oil prices ended lower for the 7th week in a row, although as we've explained previously, one week in that stretch was due to the switch from quoting the August oil contract to quoting the lower priced September oil contract....after falling 86 cents, or 1.2% to $67.63 a barrel in volatile trading last week, prices for US light sweet crude for September fell 43 cents to $67.20 a barrel on Monday after OPEC lowered their estimate for next year's oil demand growth while US oil supplies increased at the Cushing OK delivery hub...while NYMEX oil prices rallied to as high as $68.37 a barrel on Tuesday morning on news that the Saudis told OPEC that it had cut crude output by 200,000 barrels per day, that rally fizzled on a strengthening U.S. dollar and concerns about the financial crisis in Turkey and oil ended the day 16 cents lower at $67.04 a barrel...oil prices then plunged on Wednesday after the weekly EIA data showed a big, unexpected jump in U.S. crude supplies, with WTI for September delivery falling $2.03, or 3%, to settle at $65.01 a barrel, its lowest close since June 6th...oil prices recovered a bit on Thursday, rising 45 cents to $65.46 a barrel, on prospects of renewed US-China trade talks, alleviating some of the trade war.fears that had pushed prices lower...that positive sentiment carried into Friday, as oil prices rose another 45 cents to $65.91 a barrel, but still ended with a $1.72 or a 2.6% loss on the week on concerns that oversupply would weigh on U.S. markets while trade disputes and slowing global economic growth would dampen global demand for oil.
natural gas prices for September, meanwhile, were little changed on the week, ending just two-tenths of a cent higher at 2.946 per mmBTU after a 3.8 cent increase on Friday reversed the losses from earlier in the week...while the increasing deficit of natural gas supplies heading into winter have provided an impetus for higher prices on the winter contracts, with January natural gas contracts closing at $3.168 per mmBTU and February gas closing at $3.132 per mmBTU, China's threat of a retaliatory 25% tariff on LNG has thrown the future of natural gas demand into question...this week's EIA natural gas storage report for week ending August 10th indicated that natural gas in storage in the US rose by 33 billion cubic feet to 2,387 billion cubic feet during the cited week, which left our gas supplies 687 billion cubic feet, or 22.3% below the 3,074 billion cubic feet that were in storage on August 11th of last year, and 595 billion cubic feet, or 20.0% below the five-year average of 2,982 billion cubic feet of natural gas that are typically in storage heading into the second weekend of August....an S&P Global Platts' survey of analysts had forecast that 30 billion cubic feet of natural gas would be injected into storage during the week ended August 11th, so the actual 33 billion cubic feet increase was higher than expectations and thus contributed to a 4.6 cent natural gas price drop after the report, but that 33 billion cubic foot increase was still well below the 56 billion cubic foot average of surplus natural gas that has typically been added to storage during the first full week of August in recent years, thus making for the 6th consecutive below average build...
checking the historical natural gas storage archive files, we find that this week's natural gas supplies of 2,387 billion cubic feet are again the lowest for this time of year since August 8th, 2003, when natural gas supplies had fallen to 2,222 billion cubic feet...the only other early August records that even came close to this year's nadir were on August 8th of 2014, when natural gas supplies were at 2,467 billion cubic feet and on August 8th of 2008, when natural gas supplies were at 2,567 billion cubic feet...Platts Analytics is now estimating that our supplies will start the natural gas heating season at 3.37 trillion cubic feet, roughly a 500 billion cubic feet deficit from normal....to hit even that low target, we'd have to add an average of more that 75 billion cubic feet over the next 13 weeks...since we have averaged a 39 billion cubic foot weekly injection over the past 6 weeks, we'll have to step up the pace quite a bit this fall to meet that Platts estimate...
The Latest US Oil Data from the EIA
this week's US oil data from the US Energy Information Administration, covering the week ending August 10th, indicated that because of a big jump in our oil imports and a modest drop in our oil exports, we had a surplus of oil to add to our domestic commercial crude supplies for the fifteenth time in the past twenty-nine weeks.... our imports of crude oil rose by an average of 1,083,000 barrels per day to an average of 9,014,000 barrels per day, after rising by an average of 182,000 barrels per day the prior week, while our exports of crude oil fell by an average of 258,000 barrels per day to an average of 1,592,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 7,422,000 barrels of per day during the week ending August 10th, 1,341,000 more barrels per day than the net of our imports minus exports during the prior week...over the same period, field production of crude oil from US wells was reported to be 100,000 barrels per day higher at 10,900,000 barrels per day, which means that our daily supply of oil from the net of our trade in oil and from wells totaled an average of 18,322,000 barrels per day during the reporting week...
at the same time, US oil refineries were using a record 17,981,000 barrels of crude per day during the week ending August 10th, 383,000 barrels per day more than they used during the prior week, while over the same week 972,000 barrels of oil per day were reportedly being added to the oil that's in storage in the US....hence, this week's crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports and from oilfield production was 631,000 barrels per day short of what was added to storage plus what refineries reported they used during the week....to account for that disparity between the supply and the disposition of oil, the EIA needed to insert a (+631,000) 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"...with a difference between oil supply and its disposition as large as that, we have to consider the likelihood that one or more of this week's EIA oil metrics contains a statistically significant error...(for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer)....
further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports rose to an average of 8,116,000 barrels per day, which was just 0.9% more than the 8,046,000 barrel per day average that we were importing over the same four-week period last year....the 972,000 barrel per day increase in our total crude inventories was all added to our commercially available stocks of crude oil, as the amount of oil in our Strategic Petroleum Reserve remained unchanged....this week's crude oil production was reported being up by 100,000 barrels per day to 10,900,000 barrels per day even as the output from wells in the lower 48 states was reportedly unchanged at 10,500,000 barrels per day because oil output from Alaska rose by 60,000 barrels per day, and since the national total is now being rounded to the nearest 100,000 barrels per day to more reflect the EIA's inability to accurately model oil output from all the wells in the lower 48 states, that 60,000 barrels per day increase was enough to bump the rounded national total up by 100,000 barrels per day.....US crude oil production for the week ending August 11th 2017 was reportedly at 9,502,000 barrels per day, so this week's rounded oil production figure was roughly 14.7% 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...
meanwhile, US oil refineries were operating at 98.1% of their capacity in using 17,981,000 barrels of crude per day during the week ending August 10th, up from 96.6% of capacity the prior week, and the highest refinery utilization rate since our refineries operated at 98.9% of capacity during the week ending September 11, 1998....the 17,981,000 barrels per day of oil that were refined this week were the most barrels refined in any week on record, topping the record level set just seven weeks ago during the week ending June 22nd, and capping off an 11 week run when our seasonal refinery throughput was higher than ever before...hence, this week's refinery throughput was also 2.4% higher than the 17,565,000 barrels of crude per day that were being processed during the week ending August 11th 2017, when US refineries were operating at 96.1% of capacity....
with our oil refining now at a new record high, we'll take a look at a graph of the recent history of that metric for some perspective...
the above graph of US refinery throughput came from the weekly package of oil graphs that John Kemp, senior energy analyst and columnist with Reuters, provides by email on Wednesdays, which is also available as a pdf here; it shows US refinery throughput in thousands of barrels per day by "day of the year" for the past ten years, with the past ten year range of our refinery throughput for any given date shown as a light blue shaded area, and the median of our refinery throughput, or the middle of the 10 year daily range, traced by the blue dashes over each day of the year....the graph also shows the number of barrels of oil refined for each week in 2017 traced by a yellow line, with our year to date oil refining for each week of 2018 traced by the red graph...you can clearly see that except for the disruptions to refining caused by last year's hurricanes, 2017's refining in yellow had been at the top of the historical range almost all year, and that the pace of refining in 2018 in red has generally been above that, except for during late April and May...you can also see that the summer is usually when refiners see their seasonal highs, so given that we've been running refineries at a pace above that of the prior years for almost two years running, a breakout to a new record high at this time of year was not unexpected...
with the record amount of oil being refined this week, gasoline output from our refineries was considerably higher, increasing by 321,000 barrels per day to 10,234,000 barrels per day during the week ending August 10th, after our refineries' gasoline output had inexplicably decreased by 570,000 barrels per day during the week ending August 3rd...as a result of this week's increase, our gasoline production during the week was 1.9% higher than the 10,048,000 barrels of gasoline that were being produced daily during the same week of last year...meanwhile, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 100,000 barrels per day to a seasonal high of 5,337,000 barrels per day, after rising by 78,000 barrels per day over the prior week...however, this week's distillates production was only 0.9% higher than the 5,287,000 barrels of distillates per day that were being produced during the week ending August 11th, 2017...
however, even with the increase in our gasoline production, our supply of gasoline in storage at the end of the week still fell by 740,000 barrels to 233,128,000 barrels by August 10th, the 15th decrease in 25 weeks, but just the 16th decrease in 40 weeks, as gasoline inventories, as usual, were being built up over the winter months....our supplies of gasoline fell this week because our exports of gasoline rose by 347,000 barrels per day to 935,000 barrels per day while our imports of gasoline fell by 272,000 barrels per day to 663,000 barrels per day, and because the amount of gasoline supplied to US markets rose by 166,000 barrels per day to 9,512,000 barrels per day, after falling by 532,000 barrels per day the prior week...but even after this week's decrease, our gasoline inventories were still fractionally higher than last August 11th's level of 231,125,000 barrels, and roughly 9.4% above the 10 year average of our gasoline supplies for this time of the year...
