Sunday, March 4, 2018

natural gas supplies 18% below average, despite warm winter; offshore rig count drops to lowest on record

oil prices ended broadly lower this week, as tariffs on steel and aluminum imports announced by Mr. Trump led to fears of a global trade war, which would retard global economic activity and thus reduce demand for oil products...after rising 3.2% to an 18 day high of $63.55 a barrel last week, contract prices for oil to be delivered in April rose another 36 cents to a three week high of $63.91 a barrel on Monday, on strong U.S. demand and comments from the Saudis that they would continue to hold production crude well below their output cap...prices then turned lower on Tuesday on a jump in the US dollar and an anticipated rise in US crude stockpiles, with crude falling 90 cents to end the day at $63.01 a barrel...oil prices were then down for a second day on Wednesday after the EIA data showed a larger-than-expected increase in U.S. crude inventories and a surprisingly large jump in gasoline supplies, with the April oil contract price ending $1.37 lower at $61.64 a barrel...oil prices then fell 65 cents to $60.99 a barrel in a global market selloff on Thursday, following Trump's vow to impose stiff steel and aluminum tariffs, leading to fears of a trade war...oil prices then fell as low as $60.13 a barrel on Friday, but then moved higher after the report of a inconsequential rise in the oil rig count, closing the day with a gain of 26 cents at $61.25 a barrel, but still finishing the week 3.6% lower than the prior week's close.... 

on the other hand, natural gas prices, which tend to react more to weather forecasts than to politics, were up a bit on the week, but still remained near their 21 month in the contract for March natural gas expired at $2.639 per mmBTU on Monday after rising 1.4 cents, while the April natural gas contract rose 2.9 cents to close at $2.686 per mmBTU on the same day...the April contract price then fell 0.3 cents to $2.683/MMBtu on Tuesday, and 1.6 cents to $2.667/MMBtu on Wednesday, generally on the persistence of milder than normal weather forecasts for March...natural gas prices were lower Thursday morning too, falling to as low as $2.642 per mmBTU, until the weekly natural gas storage report showed a smaller than normal withdrawal, which prompted a price spike of nearly 9 cents before prices settled back to close at 2.698, a gain of 3.1 cents on the day...prices then drifted three-tenths of a cent lower to close the week at $2.695 per mmBTU, for a gain of 3.78 cents or 1.4% for the week...

the week's natural gas storage report indicated that our natural gas in storage fell by 78 billion cubic feet to 1,682 billion cubic feet in the week ending Friday, February 23rd, which left our gas supplies 680 billion cubic feet, or 28.8% lower than the 2,362 billion cubic feet that was in storage on February 24th of last year, and 372 billion cubic feet, or 18.1% below the five-year average of 2,054 billion cubic feet for the eighth week of the year...the typical natural gas withdrawal for the eighth week of the year has averaged 118 billion cubic feet over the past 5 years, so the withdrawal during the cited week was 40 billion cubic feet below normal...despite two such smaller than normal withdrawals, however, our natural gas supplies are still the second lowest on record for this time of year, eclipsed only by the polar vortex winter of 2014...and our natural gas supplies have continued to erode despite what is now turning out to be a warmer than normal winter, as we will see on the graph below...

March 3 2018 seasonal heating demand up til February 23rd

the above graphic, which compares this year's heating requirements to the previous two years and to the historical norm, came from a package of natural gas graphs that John Kemp, senior energy analyst and columnist with Reuters, emailed out with his daily news on this graph, the difference between normal heating demand and the cumulative heating demand for each of the past three heating seasons is shown daily over the span of a year, with the divergence in the current year shown as a solid yellow line, last year's divergence shown as a dashed yellow line, and with the divergence from normal of the 2015/2016 heating season shown as a dashed red line....note that all three graphs trend downward, or negative from zero, because all three years experienced warmer than normal temperatures, hence less heating degree days than normal, over their heating, if it had it been colder than normal nationally this year, the graph would be moving upwards, into a range above zero on the graph...however, for this year's solid yellow line, the downward trending pattern the graph traces generally describes a warmer than normal fall and winter except for January, when the graph moved solidly upward for three out of four weeks...but as the heading on the graph says, this year's cumulative heating demand has been 191 population-weighted heating degree days (PWHDD) below normal, compared to the much warmer prior two years that had heating requirements 570 PWHDD and 477 PWHDD below normal respectively...but while our heating requirements were below normal for this year, we have still had to pull much more natural gas out of storage than any other year on record, except for the "polar vortex" dominated winter of 2014, which we'll see in the next graph....

March 3 2018 natural gas in storage as of February 23rd

the above graph also came from the aforementioned package of graphs from John Kemp, and it shows the quantity of natural gas in storage, in billions of cubic feet, in the lower 48 states over the period from January 2015 up to the week ending February 23rd 2018 as a red line, the quantity of natural gas in storage in the lower 48 states over the "prior year" period from January 2014 up until the end of 2017 as a yellow line, and the average of natural gas in storage over the 5 years preceding the same dates shown as a dashed blue the same time, the light blue shaded background represents the range of the amount of natural gas in storage for any given time of year for the 5 years prior to the years shown by the graph…thus the light shaded area also shows us the normal range of natural gas in storage as it fluctuates from season to season, with natural gas in storage underground normally building to a maximum by the middle of October, falling through the winter, and usually bottoming out at the end of March, depending of course on the weather related heating needs during any given season...

as John Kemp notes on the top of this graph, our supplies of natural gas continue to be well below the 5 year average range and near the bottom of the overall range; in fact, if we check the Historical Record of Natural Gas in Working Underground Storage for the Lower 48 States, we see that 2014 was the only year on record to have less natural gas in storage as of the 4th weekend of February than the 1,682 billion cubic feet that we had as of this week's report....yet as we saw in the 1st graph above, our heating requirements so far this year have now been well below normal, so we know the reason that our supplies of natural gas are now well below average hasn't been the weather...rather it has been our increasing use of natural gas to generate electricity, and increasing liquefaction of natural gas (LNG) for export, (which has been as much as 3.2 billion cubic feet per day at the Sabine Pass export terminal alone) that have been responsible for drawing down our supplies of natural gas faster than our stagnant gas production can replace them...over a 167 day heating season, Sabine Pass alone takes over 534 billion cubic feet, or nearly one-quarter of our normal winter natural gas usage and converts it into LNG to be shipped to Europe and addition to that, just this past week the Cove Point, Maryland facility saw it's first export cargo of LNG produced from Marcellus shale gas depart after some delay, so henceforth that facility will also be drawing another 0.8 billion cubic feet per day from our storage during the winter months, when production from the field is inadequate to meet our domestic demand...with LNG export facilities in Cameron, Elba Island and Corpus Christi all scheduled for completion by the end of next winter, we could see as much as half of our normal winter natural gas usage heading overseas by this time next year...

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 23rd, showed that a modest increase in our oil imports, along with a large drop in our oil exports, was enough for us to have oil left over to add to storage for the fourth time in five weeks...our imports of crude oil rose by an average of 261,000 barrels per day to an average of 7,282,000 barrels per day during the week, while our exports of crude oil fell by an average of 599,000 barrels per day to an average of 1,445,000 barrels per day, which meant that our effective trade in oil worked out to a net import average of 5,837,000 barrels of per day during the week, 860,000 barrels per day more than the record low net imports of the prior the same time, field production of crude oil from US wells rose by 13,000 barrels per day to 10,283,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 16,120,000 barrels per day during the reporting week..

during the same week, US oil refineries were using 15,882,000 barrels of crude per day, 49,000 barrels per day more than they used during the prior week, while at the same time 490,000 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 252,000 barrels per day less than what refineries reported they used plus what was added to storage during the account for that disparity, the EIA needed to insert a (+252,000) 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 oil data is gathered, and the likely 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 fell to an average of 7,521,000 barrels per day, 8.1% less than the 8,185,000 barrel per day average we imported over the same four-week period last year....the 490,000 barrel per day increase in our total crude inventories included a 431,000 barrel per day addition of oil to our commercial stocks of crude oil and a,58,000 barrel per day addition to our Strategic Petroleum Reserve...this week's 13,000 barrel per day increase in our crude oil production included a 3,000 barrel per day increase in output from Alaska and a 10,000 barrel per day increase in output from wells in the lower 48 states...the 10,283,000 barrels of crude per day that were produced by US wells during the week ending February 23rd was the highest on record, 13.9% more than the 9,032,000 barrels per day that US wells were producing on February 24th of last year, and 22.0% above the interim low of 8,428,000 barrels per day that our oil production fell to during the last week of June, 2016...

US oil refineries were operating at 87.8% of their capacity in using 15,882,000 barrels of crude per day, down from 88.1% of capacity the prior week, and down from the wintertime record 96.7% of capacity set eight weeks earlier, as US refineries are now slowing down due to pre-spring blend changeover and scheduled maintenance...the 15,882,000 barrels of oil that were refined this week were 9.8% 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 1.4% more than the 15,664,000 barrels of crude per day that were being processed during the week ending February 24th, 2017, when refineries, undergoing seasonal maintenance, were operating at 86.0% of capacity....

even with the small increase in the amount of oil being refined, gasoline output from our refineries was much lower, decreasing by 717,000 barrels per day to 9,391,000 barrels per day during the week ending February 23rd, after it had increased by 515,000 barrels per day the prior week....that decrease meant our gasoline production was 0.7% lower during the week than the 9,456,000 barrels of gasoline that were being produced daily during the week ending February 24th of last the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 20,000 barrels per day to 4,469,000 barrels per day, after falling by 322,000 barrels per day the prior week...after those decreases, the week's distillates production was 6.0% lower than the 4,755,000 barrels of distillates per day than were being produced during the equivalent week of 2017....    

the big drop in our gasoline production notwithstanding, our supply of gasoline in storage at the end of the week still rose by 2,483,000 barrels to 251,817,000 barrels by February 23rd, the fifteenth increase in 16 weeks....our supplies increased because our exports of gasoline fell by 382,000 barrels per day to 536,000 barrels per day, while our imports of gasoline rose by 96,000 barrels per day to 446,000 barrels per day, and because our domestic consumption of gasoline fell by 142,000 barrels per day to 8,860,000 barrels per day...but even after fifteen increases in supplies in sixteen weeks, our gasoline inventories are still 1.6% lower than last February 24th's level of 255,889,000 barrels, even as they are now roughly 8.6% above the 10 year average of gasoline supplies for this time of the year...        

meanwhile, with the week's drop in distillates production, our supplies of distillate fuels fell by 960,000 barrels to 137,985,000 barrels over the week ending February 23rd, after falling by 2,422,000 barrels the prior week...that was even as the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 303,000 barrels per day to 3,921,000 barrels per day, while our exports of distillates rose by 38,000 barrels per day to 892,000 barrels per day and as our imports of distillates fell by 36,000 barrels per day to 207,000 barrels per day...after this week’s inventory decrease, our distillate supplies were 16.0% lower at the end of the week than the 164,208,000 barrels that we had stored on February 24th, 2017, and 2.8% lower than the 10 year average of distillates stocks at this time of the year…  

finally, with our oil imports increasing and our oil exports way down, we were able to add to our commercial supplies of crude oil for just the 5th time in 15 weeks and for the 14th time in the past 50 weeks, as our commercial crude supplies increased by 3,019,000 barrels, from 420,479,000 barrels on February 16th to 423,498,000 barrels on February 23rd....but even with that increase, our oil inventories as of that date ended the week 18.6% below the 520,184,000 barrels of oil we had stored on February 24th of 2017, and 13.0% lower than the 486,699,000 barrels of oil that we had in storage on February 26th of 2016, even as they were still 3.2% greater than the 410,246,000 barrels of oil we had in storage on February 27th of 2015, at a time when the US glut of oil had just begun to build... 

This Week's Rig Count

US drilling activity increased for 6th time in the past 9 weeks during the week ending March 2nd, a period which has seen the increases far exceed the few decreases, after an extended period of stable counts...Baker Hughes reported that the total count of active rotary rigs running in the US was up by 3 rigs to 981 rigs in the week ending on Friday, which was also 225 more rigs than the 756 rigs that were deployed as of the March 3rd 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 1 rig to 800 rigs this week, which was also 191 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, the same time, the number of drilling rigs targeting natural gas formations increased by 2 rigs to 181 rigs this week, which was also 35 more gas rigs than the 146 natural gas rigs that were drilling a year ago, but way down from the recent high of 1,606 natural gas rigs that were deployed on August 29th, 2008...

drilling activity from platforms in the Gulf of Mexico decreased by 3 rigs to 14 rigs for the week, which was down by 4 rig from the 18 rigs that were deployed in the Gulf of Mexico a year ago, and the least rigs working in the Gulf in Baker Hughes records going back to January 7, 2000, a time when there were 123 rigs drilling in the Gulf....meanwhile, two rigs began drilling from platforms on inland lakes in Louisiana this week, bringing the "inland waters" rig count up to 4 rigs, which was the same number of rigs on inland waters as on March 3rd of last year...

the week's count of active horizontal drilling rigs was up by 5 rigs to 847 horizontal rigs this week, which was also up by 214 rigs from the 633 horizontal rigs that were in use in the US on March 3rd of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of the same time, the directional rig count was up by 6 rigs to 75 directional rigs this week, which was also up from the 61 directional rigs that were in use during the same week of last year...on the other hand, the vertical rig count was down by 8 rigs to 59 directional rigs this week, which was also down from the 62 vertical rigs that were deployed on March 3rd of 2017...

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows the weekly and year over year rig count changes for the major US geological oil and gas both tables, the first column shows the active rig count as of March 2nd, the second column shows the change in the number of working rigs between last week's count (February 23rd) and this week's (March 2nd) count, the third column shows last week's February 23rd 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 3rd of March, 2017...   

March 2 2018 rig count summary

there were also a number of changes this week that were not included in these tables, since the "other basins" category shows an increase of 5 oil rigs and one rig targeting natural addition to the oil rig decreases that are obvious in the Cana Woodford of Oklahoma, the Niobrara of the Rockies front range, the Permian of west Texas and the Williston of North Dakota, the 3 rigs that were shut down in the Gulf had also been targeting oil, and they were all off the Louisiana shore...on the other hand, an oil rig was added in the Eagle Ford of south Texas, where a natural gas directed rig was shut down, which nets as a "no change"...otherwise, the 2 rig increase in the Marcellus in Pennsylvania is the only other natural gas rig change among the major basins...Ohio drilling remained unchanged, with 16 rigs targeting wet gas formations and 7 rigs drilling for oil....then, other than the changes in the major oil and gas producing states shown above, Mississippi saw 3 rigs started during the week, after having shut down their only two active rigs the prior week...meanwhile, the only two rigs which had been deployed in Kentucky were shut down this week, leaving the state with no drilling activity, same as a year ago...and furthermore, the only rig that had been active in Illinois was also shut down this week; which was also a reduction from the single rig working the state on last March 3rd...


Residents worry coal mine will undo clean water efforts (AP) — As years of work to cleanse southeastern Ohio's Sunday Creek of acid mine drainage from old coal mines start to produce cleaner water and more fish species, a new coal mine is proposed to open in the region. The prospect of a new mine opening while work is underway to clean up years of pollution left from old mines has outraged some Athens County residents. Oxford Mining Co. plans to operate a surface mine on 299 acres in Trimble Township near Glouster. The company says in its permit applications that the Johnson Run mine is expected to operate for five years and employ about 100 workers. Permits are pending before the Ohio Environmental Protection Agency and the Ohio Department of Natural Resources' Division of Mineral Resources Management. Mining wastewater would be discharged into Johnson Run, which connects to Sunday Creek. Johnson Run and three other streams will be "impacted' by the mining work, as well as three wetlands, the company says in one of its permit applications. The Appalachian Ohio nonprofit organization Rural Action has been working for 20 years to clean up the Sunday Creek and Monday Creek watersheds, and in partnership with federal, state and local agencies, universities and other nonprofit groups has spent about $9 million to date on the efforts, said Michelle Shively, Rural Action's Sunday Creek Watershed coordinator. The restoration work in the southeastern Ohio watersheds has included the addition of treatment systems that neutralize the highly acidic, orange-colored, rotten-egg-smelling water spilling from abandoned mines and make it clean enough to support life. Of the $9 million, Shively said, more than $2.6 million has been spent cleaning up the Sunday Creek watershed, most of it focused on the creek's west branch. The results include significantly cleaner water and more aquatic life. The west branch has transformed from having no fish at all to now hosting 17 species, she said. 

