Sunday, May 13, 2018

oil prices hit 42 month high on Trump's Iran sanctions; another record for US oil production, another big drop in US distillate supplies…

oil prices hit fresh 42 month highs three times this week before falling back a bit on Friday, in a rally that was mostly a reaction to Trump's abrogation of the 2015 seven nation pact with Iran, which had placed limits on their nuclear power program in exchange for lifting international sanctions....US oil prices topped $70 a barrel for the first time since November 2014 in rising $1.01 to $70.73 a barrel on Monday, boosted by news of more trouble for Venezuelan oil and the likelihood that Trump would re-impose sanctions on Iran in his speech planned for the next day...however, oil prices crashed over 4% to $67.63 a barrel on Tuesday morning, including a 3% drop in just 7 minutes, after CNN erroneously reported that Trump would not withdraw the US from the Iran pact, but prices recovered by the close to end down just $1.67 at $69.06 a barrel, when it became clear that Trump would repudiate the Obama administration's Iran deal and impose 'powerful' sanctions on Iran, including punishing any foreign companies that would do business with them....US oil prices then climbed steadily on Wednesday, rising $2.08 to another 3 1/2-year high of $71.14 a barrel, after it became clear that the US would quit the Iran pact, while the EIA reported a larger-than-expected drawdown of U.S. oil inventories...oil prices rose as high as $71.89 a barrel on Thursday morning before traders moved into to take profits, as the market digested the likely impact of the new Iran sanctions, with oil still ending the day 22 cents higher $71.36 a barrel, yet another 3 1/2 year high...oil prices then fell 66 cents in a see-saw session on Friday, retreating to close at $70.70 a barrel after rising as high as $71.63 earlier, after US allies, including Great Britain, reiterated their support for the Iran nuclear pact and the Saudis said they'd happily plug the hole left in global oil supplies by the loss of Iranian crude....US crude for June delivery thus gained just 98 cents, or 1.4% for the week in their 2nd straight weekly climb, while North Sea Brent for July, the international benchmark, saw prices rise $2.25, or 3.0% over the week to close at $77.12 a barrel, after trading as high as $78 a barrel on Thursday...

since we have a new 42 month high for oil prices, and since it's been a while since we looked at a graph of their trajectory, we'll include one here today..

May 12 2018 - oil prices past 2 years

the above graph is a Saturday afternoon screenshot of the live interactive US oil price graph at Daily FX, an online platform that provides trading news, charts, indicators and analysis of the markets...each bar on the graph represents oil prices for one week of oil trading between the 2nd last week of 2015 and May 11th of this year, with green bars representing weeks when the price of oil went up, and red bars representing the weeks when the price of oil went down...for green bars, the starting oil price at the beginning of the week is at the bottom of the bar and the price at the end of the week is at the top of the bar, while for red or down weeks, the starting price is at the top of the bar and the price at the weekly close is at the bottom of the bar...also faintly visible on this "candlestick" style graph are the feint grey "wicks" above and below each bar, to indicate trading prices during each week that were above or below the opening to closing price range for that week... 

by going back more than two years, we were able to capture on this graph the thirteen year low that US oil prices fell to during the second week of February 2016, when oil prices briefly touched $26.21 a barrel...prices at that level caused record shutdowns of US drilling operations, which culminated in a record rig count low in May of that year, and resulted in the bankruptcies of 123 North American oil and gas producers over a two year period...however, even though the exploitation companies were going bankrupt, very few of them were being liquidated, as for the most part, their stockholders lost everything, their bondholders became the new stockholders, the creditors got screwed, and the frackers kept fracking...subsequently, after nearly doubling from that low by the end of May 2016, oil prices traded in a range between $42 and $54 a barrel for the next 18 months before they began the steady climb to where they are today...

natural gas prices ended the week higher as well, mostly on the back of a 7.7 cent jump to a two week high of $2.814 per mmBTU on Thursday, that came after the EIA's report on gas in storage showed a smaller than expected addition to supplies...the natural gas storage report from the EIA indicated that natural gas in storage in the US rose by 89 billion cubic feet to 1,432 billion cubic feet over the week ending May 4th, still leaving our gas supplies 836 billion cubic feet, or 47.6% lower than the 2,295 billion cubic feet that were in storage on May 5th of last year, and 520 billion cubic feet, or 26.6% below the five-year average of 1,952 billion cubic feet of natural gas that are typically in storage at the first weekend in May...analysts had forecast a 94 to 96 billion cubic foot addition to storage, so while the 89 billion cubic foot addition fell short of expectations, it was nonetheless well above the 49 billion cubic feet of gas that was added to storage over the week ending May 5th last year, and above the average 75 billion cubic foot surplus of natural gas typically added to storage during the first week in May...

since we've now turned the corner on the natural gas storage season, we'll take a look at what that supply situation looks like:

May 11 2018 natural gas supplies as of May 4

the above graph came from a package of natural gas graphs that John Kemp, senior energy analyst and columnist with Reuters, mailed out on Friday morning, 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 May 4th 2018 as a red line, the quantity of natural gas in storage in the lower 48 states over the "prior year" from the period shown by the red graph as a yellow line, which would thus be from January 2014 up until the end of 2017, and the average of natural gas in storage over the 5 years preceding those same dates shown as a dashed blue the same time, the light blue shaded background shows us 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...this year, however, saw smallish withdrawals of gas from storage for the first three reports in April, pushing supplies that much further below while our gas supplies are now increasing as little of it is being consumed for heating, they are still well below the 5 year average as indicated by the dark dashed line, and not only the lowest of any time since 2014, but also the 2nd lowest for any week in May for as long as these weekly records have been kept...we will now be watching to see if these gas supplies trend back to normal over the next 5 months, such that we can head into the next heating season with adequate supplies...

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering the week ending May 4th, indicated that due to big drop in our oil imports, we had to pull oil out of our commercial crude supplies to meet refinery needs for the sixth time in the past fifteen weeks...our imports of crude oil fell by an average of 1,226,000 barrels per day to an average of 7,323,000 barrels per day during the week, after rising by 1,339,000 barrels per day over the prior three weeks, while our exports of crude oil fell by an average of 271,000 barrels per day to an average of 1,877,000 barrels per day during the week, which meant that our effective trade in oil over the week ending the 4th worked out to a net import average of 5,446,000 barrels of per day during the week, 955,000 barrels per day less than our net imports during the prior the same time, field production of crude oil from US wells rose by 84,000 barrels per day to a record high of 10,703,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 16,149,000 barrels per day during the reporting week...

meanwhile, US oil refineries were using 16,486,000 barrels of crude per day during the week ending May 4th, 75,000 barrels per day less than they used during the prior week, while at the same time 415,000 barrels of oil per day were reportedly pulled out of oil storage in the US....consequently, this week's crude oil figures from the EIA seem to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 78,000 more barrels per day than what refineries reported they used during the account for that disparity, the EIA needed to insert a (-78,000) 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"... (for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer)...

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports fell to an average of 8,068,000 barrels per day, which was 1.0% less than the 8,152,000 barrel per day average we imported over the same four-week period last year...the 415,000 barrel per day reduction in our total crude inventories included a 314,000 barrel per day withdrawal from our commercially available stocks of crude oil, and a 101,000 barrel per day decrease of the oil in our Strategic Petroleum Reserve, possibly a sale of oil mandated by this year's federal budget...this week's 84,000 barrel per day increase in our crude oil production included a 91,000 barrel per day increase in output from wells in the lower 48 states, which was partially offset by a 7,000 barrel per day increase in output from Alaska...the 10,703,000 barrels of crude per day that were produced by US wells during the week ending May 4th were once again the highest on record, 14.9% more than the 9,314,000 barrels per day that US wells were producing during the week ending May 5th of last year, and up by 27% from the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June, 2016...

US oil refineries were operating at 90.4% of their capacity in using 16,486,000 barrels of crude per day during the week ending May 4th, down from 91.1% of capacity the prior week, and down from the seasonal high of 93.5% of capacity during the first week of April....the 16,486,000 barrels of oil that were refined this week were the least oil processed since the first week of March, down 6.4% from the off-season record of 17,608,000 barrels per day that were being refined during the last week of December 2017, and 1.6% less than the 16,759,000 barrels of crude per day that were being processed during the week ending May 5th, 2017, when refineries were operating at 91.5% of capacity....

with the decrease in the amount of oil that was refined this week, gasoline output from our refineries was correspondingly lower than the prior week, decreasing by 71,000 barrels per day to 9,974,000 barrels per day during the week ending May 4th, after our refineries' gasoline output had increased by 159,000 barrels per day during the week ending April 27th.... with that decrease, our gasoline production was fractionally lower during the week than the 10,052,000 barrels of gasoline that were being produced daily during the week ending May 5th of last the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 2,000 barrels per day to 4,993,000 barrels per day, after rising by 18,000 barrels per day the prior week....that left the week's distillates production fractionally higher than the 4,956,000 barrels of distillates per day than were being produced during the week ending May 5th, 2017....     

with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week fell by 2,174,000 barrels to 235,804,000 barrels by May 4th, the seventh decrease in 10 weeks, but just the 8th decrease in 26 weeks, as gasoline inventories, as usual, were being built up over the winter months...our gasoline supplies fell this week because our domestic consumption of gasoline rose by 685,000 barrels per day to 9,775,000 barrels per day, and because our imports of gasoline fell by 120,000 barrels per day to 803,000 barrels per day, while our exports of gasoline fell by 320,000 barrels per day to 581,000 barrels per day...after this week's decrease, our gasoline inventories finished 2.2% lower than last May 5th's level of 241,082,000 barrels, even as they are now roughly 10.3% above the 10 year average of gasoline supplies for this time of the year...           

meanwhile, with this week's distillates production again little changed, our supplies of distillate fuels fell by 3,791,000 barrels to 115,038,000 barrels over the week ending May 4th, the 8th decrease in nine weeks, after falling by 9,428,000 barrels over the prior three weeks...our distillate inventories fell again because while the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 178,000 barrels per day to 4,307,000 barrels per day, our exports of distillates rose by 213,000 barrels per day to 1,356,000 barrels per day, while our imports of distillates rose by 52,000 barrels per day to 128,000 barrels per day...after this week’s inventory decrease, our distillate supplies ended the week 22.7% below the 148,768,000 barrels that we had stored on May 5th, 2017, and roughly 16.1% lower than the 10 year average of distillates stocks for this time of the year

finally, because our oil imports fell while our oil exports remained elevated, our commercial supplies of crude oil decreased for the 8th time in 2018 and for the 35th time in the past year, as our commercial crude supplies fell by 2,197,000 barrels during the week, from 435,955,000 barrels on April 27th to 433,758,000 barrels on May 4th...hence, after falling most of the past year, our oil inventories as of May 4th were 17.0% below the 522,525,000 barrels of oil we had stored on May 5th of 2017, 14.7% lower than the 508,487,000 barrels of oil that we had in storage on May 6th of 2016, and 4.0% below the 451,888,000 barrels of oil we had in storage on May 8th of 2015, during a period when the US glut of oil had already begun to build from the nearly stable supply levels of prior years...  

This Week's Rig Count

US drilling activity increased for the 11th time in the past twelve weeks and for 20th time in the past 27 weeks during the week ending May 11th, a period of higher oil prices that has consequentially seen the rig increases far exceed the few decreases...Baker Hughes reported that the total count of active rotary rigs running in the US rose by 13 rigs to 1045 rigs over the week ending on Friday, which was also 160 more rigs than the 885 rigs that were in use as of the May 12th report of 2017, while it was still down from the recent high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC officially began their attempt to flood the global oil market... 

the number of rigs drilling for oil increased by 10 rigs to 844 rigs this week, which was also 132 more oil rigs than were running a year ago, while it was still 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 3 rigs to 199 rigs this week, which was 27 more gas rigs than the 172 natural gas rigs that were drilling a year ago, but way down from the modern high of 1,606 natural gas rigs that were deployed on August 29th, addition, there are also two active rigs that are listed as "miscellaneous", up from the 1 "miscellaneous" rig that was operating a year ago....

drilling activity in the Gulf of Mexico increased by one rig to 20 rigs rig this week, which is the same number of rigs that were drilling in the Gulf of Mexico a year ago...however, a year ago there was also a rig drilling offshore from Alaska, so the total offshore count of 21 rigs of last May 12th is one more than this week's offshore the same time, another rig began drilling through an inland lake in southern Louisiana this week, where there are now three such inland waters rigs working, still down from the 4 rigs that were deployed on inland waters a year ago..

the count of active horizontal drilling rigs increased by 5 rigs to 918 horizontal rigs this week, which was the most horizontal rigs active since February 27, 2015, and 176 more horizontal rigs than the 742 horizontal rigs that were in use in the US on May 12th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of addition, the directional rig count increased by 8 rigs to 72 directional rigs this week, which was also up from the 66 directional rigs that were in use during the same week of last year... meanwhile, the vertical rig count was unchanged at 55 rigs this week, which was down from the 77 vertical rigs that were deployed on May 12th 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 May 11th, the second column shows the change in the number of working rigs between last week's count (May 4th) and this week's (May 11th) count, the third column shows last week's May 4th active rig count, the 4th column shows the change between the number of rigs running on Friday and as of the equivalent weekend report of 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 on Friday the 5th of May, 2017...       

May 11 2018 rig count summary

in a bit of a reversal of last week's 6 rig increase on the New Mexico side of the Permian basin, this week's Permian increase was all on the Texas side of the border, where 7 rigs were added in Texas's Permian districts, while at the same time 4 New Mexico rigs were shut down, 2 of which don't appear to have been in that basin...elsewhere, the three rig increase in Oklahoma appears include one each in the Cana Woodford, the Mississippian lime, and the Granite Wash, which also extends into the Texas addition, the three rig increase in Colorado was likely all in the Denver-Julesburg Niobrara chalk, as a Wyoming rig that was likely working that basin was concurrently shut down during the same week....meanwhile, 3 natural gas directed rigs were added in the Eagle Ford of south Texas, where an oil rig was shut down at the same time, leaving the rig deployment in the Eagle Ford at 12 gas rigs and 66 oil rigs...obviously, another natural gas rig was also deployed in West Virginia's Marcellus at the same time, while the national gas rig increase remained at 3 as a single gas rig in an "other' unnamed basin was shut down at the same time...


Fairmount Santrol another step closer in moving headquarters to Independence - --Sand-mining company Fairmount Santrol, Inc., is a step closer to relocating its headquarters from Chesterland, in Geauga County, to Independence.The Cuyahoga County Community Improvement Corp. has recommended that the county grant $500,000 in economic development loans to Fairmount Santrol, Inc., for its proposed new headquarters. Fairmount Santrol plans to take over office space at 3 Summit Park Road in Independence. The term of the loan will be seven years, and the estimated annual tax benefit from this project totals $389,381, according to a press release from the Greater Cleveland Partnership. It is not clear, at this time, when the move would officially take place. The move will bring 79 jobs to Cuyahoga County, including 52 jobs from Fairmount Santrol, according to the Greater Cleveland Partnership. The remaining jobs come from Unimin, which has merged with Fairmount Santrol. In February, the Ohio Tax Credit Authority approved an eight-year job-creation tax credit valued at $1.46 million to support what's described as a headquarters move and consolidation. Read that story here. Fairmount Santrol mines sand used for fracking in the oil-and-gas industry, and has facilities throughout North America, Europe and Asia.

Fracking amendment goes down again — Vindicator - For the seventh straight time Youngstown voters have rejected a charter amendment to ban fracking.   The final but unofficial vote was 3,589 against and 2,857 in favor.

Is there proof that fracking for oil and natural gas can by itself cause earthquakes? - Geologists used to believe that “fracking”—or hydraulic fracturing, the process of drilling down into the earth and injecting water, chemicals and sand at high-pressure to release and capture the gas or oil contained in the rock—couldn’t actually cause earthquakes. But conventional wisdom started to change in 2009 when the ground started shaking across Oklahoma in the wake of that state’s new fracking boom. Today it is not uncommon for upwards of 1,000 magnitude 3.0 or higher earthquakes to rock the Sooner State during a given year—and no one doubts that they are a result of fracking and related activities.According to the U.S. Geological Survey (USGS), earthquakes in Oklahoma are now hundreds of times more common than just a decade ago. Meanwhile, seven other midwestern and southern states have experienced similar rises in the incidence of earthquakes since fracking commenced in recent years.  Defenders of fracking insist that it’s not so much the fracking that’s to blame as it is the wastewater disposal activities that come afterwards. “Wastewater disposal wells typically operate for longer durations and inject much more fluid than hydraulic fracturing, making them more likely to induce earthquakes,” reports USGS, adding that less than two percent of the earthquakes in Oklahoma can be directly linked to fracking itself. “The remaining earthquakes are induced by wastewater disposal.” “In Ohio, some of the larger earthquakes are from fracking itself,” report Miami University geologists Michael Brudzinski and Brian Currie, who are trying to pinpoint causation on fracking-related seismicity across the central U.S. “Fracking by larger, older, deeper fault lines has a higher risk of triggering bigger earthquakes, like the 4.0 quake around Youngstown in 2011.” By studying the “fingerprint” of these quakes, Brudzinski and Currie, whose recent findings were published in the peer-reviewed journal Proceedings of the National Academy of Sciences (PNAS), hope to help prevent future quakes and minimize the damage from ones they can’t prevent

Mariner East pipeline fined $355K for spills in Lancaster, 8 other counties - The state has fined the builders of the Mariner East 2 pipeline $355,000 for pollution of streams in Lancaster County and eight other counties.The penalty is on top of a $12.6 million fine the state Department of Environmental Protection levied against pipeline builder Sunoco Pipeline LP in February on separate violations.The fine was announced Thursday, the same day that the Pennsylvania Public Utility Commission voted unanimously to allow the pipeline to be restarted. The pipeline has been shut down since March after sinkholes opened in Chester County adjacent to the pipeline construction.The PUC’s Bureau of Investigation recommended restarting the pipeline, noting that it is “of the opinion that the integrity of the (existing) ME1 pipeline has not been compromised by the soil subsidence events that triggered this investigation.”The most recent fine is for spillage of drilling fluids into wild trout streams, wetlands and streams rated as high quality.Included were seven spills in West Cocalico Township. Drilling fluids were discharged into streams, a wetland adjacent to endangered bog turtle habitat and on the Middle Creek Wildlife Management Area.The $3 billion, 350-mile-long Mariner East 2 pipeline is to carry natural gas liquids from the Marcellus Shale and Utica Shale regions of western Pennsylvania and Ohio to a refinery in Marcus Hook, near Philadelphia. In Lancaster County, the pipeline has already been built through 6.5 miles in West Cocalico and Clay townships.

DEP hits Sunoco with another fine for mariner east 2 pipeline construction - The Department of Environmental Protection fined Sunoco/Energy Transfer Partners an additional $355,622 for drilling mud spills during construction of the Mariner East 2 pipeline.The multiple violations along the 350-mile long line occurred between May 3, 2017 and February 27, 2018. The fine is on top of the $12.6 million penalty issued by the DEP in February for similar violations of the state’s Clean Streams Law.“No violations are acceptable,” said DEP Secretary Patrick McDonnell in a statement. “Cleaning up a spill does not excuse Sunoco, or any other company, from complying with the law or paying an appropriate penalty.”The DEP says Sunoco discharged drilling fluids into wetlands, wild trout streams and High-Quality Waters at locations in Allegheny, Blair, Cambria, Cumberland, Dauphin, Huntingdon, Indiana, Lancaster, and Washington counties. The agency ordered the company to halt construction and clean up the spills, as well as to submit proposed changes to construction methods.  DEP has issued Sunoco more than 50 notices of violations for construction of the Mariner East 2 pipeline.

