oil in deep backwardation; natural gas supplies 20% below normal, oil supplies at lowest in 41 months, record DUCs..

while US oil prices were down from last week's final quote for the 4th week in a row, the current front month oil contract managed to eke out a small increase over this past week...as the expiring US crude contract for August ended last week down 55 cents at $70.46 a barrel, the new US crude contract for September became the quoted price of oil at $68.26 a barrel, a drop in price of more than $2 a barrel in just the change of the quoted contract month...from there US oil prices fell 37 cents to $67.89 a barrel on Monday, as oil traders ignored belligerent exchanges between Iran and the US and focused instead on oversupply risk, as Saudi Arabia and other large producers ramped up production...however, with Iran-US tensions continuing on Tuesday, oil prices rallied to rise 63 cents to $68.52 a barrel, encouraged by Chinese plans to boost government spending...US crude was then up another 78 cents to $69.30 a barrel on Wednesday, after the EIA reported that US oil supplies had fallen to their lowest level since February 2015...oil prices then rose for the third consecutive day on Thursday, after Saudi Arabia suspended oil shipments through the Bab al-Mandeb strait into the Red Sea following a Houthi attack on two of its oil tankers, thereby also threatening most shipping through the Suez Canal, with crude finishing up 31 cents at $69.61....however, oil prices gave up 92 cents to end the week at $68.69 a barrel on Friday, after Russia’s energy minister indicated that a coalition of producers could pump as much as a million barrels per day more crude than agreed by the end of the year...while the September US oil contract thus ended the week 43 cents high than last Friday, news services such as Reuters reported US oil prices down 2.4% for the week, comparing last Friday's final quote for August oil to this Friday's quote for September oil, a bit of an apples to oranges comparison...with that in mind, we should point out that the oil futures market remains in deep backwardation, with lower prices being quoted for each month going forward for at least the next five years...the best way to show you that is to just post of copy of the current futures quotes for oil prices over the next year:

the above is the beginning of the table of light sweet crude futures prices on Globex, a 24 hour electronic trading system on the CME Group website, which is the company that owns and operates the NYMEX, the New York exchange where US oil is priced and traded, as well as commodity futures exchanges in Chicago and London...the part of the table we've captured here shows their Saturday afternoon quotes of oil futures prices over the next twelve months as indicated, with the contract month in the first column, and the last quoted price in the second column, with the other price and trading volume information over the rest of the table not really a concern for us today...what we want to point out is that prices for oil in the future are considerably lower than what it's being quoted for today...for instance, the price of oil for delivery in September of this year is quoted above at $69.04 a barrel, while the price of oil for delivery in October is quoted at $67.98 a barrel, the price of oil for delivery in November is quoted at $67.58 a barrel, the price of oil for delivery in December is quoted at $67.23 a barrel, and so on until see get to the bottom of the table where we see that the price of oil for delivery in August of next is quoted at $64.74 a barrel, 6.2% lower than the price quoted for September...in fact, if you scroll farther down the entire oil futures price table (which we haven't included here due to its length), you'd find that oil prices for delivery in August 2020 is quoted at $61.00 a barrel, oil prices for delivery in August 2021 is quoted at $59.43 a barrel,  oil prices for delivery in August 2022 is quoted at $57.22 a barrel, and oil prices for delivery in August 2023 is quoted at $56.26 a barrel...oil futures prices continue lower from there before steadying and rising slightly, but not by much; the lowest price quote seems to be $55.25 a barrel for November 2025, and the last quote on this table is for February 2027, at $55.58 a barrel

what this means is that oil traders believe that the current tightness in the supply of oil is temporary, and that there will be more supply in the future, which thus holds down the price they're willing to commit to for future holdings...remember, as we showed over two years ago, daily oil trading for just one WTI oil contract in New York is typically than 100 times the amount of oil we produce daily over a week, and more than twice the quantity of oil that exists anywhere above ground in the entire country, so it is the oil traders in New York, London, and Chicago who set the price of oil, not the oil companies or those who use the oil...while backwardation such as seen here is an obvious disincentive to own or store oil, what these depressed futures prices mean for oilfield activity is also easy to understand; a major oil company that might be thinking of investing in additional drilling in an offshore field, for instance, isn't going to make that decision based on the current price of oil, but rather the future price...likewise, the small exploitation company that may be drilling in North Dakota knows it can only contract to sell that oil at $65 next year, and less than that in the years after that, so those low prices influence the timing of their decision to frack that well...as we'll see later, that has led to a continually larger backlog of uncompleted wells, which in turn has slowed drilling of new wells in the present...

while oil contracts for August had expired last week, natural gas contracts for August continued to trade this week, rising each day after falling 3.6 cents on Monday to end at $2.822 per mmBTU, a 6.5 cent increase for the week...while natural gas traders continue to watch the weather forecasts for signs of future consumption, their focus has increasingly turned to the precariously low mid-summer additions to inventories of natural gas in storage...this week's EIA natural gas storage report for week ending July 20th indicated that natural gas in storage in the US rose by just 24 billion cubic feet to 2,273 billion cubic feet during the cited week, which left our gas supplies 705 billion cubic feet, or 23.7% below the 2,978 billion cubic feet that were in storage on July 21st of last year, and 557 billion cubic feet, or 19.7% below the five-year average of 2,830 billion cubic feet of natural gas that are typically in storage after the third week of July...the median estimate from a Bloomberg survey indicated analysts had expected 36 billion cubic feet to be added during the week ended July 20, with their range of estimates from 28 billion cubic feet to 52 billion cubic feet, so you can see the actual 24 billion cubic feet increase was lower than anyone had expected, and also quite a bit lower than the 46 billion cubic foot average of weekly surplus natural gas that has typically been added to storage during the third week of July over recent years...as we pointed out last week, the EIA is already forecasting a 10 year low for natural gas supplies going into this coming winter, expecting that natural gas in storage will only rise to 3470 billion cubic feet by October 31st, which would be 10% lower than the five-year average of 3835 billion cubic feet for that time of year, but to even meet that forecast, we'd have to average an addition of nearly 80 billion cubic feet per week over the next 15 weeks, a target that looks nearly impossible with mid-summer additions so far averaging just over 40 billion cubic feet per week over the past three weeks...while it's unlikely that we'd actually run out of natural gas even in the coldest winter scenario, we could see spot shortages if the supplies of gas we have stored remain unevenly distributed...for instance, as of July 20th, Midwest natural gas supplies remained 23.6% below the 5 year average, and are less than half of the average normally stored in the region before winter...in a polar vortex cold weather outbreak, there's be no easy way to quickly move surplus gas supplies stored on the east or west coast to the midsection of the country in an emergency, although it's possible Canadian supplies could fill the gap, should they be fortunate enough to have an exportable surplus at the time...

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering the week ending July 20th, showed that due to a big jump in our oil exports, and an equally large drop in our oil imports, we had to withdraw oil from our commercial crude supplies for the thirteenth time in the past twenty-six weeks... our imports of crude oil fell by an average of 1,296,000 barrels per day to an average of 7,770,000 barrels per day, after rising by an average of 1,635,000 barrels per day the prior week, while our exports of crude oil rose by an average of 1,222,000 barrels per day to an average of 2,683,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 5,087,000 barrels of per day during the week ending July 6th, 2,518,000 fewer barrels per day than the net of our imports minus exports during the prior week...at the same time, field production of crude oil from US wells was reported to be unchanged at 11,000,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 16,087,000 barrels per day during the reporting week... 

at the same time, US oil refineries were using 17,285,000 barrels of crude per day during the week ending July 20th, 46,000 barrels per day more than they used during the prior week, while at the same time 878,000 barrels of oil per day were reportedly being pulled out of the oil that's in storage in the US....hence, this week's crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 320,000 fewer barrels per day than what refineries reported they used during the week.....to account for that disparity, the EIA needed to insert a (+320,000) 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"...since that unaccounted for crude figure swung by 852,000 barrel's per day from last week's (-532,000) figure, we have to caution that all of this report's week over week oil data should be taken with a grain of salt.... (for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer)... 

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports fell to an average of 8,331,000 barrels per day, which was still 6.1% more than the 7,848,000 barrel per day average we were importing over the same four-week period last year....the 878,000 barrel per day decrease in our total crude inventories was all withdrawn from our commercially available stocks of crude oil, as the amount of oil in our Strategic Petroleum Reserve remained unchanged....this week's crude oil production was reported as unchanged despite a 82,000 barrel per day decrease in output from Alaska, and a 100,000 barrel per day increase in oil from the lower 48 states, because the EIA has recently decided to round the lower 48 weekly oil production estimates to the nearest 100,000 barrels per day, to more closely reflect their inability to accurately model oil output from all the wells in the lower 48 states, and there was no change in the national rounded total.....US crude oil production for the week ending July 21st 2017 was reported at 9,410,000 barrels per day, so this week's rounded oil production figure is roughly 16.9% above that of a year ago, and 30.5% 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 93.8% of their capacity in using 17,285,000 barrels of crude per day during the week ending July 20th, down from 94.3% of capacity the prior week, but still a refinery capacity utilization rate in line with historical norms...the 17,285,000 barrels of oil that were refined this week were still at a seasonal high, now for the 8th week in a row, as compared to any previous 3rd week of July...however, this week's refinery throughput was actually tied for that high with the 17,285,000 barrels of crude per day that were being processed during the week ending July 21st 2017, when US refineries were operating at 94.3% of capacity....

even with the uptick in the amount of oil being refined this week, gasoline output from our refineries was a bit lower, decreasing by 37,000 barrels per day to 10,255,000 barrels per day during the week ending July 20th, after our refineries' gasoline output had decreased by 408,000 barrels per day from the record high set during the week ending July 6th...thus after falling by 445,000 barrels per day over two weeks, our gasoline production during the week was 1.3% less than the 10,393,000 barrels of gasoline that were being produced daily during the week ending July 21st of last year...meanwhile, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 17,000 barrels per day to 5,157,000 barrels per day, after falling by 268,000 barrels per day the prior week...however, this week's distillates production was still at a seasonal high for the third week of July, but just fractionally higher than the 5,131,000 barrels of distillates per day that were being produced during the week ending July 21st, 2017...

with our gasoline production running a bit lower than previous week, our supply of gasoline in storage at the end of the week fell by 2,328,000 barrels to 233,504,000 barrels by July 20th, the 13th decrease in 20 weeks, but just the 14th decrease in 37 weeks, as gasoline inventories, as usual, were being built up over the winter months....our supplies of gasoline also fell this week because the amount of gasoline supplied to US markets rose by 138,000 barrels per day to a seasonal high of 9,846,000 barrels per day, after rising by 433,000 barrels per day the prior week, while our imports of gasoline rose by 187,000 barrels per day to 844,000 barrels per day, and while our exports of gasoline fell by 65,000 barrels per day to 669,000 barrels per day....but even after this week's decrease, our gasoline inventories were still 1.4% higher than last July 21st's level of 230,196,000 barrels, and roughly 7.6% above the 10 year average of our gasoline supplies for this time of the year...     

meanwhile, with our distillates production also a bit lower, our supplies of distillate fuels decreased by 101,000 barrels to 121,210,000 barrels during the week ending July 13th, the 3rd small decrease in 9 weeks...that was as the amount of distillates supplied to US markets, a proxy for our domestic consumption, edged up by 26,000 barrels per day to 4,167,000 barrels per day, after increasing by 336,000 barrels per day the prior week, while our exports of distillates fell by 15,000 barrels per day to 1,211,000 barrels per day, after falling by 332,000 barrels per day over the prior two weeks, and while our imports of distillates rose by 67,000 barrels per day to 207,000 barrels per day...however, since last week's distillate supplies were already at a 14 year low for this time of year, at a time of year when distillates supplies are usually increasing, this week's small inventory draw means that this week's distillates supplies have fallen below last weeks and are themselves a 14 year low for any week in mid-July, 19.0% below the 149,564,000 barrels that we had stored on July 21st, 2017, and roughly 17.1% lower than the 10 year average of distillates stocks for this time of the year...     

finally, with our oil imports falling by 1.3 million barrels per day while our oil exports rose to a near record pace, our commercial crude supplies fell for the 32nd time in the past year, decreasing by 6,147,000 barrels during the week, from 411,084,000 barrels on July 13th to a 41 month low of 404,937,000 barrels on July 20th ...thus, with our crude oil inventories as of July 20th at their lowest level since February 20th 2015, our oil supplies were 16.2% below the 483,415,000 barrels of oil we had stored on July 21st of 2017, 17.4% below the 490,501,000 barrels of oil that we had in storage on July 22nd of 2016, and 5.3% below the 427,633,000 barrels of oil we had in storage on July 24th of 2015, when the US glut of oil had already risen above the nearly stable levels of under 400 million barrels during the prior years...   

This Week's Rig Count

US drilling activity increased for the fourteenth time in the past eighteen weeks during the week ending July 20th, even as the steady increases in drilling for oil we saw with higher oil prices the first half of this year have slowed...Baker Hughes reported that the total count of active rotary rigs running in the US increased by 2 rigs to 1048 rigs over the week ending on Friday, which was also 90 more rigs than the 958 rigs that were in use as of the July 28th report of 2017, but was down from the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began their attempt to flood the global oil market...   

the count of rigs drilling for oil rose by 3 rigs to 861 rigs this week, which was 95 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 decreased by 1 rig to 186 rigs this week, which was also down by 6 rigs from the 192 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 a single drilling rig that was considered to be "miscellaneous" active this week, which shows as an increase from the zero such "miscellaneous" rigs in use a year ago....

two more of the platforms which had been operating in the Gulf of Mexico were shut down this week, leaving just 15 rigs still drilling in the Gulf, which was 8 fewer than the 23 platforms that were deployed in the Gulf of Mexico a year ago...at the same time, drilling began from a platform offshore from Alaska this week, so the total national offshore count is now at 16 rigs, also down from the 23 total offshore rigs that were deployed a year ago...meanwhile, three of the platforms that had been set up to drill through inland bodies of water in southern Louisiana were also shut down this week, and now there are just two such "inland waters" rigs operating, down from 3 "inland waters" rigs a year ago...

the count of active horizontal drilling rigs was unchanged at 922 horizontal rigs this week, which was still 112 more horizontal rigs than the 810 horizontal rigs that were in use in the US on July 28th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...meanwhile, the vertical rig count increased by 5 rigs to 62 vertical rigs this week, which was still down from the 71 vertical rigs that were in use during the same week of last year...on the other hand, the directional rig count decreased by 3 rigs to 64 directional rigs this week, which was also down from the 77 directional rigs that were operating on July 28th 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 July 27th, the second column shows the change in the number of working rigs between last week's count (July 20th) and this week's (July 27th) count, the third column shows last week's July 20th 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 28th of July, 2017...        

as you can see, this week's drilling increase was again driven by increased drilling in the Permian basin of western Texas, as it has been most weeks this year when there has been an increase; outside of the Permian, all other US drilling is down by 11 rigs from a year ago...however, looking at the Texas Oil and Gas District counts in Baker Hughes state data, there's only an increase of two rigs in the districts that could conceivably considered in the Permian, so we'd have to speculate that there might also be an increase of two rigs in the Permian on the New Mexico side of the border, accompanied by a shutdown of another New Mexico rig elsewhere, possibly in the San Juan basin or other area that Baker Hughes does not enumerate...meanwhile, the Marcellus saw a three rig increase this week - two in Pennsylvania and one in West Virginia - despite the national natural gas rig count falling by one...in addition, the net minus one rig count for the Eagle Ford of south Texas also masks an increase of a natural gas rig, as Eagle Ford oil rigs fell from 72 to 70...in addition, the Ardmore Woodford of Oklahoma went from 2 oil rigs to one oil rig and one gas rig...so with all those increases, how did the natural gas rig count fall?  well, from the table, we know that there were gas rig shutdowns in the Utica shale of Ohio and the Haynesville of Louisiana...in addition, one of the natural gas rigs that had been operating in the Arkoma Woodford of Oklahoma was switched to drilling for oil, the first oil drilling in that basin since September 1st of last year...furthermore, there was also a three gas rig decrease in other basins or regions of the country not tracked separately by Baker Hughes...since there's no obvious other possibility, we'd speculate that the three 'inland waters' that were shut down in southern Louisiana this week had been seeking natural gas, thus accounting for the downward tick in the national gas rig total...

DUC well report for June

due to time constraints, i neglected to cover the release last week of the EIA's Drilling Productivity Report for July, which includes the EIA's June data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions...for the 21st consecutive month, this report again showed an increase in uncompleted wells nationally in June, as both new well drilling and well completions were down from a month earlier...like most previous months, this month's increase was largely due to a big increase of newly drilled but uncompleted wells (DUCs) in the Permian basin of west Texas, with an additional sizable increase of uncompleted wells in the Eagle Ford of south Texas also contributing...for all 7 sedimentary regions covered by this report, the total count of DUC wells increased by 193, from 7,750 wells in May 7,943 to wells in June, the twenty-first consecutive monthly increase in uncompleted wells nationally, and hence again the highest number of such unfracked wells in the history of this report....that was as 1,436 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during June, down from 1,451  in May, while 1,243 wells were completed and brought into production by fracking, a decrease of one completion over the prior month...hence, at the June completion rate, the 7,943 drilled but uncompleted wells left at the end of the month represent a 6.4 month backlog of wells that have been drilled but not yet fracked...

as has been the case for most of the past two years, the June DUC well increases were predominantly oil wells, with most of those in the Permian basin...the Permian saw its total count of uncompleted wells rise by 164, from 3,204 DUC wells in May to 3,368 DUCs in June, as 599 new wells were drilled into the Permian but only 435 wells in the region were fracked...at the same time, DUC wells in the Eagle Ford of south Texas rose by 42, from 1,495 DUC wells in May to 1,537 DUCs in June, as 212 wells were drilled in the Eagle Ford during June, while 170 Eagle Ford wells were completed...over the same period, the number of DUC wells in the Bakken of North Dakota increased by 19 to 769, as 129 wells were drilled into the Bakken while 110 Bakken wells were fracked...meanwhile, DUC wells in the Anadarko region centered around Oklahoma rose by 13, from 895 DUC wells in May to 908 DUCs in June, as 172 wells were drilled in the Anadarko region in June while 159 drilled wells in the basin were completed...in addition, the natural gas producing Haynesville shale of the northern Louisiana-Texas border region saw their uncompleted well inventory increase by 2 to 182, as 52 wells were drilled into the Haynesville during June, while 50 Haynesville wells were fracked during the same period...on the other hand, the drilled but uncompleted well count in the Niobrara chalk of the Rockies front range decreased by 42 to 431, as just 147 Niobrara wells were being drilled while 189 Niobrara wells were being fracked...similarly, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 5 wells, from 753 DUCs in May to 748 DUCs in June, as 128 wells were drilled into the Marcellus and Utica shales, while 123 of the already drilled wells in the region were fracked....thus, for the month of June, DUCs in the 5 oil basins tracked by in this report (ie., Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) increased by 196 wells to 7,013 wells, while the uncompleted well count in the natural gas regions (the Marcellus, Utica, and the Haynesville) decreased by a net of 3 wells to 930 wells, although as the report notes, once into production, more than half the wells drilled nationally will produce both oil and gas...   

+++++++++++++++++++++++++++++

Utica Shale well activity as of July 21

• DRILLED: 288 (286 as of last week)
• DRILLING: 157 (157)
• PERMITTED: 471 (471)
• PRODUCING: 1,929 (1,929)
• TOTAL: 2,845 (2,843)

Four horizontal permits were issued during the week that ended July 21, and 17 rigs were operating in the Utica Shale.

Study suggests potential link between fracking industry and increased sexually transmitted infections - The Columbus Dispatch - Activists have long condemned natural gas drillers in Ohio over environmental concerns, but a recent study links the fracking industry to a different kind of health concern: sexually transmitted infections.Researchers at the Yale Public School of Health found about a 20 percent increase in two STIs — gonorrhea and chlamydia — in eastern Ohio counties with high shale development activity, such as Belmont.  Experienced, out-of-state workers in the industry are often brought into rural communities for their specialized skills, such as operating drilling rigs, said the study's lead author Nicole Deziel, an epidemiologist at Yale. Those workers tend to be transient young men, she said, living in hyper-masculine "work camp" environments without families — all factors that allow for casual relationships and sexual encounters. Deziel, an assistant professor in the Yale Public School of Health, was inspired to investigate the potential impact of migrant workers on local communities after visiting Belmont County in 2016 and noticing rows of camper vans that workers were living in while working there.Her team examined new well permits and reported STI cases using publicly available data sets from all 88 counties in the state from 2000 to 2016 to monitor the influx of gonorrhea, chlamydia and syphilis to account for any pre-existing trends in STI rates. Prior to 2010, there was no hydraulic fracturing activity in Ohio. Since fracking was introduced, about nine counties in eastern Appalachian Ohio with high Utica shale development activity — 10 or more new well permits a year — saw a 21 percent increase in gonorrhea and 19 percent jump in chlamydia rates.