Learn facts about fracking to make an educated decision - Richland Source -- My family and I peacefully reside in the beautiful countryside around Loudonville. We believe that it is imperative to inform our neighbors and the community on the impact from extraction activities of the oil and gas industry (Cabot Oil) -- which are showing a high degree of "interest" in our area and are moving quickly to establish their presence. One needs only to visit Carroll County or any other nearby area to witness firsthand these issues. Our past travels in those areas as well as West Virginia and Pennsylvania provide stark examples of what full scale extraction practices have done to those regions, infrastructure, aesthetics, and quality of life. As one example of this devastation, please research the life-changing impact on the local water supplies in the areas where full scale fracking is being done. Where will the millions and millions of gallons of water needed to frack come from? By one estimate, Ohio has forever lost over 16 billion gallons of water due to oil and gas extraction. The resultant toxic water will be poisoned and removed from the water cycle--forever. We all make critical choices at critical points in our lives. As the Native American proverb states, "We do not inherit the earth from our ancestors. We borrow it from our children." Our family has chosen to become educated on these issues; we will not sell our health and our well being; some things are not for sale at any price! Our family is committed to be stewards, not pillagers, of these priceless gifts of land, water, air, and life that we ALL have been given. 

Judges to hear appeal of Board of Elections' rejection of charter - The 4th District Court of Appeals today (Thursday) is scheduled to hear an appeal of the Athens County Board of Elections’ decision last July to reject an anti-fracking county charter proposal for the November 2017 ballot.The appellant, described as “a committee of petitioners for the county charter proposal,” on July 28, 2017, appealed Athens County Common Pleas Judge George McCarthy’s decision to uphold the Board of Elections’ July 10 decision to not place on the November 2017 ballot the Athens County Bill of Rights Committee’s proposed county charter.In anticipation of the appellate court hearing today, the ACBORC mailed out postcards last week urging supporters to “Please Come Protect Your Right to Vote” this morning at 8:30 at the Athens County Courthouse.This would be prior to a scheduled 4th District Court of Appeals’ hearing on the appeal sometime today (Thursday). The appeal is scheduled for discussion in the court along with three unrelated cases, though the order of discussion reportedly isn’t set till the morning.The ACBORC’s postcard reads, “You signed the petition to put the county charter on the ballot. But the Athens County Board of Elections refused to allow county residents to even vote on the issue!“We are appealing. Come support our legal team in the courtroom.”Last July, the Athens County Board of Elections rejected the charter as invalid by stating, among other things, that a proposed executive council (comprised of county elected officials who aren’t county commissioners) does not meet Ohio Revised Code requirements for a county executive under an alternative form of government. Judge McCarthy sided with the Board of Elections and upheld the rejection of the charter. In addition to filing an appeal of McCarthy’s decision with the 4th District Court of Appeals on July 28, the charter committee filed a protest of the elections board decision with Ohio Secretary of State Jon Husted.

US' Range Resources plays up Marcellus, downplays Terryville in 2018 gas outlook - US natural gas producer Range Resources sees future growth in the Appalachian Basin to serve LNG export demand even as it scales back output in the Terryville field in northern Louisiana because of disappointing results there, executives said Wednesday during an investor conference call. The outlook, shared during a call with analysts to discuss fourth-quarter 2017 financial results, highlights efforts by shale producers to increasingly focus on core assets, while shedding or reducing investment in operations that aren't hitting targets for returns. In Range's case, executives said that in addition to cutting the number of rigs it uses this year in the Terryville to one from the four it averaged last year, it also is in the process of identifying further assets to sell in the Midcontinent region and in northeast Pennsylvania, on top of the $70 million in sales last year. Its production focus will be on southwest Pennsylvania and the Marcellus, where it will devote 85% of its capital in 2018. "The Marcellus has continued to surprise us to the upside," CEO Jeff Ventura said on the call. Range has been betting that the pipeline buildout serving the resource-rich Marcellus in the US Northeast will trigger stronger financial returns in the years ahead, as growing midstream activity moves more gas, NGLs, and oil to domestic demand markets and for export. Range is among the shippers with commitments on Energy Transfer Partners' 3.25 Bcf/d Rover gas pipeline, which is designed to boost takeaway capacity from the Northeast to serve demand markets in the Midwest and Southeast. The completion of the second phase of the project in the second quarter of this year is expected to give a boost to Range's results.

LNG exports, Marcellus/Utica production driving physical gas flows, unprecedented constraints at Henry Hub. -- For decades, liquidity at the U.S. natural gas benchmark pricing location Henry Hub in Louisiana has been dominated by financial trades, with minimal physical exchange of gas, despite the hub boasting robust physical infrastructure, including ample pipeline connectivity. But that’s changing. Between the start of LNG exports from Cheniere Energy’s Sabine Pass LNG facility in February 2016, and the slew of pipeline reversals that are allowing Marcellus/Utica producers to target the new Gulf Coast demand, gas flows through Henry have been rising. In fact, more physical gas is moving through the hub than in nearly 10 years, to the point where a key pipeline interconnect is at capacity on many days, which historically was unheard of. Today, we begin a short series looking at the changing physical market at Henry.   We first delved into Henry Hub in our series Henry the Hub, I Am I Am, including its formation as a trading location and the rationale behind its status as both a spot market and futures contract delivery point. In that same series, we also alluded to the potential for gas flows and market dynamics at Henry Hub to shift with the emergence of a new demand source right in its backyard — namely LNG exports — and the push among Marcellus/Utica producers to target that demand. Now, two years after the first export cargo left Cheniere’s Sabine Pass LNG facility in Cameron Parish, LA, we are starting to see the effects of that export demand and supply influx on Henry Hub, including increased flows and even constraints. In this series, we’ll dive into those flow dynamics. But first, it’s worth putting it into context by reviewing the salient features and historical role of the hub.

Natural gas expected to remain most-consumed fuel in the U.S. industrial sector - EIA expects a 40% increase in natural gas consumed in the U.S. industrial sector, from 9.8 quadrillion British thermal units (Btu) in 2017 to 13.7 quadrillion Btu in 2050, according to the Annual Energy Outlook 2018 (AEO2018) Reference case. By 2020, industrial natural gas consumption will surpass the previous record set in the early 1970s, according to the AEO2018 Reference case. The U.S. industrial sector consumes more natural gas than any other sector, surpassing electric power in 2017 and the combined residential and commercial sectors in 2010. In 2017, about two-thirds of total industrial natural gas consumption was consumed for heat or power applications—either for industrial processes, such as in furnaces, or for onsite electricity generation. Several industries including bulk chemicals, food, glass, and metal-based durables used natural gas for 40% or more of their heat or power applications in 2017. EIA expects that these industries will continue to use about the same proportion of natural gas for heat or power applications through 2050 because of the cost associated with fuel switching. Industrial fuel switching often involves changing manufacturing processes, which requires substantial capital investment in new equipment.   As the largest natural gas consumer in the industrial sector, the bulk chemicals industry consumed 3.1 quadrillion Btu of natural gas in 2017, or the equivalent of about 3.0 trillion cubic feet. The bulk chemicals industry includes production of organic chemicals (including petrochemicals), inorganic chemicals, resins, and agricultural chemicals.   In the AEO2018 Reference case, increases in the bulk chemicals industry’s consumption of natural gas outpaces overall growth in the industrial sector through 2050, with 51% growth compared with the sector average of 40%. Most natural gas in the bulk chemicals industry is used for heat or power applications, but about 25% of bulk chemical natural gas consumption is used for feedstocks in agricultural chemicals (i.e., fertilizer) and methanol production.

US Natural Gas Exports Hit An All-Time High -- HFIR Energy -- The weekly natural gas data will be released Thursday; Over at SeekingAlpha in a report dated today, February 27, 2018

  • we expect a -84 Bcf change in the storage report for the week ended February 23, 2018
  • a storage report of -84 Bcf would be compared to -7 Bcf last year and -118 Bcf for the five-year average
  • LNG exports hit an all-time high yesterday
  • but LNG demand won't increase from this level until 2019
  • the elephant in the room for the rest of 2018 will still be just how fast lower 48 production grows
  • After a month of delay, Cove Point LNG is kicking into high gear. Yesterday's reading had US LNG exports coming in at ~4 Bcf/d, the highest in history. Total US gas exports, as a result, pushed passed 8 Bcf/d marking a milestone.

And these milestones are not subtle. Look at these two graphs:

For many Republicans, Trump’s offshore drilling plan and beaches don’t mix — After waiting in the morning chill for other lawmakers to speak, state Rep. Nancy Mace finally took the microphone. She was the General Assembly’s newest member, only four weeks on the job, “a baby among these folks,” she told the crowd. She was also a proud Republican in this very red state, the first woman to graduate from The Citadel military college, a former campaign worker for President Trump, a fiscal conservative who championed his tax overhaul — not the kind of politician demonstrators gathered at a rally organized by liberals were accustomed to hearing. But the words she roared into the mic set off a round of whistling, shouting and fist pumps. Like several GOP legislators who joined Democrats in stirring the crowd, Mace broke sharply with the president over his plan to offer oil and gas companies leases to drill a few miles off beaches that bring $20 billion in annual revenue to South Carolina and support 600,000 tourism jobs. “Eight to 10 million tourists a year come down to Charleston. They don’t want to come to see oil drilling off the coast,” said Mace, who represents an area that includes the city. The former military cadet laid down a gauntlet: “Ain’t gonna happen. Not on my watch!” As the Interior Department hosts public “listening sessions” through early March to explain its proposed five-year lease plan — which would open 95 percent of the nation’s outer continental shelf to potential drilling — a growing chorus of bipartisan opposition is finding its voice. At least a half-dozen similar rallies have taken place in other cities where sessions were held, including in New Jersey, Virginia, North Carolina, Georgia, Oregon and California. Mace’s defiance is an indication of how deep the opposition goes. Atlantic and Pacific coast governors, congressional delegations and attorneys general delivered the first waves of protests. Now state lawmakers, mayors and city councils are mobilizing in an attempt to stop the administration’s plan. 

Commentary: Ban fracking in Florida? What's the urgency? - Naples Daily News The CEO of the Conservancy of Southwest Florida used this space on Feb. 12 to again strike fear into our citizens about the urgency of a fracking ban bill, accompanied by a litany of imagined risks of the process and damages to our ecosystem and freshwater supply that has never occurred over its years of use.  All this while he stands by as we dump oceans of nutrient-laden freshwater into the Gulf of Mexico each year and irrigate thousands of golf courses in this state every day. And he expects you to believe that a few well stimulation jobs will damage our ecosystem and kill tourism. The only thing that will affect our tourism is a hurricane, and Irma did that last year. This constant barrage of toxic rhetoric, platitudes and fearmongering has been going on since the Dan A. Hughes Co. drilled an exploratory well for Collier Resources some four years ago that the Conservancy said was “fracked.” No chemicals were ever found in the aquifer, and a well drilled in an effort to show surface spills at the site contaminated the groundwater was bungled. The screwup cost hundreds of thousands of dollars and no fracking chemicals were ever found.  The Conservancy never gives you both sides of this issue and invites speakers, sponsored by radical environmental groups, to scare you about the “evils” of fossil fuels and fracturing, then asks its members for more money to support its lobbying efforts in Tallahassee. Its leaders obviously don’t care or want you to hear about the science of this process. The U.S. will produce 10.3 million billion barrels (bbls) a day of oil this year; more than half is produced using the fracking/horizontal drilling process.  No one has died, nor is there any credible evidence of the eco-damage or water contamination that Conservancy CEO Rob Moher speculates about.

Permit revoked for Energy Transfer Partners' Louisiana pipeline (Reuters) - A federal judge in Louisiana on Friday revoked a permit for Energy Transfer Partners’ Bayou Bridge crude oil pipeline, halting work on a portion of the project following protests by local and environmental groups. The decision by U.S. District Judge Shelly Dick in Baton Rouge underscores the growing clashes between energy pipeline operators expanding operations to accommodate new oil and gas flows from U.S. shale fields and environmentalists concerned about spills and other hazards. Energy Transfer Partners declined to comment, saying it would wait to review the judge’s opinion, which was not included with the order. Friday’s ruling granting a preliminary injunction requires the U.S. Army Corps of Engineers to revisit its approval of the pipeline’s construction through the Atchafalaya Basin, according to the decision. Energy Transfer Partners has suffered construction delays and court challenges to several other projects, including its Dakota Access crude pipeline and Rover natural gas line, which recently restarted construction in Ohio after regulators halted work following a drilling fluids spill. Environmentalists and local Louisiana fisherman filed the lawsuit against the U.S. Army Corps of Engineers, challenging its permit and citing risks to the environment, health and local economy. The pipeline route passes through the Atchafalaya Basin of southern Louisiana, a nearly 1 million-acre patch of swampland that is a critical component of the state’s flood protection system and a source of livelihood for the commercial fishing industry, according to the lawsuit.  Once complete, the Bayou Bridge system will have capacity to transport up to 480,000 barrels of oil per day to refineries along the Mississippi River. It is projected to start service by the second half of 2018.

Federal Judge Blocks Construction of Bayou Bridge Pipeline -- Federal District Court Judge Shelly Dick on Friday halted the construction of the controversial Bayou Bridge pipeline across the Atchafalaya Basin. The decision grants a preliminary injunction to prevent ongoing irreparable harm to this ecological treasure while a lawsuit, filed Jan. 11, is being heard.   Judge Dick found that the lawsuit filed by several groups— Atchafalaya Basinkeeper , the Louisiana Crawfish Producers Association (West) , Gulf Restoration Network , Waterkeeper Alliance and Sierra Club , represented by lawyers with Earthjustice—raises serious concerns and that the 162-mile pipeline would irreparably harm the Atchafalaya Basin.   The groups recently presented live testimony during a hearing showing that the ancient cypress and tupelo trees slated to be turned into mulch while the pipeline right-of-way is being cleared would never return, including evidence that these old-growth trees are the Noah's Ark of the swamp—providing habitat for migratory birds, bears, bats and numerous other wildlife .  In addition, the groups showed that pipeline construction would further degrade nearby fishing grounds that local commercial crawfishers rely on for their livelihood.   "The court's ruling recognizes the serious threat this pipeline poses to the Atchafalaya Basin, one of our country's ecological and cultural crown jewels," said Jan Hasselman, attorney from Earthjustice representing plaintiffs in this matter. "For now, at least, the Atchafalaya is safe from this company's incompetence and greed."

The battle over the Bayou Bridge pipeline is heating up - A federal judge ordered a halt to construction on part of the Bayou Bridge Pipeline on Friday.The 163-mile crude oil pipeline in Louisiana would connect to the controversial Dakota Access Pipeline that drew crowds of protesters to North Dakota in 2016. Developer Energy Transfer Partners completed its 1,172-mile project to the north, but this last southern leg is seeing a bitmore pushback early on from the courts.The court-ordered injunction has been a point of celebration for those opposing the pipeline. When groups like Atchafalaya Basinkeeper and the Sierra Club filed the lawsuit in January, they requested an injunction—and they got it pretty quickly. U.S. District Court Judge Shelly Dick issued the injunction so quickly that she still hasn’t released an opinion on why, which isn’t uncommon, Earthjustice attorney Jan Hasselman told Earther.“It takes a while to get these things out,” he said. “If it takes another two weeks to issue an opinion, well, a lot of the harm will have occurred already.” The fact Dick issued the injunction at all, however, shows she expects the lawsuit to prevail, a factor required for her to issue a preliminary injunction, Hasselman explained. It also shows that the judge believes halting construction is in the public interest and that this construction would cause irreparable harm.

Company building Bayou Bridge pipeline seeks halt of work stoppage, says cost is almost $1M per day As attorneys in a legal battle over the 163-mile Bayou Bridge crude oil pipeline awaited clarity on the sweep of a court-ordered shutdown Friday of construction, about 30 environmentalists took matters into their own hands Monday.Some of them sat on a piece of the future pipeline in this Assumption Parish community, briefly halting its continued construction east of Bayou Lafourche for about two hours until law enforcement ordered them to disperse and subsequent arrests of three of them shut down the protest.Environmental groups and crawfishermen sued the U.S. Army Corps of Engineers last month in an attempt to block a key permit over concerns the agency did not adequately consider the pipeline’s environmental impact to the Atchafalaya Basin, including the loss of ancient cypress and the effects of future oil spills.U.S. District Judge Shelly Dick in a preliminary injunction Friday halted pipeline construction by Bayou Bridge Pipeline LLC. In her ruling, Dick wrote she would provide written reasons for her order "as soon as possible." But, in the absence of them, Bayou Bridge lawyers argued in court papers filed Monday that her order did not extend beyond the Atchafalaya Basin into areas like Belle Rose, where construction could continue. A lawyer for the plaintiffs, however, said he interpreted the order to say all work should be halted until the case is decided.  Bayou Bridge lawyers have also asked the judge to suspend her work stoppage order, saying the construction halt would cost the company almost $1 million daily. They have asked Dick to resolve that request by Tuesday and want the suspension of the work stoppage while they pursue an appeal with the U.S. 5th Circuit Court of Appeals.