With sinkholes patched and PUC approval, Sunoco Pipeline restarts Mariner East 1 - The Pennsylvania Public Utility Commission on Thursday lifted an emergency order and allowed Sunoco Pipeline to restart operations on the Mariner East 1 pipeline, two months after sinkholes appeared in Chester County, exposing the pipe’s bare steel. The PUC voted unanimously to allow Sunoco to resume pumping Marcellus Shale natural gas liquids such as propane through the 87-year-old pipeline. The commission ordered the shutdown on March 7 after sinkholes opened up while the company was constructing the new Mariner East 2 pipeline along the same route.Gladys M. Brown, the commission’s chair, said PUC’s Bureau of Investigation and Enforcement was satisfied that the pipeline “can resume operations safely.” The bureau sought the emergency shutdown in March after expressing concern about potentially catastrophic consequences of a pipeline rupture. Sunoco said Thursday that it would resume operations immediately.A few hours after the PUC’s decision, another arm of state government, the Pennsylvania Department of Environmental Protection, announced that it fined Sunoco $355,622 for reported spills of drilling fluids over 10 months in connection with construction of the Mariner East 2 pipeline. The incidents it cited are unrelated to the West Whiteland sinkholes.The new fine comes on top of a $12.6 million penalty that Sunoco agreed to pay in February for “egregious and willful violations,” including unauthorized drilling to install the ME2 pipeline and failing to notify the agency of discharges.  Sunoco, a subsidiary of Energy Transfer Partners LP, is building two new adjacent pipelines to expand the capacity of its Mariner East system to deliver Marcellus Shale gas liquids to a terminal in Marcus Hook, where much of the material will be exported. Sunoco is spending $5.1 billion in Pennsylvania on the energy infrastructure project. Sunoco said it had complied with the PUC’s emergency order and the pipeline was now “fit for reinstatement of service” after underground cavities were filled with grout and the pipeline was inspected. Sunoco said that tests showed the subsidence did not impair the pipeline where it passes less than 50 feet from houses through backyards on Lisa Drive in West Whiteland Township, near Exton. The sinkholes developed about 300 feet from Amtrak’s mainline corridor from Philadelphia to Harrisburg.

Fracking riles residents in Pittsburgh’s northeast suburbs --Greg DeMedio first learned of hydraulic fracturing activity under way in Indiana Township when he and his wife took their daughter to play at Emmerling Community Park.  “And we saw well pad signs branded with Range Resources, and we couldn't believe it. Our jaws dropped,” said DeMedio, owner of a small insurance agency and co-owner of a cybersecurity firm. “My concern is about transparency.” Environmental activist Dianne Peterson of O'Hara Township found out about the eight approved natural gas wells because she happened to see a post about it on Facebook.  “But many people I know found out by looking up from a soccer game and seeing the well pad standing there — pretty shocking,” Peterson said.  Elissa Weiss, 64, a 28-year resident of Indiana Township, lamented that she saw nothing about planned fracking activity in the municipality's quarterly newsletters and didn't learn about it until nearly two years after the permitting process began. The three concerned residents of Pittsburgh's northeastern suburbs joined about 60 other residents and environmental activists Tuesday night in a protest against fracking shortly before the Indiana Township's board of supervisors meeting. Protesters outlined a litany of concerns about fracking activity within two miles of parks, schools, homes and day cares, arguing that drilling should be limited to industrial-zoned areas. They cited fears over the potential negative impacts on the environment and public health and questioned whether the people of the communities being affected have received enough information and had enough opportunities for meaningful input.  “Fox Chapel School District-area residents are demanding transparency and accountability from their elected officials,”   “Residents believe that their state constitutional rights have been violated ... in an effort to expedite natural gas development in their community.”

Jessup frustrated with DEP response to yellow smoke, health complaints at gas power plant - Residents of Jessup say they are not satisfied with the response from the state Department of Environmental Protection, after a new natural gas power plant spewed yellow-colored smoke and prompted health complaints earlier this month.The Invenergy plant being built in Lackawanna County started emitting noxious smoke on March 3. According to Jessup Borough Council President Jerry Crinella, DEP sent two people to investigate on March 6, but after they walked around, they said they couldn’t see or smell anything.“I’m disappointed concerned citizens are not getting the information they’re asking for. We want to know what the readings were from the air monitors,” Crinella said. “The DEP is supposed to be there to protect the public, not the company.”DEP spokeswoman Colleen Connolly declined to discuss the incident, and instead sent emailed statements.“Department believes plume is excess NOX [nitrogen oxides] as Invenergy is beginning to start up its turbines. No issues were reported to us,” Connolly wrote. “Department has asked Invenergy to provide a report on this. We are still waiting for the report.” Connolly added there have been no complaints from residents since the original incident, and said she could not discuss specifics until the department receives the report from Invenergy.

Ground around Marcellus drilling producing more than gas - When Marcellus Shale drilling came to Pennsylvania state forests, it brought a few hitchhikers along — invasive plants. They got a free ride into remote northcentral interior forests that previously had been spared the influence of heavy truck traffic. Yes, truck traffic. One does not generally associate deep forest interiors with lumbering construction vehicles, but with about 700,000 acres of state-owned forest land open to gas and oil exploration (about half of the total that is underlaid by shale deposits), a lot of ad hoc roads have been cut through those woods. It’s the only way drilling companies can get to well sites and lay concrete gas-drilling pads, which often sprawl over several acres. In the process, the trucks bring in the seeds of nonnative plants — in their tire treads, on their undercarriages or in loads of gravel and other materials. The cleared land around the pad is exactly what nonnative plants need to get a firm foothold — soft, recently disturbed soil with lots of sunlight and drastically fewer native plants to compete with. Invasions of nonnative plants can be as destructive to a northeastern forest as a wildfire is to those in the West. Invasives love edge habitat, including the sides of roads through forests and mown grass in recreational areas. With no natural disease or predators to slow them down, the foreigners can quickly colonize land where dispersed, crowding out native species. Studies have shown that invasives can even halt forest regeneration. For example, if only a handful of oak or maple seedlings manage to break through thick mats of Japanese stilt grass or mile-a-minute weed, the deer that feed on such saplings may eat the scant new growth and wipe out a new generation of trees. 

Pennsylvania Lawmaker Advancing Pro-Fracking Legislation Profits from Leasing his Land to Drillers - A Pennsylvania state senator, who is responsible for a slew of legislation favoring the oil and gas industry, leases his own land to fracking companies, recent disclosure documents show. Last year, veteran lawmaker Gene Yaw of Lycoming County profited from royalties he received from several different drillers.  Yaw, who chairs the key senate environmental resources and energy committee, has been serving in the state legislature since 2008. In recent years he’s positioned himself as a champion of the oil and gas industry by advancing various pro-industry measures. The counties in the district he represents, located squarely on top of the Marcellus Shale, have thousands of active oil and gas wells.In late 2016, Yaw co-sponsored a bill to bolster the rights of property owners leasing their land to oil and gas developers. Soon after, he introduced the “Pennsylvania Natural Gas Expansion and Development Initiative,” a bill that aims at dramatically expanding the production and transportation of natural gas in the state.“We have an abundant natural resource beneath us,” Yaw wrote in support of the bill, “which can be used to help consumers lower their energy heating costs.”   At the same time, Yaw benefits personally from Pennsylvania’s fracking boom. According to his most recent financial disclosure, last year he received income from five different drilling companies: Anadarko, Statoil, Alta Marcellus Development, Mitsui E&P, and Chesapeake.

Challenging the 'rule of capture' - Farm and Dairy  — The Pennsylvania Superior Court has made a landmark decision, ruling that a drilling company cannot remove hydrocarbons from the shale formations beneath your property without your permission. The decision, which was appealed April 16, clarifies an aspect of Pennsylvania oil and gas law, stating the “rule of capture” does not apply to fractured fissures that extend under unleased parcels.Some of these horizontal fissures could extend 5,000 to 10,000 feet from a well. In the case, Briggs vs. Southwestern Energy Production Co., the owners of an unleased, 11-acre parcel in Susquehanna County, Pennsylvania, claimed that a horizontal well bore drilled in November 2015 under a neighboring parcel by Southwestern Energy Production Co. was unlawfully draining hydrocarbons from their property. Since their property was not under lease with Southwestern, the Briggs argued that Southwestern had trespassed.  Southwestern used the “rule of capture” as its defense to the subsurface trespass claim. The rule has been recognized in Pennsylvania since the 1880s and generally precludes liability for drainage of oil and gas from under another’s land. Chadsey said there is such a rule in all 30 plus states that produce oil and gas. The difference is spacing laws. (See sidebar below.) The trial court agreed with Southwestern and granted its motion for summary judgment and dismissed the plaintiff’s complaint. The trial court held that, as a matter of law, the “rule of capture” precluded any claim of subsurface trespass. On appeal, the Pennsylvania Superior Court reversed and held that the “rule of capture” didn’t apply to hydraulic fracturing: “In light of the distinctions between hydraulic fracturing and conventional gas drilling, we conclude that the rule of capture does not preclude liability for trespass due to hydraulic fracturing. “Therefore hydraulic fracturing may constitute an actionable trespass where subsurface fractures, fracturing fluid and proppant cross boundary lines and extend into the subsurface estate of an adjoining property for which the operator does not have a mineral lease, resulting in the extraction of natural gas from beneath the adjoin landowner’s property,” said the ruling.

Frackers Feeling Shaken Up by Pennsylvania Court Decision - Anxiety is building around a court ruling in Pennsylvania that could potentially upend long-standing oil and gas arrangements, and affect hydraulic fracturing efforts nationwide. Natural gas driller Southwestern Energy Production Co. has asked Pennsylvania’s Superior Court to rehear the case with more judges after a two-judge panel ruled April 2 that hydraulic fracturing could create liability when fluids released from the fracking process flow onto adjoining properties. The case, Briggs v. Southwestern Energy Production Co., in Pennsylvania’s Superior Court, has caught the attention of energy companies, oil and gas attorneys, and legal scholars nationwide, attorneys from around the country told Bloomberg Environment. The ruling could have a chilling effect on oil and gas development because it overturns a long-standing, seemingly settled legal principle known as the “rule of capture,” they said. According to the rule of capture, a driller on one parcel of land may extract oil and gas from underneath adjoining properties as long as the driller doesn’t physically trespass over the property line. So far, a half-dozen energy associations, business and industry groups, a geologist, and a Texas-based professor of oil and gas law have asked to file friend of the court briefs in the case, an indication of the consequences the industry fears should the ruling stand. The ruling holds potential for a significant economic impact for companies invested in gas development, because it increases the possibility that energy companies could face trespass claims in connection with their fracking operations that they otherwise wouldn’t have been exposed to,  The case also could affect litigation in states that that don’t have a well-developed body of case law governing oil and gas,  “Many states will look to other states for precedent to reach their opinion,”  “The worry is that other states looking at this issue that are facing it for the first time may look to Briggs for precedent.”

New Info on Human Health and Fracking – OHVEC - The information in this blog may be overwhelming. It is, however, critical that we all keep up on current information regarding health effects of living near unconventional oil and gas drilling operations, (UOGD, aka fracking operations), compressor stations, pipelines and other associated processing facilities. If we are informed about the risks of such operations, we can better speak to public officials about the necessity of monitoring them and/or preventing them from coming into our communities. We can also take personal precautions to try to minimize these risks to our family’s health. Following are three very important recently published resources:

  • I. Physicians for Social Responsibility, including Sandra Steingraber, have recently released this compendium, titled “Compendium of Scientific, Medical, and Media Findings Demonstrating Risks and Harms of Fracking – Fifth Edition.” This important resource updates the rapidly expanding evidence indicating harm to health from fracking and methane infrastructure.
  • II. WV Public Radio recently aired a report on endocrine disruption and UOGD sites. This report, titled “Exploring the endocrine activity of air pollutants associated with unconventional oil and gas extraction” is available on the WVPB website and here.  In this study, the following important correlation is made: Compounds associated with UOG activity have been linked to adverse reproductive and developmental outcomes in humans and laboratory animal models, which is possibly due to the presence of endocrine active chemicals.
  • III. The League of Women Voters of Pennsylvania has updated their Shale Gas Extraction and Public Health Resource Guide. This is a great resource because of the broad range of health effects examined in the publication. These include air and water borne environmental hazards. methane migration, and seismic activity. This important resource can be downloaded here.

If you live near a fracking operation, a pipeline, or a compressor station or other fracking-related facility, and you or a family member has experienced health problems, please inform your attending physicians of these resources, and—if you are willing to share your story—let us know by contacting

West Virginia allows ETP to resume work on Rover natgas pipeline (Reuters) - Environmental regulators in West Virginia said Energy Transfer Partners LP could restart work on its $4.2 billion Rover natural gas pipeline after ordering the company to stop some work in the state due to permit violations:

  • * The West Virginia Department of Environmental Protection (DEP) said last week it lifted the March 7 cease and desist order on the Rover Sherwood Lateral on May 2.
  • * Rover is the biggest gas pipe under construction in the United States. It is designed to carry up to 3.25 billion cubic feet per day (bcfd) of gas from the Marcellus and Utica shale fields in Pennsylvania, Ohio and West Virginia to the U.S. Midwest and Canada’s Ontario province.
  • * One billion cubic feet of gas is enough to fuel about 5 million U.S. homes for a day.
  • * The latest cease and desist order was not the first time West Virginia stopped ETP from work on Rover. The DEP also ordered the company to halt some work from July 17 to Aug. 9 due to violations of storm water rules.
  • * In addition, the U.S. Federal Energy Regulatory Commission (FERC) stopped ETP from horizontal drilling in Ohio from May 10 to Sept. 18 after an estimated 2 million gallons of drilling fluid spilled into a wetland near the Tuscarawas River.
  • * Energy companies use horizontal drilling to cross under obstacles such as rivers and highways.
  • * Before those stop work orders, ETP expected to finish Rover in November. ETP said it still expects to complete the project by the end of the second quarter of 2018. Rover has been partially in service since August and is now able to transport up to 1.7 bcfd.
  • * Major producers signed up to use Rover include units of privately held Ascent Resources, Antero Resources Corp, Range Resources Corp, Southwestern Energy Co, Eclipse Resources Corp and EQT Corp.

Pipeline protesters in Virginia come down from trees after 5 weeks - A mother and daughter who had been camped high in trees for five weeks to protest a natural-gas pipeline near Roanoke, Virginia, climbed down from their roosts Saturday after a federal judge threatened to start levying heavy fines.Theresa “Red” Terry, 61, and her daughter, Theresa Minor Terry, 30, had perched on platforms in trees on the family’s Bent Mountain property since April 2 to protest construction of the Mountain Valley Pipeline.The women endured subfreezing temperatures, high winds, snow and rain in their efforts to stop tree-clearing and to rally opposition against the 303-mile pipeline, which will carry gas from West Virginia through the mountainous southwest section of Virginia.Late Friday, a federal judge said the pipeline company had legal authority to be on the land, found the women to be in contempt and gave them until 11:59 p.m. Saturday to come down. If they didn’t, U.S. District Judge Elizabeth Dillon would have imposed a $1,000 fine against each woman for every day they continued to defy the court. In her order, the judge said that the Terrys were free to express their opposition to the project but noted that they had contested it in court and lost. The pipeline therefore has a legal right to do the work on its right of way through the family’s property.Dillon also authorized U.S. marshals to take command of the situation and bring them down by force if necessary or practical. In addition, the judge found Coles Terry III, Red Terry’s husband and Minor Terry’s father, in contempt for his continued support of the women’s efforts. She fined him $2,000. After the ruling, Coles Terry said the women would come down. Even if they didn’t mind paying the fines, he said, the judge had directed that the money be paid to the pipeline builders, a notion that disturbed the Terrys.

Treetop protesters take anti-pipeline demonstration on the road - A pair of tree-sitting protesters stopped in Charlottesville on Monday to demand action against two natural gas pipelines that are poised to cross the state. “This is our land, we need to protect it and our representatives need to step up to the plate and quit letting the gas and oil companies run the United States,” said Theresa “Red” Terry. “It’s supposed to be for the people by the people, not for the profit.” Red Terry and her daughter, Theresa Minor Terry, on April 2 perched in protest of the Mountain Valley Pipeline, which is set to run through the family’s Bent Mountain property. U.S. District Court Judge Elizabeth Dillon last week ruled that they would face daily $1,000 fines if they did not come down by 11:59 p.m. Saturday. Dillon also authorized U.S. marshals to remove the Terrys from the trees by force, if necessary, and fined Red Terry’s husband, Cole Terry III, $2,000 for his support of the women’s efforts. The Terrys said they ended their demonstration because Dillon ordered the fines to be paid to builders of the Mountain Valley Pipeline, which angered them. Back on the ground, they now are demanding action from Gov. Ralph Northam and a Virginia Department of Environmental Quality study on the impact that the Mountain Valley and Atlantic Coast pipelines will have on streams and waterways. The Mountain Valley Pipeline, planned to be built from West Virginia through the southwestern part of the state, is led by EQT Midstream Partners of Pittsburgh. The Atlantic Coast Pipeline is a Dominion Energy-led project planned to run from West Virginia through Virginia to North Carolina. Both will be built through some of Virginia’s most mountainous terrain and cross hundreds of rivers and streams. 

At Charlottesville stop, tree-sitting pipeline protesters demand action from governor, DEQ against the work -  A pair of tree-sitting protesters stopped in Charlottesville on Monday to demand action against two natural gas pipelines that are poised to cross the state. “This is our land, we need to protect it and our representatives need to step up to the plate and quit letting the gas and oil companies run the United States,” said Theresa “Red” Terry. “It’s supposed to be for the people by the people, not for the profit.” Red Terry and her daughter, Theresa Minor Terry, on April 2 perched in protest of the Mountain Valley Pipeline, which is set to run through the family’s Bent Mountain property. U.S. District Judge Elizabeth K. Dillon last week ruled that they would face daily $1,000 fines if they did not come down by 11:59 p.m. Saturday. Dillon also authorized U.S. marshals to remove the Terrys from the trees by force, if necessary, and fined Red Terry’s husband, Cole Terry III, $2,000 for his support of the women’s efforts. The Terrys said they ended their demonstration because Dillon ordered the fines to be paid to builders of the Mountain Valley Pipeline, which angered them. Back on the ground, they now are demanding action from Gov. Ralph Northam and a Virginia Department of Environmental Quality study on the impact that the Mountain Valley and Atlantic Coast pipelines will have on streams and waterways. The Mountain Valley Pipeline, planned to be built from West Virginia through the southwestern part of the state, is led by EQT Midstream Partners of Pittsburgh. The Atlantic Coast Pipeline is a Dominion Energy-led project planned to run from West Virginia through Virginia to North Carolina. Both will be built through some of Virginia’s most mountainous terrain and cross hundreds of rivers and streams. Michael Payne, of Indivisible Charlottesville, said the pipeline issue has become a moral line that he believes scared the Northam administration into pushing for the removal of the Terrys. “This was just two people sitting in trees on their own property, but they’re terrified of it because they know what the moral choice is, they know how clear and obvious it is,” he said. 

Federal appeals court hears 2 pipeline cases — The legal fight against the Mountain Valley Pipeline ramped up Tuesday, with lawyers in two cases asking a federal appeals court to slow down the project’s run through Southwest Virginia. In back-to-back oral arguments, the 4th U.S. Circuit Court of Appeals was first asked to reverse a decision by the State Water Control Board, which issued a water quality certification after finding a “reasonable assurance” that the natural gas pipeline would not pollute the 500-some streams and wetlands it will cross. The same three-judge panel then heard a challenge of the U.S. Forest Service’s approval for the buried pipeline to cut through the Jefferson National Forest. Both cases are being brought by a variety of conservation groups and individuals who say that building the largest such pipeline ever seen in Virginia will wreak environmental havoc. Written decisions are expected in the coming weeks. Although tree-cutting for the 303-mile pipe is well underway, opponents are hoping for at least a delay as the judicial system catches up with about a half-dozen legal attacks, filed months ago during a regulatory process that has granted approval for the pipeline at every step. One judge wondered from the bench whether is was too late to stop the train. “I’m just not sure what the process is,” Judge William Traxler said during arguments about the water board’s key vote last December that moved the project forward. “It seems to me we are in no-man’s land.” But later, during arguments in the second case, Chief Judge Roger Gregory raised pointed questions about the process used by the Forest Service to evaluate a 3.5-mile route the pipeline will take across steep mountain slopes and under the Appalachian Trail.  

We're All Trespassers Now In The Face Of The Government's Land Grabs - All across the country, power companies have been given the green light to build massive gas and oil pipelines that crisscross the country, cutting through private and public lands, as well as unspoiled wilderness. “Yet despite oft-repeated claims by politicians and oil executives about the danger of relying on foreign oil, this U.S. petroleum renaissance never was designed to make America energy self-sufficient,” points out journalist Sandy Tolan. “A growing amount of that oil will end up in China, Japan, the Netherlands, even Venezuela.”So much for the public use, huh? These pipeline projects which are getting underway in a dozen states have stirred up a hornet’s nest of protests. Not all of the protests that have arisen in response to these pipeline projects hinge on environmental concerns. Some of the protesters are landowners, simple farmers and homeowners who merely want the government and its corporate partners-in-crime to keep their grubby paws off their personal property.In Virginia, for instance, activists have taken to tree sitting—living for weeks on end in platforms suspended above the ground in trees—as a form of protest over the devastation that is being wrought by these pipelines. These acts of civil disobedience come at a costly price. Pipeline and forestry officials have been working hard to make life as difficult as possible for the protesters, allegedly blocking their access to food and water and medical supplies, shining floodlights into the trees at all hours of the night, creating ground disturbances to dislodge their nests, and urging the courts to levy heavy fines for each day that the work to clear the forests for the pipeline is delayed. It takes a lot of gall to trespass onto someone’s private property, tear up their land, cut down their trees, pollute their air and water, prevent them from moving freely on their own property, threaten them with fines and arrests for challenging the intrusion, and then force them to pay (by way of taxes) to retain ownership of the property or sell it cheaply or at a loss so it can be torn down and used for some purpose that the government deems more beneficial to its bottom line.  That’s how little respect the government has for our rights.