meanwhile, with the increase in our distillates production, our supplies of distillate fuels increased by 3,566,000 barrels to 128,989,000 barrels during the week ending August 10th, the 9th increase in 12 weeks...our supplies increased as the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 43,000 barrels per day to 3,959,000 barrels per day, after increasing by 391,000 barrels per day the prior week, and as our exports of distillates fell by 185,000 barrels per day to 1,043,000 barrels per day, while our imports of distillates rose by 5,000 barrels per day to 174,000 barrels per day....however, since our distillate supplies are still coming off a 14 year seasonal low hit just 3 weeks ago, after falling during a time of year when distillates supplies are usually increasing, this week's inventory increase still leaves our distillates supplies 13.1% below the 148,387,000 barrels that we had stored on August 11th, 2017, and roughly 12.8% lower than the 10 year average of distillates stocks for this time of the year...
finally, with our oil imports increasing by nearly 1.1 million barrels per day, our commercial supplies of crude oil increased for the 16th time in 2018 and for the 22nd time in the past year, rising by 6,805,000 barrels during the week, from 407,389,000 barrels on August 3rd to 414,194,000 barrels on August 10th...that increase now means our crude oil inventories are now a bit above the five year average of crude oil supplies for this time of year for the first time this year, and roughly 24% above the 10 year average of crude oil stocks for the 2nd week of August...however, since our crude oil inventories had been falling through most of the past year and a half, our oil supplies as of August 10th were still 11.2% below the 466,492,000 barrels of oil we had stored on August 11th of 2017, 15.6% below the 490,461,000 barrels of oil that we had in storage on August 12th of 2016, and 2.4% below the 424,442,000 barrels of oil we had in storage on July 31st of 2015, when US supplies of oil had already risen above the nearly stable levels of under 400 million barrels we saw during the prior years...
OPEC's Monthly Oil Market Report
next we'll take a look at OPEC's August Oil Market Report (covering July OPEC & global oil data), which was released on Monday 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 57 of that report (pdf page 65), 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...
as we can see on this table of official oil production data, OPEC's oil output increased by 40,700 barrels per day to 32,323,000 barrels per day in July, from their June production total of 32,283,000 barrels per day....however, that June figure was originally reported as 32,327,000 barrels per day, so OPEC's June output was therefore revised 44,000 barrels per day lower with this report (for your reference, here is the table of the official June OPEC output figures as reported a month ago, before this month's revisions)...as you can tell from the far right column above, increases of 78,500 barrels per day in the oil output from Kuwait, of 70,500 barrels per day in the output from Nigeria, and of 69,200 barrels per day in the output from the Emirates were the primary reasons that the cartel's output rose, as those increases offset the decrease of 56,700 barrels per day in Libyan output, the decrease of 56,300 barrels per day in Iranian output, the decrease of 56,200 barrels per day in Saudi output, and the decrease of 47,700 barrels per day in Venezuelan output...the OPEC pledge to pump more oil in the second half of 2018 notwithstanding, OPEC's output excluding new member Congo was at 32,010,000 barrels per day in July, still 720,000 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 August 2016 to July 2018, and it comes from the page numbered 58 (pdf page 66) of the August 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...
OPEC's preliminary estimate indicates that total global oil production rose by a rounded 680,000 barrels per day to a record high 98.53 million barrels per day in July, apparently after June's global output total was revised down by 160,000 barrels per day from the 98.01 million barrels per day global oil output that was reported a month ago, as non-OPEC oil production rose by 640,000 barrels per day in July after that revision....global oil output for July was also 1.74 million barrels per day, or 1.3% higher than the 97.30 million barrels of oil per day that were being produced globally in July a year ago (see the August 2017 OPEC report online (pdf) for the year ago details)...with the jump in global output, OPEC's July oil production of 32,323,000 barrels per day represented 32.8% of what was produced globally during the month, down from their 33.0% of global share reported for June...OPEC's July 2017 production was at 32,869,000 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 now producing 985,000 fewer barrels per day of oil than they were producing a year ago, during the seventh month that their production quotas were in effect, with a 432,000 barrel per day decrease in output from Venezuela and a 337,000 barrel per day decrease in output from Libya from that time largely responsible for the cartel's output drop...
despite the 680,000 barrel per day increase in global oil output in July, an increase in summertime demand meant that we again saw a deficit in the amount of oil being produced globally during the month, as this next table from the OPEC report will show us...
the table above comes from page 31 of the July OPEC Monthly Oil Market Report (pdf page 39), 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 fourth column, we've circled in blue the figure that's relevant for July, which is their revised estimate of global oil demand during the third quarter of 2018...
OPEC's estimate is that during the 3rd quarter of this year, all oil consuming regions of the globe will be using 99.44 million barrels of oil per day, which was a upward revision of a rounded 0.03 million barrels of oil per day from their prior estimate for the quarter....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 98.53 million barrels per day during July, which means that there was a shortfall of around 910,000 barrels per day in global oil production vis-a vis the demand estimated for the month...
note that this report also revised oil demand figures for the 1st and second quarters, which we've circled in green; that means our previous estimates of surplus or shortfall for those months will have to be revised as well...a month ago, we estimated there was a small shortfall of around 30,000 barrels per day in global oil production vis-a vis the demand in June...while oil demand for the 2nd quarter was revised 120,000 barrels per day lower (as you see in the green ellipse above), we also noted earlier that June's global oil output total was revised down by 160,000 barrels per day from the 98.01 million barrels per day global total that was reported a month ago; that means our revised oil shortfall for June will be around 70,000 barrels per day...
with the downward revision of 120,000 barrels per day to 2nd quarter demand, the shortfall for May now works out to 510,000 barrels per day, revised from the 630,000 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 440,000 barrels per day that we figured last month to 320,000 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 10,000 barrels per day higher, which means that our previously recomputed oil surplus for the first quarter of 2018 will also have to be recomputed again....since we had figured a global oil 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, the revision means that our new figures show a surplus of 120,000 barrels per day for March, a surplus of 300,000 barrels per day for February, and a surplus of 140,000 barrels per day for January....totaling up all these estimates, that would mean that for the first seven months of 2018, global oil demand exceeded production by roughly 39,260,000 barrels, a relatively small net oil shortfall that is the equivalent of roughly nine and a half hours of global oil production at the July production rate...
This Week's Rig Count
the pace of US drilling activity stalled during the week ending August 17th, after increasing 15 out of the most recent 20 weeks....Baker Hughes reported that the total count of rotary rigs running in the US was unchanged at 1057 rigs over the week ending on Friday, which was still 111 more rigs than the 946 rigs that were in use as of the August 18th report of 2017, but was still down from the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began their attempt to flood the global oil market...
the count of rigs drilling for oil was unchanged at 869 rigs this week, which was still 106 more oil rigs than were running a year ago, while it was still well below the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the number of drilling rigs targeting natural gas formations was also unchanged at 186 rigs this week, which was up by 4 rigs 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, 2008...in addition, rigs drilling two exploratory wells considered to be "miscellaneous" continued this week, also unchanged, in contrast to a year ago, when all rigs were specifically targeting either oil or gas..
another Gulf of Mexico drilling platform was started back up this week, so there are now 19 rigs drilling in the Gulf of Mexico, up from the 16 rigs that were drilling in the Gulf last year at this time...in addition, two rigs continued drilling offshore from Alaska this week, so the total national offshore count is now at 21 rigs, up from a total of 16 offshore rigs a year ago, a time when there was no drilling elsewhere other than in the Gulf...
the count of active horizontal drilling rigs was down by 2 rigs to 922 horizontal rigs this week, which was still 123 more horizontal rigs than the 799 horizontal rigs that were in use in the US on August 18th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, the vertical rig count decreased by 4 rigs to 65 vertical rigs this week, which was also down from the 66 vertical rigs that were in use during the same week of last year...on the other hand, the directional rig count increased by 6 directional rigs this week, which was still down from the 81 directional rigs that were operating on August 18th of 2017...
the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows the weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of August 17th, the second column shows the change in the number of working rigs between last week's count (August 10th) and this week's (August 17th) count, the third column shows last week's August 10th 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 18th of August, 2017...
there's not much that isn't obvious here, except that it appears that at least two and probably three rigs that had been drilling in the Permian on the New Mexico side of the Texas border were either shut down or moved to Texas this week, as the core Permian Texas Oil District saw an increase of three rigs, and Texas District 7B, at the edge of the Permian, also saw an additional rig start up...outside of the Permian, note the large number of rig reductions spread throughout the other major basins, including the 3 rig drop in the Cana Woodford or Oklahoma and the decreases of two rigs each in the Mississippian Lime of the Kansas-Oklahoma border region and the Granite Wash of the Texas-Oklahoma panhandle region; we would not be seeing drilling pullbacks like that in those oil-bearing strata if fracking were a highly profitable venture at current oil prices, given there is still some degree of price backwardation...for rigs targeting natural gas, which were on net unchanged, we have an increase of two in the Pennsylvania Marcellus, an increase of one in the Arkoma Woodford of Oklahoma, and an increase of one in the Granite Wash, where three oil rigs were shut down at the same time, offset by rig decreases in Ohio's Utica shale, the West Virginia Marcellus, the Louisiana Haynesville, and one in a basin not tracked separately by Baker Hughes...we'll also note that outside of the major producing states shown above, Nebraska had the rig that started up last week shut down this week; i dont really know what that's about, since the state has only seen oilfield activity for two weeks over the past two years...