Judge says she blocked Louisiana pipeline permit on 'irreparable harm' concern (Reuters) - A judge in Louisiana who halted development of a section of Energy Transfer Partners’ Bayou Bridge oil pipeline last week said on Tuesday that her decision was designed to prevent“further irreparable harm” to wetlands. U.S. district judge Shelly Dick on Friday issued a temporary injunction preventing work on an extension to the Bayou Bridge system, revoking a permit and siding with environmentalists and fishermen who have expressed concerns about its potential effect on the local economy and wildlife. The $750 million pipeline, which is already under construction, is intended to move crude oil from Lake Charles, Louisiana, to St. James, Louisiana, and pass through the Atchafalaya Basin, a nearly one million acre (400,000 hectare) wetland that is vital to the state’s flood protection system and commercial fishing industry. The court battle renews a struggle between the oil industry and environmentalists, who are using lawsuits to halt or delay new infrastructure projects. Energy Transfer Partners faced similar controversy over its Dakota Access Pipeline, which was temporarily halted following protests but ultimately began service last year. “Bayou Bridge Pipeline respectfully disagrees with the District Court’s ruling that the Army Corps of Engineers did not properly consider the limited impacts of construction in the Atchafalaya Basin,” a spokeswoman for Energy Transfer Partners said by email on Wednesday. The U.S. Army Corps of Engineers conducted two comprehensive environmental reviews that found no significant impact in the basin, she said. A representative for the U.S. Army Corps of Engineers declined to comment. Energy Transfer said this week that it was appealing the ruling. 

State too cozy with Bayou Bridge pipeline owners, environmental groups say -- Environmental groups opposed to the Bayou Bridge Pipeline project say the state has had a too-cozy relationship with Energy Transfer Partners, the parent company of the pipeline -- while shunning contact with critics of the project.Louisiana Bucket Brigade released documents Thursday (March 1) that they say show the state Department of Environmental Quality was in close communication with the company, and sometimes borrowed the firm's language for its own descriptions of the project. The documents include several emails between the company and DEQ permit writers and other agency officials. Permits from DEQ and the U.S. Army Corps of Engineers were required for the 163-mile pipeline project. "State employees readily interact and quickly provide answers to queries from ETP representatives and employees, an ease of access (activist groups) do not have," the Bucket Brigade said in a statement.   DEQ said Thursday that it's standard practice to communicate with permit applicants."We have to communicate with them to process their applications," DEQ spokesman Greg Langley said.   It's also common to use information supplied by applicants in DEQ documents about the applicant's project, Langley said. "We didn't grant anybody special access," he said, stressing that DEQ held a public hearing on the pipeline. "We're always fair and equitable," he said.  Last Friday, a U.S. District Court judge temporarily stopped the pipeline's construction though the environmentally-sensitive Atchafalaya Basin. Judge Shelly Dick said in her ruling that the corps was "arbitrary and capricious" in some of its decisions granting the pipeline construction permits. She agreed with environmental groups that the pipeline posed a threat to ancient cypress forests and waterways in the basin, home to one of the largest swamps in North America.

U.S. Interior panel recommends cutting offshore oil and gas royalties (Reuters) - A U.S. Department of the Interior committee voted on Wednesday to recommend to Secretary Ryan Zinke that the agency lower royalty rates for federal offshore oil and gas drilling, to spur production.   The agency’s royalty policy committee voted unanimously to lower the rates to 12.5 percent through 2024. The existing rate of 18.75 percent was set during the administration of former President George W. Bush. The panel, which is made up of department and state officials, tribal representatives, and energy companies, also voted to increase the amount of acreage available for offshore oil and natural gas leasing in the outer continental shelf. The Houston meeting was aimed at updating around a dozen federal royalty rules, which guide energy and mineral production in the United States. The committee was formed last year to advise Zinke on whether the government was getting a fair price from resources companies for their use of public land. He will take its recommendations into account. The panel also voted to approve a proposal letting coal companies that mine on federal land set their own rates for coal used to calculate royalties. Zinke last year halted an Obama-era rule that had required coal companies to pay royalties on sales to their first unaffiliated customer. The rule, which had been intended to close a loophole that had let companies sell coal to its own subsidiaries at deflated prices, was criticized by Zinke as confusing. Randall Luthi, president of offshore energy lobby group the National Ocean Industries Association, said at the meeting that existing production offshore was“declining and at a very quick rate” and that lowering royalty rates should spur new activity. 

Democrats warn against cut to offshore oil royalties (Reuters) - Top Democrats on the Senate and House natural resources committees urged the Interior Department to drop a proposed cut to offshore oil and gas royalties, warning such a reduction would shortchange U.S. taxpayers. The Interior Department’s Royalty Policy Committee is due to evaluate a proposal to lower the royalty rate companies pay on petroleum produced in federal offshore waters to 12.5 percent from 18.75 percent - part of a plan by the Trump administration to encourage more U.S. energy production. “This proposal would amount to a giveaway to some of the most profitable companies in the world and rob taxpayers of potentially billions of dollars of revenues over the life of the leases,” Senator Maria Cantwell of Washington and Representative Raul Grijalva of Arizona wrote to Interior Secretary Ryan Zinke. They said in the letter that the royalty committee appointed by Zinke - made up of members from the Interior Department, states, tribes and oil, gas and coal companies - was “stacked with resources extraction interests.” An Interior Department official did not immediately respond to a request for comment on the letter. The Western Energy Alliance, which represents oil and gas companies, brushed off arguments that the energy industry did not pay its fair share. “The oil and natural gas industry is the second largest source of revenue to the federal government after the IRS,” the group said in a statement. Zinke and the Trump administration last year launched the effort to reassess royalty rates, last set by the administration of President George W. Bush, in a bid to boost domestic production of energy resources.  An offshore royalty cut could tempt drillers to bid more aggressively in future lease sales. The proposal is among a number of draft recommendations written by a royalty policy subcommittee at a meeting on Feb. 2. 

SEC charges Texas oil operators with fraud, alleging investor cash used for booze, strippers -- The U.S. Securities and Exchange Commission has charged three oil and gas companies and its executives with fraudulently scheming to raise $11.7 million for drilling projects allegedly located in Kentucky and using investor money for booze, drugs and strippers.  In a federal complaint filed Wednesday in U.S. District Court in Sherman, lawyers with the SEC's Fort Worth office say that AmeraTex Energy and Lewis Oil Company, which are based in North Dallas, and Lewis Oil Corp., which is headquartered in Albany, KY., perpetrated a fraud to sell unregistered securities to more than 150 investors in 36 states, made false statements to investors and diverted money raised for personal pleasures.  SEC lawyers say several defrauded investors live in the Houston area. The companies could not immediately be reached for comment.

Oklahoma Toughens Oil Fracking Rules After Shale Earthquakes Climb - The Oklahoma Corporation Commission announced that all explorers within certain areas must use equipment known as a seismic array, which detects movement underground. The regulators also lowered the quake threshold for pausing work from 3.0 magnitude to 2.5, a level where humans can feel the earth move. The mandated delay is for at least six hours. Fracking, or hydraulic fracturing, loosens hydrocarbons from shale by blasting water, sand and chemicals underground. Since December 2016, Oklahoma officials have counted 74 earthquakes of at least 2.5 magnitude that may be linked directly to fracking, said Matt Skinner, a commission spokesman, in an email last month. "While more study needs to be done, the indications are that those operators who have their own seismic arrays and took actions when there were seismic events too small to be felt decreased the risk of having multiple, stronger earthquakes,” said Tim Baker, director of the commission’s oil and gas conservation unit, in a statement Tuesday. The new rules are designed to slow quakes in the so-called SCOOP and STACK shale plays, where wastewater disposal, long thought to be the main culprit for larger, more prevalent tremors in the northern half of the state, isn’t as much of an issue. That opens up the idea that fracking itself may be to blame. For Oklahoma, it’s a cautious move forward, limiting though not hamstringing an oil industry that has tripled its output in the past decade to 497,000 barrels a day and created thousands of jobs in the state.  

U.S. court blocks Trump administration from ending oil, gas waste rule (Reuters) - A U.S. court temporarily blocked the Trump administration from delaying or ending an Obama-era rule aimed at preventing oil and gas leaks during production, according to court documents, marking the fourth time either Congress or the courts have upheld the rule’s implementation. The U.S. District Court for the Northern District of California, in an order filed on Thursday, granted the states of California and New Mexico’s bid for a preliminary injunction and denied the administration’s request to move the trial to another court venue in Wyoming. Its decision was part of a lawsuit filed by the two western U.S. states against U.S. Interior Secretary Ryan Zinke and the Bureau of Land Management in a case that was combined with another filed by a coalition of 17 groups, including the Sierra Club environmental advocacy organization and several tribal groups. The rule, finalized in November 2016, took effect in January 2017 and was aimed at reducing leaks of natural gas, or methane, that happen through venting and flaring during oil production on federal land. The Obama administration said that venting of methane cost taxpayers over $330 million a year in lost revenues from natural gas. In his ruling, U.S. District Judge William Orrick said he granted the request for an injunction given that the bureau’s “reasoning behind the Suspension Rule is untethered to evidence contradicting the reasons for implementing the Waste Prevention Rule,” adding that the plaintiffs were likely to prevail on the merits of their case. “They have shown irreparable injury caused by the waste of publicly owned natural gas, increased air pollution and associated health impacts, and exacerbated climate impacts,” the judge wrote in his decision. 

Trump administration ordered to enforce limits on methane gas emissions - A San Francisco federal judge has ordered the Trump administration to enforce limits on emissions of climate-changing methane gas from wells on federal and tribal lands, saying the benefits to public health and the environment far outweigh the minimal costs to oil and gas companies of reducing pollution. “Weighed against the likely environmental injury, which cannot be undone, the financial costs of compliance are not as significant as the increased gas emissions, public health harms, and pollution,” U.S. District Judge William Orrick III said in a ruling late Thursday. He told the U.S. Bureau of Land Management to end its suspension of rules approved by President Barack Obama’s administration that require oil and natural gas producers on federal lands to reduce flaring and venting that lower gas production and leak methane, a potent source of greenhouse gases. The rules took effect in January 2017, but the Trump administration ordered them suspended last month for a year while it developed its own regulations. Those rules were announced this week. They include a repeal of the Obama regulations and an elimination of restrictions on methane emissions.

Global fossil fuel emissions of hydrocarbons are underestimated - Global levels of ethane and propane in the atmosphere have been underestimated by more than 50%, new research involving scientists at the University of York has revealed.These hydrocarbons are particularly harmful in large cities where, through chemical reactions with emissions from cars, they form ozone - a greenhouse gas which is a key component of smog and directly linked to increases in mortality.  Ethane and propane escape into the air from leaks during natural gas extraction and distribution, including from fracking - the process of drilling down into the earth and fracturing rock to extract shale gas. This new study shows that global fossil fuel emissions of these hydrocarbons have been underestimated and are a factor of 2-3 times higher than previously thought. The authors of the international study involving researchers from York, Oslo and Colorado are now calling for further investigation into fossil fuel emissions of methane, a potent greenhouse gas which is emitted along with ethane and propane from natural gas sources. Co-author of the study, Professor Lucy Carpenter from the Department of Chemistry at the University of York, said: "We know that a major source of ethane and propane in the atmosphere is from "fugitive" or unintentional escaping emissions during fossil fuel extraction and distribution. If ethane and propane are being released at greater rates than we thought, then we also need to carefully re-evaluate how much of the recent growth of methane in the atmosphere may also have come from oil and natural gas development. The current policy case for fracking, for example, is partly based on the belief that it is less polluting that coal." The study used data collected from 20 observatories world-wide. The researchers from the University of York provided high-resolution data from a monitoring station in Cape Verde - a crucial location in the Atlantic which captures air blown over the Sahara, from North America, the Middle East and North Africa.

Trump EPA moves to roll back more clean air and water rules (AP) — The Trump administration said Thursday it is rewriting Obama-era rules governing pollution from oil and gas operations and coal ash dumps, moves that opponents say will significantly weaken protections for human health and the environment. The changes proposed by the Environmental Protection Agency are the latest in series of actions taken over the last year to roll back regulations opposed by the fossil-fuel industry. The agency said the revisions would save electric utilities $100 million per year in compliance costs, while oil and gas operators would reap up to $16 million in benefits by 2035. Environmental advocates predicted the revisions would lead to dirtier air and water. The 2016 standards governing leaks and emissions from oil and gas drilling operations sought to reduce the amounts of methane and volatile organic compounds, or VOCs. Methane is a potent greenhouse gas that traps heat in the atmosphere, contributing to climate change. VOCs are a component of ground-level ozone, air pollution that can aggravate asthma and contribute to early deaths from respiratory disease. In a statement, EPA Assistant Administrator for Air and Radiation Bill Wehrum said the changes will "provide regulatory certainty to one of the largest sectors of the American economy and avoid unnecessary compliance costs to both covered entities and the states." Prior to joining the Trump administration in November, Wehrum worked as a lawyer representing fossil fuel and chemical companies regulated by the EPA office he now leads. Environmental groups said the Trump rollbacks would let large-scale polluters off the hook."This move would put an estimated 25 million people who live in counties with dangerously unhealthy air at even greater risk from oil and gas related air pollution by rolling back measures that are flexible, cost-effective and that have been proven to work by leading states and responsible companies," 

These provocative images show Russian trolls sought to inflame debate over climate change, fracking and Dakota pipeline - Russian trolls used Facebook, Instagramand Twitter to inflame U.S. political debate over energy policy and climate change, a finding that underscores how the Russian campaign of social media manipulation went beyond the 2016 president election, congressional investigators reported on Thursday. The new report from the House Science, Space and Technology Committee includes previously unreleased social media posts that Russians created on such contentious political issues as the Dakota Access Pipeline, government efforts to curb global warming and hydraulic fracturing, a gas mining technique often called "fracking." One Facebook post created by a Russian-controlled group called "Native Americans United" shows what appears to be a young girl in a braid peering out over an unspoiled prairie. "Love Water Not Oil, Protect Our Mother, Stand With Standing Rock," a reference to an Indian tribe that opposed the Dakota Access Pipeline. The post also said, "No Pipelines. No Fracking. No Tar Sands." The 21-page report drew from documents submitted in the fall by Twitter and Facebook, which owns Instagram, for congressional investigations into the social media influence campaign during the 2016 presidential election. Those probes focused on the efforts by the Internet Research Agency, a troll farm in St. Petersburg that Special Counsel Robert Mueller indicted this month for disrupting and influencing U.S. politics. The committee's report found that, between 2015 and 2017, more than 9,000 posts and tweets dealt with U.S. energy policy produced by 4,334 Facebook, Twitter and Instagram accounts controlled by the Internet Research Agency. Twitter told the committee that more than 4 percent of tweets produced by the Russians dealt with energy and climate issues.

How much Canadian gas can the US west coast take? - As Canada’s natural gas exports to the Eastern U.S. have been pushed out by growing Marcellus/Utica gas supply, they’ve been flooding the U.S. West Coast. TransCanada is planning expansions of its Alberta system to send more gas across the western border, setting the stage for a showdown with Rockies gas supply. At the same time, the rise of renewable energy in California and the Pacific Northwest poses a constraint for gas demand growth in the region. Today, we look at recent shifts in border flows to the West Coast and prospects for future growth. This blog continues our series on Canada’s gas exports to the U.S., which have been under pressure from competing gas supply growth in the U.S. We began in Part 1 by looking at the macro fundamentals affecting the Canadian gas supply-demand balance, including growing gas production from the Montney and Duvernay shale plays in Alberta and British Columbia. While Canada’s gas demand is also rising — from oil sands production and gas-fired power generation — exports remain a necessary demand source for Canadian producers. However, the problem is that the U.S. will need less and less of that Canadian gas.

Steel tariffs may raise cost of energy projects and delay pipeline building, critics say-  The U.S. oil and natural gas industry depends on specialty steel for many of its infrastructure projects, and U.S. steelmakers don't supply it, said Jack Gerard, the CEO of the American Petroleum Institute, a trade association for the industry."The actions taken today are inconsistent with the administration's goal of continuing the energy renaissance and building world-class infrastructure," Gerard said.The administration said Thursday it would slap a 25 percent tariff on imported steel and 10 percent on imported aluminum, beginning next week.Even before the announcement, opponents had voiced concerns that tariffs could raise prices for all kinds of consumer and commercial goods made from aluminum and steel.There are also doubts that U.S. steelmakers would be able to handle higher volumes and produce all grades of steel necessary for industrial production.The thickest energy pipelines use a grade of steel that is produced abroad. When President Trump signed an executive order approving the Keystone Pipeline last year, he made headlines by also mandating that steel for future pipelines will need to be "made in the USA." At the time U.S. steelmakers said they had the capability to produce the steel, they just needed time to increase their output. They argued that foreign competition and anti-competitive trade practices have put them at a disadvantage for years. "The real question is whether the U.S. steel industry has the capacity to supply every pipeline project in the United States,"

Trump rolled back pipeline safety regulations, benefiting equity firm that loaned money to Kushner - The equity firm magnate that advised the Trump administration on infrastructure and whose company gave a $184 million loan to Kushner Companies also benefited from three rule changes relaxing pipeline safety regulations. Last year, Joshua Harris, founder of equity firm giant Apollo Global Management, advised the Trump administration on infrastructure policy and discussed a possible White House job that  never materialized, the New York Times reported Wednesday. During that time, Harris also met several times with White House advisor Jared Kushner. Shortly after those meetings, Apollo gave Kushner’s family real estate firm the nine-figure loan to refinance the mortgage on a Chicago skyscraper, according to the New York Times report. Harris’ company also has a number of large investments in energy companies that stand to gain from three Trump administration rule changes, including EP Energy and Northwoods Energy. Those ties were first revealed in a January 30 report published by the progressive think tank Democracy Forward. “It is a very serious conflict of interest when you have the president and other officials who work for him who are indebted to any business or any entity that wants something out of the United States government,” said Richard Painter, a former White House ethics lawyer under the Bush administration. “The whole thing stinks to high heaven.”Painter added that Kushner should leave the White House due to, among a host of other concerns, his financial conflicts. Painter says the law should be amended to limit incoming high-ranking government officials’ ownership of businesses with large amounts of debt.