Protesters of fracking erect tower in Duke Energy CEO's driveway - (video) Protesters with the group Beyond Extreme Energy upset with Duke Energy's involvement in the Atlantic Coast Pipeline, which will cut across North Carolina, took their concerns to the front yard of CEO Lynn Good's Charlotte home Wednesday.

At Dominion shareholder meeting, pipeline opponents address CEO directly -— Opponents of the Atlantic Coast Pipeline have organized dozens of meetings, protests and marches in an effort to stop the project since it was announced in 2014. But there’s just one time a year they’re guaranteed an audience with the pipeline’s lead developer, Dominion Energy, as well as its CEO, Thomas Farrell: the company’s annual shareholder meeting, where anyone who owns stock in the company or is representing someone who does is entitled to take to the microphone and unload for a few minutes. And this year, Wednesday was the big day. “Mr. Farrell, do you feel Dominion’s profits are more important than people’s lives and the planet?” asked Deborah Kushner, a resident of Nelson County who lives near the proposed path of the pipeline — one of about 10 pipeline opponents who traveled to Richmond to address Farrell in person. Farrell responded briefly to each of them. “Obviously, I don’t,” he told Kushner, adding that the various facts she had laid out, in his view, “just don’t comport with reality.” The annual meeting took place under heavy security at the Greater Richmond Convention Center downtown, where a group of about 50 protesters gathered on a corner outside. Among them was Red Terry, who spent five weeks camped in a tree on her land protesting the Mountain Valley Pipeline, another natural gas pipeline project that would slice through part of the state. There were no disruptions and the actual business portion of the meeting was brisk. Farrell gave a high-level overview of the company’s operations and plans. The first and only whiffs of dissent came when Farrell opened the floor for the question-and-answer portion of the meeting. All but two of the roughly half-dozen speakers focused on concerns about the Atlantic Coast Pipeline, which would cut through the state on its way from West Virginia to North Carolina, with a spur to Hampton Roads. Utilities in Virginia and North Carolina, mostly affiliates of pipeline partners Duke Energy and Dominion Energy, have contracted for most of the gas. 

Actors were paid to support Entergy’s gas-fired power plant at New Orleans City Council meetings - Last October, about 50 people in bright orange shirts filed into City Hall for a public hearing on Entergy’s request to build a $210 million power plant in eastern New Orleans. Their shirts read, “Clean Energy. Good Jobs. Reliable Power.”The purpose of the hearing was to gauge community support for the power plant. But for some of those in the crowd, it was just another acting gig.At least four of the people in orange shirts were professional actors. One actor said he recognized 10 to 15 others who work in the local film industry.“It was very shady, very secretive, especially when we got paid. They literally paid us under the table.”  They were paid $60 each time they wore the orange shirts to meetings in October and February. Some got $200 for a “speaking role,” which required them to deliver a prewritten speech, according to interviews with the actors and screenshots of Facebook messages provided to The Lens.“They paid us to sit through the meeting and clap every time someone said something against wind and solar power,” said Keith Keough, who heard about the opportunity through a friend.He said he thought he was going to shoot a commercial. “I’m not political,” he said. “I needed the money for a hotel room at that point.” They were asked to sign non-disclosure agreements and were instructed not to speak to the media or tell anyone they were being paid.

June Natural Gas Gets a Jolt as EIA Storage Build Leaner Than Expected -- The Energy Information Administration (EIA) on Thursday reported a weekly natural gas storage injection that came in on the low side of expectations, and futures picked up some bullish momentum on the news.EIA reported an 89 Bcf injection into Lower 48 gas stocks for the week ending May 4, slightly tighter versus consensus estimates for a build in the low- to mid-90s. Last year, EIA recorded a 49 Bcf injection. The five-year average is a build of 75 Bcf.Shortly after the 10:30 a.m. ET release of the final number, the June contract popped about 3 cents to trade above $2.785 after already gaining a few cents earlier in the session. By 11 a.m. ET, June was trading around $2.795, up about 5.8 cents from Wednesday’s settle.Prior to Thursday’s report, consensus estimates had the market looking for an injection somewhat larger than the actual figure.A Reuters survey of traders and analysts on average had predicted a 91 Bcf build, with responses ranging from 75 Bcf to 114 Bcf. A Bloomberg survey had produced a median 90 Bcf injection, with a range of 62 Bcf to 114 Bcf. IAF Advisors analyst Kyle Cooper had called for a 96 Bcf build, while Intercontinental Exchange EIA storage futures settled Wednesday at an injection of 94 Bcf. Bespoke Weather Services had estimated a 94 Bcf build and said it viewed Thursday’s report as “slightly bullish” for a market that could see further support from cooling demand if recent above normal temperatures persist into late May or early June. Total working gas in underground storage ended the period at 1,432 Bcf, versus 2,295 Bcf a year ago and five-year average inventories of 1,952 Bcf. The year-on-year deficit shrank week/week from minus 903 Bcf to minus 863 Bcf, while the year-on-five-year deficit decreased slightly from minus 534 Bcf to minus 520 Bcf, EIA data show.

Pentagon warns against offshore drilling in eastern Gulf of Mexico | TheHill: Offshore oil and natural gas drilling in the eastern part of the Gulf of Mexico would likely be incompatible with military training and testing, the Pentagon is warning lawmakers. In a report sent this week to a pair of House committees, the Defense Department’s Undersecretary for Research and Engineering Michael Griffin called the eastern Gulf “irreplaceable,” and said that any drilling there would need significant restrictions in order to not disturb military operations. The Navy and Air Force use the eastern Gulf to test laser weapons, long-range strike weapons, new vessels and mine warfare, among other activities, and drilling rigs could hamper operations. The eastern Gulf, the report said, “is an irreplaceable national asset used by [the Department of Defense] DOD to develop and maintain the readiness of our combat forces, and is critical to achieving the objectives contained in the National Defense Strategy.” “Simply stated, if oil and gas development were to extend east of the [Military Mission Line], without sufficient surface limiting stipulations and/or oil and gas activity restrictions mutually agreed by the DOD and [Department of the Interior], military flexibility in the region would be lost and test and training activities would be severely affected,” it stated. The report is likely to provide significant fodder to Florida leaders, Democrats and others who want to keep the eastern Gulf closed to oil and gas drilling. 

Pipeline firms must pay minimal damages, repair only 10 acres of wetlands: federal judge -  A federal judge on Friday (May 4) awarded only $1,102 in damages to Plaquemines Parish landowners who filed suit against major national pipeline companies for eroding their wetlands, and only ordered the companies to restore 9.6 acres of wetlands that she found they had allowed to erode.U.S. District Judge Jane Triche Milazzo reaffirmed her August 2017 ruling that found that Tennessee Gas Pipeline Co. LLC and Southern Natural Gas. Co. LLC, both subsidiaries of Kinder Morgan, and the privately owned High Point Gas Transmission LLC and High Point Gas Gathering LLC, had to repair some of the erosion that had occurred since 1953 along the paths of their canals through property largely owned by New Orleans-based Vintage Assets Inc. in the Breton Sound basin in Plaquemines Parish.The closely-watched lawsuit was believed to have the potential of setting a precedent for other suits filed against oil and gas production companies on whether or how damages should be tallied for the effects of pipeline or other production work on coastal wetlands. There are several dozen suits pending in state courts that have been filed by a half-dozen Louisiana parishes in an attempt to force restoration or recoup damage payments.A spokesman for Kinder Morgan said the company planned on appealing the ruling, despite the potentially small costs the company would face.

Louisiana State Court Declares Bayou Bridge Pipeline Permit Illegal - A Louisiana judge recently ruled that the state regulators violated guidelines when it issued Energy Transfer Partners ' controversial Bayou Bridge pipeline a coastal use permit.  The permit was issued for the last 18-mile stretch of the fracked oil pipeline that would have run through the riverside town of St. James Parish, where dozens of refineries and industrial facilities are already fueling a public health crisis in the mostly African-American community.  The proposed 162-mile Bayou Bridge pipeline would connect the contentious Dakota Access Pipeline to the Gulf of Mexico.  As noted by the Bridge the Gulf Project , the judge ruled that the permit granted by the state's Department of Natural Resources (DNR) was illegal because it did not take into consideration the impacts the project would have on the town.  In his April 30 decision, made public on Monday, 23rd Judicial District Court Judge Alvin Turner Jr. held, "Once constructed, this pipeline has the potential to impact some of Louisiana's most coveted and ecologically sensitive areas such as the Atchafalaya Basin, as well as other wetlands through Louisiana."  He also wrote, "the permit application does not include an emergency response plan nor does it address potential spills that may occur after construction once the pipeline is operational."  Among other decisions, the court ordered DNR to require the pipeline builders "to develop effective environmental protection and emergency or contingency plans relative to evacuations in the event of a spill or other disaster."

Court to hear challenge to Winona County's sand mining ban - Winona County, Minnesota's only county to ban the mining of silica sand for use by the oil and gas industry in hydraulic fracturing, goes to court Monday to defend the ban. Minnesota Sands LLC, which holds extensive mineral rights in southeastern Minnesota, is challenging the legality before the Minnesota Court of Appeals.  Southern Minnesota and western Wisconsin have rich deposits of a form of silica that's in high demand for hydraulic fracturing. The pure quartz sand from the region's soft sandstone is strong enough to prop open cracks without being crushed, and the round grains are ideal to let oil and gas flow through. The Winona County Board adopted the ban in 2016 after public hearings that drew large crowds. The Land Stewardship Project spearheaded a 17-month grassroots campaign, citing risks to public health, air and water; damage to the scenic landscape of southeastern Minnesota; the impact on roads from heavy truck traffic and the loss of farmland. Minnesota Sands LLC sued, arguing it was an unconstitutional restraint on interstate commerce and it made worthless the company's mineral rights leases on nearly 2,000 acres of land in the county. The company says the silica sand there is worth between $3.6 billion and $5.8 billion. Winona County District Judge Mary Leahy rejected those arguments last November, so the company appealed.  Minnesota Sands says the ban violates the Commerce Clause of the U.S. Constitution, which gives Congress the power to regulate interstate commerce. The clause historically has been viewed as a restriction against state laws that discriminate against or unduly burden interstate trade. The company's lawyers note that Winona County's ordinance allows sand mining for local use in construction, landscaping and agriculture, but not for uses outside the local area. 

Texas Residents Urge Rejection of World's Largest Plastics Plant: 'Millions of Gallons of Toxic Wastewater a Day' Would Be Dumped Into Corpus Christi Bay -- The Center for Biological Diversity and more than 1,100 Texas residents are demanding that Texas regulators reconsider issuing a wastewater permit to a project that would be the world's largest plastics plant. The facility, funded by ExxonMobil and the Saudi Arabian government, would discharge more than 13 million gallons a day of toxic wastewater. It will exceed legal pollution standards, as the Center for Biological Diversity notes in a petition filed Wednesday with the Texas Commission on Environmental Quality.  The plant, which would receive more than $1 billion in state tax breaks, would "crack" the ethane in natural gas to produce almost 2 million tons of ethylene and polyethylene annually. Polyethylene pellets are the basic building blocks of plastic products. The Texas plant is part of a multibillion-dollar push by the fossil fuelindustry to increase global plastic production by 40 percent over the next decade. "This facility will dump millions of gallons of toxic wastewater a day into beautiful Corpus Christi Bay. That's right in the middle of critical habitat for endangered whooping cranes," said Emily Jeffers, an attorney with the Center for Biological Diversity. "Texas and its wildlife will pay a heavy price just to produce more cheap plastic that will litter our oceans and landscapes. Texans don't want toxins in their bays and rivers, and they don't want plastics polluting our oceans and seafood."

Visualizing the Oil Boom in the Permian Basin - The Permian Basin is a booming shale-oil producing region in the United States, which is located in western Texas and southeastern New Mexico. According to a 24 April 2018 article in Bloomberg, the region could very well grow into the largest oil patch on Earth in the next decade.  The Permian shale play is all about setting records. Now, the region may even become the world’s largest oil patch over the next decade.  Output in the basin is forecastto reach 3.18 million barrels a day in May, according to the Energy Information Administration. That’s the highest since the agency began compiling records in 2007. By 2023, the basin may produce 4 million barrels a day, according to the International Energy Agency. The Ghawar field in Saudi Arabia is currently the world’s biggest oil field, with capacity of 5.8 million barrels a day, according to a 2017 EIA report. This is all thanks to the size of the oil deposits, coupled with increased technology and efficiencies. “The technology is the biggest driver,” said Rob Thummel, managing director at Tortoise, which handles $16 billion in energy-related assets. “The basin in and of itself could end up being the largest oil field in the world, even bigger than Ghawar in Saudi Arabia." By contrast, top-producing members of OPEC such as Iran and Iraq pump less than 5 million barrels a day. Iran produced about 3.81 million barrels day in March, according to data compiled by Bloomberg.   “If the Permian was part of OPEC, it would be the fourth-largest OPEC member, right behind Saudi Arabia, Iran and Iraq,” Thummel said. “By the end of the year, the Permian probably overtakes Iran.”  We've been playing with NASA's Worldview application, and specifically with the filters that allow access to the nighttime lights imagery that NASA has created for its "Black Marble" projects for 2012 and 2016, and also the real-time imagery captured by NASA's Suomi National Polar-orbiting Partnership (NPP) satellite. In the following animated image, we'll show you how nighttime lights in the Permian Basin has changed from 2012 to 2016 and then on to a snapshot from 26 April 2018, which makes for a nice companion image to go along with Bloomberg's article.

Permian gas prices collapsing as production tests takeaway capacity limit - Production of crude oil and associated gas in the Permian continues to rise, despite pipeline takeaway constraints that have widened crude spreads and depressed natural gas prices at the Waha Hub. But while oil can be — and is being — transported by trucks and railroads when crude pipelines are full, natural gas needs to be either piped away or flared, and Permian gas production is now approaching the effective maximum takeaway capacity out of the basin. While a slew of new projects have been announced to relieve the Permian gas takeaway problem, the new capacity won’t arrive soon enough to keep Permian production from hitting the takeaway-capacity wall sometime in 2019.  Today, we begin begins a series examining Permian production trends and their implications for pipeline flows and pricing in Texas.We’ve been beating the drum for some time now in the RBN blogosphere about the coming onslaught of crude and associated gas production out of the Permian and the need for more pipeline takeaway capacity from the basin (see Omaha, Help on the Way, Witchy Waha, and It Was Good Living With You, (W)aha). More recently, in our All Dressed Up With Nowhere to Go blog series on Permian crude, we’ve been discussing takeaway constraints on the oil side and their deleterious effect on the crude price at Midland versus destination markets like the Cushing, OK, hub and the Gulf Coast. But with West Texas Intermediate (WTI) prices at close to $70/bbl — and Permian breakeven costs south of $40/bbl for many producers — differentials of $10, $15 or even $25/bbl probably would do little more than slow the pace of Permian production growth for crude and associated gas.

US oil producers battle to meet Iran shortfall - As President Donald Trump’s decision to reinstate sanctions on Iran sends oil prices higher, consumers and the administration might hope that US producers could come to the rescue with increased production.But logistical constraints, in particular insufficient pipeline capacity at the heart of the US shale boom in west Texas, are limiting how quickly American companies will be able to replace any lost Iranian crude exports taken off the global oil market.The difficulties being experienced in shale country help explain why the US has talked to large oil producers abroad about ways to increase supply and offset any impact from its exit from the Iran nuclear deal. The talks were revealed by Steven Mnuchin, Treasury secretary, hours after Mr Trump’s announcement on Tuesday.Oil produced in the Permian Basin of Texas and New Mexico, the white-hot centre of the shale boom, is becoming trapped with no easy route to a refinery or an export terminal.The hectic pace of drilling and the productivity gains have boosted output from the Permian Basin by 60 per cent in the past two years, to 3.2m barrels a day. The problem is that the pace of the boom is straining the ability of the region to keep up, with workers, with equipment and with pipelines.  “There is a huge capacity issue,” says John Zanner of RBN Energy, a research firm. “For all intents and purposes, pipelines are full.”

Exclusive: US official appeared to delay protections for endangered species at behest of oil group -- The Texas hornshell is a sleek green-grey mussel that once thrived in the Rio Grande watershed,  Amid a long-term decline in its range, the Obama administration in 2016 proposed to declare the mussel an endangered species. Upon taking office, however, the Trump administration changed tack.A top interior department official, Vincent DeVito, appears to take credit for helping to delay federal protections for the species at the behest of fossil-fuel industry groups, one of several examples of his willingness to prioritize the needs of extractive industries with business before the government, according to public records obtained by the Guardian and Pacific Standard as well as Documented and the Western Values Project, both watchdog groups.DeVito, a Boston energy lawyer and the former co-chair of Donald Trump’s presidential campaign in Massachusetts, is a little-known figure in the US government. He is one of a host of political appointees hired by Ryan Zinke, the interior secretary whose department oversees well over 400m acres of public land and can determine the fate of species that inhabit them. Yet DeVito is now emerging as a critical player. At a speech last summer to Americans for Prosperity, a political advocacy group backed by the Koch brothers, DeVito described his role at the department as “the office of energy dominance”. Officially, there is no such office, though “energy dominance” has become a slogan for the interior department’s fossil-fuel-first policy agenda.  “The war on American energy is over,” DeVito told the activists, according to a recording of the speech obtained by the Guardian. “And, matter of fact, if there is a war, we’re going to win it and we’re going full bore,” he said, before adding that the administration’s approach would be a “responsible” one.

Pipeline Spews Raw Crude Oil in Oklahoma City -Raw crude oil spewed from a ruptured Sunoco pipeline in Oklahoma on Thursday. The Oklahoma City Fire Department and hazmat crews responded to the situation after receiving reports of a " yellow liquid " shooting into the air near an oil and gas well site in Edmond, a suburb outside of Oklahoma City.Officials briefly closed off a section of road on Pennsylvania Avenue and denied access to some homes in the neighborhood north of the release. The neighborhood was not evacuated."This is all taken care of now," the fire department tweeted later that afternoon. Cleanup efforts are underway.News 4 reported that the leak from Sunoco's pipeline occurred in the area of a natural gas booster plant operated by Colorado-based DCP Midstream.The release occurred in a well-populated area, with many houses surrounding the facility. Some residents expressed dismay after their property was coated in oil. One tweeted to DCP Midstream, "a massive leak at your facility in Edmond, OK, just coated my entire house and my neighborhood with crude. What are you going to do to clean it up?!?" A DCP spokesperson told News 4 it has no control over the Sunoco pipeline but is assisting with cleanup.

Lawsuit: Energy company cut safety budget before fatal blast — A shareholder lawsuit alleges Anadarko Petroleum was focused on keeping oil and gas flowing from older wells, not fixing potential safety problems, in the months before a fatal house explosion in Colorado linked to an Anadarko well. The lawsuit cites former company employees as saying Anadarko had slashed its safety budget and staff and had only a skeleton crew for refurbishing wells. “A well’s potential safety risks, and whether it was located in a residential area or near a school, played no part in whether it was chosen for remediation,” the lawsuit said. The claims are in court documents filed last year. They were first reported Tuesday by the Colorado Independent. Company spokeswoman Jennifer Brice said Anadarko does not comment on pending lawsuits. The lawsuit said Anadarko’s actions caused stock prices to fall, hurting investors. The lead plaintiff is the pension fund for the Philadelphia Iron Workers union, which owns Anadarko stock. The lawsuit was filed in federal court in Texas, where Anadarko is based. Two people died and a third was injured in the April 2017 explosion in the town of Firestone, about 30 miles (50 kilometers) north of Denver. Investigators said the explosion was caused by odorless, unrefined natural gas from a pipeline that was severed about 10 feet (3 meters) from the house. The line was believed to be abandoned but was still connected to an operating Anadarko well with the valve turned to the open position, investigators said. Authorities said the gas seeped into the home’s basement. The investigation is still underway. 

