub as a broad-sweeping term, in practice the hub could encompass natural gas liquids storage, a market trading index center, a key pipeline feeding epicenter, and a petrochemical refinery row. Its prospective development has been spurred by the current construction of a $6 billion petrochemical refining facility in Pennsylvania owned by Shell Oil.The proposed hub has come under fire from grassroots groups. But this proposal also has a powerful set of backers, including West Virginia's five-member congressional delegation, the state's Governor and Secretary of Commerce, West Virginia University, the chemical industry's trade association, Shell Oil, and the Trump administration, among others.Detractors of the planned petrochemical hub believe that its construction would buoy the oil and gas industry in its efforts to further develop drilling and hydraulic fracturing (“fracking”) projects in Pennsylvania's Marcellus Shale and Ohio's Utica Shale basins. A “major concern we have about the whole complex is that it will encourage a second or third wave of gas fracking in our region, from the Marcellus, the Utica, and the Rogersville field, which is a much deeper layer of shale gas and oil and has been recently tested and a few commercial wells have been built into it,” Robin Blakeman, project coordinator with the Ohio Valley Environmental Coalition, recently told the radio show Between the Lines. “It’s not commercially viable yet, but we think this complex will make it commercially viable.”
Seeking Treasure Underneath Trash: Wheeling Could Get $2M From Gas Leases for Old Landfills - Wheeling Intelligencer –– About $2 million up front plus a steady stream of production royalties for years to come should flow into the Friendly City, as Wheeling leaders plan to lease Marcellus and Utica shale natural gas fracking rights on approximately 336 acres of property. “While we understand that gas drilling can be controversial, we feel that we wouldn’t be acting in the most financially responsible manner if we passed up on over $2 million in up-front money that can be used for paving, playgrounds, economic development and other city functions,” Wheeling Vice Mayor Chad Thalman said. Thalman and other members of Wheeling City Council are expected to pass a resolution allowing City Manager Robert Herron to enter the lease agreement with Canonsburg, Pa.-based American Petroleum Partners. The vote is expected after a public hearing on the matter, set for noon Tuesday on the first floor of the City-County Building, 1500 Chapline St.This is a totally separate deal from the one in which the city joined with the Wheeling Park Commission several years ago to lease fracking rights at Oglebay Park to Chesapeake Energy. Chesapeake later sold most of its West Virginia operations to Southwestern Energy Co. for $5 billion. “It it currently estimated that the city would receive approximately $2 million in up-front payments for this lease, plus future royalty payments,” Mayor Glenn Elliott said.
Wheeling could get $2M from gas leases for old landfills - — About $2 million up front plus a steady stream of production royalties for years to come should flow into the Friendly City, as Wheeling leaders plan to lease Marcellus and Utica shale natural gas fracking rights on approximately 336 acres of property. “While we understand that gas drilling can be controversial, we feel that we wouldn’t be acting in the most financially responsible manner if we passed up on over $2 million in up-front money that can be used for paving, playgrounds, economic development and other city functions,” Wheeling Vice Mayor Chad Thalman said.Thalman and other members of Wheeling City Council are expected to pass a resolution allowing City Manager Robert Herron to enter the lease agreement with Canonsburg, Pa.-based American Petroleum Partners. The vote is expected after a public hearing on the matter, set for noon today on the first floor of the City-County Building, 1500 Chapline St. This is a separate deal from the one in which the city joined with the Wheeling Park Commission several years ago to lease fracking rights at Oglebay Park to Chesapeake Energy. Chesapeake later sold most of its West Virginia operations to Southwestern Energy Co. for $5 billion.“It it currently estimated that the city would receive approximately $2 million in up-front payments for this lease, plus future royalty payments,” Mayor Glenn Elliott said.“I recognize that there are those in our community who have serious concerns about or are deeply opposed to natural gas fracking. As a private citizen, I, too, share some of those concerns,” Elliott added. “But as mayor, I have to weigh the pros and cons of any decision like this from the perspective of what’s best for the city’s taxpayers.” Elliott said the drilling and fracking would take on about 336 acres of city-owned property, a significant portion of which is “under old city landfills.”
Wheeling City Council Approves $2M Oil, Gas Lease - Wheeling Intelligencer — City council on Tuesday unanimously approved allowing energy company American Petroleum Partners to extract natural gas from under 336 acres of city-owned property in Wheeling.The deal is worth $6,000 per acre — about $2 million total before any royalty payments. American Petroleum, based in Canonsburg, Pa., is being given the right to tap into Marcellus and Utica shale reserves beneath 14 separate parcels of city property, with much of the acreage consisting of former city landfills, such as the one at North Park. Wheeling will then receive 18.5 percent of production royalties once natural gas starts flowing. City Manager Robert Herron and City Solicitor Rosemary Humway-Warmuth said the lease council agreed to prohibits American Petroleum from placing rigs, pipelines, fracking equipment, storage tanks, or anything else on the surface of the leased property, meaning city residents should see no signs of the drilling or extraction near their neighborhoods once the process begins.“We had two different law firms look at this to make sure we are at the upper end for the payments,” Herron said. “There are no surface rights, whatsoever.”When asked about concerns some in the community may have regarding hydraulic fracturing, Herron said the process has taken place throughout the region for nearly a decade, with relatively few problems. He also said the West Virginia Department of Environmental Protection and the U.S. Environmental Protection Agency must be responsible for regulating the technique.“There are currently several wells around (the area). The state and federal agencies are the ones responsible for regulating fracking,” Herron said.
Virginia will get $58 million from pipeline developers for environmental impacts - Developers of the Atlantic Coast Pipeline have agreed to spend nearly $58 million to help offset the massive infrastructure project's environmental impact in Virginia. An agreement outlining the payments was signed several weeks ago by then-natural resources secretary Molly Ward and Leslie Hartz, an executive with lead pipeline developer Dominion Energy. The approximately $5 billion, 600-mile natural gas pipeline, which has received many of its key permits, is designed to start in West Virginia and run through Virginia and North Carolina. Getting the project built will involve tree removal, blasting and leveling some ridgetops as the pipe, 42 inches in diameter for much of its path, crosses mountains, hundreds of water bodies and other sensitive terrain. The Federal Energy Regulatory Commission, which oversees interstate natural gas pipelines, found in an environmental analysis largely favorable for developers that more than 3,400 acres of vegetation would face long-term to permanent effects, with the greatest impact on forested areas. The funding outlined in the agreement is intended to help diminish the effects of forest fragmentation and related impacts on water quality. It's one of four major components of mitigation efforts the state has negotiated, Deputy Secretary of Natural Resources Angela Navarro said Friday. The company will also pay $10 million in mitigation funds for impacts to historic resources, purchase a new parcel of land for a wildlife management area and provide substitute land to the Virginia Outdoors Foundation in exchange for the pipeline crossing properties under protective easements, Navarro said. Of the environmental mitigation money, about $38.7 million will go toward forest conservation and about $19.2 million will go toward water quality efforts.
Three-Time Sellout: Terry McAuliffe’s Secret Mountain Valley Pipeline Deals and The Smoking Gun They Reveal -- On Friday, February 2, we published “Secret Sellout or Pay to Play?,” a Blue Virginia exclusive. Our article exposed what until then in Virginia had been a secret Memorandum of Understanding signed in December by the administration of then Governor Terry McAuliffe with political power broker Dominion Energy regarding the Atlantic Coast Pipeline. As we explained, in return for a payoff of $58 million (paid to various entities), “Terry McAuliffe gave Dominion a full and complete release from any and all damage to Virginia’s forests and water from the Atlantic Coast Pipeline” and he did so “before the pipeline has even been approved – it still has not been approved – much less built.” It turns out the full story is much worse. Because we now know that McAuliffe made not one, not two, but three secret pipeline agreements in late December. A second agreement, which Blue Virginia is now publishing here exclusively for the first time (see below), gives the builders of the Mountain Valley Pipeline the same full waivers for damage to Virginia’s forests and water resources as were given to the ACP. For only $27.5 million – that’s all Terry McAuliffe thought our natural heritage in the affected counties was worth – the MVP companies bought their way out of any further responsibility for any damage that their $3.5 billion pipeline may cause to Virginia’s forests and water resources: Paragraph 2 – the forest damage payoff “fully satisfies any and all mitigation responsibilities related to and otherwise fully offsets the direct or indirect forest-related impacts of the Project in Virginia;” Paragraph 3(a)(i) – the water resource damage payoff “fully satisfies any and all mitigation responsibilities related to and otherwise fully offsets all water quality impacts of the Project.” A third secret agreement, which we also now publish here exclusively (also see below), concedes that the Mountain Valley Pipeline “will result in an adverse effect to historic properties” and has the MVP companies paying $2.5 million (possibly a bit more) in return for – you guessed it – a full release from any future responsibility. But that’s not even the worst part of this story…
Interior head to travel to Carolinas to discuss off shore drilling | TheHill: Interior Secretary Ryan Zinke is traveling to the Carolinas this weekend to meet with both state's governors and discuss the administration's draft plans for offshore oil and gas drilling. Zinke is scheduled to meet with South Carolina Gov. Henry McMaster (R) on Friday and North Carolina Gov. Roy Cooper (D) on Saturday, an Interior spokesperson confirmed to The Hill. The meetings follow Interior's announcement in early January that the Trump administration will seek to open up offshore leasing for much of the country. The announcement was almost immediately met with resistance from a majority of coastal states. Representatives from Florida were the most outspoken. Five days following his announcement Zinke flew down to Florida to meet with Republican Gov. Rick Scott. Following the meeting Zinke tweeted that Interior would not be considering Florida's coastlines in the decision, but left the door open to other states. “I support the governor’s position that Florida is unique and its coasts are heavily reliant on tourism as an economic driver,” Zinke said in a Jan. 9 statement. “As a result of discussion with Governor Scott's and his leadership, I am removing Florida from consideration for any new oil and gas platforms.”A number of states made statements asking to also be exempted from the rule, including South Carolina's Gov. McMaster, who told McClatchy in early January, "We cannot afford to take a chance with the beauty, the majesty and the economic value and vitality of our wonderful coastline in South Carolina." A spokesperson for McMaster confirmed that the governor's meeting with Zinke Friday at his residence stemmed from the exemption request.
Gas pipeline opponents charged with trespassing during sit-in at Cooper's office - — Fifteen activists demanding the state rescind a permit allowing construction of a natural gas pipeline in eastern North Carolina were charged with trespassing Friday evening during a sit-in at Gov. Roy Cooper's office. The state Department of Environmental Quality last week issued a critical water quality permit for the Atlantic Coast Pipeline. The $5 billion project, which will be owned and operated by Duke Energy and Dominion Energy, will carry natural gas more than 600 miles from West Virginia to southeastern North Carolina, passing through Northampton, Halifax, Nash, Wilson, Johnston, Sampson, Cumberland and Robeson counties. Activists complained that the permit was issued before Duke and Dominion supplied all the required information, a decision they claim was influenced by the utilities' agreement to put $57.8 million into a fund to expand renewable energy in the state and to ensure communities near the pipeline have access to the natural gas for economic development. "We campaigned for [Cooper], but little did we know that he would sell us out for $57.8 million," Northampton County resident Belinda Joyner said. "Little did we know that supporting him would get us a slap in the face for standing up for what's supposed to be rightfully ours." Eastern north Carolina has been a dumping ground, they said, for dangerous substances for years, from PCBs to coal ash to the planned gas pipeline. They also compared Cooper's opposition to offshore drilling with the approval for the pipeline. "You chose to stand against drilling off of our coast. At the same time, you allowed an unwanted, unneeded, unsafe fracked gas pipeline to tear through our farms, our dreams, our homes and, most of all, our families," said Tom Clark, a Cumberland County resident who is suing to block the pipeline. "Governor, when you say that you're fighting for our state, you can't endorse one and fight the other. You should see our state as one and the same."
Court sets stage for shutdown of gas pipeline through Georgia - A federal court has moved to shut down the controversial Sabal Trail pipeline, which runs more than 500 miles through Alabama, Georgia and Florida.The ruling – a triumph for environmentalists – left standing a previous court ruling that had criticized the government for not considering the downstream effects of the natural gas pipeline.The decision came down from the U.S. Court of Appeals for the District of Columbia Circuit on Thursday. The court did not issue a statement or detailed opinion. But the decision not to revisit the August decision means – absent further legal action – that the Sabal Trail pipeline will lose permission to run and operations will be halted.The Sabal pipeline is a joint venture of Spectra Energy Partners, NextEra Energy, Inc. and Duke Energy.The case that had wended its way through the court system started life as a lawsuit by the Sierra Club, which argued that the Federal Energy Regulatory Commission did not study the emissions from the burning of natural gas that had been carried by the Sabal pipeline.The pipeline had been controversial even in the planning stages with protest for several years before the pipeline went into service on July 3. It is possible that the commission or company may have recourse that might delay a shutdown. FERC had previously said it was willing to do more studies, but wanted the pipeline to continue operation while the research was done.In response to questions from The Atlanta Journal-Constitution, Sabal spokeswoman Andrea Grover offered no details, but indicated that the legal proceedings were not quite at the end of the line. “Given this is still pending litigation, we will not comment,”
FERC issues new Sabal Trail climate review, but pipeline's fate still hazy -- A natural gas pipeline in the Southeast could be forced to shut down tomorrow, and it's unclear if federal regulators will step in to save it.The Federal Energy Regulatory Commission yesterday did half of what's needed to keep the Sabal Trail pipeline in service: It completed a court-ordered analysis of greenhouse gas emissions. But the agency hasn't yet taken the second critical step of issuing an order to reauthorize the project.FERC spokeswoman Tamara Young-Allen said the order is still pending."I can't speculate on when the Commission's Order on Remand will issue," she said in an email yesterday.The administrative tangle relates to a Sierra Club legal challenge that has dire implications for Sabal Trail and a related $4 billion network known as the Southeast Market Pipelines Project in Alabama, Georgia and Florida.The U.S. Court of Appeals for the District of Columbia Circuit in August ordered FERC to take a closer look at certain climate impacts from the pipeline project under the National Environmental Policy Act. The judges sealed the deal on that decision last week when they rejected government and industry requests for reconsideration, setting a seven-day countdown — which ends tomorrow — for a court mandate that will vacate the project's permits until FERC completes the added climate review (Energywire, Feb. 1). Pipeline backers Spectra Energy Partners LP, NextEra Energy Inc. and Duke Energy Corp. on Friday asked FERC to quickly finish its supplemental environmental impact statement (SEIS) and reauthorize the project (Energywire, Feb. 5). FERC's action confused many agency watchers. The completion of the SEIS sets the stage for the project's reauthorization, but the commission didn't actually issue an order doing that. It's unclear if FERC will issue its decision today.
Fracking Ban Bill Moves In Florida Senate, Stalls in House --Despite early indications that a proposal to ban fracking in Florida would not advance in the current state legislative session, the bill passed its first senate committee Monday. The bill, sponsored by Republican Senator Dana Young of Tampa, unanimously passed the Senate Environmental and Preservation Committee. It calls for an outright ban on fracking or “hydraulic fracturing” and other “fracking-like” techniques that involve breaking up underground rock formations by blasting them with high-pressure water, acid and other chemicals to extract oil and gas. An identical bill stalled during last year’s state legislative session over concerns that there has been no Florida-specific study documenting the risks of fracking in the state’s unique limestone geology. Senior Environmental Policy Specialist with the Conservancy of Southwest Florida, Amber Crooks says the dangers of fracking are clear, and that they aren’t worth the risks to human health, the environment and to Florida’s economy. “We need to take a look at the studies that are available and similar to what we have done for offshore drilling,” said Crooks. “We as Floridians, need to determine what level of risk, given our economy, which is based on real estate and ecotourism that we’re willing to accept in Florida.” Crooks pointed to the 90 municipalities that have already passed an ordinance or resolution on fracking.
BREAKING: Florida Senate Committee Unanimously Votes to Ban Fracking - Moments ago, the Florida Senate Environmental Preservation and Conservation committee chaired by Senator Bradley voted 10- 0 to pass SB 462 to prohibit ‘advanced well stimulation,’ commonly known as fracking. This staunch showing of support for a state-level fracking ban is both unprecedented and significant in the long standing fight to ban the dangerous practice in the Sunshine State. “Floridians are ready for groundbreaking environmental legislation, and we are thrilled to have such strong leadership in the Florida Senate Environmental Preservation and Conservation committee to move our state towards a safer future. It’s finally time for our elected officials to recognize the overwhelming opposition to fracking in Florida by passing a ban bill. Competing bills have been introduced to regulate the practice, ban it, or allow it, but this is the year Florida finally passes a ban and ends the longstanding controversy once and for all.” “For the second year in a row, the Senate has shown their commitment to banning fracking because of the real risks it poses to Florida’s water. Just recently, a Duke study on fracking in Pennsylvania found high levels of radium in river and stream sediment located downstream from the discharge areas of oil wastewater treatment facilities. We cannot and should not allow the fracking industry to take our water and then contaminate our waterways. Our hope is that Speaker Richard Corcoran stops listening to special interests and lobbyists and finally acts to ban fracking in the state also.”
