US oil prices were again quite volatile this week, rising on threats to oil supplies, then falling when news showed supplies were more than adequate, but ultimately ending the week just a few cents below where they started, in the 3rd weekly decrease in a row...after sliding $2.07 or 3% to $65.81 a barrel last week, benchmark US crude prices for July fell another $1.06 to $64.75 a barrel on Monday to their lowest level in nearly two months, driven lower by growing U.S. oil production, international trade tensions, and expectations that OPEC would raise global supplies...but prices turned around on Tuesday, rising 77 cents to finish at $65.52 a barrel, after 12 of 13 analysts in a Bloomberg survey said Wednesday’s weekly EIA report would show US oil stockpiles decreased the prior week...however, when that EIA report surprised the pundits and showed an increase in crude supplies, oil prices fell back to below their Monday close, shedding 79 cents and ending the day at $64.73 a barrel....but oil prices turned around again on Thursday, rising $1.22 to $65.95 a barrel, on a steep drop in oil exports from Venezuela and word from Algeria’s oil minister that OPEC might not raise output at its meeting later this month...however, that rally reversed again the next morning on a drop in Chinese demand, and prices then fell as low as $65.15 a barrel after JP Morgan cut its 2018 US crude price forecast by $3 to $62.20 a barrel, before steadying near the close to end at $65.74 a barrel, for a loss of 21 cents on the day but just 7 cents, or 0.1%, for the week overall...
international oil prices, meanwhile, followed a similar trajectory, but maintained a premium of over $10 a barrel over US prices throughout the week...the front month of the international benchmark, North Sea Brent crude for August, was down $1.50 on Monday to $75.29 a barrel, its lowest in two months, on growing expectations that OPEC would increase production at their upcoming meeting, but then was little changed over Tuesday and Wednesday while US crude prices were being jacked up and down by the EIA report on US oil supplies...however, Brent prices were up nearly $2 to $77.32 a barrel on Thursday as the drop in exports from Venezuela and concern that OPEC might not raise production had a greater impact on international oil prices...Brent prices then fell 86 cents to end the week at $76.46 a barrel, for a loss of 23 cents or 0.3% on the week, but still $10.79 a barrel more than the similar grade of US crude for August delivery...with a price spread of that magnitude, we can almost guarantee that we'll be seeing record levels of crude exports this summer and beyond, any hurricane disruptions to port traffic notwithstanding...
natural gas prices, meanwhile, also ended lower this week, as forecasts for cooler weather dashed the bulls' hopes for an early summer gas-consuming air conditioning power burn...natural gas prices for July delivery were down 3.2 cents on Monday and 4 cents on Tuesday and despite a 3.4 cent gain on Thursday's natural gas storage report, fell another 4 cents on Friday to end the week 2.4% lower at $2.890 per mmBTU...that natural gas storage report from the EIA for the week ending June 1st indicated that natural gas in storage in the US rose by 92 billion cubic feet to 1,817 billion cubic feet over the week, which still left our gas supplies 799 billion cubic feet, or 30.5% below the 2,616 billion cubic feet that were in storage on June 2nd of last year, and 512 billion cubic feet, or 22.0% below the five-year average of 2,329 billion cubic feet of natural gas that are typically in storage at the beginning of June...the market was anticipating a 97 billion cubic foot addition to gas storage, so this week's 92 billion cubic foot addition was a bit short of expectations, and was also below the average 104 billion cubic foot weekly surplus of natural gas that is typically added to storage at this time of year...again, we're watching these supplies to see if they can be adequately rebuilt before next winter; as we noted, last year natural gas supplies rose to 3,790 billion cubic feet by the first week of November before withdrawals for heating began, so at today's levels we'd have to add 1,973 billion cubic feet over the next 22 weeks, or nearly 90 billion cubic feet per week, to match that pre-winter level by November, which will become increasingly difficult as we move into the warmer part of the summer, when demand for air conditioning is strongest...
The Latest US Oil Data from the EIA
this week's US oil data from the US Energy Information Administration, covering the week ending June 1st, indicated that due to a big jump in our oil imports and and a corresponding drop in our oil exports, we had surplus oil to add to our commercial crude supplies for the eleventh time in the past nineteen weeks.....our imports of crude oil rose by an average of 715,000 barrels per day to an average of 8,346,000 barrels per day during the week, after falling by 528,000 barrels per day over the prior week, while our exports of crude oil fell by an average of 465,000 barrels per day to an average of 1,714,000 barrels per day during this week, which meant that our effective trade in oil over the week ending June 1st worked out to a net import average of 6,632,000 barrels of per day during the week, 1,180,000 barrels per day more than the net of our imports minus exports during the prior week...at the same time, field production of crude oil from US wells rose by 31,000 barrels per day to a record high of 10,800,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 17,432,000 barrels per day during the reporting week...
meanwhile, US oil refineries were using 17,369,000 barrels of crude per day during the week ending June 1st, 214,000 barrels per day more than they used during the prior week, while at the same time 209,000 barrels of oil per day were reportedly being added to oil storage in the US....hence, we can see that this week's crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports and from oilfield production was 146,000 fewer barrels per day than what was reportedly added to storage plus what refineries reported they used during the week...to account for that disparity, the EIA needed to insert a (+146,000) 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 rose to an average of 7,934,000 barrels per day, which was still 4.4% less than the 8,303,000 barrel per day average we imported over the same four-week period last year...the 209,000 barrel per day increase in our total crude inventories included a 296,000 barrel per day addition to our commercially available stocks of crude oil, which was partially offset by a 87,000 barrel per day decrease of the oil in the oil stored in our Strategic Petroleum Reserve, likely part of a sale of government owned oil mandated by this year's federal budget...this week's 31,000 barrel per day increase in our crude oil production included a 35,000 barrel per day increase in output from wells in the lower 48 states, which was slightly offset by a 2,000 barrel per day decrease in oil output from Alaska, with no explanation as to why those rounded figures don't add up...the 10,800,000 barrels of crude per day that were produced by US wells during the week ending June 1st were again the highest on record, 15.9% more than the 9,318,000 barrels per day that US wells were producing during the week ending June 2nd of last year, and 28.1% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...
US oil refineries were operating at 95.4% of their capacity in using 17,369,000 barrels of crude per day during the week ending June 1st, up from 93.9% of capacity the prior week, as refineries will usually try to run flat out through the summer driving season...however, the 17,369,000 barrels of oil that were refined this week were still down 1.4% from the off-season high of 17,608,000 barrels per day that were being refined during the last week of December 2017, even as they have finally topped the 17,227,000 barrels of crude per day that were being processed during the same week a year ago, when US refineries were operating at 91.5% of capacity....
even with the increase in the amount of oil that was refined this week, gasoline output from our refineries was considerably lower, falling by 775,000 barrels per day to a 4 year seasonal low of 9,658,000 barrels per day during the week ending June 1st, after our refineries' gasoline output had increased by 381,000 barrels per day during the week ending May 25th....that big decrease meant our gasoline production was 2.8% lower during the week than the 9,934,000 barrels of gasoline that were being produced daily during the week ending June 2nd of last year, an otherwise slow refining week......meanwhile, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 28,000 barrels per day to a seasonal high of 5,324,000 barrels per day, after rising by 358,000 barrels per day the prior week...as a result, this week's distillates production was 7.4% higher than the 4,956,000 barrels of distillates per day than were being produced during the week ending June 2nd, 2017....
however, even with the big drop in our gasoline production, our supply of gasoline in storage at the end of the week still rose by 4,603,000 barrels to 239,034,000 barrels by June 1st, the sixth increase in 14 weeks, and the largest increase since December....our gasoline supplies increased primarily because the amount of gasoline supplied to US markets fell by 713,000 barrels per day to 8,976,000 barrels per day, and because our exports of gasoline fell by 118,000 barrels per day to 538,000 barrels per day, while our imports of gasoline fell by 182,000 barrels per day to 777,000 barrels per day....but even after this week's increase, our gasoline inventories finished the week fractionally lower than last June 2nd's level of 240,348,000 barrels, even as they were still roughly 8.6% above the 10 year average of gasoline supplies for this time of the year...
meanwhile, with this week's increase in distillates production, our supplies of distillate fuels rose for the second time in 9 weeks, increasing by 2,165,000 barrels to 116,794,000 barrels during the week ending June 1st...our distillate inventories increased because the amount of distillates supplied to US markets, a proxy for our domestic consumption, dropped by 817,000 barrels per day to 3,502,000 barrels per day, after increasing by 682,000 barrels per day the prior week, as wholesalers built supplies in advance of the holiday weekend...meanwhile, our exports of distillates rose by 536,000 barrels per day to a near record 1,659,000 barrels per day while our imports of distillates decreased by 91,000 barrels per day to 149,000 barrels per day...however, because our distillate supplies fell by 14,452,000 barrels over six weeks to May 18th, our distillate supplies still ended the week 21.5% below the 148,768,000 barrels that we had stored on June 2nd, 2017, and roughly 15.2% lower than the 10 year average of distillates stocks for this time of the year…
finally, with our oil exports down and our oil imports much higher, our commercial supplies of crude oil increased for the 12th time in 2018, but just for the 18th time in the past year, as our commercial crude supplies rose by 2,072,000 barrels during the week, from 434,512,000 barrels on May 25th to 436,584,000 barrels on June 1st...however, after falling most of the past year, our oil inventories as of June 1st were still 14.9% below the 513,207,000 barrels of oil we had stored on June 2nd of 2017, 13.0% below the 501,844,000 barrels of oil that we had in storage on June 3rd of 2016, and fractionally below the 438,447,000 barrels of oil we had in storage on June 5th of 2015, during a period when the US glut of oil had already begun to build from the nearly stable supply levels of the prior years...
before we move on, i want to take a look an anomalous increase in our total inventories in this week's report that was pointed out by Zero Hedge...as it turns out, those increases in our inventories of gasoline, distillates and crude that we've discussed above, when combined with increase in inventories of jet fuel, bunker fuel, propylene, and other oil products, was the largest increase in our total oil and oil products inventories since October of 2008...by way of showing you what happened, we'll include the graph showing that increase from the post at zero hedge:
the above graph of our total oil + oil products inventories comes from the Zero Hedge review of this week's EIA release, wherein the graph shows the end of the week supply in billions (not millions) of barrels of crude oil and petroleum products (excluding what's in the SPR) from mid-2006 to the current report...also shown below the graph as red spikes above or below a zero line is the weekly change in crude oil and petroleum products in thousands of barrels...hence, as they point out with the green dashes, this week's 15,756,000 barrel increase in our total inventories was the largest upward spike, and hence the largest increase in our total inventories since 19,673,000 barrels of oil and products were added to our supplies during the week ending October 3rd 2008...
while i can't venture a guess why supplies had jumped that much during that week nearly 10 years ago, this week's inventory jump appears to be an artifact of how our oil product supplies are distributed around the holidays...as we noted earlier, the amount of gasoline supplied to US markets, often seen as an indicator of our consumption, fell by 713,000 barrels per day during the week ending June 1st, while the amount of distillates supplied to US markets dropped by 817,000 barrels per day over the same period...checking other "product supplied" metrics, we find that jet fuel supplied to US markets fell by 163,000 barrels per day, that propane/propylene supplied to US markets fell by 326,000 barrels per day, that residual oil supplied to US markets fell by 12,000 barrels per day, and that other oils supplied to US markets fell by 400,000 barrels per day...with deliveries to US wholesalers down, inventories held by the oil product producers, whose refineries continued to operate, naturally rose...but again, this appears to be a function of product distribution around the holiday; gasoline, diesel fuel, and jet fuel wholesalers and retailers built their inventories in the weeks before the holiday, and hence their deliveries of product were slack during the holiday week...this is evident in the historical record, when for instance, the largest weekly increase in oil and oil products inventories last year was also during the week of Memorial Day, when inventories increased by 15,471,000 barrels, which was nearly a 9 year high at that time...holiday weeks in prior years also show similar anomalous inventory increases, but usually not so extreme as the past two years, and in no case have those increases been evidence of a trend...
This Week's Rig Count
US drilling activity increased for the 15th time in the past sixteen weeks and for 24th time in the past 31 weeks during the week ending June 8th, a period of higher oil prices that has seen rig increases far exceed the few decreases...Baker Hughes reported that the total count of active rotary rigs running in the US increased by 2 rigs to 1062 rigs over the week ending on Friday, which was also 135 more rigs than the 927 rigs that were in use as of the June 9th 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 count of rigs drilling for oil was up by 1 rig to 862 rigs this week, which was also 121 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, 2014...at the same time, the number of drilling rigs targeting natural gas formations also rose by 1 rig to 198 rigs this week, which was only 13 more gas rigs than the 185 natural gas rigs that were drilling a year ago, and way down from the modern high of 1,606 natural gas rigs that were deployed on August 29th, 2008...in addition, there continues to be two rigs operating that are considered to be "miscellaneous", compared to the 1 "miscellaneous" rig that was running a year ago....
with the addition of a second drilling platform offshore from Texas, drilling activity in the Gulf of Mexico increased by 1 rig to 19 rigs this week, which was still 2 fewer rigs than were drilling in the Gulf of Mexico a year ago, at which time all Gulf of Mexico rigs were in Louisiana waters...there was also a rig drilling offshore from Alaska this week, as there also was during the week ending June 9th a year ago, so the total US offshore count is now at 20 rigs, also down by 2 from last year's offshore total of 22 rigs....in addition, another platform was set up to drill through an inland lake in southern Louisiana this week, so now there are 3 such 'inland waters" rigs operating, same as the number of inland waters rigs that were operating going into the same weekend a year ago...
the count of active horizontal drilling rigs increased by 5 rigs to 934 horizontal rigs this week, which was 154 more horizontal rigs than the 780 horizontal rigs that were in use in the US on June 9th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...in addition, the directional rig count increased by 2 rigs to 67 directional rigs this week, which was also up by 1 from the 66 directional rigs that were in use during the same week of last year...on the other hand, the vertical rig count was down by 5 rigs ti 61 vertical rigs this week, which was also down from the 81 vertical rigs that were deployed on June 9th of 2017...
the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows the weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of June 8th, the second column shows the change in the number of working rigs between last week's count (June 1st) and this week's (June 8th) count, the third column shows last week's June 1st active rig count, the 4th column shows the change between the number of rigs running on Friday and those 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 9th of June, 2017...
except for the three rig decrease in Oklahoma's Cana Woodford, which has often been touted as a hot play, there's not much particularly noteworthy in this week's changes...there was another 3 rig increase in the Permian, apparently all in west Texas this week, which has now seen 112 rigs added this past year, all but one of them drilling for oil, and hence those additions account for the lion's share of the oil rig increases over the past year...drilling in all the major natural gas basins, meanwhile, was again unchanged, with the one rig increase in natural gas rigs occurring in one of those "other" basins not tracked separately by Baker Hughes...we should also note that in addition to the changes shown in the major producing states in the top table above, this week also saw a rig added in Alabama, as well as one in Mississippi...hence, in Alabama, there are now 2 rigs operating, down from 3 a year ago, while the 3 rigs now operating in Mississippi is back to the same number as a year ago...in addition, the only rig that had been drilling in Florida was shut down this week, so Florida is now free of any drilling, same as they were a year ago...
FirstEnergy's request for Trump relief draws more critics - Toledo Blade - The Trump Administration plan to bail out struggling nuclear and coal-fired power plants comes two months after FirstEnergy Solutions filed what many experts see as a historic and potentially landmark petition for relief under Chapter 11 bankruptcy laws.FirstEnergy is a subsidiary of Akron-based FirstEnergy Corp. The FirstEnergy bankruptcy filing includes FirstEnergy Nuclear Operating Co., which oversees the Davis-Besse nuclear plant east of Toledo, the Perry nuclear plant east of Cleveland, and the twin-reactor Beaver Valley complex west of Pittsburgh.The case has become a high-profile one nationally because FirstEnergy is one of America’s largest utilities.Those nuclear plants — in addition to numerous coal-fired power plants under FirstEnergy — represent a huge chunk of electricity for the regional electric grid Pennsylvania-based PJM Interconnection operates in 13 states, including Ohio. That grid, which serves 65 million people, is the nation’s largest.Because nuclear and coal-fired plants have become so unprofitable — unable to compete against record-low natural gas prices — FirstEnergy appealed to U.S. Department of Energy Secretary Rick Perry for help when it filed for bankruptcy in March. It called upon him to exercise emergency authority under a pair of federal laws typically reserved for wars or natural disasters.Now, with administration spokesman Sarah Huckabee Sanders announcing on Friday that President Trump has directed Mr. Perry to prepare “immediate steps” to keep such plants open, the utility appears to be getting its wish.
Letter: Studies on fracking, methane show mixed results - Columbus CEO -- Clarke Owens - Jon Baker's recent front-page article, "Study: East Ohio water unaffected by drilling," devotes its last two paragraphs to the words of Jackie Stewart, a public relations spokesperson for a group launched by the Independent Petroleum Association of America. She claims the study finds that "fracking is not a major threat to groundwater." Another, online article about the same study (www.sciencedaily.com) says: "Researchers hypothesized that methane concentrations in the drinking-water wells they sampled would increase over time with the growth of natural gas drilling in the area. This is a correlation researchers observed in Pennsylvania's Marcellus region." Instead, the study found that methane in groundwater was naturally occurring. The Pennsylvania researchers attributed the contamination to failed well casings, which hadn't happened "with the wells of homeowners we worked with for our study." The study was limited to new wells. "Researchers did find wide variability in methane concentrations in the drinking water, ranging from 0.2 micrograms per liter to 25.3 milligrams per liter, which is strong enough to catch fire in enclosed spaces. But researchers found no relationship between the methane observed in drinking water and the new gas wells." The study concluded: "Clearly, additional monitoring is needed to determine whether methane concentrations and source signals in this region change as the number of oil and gas wells continues to increase." Google the issue and you get a mixed result. But a Cornell University professor did a study in 2014 showing that nine percent of unconventional wells in Pennsylvania since 2009 have structural integrity issues. He was concerned the problem will grow as wells age, and tens of thousands of them are bored.
Gas Pipeline Growth For TransCanada - Two years ago, TransCanada Corporation (TRP) acquired the enormous Columbia Gas pipeline network. Columbia Gas Transmission LLC owns the various pipelines that make up the Columbia Gas system, and TransCanada Corporation owns 100% of that subsidiary. Let's take a look at how TransCanada Corporation is growing its massive gas pipeline division. Now that the Leach Pipeline is operational (came online in early January) the Columbia Gas system runs for 12,000 miles. Primarily, the pipeline transports Appalachian gas supplies to buyers in the Northeast, but that is changing as the network gets larger and larger. Operations are supported by Columbia Storage, which has 285 billion cubic feet of natural gas storage capacity (entirely or almost entirely owned by TransCanada). The company also owns half of the 12 Bcf Hardy Storage facility in West Virginia.When it comes to natural gas Appalachia is brimming with supply, and production growth out of the Marcellus and Utica shale plays show no signs of letting up. To grow, TransCanada needs to make sure that ever rising Appalachian gas supplies can reach end buyers.That isn’t as easy a task as it seems due to the risks posed by construction cost overruns, regulatory hurdles, political concerns, financing costs, and competition from other pipeline operators. Midstream firms have a preference for expanding existing pipelines rather than building new ones. Generally speaking, expansions of existing pipeline systems are an easier sell to both the public and regulators than building a new one from scratch. Let's go over some of those expansions. The Mountaineer Xpress project is a 171-mile endeavor that involves constructing a pipeline from Marshall County in the northern part of West Virginia down to Cabell County in the southwestern portion of the state. Gas will be supplied through receipt points in Pennsylvania and West Virginia, and with 2.7 Bcf/d of gas takeaway capacity, this is quite a large endeavor. On top of putting pipe in the ground, TransCanada is upgrading three existing compression stations and building three new ones as part of the Mountaineer Xpress project. When operational, the system will send 1.8 Bcf/d of gas supplies to the TCO Pool and the remaining 0.9 Bcf/d will go to either the TCO Pool or the Leach Interconnect. Through the Leach Pipeline, those gas supplies can ultimately reach Southern US markets. The pipeline can carry up to 1.5 Bcf/d of gas across 160 miles from Marshall County in West Virginia down to Leach, Kentucky. From there, the Leach Pipeline connects with the Rayne Pipeline which runs to Rayne, Louisiana. In conjunction with the Mountaineer Xpress project, TransCanada launched the Gulf Xpress endeavor. The Gulf Xpress project involves building seven new compression stations and upgrading an existing one along an existing pipeline built a while ago. When completed, this $800 million development will add roughly 875 MMcf/d to the Columbia Gulf pipeline system's transportation capacity.