Landowners, Environmentalists Unite to Stop Gas Export Facility - Sierra Magazine - When Clarence Adams learned that a Canadian company could use eminent domain to seize his land in order to move fracked gas through a pipe en route to Asia, he was outraged.“I’ve spent 27 years trying to pay off my land,” says Adams, gesturing at the mature oaks and conifers gracing his eight-and-a-half-acre property outside of Tenmile, Oregon. “If there’s a break in that pipe and a fire, my house is toast.” Adams is part of a stubborn contingent of holdouts who are refusing to sell easements for the Pacific Connector Gas Pipeline—a proposed gas conduit that, if built, would move fuel to Jordan Cove, a proposed liquefied natural gas (LNG) facility in Coos Bay, Oregon. Once there, the gas would be super cooled, loaded into tankers, and shipped to markets in Asia.  The project has met with fierce local resistance since it was first introduced in 2004 as an import project. When the North American fracking boom led to a glut of gas domestically, project planners flipped Jordan Cove into an export terminal—one of many LNG terminal projects proposed for the United States and Canada over the past several years. Opponents say the Pacific Connector pipeline route is ill considered. The proposed route crosses 400 known waterways and much of it is forested. The pipeline would require a 95-foot temporary and a 50-foot permanent easement along its length, and local residents say simply building it could degrade water quality and further fragment the forest.   The proposed Jordan Cove LNG terminal would be built on Coos Bay’s sandy north spit, well within the tsunami zone. Eighteen million cubic yards of sediment would be removed just to widen and deepen the channel, destroying clamming beds and fish habitat. If built, the LNG facility and supporting pipeline would help fuel global climate change, as they would incentivize the drilling of new gas wells in the American West and in Canada.

Pembina says market fundamentals offer hope for Jordan Cove LNG project - Pembina Pipeline executives said Friday they are more confident than in the past of being able to advance the Jordan Cove LNG export project in Oregon, thanks to stronger netbacks on shipments to Asia and expectations of tighter global supply by early next decade. Pembina, which took control of the five-year-old project following its acquisition of Veresen in October 2017, has yet to reach a final investment decision on the terminal and Pacific Connector Pipeline, which would deliver feedgas to the facility. But it continues to talk to prospective buyers to secure long-term contracts. It also is spending money on development and seeking regulatory permits. Among the second wave of US export projects, Jordan Cove is currently the only one being developed on the West Coast, a location that would offer buyers a shorter route to Asia than from other facilities concentrated largely on the Gulf Coast. During a conference call with investors to discuss first-quarter financial results, executives said competition from LNG Canada's proposed export terminal in British Columbia, which is expected to reach FID by October, won't interfere with Jordan Cove's plans. And, they said, recent market fundamentals point to a stronger case for the need for Jordan Cove. "It certainly has its challenges, but with the run-up in prices in Tokyo, and now I think there is pretty broad consensus that we'll be short LNG capacity in the 2020-2023 timeframe, it's kind of shined a light on that project," CEO Michael Dilger said on the call. It was Jordan Cove's failure to show sufficient demand for its project that was cited by the US Federal Energy Regulatory Commission as a key reason for the agency's denial in March 2016 of the operator's first permit application. Less than two weeks later, the project secured a preliminary agreement covering key commercial terms with one Japanese firm, Jera, and the next month it reached a preliminary agreement with another, Itochu. 

Trans Mountain Pipeline protesters arrested in downtown Seattle - Police arrested 14 demonstrators protesting tar-sands development and the proposed Trans Mountain Pipeline in Canada on Monday after they occupied the lobby of the Russell Financial Center and shut down traffic at Second Avenue and Pine Street with four tepees erected in the middle of the road.Police diverted traffic around the area. Interim Police Chief Carmen Best was present, and protesters were eventually told to disperse or face arrest. More than a dozen remained in the street, and they were peacefully placed in restraints and loaded onto a police van.Chase Bank in particular was targeted for its investment in the Trans Mountain Pipeline.The pipeline project — an expansion of an existing pipeline — would run from Alberta to British Columbia, where its oil would be loaded onto tankers that would travel the Strait of Juan de Fuca, tripling traffic and further endangering the already critically endangered southern resident killer whale population.  Opposition to the expansion has been fierce, and has included the provincial government in British Columbia, as well as many First Nations leaders. Developer Kinder Morgan curtailed spending on the $7.4 billion expansion in April, blaming opposition and delays in British Columbia, and setting a May 31 deadline for the federal and provincial governments to find a solution or risk canceling the project.That would suit opponents fine. “The message to JPMorgan Chase is they are contributing to climate disaster,” Rachel Heaton, a member of the Muckleshoot Indian Tribe, said during Monday’s demonstration. “We will continue taking over banks until we are heard.”

An Arctic about-face: Alaska natives, who fought offshore oil projects, now leading the charge to drill - For years indigenous people living in small villages along Alaska’s Arctic coast fiercely fought offshore drilling. Now they want a piece of the action.When Shell first showed up in 2007 with a fleet of drillships and support vessels, and parked them in the migration path of the bowhead whale in the eastern Alaska Beaufort Sea, the Inupiats went to court. An injunction from the US Ninth Circuit stopped the company and started a chain of problems that would ultimately defeat Shell’s multibillion dollar Arctic initiative.Fast-forward to 2018. The Inupiats have now taken over Shell’s offshore Beaufort Sea leases, where there were also earlier oil discoveries, and intend to develop them, most likely by partnering with larger firms. In a decade, indigenous people in northern Alaska have come full circle, from hostility to cautious embrace of offshore drilling.Arctic Slope Regional Corporation, owned by all Inupiats of the North Slope, is playing its cards close on its plans for 20 former Shell OCS leases off Camden Bay, in the Eastern Beaufort.The US Bureau of Safety and Environmental Enforcement approved the transfer of Shell’s leases to ASRC April 13. The area is highly prospective and includes Union Oil’s small “Hammerhead” oil discovery made in 1986 and two Shell prospects, Sivulliq and Torpedo, outlined in 2012. A well was partly drilled by Shell at Sivulliq but not completed.

How Wall Street Enabled the Fracking ‘Revolution’ That’s Losing Shale Oil Companies Billions --The U.S. shale oil industry hailed as a “revolution” has burned through a quarter trillion dollars more than it has brought in over the last decade. It has been a money-losing endeavor of epic proportions. In September 2016, the financial ratings service Moody’s released a report on U.S. oil companies, many of which were hurting from the massive drop in oil prices. Moody’s found that “the financial toll from the oil bust can only be described as catastrophic,” particularly for small companies that took on huge debt to finance fracking shale formations when oil prices were high. And even though shale companies still aren’t turning a profit, Wall Street continues to lend the industry more money while touting these companies as good investments. Why would investors do that? David Einhorn, star hedge fund investor and the founder of Greenlight Capital, has referred to the shale industry as “a joke.” “A business that burns cash and doesn’t grow isn’t worth anything,” said Einhorn, who often goes against the grain in the financial world. Aren’t investors supposed to be focused on putting money toward profitable companies? While, in theory, yes, the reality is quite different for industries like shale oil and housing. If the U.S. financial crisis of 2008 has revealed anything, it is that Wall Street isn’t concerned with making a “shitty deal” when it means profits and bonuses for its traders and executives, despite their roles in the crash. Wall Street makes money by facilitating deals much like a Vegas bookie makes money by taking bets. As the saying about Las Vegas goes: “The house always wins.” What’s true about casinos and gambling also holds true for Wall Street.

E&P's return to profitability in 2017 tied largely to post-crash discipline and focus -  It’s no surprise that the plunge in crude oil prices between mid-2014 and early 2016 was a five-alarm wake-up call for the 44 exploration and production companies we follow. To deal with the trauma of the crude price collapse — and generally soft natural gas prices to boot — the industry undertook a dramatic strategic and operational transformation that enabled it to climb out of a huge hole and return to profitability in 2017. Key factors driving this impressive turnaround included the high-grading of portfolios, intense capital discipline and a heightened focus on operational efficiencies. However, the trajectory of recovery has varied from company to company because of the pace of their portfolio transformations, their geographic focus and, most significantly, the commodity mix of their production. Today, we look at how specific E&Ps within our three peer groups — Oil-Weighted, Diversified, and Gas-Weighted — have been working their way back to black. In Part 1 of this two-part series, we noted that our universe of 44 E&P companies went through a major rough patch mid-decade, swinging from $57 billion in pre-tax operating profits in 2014 to $131 billion in losses in 2015. They clawed their way back, though, trimming their losses to $31 billion in 2016 and reporting $1.6 billion in pre-tax operating profits in 2017. Thirty-seven of the 44 companies vaulted into the black in 2017, compared with just four reporting pre-tax operating profits in 2016. They generated more than $81 billion in pre-tax operating cash flow in 2017, compared with the $49 billion they posted in 2016. And while oil prices have risen to near $70/bbl in recent weeks, our E&Ps have not let down their guard. We estimate that cash flows for these companies will increase another $30 billion — or 37% — in 2018, to $111 billion. Now we kick-off our deeper dive into the 44 companies we cover, through the prism of our three peer groups.

As Rest of World Moves Towards Renewables, US Keeps Offering Exclusive Tax Breaks for Fossil Fuels: About a half decade ago, as the shale drilling rush was sweeping across the US, drillers needed upfront cash -- and quick -- to let them snap up acreage, drill and frack exploratory wells, and hone their skills at the horizontal drilling and hydraulic fracturing (fracking) that fueled an oil and gas boom. Bankers and financiers began attending shale industry conferences, marketing a clever idea. By dusting off an obscure part of the tax code, drillers and pipeline builders could attract a different class of investor than would usually look at a boom-and-bust prone industry, an investor hunting for stability and predictability. Form a Master Limited Partnership, or MLP, shale drillers and pipeline builders were advised, and you'll be able to access that capital.The pitch for investors on MLPs was hard to resist: They "offer high yields and low taxes," as the Financial Times described them in 2013. The tax benefits were a huge part of the draw, especially for wealthy investors (not just individuals, but also pension funds, which poured in billions).The biggest benefit: a tax loophole that lets MLPs dodge so-called "double taxation," paid by regular corporations and much-hated by investors, in which tax is paid both by the corporation on earning money and by investors as personal income. No corporate income tax, more money to go around for everyone but the government.In 2000, MLPs had a total market value of less than $14 billion; by 2014, they had drawn over $500 billion in investments and some people were breathlessly predicting MLPs could wind up a trillion-dollar asset class.And MLPs offer another quirk that investors found exciting. Holders not only stand to collect "distributions," or a percentage of profits every three months, they can also trade MLP shares like stocks, meaning there were two ways to profit during the sector's rapid expansion. Meanwhile, the tax benefits were substantial -- from 2009 to 2012, MLPs shaved $13 billion dollars off their beneficiaries' tax bills, one 2013 report calculated.

Trouble On The Way As Implementation Of IMO's Low-Sulfur Bunker Rule Looms -- Shipowners and refiners are struggling with how to prepare for January 1, 2020, when all vessels involved in international trade will be required to meet significantly stricter limits on emissions of sulfur oxides (SOx), either by using fuel with a sulfur content of less than 0.5% or by “scrubbing” the exhaust of ship engines when using the much higher-sulfur bunker fuel that most ships now rely on. The International Maritime Organization’s (IMO) new sulfur rule isn’t a minor tweak. It’s a game changer that already is causing widening spreads on the futures market between 3.5%-sulfur heavy fuel oil (HFO) — the traditional global bunker fuel — and rule-compliant low-sulfur distillates. The rule also promises to be a boon to complex Gulf Coast and other refineries that can break down residual-based HFO into higher-value, lower-sulfur distillates. Today, we begin a new series on how shipowners, refiners and the markets for HFO and low-sulfur marine fuel are responding (or not) to the coming change in global bunker requirements.

Ex-Venezuela Oil Boss: PDVSA Is Collapsing - The man who ran Venezuela’s state oil company PDVSA for a decade after 2004 says that the country’s oil firm is on the cusp of total collapse and expects oil production to drop by 600,000 bpd each year amid lack of investment. Rafael Ramirez, who has long been a rival of Venezuela’s incumbent leader Nicolas Maduro within Hugo Chavez’s inner circle, told Bloomberg in a phone interview that “PDVSA may fall into an accelerated spiral downward.” According to OPEC’s secondary sources, Venezuela’s oil production averaged 2.154 million bpd in 2016 and 1.916 million bpd in 2017. In March 2018, its production plunged to 1.488 million bpd. Ramirez became oil minister in 2002 and then head of PDVSA in 2004. During his ten-year tenure at the company, Venezuela’s production dropped by 10 percent. Since Ramirez left PDVSA, oil production has lost another 30 percent, with the steepest drops occurring over the past two years amid total economic collapse and lack of investment.At the end of last year, Venezuela said that it would launch a criminal investigation into Ramirez over alleged corruption in a wider graft probe that ended with dozens of oil executives arrested.The lack of knowledge and experience among the top oil men in Venezuela, together with infighting within the oil circles, has led to PDVSA’s plunging production, Ramirez told Bloomberg. He also thinks that Venezuela may need to increasingly give control of PDVSA to international companies operating there. Ramirez is currently in a self-imposed exile in a European city.

Conoco aims to seize PDVSA oil inventories in Curacao: sources (Reuters) - ConocoPhillips is trying to seize PDVSA’s [PDVSA.UL] oil assets at the 335,000-barrel-per-day (bpd) Isla refinery in Curacao, which would expand its control over the Venezuelan state-run company’s barrels for export, according to sources close to the matter. Under court orders to enforce a $2 billion arbitration award by the International Chamber of Commerce (ICC), the U.S. oil firm last week temporarily seized about 4 million barrels of crude that PDVSA had stored on the Dutch Caribbean island of St. Eustatius and took control of a terminal on Bonaire, prompting PDVSA to move several oil tankers away from the region. Conoco’s actions could affect PDVSA’s ability to export some 400,000 bpd shipped from the Caribbean, or about a third of its total exports, according to Reuters calculations based on the state firm’s internal reports. The legal maneuvers further imperil PDVSA’s declining oil revenue and Venezuela’s economy, which is in deep recession with shortages of medicine and food. OPEC-member Venezuela is almost completely dependent upon crude exports, which slid 29 percent to 1.19 million bpd in the first quarter, according to Thomson Reuters Trade Flows data. Its refineries ran at just 31 percent of capacity from January through March. Piling pressure on Venezuela, Canadian mining company Rusoro is seeking the attachment of assets belonging to Citgo as part of an arbitration dispute, according to a Monday filing in the Southern District of Texas. In 2016, Rusoro was awarded more than $1.2 billion in damages awarded by a World Bank tribunal that ruled that Venezuela had unlawfully seized the company’s gold mine, but Venezuela has yet to pay. Conoco’s writs of attachments, served through at least two court orders on facilities in Aruba, Bonaire, Curacao and St. Eustatius, are seen as a legal maneuver to temporarily retain assets — from stored oil, to cargoes and facilities — and could empower the U.S. company to sell them later. 

ConocoPhillips Appears Ready To Take Control Of Venezuelan Oil Sector Assets To Enforce $2 Billion Arbitration Award -- May 7, 2018 -- From SeekingAlpha:

  • ConocoPhillips has moved to take Caribbean assets of Venezuela’s PDVSA oil company to enforce a $2B arbitration award, actions that could further harm PDVSA's declining oil production and exports
  • COP has targeted facilities on the islands of Curacao, Bonaire and St. Eustatius that accounted for ~25% of Venezuela’s oil exports last year and play key roles in processing, storing and blending PDVSA’s oil for export
  • COP’s actions could further impair PDVSA’s declining oil revenue and Venezuela's collapsing economy; the country is almost completely dependent on oil exports, which have fallen by a third since its peak and its refineries ran at just 31% of capacity in Q1

See post, May 5, 2018, just two days ago.

Why Russian Gas Is Critical For The UK - Although some companies have learned to ride the waves of geopolitics quite efficiently, still in most cases political tensions only complicate the dealings of energy companies. The Skripal poisoning case has driven a massive political wedge between the United Kingdom and Russia (nations whose relations are historically strained already) and is on the verge of blighting their energy ties. The UK Government’s threats to ban Russian gas imports altogether would be a very short-sighted step, the harm of which would take many years to undo. As opposed to the usual rhetoric of ‘‘safeguarding energy security“ and ‘‘countering Russian influence“, both London and Moscow have a lot to win from a good energy relationship.The Skripal case is slowly turning into a whodunnit where no one will tell you what really happened and you have to reconstruct everything by yourself – why was the allegedly lethal nerve agent not that lethal, who perpetrated the poisoning and how exactly. Usually when analyzing foreign affairs‘ scandals, it is imperative to look at who could benefit from such a deterioration. One thing is for sure – energy companies only stand to lose. Firstly, British companies might see their maneuvering space narrowed down, especially against the background of Brexit jeopardizing Britain’s adherence to the internal energy market (IEM) of Europe. Although the May government wishes to remain in the IEM, so as not to risk the potential $700 million per year expenses it could bear in a worse-case scenario breakup. Even if a disaster can be averted and the United Kingdom would stay, regardless if in a limited or full-fledged manner, in the IEM, infrastructure funding from EU funds will almost certainly evaporate. This could be one of the Brexit’s most serious energy consequences, since 16 EU projects of common interest are UK-related, without funding from Brussels, many fall into the risk category of not being implemented. Continental Europe might turn out to be more resolute vis-Ă -vis UK Brexit demands than expected, for instance, it might justifiably ask whether the €9 billion invested in British electricity and gas projects in 2012-2017 under EIB auspices could have been allocated someplace else. But the risk of relinquishing on Paneuropean trade preferences and investment is not the only specter haunting the UK’s energy specialists.

Europe Buys More Russian Gas Despite Strained Relations - The West-Russia relations have reached a new low since the Cold War amid the spy poisoning scandal in the UK, allegations of Russian meddling in elections, and fresh U.S. sanctions on Russia. Yet European countries continue to buy increased amounts of Russian gas, and Russia’s state-held gas giant Gazprom is boosting production and exports, and is obtaining approvals in individual countries for its Nord Stream 2 gas pipeline that has divided the EU over fears of a tightening Russian grip on gas supplies. In recent months and weeks, Gazprom has taken advantage of high demand in Europe and of decreased gas supplies to Europe from Russia’s competitors, Maxim Rubchenko writes for Russian news agency RIA Novosti. Russia—which already supplies around one-third of Europe’s gas—boosted deliveries in the winter, one of the coldest winters in Europe in the past decade, and continues to ship higher volumes even after the winter, as gas importing countries replenish gas storage supplies that had been drained amid the cold snaps.  Gazprom gas deliveries to Europe reached an all-time high in March, beating a previous record from January 2017, the Russian company says. In the first quarter of this year, Gazprom’s gas supply to Europe increased by 6.6 percent compared to the same quarter last year. Gazprom’s gas deliveries to European countries in April, even after the winter heating season ended. Demand in Europe has stayed high after the winter ended. First, because gas storage levels were low, and second—because some of the other traditional gas-supplying countries have decreased supplies over issues or maintenance at facilities.Norway, Russia’s closest competitor, had to cope with an unplanned outage at the Skarv gas field and Kollsnes processing plant in April. Flows to Europe were reduced after a compressor at the Skarv field in the Norwegian Sea failed. In the south, Libyan gas flow from the Greenstream pipeline to Italy was stopped on April 2 due to maintenance to integrate gas from a new phase of development at the offshore gas field Bahr Essalam. The maintenance was initially expected to be completed in two weeks, on April 18, but the resumption of gas supplies has been postponed several times, so Italy received no gas from Greenstream for the whole month of April.

European pipeline constraints could limit Russian natural gas imports An increase in Europe's natural gas import requirements in the next two years could test the transit network for Russian gas, potentially even leading to Gazprom being unable to meet European demand and a spike in gas prices during high-consumption periods, analysts at the Oxford Institute for Energy Studies (OIES) have warned. The colder-than-average weather in Europe in February and March saw increased European demand for Russian gas, with the monthly utilization rate rising to 86% in March, the OIES said in a paper published Wednesday. Gazprom supplies to the Far Abroad (Europe plus Turkey, but not the countries of the former Soviet Union) hit an all-time daily record of 713 million cu m on March 2. "The system is approaching full utilization during winter months," the OIES said."Any further increase in Russian gas deliveries to Europe -- northwest Europe in particular -- in 2018/2019 could see a greater number of days on which the system is full should Europe experience another cold winter in the context of a continued decline in European gas production," it said."If the rise in European import demand is substantial enough, this bottleneck could be sufficient to cause a 'shortage' of Russian gas relative to demand, and price surges on the European spot gas market."

