Sunday, July 15, 2018

US gasoline output at a record high, oil supplies at a 41 mo. low; global oil output up in June after May revised lower

oil prices ended sharply lower this week, after hitting an air pocket and dropping more than 5% on Wednesday, on the back of the announcement of the resumption of Libyan oil output...after falling a half percent to $73.80 a barrel on an increase in US crude supplies last week, contracts for US light sweet crude for August delivery rose 5 cents to $73.85 a barrel on Monday, as reports that Canada's Syncrude operations would resume activity sooner than expected cut off a rally higher....oil prices then rose 26 cents to $74.11 a barrel on Tuesday, on continued production outages globally, and expectations that sanctions against Iran would limit supplies...on Wednesday, however, oil prices collapsed, with US crude falling $3.73 to $70.38 a barrel, after Libya announced they had resumed exports, and the OPEC reported an increase in oil output; at the same time, North Sea Brent crude, the international benchmark, fell $5.46 to $73.33 per barrel, a daily price move more than three standard deviations from the mean, and the largest one-day drop since February 2016...while Brent crude rebounded $1.11 higher on Thursday, US oil prices were mostly mixed, slipping another 5 cents to $70.33 a barrel at the close, as the resumption of Libyan output offset warnings from the IEA that OPEC was facing a spare capacity crunch...US prices then climbed 68 cents to $71.01 on Friday, but still posted a sharp 3.8% loss for the week, as oil traders weighed returning Libyan supply and global trade disputes against indications of tighter crude supply and shrinking spare output capacity...

natural gas prices also ended the week lower, dropping in four out of 5 trading sessions in sliding a total of 10.6 cents to $2.752 per mmBTU by the end of the week, despite forecasts for the return of hot weather and a smaller than expected injection of surplus gas into storage....the natural gas storage report for week ending July 6th from the EIA indicated that natural gas in storage in the US rose by 51 billion cubic feet to 2,203 billion cubic feet over the week, which left our gas supplies 725 billion cubic feet, or 24.8% below the 2,869 billion cubic feet that were in storage on July 7th of last year, and 519 billion cubic feet, or 19.1% below the five-year average of 2,722  billion cubic feet of natural gas that are typically in storage after the first week of July...the consensus forecast was for an addition of 56 billion cubic feet to gas in underground storage, so this 51 billion cubic feet increase was a bit below what had been expected, and quite a bit lower than the 77 billion cubic foot of weekly surplus natural gas that has typically been added to storage during the first week of July... since US natural gas supplies as July 6th were still 1,587 billion cubic feet below the 3,790 billion cubic feet we had stored after the first week of November last year, this week's 51 billion cubic foot addition to supplies now means that we'll need to add an average of 93 billion cubic feet per week over the next 17 weeks to get our gas supplies back to a normal level before the next heating season's withdrawals begin...since that's now unlikely, it means that if the upcoming winter is much colder than normal, then parts of the country will run out of natural gas in storage and shortages will occur before the winter is over...understand, there is no one responsible for seeing that we have adequate natural gas supplies going into the winter, and that US gas producers have a greater incentive to liquefy and export gas at three times the domestic price than to store it here, since any gas shortages that develop will only cause the price to rise, making their remaining gas output more profitable...

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 6th, indicated that due to a big drop in our oil imports, the week saw the largest withdrawal from our commercial crude supplies since 2016....our imports of crude oil fell from last week's 16 month high by an average of 1,624,000 barrels per day to an average of 7,431,000 barrels per day, while our exports of crude oil fell by an average of 309,000 barrels per day to an average of 2,027,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 5,404,000 barrels of per day during the week ending July 6th, 1,315,000 barrels per day less than the net of our imports minus exports during the prior the same time, field production of crude oil from US wells was again reported as unchanged at 10,900,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 16,304,000 barrels per day during the reporting week... 

at the same time, US oil refineries were using 17,652,000 barrels of crude per day during the week ending July 6th, just 1,000 barrels per day less than they used during the prior week, while at the same time 1,805,000 barrels of oil per day were reportedly being pulled out of oil 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 457,000 more barrels per day than what refineries reported they used during the account for that disparity, the EIA needed to insert a (-457,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the data for the supply of oil and the consumption of it balance out, essentially a fudge factor that is labeled in their footnotes as "unaccounted for crude oil"... (for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer)... 

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports fell to an average of 8,271,000 barrels per day, which was still 5.9% more than the 7,811,000 barrel per day average we imported over the same four-week period last year....the 1,805,000 barrel per day drop 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 was unchanged....this week's crude oil production was reported as unchanged despite a 29,000 barrel per day increase in output from Alaska, because the EIA has recently decided to round the 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 rounded total....US crude oil production for the week ending July 7th 2017 was reported at 9,397,000 barrels per day, so this week's rounded oil production figure is roughly 16.0% above that of a year ago, and 29.3% 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 96.7% of their capacity in using 17,652,000 barrels of crude per day during the week ending July 6th, down from 97.1% of capacity the prior week, but still a refinery capacity utilization rate well above historical norms...the 17,652,000 barrels of oil that were refined this week were among the largest refinery throughput figures on record, topped only by the prior three weeks in June of this year, and the 17,725,000 barrels per day that were being refined during the last full week of August 2017....this week's refinery throughput was also 2.4% higher than the 17,244,000 barrels of crude per day that were being processed during the week ending July 7th a year ago, when US refineries were operating at 94.5% of capacity....

even with the amount of oil being refined virtually unchanged this week, gasoline output from our refineries was much higher, rising by 388,000 barrels per day to a record high of 10,699,000 barrels per day during the week ending July 6th, after our refineries' gasoline output had increased by 169,000 barrels per day during the week ending June 29th....with this week's increase, our gasoline production during the week was 2.2% more than the 10,365,000 barrels of gasoline that were being produced daily during the week ending July 7th of last the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 21,000 barrels per day to 5,442,000 barrels per day, after rising by 67,000 barrels per day the prior week...however, this week's distillates production was still at a seasonal high, and 1.7% higher than the 5,349,000 barrels of distillates per day that were being produced during the week ending July 7th, 2017...

with gasoline production at a record high, we'll take a look at an historical graph of that production so we can see what's going on there...

July 11 2018 gasoline production thru July 6h

the above is a screen copy of the interactive graph that accompanies the EIA spreadsheet for "Weekly U.S. Refiner and Blender Adjusted Net Production of Finished Motor Gasoline" which gives us the weekly totals in thousands of barrels per day of our total gasoline production from 1992 to the present, adjusted as's a poor graph, but you should be able to see that our gasoline production has been steadily rising over the entire span of this graph, thus repeatedly setting "new record highs" along the way during the summer and winter seasonal peaks of, the 10,699,000 barrels of gasoline that were produced per day during the week ending July 6th broke the previous record of 10,566,000 barrels per day that had been produced during the week ending August 18th, 2017, which in turn broke the record of 10,537,000 barrels per day set during the week ending December 23rd, 2016, which in turn broke the record of 10,456,000 barrels per day set six weeks earlier….the point being that as long as US refining continues to expand and gasoline production continues to increase, production records are going to be set along the way…so if it hadn’t been this week, more than likely we would have seen another gasoline production record sometime later this year…

however, even with our gasoline production at a record high, our supply of gasoline in storage at the end of the week still fell by 694,000 barrels to 238,997,000 barrels by July 6th, the eleventh decrease in 18 weeks, but just the 12th decrease in 35 weeks, as gasoline inventories, as usual, were being built up over the winter months....our supplies of gasoline fell because our exports of gasoline rose by 699,000 barrels per day to 1,186,000 barrels per day even as the amount of gasoline supplied to US markets fell by 594,000 barrels per day to 9,275,000 barrels per day, while our imports of gasoline rose by 205,000 barrels per day to 853,000 barrels per day....but even after this week's decrease, our gasoline inventories were still 1.4% higher than last July 7th's level of 235,656,000 barrels, and roughly 10.6% above the 10 year average of our gasoline supplies for this time of the year...    

meanwhile, with our distillates production little changed, our supplies of distillate fuels increased by 4,125,000 barrels to 117,557,000 barrels during the week ending July 6th, the largest jump in distillate inventories since the first week of this year...that was as our exports of distillates fell by 258,000 barrels per day to 1,152,000 barrels per day, after falling by 426,000 barrels per day the previous week, while our imports of distillates rose by 12,000 barrels per day to 104,000 barrels per day, and while the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 321,000 barrels per day to 3,805,000 barrels per day, after increasing by 514,000 barrels per day the prior week...however, since this week's big inventory increase comes after our distillate supplies had shrunk by 14,452,000 barrels over the six weeks to May 18th on the way to falling to a 13 year low, our distillate supplies for the week ending July 6th still remain 20.8% below the 153,553,000 barrels that we had stored on July 7th, 2017, and roughly 14.7% lower than the 10 year average of distillates stocks for this time of the year...   

finally, with that big drop in our oil imports coming while refineries were consuming oil at near record pace, the week saw the largest withdrawal of oil from our commercial supplies of crude oil since September 2016, as our commercial crude supplies fell by 12,633,000 barrels during the week, from 417,881,000 barrels on June 29th to 405,248,000 barrels on July 6th, which turns out to be the least amount of oil we've had in storage since February 20, 2015...and after falling 33 weeks over the past year, our oil inventories as of July 6th were 18.2% below the 495,350,000 barrels of oil we had stored on July 7th of 2017, 17.5% below the 491,172,000 barrels of oil that we had in storage on July 8th of 2016, and 5.6% below the 429,368,000 barrels of oil we had in storage on July 10th of 2015, when the US glut of oil had already risen above the nearly stable supply levels of under 400 million barrels during the prior years...  

OPEC's Monthly Oil Market Report

with oil prices again responding to any changes in OPEC's oil output, we'll next take a look at OPEC's July Oil Market Report (covering June OPEC & global oil data) next, which was released Wednesday of this week and is available as a free download, and hence it's the report we check for monthly global oil supply and demand data...the first table from this monthly report that we'll look at is from the page numbered 61 of that report (pdf page 71), and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months, as the column headings indicate...for all their official production measurements, OPEC uses an average of estimates from six "secondary sources", namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, ‎the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA) and the industry newsletter Petroleum Intelligence Weekly, as an impartial adjudicator as to whether their output quotas and production cuts are being met, to thus resolve any potential disputes that could arise if each member reported their own figures...    

June 2018 OPEC crude output via secondary sources

as we can see on this table of official oil production data, OPEC's oil output increased by 173,400 barrels per day in May to 32,327,000 barrels per day, from their May production total of 32,154,000 barrels per day....that May figure was originally reported as 31,869,000 barrels per day before the addition of new member Congo, so the May output of the other OPEC members was therefore revised 34,000 barrels per day lower with this report (for your reference, here is the table of the official May OPEC output figures as reported a month ago, before this month's revisions) you can tell from the far right column above, an increase of 405,400 barrels per day in the output from Saudi Arabia was main reason that the cartel's output rose, as that increase more than offset the decrease of 254,300 barrels per day in Libyan output, the decrease of 88,300 barrels per day in Angolan output, and the decrease of 47,500 barrels per day in Venezuelan output...with an original output quota set at 10,060,000 barrels per day for the Saudis, their output is now well above their allocation, but with OPEC output excluding the Congo at 31,996,000 barrels per day, OPEC's total oil output is still 734,000 barrels per day below the 32,730,000 barrels per day revised quota they agreed to at their November 2017 meeting, mostly on the big drop in Venezuelan output...

the next graphic we'll include shows us both OPEC and world monthly oil production on the same graph, over the period from July 2016 to June 2018, and it comes from the page numbered 62 (pdf page 72) of the July OPEC Monthly Oil Market Report...on this graph, the cerulean blue bars represent OPEC oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale...     

June 2018 OPEC report global oil supply

OPEC's preliminary data indicates that total global oil production rose by a rounded 600,000 barrels per day to 98.01 million barrels per day in June, apparently after May's global output total was revised down by 450,000 barrels per day from the 97.86 million barrels per day global oil output that was reported a month ago, as non-OPEC oil production rose by 430,000 barrels per day in June after that oil output for June was also 1.74 million barrels per day, or 1.5% higher than the 96.59 million barrels of oil per day that were being produced globally in June a year ago (see the July 2017 OPEC report online (pdf) for the year ago details)...after the downward revision to global output, OPEC's June oil production of 32,327,000 barrels per day represented 33.0% of what was produced globally during the month, up from the 32.6% share reported for May, with the addition of Congo's output also contributing to OPEC's share increase...OPEC's June 2017 production was at 32,611,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year, excluding new members Congo and Equatorial Guinea, are still producing 741,000 fewer barrels per day of oil than they were producing a year ago, during the sixth month that their production quotas were in effect, with the 598,000 barrel per day decrease in output from Venezuela from that time largely responsible for their output drop...

despite the 600,000 barrel per day increase in global oil output in June, the downward revisions to May output meant that we again saw a small deficit in the amount of oil being produced globally during the month, as this next table from the OPEC report will show us... 

June 2018 OPEC report 2018 global oil demand

the table above comes from page 32 of the July  OPEC Monthly Oil Market Report (pdf page 42), and it shows regional and total oil demand in millions of barrels per day for 2017 in the first column, and OPEC's estimate of oil demand by region and globally quarterly over 2018 over the rest of the table...on the "Total world" line of the third column, we've circled in blue the figure that's relevant for June, which is their revised estimate of global oil demand during the second quarter of 2018...     

OPEC's estimate is that during the 2nd quarter of this year, all oil consuming regions of the globe have been using 98.04 million barrels of oil per day, which is a downward revision of a rounded 0.04 million barrels of oil per day from their prior estimate for the 2nd quarter, as we've circled in green....meanwhile, as OPEC showed us in the oil supply section of this report and the summary supply graph above, the world's oil producers were producing 98.01 million barrels per day during June, which means that there was a small shortfall of around 30,000 barrels per day in global oil production vis-a vis the demand estimated for during the month... 

at the same time that 2nd quarter global demand was being revised a rounded 40,000 barrels per day lower, May's global output total was revised down by 450,000 barrels per day to 97,410,000 barrels per day, so that means that the shortfall for May now works out to 630,000 barrels per day, revised from the 220,000 barrel per day shortfall we had figured on a month ago...the 2nd quarter revision to global demand also means that the global shortfall for April would be revised from the 480,000 barrels per day that we figured last month to 440,000 barrels per day...

however, as is also circled in green above, while global oil demand figures for the second quarter were revised lower, global oil demand figures for the first quarter of 2018 were revised 50,000 barrels per day higher, which means that our previously recomputed oil surplus for the first quarter of 2018 will have to be recomputed again...based on the revisions of a month ago, we had figured a global oil surplus of 180,000 barrels per day for March, a surplus of 360,000 barrels per day for February, and a surplus of 200,000 barrels per day for January...each of those surplus figures thus have to be revised lower based on revised higher demand, so hence our new figures will show a surplus of 130,000 barrels per day for March, a surplus of 310,000 barrels per day for February, and a surplus of 150,000 barrels per day for January...totaling it all up, that means that for the first six months of 2018, global oil demand exceeded production by 16,270,000 barrels, a relatively small oil shortfall that is the equivalent of roughly four hours of global oil production at the June rate...  

This Week's Rig Count

US drilling activity increased for the second time in five weeks, but for 13th time in the past 16 weeks during the week ending July 13th, as the steady increase in drilling for oil we saw with higher oil prices the first half of this year has stalled over the past month...Baker Hughes reported that the total count of active rotary rigs running in the US increased by 2 rigs to 1054 rigs over the week ending on Friday, which was 102 more rigs than the 952 rigs that were in use as of the July 14th report of 2017, but was down from the recent 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 was unchanged at 863 rigs this week, which was 98 more oil rigs than were running a year ago, while it was still well below the recent high of 1609 rigs that were drilling for oil on October 10, the same time, the number of drilling rigs targeting natural gas formations increased by 2 rigs to 189 rigs this week, which was also up by 2 from the 182 natural gas rigs that were drilling a year ago, but way down from the modern high of 1,606 natural gas rigs that were deployed on August 29th, addition, there continues to be two rigs drilling this week that are considered to be "miscellaneous", in contrast to no such "miscellaneous" rigs in use a year ago....

with a second platform starting operations off the coast of Texas, drilling activity in the Gulf of Mexico increased by 1 rig to 19 rigs this week, which was still 2 fewer than the 21 platforms that were deployed in the Gulf of Mexico a year ago...however, the drilling platform that had been deployed offshore from Alaska was shut down this week, so the total US offshore count remains at 19 rigs, down by 2 rigs from the total 21 offshore rigs that were drilling a year ago...however, there was also a platform that started drilling on an inland body of water in southern Louisiana this week, so there are now 5 such "inland waters" rigs operating, up from 3 on inland waters a year ago...

the count of active horizontal drilling rigs was unchanged a 930 horizontal rigs this week, which was still 126 more horizontal rigs than the 804 horizontal rigs that were in use in the US on July 14th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...meanwhile, the directional rig count increased by 1 rig to 68 directional rigs this week, which was still down from the 72 directional rigs that were in use during the same week of last addition, the vertical rig count increased by 1 rig to 56 vertical rigs this week, which was still down from the 76 vertical rigs that were operating on July 14th of 2017...

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows the weekly and year over year rig count changes for the major US geological oil and gas both tables, the first column shows the active rig count as of July 13th, the second column shows the change in the number of working rigs between last week's count (July 6th) and this week's (July 13th) count, the third column shows last week's July 6th 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 14th of July, 2017...      

July 13 2018 rig count summary

as you can see, there was not much variation in the rig counts across the states or the primary basins from a week ago...all the major basin changes seen above were oil rigs, as the two rig increase in natural gas drilling took place in basins not tracked separately by Baker Hughes, or more than likely would have been conventional rig start ups, as the rig on the inland waters platform likely was; as you can see, the major natural gas basins, including the Marcellus and the Utica, saw no change...


Five Well Permits Issued in Ohio's Utica — Five new permits for horizontal wells were issued in the Utica shale region of eastern Ohio last week, according to the Ohio Department of Natural Resources. All five permits were secured by Oklahoma City-based Ascent Resources Utica LLC, which recently announced a deal to acquire assets and properties of Hess Corp., CNX Resources, Utica Minerals Development, and another unnamed party, totaling $1.5 billion.Ascent secured three permits to drill wells in Belmont County and two in Harrison County, according to ODNR.The number of rigs operating in the Utica shale for the week ended July 7 stood at 18, one less than the previous week.As of July 7, ODNR has issued 2,843 horizontal well permits in the Utica. Of that number, 2,371 are drilled and 1,913 are in production.There were no permits issued for northern tier of the Utica in Ohio, which encompasses Mahoning, Trumbull and Columbiana counties.However, Houston-based Hilcorp Energy Co. was awarded permits to drill four vertical wells in nearby Lawrence County and two vertical wells in Mercer County in western Pennsylvania, according to the Pennsylvania Department of Environmental Protection. Hilcorp received permits to drill two conventional wells in Mahoning Township and two others in Pulaski Township in Lawrence County, while it received two permits to drill conventional wells in Jefferson and Shenango townships in Mercer County.

Utica Shale well activity as of July 7 -

  • DRILLED: 295 (300 as of June 23)
  • DRILLING: 163 (162)
  • PERMITTED: 472 (472)
  • PRODUCING: 1,913 (1,905)
  • TOTAL: 2,843 (2,839)

Five horizontal permits were issued during the week that ended July 7, and 18 rigs were operating in the Utica Shale.

Utica Shale Natural Gas Production Hit New Record in First Quarter - Ohio’s unconventional natural gas production continued its upward climb in the first quarter, jumping more than 40% year/year (y/y) and setting a new state record at 531.3 Bcf.That’s up from 371.9 Bcf in 1Q2017 and an increase from the previous record of 503 Bcf in 4Q2017, according to data released Wednesday by the Ohio Department of Natural Resources (ODNR).  Oil production meanwhile continued to seesaw. It declined by about 4% y/y, dropping to 3.9 million bbl in the first quarter. Oil production has fluctuated over the last several quarters, reflecting a broad shift to dry gas production that occured about two years ago across much of the Appalachian Basin when oil prices remained low. While oil volumes slowly crept back up from lows for sequential increases last year, for example, they fell from roughly 18 million bbl in 2016 to 16.4 million bbl in 2017. First quarter oil production was also down slightly from 4Q2017, when unconventional producers reported 4.2 million bbl.  Ohio law does not require separate reporting of natural gas liquids (NGL) or condensate. Those totals are included in natural gas volumes. Some Appalachian operators in the region have, however, reported more NGL development since late last year as prices have improved. ODNR’s first quarter report listed 1,949 horizontal shale wells, 1,909 of which reported oil and gas production during the period. The data consists almost entirely of Utica Shale production. The average amount of oil produced by each well was 2,066 barrels, while the average amount of natural gas produced was 278.5 MMcf over 86 average days in production. To date, the state has issued 2,843 horizontal Utica permits and 2,371 of those have been drilled. That’s up compared to the 2,518 permits issued at roughly the same time last year and the 2,014 that were drilled at that time.

Ohio shale production spikes, and what that means for the state -  Output spiked at Ohio shale wells in the first three months of the year, state data shows.The Ohio Department of Natural Resources indicates that 1,949 shale wells produced 531.3 billion cubic feet of natural gas in the first quarter, a 43 percent uptick from the 371.9 billion cubic feet they produced in the first quarter of 2017. Oil dropped just a bit in that time, with shale wells in the state producing 3.94 million barrels, down almost 4 percent from 4.09 million barrels a year ago. Each well produced an average of 2,066 barrels of oil and 278.4 million cubic feet of natural gas.The wells producing the most gas were in Monroe, Belmont and Jefferson counties, while the top wells for oil were in Guernsey and Harrison counties. Eclipse Resources and Ascent Resources Utica Holdings LLC held most of the top wells in both categories. "Well, the trend is our friend, and the Utica continues to impress as natural gas play," Dan Alfaro, Energy in Depth spokesman, told me. "Production levels are continuing to increase as market value does, and the necessary infrastructure continues to be built out. ... There is a lot of promise for future investments from other energy-intensive industries like steel, and the petrochemical industry."  This comes at a time when energy advocates promote the Appalachian energy industry in Pennsylvania, Ohio and West Virginia in a bid to elevate it to a global energy hub. "Any significant recession in the country has always been preceded by a huge spike in gas prices," Karen Alderman Harbert, CEO of the U.S. Chamber of Commerce's Global Energy Institute, told me. But in the Buckeye State, years of investments in Utica shale assets since gas prices spiked a decade ago are making energy costs cheaper and more stable for both consumers and businesses, she said.

Natural Gas Pipeline Designed to Meet Ohio Demand Gets Favorable EA from FERC - FERC has issued a favorable environmental assessment (EA) for RH energytrans LLC’s Risberg Line Project, which would move 55,000 Dth/d of natural gas from northwest Pennsylvania to northeast Ohio to meet increasing demand.Federal Energy Regulatory Commission staff concluded “that approval of the proposed project, with appropriate mitigating measures, would not constitute a major federal action significantly affecting the quality of the natural and human environment.” The U.S. Army Corps of Engineers and the Pennsylvania Fish and Boat Commission were the cooperating agencies in preparing the EA. Now that it’s completed, FERC’s environmental review schedule puts the project on track for a federal authorization deadline of Sept. 27. The Commission is accepting public comment on the EA until July 30 [CP18-6-000].The project would take gas from an interconnect with Tennessee Gas Pipeline in Crawford County, PA, to help meet peak day supply deficits and new industrial demand in Ashtabula County, OH. Utility Dominion Energy Ohio entered into a binding precedent agreement as the foundation shipper for 40,000 Dth/d.  At the time RH energytrans filed for a certificate of public convenience and necessity late last year to construct the 60-mile pipeline, North Atlantic Iron Corp. expressed interest in contracting for 15,000 Dth/d of firm transportation. The company plans to build a pig iron plant in Ashtabula on Lake Erie. 