Here’s mud in your eye - It’s been a bad two weeks for the Mountain Valley Pipeline, and a time of hope for opponents. On Tuesday, a proposal by the pipeline to pay Franklin County up to $300,000 to lease 10 acres of public land to store equipment during construction failed on a tie vote of the seven-member Board of Supervisors, with one abstention. The supervisor’s vote wasn’t the first blow to the project this month, either locally or nationally. On May 17-18 earth destabilized by tree cutting and land clearing along the pipeline route buried both lanes of Cahas Mountain Road under nearly 8 inches of mud. The flooding and erosion was just the type of thing protesters had been claiming would happen and gave some weight to their warnings. State regulators ordered a temporary stop to pipeline work until better sediment control measures were put in place. On Wednesday, The Roanoke Times reported that six county landowners affected by the mudslide had filed a lawsuit against the pipeline, claiming the sediment swamped their hayfields and made its way into nearby streams. More seriously for the pipeline, on Tuesday Reuters reported that the U.S. Army Corps of Engineers had pulled its nationwide permit and “could delay the $3.5 billion project’s expected late 2018 in-service date. “The Army Corps said in a filing made available on Thursday that it pulled the permit on May 22 to determine if it is at odds with West Virginia environmental rules,” according to Reuters. If the pipeline is found to be in violation, construction will be rerouted around three West Virginia rivers, Reuters reported. But it’s likely to go forward anyway, despite sometimes obsessive hostility towards it.
Regulators cite Mountain Valley Pipeline a second time for erosion problems -- For the second time since work began on the Mountain Valley Pipeline, regulators have put the company on notice that it is breaking rules meant to protect the environment. Crews building the natural gas pipeline failed to prevent sediment-laden water from running off at a work site in Wetzel County, West Virginia, according to a notice of violation issued last week by the state’s Department of Environmental Protection. Opponents of the project have long argued that clearing land and digging ditches along steep mountain slopes for the massive buried pipeline will invite problems with erosion, leading to contamination of streams that feed public and private water supplies. Those fears were corroborated April 25, when West Virginia environmental regulators issued their first notice that Mountain Valley was using inadequate erosion and sediment control devices. Ann Rogers, director of development for the Blue Ridge Environmental Defense League, said she was “grievously concerned” to learn of a second notice — especially coming so soon in a construction process that is only a few months old. “People need to understand that we’re just getting started,” she said. “If you think this is bad, wait until they start digging deeper into the ground.” After receiving their first notice of violation, pipeline officials wrote in a letter to regulators that the issues had been “fully addressed and resolved.” Yet just a few weeks later, they were facing more problems in Wetzel County, the starting point for a 303-mile buried pipeline that will pass through Southwest Virginia. One trouble spot was in a “known flood plain,” according to written reports, and in another construction area water was seen running through a silt fence meant to curb erosion. “Sediment deposits were observed in stream, causing conditions not allowable,” an inspection report stated.
Mountain Valley Pipeline protesters lock themselves to drilling equipment - Opponents of the Mountain Valley Pipeline tried a new tactic Monday: chaining themselves to construction equipment. West Virginia state police arrested three people who were trying to slow down workers in Lindside, a community in Monroe County, West Virginia. They delayed construction for a few hours on Route 219. Police cut them out around 10 a.m., about two hours after they received a call. Police said Maxwell Shaw, 24, Evin Ugur, 21, and Sydney White, 18, are all from Massachusetts and are out on bond. Court documents showed they're each facing three misdemeanors, one each for trespassing, obstructing and resisting arrest. That could mean up to two and a half years in jail. Witnesses say about 25 other pipeline opponents came out to watch. One of them was Jammie Hale, who lives in Giles County. “Very humbling. You see somebody willing to put their life and limb in jeopardy to save my farm, my land, my community. Oh yeah, it’s very humbling,” he said. He described a tense atmosphere. Witnesses said police threatened to use tasers, pepper spray and batons. “There’s people going every which way and then police, law enforcement pulling in and you don’t know what to expect or exactly what’s going to happen,” he said. He’s encouraged by the efforts. “Nowadays people are scared to stand up and take a stand and to see especially some young people,” he said. This comes just three days after the last sitter in Virginia came down from a spot blocking construction in Giles County. “I hope a lot of people get involved and say ‘I’m going to stick up for my neighbor, for their rights, for our constitutional rights,’” Hale said.
W.Va. DEP suggests pulling or changing part of MVP permit The West Virginia Department of Environmental Protection suggested last week it might modify or waive a condition on a river-crossing permit issued to pipeline developers.The federal Clean Water Act permit, called the Nationwide 12, is at the center of a legal challenge against the U.S. Army Corps of Engineers, which approved the permit for the pipeline.The 300-mile line is designed to run natural gas from Wetzel County, W.Va., to Pittsylvania County, Va., crossing 600 streams and 400 wetlands, Kallanish Energy understands.The Mountain Valley Pipeline is ineligible for the Nationwide 12 permit because four major river crossings don’t comply with one of the permit’s conditions, lawyers for the Sierra Club, the West Virginia Rivers Coalition, the Indian Creek Watershed Association and others argued in a motion for preliminary relief filed May 22, the Charleston (W.Va.) Gazette-Mail newspaper reported.The “Special Condition C,” added to the Nationwide 12 permit by the DEP, stipulated stream crossings be completed within 72 hours. But developer Mountain Valley Pipeline LLC told the Army Corps in 2017 construction on the Elk, Gauley, Greenbrier and Meadow river crossings could take between four and six weeks to complete. After the lawyers challenged the permit, arguing that Mountain Valley Pipeline wasn’t eligible for the permit because construction would take longer than 72 hours, the Army Corps blocked construction on crossings of the four rivers.Wednesday, the Army Corps of Engineers wrote to the DEP, asking for information about construction methods, and whether the DEP planned to take additional action on the Special Condition C, or its application to the four river crossings.On Thursday, Scott Mandirola, director of the DEP’s division of water and waste management, wrote: “Yes, the WVDEP intends to take whatever action is necessary to make it clear that the most environmentally protective methods are used for the stream crossings detailed in your letter,” the Gazette-Mail reported.
TransCanada Pipeline Explodes in West Virginia - A newly installed TransCanada natural gas pipeline exploded early Thursday in the remote Nixon Ridge area of Marshall County in West Virginia. No injuries were reported but flames and smoke from the blast could be seen as far as 20 miles away , residents told local media. Area police told CBS News the fire was "very large—if you can see it from your house, evacuate." "It sounded like a freight train coming through, or a tornado, and the sky lit up bright orange, and then I got up and looked out the window and flames were shooting I don't know how far into the sky," Tina Heath-Chaplin, of Moundsville, told WPXI . TransCanada—the same company behind the Keystone pipeline—said the explosion has been contained and an investigation is underway. "As soon as the issue was identified, emergency response procedures were enacted and the segment of impacted pipeline was isolated. The fire was fully extinguished by approximately 8:30 a.m," the company commented Thursday. "The cause of this issue is not yet known," TransCanada continued. "The site of the incident has been secured and we are beginning the process of working with applicable regulators to investigate, including the Pipeline and Hazardous Materials Safety Administration."
Gas line explosion rocks Moundsville area of northern West Virginia, sends flames high in air -- A powerful gas line explosion sent flames shooting into the sky early Thursday in the Nixon Ridge area of Marshall County, West Virginia, reports CBS Wheeling affiliate WTRF-TV. The flames could be seen for miles around.The blast, in a TransCanada pipeline, was felt around 4:20 a.m., the station says.One person told WTRF it shook his house so badly it felt like a tornado was ripping through the area. Moundsville, W. Va. police told CBS News the fire was "very large -- if you can see it from your house, evacuate" Ohio County, W. Va. Ohio County Emergency Management Agency Director Lou Vargo said they were getting dozens of 911 calls from people who could see the flames and were very alarmed.In addition:BREAKING: @MarshallCoWVOEM says they have received calls from Ohio, Belmont, Marshall, and Wetzel Counties that people can see this explosion. Hart says he could see if from Cameron @WTRF7News pic.twitter.com/WMPQjrTllo — Tessa DiTirro (@TDiTirroWTRF) June 7, 2018
TransCanada's New 'Best-In-Class' Gas Pipeline Explodes in West Virginia, Causing Fiery Blast -- This morning, residents of Marshall County, West Virginia, awoke at 4:15 a.m. to a major natural gas rupture and explosion on TransCanada's Leach XPress pipeline on Nixon Ridge — a quickly built pipeline only half a year old. The fire was visible for miles, local TV news reported. Police warned anyone who could see the flames to evacuate — and the Emergency Management Agency director of neighboring Ohio County said officials had received dozens of 911 calls from locals able to see the fire, which was extinguished roughly four hours later. The blast was so powerful that one resident told a local CBS affiliate it felt like a tornado was passing through. No one was injured, and no property damage was reported, TransCananda said in a statement released today, adding that the cause of the explosion was not yet determined. The Leach XPress pipeline is just six months old, having been put into service on January 1, 2018. At the time, TransCanada emphasized that it was built quickly — but safely. “Leach XPress was done in less than a year,” Scott Castleman, manager of U.S. Gas Communications for TransCanada, said in a January statement. “We’re looking forward to generations of safe operations,” he added. “This is truly a best-in-class pipeline and we look forward to many years of safe, reliable, and efficient operation on behalf of our customers.”
Appalachian natural gas market reacts to explosion,force majeure - An explosion early Thursday morning in Marshall County, West Virginia, on TransCanada's Columbia Gas Transmission system caused a force majeure on the pipeline's Leach XPress and put prices in the region on a roller-coaster. In Thursday trading at Columbia Gas, Appalachia saw an 11-cent climb to $2.77/MMBtu, according to Platts preliminary pricing data, changing direction from other points in the area, as Texas Eastern Transmission M-2 plunged 21 cents and the Dominion Transmission South Point dropped 26-cents. This is the first time in seven trading sessions that Columbia Gas, Appalachia has moved opposite of both Tetco M-2 and Dominion South. Balance-of-the-month gas prices could also see opposite movement for Columbia Gas, Appalachia versus Tetco M-2 and Dominion South as no return-to-service date for the pipeline has been announced.For gas day Friday, timely cycle, and until further notice, LXPSEG MA41 capacity was set to zero. This month, flows through the affected segment (LXPSEG MA41) were averaging 1.46 Bcf/d while Leach XPress-related production receipts were averaging 1.24 Bcf/d. Platts estimates approximately 0.5 Bcf/d of production could be lost because of the outage. In a notice to shippers, Columbia said, based on current nominations, the potential impact to firm service was 1.3 Bcf. The impact on production is expected to be well below that, however, as gas is routed to alternative pipelines. There are several alternatives for routing production around the outage, including to Rover Pipeline, Rockies Express Pipeline, and Texas Eastern Transmission. During a previous restriction on the LXPSEG MA41 segment in late May, flows through LXPSEG MA41 fell May 22 and May 24-25, the bulk of production was routed to Texas Eastern, Rover and Equitrans, with smaller volumes to Rockies Express.
No natgas flows through West Virginia Leach Xpress, producers use other pipes (Reuters) - TransCanada Corp said on Friday it cannot move natural gas until further notice through the section of its Leach Xpress pipeline in West Virginia that ruptured early Thursday until, prompting customers to seek other pipelines to ship their gas. Alternative pipelines to route production around the outage included Energy Transfer Partners LP’s Rover, Tallgrass Energy Partners LP’s Rockies Express (REX), EQT Midstream Partners LP’s Equitrans and Enbridge Inc’s Texas Eastern Transmission (Tetco), analysts at S&P Global Platts said in a note. The blast that shut the pipe did not cause any injuries and was contained Thursday morning, TransCanada said. Columbia Gas Transmission (TCO), the TransCanada subsidiary that operates the pipe, declared a force majeure on Thursday and said the damaged section of pipe could affect movement of about 1.3 billion cubic feet per day (bcfd). One billion cubic feet a day is enough gas for about 5 million U.S. homes. Despite the pipeline shutdown, overall output in the Marcellus and Utica shale gas region of Appalachia increased to 27.4 bcfd on Thursday from 27.3 bcfd on Wednesday, according to Thomson Reuters data. U.S. oil and gas exploration company Range Resources Corp, which uses the Leach pipeline to transport its gas to market, said on Thursday it expects to temporarily lose access to its 0.3 bcfd of capacity on the pipe. As it reroutes gas to other pipes, Range said it does not anticipate impacts to production volumes and also said it currently expects the impact to second quarter cash flow to be minimal. S&P Global Platts said several gas producers whose gas normally flows on the Columbia system reported just minor impacts, including Southwestern Energy Co, which like Range said it was utilizing a variety of pipelines in the area to get its production to market. The Leach shutdown caused Appalachia prices to trade in opposite directions on Thursday, with TCO up about 11 cents, while Dominion South dropped about 39 cents, according to data from SNL, another unit of S&P Global. The 1.5-bcfd Leach Xpress in West Virginia and Ohio, which entered full service at the start of this year, transports gas from the Marcellus and Utica shale formations in Pennsylvania, Ohio and West Virginia to consumers in the U.S. Midwest and Gulf Coast.
WVU researcher receives NIH grant to explore effects of fracking on cardiovascular health -- Building and operating a hydraulic fracturing well site can emit airborne particles in multiple ways. But scientists still don’t fully understand how these particles impact human health.Travis Knuckles, assistant professor in the West Virginia University School of Public Health, has received $450,000 from the National Institutes of Health to investigate these questions.Hydraulic fracturing is a process in which oil and gas are extracted from rock by injecting mixtures of water, sand and chemicals underground. Over three years, Knuckles will explore how particulate matter in the air from fracking sites can make it harder for the body to control how much blood enters the capillaries, the narrowest blood vessels, and turn oxygen into ATP, a chemical that is a primary energy source for cells.The particulate matter at the center of Knuckles’ study is especially fine. Each particle has a diameter of less than 2.5 micrometers. That’s smaller than a particle of talcum powder—even smaller than a red blood cell. Particles that small have been shown to cause cardiovascular disease, worsen its symptoms and make it more deadly. “We have a pretty good idea of what particulate matter does in general,” said Knuckles, who is part of WVU’s Department of Occupational and Environmental Health Sciences and the WVU Health Sciences Center Toxicology Working Group. “The issue is that we have not looked at particulate matter from these gas wells as a toxicant unto itself. How is that emission different from a typical emission near a roadway? Is it more toxic than ambient particles in a broad sense?” He and his research team will compare how airborne-particulate samples collected from the Marcellus Shale Energy and Environment Laboratory near Morgantown and from downtown Morgantown influence microvascular tissue.
Livestock Maybe Affected by Fracking via Unknown Mechanism in Fayette County, PA -- After years of seeing reproductive issues among his yearling heifers that grazed in the pasture, Broadwater is convinced that a shale gas well there damaged the health of those cows via a seep that formed at the bottom of the slope on the well’s south side. “They don’t care about the farmer,” Broadwater said of Chevron and the state Department of Environmental Protection as he stood between the seep and the gas well. In 2010, Atlas Energy developed the National Mines 26H natural gas well site on Broadwater’s property, and Chevron acquired it in 2011. Broadwater began to have problems with his herd almost immediately. The first two to three years after the well was drilled, only half of the heifers were pregnant, which struck him as highly unusual. Broadwater bought a new bull, recalling that Chevron blamed his herd’s reproductive issues on the bull. The heifers continued to have trouble breeding, though, and about three years ago, Broadwater stopped making the pasture near the well available to his cattle. He saw an increase in births right away. This year, the yearling heifers have had a 100 percent calving rate, having not been exposed to the 26H seep water. But all of the cows that previously grazed in the pasture have continued to struggle with infertility issues and disappointing breeding rates, Broadwater said. He recounted with exasperation that his 3-, 4-, and 5-year-old cows, having been exposed to the seep water, have this year had four stillborn calves and one that was born with a cleft palate and died hours later. Broadwater has no doubt that the seep is a direct result of the gas well, noting that the seep had killed grass below it for more than 300 feet below. A lifelong farmer, Broadwater, 68, recalled the veterinarian for his herd saying that whatever is killing the grass can’t be good for his cows, especially since the grass is their primary food source.
Study shows vigilance vital - The state Department of Environmental Protection is the last word in Pennsylvania on most industrial processes that affect the environment, A recent disturbing case from Western Pennsylvania demonstrates, however, why residents themselves should be wary beyond the scope of the DEP’s official pronouncements. For decades, until a few weeks ago, the DEP had allowed local governments to use brine — wastewater from gas and oil drilling — to control dust on dirt and gravel roads. As reported by StateImpact Pennsylvania, researchers William Burgos and Nathaniel Warner of Penn State University looked into the practice after discovering it in a DEP database about the use of drilling wastewater. They collected brine from 14 townships and reported, in the journal Environmental Science and Technology, that lead and radium in the wastewater washed out of the road material in simulated rainstorms. The researchers said that some of the lead and radium is carried into the air as dust when the roads dry. Burgos and Warner reported that between 2008 and 2014, the use of oil and gas wastewater on state roads released four times the amount of radium into the environment than from specialized treatment plants that handle brine, and 200 times the amount released from spills. DEP suspended permits for brine last week, following a lawsuit filed last year against the agency for allowing the spread of pollution. State lawmakers should find out why the DEP allowed the use of toxic materials for dust control. And citizens facing environmental issues should not hesitate to demand answers from the agency beyond its minimum regulatory requirements.
Penn township fracking battle continues in court - The battle over fracking in Penn Township returned to a Westmoreland County courtroom Monday with residents discussing their experiences and fears about unconventional gas well drilling. “We were told that we would not be affected by drilling,” said Tracey Mason, who lives near Apex Energy's Quest well pad in the northeast corner of the township. She described noise like a “jet engine” keeping her family up at all hours and driving through a fog of dust kicked up by drilling. This week's testimony is expected to conclude Tuesday. Experts on both sides of the issue testified before Westmoreland County Judge Harry Smail last month. Local environmental group Protect PT challenged the township's zoning ordinance, which allows hydraulic fracturing wells in both industrial and rural-zoned areas. The anti-fracking group contends wells should be limited to industrial zones. Protect PT called 10 of its members as witnesses Monday to talk about why they oppose fracking. All live in or near the township, many near the Poseidon and Quest well pads, which are currently operating. Other well pads are in various planning stages. Noise, pollution and decreasing property values were top concerns. Resident Larry Irr said he's worried the sound-blocking barriers won't be enough to deaden the noise of drilling. “It's like trying to stop the green giant with a playpen,” he said. In addition to its own solicitor, the township is being represented by lawyers from Apex Energy and Huntley and Huntley Energy Exploration, which own the current and proposed fracking wells. The township and energy companies are expected to call six witnesses Tuesday, including township employees who will focus on how the zoning ordinance was created.
Testimony concludes in Penn Township fracking case - The fate of fracking in Penn Township is in a judge's hands after four days of testimony featuring more than 20 witnesses and more than 100 documents presented as evidence. Local activist group Protect PT challenged the township's mineral extraction overlay in court before Westmoreland County Judge Harry F. Smail. The overlay allows unconventional gas well drilling in rural and industrial zones. The court heard from anti-fracking residents Monday. On Tuesday the township and the gas companies that do business there presented their side. Township Community Development Director Bill Roberts said the township's zoning ordinance was developed over about seven years, in accordance with changing state and federal rules. The township started working on a new zoning ordinance in 2009, updating regulations that remained largely unchanged since the '90s. In 2012 state legislators passed Act 13, which limited municipalities' ability to restrict natural gas drilling. Parts of the law were overturned by the Pennsylvania Supreme Court in 2013. The changing standards delayed implementation of Penn Township's ordinance, Roberts testified. “We just kept adjusting as we moved along, until we ended up with the ordinance you see in front of you,” he said. The ordinance includes limitations on sound, noise and traffic generated at drill sites, he said. Protect PT questioned whether the gas companies influenced the development of the ordinance. Ryan Hamilton, Protect PT's lawyer, asked Roberts numerous questions about township Commissioner Jeff Shula, whose son works as a geologist for Huntley and Huntley Energy Exploration, which has one active fracking well in the township and has several more in development. Shula recused himself from voting on the final ordinance but was involved in shaping some of the earlier drafts.
State legislators ask feds to support ethane storage hub in Pennsylvania -- Two legislators from southwestern Pennsylvania have filed a resolution calling for federal legislation and policies to support the construction of an ethane storage hub in the Appalachian region. State Rep. Jim Christiana, R-Monaca, and state Sen. Camera Bartolotta, R-Canonsburg, spoke Tuesday in favor of the storage hub at a news conference in Harrisburg. “Pennsylvania is one of the nation's leading states in terms of natural gas production, manufacturing and the petrochemical industry,” Bartolotta said. “Building an ethane storage and distribution hub would help our state capitalize on its existing infrastructure and natural resources, giving us an opportunity to create more quality jobs and drive business growth throughout the region.” Bartolotta said among the “strategic steps” necessary for the hub's development is the passage of several bills by Congress. Such a hub could be used for the storage and distribution of ethane feedstock to petrochemical facilities such as the one being built by Shell Chemical Appalachia LLC in Beaver County, said Abby Foster, president of the Pennsylvania Chemical Industry Council. “The development of ethane storage facilities would drive additional investments to grow the supply chain and solidify this market for Pennsylvania,” Foster said. A 2017 study commissioned by the Pennsylvania Department of Community and Economic Development forecasted that, from 2026 to 2030, the expected ethane output from the Marcellus and Utica Shale plays will be enough to support up to four additional ethane steam crackers in the region. Shell Chemical is building the $6 billion facility on the Ohio River with a view toward using ethane from the Marcellus Shale and processing it into ethylene and, finally, polyethylene pellets for the plastics industry. It has begun hiring for production operator positions and anticipates up to 600 jobs.