Exposure to chemicals used during fracking may cause pre-cancerous lesions in mice, MU study finds – Using more than 1,000 different chemicals, unconventional oil and gas (UOG) operations combine directional drilling and hydraulic fracturing, or “fracking,” to release natural gas from underground rock. Today, researchers at the University of Missouri and the University of Massachusetts released a study that found that female mice exposed to mixtures of chemicals used in UOG operations during prenatal development had abnormal mammary glands in adulthood. Additionally, some of the mice developed pre-cancerous mammary lesions that may suggest they will be more sensitive to chemicals that cause cancer. “Our earlier research showed that both male and female mice had alterations to hormone levels and reproductive organs resulting from exposures to these UOG contaminants,” said Susan C. Nagel, an associate professor of Obstetrics, Gynecology and Women’s Health in the School of Medicine. “We felt this could indicate that exposures to UOG chemical mixtures can produce a range of defects in animals exposed during vulnerable periods, such as development in the womb. So, we examined 23 UOG contaminants and compounds commonly used or produced in the fracking process.” In the study, female mice were exposed to various amounts of the 23 UOG chemicals from gestational day 11 to birth. Although no effects were observed on the mammary glands of these females prior to puberty, in early adulthood, female mice developed mammary lesions and hyperplasia, a condition that causes enlargement of an organ or tissue. “We chose varying amounts of the UOG mixture in order to mimic a range of human exposures to these chemicals,” Nagel said, who also serves as an adjunct associate professor of biological sciences in the MU College of Arts and Science. “These results suggest that the mammary gland is sensitive to mixtures of chemicals used in unconventional oil and gas production. Determining whether these fracking mixtures affect human populations is an important goal, particularly as the number of fracking sites within human population centers increases.” Additional, long-term studies are needed to evaluate these outcomes, the researchers said.
Texas flood: U.S. oil exports pour into markets worldwide (Reuters) - In the two years since Washington lifted a 40-year ban on oil exports, tankers filled with U.S. crude have landed in more than 30 countries, ranging from massive economies like China and India to tiny Togo. The repeal has unleashed a flood of U.S. shale oil, undercutting global crude prices, eroding the clout of the Organization of Petroleum Exporting Countries (OPEC) and seizing market share from many of its member countries. In 2005, before the shale revolution, the United States had net imports of 12.5 million barrels per day (bpd) of crude and fuels - compared to just 4 million bpd today. U.S. producers are making new customers out of some of the world’s biggest oil-importing nations in Asia and Europe, posing a serious competitive threat to the only other countries that produce as much crude: Saudi Arabia and Russia. At home, the export boom has filled pipelines and sparked a surge of investment in new shipping infrastructure on the Gulf Coast. (For an interactive graphic detailing the global impacts of the U.S. shale revolution, see: tmsnrt.rs/2EtJgen) U.S. producers now export between 1.5 million and 2 million barrels of crude a day, which could rise to about 4 million by 2022. The nation’s output is expected to account for more than 80 percent of global supply growth in the next decade, according to Paris-based International Energy Agency. Much of the increased flow will go to China, the world’s top importer and, since November, the largest buyer of U.S. crude other than Canada. Chen Bo, president of Unipec - China’s largest buyer of U.S. crude - told Reuters that the firm expects to double U.S. imports this year to 300,000 bpd as it seeks to expand sales in Asia and find new customers for U.S. exports in other regions, including Europe. Unipec - the trading arm of Asia’s largest refiner, state-owned Sinopec - is also considering long-term crude supply deals with U.S. pipeline and terminal operators. The firm may also partner with such firms to expand and improve U.S. export infrastructure, Chen said in an interview. “U.S. crude flowing to Asia is a major trend in global oil trading,” Chen told Reuters.
The U.S. Oil Boom Is Attracting Canadian Drillers - Canadian oil and gas drillers are moving their rigs to the United States in response to greater demand for their service there and an investment climate at home that is, according to industry insiders, only making their lives harder.In a recent story for The Globe and Mail, Dan Healing quotes a few executives from drilling companies who say they’re taking rigs to the Permian in Texas, and the exodus will likely intensify, even if not all drillers are too comfortable with the move so far to the south.One of these executives, Trinidad Drilling’s CEO Brent Conway, put it in simple terms: "We've raised taxes, we're increasing costs because of labour laws that are changing, we aren't building pipelines and we can't get federal or provincial governments to do anything to help us."Meanwhile in the Lower 48, drillers are getting closer to the 10-million-bpd mark by the day, despite warnings that they might “drill themselves into the ground” if they don’t rein in production growth. These words, spoken last year by Continental Resources’ Harold Hamm, rang out across the industry when benchmarks were just beginning to recover. But now, with Brent still very close to $70 a barrel and WTI enjoying a lift to $66, it’s easy to forget them, so shale boomers are drilling and hedging their future production at the higher prices. For them, life seems to be good. For Canadian drillers, not so much. A lack of pipeline capacity seems to be the most pressing problem. It is not a new problem. It has been around for years, and even in 2015, Canadian media reported warnings that the discount at which Canadian crude trades to West Texas Intermediate will only widen if no new pipelines are built, and this will hurt the performance of the local oil industry.
Oil and gas fracking triggers 900 earthquakes a year in this US state -- Oklahoma has been transformed from a seismic dead zone to a hotspot in less than a decade. Scientists attribute this unprecedented increase in seismicity to the oil and gas industry injecting its wastewater (known as "saltwater") deep underground. In a study published in the journal Science, my colleagues and I have now shown that the size of these man-made earthquakes is strongly linked to the depth at which the saltwater is injected. As a result, reducing the depth of injections could significantly reduce the likelihood of larger, damaging earthquakes. There are now more than 10,000 injection wells dotted across Oklahoma. This includes both oil recovery wells and wells used to dispose of the saltwater that is an unwanted byproduct of the oil and gas extraction process. The water is injected deep underground, typically at depths of 1km to 2km. This deliberately is well below the level of fresh ground water supplies in order to avoid contamination. Since 2011, well operators have injected on average 2.3 billion barrels of fluid a year into layers of sedimentary rock deep underground. The link between Oklahoma's earthquakes and wastewater disposal was firmly established by a 2013 study that showed a strong association between the injection zone and earthquakes, including the 2011 magnitude 5.7 Prague event. Since 2015, some new regulations have led to an overall decline in the number of earthquakes. But the total seismic energy (the "moment") has not dropped as significantly as expected. Our new study sheds light on the complexity of Oklahoma's induced seismicity. It shows that the more saltwater is injected and the greater the depth it goes to, the larger the resulting earthquake. The injection is even more likely to cause earthquakes at depths where layered sedimentary rocks meet the crystalline "basement" rocks below them, at depths of between 1km and 6km. This shouldn't be surprising because we know that when fluid gets into the spaces within rocks it can considerably weaken them. Pressurised fluids can effectively lubricate ancient fault zones that may have locked-in stresses built up over time, making them more prone to failure.
Fracking-related Earthquakes – Earthworks -- Hydraulic fracturing injects millions of gallons of water into oil and gas containing geologic formations deep underground. Scientific and government research indicates that fracking can cause earthquakes in two ways:
- Primarily, during the fracking process: “[Earthquakes] were caused by fluid injection during hydraulic fracturing in proximity to pre-existing faults.”
- Secondarily, via the disposal of fracking wastewater via underground injection.
Our report Shaky Ground explores the risks of fracking triggered earthquakes in California. And increased earthquake activity in shale plays with active injection wells, like Texas, Oklahoma and Ohio show the risks are real. Although fracturing-related earthquakes are chronic, they were thought to be minor. But new research is showing that they can be quite large and damaging. The focus of the study, a 5.7 magnitude quake near Prague, Oklahoma, damaged 14 homes and other structures in the area. In Oklahoma, where the number of earthquakes magnitude 3.0 or more has jumped from an average of less than five a year to about 40, the state has been slow to act. So far, Gov. Mary Fallin created a Coordinating Council on Seismic Activity and the regulatory agency, the Oklahoma Corporate Commission, issued restrictions on wells in earthquake prone areas. Similar steps have been taken in Texas. But while the state figures out what to do, residents are taking matters into their own hands. Sandra Ladra, who lives is Prague, the site of the 5.7 magnitude quake in 2011, is sueing the oil company in Oklahoma’s highest court. A favorable finding would make wells a legal liability. In the meantime, insurance companies have already increased their rates, highlighting the risk. Despite the increasingly apparent threat posed by fracking-related earthquakes, many states are ignoring the issue: “Nine months after a National Academy of Sciences panel said oil and gas regulators should take steps to prevent man-made earthquakes, officials in key states are ignoring quake potential as they rewrite their drilling rules.” Arkansas, however, suspended injection wells after an earthquake swarm in 2011.
Lands stripped from Utah monuments open to claims, leases — The window opened Friday for oil, gas, uranium and coal companies to make requests or stake claims to lands that were cut from two sprawling Utah national monuments by President Trump in December —but there doesn’t appear to be a rush to seize the opportunities. For anyone interested in the uranium on the lands stripped from the Bears Ears National Monument, all they need to do is stake a few corner posts in the ground, pay a $212 initial fee and send paperwork to the federal government under a law first created in 1872 that harkens back to the days of the Wild West. They can then keep rights to the hard minerals, including gold and silver, as long as they pay an annual fee of $155. It was unclear if anyone was doing that Friday. The Bureau of Land Management declined repeated requests for information about how they’re handling the lands and how many requests and claims came in. Steve Bloch, legal director of the Southern Utah Wilderness Alliance, said he was told by the BLM Friday afternoon that inquiries were made but no claims sent in. He said other conservation groups that have sued to block the downsized monument boundaries are watching closely to ensure no lands are disturbed in the short-term, hoping a judge will side with them and return the monuments to the original boundaries. Two of the largest uranium companies in the U.S. — Ur-Energy Inc. and Energy Fuels Resources Inc. — said they have no plans to mine there. The price of uranium, which has fallen to about $22 per pound — down from more than $100 in the mid-2000s — would “discourage any investment in new claims,” said Luke Popovich, a spokesman for the National Mining Association.
Methane Reporting Gap Widens in Oil and Gas Industry - A new report from Environmental Defense Fund (EDF) shows some oil and gas companies are exposing themselves to scrutiny by failing to adequately disclose meaningful information on emissions of methane , the heat-trapping pollutant that is drawing increased attention from the public.The analysis demonstrates company reporting on methane has improved slightly, though unevenly, over the past two years since EDF first examined methane disclosure within the U.S. oil and gas industry in their report, Rising Risk. The quality of methane reporting has improved among the top companies, though 42 percent of the companies surveyed disclose nothing on their methane management practices.Methane—the key component of natural gas and a greenhouse gas 84 times more potent than carbon dioxide—is responsible for more than a quarter of the warming we are experiencing today and represents a fast-emerging, highly-potent form of carbon risk for investors."As a long-term global investor, we recognize that methane emissions are one of the most financially significant environmental risks we face," said Brian Rice, Portfolio Manager at CalSTRS, California's second largest public pension fund. "While the oil and gas industry has taken some steps to address this issue, CalSTRS sees opportunities for the industry to enhance its methane risk management and reporting efforts that simultaneously reduce atmospheric emissions and capture more natural gas by phasing out methane-emitting equipment, increasing training and designing new emissions-free systems." The report, The Disclosure Divide: Revisiting Rising Risk and Methane Reporting in the U.S. Oil & Gas Industry , examines the current state of voluntary reporting on methane in the U.S. oil and gas sector. The authors surveyed publicly disclosed data and found of the 64 top upstream and midstream companies surveyed, only four companies report quantitative methane targets. Only nine companies report comprehensively on their leak detection and repair (LDAR) programs.
Climate 'Hero' Gets Three-Year Prison Sentence for Shutting Down Tar Sands Pipeline -- Michael Foster, the valve turner who temporarily halted the flow of tar sands oil in TransCanada's Keystone pipeline in October 2016 , called for future actions to address the global climate crisis before he headed to prison, where he is expected to serve at least a year of his three-year sentence."It doesn't matter if I'm sitting in jail. What matters is stopping the pollution," Foster, a 53-year-old mental health counselor from Seattle, declared after his sentencing in North Dakota on Tuesday. "If other people don't take action, mine makes no difference," he continued. "And if they don't, the planet comes apart at the seams. The only way what I did matters is if people are stopping the poison." Although others who participated in the multi-state #ShutItDown action two years ago have been allowed to present a " necessity defense "—or argue they believed their act was " necessary to avoid or minimize a harm" that was "greater than the harm resulting from the violation of the law"—Judge Laurie A. Fontainerejected such a defense for Foster and Sam Jessup, who filmed Foster's action and received a two-year deferred prison sentence with supervised probation.Outside the court, Dr. James Hansen—who has been called " the father of modern climate change awareness" and was barred from testifying during the trial last year—said the public is generally unaware of the need to urgently address the climate crisis, emphasizing that we are entering "the age of consequences" for burning fossil fuels. "Michael Foster isn't a criminal," Hansen added, "he's a hero." The decision to sentence Foster to prison time was decried by other climate activists, including fellow valve turner Emily Johnston, who pointed out the lack of legal consequences for environmental degradation caused by the fossil fuel industry:
Court Asked to Sanction DAPL Lawyers Who Sued Environmental Movement - The Center for Constitutional Rights asked a federal court to sanction Energy Transfer Partners and Energy Transfer Equity for “misusing” the legal system when it sued “Earth First!” for “federal racketeering” to suppress activism against the Dakota Access Pipeline.Kasowitz Benson Torres, the law firm which represents President Donald Trump, attempted to sue the movement, Earth First!, in August. However, “Earth First!” is an idea that cannot be sued.Nevertheless, the law firm sent a complaint to Earth First! Journal, even though the publication was not named in the lawsuit.Sanctions, according to CCR, require lawyers accused of offenses receive “advance notice” of a motion so they have an opportunity to withdraw “improperly filed papers.” CCR served Kasowitz Benson Torres, as well as Vogel Law Firm (a co-counsel), with a sanctions motion.The lawsuit was not withdrawn, but without explanation, Vogel Law Firm no longer represents Energy Transfer Partners or Energy Transfer Equity.“Massive corporations have the financial resources to file frivolous lawsuits and crush advocacy through the sheer weight of litigation, even if they do not ultimately win in court,” CCR senior staff attorney Rachel Meeropol suggested. Earth First! Journal editor Ryan Hartman stated, “Trump’s lawyers were given an opportunity to withdraw papers they knew were improper and avoid sanctions. Their refusal leaves no doubt that the aim of this lawsuit is not to address racketeering, but to scare activists opposing pipelines into silence. It’s not working.”
How Standing Rock is forcing oil investors to consider human rights - Some shareholders want to see oil companies take human rights into greater consideration when choosing what projects to finance. And the stark police brutality against the Standing Rock Sioux Tribe during its protest of the Dakota Access Pipeline in 2016 is why. A group of shareholders with the Marathon Petroleum Corporation, a major U.S. oil company that has a $500 million stake in the controversial interstate crude oil project, is asking the company to consider a resolution on human rights—especially those of indigenous peoples. Trillium Asset Management filed this resolution earlier this year with the nonprofit Ceres, which aims to make investments more sustainable and just. In the filing, the stakeholders request Marathon prepare a report that would break down how the company currently analyzes a project’s social and environmental risks and whether Marathon is down to change these processes in the future. The concern, according to the resolution, is the way ignoring these impacts could affect a project’s image and, ultimately, result in economic loss. It offers Marathon the suggestion of using the United Nations Declaration on the Rights of Indigenous Peoples as a template, which makes clear that free, prior, and informed consent should be acquired before the approval of any project.The issue isn’t just with particular projects, though. It’s also about the companies with which Marathon does business—like, say, Energy Transfer Partners, the developer of the Dakota Access Pipeline. The resolution notes the company’s “poor environmental record” and its growing stack of lawsuits across the country.
'Not a Single Drop': California to Block Trump's Offshore Drilling Plan - The Trump administration's plan to vastly expand offshore oil drilling along the U.S. coastline has drawn bipartisan opposition from nearly all coastal governors . Now, in one of the strongest declarations of opposition yet, California's Lt. Governor Gavin Newsom, chair of the state's powerful land commission has vowed "not a single drop from your new oil plan will ever make landfall in California." So what's the plan? The Golden State will deny pipeline permits for transporting oil over land from new leases off the Pacific Coast. California's State Lands Commission sent a letter on Wednesday to the U.S. Interior Department's Bureau of Ocean Energy Management that stated, "It is certain that the state would not approve new pipelines or allow use of existing pipelines to transport oil from new leases onshore." Additionally, as NPR reported, even if oil companies drill off California's shores, they cannot construct new onshore infrastructure—i.e. terminals, pipelines and other equipment—without voter approval from more than a dozen coastal cities and counties first. While companies can get offshore oil without using onshore equipment—they can instead use floating oil rigs and transfer the oil onto ships—that method is much more difficult and expensive. And after consecutive years of low oil prices, companies would likely look elsewhere. "Absolutely," Bob Fryklund with IHS Markit, which does research and consulting for the oil industry, told NPR. "The companies look at that. They look at the ease of operation." Furthermore, CNBC noted that California could also invoke the federal Coastal Zonal Management Act of 1972, which gives states the authority to review offshore federal and industrial activity that may affect a state's coastal uses or resources. "This strategy," as CNBC pointed out, "could provide a blueprint for other states" opposed to offshore drilling.