Why We Shouldn’t Frack Our Forests (or Fields, or Farms, or…) --I am writing in reference to the current revisions to the Wayne National Forest Management Plan.One of the most significant activities that I believe will impact the forest ecosystem in a negative way is the expansion of high pressure hydraulic fracking for oil and gas development. I also feel that to allow logging in an effort to “restore oaks” is counterproductive. This forest represents a small percentage of the wooded areas in Ohio and is the only national forest in the state. For many people both in and out of state this remains a sanctuary for them to escape their hectic lives and find the peace that nature offers.  While previous forest plans have allowed for multiple uses of the forest, I believe that to call high pressure hydraulic fracking another type of energy development is a travesty for this is NOT the oil and gas development of decades ago. This process is so environmentally destructive it is staggering.Fracking and all the build-out that this industry requires will dramatically affect that ecosystem. To believe that one can conduct fracking and still sustain a vibrant, healthy forest ecosystem is ludicrous. The Halliburton loophole legislation of 2005 exempted natural gas drilling from the Safe Drinking Water Act. It exempts companies from disclosing the chemicals used during hydraulic fracturing. Essentially, the provision took the Environmental Protection Agency (EPA) off the job. Fracking is virtually unregulated. Who will guarantee that every stage of the process will be conducted in a way so as not to disrupt the forest ecosystem?

ETP says Ohio's EPA wants to delay Rover natgas pipeline completion  (Reuters) - Energy Transfer Partners LP said on Monday that state environmental regulators in Ohio were using a notice of violation related to the unapproved disposal of industrial waste to delay completion of the company’s Rover natural gas pipeline. The Ohio Environmental Protection Agency issued the violation to Rover after the company deposited spent drilling mud containing low levels of a chemical solvent, tetrachloroethene, known as PCE, without approval, according to the EPA’s July 11 filing with the Federal Energy Regulatory Commission (FERC). PCE is widely used in dry cleaning of fabrics and the manufacture of other chemicals. “Ohio EPA’s filing of the (notice of violations) with FERC was not for any legitimate purpose, but rather was an attempt to cynically use the commission to once again delay the completion of this necessary project,” ETP said in its filing with the federal regulator on Monday. ETP has long said it was not the source of the PCE, which the company said likely came from former industrial activity. Regardless of the source, ETP added, all detected levels of PCE are well below Ohio’s soil clean-up standards and are not in danger of affecting ground water. Officials at the Ohio EPA and ETP were not immediately available for comment. The $4.2 billion Rover project is designed to carry up to 3.25 billion cubic feet per day (bcfd) of gas from the Marcellus and Utica shale fields in Pennsylvania, Ohio and West Virginia to the U.S. Midwest and Gulf Coast as well as Ontario, Canada. One bcf is enough gas to supply about five million U.S. homes for a day. ETP originally planned to complete Rover in November 2017, but since starting construction on the project in March of last year, it has received numerous notices of violation in Ohio and other states, some of which led to temporary stop-work orders from both state and federal regulators. FERC, however, has told ETP that it will not approve the start-up of additional sections of the pipeline until the company restores land around certain parts of the project that are already in service. 

Rover Accuses Ohio EPA of ‘Cynically’ Attempting to Obstruct Project -- Rover Pipeline LLC has accused the Ohio Environmental Protection Agency (Ohio EPA) of attempting to stall the nearly completed 713-mile, 3.25 Bcf/d project by issuing a notice of violation (NOV) for illegitimate reasons.Earlier this month, Ohio EPA issued an NOV to Rover for disposing of “spent drilling mud containing low level PCEs” at an industrial mineral site in Ashland, OH, without a state-approved plan. Ohio EPA, which forwarded the NOV to FERC, said the drilling mud qualified as an industrial waste under state law.Rover Senior Vice President Chris Sonneborn, in charge of engineering for the pipeline, fired back in a letter filed to the Federal Energy Regulatory Commission on Monday, saying Rover is not the source of the PCE and that the low levels discovered do not present a danger to human health or require remediation. Sonneborn further questioned the timing of the NOV, pointing to Ohio EPA tests that “first revealed the presence of low-level PCE in their samples collected more than a year ago.“All of this simply confirms that Ohio EPA’s filing of the NOV with FERC was not for any legitimate purpose, but rather was an attempt to cynically use the Commission to once again delay the completion of this necessary project,” Sonneborn wrote.Sonneborn said Ohio EPA’s “improper attempt to attack this project” included an “unprecedented and inappropriate” application of state environmental laws meant for regulating industrial facilities “or an associated treatment or disposal works.” Rover and Ohio EPA have butted heads on numerous occasions during the greenfield interstate pipeline’s construction. Notably, Ohio EPA cited Rover for a roughly 2 million gallon inadvertent release of drilling mud near the Tuscarawas River in Stark County, OH, last year and solicited FERC’s help in responding to the incident, saying Rover was challenging the state’s enforcement authority.

Commissioners hear concerns about old injection well in Alex Twp. - Several local environmental activists gathered at the Athens County Commissioners meeting Tuesday morning to raise concerns about the non-operational Ginsburg fracking-waste injection well site on Ladd Ridge Road in Alexander Township. Roxanne Groff of Bern Township said the well is “not being taken care of,” and asked the commissioners if they can do something to encourage its owner to properly maintain and close the site. The commissioners said they can take some limited actions to address the issues cited by Groff and others at the meeting, but noted that ultimately the state of Ohio has sole authority to force the well owner to clean up the site. Holding up a stack of papers, Groff, herself a former Athens County commissioner, declared, “These are all… the violations that have been on this well since 1986. This well has been out of compliance more than it’s been in compliance in the last 32 years, and the situation out there continues to get worse.” Groff recounted various instances in the last decade when the pump meant to keep the well from overflowing has stopped working and, consequently, the well has gone offline. The well is a deep, cement pit containing sludge and fracking-waste that have been dumped there over the years, she said.“Those pumps are supposed to operate all the time so that the pit can be emptied constantly,” Groff said, explaining that each time it rains, the well fills with rainwater that mixes with the toxic waste, threatening to spill over. “…Because this pump never works and apparently hasn’t worked for a very, very long time, that toxic pit just sits out there,” Groff said..

Columbus Sets Up Legal Fight Over Proposal To Ban Fracking – WOSU - Columbus City Council on Monday gave the green light to a proposed fall ballot initiative that would ban oil and gas drilling within the city. The "Columbus Community Bill of Rights," if approved, would would make it illegal for any corporation or government to drill for oil and gas within the city, with the exception of pre-existing wells. Such drilling is almost non-existent in the city, anyways.The bill would also ban injection wells used to store fracking wastewater.That would set Columbus in direct conflict with a 2004 Ohio law that says the state has sole jurisdiction over that sort of drilling.Carolyn Harding, co-organizer of the effort, says they're not worried about a potential legal fight."There's a good chance there will be legal issues and legal problems, but we are represented by a non-profit legal organization," she said before the Monday vote.The state limits were upheld in 2015, when the Ohio Supreme Court determined that the city of Munroe Fallscouldn’t make their own rules when it came to oil and gas development. Harding contends that's different, as it was a zoning issue.Still, she recognizes the road ahead may be tough."It's a maverick tactic and way to approach the law," Harding says. "But it's legal. And we are a home rule state, and we are permitted to do citizen-led ballot initiatives and create law." And Harding says there's precedent: Other municipalities, like Mansfield and Broadview Heights near Cleveland, have enacted similar measures. Following Monday's vote, the issue now goes back to the Franklin County Board of Elections, which recently certified the petition signatures needed to get it before Council.

Chesapeake to exit Ohio shale gas in $2-billion divestment - - Chesapeake Energy Corp. agreed to sell its Utica Shale assets in Ohio to closely held Encino Acquisition Partners for about $2 billion as the U.S. natural gas giant whittles down its debt and streamlines operations. The agreement announced Thursday is expected to close in the fourth quarter and marks CEO Doug Lawler’s biggest transaction in 3 1/2 years. Almost all of the proceeds will be used to pay debt, Chesapeake said in the statement. The Oklahoma City-based driller’s shares and bonds soared. America’s third-largest gas producer has seen rough times as prices for the heating and power-plant fuel plummeted. The company, once valued at almost $40 billion and now worth just one-tenth of that, has been punished by investors for a debt load amassed by late founder Aubrey McClendon. The Utica asset sale will help retire a large chunk of debt, Lawler said in a phone interview on Thursday. “The Utica was the best asset for us to divest of and what we have remaining in our portfolio is five very strong assets for future growth,” Lawler said.  Chesapeake will no longer look to asset sales in the future to shrink its ratio of debt to profit, Lawler said. Instead, he’s aiming to achieve that target by raising production. Jettisoning the gas-rich Utica assets also will aid Lawler’s efforts to transform Chesapeake into a company focused predominantly on crude oil production. As of the end of 2017, more than 80 percent of the Oklahoma City-based explorer’s output was gas. Next year, he’s targeting 10 percent growth in the company’s oil production, according to the statement.

Sales volumes up, but EQT hurt by higher operating costs - Sales volumes for Pittsburgh-based EQT were up sharply in the second quarter, but the company’s net income was down because of higher operating costs, Kallanish Energy reports. The company, a natural gas giant in the Appalachian Basin, reported net income of $17.6 million or 7 cents a share in the quarter. That compares to a net income of $41 million or 24 cents a share in 2Q 2017. The company’s sales volume in the 2Q grew to 362.5 billion cubic feet of equivalent. That is up from 198.1 Bcfe in 2Q 2017. EQT reported that its operating expenses nearly doubled from 2Q 2017 to 2Q 2018. They went from $578.2 million in 2Q 2017 to $1.030.5 billion in 2Q 2018. Operating income went from $52.9 million in 2Q 2017 to a loss of $79.5 million in 2Q 2018, a difference of $132.7 million. That was due to higher operating costs and an impairment charge, the company said. In 2Q 2018, EQT drilled or spud 35 Marcellus Shale wells, three Upper Devonian wells and 10 Utica wells in Ohio. It also turned on for production 44 Marcellus wells, five Upper Devonian wells and five Utica wells. To date, the company has drilled 1,791 horizontal Marcellus wells in the Appalachian Basin with 1,482 of those wells in service. Forty wells have been completed but are not yet online, and 269 wells are drilled but not yet completed. In addition, it has drilled or spud 253 Utica Shale horizontal wells in Ohio, of which 205 are in service. Another 14 wells are completed but not yet in service., and 34 wells have been drilled but are not yet completed. 

Natural gas development in Pa. state forests has slowed significantly - The build out of natural gas infrastructure in Pennsylvania’s state forest system has slowed dramatically in recent years, according to a new report from the Department of Conservation and Natural resources.That’s mostly due to a general decline drilling, driven by low natural gas prices, as well as a moratorium on new leasing of state land imposed by Governor Tom Wolf in 2015. DCNR’s Shale Gas Monitoring Report was first published in 2014; the new analysis is an update. Under former Governor Ed Rendell, large swaths of the state forest system were leased for Marcellus Shale development. DCNR later established a monitoring program to track the impacts from the industrial development.Areas of concern include recreation, noise levels, water quality and forest fragmentation. Nearly half of Pennsylvania’s 2.2 million acres of forest is available for natural gas development—either through leases to drilling companies issued by DCNR (386,000 acres) or areas where the state does not own the underground mineral rights. In its previous monitoring report (which included data through 2012), DCNR found 1,425 acres of forest had been converted for shale gas infrastructure. The new report (which includes data through 2016) found 334 acres had been converted.  Invasive species are chief among the concerns, says DCNR spokeswoman Chris Novak. “As their presence and quantities are on the rise, disturbed sites like well pads and roads are ideal for them to get established,” she said. The impact to recreation has been a mixed bag, Novak said, as some visitors want to go hiking in a natural environment, while others enjoy riding ATV’s on newly-created or repaired roadways.

A company cut trees for a pipeline that hasn’t been approved. The landowners just filed for compensation --A Pennsylvania family that lost more than 500 trees to make way for the stalled Constitution Pipeline project asked a court on Thursday to dissolve an injunction that gave the company access to their property, and to determine compensation that remains unpaid. The Hollerans of New Milford Township in Susquehanna County argue that the pipeline will never be built after it was blocked by New York state environmental regulators, and say they have not received compensation more than two years after chain-saw crews felled the trees before the natural gas pipeline received all its needed permits.  The family received widespread media attention when federal marshals armed with semi-automatic weapons and wearing bulletproof vests patrolled the isolated 23-acre farm in early March 2016 in an attempt to protect the tree-cutting crews from a handful of protesters. Twenty-eight months later, the Hollerans are asking a judge to overturn the injunction that allowed Constitution, operated by the Williams Companies, possession of about five acres of their property on which to build the pipeline. “The continued injunction has, and will continue to, wreak severe hardship on the landowners who continue to play involuntary host to a … company that has not paid a dime of compensation for the occupation and destruction of the landowners’ trees, land and business, or the retaliatory harassment inflicted on them for exercising their First Amendment rights to oppose occupation of their property,” the family said in a document filed in federal court for the Middle District of Pennsylvania. Hundreds of Cathy Holleran’s maple trees were cut down, through the use of eminent domain, for an interstate natural gas pipeline that’s now stalled. Catherine Holleran, co-owner of the property that has been in the family since the 1950s, wrote in another document filed Thursday that 558 trees were cut down, about half of which were sugar maples that the family had been using to build up a syrup business. The company left the trees lying on the land until the spring of 2017, and failed to remove the stumps, preventing the family from using the land for other purposes, she said.Some of the trees were around 200 years old and so are irreplaceable, she said.

Molinaro supports fracking pilot in Southern Tier — Republican gubernatorial candidate Marc Molinaro said he would support limited test wells using fracking in a portion of upstate New York, a practice Gov. Andrew Cuomo banned after intense pressure from environmentalists four years ago. "I do believe that a closely monitored ... pilot in the Southern Tier is appropriate," he told reporters in Albany on Wednesday. "Again, closely watched and monitored — as was suggested before the ban was in place." Cuomo banned fracking in 2014, after asking for a study of the health and environmental risks of the technology. His decision satisfied environmental advocates who pressured him to abandon the idea of limited pilots but left behind farmers and landowners in the rural Southern Tier who can look across the border to Pennsylvania, where the shale boom has brought an influx of economic activity. Molinaro said the governor's decision to block fracking statewide circumvented the state's typical environmental review process and usurped local control of these types of activities. He did not say he would rescind a state environmental review released in 2015, after Cuomo's administration relied on a health study to block the practice, which also found the state should not allow fracking. "I think the process should produce an outcome, not have the governor declare what the outcome is and then make sure the process supports it," he said. "I think a limited, closely monitored, DEC-regulated and watched pilot effort is worth considering, only in the context of ensuring that water sources have been identified and that we've created the ability to protect them."

Cynthia Nixon Meets with Community Calling for Shutdown of AIM Fracked Gas Pipeline- “If something happens with that pipeline, at 400 feet we’re looking at a fatality rate of 100%,” said mother and Peekskill resident Courtney Williams. She was giving gubernatorial candidate Cynthia Nixon a tour of the AIM fracked gas pipeline that runs through her community. Stop number three of the tour was the Buchanan-Verplanck Elementary School, where her daughter, Irene, and son, Gunnar, go. Irene, along with her friends Katerina and Aurelia, showed Nixon the kindergarten playground where her brother plays. She’ll be in third grade this fall and plays on the other playground, she tells Nixon. The kindergarten playground is the closest to the highly pressurized gas pipeline, just on the other side of a small hill. The pipeline’s proximity to the school is one of the reasons, Yvonne Reasen, Katerina and Aurelia’s mother, is moving her family out of the area. Following the tour of the pipeline, Nixon met with impacted residents at a roundtable at Peekskill’s BeanRunner Cafe. “I grew up in New York. I can't leave New York,” Reasen told Nixon. “But because of the inaction of our governor, we can’t stay in this community anymore.” In addition to all the inherent dangers of a pipeline transporting highly pressurized fracked gas through a densely populated area, the AIM pipeline runs within 105 feet of critical infrastructure at the Indian Point nuclear power plant. Because of these risks residents of northern Westchester and New Yorkers living within the 50 mile evacuation radius have been calling on Governor Cuomo to shut down the AIM fracked gas pipeline for years.

DOJ, EPA, West Virginia Settle with CSX for $2.2 Million Over 2015 Derailment - Federal officials have announced a $2.2 million proposed settlement with CSX Transportation to resolve the company's liability for water pollution violations stemming from a train derailment that caused an oil spill in West Virginia. The U.S. Environmental Protection Agency, the Justice Department and the state of West Virginia announced the settlement Tuesday. Terms call for CSX to pay $1.2 million to the federal government and $1 million to West Virginia. Federal officials say they hope the fines deter similar incidents. The CSX train was carrying crude oil when 27 cars derailed Feb. 16, 2015 in Mount Carbon. The resulting explosions and fires destroyed a home and led officials to declare a state of emergency as they evacuated nearby residents and shut down water intakes. The Federal Railroad Administration said the derailment was caused by a broken rail.

Mountain Valley Pipeline cited 5th time by state regulators for violations - For the fifth time since April, state regulators are citing the Mountain Valley Pipeline for water quality violations along the project’s construction route in West Virginia.The notice of violation was issued by the West Virginia Department of Environmental Protection after inspectors visited construction sites in Doddridge and Harrison counties. The violation notice is for construction in Doddridge.The inspection report and violation notice were made public Thursday afternoon when they were filed with the Federal Energy Regulatory Commission.  Although the report is dated July 6, the inspection actually happened June 6, said Jake Glance, a spokesman for the DEP. According to the notice, pipeline crews failed to maintain erosion control devices and sediment-laden water was leaving the site.Crews also are accused of violating West Virginia’s legislative rules governing water quality standards by allowing “visible settleable solids” in the Meathouse Fork tributary, and sediment deposits at the bottom of the Dry Fork tributary, the notice states.Mountain Valley Pipeline has 20 days to respond and fix the problems outlined. A spokesman for the project did not respond to a request for comment Thursday evening. The Mountain Valley Pipeline will stretch 300 miles from Wetzel County, West Virginia, to Pittsylvania County, Virginia, touching nearly 4,300 acres of land in West Virginia and crossing 600 streams and more than 400 wetlands along its route. The violations are similar to others issued by the DEP in the past four months, reflecting concern voiced by citizen and environmental groups before construction began. Earlier this month, the Virginia Department of Environmental Quality issued its own notice of violation for Mountain Valley Pipeline erosion issues.

Mountain Valley gas pipeline startup pushed to 2019 amid court fight with opponents — The startup of EQT Midstream Partners' Mountain Valley Pipeline natural gas project will be delayed into next year, and the construction cost is expected to reach a point where it may begin to reduce investment returns, executives said Thursday. The market developments, disclosed as No. 1 US gas producer EQT and EQT Midstream released financial results for the April-June quarter, reflect the challenges the 2 Bcf/d natural gas project has faced from poor weather and court battles with environmental groups.Any delay figured to be a blow for downstream utilities seeking better supply access and for producers awaiting more takeaway capacity out of the US Northeast's prolific Appalachian Basin. The approximately 300-mile pipeline is seen as a key conduit to serve downstream markets, including LNG exports."We update our project schedule weekly and it is based on both weather and activism that we see," Jerry Ashcroft, a senior vice president at EQT and operations chief at the company's midstream affiliate, said on a conference call with analysts to discuss EQT Midstream's results.For the second quarter, EQT reported net income attributable to common shareholders of $17.8 million, or 7 cents a share, an almost 57% drop from profit of $41.1 million, or 24 cents a share, in the year-ago period. While revenue jumped 53%, total operating expenses almost doubled year over year. EQT Midstream's profit rose 24% in the second quarter versus a year earlier.Despite the difficulties with MVP, officials had previously maintained their expected in-service date of the fourth quarter of this year. That schedule has now been extended to the first quarter of 2019, though executives did not rule out the possibility it could be delayed further depending on the timing and outcome of a federal appeals court case brought by the Sierra Club."If the court sits on the decision for a quarter, that obviously puts the timing in jeopardy," Chief Financial Officer Robert McNally said on the call with Ashcroft. "But we don't think they'll sit on it that long." Expenses have been going up as the operator has had workers going extra hours to complete the construction that is currently allowed. The project also suffered a setback in late June when the operator said it was temporarily suspending pipeline installation work in Virginia to make sure appropriate erosion and sediment controls were in place amid heavy rainfall. When the project was announced in fall 2015, EQT Midstream had estimated Mountain Valley Pipeline would cost $3 billion to $3.5 billion to build. Its most recent estimate was $3.5 billion. And on Thursday, that estimate was raised to $3.5 billion to $3.7 billion. McNally said expenditures above $3.5 billion will start to eat into expected investment returns.