DOE focuses on Appalachia in its updated 2018 NGL primer - The U.S. Department of Energy (DOE) has published the 2018 Natural Gas Liquids (NGL) primer, highlighting the resource’s potential and focusing on the Appalachian region.  The publication is an update of the 2017 version, reporting larger than previously estimated projections for ethane production from the Marcellus and Utica shale plays. According to the updated information, the Appalachian region has experienced near-exponential growth in natural gas production which is expected to increase for decades. EIA projects that natural gas production in the East region—where the Appalachian Basin is the principal contributor—will quadruple from 2013 to 2050. "Industry has made significant investments in natural gas and NGL infrastructure to support the boom in production in Appalachia this decade," the primer says. "New investments to take advantage of the NGL resources in the region have been identified by industry, and forecasts for production over the decades to come highlight the opportunity for additional investments across the NGL supply chain."  The 2018 primer includes new data from the U.S. Energy Information Administration’s (EIA) 2018 Annual Energy Outlook, as well as forecasts from a recent EIA Short-term Energy Outlook. This includes updated information on infrastructure developments in the Appalachian region and a new section identifying research and development opportunities related to natural gas and NGL production, conversion and storage. Natural gas produced in Appalachia not only contains NGL, but also ethane and propane.  The region has significant NGL resources that are projected to be economically recoverable over the next three decades. Appalachian NGL production is projected to increase more than 700 percent between 2013 and 2023. Significant industry investments in natural gas and NGL infrastructure will support the boom in Appalachian production in the coming decades. NGL storage and midstream infrastructure are of particular importance to the region because produced volumes do not align with the high seasonal variability in demand and often exceed pipeline takeaway capacity, which presents further investment opportunities using ethane as a feedstock.

Environmental group pushes for stepped up air pollution rules for gas industry – Environmentalists want the Wolf Administration to roll out tighter controls on methane pollution from existing wells and compressor stations to go along with those on new ones.The state Department of Environmental Protection in June announced stepped-up requirements for new wells and compressor stations, facilities that help keep the gas moving through pipelines.The additional move to add already-producing wells and operating compressor stations would be even more important as “protections are being rolled back at the federal level,” said Andrew Williams, director of regulatory and legislative affairs for the Environmental Defense Action Fund.In announcing the new limits last month, Gov. Tom Wolf said that as Pennsylvania is second to only Texas in natural gas production, the state is “uniquely positioned to be a national leader in addressing climate change while supporting and ensuring responsible energy development.”Neil Shader, a DEP spokesman, said the agency is “in the early stages” of developing new regulations for methane emissions from existing wells and compressor stations.Methane has become a hot-button because it’s considered “a potent greenhouse gas, with more than 80 times the climate warming impact of carbon dioxide over a 20-year timespan,” according to Williams’ group.The rules put in place in June came over the objections of the natural gas industry.“Methane does not appear to be increasing at levels that make specific limits and controls necessary,” the Marcellus Shale Coalition said in comments submitted to DEP.The group also complained that the limits set by the state appear “arbitrary.” In a statement provided Friday, the coalition’s president David Spigelmyer said the group would not welcome additional rules to limit methane pollution.

Sunoco's stand-in ME2 line leaked gasoline at Darby Creek, pipeline map indicates - A 12-inch pipeline that Sunoco plans to use to carry natural gas liquids along unfinished parts of the Mariner East route appears to be the same line that recently leaked gasoline into a creek near Philadelphia International Airport, according to  government mapping data and Sunoco’s own statements. Sunoco wants to repurpose part of the pipeline that runs from Point Breeze near Philadelphia to the Montello terminal at Sinking Spring, near Reading in Berks County. The line would carry propane, ethane and butane while Mariner East 2, the first of the new pipelines, is being completed. The company said the stretch to be converted runs between Wallace and Middletown townships, a distance of about 25 miles.The company has informed state and federal regulators that it plans to convert the existing pipeline from carrying petroleum products such as gasoline, and reverse the direction of flow, so that it can begin supplying customers with natural gas liquids before completion of the long-delayed Mariner East 2.Conversion of the 12-inch pipeline, which, like the repurposed Mariner East 1, was built in the 1930s, has renewed claims by opponents of the Mariner East project that public safety is at risk, this time by the use of a line that has leaked at least three times in its history, according to federal data as well as state and local officials.The latest leak was first reported in mid-June at Darby Creek in Delaware County.

Two protesters arrested at pipeline construction site in Middletown -- Two demonstrators – part of a group that dubbed themselves the “Mama Bear Brigade” including mothers and grandmothers – were arrested Tuesday when they sat down and blocked construction of Sunoco’s Mariner East 2 pipeline on Pennell Road.Accompanied by six supporters, the area-residents staged a sit-in protest of the pipeline construction.Arrested for trespassing, a summary offense, by Pennsylvania State Police, were Middletown residents Fran Sheldon and Meaghan Flynn. They were soon released by police. Attorney and former state Senate candidate Tanner Rouse will represent Sheldon and Flynn.The “Mama Bear Brigade,” including Middletown Township residents and Glenwood Elementary School parents, staged the protest and are women concerned about their children and grandchildren in the blast zone of the pipeline. “The mothers and grandmothers on-site had written letters, signed petitions, testified, and met with the governor and now they are feeling that there is no other choice,” Hughes said. “They are taking children’s safety into their own hands and trying to stop construction.”

Rover Pipeline Should Be Fully Responsible for Stream Impacts - The Rover Pipeline in northern West Virginia has a long history of negligence – 18 water quality violations and two cease and desist orders since April 2017. You may have read in the news that WVDEP has issued Rover a penalty of $430,000 for 14 of those violations. The proposed agreement to that penalty is now open for public comment.While WV Rivers commends WVDEP for holding Rover accountable for their water quality violations, we request the penalty be adjusted in a way that fully considers Rover’s repeated negligence and disrespect of environmental law, and strongly deters other pipeline companies from following suit. View our letter to WVDEP here. Over the last year, Rover’s erosion impacted 35 streams and created unlawful water quality conditions approximately 92 times. $430,000 doesn’t cover the costs to reclaim the damage they’ve inflicted on West Virginia’s streams and the local residents who depend on them. Nor does it match in scale a penalty for a project with a construction budget of $4.2 billion. That’s why we are requesting WVDEP reconsider Rover’s penalties and deny them any future projects.

Landslide caused West Virginia pipeline explosion, Columbia Gas reports - Columbia Gas Transmission has told federal pipeline regulators that a landslide was the apparent cause of the rupture and explosion of a new natural gas pipeline in Marshall County, W.Va., last month. The site of the break was at the bottom of a steep hill on Nixon Ridge, just south of Moundsville. The Pipeline and Hazardous Materials Safety Administration incident report, provided to the Post-Gazette by environmental activist organization Climate Investigations Center, indicates that officials inside Columbia’s control room got an alert about low pressure on the line at 4:16 a.m. on June 7 and sent someone to investigate. Marshall County 911 reported getting calls just a few minutes later reporting an explosion. At 4:37 a.m., the emergency agency called Columbia to report the news. (26 pp filing embedded) The carbon steel pipe, manufactured by Durabond in 2015, was not operating above its maximum pressure at the time of the incident. When it burst, it spewed $437,250 worth of natural gas. No one was injured.  TransCanada, which owns the Columbia Gas Transmission system, has been working on repairing the pipeline, pushing back the expected in-service date from early July to the middle of the month.“The weather in the region has continued to create challenging conditions during the remediation process,” the company said on a website it uses to communicate with customers.Lindsey Fought, a spokesperson with TransCanada, said the company is continuing to cooperate with federal authorities in the investigation.She confirmed that the federal pipeline agency and TransCanada's "internal findings point to land subsidence as the cause of the rupture."It may take months or years for federal regulators to complete their investigation of the Marshall County incident. When a natural gas liquids pipeline burst into flames in Follansbee, W.Va., in 2015, it took PHMSA more than a year to close the case, declaring that the root cause was subsidence. A final report for the Spectra Energy pipeline that ruptured in Salem Township, Westmoreland County in 2016 is still not posted on the federal site.

Explosion triggers safety notice for TransCanada --Federal regulators yesterday said that land movement may have triggered a natural gas pipeline explosion at a remote West Virginia site last month and thatsimilar conditions exist at a half dozen other spots along the line.The Pipeline and Hazardous Materials Safety Administration warned TransCanada yesterday that it intends to impose new safety-related requirements on a portion of the Leach XPress pipeline in response to the risk of land subsidence, which might have been responsible for an explosion last month that blew an 83-foot section of pipe into the air, released 165 million cubic feet (mmcf) of natural gas and triggered a fireball that burned for several hours.The incident took place in a remote area and no injuries or damage to private property was reported (Greenwire, June 7).PHMSA's notice of proposed safety order, issued to TransCanada Corp. subsidiary Columbia Gas Transmission LLC, points to geological factors in the incident and could pose a challenge for other projects proposed for construction in similar steep, unstable Appalachian terrain.The pipeline that failed was constructed last year and went into service early this year, raising questions around why it failed so quickly and dramatically."The preliminary investigation suggests that the failure was the result of land subsidence causing stress on a girth weld," PHMSA said in the notice. An initial report on the incident filed by TransCanada and released earlier this week notes the cause of the failure as a landslide not related to heavy rains or floods. "Since the failure, TransCanada has identified six other points along the pipeline that, based on their geotechnical flyover, are areas of concern to the existence of large spoil piles, steep slopes, or indications of slips," it said.

Part of TransCanada Leach gas pipe back in service after W. Va. blast (Reuters) - TransCanada Corp's Columbia Gas Transmission (TCO) unit said on Thursday it returned to service a section of the Leach Xpress natural gas pipeline downstream from a pipe blast in West Virginia in early June.Columbia said in a notice to customers that the Stagecoach-Leach Xpress meter in southeast Ohio has returned to service.The Stagecoach meter, the large connection at which different pipelines meet, in Monroe County on the Ohio-West Virginia border attaches to EQT Midstream Partners LP's Strike Force South gathering fields in Monroe and Belmont counties in Ohio.Columbia Gas said it was still working on the site of the blast and expected the pipe to return to service in mid July. The shutdown of Leach Xpress forced producers using the line to find other pipes to ship gas out of the Marcellus and Utica shale regions of Pennsylvania, West Virginia and Ohio.Alternative pipelines include ETP's Rover, Tallgrass Energy LP's Rockies Express (REX), EQT Midstream Partners LP's Equitrans and Enbridge's Tetco, according to analysts at S&P Global Platts.Columbia Gas, which declared a force majeure after the blast, said the damaged section of pipe could affect movement of about 1.3 billion cubic feet per day (bcfd). One billion cubic feet of gas can fuel about 5 million U.S. homes for a day.Energy analysts said overall output in the Appalachian region was little changed by the blast as producers, like Range Resources Corp and Southwestern Energy Co, found other pipes to ship their gas.Appalachian output rose from 27.5 bcfd before the June 7 blast to as high as 28.1 bcfd over the weekend, according to Thomson Reuters data.The 1.5-bcfd Leach Xpress in West Virginia and Ohio, which entered full service at the start of 2018, transports Marcellus and Utica shale gas to consumers in the U.S. Midwest and Gulf Coast.  The 12,000-mile (19,312-km) Columbia pipeline system, which TransCanada acquired in 2016, serves millions of customers from New York to the Gulf of Mexico.

TransCanada says blast-damaged Leach natgas pipe back in service on July 15 - (Reuters) - TransCanada Corp's Columbia Gas Transmission expects the section of the Leach Xpress natural gas pipeline damaged in a blast in West Virginia in early June to return to service on July 15. Its return, however, requires approval from federal pipeline safety regulators, Columbia said on Thursday in a notice to customers using the pipeline. The U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA) this week gave Columbia 30 days to respond to a list of corrective actions the agency proposed to improve the safety of the Leach pipe. Since the June 7 blast, Columbia has identified six other points along the pipeline that PHMSA said are "areas of concern" based on soil conditions and steep slopes or indications of slips. PHMSA has not identified the cause of the blast but said preliminary investigation suggests the failure was the result of ground movement that caused stress on a weld. That blast resulted in the ejection of about 83 feet (25.3 meters) of 36-inch (91-centimeter) pipe from the ditch and the loss of 165 million cubic feet of natural gas, PHMSA said. The explosion was in a remote rural area and caused no injuries or evacuations. The Leach shutdown forced producers using the line to find other pipes to ship gas out of the Marcellus and Utica shale regions of Pennsylvania, West Virginia and Ohio. Alternative pipelines include Dominion Energy Inc's transmission system, Energy Transfer Partners LP's Rover, Tallgrass Energy LP's Rockies Express, Enbridge Inc'sTexas Eastern Transmission and Kinder Morgan Inc's Tennessee Gas, according to analysts at S&P Global Platts. Columbia said the blast could affect movement of about 1.3 billion cubic feet per day. One billion cubic feet of gas can fuel about five million U.S. homes for a day. Overall output in the Appalachian region, however, was little changed as producers, like Range Resources Corp and Southwestern Energy Co, found other pipes to ship their gas.

Factbox: Leach XPress resumes partial service, full capacity by July 15 — Columbia Gas Transmission on Thursday said it was immediately resuming partial service on its Leach XPress segment, with full service scheduled to return by Sunday, July 15. The news comes after an explosion in Marshall County, West Virginia, suspended operations on June 7, leaving the pipeline under force majeure over the past 35 days.

  • Early Thursday, Columbia said the upstream Stagecoach meter had returned to service effective for intraday cycle 1 on Gas Day July 12.
  • Repairs on Leach XPress, upstream of Stagecoach, continue with a resumption of operations at the Eureka, Gibraltar and Majorsville meters expected by July 15.
  • Wednesday's evening-cycle nominations for Gas Day July 12 showed flow volumes at the Stagecoach meter at zero, but are subject to revision during subsequent intraday cycles on Thursday, S&P Global Platts Analytics data shows.
  • Upstream receipts at Stagecoach are likely to return to levels near the pre-explosion average of 230 MMcf/d by later Thursday.
  • Flows at Eureka, Gibraltar and Majorsville were at zero on Thursday, where they are expected to remain until the resumption of full capacity on the pipeline Sunday.
  • Flows on Columbia's mainline were estimated just below 2.6 Bcf/d Thursday. Mainline flows have averaged 2.6 Bcf/d, or about 1.1 Bcf/d below the pre-explosion average, since June 7
  • Upstream production continues to be rerouted to Dominion Transmission, Rockies Express Pipeline, Rover Pipeline, Tennessee Gas Pipeline and Texas Eastern Transmission with flows still elevated Thursday. Since the June 7 incident, cumulative receipts on the dense network of alternate pipes are up by an average 1.3 Bcf/d.
  • In spite of the force majeure on Leach XPress, Appalachian gas production has climbed about 3% since early June. Over the past seven days, total Northeast production has averaged nearly 28 Bcf/d, compared to a 27.2 Bcf/d average in the week prior to the incident.

Alert: West Virginia’s Pipeline Explosion Caused by a Landslide on Steep Terrain.  Virginia’s Mountain Valley Pipeline, Being Built by a Serial Landslide Perpetrator, is Next.  --On May 28 and June 4, we published two stories about a lawsuit filed in federal court in Richmond that pits Dominion Energy against Precision Pipeline, LLC, the Wisconsin company that is currently building the Mountain Valley Pipeline.  The stories – which have garnered more than 37,000 readers – exposed previously unpublished expert reports – found here and here – that demonstrated Precisions Pipeline’s sheer incompetence in building a 30-inch diameter 55-mile long pipeline for Dominion in West Virginia and Pennsylvania.As we noted, the expert reports revealed that there were more than 50 landslides after the Precision Pipeline project was completed:  “Yes, >50 landslides.In a 55-mile pipeline projectWith a 30-inch diameter.In non-mountainous terrain….”That’s an average of one landslide… every mile.The proposed Mountain Valley Pipeline is 300 miles long.  Do the math.”  The landslide risks at issue in the Dominion/Precision Pipeline lawsuit are terrifying because the Mountain Valley and Atlantic Coast Pipelines are proposed to be built through some of the steepest terrain in Virginia, with slopes as steep as 78% in places.  This mountainous terrain is particularly susceptible to landslides when fill material generated by construction is deposited on slopes after the pipelines are buried.  The reasons are discussed in this excellent short video, “The Truth is in the Proof.”One week after our stories were published, a brand new TransCanada/Columbia Gas pipeline exploded in West Virginia, generating a fireball that could be seen as far away as Pennsylvania.  When the pipeline went on line in January 2018, company officials described it as “best in class” even though “whistleblowers at numerous pipeline companies have raised red flags about the impacts of rushed construction.”The West Virginia explosion occurred on a slope known as Nixon’s Ridge.  Almost immediately after it occurred, stories started to circulate that workers had observed shifting soil during construction but were told to “just keep working” and “get the pipe in the ground.” Now the bombshell news just broke: “Columbia Gas Transmission has told federal pipeline regulators that a landslide was the apparent cause of the rupture and explosion of a new natural gas pipeline in Marshall County, W.Va., last month.”  And it turns out it’s not the first time in recent years that a pipeline exploded in West Virginia due to a landslide:  a similar explosion occurred in 2015 in a 20-inch pipeline.

Mountain Valley Pipeline cited for environmental violations (AP) — Regulators in Virginia are citing the Mountain Valley Pipeline project for environmental violations they say include the improper release of sediment into waterways. The Department of Environmental Quality announced Tuesday that it issued a notice of violation to the natural gas pipeline. Other alleged violations include failing to follow approved erosion and sediment control plans. The notice of violation requires pipeline representatives to discuss how to fix the problems and prevent future violations. It could result in civil fines. Pipeline spokeswoman Natalie Cox says the issues identified have either been restored or are being fixed. West Virginia regulators have also previously cited the project for similar issues. Tuesday’s announcement comes about a week after Mountain Valley agreed to temporarily suspend pipeline installation work in Virginia to improve erosion and sediment controls. The department has since approved work to restart in some areas.

VIRGINIA DEQ Takes Enforcement Action Against Mountain Valley Pipeline – The Virginia Department of Environmental Quality (DEQ) has issued a Notice of Violation (NOV) to Mountain Valley Pipeline, LLC (MVP) for alleged violations of the Virginia Stormwater Management Act and Regulations, the Virginia Erosion and Sediment Control Law and Regulations, the Virginia Water Protection Permit Program and Regulations, and Clean Water Act Section 401 Water Quality Certification No. 17-001 at locations where land disturbing activity is occurring along the MVP pipeline project. The alleged violations include failure to take corrective actions within required timeframes, failure to install (and improperly installed) best management practices in accordance with approved erosion and sediment control plans, release of sediment off the right-of-way, and sediment deposited in surface waters. These issues are located in Craig, Franklin, Giles, Montgomery, Pittsylvania and/or Roanoke counties. The issuance of an NOV is the first step toward generating enforcement action by DEQ. The NOV requires MVP representatives to contact DEQ within 10 days to discuss how to remedy the situation and how they will prevent future violations. Enforcement actions are frequently resolved with payment of civil charges and required actions to correct the violations.  “The Notice of Violation process is standard procedure for DEQ to formally and publicly announce violations and determine a path forward for resolution,” said DEQ Director David Paylor. “The specific results of the NOV will be developed over the coming weeks and once finalized, shared with the public. We are concerned about these alleged violations and we are holding MVP accountable. We expect MVP to abide by the highest environmental standards, and we plan to resolve these issues fully in order to protect Virginia’s water quality.”

Franklin County wants pipeline company to reimburse it for public safety costs -- Franklin County plans to ask the Mountain Valley Pipeline to cover public safety costs it has incurred as a result of the project. The idea to bill the pipeline’s builders stemmed from a meeting between pipeline and county officials to discuss public safety. After concerns were raised that an influx of calls to law enforcement during construction would pose a financial burden to the county, a pipeline representative suggested such costs be passed on to them, according to multiple county officials in attendance. Supervisors Ronnie Thompson and Mike Carter, both opponents of the pipeline, attended the meeting. Thompson recalled being told the pipeline “was to never cost the municipality anything when it came down.” He took that to mean Franklin County can bill Mountain Valley for associated costs, and directed county staff to look into doing so. County Administrator Brent Robertson characterized comments made at the meeting as more of a conversation than a formal agreement. He said the county’s approach to billing Mountain Valley for such costs is still evolving.  The “crux of the discussion,” Robertson said, will be whether officials consider the response from law enforcement to fall within the realm of everyday responsibilities or something extra.

Mountain Forest Becomes Classroom Camp in Pipeline Fight - As Miracle Ridge rises toward its peak on Jack Mountain, the remnants of a wire fence divide the mountain between lower slopes where cows once pastured and a high, narrow spine of virgin forest.  The trees — mostly oak and hickory — aren't as big as the massive sugar maples on the lower slopes, but they're just as old, surviving hundreds of years on shallow, rocky soil in high winds. Loggers haven't touched this forest, nor have non-native plants invaded what Virginia's Division of Natural Heritage has declared a conservation site of "very high significance."  Now, the mountain ridge is becoming a classroom camp in the escalating battle over the Atlantic Coast Pipeline, which would level the forest and more than 3,000 feet of ridgeline on its 600-mile path from the West Virginia shale fields to natural gas markets in southeastern Virginia and North Carolina. "We anticipate people camping right where the pipeline is proposed," said Bill Limpert, whose 120-acre property includes the mountainside he began calling Miracle Ridge after he and his wife, Lynn, purchased it nine years ago.The Limperts have opened their land to an anti-pipeline encampment, beginning Friday and extending to Sept. 9, about a week before a seasonal window opens for tree cutting to resume on the pipeline route planned by Dominion Energy and its partners.They expect as many as 20 campers a day to visit their land near Bolar in Bath County near its boundary with Highland County in the Allegheny Mountains. The camp is organized by the Chesapeake Climate Action Network, an environmental organization that opposes the production of natural gas through hydraulic fracturing, or fracking, and the construction of pipelines through environmentally sensitive areas to transport the fossil fuel to markets.

One week after suspension, some work resumes on the Mountain Valley Pipeline — After coming to a brief halt, construction of the Mountain Valley Pipeline is resuming piecemeal along its approximately 100-mile route through the New River and Roanoke valleys. The Virginia Department of Environmental Quality, which said the temporary suspension began June 29 after Mountain Valley failed to control runoff from work sites, identified two segments this week where improvements by the company were sufficient for work to restart. One area is in the Jefferson National Forest, and the other is between Mount Tabor and Catawba roads in Montgomery County. Mountain Valley’s efforts to correct erosion and sediment control measures along a third segment, where the natural gas pipeline will pass under the Blue Ridge Parkway in Roanoke County, were deemed deficient. Work cannot resume there yet, DEQ said in a summary posted to its website. Environmental regulators plan to inspect other areas and provide online updates as more clearances are granted. DEQ spokesman Greg Bilyeu could not say Friday how many sites will be reviewed.  Critics said the brevity of the suspension, and the scarcity of details provided by DEQ, call into question the agency’s commitment to addressing problems and concerns that reached a critical mass as work on the interstate pipeline ramped up in May and June. “We believe that this was all a public relations stunt,” 

Court: Louisiana oil pipeline construction can continue (AP) — Construction of a crude oil pipeline through Louisiana's environmentally fragile Atchafalaya Basin swamp can continue under a federal appeals court decision handed down Friday. A divided panel of the 5th U.S. Circuit Court of Appeals vacated a lower court's preliminary injunction blocking construction of the Bayou Bridge Pipeline. The 2-1 decision was a victory for Bayou Bridge Pipeline LLC, whose lawyers had urged the panel to throw out U.S. District Judge Shelly Dick's injunction in April. Dick issued a preliminary injunction in February stopping pipeline construction in the Atchafalaya Basin swamp until a lawsuit by project opponents is resolved. But her injunction was suspended by a 5th Circuit panel in March, so construction continued even before Friday's ruling. The company recently told the court that it expects to complete construction by October. The decision comes in a lawsuit by environmental groups, including Atchafalaya Basinkeeper, Waterkeeper Alliance, The Gulf Restoration Network and the Sierra Club. They sued Bayou Bridge Pipeline LLC and the U.S. Army Corps of Engineers. The lawsuit says the Corps violated the Clean Water Act and other environmental laws when it approved a permit for the project.