Report: Fracked Gas Project Could Undermine Washington’s Clean Energy Goals -- A new report from the Stockholm Environment Institute (SEI) on a controversial fracked gas-to-methanol refinery proposed in Washington state confirms McKibben's assertion: the Kalama methanol refinery will not help us achieve a low-carbon future or meet the goals in the Paris agreement . According to the report, approving the Kalama methanol refinery "would not appear to be consistent with globally agreed climate goals of keeping warming at less than 2 degrees Celsius."The Kalama methanol refinery—the largest fracked-gas-to-methanol refinery in the world—would cause the equivalent of 3.7 to 7 million tons per year of CO 2 pollution, based on 20-year global warming potential. That's over half the carbon footprint of the massive coal -fired power plant in Centralia, Washington. When the Centralia coal plant closes in 2025, the Kalama methanol project would become Washington's top contributor to climate change.Backed by the Chinese government, a company called Northwest Innovation Works proposes to refine fracked gas to liquid methanol on the banks of the Columbia River in the Twilight-famous town of Kalama , then ship the methanol to China to produce olefins, a chemical building block for plastic .The new report casts doubt on claims that the Kalama methanol refinery would replace coal-based methanol production in China and thus benefit the climate. Researchers found that the Kalama facility is just as likely to displace more common—and less emissions-intensive—methods of making plastic. This means that "that the facility would be just as likely to increase global GHG emissions [from other sources] as to decrease them." Researchers also found that the Kalama methanol refinery could result in emissions that are two to six times higher than estimates in the final Environmental Impact Statement ("EIS"). That's largely because the EIS left out emissions involved in supplying fracked gas to the methanol refinery. "The new analysis provides an opportunity to fix that, and consider all emission impacts in the supplemental review," said SEI senior scientist Peter Erickson, a co-author of the report.
Budget deal envisions largest oil stockpile sale in history | TheHill: The two-year budget deal reached by congressional leaders would set up the biggest sale in history from the nation’s emergency oil stockpile. In an effort to partially pay for new spending, the budget agreement would sell 100 million barrels of the Strategic Petroleum Reserve (SPR) in the next decade. Taken with sales Congress authorized last year to pay for other spending, the deal would leave the Department of Energy-managed reserve with just over 300 million barrels, or about half its previous size.The deal takes a big chip out of a landmark safety net established in the 1970s to guard the United States from the effects of international turmoil or other big supply disruptions. “It’s the biggest non-emergency sale proposed in history,” Kevin Book, managing director of ClearView Energy Partners, said of the 100 million-barrel sale. “The age of energy scarcity, the entire structure — regulatory and otherwise — that was built to address concerns about ‘not enough,’ has apparently ended.” Oil is currently going for around $60 a barrel, which would net the United States $6 billion if sold today. Prices are likely to increase over the next decade, when the sales would happen, but it’s difficult to predict by how much. Until recently, Congress had strong bipartisan agreement to avoid using the SPR as a piggy bank. But with little other sources of income and perennial opposition to tax increases, it has increasingly been used as such, for costs like infrastructure and a medical research bill. The Trump administration proposed last year to cut the SPR’s size in half, which Congress is now on track to do. The deal still needs to be approved by both the House and Senate.
Revealed: Trudeau government welcomed oil lobby help for US pipeline push - The Trudeau government treated Donald Trump’s election as “positive news” for Canada’s energy industry and welcomed the help of Canada’s main corporate oil group in lobbying the US administration, documents show. Meetings conducted by senior government officials with TransCanada and the Canadian Association of Petroleum Producers (CAPP) reveal an one-sided approach more reminiscent of former Prime Minister Stephen Harper’s secret oil advocacy than Justin Trudeau’s green electoral promises. The Liberal government has strongly backed the export of Alberta tar sands via the Keystone XL pipeline, which was initially rejected by the Obama administration on climate grounds but approved by Trump in March 2017. The documents, obtained through access-to-information, show the Parliamentary Secretary to Canada’s Foreign Affairs Minister met around the same time with TransCanada’s CEO Russ Girling and CAPP to discuss the continued promotion of the pipeline and oil exports. The briefing note states that the oil lobby group “specifically will be interested to hear the outcomes of the recent visits by Prime Minister Trudeau and Minister Freeland to the United States, as well as volunteering their services (or those of members) in the Government’s U.S. engagement efforts.” The Parliamentary Secretary was advised to respond by saying “we welcome your engagement offer and would like to stay in touch.” The Guardian asked CAPP what kind of services they had volunteered but the lobby group declined to answer. CAPP shares many members with its US-counterpart, the American Petroleum Institute, whose lobbying of the Trump administration has resulted in cuts to environmental regulations and the speed-up of permits for oil and gas drilling. The briefing documents appear to present Trump’s approach to energy policy as an improvement over that of Obama’s.
Canada, facing protests, seeks to overhaul pipeline assessments (Reuters) - The Canadian government, seeking to address unhappiness over the potential environmental impact of major projects, on Thursday unveiled draft legislation to change how pipelines and mines are assessed. The bill, which officials say could become law by mid-2019, will create a new Impact Assessment Agency of Canada to investigate proposed major natural resource projects. Reaction to the new rules was mixed. Industry expressed concerns over the wider scope of the new process, and environmental and Aboriginal groups saw promise in the enhanced consultation but worried over climate commitments. Major project reviews are currently divided between three entities, a system the ruling Liberals say Canadians no longer trust. The revamp is an attempt to address the concerns of aboriginal and environmental activists, who have opposed recent oil pipeline projects on the grounds that the existing assessment process is flawed and not stringent enough. “I believe this will get us to a better place, that we will be able to ensure that you have the public trust,” Environment Minister Catherine McKenna told reporters. “We need good projects to go ahead. We need good jobs.” Officials say the new law will cut review times, and factor in health, indigenous and gender issues as well as the environment. Industry players have complained it can take years for a review to be completed. Involving indigenous groups early in the process will likely help companies smooth some opposition other projects have run into, said Patrick Kelly, chair of the Coastal First Nations. “It helps avoid some of the stickier issues that end up in litigation,” he said, but noted First Nation governments would have liked more authority in the process.
A new analysis of US midstreamers' assets and outlooks - The recent rise in crude oil prices to levels not seen since late 2014 certainly has captured everyone’s attention, and generally boosted the financial prospects for U.S. producers and midstreamers alike. But while it’s often said that a rising tide lifts all boats, the fact is that accurately assessing the relative value of — and prospects for — specific midstream energy companies requires a deep, detailed analysis. Where are their assets located? How do they complement each other? Do their contractual obligations help or hinder? Sure, things may be looking up in the midstream sector in a big-picture sense, but that hardly makes every midstream company a winner. Today, we review highlights from a new East Daley Capital report that shines a bright light on 28 U.S. midstream companies. A year ago, our friends at East Daley published their first “Dirty Little Secrets” report — a deep-dive look at a somewhat smaller group of midstream companies (23), and we ran a series of blogs highlighting what we saw as key themes from the analysis. In Part 1, we focused on the report’s argument that a surprising number of supply-push contracts for crude oil and natural gas pipeline capacity will be expiring in the next few years, and in many instances the likely terms for contract extensions or renewals may be much less favorable to the pipeline owners. The theme we discussed in Part 2 was that vertically integrated midstream companies that can gather natural gas, process it to remove natural gas liquids (NGLs), then pipe gas to market and mixed NGLs (or “y-grade”) to storage and/or fractionators — and maybe even fractionate the y-grade into ethane, propane and other “purity products” — have a real leg up on midstreamers whose assets are more disjointed. The third theme, which we talked about inPart 3, was that location really, really matters — that is, the near- and mid-term success of a midstream company depends to a significant degree on how many of its pipelines, processing plants and other assets serve production areas that are on the rise and not on the edge.
EIA's Short Term Energy Outlook -- February 6,2018 - Key points:
- $62/bbl is not going to help Saudi Arabia; projected price for Brent crude oil through 2019
- US coal production remains stable, slightly greater than 2016
- natural gas is poised to set a record annual increase and record production level in 2018
Oil and Natural gas:
- EIA’s forecast expects Brent crude oil prices to be in the $62 per barrel range in 2018 and 2019.
- that’s down a bit from current levels, as strong U.S. production growth is expected to help moderate global prices
- after exceeding 10 million barrels per day last November, a first since 1970, EIA estimates U.S. crude oil climbed to 10.1 million barrels per day in January, which would be the highest for any month on record.
- February’s short-term outlook revises the forecast for increased oil production over the next two years
- we now expect U.S. crude oil production to average 10.6 million barrels per day in 2018 and 11.2 million barrels per day in 2019
- cold weather east of the Rocky Mountains last month pushed natural gas inventory withdrawals to a record high and contributed to sharp increases in natural gas spot prices, which rose more than one dollar from December’s price to $3.88 per million British thermal units in January.
- natural gas is poised to set a record annual increase and record production level in 2018
- EIA expects a production increase of 6.7 billion cubic feet per day in 2018, climbing from 73.6 billion cubic feet per day in 2017 to more than 80 billion cubic feet per day
- growth from 2018 to 2019 is forecast to be lower but will remain close to 3% year-over-year.
- record natural gas production in the coming months should allow prices to pull back from January’s highs
- February’s short-term outlook expects production increases to continue through 2019 and, accordingly, we should see natural gas spot prices continue declining to an average of about $3.20 per million British thermal units this year and even further to $3.08 per million Btu in 2019.
EIA’s latest Annual Energy Outlook projects rising production, relatively flat consumption - EIA’s Annual Energy Outlook 2018 (AEO2018), released this morning, includes projections of U.S. energy markets through 2050 based on a Reference case and a number of sensitivity cases. The AEO2018 Reference case shows continued development of U.S. shale and tight oil and natural gas resources paired with modest energy consumption growth, leading to the transition of the United States from a net energy importer to a net energy exporter. The United States has been a net energy importer since 1953, but the AEO2018 Reference case projects the United States will become a net energy exporter by 2022. This transition occurs even earlier in some AEO2018 sensitivity cases that incorporate assumptions supporting larger growth in oil and natural gas production or that have higher oil prices. In the High Oil and Gas Resource and Technology case, favorable geology and technological developments increase oil and natural gas supply, leading to higher energy exports. In the High Oil Price case, before 2040, economic conditions are more favorable for oil producers, supporting higher levels of exports and lower domestic consumption than in the Reference case. Exports decline after 2040 in this sensitivity case as a result of the lack of substantial improvements in technology. The AEO2018 presents updated projections for U.S. energy markets through 2050 based on the Reference case and six additional sensitivity cases: Low and High Economic Growth, Low and High Oil Price, and Low and High Oil and Gas Resource and Technology. The AEO2018 Reference case incorporates only existing laws and policies and is not intended to be a prediction of the future. The sensitivity cases incorporate different key assumptions that reflect market, technology, resource, and policy uncertainties that affect energy markets.
US will be a net energy exporter by 2022, four years sooner than expected, Energy Department says - The United States is on pace to export more energy products than it imports by 2022 as oil and natural gas production from the nation's shale fields keep booming and domestic energy demand remains fairly tepid, according the Department of Energy's statistics arm. The country will achieve the feat as it expands natural gas exports beyond its traditional North American markets, shipments of crude oil increase and outward flows of refined products such as gasoline remain robust, the Energy Information Administration said in its Annual Energy Outlook. The nation's anemic appetite for energy will also play a role in the United States becoming a net exporter. U.S. energy consumption is forecast to grow by only 0.4 percent through 2050, compared with expectations for economic growth of 2 percent. If the forecast bears out, 2022 will mark the first year the U.S. energy exports surpassed imports since 1953. "The United States energy system continues to undergo an incredible transformation," EIA Administrator Linda Capuano said in a statement. "This is most obvious when one considers that the [Annual Energy Outlook] shows the United States becoming a net exporter of energy during the projection period in the Reference case and in most of the sensitivity cases as well — a very different set of expectations than we imagined even five or ten years ago." In fact, just last year, the EIA forecast the United States would not achieve net exporter status until 2026. As a net exporter, the United States would still import oil, natural gas and other energy products. Many U.S. refineries are configured to process heavier grades of crude oil, and international flows fluctuate based on the relative cost of energy products from different parts of the world.
Why the New EIA Forecast Is Unrealistic - The Energy Information Administration (EIA) of the U.S. Department of Energy has just released its Annual Energy Outlook (AEO) 2018, with forecasts for American oil, gas and other forms of energy production through mid-century. As usual, energy journalists and policy makers will probably take the document as gospel. That's despite the fact that past AEO reports have regularly delivered forecasts that were seriously flawed, as the EIA itself has acknowledged . Further, there are analysts inside and outside the oil and gas industry who crunch the same data the EIA does, but arrive at very different conclusions. The most comprehensive critiques of past AEO forecasts have come from earth scientist David Hughes, a Fellow of Post Carbon Institute (note: I, too, am a Post Carbon Institute Fellow). Since 2013, Hughes and PCI have produced annual studies questioning EIA forecasts, based on an analysis of comprehensive play-level well production data. Their latest report, a critical look at AEO2017, is just out. "Shale Reality Check: Drilling Into the U.S. Government's Rosy Projections for Shale Gas & Tight Oil Production Through 2050" explores four big questions crucial to the realization of the EIA's forecasts:
- 1. How much of the industry's recent per-well drilling productivity improvement is a result of better technology, and how much is due to high-grading the best-quality parts of individual plays? Over the past few years, industry has shown the ability to extract increased amounts of oil and/or gas from each well. This has been achieved in part by drilling longer horizontal laterals, tripling the amount of water and proppant (usually sand) used per unit of well length, and increasing the number of fracking stages. It is also in part a result of "high-grading," or focusing drilling on the best-quality parts of each play (termed "sweet spots" or "core areas").
- 2. Can technological advancement in the industry continue to raise productivity indefinitely? If, as the EIA suggests, improved technology will continue to increase well production, then perhaps per-well productivity can continue to grow for some time. However, based on the analysis of recent data, Hughes questions this (as does a team of MIT researchers ).
- 3. What will be the ultimate cumulative production from all U.S. tight oil and shale gas wells? Taking the above points into account, Hughes concludes from a detailed analysis of production data that the EIA is making extremely optimistic assumptions about ultimate production and long-term production rates in most shale plays.
U.S. Looks To Sell 15% Of Strategic Petroleum Reserve - The budget deal that the U.S. Congress reached on Wednesday includes the sale of 100 million barrels of crude oil from the Strategic Petroleum Reserve (SPR) between 2022 and 2027—a total volume equal to some 15 percent of the current reserve.According to the text of the budget deal, carried by Reuters, the agreement—expected to be voted later on Thursday—involves the Department of Energy selling 30 million barrels of the SPR between 2022 and 2025, another 35 million barrels in 2026, and additional 35 million barrels in 2027 to help fund the government.The budget deal also involves the sale of $350 million worth of crude oil, or some 5.7 million barrels, this year, with proceeds to be used to repair storage units at the reserve.Currently, the SPR has around 665.1 million barrels of crude oil stored in underground caverns on the coasts of Texas and Louisiana. Last year, in the draft budget for fiscal 2018, the Trump Administration proposed selling half of the Strategic Petroleum Reserve, hoping to raise some US$500 million during the fiscal year and US$16.6 billion over the next ten years. The proposal, however, did not become law because of opposition from Republicans in Congress. Some Republican Senators have argued that selling half the SPR would have hurt U.S. oil producers as it would have reduced oil prices. Opponents also said that the SPR was necessary in case of major storms or major unplanned outages in other oil-producing countries. Another argument of lawmakers who opposed the plan to halve the SPR was that some of the crude oil in the emergency reserve was bought at higher oil prices, so oil from the SPR should be sold when prices increase more. In the wake of Hurricane Harvey last August, the U.S. tapped the SPR after the storm disrupted the petroleum industry in Texas and Louisiana, and led to motor fuel price spikes and shortages. A total of 5 million barrels of oil from the SPR was delivered to Gulf Coast refineries, helping to continue their processing operations and prevent further supply disruptions.
Fracking is linked to breast cancer -- Fracking is linked to breast cancer, new research suggests.The chemicals used in the high-pressure extraction of oil and gas cause uncontrolled cell division in adult mice's mammary cells, a US study found.Past research shows cancer is caused by uncontrolled cell growth, which results in tumours. This cell division occurs when mice are exposed to the equivalent level of chemicals found in the drinking water of areas affected by fracking, the research adds.Fracking is a contentious issue in the UK with campaigners recently announcing they will continue to protest about the proposed operation in Kirby Misperton, North Yorkshire until the energy firm behind it goes bust. The controversial process involves drilling down into the earth before inserting a high-pressure mixture to release gas and oil trapped in rocks.Campaigners argue the use of potentially cancer-causing chemicals in fracking may escape and contaminate local water supplies. Researchers from the University of Massachusetts exposed pregnant mice to one of four doses of 23 chemicals commonly used in fracking. These chemicals were added to the rodents' drinking water. The researchers then analysed the breast tissue of the pups at 21 days old,as well as just before puberty and at 85 days old, which is considered early adulthood in mice. According to the researchers, the two lowest chemical doses investigated are equivalent to levels found in drinking water from drilled areas. The highest dose used matches that of chemicals present in industry wastewater.