4th Circuit sides with pipeline in eminent domain case (AP) — A federal appeals court has sided with the Mountain Valley Pipeline in an eminent domain lawsuit brought by landowners in the project's path.A panel of the 4th U.S. Circuit Court of Appeals on Wednesday affirmed the ruling of a lower-court judge who didn't rule on the case's constitutional issues but dismissed them, saying she lacked subject matter jurisdiction.Justin Lugar, an attorney for the plaintiffs, said his clients are evaluating the opinion and possible next steps. A pipeline spokeswoman declined comment.Work on the natural gas pipeline is under way in West Virginia and Virginia. An executive with pipeline partner NextEra Energy said in an earnings call Wednesday that construction delays mean the project won't be in service until the first quarter of 2019 at the earliest.

WV Groups Sue Pipeline Companies for Abuse of Permitting Process  – Clean water groups say getting a single, general permit to cover work at hundreds of separate sites by gas pipeline companies is an abuse of the permitting process. A coalition of six citizen and conservation groups is asking federal courts to stop the Atlantic Coast Pipeline from using one, nationwide permit for its work at all water crossings. The issue has already stalled some work on the Mountain Valley Pipeline. Cindy Rank, a longtime advocate with the West Virginia Highlands Conservancy, says this type of general permit is intended for small projects, like building a single road over a single creek. "However, with the giant pipelines, we're crossing hundreds and hundreds of these small headwater streams with a nationwide permit, without looking at the overall impact on watersheds," she points out. The pipeline companies argue it would be too much red tape to get separate permits for each water crossing. Rank says mountaintop removal mines did the same thing until stopped by the courts. She says the mines claimed a single permit allowed for disposal of excess rock in hundreds of valley fills. Rank says demanding these companies adhere to the process of getting individual permits is vitally important, because it's difficult – maybe even impossible – to build 42-inch natural gas pipelines through the raw Appalachian Mountains without causing massive damage.

Crews respond to explosion on well pad in Marshall County --Emergency crews are investigating an explosion that happened on top of a well pad in Marshall County Monday morning. The explosion happened on top of a well pad owned by Southwestern Energy about 10 a.m., said Tom Hart, emergency management director for Marshall County. A resident nearby reported the explosion, and crews found a second explosion when they arrived, he said. It’s not clear what kind of material, or how much of it spilled, according to the West Virginia Department of Environmental Protection’s spill report. The material is considered hazardous, though. Crews decided to let the fire burn, and keep the tanks on the site cool, Hart said. The fire was out by 12:40 p.m. Some equipment was damaged, but the well pad in still intact, Hart said. No one was injured, but he said an employee was treated for heat-related illness, Hart said. Christina Fowler, a spokeswoman for Southwestern Energy, confirmed the explosion, but said no Southwestern Energy employees were injured. She declined to provide more information, citing the pending investigation.

Explosion & Fire Involving Gas Processing Equipment in Marshall County, WV — No injuries were reported when an explosion and fire occurred at a Marshall County natural gas well pad at mid-morning Monday. Sorghum Ridge Road resident Dave Reinbeau had just finished his routine check on his livestock and fences and returned to his home when the explosion occurred within processing equipment at the well pad site. Reinbeau said he actually saw and felt the initial blast which occurred near the middle of his Sorghum Ridge property after he had returned to his house on the nearby hillside. “It felt like a force,” said Reinbeau, who went on to explain that he called 911 right away because he knew several workers were on the site. Marshall County Office of Emergency Management Director Tom Hart said while no injuries were reported with the blast at the Reinbeau well pad, one worker on the site was evaluated by EMS crews for being overheated. Hart said emergency crews responded to the blast and fire after the initial call came in shortly before 10 a.m. “There were no injuries, no evacuations. It is under control at this point. They are just waiting for it to burn off so that they can start assessing,” Hart said shortly after responding to the site. “There were actually crews from Williams Energy on scene that were working at the site. The actual well pad is owned by Southwestern Energy. “When the fire crews arrived on scene, they did experience heavy fire deployment. It was actually processing equipment that was on fire. It was not the well pad itself. There was an explosion prior to first responders arriving on scene, then after the fire departments did arrive, there was a secondary explosion as well,” he added. Hart said officials decided to let the fire burn itself out. “What they are trying to do is they’re keeping some of the condensate tanks and other equipment cooled down while they let the fire burn off at this point,” Hart explained. Volunteer fire departments hauled water from a hydrant on W.Va. 88 to the scene of the fire. Hart said the fire was out by 12:36 p.m. Emergency crews cleared the scene at 2 p.m. 

Will China's Appalachian gas investments survive trade fight? - It fell to Brian Anderson, a West Virginia University professor, to break the bad news at a Pittsburgh conference celebrating a hoped-for economic renaissance based on a bonanza of Appalachian shale gas. The Chinese and their money were not coming, at least for now, Anderson announced at the Northeast U.S. Petrochemical Construction Conference in Pittsburgh last month — collateral damage from President Trump's trade offensive against China's "economic aggression," as the administration describes it."It was pretty interesting to hear they'd canceled right before the conference because of the trade war going on," said Taylor Robinson, president PLG Consulting, whose firm has studied the potential of the Appalachian shale resource and was in the audience in Pittsburgh. The enormous offer last November, made in a memorandum of understanding from CEIC, was a crown jewel of the economic pledges made by China during Trump's pilgrimage to Beijing at the end of last year. It lit up West Virginia's hopes of capitalizing on the wealth of natural gas in the Marcellus and Utica shale formations underlying its borders and brightened the state's chances of catching up to two neighbors to the north that have been bigger winners in the decade of shale gas development.  West Virginia wells delivered 4,596 million cubic feet a day in April, a 13 percent gain over the year before. But Ohio's total, 6,111 million cubic feet a day, was higher and jumped 40 percent from April 2017. Moreover, the energy infrastructure boom that followed the opening of the Marcellus and Utica plays has favored Pennsylvania and Ohio. A massive industrial plant to "crack" ethane gas into ethylene, a prime petrochemical feedstock, is under construction in western Pennsylvania, and Ohio officials are confident of landing the region's second cracking plant.

West Virginians Do Not Want China’s Appalachian Gas Investments: - Upon reading this article, Will China’s Appalachian Gas Investments Survive Trade Fight?, OVEC member Mary Wildfire was dismayed to find there was no means to comment upon the article, so she directly e-mailed the author, and shared her e-mail with OVEC’s staff. Now we are sharing it with you, below.  Mr. Behr, I’m writing in response to your piece in E & E because it made me very angry and there isn’t a comment section. I live in West Virginia. Is it news to you that not everyone here thinks building Cancer Alley #2 along the entire Ohio River border of our state would be wonderful? Yes, there would be jobs, and some tax revenue for state and local governments. But:

• How many jobs is disputed and
• There is the question of how many would go to state residents, and
• The tax revenues would soon be slashed thanks to lobbying. Further,
• This project is intended to get rid of some of the glut of natural gas from the Marcellus and Utica shales which is keeping prices low here—and so are the many pipelines heading east, south and north, likely for export. Great for the industry. NOT so much for people paying gas bills, and not for people unfortunate enough to live where pipelines run, near a storage hub or compressor station or gas well or cracker plant or chemical or plastics factory. Besides,
• It’s all predicated on decades’ worth of cheap gas, but there are questions about how much gas is really down there. See David Hughes’ Shale Gas Reality Check, a comprehensive, well-by-well analysis of the real prospects for abundance into the future. And now consider that
• Pipelines leak, polluting water; sometimes they explode or create fires. Compressor stations emit air pollution and noise.
• Cracker plants create all kinds of pollution, and raise cancer rates, as do plastics plants (especially for workers); this area already has high cancer rates, and Parkersburg and Pittsburg already have serious air pollution problems.
• If built, the glut will be eased which will lead to more drilling and fracking, with a well-known complex of harms to local people and the environment
• The complex is supposed to produce plastic—but people are becoming aware of the nasty problem of plastic pollution of the ocean; a young but rapidly growing anti-plastic movement may reduce demand.
• All of this will add to the problem of climate change. Admittedly, this problem won’t do anything more serious than destroy civilization, possibly cause human extinction, and leave any future generations hating their ancestors as no generation has in all of human history, so no real need to mention something so trifling.
• There is an assumption that West Virginians will happily trade all of the above harms, and a few I’ve left out, for the jobs and revenue mentioned. And many would. But fact is, we’ve had a full century of schooling by the coal industry in how that plays out: WV is either dead last, or 49^th in just about every measure of well-being.

Bottled Water, Brought to You by Fracking - The new Food & Water Watch report Take Back the Tap: The Big Business Hustle of Bottled Water details the deceit and trickery of the bottled water industry. Here’s one more angle to consider: The bottled water business is closely tied to fracking. The report reveals that the majority of bottled water is municipal tap water, a common resource captured in plastic bottles and re-sold at an astonishing markup—as much as 2,000 times the price of tap, and even four times the price of gasoline. Besides being a rip-off, there is plenty more to loathe about the corporate water scam: The environmental impacts from pumping groundwater (especially in drought-prone areas), the plastic junk fouling up our waterways and oceans, and the air pollution created as petrochemical plants manufacture the materials necessary for making those plastic bottles filled with overpriced tap water.There is a growing international awareness that plastic is a serious problem. In 2016, about 4 billion pounds of plastic were used in the bottled water business, and most of those bottles are not recycled—meaning they often end up in landfills or as litter. There’s also the matter of whether we should be putting our drinking water in those bottles in the first place: The most common packaging (polyethylene terephthalate, or PET) includes compounds like benzene, and the bottles can leach toxins like formaldehyde and acetaldehyde. But perhaps the biggest problem is where we get all this plastic in the first place. Many of the raw materials used to create those plastic bottles come from fracking. In addition to air and water pollution, the fracking boom has delivered an abundant supply of the hydrocarbon ethane, which is used in petrochemical manufacturing to create ethylene, which is turned into plastic. One of the global powerhouses in this industry is a company called Ineos, which needs to expand fracking in order to keep profiting from plastics. To do this, massive “dragon ships” carry ethane from the United States to its facilities in Europe. The company wants even more of this raw material, which is one of the big reasons that Sunoco/Energy Transfer Partners is building the Mariner East 2, a dangerous pipeline that will travel across hundreds of miles of the state of Pennsylvania. Getting more ethane means Ineos can turn more of those hydrocarbons into plastic, with the accompanying industrial pollution and carbon emissions we have come to expect from a company that has amassed a horrendous environmental record.

Atlantic Coast Pipeline gets permission to begin North Carolina construction - The 600-mile Atlantic Coast Pipeline, the more than $6 billion natural gas project led by Dominion Energy, won approval to begin full construction in North Carolina today.The decision by the Federal Energy Regulatory Commission comes amid a federal court challenge that seeks to halt construction of the hotly contested pipeline following a ruling by the U.S. Court of Appeals for the 4th Circuit in Richmond in May.The court invalidated a key environmental review — finding it too vague to be enforced — that dealt with risks to sensitive species, a decision opponents of the project argued should have stopped it in its tracks.However, FERC has allowed the pipeline, which will run from West Virginia through much of central Virginia and the eastern third of North Carolina to plow ahead in certain areas where it already has state approvals.At issue in the federal court decision was the U.S. Fish and Wildlife Service’s “incidental take statement,” which sets limits for harming or killing certain sensitive species along the pipeline route, including bats, fish, mussels and a nearly extinct bumblebee, among others. The 4th Circuit has yet to release its full opinion, but Dominion and its partners, which includes North Carolina utility heavyweight Duke Energy, have argued the decision only affects limited portions of the route.

Dominion Energy's $6 Billion Atlantic Coast Natural Gas Pipeline Remains On Track --  Dominion Energy Inc said on Wednesday that its $6-$6.5 billion Atlantic Coast natural gas pipeline from West Virginia to Virginia and North Carolina remained on track to enter service in late 2019 after federal regulators approved the start of construction for the project in North Carolina. “Yesterday’s approval was another major step forward for the project and keeps us on track for late 2019 in-service,” Aaron Ruby, a spokesman at Dominion, said in an email. The U.S. Federal Energy Regulatory Commission (FERC) issued that approval in a filing Tuesday afternoon. Like other pipeline approvals, FERC said “if any court or agency invalidates a required federal authorization after construction has begun…(FERC) may take whatever steps are necessary to ensure the protection of environmental resources, including issuance of a stop work order.” The Sierra Club, an environmental group opposing the pipeline, said in a statement following the FERC decision that the project is facing multiple lawsuits and a challenge that could force a rehearing at FERC. The Sierra Club also said the Virginia State Water Control Board is revisiting the sufficiency of the project’s current water certifications, which could be revoked. The 600-mile (966-km) Atlantic Coast project is designed to carry about 1.5 billion cubic feet per day (bcfd) of gas from the Marcellus and Utica shale formations in Pennsylvania, West Virginia and Ohio to customers in Virginia and North Carolina. One billion cubic feet of gas is enough to fuel about 5 million U.S. homes for a day. 

Federal govt. approves Columbia Gas line under Potomac - The Federal Energy Regulatory Commission (FERC) on Thursday, July 19 issued a Certificate of Public Convenience and Necessity to Columbia Gas Transmission to build a natural gas pipeline from Fulton County, Pa. through the area west of Hancock and under the Potomac River to reach Morgan County, W.Va.  FERC’s decision will allow Columbia Gas to build a 3.37-mile, 8-inch diameter natural gas line. The line will connect an existing gas line in Fulton County, Pa. to a 23-mile gas line being built by Mountaineer Gas from the Berkeley Springs area to Martinsburg in the Eastern Panhandle of West Virginia.  The project is referred to as the Eastern Panhandle Expansion Project. In the 54-page Order issuing the certificate, FERC officials say they have made a thorough study of the Columbia Gas construction proposal, financing of the estimated $25 million project and the potential environmental impacts of construction and operation of the line. Columbia Gas plans to construct the line under the Potomac River by using Horizontal Directional Drilling. Company officials have said a drilling rig on the West Virginia side of the river will drive a bit under the riverbed. That drill will emerge north of the C&O Canal National Historical Park in the area west of Hancock. Plans say the pipeline will be built on the Hancock side of the river, then pulled back through the drilled space under the river to the Berkeley Springs side of the Potomac.

Factbox: US FERC actions on natural gas infrastructure -- At its monthly meeting Thursday, the US Federal Energy Regulatory Commission issued orders on a number of natural gas infrastructure projects:

• TEXAS EASTERN TRANSMISSION GULF COAST PROJECTS
  • The Spectra Energy Partners unit received approval to build and operate compression-based expansions of its Gulf Coast pipeline system.
  • The Texas Industrial Market expansion would provide up to 82,500 Dt/d of firm capacity from Evangeline Parish, Louisiana, to a delivery point in Orange County, Texas, and a future delivery point in Jefferson County, Texas.
  • The Louisiana Market expansion would provide up to 75,000 Dt/d of firm capacity from Calcasieu Parish, Louisiana, to a delivery point in Beauregard Parish, Louisiana.
• MILLENNIUM PIPELINE EASTERN SYSTEM UPGRADE
  • FERC denied requests that it review its authorization of the project, which will provide up to 223,000 Dt/d of firm service to local distribution companies and towns in New York.
  • A majority of the commission affirmed the certificate order, saying the $275 million project is needed by the public.
  • The majority also found the project was not improperly segmented in order to minimize its apparent environmental effect.
  • The project will provide service from an existing Millennium compressor station to an interconnection with Enbridge's Algonquin Gas Transmission.
• COLUMBIA GAS TRANSMISSION EASTERN PANHANDLE EXPANSION
  • The expansion was approved to run from Fulton County, Pennsylvania, to a delivery point in Morgan County, West Virginia.
  • The $25 million Eastern Panhandle would deliver up to 47,500 Dt/d of natural gas to serve utility Mountaineer Gas.

Energy Department clears ‘small-scale’ natural gas exports for fast approval | TheHill: The Trump administration is expediting the approval process for projects that are meant to export small amounts of natural gas, including liquefied natural gas. In a final regulation released to the public Tuesday, the Department of Energy (DOE) said it will automatically approve gas export applications if they are at or below 51.75 billion cubic feet of exports per year and do not rise to the level of requiring an environmental review. “DOE has determined that small-scale natural gas exports are consistent with the public interest,” the agency said in its regulation, citing the Natural Gas Act’s requirement that exports can only be approved if they are in the United States’ public interest.“In sum, DOE has thoroughly analyzed the many factors affecting the export of U.S. natural gas, as well as the unique characteristics and minimal adverse impacts of the emerging small scale natural gas market,” the department said, concluding that the public interest standard has been met. The regulation is due to be published in the Federal Register on Wednesday, starting a 30-day clock before it takes effect. DOE has previously approved more than two dozen projects to export liquefied natural gas, but only two are currently in operation. Interest in gas exports rose in recent years as domestic production grew significantly, owing to hydraulic fracturing and other advanced drilling techniques. Gas exports also align with the Trump administration's drive for "energy dominance," a paradigm that centers largely on selling U.S. energy around the world. The small-scale export market is mainly limited to the Western Hemisphere, including the Caribbean, South America and Central America.

Can US Gulf Coast LNG exports continue to rise? (Platts video) Since LNG exports first left the US Gulf Coast in February 2016, global markets have been transformed with contract terms that offer destination flexibility and greater diversity of pricing and hedging options. But while the global LNG market looks set to strengthen in the short- and mid-term, a key question is the extent to which low cost supplies from the Permian Basin will continue. We’re delighted to share a recent episode of our View from the Top video series. We speak to Matt Schatzman, the CEO of NextDecade, an LNG development company focused on export projects and associated pipelines in Texas. We talk to Matt about NextDecade’s plans to develop a portfolio of LNG projects, including the 27 mtpa Rio Grande LNG export facility in Brownsville, Texas and the 4.5 Bcf/d Rio Bravo Pipeline that would transport natural gas from the Agua Dulce supply area to Rio Grande LNG. Matt shares his views on the fast-developing global LNG market, specifically his view that the strength in the market place will continue.

Infrastructure additions send US gas exports to Mexico soaring above 5 bcf/d for the first time ever. --After idling near the 4.6-Bcf/d level for months, piped gas flows to Mexico raced to a record of more than 5 Bcf/d for the first time earlier in July, and have hung on to that level since. This new export volume signifies incremental demand for the U.S. gas market at a time when the domestic storage inventory is already approaching the five-year low. At the same time, it would also signify some much-needed relief for Permian producers hoping to avert disastrous takeaway constraints — that is, if the export growth is happening where it’s needed the most, from West Texas. However, that’s not exactly the case. What’s behind the sudden increase, where is it happening and what are the prospects for continued growth near-term? Today, we analyze the recent trends in exports to Mexico.

API: US Producers, Refiners Made History Last Month  - Domestic crude oil, NGL production hit unprecedented levels in June 2018, according to API.U.S. production of crude oil and natural gas liquids (NGL) hit unprecedented levels in June 2018, the American Petroleum Institute (API) reported Thursday.  “Record production U.S. crude oil and natural gas liquids last month highlighted the strength of our nation’s energy renaissance,” API Chief Economist Dean Foreman said in a written statement heralding figures from API’s Monthly Statistical Report for June.According to API, crude oil production hit 10.7 million barrels per day (MMbpd) in June and NGL production reached 4.2 MMbpd during the same period. Foreman noted that domestic oil production has supplied all of the growth in global demand so far in 2018 and has helped to compensate for production losses among some OPEC member nations.“With continued increases in drilling activity, the U.S. is poised for further production increases in natural gas and oil,” Foreman said. API noted that milestones for June included:

• U.S. petroleum demand for the year-to-date was the strongest it’s been in 11 years.
• Refinery throughput in the U.S. hit a new record of 18 MMbpd.
• Thanks to that record refinery throughput, U.S. crude inventories remained steady and accumulated refinery product stocks “more than offset” the drawdown in crude oil inventories.
• “Solid economic and energy market fundamentals” are supporting the 20.6 MMbpd U.S. petroleum demand – the strongest such level since 2007.