Still No Evacuation Plan for Vulnerable Residents at End of Louisiana’s Bayou Bridge Pipeline -- Sharon Lavigne and Geraldine Mayho took me to meet some of the most vulnerable members of their community, handicapped residents of St. James, Louisiana, who live near a terminal where the Bayou Bridge pipeline will end. “These people have no way of getting out if there is a spill or explosion,” Lavigne told me. She explained with only one road in and out of the area, if the pipeline fails or an industrial accident occurs, “we are all trapped back here.” St. James is a predominantly low-income, African-American town of less than 1,000. It is located in the middle of a highly industrialized stretch of land along the Mississippi River, between Baton Rouge and New Orleans, known as Cancer Alley. The town is part of St. James Parish’s 5th District, an area that has transformed from mostly rural to industrial over the last decade.Numerous industrial projects including the Bayou Bridge pipeline currently are being built here.The Louisiana governor’s office recently announced the Taiwan- based Formosa Petrochemical Corp. purchased a 2,400-acre site along the west bank of the Mississippi River near the Sunshine Bridge, at the district’s edge. The company plans to build a $9.4 billion chemical manufacturing complex that it is branding as “the Sunshine Project.”  But Lavigne and Mayho see it as one more nail in their coffins because they don’t believe a chemical manufacturing complex can operate so closely to their homes without adding to the air pollution their community already endures. The new industrial facilities and infrastructure like the Bayou Bridge pipeline will join a large number of oil storage tanks that were built close to many homes on St. James’ Burton Lane, where I visited and shot portraits of some of the residents with restricted mobility.

Former Putin adviser has secret investment in US energy firm praised by Trump - Vladimir Putin’s former chief of staff has a secret investment in an American energy company hailed by Donald Trump as creating jobs for American workers.Alexander Voloshin – who served as Boris Yeltsin’s chief of staff before working for Putin between 2000 and 2003 – has an undisclosed stake in American Ethane, a Houston-based firm that recently signed a multibillion dollar export deal with China. Voloshin is part of a consortium of Russian investors in American Ethane that at one point included the oligarch and billionaire Roman Abramovich.The revelation comes ahead of Trump’s four-day visit to the UK, beginning on Thursday, and his summit on 16 July with President Putin in Helsinki. In November 2017, Trump presided over a series of trade agreements with his Chinese counterpart, Xi Jinping. One of the biggest was a $26bn (£20bn) deal to supply liquid ethane to China, struck between privately owned American Ethane and a large Chinese conglomerate. Trump applauded and nodded vigorously as American Ethane’s CEO, John Houghtaling, signed a “historic” memorandum of understanding with his Chinese partner.The president was promoting “American prosperity and trade” in deals that would generate “thousands of American jobs”, the White House announced. In fact, the chief beneficiaries of the Trump-endorsed deal live and work in Moscow. One of them is Voloshin, who spent three years at Putin’s side, and headed his first presidential administration.

Differentials Aside, U.S. Onshore Could See 100 More Rigs Rising This Year, Says Raymond James - The U.S. rig count should continue to increase into the second half of this year, with up to 100 oil and gas rigs added, even with potential price differential issues in the No. 1 play, the Permian Basin, Raymond James & Associates Inc. said Monday.Analysts J. Marshall Adkins and Praveen Narra said they expect a nearly 100-rig count rise through the end of the December with “modest” growth continuing in 2019.The United States added five oil rigs in the onshore last week from a week before, bringing the domestic count to 1,052 from a year-ago tally of 952, according to Baker Hughes Inc. (BHI). For the oily onshore plays, Energent Group estimated the Permian count rose 0.2% week/week to 475 rigs, while the Eagle Ford Shale saw a 1.3% gain to 81 rigs and the Williston Basin, i.e. Bakken Shale, count climbed 5.6%.The average U.S. rig count for June 2018 was 1,056 -- up 10 from the 1,046 counted in May, and up 125 from the 931 counted in June 2017, BHI said Monday.“Given the rig count outperformance in the first half of the year and continued growth in 2018, our average rig count comes in up about 22% this year at 1,070,” Adkins and Narra said.Following a “robust” exit rate in 2018 estimated at 1,160 rigs, the count should continue to rise, albeit more modestly, at around 14% in 2019 on “buffered support” from the Bakken and Eagle Ford shales.In 2020 and beyond, Raymond James analysts are forecasting “consistent multi-year growth” in the United States because of a tightening global market.Even with the negative press around widening Permian oil price differentials and lower Permian spot oil prices, he U.S. oilfield market is prime for continued growth in part because U.S. exploration and production (E&P) cash flows should be healthy in 2018, rising by 56% year/year and up again in 2019 by around 18%, which would support more spending, said Adkins and Narra. “Even if Permian oil price differentials widen to an irrational $25/bbl average over the next 18 months (as we are modeling), realized Permian spot prices would still be in-line with initial 2018 budgeting assumptions (in the low to mid-$50 range).”

CME, Cheniere to develop first U.S. LNG futures contract (Reuters) - CME Group Inc said on Tuesday it will develop the first physically deliverable U.S. liquefied natural gas futures contract as growing worldwide demand has made the United States a key LNG exporter. CME said the contract will take delivery at Cheniere Energy Inc’s Sabine Pass LNG export terminal in Louisiana. It could not say when it will launch the new product or provide details other than that it will trade on the CME’s New York Mercantile Exchange (NYMEX) like its Henry Hub natural gas futures. Overall world LNG consumption has risen to a record 39.0 billion cubic feet per day (bcfd) in 2017 from just 29.1 bcfd in 2010 and is expected to keep growing by about 3 percent a year through 2050, according to U.S. energy data. While LNG trade on exchanges like the CME is still small, experts believe volumes will increase rapidly in the near future as the United States becomes one of the world’s biggest LNG exporters. Total U.S. LNG export capacity is expected to rise to 10.1 bcfd of gas in 2020 from 3.8 bcfd now, making the country the third-biggest LNG exporter in the world by capacity in 2019. One billion cubic feet is enough to fuel about 5 million U.S. homes for a day. “We have spoken to the market and they have expressed a desire to have a physically delivered LNG contract that can help them manage price risks,” said Peter Keavey, global head of energy at CME. Pricing at Cheniere’s Sabine Pass is currently linked to the Henry Hub gas benchmark traded on CME’s NYMEX. Sabine Pass was the first terminal in the U.S. lower 48 states to produce and deliver super-cooled LNG for export to the world. Cheniere is the biggest buyer of gas in the United States, consuming over 3.1 bcfd, and is expected to increase purchases as more liquefaction trains at Sabine Pass and its Corpus Christi LNG export terminal enter service. The company’s current consumption represents almost 4 percent of total projected U.S. gas production of 81.3 bcfd in 2018. “With Cheniere behind the CME futures contract...the odds would favor the CME contract especially if Cheniere immediately starts to sell its LNG on a Sabine Pass contract basis,” 

LNG Awakening Part 1: Buyers Seeking Transparency to Develop Price Benchmark -Buyers and sellers of liquefied natural gas (LNG) are starting to turn to online trading platforms to conduct their business in an effort to gain the transparency, liquidity and optionality they desire to trade physical cargoes, as well as an efficient marketplace to execute transactions.“Buyers want to have the choice for some optionality as well. They want flexibility,” said GLX CEO Damien Criddle, whose independent online platform trades LNG. Buyers last year sought contracts that averaged around seven years, Royal Dutch Shell plc said in its second annual outlook on the global LNG market.Most LNG in the global marketplace today is sold under long-term contracts of 10-20 years, fee structures still desired by most sellers. For example, Cheniere Energy Inc.’s recent deal with PetroChina International Co. Ltd. is to sell 1.2 million metric tons per year through 2043. However, there is a growing appetite from buyers for shorter contracts with more flexibility.The need for greater flexibility in a marketplace that has seen spot LNG volumes increase substantially in the last decade is one reason Criddle, a former LNG transaction lawyer, and his team formed GLX in 2015. The Singapore-based company launched its trading platform last year and now has more than 40 members from Asia, Australia, Europe, the Middle East and North America. Another five companies now are in the process of joining the exchange.GLX closed its first transaction on May 21. The deal was the first time Malaysia’s state-owned Petroliam Nasional Berhad, through subsidiary Petronas LNG Ltd. (PLL), sold an LNG cargo on an online trading platform. Criddle said a number of cargoes have negotiated using the platform, but the recent Petronas trade is the first to utilize the end-to-end functionality of GLX through to close the deal.

LNG Awakening Part 2: U.S. Exports on the Rise, But Limited Infrastructure in Thirsty Global Markets a Big Concern - Part two of a three-part series (See Part One; Part Three)  For all the economic benefits that liquefied natural gas (LNG) exports are expected to bring to the United States, including bringing an estimated $30 billion back into the domestic economy, a lack of infrastructure to support demand and complex regulatory regimes in some of the fastest growing markets have left industry experts cautiously optimistic about growth potential.China surpassed South Korea as the second largest importer of LNG in 2017 with imports averaging 5 Bcf/d, exceeded only by Japanese imports of 11 Bcf/d, according to data from IHS Markit and official Chinese government statistics. Imports of LNG by China, driven by government policies designed to reduce air pollution, increased by 1.6 Bcf/d (46%) in 2017, with monthly imports reaching 7.8 Bcf/d in December. An expected surge in 2018 could put China in direct competition with Japan for the No. 1 spot.The surge in gas demand over the past year led to “severe strains” on China’s gas infrastructure, “as retail and wholesale prices increased sharply and LNG imports ramped up beyond notional capacity limits,” BP plc chief economist Spencer Dale said in a June webcast to discuss BP’s 67th annual Statistical Review of World Energy. The strain also led to widespread gas rationing, with households given priority over industrial use.“Some of these tensions and strains simply reflect the speed with which gas demand expanded. There’s a limit to how quickly LNG imports can be increased,” Dale said. “Imported pipeline gas didn’t grow by as much as perhaps expected. But the strains also highlighted the underlying weakness of gas infrastructure in China. The network of pipelines across China is incomplete leading to significant distributional issues. Even more important, gas storage capacity in China is inadequate to match the fluctuations in demand.”Effective gas storage in China is about 3% of consumption, compared to 20% in the United States and Europe, according to BP. “These types of structural issues can’t be fixed overnight and are likely to constrain the extent at which Chinese gas demand outside of the power sector can grow in the near-term,” Dale said.

LNG Awakening Part 3: Second-Wave Developers Optimistic About Future Despite Growing Trade Disputes -  Part three of a three-part series (See Part One; Part Two) Even with the United States seemingly on the brink of an international trade war, and growing concern in the oil and natural gas industry that recently enacted tariffs on goods from China and other countries could threaten development, second-wave liquefied natural gas (LNG) developers appear to be cautiously optimistic that the economic and environmental benefits of U.S. exports will ensure future projects get off the ground.  NextDecade Corp. CEO Matthew Schatzman recently touted LNG exports as a way for the U.S. government to positively impact the environment by promoting the use of low-cost natural gas over coal in both developed and emerging markets. NextDecade is developing the Rio Grande LNG export project at the southern tip of Texas in Brownsville.  Schatzman told NGI he thinks the global market needs at least 150 million metric tons/year (mmty) of new liquefaction capacity by 2025. Two-thirds of the supply likely would come from North America, mainly from the U.S. Gulf Coast.“The U.S. has abundant natural gas reserves and is well-positioned to provide global markets with reliable, low-cost LNG. In fact, due to its abundance of natural resources, the United States has an opportunity to emerge as the world’s largest supplier of LNG in the coming years,” Schatzman said.  Still, the recent tariffs imposed on steel and aluminum from China, the European Union, Mexico and Canada, as well as additional tariffs on Chinese products collectively valued at about $50 billion in 2018 trade values, are keeping some in the industry on pins and needles when it comes to whether the United States will be able to capitalize on the rapidly growing LNG demand in the Asia Pacific region. “Some of these LNG project developers have pointed out that Chinese customers are telling them that they can buy their LNG from several other producers,” an official with an LNG consultancy said. China’s three largest LNG suppliers today are Australia, Qatar and Malaysia, while pipeline imports come from central Asia and Myanmar.

LNG spot prices rally on tight supply, summer heat --Platts Snapshot video - Concurrent maintenance activities and outages on the supply side tightened the LNG market during the month of June. This caused a massive rally in the Platts JKM price for spot deliveries into Northeast Asia. Now we have to ask whether this trend is expected to continue, or if supply will come back in the coming months leading up to the winter.

Natural Gas Prices to Average $2.99 This Year, $3.04 in 2019, Says EIA - Higher natural gas production during the injection season is expected to offset low storage levels and will moderate upward price pressures this year, resulting in Henry Hub spot prices averaging $2.99/MMBtu for 2018, according to the Energy Information Administration (EIA).Prices next year are expected to average slightly higher at $3.04/MMBtu, EIA said in its latest Short-Term Energy Outlook (STEO), which was released Tuesday.The 2018 price forecast is unchanged from EIA's previous STEO, while the 2019 price forecast is down 4 cents from $3.08/MMBtu.New York Mercantile Exchange contract values for October 2018 delivery traded during the five-day period ending July 5 suggest a price range of $2.37-3.59/MMBtu, encompassing the market expectation of Henry Hub prices in October at the 95% confidence level, EIA said.The front-month natural gas futures contract for delivery at Henry Hub settled at $2.84/MMBtu on July 5, a decrease of 13 cents/MMBtu from June 1."Record-high natural gas production continues to limit upward price pressures," according to EIA, which estimates that natural gas production reached 81.8 Bcf/d in June, 9.2 Bcf/d higher than in June 2017. "However, for the four weeks ending June 28, cooling degree days were 23% higher than normal, putting some upward pressure on natural gas prices."Futures prices increased to $3.02/MMBtu on June 15, the first time prices were more than $3.00/MMBtu since January. "Additional natural gas consumption for power generation helped to keep natural gas inventories about 500 Bcf below the five-year (2013–17) average through June, despite rising production." Following the coldest April in more than two decades and a resulting delay to the start of the summer injection season, inventories are expected to increase at the five-year average rate of growth during the injection season to reach 3.5 Tcf on October 31,  9% lower than the five-year average for the end of October, EIA said.

Power Demand Could Keep Natural Gas Storage at Deficit Despite Record Onshore Output - Even as Lower 48 natural gas production has reached record highs in recent days, strong power demand in the South Central region of the United States stands to challenge storage injections going into the peak summer period, according to Barclays Commodities Research.Daily natural gas flow volumes have climbed just north of 80 Bcf/d on a handful of days since the end of June. Growth has come from shale plays including the Marcellus and Utica despite infrastructure issues in the region, like the explosion on Columbia Gas Transmission’s Leach Xpress that has restricted flows on the pipeline and the still pending in-service requests for the final portions of Energy Transfer Partners LP’s Rover Pipeline. Incremental additions to takeaway capacity in the Permian Basin have allowed for continued production growth in that region as well.East Daley analysts have also noted that production from the Louisiana side of the Haynesville Shale “has been on a tear” since early 2017 as commodity prices have rebounded from 2016 lows. Natural gas production volumes hitting interstate pipelines have nearly doubled in the past 18 months, they said.Sample volumes showed the biggest sequential increases in 2Q2018 for Azure Midstream Energy LLC’s Holly system (up 52%), Momentum Midstream LLC’s M5/Indigo Blue Union (27%), Kinder Morgan Inc.’s Kinderhawk system (22%) and Aethon Energy’s Ibex system (22%).Given the production growth trajectory, Barclays researchers expect Lower 48 production to average 79.9 Bcf/d in 2018, up 7.3 Bcf/d year/year (y/y). Despite the surge in production, storage inventory deficits of historical levels remain.

Market Awaiting EIA Storage Report as August Natural Gas Called Lower -- August natural gas futures were set to open Thursday about 1.6 cents lower at around $2.813/MMBtu, with the market looking ahead to a potentially leaner than average Energy Information Administration (EIA) storage report that could help gauge the impact of recent heat. Estimates for this week’s EIA report point to a build well shy of the five-year average. A Reuters survey of traders and analysts on average showed respondents anticipating a 56 Bcf build for the week ended July 6, with responses ranging from 47 Bcf to 67 Bcf. A Bloomberg survey produced a median 55 Bcf injection, with a range of 34 Bcf to 67 Bcf. IAF Advisors analyst Kyle Cooper predicted a 50 Bcf build, while Intercontinental Exchange EIA Financial Weekly Index futures settled Wednesday at an injection of 49 Bcf. Last year, EIA recorded a 59 Bcf build, and the five-year average is an injection of 77 Bcf “It was warmer than normal over most of the country besides portions of the Northwest and South, exceptionally hot across the Northeast and Great Lakes where mid-90s were observed, although tricky with the Fourth of July holiday,” NatGasWeather said. “Our algorithm sees a bullish outcome at 47-48 Bcf.” As for the latest weather data, the firm said overnight guidance failed to trend hotter for the last week of July, “seeing weather systems tracking across the northern and eastern U.S. with mostly comfortable conditions, although hot over the rest of the country with 90s and 100s. Essentially, still not impressive enough for the market’s liking across the Northeast late next week into the last week of July.

EIA report shows a weekly rise of 51 billion cubic feet in U.S. natural-gas supplies - The U.S. Energy Information Administration reported Thursday that domestic supplies of natural gas rose by 51 billion cubic feet for the week ended July 6. Market consensus had called for a rise just shy of 60 billion cubic feet, according to Schneider Electric. Total stocks now stand at 2.203 trillion cubic feet, down 725 billion cubic feet from a year ago, and 519 billion below the five-year average, the government said. August natural gas NGQ18, -0.39% fell 2.1 cents, or 0.7%, at $2.808 per million British thermal units, down from $2.824 before the supply data.

Natural Gas Is Not Filling Storage Quickly Enough Before Winter - Natural gas is not making any progress in whittling down its significant storage deficit. This will not be a big issue if the upcoming winter is warmer than normal, or even normal. However, if the upcoming winter is much colder than normal, then parts of the country will run out of natural gas in storage and shortages will occur before the winter is over. This could cause a large rally in natural gas prices before the end of winter, if the winter is much colder than normal. At this point in time it is too early to know what the temperatures will be for the upcoming winter. The latest EIA Natural Gas Storage Report shows the following: According to the EIA: "Working gas in storage was 2,203 Bcf as of Friday, July 6, 2018, according to EIA estimates. This represents a net increase of 51 Bcf from the previous week. Stocks were 725 Bcf less than last year at this time and 519 Bcf below the five-year average of 2,722 Bcf. At 2,203 Bcf, total working gas is within the five-year historical range." The key number to focus on is that natural gas in storage is 519 Bcf below the five-year average, which is almost 20% below normal. What is also concerning is that natural gas in storage is getting closer to falling below the five-year minimum. Below is the EIA chart of the five-year average of natural gas in storage:  The report states as of July 6, 2018, the five-year minimum in storage was 2,053 Bcf. With the latest storage levels at 2,203 Bcf, we are now only 150 Bcf above the five-year minimum. The five-year minimum occurred in 2014 when storage fell to 825 Bcf at the end of March. In 2014, the summer was mild and natural gas in storage rose at an above normal rate. That is not what is happening this summer. In early 2014 natural gas futures nearly doubled and spiked to over $6 per Mcf based on storage concerns. At that time natural gas prices were depressed based on a belief that growing supply was outpacing demand. The same conditions exist in today's natural gas futures market. Hence, if storage concerns become real in early 2019 it is reasonable to expect a significant increase in natural gas futures prices from current levels.

Fourth-ever crude export sails from LOOP after record-setting load time - Another record-setting crude export out of the Louisiana Offshore Oil Port (LOOP) sailed Wednesday afternoon and is headed to the Caribbean after spending about four days loading, according to Platts vessel-tracking software. The Anne, a VLCC with a capacity of 2.02 million barrels of crude, is due on the Dutch Antilles island of St. Eustatius, on Tuesday and was north of Puerto Rico on Monday, according to cFlow, Platts trade flow software. A representative from LOOP did not return a request for comment Monday. LOOP loaded the tanker about two days faster than its previous best, which sailed only two weeks previously. Platts cFlow showed Anne arriving at LOOP on July 1 and the tanker departed on July 4. That compares with seven days at LOOP for Shaden and 10 days for Nave Photon and with six days for Eagle Vancouver, which were the first, second and third VLCCs to load at LOOP earlier this year, respectively. Four days is much faster than other VLCC load-times in the US Gulf Coast, which must either be partially or fully loaded using reverse lightering. Typically, US Gulf Coast VLCC loadings take on average 10 days to complete, according to a recent presentation by an Occidental Petroleum representative. However, as export terminals increase their capacities and fine tune their loading procedures, those load times are shortening. By comparison, the FPMC C MELODY, another VLCC was recently partially loaded in the US Gulf Coast at Enterprise Products’ Texas City dock on the Houston Ship Channel. That vessel arrived for loading in Texas City on June 21 and then moved to the Offshore Galveston Lightering Zone, where the remainder of the cargo was loaded via ship-to-ship transfer. FPMC C MELODY set sail on June 28 and is expected to arrive in Sikka, India, on August 9. FPMC C MELODY also made a one-day stop in St. Eustatius, where there are a number of blending and storage facilities. 

Plans Afoot To Load Crude Onto VLCCs At More Gulf Coast Ports --For the first time ever, U.S. crude oil exports have hit the 3 MMb/d mark — a once-unthinkable pace equivalent to sending out 10 fully loaded Very Large Crude Carriers a week. VLCCs, with their 2-MMbbl capacity and rock-bottom per-bbl delivery costs, are the most cost-effective way to transport crude to distant markets like China and India. But there’s still only one terminal on the Gulf Coast that can fill a VLCC to the brim — the Louisiana Offshore Oil Port — and pipeline connections from key Texas and Oklahoma plays to LOOP are limited. Elsewhere along the coast, VLCCs need to be loaded in offshore deep water by reverse lightering from smaller vessels — a slower and more costly loading process. Change is a-comin’, though. Companies are testing the docking and partial loading of VLCCs at terminals along the Texas coast, and plans for a number of greenfield facilities capable of partially — or even fully — loading the gargantuan vessels at the dock are being considered. Today, we review the latest efforts to streamline the loading of VLCCs and what they mean for crude-export economics. As we said in our last look at VLCCs a few months ago (Rock the Boat), the use of the supertankers during the U.S.’s 40-year ban on most crude exports was largely limited to imports to LOOP,, occasional shipments out of the Valdez Marine Terminal in Valdez, AK (the southern terminus of the Trans-Alaska Pipeline System) and into Andeavor’s Berth 121 in Long Beach, CA — the two other U.S. facilities designed to handle VLCCs. Since the export ban was lifted in December 2015, though, crude exports — and interest in using VLCCs for exports out of the Gulf Coast — have been on the upswing. Figure 1 shows that in 2015, the last year the ban was in place, exports (almost all of them to Canada) averaged 465 Mb/d, according to the Energy Information Administration (EIA). Exports rose 27% (to just about 590 Mb/d) in 2016, then almost doubled in 2017 (to more than 1.1 MMb/d).