How Sunoco's Mariner East pipeline is affecting real estate prices in Pa.'s Chester and Delaware Counties - Two months after Angela and Matthew Cibelli moved into their family’s dream home in Uwchlan Township in 2016, a representative of Sunoco Pipeline LP stopped by their house to outline upcoming construction plans for the Mariner East project. “What construction?” replied Angela, unaware that the previous owner had signed an easement allowing Sunoco to occupy their backyard to build two new underground pipelines across their Marchwood property. Shannon Healey experienced a similar sinking feeling when she learned Sunoco planned to dig up the property that she and fiance Kevin Bullman bought last year on Lenni Road in Middletown Township. Sunoco had paid the previous owner for the easement.“We wouldn’t have bought here if we had known,” said Healy.The $5.1 billion Mariner East project, which aims to deliver 675,000 barrels a day of propane and other highly volatile gas liquids across Pennsylvania to Marcus Hook through three pipelines, has produced considerable anxiety in some neighborhoods in Chester and Delaware Counties, the most densely populated areas along its 350-mile route.The project has unsettled the residential real estate market, as some fearful homeowners sold out ahead of construction, and some buyers moved in unaware of the forthcoming disruption. Many who remained are basically stuck until the dust settles, uncertain of the value of their homes.“I’m scared of it,” said Kate White, 57, whose house on Lenni Road in Middletown is less than 10 feet from the pipelines. “I would love to move, but who would buy my house now?” “When I found this house, I thought it was perfect,” said Ray Magliano, who paid $300,000 at the end of 2015 for a three-bedroom house on Wildwood Avenue in Glen Riddle, not knowing that Sunoco had paid the previous owner to expand its easement. The new pipelines run 36 feet from his front door. He said a lawyer advised him it would cost more than it was worth to challenge the sale. Zillow, the real estate website, now estimates his home is worth 10 percent less than what he paid for it.
Pennsylvania adopts new controls for cutting methane from shale gas wells - New shale gas wells in Pennsylvania will have to meet permit conditions that directly control emissions of the greenhouse gas methane for the first time, the Wolf administration announced Thursday as it released final versions of contentious air quality permits that had been under development for two years.The two general permits will apply to new natural gas wells tapping the Marcellus and Utica shales, and new compression and processing stations built along pipelines. Both permits will go into effect on Aug. 8.Department of Environmental Protection Secretary Patrick McDonnell said the permits “are some of the first in the nation to comprehensively address methane emissions from all equipment and processes, and they also address other types of air pollution that contribute to poor air quality.”Methane is the second-most prevalent greenhouse gas released from human activities after carbon dioxide, but it is more potent at trapping heat in the atmosphere over the short term. Natural gas is mostly made up of methane, so minimizing leaks means companies keep more of their product to sell.That was the point emphasized by Marcellus Shale Coalition President David Spigelmyer, who said Thursday that the industry is already “focused on ensuring methane and related emissions are managed safely and effectively.” “We remain concerned about imposing additional requirements through operating permits, particularly those that exceed DEP’s statutory authority,” he said.
Fact of the Matter: Dominion's Pipeline Jobs Claim "Deceptive" -- Dominion Energy has taken to the airwaves to gain public support for the Atlantic Coast Pipeline, a controversial 600-mile project that will send natural gas from West Virginia to Virginia and North Carolina. One much-televised ad features Brian Simpson, a heavy equipment operator and member of the International of Operating Engineers, Local 147. “For me, the Atlantic Coast Pipeline means a good, steady job with benefits,” he says. ”The scene shifts to footage of Simpson talking to two colleagues at a construction site. A narrator says, “The Atlantic Coast Pipeline: 17,000 jobs.” The logo of the pipeline appears on the screen with white print underneath it saying, “17,000 JOBS..” That’s a lot of jobs and the figure, as it’s cited in the commercial, is greatly exaggerated and misleading. The source of the number, according to a Dominion spokesperson, is a 2014 report prepared for the energy corporation by Chmura Economics and Analytics, a Richmond-based company. The report contains some major qualifications about its job estimates that Dominion doesn’t share in its commercial. Chmura estimated the pipeline would support 17,240 “cumulative jobs” in Virginia, West Virginia and North Carolina during its six-year development and construction phase from 2014 through 2019. That doesn’t mean 17,240 people will find pipeline-related work during those years, as the ad implies. “Cumulative jobs” is a measure of the number of people projected to have pipeline jobs each year multiplied the number of years the development and construction phase is expected to last. In other words, if someone was hired for a job that lasted for six years, that would count as six cumulative jobs. Chmura estimated that the pipeline will spur an annual average of 2,873 actual jobs during its development and construction phase. Multiply that number by the six-year duration of phase, and you come up with 17,238 “cumulative jobs” which, when rounded off, matches Dominion’s ad claim.
FERC splits again on affiliates, climate in Florida pipeline approval - FERC’s latest split pipeline decision highlights a growing partisan divide over pipeline approvals at the commission. LaFleur and Glick, the two Democratic commissioners at FERC, have regularly issue dissents or concurrences based on affiliate relationships and carbon impacts since the agency’s quorum was restored last year. The three Republican commissioners, meanwhile, typically vote to approve applications. That divide will likely influence FERC’s ongoing review of its pipeline certification policies, announced by Chairman Kevin McIntyre in December 2017. In this case, Glick took aim at the relationship between Florida Southeast Connection, owner of the proposed 5-mile pipeline, and Florida Power & Light, which owns the natural gas plant that would be the sole recipient of its gas. Florida Southeast says it has contracts for capacity on its proposed pipeline, called precedent agreements, with FP&L, but both companies are owned by NextEra Energy, which Glick said should raise questions over whether the pipeline is actually needed. “Although precedent agreements generally can be one measure for determining whether a pipeline is needed, precedent agreements among affiliates are less valuable for this purpose because they are not necessarily the product of arms-length negotiations,” Glick wrote. “Instead, under such circumstances, the Commission must look behind the precedent agreements and consider other indicia of need … including projections of the demand for natural gas, analyses of the available pipeline capacity, and assessments of the cost savings that the proposed pipeline would provide to consumers.” The FERC majority dismissed this argument, writing that it is “current Commission policy to not look behind service agreements to make judgments about the needs of individual shippers.” “The mere fact that Florida Power & Light is an affiliate of Florida Southeast does not call into question the need for the project or otherwise diminish the showing of market support,” the majority wrote.
Oil Hunt Damages Everglades’ Big Cypress National Preserve - New oil development has no place in sensitive wetland habitats in the Florida Everglades. The Burnett Oil Company, based in Texas, claimed it could explore for oil in the Big Cypress National Preserve with no significant, long-term impacts to sensitive wetlands. But these claims have been refuted, as Burnett Oil has caused significant damage.As NRDC previously reported , the fossil fuel industry targeted the Big Cypress National Preserve in the western Everglades for oil development, beginning the first of four planned phases of seismic survey activities in 2017. However, heavy rains forced the oil company out of the preserve before the seismic activities were complete.Even after damaging wetland soils and vegetation last year, the oil company returned to the preserve this spring to continue its hunt for oil.NRDC and its partners retained environmental professionals to inspect and document the damage these activities are causing. Here's a report outlining the damage along with recommendations for restoration, mitigation and long-term monitoring. The consultants observed extensive soil rutting, which will have long-term adverse effects on the preserve's hydrology, soils and vegetation. Nonetheless, there were no signs that the oil company attempted to restore the wetland impacts, as its state and federal permits require. For example, the 33-ton "vibroseis" vehicles compacted and deeply rutted soils due to their sheer weight. These ruts are almost 2 feet deep in places. The vibroseis vehicles created seismic survey lines that are up to 15 feet wide. In several locations where vibroseis vehicles turned around or were rerouted, consultants observed even wider paths of soil disturbance.
Gas pipeline firms appeal federal judge's order to pay for canal erosion -- Four natural gas pipeline companies that were ordered to repair some erosion along pipeline canals in Plaquemines Parish by a federal judge in August 2017 and May of this year have appealed their case to the U.S. 5th Circuit Court of Appeals.The notice of appeal does not contain an explanation of why the rulings by U.S. District Judge Jane Triche Milazzo were being challenged."We are appealing because while the court awarded only $1,100 in money damages and ordered less than a third of the specific relief requested by the plaintiffs, important issues were wrongly decided and should be reversed on appeal," said Dave Conover, a spokesman for Kinder Morgan, the parent company for two of the pipeline firms.Attorneys representing New Orleans-based Vintage Assets Inc. and other landowners who filed the suit against the pipeline companies did not immediately respond to a request for comments.In August 2017, Milazzo 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.After a September 2017 bench trial aimed at determining what should be repaired, Milazzo ruled in May that the companies had to restore 9.6 acres of wetlands that she found they had allowed to erode, and must pay $1,102 in damages. The cost of restoring the wetlands could be significant, and a permanent injunction Milazzo issued with her ruling required the companies to maintain the wetlands adjacent to the canals for as long as right-of-way agreements allowing the pipelines to be there are in force.
Oil vs wild rice: Enbridge, opponents gear up final US pipeline push (Reuters) - Canada’s Enbridge Inc (ENB.TO) faces an indefinite delay to its biggest-ever capital project if a U.S. state regulator denies its preferred pipeline route through Minnesota, but a victory would spell relief for Canadian oil shippers and northern U.S. refiners. Some pipeline opponents, which include environmental and Native American groups, are trying to convince the Minnesota Public Utilities Commission (PUC) to kill the project. Others oppose only Enbridge’s proposed new pipeline route, saying it would consume more land and threaten Native Americans’ traditional harvest of wild rice from wetlands. Enbridge wants to replace the aging 1,031-mile (1,660-km) Line 3 pipeline that runs from Alberta to Wisconsin. Worsening bottlenecks in Alberta have steepened a price discount for its heavy crude, and several pipeline projects that could ease the situation face stiff opposition. Line 3, placed into service in 1968, operates at half its capacity due to integrity concerns. Its replacement would allow it to return to approved capacity of 760,000 barrels per day. The PUC is set to decide late this month whether the total $7 billion project is necessary and if so, what route it should take. An administrative law judge recommended in April the expanded pipeline should follow the existing route. Enbridge prefers a new route that bypasses an indigenous reservation, avoids some ecologically sensitive areas and prevents a pipeline shutdown of up to one year. A different route would require a detailed evaluation that would set back plans to start the added oil flow by late 2019, said Guy Jarvis, Enbridge’s executive vice-president of liquids pipelines and major projects.
Shale Country Is Out of Workers and Dangling 100% Pay Hikes -Jerry Morales, the mayor of Midland, Texas, and a local restaurateur, is being whipsawed by the latest Permian Basin shale-oil boom. It’s fueling the region and starving it at the same time. Sales-tax revenue is hitting a record high, allowing the city to get around to fixing busted roads. But the crazy-low 2.1 percent unemployment rate is a bear. As a Republican first elected in 2014, he oversees a government payroll 200 employees short of what it needs to fully function. “This economy is on fire,” he said. Fire, of course, can be dangerous. In the country’s busiest oil patch, where the rig count has climbed by nearly one third in the past year, drillers, service providers and trucking companies have been poaching in all corners, recruiting everyone from police officers to grocery clerks. So many bus drivers with the Ector County Independent School District in nearby Odessa quit for the shale fields that kids were sometimes late to class. The oil industry has such a ferocious appetite for workers that it’ll hire just about anyone with the most basic skills. “It is crazy,” said Jazmin Jimenez, 24, who zipped through a two-week training program at New Mexico Junior College in Hobbs, about 100 miles north of Midland, and was hired by Chevron Corp. as a well-pump checker. “Honestly I never thought I’d see myself at an oilfield company. But now that I’m here -- I think this is it.” That’s understandable, considering the $28-a-hour she makes is double what she was earning until December as a guard at the Lea County Correctional Facility in Hobbs. When the boom goes bust, as history suggests they all do, shale-extraction businesses won’t be able to out-pay most employers anymore. Jimenez said she’ll take the money as long as it lasts.
Why Aren’t Permian Oil Producers Profitable? - The Wall Street Journal recently reported that only five of the Top 20 U.S. oil companies focused mostly on hydraulic fracking generated more cash than they spent in the first quarter of this year. This continues a trend that has been ongoing throughout the fracking boom. The article doesn’t list the cash flow picture for the entire Top 20, nor did it explain how it calculated cash flow. But based on the numbers they reported and my own analysis, it appears they are defining cash flow as simply the amount of cash generated from operations minus capital expenditures.The story indicated that overall, companies spent $1.13 for every $1 they took in. It further noted that “Oasis Petroleum Inc. spent $3.27 for every $1 it made in cash, while Parsley Energy Inc. spent almost $2 for every $1 it made in cash.”Hedging was blamed for the underwhelming cash flow. The article noted that many producers hedged oil prices at $50 to $55 a barrel, and were therefore unable to cash in on the rally in oil prices. Of course, that makes you wonder why a company would hedge at a price that they should have known would result in negative cash flow. Continental Resources infamously ditched its hedges in 2014 after oil prices declined to $75/bbl. The company expected prices to bounce back quickly. Continental hasn’t yet resumed hedging but expects to do so at some point. Notably, Continental was reported to have the highest cash flow among its peers at $258 million for Q1. EOG Resources was also highlighted for generating a $110 million cash surplus for the quarter.
Natural Gas Basis Implications Of Permian Production And Takeaway Capacity - Gas producers in the Permian are facing the prospect of severe transportation constraints over the next year or so before additional gas takeaway capacity comes online. Left unchecked, continued production growth could send gas at Waha spiraling to devastatingly low prices for producers. However, there are a number of ways producers and other industry stakeholders could mitigate the growing supply congestion in West Texas, at least in part, and possibly dodge the proverbial bullet. The longer-term solution will come in the form of new pipeline capacity, which will shift vast amounts of Permian gas east to the Gulf Coast and potentially create a new problem — supply congestion and price weakness along the Gulf Coast, at least until sufficient export capacity is built there to absorb the excess gas. Today, we wrap up our Permian gas blog series, with our analysis of how these events will unfold, including an outlook for Waha basis. In Part 1 of this series, we discussed the meteoric rise of Permian gas production as a byproduct of the crude-focused drilling boom in the basin. The supply growth has happened much faster than many market participants expected and both crude oil and gas production growth is now facing prolonged periods of takeaway constraints and constraint-driven supply price discounts unless either producers slow down or more takeaway capacity is built (see All Dressed Up With Nowhere to Go for more on the crude takeaway). In Part 2, we took a closer look at the effects of rising production on outbound gas flows, pipeline utilization and prices. . As we detailed in Part 3, there are six publicly announced pipeline projects vying to relieve Permian constraints, all with routes that move gas east to where the demand is growing the most — at the Gulf Coast.
Gas Glut in Permian Sparks Dilemma Over How Much to Burn - -- Texas is facing a burning question that’s pitting the state’s economy against its environment, and oil drillers against each other.With natural gas pipelines in the Permian Basin reaching 98 percent of capacity, Texas is weighing whether to keep intact or loosen strict state regulations that limit flaring, the process used by drillers to burn off excess gas pumped up along with their oil. Now the limit for individual wells is 45 days. After that, without a rare-granted exemption, the gas must be piped away or the well must close.Shut wells mean less revenue for companies and the state at a time when oil prices and production are surging while regional gas prices are in a tailspin. Ending or expanding the cap solves the problem. But it also gives drillers that haven’t paid for space on existing pipes a competitive edge over those that have, and could spark environmental protests.“This is not a simple thing we’re talking about,” “It’d be a pretty big policy shift and we want to be very thoughtful about what the ramifications could be."Sitton said he’s meeting with producers across the Permian, and hopes to have a decision within six months, when he believes the dilemma will come to a head. The gas associated with that boom has filled up all but two percent of pipeline capacity as of the end of April, according to RBN Energy LLC, and Rystad Energy AS suggests oil output may grow 10 percent more by the end of 2018.Natural gas prices in the Permian, meanwhile, are the cheapest in the nation. The region is “ground zero for the oversupply caused by associated gas production,” said John Kilduff, a partner at Again Capital LLC in New York, by email. If oil output continues to boom, gas prices “could certainly go to zero.”
Permian drilling activity drives diesel demand and projects to supply more of it. Drilling and completion activity in the Permian Basin doesn’t only produce vast quantities of energy, it consumes a lot of energy too, mostly in the form of diesel fuel to power the trucks, drilling rigs, fracturing pumps, compressors and other equipment needed to keep the oil patch humming. And while refineries within or near the Permian meet a portion of the region’s needs, rising demand for diesel there is spurring the development of new infrastructure — and the repurposing of existing assets — to bring additional fuel into the Permian from refineries along the Gulf Coast. Today, we discuss efforts to move more diesel to the oil fields of West Texas. Texas consumes far more distillate — most of it ultra low sulfur diesel (ULSD) — than any other state: an estimated 485 Mb/d (or 20.4 million gallons a day) in 2016, the most recent year that state-by-state statistics are available from the Energy Information Administration (EIA). That was 82% more than California, and more than triple the distillate consumption of other high-population states like New York, Pennsylvania and Florida. Four-fifths of Texas’s distillate/diesel consumption is by the transportation sector, the vast majority of it by tractor trailers and other trucks that transport everything from petrochemicals to corn chips across the Lone Star State. In the past few years — and especially in the past two or three — diesel consumption has been on the rise in the red-hot Permian Basin in West Texas, and in neighboring counties in southeastern New Mexico. There, diesel is the king of fuels. It powers almost everything: the trucks that haul oilfield equipment, frac sand and water to well sites, the trucks that haul produced water from the lease to disposal wells, and, increasingly in recent months as takeaway pipelines out of the Permian have filled up (see No Time), the trucks that transport crude oil long distances to downstream pipeline injection points (and sometimes all the way to Corpus Christi and Houston).
Permian tracker: Pipeline build-out to support increased production - Production from the US' fastest growing oil play continues to rise, but infrastructure has lagged the surging output leading to steep discounts at the region's pricing hub. New pipelines in development should alleviate the regional bottleneck and support further production growth, particularly with the backdrop of a firmer global market. The Midland WTI discount to Cushing WTI averaged $10.26/b in May, widening from a $5.96/b discount in April, S&P Global Platts data shows. The Midland discount to Houston averaged $14.28/b, nearly doubling the $7.79/b average discount in April. In May 2017, the discount was just $2.28/b. While Midland WTI prices have been pressured lower because takeaway capacity is lagging production growth, crude prices on the Gulf Coast have been lifted by strong export demand for US crudes. Weekly US crude exports hit a record high 2.57 million b/d the week ending May 11, according to the US Energy Information Administration. Current pipeline takeaway capacity out of the Permian is roughly 3.1 million b/d, which combined with local refinery demand for Permian crude at just under 300,000 b/d falls short of production.Current price discounts have made moving crude by rail economical, although there is limited rail capacity. There is roughly 315,000 b/d of Permian Basin rail capacity, but much of that is now being used to move other commodities like frac sands.Plains All American, which is already trucking volumes from the Permian, said it sees limited opportunities for offering CBR services from its McCamey, Texas terminal, which can move up to 15,000 b/d as transloading facilities in the basin are geared more towards handling frac sand. Murex, along with Cetane Energy, said it will expand Cetane's transloading facility at Carlsbad, New Mexico, boosting its CBR capacity by 40,000 b/d to 75,000 b/d in the third quarter. To meet the growing output, two waves of pipelines are being planned across Texas, offering a total of 3.1 million b/d of new takeaway capacity by mid-2020.
- **Gray Oak (Q3 2019 completion): Phillips 66 (75%) owner and Andeavor (25%) said in late April it has received shipper support to move ahead with the 700,000 b/d pipeline, and also launched an open season that could increase throughput on the line to 1 million b/d. The pipeline will move crude to Corpus Christi and to Sweeny/Freeport along the Houston Ship Channel and is targeted for start up in third quarter 2019.
- **EPIC Midstream (Q3 2019): The San Antonio-based company is working to bring on more shippers on its Eagle Ford Permian Ingleside and Corpus Christi pipeline for which it secured 75,000 b/d and 100,000 b/d of firm capacity, respectively, from Apache and Noble Energy. The pipeline is due for start up by the third quarter of 2019 and has increased capacity in the line to 675,000 b/d from 590,000 b/d. That figure may increase further to 825,000 b/d.
- **Cactus II (Q3 2019): Plains All American is moving ahead with the permitting, right of way and procurement process for the 650,000 b/d pipeline that it plans to bring into service in third quarter 2019. Cactus II will ship barrels from the Delaware Basin to the Port of Corpus Christi, and the adjacent Ingleside Terminal on the Texas Gulf Coast,
- **Midland to Nederland (2020): Energy Transfer Partners, which is in talks with shippers, said mid-May it will announce "very soon" strategic partners for the 600,000 b/d pipeline that will ship crude from Midland to Nederland on the USGC.