Is Australia running out of fuel? PM orders supply review - BBC News: The Australian government has ordered a review of fuel security after experts warned the country only has weeks of petrol, diesel and aviation fuel supplies left in its reserves. The country's energy minister, Josh Frydenberg, said it was the "prudent and proper thing to do" but should not be interpreted as Australia having a fuel security problem. The International Energy Agency expects countries to have 90-days worth of fuel in reserve, but Australia has not met those levels since 2012.  In January this year, the latest data available, Australia held just under 50 days worth of fuel stocks. Five years ago, it had nearly double that amount.The Australian Petroleum Statistics 2018 cites Australia as having 23 days worth of petrol, 20 days aviation fuel and 17 days diesel oil in reserve to use in an emergency. The remainder would come from overseas credits - a system that would allow Australia to buy from overseas if things went badly wrong.Australia is currently dependent on imports for more than 90% of its fuel needs. The crude oil comes from the Middle East and is processed at refineries in South Korea, China and Singapore.  It is then shipped to Australia as diesel, aviation fuel and petrol.  Mr Frydenberg says Australia's reliance on imported fuel has increased in the last 10 years because "three of Australia's seven domestic refineries have closed and our domestic oil production has declined by a third as existing fields become exhausted".

China issues 19.33 mil mt oil export quotas under general trade route --China has allocated 19.33 million mt of oil product export quotas under the general trade route to the country's five state-owned oil companies -- CNPC, Sinopec, CNOOC, Sinochem and China National Aviation Fuel, market sources said late Sunday. The new allocations bring the total oil product quotas allocated, comprising the processing trade route and the general trade route, to 39.33 million mt to date this year, equating to 96% of the actual products outflow volume in 2017 and 91.5% of the total quotas allocated last year. This is the second round of allocations for oil products export this year. Market sources expected additional quotas for gasoil and jet fuel would be released under the processing trade route soon. This is because export demand for both products is estimated to be strong in 2018, while the year-to-date quota allocations are below those for the full 2017 year. In contrast, gasoline quotas issued to date this year are 6% higher than the 2017 quota. Moreover, "the barrels exported from bonded storage, which for refueling airplanes or vessels for international voyage, are required to be exported under the processing trade route," said a Beijing-based trader. Beijing issued 120,000 mt of export quota for gasoil under the processing trade route in the first round, and 3.56 million mt for jet fuel. Market sources said it was possible there would be only two quota allocation rounds this year, with the total volume similar to that for the whole of last year. 

Ways India could be affected by U.S. decision to pull out of Iran nuclear deal - Despite United States President Donald Trump’s decision to pull out of the Joint Comprehensive Plan of Action (JCPOA), the nuclear deal itself won’t be scrapped as long as Iran and the other signatories: the U.K., France, Russia, China, Germany and the European Union remain committed to it.Even so, India could face the impact of the U.S. decision on the deal as well as instituting the “highest level of economic sanctions” in several ways:

  • 1. Oil prices: The impact on world oil prices will be the immediately visible impact of the U.S. decision. Iran is presently India’s third biggest supplier (after Iraq and Saudi Arabia), and any increase in prices will hit both inflation levels as well as the Indian rupee, which breached ₹67 to the U.S. dollar this week. In the past week alone, crude prices have crossed $70/bbl (barrel) level, touching a four-year high. After Iranian President Hassan Rouhani’s visit to New Delhi in February, India committed to increasing its oil imports from Iran, which were expected to double to about 396,000 bpd (barrels per day) in 2018-19 from about 205,000 bpd in 2017-18. Non-oil trade with Iran, which stood at about $2.69 billion of the total trade figures of $12.89 billion in 2016-17 may not be impacted as much, as New Delhi and Tehran have instituted several measures in the past few months, including allowing Indian investment in rupees, and initiating new banking channels, between them.
  • 2. Chabahar: India’s moves over the last few years to develop berths at the Shahid Beheshti port in Chabahar was a key part of its plans to circumvent Pakistan’s blocks on trade with Afghanistan, and the new U.S. sanctions could slow or even bring those plans to a halt depending on how strictly they are implemented. India has already committed about $85 million to Chabahar development with plans for a total of $500 million on the port, while a railway line to Afghanistan could cost as much as $1.6 billion. Last year, the U.S. took a lenient line on India’s wheat consignment of 1.1 million tonnes sent via Chabahar, with the former U.S. Secretary of State, Rex Tillerson, saying the U.S. wanted to target the regime, not the Iranian people. His replacement, Mike Pompeo, and the new U.S. National Security Adviser, John Bolton, have a much tougher line on Iran and any further restrictions they place will make India’s Chabahar plans more expensive and even unviable.

Hedge funds hold fire as oil prices hit multi-year highs: Kemp (Reuters) - For all the bullish commentary around oil prices at the moment, hedge fund managers have made only minor changes to their overall position in petroleum futures and options in the last few weeks. To the extent they have made any changes at all, fund managers have been reducing rather than adding to bullish positions since the middle of April ( ). Hedge funds and other money managers cut their net long position in the six most important petroleum futures and options contracts by 28 million barrels in the most recent week. Fund managers have reduced their net long position for two consecutive weeks, to 1.376 billion barrels by May 1 from a recent peak of 1.411 billion barrels on April 17. In a repeat of the week before, the liquidation last week was concentrated in crude oil, while portfolio managers increased their exposure to refined products slightly.  The fundamental outlook remains fairly bullish with strong growth in oil consumption, continued output restraint by OPEC and a draw down in oil inventories below the five-year average. Production and exports from Venezuela are declining and the United States is threatening to withdraw from the Iran nuclear agreement which could cut that country’s exports in the coming months. But hedge fund managers have already amassed a near-record bullish position in futures and options contracts linked to crude and fuels. Positioning has become exceptionally stretched and lopsided across the petroleum complex, with hedge funds’ long positions outnumbering short ones by a ratio of almost 12:1 (and as much as 17:1 in the case of Brent). Fund managers show no inclination to add substantially to their existing longs, which may indicate they are fully invested for the time being. 

WTI Tops $70 For First Time Since Nov 2014 As Iran Deal Deadline Looms - With the Iran Deal looking increasingly fragile, front-month WTI futures have just traded above $70 for the first time since Nov 2014.  $70 just happens to be the 50% retracement from the Aug 2013 highs to the Feb 2016 lows...  As's Tsvetana Paraskova notes, US President Donald Trump has another week to decide whether to waive the sanctions against Iran. Expectations that he would not waive the sanctions this time around have supported the price of oil over the past month, with Brent briefly breaching above $75 to its highest price level since November 2014.Analysts are still struggling to quantify the impact of possible fresh sanctions on Iran and prices are expected to be volatile as the deadline for President Trump’s decision is getting closer.The month of May could be a very important one for oil prices with geopolitical risks stacked and too close to call. Apart from the Iran sanctions waiver, the market will be looking to the Venezuela presidential election that socialist leader Nicolas Maduro has scheduled for May 20.“The geopolitical landscape will therefore remain tense and price conditions volatile,” Stephen Brennock, an analyst at PVM Oil Associates, told Platts on Friday.Commenting on the Iran sanctions waiver, Commerzbank analysts said in a note:“This will be the main issue preoccupying the oil market, with fundamental factors such as stock levels and production data taking a backseat until this has been resolved”.Even more worrisome, as's Kent Moors writes, is that Trump walking away from the deal, and possibly re-imposing sanctions on Iran could throw the oil market into chaos.

ICE Brent rises above $75/b, set to climb higher -- Crude oil futures were higher during Asia mid-morning trade Monday, with front month ICE Brent July futures hitting above $75, while the prompt month NYMEX crude oil June futures stood above $70/b, mainly on the back of the ongoing geopolitical tension between US and Iran coupled with trade war tensions between US and China being back on the table. Investors had shrugged-off higher rig counts and the stronger US dollar, saying that prices were set to hit new highs amid an increase in demand for crude oil. At 11:05 am Singapore time (0305GMT), July ICE Brent crude futures were up 46 cents/b (0.61%) from Friday's settle to $75.33/b, while the NYMEX June light sweet crude contract was up 53 cents/b (0.76%) at $70.25/b. In light of the recent gains in crude oil prices, rig counts in the US rose by nine to 834 for the week ending May 4, marking the fifth consecutive weekly rise, Baker Hughes reported. "The lack of any progress on the US-Iran nuclear waiver is precisely what is pushing oil prices higher as West Texas Intermediate crude oil traded above the $70 mark for the first time since November 2014 on Friday," OANDA's head of trading Stephen Innes said. "We're in the thick of it now as the president has until May 12 to decide whether the US will stay in a deal with Iran or not," Innes added. Meanwhile, industry sources expected a reversal in the recent crude builds in inventory as the impending driving season in US should bolster a healthy demand for gasoline, Mitsubishi Corp.'s senior advisor Tony Nunan said. "On the JCPOA, all signals point to Trump wanting to pull out from the deal but it could be extended one more time. I feel that China and Russia will not re-impose the sanctions ," Nunan added. 

Oil surges on Venezuela-Conoco dispute, Iran sanction worries  (Reuters) - Oil prices rose for the fourth straight day on Monday to hit levels not seen since late 2014, boosted by the latest trouble for Venezuelan oil company PDVSA and the possibility that the United States could re-impose sanctions on Iran.  U.S. West Texas Intermediate (WTI) crude futures rose $1.01, or 1.5 percent, to settle at $70.73 a barrel. This was the first time since November 2014 that WTI had climbed above $70. Brent crude futures jumped $1.30, or 1.7 percent, to settle at $76.17 a barrel. U.S. oil major ConocoPhillips moved to take Caribbean assets of Venezuela’s state-run PDVSA to enforce a $2 billion arbitration award. “If ConocoPhillips is successful, then it will limit the revenues PDVSA will have and give them even more problems paying their bills and producing their oil,” . In total, the company’s actions would affect about 400,000 barrels per day (bpd) typically shipped from the three locations, about a third of its exports. In the first quarter, PDVSA exported 1.19 million bpd of crude from its terminals in Venezuela and the Caribbean, a 29-percent decline versus the same period last year, according to Thomson Reuters data. Venezuela’s oil output has halved since the early 2000s. U.S. President Donald Trump said a decision on whether to remain in the Iran nuclear deal or to impose sanctions would be announced at 2:00 p.m. EDT (1800 GMT) on Tuesday, four days earlier than expected. “I think it’s a sign that he’s planning on reimposing sanctions, and the only question for oil markets is how soon,” . “I think they would as quickly as possible try to implement the sanctions.” The agreement has a dispute resolution clause that provides at least 35 days to consider a claim that any party has violated its terms. That can be extended if all parties agree.

Trump Tears Up The Iran Deal - Oil markets saw extreme volatility on Tuesday, with prices originally crashing on rumors that the Iran deal would remain in place before Trump tore it up. On Monday, oil prices jumped to their highest level since late 2014, with WTI jumping above $70 per barrel for the first time in years. Oil gave up some of those gains on Tuesday morning as various media outlets confused the markets with contradictory statements, but as soon as the press conference started, prices started to recover as President Trump announced the end of the nuclear deal and promised to re-impose economic sanctions against the Islamic Republic of Iran.  President Trump said he would announce his decision on the Iran nuclear deal today at 2 pm ET. Oil prices fluctuated in anticipation of President Trump's speech and were down about 2.5% before the broadcast. President Trump mentioned in the conference that his country will re-impose economic sanctions of the ''highest level'' and that they will be instituted in the next couple of months. Analyst estimates vary on the implications, ranging from zero impact to knocking as much as 800,000 bpd offline. French oil giant Total, one of the few western companies with big plans for Iran, is hoping that U.S. action won’t derail its $1 billion deal to help develop the South Pars gas field. "The geopolitical consequences of a possible dismantling of the JCPOA would likely to play a larger and long-lasting role in pushing oil prices higher than short-term policy uncertainty," Michael Cohen, Barclays director of energy market research, said in a research note Monday.  OPEC production dipped in April yet again, falling to a one-year low. According to S&P Global Platts, output fell to 32.0 million barrels per day (mb/d), a decline of 140,000 bpd from March, and crucially, 730,000 bpd below the group’s stated target. The over-compliance is the result of a rapid and ongoing deterioration in Venezuela’s production, plus Iraq’s output dipped for the first time in months.

WTI Tumbles On CNN Report Trump Won't Withdraw From Iran Deal   WTI Crude is testing a $67 handle, down over 4% this morning, and accelerating lower as CNN reports that Trump will announce new sanctions on Iran but will not withdraw from the nuclear deal...Despite earlier reports that Mike Pompeo has already briefed European leaders on Trump's decision to withdraw, CNN claims he will not and that has sparked more selling in WTI...And Energy Stocks...  And commodity currencies (RUB and CAD getting hit hard)  Perhaps President Trump noticed how soaring oil (and gasoline) prices were eating into his tax cuts? However, CNN also reports that Trump will announce additional sanctions on Iranian oil exports (which should counter the current drop in price) and is expected to allow a grace period to offer Iran Deal proponents an opportunity to renegotiate.

Oil cuts losses as Trump plans 'powerful' sanctions on Iran, withdraws from nuclear deal - Oil prices cut some of their losses by the closing bell on Tuesday, following President Donald Trump’s announcement that he will impose “powerful” sanctions on Iran as the U.S. withdraws from the Iran nuclear deal.The deal between Iran and a group of world powers had lifted most U.S. and international sanctions on Tehran in return for its agreement to curb its nuclear activities. Some analysts have said the reinstatement of sanctions could lead to tighter global oil supplies as they make it more difficult for Iran to export oil.Iranian production, however, “is unlikely to be significantly impacted by pulling out of the agreement unless [Trump] can convince other allies to reimpose sanctions,”   June West Texas Intermediate crude oil fell by $1.67, or nearly 2.4%, to settle at $69.06 a barrel on the New York Mercantile Exchange. It hit a low of $67.63, marking a drop of as much as 4.3% from Monday’s finish. Futures closed 1.5% higher at $70.73 a barrel on Monday, the highest settlement for a front-month contract since Nov. 26, 2014, according to FactSet data.International benchmark July Brent crude fell $1.32, or 1.7%, to $74.85 a barrel on ICE Futures Europe. On Monday, the contract finished up 1.7% to $76.17—also the highest finish since late November 2014.Trump on Tuesday called the 2015 Iran deal “defective at its core” and said he would institute “the highest level of economic sanctions.” The sanctions come into effect after a “wind-down” period, according to the U.S. Treasury Department. For now, the current oil price movement has reflected a “buy on the rumor, sell on the news” reaction

Why oil prices didn't rally after Trump announced 'powerful' Iran sanctions - President Donald Trump’s decision to pull the U.S. out of the Iran nuclear agreement and to impose “powerful” economic sanctions on Tehran wasn’t enough to turn oil prices positive on Tuesday.Oil futures did cut some of their earlier losses to finish off session lows. June West Texas Intermediate crude, the U.S. benchmark, settled at $69.06 a barrel on the New York Mercantile Exchange, down $1.67, or nearly 2.4%, for the session, but up from the day’s low of $67.63. It was trading at around $68.68 before the announcement. July Brent crude the global benchmark, ended at $74.85 on ICE Futures Europe, down $1.32, or 1.7%, for the day, after a low at $73.10. Prices for both WTI and Brent had settled Monday at 3 1/2-year highs. Iranian production “is unlikely to be significantly impacted by pulling out of the agreement unless [Trump] can convince other allies to reimpose sanctions,”  He forecasts a range of between $60 and $70 per barrel for WTI this year, and expects “that oil prices could pull back as it becomes obvious that Iranian production is not likely to decline significantly.” In a monthly report issued Tuesday, the Energy Information Administration raised its 2018 and 2019 forecasts on U.S. crude-oil production. Notably, the agency increased its 2019 domestic crude production forecast by 3.6% to 11.86 million barrels a day. Gerald Bailey, president of Petroteq Energy Inc., expected an initial dip in oil prices following Trump’s decision, “because people don’t know whether the trade stopping will hurt businesses or not.” “The U.S. is not dependent on Iran unlike Europe, who will not back out because Iran buys a lot from Europe,” he said. “Europe will not want to upset Iran.” But prices are poised to turn higher again. In the long run, the U.S. decision will lead to less available oil, so prices will go up, Bailey said. “We’re not talking about big spikes, but there is some uncertainty here.”

Here Are The Countries That Buy Iran's Oil, And What They May Do Next -- With Trump having started the 6 month process of pulling out from the Iranian nuclear deal (or rather as Steven Mnuchin admitted, Trump's true intention is merely renegotiating the existing deal and "entering a new agreement") the biggest concern among traders and analysts is what impact the Trump decision will have on Iran's oil exports.As a reminder, some such as Barclays have suggested that Iran's oil production may not be affected at all; others such as UBS predict the sanctions could lead to the reduction of oil exports by 200-500kb/d over the next 6 months. Meanwhile, Deutsche Bank notes that because of the 180-day wind down period, neither Iranian oil production nor exports will drop before the 5 November 2018 effective date. In fact, if behavior follows the example from 2012, there is the possibility of a short spike in Iranian exports just before the effective date, after which a slow decline may set in.As Goldman explains this morning, the final impact on Iran oil will likely be somewhere inbetween, with the ultimate impact on Iran production rather negligible for the foreseeable future. The reason for that is that following the announcement, other signatories of the deal reiterated their support for the agreement as well as their desire to revisit it. President Macron said that France, Germany and the UK regretted the decision and the EU vowed to uphold the Iran nuclear accord. Russia announced that the US alone would not be able to overturn the deal and its Deputy Foreign Minister said it was willing to support France's proposal for new negotiations.  At the same time, Iran announced that it will remain in the nuclear deal and will start talks with European nations, China, and Russia.So with the support of the other deal signatories in place, Goldman's Damien Courvalin writes that the impact on Iranian production may be more limited than implied by the US secondary sanctions, and certainly less than the 1mmb/d decline seen in 2012-15 which many use a benchmark for what happens next. After all, as shown in the chart below, the bulk of Iranian exports is shipped to Asian countries - most of whom have already said they will continue importing Iranian oil - while the handful of European nations that received Iran crude will likely continue to do so in the future, once they request, and are granted, sanctions waivers.

WTI/RBOB Extend Rebound After Surprise Crude Inventory Draw - WTI/RBOB prices ended the day lower but bounced a little after Trump's statement, running flat into API but a pushed WTI briefly back above $70 following a surprise crude draw (and large product draws). API

  • Crude -1.85mm (+1mm exp)
  • Cushing +1.653m
  • Gasoline -2.055mm
  • Distillates -6.674mm - biggest draw since 2004

Surprise crude draw and big product draws broke the trend of the last two weeks... Of course, all eyes are focused on Iran more than inventories. The U.S. decision to reinstate “the highest level of economic sanctions” on Iran will lead to gradually and modestly reduced oil production by the world’s fifth-largest producer, according to Oxford Economics.Heading into the API data, WTI/RBOB prices were flat line after the swings around Trump's statement and CNN's fake news... and both popped a little after - with WTI tagging $70 once again...Oil VIX tumbled after Trump -erasing yesterday's protection bid...

Oil Prices Rise After EIA Reports Draw Across The Board - Amid rising oil prices following President Trump’s withdrawal from the Iran nuclear deal, the Energy Information Administration added to the bullish sentiment by reporting a draw of 2.2 million barrels in U.S. crude oil inventories.Analysts polled by IG had expected a moderate build of 160,000 barrels, while a Reuters poll suggested inventories would be down by 1.2 million barrels.In the prior week, the EIA had reported a substantial build in crude oil stockpiles, which pressured prices, albeit moderately, even though it was coupled with yet another weekly increase in production and a surprise build in gasoline inventories.In the week to May 4, gasoline inventories fell by 2.2 million barrels, the EIA reported, which compares with a 1.2-million-barrel increase a week earlier. Gasoline production averaged 9.9 million barrels per day last week, down from the prior week, when refineries produced 10 million bpd.Distillate inventories were also down, by 3.8 million barrels, after a decline of 3.9 million barrels a week earlier. Distillate production last week averaged 5 million barrels daily, unchanged from a week earlier. West Texas Intermediate was trading at US$70.91 a barrel at the time of writing, with Brent crude at US$76.93, both up by more than 2 percent after Trump’s Iran announcement.U.S. oil production likely continued to rise, after hitting 10.62 million bpd two weeks ago. This should be bearish for oil but not in the current circumstances, with the market expecting a substantial drop in Iranian oil exports and with Venezuelan oil production at a 70-year low.