DUC well report for July
Monday of this past week also saw the release of the EIA's Drilling Productivity Report for August, which includes the EIA's July data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions...for the 22nd consecutive month, this report again showed an increase in uncompleted wells nationally in June, even as drilling of new wells was down for the 2nd consecutive month....like most previous months, this month's uncompleted well increase was due to a big increase of newly drilled but uncompleted wells (DUCs) in the Permian basin of west Texas, with a modest increase of uncompleted wells in the Eagle Ford of south Texas also contributing...for all 7 sedimentary regions covered by this report, the total count of DUC wells increased by 165, from 7,868 wells in June to 8,033 wells in July, again the highest number of such unfracked wells in the history of this report....that was as 1,441 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during July, down from 1,448 in June, while 1,276 wells were completed and brought into production by fracking, a increase of one completion over the prior month...hence, at the July completion rate, the 8,033 drilled but uncompleted wells left at the end of the month represent a 6.3 month backlog of wells that have been drilled but not yet fracked...
as has been the case for most of the past two years, the July DUC well increases were predominantly oil wells, with most of those in the Permian basin...the Permian saw its total count of uncompleted wells rise by 167, from 3,303 DUC wells in June to 3,470 DUCs in July, as 601 new wells were drilled into the Permian but only 434 wells in the region were fracked...at the same time, DUC wells in the Eagle Ford of south Texas rose by 32, from 1,480 DUC wells in June to 1,512 DUCs in July, as 207 wells were drilled in the Eagle Ford during July, while 175 Eagle Ford wells were completed...over the same period, the number of DUC wells in the Anadarko region centered in & around Oklahoma increased by 7 to 923, as 167 wells were drilled into the Anadarko basin while 160 Anadarko wells were fracked....in addition, DUC wells in the Bakken of North Dakota rose by 4, from 756 DUC wells in June to 760 DUCs in July, as 131 wells were drilled into the Bakken in July while 127 drilled wells in that basin were completed...meanwhile, the natural gas producing Haynesville shale of the northern Louisiana-Texas border region saw their uncompleted well inventory remain unchanged at 182, as 54 wells were drilled into the Haynesville during July, while 54 Haynesville wells were fracked during the same period...on the other hand, the drilled but uncompleted well count in the Niobrara chalk of the Rockies front range decreased by 40 to 432, as just 158 Niobrara wells were being drilled while 198 Niobrara wells were being fracked...similarly, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 5 wells, from 759 DUCs in June to 754 DUCs in July, as 123 wells were drilled into the Marcellus and Utica shales, while 128 of the already drilled wells in the region were fracked....thus, for the month of July, DUCs in the 5 oil basins tracked by in this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) increased by 170 wells to 7,097 wells, while the uncompleted well count in the natural gas regions (the Marcellus, Utica, and the Haynesville) decreased by a net of 5 wells to 936 wells, although as the report notes, once into production, more than half the wells drilled nationally will produce both oil and gas...
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Rig Count in Utica Climbs to 20 – The number of rigs operating in the Utica shale across eastern Ohio improved to 20 during the week ended Aug. 11, up from 18 the previous week, according to the latest data from the Ohio Department of Natural Resources. ODNR reported it issued nine new permits for horizontal wells across the Utica during the week. Ascent Resources LLC was awarded three permits for wells in Jefferson County, Gulfport Energy received three permits targeted for Belmont County and Eclipse Resources LP received three permits for wells in Monroe County. As of Aug. 11, ODNR had approved 2,863 permits for horizontal wells in the Utica, 2,391 of which are drilled and 1,945 of which are in production. No new permits were issued for Columbiana, Mahoning or Trumbull counties in the northern portion of the Utica, ODNR said. Nor were new Utica permits issued for neighboring Lawrence and Mercer counties in western Pennsylvania, according to the Pennsylvania Department of Environmental Protection.
Panel: Methane leak capture could add millions to Ohio's economy - -- Ohio oil and gas drillers could use existing technology to find and fix most methane leaks at little or no cost to their bottom lines, according to experts on a recent panel at Case Western Reserve University in Cleveland. Better still: leak detection could create new jobs and revenue, boosting the state’s economy and helping to curb a potent greenhouse gas responsible for about a quarter of manmade global warming experienced today.Andrew Wheeler, an attorney and scientist with the Environmental Defense Fund, said the leaks aren’t just an environmental concern.“I also like to refer to methane as wasted natural gas,” Wheeler said, noting that the product could otherwise be sold and used. As a result, “you can reduce methane emissions by 50 percent for no cost and by 70 to 80 percent at a very marginal, fractional cost.”That jives with results reported by companies in the industry, said Isaac Brown, who heads up the Center for Methane Emissions Solutions, an industry organization for companies that work in the leak detection and repair field. The group commissioned a 2016 survey of oil and gas companies in Colorado after that state’s more stringent methane detection rules came into effect. Eight out of 10 said they were profiting, breaking even or paying out just slightly more as a result of those rules. “Tackling methane emissions not only provides cleaner air, but adds good jobs,” Brown said. Salaries in the leak detection and repair field range up to $113,000 per year, he said.
New natural gas company making its way to Ohio - WTOV Steubenville — A new natural gas company is making its way to the state of Ohio. In an effort to clear a $9 billion debt, Chesapeake Energy will be selling its Ohio assets to Houston, Texas based company, Encino Acquisition Partners. While it’s a major move for the industry, Jefferson County leaders say it’s a positive one. “Encino is a very small company and they will probably be employing all 900 people from Chesapeake, which is a good sign," said Terry Bell of the Jefferson County Township Association. The goal for the new company is to keep jobs within the area and make big money through fracking. According to filings, Encino is taking on roughly 900 wells in Ohio. Many of those planted right here in the Valley. “We currently have 26 counties in the oil and gas area and Chesapeake is a big player in about 5 of these counties-- in the northern portion--which would be Jefferson, Harrison, Belmont, Columbiana, and Carroll, --they’re heavy there," Bell said. This upcoming merger is just one of the many changes coming to the oil and gas industry in our area. “Along with all this drilling activity will come more pipelines. The Shell pipeline is supposed to start in 2019 in the spring. We know they’re coming. There are other pipelines on the drawing board, so we know there’s going to be a lot of activity."
Chesapeake Energy: Probably One More Multi-Billion Sale Needed --Chesapeake Energy (CHK) management announced a $2 billion sale of the Utica Shale operations recently. Mr. Market reacted very coolly to this debt reduction progress. All kinds of wonderful company valuations had been bandied about prior to the latest announcement. Somehow actual sales tend to fall below some very optimistic expectations. Plus now the market will begin to value Chesapeake Energy as a going concern. Therefore growing production and cash flow will be paramount objectives. However, continuing significant sales to pay down debt send both continuing cash flow and remaining production in the wrong direction. Mr. Market appears to be losing patience just when management appears to be finally solving many of the company's inherited problems from a past chief executive officer. One of the problems Mr. Market has with the announcement progress is the continuing setbacks on the balance sheet. Notice that the working capital deficit expanded to $1.633 billion from $.831 billion. The bottom of the balance sheet shows long term debt decreasing by $255 million. However, the increase in the working capital deficit of $802 million means that in essence debt grew by more than $557 million since the second quarter of 2017. Therefore the recent announcement to pay down $2 billion of debt will in reality show closer to about $1.5 billion of debt reduction.Of course, if management continues to outspend cash flow, then long term debt will again significantly increase. Still the sales announcement marks the first significant debt progress in quite awhile.Part of the reason for the working capital deficit increase has been the lack of adequate cash flow. In fact the previous fiscal year had no cash flow from operating activities as shown above. The cash flow had been consumed by non-recurring events. Management had to borrow money to fund daily operations.
Chesapeake reaches $7.75 million deal in Pennsylvania royalty class-action suit, with a catch --Chesapeake reaches $7.75 million deal in Pennsylvania royalty class-action suit, with a catch Arlington, Virginia — Chesapeake Energy has agreed to end a four-year federal class-action battle over natural gas royalties with Pennsylvania leaseholders for $7.75 million, but left the door open to walking away from the settlement if the state's attorney general does not drop an unfair-trade action in state court. Chesapeake said it would set up a fund to pay an estimated 10,000 leaseholders to make up for deductions from their royalty checks for post-production processing and pipeline costs, deductions that in some months left the leaseholders with negative balances, according to the settlement filed in federal court last Thursday. The fund, which would pay class action lawyers up to one-third of the settlement amount, would recoup an estimated 8% of post-production payments for the leaseholders if US District Court Judge Malachy Mannion approves the deal. The leaseholders, mostly landowners in northeast Pennsylvania's Marcellus Shale, claimed that Chesapeake and a then-affiliated midstream company, Access Midstream Partners, inflated the costs for gathering and transporting gas to market by sweetheart deals. Access was spun off before Williams bought it in 2014. Chesapeake denied that claim and insisted in the settlement agreement that its payment practices were proper and met Pennsylvania's legal requirements. Chesapeake said it was settling the action to save money on legal fees. The potential fly in the settlement's ointment is the state attorney general's office, which has torpedoed previous settlements by refusing to drop its case in state court, alleging "bait-and-switch" tactics by Chesapeake. "The private class-action settlement does not impact our case at all," Joe Grace, spokesman for Pennsylvania Attorney General Josh Shapiro, told the Pittsburgh Post-Gazette in a Friday story. "Our claims against these energy companies are active and ongoing, and they are intended to protect all Pennsylvanians against this kind of corporate misconduct, not just one group of individuals in one case."
100+ PA Landowners Sue EQT re Gas Storage Field Payments - According to Washington County, PA landowner Joe Raposky, EQT has been storing natural gas under his property in Finleyville without permission and without compensation since at least 2007. Last year Raposky asked EQT to compensate him and they refused. So Mr. Raposky has organized over 100 of his neighbors along with landowners who sit over top of other similar underground storage fields in the region, and on July 30 they filed a lawsuit against EQT. PA has some 60 gas storage fields spread across 26 counties in the state. The fields are used to temporarily store and then retrieve natural gas. Storage, which is not something we write about very much, is in fact a big deal when it comes to the natural gas market. Not all gas is used as soon as its extracted and sold along a pipeline. There are two main “seasons” in the natural gas industry–injection season, from April 1 through October 31, when a surplus is stored underground, and withdrawal season, from November 1 through March 31, when more gas is used than is produced. Storage fields like the one in Finleyville are an important part of the natgas puzzle. In some cases, landowners are only now becoming aware of the existing fields under their feet and they (rightly) want to be compensated for the use of their property.