Oil Production Vital Statistics January 2018 - The oil price has begun 2018 strongly with Brent breaking through $70 / bbl for the first time since December 2014. OPEC+Russia+others’ discipline on production constraint remains high with ~ 1.7 Mbd production withheld from the market. The IEA reports an ~1 Mbpd stock draw in the OECD + China in 4Q 2017. IEA revisions transform the picture in the USA from one of static production to one of strong growth over the last 3 months (this undoes one of the assumptions used in my 2018 oil price forecast). The inset image (live chart below the fold) shows a slow motion train wreck in Venezuela where production has fallen 810,000 bpd since December 2014. The dramatic slide in oil production in Venezuela began ~ December 2014. We have to presume that the collapse in the oil price has something to do with this. There is however no sign that rising price, now offset by falling production, is averting that country’s collapse. The oil price was held back in 2017 by rising production in Nigeria and Libya. Production in Libya is now holding steady at ~ 1 Mbpd and production in Nigeria is holding steady at ~ 1.65 Mbpd. According to the IEA, OPEC compliance with the agreed cuts is now running at 129% in part due to the unscheduled collapse in Venezuelan supply. I have been following bio-fuel production, pointing out that it had been on a cyclical high last autumn and was scheduled to fall by ~ 1 Mbpd over the winter. This fall is duly underway (below). This, combined with the collapse of Venezuela and continued OPEC++ discipline has underpinned the strong oil price rally.
US Secretary of State Tillerson threatens oil sanctions against Venezuela -- Reflecting mounting concern over challenges to US dominance over Latin America, the Trump administration sent Secretary of State Rex Tillerson on a diplomatic tour aimed at countering “new imperial powers” in the region, particularly China and Russia.In a preamble to his trip at the University of Texas in Austin, Tillerson declared Thursday: “Today, China is gaining a foothold in Latin America. It is using economic statecraft to pull the region into its orbit.” He later condemned Russian military aid to certain countries and warned Mexican officials to be wary of Russian influence in their July general elections.The message he sought to deliver was summed up by his comment that the 1823 Monroe Doctrine claiming US hegemony over the hemisphere “is as relevant today as it was the day it was written.”This represented an about-face from the declaration by then-US Secretary of State John Kerry in 2013 that “The era of the Monroe doctrine is over.” Washington is dispensing with such rhetorical accommodations to national sentiments in order to pursue its recently announced strategic orientation to the preparation for “great power” conflicts Overall, Tillerson’s trip followed the same guidelines as that of US Vice President Mike Pence’s Latin American tour last August, when he pushed governments to join the US in condemning the government of President Nicolas Maduro in Venezuela as part of a broader campaign to undermine Russian and Chinese interests in the region. “As we see widening asymmetrical threats developing around the world, we would do well to see to Central and South America,” Pence said, advancing the reasoning behind Washington’s escalation and expansion into Latin America of the anti-China “pivot to Asia.”
Tillerson raises specter of US sanctions on Venezuelan oil (Reuters) - The United States is considering restricting imports of Venezuelan crude oil and exports of U.S. refined products to Venezuela, U.S. Secretary of State Rex Tillerson said on Sunday, to put pressure on socialist President Nicolas Maduro to “return to the constitution.” “One of the aspects of considering sanctioning oil is what effect would it have on the Venezuelan people? Is it a step that might bring this to an end more rapidly?” Tillerson said at a news conference in Buenos Aires, referring to Venezuela’s economic and political crisis. Tillerson, on a Latin America trip that also includes visits to Mexico, Peru, Colombia and Jamaica, raised eyebrows on Friday after he suggested that Maduro could be toppled by his own military. Restrictions on Venezuela’s all-important oil industry would represent an escalation of financial pressure on the OPEC member, which is gripped by severe shortages of food and medicine. Sanctions have so far focused on individual members of Maduro’s government and a ban on buying new Venezuelan debt. “We are looking at options and we are looking at how to mitigate the impacts on U.S. business interests” and on other countries in the region, Tillerson said. Standing next to Tillerson at the news conference, Argentine Foreign Minister Jorge Faurie said his country would “closely follow” the possibility of oil and fuel sale restrictions, but said sanctions “must never harm the Venezuelan people.” Other Latin American governments have said they were unwilling to take steps that would worsen the humanitarian crisis in Venezuela,
Senator Rubio calls for military coup in Venezuela - Republican Senator Marco Rubio called for the Venezuelan Armed Forces to rebel against the government, in a series of inflammatory tweets posted on Friday. The Secretary of State has hinted at support for a coup d’etat. “The world would support the Armed Forces in #Venezuela if they decide to protect the people & restore democracy by removing a dictator,” Florida Senator Rubio wrote. Rubio’s tweets come after Secretary of State Rex Tillerson on Thursday hinted at his support for a coup d’etat in Venezuela, as well as more sanctions including an embargo on Venezuela’s valuable oil exports. The Trump administration is seeking to ramp-up pressure on President Nicolas Maduro’s socialist regime in the wake of alleged human rights abuses against political dissidents in the country. “In the history of Venezuela and South American countries, it is often times that the military is the agent of change when things are so bad and the leadership can no longer serve the people,” Tillerson said at the University of Texas in Austin on Thursday.
Ireland on a path to being the 4th country in the world to ban fossil fuel exploration - The government has lost a vote on proposed legislation which would place a ban on fossil fuel exploration off the Irish coast.The Bill secured the support of 78 TDs, with 48 voting against it. It will now proceed to Committee Stage in the Oireachtas, despite the government’s opposition.Solidarity-People Before Profit’s Petroleum and Other Minerals Development (Amendment) Climate Emergency Measures Bill aims to stop the issuing of any new licences for the exploration of fossil fuels.Costa Rica, Belize and France have already implemented similar measures. The Bill sets out that the government must: Ensure regard is had to national and global environmental considerations when issuing licences, undertakings and leases under the Petroleum and Other Minerals Development Act 1960 These considerations include: The annual average global temperature, the monthly mean level of carbon dioxide in the atmosphere With the support of the Green Party, Fianna Fáil, Sinn Féin, Labour, and Independents 4 Change (and pop superstar Cher who tweeted her support) it passed, meaning Ireland is now on the path to become the fourth country in the world to implement a ban on the exploration of fossil fuels.Reacting to the vote result today, Green Party Leader Eamon Ryan TD said “this is truly is a historic day for environmentalism in Ireland. The tide has turned on fossil fuels, and there is widespread political support now for a just transition to renewable power”. Smith said passing this Bill to the next stage sends “a signal globally” that Ireland takes climate change seriously. During the week she called on the Taoiseach to support the move.
Poland Waves Goodbye to Russian Gas After 74 Years - Russia’s oldest natural gas buyer is ready to break up after more than 74 years. Poland, which relies on Kremlin-controlled Gazprom PJSC for about two-thirds of its gas, says diversification trumps potential price cuts it could leverage from building an import link to access Norwegian fuel. That comes after the eastern European nation in 2016 completed a liquefied natural gas terminal to diversify away from the Russian gas it’s been buying since 1944. “We’re not diversifying our supplies in order to continue with Russia,” Piotr Naimski, the government official in charge of strategic energy infrastructure, said in an interview in Warsaw. “It’s a question of security and the Baltic Pipe is not a part of negotiations with Gazprom.” The ruling Law & Justice party has said since it came to power in 2015 that it won’t renew a long-term contract with Gazprom that ends in 2022. In order to do that, state-controlled gas distributor PGNiG SA had to revive a project for a link to Norway first mooted about 20 years ago. The Baltic Pipe is on schedule, which is tight with a completion date of October 2022.“If we want to prolong the Gazprom contract we would need to start talks in December 2019, but by that time we’re going to be certain that the Baltic Pipe will be built, so we’re in a comfortable situation,” said Naimski. “At the same time, Poland is ready for any kind of supply risk in the transition period.”Poland is also vying with Gazprom over the Russian company’s plan to expand its Baltic Sea gas pipeline to Germany, called Nord Stream 2. Poland argues that the project would make countries like Ukraine more vulnerable if Russia decided to shut down gas links running across its territory to western Europe. During last month’s visit to Warsaw, U.S. Secretary of State Rex Tillerson said the plan was “not a helpful piece of infrastructure to support stability in Europe.”
India To Boost Oil Refining Capacity By 77% - India plans to increase its crude oil refining capacity by 77 percent to 438.65 million tons, or more than 8 million bpd, a government report has revealed. The increase would happen gradually over the next 12 years as Asia’s new powerhouse seeks to satisfy its growing demand for fuel.The report said that the bulk of the capacity boost will come from facilities owned and operated by Reliance Industries, the local heavyweight, and Essar Oil, which Russia’s Rosneft acquired last year.Reliance will start by increasing the capacity of one of its refineries from the current 33 million tons to 63 million tons annually, while Essar Oil will focus on its 20-million-ton Vadinar facility, upgrading its capacity to 45 million tons.Indian Oil Corp will also take part in the undertaking, planning to boost the processing capacity of four refineries from 80.7 million tons annually to 116.55 million tons. The report comes on the heels of a statement from a government official that the country also has plans to triple its LNG imports over the next seven years to 70 million tons annually. Currently, India has a capacity to import 20 million tons, received at four LNG terminals. Until 2024, the government will aim to build another 11 facilities as it seeks to increase the share of natural gas in its energy mix twofold to 15 percent. These will further rise to 15 terminals, Narendra Taneja, spokesman for the ruling BJP party said at an industry event in Indonesia, as the country’s demand for energy continues to rise steadily. This demand will not only be driven by the government’s plans to expand electricity supply to millions of households that are currently dependent on wood for their heating, cooking, and lighting needs, but also by ambitious plans for EV adoption announced last year.
China surpassed the United States as the world’s largest crude oil importer in 2017 - China surpassed the United States in annual gross crude oil imports in 2017, importing 8.4 million barrels per day (b/d) compared with 7.9 million b/d for the United States. China had become the world’s largest net importer (imports minus exports) of total petroleum and other liquid fuels in 2013. New refinery capacity and strategic inventory stockpiling combined with declining domestic oil production were the major factors contributing to the recent increase in China’s crude oil imports. In 2017, 56% of China’s crude oil imports came from countries within the Organization of the Petroleum Exporting Countries (OPEC), a decline from the peak of 67% in 2012. More so than other countries, Russia and Brazil increased their market shares of Chinese imports between those years from 9% to 14% and from 2% to 5%, respectively. Russia surpassed Saudi Arabia as China’s largest source of foreign crude oil in 2016, exporting 1.2 million b/d to China in 2017 compared with Saudi Arabia’s 1.0 million b/d. OPEC countries and some non-OPEC countries, including Russia, agreed to reduce crude oil production through the end of 2018, which may have allowed other countries to increase their market shares in China in 2017. Several factors are driving the increase in China’s crude oil imports. China had the largest decline in domestic petroleum and other liquids production among non-OPEC countries in 2016, and EIA estimates it will have had the second-largest decline in 2017. Total liquids production in China averaged 4.8 million b/d in 2017, a year-over-year decline of 0.1 million b/d (2%) from 2016, and further declines in both 2018 and 2019 are forecasted in EIA’s January 2018 Short-Term Energy Outlook (STEO). In contrast to declining domestic production, EIA estimates that growth in China's consumption of petroleum and other liquid fuels in 2017 was the world’s largest for the ninth consecutive year, growing 0.4 million b/d (3%) to 13.2 million b/d. As China has built up inventories of strategic petroleum reserves, China’s crude oil imports have increased faster than their domestic consumption.
Surging Chinese energy demand draws record crude imports in January; near-record for gas (Reuters) - China imported a record volume of crude oil and the second-highest amount of natural gas in January, data showed on Thursday, on a surge in refinery buying and spiking heating demand from consumers in the world’s largest energy user. Independent refiners raced to shore up supplies of crude after receiving higher import quotas for 2018 and as a Russian pipeline expansion started up. China pulled in gas last month to avoid a supply squeeze ahead of another cold snap and as the world’s most populous nation prepares for the Spring Festival celebrations that start next week. Crude imports rose 20 percent from the same time a year ago to a record 40.64 million tonnes, or 9.57 million barrels per day (bpd), according to data from the General Administration of Customs on Thursday. That compares with 33.7 million tonnes, or about 7.94 million bpd, in December and beats the previous record set in March 2017 of 9.17 million bpd. The buying spree came after China raised its 2018 crude oil import quota for the country’s independent refiners by 55 percent over 2017. Russia, the nation’s top oil supplier last year, also ramped up exports through its expanded Siberian pipeline last month. “The independents should be a major factor. They tend to increase imports in the first two months of the year, and some new players got quotas,” said Sengyick Tee, senior director SIA Energy. January gas imports, including pipeline imports and tanker shipments of liquefied natural gas (LNG), came in at 7.7 million tonnes, one-third higher than a year earlier and just shy of the previous record of 7.9 million tonnes set in December. A massive government push to heat millions of homes and power thousands of factories with natural gas in northern China has led to demand for the fuel outpacing supply, while delivery infrastructure has struggled to manage the higher consumption.
China's soaring natural gas output unable to meet demand set loose in pollution fight (Reuters) - China’s natural gas production is rising at the fastest pace in four years but that will not be enough to meet the demand for the fuel that has been unleashed through a government program to raise gas usage in order to clean the country’s polluted air. Gas output in China rose to a record 147.4 billion cubic meters (bcm) last year, up 8.5 percent from 2016, data from the National Bureau of Statistics showed. Gas production is forecast to climb by between 6 percent to 8 percent per year through 2020, according to researchers at China National Petroleum Corp. But China’s war against smog has spawned voracious demand for the fuel that will keep it reliant on growing imports of liquefied natural gas or piped gas. The consumption surge is a result of a government drive that started last year to switch factories and millions of homes from coal to gas in order to cut harmful emissions. “The momentum of this round of gas boom that started in late 2016 will extend well through this year,” said Li Yao, chief executive at SIA Energy. China, the world’s largest energy consumer, was the world’s sixth-largest gas producer in 2016 after rising investments over the past 20 years. However, consumption is surging even faster, climbing 15 percent in 2017 to 237 bcm, according to the National Development and Reform Commission. SIA expects China’s 2018 gas output to rise by around 8 percent, or roughly 12 bcm, at the same time that gas demand will rise by 30 bcm, or 12.5 percent, to 270 bcm. That means that China in 2018 will need to import as much as 114 bcm of gas through pipelines and LNG combined. China’s gas imports last year surged by 28 percent. The trend of rising imports will continue, with SIA forecasting imports of 132 bcm will be required to meet 317 bcm of demand by 2020.
Japan's average LNG spot contract price in Jan rises 8% on month: METI -- The average price for spot cargoes in Japan contracted in January rose to $11/MMBtu, up 7.8% from December, the sixth month of rise since August, data released by the Ministry of Economy, Trade and Industry on Friday showed. The price was the highest since December 2014 when Japanese buyers paid an average of $11.60/MMBtu for spot cargoes. The ministry does not disclose when these contracted cargoes will be delivered. S&P Global Platts JKM averaged $10.851/MMBtu in January, reflecting deals for February and March delivery. The spot market remained firm on expectation of additional demand on the back of colder weather in the region, and supply concerns due to some production issues. The average price of cargoes delivered to Japan in January was $10.10/MMBtu, up 24.7% from December, METI said.
Iran's Jan LPG exports jump to 520,000 mt, the most since sanctions ended: sources -- LPG shipments from Iran made a strong start to the year, rebounding to 520,000 mt in January, the highest since Western sanctions for its nuclear program were lifted in January 2016, updated fixtures from shipping sources showed this week. The latest volume is 146,000 mt more than initial figures published in mid-January, according to shipping sources. It is also up 39.4% from 373,000 mt in December 2017, when shipments posted the first month-on-month increase in three months, after exports started declining in September due to lower output at the South Pars gas field amid a two-month maintenance. In 2017, Iran's LPG shipments totaled around 3.5 million mt, with the highest monthly volume seen in August at 423,000 mt before the maintenance, which ended around mid-November, sources had said. Iranian exports are helping to fill shortfalls of spot supply from the Middle East, as major producers Saudi Arabia, the UAE, Qatar and Kuwait are exporting less spot cargoes as they focus on fulfilling term contracts and meeting domestic petrochemical demand. Preliminary figures so far showed 132,000 mt fixed for lifting in February in three cargoes, shipping sources said.
NYMEX March natural gas down 1 cent but slows declines on technicals - After a 1.0 cent drop to close at $2.846/MMBtu Friday, NYMEX March natural gas futures edged briefly higher overnight ahead of Monday's open as technical buying view with fundamental pressure. But the market then turned lower again. At 7:00 am ET (1200 GMT) the contract was 1.0 cent lower at $2.836/MMBtu. After the March contract logged a net 32.1 cent drop since becoming front month on Jan. 30, a burst of opportunist buying buoyed the futures market overnight. But the upside remains limited by fundamental weakness implied by recent and projected low weather-related demand. Natural gas demand ended January on a weak note in generally warmer weather, with the EIA's latest "Natural Gas Weekly Update" for the week ended Jan. 31 showing a 2% week-on-week drop in total US gas consumption. Dry production was up 1% over the same period. Elevated production alongside diminished demand during the week in review should limit the amount of natural gas drawn from underground storage facilities when the next weekly inventory report is released that will cover the week to Feb. 2, allowing for a continuation of the recent slow pace of stock erosion.