US expected to become world's top oil producer next year - The U.S. has nosed ahead of Saudi Arabia and is on pace to surpass Russia to become the world's biggest oil producer for the first time in more than four decades. The latest forecast from the U.S. Energy Information Administration predicts that U.S. output will grow next year to 11.8 million barrels a day. "If the forecast holds, that would make the U.S. the world's leading producer of crude," says Linda Capuano, who heads the agency, a part of the Energy Department. Saudi Arabia and Russia could upend that forecast by boosting their own production. In the face of rising global oil prices, members of the OPEC cartel and a few non-members including Russia agreed last month to ease production caps that had contributed to the run-up in prices. President Donald Trump has urged the Saudis to pump more oil to contain rising prices. He tweeted on June 30 that King Salman agreed to boost production "maybe up to 2,000,000 barrels." The White House later clarified that the king said his country has a reserve of 2 million barrels a day that could be tapped "if and when necessary." The idea that the U.S. could ever again become the world's top oil producer once seemed preposterous. "A decade ago the only question was how fast would U.S. production go down," said Daniel Yergin, author of several books about the oil industry including a history, "The Prize." The rebound of U.S. output "has made a huge difference. If this had not happened, we would have had a severe shortage of world oil," he said 

A Storm Is Brewing For U.S. Oil Exports -- Two geopolitical developments in recent weeks - U.S. sanctions on Iran and the escalating U.S.-Chinese trade war - are set to reshuffle the U.S. oil flows to the world’s fastest-growing oil market, Asia.  On the one hand, the United States is pressing Iran’s oil customers to cut their Iranian crude imports by as much as possible. China is Tehran’s biggest oil buyer, and India is its second. While India is reportedly preparing for a drastic reduction of Iranian oil imports, China will continue to buy Iranian oil. On the other hand, China is threatening to impose a 25-percent tariff on U.S. crude oil and oil products after the U.S.-Chinese trade war took a turn for the worse in recent weeks. Such a tariff would make American crude oil uncompetitive in China, and U.S. oil sellers will have to find alternative buyers for their crude to replace the volumes they are currently selling to their second-largest oil customer after Canada.India is an obvious possibility - its imports and demand are surging, and it may be willing to replace at least part of its Iranian oil imports out of fear that its companies and the sovereign could lose access to the U.S. financial system should it continue to buy Iran’s oil.But the problem with India possibly replacing Iranian oil with U.S. crude is that American light oil isn’t a substitute for heavy high-sulfur Iranian crude.India began regular U.S. imports last year, but the volumes are currently small, especially compared to the U.S. crude exports to China, EIA data shows. But in May, India’s imports of U.S. crude oil jumped by nine times the April volumes—signifying that at least a partial switch is already underway “Shale crude is not an alternative to Iranian crude,” Sandy Fielden, director of research for commodities and energy at Morningstar, told Bloomberg. “Indian refiners can’t absorb all the U.S. oil that was going to China. They can import more, but can they process it?”

U.S. Exporters Will Be a Surprise Loser From Tariff Fight (WSJ)  Who’s the biggest loser when tariffs are imposed on imports? The surprising answer: exporters. Though completely counterintuitive, theory and evidence show that taxes on imports act just like a tax on exports. Though it’s early, the Trump administration’s recent round of tariffs is already rippling out to exporters: Soybean farmers face plunging prices as China raises tariffs, Harley-Davidson will move production of motorcycles destined for the European Union out of the U.S., and BMW says foreign retaliation may hit exports from its South Carolina plant. Economists credit Abba Lerner, then a graduate student at the London School of Economics, for proving theoretically in 1936 that an import tariff was equivalent to a tax on exports. The Lerner Symmetry Theorem is considered a key principle of trade economics, like 19th century economist David Ricardo’s theory of comparative advantage. .The practical link was obvious to protectionists and free traders alike as far back as the 1600s, says Douglas A. Irwin, an economist and trade historian at Dartmouth College. They understood that a country that shuts out imports deprives its trading partners of money to buy exports. This, Mr. Irwin notes in his book “Clashing Over Commerce: A History of U.S. Trade Policy,” is why Americans were so divided over tariff policy in the 1800s. When Northern states succeeded in raising tariffs to protect their manufacturers, they angered Southern states who paid more for manufactured goods and suffered falling prices for their exports such as cotton and tobacco. Mr. Irwin’s data show that while exports and imports have varied between 3% and 25% of gross domestic product since 1790, the two tend to move together. The link was especially strong under the gold standard because trade imbalances were financed by gold flows. If the U.S. ran a trade surplus, gold would flow in, depriving foreigners of the means to purchase U.S. goods. Now that exchange rates float, the effect is less direct, and a country can pay for imports by borrowing in the capital markets, as the U.S. has since the late 1970s. Yet even now, exports and imports tend to rise and fall together, proof that the underlying relationship still holds. If the U.S., for any reason, cuts its imports from a trading partner, that country’s economy and currency both weaken, so it buys less from U.S. companies. If a tariff generated significant new demand for the protected American sector, the resulting boost to prices and jobs would put upward pressure on inflation, interest rates and the dollar, further hurting exports.

Pipeline shortage could choke North America’s oil supply -In its annual five-year oil forecast published Monday, the IEA warned that Canadian oil pipeline constraints are part of a wider capacity crisis brewing across North America. “Colossal growth in North American supply from 2018 to 2023 raises the crucial question of whether there is enough pipeline capacity to transport and sell all of that oil. If sufficient capacity is not built, the increase in production we foresee could be at risk, with serious implications for global markets.” “During 2018-19, West Texas and West Canada are likely to face shortages in midstream capacity brought about by a rapid production increase,” the IEA said. “The situation will be much more severe in Canada than West Texas as legal delays mean capacity is unlikely to increase before the end of 2019.”

Saudi refinery exports first gasoline barrels to U.S. (Reuters) - A refinery in Saudi Arabia has shipped its RBOB gasoline to the United States for the first time, a potential precursor for more deliveries to a region where prices are currently at seasonal three-year highs. The 400,000 barrels-per-day Jubail Satorp refinery, a joint venture between Saudi Aramco and French company Total, said in its verified Twitter account that it sent the shipment of reformulated blendstock gasoline - commonly called RBOB - to the United States. It did not say whether those barrels had arrived yet, and its exact destination was unclear. The shipment is unusual because when Satorp was founded in 2008, it was not expected to send RBOB to the United States, as Saudi gasoline demand remained strong, said Robert Campbell, head of oil products research at Energy Aspects in New York. Motor gasoline inventories in the United States fell to about 239 million barrels in the week to July 6, according to U.S. Energy Department data. Stockpiles were up from the same time last year, when inventories totaled 235.7 million barrels. Market participants expect the additional supply could slow U.S. inventory drawdowns. RBOB prices have been trading at seasonal three-year highs as crude has rallied in the midst of the busy U.S. summer driving season. Cash prices for the product in New York Harbor were at 2.00 cents per gallon above the futures benchmark on the New York Mercantile Exchange on Tuesday, the highest seasonally since 2015. The RBOB futures contract on NYMEX settled at $2.1603 a gallon on Tuesday. Energy trading companies often route vessels based on favorable spreads for crude oil and products, and right now moving gasoline to the United States is more profitable. But this shipment also could mean demand in Saudi Arabia is weakening, Campbell said. The shipment suggests that the Americas has become one of the best destinations for surplus gasoline, he added. “It’s tough because that means Asia really is quite significantly oversupplied,” Campbell said. 

US jet fuel output soars amid record-breaking summer travel - This summer has seen oil prices at their highest levels in four years, but you would never guess that by looking at the statistics for US travel or jet fuel market fundamentals data. As Americans have taken to the skies in unprecedented numbers this summer, the US oil complex has churned out record-breaking amounts of jet fuel, supported by favorable production margins. In the first week of July, the S&P Global Platts assessment for the US Gulf Coast Brent crude to jet fuel cracking margin averaged $11.34/b, the highest that average has been since 2013 and about 31% above the previous four-year average of $8.63/b. Platts data shows that cracking margins in New York Harbor, Chicago and Los Angeles have followed similar patterns this year, which has helped lift US output to record levels. Nationwide jet production rose to 1.944 million b/d in the week that ended June 29, the highest that figure has ever been since the US Energy Information Administration began tracking it in 1982. This broke the previous all-time high set just a week earlier. The US Transportation and Security Administration said the Friday before Independence Day, June 29, was the second-busiest day in the history of the agency, with more than 2.67 million individuals screened at checkpoints nationwide, according to a July 3 notice. The week that ended June 30 was also the single busiest week for TSA screenings, and, combined with the two previous weeks, this amounted to the busiest consecutive 21 days on record, the TSA said.

US Refineries Persist in Using Toxic Acid, Despite Safer Alternatives - Fifty refineries across the United States use hydrofluoric acid. Because this highly toxic substance can travel for miles in the form of a potentially fatal ground-hugging cloud, however, use of the chemical continues to prove highly controversial — rarely more so than now, given recent accidents at some of these refineries and potential rule changes that call into question the chemical’s long-term future in the oil refining industry. In January 2017, California regulators announced that they were taking steps to potentially phase out a modified version of the acid being used at the two refineries in the state, but the rule is still being thrashed out, and it’s too soon to say whether an outright ban on hydrofluoric acid will be enacted there. Hydrofluoric acid is used as a catalyst to transform crude oil into high-octane gasoline. If released into the environment in California, its ability to travel for miles would put at risk the densely populated neighborhoods surrounding both refineries in the South Bay region of Los Angeles. Proponents of the status quo warn of the costs associated with switching to alternative processes, which could mean gasoline price spikes and plants potentially shuttered. But Sally Hayati, president of the Torrance Refinery Action Alliance, a local community group pushing for hydrofluoric acid to be phased out, believes that industry is exaggerating the costs of moving away from the chemical, and warns of the potential consequences of allowing its continued use. The Air Quality Management District (AQMD) is “bending too much to political and economic pressure by the refineries, and they’re not paying enough attention to their mandate to protect public safety,” she said about the agency responsible for the rule change. “There’s no other solution other than to get rid of [hydrofluoric acid].”

Oil’s New Technology Spells End of Boom for Roughnecks - After 20 years in the oil-and-gas industry, Eric Neece wasn’t surprised when he was laid off by GE Oil & Gas in Conroe, Texas, in 2015 after oil prices plummeted. He figured his job would come back when prices crept back up.He was almost right. The work came back. But Mr. Neece’s former job as a well logger—measuring well conditions thousands of feet underground—was gone. Those duties are increasingly being overseen remotely and handled by automation. Technology has already transformed labor needs in most of the world’s manufacturing. It’s now upending the energy business, foretelling the end for one of the last sectors in America where blue-collar workers could depend on jobs paying six-figure salaries. “Our industry has had a lot of people making $150,000 out in the field,” said Kathryn Humphrey, who spent two decades at BP PLC before retiring from the company’s digital oil field program in 2013. Those days are going away, she said.For Mr. Neece, the changes could reduce the number of jobs he used to do by more than 25%, analysts said. Automated control systems can send commands to underground tools that capture data on a well’s geologic formations, flow rate and other variables. Smaller teams of technical specialists located in remote operations centers are replacing laborers on the ground, who in the past made adjustments manually. The energy sector had been shielded from pressure to innovate by high oil prices. When prices fell 75% over 20 months beginning in 2014, oil and gas companies were finally forced to modernize to squeeze out profits. Many found they could use new technologies to do the work better and cheaper, with fewer people. They have invested billions of dollars on what the industry dubs “digital oil fields,” embracing artificial intelligence, automation and other technologies.

A decade of fracking research: What have we learned? --  When oil and gas developers began using hydraulic fracturing to tap previously unaccessed sources of fossil fuels across the United States, the American public had a few questions. Will this process pollute drinking water? Will it cause cancer in the communities close to well sites? What are the ramifications for global climate change? Hydraulic fracturing — or fracking, as it is more commonly known — is just one small part of the broader process of unconventional oil and gas development. The extraction technique, popularized about a decade ago, has helped unlock hydrocarbons trapped in tight shale formations, spawning a vast web of rigs, wells and energy infrastructure across the country.  Every element of that network carries its own risks for water contamination, air pollution, health and climate change. Scientists have, in some cases, been able to distill the likelihood and severity of those risks. But not always.  "Those who have black-and-white views on this issue would be well served to look at the research and try to understand the other side's position," said Daniel Raimi, a University of Michigan lecturer and senior research associate at the think tank Resources for the Future (RFF). In his recent book, "The Fracking Debate: The Risks, Benefits, and Uncertainties of the Shale Revolution," Raimi addresses some of the most divisive questions about the shale boom, including "Will fracking make me sick?" and "Is fracking good for the climate?" (Energywire, Jan. 26). Many times the answer is: We don't know yet.

Opponents speak out against anchor supports for oil pipeline (AP) — More than two dozen people spoke out at a public hearing against a proposal for more anchor supports in the Straits of Mackinac to bolster twin oil pipelines. Enbridge Inc. is asking the Department of Environmental Quality to allow installation of 48 additional supports for its Line 5 pipes. A public hearing Wednesday evening in Mackinaw City drew waterfront property owners, environmentalists and others. Line 5 extends from Superior, Wisconsin, to Sarnia, Ontario. A nearly 5-mile (8-kilometer) section runs beneath the straits, where Lake Huron and Lake Michigan converge. The company has made several requests to install supports after gaps were discovered beneath the pipes. The DEQ earlier granted a permit for 22 supports. Environmental groups want Line 5 decommissioned and say the supports wouldn't necessarily make it safer.

Left Wing Activists Target New Mexico Officials In Brutal Fight Over Mundane Fracking Rule - Environmentalists in a small New Mexico county are ratcheting up the rhetoric against local fracking ordinances as government officials fear the fight is taking on new and terrifying dimensions.   Members of the state’s Sandoval County commission claim activists are haranguing them for contemplating rules permitting gas extraction. Documents also show activists are pressuring commissioners to block industry representatives from discussing future ordinances on natural gas production.“We got blasted by the public about being racists and baby killers,” Jay Block (pictured), one of the commission’s two Republicans, told The Daily Caller News Foundation, referring to insults people hurled at him during debates about gas exploration in the county. Block is in an untenable position, stuck in between an animated anti-gas movement and concerns about the county’s economic well-being. “The citizens are driving the narrative,” said Block, a conservative who worked for the Jack Kemp presidential campaign in 1987. “They are delivering misinformation to the public and not one time has the industry been invited,” he added, referring to the Citizens Watch Group (CWG), an activist group created after the commission voted down ordinances in 2017 following significant public outcry. The proposed ordinance would have banned drilling and fracking within 750 feet from homes, schools, hospitals, and fresh water supplies. It also required areas to be fenced and that operators provide certificates showing they have safe water use agreements. Any violations would result in a $300 fine.

Oil and gas community says proposed ballot measure would ban fracking in Colorado -  — The debate on the topic of how far should oil and gas operations be from homes and schools could get a lot more intense if a proposed ballot measure in Colorado qualifies for the ballot. Currently, oil and gas operations cannot take place within 500 feet of a home or building and 1,000 feet from a school. “I really am concerned with the proximity of wells to homes and schools,” said Beth Ewaskowitz, a supporter of the campaign.Ewaskowitz, who lives in Erie, said she got involved in the signature gathering-effort after being concerned for her son’s safety.  “I counted it up and there are 156 wells within a one mile radius of our home, Ewaskowitz said. Ewaskowitz said 2,500 feet is not an arbitrary number; it is equivalent to a half-a mile or the typical area evacuated when something goes wrong. In order to make the ballot, more than 98,000 signatures are needed. Campaign organizers declined to say how close they are but one official said “they are on track to make the ballot.”The oil and gas community is preparing for a major and costly political fight should this qualify for the ballot.“I consider this to be a ban on oil and gas in Colorado,” said Dan Haley, president and CEO of the Colorado Oil and Gas Association.Haley, like all major energy groups, is opposed to the measure, believing more than $7 billion in economic activity would be lost if this would be approved — not to mention thousands of jobs. “This would be a huge hit on our economy, we are talking about 100,000 jobs over the next five years if this were to pass,” Haley said.

North Dakota's Oil Tax Collections In June: 72% Higher Than Predicted -- July 13, 2018 - From "top North Dakota news stories" this week:Several categories of state tax collections are well above forecast, thanks largely to the resurgence in the state’s oil industry.The combination of higher oil prices and increased oil production has tax collections well ahead of the forecast made during the 2017 legislative session.North Dakota oil producers received an average of $61.11 per barrel during the month of April, with near-record production of 1.22 million bbl/day.Legislators forecast production at less than a million bbl/day at a price of $47.00/bbl, so tax collections for the month of June were 72% higher than predicted.Corporate and personal income tax, motor vehicle excise tax and sales tax collections are also running ahead of the budget forecast.The upside in the oil industry has been partially offset by lower commodity prices for grain and livestock. [Always something to complain about.]The surge in oil tax revenue, including a deposit of nearly $59 million in June, has pushed the state’s Legacy Fund balance to more than $5.5 billion. See 1Q18 taxable sales data here.

Red Fawn Fallis sentenced in DAPL protest case - Red Fawn Fallis was sentenced Wednesday for her role in a shooting incident during the Dakota Access oil pipeline protests. Fallis will serve 57 months in federal prison for one count of civil disorder and one count of possession of a firearm and ammunition by a felon. The sentences will run concurrently. Fallis is also sentenced to three years of supervised probation after her release. Chief Judge Daniel Hovland also put special conditions on her supervised release including drug and alcohol treatment and treatment for mental health issues. Hovland said she would not get credit for time served in a halfway house after she was arrested in January for violating her pretrial release agreement. Hovland says he is recommending placement in Phoenix or Tucson, Ariz. Fallis spoke at her sentencing saying that she feels remorse and takes responsibility for her actions. She also says she is doing the best she can to move forward and operate in a way that is best for her and the community. Both sides can appeal the sentence within 14 days of the judgement being signed.

Natural gas supply and consumption grow significantly from the first half of 2017 to the first half of 2018 - Natural gas supply and consumption have grown significantly from the first half of 2017 through the first half of 2018. According to data from PointLogic Energy, total natural gas consumption in the Lower 48 states averaged 87.4 billion cubic feet per day (Bcf/d) during the first half of 2018, which is 8.4 Bcf/d (11%) greater than during the first half of 2017. The total supply of natural gas averaged 84.8 Bcf/d during the first half of 2018, a 7.8 Bcf/d (10%) year-on-year change.Natural gas consumption in the first half of 2018 grew in all sectors compared with the year-ago levels:

  • The largest growth occurred in residential and commercial consumption, which rose by 3.7 Bcf/d (17%) compared to the first half of 2017. Residential and commercial consumption is primarily related to heating needs, and the beginning of 2018 experienced record, prolonged cold temperatures across much of the Lower 48 states.
  • The volume of natural gas used for electricity generation (power burn) during the first half of the year increased by 2.2 Bcf/d (9%) from 2017 to 2018.   the increased power burn may have resulted from the increased buildout of natural gas-fired power plants, continued coal-to-gas switching, and the use of electric heating during the cold weather.
  • The first half of 2018 saw an increase in exports over year-ago levels. Liquefied natural gas (LNG) exports and net pipeline exports to Mexico collectively increased by an average of 1.4 Bcf/d (23%) from the first half of 2017 through the first half of 2018.

The increase in natural gas supply was driven by dry production, which rose 7.4 Bcf/d (10%) from the same period last year. Production increases were facilitated by the additional pipeline capacity brought into service since June 2017, including the Leach XPress, the Rover Pipeline, and Phase 1 of Atlantic Sunrise. Net pipeline imports from Canada increased slightly, likely related to the colder weather.Overall, consumption increased 0.7 Bcf/d more than supply. This market tightening was reflected in the large storage withdrawals this year and the current low levels of natural gas in storage relative to the five-year average.

Natural gas-fired electricity generation this summer expected to be near record high -  EIA’s July 2018 Short-Term Energy Outlook (STEO) expects natural gas-fired power plants to supply 37% of U.S. electricity generation this summer (June, July, and August), near the record-high natural gas-fired generation share in summer 2016. EIA forecasts the share of generation from coal-fired power plants will drop slightly to 30% in summer 2018, continuing a multi-year trend of lower coal-fired electricity generation.  The share of electricity generation supplied by natural gas-fired power plants has increased over the past decade, while the share supplied by coal has fallen, primarily as a result of sustained low natural gas prices, increases in natural gas-fired capacity, and retirements of coal-fired generating capacity. Over the three-year period from 2015 to 2017, the cost of natural gas delivered to electric generators averaged $3.16 per million Btu (MMBtu), compared with $7.69/MMBtu between 2006 and 2008.  The combination of relatively low natural gas prices, environmental regulations, and supportive renewable energy policies has led the industry to build new natural gas-fired and renewable capacity and to retire coal-fired power plants. As reported on EIA’s Preliminary Monthly Electric Generator Inventory, power plant operators added 5.4 gigawatts (GW) of new natural gas-fired generating capacity during the first four months of 2018 with an additional 15 GW scheduled to come online through the end of the year. This addition would be the largest increase in natural gas capacity since 2004. The electric industry also added 2.6 GW of new utility-scale solar and wind generating capacity during the first four months of the year, with an additional 9.6 GW scheduled to come online by the end of 2018. More than 10 GW of coal-fired capacity was retired over the 12-month period ending April 2018. EIA forecasts the delivered cost of natural gas will average $3.16/MMBtu this summer, 2% lower than the average cost during the summer of 2017. In contrast, the cost of coal delivered to electric generators is forecast to rise slightly this summer. The continued low cost of natural gas, along with the recent additions of natural gas-fired capacity and retirements of coal power plants, drive EIA’s expectation that natural gas will contribute a growing share of electricity generation this summer, while coal's share will fall.

Natural gas production records on the way, says US EIA, pointing to efficiency — The US Energy Information Administration raised its natural gas production estimates for the remainder of 2018 and continued to predict new production records for the year, as drilling efficiencies combine with higher output associated with oil production. Natural gas consumption was also expected to be higher for 2018 than 2017, driven by power sector use, according to the agency's July short-term energy outlook released Tuesday."The July outlook continues to forecast record production for US dry natural gas in 2018 and 2019," said EIA Administrator Linda Capuano. "Assuming the forecast holds, we will see production top 81 Bcf/d in 2018, and another increase that will push production up" to roughly 84 Bcf/d next year.The agency Tuesday raised by 0.71 Bcf/d to 89.83 Bcf/d its natural gas marketed production estimate for the US in the fourth quarter. It also raised its Q3 production forecast by 0.55 Bcf/d to 88.77 Bcf/d."The expected growth in natural gas production is largely in response to improved drilling efficiency and cost reductions, as well as higher crude oil prices that contribute to higher associated gas production from oil-directed rigs," the report said. Capuano noted that growth in production enables EIA's forecast of LNG and pipeline exports from the US to expand, while natural gas pipeline imports from Canada continue to decline."New infrastructure and increased exports from the Appalachia basin to the US Midwest and Canada are behind much of the decrease," Capuano said. The decrease was expected to continue as the Rover and Nexus pipelines add to deliveries of Appalachian basin gas to the Midwest and Eastern Canada. Turning to prices, EIA said that "higher natural gas production during the injection season will offset current and forecast low storage levels and will moderate significant upward price pressures in 2018." It lowered its forecast for Q3 Henry Hub natural gas spot prices by 2 cents to $2.99/MMBtu. The 2018 forecast stayed flat at 2.99/MMBtu, but the 2019 forecast dropped 4 cents from the previous month's estimate to $3.04/MMBtu. As to storage, the agency estimated that natural gas inventories are likely to increase at the five-year average rate of growth during the current injection season to reach 3.5 Tcf on October 31. That level would be 9% lower than the five-year average for the end of October.

3 Reasons the Deadly Lac-Mégantic Oil Train Disaster Could Happen Again -- In the five years since the oil train disaster in Lac-Mégantic, Quebec, claimed 47 lives, the world has learned much about the risks that hauling oil by rail poses. One of the clearest lessons is how little has been done to address those risks, which means that deadly event could easily happen again.  [Read this explainer for background on what unfolded during the fiery early morning hours of July 6, 2013 in Lac-Mégantic.]  Here are three main reasons history may yet repeat itself.