US Refiners Boost Purchases Of CPC Blend To Record As Prices Drop -(Reuters) - U.S. refiners will import a record monthly volume of crude from the Caspian region in July after snapping up the cargoes when prices reached near six-year lows, according to market sources and Thomson Reuters shipping data. The unusually large volume of crude is one of many changes in the international oil trade caused by a flood of U.S. shale oil headed overseas.Record exports of crude from the United States to Europe and Asia have pushed down the price of comparable oil, such as the crude produced near the Caspian in Kazakhstan and Russia. That oil is pumped through the CPC pipeline and loaded in the Mediterranean. U.S. East Coast refiners, which rely on crude imports, have bought most of the 3.7 million barrels of CPC crude that will reach the United States in July, according to the Thomson Reuters data.The East Coast refiners have limited access to the oil produced in the shale fields hundreds of miles away in Texas or North Dakota. They buy additional crude from West Africa, Middle East and Europe.  That is because U.S. domestic shipping rules can make it more expensive for East Coast refiners to ship crude from the Gulf coast to the northeast than it is to import oil. East Coast refiners "can get oil cheaper from the Urals than the Eagle Ford,"

U.S. Refiners Scramble To Avoid Railcar Shortage -- U.S. oil refiners as well as producers are frantically looking for ways to reverse a decision by the country’s largest railroad operator, BNSF Railway Co, to curb the use of retrofitted oil tank cars on its railroads as a safety measure after a derailment in Iowa in June.  Reuters reportsthat this decision could lead to the removal of several thousand oil tank cars from a crucial railway line and up the lease the rates for new cars substantially. Already, two brokers told Reuters, the lease rate for new oil tank cars is over US$1,000 apiece per month, up from US$400 per month at the end of last year.In June, an oil train derailed in Iowa and spilled more than 200,000 gallons of Canadian heavy crude into a public waterway. Following the incident, BNSF said it will stop offering retrofitted tank cars—of which there are about 11,000 on U.S. railroads—in new contracts. Companies including Exxon, Phillips, and Enbridge use the cars and will be affected by the change.BNSF’s decision comes at a bad time for shale producers, particularly in the Permian. The oil rush that some media have dubbed Permania led to a shortage of pipeline capacity in the prolific shale play that has resulted in a discount for crude pumped there as it sits and waits longer than usual to be shipped to the Gulf Coast refineries.Canadian heavy oil producers are also suffering a worsening pipeline shortage, so for both groups, the railway has become the obvious alternative, even though it is costlier for them and, based on statistical data, riskier for the environment, as once more proved by the Iowa derailment. However, pipeline opposition in both the United States and Canada has prevented the industry from adding much needed capacity, although the Permian is better placed than the Alberta oil sands: several large-scale pipeline projects are in progress there already.

Oilfield service giants miss earnings forecasts despite soaring U.S. production (Reuters) - Oilfield service giants Schlumberger and General Electric Co’s Baker Hughes missed second quarter revenue forecasts on Friday as slow international growth offset record production in the United States that boosted domestic demand for their services. The Houston-based companies were the first among their peers to report earnings, putting them under scrutiny from analysts seeking clues about the health of the industry. Schlumberger, the world’s largest oilfield services firm, is viewed a as bellwether for the global oil and gas industry due to its heavy international exposure. Schlumberger’s overall revenue rose 11 percent in the quarter to $8.30 billion, missing analysts’ estimate of $8.36 billion, according to Thomson Reuters I/B/E/S. Revenue from Schlumberger’s international business dragged the overall performance down: it grew 4 percent in the quarter to $5.07 billion, but remained 1.4 percent below a year ago. GE’s Baker Hughes reported total revenue of $5.55 billion, versus analysts’ forecasts of $5.57 billion, according to I/B/E/S. Baker Hughes’ revenues were hurt by its oilfield equipment and turbomachinery businesses. The performances reflect how a relatively slow recovery in international markets, where oil projects are often more costly, continues to drag down earnings for large integrated service firms, even as surging U.S. production helps. U.S. oil production last week hit a record 11 million barrels per day, marking a dramatic comeback in an industry that had been hard hit by the 2014 oil price crash. Wall Street analysts were not fazed by the missed estimates, and instead focused their attention on stronger-than-expected sequential growth in international markets and upbeat comments from executives. Shares of Schlumberger were trading at $66.86 in afternoon trade, off a fraction of a percent. Baker Hughes was up about 0.8 percent at $32.04.

Texas oil pipeline signs up shippers for 200,000 b/d of new capacity: notice - San Antonio-based EPIC Midstream said late Thursday it has secured shipper commitments for another 250,000 b/d on its planned Eagle Ford and Permian to the Texas Gulf Coast crude pipeline and was now considering an increase in the pipeline's diameter that would result in higher throughput. Permian Basin producer Diamondback Energy has signed a deal to take 50,000 b/d of capacity on the 730-mile EPIC - Eagle Ford, Permian, Ingleside and Corpus Christi - pipeline and also acquire a 5% interest as a strategic partner, EPIC Midstream said. Other producers also in south Texas have together booked 150,000 b/d on the pipeline, EPIC Midstream said, without naming the shippers. No comment was immediately available from EPIC Midstream on who the other shippers were.In May, EPIC Midstream said it had taken on board two anchor customers - Apache and Noble Energy - that had committed to 75,000 b/d and 100,000 b/d respectively. Apache and Noble also have an option to take 15% and 30% stake respectively in the pipeline, EPIC Midstream said then. With these commitments, shippers have now secured 425,000 b/d of capacity on the pipeline that is planned to have an throughput of 590,000 b/d, EPIC said Thursday, noting it will launch an open season on August 1 to seek more barrels.  Based on the open season, EPIC will consider upsizing the pipeline diameter to 30 inches from the planned 24 inches to move barrels from the Permian Basin, it said Thursday. EPIC Midstream had said in May that depending on shipper demand and commitment, it was keeping options open to increase capacity of the pipeline to 825,000 b/d from 590,000 b/d. The EPIC pipeline will move crude from the Eagle Ford and Permian basins to export facilities at Corpus Christi and Ingleside, home to Occidental's major export terminal. Besides EPIC, the two other major long-haul pipelines planned to come online by late 2019 are the 650,000 b/d Cactus II facility by Plains All American and the 700,000 b/d Gray Oak line by Phillips 66/Andeavor.

Exclusive: Occidental Petroleum explores sale of pipeline assets - sources (Reuters) - Occidental Petroleum Corp is exploring a sale of its pipeline assets, hoping to fetch more than $5 billion and free up capital to invest in exploration and production as oil prices rebound, people familiar with the matter said on Tuesday. Occidental's decision to shed the assets is the latest example of an oil company balking at the capital expenditure required to maintain U.S. pipelines, which have been plagued by bottlenecks and require construction of new networks. Hess Corp and Oasis Petroleum Inc are among the companies that have sold or spun off pipelines in the past year, looking to take advantage of high valuations for these assets, which have been buoyed by the capacity constrains. Inability to transport enough oil out of the Permian Basin of West Texas and New Mexico, the largest U.S. oilfield, combined with increasing appetite for U.S. oil exports, could help Occidental sell its pipelines for top dollar, according to the sources. Occidental is working with investment bankers on an auction for the pipeline assets, added the sources, who asked not to be identified because the matter is confidential. Occidental representatives did not immediately respond to requests for comment. Occidental's midstream assets include a major U.S. crude pipeline, a stake in a gas pipeline in the Middle East, a crude export terminal in Texas, and the Centurion Pipeline, a 2,900 mile line carrying crude from the Permian Basin of West Texas and New Mexico to Cushing, Oklahoma. 

EPA went soft on Oklahoma-based oil and gas companies with Scott Pruitt as head, study finds -  Environmental groups are urging the Environmental Protection Agency (EPA) to look into whether Oklahoma-based oil and gas companies were given special treatment when Scott Pruitt, a former Oklahoma attorney general and state lawmaker, served as head of the agency.The Environmental Integrity Project (EIP), Sierra Club, and Environment Texas sent a letter to EPA Assistant Administrator Susan Bodine on Monday to express concern about the EPA’s handling of Clean Air Act violations by oil and gas companies in Oklahoma. In their letter, the groups cited a new EIP report that found unequal treatment of oil and gas companies based on where they are headquartered.Researchers at EIP looked at six different oil and gas companies that had violated the Clean Air Act, three of which are based in Oklahoma. According to the report, the three Oklahoma-headquartered companies have yet to be penalized for their Clean Air Act violations. Three companies based in other states that committed similar violations have, under both the Obama and Trump administrations, been cumulatively fined millions of dollars and are spending more than $100 million in total on clean-up costs, the researchers found. “We respectfully request that you exercise your authority, and demonstrate that Oklahoma corporations are not subject to a more relaxed ‘rule of law’ than the one that applies to their competitors,” officials with the three environmental groups wrote in their letter to Bodine. Over the last three years, the EPA penalized three non-Oklahoma oil and gas companies — Noble Energy of Texas, PDC Energy of Colorado, and Slawson Energy of Kansas — a combined $9.55 million for air pollution violations. The companies also signed consent decrees that required them to spend a total of $146 million on cleanup and environmental mitigation efforts. The mitigation measures are expected to reduce more than 20,000 tons of air pollution per year, EIP found in its research. In its review of EPA records for three Oklahoma-based companies — Devon Energy, Chesapeake Energy, and Gulfport Energy — EIP found that they received violation notices for methane leaks at their facilities.

Nebraska Supreme Court agrees to speed up oral arguments in Keystone XL pipeline case --  Citing a looming 2019 deadline, the developer of the Keystone XL pipeline has requested, and been granted, expedited arguments in a legal effort to block the $4 billion project.The ruling by the Nebraska Supreme Court on Tuesday most likely means that oral arguments, barring new motions or scheduling conflicts among attorneys, will be heard in October in the case pitting landowners, Native American tribes and environmental groups against pipeline developer TransCanada.The landowners are seeking to nullify the Nebraska Public Service Commission’s 3-2 approval in November of a pipeline route across Nebraska. The lawsuit claims, among other things, that TransCanada didn’t formally seek approval of the “mainline alternative” route that was approved.The selection of an alternative route meant that the company needed to negotiate right-of-way agreements with an unexpected, new group of landowners in northeast and eastern Nebraska.In the motion requesting an expedited hearing, attorney Jim Powers of Omaha, who represents TransCanada, said a “segment” of property owners are unwilling to negotiate until the lawsuit before the State Supreme Court is resolved. A ruling is expected by the end of the year. TransCanada faces a deadline of November 2019 to either work out a deal with a landowner or go to court to obtain right of way via eminent domain.

Dakota Access pipeline builder wants state lawsuit dismissed - — The company that built the Dakota Access oil pipeline wants a North Dakota judge to throw out a lawsuit over its ownership of agricultural land, claiming it's not violating a Depression-era state ban on corporate farming that it calls unconstitutional anyway. Attorneys for Dakota Access LLC also asked the judge in court documents filed Tuesday to prevent North Dakota Attorney General Wayne Stenehjem from enforcing the state's anti-corporate farming law. It prohibits large corporations from owning and operating farms in order to protect the state's family farming heritage. Stenehjem's office filed a civil complaint July 3 alleging that the pipeline company's continued ownership of ranch land it bought in September 2016 violates the law. He wants the court to fine the company $25,000 and order it to sell the land within a year or face more fines. Dakota Access bought 12 square miles of ranchland in an area of southern North Dakota where thousands of pipeline opponents gathered to protest in 2016 and 2017. It cited the need to protect workers and help law officers monitoring the protests. Stenehjem deemed the purchase temporarily necessary to provide a safer environment and reached a deal with the company under which he agreed not to immediately sue. The agreement expired at the end of June, and he sued. He declined comment Wednesday on the company's formal response. Dakota Access attorney Lawrence Bender argues that the company's ownership of the land falls within an exception within the anti-corporate farming law that allows for companies to own farmland if it's necessary for an industrial project. He also said the land continues to be used for agriculture.

A year later, still no federal charges against 'saboteurs' of Dakota Access Pipeline--why? - It's been one year since two Iowa environmental activists claimed responsibility for deliberately causing millions of dollars in damage to the Dakota Access Pipeline project, but federal prosecutors haven't filed charges against them. The activists — Jessica Reznicek, 36, and Ruby Montoya, 28 —  have gone into hiding. The lack of federal prosecution has some Iowans wondering whether charges will ever be filed. "As representatives of people who worked on the pipeline project, it's a little disturbing," said Richie Schmidt, an Iowa organizer for Laborers International Union of North America. "Obviously, we want to to see anybody who vandalizes any project that our members are working on brought to justice." Rachel Scherle, a spokeswoman for the U.S. Attorney's Office in Des Moines, declined to say last week why no criminal charges have been filed against either Reznicek or Montoya. But she indicated the matter hasn't been dropped by federal authorities. Reznicek and Montoya, who had been involved in the Des Moines Catholic Workers' social justice movement, held a news conference July 24, 2017, in Des Moines outside the Iowa Utilities Board's offices. There, they provided a detailed description of their "direct action" campaign to stop the pipeline while it was under construction. The two women said their sabotage included burning at least five pieces of heavy construction equipment in northwest Iowa's Buena Vista County. They also used oxyacetylene cutting torches to damage exposed, empty pipeline valves up and down the pipeline route through Iowa and into part of South Dakota. They said they later used tires and gasoline-soaked rags to burn multiple valve sites and electric units, as well as heavy equipment on pipeline easements. The damage to heavy equipment in Buena Vista County alone was estimated at exceeding $2.5 million, while damage at a series of work sites elsewhere in Iowa after November 2016 was described as either undetermined or for lesser amounts. Frank Cordaro, a Catholic Workers activist and former Catholic priest, told the Des Moines Register that the two women left Des Moines late last September. He said they have "dropped out" to destinations that they are not disclosing. Both Cordrao and anti-pipeline leader Ed Fallon of Des Moines suspect the energy company doesn't want a trial. "What is it that Dakota Access is afraid will come out? Obviously, it could be pretty damaging," Fallon said.

Top U.S. Shale Oil Fields Decline Rate Reaches New Record.... Half Million Barrels Per Day While the U.S. reached a new record of 11 million barrels of oil production per day last week, the top five shale oil fields also suffered the highest monthly decline rate ever.  This is bad news for the U.S. shale industry as it must produce more and more oil each month, to keep oil production from falling. According to the newest EIA Drilling Productivity Report, the top five U.S. Shale Oil fields monthly oil decline rate is set to surpass a half million barrels per day in August.  Thus, the companies will have to produce at last 500,000 barrels of new oil next month just to keep production flat.Here are the individual shale oil field charts from the EIA's July Drilling Productivity Report:The figures that are shown above the UP arrow denote the forecasted new production added next month while the figures above the DOWN arrow provide the monthly legacy decline rate.  For example, the chart on the bottom right-hand side is for the Permian Region.  The EIA forecasts that the Permian will add 296,000 barrels per day (bpd) of new shale oil production in August, while the existing wells in the field will decline by 223,000 bpd.If we add up these top five shale oil fields monthly decline rate for August will be 503,000 bpd.  Thus, the shale oil companies must produce at least 503,000 bpd of new oil supply next month just to keep production from falling.  And, we must remember, this decline rate will continue to increase as shale oil production rises.We can see this in the following chart below.  Again, according to the EIA's figures, the top five U.S. shale oil fields monthly legacy decline rate increased from 398,000 bpd in January to 503,000 bpd for August: In just the first seven months of 2018, the total monthly decline rate from these top shale fields increased by 26%.  These massive decline rates are the very reason the shale oil and gas companies are struggling to make money.  A perfect example of this is PXD, Pioneer Resources.  Pioneer spent $818 million on capital expenditures (CapEx) for additions to oil and gas properties (drilling and completion costs) during Q1 2018, brought on 63 horizontal wells in the Permian, and only added 9,000 barrels per day of oil equivalent over the previous quarter.  So, how much Free Cash Flow did Pioneer make with oil prices at the highest level in almost four years??  Well, you're not going to believe me... so here is Pioneer's Cash Flow Statement below:

Drilling in Arctic National Wildlife Refuge to get fast review -  The Interior Department has commissioned an expedited environmental review of the impact of leasing part of the Arctic National Wildlife Refuge for oil and gas drilling, according to a document released under the Freedom of Information Act.The nearly $1.7 million contract that Interior signed April 8 with Colorado-based Environmental Management and Planning Solutions, obtained by the liberal think tank Center for American Progress, shows how rapidly the Trump administration is moving ahead with its plans to open up the refuge’s coastal plain to energy exploration.It outlines a schedule ending with a lease sale notice to be issued next summer. That gives the firm three months to complete a scoping report, which will set the terms of how federal officials will gauge the impact of energy development in the refuge. The report must reflect the input of local tribes and the hundreds of thousands of public comments that have been submitted. Congress passed tax legislation in December directing Interior to conduct two lease sales by December 2024, each covering 400,000 acres, in the refuge’s coastal plain. Many environmentalists and scientists have sought to block energy exploration within the nearly 19 million-acre refuge on the grounds that it would disturb denning polar bears, disrupt a major migration corridor for waterfowl and porcupine caribou, and damage wilderness habitat that has enjoyed federal protection for decades. In an interview Monday, Alaska Natural Resources Commissioner Andrew T. Mack said that state officials realize Interior has laid out a “compressed” schedule and that they are devoting resources to ensure the assessment is done right.  “We’re not going to shy away from saying there will be impacts. And we need to figure out ways to mitigate those impacts.” Geoffrey Haskett, who served as the U.S. Fish and Wildlife Service’s regional director between 2009 and 2016, said in an interview that such reviews typically take two to three years.  “The idea of imposing an arbitrary deadline like this is just horrific to me,” said Haskett, who is now president of the National Wildlife Refuge Association. “I think they’re going to make mistakes because they’re moving so fast. They’re certainly not going to get much input on this.”

This Civilization is Collective Murder-Suicide - The end point for everything the extreme energy civilization is doing: The Earth nothing but a desert with ruins.  Civilization is destruction. For humanity and the Earth it is death. We’re bogged down in it. It’s driving us to the brink of nuclear war at the same time it’s giving us all cancer. Most civilized people want the missiles to fly, and most want cancer for themselves and their children. Their actions prove it.“Growth”, the idol of fundamentalist worship by all the civilized, including “environmentalists” and the climate crocodiles, is physically unsustainable and must collapse with unfathomable consequences. It is cancer as well. Symbolically growth is directly analogous to cancer metastasis, and growth’s reality depends upon physically killing us with cancer, starvation, bullets.Look everywhere Western globalization has spread, look at any government, any Leader, any journalist, any academic, any NGO, see what they unanimously say: If you’re not rich, then die.It is self-evident that anyone who thinks this way also will think murderously, though few are as honest as the Canadian bankster who openly says, “There are some people that are going to die in protesting construction of this pipeline.”   What this means is, “We should kill anyone who is in the way of our tyranny, whether as activists or simply as obstacles.” This means the entire 99%. All system cadres think this way and intend to act on this. This is the intended consummation of modern civilization, the total murder of the Earth and murder-suicide of humanity.  Smash the bottlenecks.

Permitting problems put brakes on key U.S.-Canadian transportation projects -  Degraded infrastructure, unsteady political support for financing transportation projects and regulatory differences between American states and Canadian provinces dominated discussion Monday during the transportation sessions at the Pacific Northwest Economic Region’s annual summit being held in Spokane. Spanning any ideological divide among the governmental and private sector participants, however, was the push to simplify the permitting process for large-scale infrastructure projects. Zak Andersen, an executive at BNSF Railways, said the process that gives permission to build those projects, such as the $680 million Millennium Bulk Terminals-Longview project, has been “hijacked.” Washington state rejected permits for the coal terminal, citing “significant and unavoidable harm” to the environment, after a lengthy and heated public process. “Where the system has gone awry, it’s become too easy to hijack the process,” he said, referring to special interest groups that he characterized as having outsized influence. He said the scope of the coal project in the state’s definition stretched from Longview “to the coal mines of Wyoming.” Andersen, whose company has joined a lawsuit opposing the state’s decision, said defining a project’s scope in such a way allows for “the worrying of things that seem beyond what the project is being permitted for.” “It makes building anything impossible,” he said. “It’s becoming a long, drawn-out process simply due to inertia. You folks need to get off the bench.” 