March NYMEX natural gas catches its breath at $2.754/MMBtu after further sharp decline - NYMEX March natural gas futures ticked marginally higher overnight in the US ahead of Tuesday's open, with little in the way of fundamental support. Having shed 9.9 cents Monday, the contract was 0.7 cent higher at $2.754/MMBtu at 7:01 am ET (1201 GMT). March gas has notched a cumulative loss of 44.8 cents after steadily declining for four consecutive sessions from January 31 to February 5, with fundamental pressures coming from weather and natural gas inventories. Warmer weather in the week to January 31 drove a 2% decline in total US gas consumption compared with a week earlier, according to the EIA's latest Natural Gas Weekly Update, feeding expectations for a continuation of the slow pace of storage erosion. Farther out, abating cold in midrange temperature outlooks should heap additional downside pressure on demand levels, likely to allow for more natural gas to remain in underground storage facilities heading toward spring.
Feature: LPG's 'flipped' year of summer strength and winter weakness - Through the late summer and into the winter, global markets for LPG have repeatedly defied expectations about seasonal patterns in supply and demand, reversing the usual script by strengthening in summer and weakening in winter, just when prices are typically at their annual peak. Across the US, Europe and Asia, those patterns have been fueled by low stocks and high prices in the US during the summer months, followed by weak winter heating demand in key consumer markets, and a closed arbitrage from Europe to the US for gasoline, which has undercut demand for butane as a blending component as temperatures dropped. But underlying these factors are signs of a longer-running shift in LPG markets, as the explosion of US shale energy has redrawn the supply map for propane and butane, while petrochemical buyers, who use the products as alternative feedstocks to naphtha for their steam crackers, have increasingly set the floor for demand even during the winter months. Both propane and butane prices are typically seasonal. For propane, winter heating demand around the world normally pushes up price levels during the colder months, while temperatures dip during the spring and into the summer to levels where the product becomes attractive as an alternative feedstock to naphtha for petrochemicals. Butane has typically followed a similar cycle. In the autumn, gasoline blends in Northwest Europe shift to winter blends, which allow butane to be used as a blending component. Butane is too light to be used in blending during the summer months, and in markets like West Africa, summer specification is used all year round. In the summer, like propane, butane sinks to levels where it becomes competitive as an alternative feedstock. Over the past several years, those seasonal troughs and peaks have often been flattened or slightly shifted, with butane's seasonal shifts coming slightly later over the last two years. But the change has been particularly notable recently: rather than merely flattening or coming later in the year, the seasonal trends have often been totally reversed, with strength in the summer and weakness in the winter, driven by sparse product during the warmer months and sparse demand into the winter.
Mar NYMEX natural gas near flat at $2.765/MMBtu weighed down by fundamentals - NYMEX March natural gas futures were near unchanged overnight in the US ahead of Wednesday's open on fundamental pressure. At 6:44 am ET (1144 GMT) the contract was 0.6 cent higher at $2.765/MMBtu.While Tuesday saw a modest 1.2 cent uptick it followed a cumulative loss for the March contract of 44.8 cents after steadily declining for four consecutive sessions from January 31 to February 5.Market participants anticipate a continuation of the slow pace of storage erosion when the US Energy Information Administration releases its weekly inventory report Thursday.Estimates for the storage data call for a withdrawal in the upper 110s Bcf to the low 120s Bcf, which would be below both the 142 Bcf year-ago pull and the 151 Bcf five-year-average.The week's data will follow a modest 99 Bcf drawdown reported for the week to January 26Generally warmer weather in the week ended January 31 drove a 2% decline in total US gas consumption compared to the week ago, according to the EIA's latest Natural Gas Weekly Update. Additional warming in the weeks ahead suggest ongoing demand weakness, which should allow for more gas to remain in underground storage facilities as it keeps a lid on the rate of weekly stock draws.
EIA reports slightly larger-than-expected decline in U.S. natural-gas supply - The U.S. Energy Information Administration reported Thursday that domestic supplies of natural gas fell by 119 billion cubic feet for the week ended Feb. 2. Analysts surveyed by S&P Global Platts had forecast a decrease of 109 billion, while the five-year average withdrawal is 151 billion. Total stocks now stand at 2.078 trillion cubic feet, down 503 billion cubic feet from a year ago, and 393 billion below the five-year average, the government said. March natural gas was up 2.3 cents, or 0.9%, at $2.726 per million British thermal units, little changed from before the data.
Iran plans to increase oil production capacity by 700000 BPD within 4 (Reuters) - Iran aims to raise its crude output capacity to 4.7 million barrels per day within the next four years, deputy Oil Minister Amir Zamaninia told a conference in Paris. “We are striving - to be very cautious and not ambitious - for the next 3, 4 years we are planning to increase our production by about 700,000 taking our production to 4.7 million bpd,” Zamaninia said. He added that it could rise to as much as 1 million if Iran was able to reach deals on the development of four of its oil fields with international companies.
Two OPEC Nations Set to Open Giant Fields - Two OPEC countries will bring giant oil fields online this year, testing their commitment to cap output amid a global push to curb supply.Total SA plans to start production at two so-called mega-projects, Kaombo in Angola and Egina in Nigeria, Chief Executive Officer Patrick Pouyanne said Thursday. Once both are onstream -- Kaombo by mid-year and Egina in the fourth quarter -- they’ll have a combined capacity of 430,000 barrels a day. That exceeds the total output of OPEC members Gabon and Equatorial Guinea. The Organization of Petroleum Exporting Countries has been curtailing production for more than a year, achieving unprecedented compliance with caps and driving oil prices up 18 percent in 2017 as global stockpiles finally shrank. Yet the latest supply data from Angola and Nigeria show that the additional barrels planned for this year would cause both to flout their OPEC commitments should their output remain otherwise unchanged.
OPEC-Russia Deal Could Extend Until 2019 - Gazprom Neft—the Russian oil company that has publicly expressed frustration with the OPEC-Russian deal to curtail oil supply—does not rule out that the joint cooperation pact could last until the first half of 2019. Gazprom Neft is basing its planning on that assumption, Sergey Vakulenko, head of strategic planning at the oil producing arm of Russia’s gas giant Gazprom, told Reuters on Thursday. Before the extension of the production cut pact in November last year, Gazprom Neft had been hinting that it was not happy with the deal as it had to sacrifice production growth plans as Russia and OPEC restrict oil supply to draw down the global overhang. In October 2017, a month before OPEC and allies decided to extend the deal to the end of 2018, Gazprom Neft’s first deputy CEO Vadim Yakovlev said in an interview with Reuters—also published on the corporate website—that the company sees the OPEC deal as short term. Gazprom Neft is holding its nose at the deal as it is forcing the firm to scale back production growth plans, Yakovlev said. Months before that, in June 2017, Gazprom Neft CEO Alexander Dyukov had said in another interview published on Gazprom Neft’s website: “Gazprom Neft, as you know, has, in recent years, aggressively expanded production — by seven to nine percent per year — and, of course, we had planned to continue growing at that same rapid pace. Following the OPEC agreement, instead of growing at eight to nine percent, we have increased production by just 4.5 to five percent. Which is, without a doubt, a negative factor for us.”
Art Berman: When Oil Longs Outnumber Shorts, It "Always Leads To A Correction" - The legalization of US oil exports may have "changed the game" for global oil prices - especially WTI - but that doesn't mean old pricing models like the inverse correlation between inventories and prices still apply. At least that's what Art Berman, a petroleum geologist and the featured guest on this week's episode of MacroVoices, told host Erik Townsend back in October during a previous appearance on the program. Berman argued this to justify his bet that oil prices would continue to head higher while causing the spread between WTI and Brent to compress. And as it turns out, Berman had it right: WTI climbed above $70 for the first time in three years last month, the strongest signal yet that the bear market in oil that's contributed to a string of bankruptcies in the oil patch and a devastating economic crisis in Venezuela is finally over, and that the long-anticipated "rebalancing" of inventories and prices has begun. For Berman believes that, even though the price of oil has nearly doubled since June, the commodity has a long way to climb as accelerating economic growth and coordinated production cuts more than offset the impact of US exports and the booming shale industry in the US and Canada. Berman explains, using slides from his latest chart deck, how OPEC's response to the growing threat from the North American shale industry has been the dominating factor in energy markets since 2014. By reducing production, OPEC has shifted the WTI futures curve from Contango to Backwardation - a strong signal that prices will continue higher. Still, Berman admits that speculation ultimately is the guiding force for oil markets, and that the record net long positioning in WTI futures could trigger a sharp correction if something triggers a vicious short squeeze. Right now, WTI longs outnumber shorts 12:1.
Hedge funds pause oil buying as rally runs out of steam: Kemp (Reuters) - Hedge fund managers have cut their bullish exposure to petroleum for the first time in six weeks as oil prices stalled and sentiment turned more cautious amid concerns about an increasingly crowded trade. Fund managers cut their net long position in the six most important futures and options contracts linked to crude and fuels by 21 million barrels in the week to Jan. 30 (http://tmsnrt.rs/2E1RCJ6). The reduction was small and comes after the net long position was increased by 258 million barrels over the previous five weeks and by 1,174 million barrels since the end of June. Nonetheless it came after portfolio managers had built a record net long position in Brent, NYMEX and ICE WTI, U.S. gasoline, U.S. heating oil and European gasoil a week earlier. Long positions had come to outnumber short ones by a record ratio of more than 11:1, fuelling concerns about lopsided positioning and the risk of a correction. In the most recent week, fund managers cut their net long position in Brent (-7 million barrels) and West Texas Intermediate (-18 million barrels), according to records published by regulators and exchanges. Changes in U.S. gasoline (+3 million barrels), U.S. heating oil (-2 million barrels) and European gasoil (+4 million barrels) were smaller and more mixed. There is not enough data to determine whether the position reduction was merely a pause after an extraordinary bull market or the start of a more sustained pull back.
Oil Prices Ravaged By Financial Turmoil - Oil prices fell back suddenly over the last few trading sessions, dragged down by some forces beyond the oil market. The steady decline of the U.S. dollar has helped drive up crude prices for weeks, but that came to an abrupt halt last week. A rebound for the greenback led to a steep decline in oil prices on Friday. At the same time, sudden turmoil in the broader financial system also bled over into the oil market. Volatility in the stock market flared up on Friday, sparking the sharpest single-day upheaval in years. The Dow Jones Industrial Average fell more than 600 points, only the ninth time in history that a fall of that magnitude has occurred. “The stock market and interest rates can really affect oil a lot,” Mark Waggoner, president of Excel Futures, told The Wall Street Journal. “It’s spilling over into the energy markets and causing these ripple effects.” The stronger-than-expected job growth and wage increases fueled speculation that the Fed would tighten interest rates more than previously thought. Bond yields continue to rise, undercutting equities. Signs of higher inflation also led to speculation of interest rate hikes from the central bank. The dollar gained 0.7 percent on Friday. That led to a selloff for Brent and WTI. And if the turmoil continues, the trouble for oil benchmarks will also linger. “The potential is present for a big move lower should fear return to the stock market and spark liquidations across the board,” analysts at TAC Energy said Friday, according to The Wall Street Journal. “The cross-asset class correlations have returned over the past several weeks.”
Oil takes a hit from global market jitters, sending WTI to a 2-week low - Oil prices dropped on Monday, tracking a sharp drop in global stock markets, with a stronger dollar and rising U.S. crude production sending U.S. benchmark crude to its lowest finish in two weeks. March West Texas Intermediate crude fell $1.30, or 2%, to settle at $64.15 a barrel on the New York Mercantile Exchange, adding to a 0.5% loss from Friday. It marked its lowest finish since Jan. 22, according to FactSet data. Brent for April gave up 96 cents, or 1.4%, to $67.62, ending at a roughly four-week low on the ICE Futures Europe exchange. Some of the tailwinds for the oil markets in recent weeks “have become headwinds, including the U.S. dollar bottoming out, and storage drawdowns turning into inventory builds,” “While stock prices have started to drop back in an overdue correction, oil prices…could be vulnerable if traders pull out of risk markets and go defensive,” he said.Both WTI and Brent ended last week with losses, as a key dollar index DXY, -0.02% put on 0.6% for its biggest gain of the year. That came as better-than-expected U.S. wage growth data stoked fears of resurgent inflation that could force the Federal Reserve to raise interest rates faster than anticipated. A strong buck tends to weigh on dollar-denominated commodities such as oil, as they become more expensive to buy for holders of other currencies. On Monday, the dollar strengthened, with the ICE U.S. Dollar Index up 0.5%. Investors have also been lukewarm about dipping further into the oil market after data out last week showed U.S. production crossed the 10-million-barrels-a-day mark in November for the first time in nearly 50 years. In the same vein, Baker Hugheson Friday said the number of active U.S. rigs drilling for oil rose by six last week, indicating American production will remain high for the foreseeable future.
US crude falls 2%, settling at $64.15, as oil prices sell off with broader market - Oil fell for a second day on Monday as rising U.S. output, a weaker physical market and recent dollar strength added to the pressure from a widespread decline across equities and commodities markets.U.S. West Texas Intermediate (WTI) crude finished Monday's session down $1.30, or 2 percent, to $64.15, slipping further from a roughly three-year intraday high of $66.66 set on Jan. 25.Brent crude futures fell to session lows, dropping $1, or 1.5 percent, to $67.58 a barrel by 2:29 p.m. ET. The contract was trading near its lowest level since early January."We're definitely starting to raise some serious red flags, especially in the $67 area for Brent. If we can get a bounce off that area, that would suggest to us we have the possibility to work higher, but it would suggest the sideways consolidation period could continue," said Brian LaRose, technical analyst at United-ICAP.Friday's U.S. jobs report that showed the fastest wage growth in nearly nine years exacerbated a broader market sell-off that was already under way as Wall Street stocks backed off record highs, and a rising dollar dented commodities.Wall Street's three major indexes logged their biggest weekly losses in two years on Friday after the strong payrolls report. The S&P 500 and Dow Jones Industrials posted their worst weeks since January 2016 while the Nasdaq recorded its worst week since February 2016.On Monday, the Dow Jones Industrial Average shed more then 600 points, dropping another 2.4 percent in mid-afternoon trading, fueling concerns that oil prices could fall further."If you don't see some signs in the equity markets finding their footing then that will be headwinds for the energy complex as a whole," LaRose added.Although volatility in oil is rising, it is still close to its lowest in three years. The physical crude market has deteriorated in the last few weeks, as the price of North Sea oil hit its lowest in eight months, while Russian Urals crude changed hands last week at its lowest level in a year.
Oil prices drop sharply as U.S. production rises | Calgary Herald: Oil’s rally is unraveling on fears over an increase in U.S. production and as a deepening slump in equities undermines market support. Benchmark Brent fell to its lowest level since Jan. 8 after Baker Hughes data showed American explorers last week raised the number of rigs drilling for crude to the highest in almost six months. A global slump in equities deepened on Monday, removing another pillar of support for the oil market. Brent has broken $70 a barrel this year, extending a rally driven by the extension of an output deal until the end of 2018 by the Organization of Petroleum Exporting Countries and its allies. While crude’s strong start to the year was also helped by falling U.S. inventories, strong gains in equities and a weaker dollar, analysts have been cautioning about the potential for a surge in U.S. shale production. “A global sell-off in risk assets is gathering pace and sending the energy complex lower amid a sea of red,” PVM Oil Associates Ltd. analysts Tamas Varga and Stephen Brennock wrote in a report. “The risk-off environment throughout the energy complex comes as U.S. drillers added oil rigs for a second consecutive week.” Brent for April settlement lost as much as 98 cents to $67.60 a barrel on the London-based ICE Futures Europe exchange. It traded 90 cents lower at $67.68 a barrel at 12:44 p.m. in London. The global benchmark crude traded at a premium of $3.29 to April West Texas Intermediate, touching the least since August. WTI for March delivery dropped 61 cents to $64.84 a barrel on the New York Mercantile Exchange. Total volume traded was about 73 percent above the 100-day average.