  • Reason #1: Inadequate Safety Regulations. The Bakken shale oil carried on the runaway train that decimated the small Quebec town of Lac-Mégantic is a very light and highly volatile crude oil that ignites easily. Despite many calls for regulations in the U.S. to make that oil safer via a process known as stabilization—including from Obama's Secretary of Transportation Anthony Foxx, the issue of stabilizing oil volatility on trains remains unaddressed on either side of the border.Another apparent safety gap in regulations involves the outdated brake systems on oil trains, which is the case in both the U.S. and Canada. Rail experts have testified repeatedly that modern electronically controlled pneumatic (ECP) brakes would be a huge improvement over the current air braking system that was considered revolutionary in the 19th century. When the U.S. Department of Transportation released an overhaul of rules governing oil trains in 2015, ECP brakes were among the requirements. However, that measure was repealed in late 2017 due to intense industry pressure.
  • Reason #2: Oil Trains Derail More Often.  Another lesson revealed in the wake of Lac-Mégantic is that oil trains derail more often than similar trains carrying ethanol, another hazardous material. The reason is likely because oil trains tend to be longer andheavier and may be subject to more sloshing forces from the liquid moving inside the not-entirely-full tank cars. Unlike tanker trucks or other types of trains, oil trains don't have to be weighed, and some evidence indicates rail companies may be overfilling oil train cars beyond the current weight limits. And no regulations exist dictating the train lengths safe for transporting flammable materials like oil. Of course, longer and heavier trains make more money for railroads. A recent article in the Wall Street Journal notes that one of the reasons the rail industry is shifting to ever-longer trains is due to pressure from "activist investors."
  • Reason #3: The Rail Barons Are in Charge. Brian Stevens, National Rail Director for Unifor, Canada's largest private sector union, previously spent 16 years as an air-brake mechanic working on trains. Stevens summed up the problem: "Nothing has changed. The railway barons are still there. And stronger than ever." And while this statement was made by a Canadian at a conference in Canada about an accident in Canada, the rail barons are on both sides of the Canadian-American border.

Vowing to Continue 'Fierce Opposition,' Protesters End 35-Hour Aerial Blockade of Trans Mountain Oil Tanker --Twelve protesters who spent nearly two days suspended from a bridge in British Columbia, blocking the path of an oil tanker, vowed Thursday to continue fighting Canada’s plans to buy Kinder Morgan’s Trans Mountain pipeline, after police forced them to end their demonstration.“I will remain the fierce opposition. It is in my blood to protect the water. Our Indigenous rights are being completely ignored, the safety of our water is being ignored, and most of all my son’s future is at stake. I will do whatever it takes to protect the water and my family and your family,” Will George, an Indigenous Coast Salish member, said in a statement after the protest ended.George was among the Greenpeace members—from all over Canada as well as the U.S., Mexico, and the U.K.—who rappelled from the Iron Workers Memorial Bridge for 35 hours to form a blockade preventing a Trans Mountain oil tanker from leaving Vancouver with tar sands oil.Canadian Prime Minister Justin Trudeau plans to purchase the existing Trans Mountain pipeline and Kinder Morgan’s expansion project, which carries crude and refined oil from Alberta to Canada’s western coast, costing taxpayers $4.5 billion. More than 200 people have been arrested in British Columbia for protesting the plan, which opponents say will put coastal communities at grave risk of oil spills and will threaten the area’s dwindling orca population with extinction. The plan also violates the U.N. Declaration of the Rights of Indigenous Peoples.

How Fracking Companies Use Facebook Surveillance to Ban Protest - There’s a struggle going on between companies that want to drill for shale gas in the UK countryside and campaigners trying to stop them. Now, the struggle is waging online.Revelations about how Facebook data has been used to target individuals for political ends continue to emerge. But after the Cambridge Analytica scandal of earlier this year, the story has taken an unexpected twist: Facebook is being used by oil and gas companies to clamp-down on protest. Three companies are currently seeking injunctions against protesters: British chemical giant INEOS, which has the largest number of shale gas drilling licenses in the UK; and small UK outfits UK Oil and Gas (UKOG), and Europa Oil and Gas.Among the thousands of pages of documents submitted to British courts by these companies are hundreds of Facebook and Twitter posts from anti-fracking protesters and campaign groups, uncovered by Motherboard in partnership with investigative journalists at DeSmog UK. They show how fracking companies are using social media surveillance carried out by a private firm to strengthen their cases in court by discrediting activists using personal information to justify banning their protests.The material was submitted to support the companies’ case that campaigners intended to illegally disrupt their activities or trespass on their land. The companies all stress they do not seek to restrict lawful forms of protest, but argue that activists should not be allowed to unduly disrupt their lawful business activity.Anti-fracking campaigners have described the use of injunctions to stop protest around potential fracking sites as “an unprecedented restriction on our fundamental rights.” They say the injunctions against “persons unknown” are “draconian” and “anti-democratic.”

Decision to extend fracking licence a shambles, Labour says --  The Scottish Government has been criticised for extending a fracking licence owned by petrochemical giant Ineos.Ministers have decided to extend Petroleum Exploration and Development Licence (PEDL) 162 for a year until June 2019 despite an effective ban on the controversial gas extraction technique.The licence, jointly owned by Ineos and Reach Oil and Gas, covers an area of 400 km2 to the south west of Falkirk in the central belt.Friends of the Earth Scotland said the move added to “confusion” surrounding the government’s position on fracking while Scottish Labour branded it a “shambles”.Last month Ineos and Reach lost a legal challenge seeking a review of the government’s decision to effectively ban fracking development in Scotland, which they argued was unlawful.Refusing the challenge at the Court of Session, Lord Pentland found that while while ministers had described the position as a ban, there was in fact no legally enforceable prohibition.Friends of the Earth Scotland’s head of campaigns Mary Church said the decision to extend the licence was “disappointing”. She said: “Extending this licence risks adding to the confusion caused by Ineos’s recent legal challenge and only increases the pressure on the Scottish Government to move forward with its decision-making process, legislate to ban fracking and draw a line under this issue for good.

Natural gas drillers are fighting for their lives-  The natural gas industry is on a mission to prove it can keep up with the green energy industry, whose price reductions are starting to become a competitive threat to fossil fuels.Gas and oil producers have slashed overheads by a third since 2014 and are finding deeper reductions harder to come by, according to energy consultants Wood Mackenzie. That’s spurring them to rewrite supply contracts, build mobile liquefied natural gas terminals and take more prosaic steps like fixing leaky pipes. “This is about getting affordable energy out,” said Jens Okland, executive vice president of marketing, midstream and processing at Equinor ASA, Norway’s biggest energy company. “A lot of these LNG projects are huge. You need to make them cheaper, quite simply.” Keeping gas affordable is a crucial ingredient of the world’s effort to shift toward less-polluting forms of energy, since it’s gas-fired power generators that can start and stop quickly, helping smooth fluctuations in supply coming from wind and solar farms. Its costs have to fall as cheaper wind turbines and solar panels make utilities scale back their most-expensive traditional power plants. And gas has plenty of competition even before the rise of renewables. For example, to compete with coal in Asia, gas imports need to land there at about $4 to $6 per million British thermal units. That’s about half the cost of reported contracts, according to the International Gas Union trade lobby. In Germany, solar and onshore wind power are already comparable to gas based on the value of electricity the assets generate over their lifetime, Bloomberg New Energy Finance data show. Expectations about costs are already influencing energy policy as governments decide how to balance supply needs against what voters are willing to pay for. Britain’s climate change adviser said last month the nation may need a fivefold increase in gas-fired plants by 2050 to guarantee power capacity -- a forecast that suggests a need for more investment at a time politicians are pressing for utilities to cut their bills to consumers.

Beyond Nord Stream 2: A Look at Russia’s Turk Stream project --  Since 2015, Nord Stream 2 has been at the centre of all European discussions concerning the EU-Russia relations. But as endless political discussions in Europe are being held on this pipeline project, the pipes of another similar Russian pipeline project – Turk Stream – are already being laid by Gazprom at the bottom of the Black Sea. This piece looks at these developments, analysing their strategic impacts on Europe. Launched by Russia president Vladimir Putin in December 2014 during a state visit to Turkey, Turk Stream is a pipeline projected to deliver 31.5 Bcm/y of gas to Turkey and Europe. As in the case of Nord Stream 2, also this project is not aimed at carrying additional volumes of gas, but just to partially replace flows that currently reach Turkey and Europe through Ukraine.Turk Stream comprises two lines, each with a capacity of 15.75 Bcm/y. Line 1 is designed solely to supply Turkey, while Line 2 is intended to deliver gas to Europe.After a year of works, construction of the offshore part of Line 1 was completed on April 30th 2018; the onshore parts remain under works. With the construction of Line 2 also progressing, both lines of Turk Stream are expected to be finalised by the end of 2019.However, due to EU anti-monopoly rules Gazprom, as a supplier, is prohibited from operating gas pipelines inside the EU. The Russian company is thus currently exploring potential alternative options with European gas grid operators for bringing the 15.75 Bcm/y capacity of Turk Stream’s Line 2 to European markets. The first option would be to link Turkey and Austria with a pipeline running through Bulgaria, Serbia and Hungary. This pipeline has been dubbed ‘South Stream Lite’, as it would roughly follow the path of the proposed South Stream pipeline, which was scrapped by Russia in 2014 following opposition from the European Commission. The second option would be to link Turkey and Italy with a pipeline running through Greece. The feasibility study for such a pipeline was conducted in 2003 by Greece’s public gas supply company DEPA and Italy’s energy company Edison. The development of the project – named Poseidon – was then covered by an intergovernmental agreement signed in 2005 between Greece and Italy.

Trump lashes Germany over gas pipeline deal, calls it Russia's 'captive' (Reuters) - U.S. President Donald Trump launched a sharp public attack on Germany on Wednesday for supporting a Baltic Sea gas pipeline deal with Russia, saying Berlin had become “a captive to Russia” and he criticized it for failing to raise defense spending more. Trump, meeting reporters with NATO Secretary-General Jens Stoltenberg, before a NATO summit in Brussels, said it was “very inappropriate” that the United States was paying for European defense against Russia while Germany, the biggest European economy, was supporting gas deals with Moscow. Trump was due to meet German Chancellor Angela Merkel at the summit later in the day and will meet Russian President Vladimir Putin in Helsinki on Monday. Berlin has given political support to the building of a new, $11-billion pipeline to bring Russian gas across the Baltic Sea called Nord Stream 2, despite qualms among other EU states. However, Merkel insists the project is a private commercial venture and is not funded by German taxpayers. “When Germany makes a massive oil and gas deal with Russia,” Trump said to Stoltenberg. “We’re supposed to be guarding against Russia and Germany goes out and pays billions and billions of dollars a year to Russia. “We’re protecting Germany, we’re protecting France, we’re protecting all of these countries. And then numerous of the countries go out and make a pipeline deal with Russia where they’re paying billions of dollars into the coffers of Russia. 

Why Germany Can’t Buy Natural Gas From the US - True to form, President Trump, kicked off Wednesday’s NATO summit by tossing a grenade. This one was in German Chancellor Angela Merkel’s direction and aimed at the country’s dependency on natural gas imports from Russia.It’s not clear whether Trump’s goal in targeting Merkel this morning was to shame Germany into putting more money into NATO or to encourage the Germans to buy more natural gas from the United States. But if it’s the second, that will be very difficult to achieve. Germany currently receives about a third of its current 80 billion cubic meters of annual natural gas supply from Russia, nearly all transported by pipelines running through Eastern Europe. Europe as a whole consumed about 425 billion cubic meters of natural gas last year, of which about 150 billion cubic meters came from Russia.Russia’s state-controlled gas producer, Gazprom, next year is completing a new pipeline dubbed the Nord Stream 2 that detours around Eastern Europe by following a route under the Baltic Sea before reaching the German coast at the city of Lubmin, where construction of a new receiving terminal was begun in May. Once the new pipeline is in operation, it will deliver about 55 billion cubic meters of Russian natural gas annually to Germany, which would then distribute the gas to the rest of Europe.  Critics argue that the Nord Stream 2 is unnecessary and is a politically inspired move by Russia to avoid paying transit fees to Poland, the Baltic states and, most important, Ukraine for the right to transport natural gas through these countries on its way to Europe. Over half the gas Russia sends to Europe annually travels through Ukraine. For the U.S. natural gas to reach Europe, it must first be converted to liquefied natural gas (LNG), loaded on a special tanker and sailed from the U.S. Gulf Coast to a receiving terminal where it is reconverted into gas. Naturally this costs more than simply putting natural gas in a pipeline and sending it off. In addition, Qatar, Australia and other countries are way ahead of the United States in developing liquefaction facilities. In time the United States could sell more natural gas to Europe, but the sales probably will be limited to countries like Spain, Portugal and Turkey that have never received a lot of their supply from Russia. It is exceedingly doubtful that U.S. LNG will ever be a major source of supply to Germany.

China is a key destination for increasing U.S. energy exports -- In recent years, as its domestic energy consumption has grown, China has become a more significant destination for U.S. energy exports. In particular, China has been among the largest importers of U.S. exports of crude oil, propane, and liquefied natural gas.  In 2017, more U.S. crude oil was sent to China than any other destination except Canada. China received more U.S. crude oil in 2017 than the third- and fourth-largest importers, the United Kingdom and Netherlands, combined. China has been the world’s largest net importer of total petroleum and other liquid fuels since 2013 and surpassed the United States as the world’s largest gross crude oil importer in 2017. Based on data through April, China’s imports of U.S. crude oil have continued to increase, averaging 330 thousand barrels per day (b/d) in 2018. In February 2018, China received more U.S. crude oil than any other destination. Nearly all of these crude oil exports were sent from the U.S. Gulf Coast region.  China was the third-largest destination for U.S. propane exports in 2017, behind only Japan and Mexico. Overall, about half of U.S. propane exports went to Asian countries in 2017, displacing supplies from Middle Eastern countries and some regional production of propane. Propane is used in many Asian countries as a feedstock for producing ethylene and propylene, building blocks for chemical and plastic manufacturing.  So far in 2018, China has remained the third-largest destination for U.S. propane exports, receiving 92 thousand barrels per day through April, or 31% less than U.S. propane exports to China in the first four months of 2017. As U.S. liquefaction export facilities have come online, the United States has exported greater volumes of liquefied natural gas (LNG), averaging 1.9 billion cubic feet per day in 2017. Of that amount, 15% went to China, making it the third-largest importer of U.S. LNG exports behind Mexico and South Korea. The next-largest importer, Japan, received about half as much U.S. LNG in 2017 as China. In 2017, China surpassed South Korea to become the second-largest importer of LNG in the world. Based on data through April 2018, China’s imports of U.S. LNG have averaged 0.4 billion cubic feet per day, behind only South Korea and Mexico. The next-largest importer of U.S. LNG, India, has received less than half as much U.S. LNG as China so far in 2018.

China’s new air quality plan could increase LNG imports - Early this month, China’s State Council released a three-year “blue sky” action plan to curb air pollution by 2020—a plan that could have implications for the U.S. oil and gas industry. The latest plan extends to cities in the Fenwei plain in Shanxi, Shaanxi and Henan provinces, where air pollution is worsening. The target area for air pollution control and prevention now includes 28 cities—11 in Fenwei plain and provinces in the Yangtze River Delta. As air pollution in China spreads to more cities and inland provinces, he said the affected area is home to 37 percent of the country’s population and 41 percent of its gross domestic product. “The recently announced ‘blue sky action plan’ offers tougher limits and proposes a quicker shift to cleaner fuels such as LNG and electricity, and high-grade iron ore, coal and metals.” He noted that many of these commodities are not produced locally or at competitive prices. Therefore, Sharma believes they will need to be imported. “Additionally, a large portion of existing capacity will now require stricter supervision and environmental compliance,” he said. “As a result, we expect domestic costs to rise and production curbs to increase. “A ban on trucking to move raw materials from port to plant could be a game changer as it creates more competition between domestic supply and imports and strengthens the arbitrage relationship,” Sharma added. “China’s slow transition means uncertainty for commodity prices will continue” He stressed that China is on a track to tighten its fuel specification and vehicle emission standards. Under the current plan beginning Jan. 1 next year, a unified fuel specification standard will be enforced for road diesel, off-road diesel and bunker diesel. “Most giant refineries are geared to meet this challenge of supplying a uniform standard fuel from next year, but some small independent players may struggle,” Sharma said. “The current plan will impose more stringent supervision on fuel blending, which will further compress the marketplace for independent refiners and fuel blenders.” Sharma noted that China intends to develop a “green transport system” with higher fuel efficiency and lower emissions intensity. This would be achieved by increasing the share of railways and waterways and drastically reducing road transport. 

Analysis: China's expanding underground gas storage may reduce LNG winter price volatility — The expansion of underground gas storage in northeast China could alleviate distribution network bottlenecks in the country's key winter demand centers, and help stabilize seasonal demand and price fluctuations in the wider Asian LNG markets. China's growing LNG consumption, driven by coal-to-gas conversion policies, GDP expansion and industrial recovery, have tightened Asian LNG fundamentals, with the Platts JKM averaging $9/MMBtu in first-half 2018, up from $6.30/MMBtu in H1 2017, after peaking at $11.70/MMBtu on January 15 -- its highest level since late 2014, S&P Global Platts data showed. The country's biggest underground gas storage is currently being built by Liaohe Oil Field Company, a subsidiary of state-owned CNPC, on the bank of the Bohai Bay, a strategic location and home to a natural gas pipeline network that connects China's heavily industrialized neighboring regions of Beijing, Tianjin and Hebei province, local media reported Wednesday. The underground gas storage being built at the Liaohe oil field will have total storage capacity of 20 Bcm, the equivalent of 14.5 million mt of LNG, in a space of just under 10,000 sq km. That is nearly half of China's existing gas storage capacity of 41.5 Bcm across around 25 locations.

Chinese Refiner Halts US Oil Purchases, May Use Iran Oil Instead - With the US and China contemplating their next moves in what is now officially a trade war, a parallel narrative is developing in the world of energy where Asian oil refiners are racing to secure crude supplies in anticipation of an escalating trade war between the US and China, even as Trump demands all US allies cut Iran oil exports to zero by November 4 following sanctions aimed at shutting the country out of oil markets.Concerned that the situation will deteriorate before it gets better, Asian refiners are moving swiftly to secure supplies with South Korea leading the way. Meanwhile, Chinese state media has unleashed a full-on propaganda blitzkrieg, slamming Trump's government as a "gang of hoodlums", with officials vowing retaliation, while the chairman of Sinochem just become China's official leader of the anti-Trump resistance, quoting Michelle Obama's famous slogan "when they go low, we go high." Standing in the line of fire are U.S. crude supplies to China, which have surged from virtually zero before 2017 to 400,000 barrels per day (bpd) in July. Representing a modest 5% of China's overall crude imports, these supplies are worth $1 billion a month at current prices - a figure that seems certain to fall should a duty be implemented. While U.S. crude oil is not on the list of 545 products the Chinese government has said it would immediately retaliate with in response to American duties, China has threatened a 25% duty on imports of U.S. crude which is listed as a U.S. product that will receive an import tariff at an unspecified later date. And amid an escalating tit-for-tat war between Trump and Xi in which neither leader is even remotely close to crying uncle, industry participants expect the tariff to be levied, a move which would make future purchases of US oil uneconomical for Chinese importers. According to Japan Times, in a harbinger of what's to come, an executive from China's Dongming Petrochemical Group, an independent refiner from Shandong province, said his refinery had already cancelled U.S. crude orders. "We expect the Chinese government to impose tariffs on (U.S.) crude," the unnamed executive said. "We will switch to either Middle East or West African supplies," he said.

U.S. oil exports to India soar ahead of sanctions on Iran (Reuters) - U.S. crude oil exports to India hit a record in June and so far this year are almost double last year’s total as the Asian nation’s refiners move to replace supplies from Iran and Venezuela in a win for the Trump administration. U.S. President Donald Trump’s administration has been pressuring its allies to cut imports of Iranian goods to zero by November and India’s shift advances the U.S. administration efforts to use energy to further its political goals. The United States has become a major crude exporter, sending 1.76 million barrels per day (bpd) abroad in April, according to the latest government figures. All told, producers and traders in the United States will send more than 15 million barrels of U.S. crude to India this year through July, compared with 8 million barrels in all of 2017. The exports to India could go higher if China imposes levies on its U.S. oil imports over the latest round of U.S. tariffs, which could damp Chinese purchases and lead U.S. crude prices lower. A. K. Sharma, head of finance at Indian Oil Corp (IOC.NS), the country’s top refiner, said U.S. crude is gaining appeal because of its lower cost, and could expand further if China cuts its imports of U.S. energy. “If China levies a tariff on U.S. oil then U.S. imports to India will probably rise,” he said. “We are looking for a mini-term deal to buy three to four cargoes of U.S. oil over a period of three to six months instead of buying single cargoes.” 

BANK OF AMERICA: Oil is now a 'game of chicken' and completely cutting off Iran could send it soaring to $120 a barrel - Crude oil could surge to more than $120 a barrel, according to Bank of America Merill Lynch analysts, if the Trump administration were to order a complete cutoff of Iranian barrels before the end of the year. "Oil is now a game of chicken," the analysts wrote in a note Thursday. They said zero-tolerance sanctions on Iran — the fourth-largest oil producer — could add $50 per barrel to crude prices, which are up more than 25% this year. Brent, the international benchmark, is currently trading at around $77 a barrel. The State Department said this week that certain countries, including India and South Korea, will be allowed reduced flows of Iranian oil. And Saudi Arabia recently agreed to increase production by two million barrels per day, according to a White House statement.But analysts are skeptical Saudi Arabia will be able to keep up. The unofficial leader of the Organization of Petroleum Exporting countries has never pumped more than 10.6 million barrels per day on average over a single month, according to BAML."It appears the oil market has little confidence that Iran volumes can be easily replaced," the analysts wrote.The move is part of Trump's withdrawal from the Iran nuclear deal, which previously eased economic penalties on the country as long as it curbed its nuclear weapons program.The oil sanctions come after OPEC and other supply-cutting countries agreed at a summit in June to reduce compliance from more than 150% in May to about 100% starting this month. The cartel had previously been practicing over-compliance in efforts to tackle a global oil glut.But it is unclear if the new agreement will be able to balance supply as multiple producers — Venezuela, Libya, Angola, Mexico, or Nigeria — face major output disruptions. "Unlike in trade wars, oil price shocks have winners," the analysts wrote. "But these do not include the US, China, Europe, Japan."

U.S. Allies Starved of Iran Oil Even Before Trump's Deadline -  Iranian oil shipments to some U.S. allies are being threatened even before America’s Nov. 4 deadline for buyers to curb imports and comply with renewed sanctions on the OPEC member. September-loading cargoes are set to be the last to head for Japan if the Asian nation doesn’t receive an exemption from the U.S., people with knowledge of the matter said. South Korea, meanwhile, is said to be facing problems with July shipments because of tanker-insurance and chartering issues, with buyers already shunning a form of oil known as condensate from the Persian Gulf state. A Taiwanese refiner is mulling ending purchases. The risk of disruptions sooner than early November signals how diplomatic allegiances are affecting the oil market after Donald Trump’s decision in May to reimpose restrictions on the Islamic Republic over its nuclear program. Close American allies such as South Korea and Japan are grappling with how to sustain their ties with the U.S. without jeopardizing their energy industry as well as their relationship with long-time crude supplier Iran. “We are in a knotty situation as we have to listen to the U.S., but at the same time Iran is an important supplier of crude and condensate,” said Kim Jae Kyung, a research fellow at Korea Energy Economics Institute. “It’s the Trump administration that we are dealing with, and that unpredictability is stoking concern among refiners and petrochemical companies in Asia, making them voluntarily cut their shipments from Iran before the deadline.” Japan, Iran’s third-biggest customer, imported 140,000 barrels a day of oil from the Middle Eastern nation in the first six months of this year, 32 percent more than for 2015, according to data from industry consultant FGE. South Korea, meanwhile, has cut shipments from Iran by 30 percent in the period to 81,000 barrels a day, while Taiwan has boosted purchases to 11,000 barrels daily this year from zero three years ago. A decision on what to do about imports from Iran by China and India, who together bought about 1.4 million barrels a day of Iranian crude over the past three months, will probably have a larger impact on the broader oil market.