Canada to Miss Deadline for Quickly Reselling Trans Mountain Pipeline - About a dozen parties are interested in the Trans Mountain oil pipeline, but the Canadian government won’t reach a deal to flip it before a marketing deadline with Kinder Morgan Inc. closes Sunday, according to people familiar with the situation.  The government’s C$4.5 billion ($3.4 billion) purchase of the pipeline and expansion project gave it to July 22 to co-market the pipeline with an eye to selling it to a third party. A quick sale would have effectively allowed the government to substitute in another buyer for the current deal to be finalized. That deadline Sunday is set to pass. The deal will be finalized with the government as the new owner, and it will seek a new buyer without Kinder Morgan’s help, amid fears of legal and political delays. About a dozen parties have signed non-disclosure agreements as part of the process for a potential resale, and the project is seen likely to end up being bought by a Canadian-led consortium, as opposed to a single buyer, the people said. The Trans Mountain sale is scheduled to close in either the late third quarter or early fourth quarter, as the project faces continued opposition from the British Columbia premier and awaits a key court ruling. Kinder Morgan’s Canadian unit declined to comment beyond previous statements that it is working with the government to find a buyer, and it referred questions on the status of those efforts to the government. A spokesman for Finance Minister Bill Morneau declined to directly say if there’d be a sale to a third party by July 22, but said the government won’t hold the pipeline forever.  Finding a third-party purchaser by the Sunday deadline would be difficult because the obstacles that Kinder Morgan cited in its threat to abandon the project still exist, said Kevin McSweeney, a fund manager at CI Investments in Toronto. British Columbia has given no indication it will drop efforts to impose additional regulations on the pipeline, and a court case over the project is still under way, he said. Third-party purchasers are likely to be attracted to the pipeline once those issues are resolved, he said.

With Trump Going Soft on Nord Stream, Congress Moves to Kill the Pipeline - After U.S. President Donald Trump’s embrace of Russia at the Helsinki summit, lawmakers in the U.S. Congress are again putting Moscow’s huge and controversial European energy project in the crosshairs, rolling out a new slate of sanctions that could kill the Nord Stream 2 pipeline and boost U.S. energy exports to Europe. Tougher U.S. sanctions on the $11 billion natural gas pipeline from Russia to Germany across the Baltic Sea, are about the only thing that could kill the project at this point. What’s less clear is whether U.S. natural gas will be able to make up the difference—and whether Europe wants or needs Washington’s help in managing its own energy security.  On Wednesday, Republican Sens. John Barrasso and Cory Gardner introduced a bill that would make mandatory U.S. economic sanctions on companies building the Nord Stream pipeline. Last year, Congress passed tough potential sanctions on Russian energy projects, but the new bill would make them explicitly applicable to Nord Stream and mandatory, rather than leaving them to the president’s discretion. The bill also seeks to streamline the export of more U.S. natural gas to allies such as Japan and members of NATO.  Barrasso has been trying to boost U.S. energy exports to allies for years and has been a vocal critic of Nord Stream 2. But energy analysts viewed the introduction of the new bill as a timely response to Trump’s softer language on the Russian energy project in his meeting with Russian President Vladimir Putin in Helsinki on Monday. The United States has been railing for years against big Russian pipeline projects, including Nord Stream 2, that could redouble the European Union’s reliance on Moscow for energy, thus handing Russia potential leverage over the continent’s economic lifeblood. But by promoting U.S. energy exports as a replacement for Nord Stream 2, Washington is sending the wrong message on Russian energy coercion, said Brenda Shaffer, an energy expert at Georgetown University. “Linking U.S. gas exports to anti-Nord Stream 2 legislation undermines the U.S. position against the pipeline,” she said, because it “reinforces Moscow’s claim that the U.S. is acting out of self-interest, despite that not being the case.”

US bill against Nord Stream 2 natural gas pipeline ‘absurd’ -- Russian energy minister Alexander Novak Friday described a US bill introduced by senator John Barasso, Republican-Wyoming, that would impose mandatory sanctions against the Nord Stream 2 pipeline as “absurd”. “This is, in my opinion an absurd bill that offsets all market rules,” Novak told journalists. Speculation is growing about the fate of the Nord Stream 2 project, which would double Nord Stream’s capacity and allow for shipments of up to 110 Bcm/year of Russian gas. The project has divided opinion in Europe, with some including the European Commission and many countries in Eastern Europe opposing the project on the grounds that it will increase Europe’s dependence on Russian gas. It has not been blocked yet, however, and five European companies continue to invest in it.

Natural gas storage injections slump in NW Europe on Nord Stream pipeline flow suspension -- Injections into natural gas storage facilities in northwest Europe dropped significantly with the start of two weeks of maintenance on the key Nord Stream gas pipeline from Russia to Germany, an analysis by S&P Global Platts showed Friday. Nord Stream -- which recently flowed at its maximum capacity of 158 million cu m/d -- was closed Tuesday for annual maintenance. The outage has left the northwest European market short of a significant chunk of supply amid strong demand for storage restocking and in the power sector. The slump in storage injections in the region comes at a time when inventories are already lagging 1.1 Bcm behind the 23 Bcm recorded a year ago and this could put pressure on supply and prices next Winter. Nord Stream flows drop offset by storage and Yamal Net storage injections fell week on week to just 131 million cu m/d on Tuesday, the first day of the Nord Stream maintenance, compared with an average of 175 million cu m/d in the week July 9-13, according to data from S&P Global Platts Analytics.

Europe to become 'massive' buyer of US LNG, Trump says -- Europe will build more terminals to import US liquefied natural gas, the head of the European Commission told US President Donald Trump during a meeting aimed at averting a transatlantic trade war. “They want very much to do that, and we have plenty of it,” Trump said, referring to the US shale boom, which has unleashed record supplies of the heating and power-plant fuel. “They will be a massive buyer, and they will be able to diversify their energy supply.” Imports to Europe are poised to rise almost 20% by 2040 from 2016 levels, according to International Energy Agency. While Russia has long been the region’s top supplier, it’s now facing significant challenges from both the US and Qatar, rivals with vast natural gas reserves. Trump and the Commission president, Jean-Claude Juncker, spoke to the media after meeting at the White House. The comments quickly sparked investor reaction for both Cheniere Energy, America’s largest exporter of LNG, and Tellurian, which is working to get its export project in Louisiana approved. The comments come as at least four new US LNG export projects are slated to start up by 2020. Since early 2016, the US has shipped 41 cargoes of LNG to Europe, according to ship tracking data compiled by Bloomberg. That’s about 10% of US LNG exports. Europe is looking to step up gas imports with its largest production field in the Netherlands slated to shut and France moves toward shutting nuclear power plants. After Cheniere began shipping gas two years ago from its Sabine Pass terminal in Louisiana -- the first to send shale output abroad -- the US became a net exporter of the fuel for the first time since the 1950s. This year, Dominion Energy opened the first export facility on the East Coast, providing a quicker route to European buyers. Many of the continent’s buyers, particularly in Eastern Europe, are eager for alternatives to Russian supply. Gas flow to Europe was disrupted twice, in 2006 and 2009, over a pricing dispute between Russia and Ukraine. Meanwhile, Lithuania and Poland have built terminals to import cargoes of liquefied natural gas from overseas, reducing their reliance on Russia. But Russia relies on gas exports for its budget revenue and Europe is its biggest customer, meaning the nation will “protect its turf at all costs,” Manas Satapathy, a MD for energy at Accenture Strategy, said in a telephone interview.

EU to build more terminals to import US LNG -- The European Union plans to import more liquefied natural gas (LNG) from the US to diversify its energy supply. European Commission President Jean-Claude Juncker said more terminals will be built in the region during his visit to the White House this week. He met with President Donald Trump yesterday to launch a new phase in the relationship between the US and the EU, including strengthening their co-operation on energy. Mr Juncker said: “We have decided to strengthen our co-operation on energy. The European Union will build more terminals to import liquefied natural gas from the US. This is also a message for others. We agree to establish a dialogue on standards. And we also agree to work on the reform of the WTO [World Trade Organisation]. This of course if based on the understanding that, as long as we are negotiating, unless one party would stop the negotiations, we hold off further tariffs and we reassess existing tariffs on steel and aluminium.”

Lean EIA Storage Data Expected as August Natural Gas Called Higher - August natural gas futures were set to open Thursday about 0.7 cents higher at around $2.782/MMBtu, with the market turning its attention to upcoming weekly Energy Information Administration (EIA) storage data that could once again show a below-average injection.Estimates for the report, set to release at 10:30 a.m. ET, point to a lean build that would grow the year-on-five-year deficit for the third straight week, as summer heat has kept stockpiles in check despite record-level production.A Bloomberg survey showed traders and analysts expecting a median 36 Bcf injection for the week ended July 20, with a range of 28 Bcf to 52 Bcf. IAF Advisors analyst Kyle Cooper called for a 30 Bcf injection, while Intercontinental Exchange EIA Financial Weekly Index futures settled Wednesday at an injection of 25 Bcf.Last year, EIA recorded a 19 Bcf injection, while the five-year average is a build of 46 Bcf. Last week’s report covering the week ended July 13 missed to the bullish side of estimates at 46 Bcf, widening the stubborn year-on-five-year deficit to well over 500 Bcf.In recent weeks, the market has shown a tendency to shrug off the weekly storage number, with prices sometimes rising on a seemingly bearish report or falling when injections have missed to the low side, EBW Analytics Group CEO Andy Weissman said. “This week seems to be different,” he said. “Natural gas futures surged Wednesday, largely in response to the potential that today’s reported injection might be below 30 Bcf. The consensus forecast is for a reported injection of 35-36 Bcf this morning. A number of well respected prognosticators, however, are predicting injections between 23 Bcf and 30 Bcf.

US natural gas storage increases 24 Bcf to 2.273 Tcf: EIA — US natural gas in storage increased by 24 Bcf to 2.273 Tcf for the week ended July 20, the US Energy Information Administration reported Thursday. The build was much less than an S&P Global Platts' survey of analysts calling for a 35 Bcf addition.The injection was more than the 19 Bcf build reported during the corresponding week in 2017 but well below the five-year average addition of 46 Bcf, according to EIA data.As a result, stocks were 705 Bcf, or 24%, less than the year-ago level of 2.978 Tcf and 557 Bcf, or 20%, less than the five-year average of 2.784 Tcf.The injection was smaller than the 46 Bcf build reported the week prior as gas-fired power generation jumped to year-to-date highs across Texas, the Southeast and the Midwest, according to data from S&P Global Platts Analytics.Small dips from onshore production in the Southeast and Texas also provided further downward pressure to this week's estimate.Despite the bullish build, NYMEX August Henry Hub natural gas futures only inched up 1 cent to $2.78/MMBtu following the 10:30 am EDT storage announcement.The EIA reported a 20 Bcf injection in the East to 527 Bcf, compared with 624 Bcf a year ago; a 23 Bcf build in the Midwest to 524 Bcf, compared with 742 Bcf a year ago; a 1 Bcf addition in the Mountain region to 145 Bcf, compared with 197 Bcf a year ago; a 2 Bcf withdrawal in the Pacific to 257 Bcf, compared to 294 Bcf a year ago; and an 18 Bcf pull in the South Central region to 820 Bcf, compared to 1.122 Tcf a year ago. Total inventories are now 103 Bcf less than the five-year average of 630 Bcf in the East, 162 Bcf less than the five-year average of 686 Bcf in the Midwest, 29 Bcf less than the five-year average of 174 Bcf in the Mountain region, 54 Bcf less than the five-year average of 311 Bcf in the Pacific, and 208 Bcf less than the five-year average of 1.025 Tcf in the South Central region.

Another Bullish Miss in EIA Storage Report Leads to Modest Rally - Another bullish miss on Thursday from the Energy Information Administration’s (EIA) weekly natural gas storage report failed to spark much of a rally as the market continues to count on production replenishing stockpiles once summer heat subsides.EIA reported a 24 Bcf injection into Lower 48 gas stocks for the week ended July 20, lower than most estimates and well below the five-year average 46 Bcf. Last year, EIA recorded a 19 Bcf injection. Last week’s EIA report covering the week ended July 13 also missed to the bullish side of estimates at 46 Bcf, as surging production has kept a lid on prices but can’t seem to shrink deficits.  Wednesday’s 4.3 cent rally for the front month suggested the market was anticipating a tight EIA report, which may help explain why the immediate price response Thursday was muted. When the number was published at 10:30 a.m. ET, the August Nymex contract picked up about 2.0 cents to trade up around $2.790. By 11 a.m. ET, August was trading around $2.794, up about 1.9 cents from Wednesday’s settle. September, set to take over as the prompt month once August expires Friday, was trading around $2.776, up about 2.1 cents from Wednesday’s settle.Prior to the report, consensus estimates had the market looking for a build about 10 Bcf higher than the actual figure. A Bloomberg survey had produced a median 36 Bcf injection, with a range of 28 Bcf to 52 Bcf. Intercontinental Exchange EIA Financial Weekly Index futures came closer to the mark, settling Wednesday at an injection of 25 Bcf.Bespoke Weather Services said the figure came in about 9 Bcf below its estimate, largely because of a “massive draw” reported for the South Central region. “We had been looking for a small implicit revision from last week’s very tight print, but instead today’s print seemed to confirm last week,”

Japan June LNG imports fall 10.3% to hit 5.55 million mt, lowest since May 2016 — Japan's LNG imports dropped 10.3% year on year in June, hitting the lowest monthly volume in almost two years as supply from major producing countries such as Australia, Qatar and Malaysia fell, data from the Ministry of Finance showed Friday. June's imports came in at 5.55 million mt, the lowest since May 2016's 5.52 million mt. Australia sent 1.68 million mt of LNG, 29.6% less than a year earlier. Qatari imports fell 13.2% year on year to 756,846 mt while Malaysia supplied 677,337 mt, down 24.3%. Globally, supply shrank in the second quarter due to unplanned countenances in Qatar, Malaysia and Brunei combined with a natural disaster in Papua New Guinea, according to S&P Global Platts Analytics. Imports from Papua New Guinea have been recovering after the country was hit by a massive earthquake in late February. PNG volume rose 32.5% to 208,788 mt from May, but was still down 22.6% from a year earlier. Japan imported 180,313 mt of LNG from the US. According to S&P Global Platts ship-tracking software cFlow, the Golar Glacier and Maran Gas Alexandria delivered cargoes from Cove Point LNG to the Ohgishima terminal on June 6 and June 14, respectively. The Maria Energy also delivered a cargo from Sabine Pass to Japan's Himeji terminal on June 14, according to cFlow. The Japan Customs Cleared crude oil price was $76.344/b in June, rising 8.1% from May and soaring 46.2% year on year. Japan's long-term LNG contracts are often linked to the JCC crude price, but with a lag of a few months, so fluctuations in oil prices typically take some time to feed through into LNG prices.

Global Oil Discoveries See Remarkable Recovery In 2018 - Global discoveries of conventional oil and natural gas are seeing an exciting recovery with discovered resources already surpassing 4.5 billion boe in H1 2018, Rystad Energy analysis shows. The average monthly discovered volumes YTD are estimated at 826 million boe, up approximately 30% compared to 625 million boe in 2017. During H1 2018, Guyana led the top five countries in terms of total discovered resources added followed by the United States, Cyprus, Oman and Norway. These five countries hold three-fourths of the total resources discovered this year. The discoveries in Guyana, the United States and Cyprus are located in ultra-deepwater and are 100% owned by oil majors, indicating indicates that oil majors have started to re-focus on deepwater exploration.The biggest offshore discovery to date this year is believed to be the Eni-operated Calypso gas find offshore Cyprus, while the largest onshore discovery, a gas-condensate find, was reported on the Mabrouk North East prospect, operated by Petroleum Development Oman. ExxonMobil’s spate of oil discoveries continue in Stabroek block with three major oil discoveries reported in 2018 - Ranger, Pacora and Longtail, which together could hold almost 1 billion barrels of oil or more. These finds followed previous major discoveries on the block at Liza, Payara, Snoek and Turbot.The United States reported oil discoveries at Ballymore and Dover prospects in the Norphlet play in deepwater Gulf of Mexico. The Norphlet play, which is characterized by high-pressure, high-temperature (HPHT) conditions accompanied with complicated and elusive structures revealed to be fortunate for Chevron and a prevailing success for Shell. Chevron discovered a significant oil play at the Ballymore prospect with its first exploration well in the subtle play whereas the Dover discovery located 13 miles from the Appomattox host was Shell’s sixth discovery in the play. Related: Strong Dollar Could Cap Oil PricesCyprus marked its entry in the list owing to Eni’s promising gas discovery at Calypso 1 NFW ultra-deepwater well in Block 6. The discovery well encountered an extended gas column in rocks of Miocene and Cretaceous age, confirming the extension of “Zohr-like” play in the Cyprus Exclusive Economic Zone.

Global oil industry prepares for a revival - Oil producers are ordering more equipment and lining up drilling rigs for later this year, according to top industry executives, indications that international activity is picking up. The chief executives of Schlumberger Ltd. and Baker Hughes , owned in part by General Electric Co. , said customers are moving forward with large projects and even preparing to increase exploration for future ones. “The international recovery has finally started,” Schlumberger Chief Executive Paal Kibsgaard said during the company’s earnings call with analysts. “The backlog on integrated drilling projects is the most we’ve ever seen.” Over the past year, global oil activity has divided into two distinct stories. The U.S. has remained a bright spot for the oil industry, as frackers have withstood sustained low oil prices following a crash in 2014. Earlier this month, U.S. oil output hit 11 million barrels a day for the first time ever, according to federal estimates. Outside of the U.S., major oil conglomerates and national oil companies have pulled back production and stopped investing in costly offshore projects. .Oil prices reached 3 ½-year highs earlier this year, as Brent crude, the global benchmark, topped $80 a barrel. Prices have fallen a bit in recent weeks following a June OPEC meeting at which the cartel and Russia agreed to ramp up production by up to one million barrels a day, but have stayed above $70 since April. Baker Hughes CEO Lorenzo Simonelli said higher commodity prices are creating a good climate for renewed investment in oil production and exploration. “People are starting to firm up their plans for next year and you are starting to hear more about [spending] increases and projects moving forward,” Mr. Simonelli said. The international rig count is flat so far this year, but that may be starting to change. Mr. Kibsgaard said the company was mobilizing 90 land rigs outside the U.S. jointly with third-party drillers, which he called “unprecedented.” In another sign of global activity heating up, Baker Hughes said it had its largest number of orders for oil-field equipment since 2015. The uptick in activity comes as concerns over supply grow because of instability at some of the world’s biggest oil producers and geopolitical concerns. There have been large supply outages in Venezuela and Libya, and renewed U.S. sanctions pose a risk to supply in Iran. 

Profits For Oil Majors Soar Even As Wall Street Hoped For More - It was mostly a quiet week for oil prices, rising on the back of geopolitical tensions at the start of the week before losing those gains on Friday as the oil rig count increased. Earnings reports started trickling in this week, with strong performances across the board. The recovery of oil markets in the last year is starting to be reflected in earnings, although some share prices were battered as Wall Street had expected more.  Royal Dutch Shell nearly tripled its profits in the second quarter, year-on-year, and announced the beginning of a $25 billion share buyback program. Investors weren’t convinced, and Shell’s stock sunk nearly 4 percent on the news. The skepticism may have been the result of the 1.5 percent decline in production, which stemmed from field declines and asset sales. Also, Shell’s earnings came in a little under expectations. Shell’s gearing, or debt ratio to capitalization, declined from 24.7 percent in the first quarter to 23.6 percent in the second, another sign of progress. . BP agreed to purchase BHP’s shale assets for $10.5 billion. BHP has been trying to unload its shale assets for a while, after losing some $19 billion on shale, so the sale is welcome. For BP, the acquisition is an enormous splash, making it a major player in U.S. shale. The assets are located in the Eagle Ford, Permian and Haynesville shales. “This is a transformational acquisition for our (onshore U.S.) business, a major step in delivering our upstream strategy and a world-class addition to BP’s distinctive portfolio,” BP Chief Executive Bob Dudley said in a statement. BP also hiked its dividend for the first time in almost four years and also announced a $6 billion share buyback.  Chevron reported earnings of $3.8 billion for the second quarter, more than twice as much as a year earlier. Like some of the others, earnings still came in a bit under expectations – shares were down 2 percent on the news. Meanwhile, ExxonMobil (NYSE: XOM) fell 4 percent in early trading on Friday after undershooting expectations. The oil major said that production fell 7 percent in the second quarter, year-on-year, even as Permian and Bakken production jumped. Exxon earned just under $4 billion for the quarter, up 18 percent from a year earlier.