Analysis: OPEC's success may be its own undoing, as oil market may overtighten (Platts)-- OPEC oil ministers have taken pains to head off any rumors that they will abandon their production cuts prematurely, saying that despite higher oil prices in recent weeks, global inventory levels were still much too bloated -- by some 100 million barrels -- to even consider the idea. But do the ministers protest too much? Some analysts say they believe stocks are far less than OPEC has declared. S&P Global Platts Analytics estimates that excess stocks of oil in storage have largely already drained and that the rebalancing is more or less complete, taking into account the growth in demand over the last three years and line-fill volumes required for new infrastructure builds. The danger is that OPEC overshoots on tightening the market, which could exacerbate the backwardation in prices, prolong the rally in near-term prices, and ultimately erode demand. That is what happened in 2014 after years of stable, high oil prices at or above $100/b, which helped prompt the boom in US shale growth and trigger a severe market slump that persisted until the current OPEC/non-OPEC output agreement was reached and the cuts started to bite, head of S&P Global Platts Analytics Chris Midgley said. Midgley added that he was "less concerned this time about shale production growth," saying that these barrels will be needed to meet strong demand growth this year, and that producers are showing far greater fiscal discipline and focusing primarily on cash flow over output. A price surge may not happen until the second half of the year, given seasonal demand patterns, but it's a situation that "we need to watch carefully," Midgley said. Goldman Sachs drew an even more bullish conclusion, saying in a note to clients Thursday that "the rebalancing of the oil market has likely been achieved, six months sooner than we expected." The investment bank revised up its forecast for demand growth in 2018 and forecast that oil prices could rise to $82.50/b by mid-year. ICE Brent futures were trading at $69.48/b at 1130 GMT Friday.
Crude oil futures: Crude continues to edge lower amid stocks selloff -- Crude oil futures continued to trend lower during European morning trading on Tuesday as expectations of further increases in US oil stocks this week -- as well as dramatic global stock market falls -- exerted pressure on the oil market. At 1113 GMT, April ICE Brent crude futures were down 42 cents from Monday's settle at $67.20/b, while the NYMEX December light sweet crude contract was down 54 cents cents at $63.61/b. An S&P Global Platts survey of analysts' expectations for US weekly oil stocks data indicates an increase of 2.8 million barrels for the week ended February 2. For the week ended January 26, total US crude stocks increased 6.78 million barrels to 418.36 million barrels, ending 10 consecutive weeks of declines. The American Petroleum Institute will release its data later Tuesday with more definitive numbers from the US Energy Information Administration due to be published on Wednesday. Meanwhile, global stock markets experienced further volatility on Tuesday, after the Dow Jones Industrial Average saw its largest daily loss of all time yesterday. According to analysts at ING, "given the amount of speculative money in the oil market at the moment, it shouldn't come as too much of a surprise that the more recent risk-averse move from global investors has put pressure on the oil market." Carsten Fritsch at Commerzbank said that "given the magnitude of the stock market selloff the oil drop is still rather moderate and not far away from any kind of panic -- we can likely expect it to fall further." The US Dollar Index was down 0.14 from Monday's close at 89.50.
WTI/RBOB Rise After Surprise Crude Inventory Draw -- Both WTI/RBOB slid notably lower on the day amid equity market chaos, OPEC comments, and chatter about US production reaching 11m b/d sooner than expected. API printed an unexpected 1.05mm crude draw and WTI managed a small pop.“The mood of the market will get a lot more positive as the stock market mood gets more positive,” Phil Flynn, senior market analyst at Price Futures Group Inc. in Chicago, said by telephone. Meanwhile, there’s concern about being “too long ahead of tonight’s API report.” API :
- Crude -1.05mm (+3.15mm exp)
- Cushing -633k
- Gasoline-227k
- Distillates +4.552m
Last week's surprise crude build - breaking the streak of draws - has prompted expectations of a build again this week from analysts, but API shows a draw. The big build in distillates was also very notable... The move in oil prices is “linked to what’s going on in the broader markets,”Tamar Essner, an analyst at Nasdaq Inc. in New York, said by telephone. “Markets tend to move in lockstep. In panic situations, markets tend to move together in a coordinated way.” But we do note that as stocks ramped into the close, WTI/RBOB did not but very modestly popped higher on the API data.
Oil Crushed By Market Meltdown - The major news over the last few days is the global market meltdown, which has inflicted disproportionate pain on the energy sector. Equities sold off around the world, but energy stocks dropped especially severely. Falling oil prices and a rebound in the U.S. dollar magnified the losses in the energy space. As of early trading on Tuesday, the losses continued. The Energy Select Sector SPDR ETF, an exchange-traded fund that tracks the energy sector, lost 4.31 percent on Monday, the largest one-day decline since January 2016. The fund has lost more than 10 percent in two days. The losses mirror those at individual companies. ExxonMobil saw its share price plunge by more than 10 percent between Friday and Monday. The oil major was hit on two fronts as poor earnings came on the same day that markets started melting down. Barclays gave Exxon a double downgrade. "This is contagious from the financial markets and the equity market, especially,” Michael Lynch, president of Strategic Energy & Economic Research, told Bloomberg. "People worry that the demand may be not as robust over the next couple of quarters as people have been anticipating.” Ahead of the market meltdown, hedge funds and other money managers trimmed their bullish bets on oil futures, the first cut in net-long bets in six weeks. The reduction was small, but it was an indication that investors were growing wary last week of the oil price rally. Meanwhile, since that data release, global equities have sold off. That risks a deeper liquidation of bullish bets on crude oil, which could send prices careening down. U.S. Secretary of State Rex Tillerson floated the idea of a ban on Venezuelan oil imports into the U.S., a drastic move that would send shockwaves through a country already dealing with falling oil production and an economic crisis. American refiners would also be hit. Valero Energy and Chevron would be impacted the most, the first and second largest U.S. buyers of Venezuelan oil. They have refineries on the Gulf Coast that would be negatively affected, a fact not lost on the U.S. government.
Crude oil prices fall as global financial markets tumble - Oil prices dropped by more than 1 per cent on Tuesday, extending falls from the previous session as global financial markets tumbled lower in the wake of one of the biggest intra-day falls ever registered on Wall Street. Brent crude futures were at $66.91 (£47.84) per barrel on Tuesday morning, down 71 cents, or 1.1 per cent, from the previous close. That was more than $4 below their high-point for 2018, hit last month. US West Texas Intermediate (WTI) crude futures were at $63.46 a barrel, down 69 cents, or 1.1 per cent, from their last settlement and more than $3 off their 2018 high. “The fall [in crude futures] is mainly attributable to a global sell off in equities,” said Sukrit Vijayakar, director at consultancy Trifecta Energy. “People ran to the US dollar as a safe-haven currency. Therefore the dollar strengthens. This makes commodities more expensive to buy, hence oil futures get sold off,” he added. Financial markets went into a tailspin on Monday after a sharp rise in US bond yields that raised alarms over rising inflation and potentially higher interest rates. The Dow Jones Industrial Average’s 4.6 per cent loss on Monday was its largest in percentage terms since August 2011, and the day’s 1,175 point loss was its biggest ever in absolute terms. The index was briefly down more than 6 per cent. US S&P 500 futures tumbled 3 per cent in Asian trade on Tuesday, extending Monday’s sell-off. “Suddenly, inflation has become one of the most-talked about issues in markets,” US bank JP Morgan said in a note to clients. The correction in oil is also being driven by fundamentals, traders said. Despite Opec and Russia cutting production in order to tighten the market, crude remains in ample supply. That is largely due to soaring US shale oil production, which has jumped by almost 18 per cent since mid-2016 to 10 million barrels per day (bpd), surpassing top exporter Saudi Arabia. Only Russia produces more, averaging 10.98 million bpd in 2017.
WTI/RBOB Sink After US Oil Production Hits Record High, Surpassing Saudis - WTI/RBOB held on to gains after last night's surprise crude draw from API, but quickly tumbled after DOE reported a 1.9mm crude build (2nd week in a row) and significant gasoline and distillate builds. However, US crude production's massive spike to 10.25m b/d was the big headline. DOE:
- Crude +1.895mm (+3.15mm exp)
- Cushing -711k (-263k exp)
- Gasoline +3.414mm (+500k exp)
- Distillates +3.926mm (-1.25mm exp)
Last week's surprise (huge) crude build from DOE was dismissed by API overnight but DOE ruined that party and showed the second weekly crude build in a row. Gasoline and Distillates stocks resumed their rise...As Bloomberg's David Marino notes, Total U.S. inventories grew the most since early September. It's actually even a bigger deal than the headline number suggests: if not for a 6.4 million draw from propane/propylene and "other" oils, we'd be looking at a 10 million barrel build. But all eyes were once again on US crude production as it smashed above 10m b/d. As Bloomberg's Julian Lee notes, that huge jump in crude production is not the result of a sudden burst of drilling. More likely it is the correction we expected after the earlier release of monthly data for November that showed production was already above 10 million barrels a day three months ago.U.S. crude output hits a record high of 10.25 million bpd, surpassing both the monthly high set in Nov 1970, and Saudi Arabia's latest production.
Oil prices tank 2.5%, settling at one-month low of $61.79, after US crude and fuel stockpiles jump - Oil prices fell for a fourth straight session on Wednesday after government data showed U.S. crude and fuel stockpiles rose last week, while American drillers continue to increase production. "The report was unilaterally negative — not only did it show builds in both crude and refined products, but what spooked the bears is that U.S. production hit a fresh record high of 10.25 million" barrels per day, said Tamar Essner, director of energy and utilities at Nasdaq Corporate Solutions. U.S. West Texas Intermediate (WTI) crude futures ended Wednesday's session down $1.60, or 2.5 percent, to $61.79 a barrel. The contract hit one-month closing and intraday lows and was trading down 5.6 percent this week. Brent crude futures fell $1.35, or 2 percent, to $65.51 a barrel, closing below its 50-day moving average for the first time in about seven months. The contract has not fallen below $66 a barrel since Dec. 26 and is down 4.5 percent for the week. Crude futures were caught up in a broad market sell-off earlier in the week. But while U.S. share prices continued to rally after a late afternoon rebound on Tuesday, oil prices extended losses after the weekly inventory report. U.S. commercial crude inventories rose by 1.9 million barrels to 420.3 million in the week through Feb. 2, the U.S. Energy Information Administration reported. That was lower than the increase of roughly 3 million barrels analysts anticipated in a pair of surveys. But data on Tuesday from the American Petroleum Institute had shown a decline of 1.1 million barrels, setting market expectations for a drop after the previous week's big rise. The increase was largely due to a buildup of stockpiles in the Gulf Coast refining hub, where refiners are winding down operations for seasonal maintenance. Despite this, refinery activity remained strong, but last week's data likely did not reflect some big shutdowns, said Tom Kloza, global head of energy analysis at Oil Price Information Service. "We're going to see those refinery runs drop next week and they'll continue to drop into March," he said.
Oil hits one-month low on U.S. crude stocks build, record output - (Reuters) - Oil prices fell to a one-month low on Wednesday after U.S. data showed a build in inventories and record high crude production, raising worries of more selling that could expose speculators with big bets on upward momentum in crude prices. U.S. West Texas Intermediate (WTI) crude fell $1.60, or 2.5 percent, to settle at $61.79 a barrel. WTI hit a low of $61.33, the lowest since Jan. 5. Volumes were heavy, with more than 957,000 front-month futures trading, far more than the average of 634,000 contracts over the last 200 days. Brent crude futures fell $1.35, or 2 percent, to $65.51 a barrel. U.S. WTI prices have slid for four straight sessions, down 6 percent in that time. U.S. crude inventories rose 1.9 million barrels last week, according to the U.S. Energy Information Administration. [EIA/S] This was less than expected, but that was in part because of a surprising increase in refining activity that boosted fuel inventories headed into the seasonally slow spring. However, U.S. crude production also rose, hitting 10.25 million barrels per day (bpd), a record if confirmed by more reliable monthly data, which lags by a couple of months. “U.S. weekly oil production registering 10.25 million bpd in today’s report has unsettled the market – the impact of which is manifested as weakening oil prices,” A recent rebound in drilling rig activity boosted production after futures prices extended a rally to three-year highs earlier this month. Higher output could undercut prices, analysts said, noting that official estimates for U.S. production gains were recently increased. Hedge funds and other speculators had a record long position in crude futures as recently as late January. These positions have been trimmed, but are still largely arrayed in favor of rising oil prices.
US shale surge sends warning to OPEC: Kemp (Reuters) - U.S. crude oil production is set to increase by more than 1.2 million barrels per day in 2018 compared with 2017, according to the latest short-term forecasts from the U.S. Energy Information Administration. U.S. crude production will average almost 10.6 million barrels per day (bpd) this year compared with 9.3 million bpd in 2017 ("Short-Term Energy Outlook", EIA, Feb. 6).The forecast has been revised sharply higher from less than 10.3 million bpd at the time of the last prediction in January 2018 and 9.9 million bpd in July 2017 (http://tmsnrt.rs/2EpmSoV).Unexpectedly rapid growth in U.S. onshore production from the Lower 48 states in recent months has caused the agency to re-benchmark its output numbers going forward.Crude production from the Lower 48 excluding federal waters in the Gulf of Mexico, mostly from shale, is expected to rise by nearly 1.25 million bpd this year.Total U.S. liquids production, which includes natural gas liquids, is predicted to rise by 1.7 million bpd in 2018, which is exactly the same as the forecast increase in global liquids consumption.If the forecasts prove correct, U.S. shale producers will capture all or most of the predicted growth in global oil consumption this year. Surging output from shale underscores the growing competitive threat to members of the Organization of the Petroleum Exporting Countries and its allies led by Russia.Efforts to restrain production under the cooperation framework between OPEC and non-OPEC allies risk back-firing.The cooperating countries are already conceding market share to the shale producers, in a re-run of the situation before oil prices slumped in 2014.If production restraint succeeds in drawing down global inventories even further, and pushes Brent significantly above $70 per barrel, the resulting shale surge and slowdown in consumption growth will intensify the danger. The dilemma between defending prices or protecting market share has been a familiar one for OPEC for the last 40 years, and the organisation has regularly alternated between pursuing these competing priorities. The price defence strategy has worked but is now starting to threaten the organisation's market share and could become counterproductive if carried too far.
Oil World Turned Upside Down as America Sells Oil in Middle East - The United Arab Emirates, a model Persian Gulf petro-state where endless billions from crude exports feed a giant sovereign wealth fund, isn’t the most obvious customer for Texan oil. Yet, in a trade that illustrates how the rise of the American shale industry is upending energy markets across the globe, the U.A.E. bought oil directly from the U.S. in December, according to data from the federal government. A tanker sailed from Houston and arrived in the Persian Gulf last month. The cargo of American condensate, a type of very light crude oil, was preferred to regional grades because its superior quality made more suitable for the U.A.E’s processing plants, a person with knowledge of the matter said, asking not to be identified discussing a commercially sensitive matter. “As a member of OPEC and a large crude producer, I would imagine they would be very self-sufficient in their own crude supply,” said Andy Lipow, president of Lipow Oil Associates LLC. The purchases of U.S. oil aren’t likely to continue, given the U.A.E.’s own supply, Lipow said. The end of a ban on U.S. exports in 2015 coupled with the explosive growth of shale production, has changed the flow of petroleum around the world. Shipments from U.S. ports have increased from a little more than 100,000 barrels a day in 2013 to 1.53 million in November, traveling as far as China and the U.K.
Oil hits seven-week low on expectations of higher US, Iran output (Reuters) - Oil prices fell to their lowest in seven weeks on Thursday amid fears of rising global supplies after Iran announced plans to increase production and U.S. crude output hit record highs. Brent futures LCOc1 fell 70 cents, or 1.1 percent, to settle at $64.81 a barrel, their lowest close since Dec. 20. U.S. West Texas Intermediate (WTI) crude CLc1, meanwhile, was down 64 cents, or 1 percent, to settle at $61.15, its lowest close since Jan. 2. Both benchmarks fell for the fifth straight day, the longest losing streak for Brent since November 2017 and for WTI since April 2017. Brent futures have lost as much as 15 percent since hitting a four-year high above $71 in late January. “Oil prices remain under pressure in today’s trading session as market participants continue to digest yesterday’s bearish oil inventories report,” said Abhishek Kumar, Senior Energy Analyst at Interfax Energy’s Global Gas Analytics in London. The U.S. Energy Information Administration (EIA) on Wednesday said crude production last week rose to a record high of 10.25 million barrels per day (bpd). At that level, U.S. production would overtake the current output in Saudi Arabia, the biggest producer in the Organization of the Petroleum Exporting Countries. [EIA/S] OPEC and other producers, including Russia, have cut production since January 2017 to force down global inventories, but these cuts have been somewhat offset by rising U.S. oil production. Oil prices were also pressured by an announcement from Iran that it is looking to boost production over the next four years. “The Iranians are looking to increase production...despite their alleged adherence to the OPEC-Russia deal. Everybody is itching to produce more oil,” said John Kilduff, partner at energy hedge fund Again Capital LLC in New York. Traders also noted the restart of the Forties pipeline in the North Sea, added to losses in crude prices. The pipeline, which carries around a quarter of all North Sea crude output and roughly a third of Britain’s offshore natural gas production, shut on Wednesday for the second time in two months after a valve closure at a Scottish facility.
Oil Prices Fall Below $60 On Renewed Shale Threat -- After a bit of a hiatus mid-week, instability in the global financial markets returned on Thursday. Benchmark oil prices appeared to be headed for steep losses to close out the week. WTI and Brent lost another 1 percent on Thursday, as global equities sold off yet again. The Dow Jones Industrial Average fell by another 4 percent. That dragged down the entire energy sector. Oil prices crashed on Friday as a result of a major increase in U.S. drilling activity. As this newsletter has noted in the past, the preponderance of bullish bets on oil futures from hedge funds and other money managers puts benchmark prices at risk of a correction. That could be underway – WTI and Brent are off more than 10 percent in a week. Forthcoming data will reveal if financial moves from investors are accelerating the oil price slide. The EIA published its latest Short-Term Energy Outlook, in which it drastically revised its forecast for U.S. oil production, predicting the country will hit 11 mb/d by the end of 2018, a year earlier than it previously thought. In fact, the latest weekly survey estimates that U.S. oil production already jumped to 10.25 mb/d in the first week of February. Surging output threatens to push down oil prices further. The EIA sees Brent averaging $62 per barrel in 2018, and WTI to average $58.