Trump criticizes Cuomo over ban on fracking - Oneonta Daily Star — As President Donald Trump sees it, the administration of Gov. Andrew Cuomo has killed a golden goose and ensured high taxes for New Yorkers by blocking the development of shale gas in the state.Trump, who led a rally in Utica Monday for incumbent Rep. Claudia Tenney, R-New Hartford, used the occasion to stir the debate over the controversial technique known as horizontal hydrofracking by suggesting the state should be cashing in on its natural gas deposits. Trump asserted that New York’s natural gas reserve is “dissipating” because the Cuomo administration has blocked the issuance of permits for hydraulic fracturing of shale layers under which the fossil fuel is trapped. “Think of it,” he told Tenney supporters at the Hotel Utica, “if they would’ve allowed a little bit of fracking, and taken some of the richness out of the land, which by the way is being sucked away by other states — you know they don’t have state lines underground.”Trump’s suggestion that New York is losing significant amounts of the underground gas to drillers in Ohio and Pennsylvania because the supply is migrating shows he has no knowledge of the geology of shale formations, said a Cornell University engineering professor and a retired top oil industry executive. “He’s dead wrong on his science,” said Anthony Ingraffea, a Cornell University engineer who has studied fracking and endorsed the New York ban. “He is obviously not a petroleum geologist and he doesn’t know anything about gas and he doesn’t know anything about shale. My guess is he is just making it up because it sounds like a justification for his statement that New York could have become rich. The reality is there is no substantial amount of shale gas in New York.”Lou Allstadt, a Cooperstown village trustee who retired as an executive with Mobil Corp. before the company became known as Exxon Mobil, called Trump’s assertions about the properties of natural gas deposits “total bunk.” “Shale oil or shale gas does not flow like a river,” said Allstadt. “It is trapped in the shale.”
Stumping in New York, Trump blames lack of fracking for high taxes - President Donald Trump linked New York’s taxes to the state’s restrictions on fossil fuel development in a speech on Monday, arguing that such policies have hindered jobs and driven state costs up. While in the city of Utica stumping for Rep. Claudia Tenney (R), Trump took aim at New York’s taxes, blasting them as “the highest” in the nation and arguing that “we should have no taxes” while accusing Gov. Andrew Cuomo (D) of falling short in exploring hydraulic fracturing, or fracking. “No, think of it, if they would’ve allowed a little bit of fracking, and taken some of the richness out of the land, which by the way is being sucked away by other states, you know they don’t have state lines underground, you know what that means?” Trump asked, addressing some 300 people in a room at Hotel Utica. Arguing that untapped fossil fuels in the ground just go “down, down” and benefit other states like Pennsylvania and Ohio, the president argued that fracking and drilling in those states has created jobs.“This place, it’s just so sad to see it,” he said, referencing New York. “And we had the potential to do it better than anybody, and now it’s dissipating, it’s dissipating. Because that stuff flows, do you understand that, it flows.”Indicating a horizontal line with his hands to indicate flowing, the president then made turning motions, seemingly to describe the process of fracking.“And they probably have those little turns, you know they make the turns at the border, it goes like this, right?” he said, motioning a curving shape, before returning to the topic of New York’s finances. “And all of a sudden, some day, you’re not going to have that underground maybe so much, and it’s a shame,” Trump said, “’cause you could have had no taxes, you could’ve had the lowest taxes instead of the highest taxes, and it’s very sad to see what’s happened with New York.”
Trump Blasts Cuomo Over Frack Ban in New York State - - President Trump, at a campaign stop in Upstate New York to support a Republican congresswoman seeking reelection, used his appearance as an opportunity to pillory Democratic Gov. Andrew Cuomo for his opposition to hydraulic fracturing (fracking).Shortly into a speech Monday backing Rep. Claudia Tenney (R-NY), Trump faulted Cuomo, who is seeking a third term, for passing on the opportunity to lower the state's taxes, which are among the highest in the nation. The Cuomo administration enacted a statewide ban on high-volume hydraulic fracturing (HVHF) in June 2015."If they would have allowed a little bit of fracking and taken some of the richness out of the land," taxes in the state would be lower, Trump reasoned. He opined that the oil and natural gas locked in New York's portion of the Marcellus and Utica shales were "being sucked away by other states.""You look at what's happened in Pennsylvania, with the money they've taken in. You look at what happened in Ohio with the money they've taken in. They're fracking. They're drilling a little bit. They're creating jobs. And this place, it's just so sad to see it. And we had the potential to do it better than anybody."Trump also asserted that New York's oil and gas was "dissipating," adding "that stuff flows, do you understand that? And all of a sudden someday you're not going to have that underground maybe so much. And it's a shame, because you could have had no taxes. You could have had the lowest taxes instead of the highest taxes. And it's very sad to see what's happened with New York." From the podium in Utica, NY, Trump told Tenney supporters that the city "could have been a boomtown" had HVHF moved forward. The city lies near the edge of the Utica Shale formation.
What the Frack is Donald Trump Talking About? - Food and Water Watch --There was good news and bad news to report from a campaign stop Donald Trump made this week in New York. The bad news is that Trump very much wishes to see fracking there, where it is currently banned. The good news? He doesn’t appear to know what he’s talking about. .It can be dangerous to try to make sense of Trump’s utter nonsense, but let’s forge on nonetheless. Here’s what he told a crowd in Utica:"Considering the fact that we have the highest taxes in the nation in New York, and we should have no taxes if [New York Governor] Andrew Cuomo, if he took over and... think of it, if they would have allowed a little bit of fracking and taken some of the richness out of the land, which by the way is being sucked away by other states. You know, they don't have state lines underground. You know what that means that means? It just goes down, down, down, we don't get it. You look at what's happened in Pennsylvania with the money they've taken in, you look at what’s happened in Ohio with the money they've taken in. They’re fracking, they're drilling a little bit, they're creating jobs and this place-- it's just so sad to see it, and we had the potential to do it better than anybody. And now it's dissipating. It's dissipating. Because that stuff flows. Do you understand that it flows? And they probably have those little turns, you know they make the turns at the border it goes like this, right. And all of a sudden someday you're not going to have that underground maybe so much. And it's a shame, because you could have had no taxes, you could have had the lowest taxes instead of the highest taxes. and it's very sad. So, to paraphrase: Fracking is a form of flowing magic that eliminates state taxes, an easy way to access riches underground that can be stolen from you by other states if you don’t drill first. Make sense?
Fracking industry water use rises as drills extend, study says - Water use for fracking by oil and gas operators in the Marcellus Shale region rose 20 percent between 2011 and 2016 as longer laterals were drilled to fracture more gas-bearing rock, even though the pace of well development slowed in response to low natural gas prices, a Duke University study said on Wednesday.The rise was the smallest of any of the six U.S. regions studied, including the Permian Basin area of Texas, where water use surged by 770 percent over the period.The study also said the volume of fracking waste water produced in the Marcellus – which includes Pennsylvania, West Virginia, eastern Ohio and southern New York, where fracking is banned — rose four-fold to 600,000 gallons in 2016, forcing energy companies to rely increasingly on holding the waste in underground injection wells.But the Marcellus waste water increase was also significantly smaller than other regions, where it rose as high as 1,440 percent during the period, the report said.Although fewer new wells were drilled during the period than in the early stages of the fracking boom, more water was needed because longer wells required the fracturing of more rock, said Andrew Kondash, the paper’s lead author.The median water use per Marcellus well rose to 7.4 million gallons in 2016 from 6.1 million gallons in 2011, Kondash said.The peer-reviewed study, published in the journal Science Advances, shows the fracking industry is having an increasing impact on water resources after more than a decade of operation, said Avner Vengosh, professor of geochemistry and water quality at Duke’s Nicholas School of the Environment. “We clearly see a steady annual increase in hydraulic fracturing’s water footprint, with 2014 and 2015 marking a turning point where water use and the generation of flowback and produced water began to increase at significantly higher rates,” he said in a statement.
Water use for fracking has risen by up to 770 percent since 2011 - The amount of water used per well for hydraulic fracturing surged by up to 770 percent between 2011 and 2016 in all major U.S. shale gas and oil production regions, a new Duke University study finds. The volume of brine-laden wastewater that fracked oil and gas wells generated during their first year of production also increased by up to 1440 percent during the same period, the study shows.If this rapid intensification continues, fracking's water footprint could grow by up to 50-fold in some regions by the year 2030—raising concerns about its sustainability, particularly in arid or semi-arid regions in western states, or other areas where groundwater supplies are stressed or limited."Previous studies suggested hydraulic fracturing does not use significantly more water than other energy sources, but those findings were based only on aggregated data from the early years of fracking," said Avner Vengosh, professor of geochemistry and water quality at Duke's Nicholas School of the Environment."After more than a decade of fracking operation, we now have more years of data to draw upon from multiple verifiable sources. We clearly see a steady annual increase in hydraulic fracturing's water footprint, with 2014 and 2015 marking a turning point where water use and the generation of flowback and produced water began to increase at significantly higher rates," Vengosh said."While the extraction of shale gas and tight oil has become more efficient over time as the net production of natural gas and oil from these unconventional wells has increased, the amount of water used for hydraulic fracturing and the volume of wastewater produced from each well have increased at much higher rates, making fracking's water footprint much higher," he added. The Duke team published its peer-reviewed findings August 15 in Science Advances.