WTI Tops $71 After Surprise Crude Draw, Production Spikes - WTI/RBOB extended gains overnight (WTI at 3.5yr highs) following Trump's Iran decision and a surprise crude draw reported by API, and DOE data confirmed the draw (even larger) along with gasoline and distillate draws. US crude production jumped to a new record high. “It’s the time of year when you expect oil draws because refiners start coming back fairly soon from maintenance season,” says James Williams, president of energy researcher WTRG Economics. DOE

  • Crude -2.197mm (+1mm exp)
  • Cushing +1.388mm
  • Gasoline -2.174mm
  • Distillates -3.791mm

Over the last couple of weeks, U.S. crude inventories have built up, in part helped by an unusual drop in refining activity, at least compared with last year's trends, but that trend is over this week with crude surprisingly drawing down 2.197mm barrels... Distillate inventories are near their five-year lows on a seasonal basis...very unseasonal! Additionally, Bloomberg reports that gasoline demand soared at its fastest rate since Feb 2016.Bloomberg's Javier Blas notes a key statistic: Year-to-date, U.S. crude inventories have risen by ~11.5 million barrels. To put that into perspective, consider that over the same period in 2017 they built ~48.8 million barrels.

EU Fights to Keep Iran Nuclear Deal Alive After Trump’s exit - Donald Trump didn’t kill the Iran nuclear deal. He just shrank its membership by one. That was the line taken by the European Union immediately after the U.S. president announced his withdrawal from the 2015 accord. Germany, France and the U.K. all said they’ll stick to their commitments. Iran’s Supreme Leader Ayatollah Ali Khamenei said he wants to see them deliver. “I don’t trust these three countries either,” Khamenei said on his website. “If you want to have a deal, we need practical guarantees otherwise they will do the same as the U.S. If they can’t give definitive guarantees, it won’t be possible to continue.” But it’s not clear whether the EU, China and Russia will be able to ensure Iran receives the promised economic benefits -- including free access to international oil markets and accelerating flows of trade and investment -- that persuaded the Islamic Republic’s leaders to sign up to an agreement capping its nuclear program. Before Trump’s announcement Tuesday that he’ll pull the U.S. out of the deal, Western businesses had already been reluctant to take the plunge into a country still subject to multiple curbs imposed by Washington. The exit throws billions of dollars of European investments that had been planned into disarray. President Hassan Rouhani said Iran will push to make the deal work but may step up uranium enrichment again if the efforts of the remaining parties don’t yield tangible results. “The international reach of U.S. sanctions makes the U.S. the economic policeman of the planet, and that is not acceptable,” French Finance Minister Bruno Le Maire said Wednesday in an interview on France Culture radio. He branded Trump’s decision a “major mistake” and said he’ll lobby Treasury Secretary Steven Mnuchin this week to grant exemptions for European firms. French President Emmanuel Macron is due to speak to Rouhani later in the day. 

U.S.Treasury's Mnuchin does not see Iran sanctions hiking oil prices (Reuters) - U.S. Treasury Secretary Steven Mnuchin said on Tuesday he does not anticipate major oil price hikes after renewed sanctions hit Iranian production because some countries are willing to increase output to offset such losses. Steven Mnuchin, Secretary, U.S. Department of the Treasury, speaks at the Milken Institute's 21st Global Conference in Beverly Hills, California, U.S. April 30, 2018. REUTERS/Lucy NicholsonMnuchin, speaking to reporters at a news briefing, declined to identify countries which may add output, saying there had been conversations with “different parties that would be willing to increase oil supply to offset this. So my expectation is not that oil prices will go higher - to a certain extent, some of this was already in the market on oil prices.” Mnuchin said that licenses for Boeing Co (BA.N) and Airbus (AIR.PA) to sell aircraft and components to Iran will be revoked as a result of the reimposed sanctions on Tehran. “Under the original deal, there were waivers for commercial aircraft, parts and services and the existing licenses will be revoked,” Mnuchin said. 

Crude Oil Price Jumps on Iran, Lower Inventories - The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning showing that U.S. commercial crude inventories decreased by 2.2 million barrels last week, maintaining a total U.S. commercial crude inventory of 433.8 million barrels. The commercial crude inventory remains in the lower half of the average range for this time of year. Tuesday evening, the American Petroleum Institute (API) reported that crude inventories fell by about 1.9 million barrels in the week ending May 4. Gasoline inventories declined by about 2.1 million barrels, and distillate stockpiles decreased by 6.7 million barrels. For the same period, analysts expected crude inventories to decrease by about 720,000 barrels and gasoline inventories to drop by 450,000 barrels. Diesel inventories are seen down about 1.3 million barrels. Total gasoline inventories decreased by 2.2 million barrels last week, according to the EIA, and remain in the upper half of the five-year average range. U.S. refineries produced over 9.9 million barrels of gasoline a day last week, down by about 100,000 barrels compared to the prior week. Total motor gasoline supplied (the agency’s proxy for demand) averaged 9.5 million barrels a day for the past four weeks, up about 2.2% compared with the same period a year ago.Before the EIA report, benchmark West Texas Intermediate (WTI) crude for June delivery traded up about 2.6% at around $70.88 a barrel, and it rose about 3% to around $71.29 shortly after the report’s release. WTI settled at $69.06 on Tuesday and opened at $70.11 Wednesday morning. The 52-week range on June futures is $44.54 to $71.25, and the high was posted this morning.The U.S. withdrawal from the nuclear non-proliferation deal with Iran is having its expected effect of pushing crude oil prices higher. Brent crude for July delivery traded up around 3% Wednesday morning at $77.20 a barrel, about $6 a barrel more than WTI. The reimposition of U.S. sanctions on Iran is almost certainly due in part to an agreement between the United States and Saudi Arabia to ease, if not lift entirely, the production cuts imposed by OPEC and its partners, including Russia, that began last year. That is the only way that the president could have avoided a sharp increase in crude oil prices that he already has declared are too high.

Oil prices hit three-and-a-half-year high after US exits from Iran deal - Crude oil prices rose to three-and-a-half-year highs following the news that the Trump administration revoked the nuclear deal with Iran. Brent crude oil prices, the global benchmark, and US West Texas Intermediate rallied above $77 and $71 per barrel, respectively, in the aftermath of the announcement. The rise came after the treasury secretary, Steven Mnuchin, told reporters he did not expect a major oil price hikes because other countries would increase output to offset such losses. Although Donald Trump’s decision to withdraw from the Joint Comprehensive Plan of Action was not a surprise, reinstating all US nuclear-related sanctions was more than expected, said Barclays analysts in a research note. Bart Melek, global head of commodity strategy at TD Securities, said this announcement comes at a time where there are increased geopolitical tensions in the Middle East and global crude oil inventories are normalizing after being in a supply glut for the past few years. In the US inventory levels are now below the five-year average. “There’s a broad consensus that [supplies are] going to rebalance and tighten up, but you throw the possibility of disruptions of flows from Iran, and the markets started to worry,” he said. The reimposition of US sanctions will be phased in over the next 90-180 days to give companies time to wind down operations. Does this mean oil prices will return to the $100-plus days of a few years ago? It’s unlikely for now. Melek said he sees WTI and Brent crude oil prices not going much higher than $72 and $78, respectively, saying the price rise this week reflects a temporary risk premium rather than actual supply shortages. Even if some Iranian oil is off the market, Melek said there was capacity for members of the Organization of Petroleum Exporting Countries (Opec) to increase production to make up for the shortfall. 

Sanctions spell the end of OPEC output deal: Kemp (Reuters) - President Donald Trump’s decision to withdraw from the nuclear agreement with Iran marks the end of the current output agreement between OPEC and its allies. OPEC is likely to insist the current agreement remains in effect, at least for now, but the prospective removal of several hundred thousand barrels per day of Iranian exports from the market will require a major adjustment. Saudi Arabia has already promised to "mitigate" the impact of any potential supply shortages, in conjunction with other suppliers and consumer countries, in a statement released immediately after the sanctions decision. The kingdom is customarily coy about how it might respond but the prospective removal of Iranian crude from the market will send oil prices sharply higher unless other producers step up to fill the gap. As a practical matter, only Saudi Arabia, the United Arab Emirates, Kuwait, Russia and the United States have the ability to raise production and exports in the short term. Saudi Arabia and its close allies Abu Dhabi and Kuwait hold almost all the spare capacity that could respond quickly to a reduction in Iranian exports. U.S. shale producers could also increase their output but it would take time and their light crude is not a good substitute for heavier Iranian oil. Russian firms may also hold spare capacity and could certainly increase output over a 12-month horizon. Their crude is a close equivalent to Iranian grades. The United States and Saudi Arabia appear to have reached a high-level political understanding in which the United States will intensify pressure on Iran in exchange for Saudi Arabia agreeing to help avoid a spike in oil prices. The existence of an understanding was confirmed by the U.S. Treasury Secretary who told reporters on Tuesday that "we have had conversations with various parties ... that would be willing to increase oil supply".   In effect, the United States agreed to implement tough sanctions, and Saudi Arabia agreed to limit the impact on oil prices.   U.S. gasoline prices are already averaging just under $3 per gallon, the highest level since late 2014, up from $2.50 a year ago.   Assuming the U.S. sanctions are effective in curbing Iran's crude exports, Saudi Arabia and its OPEC allies will have to raise their production to make up the shortfall, or risk being blamed for a further rise in motoring costs. 

Saudi Arabia stands to win most from Trump ditching Iran deal: Russell (Reuters) - Saudi Arabia is in pole position to be the major beneficiary of U.S. President Donald Trump’s decision to walk away from the Iranian nuclear deal and reimpose sanctions on the Islamic Republic. It’s little surprise that one of the few voices of support for Trump’s move was from Saudi Arabia, the main rival to Iran in the volatile Middle East. The Saudis stand to enjoy a double-whammy windfall as crude oil prices may remain strong and state producer Saudi Aramco will also likely to be able to pump more oil to replace any Iranian barrels lost because of the reimposed sanctions. A cherry on top of this is that customers who had been turning away from Saudi crude, such as the world’s top importer China, may be forced to buy more from the Kingdom. This would allow the Saudis to regain market share lost since the 2016 deal between the Organization of the Petroleum Exporting Countries (OPEC) and allies, such as Russia, to reduce output in order to tighten global oil markets. The main risk for the Saudis is that the U.S. decision inflames an already tense situation in the Middle East, resulting in increased conflict and even the possibility of outright war. However, the Saudis are probably taking a calculated risk that the conflict situations won’t worsen much, and in the meantime they stand to gain a financial windfall and weaken their key rival at the same time. Whether the eventual reality aligns with what the Saudis hope for is inherently uncertain, but there are some points worth noting. Firstly, despite the usual flourish of belligerence and flamboyance in Trump’s announcement, not much is likely to happen for several months. This is because the U.S. Treasury Department has indicated that sanctions won’t be reimposed immediately, rather that it will take up to 180 days to allow Iranian oil customers and other companies involved in doing business with Tehran to make plans. It’s also not clear what sanctions will be reimposed and in what form, with the main risk being the so-called secondary sanctions that would target companies that do business with other entities involved with Iran. 

Middle East teeters on brink of region-wide war after US withdrawal from Iran deal -- Tuesday’s decision by President Donald Trump to withdraw from the Iranian nuclear agreement has pushed the Middle East to the brink of a catastrophic regional conflict that could rapidly draw in the major powers.Within minutes of Trump’s announcement, Israeli fighter jets violated Syrian airspace to launch a missile strike on a government base close to Damascus. The strikes caused the deaths of 15 people, including at least seven Iranian military personnel stationed in the country to support the regime of Syrian President Bashar al-Assad.The situation escalated further late Wednesday, as reports emerged of Israeli shelling of Syrian army positions from the Golan Heights. Rocket sirens sounded in the north and explosions were heard. According to the Golan Regional Council, several towns in the region were targeted by rocket fire.The Israeli military released a statement early Thursday accusing Iran’s Revolutionary Guard Corps’ Quds force of firing 20 rockets at army border posts in the Golan. It claimed several projectiles had been intercepted and reported no injuries.According to the Syrian state news agency, Sana, Israeli war planes began firing missiles at targets near Damascus early Thursday, soon after the alleged Iranian attack. As of this writing, the extent of these air raids and whether they caused any casualties remain unclear. Tel Aviv justified Tuesday’s air strike with the unsubstantiated claim that Tehran was preparing to strike Israel in retaliation for a raid on the T4 airbase in April that claimed the lives of nine Iranians. The absurdity of such allegations is obvious, given that Iran would have nothing to gain from being the first to launch an attack just as Trump was set to announce his decision on the Iran nuclear agreement. Everything points to the Israeli attack having been closely coordinated with the US. On Sunday, Israeli media began reporting unverified allegations of an Iranian plot to strike targets in Israel. Then on Tuesday, CNN reported that the Pentagon was concerned about alleged preparations for an Iranian strike.

Israel Struck ‘Almost All of the Iranian Infrastructure in Syria,’ Defense Chief Says -- Defense Minister Avigdor Lieberman said on Thursday that Israel struck ''almost all of the Iranian infrastructure in Syria" overnight in response to a rocket barrage at its military outposts in the Golan Heights. He confirmed that no rockets landed in Israeli territory.  Lieberman said that Israel won't allow Iran to turn Syria into a "forward base" against Israel and that, as opposed to the Iranians, Israel has no desire to expand their military presence to create new proxies and fronts. "I hope we finished this chapter and everyone got the message," Lieberman said, adding that Israel does not want the situation to escalate. He added a warning: “If it rains on us, it will pour on them.”  "Iran is truly the only country today that represents extremism, not just ideologically but also in its willingness to sacrifice its citizens, sacrifice its future for this same extremist ideology, the defense chief said.

Trump’s Iran Sanctions to Shake Up Global Oil Supply Lines - Washington’s decision to reinstate Iranian sanctions is likely to slowly cut off a chunk of the world’s crude supply—a shift that could redraw global supply lines and require Iran’s big customers to find alternative sources.The Trump administration’s move rattled oil markets, sending international crude up sharply after bouncing wildly in the lead-up to the decision. Midday in Europe, international crude was up 2.7% to $76.87 a barrel on London’s Intercontinental Exchange, trading at its highest level in 3½ years.In an effort to limit short-term pressure on prices, the U.S. said buyers will have until November to stop shipments, and Washington held out the prospect of exemptions for countries that reduced their Iranian purchases significantly, without providing specifics.Treasury Secretary Steven Mnuchin said Tuesday the U.S. negotiated ahead of time with oil-producing allies to boost output and keep prices in check. Saudi Arabia, a longtime regional rival of Iran and a fierce competitor for global oil market share, said late Tuesday it was ready to step in to stabilize markets.Still, some big global buyers will need to find new supplies. Iranian oil exports amounted to about 2.7 million barrels a day in April, or almost 3% of global demand.While no U.S. entities buy Iranian crude, Washington’s sanctions would extend to foreign firms that do, if they conduct significant dollar transactions, use U.S. banks, or have other business in the U.S.China is the biggest buyer of Iranian crude, taking more than 700,000 barrels a day in March. Chinese buyers traditionally haven’t heeded U.S. or European sanctions in the past, and aren’t expected to curtail purchases now. But they will likely need to scrutinize whether the new sanctions could ensnarl them. Asked at a regular weekday media briefing if China would continue to purchase oil and other products from Iran, a Chinese Foreign Ministry spokesman said that “normal, transparent and pragmatic cooperation with Iran” would continue. “The Chinese government has consistently opposed the imposing of unilateral sanctions by any country and the long-arm jurisdiction on other countries based on its domestic law,” said the spokesman, Geng Shuang.  European and Asian buyers will likely have to find new suppliers as they comply with Washington’s time line for ending purchases, or apply for exemptions. France’s Total SA, which buys Iranian oil mostly for its own refineries, bought about 158,000 barrels a day of Iranian crude last year. Total declined to comment about the new sanctions Wednesday.

How The World's Oil Powers Will Seize The Iran Deal - Despite President Trump’s clear signals over the last month, his decision to leave the JCPOA nuclear deal has still managed to shock the market. It appears that the market, and most European politicians, didn’t believe that Washington would take the step to unilaterally leave the deal. In spite of intense European efforts to convince Washington to stay in the JCPOA deal and try to renegotiate with Iran, the U.S. president has presented the world with a clear message: The President will fulfill his electoral pledges regarding Iran. The global oil market had partially factored in a withdrawal by Washington, but the true impact of the deal remains unclear. In the coming months, Washington will reinstate all of the former sanctions on Iran, starting with the lighter ones, which are mainly meant to curtail Iranian oil exports. If all sanctions, as indicated by Washington after Trump announced the withdrawal from JCPOA on TV, are put in place then the global geopolitical landscape with change dramatically.If a complete reimposition of sanctions become a reality, which would include the threat of action against European and Asian companies dealing with Iran, the oil market could hit a brick wall. Looking at current fundamentals, demand and supply are already reaching a point where additional changes in supply could lead to supply shortages. The removal of a potential 1 million bpd of Iranian oil before the end of 2018 would surely lead in the short-to-midterm to higher prices. Asian and European clients already expect such a price spike before the end of 2018. There is a chance that the market could mitigate some aspects of this supply shock, with Asian refiners already trying to shift purchases to other exporters. The key Asian importers of Iranian oil are China, India and Japan, all of whom are now eagerly targeting Iraq, Saudi Arabia and Russia for new supply options. The implementation of new sanctions on Iran and its customers will force the Islamic Republic to reassess its options. The same will be true for European oil importers, who have been very active on the Iranian front in recent years. The real effects of decisions made by Trump will be felt within 180 days, as this is the official timeframe. However, based on remarks made by the U.S. Ambassador to Germany yesterday, straight after decision, Washington could decide to speed up the implementation time-frame. In a ceteris paribus situation, the removal of Iranian oil exports would be hitting the market at present very hard. Price volatility could be extreme, leading to price levels between $80-100 per barrel. The latter would, however, result in possible demand destruction in Asia, and lower economic growth in most Western countries, including the U.S.

Iran Crisis Warps OPEC Equation as Saudis Signal More Supply - The international nuclear agreement with Iran might not be the only deal U.S. President Donald Trump has unraveled. On Monday, Saudi Arabian Energy Minister Khalid Al-Falih was repeating his mantra that production cuts by OPEC and its allies must keep going. Within 48 hours, the kingdom had raised the prospect of increasing output.Between the two pronouncements came Trump’s decision to scrap the Iran deal, re-imposing sanctions on the world’s fifth-biggest oil exporter.“There is a good chance the current OPEC deal will end by end-2018, if not before,” said Ed Morse, head of commodities research at Citigroup Inc. in New York. For the past 16 months, the Organization of Petroleum Exporting Countries, Russia and other allies have been constraining output to eliminate a global glut. They’ve largely achieved that goal, but the Saudis -- keen for higher prices -- have insisted the curbs should continue to drive oil stockpiles even lower.That policy may falter in the wake of Trump’s Iran sanctions. While it’s still uncertain how much he intends to curtail Iranian oil shipments, most analysts predict a cutback.“The Iranian sanctions may change the OPEC June meeting completely,” said Amrita Sen, chief oil analyst at consultants Energy Aspects Ltd. in London. “It’s no longer about extending the production cuts, but rather about when to start raising output gradually.” When the international sanctions were last in force on Iran from 2012 to 2015, it removed about 1 million barrels a day from the market. This time, America’s allies in Europe want to keep the nuclear accord alive and are resisting joining any U.S. embargo. Estimates vary from “little impact” anticipated by Barclays Plc, to a potential loss of more than 50 percent of the country’s 2.7 million barrels of daily shipments predicted by consultant FGE. Reduced flows from Iran would compound escalating losses in troubled OPEC member Venezuela, further draining global oil inventories while demand remains strong, according to Goldman Sachs Group Inc. Brent oil futures rose to a three-year high of $78 a barrel on Thursday. This presents the Saudis with a dilemma: Should they retain their focus on higher prices and keep output steady? Or should they offer political and economic support to Trump, and take market share away from their regional rival, by raising production to fill the gap?

Saudi Arabia will not act alone to fill any Iran oil shortfall: OPEC source (Reuters) - Saudi Arabia is monitoring the impact of the U.S. withdrawal from the Iran nuclear deal on oil supplies and is ready to offset any shortage but it will not act alone to fill the gap, an OPEC source familiar with the kingdom’s oil thinking said. FILE PHOTO: The logo of the Organization of the Petroleum Exporting Countries (OPEC) is pictured at its headquarters in Vienna, Austria September 21, 2017. REUTERS/Leonhard Foeger/File PhotoU.S. President Donald Trump on Tuesday abandoned a nuclear deal with Iran and announced the “highest level” of sanctions against the OPEC member. The original agreement had lifted sanctions in exchange for Tehran limiting its nuclear program. Iran is the third-largest oil producer in the Organization of the Petroleum Exporting Countries after Saudi Arabia and Iraq. During the last round of sanctions, Iran’s oil supplies fell by around 1 million barrels per day (bpd), but the country re-emerged as a major oil exporter, especially to refiners in Asia, after sanctions were lifted in January 2016. “People shouldn’t take it for granted that Saudi Arabia will produce more oil single-handedly. We need to assess first the impact if there is any, in terms of disruption, in terms of a reduction of Iran’s production,” the OPEC source said on Wednesday. “We have managed to put together this new alliance between OPEC and non-OPEC. Saudi Arabia will not in any way act independently of its partners.” Riyadh is working closely with the United Arab Emirates (UAE), which holds OPEC’s presidency in 2018 and non-OPEC producer Russia for “coordination and market consultations,” the OPEC source said. He said any action would be taken in coordination with all OPEC and non-OPEC partners, if needed. 