In China's far west, CNPC vows $22 billion spend to replace ageing oil wells (Reuters) - China National Petroleum Corp (CNPC) said on Wednesday it will spend more than 150 billion yuan ($22 billion) by 2020 to boost oil and gas production in the western region of Xinjiang, aiming to offset falling output from ageing fields in northeast China. The increased spending will push output in the Xinjiang Autonomous Region to more than 50 million tonnes of oil equivalent between 2018 and 2020, CNPC said. The investment is equivalent to the total expenditure by CNPC’s listed unit PetroChina, China’s top oil and gas producer, for oil and gas exploration and production in 2017. CNPC’s Xinjiang operations churned out 11.45 million tonnes of crude oil last year, while the company produced 23.5 billion cubic meters of gas, equivalent to 17.1 million tonnes of gas, from the Tarim in the region, one of China’s largest gas basins, according to PetroChina’s 2017 annual report. Based on these figures, the new investment would boost output from the region by at least 75 percent by 2020. The spending spree underscores the need to replace output from the Daqing oilfield in the northeastern province of Heilongjiang as well as a push to increase the country’s natural gas output to meet growing demand for the fuel as part of Beijing’s shift away from coal. Beijing also wants to increase development in the unruly Xinjiang region, which borders Central Asia, where hundreds have died in ethnic unrest in recent years.  “A portion of the money would be spent on the logistics, storage tanks, and also downstream gas infrastructure for the southern part of Xinjiang to use natural gas for environmental reasons.” The boost is unlikely to affect import demand from the world’s top crude importer because new output will replace lost capacity elsewhere. Still, it reflects the company’s growing confidence after a surge this year in the price of crude oil. State oil majors have also grabbed a bigger share of the lucrative fuel export market as smaller independent refiners struggle with tough new taxes and an environmental crackdown. 

China data: Commercial crude stocks unlikely see further build in H2 — China is unlikely to build its commercial stocks of crude oil in the second half of 2018 as refiners prefer to keep their inventory low for daily operation amid price volatility, analysts said last week. "Chinese refiners would like to build up crude oil stocks when oil prices are rising, which helps them lift their refining margins. Currently, however, oil prices are unlikely to rise further and cross $80/b, given the strong dollar, which discourages refiners from building their stocks," a Beijing-based analyst said. Chinese refiners normally process crude oil barrels that they fixed 1-2 months ahead, while the domestic price of oil products are set based on the movement of a basket of international crude prices in the previous 10 working days. The pricing mechanism for crude oil and oil products determine that refiners earn more when crude prices are rising as they can buy feedstock low and sell products at a high price. International crude prices have been on an uptrend since June 22, 2017, with ICE Brent hitting a multi-year high of $80.49/b on May 22 this year. But since then, the benchmark has fluctuated but stayed below $80/b. Moreover, due to a depreciating yuan, the cost of holding stocks was rising, a Singapore-based analyst said. The yuan fell sharply to one-year low of Yuan 6.767 against the dollar at 4:30 pm Singapore time on Friday from 6.2771 on April 17. Most Chinese refiners do not hedge against foreign exchange risk.

Germany Encourages India To Keep Buying Oil From Iran - Germany’s minister of state for foreign affairs has encouraged India to continue buying Iranian oil, despite pressure from the United States, which Niels Annen called “irritating, to put it mildly.” “I am not a salesman for Iran but I have an impression that India is willing to continue buying oil from Iran and this will be a very important statement,” Annen told Indian media, as quoted by Sputnik, also noting that whatever New Delhi decided, it would be a sovereign decision. India is Iran’s top oil client, and it is also one of the countries that are most heavily dependent on oil imports. This means that the consequences of U.S. sanctions on Tehran will spread to India, which already has a problem with too high international oil prices. India is a strong U.S. ally in Asia, but it has also been building better relations with Tehran, which puts it in a sensitive position. In May, when President Trump announced that the United States would pull out of the Joint Comprehensive Plan of Action, more commonly known as the Iran nuclear deal, India’s Foreign Minister said that India will continue importing Iranian crude despite U.S. sanctions, adding that that India only honors sanctions imposed by the United Nations, but not ones introduced by individual countries. Nevertheless, Iranian crude oil imports into India fell by 15.9 percent in June from May, or to 592,800 bpd from more than 705,000 bpd in the previous month. The drop suggests that despite its initially tough stance on U.S. sanctions, Indian refiners have started changing their mind as the November 4 deadline to wind down business relations with Iran draws nearer. An Iranian official from the embassy in New Delhi then threatened India that it might lose its “special privileges” if it stops buying Iranian crude in November. Other Tehran officials were quick to call the threat a misquote, and went on to assure India that Iran will continue to ensure a stable supply of crude for its regional partner.

Can Iran Circumvent U.S. Sanctions? - On August 6th, the first batch of sanctions against the Islamic Republic will go into effect. This includes sanctions on the acquisition of US dollar banknotes by Iran's government, sanctions on its trade in gold and other precious metals, sanctions on sales and transfer of aluminum, steel, coal, and graphite, and sanctions on Iran's automotive sector. However, the second set of sanctions of November 4th will hit the crucial energy and banking sector. With the announcement of the re-installation of sanctions by President Donald Trump, Iran is in a unique position. Although the threat of sanctions is hanging over the country like the Sword of Damocles, Tehran is in a relatively comfortable position internationally to withstand pressure from Washington as the other signatories of the JCPOA remain supportive. Germany, France, and the UK have promised to soften the pain for Iran in order to keep the country in the nuclear agreement. In recent announcements, the current U.S. administration said that it intended to hit Tehran where it hurts by bringing their oil exports to virtually zero. However, the potential risk of a price explosion globally due to decreasing production in other regions such as Venezuela, Nigeria, and Libya, has somewhat softened Washington’s approach. Waivers could be provided to some importers. For now the current regime has restricted itself to mere threats and announcements, but as domestic pressure from hardliners continues to rise, Iranian President Hassan Rouhani could soon be forced to reinvigorate the nuclear program. Iranian officials have already been ordered to start preparations to deploy machines for advanced nuclear enrichment, putting pressure on European states to provide incentives to keep the Islamic Republic in the nuclear accord.   The first sign of the French, British and German governments falling through on their promise, came in the week of 16 July. Iran was told by the European powers that they are investigating activating accounts for the Iranian central banks with their national central banks in a bid to open a financial channel for Iran to continue its economic activities in euro, sterling, and other denominated accounts, thus bypassing the dollar. This is significant as companies could be restricted in their access to the dollar as a consequence of continuing business in Iran. Furthermore, Washington intends to impose secondary sanctions on firms dealing with Iran, meaning that companies which are active in both countries will face sanctions in the U.S.

Trump's Twitter War with Iran Spotlights Vital Oil Route - The war of words between U.S. President Donald Trump and his counterpart in Iran over oil exports and sanctions is shining a spotlight on the narrow, twisting conduit for about 30 percent of the world’s seaborne-traded crude. The Middle East’s biggest oil exporters rely on the Strait of Hormuz, the passage linking the Persian Gulf with global waterways, for the vast majority of their crude shipments -- some 17.5 million barrels a day. Should a regional conflict block that bottleneck, three of the largest Gulf Arab crude producers have pipeline networks that would potentially enable them to export as much as 4.1 million barrels via alternative outlets, according to Bloomberg calculations. Even so, this amount of oil, if sent by pipeline, would be less than a quarter of the total that typically sails on tankers through Hormuz. Iran has renewed threats to block the Strait since the U.S. announced its plan to reimpose sanctions and cut shipments from OPEC’s third-largest producer to zero from about 2.5 million barrels a day now. The U.S. president warned Iranian President Hassan Rouhani to “never, ever threaten the United States.” Trump’s tweet came hours after Rouhani warned the U.S. against endangering Iranian oil exports and called for improved relations with neighbors, including rival Saudi Arabia. Saudi Arabia and the United Arab Emirates, two of America’s closest friends in the Middle East and geopolitical adversaries of Iran, both have pipeline networks that bypass Hormuz. Iraq has one operational pipeline to a Turkish port on the Mediterranean Sea. All four countries are members of the Organization of Petroleum Exporting Countries and depend on the Strait to export their oil. The total capacity of pipelines that could be used instead of Hormuz is about 7.1 million barrels a day, though some of that capacity is currently taken up by oil sent to export markets or domestic refineries. Saudi Arabia and Abu Dhabi, the capital of the U.A.E., are each using less than half of the respective pipeline capacities, while a link from northern Iraq is about two-thirds utilized, Bloomberg data show. “Actual export capacity that avoids the Strait is limited,” 

Khamenei backs threat to stop Gulf exports if oil sales halted --Iran's Supreme Leader Ayatollah Ali Khamenei has supported a suggestion by President Hassan Rouhani who hinted earlier this month that Tehran may block regional oil exports if its own sales are stopped following the US' withdrawal from a 2015 nuclear deal with world powers. Rouhani's apparent warning on July 3 that Iran may disrupt oil shipments from neighbouring countries came in reaction to looming US sanctions and efforts by the administration of President Donald Trump to force all countries to halt purchases of Iranian oil.Even though Rouhani did not mention the Strait of Hormuz, his comments were nonetheless seen as a threat to the narrow strategic passageway located between Iran and Oman, through which at least 18.5m barrels of oil moved every day in 2016, according to a US energy department report.The strait is not only used by Iranian ships, but also by Gulf countries who rely on safe passage through the narrow chokepoint to export their oil and gas.  "Remarks by the president ... that 'if Iran's oil is not exported, no regional country's oil will be exported,' were important remarks that reflect the policy and the approach of [Iran's] system," Khamenei's official website quoted him as saying on Saturday.He went on to describe Rouhani's remarks as "important", adding that they "reflect the policy and the approach of [Iran's] system".The comments come as the US demands that all countries end imports of Iranian oil by November 4 as part of its new policy towards Tehran after Washington unilaterally pulled out of the Joint Comprehensive Plan of Action (JCPOA), known colloquially as the Iran nuclear deal.

If Iran's oil export is blocked, no other country in region will export oil either: Imam Khamenei - The Foreign Minister, staff and officials of the Ministry of Foreign Affairs as well as Iranian ambassadors and senior diplomats serving abroad met with the Leader of the Islamic Revolution—Ayatollah Khamenei—this morning [Saturday] July 21, 2018. At this meeting, the Leader of the Islamic Revolution described the assumption that the country's problems can be solved by negotiations or relationship with the U.S. ‘an evident mistake’ and added: "The U.S. has fundamental issues with the essence of the Islamic establishment. Moreover, many countries in Africa, Asia or Latin America have relations with the U.S., and yet they are facing plenty of problems.” Referring to the deeply-rooted hostility the U.S. practices against the Islamic Republic, Ayatollah Khamenei reiterated: "The American officials seek the position and status they once enjoyed in Iran before the 1979 Islamic Revolution and they will not be content with less than that." He regarded the United States’ opposition to the nuclear capability, high enrichment power, and the presence of Iran in the region, as a result of their deep animosity against the Islamic Republic's elements of sovereignty, adding: "The presence of Iran in the region reassures power and security of Iran, and is part of the strategic backdrop of the country; that is why the enemies oppose it.” The leader of the Islamic Revolution referred to the repeated mention of unreliability of the US by Iranian officials and stated: "I have always been insisting that we cannot trust the words or even signatures of the U.S. authorities. Hence, negotiating with the US is useless." 

Trump's war of words with Iran raises real world risks for oil markets --The threat of military conflict between the United States and Iran is rising, threatening to shut the world's busiest seaway for oil exports and send crude prices higher, analysts told CNBC on Monday. President Donald Trump on Sunday night warned Iranian PresidentHassan Rouhani on Twitter that his country would "SUFFER CONSEQUENCES THE LIKES OF WHICH FEW THROUGHOUT HISTORY HAVE EVER SUFFERED BEFORE" if Rouhani ever threatened the United States again. Trump appeared to be responding to comments over the weekend from Rouhani, who said, "Iran's power is deterrent and we have no fight or war with anybody but the enemies must understand well that war with Iran is the mother of all wars," according to an English translation on the Iranian president's official website.Oil prices jumped by about $1 per barrel on Monday following the back-and-forth, but ultimately pulled back to end the day roughly flat. "I think the market's a little complacent," said Bob McNally, founder and president of energy consultancy The Rapidan Group. "Maybe they're thinking this is a repeat of North Korea. The president will tweet about fire and fury and before you know it, the president and President Rouhani will be in Geneva having a meeting and talking about a deal." On Monday, Trump's national security advisor, John Bolton — who hasargued for launching a military strike on Iran's nuclear infrastructure —doubled down on Trump's late-night tweet.“I spoke to the President over the last several days, and President Trump told me that if Iran does anything at all to the negative, they will pay a price like few countries have ever paid before,” he said in a statement on Monday. While war is not imminent, the odds of a military incident occurring in the Persian Gulf is increasing..

Trump, Iran and the New Guns of August - James Stavridis, fmr Cmdr NATO - It was the midst of the Iran-Iraq War — which lasted eight years and cost more than half a million lives — and our mission was to keep the global shipping lanes open while Iran sought to control the vital strait through which flows some 35 percent of the world's seaborne oil. . Over the next year, the U.S. Navy would eventually attack the Iranian Navy, retaliating after one of our frigates was nearly sunk by an Iranian mine in Operation Praying Mantis. Eventually, Iraq and Iran settled their differences and an uneasy peace reigned between Arabs and Persians in the flat, hot, shallow waters of the Gulf, despite occasional flare-ups, for the next three decades. Until now. The tension in the Gulf — and especially in the Strait of Hormuz — is rising again, and the echoes of those conflicts 30 years ago are getting louder. The presidents of Iran and the U.S. this week exchanged harshly worded tweets (in 1987, a tweet was something a bird did on a spring morning) and oil markets are keeping a wary eye on developments. Israel released another cache of stolen Iranian documents showing the perfidy and determination of its nuclear program. What would a conflict centered on the Strait of Hormuz look like? How long would it last? And above all, what is the best strategy the U.S. could take toward Iran? We know that Iran has detailed plans to close the strait. It would use a variety of means including widespread mining; swarms of small, ultrafast patrol boats; shore-based cruise missiles; manned aircraft; and diesel submarines. Iran would employ a “layered offense,” stationing diesels in the Arabian Sea on the other side of the strait to harass incoming merchant ships; swarming U.S. and allied warships in the narrow confines of the strait itself; and mining sections of the shipping lanes. All of this, of course, is illegal under international law, but would have the intended consequence of challenging the U.S. and the Gulf Arabs while driving up oil prices exponentially. (Iran is able to export some oil from its southern coast, bypassing the strait, so its economy might suffer less than the Arabs'.) When Supreme Leader Ayatollah Ali Khamenei and President Hassan Rouhani talk about shutting down the strait, they mean it. They could accomplish it in just 48 to 72 hours, as commercial shipping, out of prudence and under pressure from insurers, would opt not to take the risk of passing through the waters.

What's at stake if trading at Strait of Hormuz is disrupted? --When Iranian President Hassan Rouhani dismissed the US efforts to block all of Iran's crude oil exports, he neither mentioned the Strait of Hormuz, nor the actions Tehran could take to disrupt trade at the world's busiest oil transit chokepoint, which translates to 30 percent of seaborne global oil exports every day. Rouhani's response was nonetheless interpreted as a threat to the narrow waterway located between Iran and Oman, where at least 18.5 million barrels of oil were transported every day in 2016, based on a US energy department report. He had earlier complained that "it has no meaning for Iranian oil not be exported, while the region's oil is exported", adding in a defiant tone that the US "will never be able to cut Iran's oil revenues". Before flying back fromEurope to Tehran early on Thursday, the Iranian leader renewed his criticism of the US, saying its move to choke off Iranian oil "shows they have not thought about its consequences".Ismali Kowsari, an Iranian Revolutionary Guard Corps (IRGC) commander, was more blunt, telling Iran's Young Journalist Club on Wednesday that if Iranian oil exports are prevented, "We will not permit the shipment of oil through the Strait of Hormuz."  The US military quickly responded, vowing to keep the Gulf waterways open to oil tankers and "ensure the freedom of navigation ... wherever international law allows."

Strait of Hormuz - The aorta of global oil flows  (pdf) Thomson Reuters paper on the Iranian threat to Hormuz

Is The Oil World In Panic Mode? - Oil markets have shown tremendous weakness in recent days, losing nearly seven dollars before rallying back a bit on Thursday.What’s causing it? Market analysts have been struggling to find a single reason for it, preferring to cite a cocktail of negative news and rumor to explain the downdraft.There have been reports of increased Saudi production to Asian customers, which many cite as a breaking of the dam of OPEC production guidelines – a break that would have many in the oil world in full panic mode.But I don’t see these promises as a collapse inside the cartel. The Asian contracts are merely adding stability to the oil markets in front of the threats of renewed U.S. sanctions on Iran. It’s been made clear that the Iranians won’t stand for any production increases that are over and above the agreed upon increases at their Vienna meeting last month – and equally clear that the Saudis don’t want to put that production agreement in jeopardy either.Many analysts are pointing to the reopening of Libyan oil ports to explain the quick drop in oil prices. But I also don’t find this explanation very compelling either: Even with these newly cleared impasses, Libyan exports are only marginally increasing, and most experts believe that Libyan production will continue to slide downwards through the rest of 2018. Others have cited the threat of slowing oil demand from China, but these predictions of slowing Chinese growth are as frequent, and usually as wrong, as dandelions growing in an open field. According to the COT reports, long positions have actually held fairly steadily through this latest 7 dollar downdraft in oil.  So – WHAT IS IT? Despite the varied answers that are appearing in the media for oil’s recent drop, I can find only one convincing reason that oil is recently acting poorly despite being one of the most fundamentally bullish oil markets I have seen in my 35 years trading it.  Commodities are different than stocks.  . Current September commodity futures contracts don’t care where the markets will be in 6 months. They only care about their price prospects on the day they expire – the 28th of August. Because of this, they are far more sensitive to current threats than stocks and have been responding to the disastrous economic threat of a continuing trade war between the US and China (and our allies).

Hedge funds slash bullish oil positions after prices peak: Kemp (Reuters) - Hedge fund managers have slashed bullish long positions in petroleum at the fastest rate in more than a year, as the gentle profit-taking in previous weeks turned into a rush for the exit.Hedge funds and other money managers cut their combined net long position in the six most important futures and options contracts linked to petroleum prices by 178 million barrels in the week to July 17.Net long positions were reduced by the third-largest number of barrels on record, according to an analysis of data published by regulators and exchanges going back to the first quarter of 2013.The net long position in petroleum was cut below 1 billion barrels for the first time since the middle of September 2017 (https://tmsnrt.rs/2LhKO1S).The reduction was concentrated on the long side of the market, where positions were slashed by 170 million barrels, as managers took profits after the year-long rally in oil prices.Short positions rose by just 8 million barrels and remain close to multi-year lows, confirming the shift in net positioning is being driven by profit-taking rather than any newfound bearishness.Long liquidation was concentrated in Brent, with net long positions in the North Sea benchmark cut by 95 million barrels, the largest one-week reduction since the series began in 2013. But portfolio managers also cut net long positions in NYMEX and ICE WTI (-34 million barrels), U.S. gasoline (-8 million barrels), U.S. heating oil (-17 million barrels) and European gasoil (-25 million barrels). Hedge fund managers hold most of their positions in futures and options with a relatively short duration to expiry since these tend to offer the most liquidity, so the sell-off has hit near-dated contracts especially hard.