OPEC to meet with U.S. shale firms in Houston on Monday - sources (Reuters) - OPEC will hold a dinner on Monday in Houston with U.S. shale firms, two industry sources said, the latest sign of the producer group widening talks about how best to tame a global oil glut. OPEC Secretary General Mohammad Barkindo plus other OPEC officials will attend the dinner, one of the sources said. A second source said the chief executives of U.S. shale companies of various sizes have been invited. The meeting will be on the first day of the CERAWeek energy conference in Houston. On Tuesday, OPEC representatives will hold a dinner with U.S. hedge funds who have invested in shale firms, one source said. A year ago, the Organization of the Petroleum Exporting Countries held unprecedented talks with fund executives and shale producers on the sidelines of the same event. “Shale has dramatically changed the world’s perception of fossil fuels,” said the chief executive of one shale company, declining to be identified by name. “We now have a seat at the table on pricing.” OPEC led by Saudi Arabia and non-OPEC Russia have reduced production during 2017-18 to prop up oil prices. The United States, which rivals Russia and Saudi Arabia for the position of the world’s largest oil producer, is not participating in cuts as its industry is represented by private producers who can be sued for collusion if they join the deal. The OPEC cut has boosted prices, which topped $71 a barrel this year for the first time since late 2014. But the rally is spurring renewed growth in shale output, offsetting the OPEC-led effort. The International Energy Agency said on Tuesday the United States will overtake Russia as the world’s biggest oil producer by 2019 at the latest, as the country‘s shale oil boom continues to upend global markets. OPEC officials say they are not worried about a renewed surge in shale swamping its efforts this year, but have urged shale producers to help curtail global supply. “It’s normal for shale oil, tight oil to increase in 2018 and whenever oil prices support it,” said Iraq’s national representative to OPEC, Ali Nazar, at an event in Berlin on Tuesday. “But we all should look with responsibility to the market in order to keep the balance in the market as much as we can so as not to harm investors.” 

Alaska Legislature considers borrowing $1B to pay oil debt (AP) — The Alaska Legislature is considering a proposal to borrow up to $1 billion from global markets to cover a debt it owes to oil and gas companies.  Gov. Bill Walker's administration said the borrowing could be a way to reduce that deficit at the expense of some longer-term risk, the Juneau Empire reported .  Revenue commissioner Sheldon Fisher and tax division director Ken Alper presented the plan on Wednesday to the Senate Resources Committee. "The large, overarching goal of this is to provide additional stimulus into the economy," Fisher said.  The state promised billions of dollars in tax credits to smaller oil and gas companies between 2003 and 2017. But when petroleum prices plunged, the state could no longer afford the program.  The state has been paying only the minimum amount on what it owes for the past several years, as was required by state law. But as of Dec. 31, the state owes $806 million in credits. If estimates hold true, the debt will be closer to $1 billion once expected applications are filed this year.

U.S. to overtake Russia as top oil producer by 2019 at latest: IEA (Reuters) - The United States will overtake Russia as the world’s biggest oil producer by 2019 at the latest, the International Energy Agency (IEA) said on Tuesday, as the country’s shale oil boom continues to upend global markets. IEA Executive Director Fatih Birol said at an event in Tokyo the United States would overtake Russia as the biggest crude oil producer “definitely next year”, if not this year. “U.S. shale growth is very strong, the pace is very strong ... The United States will become the No.1 oil producer sometime very soon,” he told Reuters separately. U.S. crude oil output rose above 10 million barrels per day (bpd) late last year for the first time since the 1970s, overtaking top oil exporter Saudi Arabia PRODN-SA. The U.S. Energy Information Administration said early this month that U.S. output would exceed 11 million bpd by late 2018. That would take it past top producer Russia, which pumps just below that mark C-RU-OUT. Birol said he did not see U.S. oil production peaking before 2020, and that he did not expect a decline in the next four to five years. The soaring U.S. production is upending global oil markets, coming at a time when other major producers - including Russia and members of the Middle East-dominated Organization of the Petroleum Exporting Countries (OPEC) - have been withholding output to prop up prices LCOc1. 

Peak U.S. Shale Could Be 4 Years Away - U.S. shale production growth has outperformed even the most bullish forecasts, forcing OPEC and the International Energy Agency (IEA) to revise up American supply growth projections month after month.The U.S. Energy Information Administration (EIA) also expects shale/tight oil to continue to grow in all possible modeled scenarios for the next four years, according to its Annual Energy Outlook 2018 published this month.While the EIA is not predicting what will happen, it is modeling possible production scenarios under certain assumptions. Under one of those modeled projections—the Low Oil and Gas Resource and Technology case—the assumptions applied are lower resources and higher costs. In this model, U.S. tight oil production—including the plays Bakken/Three Forks/Sanish, Eagle Ford, Woodford, Austin Chalk, Spraberry, Niobrara, Avalon/Bone Springs, and Monterey—is expected to rise from 4.96 million bpd in 2017 to 5.59 million bpd in 2022, and then to start declining on a steady downward trend by 2050, when tight oil production is expected to be at 4.42 million bpd.This is one of the side cases in EIA’s models, and one of the most unlikely, because it assumes no technological breakthroughs, lower resources, and higher costs. Under this model, total U.S. crude oil production is pegged at 9.14 million bpd this year, while figures are currently available, showing that production is already above 10 million bpd and likely to average more than 10.5 million bpd this year.   The Reference case scenario shows tight oil production jumping to more than 7 million bpd by 2025 and surpassing 8 million bpd in 2036, before starting to level off some time in the early 2040s. Total U.S. crude oil production in the Reference case is between 11 million bpd and 12 million bpd by 2050, “as tight oil development moves into less productive areas and as well productivity declines,” the EIA says. Sure, longer-term projections are much more uncertain than shorter-term forecasts, and U.S. oil production will depend on many factors—oil prices, the pace of technological advances, costs, well productivity, and U.S. and global oil demand growth, to name a few.

Warning Bells About Fracking and Earthquakes Growing Louder - Recent studies on hydraulic fracturing suggest the technology is causing more earthquakes than expected and that it doesn’t take the injection of much fluid to trigger a tremor. In addition, researchers warn that the industry’s increasing reliance on “supersized” fracking using massive volumes of fluid and sand in longer wells could increase seismic hazards across North America.A recent analysis of 300 hydraulically fractured wells near Fox Creek, Alberta, found that a modest injection of 10,000 cubic metres (2.6 million gallons) can cause an earthquake in geological formations containing faults. The larger the volume of fluids injected underground, the greater the number of earthquakes, the study found. “The rate of earthquake scales with the rising volume of injected fluids in sensitive areas,” said Gail Atkinson, one of the paper’s co-authors and a University of Western Ontario professor who holds a research chair in the hazards from induced seismicity.   “The more fluid you inject, the higher the productivity rate of earthquakes. It is almost like a dial,” she said. “It implies that you can affect the rate of earthquakes by changing the injected volume.”  But volume doesn’t seem to have any effect on the size of an earthquake that fluid injection might trigger if it hits a fault. In fact, no one can predict or model the potential severity of a tremor caused by oil and gas activities. In fracking operations, energy companies inject high volumes of highly pressurized fluid, sand and chemicals underground to force open cracks in rock formations. In recent years the volume and pressure used in fracking operations has doubled or tripled in both Canada and the U.S.

Oilsands pollution on collision course with Canada's climate plan -- Carbon pollution from oilsands expansion is radically undermining Canada's plan to fight climate change. On the present course, almost everything else in Canada would have to shut down for the country to meet its climate change targets.

  • Accelerating climate failure — Oilsands expansion is devouring our national climate goals.
  • Wildly unbalanced — Oilsands’ share of Canada’s climate budget is out of proportion to the relatively small contribution to jobs and GDP.
  • Extreme actors — Canadians are outliers in both pace and scale of fossil carbon extraction compared to other countries.

To illustrate the accelerating threat posed by oilsands pollution, I created the chart below. It shows the percentage of Canada's climate targets eaten up by climate pollution from Alberta's oilsands industry.1 As you can quickly see, the oilsands’ share keeps rising relentlessly. Back in 1990, oilsands pollution caused two per cent of our country's total. Since then it has accelerated upwards, grabbing:

  • 6% of Canada’s 2005 target set by the Mulroney government
  • 9% of the 2010 target set by the Chretien government
  • 15% of the 2020 target set by the Harper government

Alberta's "hard cap" allows just one industry to consume Canada's climate goals - by 2050 the oilsands industry will take up 78% of Canada's carbon budget  The oilsands industry is projected to expand another sixty percent by 2030. At that level, oilsands will grab:

  • 22% of our first Paris Accord target, in 2030
  • 78% of Canada's 2050 target

Both Stephen Harper's Conservative government and Justin Trudeau's Liberal government agreed to Canada's 2030 target. The latest projections, however, expect us over-pollute by 125 million tonnes of CO2.1b Rising oilsands pollution makes up two-thirds of that failure.1c How much more of our nation's climate budget are we going to hand over to this single industry in a single province? Apparently, a whole lot more.  Continuing at this capped level, the oilsands would gobble up 78 per cent of our nation's climate target for 2050.

Oil and Gas: Mexico annual oil output falls below 2 million barrels a day(AP) — Mexico's annual crude oil and gas output has fallen below 2 million barrels per day for the first time since comparable records were kept starting in 1990.  State-owned oil company Petroleos Mexicanos reports on its website that average daily output in 2017 was about 52,000 barrels short of the 2 million mark.  Production has fallen steadily after peaking at almost 3.4 million barrels per day between 2003 and 2005. The drop is largely due to the company's inability to find new reserves to replace aging, shallow water fields. The company was unable Monday to provide figures from before 1990, when crude output ran at about 2.5 million barrels per day.

Presidential frontrunner López Obrador backs off threat to undo Mexican oil privatization -- When he ran for president in 2006 and 2012 as the candidate of the once center-left Party of the Democratic Revolution (PRD), Andrés Manuel López Obrador (AMLO) raged against privatizing Pemex (Petróleos Mexicano), the Mexican state oil company, which had held a monopoly over crude production since 1938.In the 2012 election campaign, López Obrador called the plan of the current Mexican president, Enrique Peña Nieto of the Party of the Institutional Revolution (PRI), to invite foreign oil giants to enter into profit-sharing and production contracts with Pemex “the robbery of the century,” which he said would cost Mexico $40 billion a year.In December 2012, when the PRD signed on to Pena Nieto’s “Pact for Mexico” to liberalize the Mexican economy, the centerpiece of which was energy privatization,  He rightly accused the PRD of abandoning the last of its social democratic pretensions.   He led tens of thousands into the streets of Mexico City in protest. At that time, AMLO warned that if Mexico bought foreign gasoline instead of making it at home, Mexicans would pay 30 percent more for it. He projected a loss of $30 billion a year, which he said would starve the public budget of money needed for infrastructure projects, higher salaries for teachers and doctors, and social programs such as initiatives to reduce hunger and poverty. Now AMLO’s chief advisers in essence are signaling that all that is left of Lopez Obrador’s prior energy platform is that he would still seek to build two new refineries in order to increase Mexican gasoline production and thereby reduce dependence on the US for fuel imports.

Exclusive: U.S. mulls sanctions on Venezuela to put pressure on Maduro (Reuters) - The Trump administration is considering sanctioning a Venezuelan military-run oil services company and restricting insurance coverage for Venezuelan oil shipments to ratchet up pressure on socialist President Nicolas Maduro, a U.S. official said on Wednesday. With Maduro running for another term in an April election that Washington and its allies oppose as a sham, the United States is weighing sanctions that would target Venezuela’s vital oil sector beyond what has been done before, the official told Reuters. Some measures could come before the vote and others could be imposed afterwards. The official, who is close to U.S. internal deliberations on Venezuela policy and spoke on condition of anonymity, would not rule out an eventual full-scale ban on Venezuelan oil shipments to the United States, among the toughest of oil-related sanctions. “I think (it would cause) a fairly strong shock to the oil market in the short term,” the official said. The official stressed that no decisions have been made and that any U.S. action would take into consideration potential harm to ordinary Venezuelans, already suffering from food shortages and hyperinflation, and the country’s neighbors as well as the impact on the U.S. oil industry and American consumers. Venezuela was the fourth largest supplier of crude oil and products to the United States in 2017, according to the U.S. Energy Information Administration. Its crude oil sales to the United States last year were the lowest since 1991, according to Thomson Reuters trade flows data. “Oil sanctions are not taken lightly,” the official said. “This would be a fairly strong escalation for U.S. policy, whether it’s a complete oil sanction or salami slices of different graduated steps.” 

Venezuelan Oil Production Could Further Collapse On New U.S. Sanctions - If the U.S. expands sanctions on Venezuela to include the oil industry and restricts U.S. exports of oil products that are crucial for diluting Venezuela’s extra-heavy oil, oil production in the country sitting on the world’s largest oil reserves would further collapse.According to data by the EIA compiled by Bloomberg, Venezuela’s imports of heavy naphtha from the U.S.—all of which comes from Gulf Coast refineries—are some 2 million barrels per month.Oil production in the Orinoco oil belt, responsible for half of Venezuela’s crude oil production of currently around 1.6 million bpd, depends on the imports of this heavy naphtha from the U.S., which is blended with the thick tar-like extra-heavy oil to allow it to flow through pipelines from Orinoco to Venezuela’s coasts for loading onto tankers.Earlier this month, U.S. Secretary of State Rex Tillerson said that the U.S. was considering extending sanctions against Venezuela to include imports of Venezuelan crude and exports of U.S. refined products to the troubled South American country. Currently, sanctions target separate individuals from the Nicolas Maduro government as well as a ban on U.S. banks and other institutions buying Venezuelan debt. According to analysts, while a U.S. ban on Venezuelan oil imports could hurt U.S. refiners, restrictions on U.S. oil product exports to Venezuela could push Venezuela’s oil production off the cliff.

Who pays the bill when fracking goes wrong? - The 1 Territory Research Team is releasing a paper that challenges the economic scenarois being put forward by gas industry corporations and other economic models for the Unconventional Fracturing of Shale Gas in the Northern Territory. The paper includes an economic model that has been constructed by Sue Fraser-Adams [1 Territory’s vice-president] that attempts to assess the cost of remediation of wells that fail over two specific periods of time, namely 24 years and 100 years in the future. The two major macro economic models that have been constructed to date. The first report, commissioned by APPEA (Deloitte Access Economics in July 2014 and the ACIL Allen Consulting Report dated October 2017 commissioned by the Scientific Inquiry into Hydraulic Fracturing in the NT) do not appear to include well remediation costs. The modeling shows that the cost could be significant. The results indicate that at a full development scenario of 67,000 wells over 24 years at a failure rate of 6%, the costs could be in the order of $4.5b. If a failure rate of 15% is used, the costs could be in the order of $11b. Over 100 years with gradually increasing failure rates to 20%, the cost could exceed $50b. The existing number of exploration and production wells that have already been drilled in the NT will over time also need remediation. On the assumption of a 6% failure rate, over the next 24 years, more than $16m could be required to be spent on well remediation and over 100, the cost could be over $1b. 

NYMEX April gas settles 0.3 cent lower at $2.683/MMBtu -- The NYMEX April natural gas futures contract settled 0.3 cent lower Tuesday at $2.683/MMBtu on its first day as the front-month contract. Prices continue to be blocked on the upside by robust production, slowing demand and a mild weather outlook. The month of February has been bearish for the NYMEX front-month contract, as expectations of continued strong production outweighed strong demand and lower-than-normal storage inventories. With weather forecasts not as cold as some may have thought, the market is "resuming downward pressure" after the expiration of March as the front-month contract and the small rally that accompanied it, said Phil Flynn, senior market analyst at Price Futures Group. While the front-month contract is not "collapsing yet" based on the supply report, "expect a downside breakout" as $2.50/MMBtu levels are tested over the next few weeks, Flynn added. US gas production has remained strong throughout February. Over the past seven days, dry gas production has averaged 77.3 Bcf/d, compared with a 77.3 Bcf/d for the whole of the month. Output is 6.3 Bcf/d higher than the 71 Bcf/d average for February 2017, according to S&P Global Platts Analytics data. With the winter season quickly coming to a close, US demand is expected to dip compared with the average so far in February, as over the next seven days, demand is forecast to average 80.1 Bcf/d, an 8.5 Bcf/d drop from the 88.6 Bcf/d average so far this month, according to Platts Analytics data. 