Water Use in Fracking Soars — Exceeding Rise in Fossil Fuels Produced, Study Says - As the fracking boom matures, the drilling industry's use of water and other fluids to produce oil and natural gas has grown dramatically in the past several years, outstripping the growth of the fossil fuels it produces.A new study published Wednesday in the peer-reviewed journal Science Advances says the trend—a greater environmental toll than previously described—results from recent changes in drilling practices as drillers compete to make new wells more productive. For example, well operators have increased the length of the horizontal portion of wells drilled through shale rock where rich reserves of oil and gas are locked up.They also have significantly increased the amount of water, sand and other materials they pump into the wells to hydraulically fracture the rock and thus release more hydrocarbons trapped within the shale. The amount of water used per well in fracking jumped by as much as 770 percent, or nearly 9-fold, between 2011 and 2016, the study says. Even more dramatically, wastewater production in each well's first year increased up to 15-fold over the same years. "This is changing the paradigm in terms of what we thought about the water use," Monika Freyman, a water specialist at the green business advocacy group Ceres, said that in many arid counties such as those in southern Texas, freshwater use for fracking is reaching or exceeding water use for people, agriculture and other industries combined. "I think some regions are starting to reach those tipping points where they really have to make some pretty tough decisions on how they actually allocate these resources," she said.
Scientists warn fracking could cause water shortages after usage shoots up by 800% in parts of US -- The amount of water used at fracking wells in parts of the US has increased by up to 770 per cent, sparking fears the industry could cause water shortages in arid regions. There was also a massive increase of up to 1440 per cent in the amount of toxic wastewater generated in the first year of operation at fracked oil and gas wells over the same period. A study charting the intensification of the controversial fossil fuel extraction technique looked at changes in its “water footprint” between 2011 and 2016.Previous work had suggested that fracking does not use more water than other energy sources, but this more comprehensive investigation found that future operations may not be sustainable due to the volume of water required.The authors of the study warned that if rapid intensification continues, the industry’s water use in some regions could be 50-times greater by the year 2030, which would lead to water shortages.“I think this is really important in places like the western US where water availability is limited,” study co-author Professor Avner Vengosh from Duke University told The Independent. More water is required at fracking sites as wells are dug ever further into the ground, which explains why water use has increased even as unconventional oil and gas production has more broadly declined in the US. These findings were published in the journal Science Advances. Though the UK fracking industry is only in its preliminary stages, concerns have been raised over the industry’s water footprint on this side of the Atlantic.
What Happens When a Pipeline Runs Afoul of Government Rules? Authorities Change the Rules. A week ago, the federal government halted work on a massive pipeline project that runs from Northern West Virginia through Southern Virginia. The government said it had no choice but to order work on the multibillion-dollar Mountain Valley Pipeline stopped after a federal appeals court ruled that two federal agencies had neglected to follow important environmental protections when they approved the project. The court had found that the U.S. Forest Service had suddenly dropped — without any explanation — its longstanding concerns that soil erosion from the pipeline would harm rivers, streams and aquatic life. It also found that the Bureau of Land Management approved a new construction path through the Jefferson National Forest, ignoring rules that favor sticking to existing utility rights-of-way. “American citizens understandably place their trust in the Forest Service to protect and preserve this country’s forests, and they deserve more than silent acquiescence to a pipeline company’s justification for upending large swaths of national forestlands,” Judge Stephanie Thacker wrote for a unanimous ruling from a three-judge panel of the 4th U.S. Circuit Court of Appeals. “Citizens also trust the Bureau of Land Management to prevent undue degradation to public lands by following the dictates” of federal law. It turns out, those weren’t the only times state and federal regulators bent environmental standards for the project, which began construction in February. A review by the Charleston Gazette-Mail, in collaboration with ProPublica, shows that, over the past two years, federal and state agencies tasked with enforcing the nation’s environmental laws have moved repeatedly to clear roadblocks and expedite the pipeline, even changing the rules at times to ease the project’s approvals. For example:
Is MVP Still Under Construction Following FERC Stop-Work Order? - We spotted something that seemed a bit odd to us. In a story about pipelines in WV and the challenges they face, EQT said they continue to engage in some construction activities for Mountain Valley Pipeline, even though the Federal Energy Regulatory Commission (FERC) recently ordered them to stop all construction on the project until further notice (see FERC Shuts Down ALL Work on Mountain Valley Pipeline in WV, VA). At least, that’s what EQT appears to be saying. Background: The radical Sierra Club convinced the U.S. Court of Appeals for the Fourth Circuit to overturn permits issued by the U.S. Forest Service (USFS) and Bureau of Land Management (BLM) that allows EQT Midstream’s 303-mile Mountain Valley Pipeline to cross 3.5 miles of Jefferson National Forest in West Virginia and Virginia (see Court Cancels Permits for Mountain Valley Pipe on Fed Land). Even though 3.5 miles is like 1% of the entire MVP project, FERC told MVP to “cease immediately” *all* construction activities along the *entire length* of the pipeline, until the permit issue for Jefferson National Forest is resolved. And yet, an EQT spokesperson told a WV reporter, “Various construction activities have been happening along the route, include construction of compression facilities, tree felling, trenching, welding, stringing of pipe.” Did she mean those things happened *until* FERC told them to stop? Or they’ve continued to happen *after* FERC told them to stop? We report, you decide…
MVP Stabilization Plan, Including Completing Some In-Progress Construction, OK'd by FERC - FERC has approved Mountain Valley Pipeline LLC’s (MVP) plan to temporarily stabilize parts of its route during an indefinite work stoppage required after an appeals court vacated key federal authorizations for the 300-mile, 2 Bcf/d project.MVP submitted the stabilization plan last week in response to an Aug. 3 order from the Federal Energy Regulatory Commission requiring all project construction to stop as the U.S. Forest Service (USFS) and the Bureau of Land Management (BLM) reissue key approvals vacated last month by the U.S. Court of Appeals for the Fourth Circuit.MVP’s plan proposed installing up to 80 miles of additional pipeline, conducting limited work on compressor stations and interconnects, and other cleanup efforts to prevent adverse environmental impacts, with the operator noting that “temporarily stopping work on the project has the potential to cause impacts to sensitive environmental resources that would not have been caused with continued work.”FERC’s Terry Turpin, director of the Office of Energy Projects, acknowledged in an order Friday that “the shutdown presents challenges for stabilization and restoration, and we agree that there are some clear advantages to allowing some limited construction activities to proceed to prevent potential safety and environmental impacts.”Turpin said some proposed construction activities are still under review and that FERC staff may request additional information from MVP.MVP “must also seek concurrence from appropriate agencies,” including BLM, USFS and the Army Corps of Engineers, for any construction activities proposed on federal lands, Turpin said. After securing a FERC certificate last fall following a contentious review process, MVP began construction earlier this year but has encountered regulatory and legal setbacks. Management for backer EQT Inc. recently pushed the pipeline’s target start date back about three months to 1Q2019.
Federal agency halts all work on Atlantic Coast Pipeline after judges revoke permits -- A federal agency has ordered a halt to all work on the Atlantic Coast Pipeline after a panel of judges suspended two key permits for the massive project to bring natural gas from West Virginia through central Virginia.The Federal Energy Regulatory Commission sent a letter late Friday to Dominion Energy, the company leading construction of the 600-mile pipeline, saying that work must stop until the permit issues can be resolved.Earlier in the week, three judges from the U.S. Court of Appeals for the 4th Circuit had vacated a permit issued by the National Park Service to allow the pipeline to tunnel under the federally owned Blue Ridge Parkway, saying the agency had not explained how the pipeline fit with the its mandate to conserve public lands.The court also vacated a permit issued by the U.S. Fish and Wildlife Service governing impact on endangered wildlife, saying the agency failed to set proper limits for harm to five species, including a type of freshwater clam and certain bats. The rulings capped a series of setbacks for the two major pipeline projects underway in Virginia. Last month, the same court revoked a permit for the separate Mountain Valley Pipeline to cross about 3.5 miles of the Jefferson National Forest, finding that the impact on the forest had not been fully reviewed.The Federal Energy Regulatory Commission then stepped in to halt all work on that pipeline, as well. The Southern Environmental Law Center brought the challenges against both sets of permits and has urged FERC to reconsider approval for both pipelines.
Is the anti-pipeline playbook starting to work? -Environmental groups have grown accustomed to losing courtroom battles over natural gas pipelines.Although they've notched some important wins over the years, the scoreboard shows developers and federal regulators overwhelmingly in the lead.This summer, though, things have started to change. Two critical legal victories over the Atlantic Coast and Mountain Valley pipelines in Appalachia could signal a long-awaited turn of the tide for the tireless anti-pipeline crowd. “That's why we do this," Southern Environmental Law Center attorney D.J. Gerken said. "The theory behind organizations like mine is we clarify the law so the government does its job and we don't have to do it for them."Gerken argued against the Atlantic Coast pipeline in the 4th U.S. Circuit Court of Appeals earlier this year, securing a major ruling this week that scrapped two federal approvals: a right of way across National Park Service land and a Fish and Wildlife Service assessment of protected species along the project's 600-mile route. And just 10 days earlier, environmental groups persuaded the 4th Circuit to scrap two other federal approvals for the 300-mile Mountain Valley proposal: a Bureau of Land Management right of way and a Forest Service approval.The Federal Energy Regulatory Commission then took the unusual step of suspending construction on Mountain Valley while the other agencies address the permitting deficiencies. Atlantic Coast may face a similar fate (Energywire, Aug. 7). Experts say a variety of factors played into pipeline opponents' sudden shift in fortunes: rushed permitting decisions, sympathetic judges and savvy legal strategies, to name a few.