Oil prices spurred higher by Trump's Iran tweet - Oil prices rose Monday amid a testy exchange between U.S. and Iranian leaders that underlined fears about the potential for disruptions to output in the Middle East and tighter global crude supplies. President Donald Trump "has provided a shot in the arm for prices to start the week, turning up the heat regarding tension with Iran once again," Matt Smith, director of commodity research at ClipperData, told MarketWatch. "Iranian crude exports have dropped to a six-month low so far in July -- a trend which will continue apace if the U.S. administration has its way." Trump on Sunday tweeted an all-caps message to his Iranian counterpart, Hassan Rouhani, warning that threats against the U.S. will be met with "consequences...few in history have suffered before." The tweet appeared to refer to comments Rouhani had made warning against hard-line U.S. policies on Iran. September Brent crude traded 42 cents, or 0.6%, higher, at $73.49 a barrel on ICE Futures Europe. The global benchmark had marked a weekly loss of about 3% through Friday, logging its third straight weekly fall. September West Texas Intermediate crude , which became the front-month contract at Friday's session close, added 30 cents, or 0.4%, at $68.56 a barrel Monday. The August contract, the U.S. benchmark, finished Friday at $70.46 a barrel, the highest level in a week, but not enough to reverse a 0.8% weekly drop, which was also the third decline in a row.   "Iran will not back down, and we think there's a Russian connection. With Trump finally talking tough about [Russian President] Vladimir Putin, we suspect that there were phone calls between Moscow and Tehran in recent days, and now there's a new crisis for Trump: Putin may have sent Trump a message--turn on me, and I'll play my Iranian card,"  . "There's a potential market impact here and that obviously is oil prices." Trump in May withdrew the U.S. from a 2015 international agreement to curb Iran's nuclear program, setting the stage for the reimposition of economic sanctions that are expected to hinder Iran's oil industry. Analysts have estimated up to 1 million barrels a day out of Iran's more than 2.5 million barrels a day of crude exports could be at risk.

Crude Oil Prices Settle Lower Despite Rising U.S.-Iran Tensions – WTI crude oil prices settled lower Monday as investor concerns faded about a global supply shortage that followed a heated exchange between the U.S. and Iran. On the New York Mercantile Exchange crude futures for September delivery fell 37 cents to settle at $67.89 a barrel, while on London's Intercontinental Exchange, Brent rose 0.03% to trade at $73.10 a barrel. Concerns about the prospect of an oil supply shortage returned Monday, albeit briefly, after President Donald Trump warned his Iranian counterpart, Hasan Rouhani, that threats against the U.S. would be met "with consequences few in history have suffered." Trump's tweet came as Rouhani said hostile U.S. policies towards Tehran could lead to "the mother of all wars." Trump in May said the United States would leave the 2015 Iran nuclear agreement, paving the way for sanctions, which are expected to hamper the Islamic Republic's Energy Industry, to resume. Yet the prospect of a big drop in Iranian crude exports has waned in recent weeks as the U.S. has hinted waivers could be in the offing to some buyers of Iranian crude. Some oil observers also cited escalating trade-war tensions between the U.S. and China as a headwind, keeping some investors sidelined amid remarks over the weekend at the G20 Finance Ministers Summit from U.S. Treasury Secretary Steven Mnuchin. "It’s definitely a realistic possibility,” Mnuchin said of Trump following through on a threat to impose tariffs on all $500 billion worth of goods the U.S. imports from China each year. Trump had threatened on Friday to impose tariffs on $500 billion of Chinese exports to the United States unless Beijing agreed major changes to its policies on technology transfer, industrial subsidy and joint ventures. The timid start to the week for oil prices comes as data on Friday showed speculators continued to trim bullish on oil for the second-straight week.

Oil market hits a cyclical pause: Kemp (Reuters) - Brent crude futures prices are trading in contango for the first time in 10 months, as traders anticipate an increase in crude availability during the remainder of 2018. The Brent calendar spread for the first six months slumped into a contango of 43 cents per barrel on Monday, from a backwardation of $3.50 as recently as April 26. Brent futures are trading in contango for the four contracts closest to delivery, from September 2018 through January 2019 (https://tmsnrt.rs/2JP7ykb ). Hedge funds and other money managers have sold a large number of long positions in recent weeks, depressing the front-end of the curve. Portfolio managers tend to hold a majority of their positions in contracts close to expiry because that’s where the liquidity is normally greatest. Just as position-building by the hedge funds spurred the rise in spot prices and calendar spreads in the second half of 2017 and first quarter of 2018, liquidation is now accelerating the correction. More fundamentally, traders have reacted to pledges of increased output and exports from Saudi Arabia, Kuwait, the United Arab Emirates and Russia. Saudi Arabia and its OPEC and non-OPEC allies have responded to pressure from the United States to counter rising prices by increasing their production. Extra barrels have been loaded in June and July, with more promised in August, ensuring increased availability in the second half of the year. Fears about slower consumption growth as a result of a strengthening dollar and the intensifying trade conflict between the United States and China are also weighing on oil prices. Because the oil market is forward-looking, concerns about the strength of consumption growth later in 2018 and 2019 are being discounted back to lower oil prices in the near-term. 

Oil Prices Head Upwards As Iran Hits Back - Oil markets appeared to take a breather on Monday, with prices largely unaffected by the increase in tensions between Iran and the United States over the weekend. On Tuesday, however, a strong response from Iran’s foreign ministry to Trump’s threats saw oil prices jump once again.. President Trump and Iranian President Hassan Rouhani traded threats over the weekend. Trump said on twitter in all-caps that Iran would “SUFFER CONSEQUENCES,” but oil prices gave up early gains on Monday, with traders seemingly dismissing the potential conflict between the U.S. and Iran. "I think the market's a little complacent," Bob McNally, founder and president of energy consultancy The Rapidan Group, told CNBC. Most analysts do not view conflict as necessarily likely, but if Iran shut the Strait of Hormuz, as Iranian officials hinted at, it would cause a painful shock to the oil market. "The numbers on a blockage or any kind of upset or military situation in the Strait of Hormuz, that is off to the races. Pick your number — $150, $200 — it goes sky high," John Kilduff of Again Capital, said on CNBC. "Because we are talking about an abject shortage of oil then in the global market."  . The Permian should be “ripe” for M&A deals, but the basin has been unusually quiet since Concho Resources paid $9.5 billion for RSP Permian earlier this year. There has been $35 billion worth of deals so far this year, down by nearly half for the same period in 2017. “The oil and gas world has not had a lot of corporate M&A, certainly relative to other sectors,” Jay Horine, global head of energy investment banking at JPMorgan Chase & Co., said in a Bloomberg interview. The pipeline bottleneck in the Permian and the discounted prices for Midland crude are scaring away investors, and the battered stock prices of Permian-focused drillers have made deals difficult. Analysts say that will change next year when pipelines come online, which could usher in a wave of M&A activity.

Oil rises as fears of oversupply ebb (Reuters) - Oil prices rose on Tuesday as the market shifted focus to the possibility of increased Chinese demand, drawing attention away from oversupply worries and trade tensions between China and the United States. Brent crude settled 38 cents higher at $73.44 a barrel, after it reached a session high of $74. U.S. West Texas Intermediate (WTI) settled up 63 cents, or nearly 1 percent, to settle at $68.52. Earlier in the day, WTI reached a high of $69.05. Reports that China will increase infrastructure spending helped lessen fears that U.S.-China trade tensions will reduce the country’s demand for oil, said Phil Flynn, analyst at Price Futures Group in Chicago. “That’s going to be very bullish for oil demand,” Flynn said. “Infrastructure spending from China in the past had really jacked up oil demand, and I think that’s adding some outside support for prices.” After an 8 percent decline from multi-year highs, buyers returned to the market, said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut. The supply-and-demand picture will remain favorable unless there are significant production increases from Russia and Saudi Arabia, McGillian said, because strong global growth has led to notable reductions in crude inventories. U.S. crude stocks fell last week by 3.2 million barrels, according to the American Petroleum Institute. The larger-than-expected draw caused futures to rise in post-settlement trade, with U.S. crude at $68.73 a barrel. [API/S] Inventories were forecast for a 2.3 million-barrel draw last week, according to a Reuters poll. Stockpiles at Cushing were expected to fall for the 10th consecutive week, traders said. [EIA/S] The commitments from Russia and Saudi Arabia to increase production, along with easing supply disruptions in Libya and decreases in global refiner demand continue to weigh on prices, said Jim Ritterbusch, president of Ritterbusch and Associates. Sentiment has been driven by fears that supply could be disrupted by confrontation in the Middle East or that Washington’s trade dispute with major trading partners could dampen global growth. Iran, OPEC’s third-largest producer, which pumps 3.75 million barrels per day, has come under increasing U.S. pressure, with the administration of President Donald Trump pushing countries to cut all imports of Iranian oil beginning in November. 

The Regulation That Could Push Oil To $200 -- Oil prices could spike as high as $200 per barrel over the next 18 months, which would cause an “economic crash of horrible proportions,” according to a new report.  A research paper from economist and oil market watcher Philip K. Verleger predicts there could be a shortage of low-sulfur diesel fuel in 2020 as a result of regulations from the International Maritime Organization (IMO) aimed at cutting sulfur emissions. The regulations, due to take effect at the start of 2020, lowers the allowed concentration of sulfur in maritime fuels from 3.5 percent to just 0.5 percent. Those rules have already sparked a scramble for low-sulfur options. But the current global refining capacity may not be able to churn out enough low-sulfur fuels to allow a smooth transition from high-sulfur fuels by the world’s shipping fleet. The shipping industry accounts for about 5 percent of total global oil demand, and most ships burn heavy fuel oil that is high in sulfur. Ship-owners will have a few options: install expensive scrubbers to remove sulfur, switch to low-sulfur fuels such as diesel or gasoil, or switch over to LNG. Scrubbers and LNG are generally thought to be the most expensive options, requiring capital outlays to overhaul entire fleets. That will put the onus on low-sulfur fuels. But the problem is that not all crude oil is the same – heavier and sour varieties hold more sulfur and are unable to produce lower sulfur diesel without extra processing. And not all refineries are equipped to handle that processing. Up until now, the maritime industry has been burning the residual fuel oil left over after the refining process. Fuel oil is the bottom of the barrel – it’s the cheapest, most viscous and dirtiest part of the barrel. By 2020, diesel production will need to rise by at least seven percent, according to Philip K. Verleger, on top of the three percent increase needed for road transport and other uses. All of it will need to be low-sulfur. “It is not clear that the greater volumes can be produced,” Verleger wrote in his paper. “Instead…very large price hikes may be required to suppress non-maritime use.”  He predicts a rerun of the historic price spike in 2007-2008, which was in part the result of a shortage of low-sulfur oils. Refiners found themselves in a bidding war for low-sulfur oil, pushing oil prices to well over $100 per barrel. “This situation will reoccur in 2020,” Verleger wrote, except that the price spike could be even more dramatic because “the fuel shift is greater and the refining industry is less prepared.”

WTI/RBOB Extend Gains After Broad Inventory Draws, Flat Production - WTI/RBOB are holding gains, helped by a weaker dollar, after last night's API draws, and extended gains after DOE reported across the board inventory draws and no increase in US production. Bloomberg Intelligence Senior Energy Analyst Vince Piazza noted that bearish concerns are brewing in a U.S. crude market awash with domestic supply and braced for the reintroduction of OPEC oil. Exports had been a safety valve, but they declined to less than 1.5 million barrels a day in the week ended July 13 from more than 2 million the previous period. Still, analysts expect a 3 million-barrel draw for the week through July 20. Piazza also notes that U.S. refiners will start to cull runs and enter maintenance after early-summer oversupply narrowed U.S. crack spreads. DOE:

• Crude -6.15mm (-3mm exp, whisper -1mm)
• Cushing -1.127mm (-900k exp)
• Gasoline -2.328mm
• Distillates -101k

After last week's surprise build in crude inventories, this week saw that reversed and some with a 6.15mm draw...  Notably, crude inventories in the European storage hub at Amsterdam, Rotterdam and Antwerp rose by 3.3 million barrels last week, according to Genscape data.  Despite huge discounts still in the Permian, last week saw a surge in production to a record 11mm b/d, but this week it remained flat...

Oil gains as U.S. crude stocks fall to lowest since Feb. 2015 - - (Reuters) - Oil prices rose for the second consecutive day on Wednesday after U.S. government data showed domestic crude inventories fell to their lowest since February 2015, easing worries about oversupply that have weighed on markets in recent weeks. Brent crude futures rose 49 cents to settle at $73.93 a barrel, a 0.67 percent gain. U.S. West Texas Intermediate (WTI) crude futures rose 78 cents to settle at $69.30 a barrel, a 1.14 percent gain. U.S. crude inventories fell 6.1 million barrels in the week to July 20, data from the U.S. Energy Information Administration showed, to 404.9 million barrels, their lowest since February 2015. Analysts had expected a decrease of 2.3 million barrels. Crude stocks at the Cushing, Oklahoma, delivery hub fell by 1.1 million barrels, EIA said, their lowest since November 2014. Gasoline stocks fell 2.3 million barrels, EIA data showed, compared with analysts’ expectations in a Reuters poll for a 713,000-barrel drop. Meanwhile, U.S. Midwest gasoline stockpiles fell to their lowest seasonally since 2015. “Stronger product demand rounds out a supportive report, encouraging a decent draw to gasoline stocks,” said Matt Smith, director of commodities research at ClipperData. However, price gains were limited after the release of the data because a majority of the crude stock draw was in the West Coast region, also known as PADD 5. Stocks in the area fell their most since December 2011. The market usually discounts large inventory drawdowns when they are concentrated in the West Coast, said John Kilduff, a partner at Again Capital Management in New York, because limited connectivity from the West Coast to the rest means it is “just not as critical to the overall inventory situation.” Prices were also supported by an International Monetary Fund report about skyrocketing inflation in Venezuela, suggesting a limited ability for that country to boost oil output, said Stephen Innes, a trader at brokerage OANDA. “Venezuelan oil production has already plummeted to a new 30-year low of 1.5 million barrels a day in June,” he said. Oil prices have come under pressure this month as a trade dispute between the United States and China, as well as other major economic blocs, has raised the possibility of slower economic growth and weaker energy demand. Reports that China will increase infrastructure spending reduced some concerns that U.S.-China trade tensions will dent Chinese demand for oil.

Risks rising that oil prices will cause next recession -- Oil gained more than 20 percent in the first half of 2018, and odds have been rising that higher crude oil prices will spark the next economic downturn. This should not come as a surprise for any investor who is a student of market history: The last five U.S. recessions were also preceded by a rise in oil prices. “Quickly rising oil prices have been a contributing factor to every recession since World War II,” said Moody's chief economist Mark Zandi. Odds of a 2020 U.S. recession have risen to 34 percent, from 28 percent before this year’s spike in crude oil, Moody’s stated in a report.  President Donald Trump’s tax cut, a deal on Capitol Hill to boost government spending, and a flattening of the difference between short- and long-term interest rates also are contributing to the elevated recession risk. “My recession odds for 2020 have significantly increased since late last year,” Zandi said.Oil seesawed in trading on Monday after President Trump's tweet about Iran added to a geopolitical catalysts for oil. It started trading strong but trailed off by the end of the day. Recent swings in the price of oil — especially early last week, when Treasury Secretary Steve Mnuchin said some buyers of Iranian oil may be given extra time before sanctions hit, and Trump and Russian President Vladimir Putin discussed working together to regulate oil prices — show that the oil trade remains vulnerable to a downturn.Sanctions against Iran, reimposed as Trump repudiated his predecessor’s deal to halt Iran’s development of nuclear weapons, is playing a major role in crude oil prices. In late June the Trump administration signaled that oil buyers must stop buying Iranian crude by November, and shortly after, Trump said he had a deal with the Saudis to increase production, though doubts remain about the Saudis' ability to increase production by as much as 2 million barrels. In June figures reported last week, Saudi production was up by 500,000 barrels as it tries to tame the recent growth in crude oil prices. But the Saudis also have also said they cannot raise oil productionabove that level this month.

Oil prices pare gains after earlier rise on Saudi news - (Reuters) - Oil prices rose for the third consecutive day on Thursday after Saudi Arabia suspended oil shipments through a strait in the Red Sea following an attack on two oil tankers and as trade tensions between the United States and the European Union eased.   Brent futures rose 61 cents to settle at $74.54 a barrel, a 0.8 percent gain. The contract earlier touched $74.83 a barrel, highest since July 16. U.S. West Texas Intermediate (WTI) crude futures were up 31 cents, settling at $69.61, a 0.5 percent gain. After meeting European Commission President Jean-Claude Juncker at the White House on Wednesday, U.S. President Donald Trump agreed to refrain from imposing car tariffs while the European Union and the United States start talks on cutting other trade barriers. “Certainly it’s positive for the economy and commodities,” said John Kilduff, partner at Again Capital Management in New York. “This sort of revives economic prospects that were dimmed from the trade wars that were started.”  Brent rose in post-close trading on Wednesday after Saudi Arabia said it was “temporarily halting” oil shipments through the Red Sea shipping lane of Bab al-Mandeb after an attack by Yemen’s Iran-aligned Houthi movement.   Any move to block the Bab al-Mandeb, which is between the coasts of Yemen and Africa at the southern end of the Red Sea, would virtually halt oil shipments through Egypt’s Suez Canal or the SUMED crude pipeline that link the Red Sea and Mediterranean. An estimated 4.8 million barrels per day of crude oil and refined products flowed through the Bab al-Mandeb strait in 2016 toward Europe, the United States and Asia, according to the U.S. Energy Information Administration.  Saudi Arabia additionally has the Petroline, also known as the East-West Pipeline, which mainly transports crude from fields clustered in the east to Yanbu for export. That could offset a bottleneck caused by Bab al-Mandeb’s closure.

Oil Prices Slip As Rig Count Inches Higher  - Baker Hughes reported an increase to the number of active oil and gas rigs in the United States on Friday. Oil and gas rigs increased by 2 rigs, according to the report, with the number of active oil rigs increasing by 3 to 861 this week, while the number of gas rigs dipped by 1, hitting 186.The oil and gas rig count now stands at 1,048—up 90 from this time last year, with the number of oil rigs accounting for all of that increase.Canada gained 12 oil and gas rigs for the week, all of which were oil rigs. Canada’s oil and gas rig count is now up just 3 year over year. Oil rigs are up by 12 year over year in Canada, while the number of gas rigs were flat.The biggest winner by basin this week was the Permian, which gained 4 rigs. Granite wash came in second, adding 2 rigs for the week.Oil prices were trading relatively even early on Friday morning in quiet trade, but were on track for their first weekly gain in four weeks as tension around a key Middle Eastern chokepoint between the Iran-backed Houthis and Saudi Arabia lent support to the price of oil earlier this week.  By 12:26pm EDT, WTI crude was trading down while Brent crude was trading up—widening the WTI discount to Brent. WTI was trading down 0.45% (-$0.31) at $69.30. Brent crude was trading up 0.05% (+$0.04) at $75.16 per barrel—both up on the week. US production this was unchanged, staying at last week’s psychologically important high of 11 million bpd, after hovering at 10.9 million bpd since week ending June 08. At 15 minutes after the hour, WTI was trading down 1.59% at $68.50, with Brent trading down 0.80% at $74.52.

Oil Prices Fall With Stock Market; Brent Marks Weekly Gain - (Reuters) - Oil prices fell on Friday, weighed down by a drop in the U.S. equities market, but Brent still marked a weekly increase, supported by easing trade tensions and a temporary shutdown by Saudi Arabia of a key crude oil shipping lane. Brent crude futures fell 25 cents to settle at $74.29 a barrel, but notched a 1.8 percent weekly increase, its first increase in four weeks. U.S. West Texas Intermediate (WTI) crude futures fell 92 cents to settle at $68.69 a barrel, and marked a fourth week of declines, falling about 2.4 percent. Depressing oil prices, U.S. stock markets broadly fell on Friday. Crude futures at times track with equities. "That could show some sign of a slowdown in the economy, which could in turn affect oil consumption," s The oil market largely brushed off government data on Friday that said the U.S. economy grew in the second quarter at its fastest pace in nearly four years. "The reason why we're not rallying off that is because it came in line with expectations, but when you're running that kind of a GDP, that's a lot of oil." U.S. energy companies added three oil rigs in the week to July 27, the first time in the past three weeks that drillers have added rigs, General Electric Co's Baker Hughes energy services firm said on Friday. Hedge funds trimmed their bullish wagers on U.S. crude, cutting their combined futures and options position in New York and London by 11,362 contracts to 412,289 in the week to July 24, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday. That was the lowest level since late June, the data showed.