April NYMEX natural gas at $2.686/MMBtu searches for direction - NYMEX April natural gas futures inched up a fraction overnight in the US ahead of Wednesday's open, as lingering cold in weather outlooks suggest some late-season heating demand, while seasonal changes drive uncertainty in the market. At 7:05 am ET (1205 GMT), having closed 0.3 cent lower Tuesday, the contract was 0.3 cent higher at $2.686/MMBtu. Below-average temperatures dominate in the revised National Weather Service forecasts. Although the transition from winter to spring suggests higher low temperatures, colder weather in store could still inspire residual heating demand that would encourage storage withdrawals. Warmer weather that has helped trim natural gas consumption in recent days is expected to have encouraged a step lower in the rate of weekly storage draws to the 70s Bcf in the next US Energy Information Administration inventory data that will cover the week ended February 23, which would compare to a 118 Bcf five-year-average withdrawal. The EIA currently sees total natural gas inventories ending the traditional withdrawal season at 1,290 Bcf on March 31, which is 24% lower than the five-year average and the second lowest end-of-season level reported since 2010, with net storage draws matching the five-year average for the balance of the season. 

NYMEX April gas settles 1.6 cents lower at $2.667/MMBtu The NYMEX April natural gas futures contract was relatively calm for the second straight day Wednesday, settling 1.6 cents lower at $2.667/MMBtu following a March front-month contract that experienced volatility over the same period. The NYMEX front-month contract may be hindered on both sides as an outlook for lower-than-average temperatures and low storage levels may be countering a rise in production and a fall in demand. February has seen large storage withdrawals, as current storage levels currently sit at an estimated 1.760 Tcf, a 19% deficit to the five-year average, according to the US Energy Information Administration. This trend may start to reverse as a consensus of analysts S&P Global Platts surveyed expects a 79-Bcf pull from storage for the week that ended February 23, which is below the 118-Bcf pull averaged over the past five years, according to EIA data. In tandem with low storage numbers, providing some price support could be cold weather on the horizon, as the most recent six- to 10-day National Weather Service outlook calls for lower-than-average temperatures across the Northwest, Southwest, Rockies, Midcontinent, and Southeast. Despite the expectation of some lower-than-average temperatures over the next week, US demand is forecast to fall 7.3 Bcf/d over the next seven days to average 80.9 Bcf/d, compared with a February average of 88.2 Bcf/d, according to S&P Global Platts Analytics. According to Platts Analytics, dry production is expected to average 78 Bcf/d over the next seven days, a rise of 500 MMcf/d from the 77.5 Bcf/d averaged over the previous seven days.

Forecasts show weak US February natural gas heating demand continuing into March - Floundering natural gas demand from the US residential-commercial sector in February, now forecast to continue through mid-March, is making a final gasp of winter weather-driven demand look increasingly unlikely this season. On Wednesday, US heating demand sank to its lowest since mid-February at an estimated 31.4 Bcf/d. It was a fitting end to a disappointing month for the US residential-commercial sector. In February, homes and businesses consumed an average 40.2 Bcf/d, underperforming the five-year average by over 5 Bcf/d, S&P Global Platts Analytics data shows. Looking ahead, demand during the first week of March is currently forecast to average just over 35 Bcf/d, widening its shortfall to the five-year average to roughly 7 Bcf/d. On Wednesday, a forecast published by the US National Weather Service showed that trend is likely to continue through the second week of March. In its eight- to 14-day outlook, the agency called for temperatures at or slightly below normal across most the Northeast and the Midwest, where heating demand is most sensitive to colder weather. Data from Custom Weather appeared to support that outlook, calling for US population-weighted temperatures to average just over 46 degrees Fahrenheit, less than 1 degree cooler than during the first week of March. Over a short 10-day period from late January to mid-February, increasingly bearish weather forecasts led a near-$1/MMBtu decline in benchmark spot prices at the Henry Hub.

Seesawing April NYMEX natural gas at $2.709 searches for direction - NYMEX April natural gas futures moved in a seesaw fashion overnight in the US ahead of Friday's open, as traders considered a changing fundamental landscape. At 6:50 am ET (1150 GMT) the contract was 1.1 cents higher at $2.709 while trading from $2.686/MMBtu to $2.728/MMBtu. The US Energy Information Administration's latest storage data outlined a net 78 Bcf withdrawal for the week ended February 23 that took total working gas stocks to 1,682 Bcf, or 680 Bcf below the year-ago level and 372 Bcf below the five-year average of 2,054 Bcf. While the reported inventory draw was on the high end of the range of estimates coming into the day and well above the 7 Bcf year-ago drawdown, it was well below the 118 Bcf five-year-average pull. Warmer weather that sapped heating demand is seen to have encouraged the week's storage withdrawal. "Next week's report is likely to show a below normal injection level as the weather has been mild for most of this week in the main natural gas consuming regions of the country," Energy Management Institute principal Dominick Chirichella said. 

Russian natural gas flows to Europe lower in February as Ukraine transit dips - Russian gas flows to Europe in February via its three main pipeline routes amounted to 9.1 Bcm, according to data from S&P Global Platts Analytics, as mild weather across the continent in the first part of the month reduced demand for Russian deliveries. Flows averaged 324 million cu m/d -- up from January's 310 million cu m/d, which was the lowest monthly average since August 2016 -- but they were down on the February flows of 2017 when cold weather hit much of Europe. Deliveries via Nord Stream and Yamal-Europe to northwest Europe remained at close to maximum through February, and supplies picked up via Ukraine toward the end of the month when the "Beast from the East" cold weather front sent temperatures plunging from February 26. Russian gas supplies to Europe hit a new record high in 2017 due to high demand -- both in the winter to meet high demand and in the summer to replenish European storage stocks. Gazprom's gas has also been competitive with European hub pricing over the past few years given the low oil price environment combined with Gazprom's pricing structure leaning toward more hub indexation, with customer nominations increasing as a result. But the mild weather through January and most of February 2018 had a significant impact on Russian flows, especially through the Ukraine route to central Europe and Italy. 

Ukraine shivers as Russia refuses to deliver gas - Ukraine on Friday urged schools to close and factories to cut production after Russia refused to restart natural gas deliveries, while residents shivered as the country strained to save on gas supplies. Russian gas deliveries to Ukraine were supposed to restart on Thursday following a foreign court ruling aimed at ending years of disputes between Kiev and Moscow, including two halts to Russian gas supplies to Europe through Ukraine. But Russia's Gazprom gas giant unexpectedly refused to resume deliveries, returning the prepayment for supplies made by Kiev, claiming amendments to a contract had not been completed.  The decision coincided with freezing temperatures all over Ukraine, and the government called on Friday for measures to reduce consumption.  "Starting today, we recommended ... to stop the work of kindergartens, schools and universities," energy minister Igor Nasalyk told lawmakers. And he urged Ukrainian companies to adjust their operations to save gas, while power companies were ordered to switch to fuel oil where possible. Nasalyk said these savings measures would be in effect until Tuesday, when temperatures are expected to rise. Gazprom director Alexei Miller said Friday that the company would immediately turn to the Stockholm arbitration court to break its contract with the Ukrainian operator Naftogaz, Russian news agencies reported.A ruling by the same court last year was meant to halt disputes over gas prices and shipments, which had often been a proxy for political disputes between Moscow and Kiev.The court set a price and ordered Kiev to resume purchases it had cancelled after Russia annexed the Crimea from Ukraine.Naftogaz said Friday that Gazprom had not only refused to resume deliveries meant for it, but lowered the pressure in gas pipelines by 20 percent and minimised sales to other customers.  Gazprom was trying to portray Ukraine in a negative light and suggest that it was willing either to let its own population freeze or make it out to be "an unreliable transit company that takes the gas away" from European countries, Naftogaz said in a statement.

NW European natural gas demand hits six-year high, prices surge again - Demand for gas in northwest Europe is forecast to hit a six-year high of more than 1.42 Bcm on Wednesday, according to S&P Global Platts Analytics, as temperatures remain well below seasonal norms due to the Arctic weather front dubbed the "Beast from the East." Gas consumption in the main demand centers of the UK, Germany, France, Belgium and the Netherlands is estimated at 1.422 Bcm Wednesday, the highest daily demand in the countries since February 2012 when daily consumption peaked at 1.53 Bcm. Prices across Europe surged Tuesday, with all the main hubs assessed by S&P Global Platts at more than Eur34/MWh -- or $12/MMBtu. The UK NBP within-day price surged in early trading Wednesday to as high as 140 p/th -- or more than Eur54/MWh -- while the Dutch TTF day-ahead price was trading higher in early trade on Wednesday at above Eur37/MWh. European hub gas is currently the highest-priced hub gas in the world, with the hubs trading well above the most prompt Asian spot JKM price for the second half of March, which was assessed by S&P Global Platts at $9.95/MMBtu on Tuesday. But contracts to buy LNG are typically agreed well in advance, and with March contracts across the European hubs trading around $7/MMBtu, it was likely too late to agree a cargo ahead of the price spikes and trying to secure a cargo now based on the month-ahead price would not be competitive versus the JKM. Gas storage facilities across Europe are withdrawing at higher rates this week, with stocks at dangerously low levels. 

LNG: the glut that was and may never be -- There was a certain air of triumphalism surrounding Anglo-Dutch major Shell’s statement in February that the world’s growing supply of LNG would be “comfortably” absorbed by rising demand in 2018, and that the much anticipated glut would never materialize. This glut has been much predicted, predicated on the apparent surplus of new LNG capacity coming on stream versus predictions of demand rising, but at a slower rate than supply. If Shell’s position holds, it is an important development because it could launch a new round of multi-billion dollar investments in LNG capacity, targeting an increasingly tight market between 2022-25. This would have profound effects on the fortunes of many countries, not least those on LNG standby such as Mozambique and Tanzania, not to mention Qatar’s expansion plans for the giant North Field, Russia’s Arctic LNG 2, and the raft of developers waiting to export the growing volumes of “free” associated gas emanating from the latest shale boom in Texas’s Permian basin. Of equal importance is that Shell’s statement justifies past spending because higher LNG prices mean that overspent LNG projects in Australia may be back in the money, while US LNG gets a wide open arbitrage to Asia. As US LNG production ramps up, producers there will be heavily dependent on this opportunity, which they hope will exist not as a function of below cost-recovery, must-run LNG production in the US — the glut scenario — but high prices in Asia as a result of strong demand growth. It is arguable that the glut hasn’t arrived because most promised US LNG capacity is not yet up and running, and because there is perhaps more flexibility, or less reliability, on the supply-side of an increasingly diverse set of LNG producers around the world. 

European natural gas on the brink as ‘Beast from the East’ brings major cold snap -  A major cold spell -- the first late-winter cold snap in Europe since 2013 -- triggered by a rare meteorological event over the Arctic is set to test European gas markets in the coming weeks, with prices already rising and storage levels at dangerously low levels in certain countries. The so-called “Beast from the East” weather front is expected to see temperatures plunge across Europe to lows of up to 12 degrees Celsius below seasonal norms, with gas demand set to soar. The European gas market is relatively tight for the time of year with storage stocks in several countries already at multi-year lows due to strong withdrawals already so far this month and during December on the back of below-average temperatures and several outages at the time. The cold snap is set to peak on February 27 and 28, though it is expected to continue into early March, according to the latest forecasts from the Weather Company. The risk of storage reservoirs running dry differs greatly between individual countries, dependent on current stock levels and flexibility from other sources of pipeline supply. With the loss of the long-range Rough reservoir, the UK was always keenly eyed by traders this winter with only seven medium-range facilities available during the high-demand period.

U.K. may run out of natural gas today, National Grid warns - U.K. gas system operator National Grid issued a rare “gas deficit warning” earlier today, indicating the country could run out of natural gas because demand is running high amid unusually harsh weather conditions. NGG estimates U.K. gas demand today of 404M cm, up from an initial forecast of 396M cm, while supply is forecast at just 376M cm; the system had opened more than 50M cm after an unplanned outage at the South Hook LNG facility added to other outages affecting domestic production. The “Beast from the East” is the most severe winter storm seen in the U.K. and much of Europe in many years.

UK looks to fracking as cold snap exposes its poor energy supply - — Britain’s natural gas fracking industry is using a cold snap that’s gripped large swathes of Europe this week and laid bare weaknesses in the UK’s energy supply to make its pitch.Britain’s natural gas market has been stretched to its limits as the coldest spell since 2010 tests the nation’s energy and transport network. UK pipeline manager National Grid Plc even urged industry to curb its gas usage while the cold weather persisted.As gas prices surged to record levels, industry bodies and Ineos Group called for Britain to improve energy security by producing more gas at home rather than rely on imports."The UK is worryingly dependent on gas imports and this is forecast to increase to 80% by 2035," said Ken Cronin, CEO of industry body UK Onshore Oil and Gas. "The need to ensure we have our own homegrown source of gas rather than pursuing this continued over-reliance on imports has today become very evident."Britain is Europe’s biggest gas consumer after Germany. Once a major producer, the UK increasingly relies on imports during winter months as output from the North Sea falls. It’s a risky dependency when it’s cold across Europe, such as this week when a mass of Siberian air pushed in from Italy to Scandinavia.On top of that, liquid natural gas (LNG) shipments to Europe this season have been scarce as a surge in demand in China pushed up the cost of the super-chilled fuel.Ineos, which is looking to develop its own shale resources, agreed to reduce its consumption by 20% at its Runcorn plant in the UK and said there is an "urgent need for increased domestic supplies of gas". "These supplies can be provided by shale and yet multiple projects are being held up at the planning and surveying stage," the company said by e-mail. "The resources beneath our feet can be used to create jobs, heat our homes and go a long way toward self-sufficiency."

UK regulator expects extra 2.8 billion barrels of oil and natural gas output  - UK efforts to boost North Sea production are bearing fruit with production expected to recover this year after disruption in December, and an extra 2.8 million barrels of oil equivalent to be produced by 2050 thanks to a "maximizing recovery" strategy launched in 2014, regulator the Oil & Gas Authority said Thursday. In a report, the OGA said it now expected UK oil and gas production to total 11.7 billion barrels of oil equivalent in 2016-50. It said prospects had improved following a review carried out in 2014 intended to address the country's production decline, and the implementation of recommendations such as the creation of the OGA as a new regulator, and efforts to promote collaboration among companies. "The extra 2.8 billion barrels identified shows the future potential of the basin which could be boosted further through investment and exploration successes. 2017 continued to be a productive year and production levels are set to rise in 2018 as more new fields come on-line," OGA chief executive Andy Samuel said. "The OGA continues to work in partnership with industry and government in maximizing the economic recovery of our resources." As crude production in the North Sea continues to evolve, its role in an increasingly globalized market has started to shift, having an impact on Dated Brent and its position as a global oil benchmark. In this report, S&P Global Platts delves into the dynamics affecting the North Sea and Northwest Europe crude markets and the continuing evolution of Dated Brent. UK oil production was on track for a third successive annual increase last year until the Forties pipeline, which carries around 45% of the country's oil output, was shut in mid-December for nearly three weeks due to the discovery of a hairline crack.

Russia to Rescue as Europe Draws More Gas - Russia is sending more natural gas to Europe than ever before as a blast of Arctic air lifted demand for heat and electricity, underlining the region’s dependence on its eastern neighbor.The freeze severely tested Europe’s energy network over the past week. Spot gas prices tripled to a record, drawing in more Russian supplies by pipeline and prompting a tanker of the fuel in its liquid form to schedule arrival in the U.K. next week.With a dissipating capacity to store gas and few tankers of liquefied natural gas arriving this season, Europe and particularly the U.K. is increasingly reliant on Russia to feed its energy needs. Moscow-based Gazprom PJSC, the continent’s dominant supplier for decades, used the opportunity to crow about its essential role.  “Only Gazprom is capable of increasing gas supplies to European customers to maximum levels at a breakneck speed,” Alexey Miller, the chief executive officer of Gazprom, said in a response to questions. “There’s no other supplier that could cope with the task.”Daily shipments from Russia’s state-controlled Gazprom skyrocketed to a record in February, according to the company’s data. Europe’s consumption jumped to highest level in at least five years during the week through Feb. 24, and this week’s cold snap drove demand higher still, according to estimates from London-based Marex Spectron Group Ltd.  It will be the first seaborne gas delivery to the U.K. since Feb. 22, which was the only cargo that month.

The Pros And Cons Of Nord Stream 2 --There are few issues as divisive in the EU as the planned construction of Nord Stream 2, another direct gas infrastructure connection between Germany and the Russian Federation. With the climate of relations between Russia and the West just above the point of freezing, the agreement between Gazprom and its Western counterparts Shell, OMV, ENGIE, Uniper, and Wintershall has caused critics of closer relations with Russia to mobilize.While supporters of the project insist that it isn’t more than a commercial deal (mostly Western European countries and companies), opponents (Central and Eastern Europe) are convinced that the deal will give Moscow more unwanted influence. Here, we’ll discuss the arguments of opponents and proponents of the proposed gas infrastructure in order to make a modest recommendation regarding Europe’s common interest.   Currently, over almost 40 percent of the gas consumed in the EU originates from Russia, making Moscow the biggest supplier, followed closely by Norway and Algeria. Even though many policy declarations were made to diversify and several serious crises involved Russia, the export of Siberian gas to Europe increased spectacularly — from 8 percent in 2017 to a record 195 bcm. The most important reasons behind this growth are the expanding economy of the Eurozone and domestic gas fields that are producing less. Although Europe currently possesses 208 bcm of LNG capacity, of that just 51 bcm was used in 2016. Most of the capacity was idle due to much cheaper pipeline gas, especially from Russia. Proponents, therefore, argue that Nord Stream 2’s importance will increase over the years as demand for imported gas will do the same. Opponents, however, argue that it is exactly these crises that have shown Russia’s real intention and the necessity to import less from Moscow.