Resistance to Southeast Pipelines Gains Momentum -Two controversial gas pipelines in the South are in trouble after federal judges and regulators questioned whether their impacts had been adequately studied. On August 3, the Federal Energy Regulatory Commission halted construction along the entirety of the Mountain Valley Pipeline after agreeing with a federal court ruling that 3.6 miles of its route through the Jefferson National Forest in Virginia hadn’t been properly considered. Then, just three days later, a three-judge panel with the U.S. Fourth Circuit of Appeals threw out two key permits for the Atlantic Coast Pipeline to pass under the Blue Ridge Parkway, forcing a significant delay. Environmental groups are thrilled with the twin decisions. “This is an example of what happens when dangerous projects are pushed through based on politics rather than science,” Southern Environmental Law Center attorney D.J. Gerken said in a statement regarding the Atlantic Coast Pipeline delay. “This pipeline project was flawed from the start, and [developers] Dominion and Duke’s pressure tactics to avoid laws that protect our public lands, water, and wildlife are now coming to light.”The Mountain Valley Pipeline (MVP) is a proposed 300-mile pipeline that, if completed, would go through West Virginia and Virginia, along the way cutting through vast swathes of Appalachian hardwood forest and crossing the iconic Appalachian Trail. Nearly 600 miles long, the Atlantic Coast Pipeline is even bigger. It would slice through West Virginia, Virginia, and North Carolina to deliver gas throughout the Southeast. The pipelines have drawn opposition from the Appalachian Trail Conservancy, the National Resources Defense Council, and the Sierra Club, which fear that the new gas infrastructure will exacerbate greenhouse gas emissions. Now, resistance to the two pipelines is coming from a new direction as racial-justice advocates raise concerns that the projects will disproportionately impact communities of color. On July 30, the group Virginia Wild released a letter from the Virginia NAACP to the Virginia Department of Environmental Quality (DEQ), dated May 30, that detailed the civil rights organization’s objections to the Mountain Valley and Atlantic Coast Pipelines. The letter states, “Consideration under the U.S. Army Corps of Engineers is inadequate and grossly neglects to consider the magnitude of both projects and the massive disruptions to surrounding communities and the environment that will result.” The NAACP letter goes on to call for a construction halt on both pipelines.
Oil industry targets Florida in new offshore drilling advocacy push - The oil industry is undertaking a new public relations campaign to push for offshore drilling along Florida’s coast. The American Petroleum Institute’s Explore Offshore program, launched in June to promote offshore drilling, held its first Florida event Wednesday. The Trump administration’s January proposal to allow offshore oil and natural gas drilling all along the Atlantic, Pacific and Gulf coasts met strong opposition in many places, but it was especially widespread in Florida.That quickly prompted Interior Secretary Ryan Zinke to promise that no drilling would be allowed in the water near either side of Florida. But the oil industry has nonetheless pushed for some compromise, including allowing some new drilling with a large margin around the state. “Our American way of life and the freedoms we enjoy are undoubtedly linked to access to affordable, reliable energy. At the same time, 94 percent of America’s offshore energy resources are completely off-limits to natural gas and oil development, disallowing hundreds of thousands of American jobs and abundant domestic energy supply, and keeping us reliant on foreign sources,” Jim Nicholson, co-chairman of Explore Offshore, said in a statement.
Is Deepwater Drilling More Profitable Than Shale? -- Royal Dutch Shell says that offshore drilling is now more competitive than onshore shale drilling, upending what has become conventional wisdom since the 2014 oil market meltdown. The downturn was thought to place a premium on short-cycle shale drilling, dramatically reducing the risk companies face by allowing them to quickly earn their money back in a matter of months or even weeks on individual shale wells. In sharp contrast, deepwater drilling requires huge upfront outlays, and promises returns that extend over years or even decades, not a particularly desirable place to be in the “lower for longer” environment or in a world in which peak oil demand looms. But Shell argues that the earnings are much better offshore. “The most excitement at the moment is from the deepwater,” Andy Brown, Shell’s head of exploration and production, told the Financial Times in an interview. Shell has prioritized projects in Brazil (aided by the $50 billion acquisition of BG Group), the Gulf of Mexico and the North Sea. The reason why deepwater drilling is so exciting to Shell is that the cost of new projects has fallen significantly in recent years. “Deepwater can compete if not demonstrate higher returns because of fundamental cost reduction,” Brown said. “Break-even prices in deepwater — we are now talking $30 per barrel.” That compares favorably to a lot of onshore shale plays, and in fact, it would beat out just about everywhere that shale companies are drilling. For instance, the SCOOP in Oklahoma has a breakeven price in the mid-$60s per barrel, according to data from Bloomberg New Energy Finance from earlier this year. That is on the upper end, but even more competitive areas are much costlier than the figures that Shell is citing. The Eagle Ford breaks even at between $48 and $61 per barrel, the Bakken at $53 to $56, the Niobrara at $63 and the Delaware basin (Permian) at $57 per barrel. Even the Midland Permian, arguably the most prized shale region in the country, breaks even at about $37 per barrel, BNEF says. With those figures in mind, the oil industry is going back into deepwater. According toRystad Energy, there have already been 45 offshore projects that have received final investment decisions this year, more than all of 2016 combined. Moreover, offshore FIDs this year are on track to exceed the 2017 total by more than 50 percent.
Fewer than 1 percent of offshore drilling tracts auctioned by Trump receive bids - Oil and gas companies bid on fewer than one percent of the offshore tracts made available by the Trump administration during an auction Wednesday. Of the 14,622 tracts made available by the Interior department for bidding on 801,288 acres in federal waters off the Gulf of Mexico, only 144 received bids. The percentage of tracts bid on was slightly less than the previous lease sale in March that leased just over 1 percent of tracts made available.The last sale in March was the biggest offshore lease sale in United States history--with 77.3 million acres made available. The sale saw 33 companies bidding on plots off the cost of Texas, Louisiana, Mississippi, Alabama, and Florida for $124.8 million. Of the 14,474 tracts available for bidding only 148 tracts received any bids. The Obama administration held much smaller sales that focused only on areas where oil companies had expressed interest. The administration Wednesday nevertheless hailed the latest sale as a success, promoting the nearly $180,000,000 in sales generated in a press release. "Today’s lease sale is yet another step our nation has taken to achieve economic security and energy dominance,” Interior Deputy Secretary Bernhardt said in a statement. “The results from the lease sale will help secure well-paying offshore jobs for rig and platform workers, support staff onshore, and related industry jobs, while generating much-needed revenue to fund everything from conservation to infrastructure.”
Water Protectors Take Action to Keep Pipeline Out of Black and Indigenous Communities -Chants of "St. James needs an evacuation route!" came from the dozen-plus activists gathered at Louisiana Radio Network on July 18. The activists were part of the L'Eau Est La Vie ("Water Is Life") camp, in Rayne, Louisiana. They want to stop the construction of the Bayou Bridge pipeline in Louisiana from St. Charles to St. James, through the Atchafalaya Basin.They were at the Radio Network because they want to get the attention of Lousiana Gov. John Bel Edwards, who was holding his monthly radio call-in show there. They believe that the struggle against the pipeline is inherently connected to the struggles against extractive capitalism and White nationalism, and the movements for Native rights and Black lives.One of the water protectors' demands is securing an evacuation route for the 5th District of St. James Parish, which is accessible by only one road. The Mississippi River hems the community in on one side, and sugar cane fields the other. Crude oil terminals, petrochemical plants, and oil tanks line the residential stretch. If an industrial accident occurred, the predominantly low-income Black residents would be trapped."This is on the intersection of a lot of things," said Cherri Foytlin, who calls the fight "a justice issue, right in the heart of KKK territory." Foytlin originally hails from Oklahoma and is of Diné and Cherokee descent. She's lived in Rayne for 15 years, where she raises six children. Foytlin recalled the 2010 BP oil spill in the Gulf of Mexico. She remembers finding a dying pelican and burying the bird after it expired. "I came back and took a really hard look at myself and said … 'What are you going to do?'" What she did is walk from New Orleans to Washington, D.C., to raise awareness about the impacts of the disaster. "I'd walk through one community and they'd be dealing with mountaintop removal," she said. "I go to the next community and they're dealing with uranium mining." It was during the walk that she deeply understood how access to clean air and water connects to poverty and racism, Foytlin said.