Russia does not use stocks in tanks to help boost oil output: Novak (Reuters) - Russia does not use stocks in tanks to help boost oil output and does not have enough stocks to influence the oil market, Russian Energy Minister Alexander Novak told reporters in Johannesburg late on Thursday evening. Russia used stocks held in tanks at its oilfields to help boost crude production in June, three industry sources told Reuters in July, in a sign of supply flexibility as OPEC kingpin Saudi Arabia pushes other major producers to increase spare output capacity. Russia does have some flexibility thanks to spare capacity in the Transneft pipeline system and in oil tanks at fields, the sources said. “Transneft of course has its own oil storage facilities for the technological process. But we of course do not have large (storage) capacity which would regulate the market,” Novak said. Russia does not have storage capacity for accumulating of reserves, the minister said, adding that such a project would require a huge investment which may not provide an economic return. Russian oil production last month rose by around 100,000 barrels per day from May. From July 1-15, the country’s average oil output was 11.215 million bpd, an increase of 245,000 bpd from May, two industry sources said. Novak said that Russia has raised oil output by increasing oil production, not by using stocks. The Organization of the Petroleum Exporting Countries (OPEC) and other oil producers led by Russia agreed last month to ease production curbs. The deal effectively increases combined oil output by 1 million barrels per day (bpd), of which Russia’s share stands at 200,000 bpd. 

Russia and OPEC may form new organization - New OPEC-Russia organisation may start its work on 1 January 2019, Russian energy Minister Alexander Novak said.The minister specified that it will retain the functions of regulating oil production and will be able to cut it again, if necessary.“We plan to start this mechanism on January 1, 2019. We will discuss it at a ministerial meeting,” TASS cited Novak as saying. He added that the options for the name of the new organization’s name have yet to be chosen, as well as the location of the headquarters. According to the head of the Ministry of Energy, he does not expect the overproduction of oil in the foreseeable future, despite the recent decision by OPEC + to increase production by 1 million barrels per day. “On the contrary, the market is rebalancing, a deficit can be expected,” Novak predicts. A leading analyst of the National Energy Security Fund,  Igor Yushkov, noted that the format of Russia’s cooperation with OPEC is likely to remain at the current coordination level. “It is rather difficult to imagine any new format, since Russia has been de facto a member of OPEC for more than a year – we have been committed to the volumes of production, execute them, we constantly meet with OPEC members and discuss the situation on the market, monitor the effectiveness of regulation volumes of oil output,” he recalled. “OPEC and Russia will benefit equally from such cooperation and a constant information campaign around it with regular statements that we jointly monitor the market and an acceptable level of prices. We have already seen how prices have risen to $80 per barrel, now they have gone down to $70, but this corridor is comfortable for everyone,”

Meanwhile, Saudis Stuck On Oil Thanks To MbS Crackdown -- Saudi Crown Prince Mohammed bin Salman (MbS) has a plan to get Saudi Arabia off oil, with an immediate push to create 1.2 million private sector jobs by 2020.  However, as Juan Cole reports, his political crackdown last year in which over 300 people were tossed in jail  for various supposed crimes, with many of them now having frozen bank accounts and other restrictions placed on them, has somewhat scuttled this project badly.  700,000 foreign workers have left,and foreign direct investment has fallen from $7.42 billion in 2016 to $1.32 billion in 2017.  Oooops!  This is not the way to  wean the nation off oil.  Nobody wants to invest because they fear MbS will go on another rampage, seizing money and putting people in prison. Of course, it is now clear that Trump and his son-in-law, Jared Kushner, encouraged MbS in his coup against his cousin, former Crown Prince Mohammed bin Nayef.  They also supported his stupid war in Yemen and initially encouraged him in his campaign against Qatar, still ongoing although a total flop, although on that one Trump has figured out that the largest US air base in the Persian Gulf, al-Ubeid, is there, so he has lost his enthusiasm for this particular stupid project of MbS’s.  Unfortunately, there is little prospect this 32 year old leader will be removed from power any time soon.

Higher Oil Prices Fail To Stimulate Economic Growth In Gulf States - The higher oil prices and the subsequent higher oil revenues play a part in a significantly improved outlook for the state finances and trade balances of the Arab Gulf countries, but they are not boosting economic growth, a quarterly Reuters poll of 24 economists showed on Tuesday. The Arab Gulf states have good reason to be happy about their budgets and government accounts this year, as the oil prices have been significantly higher and because they are now boosting their oil production to offset declines in Venezuela and Angola and an anticipated slump in Iran’s oil exports.The Gulf states - Saudi Arabia and its close allies Kuwait and the United Arab Emirates (UAE), for example - are also some of the few OPEC countries theoretically capable of boosting their crude oil production.So far this year, the Brent Crude price has averaged $71.60 a barrel, compared to an average of $55 per barrel last year.Despite the double boon from higher oil prices and rising oil production, the Gulf economies are only modestly growing, and the higher oil revenues will have little impact on that growth, according to the economists polled by Reuters in this quarter’s survey. The governments in the Gulf would rather use the higher oil income to cut budget deficits than to spur economic growth, economists say. The private sector in the Gulf oil-producing countries is still reeling from austerity measures that the governments introduced to try to keep budgets in check after the oil prices slumped. “Higher-than-budgeted oil revenue will not result in higher government expenditure, but rather, it will contribute to lowering the fiscal deficit,” Saudi investment bank Jadwa said about Saudi Arabia. In the previous Reuters quarterly poll, economists were of the same opinion - trade surpluses in the Arab Gulf will increase, but economies will grow only moderately because of the austerity measures.

Saudi Aramco CEO: Deal for Sabic Would Affect IPO Timeline -- Saudi Aramco signaled another potential delay for the world’s largest initial public offering after it started talks this week to buy a stake in a local petrochemical company. The state-owned oil company said it may buy a strategic stake in Saudi Basic Industries Corp. from the country’s sovereign wealth fund. Sabic, as the chemical company is known, carries a market value of little more than $100 billion and the sovereign wealth fund controls a 70 percent stake. Amin Nasser, Aramco’s chief executive officer, said in an interview that the company is still in the early stages of talks and a deal isn’t certain. “A potential Sabic deal would affect the time frame for Saudi Aramco’s initial public offering,” Nasser told Arabiya television in an interview airing Friday. A stake in a chemical company like Sabic makes Aramco less vulnerable to volatile oil prices, and would be positive for its revenue, Nasser told Arabiya The remarks raise the specter of further delay for an IPO that could raise as much as $100 billion. Saudi Energy Minister Khalid al-Falih said last month that while “it would be nice if we can do it in 2019, there is a lot more at stake than just ticking a box and say, ‘We got this out of the way.”’ 

Has Saudi Arabia Fooled Oil Analysts? --- The world’s largest oil company Saudi Aramco, the main revenue source for the Kingdom, is the latest source of intrigue for observers, with rumors that it is targeting a majority stake in one of the world’s largest petrochemical giants - SABIC. This move has been misunderstood by many analysts, and may actually be an ambitious attempt to counter the continuous delays that the planned Aramco IPO has faced. MBS’s advisors have come up with this strategy in order to restructure the Saudi economic base, provide the Kingdom with renewed power in the downstream sector, and address the much-needed additional funding for Saudi Arabia’s Vision 2030.Rumors that Saudi Aramco was looking to acquire SABIC began with suggestions that the oil giant would acquire a minority stake in the petrochemical company, but now it appears that Aramco is making a much larger move.Today, Saudi sources have stated that Aramco is targeting the entirety of the 70 percent stake in SABIC that is currently held by the Saudi sovereign wealth fund PIF. This move would create an oil company the likes of which has never been seen before. Whether these latest reports are reliable is yet to be seen, but the impact on the shape of global oil markets would be significant. Sources have reported that JPMorgan and Morgan Stanley have been appointed as advisors to Aramco’s move to buy a controlling stake in SABIC.SABIC has long been ruling the downstream sector in the Kingdom, while Aramco was focused on its upstream endeavors. The continuous international growth in Saudi Arabia’s downstream sector and the successful acquisition of entities in Europe (including DSM Petrochemicals) and elsewhere, saw SABIC growing increasingly powerful. As always, success created not only competition but also a kind of envy. Aramco’s dream of ruling the world’s up and downstream sector was always partly constrained by SABIC’s ongoing success. But now that Crown Prince Mohammed bin Salman has taken control in the Kingdom, it appears that Aramco will regain full power in downstream and lock in its own future demand in targeted markets. By acquiring a controlling stake in Saudi Arabia’s second most influential oil company, Aramco would gain near-complete control.

Saudi Arabia Pressures Aramco to Take On Debt After IPO Stalls -- Saudi Arabia is pushing Aramco to raise tens of billions of dollars in debt now that the state oil giant’s initial public offering has stalled, as the kingdom pursues other ways to fund an economic transformation. Crown Prince Mohammed bin Salman’s advisers are prodding Saudi Arabian Oil Co., as the oil company is officially known, to raise debt to buy a controlling stake in a petrochemical company from the country’s sovereign-wealth fund, said Saudi officials and executives familiar with the talks. A potential deal would give the Public Investment Fund between $50 billion and $70 billion for all or part of its stake in Saudi Basic Industries Co., officials and executives said. Controlled by the state, Sabic is the country’s largest publicly listed company, with a market capitalization of about $100 billion. That sum is roughly what the sovereign-wealth fund had expected to reap from Aramco’s plan to go public. Preparations for an IPO have stalled amid doubts about the company’s and country’s readiness to handle the scrutiny that accompanies a public listing of shares. Aramco has already begun seeking billions of dollars in loans from international banks to finance the Sabic deal, according to people familiar with the matter. That debt could be lent in three parts, with the first tranche of up to $10 billion likely to be raised this year, these people said. Aramco is also looking to raise money on the international bond market, Saudi officials and executives said, a move that could open its accounts up to scrutiny from investors. 

Saudi Arabia halts oil exports in Red Sea lane after Houthi attacks (Reuters) - Saudi Arabia said on Thursday it was suspending oil shipments through the Red Sea’s Bab al-Mandeb strait, one of the world’s most important tanker routes, after Yemen’s Iran-aligned Houthis attacked two ships in the waterway. Brent futures rose 19 cents to $74.12 a barrel by 1305 GMT, extending their rally into a third day but slipping from a 10-day high in earlier trading. [O/R] Saudi Arabia and arch-foe Iran have been locked in a three-year proxy war in Yemen, which lies on one side of the Bab al-Mandeb strait at the southern mouth of the sea, one of the most important trade routes for oil tankers heading from the Middle East to Europe. The Houthis, who have previously threatened to block the strait, said on Thursday that they had the naval capability to hit Saudi ports and other Red Sea targets. Iran has threatened to block another strategic shipping route, the Strait of Hormuz. Saudi Energy Minister Khalid al-Falih said the Houthis attacked two Saudi oil tankers in the Red Sea on Wednesday, one of which sustained minimal damage. “Saudi Arabia is temporarily halting all oil shipments through Bab al-Mandeb strait immediately until the situation becomes clearer and the maritime transit through Bab al-Mandeb is safe,” he said. It was not clear if a Saudi-led military coalition would take additional security measures or impose further restrictions on imports to Yemen, which is struggling with the world’s most urgent humanitarian crisis. A senior oil source said Saudi Arabia had already beefed up oil security and that all crude vessels in the area are accompanied by security ships. Saudi crude exports through Bab al-Mandeb are estimated at around 500,000-700,000 barrels per day (bpd), according to analysts and Reuters data. Most Gulf oil exports that transit the Suez Canal and SUMED Pipeline pass through the strait.

Hundreds of White Helmets evacuated from Syria to Jordan -Hundreds of White Helmets rescuers and their families have been evacuated from Syria to Jordan overnight with the help of Israel, the United States and European countries. Also known as Syrian Civil Defence, the White Helmets operate in rebel-held parts of war-ravaged Syria. The request for the evacuation came as the volunteers and their relatives were threatened by advancing forces of the Syrian government in the south of the country.The evacuees were transported on Sunday to Jordan, from where they are expected to be resettled in Europe and Canada in the coming weeks. Jordan's Foreign Minister Ayman Safadi saidon Twitter that 422 people were evacuated, instead of the initial 800 cleared for the operation.   A non-Jordanian source familiar with the agreement told Reuters news agency the original plan had been to evacuate 800 people, but only 422 made it out as operations were hampered by government checkpoints and the expansion of Islamic State in the area. The Israeli military earlier said it had "recently completed a humanitarian effort to rescue members of the Syrian civil organisation and their families" after a "request of the United States and additional European countries".

More Shocking Details Emerge Of White Helmets Evacuation From Syria - Since the overnight Saturday and into early Sunday Israeli military operation which successfully evacuated White Helmets members and their families from southwest Syria at the request of the US and European governments, new details and footage have emerged.  First, what we find most striking and woefully under-reported in international media is that the fact that armed groups immediately set fire to Quneitra crossing on the Syrian side of the border the morning just after the White Helmets passed through it to the Israeli side.  The post acts as the only crossing between Syrian territories and the Israeli-occupied Golan Heights, and was formerly run by the United Nations Disengagement Observer Force (UNDOF). There is over a mile in distance between the Syrian and Israeli sides of the crossing. Middle East-based Al Masdar News reported Monday that the crossing was used by Nusra militants (also called Jabhat Fatah al-Sham/JFS, or Syrian al-Qaeda) to store weapons, ammunition and various supplies provided by Israeli Army, suggesting that its destruction by al-Qaeda and FSA fighters may have been an attempt at concealing the extent of their external state sponsorship by the Israelis. Meanwhile, Israel released professionally edited footage of the nighttime transfer of White Helmets and their families into Israel via the Golan border in what the IDF called "an exceptional humanitarian gesture".  The UK, Germany, and Canada have confirmed they will resettle the White Helmets members and their families, with German Interior Minister Horst Seehofer announcing Germany would issue residency permits to eight White Helmets, allowing them to bypass asylum applications.   The move has come under fierce criticism by Syrian and Russian leaders, as well as some journalists in the West who have long documented the group's associations with Nusra Front, which is a designated terrorist group in the US and internationally. Some have questioned just who it is that's being resettled and their ties to extremist groups.

Trump seeks to revive ‘Arab NATO’ to confront Iran (Reuters) - The Trump administration is quietly pushing ahead with a bid to create a new security and political alliance with six Gulf Arab states, Egypt and Jordan, in part to counter Iran’s expansion in the region, according to U.S. and Arab officials. The White House wants to see deeper cooperation between the countries on missile defense, military training, counter-terrorism and other issues such as strengthening regional economic and diplomatic ties, four sources said. The plan to forge what officials in the White House and Middle East have called an “Arab NATO” of Sunni Muslim allies will likely raise tensions between the United States and Shi’ite Iran, two countries increasingly at odds since President Donald Trump took office. The administration’s hope is that the effort, tentatively known as the Middle East Strategic Alliance (MESA), might be discussed at a summit provisionally scheduled for Washington on Oct. 12-13, several sources said. The White House confirmed it was working on the concept of the alliance with “our regional partners now and have been for several months.” Saudi officials raised the idea of a security pact ahead of a Trump visit last year to Saudi Arabia where he announced a massive arms deal, but the alliance proposal did not get off the ground, a U.S. source said. Sources from some of the Arab countries involved also said they were aware of renewed efforts to activate the plan. Officials from other potential participants did not respond to requests for comment. “MESA will serve as a bulwark against Iranian aggression, terrorism, extremism, and will bring stability to the Middle East,” a spokesperson for the White House’s National Security Council said. The spokesperson declined to confirm that Trump would host a summit on those dates and sources cautioned that it remains uncertain whether the security plan will be finalized by mid-October. Similar initiatives by previous U.S. administrations to develop a more formal alliance with Gulf and Arab allies have failed in the past. 

At least 10 Iranian Revolutionary Guards killed in border attack - At least 10 Iranian border guards have been killed in an overnight attack by unidentified gunmen near the border with Iraq, according to media in Iran.The incident took place near the town of Marivan, in a Kurdish area of Iran some 620km west of the capital, Tehran, according to the semi-official Fars news agency."The attack by the evil rebels and terrorists against a revolutionary border post and the explosion of a munitions depot caused the martyrdom of 10 fighters," a statement by the Islamic Revolutionary Guard Corps, as quoted by the semi-official Tasnim news agency, said on Saturday.Provincial security official Hosein Khosheqbal told state television that 11 members of the Guards' voluntary Basij forces were killed in the overnight violence in Marivan, which he blamed on the Kurdish armed opposition group The Party of Free Life of Kurdistan (PJAK). "The latest news is that the Basij [the government-aligned militia] and Guards forces are in hot pursuit of the attackers," Khosheqbal said.

Israeli jets said to strike Iranian-run missile production facility in Syria - Israeli jets reportedly carried out a strike Sunday on a missile production facility in northwest Syria that observers say was supervised by Iranians. In the past, the site was allegedly used to produce and store chemical weapons. “One of our military positions in Masyaf was the target of an Israeli air aggression,” Syria’s official news agency SANA said quoting a military source. Hebrew media quoted Syrian opposition officials as saying that several Hezbollah members were killed, but the reports could not be confirmed. SANA said the strikes cause only “material damage.” It was the fourth time this month that Syria has accused Israel of bombing a military position in the country. There was no comment from Israel, but the strike came just hours after Prime Minister Benjamin Netanyahu warned Israel was continuously acting against Iran’s military activities in Syria. “We will not stop taking action in Syria against Iran’s attempts to establish a military presence there,” he said in a statement from his office. A war monitor, the Britain-based Syrian Observatory for Human Rights, also reported the air strike and said it targeted a “workshop supervised by Iranians where surface-to-surface missiles are made.”

Israel Rejects Russian Plan To Keep Iranian Forces 100km From Golan Border - Israel has rejected a Russian proposal to keep Iranian forces in Syria at least 100 kilometers from the Syrian-Israeli recognized ceasefire line along the Golan Heights, Reuters reports, while Israeli leadership has further threatened to hold Assad responsible "for any Iranian aggression".According to the breaking report, which cites an unnamed Israeli official, the issue came up during a meeting between Israeli Prime Minister Benjamin Netanyahu and a visiting Russian delegation led by Russia’s foreign minister, Sergei Lavrov: The official said that Netanyahu told Lavrov "we will not allow the Iranians to establish themselves even 100 kilometres from the border." And crucially, the official paraphrased the following exchange from the closed door meeting: "Netanyahu told Lavrov Israel will maintain freedom of operation against Iranian entrenchment in all of Syria and will see Assad responsible for any Iranian aggression against Israel from Syrian territory because Assad is the one hosting the Iranians."

Adolf Hitler's spirit has 're-emerged' in Israel, Turkey's president claims - Turkey's president has ignited a war of words with Israel after claiming that the spirit of Adolf Hitler has re-emerged in the country.Recep Tayyip Erdogan's remarks come after the Israeli Knesset passed a law stipulating that only Jews have the right of self-determination, angering members of the country's Arab minority.The approval of the nation-state law shows Israel is the most "Zionist, fascist and racist" country in the world, Mr Erdogan said.He added that the law legitimised unlawful actions and oppression against Arab minorities, and he accused Israel of trying to form "an apartheid state". Israeli Prime Minister Benjamin Netanyahu responded by saying Turkey is becoming a "dark dictatorship" under Mr Erdogan's leadership.Mr Erdogan also called on the international community to mobilise against Israel in one of his harshest onslaughts against the country.In a speech to AK Party lawmakers, he said: "The Jewish nation-state law passed in the Israeli parliament shows this country's real intentions. It legitimises all unlawful actions and oppression."He said Israel had shown itself to be a "terror state" by attacking Palestinians with tanks and artillery, adding: "There is no difference between Hitler's Aryan race obsession and Israel's mentality."The spirit of Hitler, which led the world to a great catastrophe, has found its resurgence among some of Israel's leaders." Mr Netanyahu accused the Turkish president of "massacring Syrians and Kurds" in response, adding that Mr Erdogan's administration had "imprisoned tens of thousands of citizens".

Chinese President Xi Jinping wraps up UAE visit with series of deals to boost presence in Middle East -- China and the United Arab Emirates have agreed to strengthen their cooperation on a wide range of areas from trade to military and energy as President Xi Jinping wrapped up his visit to the Middle Eastern nation on Saturday. Xi arrived in Senegal on Saturday for the start of a tour of Africa that will seek to develop China’s economic and military ties on the continent. At the end of a showy, three-day visit to the UAE, during which the Chinese leader was given a horse by his Emirati counterpart, the two countries signed a slew of agreements. These included one for strategic cooperation between two state-owned oil companies, the Abu Dhabi National Oil Company and China National Petroleum Company, after the former awarded US$1.6 billion worth of contracts to the latter. The agreements and memoranda of understanding also played up Xi’s signature Belt and Road Initiative and included a deal to allow state-owned financial services firm Industrial Capacity Co-Operation Financial Group to set up a lending platform in Abu Dhabi. A deal was also reached for the Zhejiang China Commodities City Group to build a “traders market” at the Dubai Jebel Ali free economic zone. The joint statement issued by the two nations also announced plans for joint military training exercises.