- **Jupiter (2020): An open season will be launched late summer by Dallas-based Jupiter Midstream for the pipeline, which will have a capacity of up to 500,000 b/d and will move barrels from the Permian to Brownsville on the southernmost tip of the Texas Gulf Coast.
New Mexico official says Texas landowners are “stealing” millions of gallons of water and selling it back for fracking — After you head northeast on Ranch Road 652 from tiny Orla, it’s easy to miss the precise moment you leave Texas and cross into New Mexico. The sign just says “Lea County Line,” and with 254 counties in Texas, you’d be forgiven for not knowing there isn’t one named Lea. But the folks who are selling water over it know exactly where the line is. That’s because on the Texas side, where the “rule of capture” rules groundwater policy, people basically can pump water from beneath their land to their heart’s content. But on the New Mexico side, the state has imposed tight regulations on both surface and groundwater that restrict supply. Here’s the rub — or the opportunity, depending on your perspective: With an oil fracking boom driving demand for freshwater on both sides of the state line in these parts, Texas landowners are helping to fill the void with water from the Lone Star State — including from at least one county in which Gov. Greg Abbott has declared a drought. Now a top New Mexico politician is crying foul, saying that unregulated pumping from wells next to the state line is depleting the shared aquifers that supply water to southern New Mexico. “Texas is stealing New Mexico’s water,” said New Mexico State Land Commissioner Aubrey Dunn. “If you put a whole bunch of straws in Texas and you don’t have any straws in New Mexico, you’re sucking all the water from under New Mexico out in Texas and then selling it back to New Mexico.” The difference in ownership of land in the two states contributes to the divergent water policies. In Texas, more than 90 percent of the land is privately owned. In New Mexico, by contrast, only 43 percent is owned by individuals, while 57 percent is in government or tribal hands.
Watchdog: Government isn’t sufficiently tracking costs from ‘orphaned’ oil, gas wells | TheHill: Costs to the government from dealing with “orphaned” oil and natural gas wells on federal land are likely increasing, the Government Accountability Office (GAO) said. But the Bureau of Land Management (BLM) doesn’t track the costs of dealing with such in an effective, agencywide way, the GAO concluded in a Tuesday report. “Precisely how the agency’s actual reclamation costs and potential liabilities have changed is unclear because BLM does not systematically track them at an agency-wide level,” GAO auditors wrote in their report.“BLM headquarters officials we interviewed told us that they did not have any information on actual costs incurred to reclaim orphaned wells and stated that BLM’s data systems were not designed to track incurred reclamation costs,” the auditors wrote. Orphaned wells are old oil and gas wells whose driller is unable to pay to reclaim them, usually due to bankruptcy. Auditors gathered data from 13 of the BLM’s 33 field offices to try to get their own estimate of orphaned well costs. That exercise found that those offices spent about $2.1 million between 2010 and 2017 on orphaned wells. The average cost were well was $267,600, compared with a $171,500 per well cost when GAO examined the issue in 2010. The total cost of reclamation for orphaned wells those offices knew about was $46.2 million. The GAO also found that the number of known orphaned wells across BLM lands has increased to 219 in 2017, from 144 in 2010.
Trump's BLM Ready to Sacrifice Ancient Rock Art for Gas Drilling - While the Ancestral Puebloan people of the Southwest were building citadels like Chaco Canyon , the Fremont people were carving mysterious petroglyphs depicting horned, broad-shouldered triangular men and sweeping carvings of desert snakes. Nowhere is their legacy more apparent than in eastern Utah's Molen Reef. Fremont artifacts dominate this cultural heritage site, but its rock art ranges from 3,000-year-old panels from the Barrier Canyon tradition to etchings by Mormon pioneers crossing the Utah desert. They aren't easy to see, but that's not a bad thing. You won't find these cultural treasures on a map, and Jonathan Bailey, a Ferron, Utah-based photographer and author of Rock Art: A Vision of a Vanishing Cultural Landscape , thinks it should stay that way. "There are hundreds of rock art panels in the Molen Reef, and maybe a dozen are known," he said. "They are mostly pristine, unexcavated sites that have very little vandalism." Bailey worries about the resources being compromised by human activity before they can be cataloged and protected. But the Bureau of Land Management (BLM) has different plans for the area. In January 2018, the agency approved the leasing of 32,000 acres for mineral exploration between the San Rafael Swell and Molen Reef—just as it has in many other places in Utah . In Molen Reef, instead of highly publicized conservation efforts led by environmental organizations, tribal groups, or multibillion-dollar outdoor recreation outfitters, the resistance is being led by a scrappy group of rock art enthusiasts fighting to save the sites they love to explore. The Utah Rock Art Research Association (URARA) has been protesting oil and gas leasing in the area for years. The group works with environmental organizations and others because "wilderness concerns cross over with rock art concerns." But it avoids taking partisan stances. "We're an organization of both Republicans and Democrats," said Diane Orr, cochair of URARA's conservation and preservation committee. "Our concern with oil and gas leases is when the leasing process does not carefully look at all the resources in the area and really evaluate what needs to be protected."
How Weakened Fossil Fuel Regulation Hurts Small Towns - From the start, President Donald Trump’s administration has made dismantling regulations, especially for the oil, gas, and coal industries, a top priority. Environmental Protection Agency Administrator Scott Pruitt, Interior Secretary Ryan Zinke, and Trump have teamed up with the Republican-led Congress to get federal agencies on the case, by streamlining environmental permitting and attempting other sweeping changes. As an environmental sociologist who has spent hundreds of hours researching communities directly affected by oil and gas production, I find that many people living in these places feel that fossil fuel industries already had the upper hand before Trump took office. Companies enjoyed significant exemptions from federal environmental regulations that date back to George W. Bush’s presidency and remained on the books throughout the Obama administration. After the enactment of the 2005 Energy Policy Act, the law that codified many of these exemptions, states became responsible for creating their own policies, procedures, budgets and enforcement plans—most of which weren’t in place before the boom got underway. The government exempted fracking from federal environmental regulations like the Safe Drinking Water Act and the Clean Water Act. States could decide rules like setbacks from homes, zoning, water acquisition and disposal, and most other aspects of drilling. This made it easier and quicker to permit hydraulic fracturing, but the states had to scramble to determine how to regulate it. As fracking spread into more densely populated areas, wells ended up within a few hundred feet of homes, schools, hospitals, and other buildings in states like Colorado, Texas, Pennsylvania and North Dakota. That made a big impact on people’s quality of life.But in places like Denton, Texas, and Colorado’s Front Range, the people who live in places most affected by these types of changes have no seat at the table. They live alongside oil fields and gas patches but have little power to affect what happens around them.
Journalist Cleared of Trespassing at Pipeline Protests (AP) — A journalist arrested last year while covering protests over the Dakota Access oil pipeline has been cleared of criminal trespass charges in North Dakota. Judge Thomas Schneider ruled Friday that Jenni Monet complied with police orders while reporting on the demonstration, the Bismarck Tribune reported . "It's a great day for journalism and for North Dakota in recognizing the essential role that reporters play in shaping our democracy," Monet said. "Today the court upheld our constitutional right to press freedom, which has never been more important than right now." Monet was reporting for Yes! Magazine on police clearing a protest camp in Morton County when she and 75 others were arrested on Feb. 1, 2017, according to court records. Police testified the Last Child Camp sat on Dakota Access-owned property across from the main camp, but demonstrators alleged it was treaty land. Prosecutor Chase Lingle alleged Monet was guilty of criminal trespass for remaining on the property after police ordered the group to leave. "Journalists have no special right to accessing private property," Lingle said. Lt. Tom Iverson of the North Dakota Highway Patrol had asked Monet and some others who said they were journalists for their press credentials, Monet said. She said she was the only one who displayed credentials and believed Iverson had consented to allowing her to remain on-site and report. A Beulah officer later arrested her. Schneider said Monet didn't knowingly break the law when she stayed on the property. "I believe she thought she was licensed or privileged to be there," he said. Monet said Friday that journalism is vital in "shining a light where there's darkness, especially in marginalized communities like Standing Rock."
Taxpayers Still Shelling Out Billions Annually in Fossil Fuel Subsidies – The world's richest countries continue to subsidize at least $100 billion a year in subsidies for the production and use of coal , oil and gas , despite repeated pledges to phase out fossil fuels by 2025.The Group of Seven, or G7, consists of Canada, France, Germany, Italy, Japan, the UK and the U.S. The group, as well as the larger G20, agreed as early as 2009 to phase out fossil fuels in order to combat climate change .But a new report from Britain's Overseas Development Institute (ODI) reveals that on average per year in 2015 and 2016, the G7 governments supplied at least $81 billion in fiscal support and $20 billion in public finance, for both production and consumption of oil, gas and coal at home and overseas."With less than seven years to meet their 2025 phase-out deadline, G7 governments continue to provide substantial support the production and use of oil, gas and coal," the authors stated .The study, co-authored by Oil Change International , the International Institute for Sustainable Developmentand the Natural Resources Defense Council , was issued Monday ahead of the G7 summit in Canada. For the study, each G7 member was rated on the following measures: transparency; pledges and commitments; ending support for fossil fuel exploration; ending support for coal mining; ending support for oil and gas production; ending support for fossil fuel-based power; and ending support for fossil fuel use. France ranked the highest overall, with 63 out of 100 points. While the country is lagging behind in its support for fossil fuel use, France earned the top spot for making early progress in ending fossil fuel exploration and production and ending coal mining, the researchers determined. Germany (62 points) and Canada (54 points) rounded out the top three in the dubious list.
New U.S. pipeline expected to lower natural gas prices in Central Canada: — Consumers in Ontario and Quebec can expect to pay less for natural gas to heat their homes as a new pipeline connects shale gas from the northeastern United States to the Dawn storage hub near Sarnia in southwestern Ontario. The Rover Pipeline last week won approval from the U.S. energy regulator to increase shipping to its capacity of 3.25 billion cubic feet per day of natural gas, transporting the fuel from Marcellus and Utica shale wells in the northeastern U.S. to American markets and, via the Vector Pipeline connection, to the Dawn hub for distribution in Central Canada. "Prices are as low as they've been in the last 10 years and there's more downward pressure, because of the incremental supply, than there would be upward pressure," said Chris Shorts, director of storage, transportation, marketing and utilization for Union Gas Ltd., operator of the Dawn hub. He said he couldn't estimate what that will do to an average bill — consumer natural gas rates in Ontario and Quebec are affected by market gas prices but also take into account transmission and management costs. Union Gas last year increased its capacity to accept gas on the Vector connection by about 300 million cf/d to about 1.8 billion cf/d, he said, adding the actual amount delivered each day will vary according to sales contracts between shippers in the U.S. and buyers in Canada. Natural gas volumes arriving at Dawn are already being affected by about 1.4 billion cf/d in western Canadian natural gas added late last year after TransCanada Corp. brought in discount tolls to increase the use of its poorly utilized Canadian Mainline gas system, he said.
Canada promises climate progress and buys a pipeline instead - The Canadian government’s decision to buy a controversial oil pipeline project is drawing intense criticism from environmental groups and could open the door to legal challenges over its ability to meet the emissions reduction target the country promised to the Paris Climate Agreement.The Trudeau administration announced last week it would buy the Trans Mountain Pipeline from Houston-based Kinder Morgan for $3.5 billion. Kinder Morgan had threatened to walk away from a planned expansion of the pipeline, which has been mired in lawsuits, if the government could not assure the company it could proceed. Instead of providing assurance, Prime Minister Justin Trudeau decided to buy the whole pipeline and proceed with the expansion. Kinder Morgan secured federal permits in 2016 to build a pipeline parallel to its existing, 65-year-old one. It would increase the volume of crude it could move from the oil sands of Alberta to the coast of British Columbia from 300,000 barrels to 890,000 barrels per day, most of which will be shipped overseas. Kinder Morgan estimated that the new 715-mile pipeline will cost $5.72 billion to build.The government’s plan to own Trans Mountain is heightening the already intense criticism of Trudeau and his oft-repeated claim that the country can both boost oil production and reduce emissions by 30 percent from 2005 levels by 2030, the country’s commitment to the Paris Agreement.“Trudeau has beautiful speeches and a great reputation as environmentally progressive. But his actual policies involve taking actions on climate change as long as it doesn’t touch the oil industry,” said Keith Stewart, a senior energy strategist with Greenpeace Canada.
Canada pushes Trans Mountain pipeline to sell oil to China far beyond US shores - As it battles over trade with its big southern neighbor, Canada is looking westward for new markets for its oil.In the thick of a bitter trade dispute with the United States, the only customer for its crude oil, the Canadian government has opted to buy a pipeline project that will more than double the oil it can send to the West Coast — and then on to new markets in Asia.While the pipeline project has been moving on its own timeline, the purchase coincidentally comes during one of the thorniest periods in U.S.-Canadian trade relations. Analysts say ironically that should in fact help Canadian Prime Minister Justin Trudeau find some support for thecontroversial project, which has pit the province of British Columbia against Alberta and has prompted protests across the country.The construction is slated to begin this summer, but it is opposed by the British Columbia government, local governments, environmental interests and even groups in Washington state. Canada has long sought a pipeline solution, both to the east and west coast, and has so far failed. There is a lot to gain from moving its oil resources outside of North America, including much higher prices and access to the world's fastest growing market.Trudeau's government late last month announced it would buy Trans Mountain pipeline, its British Columbia terminal and expansion project for about $3.5 billion, after owner Kinder Morgan Canada found the project too risky. Trudeau has said he wants to make sure the pipeline expansion gets built and then sold to a new operator so Canada can send oil on to new customers in Asia."We are going to ensure that it gets built so that we can get our resources to new markets," Trudeau told Bloomberg News.
Quebec to ban shale gas fracking, tighten rules for oil and gas drilling - The Quebec government is banning fracking for shale gas provincewide. Pierre Moreau, the minister of energy and natural resources, announced a series of new measures to regulate oil and gas exploration Wednesday afternoon in Quebec City. The ban on fracking for shale gas, he said, would protect the low-lying Lower St. Lawrence region in particular. Under the new measures, which will amend Quebec's Petroleum Resources Act, passed in 2016, the government would also ban drilling for oil and gas in 13 waterways across the province. That includes the Lake of Two Mountains, Lake Memphremagog and the St. Lawrence River, Moreau said. "The story of the energy transition is being written, and these rules on hydrocarbons are part of that," Moreau said. He said the government is approaching the issue with "caution." In urban areas where oil and gas exploration is already prohibited, the government plans to now extend that ban to a one-kilometre zone around those municipalities. "This regulatory measure means that any exploration and exploitation of hydrocarbons will be strictly banned on the entire surface of the island of Montreal and the island of Laval," Moreau said.Outside these urban areas and the additional one-kilometre zones, the government also plans to increase the allowable distance between an oil well or gas drilling site and what Moreau called "sensitive" areas. Wells will now need to be at least 300 metres from a private residence, at least 550 metres from a school, hospital or public building, and 200 metres from an ecotourism site, Moreau said.
U.N. Report Calls U.S. Fracking History Cautionary Tale – After looking back at the history of shale gas extraction in the United States, international development and trade experts say hydraulic fracturing should be approached with caution by countries considering ways to meet growing energy demands. Mitch Jones, a senior policy advocate with the watchdog group Food and Water Watch, says a new report by the United Nations Conference on Trade and Development adds to a growing body of research pointing to hazards associated with fracking. "Fracking in the U.S. – whether it's in Pennsylvania, or in Wyoming and North Dakota or Colorado – serves as a cautionary tale for other countries that are considering fracking for shale gas on their own," he states.In its recent Commodities at a Glance report, the United Nations' trade division points to groundwater contamination, increased seismic activity and methane waste as fracking's biggest drawbacks. Analysts also say all countries should move as quickly as possible to stop burning fossil fuels, including shale gas. The Trump administration has called for expanded fossil fuel production in an effort to achieve energy dominance. The Petroleum Association of Wyoming has not yet responded to a request for comment on the report.The U.N. agency also warns that investments in shale gas should not come at the expense of renewable energy and efficiency strategies, both considered critical to limit the impacts of climate change. Jones points to a recent Rocky Mountain Institute study warning that nearly $1 trillion in natural gas infrastructure could end up as stranded assets in investment portfolios.
Mansfield woman sabotaged fracking gear while wearing her daughter’s hoodie - A dog walker sabotaged survey equipment “out of rebellion” for the mess a fracking firm has made of the countryside, a court heard. Fiona Radford, from Langwith, snipped a cable linking underground probes to a seismic monitor with secateurs, while walking her dog in a field, off Devonshire Drive, on January 20. Prosecutor Simon Rowe said INEOS, which owns the device, put CCTV footage of the incident on social media and tracked down Miss Radford because she was wearing a distinctive hoodie. In police interview, she said: “I did it. I cut it. I was angry. I wanted to hurt them like they have hurt us.” “She had been visited by an elderly lady the day before who was upset because the fields had been damaged by vehicles going on and off the field,” Mr Rowe said. She contacted INEOS, Derbyshire County Council and landowners, the Welbeck Estates, to complain, but received no response, he said. “She said she did it out of rebellion for what INEOS had done,” Mr Rowe said. “She wasn’t hiding her actions, she did it in daylight. “Later she said she regretted it, and wouldn’t do it again, and would stick to protesting.” INEOS intend to pursue her for the £570 cost of repairs through civil means, the court heard. Michael Little, mitigating, said: “Prior to this her protests had been limited to putting posters in her window.” He said Miss Radford had seen red when her elderly friend told her she couldn’t use her disability scooter because of the “unfortunate mess” the countryside had been left in by INEOS. Police initially contacted her daughter because the hoodie seen in CCTV belonged to her, but she was at university, and when Miss Radford found out, she contacted police.
Greenpeace protesters abseil into oil firm Total's AGM - More than 250 Greenpeace activists hijacked Total’s annual shareholders’ meeting in Paris to protest at the oil company’s plans to drill in the mouth of the Amazon and French Guiana. Four activists descended by ropes from the ceiling above the stage, as the Total chief executive, Patrick Pouyanné, began his presentation, with at least 20 more gaining access to the Palais des Congrès. Some of the activists chained themselves to fixtures in the hall with the proceedings disrupted by chants and the blowing of whistles. The remainder of the 250-strong group protested outside the venue. Edina Ifticene, who was invited by Pouyanné to address the annual meeting to explain the protest, said direct action had been planned after Total ignored the activists last year. “We have been campaigning for more than a year and a half,” she said, speaking to the Guardian. “Last year at the annual meeting we had a share [of stock] and so asked questions of the company and provided a lot of evidence and arguments. They said everything is fine and there is no ecological risk. This year we decided to take direct action, we want Total to listen to us.”Total wants to explore Brazil’s Foz do Amazonas basin, which geologists estimate could contain up to 14bn barrels of oil, or more than the entire proven reserves in the Gulf of Mexico. Brazil’s environmental agency rejected the company’s bid for a licence for the fourth time on Tuesday, requesting more information. A Greenpeace expedition in April documented coral in the area where Total plans to drill, after an earlier discovery of a massive coral reef nearby. Greenpeace also opposes Total’s investment in offshore oil production in French Guiana, which will boost its presence in the potentially lucrative area. Total faces more protests this month, after France’s largest farmers’ union called for a blockade of refineries in protest at the company’s decision to use imported palm oil at a new biofuel production site.
Royal Dutch Shell Surpasses Exxon As World’s Largest Oil & Gas Company - Royal Dutch Shell took the top spot among oil and gas companies on the Forbes Global 2000’s list of the biggest and most powerful public companies, surpassing last year’s leader Exxon Mobil Corp. San Ramon, Calif.-based Chevron Corp. was the third-biggest oil and gas company on the list. France’s Total SA was the fourth-ranked, followed by China Petroleum & Chemical Corp., known as Sinopec, and PetroChina Co. Ltd. BP plc, Gazprom and Rosneft of Russia and India’s Reliance Industries Ltd. rounded out the top 10.
Nordstream 2 Reveals The Extent Of U.S. Weakness --The latest twist of the Nordstream 2 Saga is the U.S. is now threatening to sanction the European companies acting as Gazprom’s financier’s for the pipeline. This threat has been there since President Trump signed the sanctions bill spearheaded by a dying John McCain last summer. But, don’t let appearances fool you. Trump wasn’t reluctant about signing that bill. He welcomed it. He went to the Three Seas Summit with “European Energy Security” on his lips and trade tariffs/barriers in his heart.He knew where this would lead. And so did we. The recent report from RT linked above reveals just how desperate the U.S. is to stopping Nordstream 2, and, frankly, it’s pathetic.“Everything is on the table. The administration is taking a whole-of-government approach to stopping the Nord Stream project,” the source said, as cited by the media.Last summer, Congress approved the so-called Countering America’s Adversaries Through Sanctions Act (CAATSA). The legislation allows the White House to introduce punitive measures against the participants of the energy project, investing over $5 million in those enterprises.“We have been clear that firms working in the Russian energy export pipeline sector are engaging in a line of business that carries sanctions risk,” a State Department spokeswoman told the media.Trump and his increasingly erratic foreign policy inner circle continue to up the stakes for European companies and countries that do not go along with his plans to remake the world in his image. Nordstream, along with Turkish Stream and potentially a revived Southstream into Bulgaria represent an existential threat to U.S. control over European politics and its economy.