Iran Sanctions Are Different This Time -- The Trump administration is trying to replicate the Obama-era strategy of shutting in Iranian oil exports as a way to pressure the regime into making a series of concessions. But there are several reasons why Trump may not succeed. It isn’t that Trump’s sanctions won’t be as effective, despite the refusal of the rest of the international coalition to go along with Washington’s isolation campaign. In fact, even though the EU, in particular, is hoping to shield Iran from the wrath of the U.S. Treasury, international companies are packing up and leaving Iran and refiners around the globe are starting to cut their oil imports from Iran. So, yes, there is every reason to believe that the sanctions will have real bite. The main problem that could frustrate the Trump administration is the oil market, which is in a very different place than it was in 2012-2015. The oil market is tighter than it has been in years, which could ultimately force the U.S. to go easier on Iran than it would like. A cursory glance at oil prices for the period in which the Obama administration pushed sanctions on Iran shows elevated prices, which would lead one into thinking that the Obama administration also had to contend with a tight oil market. Brent crude routinely topped $100 per barrel during a time in which Iran saw around 1 million barrels per day of exports disrupted. Brent is now significantly lower than that, so Trump should have no problem cutting Iranian supply off once again, right? Not so fast. President Obama had the fortune of an exploding U.S. shale sector. It probably wasn’t obvious to the Obama administration what was unfolding in North Dakota and Texas when sanctions on Iran really started to hurt in 2012. U.S. oil production skyrocketed between 2012 and 2014, rising by over 3 mb/d, which more than compensated for the 1 mb/d of lost Iranian supply. To be sure, the Trump administration is also presiding over a shale boom. U.S. production is up about 1.6 mb/d since Trump took office, and output in 2018 has increased by around 400,000 bpd year-to-date. However, the problem for Trump is that Permian bottlenecks could mean that additional growth slows to a crawl, at least for the next year or so.

Could Saudi Arabia replace all the barrels lost from Iran sanctions? Kemp (Reuters) - The United States wants to eliminate all Iran’s crude oil exports from November, and is relying on Saudi Arabia and other OPEC and non-OPEC members to fill the gap in supplies. "Our goal is to increase pressure on the Iranian regime by reducing to zero its revenue from crude oil sales," a senior State Department official told a news briefing this month. "   But if the United States succeeds in reducing Iran's crude exports close to zero from November, in line with its stated policy, Saudi Arabia would have to raise its production to unprecedented levels to cover the loss. And it would leave the global market tighter than at any time since the oil shocks of 1973/74 and 1979/80, with resulting upward pressure on prices. The administration has not been clear about whether sanctions will apply just to crude or will include condensates. But assuming sanctions apply only to crude, the global market would still need to replace more than 2 million barrels per day (bpd) of Iranian exports from the start of November. According to the latest information from the Joint Organisations Data Initiative (JODI), Iran exported between 2.1 million and 2.2 million bpd of crude between January and April. The question is where will the replacement barrels come from? The International Energy Agency estimates OPEC members held 3.4 million bpd of spare capacity at the end of May, while their non-OPEC allies had no more than 330,000 bpd ("Oil Market Report", IEA, June 2018). Saudi Arabia accounted for almost two-thirds of the reported OPEC spare capacity (2.02 million bpd), with smaller volumes held by Iraq (330,000 bpd), United Arab Emirates (330,000 bpd) and Kuwait (220,000 bpd). Russia accounted for most of the non-OPEC spare capacity (roughly 250,000 bpd) with little or no available spare capacity in the other non-OPEC allies. Other agencies and market analysts put the spare capacity figures for OPEC and non-OPEC members significantly lower than the IEA, which implies the market is even tighter. But using the IEA's figures, it is clear Saudi Arabia would have to replace most of the Iranian barrels lost as a result of sanctions. The kingdom would need to increase production and exports by at least 1 million bpd to cover the total loss of Iranian barrels. The required increase would be even higher if other OPEC and non-OPEC countries struggle to raise their output or more production is lost as a result of problems in Venezuela and Libya. 

Do not blame OPEC, oil producer group says of Trump criticism (Reuters) - The president of OPEC defended the oil producer group on Monday against U.S. President Donald Trump’s recent demands for higher oil output, saying OPEC does not shoulder the blame. OPEC alone cannot be blamed for all the problems that are happening in the oil industry, but at the same time we were responsive in terms of the measures we took in our latest meeting in June,” Organization of the Petroleum Exporting Countries President Suhail al-Mazrouei told Reuters in an interview in Calgary, Alberta. “I feel OPEC is doing its part.” Trump has accused OPEC in recent weeks of driving gasoline prices higher and stepped up pressure on U.S. ally Saudi Arabia to raise supplies to compensate for lower exports from Iran. Washington has warned that it will impose sanctions on foreign companies that do business with Iran, in an effort to cut Iran’s exports of crude oil and condensates to zero from over 2 million barrels per day. Mazrouei said OPEC was willing to listen to major oil-producing countries, including the United States. OPEC agreed in June on a modest increase in oil production starting in July after its leader, Saudi Arabia, persuaded arch-rival Iran to cooperate, following calls from major consumers to curb rising fuel costs. Global oil prices LCOc1 have climbed steadily this year, helped by rising demand, and topped $80 per barrel in May for the first time in 3-1/2 years. 

European Powers Prepare To Ditch Dollar In Trade With Iran - While the White House’s frenzied anti-Iran campaign has entailed unprecedented attempts to twist the arms of the United States’ traditional European allies, the pressure may be backfiring – a reality made all the more clear by Russian Foreign Minister Sergei Lavrov’s claims that Europe’s three major powers plan to continue trade ties with Iran without the use of the U.S. dollar.  The move would be a clear sign that the foremost European hegemons – France, Germany, and the United Kingdom – plan to protect the interests of companies hoping to do business with Iran, a significant regional power with a market of around 80 million people.Lavrov’s statement came as Trump insisted that European companies would “absolutely” face sanctions in the aftermath of Washington’s widely-derided sabotage of the six-party Joint Comprehensive Plan of Action (JCPOA).  On May 8, the former host of NBC’s “The Apprentice” blasted the agreement and said that the U.S. would reinstate nuclear sanctions on Iran and “the highest level” of economic bans on the Islamic Republic.Speaking in Vienna at the ministerial meeting of the JCPOA, Lavrov blasted the U.S. move as “a major violation of the agreed-upon terms which actually made it possible to significantly alleviate tensions from the point of view of the military and political situation in the region and upholding the non-proliferation regime.”  He added that “Iran was meticulously fulfilling its obligations” at the time that Trump destroyed the U.S.’ end of the agreement. Continuing, Lavrov explained:The Joint Commission... will be constantly reviewing options which will make it possible, regardless of the US decision, to continue to adhere to all commitments undertaken within the JCPOA framework and provide methods for conducting trade and economic relations with Iran which will not depend on Washington’s whims.  What they can do is to elaborate collectively and individually such forms of trade and settlements with Iran that will not depend on the dollar and will be accepted by those companies that see trade with Iran more profitable than with the US. Such companies certainly exist – small, medium and large.” Lavrov noted that the move wasn’t so much meant to “stand up for Iran” but to ensure the economic interests and political credibility of the European signatories to the accord.

Bernstein: Oil May Jump Past $150 On Chronic Underinvestment - A supply shortfall is lurking should major oil companies continue to underinvest in exploring for new oil reserves, and this “chronic underinvestment” is setting the stage for the next super-cycle that could see oil prices soar to $150 a barrel or more, analysts at Sanford C. Bernstein & Co said on Friday.Investors clamoring for cash returns on their investments in lieu of increased capital expenditures may soon backfire, as new oil reserves may be unable to keep up with demand, according to Bernstein analysts.“Investors who had egged on management teams to reign in capex and return cash will lament the underinvestment in the industry,” the analysts said in a note, as carried by Bloomberg.“Any shortfall in supply will result in a super-spike in prices, potentially much larger than the $150 a barrel spike witnessed in 2008.”“If oil demand continues to grow to 2030 and beyond, the strategy of returning cash to shareholders and underinvesting in reserves will only turn out to sow the seeds of the next super-cycle,” said Bernstein.“Companies which have barrels in the ground to produce, or the services to extract them, will be the ones to own and those who do not will be left behind.”After the oil price crash of 2014, oil companies slashed exploration capital expenditure. Now that oil prices have recovered, those companies are looking to reward shareholders with dividends and share buybacks to show that they have successfully come out of the price slump. The lowered capex in exploration, however, is depleting the oil industry’s reserves and reserves replacement ratios. According to Bernstein, the reinvestment ratio in the industry is the lowest in a generation, which is setting the stage for a super-spike in oil prices; prices may even beat the record of $147 a barrel from 2008.

Hedge funds target WTI, leaving other oil contracts becalmed (Reuters) - Hedge fund managers have continued to boost their bullish exposure to U.S. crude futures and options, following a longer-than-expected disruption of pipeline deliveries from Canada. Position-building in U.S. crude, also known as WTI, accounted for almost all changes in the petroleum complex in the week to July 3. Hedge funds and other money managers raised their net long position in the six most important petroleum futures and options contracts by 47 million barrels. Portfolio managers raised net their long position in U.S. crude (+41 million barrels) with minor increases in Brent (+4 million), U.S. gasoline (+4 million) and U.S. heating oil (+2 million). Net length in European gasoil was cut by 3 million barrels, according to an analysis of regulatory and exchange data ( ). WTI position-building is being driven by the draw down in inventories around Cushing and disruption of pipeline deliveries to the U.S. Midwest as a result of the stoppage in production at Canada’s Syncrude plant.   But the rest of the petroleum complex, including the international benchmark Brent, has shown no significant changes in recent weeks. Funds' net long position in WTI has surged by 116 million barrels in the two most recent weeks, while net length in Brent has been unchanged. Net length in WTI has closed the gap with Brent for the first time since June 2015, with managers holding a net long position of 457 million barrels in both benchmarks. Portfolio managers hold the most lopsided position in WTI since June 2014, when Islamic State fighters were racing across northern Iraq and threatening the country’s oilfields. Hedge fund long positions outnumber short positions in WTI by a ratio of almost 13:1, up from less than 6:1 two weeks ago. But away from WTI, there were no significant position changes.

Oil prices finish higher, with Brent up sharply as traders weigh global supply disruptions - Crude-oil benchmarks finished higher Monday, with Brent crude posting a sizable gain as traders fretted over production disruptions in Libya and Venezuela and expectations for big declines in Iranian exports. August West Texas Intermediate crude, the U.S. benchmark, climbed by a nickel, or less than 0.1%, to settle at $73.85 a barrel on the New York Mercantile Exchange, after trading as low as $72.99. WTI prices lost 0.5% last week. September Brent crude added 96 cents, or 1.2%, to $78.07 a barrel on the ICE Futures Europe exchange, after closing on Friday with a weekly retreat of 2.7%. Longstanding, and expected, outages to supplies in Libya, Venezuela and Iran have helped lift crude prices, which had been on an uptrend amid efforts by the Organization of the Petroleum Exporting Countries and its allies to balance supply and demand. During a meeting last month, OPEC agreed to lift output globally by 1 million barrels a day to help counteract lost barrels from Venezuela and Iran, where the U.S. has pulled out of a nuclear agreement and threatened to reimpose sanctions targeting Tehran’s oil exports. Some countries, however, have voiced support for the Iran nuclear deal, easing concerns over the potential for lower exports from Iran. Top diplomats from Germany, Britain, France, Russia and China reaffirmed their commitment to the 2015 nuclear pact, according to a report from the Associated Press, citing comments from the European Union foreign policy chief.

Crude futures settle higher on supply concerns— Crude futures settled higher Monday, supported by recent supply disruptions, both real and anticipated. ICE September Brent settled 96 cents higher at $78.07/b, while NYMEX August WTI settled 5 cents higher at $73.85/b. NYMEX crude was stronger further out on the curve, with the September contract settling 41 cents higher at $71.98/b and the October contract jumping 71 cents to close at $69.75/b. Production losses out of Libya, Venezuela and Canada have been supportive for the oil complex. According to Commerzbank commodities analysts, unscheduled outages in Libya and Canada will offset most of the announced increase in crude oil production, meaning that the oil market will remain tight in the short term. Moreover, "if shortfalls in Iranian oil supply due to US sanctions then compound the situation in the autumn, there is a risk of the market tightening further," Commerzbank analysts wrote in a daily note. "Brent should rise further toward the $80[/b] mark in the coming days," they added. US sanctions targeting Iranian oil exports will go into effect again in November, with some analysts saying more than 1 million b/d of Iranian crude production could be shut in. Tight takeaway capacity looks to be taking a toll on Permian Basin drilling activity and production. The Permian currently produces 3.5 million b/d of crude, and should stay fairly flat for the rest of 2018, according to S&P Global Platts Analytics. The 350,000 b/d Syncrude oil sands facility in Canada is expected to reach full production by early to mid-September, majority-owner Suncor said Monday.

Barclays raises oil price view on tighter supply outlook - (Reuters) - British bank Barclays on Tuesday raised its outlook for oil prices for this year and next amid expectations of lower supply from Libya and Iran. “Due to new outages and a quicker Iran supply reduction, we see Brent and WTI prices averaging $71 per barrel and $65 per barrel next year,” the bank said. Barclays had previously forecast Brent to average $65 per barrel in 2019. The bank also raised its outlook for Brent prices to average $73 per barrel in the second half of the year from $70 earlier. Libya’s national oil production fell to 527,000 barrels per day (bpd) from a high of 1.28 million bpd in February following recent oil port closures, the head of the National Oil Corporation (NOC) said on Monday. The United States says it wants to reduce oil exports from Iran, the world’s fifth-biggest producer, to zero by November, which would oblige other big producers to pump more. Elsewhere, in Canada an outage at the 360,000-barrel per day (bpd) Syncrude oil sands facility had reduced flows into Cushing, Oklahoma where inventories hit a three-and-a-half-year low last week. While the WTI-Brent spread has narrowed since May due to the outage at Syncrude, it could widen again toward the end of the year to $7.50 in Q4, Barclays said. The bank also said the likelihood of Saudi Arabia increasing exports to the United States in the coming months could likely weaken the strong WTI backwardation. Oil prices have gained for most of 2018 on tightening supply and strong demand but investors fear a decision by the Organization of the Petroleum Exporting Countries to increase production may dampen price gains and offset production losses in countries including Libya. [O/R] “Indeed, OPEC’s decision and disruptions elsewhere will deplete the market’s spare capacity cushion, raising prices,”

Bullish Sentiment Soars As Oil Outages Mount - Oil prices jumped in early trading on Tuesday on fresh concerns about supply outages. Strikes in Norway and Gabon knocked off more supply, Canada’s outage looks set to last longer than previously expected and the U.S. has reiterated its hardline stance on Iran. Brent jumped by more than 1 percent on Tuesday, putting it within reach of $80 per barrel. Hundreds of workers in Norway have gone on strike after rejecting a proposed wage deal, disrupting production at least one offshore oil project – Royal Dutch Shell’s Knarr field. The disruption adds to the series of outages around the world and helped push up prices on Tuesday. “As a result of the strike, Knarr is closing its production in the Norwegian North Sea,” said Shell spokeswoman Kitty Eide.  Oil workers in Gabon began a 15-day workers strike at the facilities of Total due to wage demands. Gabon produces about 200,000 bpd.  OPEC’s president deflected blame over the recent surge in oil prices. “OPEC alone cannot be blamed for all the problems that are happening in the oil industry, but at the same time we were responsive in terms of the measures we took in our latest meeting in June,” OPEC president Suhail al-Mazrouei told Reuters. “I feel OPEC is doing its part.” The defense came in response to a series of accusations from U.S. President Donald Trump that OPEC has been manipulating oil prices.. U.S. sanctions are already starting to impact Iran’s oil exports as Asian refiners cutback ahead of the November deadline. South Korea is aiming to eliminate purchases in August, while Japan could cut off imports after September. “It’s the Trump administration that we are dealing with, and that unpredictability is stoking concern among refiners and petrochemical companies in Asia, making them voluntarily cut their shipments from Iran before the deadline,” Kim Jae Kyung, a research fellow at Korea Energy Economics Institute, told Bloomberg.   Syncrude Canada’s 350,000-bpd outage at its oil sands facility was expected to last through July, but restoration could take longer than expected. The facility could be brought back online in phases, and full output might not be achieved until September or October.  “Today, production is 527,000 barrels a day, tomorrow it will be lower, and after tomorrow it will be even lower and everyday it will keep falling,” Mustafa Sanalla, chairman of the Tripoli-based National Oil Corp., said in a video statement posted on the company’s Facebook page. Several key oil export terminals remain offline as the army commander that took them over has decided to put them under control of a rival NOC based in the east.

WTI Extends Gains After Big Crude Draw  While Brent popped on Norway disruptions today, WTI has traded in a narrow range for two weeks as US crude production has flatlined for three weeks amid Permian pipeline bottlenecks. API

  • Crude -6.7mm
  • Cushing +1.952mm (-1.3mm exp)
  • Gasoline -1.59mm
  • Distillates -1.925mm

A major crude draw was offset by a surprise build at Cushing... EIA raised its U.S. crude output forecast to 11.8m b/d in 2019 compared 11.76m b/d estimate in June report. Oil Prices have traded in a narrow range for the last two weeks with WTI hovering around $74 today ahead of the API data and extended the gains after the big crude draw... Geopolitical risks, shrinking spare-production capacity, and wariness that OPEC may renege on pledges to raise output are creating a “perfect storm” in crude markets, said Ehsan Khoman, an analyst at MUFG Bank Ltd.

Crude Oil Prices Settle Higher Despite Prospect of Iran Sanction Waivers - – Crude oil prices settled higher Tuesday despite falling sharply from session highs on concerns that the loss of Iranian crude from the global market may not be as severe as many had anticipated. In the New York Mercantile Exchange crude futures for August delivery rose 26 cents to settle at $74.11 a barrel, while on London's Intercontinental Exchange, Brent climbed 84 cents to trade at $78.91 a barrel. Oil prices retreated sharply as U.S. Secretary of State Mike Pompeo said the White House would consider extending sanctions relief to some oil buyers of Iranian crude beyond the previously announced November deadline. Pompeo remarks were in sharp contrast to comments from the U.S. State Department just two weeks ago, warning countries to cut their imports of Iranian crude to zero by Nov. 4, or face sanctions. Investor fears that the loss of Iranian crude could be less than initially anticipated, reducing the prospect of a meaningful global supply shortage, overshadowed reports about a fresh supply outage. Shell's Knarr field in Norway was taken offline – which produces around 23,000 barrels of oil per day - after 669 oil rig workers in Norway went on strike Tuesday as wage talks failed. The disruptions in Norway exacerbated unplanned outages in Libya and Canada, which had already trimmed global inventories. Libya's national oil output has dropped to 527,000 barrels per day (bpd) from a high of 1.28 million bpd in February, the head of the National Oil Corporation said on Monday. WTI crude oil prices were also weighed down by expectations for a continued uptick in U.S. production. The U.S. Energy Information Administration raised its 2019 estimate on U.S. crude-oil production, according to the agency's July short-term Energy Outlook report released Tuesday.

Saudi Oil Production Surges By Over 400,000 Barrels In June: OPEC -  The energy community was looking with particular interest to the latest, just released July OPEC monthly report, for signs of the promised - if only by Saudi Arabia - boost in oil output, and it got what it was looking for, if to a lesser extent than some had expected: in June, OPEC's collective oil production rose by 173Kb/d to 32.327MM, according to secondary sources. While the total production rose to the highest level in months, it was well below both year end 2016 and 2017 production, both of which were above 32.6MM as a result of production declines and stoppages among some key OPEC members. In June, Crude output was boosted mostly in Saudi Arabia, where it increased by over 400K to 10.420mmb/d, with Iraq, Nigeria, Kuwait and UAE also increasing their monthly production. On a self-reported basis, Saudi said it had boosted output by 459kb/d, bringing the total to 10,489mmb/d. Meanwhile, production declined in Angola as well as the two more troubled nations Libya, which has recently seen a sharp drop in output due to political infighting, and Venezuela, where the nation is grinding to a halt due to the ongoing economic collapse. That said, Libya may soon be returning to peak production with the NOC announcing overnight it had regained control of Eastern oil ports, with operations set to resume to normal levels “in a few hours.  Elsewhere in the report, OPEC's 2018 global oil demand growth forecast remained unchanged, forecast to increase by around 1.65mln bpd to average 98.85mln bpd. In 2019, initial projections indicate a global increase of around 1.45mln bpd, with annual average global consumption anticipated to surpass the 100mln bpd threshold. Non-OPEC oil supply (now excluding the Republic of the Congo) in 2018 was revised up from the previous MOMR by 140k bpd to average 59.54mln bpd; an increase of 2mln bpd Y/Y. OPEC also cautioned that U.S. refinery runs may drop from near-record level in coming month amid strong gasoline inventories, something we have seen in practice in recent weeks. "High gasoline inventories and weak refining margins, despite positive performances in the bottom of the barrel, are most likely going to pressure refinery runs from the current high levels in the coming month."

OPEC’s oil output jumps in June as Saudi Arabia opens the taps - Saudi Arabia hiked its oil output in June to the highest level since the end of 2016, as it aims to cool the market after crude prices recently rose to 3½-year highs. The jump in Saudi supplies shows the world’s top crude exporter is making good on its recent vows to tame oil prices. The kingdom has faced pressure from big crude importers like China and India, as well as President Donald Trump, who worry about negative economic impacts from rising fuel costs. The increase also comes as OPEC forecast global oil demand will surpass 100 million barrels per day (bpd) next year. Saudi Arabia reported that it pumped nearly 10.5 million bpd last month, up from just more than 10 million bpd in May.

International Energy Agency – Oil Market Report – Highlights:

  • Demand got off to a strong start this year with global 1Q18 growth at over 2 mb/d, helped by cold weather in the northern hemisphere. Recent data, however, point to a slowdown, with rising prices a factor. In 2Q18, growth slowed to 0.9 mb/d. In 1H18, growth will average 1.5 mb/d, falling to 1.3 mb/d in the second half of the year.
  • In 1H19, the comparison with a strong 1H18 will see growth of close to 1.2 mb/d, accelerating to 1.6 mb/d in the second half. We expect growth of 1.4 mb/d in world oil demand in both 2018 and 2019, unchanged from last month's Report.
  • Global oil supply rose by 370 kb/d in June mainly due to higher Saudi Arabian and Russian output as parties to the Vienna Agreement decided to achieve 100% compliance. OPEC crude production in June reached a four-month high of 31.87 mb/d. A surge from Saudi Arabia offset losses in Angola, Libya, and Venezuela.
  • Non-OPEC output is set to expand by 2 mb/d in 2018 and by 1.8 mb/d next year led by the United States, but there are temporary disruptions in Canada, Brazil, Kazakhstan and the North Sea.
  • OECD commercial stocks rose 13.9 mb in May to 2 840 mb, only the third monthly increase since July 2017. However, stocks gained only half as much as normal. At end-month, OECD inventories were 23 mb below the five-year average. Preliminary data show stocks falling in June.
  • Crude oil prices fell in June but since the Vienna Agreement meetings values for ICE Brent and NYMEX WTI have increased by 7% and 13%, respectively, on news of supply disruptions. In product markets, increased refinery output and signs of slowing demand put pressure on gasoline, diesel and jet fuel cracks.
  • Global refining throughput will grow by 2 mb/d from 2Q18 to 3Q18, with more than half of the increase in the Atlantic Basin. Runs are forecast to reach 82.8 mb/d, 0.7 mb/d higher than the previous record level in 4Q17. This could result in large crude stock draws, exceeding 1.4 mb/d. Refined product stocks will seasonally increase by 0.6 mb/d.