US oil rig count climbs by 26: Baker Hughes - The number of US oil rigs in use jumped by 26 this week to 791, a level not seen in nearly three years, with the Permian Basin posting the largest single-area gain, according to Baker Hughes data released Friday. The Permian, located in West Texas and New Mexico, gained 10 oil rigs for a total of 437, the weekly Baker Hughes North American rig count showed. That is the highest number of oil rigs in the Permian since late January 2015. The last time the total domestic oil rig count was that high was the week of April 2, 2015, a time when the rig count (802 that week) was falling due to plummeting oil prices. Friday's rig count was released on a day oil prices dropped further, with NYMEX March WTI settling down $1.95 at $59.20/b. Analysts pointed out that current rig count numbers represent drilling decisions made weeks to a few months ago. "The higher rig count is from oil prices a little above $55/b in November," said energy economist James Williams, president of WTRG Economics. "The recent drop in prices will just slow the growth in drilling in the second quarter if prices do not recover." "Some companies were talking about increasing their capex for drilling but this will probably cause some to delay that decision," Williams added. Even so, companies are now launching their activity programs for 2018, Evercore ISI Group's James West said. "E&Ps are moving forward with their growth programs and now have fresh 2018 budgets," he said. In addition, the "others" category, which includes less prominent areas outside of the 14 named basins that Baker Hughes tracks each week, was up 11 oil rigs to 132.
U.S. drillers boost oil rig count to highest nearly three years: Baker Hughes - (Reuters) - U.S. energy companies added 26 oil rigs this week, boosting the count to 791, its highest since April 2015, even as crude pulled back from three-year highs with drillers expecting higher prices for their output in 2018 than last year. The increase in the week to Feb. 9 was the biggest weekly rise since January 2017, General Electric Co’s Baker Hughes energy services firm said in its closely followed report on Friday. More than half of those oil rigs were located in the Permian basin in west Texas and eastern New Mexico where the number of active units increased by 10 this week to 437, the most since January 2015. Those rigs were expected to help boost oil output in the Permian to a record high near 2.9 million barrels per day in February, according to federal projections, representing about 30 percent of total U.S. oil production. The U.S. rig count, an early indicator of future output, is much higher than a year ago when 591 rigs were active as energy companies have continued to boost spending since mid-2016 when crude prices began recovering from a two-year crash. U.S. crude prices on Friday fell through $60 a barrel for the first time since December and have tumbled more than 11 percent from this year’s high point in late January, due to growing worries that U.S. production will overwhelm efforts by OPEC nations to cut supply. That compares with averages of $50.85 in 2017 and $43.47 in 2016. Looking ahead, futures were trading above $57 for the balance of 2018 and below $54 for calendar 2019. In anticipation of higher prices in 2018 than 2017, U.S. financial services firm Cowen & Co said 36 of the roughly 65 E&Ps they track have already provided capital expenditure guidance indicating an 8 percent increase in planned spending over 2017. Cowen said the E&Ps it tracks planned to spend about $66.1 billion on drilling and completions in the lower 48 U.S. states in 2017, about 53 percent over what they planned to spend in 2016. Analysts at Simmons & Co, energy specialists at U.S. investment bank Piper Jaffray, this week slightly reduced their forecast the total oil and natural gas rig count to an average of 1,002 in 2018 and 1,128 in 2019. Last week, they forecast 1,006 in 2018 and 1,131 in 2019. There were 975 oil and natural gas rigs active on Feb 9, also the highest since April 2015. On average, there were 876 rigs available for service in 2017, 509 in 2016 and 978 in 2015. Most rigs produce both oil and gas.
'Short-Term Folly': U.S. Adds 38 Percent More Oil and Gas Rigs - The number of oil and gas rigs in the U.S. has increased an astonishing 38 percent over the past year. That's according to S&P Global Platts Analytics, which reported this week that the country had 1,070 rigs at the end of January , up from just 773 a year earlier. Experts expressed fear that all of this new development does not bode well for the planet. "This will have a very significant climate impact," said Romany Webb , climate law fellow with the Sabin Center for Climate Change Law. "The oil and gas industry is a huge source of methane , which is a really potent greenhouse gas. And then on top of that you also have the carbon dioxide emissions from the combustion of this oil and gas. So this is very concerning from a climate perspective." Webb links the increase in drilling, in part, to the recent rise in prices for crude oil and natural gas. "Oil is now above $60 a barrel , which is what the industry always said that they needed to ramp up production," she said. Experts also connect the boom to the policies of the Trump administration, which has prioritized the extraction of oil, natural gas and coal over the development of renewable energies even as the planet continues to warm. "That the hottest years in human history coincide with a dramatic increase in U.S. drilling for oil and gas is a reminder of what a rogue nation we now live in," said noted environmentalist Bill McKibben . The extraction boom took place nationwide, with all but one of S&P's reporting regions (see below) gaining new rigs. The fastest growth occurred in two states in the natural gas-rich Permian Basin: Texas gained 141 rigs, while New Mexico added 43. S&P also noted that extraction companies are moving outside the Permian Basin, which, according to senior analyst Trey Cowan, indicates "future growth being led from other regions in the months ahead." The analysis includes rigs located on U.S. land, as well as in inland waters and the Gulf of Mexico.
Oil falls below $59 after big jump in US rig count - A crushing oil price rout extended into a sixth day, with U.S. crude nearly falling below $58 a barrel, as rising production, a strong dollar and a broad financial asset sell-off combined to weigh down the market.The drubbing started last Friday and gathered steam this week, putting U.S. West Texas Intermediate crude on pace for its worst weekly performance in two years.U.S. crude plunged to a seven-week low at $58.07 a barrel, before paring losses to end Friday's session down $1.95, or 3.2 percent, at $59.20.Brent crude dropped $1.66, or 2.6 percent, to $63.15, after hitting a nine-week low at $61.77 by 2:28 p.m. ET.For the week, U.S. crude was down nearly 9.6 percent, while Brent has fallen about 8 percent. WTI broke below $59 a barrel after Baker Hughes reported the U.S. oil rig count rose by 26 rigs to 791, the highest total since April 2015. The week's losses accelerated on Wednesday after government data showed weekly U.S. production jumping to a record 10.25 million barrels a day. Meanwhile, the nation's stockpiles of crude rose for a second straight week. With American output on the rise, concerns are creeping into the market that OPEC's deal with Russia and other major producers to limit supply could come under pressure, "It goes to the sense that folks are getting antsy about the production scheme holding together," he said.
U.S. oil benchmark ends below $60 a barrel for first time in 2018 - Oil futures fell for a sixth straight session on Friday, with the U.S. benchmark settling below $60 a barrel for the first time in 2018 to notch its biggest weekly loss in more than a year. Data released Friday revealed the biggest weekly jump in the number of U.S. oil-drilling rigs since January 2017, contributing to concerns about a surge in U.S. production. March West Texas Intermediate crude dropped $1.95, or 3.2%, to settle at $59.20 a barrel on the New York Mercantile Exchange. Prices saw their lowest finish since Dec. 22. For the week, it was down roughly 9.6%, which was the biggest such decline since January 2016. April Brent crude the global oil benchmark, fell $2.02, or 3.1% to end at $62.79 a barrel on London’s ICE Futures exchange. Brent, which settled at its lowest since Dec. 13, retreated roughly 8.4% this week. Baker Hughes on Friday reported that the number of active U.S. rigs drilling for oil jumped by 26 to 791 this week. That marked a third straight week of increases and the largest weekly rise in more than a year. This offers a “path for much more than a million barrels a day U.S. production increase this year, but prices will need to remain above $50,” . “Not a good Friday for OPEC.” Until recently, oil prices have been buoyed by production cuts from the Organization of the Petroleum Exporting Countries and other large producers among other threats to supply.However, OPEC member Iran also plans to raise its oil production in the next four years, according to a report from Reuters. That has “added to market fears of an increase in global supplies,” Oil-market fundamentals are also changing as recent increases in prices provided incentive for the U.S. to crank up output.
Emboldened by the oil market's recovery, OPEC readies the taps -- just in case -- Having patiently waited a year for the oil market to turn, many OPEC members are now feeling confident enough in its recovery to begin touting their output expansion plans, even as they insist they will comply with their quotas under their production cut agreement. In recent weeks, Kuwaiti oil minister Bakheet al-Rashidi has declared that his country will boost its production capacity to 3.225 million b/d by the end of March, up from its current 3 million b/d, while normally hawkish Iranian oil minister Bijan Zanganeh has said his country could raise its output by 100,000 b/d within days if the deal were to be terminated. Iraqi oil minister Jabbar al-Luaibi at a conference in London trumpeted the record 4.6 million b/d in export capacity now built in the southern port of Basra and proclaimed that it would reach 5 million b/d by year's end. The UAE also has ambitions of hiking its production capabilities to 3.5 million b/d from around 3 million b/d later this year. While all of them have insisted that these capacity gains will not be unleashed while the production cut deal is in force, their declarations provide perhaps a warning that, for all the talk of an orderly exit from the agreement, countries may be champing at the bit to pump more and earn more. Or, they may be serving as an intra-OPEC warning shot to unstable Venezuela, Libya and Nigeria that their cohorts may not be so magnanimous as to stay on the sidelines if their respective domestic crises cause output to fall. "Current price levels are likely to encourage additional drilling .. as producers seek to take advantage of attractive economics," analysts with Barclays said in a recent note.
The War in Yemen and the Making of a Chaos State - The thousand-day war in Yemen has embroiled nearly a dozen nations, most of them allied closely with Saudi Arabia. That means most of them are, by extension, allied against Iran, which stands accused of arming the Houthis. Of particular concern, the commander of U.S. Central Command told reporters Monday, is that Iran is arming the Yemeni rebels with ballistic missiles. General Joseph Votel, the head of U.S. Central Command, has said that this created a “growing missile threat that is being orchestrated by Iran through the Houthis, and which I think poses a significant danger, not just to Saudis and Emiratis, but in cases where we have our forces and citizens co-located it poses a risk to us.” A few of those Saudi allies are wondering how to proceed, now that the Saudi-led war on the Houthis has largely stalemated in a horseshoe around Yemen’s western highlands. And even though the Saudis have succeeded in some respects along the southern coast, the broader fighting has accelerated the country’s descent from failed state into a “chaos state.” “Yemen more closely resembles a region of mini-states at varying degrees of war with one another, and beset by a complex range of internal politics and conflicts, than a single state engaged in a binary conflict,” wrote Peter Salisbury, a researcher with the London-based Chatham House policy institute, in a December report on the country. Yemen has been a hotbed for extremism since the Afghan civil war ended in the 1990s. For more than 15 years, the U.S. military has used drones primarily to kill Yemen-based descendants of those foreign fighters, now known as al-Qaeda in the Arabian Peninsula. This sustained war-within-a-war may be one of the few relative bright spots inside Yemen today, with some experts saying the U.S. military may be enjoying its most successful period against AQAP to date. For a brief time, even Yemenis changed their minds about American drone strikes in their country, thanks to improved targeting methods that have reduced civilian deaths and collateral damage. But Yemeni attitudes began to swing back in 2017, beginning with the bloody January 29 U.S. special forces raid in central Yemen. The persistence of the Houthi rebellion—and the fact that more than 8,000 civilians are believed to have been killed since March 2015—has turned up the pressure on Washington. December was a particularly bloody month for Yemeni civilians, with more than 100 killed in Saudi airstrikes in a single 10-day period.
War that Won't End: No Signs Fighting Will Cease in Syria – SPIEGEL - By invading Afrin, one of the last unscathed regions in Syria, Turkey is trying to prevent the creation of a Kurdish state. The U.S. is looking on powerlessly while Russia is rubbing its hands in glee. Ultimately, the true winner might be Bashar Assad.The first victims on both sides of the front hadn't done anything. All they wanted was to survive. When the Turkish air force began bombing Kurdish positions in and around the Syrian town of Afrin on Jan. 20, one of their rockets struck a chicken farm near the village of Jalbara and wiped out almost the entire Hussein family. The mother and six children were killed, with only the father surviving. They were refugees from Maarat al-Numan, a city located further south in the province of Idlib, which has once again become the the target of massive bombings by the Syrian air force and has been under fire since December. The next morning, another rocket, this time fired from the Kurdish enclave of Afrin, struck near the Turkish border town of Reyhanli, slamming into the ground only two meters away from Nadir al-Fares' car. The taxi driver was killed instantly when the razor-sharp metal shrapnel ripped his car to shreds. Fares had fled to the border region from Bashar Assad's army back in 2012. He had managed to make it into Turkey, while Hussein family's flight ended in Afrin, where they endured the stench of the chickens to at least have a roof over their heads during the cold winter. The deaths of these civilians shows on a small scale what the larger situation in the region looks like. They show how new battle lines are constantly being drawn and new hotspots are constantly emerging in the war in Syria. A conflict that those involved aren't even trying to stop anymore. For the last two weeks, a brand new front has encircled Afrin. The increasingly autocratic Turkish President Recep Tayyip Erdogan had repeatedly announced his intention to extend his fight against the Kurdistan Workers' Party across the border into Syria. There, the PKK offshoot YPG, or People's Protection Units, controls around a quarter of the country and has established what is effectively its own Kurdish state. The region includes areas traditionally settled by Kurds, but also places where a majority of residents are Arab.
Turkey Warns US Troops In Northern Syria May Be Targeted By Its Army - Last week we reported that days Turkey valiantly demanded that US forces vacate military bases in the Syrian district of Manbij, the US predictably refused, and on Monday a top American general said that US troops will not pull out from the northern Syrian city of Manbij, rebuffing Ankara demands to withdraw from the city and risking a potential confrontation between the two NATO allies. One week later, in the latest dramatic escalation between the two NATO members, Turkey's Deputy PM has warned that US troops fighting alongside Syrian Kurdish militias in the same uniform may be targeted by the Turkish army due to the difficulty of distinguishing them in the heat of battle, effectively stating that US troops in northern Syria are now "fair game" in the ongoing deadly conflict. Speaking to CNN Turk on Sunday, Turkish Deputy Prime Minister Bekir Bozdag said if US troops wear “terrorists’ clothes” and find themselves among “terrorists” of the Kurdish YPG forces attacking the Turkish troops, “there is no chance that we will make a distinction at this point.” The unambiguous warning comes at a time when Turkish troops are making further advances into the Kurdish-held Syrian province of Afrin as part of the recently launched "Operation Olive Branch." As RT reports, Ankara had previously complained that the American troops’ embedding with Kurdish militias – regarded as terrorists in Turkey – is unacceptable for the US-Turkish alliance. “We are clearly saying that we do not want to confront our ally, the United States. I am sure that they do not want to face Turkey and Turkish armed forces,” Bozdag stated, although he also made it clear that a confrontation appears inevitable if the two sides continue on their present course.
Turkey's Offensive In Syria: The US Falls Into A Trap Of Its Own Making - In the heat of the battle for Afrin, Turkey has warned it will go farther to establish control over vast swathes of land in northern Syria. The offensive is supposed to take Turkish forces as far as Syria’s border with Iraq. On Jan. 28, Ankara called on Washington to withdraw its military from Manbij (100 km from Afrin) before it launches an operation to clear that area of Kurdish militias. It’s important to note that the US had provoked Turkey’s action by announcing its decision to set up a new border security force in the areas under Kurdish control. So Washington has created this situation all by itself – a trap of its own making. Having sown the wind, it reaps the whirlwind. A push to the east will potentially force a confrontation between Turkish troops and the US-led Syrian Democratic Forces (SDF). The Kurdish combat units in Afrin missed their opportunity to avoid a worst-case scenario. Some Pro-Kurdish sources say Russia had betrayed the Afrin Kurds by pulling its peacekeepers out before the Turkish attack began. This is a very misleading statement. Let’s look at the facts. Moscow believes all regions west of the Euphrates should be under the control of the regular Syrian army, because these areas belong to Syria – a territorially cohesive country with a legitimate government. Russia had asked the Kurds in Afrin to interact with Damascus and allow its regular army into the area. They refused. Moscow is still ready to act as a mediator to broker talks on autonomy within Syria. So far that initiative has been rejected. The Kurds have preferred the US as their protector. Now they are on their own. They've made their bed, now they must lie in it.". The US military has not defended the Kurds in Afrin, claiming it does not regard them as allies on par with the Kurds who are part of the SDF farther east. The US maintains that the Kurds in Afrin did not fight the Islamic State (IS). But even so, those Kurds did protect Afrin and kept their land from being invaded by jihadi militants. Perhaps the US never committed itself to defending the Kurds in Afrin, but it did accept the responsibility of protecting the SDF in Manbij. What will happen now? It is next to impossible to make predictions with any degree of accuracy, but we can contemplate some potential scenarios.