Growing US shale production reshaping global LNG market -- The US gas market is undergoing a structural shift that threatens to shake the established global LNG order. In 2017 the US became a net exporter of natural gas for the first time in 60 years. Driven by a combination of increased shipments to Mexico, and growing throughput at the Sabine Pass LNG export terminal, net exports averaged around 0.4 bcfd in 2017, compared to 1.8 bcfd net inflows in 2016. Growing shale production underpins the market shift. In addition to fueling exports, the supply abundance is altering the landscape of domestic demand through an expansion in natural gas electricity generation and industrial use. Short term, the abundant supply has weighed heavily on Henry Hub prices, and the incremental export demand has done little to change this. And medium-term prospects for significant LNG export demand come on the heels of a 5-year expansion in domestic natural gas generation capacity. This article details how the coming combination of domestic and export demand will inject much needed bullishness into the market. The advent of shale has seen US dry gas production grow at a meteoric pace to 73.3 bcfd in 2017 from 58 bcfd in 2010. Output is expected to reach 82.8 bcfd by 2019 according to the US Energy Information Agency (EIA). Production growth is expected to accelerate through 2020 before slowing, averaging 3% over the next 7 years (Fig. 1). Longer term EIA forecasts see production reaching 95.5 bcfd by 2024. The regions that will drive gas production growth are the East, Southwest, and Gulf Coast, which coincide with the location of future US LNG projects. On a regional basis, the EIA forecasts Gulf Coast dry natural gas production to grow 13% in 2018 to 16 bcfd from 14.1 bcfd in 2017 and by another 24% to 19.8 bcf/d in 2024. The Southwest, which includes West Texas is expected to increase 5% in 2018 to 10.94 bcfd and by a further 13% to 12.4 bcfd in 2024. Eastern dry gas production is expected to grow 5% in 2018 to 23.5 bcfd from 22.4 bcfd in 2017 and by a whopping 58% to 35.6 bcfd in 2024. The supply growth from these regions will be sustained by new demand from exports in the form of LNG and pipeline shipments to Mexico, as well as an increase in domestic demand from power generation.
NYMEX July natural gas futures down 1.7 cents to $2.913/MMBtu early Tuesday - NYMEX July natural gas futures extended Monday's fall in early Tuesday trading, easing back towards the $2.90/MMBtu mark, after having nudged $3/MMBtu Monday morning. The NYMEX July contract was seen trading at $2.913/MMBtu at 0700 EDT (1100 GMT), 1.7 cents lower than Monday's settlement of $2.930/MMBtu. The contract ranged between $2.911/MMBtu and $2.927/MMBtu, easing lower as Monday's bearish sentiment continued -- the contract lost 3.2 cents during the first session of the week on a drop in demand over the weekend that trumped forecasts of warmer-than-average weather for most of the US. National Weather Service forecasts show that above-average temperatures were expected over most of the US in its 6-10 day outlook, with below-average conditions due in the northwest and the southeast.
NYMEX July natural gas futures steady at $2.899/MMBtu in early trade - NYMEX July natural gas futures were broadly steady in early Wednesday trading, ticking up slightly after Tuesday's fall and nearly back to the $2.90/MMBtu mark after weather-related losses over previous trading sessions. The NYMEX July futures contract was seen trading at $2.899/MMBtu at 0700 EDT (1100 GMT), 0.9 cent higher than Tuesday's settlement of $2.89/MMBtu. The contract ranged between $2.887/MMBtu and $2.912/MMBtu, easing lower as the bearish sentiment continued, after the contract lost 4 cents Tuesday on the back of a mixed weather outlook. In its latest forecast, US National Weather Service showed above-average temperatures over most of the US in its 6-10 day outlook, while below-average conditions were expected in the Northwest of the country. Milder temperatures could drive demand further down, with total US demand falling 600 MMcf to 70.4 Bcf Tuesday.
July Natural Gas Called A Nickel Higher Ahead of EIA Storage Report --July natural gas prices were set to open 5.6 cents higher at $2.952 as the market anticipates another sub-100 Bcf storage injection once the Energy Information Administration (EIA) releases its weekly report later this morning for the week ending June 1.The EIA storage report will reflect the Memorial Day holiday week, which typically corresponds with a strong storage injection. But market estimates are wide ranging, between 77 Bcf and 98 Bcf and fall short of the triple-digit injection some would expect from a holiday weekend. INTL FCStone Financial Inc. Senior Vice President Tom Saal told NGI that the story is the Memorial Day weekend. “If we got over 100 Bcf, I wouldn’t be surprised. That weekend should produce a big number.” His official estimate, however, is for a 97 Bcf injection.ION Energy’s Kyle Cooper is projecting a 97 Bcf injection, while a preliminary Bloomberg survey had a median estimate of an 89 Bcf build. A Reuters poll pointed to a 90 Bcf injection, and the Intercontinental Exchange EIA Financial Weekly Index settled Wednesday at an injection of 94 Bcf.The reporting week period was a hot one from Texas to the Midwest, where 90s reached Chicago for several days and 100s in Texas for strong demand, according to NatGasWeather. Sub-tropical Storm Alberto, however, brought showers and cooling to the Southeast for light demand.“There was also the Memorial Day holiday that eased demand, as well as the potential for last week’s EIA report having been a little too low and in need of a few Bcf higher correction. Thus, many ways this report comes in squirrely,” NatGasWeather said. Last year, a build of 103 Bcf was reported by the EIA, and the five-year average build stands at 104 Bcf. There were 71 cooling degree days (CDD) last week compared with 44 CDDs at the same time last year and a 30-year normal of 42 CDDs. In the week ended May 25, 96 Bcf was added to storage.
Pipe Explosion, Heat and Sub-100 Bcf Storage Build Lift Nymex, Spot Natural Gas Prices -- Nymex July natural gas prices found some support on Thursday as an early-morning pipeline explosion combined with another sub-100 Bcf reported storage injection from the Energy Information Administration’s (EIA) storage report to lift the prompt month some 3.4 cents to $2.93.Spot gas prices also rose amid some returning heat to high demand centers. The NGI National Spot Gas Average rose 3 cents to $2.61/MMBtu.Trading action was swift Thursday morning as news broke that Columbia Gas Transmission LLC’s (TCO) Leach Xpress Pipeline in West Virginia -- which began flows in January -- had exploded. TCO said about 1.3 Bcf/d of firm service could be disrupted indefinitely after the explosion and fire occurred on the line in Marshall County, WV, prompting the company to issue a force majeure.TCO said that until further notice, capacity on the segment would be cut to zero. A spokesperson for TransCanada Corp., which owns the TCO system, said the incident occurred at 4:15 a.m. ET. The cause of the blast remains unclear and the impacted area has been isolated, the company said.The Nymex July futures contract was up a nickel before the start of trading as news of the explosion spread, and support remained strong just before the storage report from the EIA. “With supply growth being so critical to the health of summer fundamentals, it is no surprise that this morning's Columbia Gas incident” in West Virginia was met with price upside, Societe Generale (SocGen) natural gas analyst Breanne Dougherty said. “Until the storage deficit softens, ALL bullish news is expected to get a pronounced market response.”
Analysis: Strong JKM prices to drive US LNG to East Asia this summer - US LNG exporters should deliver a record number of cargoes to East Asia this summer, thanks to the region's unseasonably strong gas prices, which are likely to remain elevated through next winter. On Friday, the Platts JKM for July-delivered cargoes was assessed at $9.60/MMBtu. That anomalously high price has been exacerbated recently as certain portfolio players move to cover short positions. More fundamentally, though, elevated crude-linked contract prices and continuing strength in spot-market demand from China are largely behind the recent run-up in prices. In contrast to previous shoulder seasons, Asian LNG prices have actually strengthened this spring and are at their highest, seasonally, dating back to 2014, S&P Global Platts data shows. In recent years, the Platts JKM has reached annual highs around $10/MMBtu during the peak-demand months of winter, followed by significantly lower prices from April through October. Last May, for instance, the index traded at an average $5.59/MMBtu. This May, the JKM averaged $8.68/MMBtu. But this season's elevated prices look like more than just a flash in the pan. With crude-linked contracts now valued in the mid-$10s/MMBtu and strong Chinese demand expected to continue, forwards markets are betting on prices at over $9/MMBtu through first-quarter 2019. Those price levels should drive a record share of US cargoes to consumers in East Asia this summer, with South Korea, China and Japan likely to import the majority of those volumes. Through May, US exporters have already shipped the LNG equivalent of roughly 196 Bcf of gas to consumers in East Asia this year. To put that number in perspective, consider that total exports in 2018 have amounted to just over 406 Bcf, meaning that nearly half of all US cargo sales have targeted East Asian buyers this year.
The Road To Mexico -- Elections July 1, 2018 -- ArgusMedia says it has a 3-part series on the Mexico election from an energy stand point. This is the first installment of that 3-part series: Like his fellow populist leader in the US, Mexico's leading presidential candidate wants to make Mexico great again, starting with making more refined products within the country's borders. Andres Manuel Lopez Obrador says he would make good on that promise by building up to two new refineries in Mexico, which would also come at a great estimated cost of $8bn. Lopez Obrador, an early opponent of the energy reforms, has been leading the polls for over a year, cementing a solid double-digit lead for months. Lopez Obrador has said he will stop Mexican crude exports to boost the domestic production of gasoline and diesel. He has also argued in favor of freezing fuel prices and reviewing all awarded upstream contracts. After years of severe budget cuts imposed on state-run oil company Pemex, Lopez Obrador has said he would focus heavily on Pemex. Rocio Nahle, the candidate's pick for energy secretary under a Lopez Obrador presidency, toldArgus in a March interview that Mexicans could expect "a radical change in the organization of Pemex." Lopez Obrador's Mexico-first energy program, formalized in a 415-page document published late last year, has stirred national pride among his supporters, upset by US president Donald Trump's repeated tirades against the US' southern neighbor. Mexico's fuel and natural gas imports from the US have been rising for years. In 2017, state-run Pemex gasoline imports rose 13pc to 570,000 b/d from the previous year, while diesel imports increased by more than 26pc to 237,500 b/d. Pemex's natural gas imports dipped 8.6pc in 2017 to 1.766 Bcf/d, but were still 62pc more than the 1.089 Bcf/d imported at the beginning of the current administration in 2012.
Ecuador To Sell A Third Of Its Amazon Rainforest To Chinese Oil Companies -- Ecuador plans to auction off more than three million hectares of pristine Amazonian rainforest to Chinese oil companies, angering indigenous groups and underlining the global environmental toll of China's insatiable thirst for energy. On Monday morning a group of Ecuadorean politicians pitched bidding contracts to representatives of Chinese oil companies at a Hilton hotel in central Beijing, on the fourth leg of a roadshow to publicise the bidding process. Previous meetings in Ecuador's capital, Quito, and in Houston and Paris were each confronted with protests by indigenous groups. Attending the roadshow were black-suited representatives from oil companies including China Petrochemical and China National Offshore Oil. "Ecuador is willing to establish a relationship of mutual benefit – a win-win relationship," said Ecuador's ambassador to China in opening remarks. According to the California-based NGO Amazon Watch, seven indigenous groups who inhabit the land claim that they have not consented to oil projects, which would devastate the area's environment and threaten their traditional way of life. "We demand that public and private oil companies across the world not participate in the bidding process that systematically violates the rights of seven indigenous nationalities by imposing oil projects in their ancestral territories," a group of Ecuadorean organised indigenous associations wrote in an open letter last autumn.
PdV considers force majeure on oil exports (Argus) — Venezuela's state-owned PdV is considering a declaration of force majeure on some of its oil supply contracts in June unless its clients agree to accept volume reductions of up to 50pc, PdV officials tell Argus.PdV's tumbling crude production, chronic breakdowns of its heavy crude upgraders and difficulty importing critical light crude and naphtha are progressively reducing the amount of oil available for export. The company was already taking advantage of flexibility in its supply contracts to shave off up to 10pc in export volumes. But larger cuts are now looming. PdV "in the best case only has about 695,000 b/d of crude supply available for export in June," a PdV marketing division executive said.Because the distressed company's problems are structural, any force majeure declaration would set a commercial bar that the Opec country could not quickly overcome.PdV is asking its principal clients that are collectively owed 1.5mn b/d of crude in June to accept smaller volumes and restructure existing supply contracts for up to one year.Among the drivers behind PdV's supply deficit is ongoing maintenance at its PetroPiar upgrader in which Chevron owns a 30pc stake. The facility, which has been off line since early May, supplies about 160,000 b/d of synthetic crude to the country's export portfolio. Maintenance will last through the end of June at the earliest, PdV officials say. Chevron declined to comment.Three other upgraders, all run by PdV, are in poorer operational condition. PdV could invoke force majeure if new supply deals involving smaller volumes cannot be worked out with clients such as Chinese state-owned CNPC, India's Reliance and Russia's Lukoil.The energy ministry likely would attribute a force majeure declaration to US financial sanctions and the effects of its debt-related dispute with US independent ConocoPhillips that severed PdV's Dutch Caribbean logistics last month. From the perspective of Venezuela's increasingly isolated government, the strategy would boost its international case against sanctions by adding pressure to the oil market.
Venezuela’s Oil Meltdown Defies Belief --Venezuela might have to declare force majeure on its oil exports as production plunges and its ports are unable to ship enough crude.The ongoing meltdown in Venezuela’s oil sector could tighten the oil market more than expected. Reuters reported Tuesday that Venezuela is considering declaring force majeure, a legal declaration made in extraordinary circumstances to basically get out of contractual obligations. In other words, Venezuela’s PDVSA is essentially prepared to say that it can’t supply the oil that it promised.The utter collapse of the country’s oil production is obviously a big factor in PDVSA’s inability to ship enough oil. Output is down below 1.5 million barrels per day and falling fast.But the tanker traffic at a handful of its ports has created unexpected bottlenecks, which have slowed loadings. Clogged ports are the direct result of the seizure of operations on several Caribbean islands by ConocoPhillips last month. The American oil major sought to enforce an arbitration award, laying claim to a series of storage facilities on the islands of Bonaire, Curacao and Aruba.Those assets were crucial to PDVSA’s operations – in fact, they had become even more important as PDVSA’s facilities in Venezuela deteriorated. They had the ability to service very large crude carriers (VLCCs), and were important for storing and blending PDVSA’s oil, and preparing it for export. Since ConocoPhillips tried to take over those facilities, PDVSA has tried to shift operations back to its ports in Venezuela. But those terminals are in very bad shape, and cannot make up for the loss of the Caribbean facilities. Reuters reported that there are more than 70 tankers sitting off the Venezuelan coast.
Venezuela Seeks OPEC Support Against U.S. Sanctions - Cash-strapped Venezuela is pleading with OPEC for solidarity against U.S. sanctions, a week after Iran also asked its fellow cartel members for support against the returning U.S. sanctions on Tehran. “I kindly request solidarity and support from our fellow members,” Venezuela’s Oil Minister Manuel Quevedo wrote in a letter to OPEC seen by Bloomberg News. In the letter, Quevedo is calling upon the cartel to discuss “the constraining effects of unilateral sanctions imposed by the United States of America, which represent an extraordinary aggression, financially and economically, for our national oil industry’s operations and the stability of the market.” The letter by Venezuela is similar to the one that Iran sent to OPEC last week, in which Tehran sought support from fellow OPEC members against the returning U.S. sanctions and wanted the issue on the agenda at the Vienna meeting later this month. In his letter, Iranian Oil Minister Bijan Zangeneh also suggested that his country does not agree with “recent remarks by certain OPEC members, noting that the Organization adopted decisions by consensus and no single member spoke for the body.”
Kazakhstan introduces 3-month ban on imports of Russian gasoline - Kazakhstan has introduced a three-month ban on the import of Russian gasoline, according to a document on the energy ministry website, which becomes effective 10 days after its publication. The ban could be related to rising gasoline prices in Russia, according to market sources. Kazakhstan's energy minister Kanat Bozumbaev said that so far the rise in Russia's gasoline prices was not having a big impact on Kazakhstan's domestic prices. He said the higher Russian prices were offset by healthy domestic supply, adding that stocks are exceeding consumption significantly and in four or five months Kazakhstan will be able to cover 90% of its needs, according to a Tengrinews report published on the energy ministry website. Kazakhstan is reliant on imports of Russian oil products until it completes the upgrade of its refineries. Kazakhstan's energy minister also said recently that last year the country covered 30% of its gasoline demand, 20%-25% of diesel and 58%-60% of jet fuel with Russian imports. But once the upgrades are completed in three or four months, Kazakhstan will be able to fully cover its gasoline, diesel and jet requirements, Bozumbaev said as quoted by Kazinform news agency and reported on the energy ministry website. In the second half of the year, Kazakhstan will also decide on a location for a new, fourth refinery, Bozumbaev said on the energy ministry website. He also said that all three refineries in the country will reduce the duration of their turnarounds from 45 to 20 days annually and a 45-day turnaround will be held only once every three years. Up until 2018 each refinery stopped for 30 to 45 days every year, the minister said. The change of the maintenance cycle will increase crude oil processing by 300,000 mt/year and thus allow the Kazakhstan market to be entirely supplied with domestic product.
A trade war between the US and China is brewing, but what role will US crude oil exports play? - Capitol Crude podcast - US Treasury Secretary Steven Mnuchin has called energy trade a rare bright spot in trade relations with China and has called for a nearly sixfold increase in American energy exports. Is that realistic? This week, Meghan Gordon and Brian Scheid talk with Jane Nakano, a senior fellow with the energy and national security program at the Center for Strategic International Studies, about energy trade between the US and China and where it's headed.
European refiners winding down purchases of Iranian oil (Reuters) - European refiners are winding down oil purchases from Iran, closing the door on a fifth of the OPEC member’s crude exports after the United States imposed sanctions on Tehran, company and trading sources said. Although European governments have not followed Washington by creating new sanctions, banks, insurers and shippers are gradually severing ties with Iran under pressure from the U.S. restrictions, making trade with Tehran complicated and risky. U.S. President Donald Trump on May 4 announced his decision to quit a landmark 2015 nuclear deal between Iran and world powers and reimposed sanctions on Tehran. The sanctions on Iran’s petroleum sector will take effect after a 180-day “wind-down period” ending on Nov. 4. “We cannot defy the United States,” said a senior source at Italy’s Saras, which operates the 300,000-barrels-per-day (bpd) Sarroch refinery in Sardinia. Saras is determining how best to halt its purchasing of Iranian oil within the permitted 180 days, the source said, adding: “It is not clear yet what the U.S. administration can do but in practice we can get into trouble.” A drop in crude trading between Iran and Europe could complicate efforts by the European signatories of the nuclear deal - France, Germany and Britain - to salvage the agreement. Refiners including France’s Total, Italy’s Eni and Saras, Spain’s Repsol and Cepsa as well as Greece’s Hellenic Petroleum are preparing to halt purchases of Iranian oil once sanctions bite, the sources said. These refiners account for most of Europe’s purchases of Iranian crude, which represent around a fifth of the country’s oil exports. Iran’s crude sales to foreign buyers averaged around 2.5 million bpd in recent months, according to data collected by Reuters and EU statistics office Eurostat. The bulk of the exports go to Asia.
Why India is ignoring US sanctions and sticking with Iran -- Pepe Escobar --Pay very close attention to what India’s External Affairs Minister, Sushma Swaraj, said after meeting with Iranian Foreign Minister Mohammad Javad Zarif earlier this week in New Delhi: “Our foreign policy is not made under pressure from other countries … We recognize UN sanctions and not country-specific sanctions. We didn’t follow US sanctions on previous occasions either.” After fellow BRICS members China and Russia, India left no margin for doubt. And there’s more; India will continue to buy oil from Iran – its third top supplier – and is willing to pay in rupees via state bank UCO, which is not exposed to the US. India bought 114% more oil from Iran during the financial year up to March 2018 than in the previous term.India-US trade amounts to $115 billion a year. In comparison, India-Iran trade is only $13 billion a year. India may grow an impressive 7% in 2018 and has reached a GDP of $2.6 trillion, according to the IMF, ahead of France, Italy, Brazil and Russia. To keep growing, India badly needs energy.So for New Delhi, buying Iranian energy is a matter of national security. Couple it with the obsession in bypassing Pakistan, and it’s clear this is all about a complex interconnection of geopolitics and geoeconomics.The comprehensive India and Iran partnership revolves around energy, trade and investment connectivity corridors, banking, insurance, shipping and – crucially – the imminent possibility of doing everything using the rupee and the rial, bypassing the US dollar.India-Iran already trade in euros – so that is step one in bypassing the long arm of the US Department of the Treasury. Both nations are still using SWIFT. Assuming the EU does not give in to the unilateral US violation of the Iranian nuclear deal, known as the JCPOA, India’s oil imports won’t be sanctioned.