OPEC/non-OPEC producer group achieved 100% cut compliance in June: IEA --Russia and Saudi Arabia raised their oil production by a combined 500,000 b/d, and OPEC crude output hit a four-month high of 31.87 million b/d in June, reflecting agreement on easing output cuts, the IEA said Thursday. In its monthly oil market report, the IEA also said Saudi Arabia had broken its output quota under the 2016 output pact among OPEC and non-OPEC countries, increasing its crude output by 430,000 b/d to 10.46 million b/d. It said the OPEC/non-OPEC group had achieved 100% compliance with the 2016 agreement, rather than the over-compliance of previous months. For OPEC members, compliance averaged 120% in June, while for non-OPEC members it was just 66%, it said. The IEA also raised its estimate of production growth by non-OPEC producers in 2019 to 1.8 million b/d, from 1.7 million b/d in its previous report, citing mainly US production prospects.

WTI Jumps After Biggest Crude Draw Since 2016 - WTI was trading lower overnight after the bounce on API's big crude draw was eviscerated by escalating trade wars. However, when DOE reported a massive 12.63mm crude draw - the most since Sept 2016 - WTI prices spiked (after kneejerking lower first).Bloomberg's Michael Jeffers notes that American oil stocks are now at the lowest level since February of 2015, flying in the face of bumper production. The refineries are in overdrive for this time of year, even as utilization fell slightly. Exports are still over 2 million barrels a day.  DOE:

  • Crude -12.63mm (-3.79mm exp) - biggest draw since Sept 2016
  • Cushing -2.062mm (-1.3mm exp)
  • Gasoline -694k (-1mm exp)
  • Distillates +4.125mm - biggest build since Jan 2018

Following last week's surprise crude build (from DOE), API reported a much bigger than expected crude drawBloomberg Intelligence Energy Analyst Fernando Valle notes that exports of refined products need to rise if crack spreads are to recover from recent lows. Rising crude prices have dampened demand growth just as red-hot refinery utilization has flooded domestic markets, pushing down margins.All eyes remain on US crude production which has now flatlined for 4 straight weeks...

Crude Oil Prices Settle 5% Lower as Libya Resumes Exports, OPEC Output Jumps - – WTI crude oil prices settled sharply lower Wednesday, shrugging off a larger-than-expected draw in U.S. crude stockpiles as raising OPEC output, and the reopening of terminals in Libya dented investor expectations for a global supply shortage. On the New York Mercantile Exchange crude futures for July delivery fell 5% to settle at $70.38 a barrel, while on London's Intercontinental Exchange, Brent fell 6.7% to trade at $73.56 a barrel. Inventories of U.S. crude fell by 12.633 million barrels for the week ended July 6, confounding expectations for a draw of 4.489 million barrels, according to data from the Energy Information Administration (EIA). The large draw in crude supplies came as imports fell by 1.315 million barrels a day (bpd), and output remained roughly flat at 10.9 million bpd, the EIA said. The production shutdown at Canada's Syncrude - which has capacity to produce 350,000 bpd of oil – continued to weigh on North American crude supplies. Gasoline inventories – one of the products that crude is refined into – fell by 0.649 million barrels, missing expectations for a draw of 0.750 million barrels, while supplies of distillate – the class of fuels that includes diesel and heating oil – unexpectedly rose by 4.125 million barrels, against expectations for a build of 1.200 million barrels. The mostly bullish inventory report failed to lift sentiment amid investor concerns about an increase in global supplies as OPEC output increased last month, while Libya resumed export activities, which could see as much as 0.7 million bpd return to the market. OPEC output rose above 32.3 million bpd in June, up 173,000 bpd from the previous month, according to OPEC's monthly report. The increase was led by a rise in Saudi output to levels not seen since the output-cut agreement in 2016. Saudi Arabia reported that it pumped nearly 10.5 million bpd last month, up from about 10 million bpd in May. OPEC, in its monthly report, said it expects the pace of oil demand growth to slow, but still increase by 1.45 million bpd in 2019. The oil-cartel also said it expects non-OPEC production to rise by 2.1 million barrels in 2019, led by a surge in U.S. output.

    Brent stumbles as market resets after year-long rally: Kemp (Reuters) - Brent crude prices registered their largest one-day fall in more than two years on Wednesday, in what was probably an indication hedge fund managers and other traders are realising profits after a year-long rally. Front-month futures slumped by $5.46 per barrel, or just under 7 percent, a daily price move more than three standard deviations away from the mean, and the largest one-day decline since February 2016. The market has suffered a larger percentage decline on only 44 days since the start of 1990, and it comes after a long period in which price volatility has been very low by historical standards. Traders and analysts have blamed the sudden drop on a cocktail of factors, including the reopening of oil export terminals in Libya and the worsening trade dispute between the United States and China. There have also been hints the United States will grant at least some waivers for countries to continue importing Iranian crude, easing fears of an extreme supply crunch after sanctions are reimposed in November. Saudi Arabia also sharply increased exports in June and is expected to raise them further in July, helping relieve fears about future shortages. The most likely explanation is a combination of all these factors, coupled with stretched market positioning and a lack of liquidity. Brent has shown signs of topping out for some time, even as prices remain close to their highest since 2014 ( 

    Oil’s Perfect Storm Lays At Trump’s Feet - It’s becoming painfully clear that the way forward for global oil markets is going to be bumpy, very bumpy, particularly as we head into next year. Much of this uncertainty, even blame, is being increasingly leveled at a person that has surprised, flabbergasted and even shocked political opponents, allies and adversaries alike since he took office - President Donald Trump.A growing line of thought surmises that while Trump uses the presidential bully pulpit, in this case Twitter, to put pressure on long-time ally and de facto OPEC leader Saudi Arabia to get ready to pump more oil to keep (both oil and gas) prices from spiraling out of control, much of the blame for higher prices actually belong to Trump.The argument makes perfect sense. If Trump would ease back on both his heated rhetoric toward Iran, though that case could be made over much of Trump’s dealings with China, the EU, Canada and others, and if Trump would revisit his decision on re-imposing sanctions on Iran, then oil markets would benefit. Why? A softer line on Iran would reduce the worry or even fear that a loss of some 2.7 million barrels per day (bpd) of Iranian crude would roil oil markets so much that the Saudis would have to pump an unprecedented amount of oil, perhaps as much as 12.5 million bpd, eating up all of its spare capacity. The Saudi’s have never pumped more than around 10.7 million bpd of oil, a level reached in June, and has for more than 50 years kept at least 1.5-2 million bpd of spare capacity for oil market management.

    Libyan Supply Keeps Oil Prices Down - Oil prices held steady after Wednesday’s steep selloff, with the return of Libyan supply keeping prices in check despite reports of a tight global market. The IEA said on Thursday that the oil market was tightening significantly and that even though higher production from OPEC was “very welcome,” it would cut into limited spare capacity, which could become “stretched to the limit.” Outages around the world are piling up and “we see no sign of higher production from elsewhere that might ease fears of market tightness,” the IEA wrote.   Oil prices have climbed over the last few weeks in large part because nearly 700,000 bpd was shut down in Libya. However, that changed this week when the National Oil Corp. moved to lift force majeure on several export terminals, and said that it would begin restoring the disrupted supply. Oil prices fell sharply on the news, declining by more than 6 percent on Wednesday.  If the oil market needs more oil, the OPEC+ coalition will provide it, according to Russia. “I can’t rule out that if there is a need for more than 1 million barrels we will be able to quickly discuss it all together and make all necessary decisions,” Russian energy minister Alexander Novak told reporters in Moscow on Friday. OPEC+ has “all needed tools,” if necessary, he said.   The chairman of Indian Oil Corp., the country’s largest refiner, warned that long-term demand is highly price sensitive. “Demand cannot be seen in isolation to prices, especially for a price sensitive market like India,” Sanjiv Singh said, according Bloomberg. “You may not see an impact on demand in the short term, but in the long term, definitely it will have implications.” India is one of the largest buyers of Iranian oil and the U.S. government has been urging India to cut back. India is starting to replace Iranian oil with crude from the United States. U.S. oil exports to India are expected to hit 15 million barrels year-to-date in July, up from 8 million barrels for the full year in 2017. Meanwhile, India’s imports of Iranian oil fell by 15.9 percent in June compared to a month earlier. After a few weeks of very tough rhetoric about Iran sanctions, U.S. Secretary of State Mike Pompeo signaled a softer line this week, noting that a lot of countries could request waivers. "We’ll consider it,” he said. High gasoline prices are likely putting pressure on the U.S. government to slow down on its campaign to shut in all of Iran’s oil exports.

    Iran says U.S.-caused oil spike will slow growth, add to tariff impact (Reuters) - A rise in oil prices caused by the United States’ sanctions policies will hurt economic growth in China, Europe and other consumers, much like President Donald Trump’s trade measures, a top Iranian official said on Thursday. Iran’s OPEC governor also told Reuters the rise in oil output by OPEC and its allies, after pressure by Trump to do so, was only 170,000 barrels per day (bpd) in June and would not grow much in 2019, also weighing on economic growth. While Trump has accused the Organization of the Petroleum Exporting Countries of driving up oil prices, Iran, OPEC’s third-largest producer, says the United States has caused this by imposing sanctions on Iran and fellow OPEC member Venezuela. “The higher oil prices Trump is causing are leading to a higher energy bill in the EU, Japan, China and India, impacting their economic growth just like the tariffs imposed upon them, also enabling Saudi Arabia and the UAE to pay their arms bill to the U.S.,” Iran’s Hossein Kazempour Ardebili said. The comments underline the still-simmering tensions after OPEC’s meeting last month, when the group agreed to return to full compliance with earlier agreed oil output cuts, after months of underproduction by OPEC countries including Venezuela. Saudi Arabia said the deal allowed countries able to produce more, such as itself, to go ahead and do so, to make up for shortfalls elsewhere. Iran strongly disagreed and criticized Saudi plans to boost output. Kazempour said Trump may be disappointed by the scale of the production increase so far and voiced scepticism Saudi Arabia and Russia could add much more oil in 2019. “These days Saudi Arabia are supplying out of stocks not additional production,” he said. “Russia is also unable to do much not even 200,000 barrels per day - all are talking few barrels next year and the world economy will shrink and all indexes will be down.” “The June versus May increase in OPEC and non-OPEC production was only 170,000 bpd. Does this surprise you, Mr President?” The International Energy Agency, in a report on Thursday, put the combined month-on-month increase at 230,000 bpd. 

    Crude Oil Prices Settle Lower as Traders Weigh Libyan Output Restart – WTI crude oil prices settled lower Thursday, as traders weighed the impact of increased supply from Libya against expectations that major oil producers may struggle to avert a global supply shortage. On the New York Mercantile Exchange crude futures for August delivery fell 5 cents to settle at $70.33 a barrel, while on London's Intercontinental Exchange, Brent rose 1.53% to trade at $74.52 a barrel. Oil prices were on the back foot for most of the session as Libya's National Oil Corp (NOC) said it would reopen four oil export terminals, denting some the supply-risk premium which had underpinned the recent run-up in oil prices. The International Energy Agency, however, raised expectations for a global shortage in crude supplies as the energy watchdog warned of a potential capacity crunch amid a rise in output from Middle East Gulf countries and Russia. "Rising production from Middle East Gulf countries and Russia, welcome though it is, comes at the expense of the world's spare capacity cushion, which might be stretched to the limit," the Paris-based agency said in its monthly report. Saudi Arabia increased production by 430,000 barrels a day in June, the IEA said. That, however, was offset somewhat by falling Iranian exports, as European traders trimmed their imports ahead of U.S. sanctions on Tehran, which come into effect in November. "In June, Iran's crude exports fell back by about 230,000 barrels a day, albeit from a relatively high level in May, as European purchases dropped by nearly 50%," the agency said. Also stemming losses in oil prices were reports of ongoing declines in inventories at the Cushing, Okla. delivery hub. Inventories at the Cushing, Okla. delivery hub had fallen 929,399 bpd from July 6 to July 10, Reuters reported, citing traders. This comes on a day after data showed inventories of U.S. crude fell by 12.633 million barrels for the week ended July 6, confounding expectations for a draw of 4.489 million barrels. 

    Spare Capacity: The Biggest Mystery In Oil Markets - With around 2.5 million barrels per day (mb/d) of Iranian supply targeted by the Trump administration, how will the oil market cope with the losses? Is there enough supply capacity to make up for the shortfall?There is a great deal of debate about the true extent of the world’s spare capacity. Or, more precisely, there are a range of guesses over how much surplus is located in Saudi Arabia, the one country that really has the ability to ramp up large volumes of supply on short notice.Saudi Arabia claims it could produce 12.5 mb/d if it really needed to. However, that claim has not been put to the test. Saudi Arabia’s all-time highest level of production was just over 10.7 mb/d in 2016, just before it helped engineer the OPEC+ production cuts.Adding around 2 mb/d of extra supply – as President Trump demands – is a tall order. “More recent history shows Saudi has never produced more than 10.6mn b/d on average over a single month. And even in the recent period, we have observed a steep decline in domestic Saudi oil inventories,” Bank of America Merrill Lynch wrote in a note, arguing that there is plenty of reason to question the notion that Saudi Arabia has around 2 mb/d of idled capacity. “Thus, it appears the oil market has little confidence that Iran volumes can be easily replaced.”The International Energy Agency estimates that there is around 1.1 mb/d of total global spare capacity that can truly be ramped up in a short period of time. A looser definition of spare capacity that encompasses the ability to add supply over several months puts the figure at about 3.4 mb/d, 60 percent of which is located in Saudi Arabia. Smaller additions come from the UAE, Kuwait, Iraq and Russia. The problem is that Saudi Arabia is already ramping up output to replace lost barrels elsewhere. Saudi Arabia added 500,000 bpd in June compared to a month earlier, putting output at 10.5 mb/d. But that increase only offset losses in Libya, Angola and Venezuela. In other words, Saudi Arabia had 2.5 mb/d of spare capacity at the start of June, proceeded to burn through 0.5 mb/d, but because of the losses elsewhere, the oil market saw no net increase in supply.

    Trump May Tap Up To 30MM Barrels From Oil Reserve To Halt Rising Gas Price - Having already yelled at OPEC on several prior occasions on Twitter with demands for Saudi Arabia and the rest of the OPEC cartel to boost production in order to push oil - and gasoline - prices lower.... only to realize that the amount of needed incremental output is next to impossible to achieve when considering the amount of Iran exports that will be curbed on November 4 when the Iran sanctions kick in officially, Trump has been left with two choice: ease off the Iran sanctions and implement them more gradually, or release oil from the US Strategic Petroleum Reserve. And now, with oil prices continuing to rise and pushing the price of gasoline to levels not seen in 4 years, at a critical time with November mid-term elections fast approaching, Trump appears to have decided on the latter, and is actively considering tapping into the nation’s emergency crude oil reserve, Bloomberg reported citing two people "familiar with the situation." While no decision has been made yet to release crude from the 660-million-barrel SPR stockade, options under review range from a 5-million-barrel test sale to a larger release of 30 million barrels. An even larger release could be possible it it were to be coordinated with other nations. For Trump, the magic number appears to be $3 per gallon on the national level; every time regular gasoline nears that round number, Trump has been quick to voice his displeasure. The average national price of unleaded gasoline rose to $2.89 Friday, an increase of 63 cents from where it was a year ago, per AAA data. The U.S. gasoline price average is expected to range between $2.85 per gallon and $3.05 per gallon through Labor Day, according to the group. Even an SPR release may not be sufficient to push prices lower, and analysts remain split on the effect such a release would have and how long it it last. Depending on its size and timing, an oil sale might leave the market unmoved, or have a real, if fleeting, impact on prices.

    US, Canadian Rig Count Rises After Tumultuous Week - 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 staying at 863 for the week, while the number of gas rigs increased by 2, hitting 189.The oil and gas rig count now stands at 1,054—up 102 from this time last year, with the number of oil accounting for 98 of that 102.Canada gained 15 oil and gas rigs for the week, 13 of which were oil rigs. Canada’s oil and gas rig count is now up just 6 year over year. Oil rigs are up by 33 year over year in Canada, while the number of gas rigs are down by 27.Oil prices were trading up on Friday afternoon after a rather tumultuous week for the oil industry—a state of being that is quickly becoming the new norm as geopolitical forces, supply disruptions, and big inventory moves all make for a rocky market.In afternoon trading, both benchmarks were up, with WTI trading up $0.57 (+0.81%) at $70.90 at 12:45pm EDT and Brent trading up $0.88 (+1.18%) at $75.33. While both benchmarks are trading up on the day, WTI is trading down almost $3 since Monday. Brent is trading down more than $3 this week.  The normal market forces—Libya’s supply disruptions while the two NOCs duke it out over control of its oil, Venezuela’s inability to stop the steadily falling production declines, the escalating trade dispute between China and the United States, and serious inventory draws for crude oil—are all working to lift the price of oil. Likewise, Saudi Arabia’s production increases and OPEC’s prediction that 2019 demand growth may be lower than previously thought seeks to pull oil prices downwards.As for the oil production in the United States, which has been on a tear for all of 2018, seems to have leveled off a few weeks ago at 10.900 million bpd, where it has been for five weeks running. The 11 million bpd mark, should the United States hit this production level soon, will be an important psychological mark to surpass. At 8 minutes after the hour, WTI was trading up 1.08% at $71.09, with Brent trading up 1.26% at $75.39.

    Northeast, Haynesville Flat as Natural Gas Drilling Drives Small Uptick in Rig Count - The U.S. rig count inched higher during the week ended Friday, thanks to a small uptick in natural gas-directed drilling, though activity was flat in the largest gas-focused onshore plays, according to data from Baker Hughes Inc. (BHI). Two gas rigs returned to action during the week in the United States, putting the total number at 189, roughly in line with 187 rigs running a year ago. The total number of oil-directed units held at 863, but up from 765 a year ago. The net gains included one directional and one vertical unit. One rig was added on land, along with one in inland waters. BHI’s Gulf of Mexico tally increased by one to 19 for the week. Canada added 15 rigs for the week, 13 oil-directed and two gas-directed, to finish at 197 active units, up from 191 last year. The combined North American rig count finished the week at 1,251 units, versus 1,143 rigs in the year-ago period. Among plays, no major changes were reported for the week. The Permian Basin added a unit to finish at 476 (373 a year ago), while the Granite Wash saw one rig depart to finish at 15 (14 a year ago). One rig was added in the Cana Woodford, and a more detailed breakdown by NGI’s Shale Daily showed that rig is going to work in the STACK, aka the Sooner Trend of the Anadarko Basin, mostly in Canadian and Kingfisher counties. The two domestic gas rigs added for the week did not reflect any changes to activity in the Northeast, as the Marcellus and Utica shales both finished flat at 53 and 23 units, respectively. The Haynesville Shale in Louisiana and Texas also finished flat at 49 rigs. Among states, Texas led gainers as it added two net rigs overall for the week to end at 528, up from 466 units this time last year. Colorado and Louisiana added one rig each. Alaska and Colorado each saw one rig exit the patch, according to BHI. 

    Oil prices rise, but post sharp weekly loss amid expectations for rising Libyan output - Oil prices climbed on Friday, but posted sharp losses for the week, as traders weighed concerns over resurgent Libyan supply and global trade disputes against indications of tighter crude supply and shrinking spare output capacity. August West Texas Intermediate crude, the U.S. benchmark, tacked on 68 cents, or 1%, to settle at $71.01 a barrel. The contract settled at $70.33 a barrel on the New York Mercantile Exchange Thursday—the lowest since June 25. Prices also briefly hit lows Thursday under $70 a barrel for the first time in over two weeks. It lost 3.8% for the week. September Brent crude, the international benchmark, added 88 cents, or 1.2%, to $75.33 a barrel on the ICE Futures Europe exchange. Its closing low of the week, $73.40 on Wednesday, was the lowest settlement since June 21. Brent closed out the week 2.3% lower. Prices for Brent had dropped by 6.9%, or more than $5 a barrel, on Wednesday alone, “as trade concerns, returning Libyan supply, and a potentially softer U.S. stance on Iranian oil sanctions all combined to chip away at the market’s overall upside risk,”    This week, Libya’s state-run National Oil Corp. cleared the way for a potential 700,000 barrels of oil a day flowing back into the global market.Market participants have been concerned by further trade tensions between China and the U.S. Also, Washington raised the possibility that allies could buy Iranian crude despite the reintroduction of sanctions, which would bring more oil into the market. Such worries outweighed a report from the Energy Information Administration, which said weekly U.S. crude supplies dropped by 12.6 million barrels in the week ended July 6 and stand at a bout 4% below the five-year average for this time of year. A report from the International Energy Agency on Thursday suggested that global spare production capacity could be pushed to its limit. “We’re still talking about a market that is potentially dangerously low in terms of spare capacity,” Fraser told MarketWatch.

    OPEC Output May Be Stretched to Limit by Supply Crises --OPEC’s Gulf members may need to pump almost as much crude as they can to cover swelling supply losses from Venezuela to Iran and beyond, the International Energy Agency said. Saudi Arabia might have to draw harder than ever before on its spare production capacity as a spiraling economic crisis in Venezuela, renewed U.S. sanctions on Iran and disruptions in Libya strain global markets, the agency predicted. “Rising production from Middle East Gulf countries and Russia, welcome though it is, comes at the expense of the world’s spare-capacity cushion, which might be stretched to the limit,” the Paris-based IEA said in its monthly report. “This vulnerability currently underpins oil prices and seems likely to continue doing so.”

    Russia seen adding 600,000 b/d of oil output by late 2019: analysts— Russian oil producers may be capable of increasing production by as much as 600,000 b/d within the next nine to 18 months if the country's agreements with OPEC and its partners allow, according to analysts. Following the decision in June by OPEC and its oil producing partners to boost output by 1 million b/d from levels in May, Russia has pledged to add an additional 200,000 b/d to the market. The return of Russian barrels is a key factor currently weighing on markets. "I think it is realistic to boost output by up to 600,000 b/d within the first half of 2019 -- but Russian companies will need to drastically intensify drilling to do so," said Mikhail Sheybe, an analyst from Sberbank CIB. The Energy Information Administration defines spare capacity as the volume of crude that can come on stream within 30 days and be sustained for at least 90 days. "We estimate that Russia will retain [roughly] 360,000 b/d of swing capacity at the end of 2018, as oil output ramps up by the agreed 200,000 b/d," a recent report by BofA Merrill Lynch Global Research said. "We expect Russian oil producers to accumulate additional [roughly] 140,000 b/d spare capacity by the end of 2019, bringing the total figure to 500,000 b/d." Russia's spare capacity has grown because oil producers continued to prepare major greenfield projects for full-scale development in anticipation of production caps being lifted at some point this year, analysts said. The country can produce more crude if required, Russian energy minister Alexander Novak said last month. His comments came amid concerns that OPEC countries may not be able to cover potential gaps in supply in the fourth quarter, expected as a result of looming US sanctions on Iran, sliding output from Venezuela and the latest slump in Libyan exports. Saudi Arabia and Russia hold the bulk of the world's current spare capacity. Because Russia has never deliberately reduced its output before, it's uncertain how quickly oil producers will be able to increase production. Key producers estimated they would need on average of between two to four months to restore barrels, while some sources said these forecasts were conservative. In June, Russia boosted its output by 89,400 b/d to 11.063 million b/d, as oil producers carried out tests to assess how quickly output could be increased.