World oil prices reach maximum since 2014 - World oil prices on May 10 are trading at their highest levels since November 2014 on the decision of U.S. President Donald Trump to withdraw from the nuclear deal with Iran. Brent crude oil futures were at $77.78 per barrel, up 0.73 percent, U.S. West Texas Intermediate (WTI) crude futures were up 0.77 percent, at $71.69 a barrel, according to RIA Novosti. Oil prices have renewed their highs for 3.5 years after Trump announced that the U.S. is withdrawing from an agreement with Iran on the nuclear program reached by the six international mediators (Russia, the United States, Britain, China, France, Germany) in 2015. In addition, the U.S. president announced the restoration of all sanctions, the effect of which was suspended as a result of the deal. The imposition of sanctions against Iran could lead to a reduction in world oil reserves. At present, Iran accounts for about 4 percent of the global supply in the oil market, according to Reuters. Analysts at Goldman Sachs note that U.S. sanctions against Iran are likely to have a “high level of efficiency.” According to their forecasts, in the summer the price of Brent crude oil could reach $82.5 per barrel. Support for the growth of world prices also provided data on the reserves of raw materials in the U.S. The Energy Ministry of the country reported that commercial oil reserves in the U.S. (excluding the strategic reserve) for the week ended on May 4 decreased by 2.2 million barrels, or 0.5 percent - to 433.8 million barrels, while the reduction was projected only 0.2 million barrels. OPEC and non-OPEC producers reached an agreement in December 2016 to curtail oil output jointly and ease a global glut after more than two years of low prices. OPEC agreed to slash the output by 1.2 million barrels per day from January 1. 

Oil prices hit highest in years as markets adjust to looming sanctions on Iran (Reuters) - The oil price rose on Thursday, heading for its largest weekly increase in a month, as the market prepared for potential disruption to crude flows from major exporter Iran in the face of U.S. sanctions. The United States plans to impose new sanctions against Iran, which produces about 4 percent of global oil supplies, after abandoning an agreement reached in late 2015 that curbed Tehran's nuclear activities in exchange for removal of U.S. and European sanctions. Brent crude futures rose 27 cents to $77.48 a barrel by 1200 GMT, having gained 3.5 percent so far this week. U.S. West Texas Intermediate crude futures were up 45 cents at $71.59. The oil price is at its highest since late 2014 and on track for its fourth consecutive quarterly gain, the longest such stretch for more than 10 years. Analysts had little hope that opposition to the U.S. action would prevent sanctions from going ahead. "Europe and China will not fight against the U.S. sanctions. They will grumble and accept it. There is no one who will realistically choose Iran over the U.S.," said energy consultancy FGE. "We believe the previous 1 million bpd limit for exports (imposed during previous sanctions) will be reimposed. As before, it may take several rounds of reductions to reach target levels," FGE's founder and chairman Fereidun Fesharaki wrote in a note. Even without disruption to Iran's crude flows, the balance between supply and demand in the oil market has been tightening steadily, especially in Asia, with top exporter Saudi Arabia and No.1 producer Russia having led efforts since 2017 to cap output to prop up prices. Saudi Arabia is ready to offset any supply shortage but it will not act alone to fill the gap, an OPEC source familiar with the kingdom’s oil thinking said on Wednesday. "What the full impact on Iranian flows will be is still difficult to estimate," Petromatrix strategist Olivier Jakob said. "One thing that has changed and which I think is clearly a new development is that it seems to me that the White House administration has really pushed Saudi Arabia to do something about price and to put supply back into the market to make sure prices do not run up ... before (when sanctions were last in place) Saudi Arabia was driving its own oil policy."

Oil Cartel Member Complains U.S. President Is Driving Up Prices -- It’s not often that an OPEC producer accuses the U.S. of driving up oil prices.But that’s exactly what Iran Oil Minister Bijan Namdar Zanganeh said on state television Thursday. Two days after Donald J. Trump decided to withdraw from the Iran nuclear agreement, Zanganeh said the U.S. president is engaging in “shenanigans” in the oil market -- and that he’s cut a deal with some members of the Organization of Petroleum Exporting Countries to keep production down and prices high.Higher oil prices boost the U.S. economy and employment and increase taxes the federal government collects, according to Zanganeh. Iran has become a new voice for moderation in oil markets, with the minister saying Sunday that a “suitable price” is $60 to $65 a barrel -- below the reported $80 that the Saudis are seeking.Oil prices have climbed to a three-year high as the market prepares for Iranian exports to fall. Bank of America Corp. said Thursday that $100 a barrel for Brent crude, the international benchmark, is a possibility next year.Meanwhile, Saudi Arabia -- which has long called for sanctions to be re-imposed on Iran -- has pledged to “mitigate” the effects of the sanctions. That may put in jeopardy an existing agreement among OPEC and non-OPEC nations to curb output.“There is a good chance the current OPEC deal will end by end-2018, if not before,” said Ed Morse, head of commodities research at Citigroup Inc. in New York. As far as boosting the U.S. economy, the old rule of thumb was that a sustained $10 a barrel rise in oil prices would shave about 0.3 percent off of U.S. GDP the following year. Now, says Mark Zandi, chief economist at Moody’s Analytics, the hit is around 0.1 percent.

Iran Accuses US Of Pushing Up Oil Prices - U.S. President Trump has made a deal with some OPEC producers to keep prices high as they support the U.S. economy and boost federal taxes. This is what Iran’s Energy Minister Bijan Zanganeh said on state TV this week as quoted by Bloomberg, adding that Trump was engaging in “shenanigans” on the oil market.  It’s not too hard to guess which the OPEC producers Zanganeh mentioned are...Saudi Arabia has been a strong opponent of the Iran nuclear deal and was now quick to offer to fill any gap that new U.S. sanctions would leave on international oil markets by curbing Iran’s abilities to export its crude.Saudi Arabia is also the most vocal supporter of ever-higher prices, as it prepares to list its state energy giant Aramco and struggles with a much too high breakeven price for its crude.Iran, on the other hand, has repeatedly called for more “reasonable” prices, which for the Tehran officials are prices between US$60 and $65 a barrel. Like many analysts, Iran is concerned that pricey crude oil will start affecting demand, and not in a good way.Now, some forecast oil could reach US$100 a barrel by next year, with one hedge fund manager, notorious Pierre Andurand, going as high as US$300 a barrel. Apparently, according to the bull camp, oil can reach US$300 without hurting demand enough to start sliding back down.This stance is questionable, to say the least. Already some experts, such as Reuters’ John Kemp, are warning that the imposition of new U.S. sanctions on Iran would spur other OPEC members into increasing their production levels, which would effectively put an end to the OPEC production cut deal. Should this happen, prices will not get even close to US$100, they will start sliding back to US$60. Another group of people tracking events in the oil world believes that sanctions will not have a serious negative effect on Iranian oil shipments to its biggest clients. China has stated its commitment to Iranian imports, and as an added benefit for both, is ready to settle these imports in yuans, undermining the dominance of the greenback. Other importers, including staunch U.S. allies Japan and South Korea, are also looking for ways to keep on buying Iranian crude.

Oil price rise poses challenge for sanctions policy: Kemp (Reuters) - The United States and Saudi Arabia seem to have an understanding to keep the oil market well supplied and avoid a significant price rise after the U.S. re-imposition of sanctions on Iran. But exactly what this involves is not clear to the market, and may not even be clear to the two governments themselves, sowing uncertainty in the weeks ahead. “We have had various conversations with various parties about different parties that would be willing to increase oil supply to offset [the impact of sanctions]” U.S. Treasury Secretary Steven Mnuchin told reporters on May 8. “My expectation is not that oil prices go higher. To a certain extent some of this was already in the market, on oil prices,” Mnuchin added. He declined to name the countries or companies involved but since Saudi Arabia holds most of the world’s spare production capacity it is likely to have been included. In retrospect, the U.S. president's April 20 tweet blaming OPEC for high oil prices can be seen as part of the negotiating. The basic bargain appears to be that the United States will impose tough sanctions that curb Iran’s oil exports and in return Saudi Arabia will avoid a damaging and politically controversial spike in prices. Saudi Arabia appeared to confirm the existence of an understanding by committing to maintain “the stability of oil markets” and more specifically to “mitigate the impact of any potential supply shortages”. The kingdom committed to “work with major producers within and outside OPEC as well as major consumers” to limit the impact from possible supply disruptions. The comments were made in an unusual statement issued by the kingdom’s ministry of energy and carried by the official news agency shortly after the sanctions were announced. They were subsequently confirmed by the energy minister in a statement on Twitter and in briefings with news organisations.

    US Rig Count Increases Sharply Amid Rising Crude Output - US drillers added 13 rigs to the number of oil and gas rigs this week, according to Baker Hughes, adding 10 active oil rigs and 3 active gas rigs. The oil and gas rig count now stands at 1,045—up 160 from this time last year.Meanwhile, neighboring Canada lost 7 rigs for the week—the latest in a string of losses. Gas rigs in Canada are now fewer in number than they were a year ago.Both the Brent and WTI benchmark were trading down on the day at 10:00am EST after reaching almost three-year highs earlier in the week over U.S. President Donald Trump’s announcement that the US would withdraw from the nuclear deal, combined with Venezuela’s falling production. WTI was trading down 0.32% at $71.13, with Brent trading down 0.30% at $77.24. Western Canada Select (WCS) was trading down a staggering 4%, increasing its discount to WTI.Oil prices seem to be stuck in a perfect storm, a culmination of several geopolitical factors which include Iraq’s election scheduled for Sunday, the likes of which could see delays for project approvals and licensing awards; Venezuela’s election scheduled for May 20 which may prompt the United States to up the sanctions against Maduro’s socialist regime; the nuclear deal announcement which could restrict Iran’s exports, and OPEC comments that it would ramp up production to fill the void left by Iran if necessary. US oil production rose again in the week ending May 04, reaching 10.703 million bpd—the eleventh build in as many weeks—about 300,000 bpd shy the 11.0 million bpd forecast that many are predicting for 2018. Earlier this week, the EIA raised its US production forecast for 2018 and 2019, anticipating that the full-year production for the United States will be 10.7 million bpd, with 11.9 million bpd forecast for 2019—a 400,000 bpd increase over its forecast last month. At 8 minutes after the hour, WTI was trading down 0.42% at $71.06, with Brent trading down 0.10% at $77.39.

    Brent crude hits $78 as oil prices remain at multi-year highs on looming U.S. sanctions - Oil prices on Friday held multi-year highs reached the previous session as looming U.S. sanctions against major oil producer and OPEC-member Iran threatened to tip an already tight market into undersupply. The United States plans to re-introduce sanctions against Iran, which produces around 4 percent of global oil supplies, after abandoning an agreement reached in late 2015 that limited Tehran’s nuclear ambitions in exchange for removing U.S.-Europe sanctions.The sanctions come amid an oil market that has been tightening due to strong demand, especially in Asia, and as top exporter Saudi Arabia and top producer Russia have led efforts since 2017 to withhold oil supplies to prop up prices. Brent crude futures, the international benchmark for oil prices, were at $77.47 per barrel at 0057 GMT, unchanged from their last close. Brent hit $78 a barrel, its highest since November 2014, the previous day. U.S. West Texas Intermediate (WTI) crude futures were at $71.42 a barrel, also not far off Thursday’s November 2014 high of $71.89 per barrel.Many analysts expect oil prices to rise to $80-$100 per barrel later this year, once U.S. sanctions start to bite and Iran’s exports start sinking. There are, however, signs that other suppliers from within the Organization of the Petroleum Exporting Countries (OPEC) will step up output in order to counter the Iran disruption. “The market is now focused on OPEC and other producers’ ability to react to this potential supply disruption,” ANZ bank said on Friday. “Investors are increasingly viewing Kuwait and Iraq as the producers with the best ability to raise output quickly in response to any fall in Iranian exports,” it added.

    U.S. diplomats face tough task imposing new Iran oil curbs - (Reuters) - By restoring sanctions against Iran, U.S. President Donald Trump has tasked a little-known State Department office with convincing companies and governments worldwide to cut imports of Iranian crude - even if that means paying more to buy oil from other suppliers. The Bureau of Energy Resources got the job done during the Iran sanctions that spanned 2012 to 2015, when President Barack Obama had the cooperation of European leaders in choking off Iran’s main revenue source to pressure it to curb its nuclear program. This time around, the office faces steeper challenges: Europe’s leaders now oppose Trump’s aggressive stance on Iran and are considering ways to block the sanctions; the U.S. Senate has yet to confirm a leader for the bureau; and the State Department already has its hands full managing sanctions on Venezuela, trade disputes with China, and looming talks with North Korea. “It’s going to be a lot harder this time,” . “There’s going to be a lot less good will.”   Under Trump’s renewed sanctions, foreign firms will have 180 days to make reductions or face penalties that can include fines and restrictions on doing business in the United States. Washington can identify the buyers, sellers, traders, shippers, insurers and financial institutions involved in Iranian oil purchases because all foreign transactions in U.S. dollars are cleared by the Federal Reserve. The work is harder if trades are done in other currencies. The United States has banned Iranian oil imports to its own shores for decades, so Washington’s ability to squeeze the exports will rely on convincing foreign governments and companies to pressure the Islamic Republic back to the negotiating table for a “better deal” - as Trump has said he expects. 

    Short-Term Oil Glut Softens Iran Sanctions Impact -- Oil prices have risen on the back of U.S. sanctions on Iran, but a short-term glut in the physical market is softening the blow -- for now. The market, however, is starting to price a more dire situation by year-end. Oil refiners have plenty of crude at hand right now, with unsold cargoes in north-west Europe, the Mediterranean, China, and West Africa, according to physical traders who asked not to be named discussing market movements. The overhang is reflected in Brent nearby time-spreads, which are fast narrowing -- a sure sign of an oversupplied market. The July-August price spread for example has fallen from a peak of 63 cents per barrel in mid-April to a five-month low of 24 cents now despite U.S. President Donald Trump withdrawing from the Iran nuclear deal and announcing a raft of new sanctions that threaten to cut crude supplies. Deferred oil spreads are widening, however. The November-December Brent spread rose to 56 cents per barrel on Wednesday, its strongest ever, suggesting that traders are starting to price tightness despite the current excess.  One indicator of the overhang in the prompt market is Vitol Group, the world’s top independent oil trader, offering on Thursday a cargo of Angolan Kissanje crude for delivery to China as early as May 20. With the vessel currently near Singapore and well on its way to its final destination, this represents a sharp contrast to the more typical trade of cargoes bought even before they have loaded in West Africa. Moreover, U.S. crude exports that at times have surged above 2 million barrels a day are reinforcing the oversupply. Add seasonal refinery maintenance and the combination has "barrels without a home, creating a prompt overhang," said Amrita Sen, chief oil analyst at Energy Aspects Ltd. in London. For weeks, physical oil traders wondered whether the weakness in the physical oil market could bring down the paper -- or derivatives -- market. The U.S. sanctions on Iran have changed the picture, with the market pricing that physical prices will ultimately track the paper market higher.

    How Much Iranian Oil Can Trump Disrupt? - Oil prices surged following President Trump’s withdrawal from the Iran nuclear deal. So, what happens next?Trump did not offer any new justification for how Iran was violating the nuclear accord – the IAEA confirmed on May 9 that Iran is in compliance with its nuclear commitments – and offered no Plan B or even a coherent strategy on what comes next. For now, Washington is pursuing confrontation with Iran, and hoping that “maximum pressure” will force Iran to not only abandon any hint of a nuclear weapons program, but also agree to concessions on a range of non-nuclear issues. If history is any guide, there is little chance of this happening, so we are now on a course of escalating confrontation. The U.S. will re-impose all nuclear related sanctions on Iran, which could begin to disrupt oil flows from the country. There will be a 90-day and 180-day wind down period before sanctions really start to bite, which puts the deadline at early November. However, there is a great deal of disagreement and uncertainty over how quickly and how severely the impact of U.S. confrontation will be. The U.S. will not have the coalition that shut in 1 million barrels per day (mb/d) of Iranian oil exports prior to the 2015 agreement. The EU, China and Russia have said they are sticking with the deal. Still, U.S. sanctions will loom over private companies from those nations, which could keep them from doing business with Iran. The EU has vowed to protect its companies, and could even pursue trade retaliation if the U.S. Treasury moves to penalize European companies. However, U.S. sanctions will almost certainly deter large-scale investment in Iran’s oil and gas sector for years to come.  The big question at this point is how disruptive unilateral sanctions from the U.S. will be to Iranian oil flows. The U.S. has advised other countries to “significantly reduce” their purchases of oil from Iran. In theory, some countries could receive waivers from sanctions if they reduce their oil purchases from Iran by some unspecific amount. A 20 percent reduction was an unofficial rule of thumb during the Obama era.

    Bank of America: World oil price could hit $100 a barrel next year: Is $100 oil on its way back? Bank of America thinks so. The bank's analysts wrote Thursday that collapsing oil production in Venezuela and potential export disruptions in Iran could push the price of Brent crude as high as $100 per barrel in 2019. The analysts said their target price for Brent, the global benchmark, was $90 for the second quarter of next year. But they warned there was a risk that deteriorating conditions in Iran would push prices to $100, a level not seen since 2014. They expect West Texas Intermediate, the most commonly cited US contract, to trade $6 below the price of Brent in 2019. President Donald Trump's decision to exit the Iran nuclear deal has already pushed Brent prices above $77 per barrel. Prices have gained over 8% over the past month and 15% since the beginning of the year. Investors are worried that renewed sanctions on Iran, a major oil producer, could lead to supply disruptions. Trump vowed on Tuesday to impose "powerful" sanctions on the OPEC nation, which has the fourth largest crude oil reserves in the world. After sanctions were eased as part of the nuclear agreement, Iran ramped up production to about 3.8 million barrels a day. That's about 1 million barrels a day more than in early 2016.Another factor that's helping to reduce supply is an agreement between OPEC and other major producers including Russia to slash output.  The deal is set to expire at the end of 2018, but the Bank of America analysts said that OPEC and Russia are likely to continue working together to prevent prices from falling.

    OPEC in no hurry to decide if extra oil needed to offset Iran: sources - (Reuters) - OPEC is in no hurry to decide whether to pump more oil to make up for an expected drop in exports from Iran after the imposition of new U.S. sanctions, four sources familiar with the issue said, saying any loss in supply would take time. The Organization of the Petroleum Exporting Countries has a deal with Russia and non-OPEC producers to cut supplies that has helped erase a global glut and boosted oil prices to their highest since 2014. Officials are considering whether a drop in Iranian exports and a decline in supply from another OPEC member, Venezuela, demands adjusting the deal that runs to the end of 2018. Ministers meet in June to review the policy. U.S. sanctions on Iran will have a six-month period during which buyers should “wind down” oil purchases, meaning any loss of supply will not be immediately felt in the market. “I think we have 180 days before any supply impact,” an OPEC source said when asked about any plans for action. A second OPEC source said that, while the need to add extra supply was being considered, the safest thing for the group to do for now was to sit tight and monitor the situation. Oil LCOc1 reached $78 a barrel on Thursday, its highest since November 2014, two days after President Donald Trump said the United States was abandoning an international nuclear deal with Iran and would impose new sanctions. Iran, which pumps about 4 percent of the world’s oil, exports about 450,000 barrels per day (bpd) to Europe and around 1.8 million bpd to Asia. Sales to Europe are seen by analysts as the more likely to be reduced by the sanctions. “It’s too early to know now the impact,” said a third OPEC source. “We need to wait and see what China will do, what Japan will do. Who will buy Iranian oil and who will side with Trump.” 

    Azerbaijani oil price approaches to $78 a barrel -- The price of Azerbaijan's oil Azeri LT CIF on the world market has grown by $2.99 (3.99%). Cost of oil grade Azeri LT CIF is now $77.84 a barrel. The lowest price for Azeri LT CIF was fixed in December 2001 - $19.15 and highest price in July 2008 - $149.66. At the London ICE (InterContinental Exchange Futures) the cost of one barrel of Brent crude rose by $0.56 up to $77.77. At the New York exchange NYMEX (New York Merchant Exchange) the value of WTI crude rose by $0.57 up to $71.71 a barrel.