China’s oil storage is OPEC’s latest concern in managing global supply - Having drained one glut, OPEC and its allies have found a new, brimming oil hoard to worry about: China’s crude reserves. China’s state-and-commercial-owned oil stores will help the Organization of the Petroleum Exporting Countries and other major producers determine whether to continue their supply cuts or open the taps wider again. Excess Chinese oil could feed into any resurgent glut and push prices down. OPEC estimates commercial oil stocks in the Organization for Economic Cooperation and Development are now 20 million barrels below their five-year average, according to a person familiar with the matter. Chinese stocks are going in the opposite direction, analysts estimate, as Beijing shores up its reserve as a buffer against oil shocks and local refiners scoop up crude to maintain their ‘use it or lose it’ import quotas.
Iraq's OPEC oil pledge questioned as government talks take shape - Iraq's oil policies and OPEC strategy are likely to come under closer scrutiny during the political jostling to form a new federal government in Baghdad. The second-largest producer in the Middle East after Saudi Arabia depends on crude for 90% of revenues, but output is restricted because of 1.8 million b/d of cuts agreed by OPEC and its allies. Some newly-elected politicians linked to nationalist cleric Moqtada al-Sadr, whose Saeroon Alliance coalition won the most seats, question if the OPEC deal is good for Iraq. "For sure Iraq's share of exports should be unlimited so it can compensate for the low oil prices which have increased taxes on the people and workers," Qusay al-Yassiri, a Saeroon lawmaker-elect from southern Dhi Qar province, said. Iraq exported 3.49 million b/d in May, according to official figures. "We should be able to export whatever we can via open share, we have an abundance of oil and we need to benefit from that," al-Yassiri said. Al-Yassiri was one of a dozen newly elected members of parliament and politicians allied to al-Sadr's political bloc interviewed by S&P Global Platts. Negotiations to form a new government are gathering pace following elections on May 12. Oil prices have recovered 75% since last year to trade above $80/b in May due to growing geopolitical risk in the Middle East and concerns over supplies from Venezuela. Oil ministers from the countries participating in the OPEC/non-OPEC pact are scheduled to meet in Vienna on June 22 with an extension to the deal hanging in the balance. Baghdad's restraint could be crucial to maintaining compliance, which has been high at 152% for April. To date, Iraq's own commitment has been patchy, with its cuts averaging 45% of its quota over the course of the deal, according to the International Energy Agency.
Saudis May Hike July Oil Prices To Asia To More Than 4-Year-High - Saudi Arabia may raise again its official selling prices (OSPs) for oil bound for Asia in July, and the price of its flagship Arab Light crude could reach its highest since February 2014, a Reuters survey of five refiners and traders showed on Friday.The possible increase could come as Asian demand for Middle Eastern crude oil is growing ahead of the peak summer oil consumption period, and as the Dubai oil benchmark has gone deeper into backwardation—the market situation in which front-month prices are higher than prices further out in time—a sign of rising demand for prompt deliveries.According to the Reuters survey, Saudi Aramco may raise the OSP for Arab Light to Asia by as much as US$0.40 per barrel to a premium of US$2.30 a barrel to the Oman/Dubai Middle East benchmark. This would be the highest OSP for Arab Light in Asia in more than four years—since February 2014 when the OSP was set at a US$2.45 premium to Oman/Dubai.Although they expect such a rise, most of the survey respondents hope that the increase for Arab Light would be smaller, due to weaker jet fuel margins and to potential Saudi concern that a big price hike would make its Arab Light grade uncompetitive compared to other Middle Eastern crudes and Russian grades of similar quality. Moreover, with rising U.S. oil exports to Asia and the wide WTI Crude discount to Brent Crude, Asian refiners have seized the opportunity to boost the cheaper U.S. crude oil imports and are cutting some pricier imports from the Middle East, particularly after Saudi Arabia’s recent pricing policies that raised prices for the Asian markets.
"The Strongest Flashing Red Light Since 2008": Will Oil Shock Trigger The Next Recession? - When analysts talk about the biggest threats to the second longest economic expansion in US history that has sent the unemployment rate in the US to its lowest level in 18 years, the risk of a trade war often occupies a sizable chunk of the conversation. And now that President Trump has decided to slap Section 232 tariffs on metals imports from some of America's closest allies, we'll be hearing even more about the risks as academics and economists latch on to the notion that tariffs will harm the US economy (the same way Brexit would unleash a UK depression). But while trade-war related risks have yet to materialize, the possibility that we're headed for - or are already in the middle of - an oil shock is looking increasingly more likely, despite numerous analysts and economists writing off rising oil prices as a non-issue (in a recent note about how rising oil prices will impact the Asian economy, researchers at SocGen played down oil price risks to both growth and inflation). However, those ignoring the very real problems posed by climbing crude prices at this point so very late in the business cycle do so at their own peril, as David Fickling, an opinion columnist at Bloomberg, pointed out in a recent column. But it's not just big bank strategists who are overlooking the risks of rising oil: the abovementioned SocGen energy analysts see oil price pressures receding in the near future as OPEC and Russia start to crank up production, pushing the price of crude lower. As it turns out, retail investors are also overlooking the risks, too. As evidence, Fickling points to the number of web searches for the terms "oil shock" and "oil crisis". And yet, as Fickling points out, the number of warning signs suggesting that oil prices are already having a very real negative impact on growth - particularly in Asia and South America - are rapidly increasing.
- In Brazil, a strike by truckers protesting the price of fuel brought the economy to a halt over the past week, interrupting exports of soybeans, coffee and chicken and prompting some to call for a return to military dictatorship.
- In India, prices for diesel and gasoline have hit multi-year records, leading to demands for the government to cut taxes and for a price cap to be imposed on state-controlled Oil & Natural Gas Corp.
- Governments in Thailand, Vietnam and Indonesia and implementing or planning increases in retail fuel subsidies to protect consumers from the effects of rising oil prices and weakening national currencies.
- Airline profits have probably peaked because of headwinds from fuel costs, according to Alexandre de Juniac, CEO of the International Air Transport Association. Philippine budget carrier Cebu Air Inc. this week promised to impose fresh fuel surcharges.
- Moody’s Investors Service just blamed high oil prices in part for a 0.2 percentage-point cut in its outlook for India’s 2018 GDP growth, and warned of the potential of falling consumption spending and rising inflation across the globe if current high prices are sustained.
Shale Bottlenecks Could Send Oil Prices Higher - Amid reports that OPEC will likely decide to start easing production quotas after June 22 and an IEA forecast that electric vehicles will displace 2.5 million bpd in crude oil demand by 2030, some analysts remain upbeat about the future of oil prices, citing transport constraints in the U.S. shale patch as well as companies’ prioritization of returning cash to shareholders over investing in new production. CNBC recently quoted one such analyst, Tamar Essner from Nasdaq Corporate Solutions, as saying “I think it's temporary. I think the fundamental picture is still really strong. The market's getting a bit dislocated right now based on a risk-off sentiment." Essner went on to note the 500,000-bpd fall in production in Venezuela and speculated that it could fall by another half a million barrels daily by end-2018. If this happens, he said, U.S. shale drillers would not be able to ramp up production quickly enough to meet growing demand.Indeed, Venezuelan production has been sliding inexorably, and chances are that it will continue to fall until the year’s end, at least. However, U.S. drillers have increased their daily production since the start of the year by 1.28 million bpd already, if we are to believe EIA’s weekly production estimates and monthly reports, which have historically proven to be quite accurate.So, that’s 1.28 million bpd more over five months. Even if the EIA is erring on the positive side, the increase in U.S. production could be around 1 million barrels daily, which would be enough to offset a Venezuelan production decline of the same proportions. But, say bullish analysts like Essner, U.S. drillers have already hedged their production at lower prices, so they won’t see as much cash coming in as they would have otherwise. Also, they have made their capex plans based on cheaper oil. True as this may be, again, if we are to believe EIA figures, drillers are drilling more and pumping more oil. The situation is a bit paradoxical.
WTI Crude Drops Below Key Technical Support After OPEC, Russia Headlines - For the first time since September 2017, WTI Crude has tested the 100-day moving-average and is now down over 10% from its highs 8 days ago after an OPEC committee stressed the need to ensure supplies can meet growing demand, adding to speculation the group will phase out its production cuts. The 100DMA is holding WTI around $65.28 for now at around two-month lows as Bloomberg reports Saudi Arabia and Russia signaled plans to restore output for the first time since the end of 2016. Their production cuts have cleared a global inventory surplus and there’s now a growing risk of supply disruptions due to U.S. President Donald Trump’s decision to renew sanctions on Iran and Venezuela’s economic crisis. Crude’s surge last month gave rise to concerns demand may falter, even as rising fuel prices have sparked protests from Brazil to Siberia. “OPEC and Russia have shown concerns about the impact of the rapid escalation in oil prices on global demand,” Bank of America Corp. analysts said in a note. While governments may intervene to cap fuel prices in emerging markets, “we note the growing risks to consumption arising from higher U.S. interest rates and political turmoil in Europe.” While Saudi Arabian Oil Minister Khalid Al-Falih said scaling back supply caps put in place since early 2017 is “on the table,” most producers weren’t consulted about the proposal to revive supplies.
Crude Oil Prices Settle Lower as Fears of OPEC Easing Output Curbs Linger – Crude oil prices settled lower on Monday as signs of ongoing expansion in U.S. output and uncertainty over whether OPEC would ease production limits continued to weigh on sentiment. On the New York Mercantile Exchange crude futures for July delivery fell 1.61% to settle at $64.75 a barrel, while on London's Intercontinental Exchange, Brent fell 2.03% to trade at $75.22 a barrel. The number of oil rigs operating in the US increased by 2 to 861, its highest level since March 13, 2015, according to data from energy services firm Baker Hughes, pointing to signs of an expansion in U.S. output. The uptick in drilling activity emerges as the Energy Information Administration said last week U.S. oil output rose 215,000 barrels per day to a record 10.47 million barrels per day in March. Oil prices were also held back by uncertainty over whether OPEC and its allies would ease curbs on production limits to plug the gap from falling supplies in Venezuela and an expected drop in Iran oil exports as U.S. sanctions loom. OPEC in its most recent report said the production-cut agreement had helped slashed excess global oil supplies to just above the five-year average. In November 2016, OPEC and other producers, including Russia agreed to cut output by 1.8 million barrels per day (bpd) to slash global inventories to the five year-average. The OPEC-led deal was renewed last year through 2018 and is expected to come under review at OPEC's meeting on June 22. The weaker start to crude prices arrived on the back of a 5% slump last week as traders continued to slashed their bets on further upside in oil prices, according to data released Friday. CFTC COT data data last week showed speculative net long positions in WTI crude oil fell to 324,235 from 377,520 in the prior week. The negative sentiment on oil prices comes despite analysts continuing to tout higher oil prices amid strong oil demand growth and robust fundaments. "We continue to forecast 1.8 million barrels per day in 2018 global oil demand growth, ahead of the IEA forecast of 1.4 million barrels per day," Goldman Sachs said.
Crude oil futures complex lower on expectations of more OPEC supply - ICE August Brent was lower in US morning trading Tuesday on expectations OPEC oilproducers will soon relax production limits. At 1326 GMT, ICE August Brent was $1.16 lower at $74.13/b. NYMEX July crude was down 40 cents at $64.35/b. NYMEX July ULSD was 2.77 cents lower at $2.1248/gal. NYMEX July RBOB was 2.31 cents lower at $2.0993/gal. ICE August Brent touched a low of $73.81/b so far Tuesday, dipping below its Bollinger Band lower limit calculated at $74.3/b, suggesting the front-month contract may have veered into oversold territory. The last time ICE Brent dipped below the Bollinger Band lower limit was May 8. A rally then lifted Brent to its upper limit until prices fell hard on indications Saudi Arabia and Russia were considering raising supply. Bloomberg reported Tuesday that US government officials have asked Saudi Arabia and other OPEC producers to increase production by more than 1 million b/d, citing unnamed sources. "Reports that the US asked Saudi Arabia to increase production are taking blame for the sell-off this morning, one of many story-lines that will be debated as the count-down to the June 22 OPEC meeting continues," TAC Energy said in a note. A meeting in Kuwait City over the weekend involving Gulf oil ministers failed to yield any clues on production strategy ahead the June 22 meeting in Vienna. ICE August Brent was $9.85/b above NYMEX August crude Tuesday morning, in from $10.61/b Monday. The ICE Brent/WTI spread settled Friday at $11.02/b, its widest since February 2015.
The Oil Trader Tug-Of-War - Despite the recent sell-off, Brent Crude prices continue to be supported by geopolitical events and supply concerns, while the U.S. benchmark WTI Crude has been pressured to the downside by pipeline constraints in the most prolific U.S. shale basin amid record-high American oil production.The discount of WTI Crude to Brent Crude topped $10 a barrel last week, and even touched $11 a barrel last Thursday. The WTI-Brent spread is currently at its highest since 2015.The huge discount of the U.S. oil benchmark to the international benchmark is setting the stage for a tug-of-war between oil majors and big oil trading houses that seek to capitalize on the wide price gap to make profitable arbitrage exports of U.S. crude oil on the one hand, and hedge funds and other money managers who bet that WTI will be pushed further into discount.Hedge funds are betting that the spread will continue to widen, while physical oil traders bet on record U.S. oil export volumes to narrow that gap, brokers and traders tell Bloomberg. The WTI discount to Brent has doubled from around $5 a barrel in mid-May, while U.S. production continues to break records by the week, and the Permian faces takeaway capacity constraints. The Permian’s production is expected to grow by another 78,000 bpd in June over May, to 3.277 million bpd, EIA estimates show. But pipeline capacity “may be in short supply over the next year, putting downward pressure on barrels priced in the region and potentially restricting production growth in 2019,” according to Dallas Fed’s Energy Indicators report from May.
Oil Bulls Flee On OPEC Concerns – Pessimism is back in the oil market, at least for now, on rising expectations that OPEC and Russia will hike production. WTI dipped below its 100-day moving average this week, breaking technical resistance to lower prices. “We are breaking key levels of support now,” Phillip Streible, analyst at RJO Futures, told Reuters. “Once we started taking out $65.50 or so, it really started to accelerate. People are not really believing that the rally will continue,” he said. According to Bloomberg, the U.S. government has asked Saudi Arabia to boost oil production by 1 million barrels per day. The request would be unusual, but not surprising since high gasoline prices are always a political threat to the party in power. It does not seem that Saudi Arabia and Russia have reached an agreement yet, but the two countries are considering several options for an increase in production. A series of deals in the last few months indicate a growing focus on petrochemicals from state-owned oil giants in the Middle East, according to Bloomberg. The strategy shift comes as the durability of long-term oil demand is up in the air. The IEA has stated that petrochemicals will represent one of the largest sources of oil demand growth over the next few decades, outpacing the transportation sector. The Gulf Petrochemicals & Chemicals Association told Bloomberg that oil producers can earn $15 per barrel from refining and an additional $30 per barrel from using fuels to produce petrochemicals. OPEC has aimed to drain OECD inventories below the five-year average, an objective that looks to have been completed recently. However, now they have their sights on China’s oil inventories, which have been on the rise. The problem is that precise data on Chinese inventories is hard to come by, but Ursa Space Systems, an oil data company, estimates that inventories have climbed by 130 million barrels over the past year in China. OPEC is concerned about boosting oil production while China is sitting on a mountain of supply.
WTI/RBOB Drop After Huge Gasoline Build - Last week saw API and EIA disagree but WTI rallied into the API print tonight amid expectations for a 2.1mm crude draw. However, the biggest gasoline build since the first week of Jan sparked selling in both WTI/RBOB. API:
- Crude -2.28mm (-2.1mm exp)
- Cushing -1.038mm (-500k exp)
- Gasoline +3.759mm - biggest build since the first week of January
- Distillates -871k
After last week's EIA data showed the exact opposite of API's one wonders whether the extra noise is worthwhile (and who is correct), but the big surprise gasoline build will be the one to watch in tomorrow's data... The price advantage for crude from U.S. wells “just begs for more exports” of U.S. crude, said Bob Yawger, director of futures at Mizuho Securities USA Inc. in New York.
U.S. Asks OPEC for 1 Million Barrel a Day Oil Output Hike - The U.S. government has quietly asked Saudi Arabia and some other OPEC producers to increase oil production by about 1 million barrels a day, according to people familiar with the matter. The rare request came after U.S. retail gasoline prices surged to their highest in more than three years and President Donald Trump publicly complained about OPEC policy and rising oil prices on Twitter. It also follows Washington’s decision to reimpose sanctions on Iran’s crude exports that had previously displaced about 1 million barrels a day, or just over 1 percent of global production. While U.S. lawmakers have habitually criticized the Organization of Petroleum Exporting Countries at times of high oil prices, and the government has on occasion encouraged the cartel to pump more, it’s unusual for Washington to ask for a specific output hike, the same people said, asking not to be named discussing private conversations. It’s not clear precisely how the request was communicated. Raising production was discussed at a meeting of some Arab oil ministers over the weekend in Kuwait City. A statement published after the talks pledged to “ensure stable oil supplies are made available in a timely manner to meet growing demand and offset declines in some parts of the world.” Saudi Arabia and Russia last month proposed a gradual production increase, although other members of the group have yet to agree. Benchmark Brent oil futures dropped as much as 2 percent to $73.81 a barrel in London trading after the U.S. request was reported. "Looks like OPEC is at it again," Trump wrote in mid-April in a post on Twitter. "Oil prices are artificially Very High! No good and will not be accepted!" The White House declined to comment on specific conversations, but a spokesperson for the U.S. National Security Council said access to affordable and reliable energy underpins global economic growth and the nation’s security. "We welcome any market-based action that increases energy access and fosters a healthy global economy," the spokesperson said
OPEC's Dilemma: Demand Destruction Or Production Boost - The early signs of discontent and demand destruction could be forcing OPEC’s hand, but increasing production carries its own risks. OPEC and Russia are considering raising oil production in a few weeks’ time, and while much of the focus has (rightly) been on the supply outages in Venezuela and the potential for disruptions in Iran, the prospect of demand destruction also looms large for the cartel and its partners. Oil forecasters had been predicting a blistering oil demand growth for 2018. But lately, those bullish forecasts are not looking quite as good, precisely because oil prices had climbed to their highest level in more than three years. For instance, in May the International Energy Agency revised down its forecast for demand growth for 2018 from 1.5 million barrels per day (mb/d) to 1.4 mb/d. But a growing list of other signs should cause OPEC some concern, and might ultimately push the disparate members of the group into agreeing on higher output. A nationwide truckers’ strike in Brazil paralyzed the country. Truckers were outraged by the soaring cost of fuel. The country’s GDP is expected to take a significant hit. That strike was followed up by an oil workers’ strike, which forced the temporary shutdown of a series of refineries. Brazil is emblematic of the pain that consumers face when oil prices rise by so much in such a short period of time. There are similar signs of disgruntlement around the world. Bloomberg notes that there are plans or calls for changes to fuel prices in India, Thailand, Vietnam and Indonesia. The reactions vary in degree and approach, but across the world there is unrest at the rising cost of energy. These developments will not be lost on OPEC and its non-OPEC partners as they gather in Vienna on June 22. Keeping the production cuts in place for the rest of 2018, which has long been the plan, could risk overtightening the oil market, potentially sending prices up towards $100 per barrel. That would lead to much wider economic pain and conflict. Ultimately, high prices would destroy oil demand, a development that would likely backfire on OPEC. However, the flip side of this is that OPEC also faces risks if it decides to increase oil production.
Why Have Oil Markets Turned So Bearish? - Oil prices slid early on Tuesday, as reports of the U.S. asking OPEC to lift oil production and hedge funds boosting their short positions added to bearish sentiment. Rising geopolitical concerns over Iran vowing to enrich uranium amid EU attempts to salvage the nuclear deal as well as heightened tensions in the Iranian-Israeli feud helped to boost prices in the afternoon, but prices extended losses after the API inventory report. WTI Crude traded as low as $64.22 yesterday - near two month lows and well below the levels on May 8, the day on which the U.S. withdrew from the Iran nuclear deal. Earlier on Tuesday, Bloomberg reported that the United States had quietly asked Saudi Arabia and several other OPEC nations to raise oil production by some 1 million bpd.While the U.S. government has often expressed opinion against OPEC’s oil price-fixing policies, including a recent comment by President Trump, asking for a specific amount of oil production come online is a rare move.Saudi Arabia and some of its close Arab allies in the Gulf, as well as the leader of the non-OPEC nations taking part in the production cut deal - Russia - are the only producers that have the spare capacity to increase production. So, in case of increased production from OPEC and allies, the potentially lower oil prices would hurt the other OPEC members that don’t have the spare capacity to boost output. On the geopolitical front, Iran’s Supreme Leader Ayatollah Khamenei ordered on Monday the Atomic Energy Organization of Iran to “make the necessary arrangements to reach 190,000 SWU in the framework provided by the JCPOA.”“Iranian nation & government will not stand being under both sanctions & nuclear restrictions. The Atomic Energy Organization of #Iran must immediately make the preparations for achieving 190K SWU-- for now within #JCPOA-- starting tomorrow,” a tweet from the leader’s Twitter account says.The Prime Minister of Israel, Benjamin Netanyahu, tweeted, referring to Iran’s pledge to enrich uranium:“Ayatollah Khamenei, ruler of Iran, declared his intention to destroy Israel. Yesterday he explained how he would do this – with the unrestricted enrichment of uranium, to produce an arsenal of nuclear bombs. We are not surprised. We will not allow Iran to obtain nuclear weapons.”The Iran-Israel spat continues to escalate while the EU, China, and Russia try to salvage the Iran nuclear deal. Meanwhile, analysts continue to speculate as to how much of Iran’s oil exports would be affected when the U.S. sanctions on Tehran return.