U.S. refineries running at near-record highs -- For the week ending July 6, 2018, the four-week average of U.S. gross refinery inputs surpassed 18 million barrels per day (b/d) for the first time on record. U.S. refineries are running at record levels in response to robust domestic and international demand for motor gasoline and distillate fuel oil. Before the most recent increases in refinery runs, the last time the four-week average of U.S. gross refinery inputs approached 18 million b/d was the week of August 25, 2017. Hurricane Harvey made landfall the following week, resulting in widespread refinery closures and shutdowns along the U.S. Gulf Coast. Despite record-high inputs, refinery utilization as a percentage of capacity has not surpassed the record set in 1998. Rather than higher utilization, refinery runs have increased with increased refinery capacity. U.S. refinery capacity increased by 862,000 barrels per calendar day (b/cd) between January 1, 2011, and January 1, 2018. The record-high U.S. input levels are driven in large part by refinery operations in the Gulf Coast and Midwest regions, the Petroleum Administration for Defense Districts (PADDs) with the most refinery capacity in the country. The Gulf Coast (PADD 3) has more than half of all U.S. refinery capacity and reached a new record input level the same week as the record-high overall U.S. capacity, with four-week average gross refinery inputs of 9.5 million b/d for the week ending July 6. The Midwest (PADD 2) has the second-highest refinery capacity, and the four-week average gross refinery inputs reached a record-high 4.1 million b/d for the week ending June 1. U.S. refineries are responding currently to high demand for petroleum products, specifically motor gasoline and distillate. The four-week average of finished motor gasoline product supplied—EIA’s proxy measure of U.S. consumption—typically hits the highest level of the year in August. Weekly data for this summer to date suggest that this year’s peak in finished motor gasoline product supplied is likely to match that of 2016 and 2017, the two highest years on record, at 9.8 million b/d. The four-week average of finished motor gasoline product supplied for the week ending August 3, 2018, was at 9.7 million b/d. U.S. distillate consumption, again measured as product supplied, is also relatively high, averaging 4.0 million b/d for the past four weeks, 64,000 b/d lower than the five-year average level for this time of year. In addition to relatively strong domestic distillate consumption, U.S. exports of distillate have continued to increase, reaching a four-week average of 1.2 million b/d as of August 3, 2018. For the week ending August 3, 2018, the four-week average of U.S. distillate product supplied plus exports reached 5.2 million b/d.
US Refineries Processing Record Levels Of Crude Oil To Keep Up With Demand - U.S. refineries are running at record levels to meet the high demand for gasoline and distillate fuel oil, according to federal data. The U.S. Energy Information Administration (EIA) found the four-week average of gross refinery inputs hit 18 million barrels a day in early July — a new record. EIA noted that refineries were “responding currently to high demand for petroleum products, specifically motor gasoline and distillate.” EIA expects refineries to deliver 9.8 million barrels per day of gasoline. Refineries along the Gulf Coast processed a record-breaking 9.5 million barrels per day during that period, and Midwestern plants processed a near-record amount of crude oil, EIA reported. Refiners nearly broke the 18-million-barrel record in August 2017, but Hurricane Harvey forced some facilities to shut down as it hammered the Gulf Coast. Harvey shut-in around 3.2 million barrels a day in refining capacity, causing gas prices to rise. EIA projects “U.S. refinery runs will average 16.9 million b/d and 17.0 million b/d in 2018 and 2019,” which are new record highs.
Kaspersky Lab Contest Reveals Ease Of Hacking Oil Refineries - In October, four South Korean hackers in Shanghai spent seven hours attempting to infiltrate an oil refinery’s corporate network to gain access to its control systems and shut the facility down. Another 15 minutes or so, and they likely would have succeeded. Fortunately for the industry, the attack was not real. It was performed in a live-televised cybersecurity competition put on by Internet security firm Kaspersky Lab. The competition pitted teams from around the world in a race to breach a model of a real oil refinery that is one of the company’s clients.None of the three teams in the final managed to bring the refinery down; the South Korean team came closest and won the contest. But as the organizers note, real-world hackers do not operate under such tight time restrictions.“The contest demonstrated once again that, by exploiting weaknesses in the corporate network’s protection and network configuration faults, a remote threat actor can gain unauthorized access to the industrial segment of the network,” Kaspersky’s industrial control system vulnerability research group manager, Vladimir Dashchenko, said.This was the third annual cybersecurity competition that Kaspersky has held. The 2016 contest invited hackers to penetrate the network of a model power plant.The competition highlights the vulnerabilities of critical infrastructure, including oil refineries, as the stakes of cyberwarfare grow. The environmental and human toll of a cyber-induced disaster could be significant, to say nothing of the disruption to oil and gas markets.“Oil and gas is one of the industries that is essential to how societies and economies function,” Dashchenko said.The Moscow-based company earlier this year said it discovered malware infecting a control system installed at more than 1,000 gasoline stations that would have allowed hackers to shut down fueling systems, change fuel prices and cause leakages, among other acts of sabotage. Kaspersky itself has faced allegations of helping the Russian government spy on its customers, as the US has banned the use of its products on federal networks and reportedly is weighing sanctions against the company. The company denies the charges and says it is “caught in the middle of a geopolitical fight” between the US and Russia.
Natural gas pipeline capacity to South Central region and export markets increases in 2018 -- By the end of 2018, EIA expects natural gas pipeline capacity into the South Central region of the United States to reach almost 19 billion cubic feet per day (Bcf/d). The region has shifted from being a source of natural gas supply to a source of growing demand, reversing the historical flows of natural gas in the Lower 48 states. Natural gas pipeline projects scheduled to come online in 2018 will bring additional supply to the Gulf Coast and support growing export markets. Of the additional 6.4 Bcf/d of Northeast capacity planned to come online in 2018, more than 2.8 Bcf/d reaches the South Central region directly through three projects that transport natural gas through the Midwest and Southeast: Rayne Xpress, Gulf Xpress, and Atlantic Sunrise. Further west, Natural Gas Pipeline of America’s Gulf Coast Southbound Phase 1 is scheduled to enter service in October 2018. This pipeline will transport up to 0.46 Bcf/d of natural gas from Illinois into south Texas and Louisiana, where it will supply the Corpus Christi LNG export facility and pipelines into Mexico. The LNG export facilities scheduled to come online in 2018 and 2019 represent an additional 6.1 Bcf/d of LNG export capacity, requiring infrastructure to connect them to the interstate pipeline network and deliver large volumes of natural gas to the liquefaction terminals. The United States currently has two operational LNG export facilities, which have a combined export capacity of 3.5 Bcf/d: Sabine Pass Trains 1-4 (2.8 Bcf/d) and Cove Point (0.8 Bcf/d). In addition to Train 5 at Sabine Pass, four new LNG export facilities are under construction, three of which are located in the South Central region. All three of these facilities have associated pipeline projects that are scheduled to be completed this year:
- Freeport LNG will be supplied in part by the Coastal Bend Header Project (1.5 Bcf/d)
- Cameron LNG will be supplied in part by Columbia Gulf Transmission’s Cameron Access Project (0.8 Bcf/d) and Tennessee Gas Pipeline’s Southwest Louisiana Supply Project (0.9 Bcf/d)
- Corpus Christi LNG will be supplied in part by the Cheniere Corpus Christi Pipeline Project (2.25 Bcf/d)
New wave of oil and natural gas mega-projects set to test capital discipline: Wood Mackenzie — A new wave of oil and natural gas mega-projects lined up for approval by producers over the next 18 months will test industry hopes that cost overruns and delays on large-scale, complex upstream projects are a thing of the past, according to a report by Wood Mackenzie. An uptick in major project sanctions began towards the end of last year, suggesting confidence is returning to the upstream sector and project approvals are set to shift again in 2019, Wood Mac believes. Most of the new planned projects are giant, capital-intensive LNG plants with multi-billion boe developments such as Mozambique LNG, LNG Canada. LNG expansions in Qatar and Papua New Guinea are also eyeing final investment decisions. FIDs for deepwater oil off Brazil, Guyana, Nigeria, and the US Gulf of Mexico are also on the cards. But with free cash flow generation building as oil prices hold over $70/b, pressure is growing on producers to stick with their mantras of capital discipline amid a growing risk of over-confidence in launching large-scale projects, according to Wood Mac's research director Angus Rodger. "There is a looming wave of big pre-FID LNG developments building on the horizon, all aiming for sanction between 2018 and 2020," Rodger said. "After a fallow period in new LNG project sanctions, and megaprojects in general, the next 18 months will likely see a step change. This will be the real test of whether the industry has addressed the issue of poor delivery." Keeping a lid on project costs will be key, particularly as oil major's switch of focus to smaller, quick-return projects during the downturn is "not sustainable longer-term an industry underpinned by large, cash-generative assets," according to Wood Mac.
Cheniere continues LNG expansion in Asian market with new Taiwan SPA — US-based Cheniere Energy continues to expand its LNG presence in Asia despite rising diplomatic tensions between Washington and Beijing, with a new deal signed between the LNG exporter and Taiwan's incumbent LNG buyer CPC Corporation for 2 million mt of LNG/year over 25 years from 2021. The sale and purchase agreement is expected to support Cheniere Energy's export expansion plans in the US Gulf Coast at a time of growing uncertainty for the industry, and help diversify CPC's portfolio away from crude oil prices.The deal, signed on a DES basis, is indexed to the monthly Henry Hub price, plus a fee, the Houston-based company said in a statement Friday."This SPA demonstrates Cheniere's growing capabilities to deliver tailored solutions to meet the energy needs of customers worldwide," Cheniere's President and CEO Jack Fusco said.