Exxon quits Russian joint ventures, cites U.S. and EU sanctions (Reuters) - Exxon Mobil will exit some joint ventures with Russia’s Rosneft (ROSN.MM), citing Western sanctions first imposed in 2014, while the Russian company said the pullout will result in serious losses for its U.S. partner. Rosneft also said it would welcome Exxon’s return to the projects if the “legal possibility arises”. The move is an about-face for Exxon, which had opposed the sanctions over Russia’s invasion of Crimea and argued they unfairly penalized U.S. companies while allowing foreign energy rivals to operate in the country, the world’s largest oil producer. Yet the sanctions were effective in slowing work on a project by Exxon and Rosneft on what was hailed as a major discovery in the Kara Sea above the Arctic Circle. Rosneft, Russia’s largest oil company, said last year that it planned to return to operations at the project in 2019. Exxon’s exit from projects will not affect the Sakhalin project off the eastern coast of Russia, Exxon and Rosneft spokesmen said. Sakhalin-1 operates under a Production Sharing Agreement struck in the mid-1990s and currently produces around 200,000 barrels of oil per day.   The joint ventures were reached when U.S. Secretary of State Rex Tillerson was Exxon’s chief executive. A Rosneft’s spokesman said ExxonMobil would incur serious losses because of the decision. . Rosneft also said in a separate statement that it would implement the projects on its own even though Exxon has decided to pull out of them. 

Natural Gas Sets The Stage For Armed Conflict In The East Mediterranean - The efforts of individual countries to access the gas fields in the south-eastern part of the Mediterranean make the area very vulnerable to new conflicts and war and can also lead to a dispute within NATO and affect Europe’s energy security, putting the EASTMED pipeline in question. The war for natural resources is looming large. The first problem is the relationship between Cyprus and Turkey. Ankara, the only capital which recognizes North Cyprus, says that all activities related to the extraction of gas in the Cypriot area are an encroachment on the interests of North Cyprus. While Turkey does not recognize agreements between Cyprus and other countries on the issue of economic exclusive zone (EEZ) or licenses for gas exploration in Cypriot territorial waters, Nicosia holds the opposite opinion. It is worth mentioning that also in February a Turkish coast guard boat rammed a Greek patrol ship in the Aegean Sea, which shows that the Turkish government is willing to use military force. The deepening cooperation between Cyprus, Greece, Israel and Italy regarding the EastMed gas pipeline project is another flashpoint. The new pipeline, whose aim will be to supply gas from the Caspian Sea to Southern Europe, would weaken the transit role of the Turkish TANAP. Another potential conflict is the one between Turkey and Egypt over the rich Zohr gas field discovered only in 2015. Ankara does not recognize the 2003 Cypriot-Egyptian EEZ accords and the 2013 sea border agreements between Cairo and Nicosia, which assign the Zohr gas field to Egypt. The sea area between Israel and Lebanon is the most explosive area, which extends along the edges of three Lebanese gas exploration Blocks: 8, 9, 10 of which Block 9 is said to be the most profitable and is claimed by Israel. In the first half of February 2018, Lebanon signed a contract for exploratory and production works with Italian Eni, French Total and Russian Novatek. Since the works are to be carried out in Block 9, Israel described Lebanon’s action as “very provocative”, paving the way for a military showdown. In response to it, the Hezbollah leader Hassan Nasr Allah threatened to target Israeli offshore gas platforms. The Israeli media are already speculating about the third Lebanese war and suggest that the Hezbollah attack on Israel is inevitable. Gas deposits in the Eastern Mediterranean attract the attention of European, Russian, Iranian, Turkish and American armed forces. Cyprus occupies here a strategically important place. The number of players is a sum of the countries directly involved and their allies. Gas, like crude oil, has the potential of igniting a new wave of violent encounters between enemies and friends.

China's domestic LNG plants reopen after shutdowns as heating crisis eases (Reuters) - At least 10 of China’s domestic liquefied natural gas (LNG) plants have resumed output in the past week after the government cut off their supply, providing the first signs that the country’s gas supply crunch is starting to ease, company sources said. The return of the plants, which liquefy domestically produced gas that is then trucked to end-users, has raised LNG supply in China’s interior, pushing nationwide LNG prices lower. These restarts are also a sign that state-owned gas producers Sinopec and China National Petroleum Corp have resumed piping gas to the facilities after the government ordered them to divert shipments from the plants to residential users to make up a supply shortfall during the winter heating season. Yangcheng Shuntianda Gas Corp, based in China’s Shanxi province, southwest of the capital Beijing, has restarted its plant, with the capacity to liquefy 500,000 cubic meters of gas, after shutting in December, a sales manager at the company who only gave his surname of Wang told Reuters. “We lost 20 million yuan ($3.2 million) each month because we weren’t producing anything. Our boss was under extreme pressure from the bank to pay off loans,” said Wang. Yulin Huachen, which runs a similar-sized plant in neighboring Shaanxi province, resumed half of its production last weekend after closing for more than two months, said a company sales manager, who declined to be identified as he was not authorize to speak to the media. Sinopec and CNPC cut gas supplies to the LNG plants to meet the newly created demand from residential consumers. These buyers were converted to gas or electric heating ahead of this winter to reduce air pollution from coal-fired heating as part of the government’s war on smog. The companies could not cope with the extra demand because of inadequate infrastructure and insufficient domestic output.

Saudi oil minister hopes OPEC, allies can ease output curbs in 2019 (Reuters) - Saudi Arabia hopes OPEC and its allies will be able to relax production curbs next year and create a permanent framework to stabilize oil markets after the current supply cut deal ends this year, its oil minister said on Saturday. The Organization of the Petroleum Exporting Countries is reducing output by about 1.2 million barrels per day (bpd) as part of a deal with Russia and other non-OPEC producers. The pact, aimed at propping oil prices, began in January 2017 and will run until the end of 2018. Saudi Arabian oil minister Khalid al-Falih said OPEC and its allies were committed to bringing balance and stability to the market and that he hoped it would be possible to ease output curbs next year. “A study is taking place and once we know exactly what balancing the market will entail we will announce what is the next step. The next step may be easing of the production constraints,” he told reporters in New Delhi. “My estimation is that it will happen sometime in 2019. But we don’t know when and we don’t know how”. Falih said OPEC was determined to translate the success of the deal to curb supply into a permanent framework with other major producers. “What we want is an evergreen framework that brings producers from OPEC and non-OPEC (countries) together in a market monitoring fashion that allows us to take quick decisions,” he said. STEERING WHEEL “I think everybody has learnt, producers as well as consumers, that a market without a steering wheel is very destructive, very damaging to the interests of all,” he said. 

Aramco IPO: Why Saudis Turned Oil Price Hawks - There's a neat story from the folks over at Oil Price about how the Saudis have done an about-face on the price of traded oil. For the longest time, they were considered as being among the least "activist" in the commodity cartel OPEC [Organization of Oil Producing and Exporting Countries]. That is, they did not push for boosting oil prices by crimping production of OPEC member countries. In recent years, though, that has changed as they've turned from "doves" content with a lower price of oil to "hawks" seeking to increase this price. The proximate cause of this apparent change of heart is the imminent initial public offering [IPO] of Saudi Aramco, the state-owned energy behemoth. Many of the specifics of that listing are not yet known: where the listing is to be made and how much of the company is to be floated: Saudi Arabia is undergoing a truly seismic shift in its economy, politics, and society, all thanks to the oil price crash of 2014. Crown Prince Mohammed bin Salman, commonly referred to as MBS, would likely not have had the opportunity to initiate the sweeping changes envisaged in Vision 2030 had it not been for the price collapse. Now, Riyadh needs oil prices to rise as high as possible for the plan to succeed — and is even ready to tip the market into a deficit to that end. Saudi Arabia used to be OPEC’s most influential price dove, according to Bloomberg’s Grant Smith. Now, the kingdom is focused on pushing prices as high as it can for a very simple reason: Aramco’s IPO. The change is rather dramatic. Consider the changing stances of Saudi Arabia and its ideological arch-rival within OPEC, Iran:  When oil surged to almost $150 in 2008, attempts by Saudi Oil Minister Ali al-Naimi to cool the rally also faced opposition from other OPEC nations eager to enjoy soaring revenues. , Oil Minister Bijan Namdar Zanganeh of Iran -- an OPEC producer that often used to agitate for higher prices -- said that $60 was sufficient.

Hedge funds continue to exit oil but OPEC stems rout: Kemp (Reuters) - Hedge funds continued to take profits on their bullish positions in crude and especially refined fuels in the most recently reported week but supportive comments from OPEC helped steady oil prices.Hedge funds and other money managers cut their combined net long position in the six most important futures and options contracts linked to petroleum by the equivalent of 48 million barrels in the week to Feb. 20.The hedge funds' net long position has been cut in each of the four most recent weeks by a total of 263 million barrels, in what has been the largest drawdown for more than seven months.Most of the drawdown has come from the liquidation of bullish long positions rather than the establishment of new bearish short ones and it has been proportionately greater in fuels rather than crude.Portfolio managers have cut their net long position in U.S. heating oil by 58 million barrels, European heating oil by 45 million barrels and U.S. gasoline by 27 million barrels since Jan. 23.Over the same period, the net long position in Brent has been cut by 61 million barrels while WTI is down by 71 million barrels ( of this liquidation seems to be attributable to profit-taking after the big rally in oil prices over the last seven months. Few fund managers have dared to initiate new short positions.Short positions across the whole of the petroleum complex total just 137 million barrels. Short positions in NYMEX WTI have fallen to just 30 million barrels, the lowest since July 2014.Fund positioning remains very stretched with longs outnumbering shorts by a ratio of almost 10:1, but down from almost 12:1 at the end of January. Despite the profit-taking, oil prices have steadied, probably owing to a combination of strong consumption growth, a continued fall in oil inventories, and supportive comments from senior OPEC leaders.

Fundamentalists complain about a new generation of commodity speculators (Reuters) - Traditional commodity traders are lamenting the rise of a new generation of hedge funds who show little interest in the fundamentals of conventional supply and demand analysis. The newcomers are blamed for distorting prices, making markets impossible to trade, and forcing the closure of some long-established specialist commodity funds. The target of this criticism is not always well-specified: it variously includes high-frequency computer-driven traders, momentum-chasing hedge funds and macro funds dabbling in energy markets. But the newcomers are operating on a scale never seen before in energy markets, with record open interest in futures and options contracts linked to crude oil and refined products. Money managers, a category which includes many hedge funds and other investors, have accumulated record positions in crude, gasoline and distillates since the middle of last year, according to regulatory data. By the end of January, money managers had established a bullish position in futures and options contracts equivalent to almost 1.5 billion barrels of crude, gasoline and distillates. The net long position was more than 400 million barrels higher than the previous peak in February 2017 and almost 700 million barrels higher than the peak before that in June 2014. "Who trades oil is changing," according to the Financial Times ("Fundamentals do not matter to new breed of oil speculator", Feb. 27).  "Investors who bother little with details such as inventories and pipeline flows are replacing dwindling ranks of specialist commodity funds. The shift could alter the way prices are formed." Commodity specialists complain the prevalence of high-frequency trading has reached a tipping point, distorting prices and forcing the closure long-established hedge funds ("Data overload: commodity hedge funds close as computers dominate," Reuters, Feb. 12).

Oil Prices Climb On Monday As Asia’s Oil Production Drops  - Oil prices are up Monday morning in Asia, boosted by a new report from Rystad Energy forecasting oil production in East and Southeast Asia will drop by 20 percent between 2017 and 2025. Crude Oil WTI Futures for April delivery were trading at $63.88 a barrel in Asia at 19:45am ET, up 0.52%. Brent crude futures for April delivery, traded in London, were up 0.39% at $67.30 per barrel. Oil production in Asia is eroding sharply due to natural depletion in mature oil fields. Total oil production in East and Southeast Asia is set to decline from 13.1 million barrels of oil equivalent per day (boe/d) to 10.4 million boe/d by 2025, according to Rystad Energy. Underpinning the decline in output is the diminishing volume of new oil discoveries in East and Southeast Asia. The past decade and a half has seen fewer and fewer new sources of oil, while the limited volume of new oil discovered may not translate into production. China’s oil production will decline the least, with the giant Changqing field continuing to support stable output and likely to contribute over 1 million boe/d over the next five years. With that said, China’s output has still declined quite a bit in recent years. The International Energy Agency (IEA) predicts China will produce an average of 3.8 million barrels per day (bpd) in 2018, down by 0.5 million bpd since 2015. Oil demand from East and Southeast Asia, on the other hand, is soaring. China emerged as a top buyer of U.S. crude last year. The shipment of crude oil that just left the newly upgraded Louisiana Offshore Oil Port (LOOP) also appears to be heading for China, and this will likely become an increasing trend. BP predicts that China and India alone would make up half of total growth in global energy demand over the next 30 years, according to its annual Energy Outlook, released last week. Oil markets are therefore well supported with Asia’s oil production dropping fast as its demand soars. 

Crude Oil Prices Settle at 3-Week Highs Upbeat Saudi Comments  – Crude oil prices settled at three-week highs supported by positive comments from Saudi Arabia on continued production cuts. On the New York Mercantile Exchange crude futures for March delivery rose 36 cents to settle at $63.91 a barrel, while on London's Intercontinental Exchange, Brent gained 23 cents to trade at $67.27 a barrel. "A study is taking place and once we know exactly what balancing the market will entail we will announce what is the next step. The next step may be easing of the production constraints," said Saudi Arabian oil minister Khalid al-Falih. The oil cartel together with Russia agreed in November to extend the 1.8 million bpd output cuts through 2018, to rid the market of excess supplies. The comments came a day after Baker Hughes on Friday showed the number of oil rigs operating in the US jumped by one to 799, the highest level since April 2, 2015. Sentiment on oil was also supported by expectations for an increase in crude demand as the cold snap engulfing Europe is expected to encourage some refiners to shelve plans momentarily to enter a period of maintenance. This time of the year traditionally sees refinery activity slow, this in turn, lowers demand for crude while raising the prospect of a build in supplies. Crude supplies unexpected fell last week, however, as producers were encouraged to sell rather than store crude as current prices traded at a premium to forward prices – a market structure known as backwardation. Despite the uptick in crude prices money managers appeared to be less bullish on the oil prices, reducing their WTI net-long position – the difference between bets on a price increase and wagers on a drop – for a fourth week in the period ended Feb. 20, according to U.S. Commodity Futures Trading Commission data. 

Oil Market Fears: War, Default And Nuclear Weapons --  The U.S. is one of the few areas of the world in which there is an energy investment boom underway, a development that could smooth out the uncertainties of geopolitical events around the world. At the same time, outside of the U.S., there is a deterioration of stability in many oil-producing regions, aggravating risks for both oil companies and the oil market, according to a new report.Financial risk firm Verisk Maplecroft explores these two trends as they play out simultaneously. The U.S. shale sector has emerged from years of low oil prices, damaged but still intact. Importantly, the shale industry “can ride out price dips and respond quickly to upticks, weakening OPEC in the process,” James Lockhart-Smith, director of financial sector risk at Verisk Maplecroft, wrote in the report. Combined with deregulation at the federal level, the oil industry is in the midst of an investment boom in the U.S.Meanwhile, things are not so rosy elsewhere. Verisk Maplecroft surveyed a long list of countries, and produced its Government Stability Index (GSI), which uses some predictive data and analysts forecasts to take stock of geopolitical risk in various countries over the next few years.The results are not encouraging. The number of countries expected to see a deterioration of stability “significantly outnumber those we see becoming more stable,” the firm said. The reasons are multiple, including low oil prices, but also the erosion of democratic institutions. "We don't see increasing instability necessarily ending in coups or significant political upheaval, but a less predictable above-ground-risk environment is likely to emerge," Verisk Maplecroft’s Lockhart-Smith said. "Arbitrary decision making, possible measures to buy off key stakeholders or an inability to pass regulatory reforms will be the main risks to projects in these countries, as their governments seek to stabilise and maintain their influence." Not all of the countries expected to suffer from a decline in stability are that important for the oil market, such as Romania or Kenya. Also, some countries might be on an improving path, but at the same time present a downside risk that, while unlikely, could be huge.