Crude Oil Prices Rebound to Settle Higher Ahead of US Inventory Data – WTI crude oil prices settled higher Tuesday shrugging off fears of an uptick in global output following a report that the U.S. government had asked major oil producers to increase oil output. On the New York Mercantile Exchange crude futures for July delivery rose 1.2% to settle at $65.52 a barrel, while on London's Intercontinental Exchange, Brent fell 0.16% to trade at $75.16 a barrel. Crude prices rebounded from session lows as focus shifted toward U.S. energy inventory data due Wednesday expected to show a draw in domestic crude supplies for the second straight week. Oil prices started the day on the back foot after Bloomberg reported, citing sources, the U.S. government had asked Saudi Arabia and other OPEC members to increase oil output by around 1 million barrels a day. The request comes in the wake of President Trump's tweet in April, in which he criticised OPEC and claimed oil prices were "artificially high." Jeff Currie, Goldman’s global head of commodities research, played down the impact of an increase of 1 million barrels per day, insisting stockpiles would continue to edge lower in the second half of this year. Sentiment on oil prices remained mostly negative, however, as investors continued to fear OPEC, at its meeting on June 22, could ease production curbs to offset falling supplies in Venezuela and an expected drop in Iran oil exports as U.S. sanctions loom. In November 2016, OPEC and other producers, including Russia agreed to cut output by 1.8 million barrels per day (bpd) to slash global inventories to the five year-average. The OPEC-led deal was renewed last year through 2018. A fresh batch of inventories data from the U.S. Energy Information Administration data due 10:30 ET Wednesday expected to show U.S. crude stockpiles fell by 1.824 million barrels last week.
US Crude Oil Inventories increased This Past Week -- June 6, 2018 -- Weekly petroleum report, link here:
- US crude oil inventories: increased by 2.1 million bbls
- US crude oil inventories: 436.6 million bbls; "in the lower half of the average range for this time of year" -- per the EIA; my own "baseline" -- 350 million bbls -- so for me, an inventory of 437 million bbls is still a huge over-supply
- total motor gasoline inventories increased by 4.6 million bbls last week (and yet gasoline prices are said to be going up)
- distillate fuel inventories rose by 2.2 million bbls
- refineries operating at 95.4% capacity -- a huge jump from the recent 91% to 93%; despite that,gasoline production DECREASED last week, slightly under the "benchmark" of 10 million bbl/day
- distillate fuel production INCREASED slightly last week, slightly over the "benchmark" of 5 million bbl/day
Following the report, WTI dropped ten cents to $65.42/bbl.
WTI/RBOB Tumble After Biggest US Inventory Build Since 2008 - WTI/RBOB are trading lower - near two-month lows - after API reported a big gasoline build overnight (but crude draw), as traders anticipate EIA's confirmation (or denial as in the case of last week). However, a big surprise crude build (and gasoline build) sent prices notably lower, along with production hitting a new record high. Inventories DOE:
- Crude +2.072mm (-2.1mm exp)
- Cushing -955k (-500k exp)
- Gasoline +4.603mm - biggest build since Dec 2017
- Distillates +2.165mm - biggest build since Feb 1018
Once again API was completely wrong on crude's inventory data. A big surprise crude build - along with major builds in gasoline and distillates - was a big shock for traders. However, this is the 3rd weekly decline in Cushing stocks. Total petroleum supplies soared 15.8 million barrels last week, the biggest weekly gain since October 2008. Crude exports were expected to remain high since the Brent/WTI spread is so wide... Bloomberg Intelligence Senior Energy Analyst Vince Piazza notes that crude oil differentials blowing out to more than $9 a barrel vs. Brent drive the near-term narrative as summer driving season kicks into gear. Strong domestic production estimated above 10.7 million barrels a day is balanced against a tighter oil complex with elevated exports and refining demand. However, Exports fell sharply, possibly reflecting protests against high fuel prices in Latin America... Production rose once again to a new record high...+31k b/d to 10.8mm b/d... But, interestingly, Bloomberg notes that booming production in the Permian has outpaced pipeline capacity, causing the spread between WTI Midland and Houston to blowout beyond $20 a barrel last week. Gulf Coast refinery runs and exports coupled with the production number will determine if the discount for Midland crude to Houston continues to widen.
Crude Oil Prices Settle 1.2% Lower on Surprise Increase in U.S. Supplies – WTI crude oil prices settled 1.2% lower on data showing a surprise build in U.S. crude supplies and an ongoing expansion in U.S. output to a record. On the New York Mercantile Exchange crude futures for July delivery fell 1.21% to settle at $64.73 a barrel, while on London's Intercontinental Exchange, Brent fell 0.01% to trade at $75.36 a barrel. Inventories of U.S. crude rose by 2.072 million barrels for the week ended June 1, confounding expectations for a draw of 2.000 million barrels, according to data from the Energy Information Administration (EIA). The unexpected rise in crude supplies emerged as exports fell - despite the widening spread between WTI crude and Brent oil prices – and imports rose sharply. Crude imports rose 715,000 barrels per day (bpd) last week to 8.3 million barrels per day (bpd), while exports fell 500,000 bpd to 1.7 million bpd. A 1.5% uptick in refinery activity, however, limited the size of the build in crude inventories yet product supplies rose sharply. Gasoline inventories – one of the products that crude is refined into – rose by 4.603 million barrels, missing expectations for an increase of just 0.587 million barrels, while supplies of distillate – the class of fuels that includes diesel and heating oil – rose by 2.165 million barrels, missing expectations for a build of 0.784 million barrels. The sharp builds in product stockpiles come as total petroleum product supplied sank to 18.5 million barrels a day, the lowest since Dec. 2016, according to Bloomberg. U.S. oil output, meanwhile, continued its expansion rising to a record 10.8 million bpd, according to preliminary EIA data. Sentiment on oil prices has sourced in recent weeks on expectations OPEC and its allies would ease production cuts to curb falling supplies from Venezuela and Iran, slowing the pace of rebalancing in oil markets. Those fears were exacerbated Tuesday following a report the U.S. government had asked Saudi Arabia and other OPEC members to increase oil output by around 1 million barrels a day.
Oil bounces back, settles higher on Iran, Venezuela output woes - Oil futures finished Thursday’s session sharply higher and the energy complex broadly rose, as traders fretted over a looming supply outage in Iran and falling output in Venezuela. “The looming supply outages in Iran and the increasing outages in Venezuela explain why prices recovered quickly again,” wrote commodity analysts led by Eugen Weinberg at Commerzbank in Frankfurt, in a Thursday note. They noted that several European oil companies have announced plans to withdraw from their businesses in Iran due to the risk of U.S. sanctions, while Reuters data shows that Venezuela is behind in its shipments to customers by almost a month. U.S. benchmark West Texas Intermediate crude for July delivery rose $1.22, or 1.9%, to settle at $65.95 a barrel on the New York Mercantile Exchange. August Brent crude, the global benchmark, gained $1.96 or 2.6%, at $77.32 a barrel on the ICE Futures Europe exchange. Venezuela is “nearly a month behind delivering its crude to customers due to falling output and congestion in its key oil ports,” said analysts at ICICI Bank in a daily note. “This was exacerbated after ConocoPhillips seized assets [last month] in the Caribbean port of Venezuela, which is hindering the ability to load cargoes and deal with its customers.” WTI oil prices had notched a two-month low Wednesday after the U.S. Energy Information Administration said crude supplies climbed by 2.1 million barrels in the week ended June 1, versus expectations for a decline of more than 1 million barrels. Concerns about excess U.S. supply have allowed the spread between WTI and Brent to widen, leaving the U.S. discount to the global benchmark near $11 a barrel. Globally, oil prices have been pressured by speculation the Organization of the Petroleum Exporting Countries and its allies will move to boost production in an effort to make up some of the lost Iranian and Venezuelan output.
Oil Falls On OPEC Uncertainty - Oil prices seesawed this week, dipping on expectations of more supply from OPEC+, but rebounding on news of deeper troubles in Venezuela. Trading will likely be choppy over the next two weeks until the market gets some clarity from the Vienna meeting. President Trump has done severe damage to the U.S.’ relationship with its closest allies, and the other six countries attending the G7 Summit today in Quebec are prepared to issue a statement denouncing Washington’s policies. Trade tariffs, among other issues, have isolated President Trump, although he doesn’t seem to mind. The White House said he would leave the G7 Summit early, before any official statements are issued. The fraying ties mean there is little sign of a solution to the trade fights on the horizon. Trump’s 25 percent steel tariffs on Canada, Mexico and the European Union could drive up the cost of oil production in the U.S. shale patch if the industry is not granted exemptions. Also, oil and gas pipeline construction relies on specialty steel, about 75 percent of which comes from outside the United States. Steel makes up 10 to 20 percent of the cost of drilling a shale well, and half of the steel for drilling is imported. The tariffs are already having an impact – U.S. steel prices are up 20 percent since February. The U.S. reportedly asked Saudi Arabia for higher oil production to offset Iranian outages, a request that was made before the U.S. withdrawal from the Iran nuclear deal. The apparent sudden shift in the Saudi position shortly after the conversation has angered a lot of OPEC members. “It’s crazy and astonishing to see instruction coming from Washington to Saudi to act and replace a shortfall of Iran’s export due to their Illegal sanction on Iran and Venezuela,” Iran’s OPEC governor, Hossein Kazempour Ardebili, told Reuters. “OPEC will not accept such a humiliation. How arrogant and ignorant one could be (to) underestimate the history of 60 years’ cooperation among competitors,” he said. The comments raise the possibility of a contentious meeting in Vienna. Venezuela wrote to OPEC members, issuing a call to denounce U.S. sanctions.
Baker Hughes: US rig count climbs 2 units to 1,062 - The US drilling rig count reached 1,062 units working, up 2 rigs the week ended June 8, according to Baker Hughes data. The count is up 135 units from this time a year ago when the count stood at 927. Offshore units were up 1 unit from last week with 20 rigs working. A total of 1,039 rigs were drilling on land, unchanged from last week. The number of rigs drilling in inland waters was up 1 unit to 3 working. US oil-directed rigs were up 1 unit this week to 862 and also up from the 741 rigs drilling for oil this week a year ago. Gas-directed rigs gained 1 unit and now total 198. This time a year ago, 185 units were drilling for gas. Among the major oil and gas-producing states, Texas was up 3 units to 538. Colorado was up 2 units to 34. Louisiana reached 59 units, up 1. Eight states were unchanged this week, namely New Mexico, 90; Pennsylvania, 39; Ohio, 23; West Virginia, 18; California, 15; Alaska, 9; Utah, 8; and Arkansas, 1. North Dakota, at 54, was down 1 rig and Wyoming, at 25, was down 2 rigs. Canada gained 13 rigs to 112 working from a week ago. This week a year ago, 132 rigs were drilling. Oil-directed rigs increased 13 units this week to 69, while those targeting gas were unchanged at 43.
US Rig Count Creeps Higher Amid Record Oil Production --U.S. drillers added 2 rigs to the number of oil and gas rigs this week, according to Baker Hughes, with oil and gas rigs each increasing by 1. The oil and gas rig count now stands at 1,062—up 135 from this time last year. The Permian basin saw the biggest increase in the number of rigs, at 3. The prolific basin now boasts 112 rigs year over year at 480 total rigs. The second largest basin, Eagle Ford, has 80 total rigs—a decrease year over year.Canada, for its part, gained 13 oil rigs for the week—after last week’s gain of 18 oil and gas rigs. Despite two weeks of significant gains, Canada’s oil and gas rig count is still down year over year.Oil benchmarks were trading down on Friday, despite Venezuela’s freefalling oil production and export woes that has created a backlog of 24 million barrels in the country, combined with the threat of even more crude oil export disruptions in Iran as US sanctions set in in the coming months.At 1:00pm EST, WTI was trading down 0.44% (-$0.29) to $65.66, with Brent down 0.92% (-$0.71) to $76.61. Brent crude is trading at nearly the same level as this time last week, but the WTI benchmark is trading almost $1 lower than last week levels. U.S. oil production continues putting downward pressure on oil prices, and for the week ending June 01, production reached 10.800 million bpd—the fifteenth build in as many weeks. U.S. production continues to offset OPEC’s production cut efforts that took 1.8 million barrels out of play.At 14 minutes after the hour, WTI was trading down 0.50% at $65.62, with Brent trading down 1.01% at $76.54.
Oil Prices Edge Lower After Recent Rally -- Oil prices edged lower Friday, giving up some ground as investors continued to bet on increased supply despite concerns over output from Venezuela and Iran. Light, sweet crude for July delivery fell 0.3% to $65.74 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell 1.1% to $76.46. On Friday afternoon, Saudi Arabia said it has started increasing crude production ahead of a June meeting to assess whether to ease caps on output among major exporters. Oil futures were little changed in electronic trade following the announcement. Traders have been anticipating a ramp up in crude supply from the Organization of the Petroleum Exporting Countries, following comments from Saudi Arabia and Russia in May that the countries were open to adding supply to the market, after more than a year of measured controls. Prices traded slightly higher earlier in the session, on uncertainty over supply disruptions elsewhere. The economic crisis in Venezuela is curtailing the country’s oil production, while the planned reinstatement of U.S. sanctions against Iran is expected to hit production from the third-largest member of the Organization of the Petroleum Exporting Countries.“If you take the expected decline for Venezuela and then Iran, you want to be 800,000 to 1 million barrels a day lower by year-end,” Analysts said that while U.S. shale is driving global oil-production growth, it wasn’t enough to offset supply issues elsewhere. The U.S. Energy Information Administration forecasts the country’s production will rise to 10.7 million barrels a day on average in 2018, up from 9.4 million barrels a day last year. This leaves OPEC members, along with Russia, to potentially plug any gap. OPEC and its allies are meeting later in June to discuss the outlook for their deal to cut supplies, currently due to expire at the end of the year. Saudi Arabia has the largest spare production capacity of any oil exporter globally.
US crude dips 21 cents, settling at $65.74, as China demand dips, JP Morgan cuts price forecast --Oil prices fell on Friday, extending losses as JP Morgan cut its crude price forecast, after already weakening on concerns about surging U.S. output weighed and falling demand in China. U.S. West Texas Intermediate (WTI) crude futures ended the session down 21 cents at $65.74. The contract fell slightly on the week, marking its third straight loss over a five-day period. Brent crude futures were down 87 cents, or 1.1 percent, at $76.45 per barrel at 2:29 p.m. ET, on pace for a slight weekly increase. "It's all about the JP Morgan report," said Bob Yawger, director of energy futures at Mizuho in New York. JP Morgan cut its 2018 crude forecast for WTI by $3 to $62.20 a barrel, traders said. The bank did not immediately respond to a request for the report. Crude prices were down slightly earlier in the session after data suggested Chinese demand was waning and concerns lingered about growing U.S. output. China's May crude oil imports eased away from a record high hit the month before, customs data showed on Friday, with state-run refineries entering planned maintenance. May shipments were 39.05 million tonnes, or 9.2 million barrels per day (bpd). That compared with 9.6 million bpd in April. Further weighing on prices has been surging U.S. output, which hit another record last week at 10.8 million bpd. That's a 28 percent gain in two years. It puts the United States close to becoming the world's biggest crude producer, edging nearer to the 11 million bpd churned out by Russia. The surge in U.S. production has pulled down WTI into a discount versus Brent of more than $11 per barrel, its steepest since 2015. "This is occurring because of the rapid increase in production from U.S. shale coupled with the tightening of supplies elsewhere through the actions of OPEC and Russia," said William O'Loughlin, investment analyst at Australia's Rivkin Securities. U.S. energy companies added oil rigs for a third week in a row even though crude prices have declined about 8 percent over the past three weeks.
Oil demand could keep growing until 2050 in conflict-ridden world: Equinor (Reuters) - Global oil demand could peak in the early 2020s if countries pull together to hit climate goals, or keep growing until 2050 in a conflict-ridden world, according to Norwegian oil and gas firm Equinor. Expectations for when oil demand will peak could change the supply dynamics, as investors weigh up whether to back long-term projects or to reduce their risks by focusing on investments with more rapid returns, such as shale oil, it said. “An oil market in potential decline increases the uncertainty the producers face, reduces their investment horizon, and increases the focus on short payback periods for investments,” Equinor said in its new energy outlook. Equinor, formerly known as Statoil, changed its name on May 15 to reflect its strategy of becoming a “broad energy” company. Oil demand in 2050 varies between 59 million and 122 million barrels per day (bpd) in its three scenarios called Renewal, Reform and Rivalry, compared with 97.8 million bpd in 2017. The Renewal scenario is consistent with the goal of the Paris climate agreement to limit a rise in the world’s average surface temperatures to below 2 degrees Celsius above pre-industrial times. The Reform scenario, based on a continuation of existing policy and technology trends, sees oil demand peaking at 111 million bpd around 2030, and declining to 105 million bpd in 2050. The geopolitical backdrop in Rivalry is “a fluid, volatile and conflict-ridden world”, where a lack of trust prevents countries from addressing climate change effectively. “The value proposition of democracy declines, with many parts of the world now ruled by dictators and autocrats, some of whom are intent on exporting their authoritarian political models. Other issues than climate dominate the energy policy agendas,” Equinor said of this scenario.
Israel’s Netanyahu tours Europe to advocate action against Iran --Israeli Prime Minister Benyamin Netanyahu completed a tour of three major European capitals—Berlin, Paris and London—to push for an all-out offensive against Iran.His message to Chancellor Angela Merkel, President Emmanuel Macron and Prime Minister Theresa May was that the nuclear deal with Iran is effectively dead and buried, and that the task now is to oppose Iranian influence in Syria and throughout the Middle East. Netanyahu spoke with the full backing of Washington. His visit takes place just weeks after President Donald Trump unilaterally withdrew from the Iran nuclear accord signed in July 2015 by the US, Germany, France, Britain, Russia and China. The US not only announced that it would re-impose crippling economic sanctions on Iran and introduce further unspecified sanctions, but also demanded that the European Union (EU) sever its trade relations with Iran— worth $25 billion in 2017—or face secondary sanctions, making it clear that the EU was no less a target than Iran. The European powers are furious because Trump’s moves cut across their attempts to exploit Iran economically. They fear that the move presages a war with Iran that would destabilise the entire Middle East and lead to soaring oil prices and a further mass influx of refugees. They have called for the treaty to be preserved and vowed to defend their business interests. US-EU tensions are already growing over US demands that the European powers increase their military spending, its pull-out from the climate agreement, the imposition of tariffs against EU steel and aluminium and its threats to impose a 35 percent tariff on the import of European cars.However, their position is weak, faced with a globally linked economy tied to dollar-denominated trade and investment—and both they and Netanyahu know it. Major European companies have already started curtailing their activities in Iran, while the European Investment Bank has baulked at EU proposals that it should support investment by European firms.
Iran: Oil Prices Could Jump To $140 On US Sanctions --Oil prices could jump to $140 a barrel due to the U.S. sanctions against Iran and Venezuela, Iran’s OPEC governor Hossein Kazempour Ardebili told Reuters on Friday.The Iranian official also criticized a reported request that the United States made of Saudi Arabia to help stabilize oil prices in case the sanctions against Iran drives oil prices up.A day before U.S. President Donald Trump pulled the United States out of the Iran nuclear deal, a senior official of the Trump Administration phoned Saudi Arabia to ask it to help keep oil prices stable should the U.S. decision on Iran disrupt oil supply, Reuters reported yesterday.Earlier this week, Bloomberg reported that the United States had quietly asked Saudi Arabia and several other OPEC nations to raise oil production by some 1 million bpd.Commenting on the U.S. request to Saudi Arabia, Iran’s Kazempour told Reuters:“It’s crazy and astonishing to see instruction coming from Washington to Saudi to act and replace a shortfall of Iran’s export due to their Illegal sanction on Iran and Venezuela.” “No one in OPEC will act against two of its founder members,” he said. “The U.S. tried it last time against Iran, but oil prices got to $140 a barrel.”According to the Iranian official, OPEC will not accept the U.S. request because “OPEC will not accept such a humiliation. How arrogant and ignorant one could be (to) underestimate the history of 60 years’ cooperation among competitors.” Iran and Venezuela have separately pleaded over the past week to their fellow OPEC members for support and solidarity against the U.S. sanctions. Iran and Venezuela are currently the two key oil supply concerns globally that supported the oil price rally in recent weeks, before Saudi Arabia and Russia hinted at discussions that they were considering reversing some of the cuts to offset production losses and “ease market and consumer anxiety.”