    Why The Coming Oil Crunch Will Shock The World – Chris Martenson - Here's why I'm harping so much on strategy: the US is operating without a viable one.We neither have a compelling Vision of where we want to go, nor any sense of the Resources required to change with the many transitions underway around us. The current ‘strategy' (if we can be so generous as to call it that), is nothing more than "business-as-usual" (BAU).The US is assuming it is always going to have more cars and trucks on the road this year than last year, more goods sold, a larger economy, more jobs, and the world’s most powerful military. That’s the BAU model. And it has largely worked for the past century. But it can't work going forward. And the longer we pursue it, the more of our future prosperity we ruin. Why? Because the future of everything is dependent on energy. More specifically: net energy. In total, the US consumes over 7 billion barrels of oil each year. And that represents only 37% of the nearly 100 quadrillion of BTUs of America's annual energy consumption (the rest coming from natural gas, coal, and other sources). For comparisons sake, the rest of the world consumes another 450 quadrillion BTUs. And world energy demand just keeps on insatiably growing year over year. The (notoriously conservative) EIA predicts it will jump by 28% over the next two decades. The nations of the world have made the truly regrettable decision to build so much of their infrastructure using concrete reinforced with steel (re-bar, mesh, etc.). As I've explained in detail in previous articles, because the steel rusts over time, the concrete is busy being destroyed from the inside out -- something we can detect easily enough by the cracks and spalling (sheets flaking off) so readily apparent on every bridge that’s more than a couple of decades old.This has created a ticking time bomb. The world's crumbling concrete buildings, bridges and roadways will have to be entirely replaced in just 40 to 100 years of their original construction dates. Where will all of the energy come from for that?Also, note that China has poured more steel-reinforced concrete over just the past few years than the US did in the entire 20th century(!). All of this, too, will need to be replaced later this century.Given that the sand required for all of the world's *current* concrete projects is now in very short supply, where all the sand will come from for all that future concrete and cement work? Who ever thought we could run out of sand? But such are the unpleasant surprises that crop up during the late stages when running an exponential economic paradigm (i.e., "Growth forever!").

    800,000 expats have left Saudi Arabia, creating a hiring crisis: 'Employers say young Saudi men and women are lazy and are not interested in working' - Hit hard by the oil-price collapse, the kingdom is now experiencing a plunge in foreign investment and high levels of capital outflow as its de facto leader, MBS as he is commonly known, attempts to consolidate power and steer a new economic course. The uncertainty caused by his ambitious, some would say unrealistic, plans to modernise the economy has been further stoked by Saudi Arabia's apparent struggle to fill private sector jobs vacated by a growing exodus of expats. As of April, more than 800,000 had left the country since late 2016, alarming domestic companies concerned that the foreigners cannot be easily replaced.Their departure is part of MBS's attempt to wean the country off its dependence on oil through economic diversification, a significant element of which involves trying to persuade Saudis in undemanding state sector jobs — which make up two-thirds of domestic employment — and those out of work to take up the new vacancies. The authorities want to generate 450,000 openings for Saudis in the private sector by 2020.MBS has sought to expedite the exodus of foreign workers, who constitute about a third of the population, by stepping up the process of so-called Saudisation — essentially the creation of a more productive local workforce. He is hiking up levies on companies employing non-Saudis, requiring foreigners to pay fees for dependents, and restricting the sectors in which they can work, with employment in many areas of the retail and service industries now strictly confined to Saudis. The measures are said to be driving the expat exodus, evident in the marked downturn in the rental real estate market and empty shopping malls.While among high-earning Western professionals Saudi Arabia has long been viewed as a hardship posting compensated by their tax-free status, the majority of foreigners in the country are from the Middle East and Asia, many employed in low-paid jobs in the sectors now earmarked for Saudis.But Saudi business owners are having difficulty getting locals, accustomed to undemanding work in the state sector and generous unemployment benefits, to work for them. Reports suggest many Saudis are put off by what they regard as poorly paid, low-status jobs. The recruitment problems have seemingly sparked so much concern that they have been played out on the pages of the Saudi Gazette, the government's mouthpiece, which normally features anodyne stories about life in the kingdom.

    Assault on port of Hodeidah resumes as US escalates Yemen intervention - At least 165 people were reportedly killed over the weekend as fierce fighting resumed south of the port city of Hodeidah, which serves as a lifeline for three-quarters of the population of Yemen, a country that depends upon imports for 90 percent of its food, fuel and medicine.A force consisting of troops of the United Arab Emirates, Sudanese soldiers and Yemeni mercenaries, backed by Saudi air power, began an offensive to take the strategic Red Sea port last month.The UAE announced a pause in the fighting, supposedly to allow for negotiations by UN Special Envoy Martin Griffiths over a plan to turn the port over to UN control as part of a cease-fire agreement. The port and the city of Hodeidah are currently held by the Houthi rebels, who control Yemen’s capital of San’aa as well as the most populated areas of Yemen in the country’s northwest.The UAE, the oil sheikdom that has played a major role in ground fighting since it joined Saudi Arabia in attacking Yemen in March 2015, had initially rejected any agreement outside of an unconditional surrender by the Houthis. The pause in the fighting followed fierce battles in which the UAE-led forces suffered serious losses while gaining little territory. The Houthis inflicted casualties as well as destruction of tanks and armored vehicles of the invading force, including through the use of armed drones and landmines.While the UN envoy Griffiths has held talks with both the Houthis and the UAE and is scheduled to meet today with President Abed Rabbo Mansour Hadi, a stooge of US and S audi Arabia, who lives in self-imposed exile in Riyadh, a full-scale battle for the port city appears to be resuming.

    UAE and US guilty of war crimes in Yemen torture centers, Amnesty charges --The United Arab Emirates (UAE) and mercenary forces operating under its command have carried out widespread forced disappearances, torture and murder of Yemenis suspected of opposing the more than three-year-old intervention by the oil-rich Gulf state in alliance with Saudi Arabia and Washington.This is the conclusion drawn by the human rights group Amnesty International after interviewing at least 75 people, including families of the disappeared and detained, survivors of the UAE torture centers, lawyers, journalists and local officials in Yemen.Amnesty concentrated its investigation on 51 cases, typical of the untold hundreds if not thousands who have been swept up into the UAE detention and torture apparatus. Nineteen of these individuals remain missing, their whereabouts unknown to their families amid fears that some of them may have died in captivity.The report outlines the stark political contradictions underlying the UAE’s repressive operations in Yemen. While intervening in the country as part of a Saudi-led coalition whose ostensible aim is the restoration to power of President Abd-Rabbu Mansour Hadi, the Saudi puppet who was overthrown by Houthi rebels in January 2015, the UAE is clearly pursuing its own interests in the region.“The UAE had been bypassing Hadi government officials in dealing with security issues, at times prompting President Hadi and his supporters to criticize the UAE for behaving like an occupier,” the Amnesty report states. This statement was substantiated on Monday when the “interior minister” designated by President Hadi, who remains in self-imposed exile in Riyadh, held a meeting in the southern Yemeni port city of Aden with a top UAE official, calling on Abu Dhabi to shut down or hand over the prisons it runs in southern Yemen. The UAE has been working in collaboration with southern secessionists, who oppose the re-imposition of Hadi’s rule over the region, as well as with a network of militias and mercenaries that it is arming and financing. Its aim is to assert control over a series of bases bordering the strategic waterways linking the Red Sea with the Indian Ocean, most importantly the Bab el-Mandeb Strait, through which much of the Middle East’s oil bound for Asia is shipped.

    Israel acknowledges US-Saudi nuclear deal but presents its ‘red lines’: report - Israel has presented its “red lines” to President Donald Trump regarding nuclear reactors that the US is helping Saudi Arabia build, Israel's Channel 10 reported on Sunday. According to the report, Israeli Prime Minister Benjamin Netanyahu dispatched Energy Minister Yuval Steinitz to the US two weeks ago to meet his American counterpart Rick Perry to discuss Israel’s concerns and “red lines” regarding a multi-billion nuclear deal between the US and Saudi Arabia revealed in March. Among the parameters reportedly presented by Steinitz was a "no surprises policy" that would assure Israel of full transparency, meaning informing it of the specific nuclear equipment Saudi Arabia receives from the US. Israel is also reportedly insisting on knowing the exact locations of Saudi nuclear reactors in addition to receiving assurance that Riyadh will not get the “capability or the legitimacy” to enrich uranium on its soil. The Saudis, however, are expected to ask the US for its permission to enrich uranium, the report said. 

    Facing Threats at Home and Abroad, Iran’s President Takes a Harder Line - For much of his presidency, Hassan Rouhani has been at loggerheads with Iran’s military and conservative establishment, as he forged diplomatic ties with the West to break his country’s international isolation. But now with his political survival in question, Mr. Rouhani is sounding a lot like Iran’s hard-liners. During a visit to Switzerland last week, Mr. Rouhani responded to U.S. plans to enforce a global freeze on Iranian oil exports by threatening to disrupt the flow of Middle Eastern oil through the Persian Gulf. It was seen as a warning to the world that Iran could block the Strait of Hormuz, a waterway for about one-third of global seaborne oil trade—a threat made before by Iran’s military, but not by this president.Iran’s military leaders, whose powers Mr. Rouhani has tried to curb, were suddenly praising the politically moderate president. “I kiss your hand for expressing such wise and timely comments,” Maj. Gen. Qassem Soleimani, commander of the Revolutionary Guard’s elite Quds Force, said in an open letter to Mr. Rouhani that grabbed state media headlines. Gen. Soleimani, who is one of Iran’s most powerful military figures, added: “I am at your service to implement any policy that serves the Islamic Republic.” Mr. Rouhani’s political pivot comes at a time of crisis for his government. After President Donald Trump’s withdrawal in May from the multinational agreement that checked Iran’s nuclear program in return for lifting sanctions, Mr. Rouhani’s bridge to the West is in danger of collapsing while a flailing economy has triggered protests. Banks and investors are heading for the exits. Mr. Rouhani’s 2013 election had ushered in hope among his supporters of shedding Iran’s status as international pariah. Mr. Rouhani had staved off pressure from political forces opposed to diplomatic outreach—until now. “Rouhani made a huge concession” to hard-liners, said Scott Lucas, an Iran expert and professor at the University of Birmingham. “This is the hardest line he has come out with, aiming at the Americans.” To some who supported Mr. Rouhani’s candidacy, the tough rhetoric is jarring. “We voted for Mr. Rouhani because he promised to open the doors for international relations. Threatening to close the Strait of Hormuz is not reasonable and is not moderate,”  “We don’t want to get isolated again.” 

    The €300 million cash withdrawal - The eyes of the world are on one of history's largest cash withdrawals ever. Earlier this week, the Central Bank of Iran ordered its European banker, Hamburg-based Europaeisch-Iranische Handelsbank AG, to process a €300 million cash withdrawal. Germany's central bank, the Bundesbank, is being asked to provide the notes. If the transaction is approved, these euros will be counted up, stacked, and sent via plane back to Iran. German authorities are still reviewing the details of the request. Iran claims that it needs the cash for Iranian citizens who require banknotes while travelling abroad, given their inability to use credit cards, says Bild. Not surprisingly, U.S. authorities are dead set against the €300 million cash transfer and are lobbying German lawmakers to put a stop to it. They claim the funds will be used to fund terrorism.The picture below illustrates $1 billion in U.S. dollars, so you can imagine that €300 million in euro 100 notes would be about a third of that. That's a lot of paper. The fate of this transaction is important not only for Iran but the rest of the world. It gives us a key data point for answering the following question: just how resistant is the global payments system to U.S. censorship? If a payments system is censorship resistant, third-parties do not have the power to delete a user or prevent them from accessing the system. If the U.S. can unilaterally cut off any nation from making cross border payments, then the global payments system isn't censorship resistant. We already know that the global payments system is highly susceptible to U.S.-led censorship. From 2010-2015, Barack Obama successfully severed Iran from the world's banks, driving the nation's economy into the ground and eventually forcing its leaders to negotiate limits to their nuclear plans.

    Iran's Revolutionary Guard Says "Awaiting Orders" To Attack Israel Ahead Of Putin-Netanyahu Summit - Though by many accounts the situation in Syria's south is stabilizing as the government is fast securing the border with Jordan after a major offensive against FSA, al-Qaeda, and ISIS factions in the region, the possibility for further clashes between Israel and Damascus remains high, as we previously warned here. In the past months there's been widespread reporting on a "secret" deal brokered between Russia, Israel, and Syria, which reportedly involves the Syrian Army agreeing to keep Iranian forces away from the ongoing campaign along the Israeli and Jordanian borders, especially the contested Golan Heights. However, Israeli media has this week highlighted statements by a top Islamic Revolutionary Guard Corps (IRGC) commander that suggests further open hostilities between Israel, Syria, and pro-Iranian forces could break out at any moment as the IRGC has vowed to "break" Israel's presence, especially along the Golan. Ahead of a summit between Israeli Prime Minister Benjamin Netanyahu and Russian President Vladimir Putin set to be held Wednesday (July 11) in Moscow, Netanyahu reiterated what will likely be a key demand as he meets face to face with Putin: “We will not tolerate the establishment of a military presence by Iran and its proxies anywhere in Syria – not close to the border and not far away from it,” he told reporters over the weekend.  In a recent speech, IRGC deputy commander Hossein Salami boasted of the creation of an “Islamic army” near the Israeli-occupied Golan Heights, which he warned threatened to “end” Israel.“Today, an international Islamic army has been formed in Syria, and the voices of the Muslims are heard near the Golan,” Salami said, as quoted by the Times of Israel.“Orders are awaited, s o that…the eradication of the evil [Israeli] regime will land and the life of this regime will be ended for good. The life of the Zionist regime was never in [so much] danger as it is now,” the officer added.

    This Is What Modern War Propaganda Looks Like -  Caitlin Johnstone - I’ve been noticing videos going viral the last few days, some with millions of views, about Muslim women bravely fighting to free themselves from oppression in the Middle East. The videos, curiously, are being shared enthusiastically by many Republicans and pro-Israel hawks, who aren’t traditionally the sort of crowd you see rallying to support the civil rights of Muslims. What’s up with that? Well, you may want to sit down for this shocker, but it turns out that they happen to be women from a nation that the US war machine is currently escalating operations against. They are Iranian.Whenever you see the sudden emergence of an attractive media campaign that is sympathetic to the plight of civilians in a resource-rich nation unaligned with the western empire, you are seeing propaganda. When that nation is surrounded by other nations with similar human rights transgressions and yet those transgressions are ignored by that same media campaign, you are most certainly seeing propaganda. When that nation just so happens to already be the target of starvation sanctions and escalated covert CIA ops, you can bet the farm that you are seeing propaganda. Back in December a memo was leaked from inside the Trump administration showing how then-Secretary of State, DC neophyte Rex Tillerson, was coached on how the US empire uses human rights as a pretense on which to attack and undermine noncompliant governments. The propaganda machine doesn’t operate any differently from the State Department, since they serve the same establishment. US ally Saudi Arabia is celebrated by the mass media for “liberal reform” in allowing women to drive despite hard evidence that those “reforms” are barely surface-level cosmetics to present a pretty face to the western world, but Iranian women, who have been able to drive for years, are painted as uniquely oppressed. Iran is condemned by establishment war whores for the flaws in its democratic process, while Saudi Arabia, an actual monarchy, goes completely unscrutinized. This is because the US-centralized power establishment, which has never at any point in its history cared about human rights, plans on effecting regime change in Iran by any means necessary. Should those means necessitate a potentially controversial degree of direct military engagement, the empire needs to make sure it retains control of the narrative.

    Lebanese tourist sentenced to eight years in prison for Facebook post against Egypt -- A Lebanese tourist who was arrested last month for posting a video on Facebook complaining of sexual harassment and conditions in Egypt was sentenced to eight years in prison by a Cairo court on Saturday, her lawyer told Reuters.  Mona el-Mazboh was arrested at Cairo airport at the end of her stay in Egypt after a 10-minute video in which she called Egypt a "son of a bitch country" went viral on social media. The 24-year-old Mazboh complains of being sexually harassed by taxi drivers and young men in the street, as well as poor restaurant service during the holy month of Ramadan and an incident in which money was stolen from her during a previous stay. A Cairo court found her guilty of deliberately spreading false rumours that would harm society, attacking religion, and public indecency, judicial sources said. An appeal court will now hear the case on July 29, according to Mazboh's lawyer, Emad Kamal.

    OPCW Issues First Report Of ‘Chemical Weapon Attack’ in Douma --On April 7 2018 Syrian 'rebels' claimed that the Syrian government used chlorine gas and Sarin in an attack on the besieged Douma suburb near the Syrian capital Damascus. They published a series of videos which showed the dead bodies of mainly women and children.During the night the incident allegedly happened Douma was hit with artillery and air strikes in retaliation for earlier deadly attacks by some 'rebels' splinter groups on Damascus city. Jaish al-Islam, the main 'rebel' group in Douma, had already agreed to leave towards Idleb governorate.The claim of the 'chemical attack' was made shortly after U.S. President Trump had announced that he wanted U.S. troops to leave Syria. It was designed to "pull him back in" which it indeed did. Moon of Alabama published several pieces on the issue: (linked list)It seemed obvious from the very first claims of the 'gas attack' that it did not happen at all. The Syrian government had no motive to use any chemical weapon or an irritant like chlorine in Douma. It had already won. The incident was obviously staged, like others before it, to drag the U.S. into a new attack on Syria. Today the Organisation for the Prohibition of Chemical Weapons (OPCW) published an interim report and some technical results: OPCW designated labs conducted analysis of prioritised samples. The results show that no organophosphorous nerve agents or their degradation products were detected in the environmental samples or in the plasma samples taken from alleged casualties. Along with explosive residues, various chlorinated organic chemicals were found in samples from two sites, for which there is full chain of custody. .The "Sarin" organophosphate use the 'rebels' claimed is thereby debunked. No degradation products of such chemicals were found. The "various chlorinated organic chemicals" are unsurprising. Chlorine is widely used for water purification and cleaning and "chlorinated organic chemicals" will be found in any household.

      "No Nerve Agents" In Douma: OPCW Report Demolishes White House Sarin Narrative - A preliminary report published Friday by the Organization for the Prohibition of Chemical Weapons (OPCW) found no traces of any nerve agent at the site of a suspected chemical attack in the Syrian city of Douma. The OPCW report states this unambiguously as follows:"No organophosphorous nerve agents or their degradation products were detected in the environmental samples or in the plasma samples taken from alleged casualties."Compare the newly published official OPCW findings with the 5-page White House assessment released on April 13th, just days after the alleged attack. Now contradicted by the new OPCW findings, the White House asserted that sarin was used at DoumaA significant body of information points to the regime using chlorine in its bombardment of Duma, while some additional information points to the regime also using the nerve agent sarin. Firebrand British MP George Galloway responded as follows moments after the OPCW's findings were made public: Was that, was that the news? What about Douma? The chemical weapons attack? The nerve agent bombs that rained down on Douma that took us to the brink of World War 3? The OPCW have just reported, well two hours ago... There was no nerve gas attack on Douma. There was no nerve agent deployed on Douma. We were taken to World War 3’s brink on a crock. A crock of vile propaganda. Ring any bells? The April 7th alleged chemical attack, widely blamed by Western countries and the media on Assad's forces, resulted in massive US-led retaliatory airstrikes mostly concentrated on suspected chemical production facilities in Damascus. Though at the time both UN and OPCW officials urged caution in the rush to blame "animal Assad" for "using nerve agents" as many world headlines breathlessly concluded a mere moments after videos purporting to show scores of chemical attack victims first surfaced (and though CW experts themselves warned that not a single neutral observer was on the ground to verify such claims when it happened), the latest OPCW report flatly contradicts the narrative that quickly solidified in the mainstream.

      Mainstream Media Lie About Watchdog Report On The ‘Chemical Attack’ In Douma - Some mainstream media are outright lying about the OPCW report on the alleged 'chemical attack' in Douma.The Washington Post writes:[A] global watchdog concluded that chlorine was indeed used in the city of Douma a day before rebel forces surrendered there. ..In an interim report released Friday, the Organization for the Prohibition of Chemical Weapons said its inspectors had discovered traces of “various chlorinated organic chemicals” across two sites it inspected. The OPCW did not conclude at all that "chlorine was indeed used". It found some chemical compounds which have chlorine, carbon and hydrogen in various configurations as their main elements. There are hundreds if not thousands of "chlorinated organic chemicals". A plastic pipe made from polyvenylchlorid (PVC = (C2H3Cl)n) is made of the same elements. One could call it a "chlorinated organic chemical". Burning something made of PVC will releases various compounds many of which will themselves be "chlorinated organic chemicals". But finding residues of a burned plastic pipe or isolation in a home does not mean that chlorine gas was used in that place. Several of the compounds the OPCW found result from using chlorine to disinfect water. They can be found within the chlorinated water and about anywhere where chlorinated water was used.  The BBC made a similar 'mistake'. It headlined "Syria war: Douma attack was chlorine gas - watchdog".

      German Parliament Report: U.S. Presence in Syria Is Illegal - The Scientific Services of the German Bundestag are the equivalent to the Congressional Research Service in the United States. Members of Parliament can ask the services to give their neutral expert opinions on legal questions and other issues. Opinions by the Scientific Services are held in high regard. Alexander Neu, a Member of Parliament for the Left Party in Germany, requested an opinion on the legality of the military presence and operations by Russia, the United States and Israel in Syria. The result (pdf, in German) is quite clear-cut:  Russia was asked by the recognized government of Syria to help. Its presence in Syria is without doubt legal under International Law. U.S. activities in Syria can be seen as two phases:

      • Regime Change: The provision of arms to insurgents in Syria by the U.S. (and others) was and is illegal. It is a breach of the Prohibition on the Use of Force in international law specifically of the UN Charter Article 2(4): All Members shall refrain in their international relations from the threat or use of force against the territorial integrity or political independence of any state, or in any other manner inconsistent with the Purposes of the United Nations.
      • Fight against ISIS: The U.S. argues that its presence in Syria is in (collective) self-defense under Article 51 of the UN Charter because the Islamic State in Syria threatens to attack the United States. That, in itself, would be insufficient as Syria is a sovereign state. The U.S. therefore additionally claims that the Syrian state is "unwilling or unable" to fight against the Islamic State. The Scientific Services says that the claim of "unwilling or unable" was already dubious when the U.S. operation started. The already dubious legal case for the presence of U.S. (and other 'coalition' troops in Syria) can thus no longer be made. The U.S. presence in Syria is illegal.

      US Blasts China, Russia Over Sneaky Oil Sales To North Korea; Urges UN Action -  The United States has petitioned the UN to reprimand Russia and China for allegedly selling oil products to North Korea in violation of caps placed on petroleum sales as part of a larger sanctions package, reports the Wall Street Journal.  The U.S. State Department called on Russia and other U.N. members to “strictly implement” sanctions on North Korea while working “more closely together to shut down U.N.-prohibited activities, including ship-to-ship transfers of refined petroleum and the transport of coal from North Korea.” Chinese vessels were "caught red handed" last year by US spy satellites illegally selling oil to North Korea last year in around 30 transactions involving Chinese vessels, while a Hong Kong ship was seized in December after it was seen transferring oil to the Kim regime. The images allegedly showed large Chinese and North Korean ships transacting in oil in a part of the West Sea closer to China than South Korea. The surveillance photographs even showed the names of the ships. Meanwhile, Reuters reported in December that 'two senior Western European security sources' confirmed Russian tankers have supplied fuel to North Korea on at least three occasions in recent months by transferring cargoes at sea. Reuters' sources said the Russian-flagged tanker Vityaz was one vessel that had transferred fuel to North Korean vessels.

      China’s silky charming of Arabia - Under the radar, the eighth ministerial meeting of the China-Arab States Cooperation Forum (CASCF), established in 2004, sailed on in Beijing, hosted by President Xi Jinping. Amid the torrential pledge of loans and aid, China committed to invest right across the Arab world in transportation infrastructure, oil and gas, finance, digital economy and artificial intelligence (AI). Significantly, Beijing will offer $15 million in aid for Palestinian economic development, as well as $91 million distributed among Jordan, Lebanon, Syria and Yemen. Aid and loan package A China-Arab bank consortium will be set up, with a dedicated fund of $3 billion tied up with the financial aid and loan package. Beijing also foresees importing a whopping $8 trillion from Arab states up to 2025. Predictably, once again Xi fully connected the whole Arab world with the expansion of the New Silk Roads, or Belt and Road Initiative (BRI). And careful to navigate the geopolitical minefield, he urged “relevant sides” to respect the international consensus in the Israel-Palestine confrontation, calling for justice. That may indicate a gradual, but sure departure from trademark Chinese passive or reactive policy across the Arab world, focused exclusively on energy and political non-interference. 

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