OPEC Looks To Dial Back Production Cuts - Oil prices gained a bit over the past few trading days, after a surprise drawdown in crude stocks last week. But analysts see that to be a one-off, with expectations that inventories will resume climbing this week. . The IEA’s executive director said that the U.S. will surpass Russia to become the world’s largest oil producer “definitely next year,” if not in 2018. “U.S. shale growth is very strong, the pace is very strong ... The United States will become the No.1 oil producer sometime very soon,” Fatih Birol told Reuters. Saudi oil minister Khalid al-Falih said that he hopes that OPEC can relax the production limits next year, while putting in place a more permanent framework for cooperation between OPEC and the non-OPEC countries that are participating in the deal. “A study is taking place and once we know exactly what balancing the market will entail we will announce what is the next step. The next step may be easing of the production constraints,” al-Falih told reporters in New Delhi. “My estimation is that it will happen sometime in 2019. But we don’t know when and we don’t know how.” He went on to add that a longstanding cooperative agreement is a priority. “What we want is an evergreen framework that brings producers from OPEC and non-OPEC (countries) together in a market monitoring fashion that allows us to take quick decisions,” he said.

WTI Dips On Report OPEC-Shale Firms To Meet - WTI/RBOB prices limped lower after Reuters' headlines reported OPEC officials will meet with U.S. shale firms at a dinner Monday in Houston, citing two unidentified industry sources. With US crude output surpassing Saudi's and nearing Russia's, OPEC is desperate for US Shale firms to stop ruining the production-cut-deal party. As Reuters reports, OPEC Secretary General Mohammad Barkindo plus other OPEC officials will attend the dinner, one of the sources said. A second source said the chief executives of U.S. shale companies of various sizes have been invited.The meeting will be on the first day of the CERAWeek energy conference in Houston. A year ago, the Organization of the Petroleum Exporting Countries held unprecedented talks with fund executives and shale producers on the sidelines of the same event."Shale has dramatically changed the world's perception of fossil fuels," said the chief executive of one shale company, declining to be identified by name. "We now have a seat at the table on pricing."OPEC led by Saudi Arabia and non-OPEC Russia have reduced production during 2017-2018 to prop up oil prices.The United States, which rivals Russia and Saudi Arabia for the position of the world's largest oil producer, is not participating in cuts as its industry is represented by private producers who can be sued for collusion if they join the deal.

Oil prices dip before U.S. crude inventory data --(Reuters) - Oil fell on Tuesday, its first decline in five days, pressured by a firmer U.S. dollar and expectations that upcoming weekly data will show an increase in U.S. crude inventories. Brent crude settled at $66.63 a barrel, an 87 cent drop from Monday. U.S. West Texas Intermediate crude CLc1 fell 90 cents to $63.01. Those settlement prices represented a modest recovery from session lows, when benchmarks had slid more than a dollar. The dollar rose after Federal Reserve Chairman Jerome Powell said the U.S. central bank would stick with gradual interest rate increases. [FRX/] A strong dollar makes oil more expensive for buyers using other currencies. The oil market had put together a string of four straight days of gains before Tuesday’s pullback. “We got a little extended on the upside - we had a price advance of more than $6 a barrel in crude in less than two weeks,” said Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates. Analysts polled by Reuters forecast that data would show U.S. crude inventories rose by 2.7 million barrels last week. Industry group the American Petroleum Institute releases its weekly figures on Tuesday at 4:30 p.m. EST. The U.S. Energy Information Administration (EIA) data is out Wednesday morning. U.S. crude inventories have fallen more than 100 million barrels in 12 months to their lowest in three years. The EIA will release monthly data on crude supply on Wednesday, which analysts expect to include substantial upward revisions to U.S. oil output, perhaps to an all-time record. Soaring U.S. production has pressured oil futures at a time when OPEC members and Russia have reduced output in an attempt to support prices. The United States will overtake Russia as the world’s biggest oil producer by 2019, International Energy Agency (IEA) Executive Director Fatih Birol said on Tuesday.  “U.S. shale growth is very strong... The United States will become the No.1 oil producer sometime very soon,” he said.

WTI/RBOB Extend Losses After Crude Inventory Build - WTI/RBOB prices sank today (amid OPEC and IEA comments and a dollar spike) ahead of tonight's inventory data. Following last week's surprise draw, API reported a crude build this week (though smaller than expected) and along with another gasoline build, sent energy prices lower. API:

  • Crude +933k (+3mm exp)
  • Cushing -1.277mm (-1.2mm exp)
  • Gasoline +1.914mm
  • Distillates -1.473mm

Following last week's surprise crude draw, expectations were for a sizable build but API data showed only a modest build (but still a build) and once again Gasoline inventories increased.  If the Cushing data holds for tomorrow's DOE data, this would be 10th weekly draw in a row... “The comments from the IEA head about the pace of U.S. shale growth might have taken the wind out of the bull’s sails,” . Heftier stockpiles and a slide in refiner demand “should end up being a bearish factor for the market as well.” Prices had limped lower into the API data (with WTI back below $63), then confused algos briefly popped prices before they sank to the day's lows...

Libya Oil Field Is Said to Be Halted Amid Still-Fragile Recovery --A Libyan oil field halted production due to a labor dispute, underscoring the still-fragile nature of the North African country’s recovery from a domestic conflict. The company operating the 70,000 barrel-a-day El-Feel deposit, also known as Elephant, suspended output late Thursday after armed guards who work at the facility decided to occupy it to protest at unpaid wages, a person with knowledge of the matter said, asking not to be identified because they’re not authorized to speak to the media. Most workers were evacuated and the protesters threatened further action if their claims aren’t resolved. It wasn’t immediately clear when production might resume, or when the labor dispute might be resolved. The Petroleum Facilities Guard is seeking wages that have been held up for at least two years, the person said. The field is operated by Mellitah Oil and Gas B.V., which is jointly owned by Libya’s National Oil Corp. and Italy’s Eni SpA. Calls to the Libyan company weren’t answered on what is a weekend in the country. Eni officials didn’t immediately respond to requests for comment. Libya, a member of the Organization of Petroleum Exporting Countries, has struggled to boost oil production amid the lingering effects of civil war that began earlier in the decade. Its crude output averaged 828,000 barrels a day last year, the highest since 2013, according to data compiled by Bloomberg. Still, the country’s oil output remains well below where it was under the rule of dictator Muammar Qaddafi. Major oil fields including El-Feel and Sharara have experienced sporadic disruptions, occasionally setting back the revival.

Oil Dips as Industry Report Shows Swelling Spare US Oil Supply -- Crude slipped after an industry report was said to show an increase in U.S. crude stockpiles. Futures in New York fell from the settlement Tuesday after the American Petroleum Institute was said to have reported U.S. crude stockpiles expanded by 933,000 barrels last week. If confirmed in a government tally scheduled to be released on Wednesday, inventories will have racked up increases in four of the past five weeks. American crude explorers are driving “explosive growth” that will continue into next year, International Energy Agency Executive Director Fatih Birol said earlier in the day. Prices also were under pressure because of the strengthening dollar that diminished the appeal of the commodity as a store of value. As the Organization of Petroleum Exporting Countries works to trim output, producers are committed to bringing supply and demand into balance, United Arab Emirates Energy Minister Suhail Al Mazrouei said Tuesday in Abu Dhabi. Strong U.S. shale growth could delay those efforts, Birol said the same day in a Bloomberg Television interview. “The comments from the IEA head about the pace of U.S. shale growth might have taken the wind out of the bull’s sails,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund. Heftier stockpiles and a slide in refiner demand “should end up being a bearish factor for the market as well.” American explorers have expanded the fleet of rigs searching for domestic crude to the highest since 2015 as the OPEC-led supply curbs resurrected oil markets. 

WTI/RBOB Tumble After Bigger Than Expected Crude, Gasoline Builds -  WTI was higher and RBOB lower after last night's API (even as the USD rises) but both tumbled after bigger than expected crude and gasoline builds (and a new record high for US crude production). Bloomberg Intelligence Senior Energy Analyst Vince Piazza explained that the crude market is in a holding pattern with oil vacillating around $60 a barrel as E&Ps continue to imply higher output this year. U.S. production is poised to grow about 13% to 10.6 million barrels. Distillate demand remains robust, while summer driving season will be the next catalyst for gasoline use. Rising petroleum exports limit inventory bloat. Inventories are just 2% above the five-year norm. DOE:

  • Crude +3.02mm (+3mm exp)
  • Cushing -1.22mm (-1.2mm exp)
  • Gasoline +2.48mm (+600k exp)
  • Distillates -960k (-950k exp)

This is the 10th weekly drop in Cushing stocks in a row and 4th crude build in the last 5 weeks (seemingly signaling last week's draw as an outlier)... Total US oil inventory is now its highest since 2017... Gasoline exports dropped by nearly half last week to 536,000 barrels a day. Looks like the fog-related closures on the Houston Ship Channel could've had more of an impact than expected. Exports fell to the lowest level since early October. Once again all eyes were on US crude production (which dropped by a miniscule amount last week due to Alaska, while Lower 48 rose), and total US crude production rose to a new record this week...

Crude Oil Prices Settle Lower as Massive Build In Gasoline Supplies Weighs – WTI crude oil prices settled lower after data showed a large build in both crude and gasoline stockpiles as US output continued to rise. On the New York Mercantile Exchange crude futures for April delivery fell 2.17% to settle at $61.64 a barrel, while on London's Intercontinental Exchange, Brent fell 2.60% to trade at $66.69 a barrel. Inventories of U.S. crude rose by 3.019 million barrels for the week ended Feb. 23, exceeding expectations for a rise of 2.4 million barrels. Gasoline inventories – one of the products that crude is refined into – rose by 2.483 million barrels, confounding expectations for a decline of 190,000 barrels, while supplies of distillate – the class of fuels that includes diesel and heating oil – fell by 960,000 barrels, a steeper fall than the 709,000 million barrels forecast. The massive build in gasoline stockpiles garnered most of the attention as some market participants had expected that a slowdown in refinery activity - as refiners enter period of maintenance - would lead to fall in gasoline supplies. Also adding to negative sentiment was an uptick in domestic crude production to 10.3 million barrels per day as the US closes in on Russia as the world’s largest oil producer. That added to investor fears that a faster pace of US output would slow OPEC’s efforts to rebalance oil markets. “All the indicators that suggest continued fast growth in the U.S. are in perfect alignment; rising prices leading, after a few months, to more drilling, more completions, more production and more hedging,” the International Energy Agency said in the report. 

Oil ends at 2-week low on fresh evidence of rising U.S. stocks and output - Oil prices on Thursday settled at their lowest level in about two weeks, a day after data showed a weekly rise in U.S. crude supplies and production, along with an unexpected climb in gasoline stockpiles. April West Texas Intermediate crude shed 65 cents, or 1.1%, settle at to $60.99 a barrel on the New York Mercantile Exchange. The contract marked its lowest finish since Feb. 14, after losing roughly 4.8% for the month. That was the first monthly loss since August. The global crude benchmark, May Brent fell 90 cents, or 1.4%, to $63.83 a barrel on the ICE Futures Europe exchange, its lowest finish since Feb. 13. Lead-month Brent fell about 4.7% in February, its first monthly loss since June. U.S. crude-oil stocks rose by 3 million barrels last week, while gasoline inventories rose 2.5 million barrels, the Energy Information Administration’s weekly report published Wednesday showed. “The weekly stock report was anything but positive,” said Tamas Varga, analyst at brokerage PVM. The rise in gasoline stocks was counter-seasonal as fuel inventories don’t typically build during the ongoing refinery maintenance period. “Refinery utilization is still low, so we should see lower stocks, but there is not yet strong demand,” said Ehsan Ul-Haq, director for crude oil and refined products at Resource Economist Ltd, adding that gasoline imports were also low. Gasoline demand typically starts to pick up ahead of the U.S. driving season, which starts on Memorial Day on May 28. Oil prices were also pressured by EIA data showing weekly U.S. crude production hit a fresh high of 10.283 million barrels a day.

Crude oil futures edge lower to $63.79/b at 1130 GMT, Mar 2, amid heightened risk sentiment - Oil prices were marginally lower in Europe's morning trading session Friday, after three straight days of losses amid bearish cues from crude inventory data this week and lower equities following President Trump's announcement on planned US steel and aluminum tariffs. At 1130 GMT, May ICE Brent stood at $63.79/b, down 4 cents from the overnight settle, while the NYMEX WTI front month contract was down 5 cents to $60.94/b. "The planned steel tariffs do not directly affect [crude oil] fundamentals. It is more about the broader trade environment," said Harry Tchilinguirian, senior oil analyst at BNP Paribas, adding that Trump's latest decision has the potential to damage relationships with the US's trading partners or even spark a trade war that could impact oil markets. The EU's response to the planned tariffs did not calm market participants. It said it would "act firmly", bringing forward "WTO-compatible countermeasures against the US to rebalance the situation." While the dollar eased from higher levels seen on Thursday, it remains a significant factor influencing the recent fall in oil prices, along with "the reality check in oil fundamentals that saw crude stocks picking up", according to Tchilinguirian. As of 1130 GMT, the Dollar Index was down 0.34, standing at 89.91. US crude inventories showed a stronger than expected build of 3.02 million barrels this week, EIA data showed, while the market will be looking for further direction on fundamentals from the Baker Hughes rig count numbers due out later today. 

Oil Market Sentiment Sours Amid Global Financial Turmoil - Oil prices fell sharply at the close of the week, as the EIA reported a larger-than-expected build in crude oil inventories, while gasoline stocks also rose. Meanwhile, the surprise announcement that the Trump administration was planning harsh tariffs on imported steel led to a broad selloff in financial markets, particularly those in the industrial sector – with negative implications for commodities. An early morning tweet from President Trump, arguing that “trade wars are good, and easy to win,” doesn’t bode well for global equities and commodities.  Venezuela is set to hold presidential elections on April 22, but because it is widely regarded as a rigged affair, the U.S. is gearing up for another round of sanctions on the struggling South American nation. No decision has been made, but among the measures could be a ban on Venezuelan oil imports into the U.S., a ban on U.S. diluent to Venezuela, a ban on oil tanker insurance, or some combination of those options, perhaps in several waves. Any/all of these sanctions would be crippling to Venezuela, which is already expected to see a decline of oil production by several hundred thousand barrels per day this year. U.S. sanctions could lead to wider losses.  ExxonMobil and its partner Hess Corp announced its seventh major oil discovery in the Stabroek block off the coast of Guyana after it drilled the Pacora-1 exploration well. The well, according to the companies, will included in the third phase of development, which will ultimately lead to more than 500,000 bpd of new supply.   After years of limbo, ExxonMobil decided to call it quits on its joint venture with Russia’s Rosneft, after initially pulling back following U.S. sanctions on Russia in 2014. Rosneft warned it would lead to “serious losses” for the oil major, but welcomed Exxon’s return if the “legal possibility arises,” Reuters reports. In 2014, Exxon was forced to end work just weeks after it and its Russian partner made a major discovery in the Russian Arctic. 

Oklahoma adds 3 rigs as US rig count increases to 981- The number of rigs exploring for oil and natural gas in the U.S. increased by three this week to 981. That exceeds the 756 rigs that were active this time a year ago. Houston oilfield services company Baker Hughes reported Friday that 800 rigs drilled for oil this week and 181 for gas. Among major oil- and gas-producing states, Oklahoma increased by three rigs, Alaska and Pennsylvania each gained two rigs and New Mexico and Texas each increased by one. Colorado decreased by three rigs, North Dakota lost two rigs and Louisiana lost one. Arkansas, California, Ohio, Utah, West Virginia and Wyoming were unchanged. The U.S. rig count peaked at 4,530 in 1981. It bottomed out in May of 2016 at 404. 

US Rig Count Inches Higher As Canadian Rig Count Slips - Baker Hughes reported another 3-rig increase to the number of oil and gas rigs this week.The total number of oil and gas rigs now stands at 981, which is an addition of 225 rigs year over year.The number of oil rigs in the United States increased by a single rig this week, and now stands at 800, or 191 over this time last year. The number of gas rigs, which rose by 2 this week, now stands at 181, or 35 rigs above this week last year.Canada lost another 4 rigs this week after losing 12 last week. The losses were 6 for gas, while oil gained 2.At 11:45 am EST, the price of a WTI barrel was trading down $0.22 (-0.36%) to $60.77—dollars below last week’s price. The Brent barrel was also trading down on the day, by $0.02 (-0.03%) to $63.81. That represents a $3 fall for the benchmark in a week. The market bristled in early trading after President Donald Trump on Thursday announced his plan for imposing tariffs on steel and aluminum. Many in the oil industry spoke out against the plan, on the grounds that the tariffs would kill jobs in the energy industry as costs for infrastructure projects would likely skyrocket.   US crude oil production rose in the week ending February 23 to 10.283 million bpd—resuming its steadfast climb of recent weeks after a tiny hiccup last week when it fell from a high of 10.271 million bpd to 10.270 million bpd. This week is the highest production figure for the U.S. ever. By basin, the Marcellus gained two rigs. The Williston basin lost 2. Cana Woodford, DJ-Niobrara, and the Permian all lost a single rig. At 1:11pm EST, oil had rallied somewhat, with WTI trading at $61.14 (+$0.15) and Brent trading at $64.17 (+$0.34).