US-led coalition in Syria attacks pro-Assad fighters, 100 dead --The US-led coalition that has been fighting the "Islamic State" (IS) in Syria said it had carried out retaliatory airstrikes late on Wednesday and early Thursday, killing about 100 people it described as pro-Assad forces.According to the coalition, the strikes were a response to a "large, coordinated and unprovoked attack" on one of the headquarters of the Syrian Democratic Forces' (SDF)in Deir al-Zor province. The US supports the SDF, an alliance of Arab and Kurdish militias in northern and eastern Syria, one of many armed groups opposing President Assad. A US official told the news agency Reuters the attack had been by 500 opposing forces, backed by artillery, tanks and multiple-launch rockets 8 kilometers (5 miles) east of the Euphrates River. Russia and the US informally treat the river as a dividing line for their air forces' bombing missions over Syria.However, a Russian MP criticized the attack, using language reminiscent of the frequent US condemnations of Russia airstrikes in support of Assad. "The actions of the US coalition do not comply with legal norms, beyond all doubt it is aggression," Franz Klintsevich, a member of Vladimir Putin's United Russia party, was quoted as saying by Interfax news agency.The US-led coalition alerted Russian officials about the presence of SDF forces in the area far in advance of the attack, a US official told Reuters. "Coalition officials were in regular communication with Russian counterparts before, during and after the thwarted [enemy] attack," he said. The Russian Defense Ministry said later on Thursday that the US's goal in Syria was not to fight IS, but to capture what it called "economic assets."
Syria – U.S. May Have Arranged “Self Defense” Attack On Syrian Government Forces - Last night the illegal U.S. occupation force in north-east Syria attacked a group of Syrian government aligned troops and their Russian support. The incident happened north-east of Deir Ezzor city on the east side of the Euphrates. The U.S. claims that it killed some 100 Syrian soldiers that were allegedly attacking its proxy forces in an attempt to recover oil fields. There is a factual separation of areas south-west of the Euphrates under Syrian government control and north-east of the Euphrates under U.S. occupation. But several locations around Manbij, Raqqa and Deir Ezzor contradict that and are under control of the respective other side. The U.S. claims that a "de-confliction line" along the Euphrates is agreed upon. The Syrian government says that no such agreement exists. An small area across the Euphrates north-east of Deir Ezzor had been taken by Syrian government forces months ago. It is near some oilfields which the U.S. wants to keep away from the Syrian government. "The U.S. wants to keep Syria weak and poor," says Prof. Joshua Landis. According to Landis the U.S. is keeping the north-east of Syria under occupation to deny Syria access to its oil and its best agricultural land. It wants to turn Syria into a swamp for Russia and Iran to the benefit of mostly Israel. The valuable oil and gas fields are currently in the hands of local Arab tribes who earlier worked with the Islamic State and are now, the U.S. claims, allied with the YPG/PKK Kurds under the name Syrian Democratic Forces. The SDF is the U.S. local proxy force for its occupation.
Moscow Slams "Illegal US Presence In Syria" Following Pentagon's "Defensive" Airstrikes - Moscow lashed out at the US this morning, after the US-led coalition in Syria carried out several "defensive" airstrikes against Syrian forces allied with President Bashar al-Assad on Wednesday in Syria's Deir al-Zor province - purportedly in retaliation for what the coalition said was an "unprovoked" attack on the US-backed left-wing rebel group. In response, during a closed door meeting of the UN Security Council in New York, Russian UN ambassador Vasily Nebenzya reminded his colleagues that the US presence in Syria is "actually illegal." "Nobody invited them there," Nebenzya stated, emphasizing that the coalition's actions were jeopardizing the region's hard-fought stability. According to the Russian Defense Ministry, the Syrian militia was advancing against a “sleeper cell” of Islamic State terrorists near the former oil processing plant of al-Isba, when the unit was suddenly fired upon by air strikes. At least 25 militiamen were injured in the attack, the Russian Ministry of Defense said, adding that pro-government troops targeted by the coalition did not coordinate their operation with the Russian command. 'What right does the US have to defend illegal formations in Syria?' - former US diplomat @JimJatrashttps://t.co/1gIXvGODUR pic.twitter.com/a8hTiKYfHq — RT (@RT_com) February 8, 2018 The US, however, maintains that the militia attacked the SDF. The Pentagon said Syrian forces moved "in a battalion-sized unit formation, supported by artillery, tanks, multiple-launch rocket systems and mortars." The battle, which lasted over three hours, according to the US, began after 30 artillery tank rounds landed within 500 meters of the SDF unit’s location, according to RT "At the start of the unprovoked attack on Syrian Democratic Forces and coalition advisers, coalition aircraft, including F-22A Raptors and MQ-9B Reapers, were overhead providing protective overwatch, defensive counter air and [intelligence, surveillance and reconnaissance] support as they have 24/7 throughout the fight to defeat ISIS," Air Forces Central Command spokesman Lt. Col. Damien Pickart told Military.com.
US massacre of Syrian troops threatens to unleash wider war - US warplanes and artillery batteries carried out an unprovoked massacre of up to 100 pro-government troops in the northeastern province of Deir Ezzor Wednesday, signaling the initiation of a new and far more dangerous stage in the more than three-year-old direct US military intervention in Syria.The Syrian government denounced the attack as a “war crime” and “direct support to terrorism,” insisting that its forces came under US attack as they were carrying out an operation against Islamic State of Iraq and Syria (ISIS) elements between the villages of Khasham and al-Tabiya on the eastern side of the Euphrates River.While the Pentagon proudly claimed to have killed 100 pro-government fighters, Damascus allowed that the US strikes claimed “the lives of dozens, injuring many others and causing massive damage in the area.” The Syrian Observatory for Human Rights, meanwhile, said it had confirmed only 20 dead among the pro-government forces.Whatever the precise number of casualties—the Pentagon’s figures are suspect given that the bombings and artillery barrages were not followed up by any ground attack—the incident marks a major escalation of US aggression against Syria, eclipsing the firing of 59 US cruise missiles last April in response to an unsubstantiated allegation of a chemical weapons attack in Idlib province. The only previous US attack resulting in comparable bloodshed was the September 17, 2016 US airstrike against a Syrian army position near the Deir Ezzor airport, which killed 62 soldiers and wounded some 100 more. The Pentagon claimed that attack was the result of an “unintentional, regrettable error.” This time around, the US military said that it was exercising its “inherent right of self-defense” in attacking the forces of a government whose territory American troops are occupying without either its consent or any mandate from the United Nations.
Russians reported killed in US strikes in Syria - Multiple reports indicate that Russian military contractors were among the dead in air and artillery strikes launched Wednesday by the US military in the northeastern Syrian province of Deir Ezzor against forces loyal to the government of President Bashar al-Assad.The Pentagon unleashed devastating firepower against the pro-government fighters on the pretext that they were mounting an attack against a headquarters of the Syrian Democratic Forces (SDF), the US proxy ground force that is dominated by the Syrian Kurdish YPG militia. US special forces troops directing the activities of the Kurdish proxies were stationed at the headquarters in the zone of influence carved out by the US intervention in Deir Ezzor, northeast of the Euphrates River.Bombs and missiles were rained down upon the force, which reportedly included between 300 and 500 infantry, backed by tanks and artillery. US F15 fighter jets, Apache helicopters, AC-130 gunships and unmanned drones were all called in to attack the force, along with US artillery units.According to Pentagon sources, 100 of the Syrian fighters were killed in the barrage. The Syrian government reported “dozens” killed in what it described as an unprovoked “massacre” and a “war crime.” Iran’s Tasnim news agency quoted Syrian sources as reporting that several Russian military advisors were killed in the attack, which took place in the Khasham gas field in Eastern Deir Ezzor.
Iraqi Kurds maneuver to get closer to Iran - Iraqi Kurds have given reassurances to Tehran that they will not allow Kurdish opposition groups to launch cross-border attacks from Iraqi Kurdistan, a major development in the warming up of relations between Erbil and Tehran. This comes as ties reached a breaking point following the controversial Sept. 25 independence referendum in Iraqi Kurdistan. “We cannot tolerate the fact that some counter-revolutionary groups use the Kurdish lands to kill our soldiers and citizens, [then] return to the areas under the [Kurdistan Regional Government's (KRG)] control and claim responsibility with audacity in interviews with the official Kurdish media,” Ali Shamkhani, the secretary of Iran’s Supreme National Security Council, reportedly told a Kurdish delegation headed by KRG Prime Minister Nechirvan Barzani on Jan. 21.The KRG came under a crippling economic blockade and political pressure following the September referendum, with KRG officials now trying to repair relations with Baghdad and neighboring countries — including Iran, a key player with a long land border with the Kurdistan Region and enormous clout in Baghdad. Both the Iraqi Kurds and Iranians have described the meetings in Tehran as positive and a step in the right direction of accepting the KRG once again as a responsible partner in the region. Al-Monitor has learned that the delegation headed by Barzani explained to the Iranians in clear terms that their overreliance on Turkey and the West — including the Americans — in recent years was misplaced and that they will from now on readjust their policies to reflect the position of Iran in Iraq and in the region.
How Al-Qaeda Ended Up With Anti-Aircraft Missiles: Here Is The Congressional Authorization - After the terrorist group Hayat Tahrir al-Sham (HTS), a rebrand of Jabhat al-Nusra, which is the Syrian al-Qaeda affiliate, claimed responsibility for the dramatic downing of a Russian Su-25 fighter jet over Idlib in northwest Syria on Saturday - the first Russian plane downed in Syria since 2015 - a number of analysts have published articles asking the obvious million dollar question: where did al-Qaeda get the portable anti-aircraft missile system used in the attack? Once such article in Al Monitor speculates on the following: "The three immediate questions that arose from the attack were how the downing was made possible, how the militants acquired the arms and whether there was a bigger-level player behind the attack." MANPADS are heat seeking shoulder fired missiles capable of hitting targets flying at anywhere between 10,000 and 15,000 feet. Image source: Activist Post And Al Monitor seems to answer its own question in the following when listing the array of allied groups now operating under the leadership of al-Qaeda (HTS) - among them groups previously "vetted" and approved to receive advanced weaponry by the CIA (specifically the TOW anti-tank missile): Dozens of miles of Idlib province are contested among an array of groups, including the terrorist Hayat Tahrir al-Sham (HTS), a rebrand of Jabhat al-Nusra, which was affiliated with al-Qaeda; the Free Syrian Army; and its affiliate Jaish al-Nasr, which is considered a “moderate opposition group" that received weapons from the United States. But does anyone remember this? ...from The Wall Street Journal all the way back in February of 2014, headlined Saudis Agree to Provide Syrian Rebels With Mobile Antiaircraft Missiles - U.S. Also Giving Fighters Millions of Dollars for SalariesWashington’s Arab allies, disappointed with Syria peace talks, have agreed to provide rebels there with more sophisticated weaponry, including shoulder-fired missiles that can take down jets, according to Western and Arab diplomats and opposition figures.Saudi Arabia has offered to give the opposition for the first time Chinese man-portable air defense systems, or Manpads, and antitank guided missiles from Russia, according to an Arab diplomat and several opposition figures with knowledge of the efforts. Saudi officials couldn’t be reached to comment.
Israel Launches Attack On Syrian Military Facility After Unverified Gas Attack Claims - Overnight Tuesday Israel again launched a major attack on Syrian government locations near Damascus in what seems a monthly exercise that many analysts now openly recognize as an Israeli attempt to provoke war with Syria. For at least the third time since the start of the 7-year long war in Syria, Israeli jets attacked a site just outside of Syria's capital city called Jamraya - believed to be a military research facility related to chemical weapons. Jamraya is an area well-known for its multiple government facilities, including a branch of Syria's Scientific Studies and Research Center, which was the site of two prior attacks by Israel - one in 2013 and another in early December 2017 - but also has sprawling civilian residential areas. It lies on the opposite side of Mt. Qasioun, against which the Damascus city center is nestled.Like with other recent attacks, Israeli jets are reported to have fired from over Lebanon, with a Syrian military media statement saying that its air defenses intercepted most of the inbound missiles, though no further details were given. Unconfirmed international media reports, however, indicate one or more of the Israeli missiles may have impacted parts of the Syrian government facility during the strikes which occurred at 03:42 am local time Wednesday morning.
Secret Alliance: Israel Carries Out Airstrikes in Egypt, With Cairo’s O.K. NYT The jihadists in Egypt’s Northern Sinai had killed hundreds of soldiers and police officers, pledged allegiance to the Islamic State, briefly seized a major town and begun setting up armed checkpoints to claim territory. In late 2015, they brought down a Russian passenger jet. Egypt appeared unable to stop them, so Israel, alarmed at the threat just over the border, took action.For more than two years, unmarked Israeli drones, helicopters and jets have carried out a covert air campaign, conducting more than 100 airstrikes inside Egypt, frequently more than once a week — and all with the approval of President Abdel Fattah el-Sisi.The remarkable cooperation marks a new stage in the evolution of their singularly fraught relationship. Once enemies in three wars, then antagonists in an uneasy peace, Egypt and Israel are now secret allies in a covert war against a common foe. For Cairo, the Israeli intervention has helped the Egyptian military regain its footing in its nearly five-year battle against the militants. For Israel, the strikes have bolstered the security of its borders and the stability of its neighbor. Their collaboration in the North Sinai is the most dramatic evidence yet of a quiet reconfiguration of the politics of the region. Shared enemies like ISIS, Iran and political Islam have quietly brought the leaders of several Arab states into growing alignment with Israel — even as their officials and news media continue to vilify the Jewish state in public.
Gaza hospitals shut down as deadly siege tightens -- Doctors at Gaza’s al-Nasr children’s hospital say patients’ lives are at risk as hospitals in Gaza shut down due to a shortage of fuel for generators. (via Facebook) Emergency generators have run out of fuel in at least 19 health facilities in the Gaza Strip as Israel’s deadly decade-old siege on the territory tightens.The health ministry in Gaza announced Tuesday that the generators have shut down in 16 primary care clinics and three major hospitals, but that medical staff have been ordered to stay at their posts and do what they can to assist patients.On Tuesday, the UN humanitarian coordination agency OCHA warned that “emergency fuel for critical facilities in Gaza will become exhausted within the next 10 days,” unless donors step in to prevent a “humanitarian catastrophe.”But for patients and medical personnel on the frontlines, the catastrophe is already happening, and it is only the latest chapter in the forced collapse of Gaza’s healthcare system.At the al-Nasr children’s hospital, head of intensive care Dr. Raed Mahdi said that the lives of dozens of children in his unit are at risk.According to the health ministry, Mahdi said overcrowding and pressure on medical staff and supplies had reached a crisis point at his hospital as children were being transferred there from other facilities that had lost all power.
Another Unnecessary War - The writing is already on the wall: Israel will soon launch a military operation in Lebanon. Not a targeted attack on a weapons convoy or factory, but a simultaneous attack on Hezbollah’s missile production and launch sites. The operation will take place at the same time as, or immediately after, a series of assassinations of known Hezbollah operatives. That organization will, of course, react by launching a massive missile barrage at population centers in Israel, and Hamas may contribute its share in the south. Last week we were informed that missile interceptor systems have already been deployed throughout the country as part of a joint “drill” between the IDF and the U.S. military. Washington has already given a green light, or so we learn from Thomas Friedman’s most recent column — a faithful mouthpiece of American foreign policy. In this well-orchestrated event, Israel’s mouthpieces play a single tune: Iran and Hezbollah have crossed a red line, and if their Russian patron does not restrain them (the crux of Israel-Russia security coordination), Israel will strike hard (and it will do so because the Russians cannot restrain them). Defense Minister Liberman promises that “all of Beirut will be hiding in bomb shelters,” while Minister Naftali Bennett has pledged that (Hebrew) “the Lebanese will pay the price” (an explicit threat to commit war crimes). Of course this is also the finest hour of the retired generals who can now speak freely. “The IDF is going to use a lot of force. These places will be destroyed almost completely,” promises Maj.-Gen. (res.) Noam Tibon. Maj.-Gen. (res.) Amiram Levin tossed another log into the fire: “Lebanon will be destroyed.” This is nothing short of Orwellian. There is no “balance” between the precision of Israeli missiles and those in the hands of Hezbollah. Weapons “removing the balance of power” in the organization’s hands actually restore balance. But a true balance between Hezbollah’s deterrence capability and that of the IDF is an intolerable thought for the top echelons of the Israeli defense establishment. Therefore, it is necessary to bomb any sign of weapons that “remove the balance of power” — an attack designed to destroy the balance between the two sides. This loop is self-defeating for Israel.
Russian fleets control ports of Lebanon - Russian media sources revealed that on Tuesday Russian Prime Minister, Dmitry Medvedev, instructed the Russian Defence Ministry to begin talks with its Lebanese counterpart to sign a military cooperation agreement between Russia and Lebanon. The draft agreement to be signed between the parties included the opening of Lebanese ports in front of Russian military vessels and fleets, in addition to making Lebanese airports a transit station for Russian aircrafts and fighters, and the dispatch of Russian military experts to train and strengthen the capabilities of members of the Lebanese army, according to the Russian agency Sputnik.
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