Iran Moves to Lift Its Nuclear Enrichment Capacity — Iran announced on Tuesday that it had completed a new centrifuge assembly center at the Natanz nuclear site, in a first step to increasing its enrichment capacity. While Iran said it would keep enrichment within limits set by the 2015 nuclear accord, the center’s opening seemed to signal that it could swing to industrial-level enrichment if that agreement, which the United States withdrew from last month, should further unravel. The head of the Atomic Energy Organization of Iran, Ali Akbar Salehi, told state television that the center’s construction had been “in line with our safeguard commitments but not publicly announced.” A spokesman for the Iranian nuclear agency, Behrouz Kamalvandi, said a letter had been sent to the International Atomic Energy Agency explaining the action. He also told the semiofficial Iranian Students’ News Agency that Tehran would increase its capacity to produce uranium hexafluoride, a feedstock for centrifuges. It was unclear whether the assembly center would actually begin to produce new centrifuges. Under the 2015 nuclear deal, Iran stopped enriching uranium to the 20 percent level that would allow for rapid development of a nuclear weapon and agreed to a limit of under 5 percent. It will adhere to that limit, Iran’s supreme leader, Ayatollah Ali Khamenei, said in a speech on Monday. It was also uncertain whether the opening of the centrifuge plant would have any significant impact on Iran’s nuclear program, which continues to be closely monitored by the International Atomic Energy Agency.
China hosts summit with Russia, Iran as nuclear deal wobbles - Iran, China and Russia may seek ways to salvage the nuclear deal ditched by Donald Trump when their leaders meet this weekend at a summit on the Chinese coast.The Shanghai Cooperation Organisation (SCO), a regional security bloc led by China and Russia, is set to hold its 18th annual gathering in the city of Qingdao on Saturday and Sunday. Iran's President Hassan Rouhani is attending this year -- just the second time an Iranian leader has participated. It comes after US President Trump controversially pulled Washington out of a 2015 international pact with Iran that placed limits on its nuclear programme in return for easing economic sanctions.China is Iran's top trade partner and one of the biggest buyers of its oil, but those who oppose the US abandonment of the deal risk huge fines for busting the tough American measures. Rouhani is taking part because "Iran is currently evaluating the signatories of the nuclear deal to see to what extent they'll be able to effectively maintain it even after the US's withdrawal", said Gao Shangtao, an expert on Middle East relations at Beijing Foreign Affairs College. "To put it bluntly, if Tehran feels assured that China and Russia can withstand the pressure of US sanctions and continue to do business with Iran, then Tehran will seek to retain the deal -- otherwise, it's meaningless," he said.
Saudi Arabia Detains 17 in Sweeping Crackdown - Saudi Arabia on Saturday said it detained 17 people for "undermining" the kingdom's security, in what campaigners have dubbed a sweeping crackdown against activists just weeks before a ban on women driving ends. Rights groups earlier reported arrests of at least 11 people in May, mostly identified as women campaigners for the right to drive and to end the conservative Islamic country's male guardianship system. Without naming anyone, the public prosecutor's office said the number of detainees stood at 17, adding that eight of them had been "temporarily released" until the investigation is completed. Nine suspects, including four women, remain in custody after they "confessed" to a slew of charges such as suspicious contact with "hostile" organisations and recruiting people in sensitive government positions, it said in a statement released by the Saudi Press Agency. The statement accused the detainees of "coordinated activity undermining the security and stability of the kingdom". Previous reports in state-backed media branded some of the detainees traitors and "agents of embassies". Campaigners have dismissed the reports as a "smear" campaign. The crackdown has also sparked a torrent of global criticism, casting a shadow on the kingdom's much-publicised liberalisation push launched by powerful Crown Prince Mohammed bin Salman.
'An enormous, long-standing Ponzi scheme': A court rules that a Saudi business empire was complicit in defrauding more than 100 banks - A court ruled that a giant Saudi-Arabian business empire was complicit in defrauding more than 100 banks, in what liquidators called "the largest Ponzi scheme the world has ever seen."A Cayman Islands court ruled the collapse of family owned Saudi conglomerate, Ahmad Hamad Algosaibi & Brothers (AHAB) in 2009, was the result of a $6 billion fraud from within, with the judge labeling the scheme a "cauldron of corruption."This case began in July 2016 and produced a 1,348 page verdict, the Cayman Compass reported.Partners at family firm AHAB brought claims against Maan Al Sanea, who married into the family and managed its financial empire. Al Sanea was accused of committing fraud which crippled the company. AHAB said he forged documents to borrow billions of dollars of unauthorised debt and transferred much of it to accounts in the Cayman Islands. The Saudi company also made claims against Al Sanea's liquidators in an attempt to reclaim the wealth. While the judge found that Al Sanea had indeed falsified accounts and committed fraud to enrich himself, he ruled that he had done so with full knowledge of the AHAB partners who were the "primary architects" of the scheme. The judge said that the partners were willing to accept Al Sanea's borrowing activities as "quid pro quo" for running the corrupt Money Exchange which was used as a fraudulent vehicle to allow the Saudi partners to enrich themselves.
GCC crisis, one year on: What’s the impact on Gulf economies? - A year ago, the four Arab states of Saudi Arabia, the United Arab Emirates, Bahrain and Egypt imposed a full land, sea and air blockade on Qatar. Since then, the richest country in the world per person, was forced to tap into its sovereign wealth fund and do everything it could to shore up its economy, banking system and currency. And those efforts have been paying off.Earlier this year, Qatar raised $12bn in a bond issue, which showed that despite the rift with its Gulf neighbours, international investors still feel confident betting on Qatar's future growth.The peninsula is reshaping supply lines and developing domestic goods while pushing ahead with its $200bn infrastructure plan. The world's largest exporter of liquefied natural gas (LNG) is also busy forging new long-term supply deals. Qatar is in a much better position right now. It seems that the economic cost of the blockade, or the crisis, has been limited. The government has managed to intervene in certain sectors, it has managed to provide some guarantees and the central bank has provided much-needed liquidity.Qatar [is] not really in an isolated position internationally, and that's a function of both the importance of the gas reserves and gas exports but also the financial cushion that Qatar has through its sovereign wealth fund, the Qatar Investment Authority. It's in a much better situation today. It is contained, but it's far from ideal because obviously the position of Qatar, its geography, its trade links. So this is far from a preference, but I think one year after the beginning of the Qatar crisis with the other GCC members, the economy is not crashing and Qatar seems to have adjusted to what is a very challenging situation.
Qatar Won the Saudi Blockade - A year ago Tuesday, a coalition of Arab countries led by Saudi Arabia imposed a historic land, maritime, and air blockade on Qatar. The measures were designed to strong-arm Doha to comply with a list of demands that involved alleged support for Islamic extremists throughout the Middle East, including within the four countries — Bahrain, Egypt, the United Arab Emirates, and Saudi Arabia — that later became known as the anti-Qatar quartet.The quartet received added momentum one day after the start of the blockade from U.S. President Donald Trump, who tweeted: “So good to see the Saudi Arabia visit with the King and 50 countries already paying off. They said they would take a hard line on funding … extremism, and all reference was pointing to Qatar. Perhaps this will be the beginning of the end to the horror of terrorism!” A year on, however, Qatar has not only weathered the storm — it also appears to have emerged as the main winner of the conflict. The anti-Qatar quartet failed in its mission of forcing Qatar to accept its 13 demands, which included shutting down Al Jazeera and other media outlets said to be funded by Doha, and to cease support for various regional Islamist groups, ostensibly both Sunni and Shiite. Rather than convincing commentators and politicians in the West that Qatar had serious problems it needed to address, the effect has largely been the opposite. In large part, that’s because the quartet failed to anticipate Qatar would organize an effective public relations campaign of its own in the West.
Saudi Arabia warns of military action if Qatar gets Russian missiles - Saudi Arabia has threatened military action against Qatar if it goes ahead and acquires Russia’s top of the range S-400 air defence missile system, Le Monde daily reported. Citing information it had obtained, Le Monde said that Riyadh had written to French President Emmanuel Macron asking him to intervene to prevent the deal going ahead and to help preserve regional stability. There was no immediate official reaction from the president’s office or the French foreign ministry to the report. Saudi Arabia, backed by other regional powers including Bahrain and the Unite Arab Emirates, broke off relations with Qatar in June last year, accusing the Gulf state of supporting radical Islamist groups and of being too close to Iran — Riyadh’s arch rival in the region. They subsequently imposed economic sanctions on Qatar which has consistently rejected the charges against it. In an effort to ease its isolation, Qatar has sought new friends, including Russia.
UN Warns 10 Million More Yemenis Expected To Starve To Death By End Of Year - During a briefing last Friday, the UN warned that millions more Yemeni civilians are expected to starve to death before year’s end as a result of a blockade imposed on the country by the Saudi Arabia-led coalition. The Saudis’ unsuccessful bid to quash the Houthi-led resistance movement against Western and Saudi imperialism in Yemen has already claimed the lives of thousands of civilians and transformed the country into the world’s worst humanitarian crisis since the war began in 2015. Mark Lowcock, the UN’s emergency relief coordinator, expressed his concern regarding the “recent decline of commercial food imports through the Red Sea ports” — adding that, if conditions do not improve, the number of Yemenis at the brink of starvation would rise from the current figure of 8.4 million to 18.4 million by this December. Given that there are approximately 28 million people in Yemen, a continuation of the Saudi-led blockade would mean that nearly two-thirds of the entire country’s population will soon face starvation. The UN’s dire warning regarding the situation in Yemen, undoubtedly the worst humanitarian crisis in the world, comes just as the Saudi-led coalition, with support from the United States and the United Kingdom, is preparing for an assault on the key Yemeni port of Hodeidah. On Monday, a coalition spokesman announced that its forces were within 20 km from the Houthi-held port, which has long been a key coalition target. The UN and other groups have long warned that any assault on Hodeidah would drastically worsen the crisis and greatly increase the number of Yemenis facing starvation.
The Yemeni Holocaust -- We often ask, what would we do if there was another Holocaust? Surely we would do something? Surely, at least, we would not be complicit?The question might have been answered in Rwanda, where the UN commander begged the UN for orders to intervene, orders which never came. The general, Romeo Dallaire, has spent the rest of his life curled around his failure to act despite orders. Meanwhile, we have the blockade of Yemen, which despite claims, continues: Mark Lowcock, the UN’s emergency relief coordinator, expressed his concern regarding the “recent decline of commercial food imports through the Red Sea ports” — adding that, if conditions do not improve, the number of Yemenis at the brink of starvation would rise from the current figure of 8.4 million to 18.4 million by this December. Given that there are approximately 28 million people in Yemen, a continuation of the Saudi-led blockade would mean that nearly two-thirds of the entire country’s population will soon face starvation.Not sure how many of those who face starvation will starve to death, rather than simply sit on the edge of death, but millions of lives are at risk, this is deliberate, it is happening in slow motion, and the rest of the world is doing nothing.Well, if they aren’t helping the mass murder, like America (and America was helping under Obama, so no, this isn’t a partisan issue.)America could stop Saudi Arabia cold if it wanted to; and it certainly could at least not participate. But, of course, we all know that in the run up to World War II no one cared what was happening to the Jews: we refused to let in Jewish refugee ships, after all. If all Hitler had done was the Holocaust, no one would have gone to war with him over that.
Washington considers direct intervention in siege of Yemeni port city -- In what would constitute a major escalation of the US role in the near-genocidal war waged over the last three years by Saudi Arabia and the United Arab Emirates (UAE) against Yemen, US officials were in discussions yesterday on the Pentagon taking a direct role in the siege of the country’s Red Sea port city of Hodeidah. Saudi and UAE-led forces came within 10 km of Hodeidah on Monday, having pushed north up Yemen’s western coast with the aid of relentless air strikes against Houthi rebel forces, which control the city as well as the country’s northwestern provinces, including the capital of Sana’a, which is 230 miles to the north. The Wall Street Journal Monday cited US officials reporting that “The Trump administration is weighing an appeal from the United Arab Emirates for direct US support to seize Yemen’s main port. ...” Secretary of State Mike Pompeo, a strong proponent of global US military intervention, has asked American officials to come up with a “quick assessment” of the prospects for a direct US military role in the siege of Hodeidah. The Journal report cited one official raising doubts that the US-backed forces “would be able to do it cleanly and avoid a catastrophic incident.” Another senior American official, however, told the Journal: “We have folks who are frustrated and ready to say: ‘Let’s do this. We’ve been flirting with this for a long time. Something needs to change the dynamic, and if we help the Emiratis do it better, this could be good.’ ” A battle for control of Hodeidah poses a direct threat to the city’s civilian population of 400,000, with the potential of a Saudi blitzkrieg combined with a direct US intervention recreating the kind of mass slaughter unleashed by the Pentagon in Mosul, Iraq and Raqqa, Syria. More broadly, such a siege threatens the lives of millions of Yemenis in the Houthi-controlled highlands, for whom Hodeidah is the sole aid lifeline in a country historically reliant on imports for 90 percent of its food.
Amnesty International report finds US guilty of war crimes in Syria - The US carried out war crimes in its four-month-long siege of the Syrian city of Raqqa last year, according to evidence gathered by Amnesty International and released in a report by the human rights group on Tuesday.The report takes its title, “War of Annihilation,” from the description given by Defense Secretary James Mattis of the tactics that would be pursued in taking the city from the Islamic State of Iraq and Syria (ISIS). The report concludes that “the impact on civilians was devastating.” “There is strong evidence that [US] coalition air and artillery strikes killed and injured thousands of civilians, including in disproportionate or indiscriminate attacks that violated international humanitarian law and are potential war crimes,” Amnesty International declared. While the Pentagon utilized proxy ground troops in the siege, organized in the so-called Syrian Democratic Forces (SDF), comprised almost entirely of members of the Syrian Kurdish YPG militia, their advance was made possible only through a relentless bombardment by US warplanes and artillery units.The Amnesty report quotes US Army Sergeant Major John Wayne Troxell, who declared: “In five months they [US Marines] fired 30,000 artillery rounds on ISIS targets. … They fired more rounds in five months in Raqqa, Syria, than any other Marine or Army battalion, since the Vietnam War. … Every minute of every hour we were putting some kind of fire on ISIS in Raqqa, whether it was mortars, artillery, rockets, Hellfires, armed drones, you name it.” Using satellite imagery and eyewitness testimony, the report decisively refutes the claim by the top US commander in the operation, General Stephen Townsend, that the US offensive on Raqqa had been “the most precise air campaign in history.” . “On the ground in Raqqa we witnessed a level of destruction comparable to anything we’ve seen in decades of covering the impact of wars.”
Syria: 'Russian' warplanes bomb rebel-held Idlib, dozens dead - Air attacks believed to have been carried out by Russia on a village in Syria's rebel-held Idlib province killed at least 44 people overnight, inflicting the highest death toll in a single attack on the region this year, a monitoring group said on Friday."Warplanes, which are likely Russian, targeted the village of Zardana in northern rural Idlib overnight and caused the highest death toll in a single attack on the region including 11 women and six children," Rami Abdulrahman, the director of the group, said. Russia's defence ministry, however, denied that it carried out the deadly air strikes, according to Russian news agencies. More than 60 people were also injured in the attacks that took place in the village of Zardana, said the Britain-based watchdog adding that the attack occurred after Muslims broke their Ramadan fast after sunset.The death toll is expected to increase as some of those injured in the attacks were in a critical condition, Abdulrahman said.The White Helmets rescue group said the air raids had targeted a market near a mosque in Zardana, according to the Reuters news agency.Rescue workers were still searching under the rubble for survivors.
UAE buying Jerusalem properties on behalf of Israel - A Palestinian businessman who is affiliated with former Fatah leader Mohammed Dahlan is planning to buy real estate in the Old City of Jerusalem on behalf of the UAE which is helping the occupation expand its illegal settlements, the deputy head of the Islamic Movement in Israel, Sheikh Kamal Khatib, warned yesterday. Khatib posted on Facebook that “an Emirati businessman very close to the Crown Prince of Abu Dhabi, Mohammed Bin Zayed, is planning to buy houses and properties adjacent to Al-Aqsa Mosque in particular, with the help of a Jerusalemite businessman who works for Dahlan.” “They offered a resident of Jerusalem $ 5 million to buy his house which is adjacent to Al-Aqsa Mosque. When he refused, they raised the offer to $20 million, but the attempt to lure him was unsuccessful.” Khatib warned that these moves as similar to those which took place in 2014 when “Bin Zayed’s regime” purchased houses for settlement institutions in the Silwan and Wadi Hilwa areas in occupied Jerusalem. He added: “Under these dangerous circumstances, we advise our honourable people in Jerusalem not to deal with any attempt to sell homes or real estate to any party and under any cover … Rulers of the Emirates are a cancer destroying the body of the Ummah.”
Israeli troops open fire on Gaza protesters as Middle East marks anti-Israel Al-Quds Day - Friday's anti-Israeli Al-Quds Day demonstrations turned violent along the Gaza border, as Israeli soldiers opened fire on Palestinian protesters. More than 600 Palestinians were reportedly wounded as protesters came under Israeli gunfire as they headed to the Gaza fence. According to Gaza's Health Ministry, at least four Palestinians were killed, including a 15-year-old. The demonstrations in Gaza were organized by Hamas, the Islamic militant group ruling the blockaded Palestinian enclave. Gaza residents were urged to head to the perimeter fence on the Israeli border after noon prayers. The call was issued through mosques and loudspeakers mounted on cars that toured Gaza neighborhoods. Several protesting Palestinians also donned uniforms similar to those worn by Jewish prisoners in World War Two. Ahmed Abu Artima told the AP news agency: "We want to remind the world that the Israeli occupation is committing the same massacres that the Nazis committed."
Jordan sees largest anti-government protests in years - Al Jazeera - Hundreds of Jordanians took to the streets of the capital Amman on Sunday in a fourth day of nightly protests against IMF-backed price increases that have shaken the kingdom. Demonstrators who converged near the cabinet office chanted slogans calling for the sacking of Prime Minister Hani Mulki, vowing they would only disband if the government rescinded a tax bill it sent to parliament last month, which critics say worsens living standards. "We are here until we bring the downfall of the bill... This government is shameful," demonstrators chanted as police prevented them from approaching the heavily guarded government offices. "Our demands are legitimate. No, no to corruption," they yelled, urging King Abdullah II, who is seen as a unifying force, to intervene and crack down on official graft. About 3,000 people faced down a heavy security presence to gather near the prime minister's office in Amman in the early hours of Sunday, waving Jordanian flags and signs reading "we will not kneel". Protests have gripped the country since Wednesday when hundreds responding to a call by trade unions, flooded the streets of Amman and other cities to demand the fall of the government. "Women have started looking in rubbish bins to find food for their children, and every day we're hit by price hikes and new taxes," said one protester. Bank employee Mohammad Shalabiya, 28, said demonstrators wanted "to tell the government that the citizen's income isn't suitable for this kind of law and that we have a right to demonstrate".
Jordan’s prime minister resigns amid massive protests against IMF-dictated austerity -- Jordan’s Prime Minister Hani Mulki resigned yesterday following days of anti-government protests in Amman and other major cities. The protests were against a new law lowering the income tax threshold, a hike in the sales tax, and increases in the cost of fuel, electricity and water. King Abdullah, the country’s real ruler, cancelled his planned overseas trip and appointed education minister Omar al-Razzaz, a former World Bank economist, in Mulki’s place. The king’s move follows the failure of his announcement last Friday suspending price increases until the end of the year—at a cost of $22.5 million—to assuage popular anger.On Saturday, he called on parliament to lead a “comprehensive and reasonable national dialogue” on the new tax law, saying, “It would not be fair that the citizen alone bears the burden of financial reforms.”Petra, one of Jordan’s news agencies, reported that legislators were set to ask Abdullah’s permission to hold an exceptional session to withdraw the changes.Last Wednesday, 33 unions called a general strike of health care and public-sector workers—Abdullah’s key and very narrow social base—along with small towns, villages and tribal areas where the clans and indigenous minority East Bankers live. This was to protest legislative proposals aimed at increasing the proportion of income tax payers from 4.5 percent to 10 percent. The average wage, such as a teacher’s salary, is around $350 a month, or less than $5,000 a year. This will hit families hard, because Jordan is a low-wage economy, where the median age is 22 years and it is the norm for young people to live at home with their parents until they can afford to marry. Many work at two or three jobs, if they can find them in a country with an official unemployment rate of 18 percent, a gross underestimate.
Jordanians vow to continue protests, demand 'new approach’ - Jordanians have vowed to continue protesting after the resignation of the country's prime minister, broadening their demands to include a complete overhaul of the government's system and approach. The protests began last week amid anger over an income tax reform bill and price increases. Prime Minister Hani al-Mulki resigned on Monday, a move seen by many as an attempt by the kingdom to defuse the outrage over the economic policies. But protesters are expected to again take to the streets later on Monday for the fifth consecutive day, demonstrators and organisers say, calling for a "new approach" to how the government operates. "We're going to send the government a new message today," Odai Nofal, who hails from the province of Zarqa, told Al Jazeera."That power lies with the people, that the government needs to be cautious when dealing with its citizens from now on," the 28-year-old said. "If they want to resolve the country's economic crisis, they should place more of the burden on established corporations rather than their people."