Crude Oil Prices Snap 2-Week Winning Streak as Oil Rigs Near 3-Year Highs – Crude oil prices snapped a two-week winning streak despite settling higher on Friday, as fears over rising U.S. oil output persisted after data showed the number of oil rigs rose to their highest in nearly three years.On the New York Mercantile Exchange crude futures for April delivery rose 26 cents to settle at $63.25 a barrel, while on London's Intercontinental Exchange, Brent gained 45 cents to trade at $64.28 a barrel.The number of oil rigs operating in the US rose by one to 800, the highest level since April 2, 2015, according to data from energy services firm Baker Hughes.That added to concerns that U.S. crude production may curtail major oil producers’ efforts to drain excess supply in the industry, as oil rig data often serves as an indicator of future production and demand.Much of rebound in oil prices seen Friday was said to be on dollar weakness, while the underlying sentiment on oil prices remained bearish as Energy Information Administration (EIA) data Wednesday showed U.S. stockpiles of crude continued to build for the second-straight week.Inventories of U.S. crude rose by 3.019 million barrels for the week ended Feb. 23, exceeding expectations for a rise of 2.4 million barrels. Gasoline inventories – one of the products that crude is refined into – rose by 2.483 million barrels, confounding expectations for a decline of 190,000 barrels.Also adding to negative sentiment was an ongoing uptick in U.S. crude production to 10.3 million barrels per day. That strengthened the U.S.’s position as the world’s second largest oil producer, as it closes in on leader Russia, fuelling investor fears that rebalancing in oil markets could face headwinds.  Money managers have turned bearish on oil prices, reducing their WTI net-long position – the difference between bets on a price increase and wagers on a drop – for a second week in the period ended Feb. 23, according to U.S. Commodity Futures Trading Commission data.

Oil ends higher after rig data, but logs weekly loss - Oil futures maintained gains to snap a three-session slide after another small rise in the number of U.S. rigs drilling for crude, but suffered a down week.April West Texas Intermediate crude  rose 26 cents, or 0.4%, to end at 61.25 a barrel on the New York Mercantile Exchange. That left the U.S. benchmark with a 3.6% weekly decline. The global crude benchmark, May Brent rose 54 cents, or 0.9%, to settle at $64.37 a barrel on the ICE Futures Europe exchange, trimming its weekly fall to 4%.Oil held on to gains after oil-field services firm Baker Hughes said the number of rigs drilling for U.S. crude rose by one unit to 800 this week. The firm’s weekly data on the number of rigs drilling for oil in the U.S. is seen as a bellwether for activity in the sector.Oil saw weakness in early action, attributed in part to President Donald Trump’s announcement Thursday that he would impose tariffs on steel and aluminum imports, stoking fears of a global trade war and contributing to a global equity selloff. But a weaker dollar appeared to help lift crude as the ICE U.S. Dollar Index, a measure of the U.S. unit against a basket of six major rivals, fell by around 0.4%. The dollar and commodities priced in the currency often exhibit an inverse relationship. A weaker dollar makes oil cheaper to buyers using other currencies. And while trade-war fears dented overall risk appetite, tariffs offer a reason to be bullish on crude, said Phil Flynn, senior market analyst at Price Futures Group, in a note. That is because the tariffs would raise the cost of production for crude given that steel is used in almost very part of the industry from production, refining and processing, and distribution of refined products.   A surge in North American crude output also has the market worried, despite efforts by the Organization of the Petroleum Exporting Countries and external producers such as Russia to limit global crude production.

OPEC oil production drops to 10-month low - (Bloomberg) -- Crude production from OPEC countries fell to a 10-month low in February, mainly due to maintenance at a field in the United Arab Emirates and continued output declines in Venezuela. The  Organization of Petroleum Exporting Countries and allies including Russia have defied the skeptics by going deeper than their pledged cuts and maintaining them for long enough to deplete bloated inventories and boost prices. While the group says it’s committed to the deal for the remainder of the year, it’s also contending with a record-breaking surge in U.S. output that could undermine its efforts.Output from the 14 members of OPEC fell 80,000 bpd to 32.28 MMbpd in February, according to a Bloomberg News survey of analysts, oil companies and ship-tracking data. That’s the lowest since 31.89 million in April.Venezuela’s output dropped by 30,000 bpd to 1.68 MMbbl. The Latin American nation is a big part of the reason for OPEC’s stellar implementation of promises to curb production. Its industry is suffering from a lack of investment and  looming U.S. sanctions, sending output last year to the lowest since the 1980s.Oil production in the UAE fell last month due to maintenance at fields that produce the Das Blend, according to a person with knowledge of the matter. The survey found the Persian Gulf country pumped 2.8 MMbpd, a drop of 50,000 a day from January. Production in Saudi Arabia, OPEC’s largest producer, fell 80,000 bpd to 9.88 MMbbl, the survey found. Libya’s output rose 70,000 barrels a day to 1.05 million, the highest since 2013.

Jump in Islamic tax liabilities worries Saudi banks (Reuters) - A jump in retroactive Islamic tax liabilities faced by Saudi Arabian banks is creating concern about damage to their earnings and the government’s motives in demanding the money. While Saudi banks and other firms generally do not pay corporate tax, they are subject to an annual Islamic tax called zakat, a 2.5 percent levy on each bank’s net worth. Analysts say the way in which this is assessed can be complex and opaque. In the last couple of weeks, several major banks have disclosed that the government’s General Authority of Zakat and Tax (GAZT) is seeking additional zakat payments from them for years going back as far as 2002. In some cases, the demands exceed half of a bank’s annual net profit. The banks are challenging the assessments, but analysts said the issue could weigh on share prices in the banking sector, which is expected to attract billions of dollars of foreign investment as Saudi Arabia joins global equity indexes in the next couple of years. So far, only a few of Saudi Arabia’s 12 listed banks have disclosed retroactive zakat demands, but analysts predicted more would do so as they released full financial statements for 2017 in the coming weeks. 

Mosques flattened in fresh Saudi airstrikes in Yemen: Saudi Arabian warplanes have flattened a mosque in Yemen's west-central Ma’rib Province, and stricken another in the northwestern Sa’da Province. The first attack targeted the mosque in Ma’rib’s Sirwah district, Yemeni news website Sahafah24 reported on Sunday. Yemen’s al-Masirah television network published a video released by the country’s War Media outlet showing the moment the structure fell into ruin. A day earlier, the aircraft targeted a mosque and other religious centers in Sa’ada’s Razih District. The Saudi military campaign was launched in March 2015 with the aim of reinstalling Yemen’s former Riyadh-backed government and crushing the country’s Houthi Ansarullah movement, which has been both running state affairs and defending the nation against the aggression. Around 13,600 Yemenis have so far lost their lives in the war, which also recruits many of Saudi Arabia’s regional allies, and enjoys logistical, political, and arms support from the United States and the United Kingdom Saudi Arabia has also imposed an all-out blockade over Yemen’s ports, saying it was aimed at preventing transfers of weapons to Ansarullah. The siege has been depriving the most impoverished Arab nation of direly-needed food and medicine. 

'Survive or die together': More than 400 killed in Eastern Ghouta --More than 400 people have been killed in Eastern Ghouta, a monitoring group said, as Syrian government forces backed by Russian warplanes continued their aerial bombardment of the rebel-held area.The Syrian Observatory for Human Rights said on Thursday that at least 403 people were killed in the "hysterical attack" that began on Sunday, including 150 children. Almost 2,120 others were wounded.UN special envoy for Syria, Staffan de Mistura, stressed the urgent need for a ceasefire in comments made before Thursday's UN Security Council meeting. "The humanitarian situation in Eastern Ghouta is appalling and, therefore, we need a ceasefire that stops both the horrific heavy bombardment of Eastern Ghouta and the indiscriminate mortar shelling on Damascus," he said. He added the ceasefire needs to be followed by immediate, unhindered humanitarian access and a facilitated evacuation of wounded people out of Eastern Ghouta and warned against this being a repeat of Aleppo.  Residents of Eastern Ghouta, the majority of whom are internally displaced, say there is nothing they can do and nowhere to hide.  "Seeing a father or mother wailing and crying over their dead children, or a father carrying his son who has one leg amputated, or another screaming at God and then at people to help save his family who are all lying under the rubble of a building … I try to comfort them even though I want to sit and cry with them from the horror of what is happening all around us," . Rebel-controlled Eastern Ghouta, a mostly rural area on the outskirts of the capital Damascus, has been under government siege since 2013. About 400,000 Syrians live there. The siege has resulted in huge inflation of the cost of basic foodstuffs, a bag of bread now costs the equivalent of $5.

UN Security Council votes in favour of 30-day Syria ceasefire - The UN Security Council has voted in favour of a resolution calling for a 30-day ceasefire in Syria.The unanimously approved resolution, passed on Saturday, will allow for aid deliveries and medical evacuations to take place.The vote, held at around 2:30pm local time (19:30 GMT), had been delayed by more than 24 hours due to disagreements between Russia and other Security Council members over the wording of the resolution.A meeting was originally scheduled for 11am local time (16:00 GMT) on Friday.Nikki Haley, the US  ambassador to the UN, criticised Russia for delaying the Security Council meeting saying it had "belatedly decided to join the international consensus"."Hardly anything in the resolution has changed except a few words and commas," she said following the vote."Every minute the council waited on Russia, the human suffering grew."  Russia had objected to an earlier version of the resolution which called for an "immediate ceasefire" in Syria. The approved resolution calls for a ceasefire "without delay", he said.  Syrian government warplanes launched attacks just outside of Damascus in the rebel-held enclave of Eastern Ghouta minutes after the vote was passed, according to the UK-based Syrian Observatory for Human Rights (SOHR).

Fighting continues in Syria after another UN ceasefire - Fighting continued in Syria over the weekend despite the latest United Nations Security Council ceasefire resolution that is supposed to allow for the evacuation of Ghouta, the eastern suburb of the capital, Damascus. The draft resolution urging a 30-day ceasefire throughout Syria was delayed from Thursday to Saturday due to Russian objections. Russia argued that the United States had forced delays by opposing amendments allowing for a continued military offensive against Islamist forces loyal to Islamic State and pro-Al Qaeda groups. Washington has relied on these forces to wage war against the Syrian government of Bashar al-Assad. Saturday’s resolution calls on UN Secretary General Antonio Guterres to report back to the council in two weeks on whether the terms of the ceasefire have been implemented. However, not only will the Syrian military campaign continue, but so too will fighting throughout the country. The ceasefire’s failure will again be attributed to the Assad regime and its main backer, Russia and used to demand a military response by the Western powers. But Syria’s terrible fate has been sealed by the escalating proxy war for its territorial division that has emerged from the civil war instigated by the United States.

US-Led Coalition Warplanes Strike Syrian Regime Forces - The last time the US-led coalition fighting ISIS in Syria conducted air and artillery strikes against pro-regime forces in Syria, in the oil-rich Deir Ezzor region, was on Feb. 7, when hundreds of pro-regime fighters were killed, the largest number of "pro-regime" casualties inflicted by the US-led coalition in one attack. The coalition described its action as carried out in "self defense", while the Syrian state news agency SANA described the action as an "aggression" by the coalition against "popular forces" who were fighting ISIS and the US-backed Syrian Democratic Forces. In a bombshell update one week later, it was revealed that among the casualties were hundreds of Russian mercenaries working on behalf of the Assad regime, and hired by the Wagner PMC (Private Military Group) - a shadowy organization often referred to as Russia’s answer to Blackwater. Adding to the mystery, is that the Wagner Group is believed to be funded by Yevgeny Prigozhin, a rich businessman close to President Vladimir Putin and also known as "Putin's Chef." Prigozhin was recently sanctioned by the US due to his links to the eastern Ukraine separatists.  Unnamed US intelligence sources quoted by the Washington Post said Prigozhin was in close contact with the Kremlin in the run-up to the Feb 7 assault on the Syrian Democratic Forces base in Deir Ezzor region. According to the unconfirmed report, intercepted communications showed that Prigozhin was also involved in the operational planning with Syrian officials, ahead of the attack.  Meanwhile, amid unconfirmed reports that more than 100 Russians had been killed, the Kremlin denied that any regular Russian military forces had been involved. It admitted only that there had been "several dozen" Russian casualties, but gave no further details.

Syria: Putin orders five-hour daily ceasefires in eastern Ghouta - Vladimir Putin has ordered a daily five-hour “humanitarian pause” in the besieged Syrian enclave of eastern Ghouta to begin on Tuesday, effectively replacing a United Nations security council resolution that had demanded a month-long ceasefire in the embattled region. The Russian president’s move, which was announced by his defence minister, Sergei Shoigu, highlighted in stark terms Russia’s primacy in Syrian affairs and the UN’s failure to impose an end to the fighting in the area bordering Damascus. More than 500 people have been killed in eight days of one of the deadliest bombing campaigns by the regime of Bashar al-Assad and his allies during the seven-year war. The move by Moscow follows mounting condemnation of the violence, with the UN secretary general, António Guterres, describing the situation in Ghouta as “hell on earth”. Shoigu said a ceasefire would begin on Tuesday in the Damascus suburb and would take place from 9am until 2pm (7am GMT to 12pm) daily, according to a transcript of his remarks published by the Russian news agency Interfax. Russia, a key ally of the Syrian regime, would also help create an evacuation route for civilians in the area, he added. The Syrian Observatory for Human Rights said calm had generally prevailed in eastern Ghouta since midnight, though four rockets had hit the town of Douma on Tuesday morning. The announcement on Monday came after at least 29 people were killed in eastern Ghouta despite a UN security council resolutionthat demanded an immediate cessation of the fighting. Local doctors and monitors said at least 18 people had been injured by a suspected chlorine attack in eastern Ghouta on Sunday evening. Residents have condemned the international community’s inability to put an end to the fighting. 

US airstrike kills dozens amid mounting Western war propaganda over Syria --A US air strike in Syria’s eastern Deir Ezzor province killed at least 25 civilians Monday, the majority of them women and children.The American bombing raid, which struck the settlement of Dahra Alounik, was reported by the Syrian Observatory for Human Rights, a war monitoring group that is hostile to the Syrian government of President Bashar al-Assad.A Pentagon spokesman provided the standard and indifferent US military response to the exposure of such atrocities. “We take all allegations seriously and as we always do we will put it into our civilian casualty assessment and we will publish the results of those on a monthly basis,” Col. Ryan Dillon told the Reuters news agency.The American air strike was reported by the Turkish Anadolu agency to be part of a broader bombing campaign in Deir Ezzor aimed at halting the advance of forces loyal to the Assad government on strategically important gas and oil fields and facilities that had been under the control of the Islamic State of Iraq and Syria (ISIS), which handed them over to the US military and its proxy ground forces dominated by the Syrian Kurdish YPG militia.The same area saw a savage onslaught by US warplanes and artillery batteries on February 7 against a column of Syrian government forces in which at least 100 were killed, including a number of Russian military contractors. The latest killing of Syrian civilians by US bombs—carried out in open violation of a supposed 30-day truce mandated by the United Nations Security Council last Saturday—attracted scant attention in the Western media, which has returned to the kind of full-throated outcry over alleged atrocities by the Syrian government and its principal military ally, Russia, which has not been seen since the siege of Aleppo at the end of 2016.

Yet Another Senseless Mass Killing: Women And Children Among 25 Dead - This week, 25 people were slaughtered in yet another mass killing, and half of those deaths were women and children.  But you won’t see these murders broadcast relentlessly on CNN, Fox News, MSNBC, nor discussed at length in social media threads. That’s because the U.S. military committed them in their crusade against the Islamic State’s “last enclave on the Euphrates in Syria,” Reuters reported Monday.  It is for this reason that many Americans will dismiss comparisons between this type of mass killing and school shootings and other domestic mass atrocities. Their grossly overfunded (yet somehow financially irresponsible) military is fighting the good fight. If some innocent people have to die in the process Americans can feel safe in their homes and shopping malls, so be it. “Collateral damage” is just part of the price the world must pay for the United States to police it and keep it safe, even as the American military has racked up millions of civilian deaths during its reign as the global arbiter of morality and justice. Though the figures from this week’s deaths in Syria were reported by the Syrian Observatory on Human Rights —  which, though cited often by mainstream media has questionable credibility — the evidence of similar killings from other sources is rampant. Whether bombing hospitals, funerals, schools, or flat out raping and murdering villages filled with civilians, the U.S. military’s brutalization of innocent people is not a rare occurrence. Aside from the callous apathy many Americans display in their dismissals and rationalizations for the loss of innocent life funded by their tax dollars, the popular notion that the military must murder civilians to win the greater moral battle is faulty, anyway. The U.S. killed as many as three million civilians in the Korean War to halt communism, yet to this day, North Korea remains oppressed under a dictatorial communist regime. In Vietnam, Cambodia, and Laos, the United States haphazardly killed civilians for years before retreating from the nations in defeat. Despite the thousands of people who died, the U.S. failed to achieve its objectives.

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