    The Saudi Coalition’s Starvation of Yemen Hasn’t Ended - The AP has published an extensive, important report on the dire and worsening conditions in Yemen. The report focuses on the widespread malnutrition and starvation in the country caused in large part by the Saudi coalition blockade:Around 2.9 million women and children are acutely malnourished [bold mine-DL]; another 400,000 children are fighting for their lives, in the same condition as Mizrah.Nearly a third of Yemen’s population — 8.4 million of its 29 million people — rely completely on food aid or else they would starve. That number grew by a quarter over the past year.Aid agencies warn that parts of Yemen could soon start to see widespread death from famine. More and more people are reliant on aid that is already failing to reach people. As the report says, more than eight million are on the brink of famine, and millions more are malnourished and therefore much more vulnerable to illness. The crisis in Yemen is entirely man-made, and the Saudi coalition bears a huge share of the responsibility for creating it. Each day that they impede the delivery of commercial goods and humanitarian aid is another day that Yemen’s civilian population can’t get the food and other essential goods they need to live. In addition to the threat of massive loss of life, the long-term destructive effects on the health and development of an entire generation of Yemenis will be severe.   Both the U.S.-backed coalition bombing campaign and blockade are to blame:The war has shattered everything that kept Yemen just above starvation. Coalition warplanes blasted hospitals, schools, farms, factories, bridges and roads. The coalition has also clamped a land-sea-and-air embargo on Houthi-controlled areas, including the Red Sea port of Hodeida, once the entry point of 70 percent of Yemen’s imports. Now far less gets in as coalition ships off shore allow through only UN-inspected and approved commercial ships and aid, often with delays. What little that does get in is often so expensive that it isn’t affordable for most Yemenis. Humanitarian aid can’t substitute for normal commercial imports, and as long as the blockade is in place Yemen can’t import nearly enough of what it needs.  Most of the deaths from Yemen’s humanitarian crisis are invisible to the outside world because they go uncounted:

    Yemeni Rebels Begin Attacking Saudi Oil Infrastructure: You Know What That Means -- The Houthi rebels in Yemen, officially known as Ansurallah, have vowed to intensify rocket attacks on Saudi Arabia’s critical oil infrastructure, warning that they are now manufacturing their own ballistic missiles to achieve those aims, the Financial Times reports. The threat comes at a time when Houthi attacks on Saudi Arabia have begun to increase. Just this Saturday, Saudi Arabia’s air defense system intercepted four ballistic missiles over the southwestern region of Jizan. The debris of those missiles reportedly killed one person. Just a week prior, two other missiles were launched at the Saudi Arabian Oil Company (Aramco) facilities on the Red Sea.At the beginning of April, the London-based IHS Jane’s Terrorism and Insurgency Center noted that the Houthis claimed to have carried out three separate rocket attacks on Aramco facilities in ten days, including an attack on a Saudi oil tanker, which suffered some damage and led to the intervention of a coalition naval vessel, which in turn repelled the attack.The Houthis also unveiled their new Badr-1 surface-to-surface weapon system (a heavy artillery rocket system) approximately a week prior, which the rebels claimed they had used to attack Aramco facilities. Mohammed al-Boukhaiti, a member of the Houthi political council, also told the Financial Times that these attacks were “only the beginning of the response” to the death of Houthi leader Saleh al-Samad, who was killed by Saudi air strikes in April. “Yemenis will not pass on the death of Samad easily and they will do their best to take revenge for him,” Mr. Boukhaiti said. Boukhaiti also dismissed allegations that Iran has supplied the Houthis with sophisticated missiles, claiming instead that the rebels have been developing and manufacturing their own rockets and drones.

    Saudi team in Socotra as UAE presence angers Yemen -- A first meeting between a Saudi delegation and representatives of the Yemeni government on the Yemeni island of Socotra has ended without results, a Yemeni source told Al Jazeera.The delegation met Ahmed Obeid bin Daghr, Yemen's prime minister, on Friday after the United Arab Emirates (UAE) deployed four military craft and more than 100 troops to Socotra, reportedly without first consulting Yemen's government.On Friday, a Yemeni government official said UAE forces had occupied sea and airports on Socotra, in a move the official called an "act of aggression".A Yemeni minister told Anadolu news agency on Friday that the Yemeni people would not give up any sovereign territory. "Yemenis will safeguard their land, islands and coastland. We will not surrender one grain of sand," Nayef al-Bakri, the minister for youth and sports affairs, was quoted as saying.

    Saudi Arabia Will Build Christian Churches After Striking Deal With Vatican -  First he let women drive. Then he loosened rules surrounding public interactions between men and women. Now, in his latest act of progressive benevolence (in a country that still chops people's heads off for committing adultery), Saudi Crown Prince Mohammed bin Salman will allow the Vatican to build Christian churches in Saudi Arabia.The historic deal was signed by the Secretary General of the Muslim World League Sheikh Mohammed bin Abdel Karim Al-Issa and the President of the Pontifical Council for Inter-religious Dialogue in the Vatican, Cardinal Jean-Louis Tauran following a meeting last month, according to Breitbart.  The decision is part of KSA's shift to an ever more open stance as it seeks to recruit technology firms and other industries to help diversify its economy away from oil.During a visit to Riyadh in April, Cardinal Tauran was received at the royal palace by King Salman bin Abdulaziz Al Saud, who in addition to nominally running the country is also the custodian of the Two Holy Mosques, as well as his son MbS.In his address to Saudi officials, Tauran spoke about the difficulties faced by the "hundreds of thousands of Christians in the Saudi Kingdom" despite the fact that the country is the only state in the Arab world without even a single church.Tauran insisted that Pope Francis follows their plight "with close attention." The cardinal also reaffirmed the Vatican's view on the equal treatment of all citizens regardless of their religion, including those who are atheist or agnostic.

    UK drones in Syria using controversial 'vacuum' bombs | Middle East Eye: Britain's defence ministry have acknowledged using controversial thermobaric missiles in Syria that rights groups have described as "indiscriminate". Royal Air Force drones used the weapons, often called "vacuum" bombs because they suck oxygen into the powerful blast, against targets in Syria in January and February of this year, an FOI request sent by Drone Wars UK, a campaign group, has revealed. The missiles work by sucking in oxygen from the environment to create a high-temperature explosion with an extremely powerful blast radius. Unlike conventional explosives that cause injuries through shrapnel, the blast effect of thermobaric weapons causes internal organ damage including to the lungs. RAF MQ-9 Reaper drones fired 19 AGM-114N missiles in January and February of this year. The 'N' variant of the AGM-114 missile, known as Hellfire missiles, contains a thermobaric warhead which is particularly effective at targeting people inside enclosed spaces such as buildings, fortifications or tunnels. The exact cause of death from being hit by a thermobaric weapon would be multiple injuries to various organs including the lungs - Justin Bronk, RUSI air power expertThe British government has in the past refused to acknowledge whether it has used the weapons in combat saying it could harm the effectiveness of the armed forces. The revelations came on the same day that the British government admitted for the first time that its bombing campaign against Islamic State in Syria and Iraq killed civilians.

    It’s not clear if Trump and Netanyahu want a war with Iran – but they may fall into one all the same - - Iran has an exaggerated reputation in the Middle East for Machiavellian cunning and an ability to outmanoeuvre its enemies. Britain used to be regarded in the same light in the region: its most ill-considered actions were admired as devilishly clever plots when all it was doing was taking advantage of the blunders of its opponents.The Islamic Republic is similarly seen as the sinister hidden hand behind many developments with which it has little to do. It is accused of creating a corridor of pro-Iranian states from Tehran to the Mediterranean, posing an existential threat to Israel and the Gulf monarchies. The Iran nuclear deal of 2015 is to be dropped by Donald Trump because it has supposedly done nothing to avert these dangers, possibly leaving military action as the only option. Iranian influence has certainly expanded but only thanks a series of disastrous US-led military interventions since the start of the millennium. In early 2001 Iran was isolated with Afghanistan to the east under the rule of the Taliban, whose Sunni sectarianism inspired them with hatred of Shia  Iran whose diplomats they casually murdered. Iran’s neighbour to the west was Saddam Hussein’s Iraq, with whom it had fought a ferocious eight-year war. Western debacles in the Middle East since 9/11 have not produced a learning curve; or there is such a curve, it points down rather than up. In the wake of the popular uprising in Syria in 2011, the US and its regional allies – Saudi Arabia, Turkey and Qatar – backed the armed opposition to president Bashar al-Assad. Whatever they supposed they were doing, they ensured that for Assad to survive he needed maximum engagement of Russia and Iran in Syria.Are we about to see Iranian influence expand once again as the US and Israel gear up for a confrontation – and quite possibly a war – with Iran? Trump is likely to reimpose sanctions on Iran on 12 May, thereby sinking the nuclear deal negotiated by Barack Obama. It is a self-harming decision, pillorying Iran for being a great and threatening power while oddly weak enough to be brought to heel by economic sanctions and possible airstrikes. Sanctions will not work any better against Iran than they did against Iraq in the 1990s or against Syria today. If they do not, then the only alternative is military action by the US or by the US “green-lighting” an Israeli attack. But what happens then? This is the question that was never properly answered when the US intervened directly or indirectly in Afghanistan, Iraq and Syria. Supporters of these ventures had no clear vision of what a US victory would look like and, in so far as they did have a strategy, it rested on wishful thinking.

    Iran Claims Israel Attack Was A False Flag - In the aftermath of one of the most severe Israeli attacks on Syria "in decades," Iranian lawmakers said Thursday that Iran had no role in the attack, and that Shia nation doesn't operate any bases in Syria.  Mohammad Javad Jamali Nobandegani, a member of the Iranian Parliament’s national security and foreign policy committee, said Israel’s claim that Iran had provoked Israel by firing first was "a lie," adding that "Israel's history of carrying out unprovoked attacks in Syria has been well-documented.""Iran does not have military base in Syria," Nobandegani added.And while Iran maintains that last night's skirmish between the Israeli Defense Force and Syrian Army forces was a false flag, and that the IDF struck first (continuing its pattern of airstrikes and other military assaults in Syria), the IDF boasted Thursday morning that Tehran "will need a lot of time to recover" from the most extensive Israeli attack in Syria since 1974.  Meanwhile, Israel said Iran paid a "heavy price" for its (nonexistent) aggression following multiple Israeli airstrikes against what Tel Aviv said were targets belonging to the Iranian Revolutionary Guard Corp’s Quds Force.

    Iran: Israeli claims are 'fabricated' and 'baseless' -- Iran has denied Israel's allegations that it launched rocket attacks on its forces in the occupied Golan Heights, calling the claims "fabricated" and "baseless". On Thursday, Israel launched a wave of attacks on what it called Iranian targets in Syria in response to alleged Iranian attacks that targeted the Israeli-occupied Syrian territory of Golan Heights for the first time. It was the most extensive military exchange ever between the two adversaries. "The Zionist regime's frequent attacks on Syria under fabricated and baseless excuses is a breach of the national sovereignty and territorial integrity of Syria and in defiance of all international laws and regulations," Iranian Foreign Ministry spokesperson Bahram Qasem said. Israel says it hit dozens of Iranian military targets, as well as five Syrian anti-aircraft installations in response to Iranian forces allegedly launching 20 rockets in the occupied Golan Heights.Syrian state media reported that Syrian air defences had intercepted most of the incoming rockets over the capital, Damascus, but also confirmed that a radar station and a weapons storage site were struck.

    The US-Israeli Plan To Assassinate Iran's Elite Revolutionary Guard Commander -- The United States gave Israel the green light to assassinate Iran's top military officer, Iranian Revolutionary Guards al-Quds Force commander Maj. Gen. Qassem Soleimani, according to a widely circulated report in Kuwaiti newspaper Al-Jarida published earlier this year. News of the agreement, first published in Arabic in January, is now resurfacing in both Russian and Middle East regional media the day after Syria and Israel engaged in a massive overnight exchange of fire in what constitutes the most sustained Israeli attack on Syria in decades.  In the Arab world Al-Jarida is generally considered to be a platform through which Israel circulates news and its perspective to neighboring countries in the region. The newspaper first published report based on an Israeli government source who was cited as saying, "there is an American-Israeli agreement" that Soleimani is a "threat to the two countries' interests in the region"—which reportedly led to a Washington green-light for the Israelis to assassinate him.  General Soleimani, as leader of Iran's most elite force, also coordinates military activity between the Islamic Republic and Syria, Iraq, Hezbollah, and Hamas - a position he's filled since 1998 - and as Quds Force commander reports directly to the Supreme Leader of Iran, Ali Khamenei, and oversees Iran's covert operations in foreign countries.Israeli officials initially "leaked" the story after days of internal Iranian anti-government protests gridlocked the country in late December and early January, bringing international media attention and discussions in Tel Aviv and Washington of a potential coup attempt in the works. Whether or not there actually ever was such a green-light given by the American side, Al-Jarida report ultimately served the purpose of a semi-official threat issued through the media by the Israelis.

    Iran cleric threatens destruction of Israeli cities - A prominent Iranian cleric on Friday threatened two Israeli cities with destruction if the Jewish state "acts foolishly" and attacks its interests again, while thousands of protesters demonstrated against President Donald Trump's withdrawal from the Iranian nuclear deal with world powers. The comments by Ayatollah Ahmad Khatami followed a week of escalating tensions that threaten to spill over into a wider conflict between the two bitter enemies, who have long fought each other through proxies in Syria and Lebanon. Israeli airstrikes struck Iranian military installations inside Syria on Thursday — its biggest coordinated assault on Syria since the 1973 Mideast war — in retaliation for an Iranian rocket barrage on Israeli positions in the occupied Golan Heights. It was the most serious military confrontation between the two rivals to date.   "The holy system of the Islamic Republic will step up its missile capabilities day by day so that Israel, this occupying regime, will become sleepless and the nightmare will constantly haunt it that if it does anything foolish, we will raze Tel Aviv and Haifa to the ground," he said, according to state television. His remarks drew chants of "Death to America!" from those gathered for Friday prayers in Tehran. Thousands later demonstrated across the country to protest Trump's withdrawal from the nuclear deal.   In a lengthy government statement on Friday, the Iranian government warned that it would take "whatever reciprocal measures it deems expedient" if it is not fully compensated for the U.S. withdrawal from the nuclear agreement as provided for in the accord. It called on the other parties to the agreement — especially Britain, France and Germany — to safeguard the accord, adding that no provisions or timeframes in the 2015 agreement "are negotiable in any manner." At the same time, the government said it has tasked the president of the Atomic Energy Organization of Iran with "taking all necessary steps in preparation for Iran to pursue industrial-scale enrichment without any restrictions." 

    Russia, after Netanyahu visit, backs off Syria S-300 missile supplies (Reuters) - Russia is not in talks with the Syrian government about supplying advanced S-300 ground-to-air missiles and does not think they are needed, the Izvestia daily cited a top Kremlin aide as saying on Friday, in an apparent U-turn by Moscow. The comments, by Vladimir Kozhin, an aide to President Vladimir Putin who oversees Russian military assistance to other countries, follow a visit to Moscow by Israeli Prime Minister Benjamin Netanyahu this week, who has been lobbying Putin hard not to transfer the missiles. Russia last month hinted it would supply the weapons to President Bashar al-Assad, over Israeli objections, after Western military strikes on Syria. Foreign Minister Sergei Lavrov said the strikes had removed any moral obligation Russia had to withhold the missiles and Russia’s Kommersant daily cited unnamed military sources as saying deliveries might begin imminently. But Kozhin’s comments, released so soon after Netanyahu’s Moscow talks with Putin, suggest the Israeli leader’s lobbying efforts have, for the time being, paid off. “For now, we’re not talking about any deliveries of new modern (air defense) systems,” Izvestia cited Kozhin as saying when asked about the possibility of supplying Syria with S-300s. The Syrian military already had “everything it needed,” Kozhin added.  The Kremlin played down the idea that it had performed a U-turn on the missile question or that any decision was linked to Netanyahu’s visit. “Deliveries (of the S-300s) were never announced as such,” Kremlin spokesman Dmitry Peskov told reporters on a conference call, when asked about the matter.

    The Banal Hypocrisy Of Western Coverage of Israel - So, I see the usual suspects, in response to a large attack by Israel on Iranian targets in Syria, are saying the usual, “I support Israel’s right to defend itself.” Really what they mean, of course, is “I’m scared of the Israeli lobby in my country, and of being called an anti-semite if I dare say the truth.” The truth is that Israel attacks other countries far more than other countries attack Israel. The truth is that the attack to which the Israelis were responding was actually in response to routine Israeli attacks on Syria. The truth is that Iran is an invited guest in Syria and Israel is not.Modern Iran has not attacked multiple neighbours over the course of its history. Israel has, and taken territory from them to boot.The Golan Heights was taken from Syria, by Israel. Our entire “conversation” about Israel and the region around it is based on hypocrisy, fear and guilt over the holocaust, as if because Germany killed millions of Jews, it’s ok for Israel to treat Palestinians and everyone else in the neighbourhood monstrously. Israel should remember that “the powerful do as they will, the weak suffer what they must” was replied to “what you do to us, will one day be done to you, because seeing how you treat us, no one will trust you or have mercy on you.”

    U.S. Exit From Nuclear Deal Would Help Iran, Former Israeli General Says - Iran would 'drive a wedge between the world powers,' Amos Gilad tells Haaretz, making it harder to monitor Tehran's nuclear program  Maj. Gen. (res.) Amos Gilad, the former research chief at Military Intelligence, told Haaretz that a U.S. withdrawal from the 2015 nuclear agreement with the big powers would mainly help Iran. Gilad, also the former director of the political-security division at the Defense Ministry, said over the weekend that although he had reservations about the nuclear agreement when it was signed, he now believed that an American commitment to the deal remained the least bad option. Referring to last Monday’s presentation by Prime Minister Benjamin Netanyahu on Iran’s nuclear program, Gilad said the material obtained by the Mossad did not prove that the Iranians were violating the nuclear agreement.   “Israel needs to prioritize the threats against it,” said Gilad, who is also a former coordinator of government activities in the territories. “If Iran now continues to suspend its nuclear project for eight or 10 years, in accordance with the agreement, that will let us focus on more urgent threats relating to the Iranian army establishing a presence in Syria, and preparing the Israeli army for the possibility that, in the future, we’ll have to deal with the nuclear [issue] if a confrontation erupts.”

    Reimposing Iran Oil Sanctions May Spell Trouble for Turkish Lira -  Turkey’s currency is already having a rough year, but if the U.S. reimposes sanctions on Iranian oil exports it could fall even further.That’s because the lira, along with the yen and the Swiss franc, is more at risk of declining than most major peers should Iranian shipments be curtailed, according to an analysis from Danske Bank’s Jens Pedersen that maps different currencies’ sensitivity to oil-price moves. The Canadian dollar, Norwegian krone and ruble are among those seen as most likely to benefit. Crude oil is trading near the highest since 2014 in advance of the May 12 expiration of the waiver on U.S. sanctions on Iran. President Donald Trump said in a tweet Monday that he’ll announce his decision on Tuesday on whether the U.S. will remain in the Iran nuclear accord. The lira has already lost 10 percent this year against the euro amid concern that monetary policy is too loose to anchor inflation. The report, released Monday, used the euro as its base. It found that the euro-lira, euro-yen and euro-franc pairs have upside risk should the price of Brent oil rise to $80 to $85 per barrel in a scenario where Iranian oil sales are hampered, from about $75 now. Traders focusing on the euro-dollar rate need not be worried, according to the report, as the pair “maintains a minuscule sensitivity to oil, which means that an oil spike should not be able to derail the current negative momentum in the cross.”

    China’s Position on the Iran Nuclear Deal – Earlier this month, China underlined its commitment to the Iran nuclear deal (also known as the Joint Comprehensive Plan of Action or JCPOA). In a statement by Foreign Ministry Spokesperson Hua Chunying following Prime Minister Netanyahu’s “Iran Lied” presentation, China reiterated the role of the UN Security Council and the International Atomic Energy Agency (IAEA) in the agreement. China rightly pointed out that the IAEA had verified Iran’s compliance with the accord on no fewer than 10 occasions, that the JCPOA put in place the strictest monitoring and verifications measures on the Iranian nuclear program, and that all parties should implement and safeguard the accord. Last month, both China and Russia in the Preparatory Committee of the 2020 NPT Review Conference issued a joint statement on the JCPOA. In addition to confirming their support, the two countries said that the JCPOA contributed to strengthening the global non-proliferation regime and demonstrated that non-proliferation issues can only be addressed through diplomacy—in marked contrast to Donald Trump’s approach. They emphasised the need for all parties to implement their commitments under the accord and to refrain from actions that undermine implementation of commitments.

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