Cheniere makes feedgas request for Corpus Christi LNG export facility — Cheniere Energy wants to introduce feedgas to the first liquefaction unit at its LNG export facility in Texas as it prepares to begin production before the end of the year. The Houston-based company has been moving quickly to ramp up its operations amid strong demand and netbacks in Asia and as other US competitors are expected to start their terminals in the months ahead. Cheniere's late-Monday filing with the US Federal Energy Regulatory Commission requests permission to be granted by Thursday to introduce feedgas to Train 1. It said Cheniere is ready to begin commissioning of the dry flare. Once in operation, Corpus Christi will be the company's second LNG export terminal. Its first, at Sabine Pass in Louisiana, began shipping cargoes in February 2016. With Cheniere and Dominion Energy already producing, US LNG exports are forecast by S&P Global Platts Analytics to surpass 4 Bcf/d this year. With Corpus Christi nearing startup and facilities under construction by several other developers, that total is projected to reach 8 Bcf/d by the end of 2019, Platts Analytics data shows. Delays at Freeport LNG and Cameron LNG mean the bulk of the new capacity is expected to come online in the second half of next year. Kinder Morgan expects initial in-service at its export terminal at Elba Island near Savannah, Georgia, in the fourth quarter, with final units slated to come online by the third quarter of 2019. One wildcard for the market is what happens with the next crop of US LNG export hopefuls that are part of the so-called second wave of developers. More than a dozen projects are being proposed as part of that group, with startups expected in the early- to mid-2020s. Many have struggled to reach long-term contracts with buyers of their capacity to finance construction. Construction is ahead of schedule at Corpus Christi, where a second train is being built and a third train is planned. Cheniere also plans to add midscale liquefaction units at Corpus Christi and is working to commercialize a sixth liquefaction train at Sabine Pass. Four trains are currently operating at Sabine Pass and a fifth one, like Train 1 at Corpus Christi, is expected to begin producing LNG before the end of the year. Cheniere's Midcontinent Supply Header Interstate Pipeline project, which would boost takeaway capacity from Oklahoma's Anadarko Basin to support growing Gulf Coast demand for LNG exports, received its FERC permit certificate earlier this week. The pipeline has shipper agreements with Devon Energy, Marathon Oil, Gulfport Energy and Cheniere's Corpus Christi export facility. Cheniere, which procured steel for the pipeline from a Canadian supplier, is awaiting word on whether it will be granted exemptions from the Trump administration's move to impose a 25% tariff on imports of steel.
US natural gas storage volume rises 33 Bcf to 2.387 Tcf: EIA — US natural gas in storage increased by 33 Bcf to 2.387 Tcf for the week ended August 10, the US Energy Information Administration reported Thursday. The build was slightly more than an S&P Global Platts survey of analysts call for a 30 Bcf addition. The injection was less than the 49 Bcf build reported during the corresponding week in 2017 and again less than the five-year average addition of 56 Bcf, according to EIA data. Stocks were 687 Bcf, or 22%, less than the year-ago level of 3.074 Tcf and 595 Bcf, or 20%, less than the five-year average of 2.982 Tcf. The injection was less than the 46 Bcf build reported the week prior. Average population-weighted temperatures in the EIA's Midwest region increased 6 degrees week over week, while the East and South Central warmed up a few degrees less. As a result, modeled estimates for gas-fired power generation in all of those regions increased around 1 Bcf/d, according to data from S&P Global Platts Analytics. NYMEX September Henry Hub natural gas futures fell 4.6 cents to $2.894/MMBtu following the 10:30 am EDT storage announcement.The EIA reported a 17 Bcf injection in the East to 592 Bcf, compared with 697 Bcf a year ago; a 24 Bcf build in the Midwest to 603 Bcf, compared with 794 Bcf a year ago; a 3 Bcf addition in the Mountain region to 151 Bcf, compared with 204 Bcf a year ago; a 5 Bcf withdrawal in the Pacific to 240 Bcf, compared to 292 Bcf a year ago; and a 6 Bcf pull in the South Central region to 801 Bcf, compared to 1.088 Tcf a year ago.Total inventories are now 103 Bcf less than the five-year average of 694 Bcf in the East, 156 Bcf less than the five-year average of 759 Bcf in the Midwest, 32 Bcf less than the five-year average of 183 Bcf in the Mountain region, 80 Bcf less than the five-year average of 320 Bcf in the Pacific, and 225 Bcf less than the five-year average of 1.026 Tcf in the South Central region.An early forecast for the week in progress expects a build of 48 Bcf, which is 4 Bcf less than the five-year average, according to Platts Analytics. Approximately 12 more weeks of injections are likely before the flip to withdrawal season, based on EIA's historical data. Platts Analytics is estimating the season will start at 3.37 Tcf at a 500 Bcf deficit to normal.
Gas production projected to jump 1 Bcf/d - Natural gas production in the Lower 48 U.S. states’ seven most productive unconventional plays is projected to jump 1 billion cubic feet per day (Bcf/d) from August to September, the just-released Drilling Productivity Report shows. The Energy Information Administration’s monthly report shows five of the seven plays will show a month-to-month production increase measured by triple digits, Kallanish Energy calculates. The biggest month-to-month increase by far will occur in the Appalachia region, which includes the Marcellus and Utica Shale plays. The Drilling Productivity Report, or DPR, reports gas production to jump 306 million cubic feet per day (Mmcf/d), to 29.35 Bcf/d, from 29.05 Bcf/d (all numbers are rounded). The Permian Basin will see the second-largest jump in natural gas production, up 243 Mmcf/d, to 11.54 Bcf/d from 11.30 Bcf/d. The gas produced is associated with the ongoing crude oil production frenzy in West Texas/southeast New Mexico. The Haynesville Shale, which is rapidly once again ramping up production, will experience a 154 Mmcf/d natural gas production increase, to 9.58 Bcf/d in September, from 9.43 Bcf/d in August. The Eagle Ford Shale in South Texas is projected to jump 128 Mmcf/d in September, to 7.06 Bcf/d, from 6.93 Bcf/d in August. Rounding out the triple-digit production increase is the Anadarko, projected to see a 100 Mmcf/d natural gas production increase from August to September, to 7.22 Bcf/d, from 7.12 Bcf/d. In the two remaining “super plays,” the Niobrara is expected to see a 54 Mmcf/d production increase, to 5.21 Bcf/d, from 5.15 Bcf/d, the DPR reported.
PetroChina Mulls Suspending US LNG Purchases -- PetroChina Co. may temporarily halt purchases of U.S. liquefied natural gas spot cargoes through the winter to avoid potential tariffs amid a trade conflict between the U.S. and China, according to people with knowledge of the strategy. Under the plan, PetroChina would boost buying of spot cargoes from other countries or swap U.S. shipments with other nations in East Asia to avoid paying additional tariffs, said the people, who asked not to be identified because the information isn’t public. PetroChina, a unit of the state-owned China National Petroleum Corp., couldn’t immediately comment when contacted by Bloomberg. China said this month it was considering a 25 percent tariff on U.S. LNG, which had been missing from previously targeted goods, in a direct hit to American gas exporters. The move comes ahead of the winter heating season when demand and prices typically peak and shows that Chinese President Xi Jinping may be willing to suffer some pain to avoid backing down from U.S. President Donald Trump’s trade dispute. “If the tariff is implemented before winter, it would potentially increase the competition for non U.S. supply to the Asian market and hence drive up spot prices in Asia this winter,” Maggie Kuang, an analyst with Bloomberg NEF in Singapore said in an email. “Australia, Qatar, and Southeast Asia will most likely benefit.” Singapore Exchange Ltd.’s North Asia Sling spot price was assessed at $10.165 per million British thermal units as of Friday, the highest in a month. Prices are about 66 percent higher than the same time a year ago. Shares of PetroChina ended 2 percent lower at HK$5.81 in Hong Kong, compared with a 1.5 percent drop in the city’s benchmark Hang Seng Index.
Trade Fears Throw Future of U.S. Natural Gas Into Question… U.S.-China trade tensions threaten a promising area of growth in U.S. energy: natural-gas exports. While the trade dispute hasn’t impacted near-term prices, some analysts believe it could disrupt exports and slow new infrastructure expansions. That could weigh on natural-gas prices in the longer term because U.S. producers are quickly running out of places to sell an unrelenting rush of supply.Earlier this month, in response to U.S. tariffs, China proposed its latest round, including a 25% levy on liquefied natural gas, or LNG.The two countries on Thursday announced they would hold lower-level talks on trade issues later this month.If the sides can’t come to an agreement, natural-gas tariffs in China could lead to opportunities for other major LNG exporters, such as Australia and Qatar, if U.S. gas becomes more expensive. China also may tap supply from Russia via a major pipeline under construction, or from its own domestic production in the coming years, analysts said.“China will look elsewhere in the world to source the commodities they need,” said J. Alexander Blackman, senior executive at Standard Delta LLC, a Houston-based commodities firm with operations in Asia.U.S. exporters, in turn, will need to sell LNG to other countries if they are cut off from the rapidly growing Chinese market. Since exports wouldn’t be hit immediately, analysts doubt tariffs would lead to a sudden swelling of supplies or depressed prices.The more chilling prospect is that companies investing in U.S. export infrastructure scale back plans or put them on hold. “There’s no way in the current environment that anyone’s going to be signing any deals,” said Neil Beveridge, senior oil analyst at Sanford C. Bernstein & Co. “It’s causing a big overhang on what can get done.”That could inhibit producers’ future ability to access the international market, limiting the growth of the U.S. natural-gas sector and an avenue to work off excess supply. As the shale boom took off, U.S. companies rushed into projects to superchill gas into liquid so it can be loaded onto tankers and traded around the world. Growing demand for LNG and unexpectedly fast growth in China in particular have been a boon for U.S. producers hoping to sell natural gas overseas as an outlet for their record production.
Trump's Turkey tariffs hike expected to hit Kinder Morgan gas pipeline project -- President Donald Trump's plan Friday to double tariffs on steel imported from Turkey to 50% could place additional financial pressure on Kinder Morgan's proposed 1.98 Bcf/d Gulf Coast Express Pipeline and dampen prospects for future US natural gas projects. The escalating trade headwinds for domestic pipeline operators come at a time when transportation constraints in the prolific Permian Basin shale play have increased demand for new takeaway capacity to deliver supplies to market for use in exports and to serve power-hungry Mexico.Houston-based Kinder Morgan, which moves more than a third of the gas consumed in the US, is sourcing 144,000 mt of steel pipe from Turkish producer Borusan Mannesmann to be used for Gulf Coast Express. Welspun Tubular is set to produce about 175,000 mt for the pipeline at its Little Rock mill."We continue to be concerned that these sorts of trade actions threaten important energy infrastructure projects, and ultimately hurt American consumers and businesses," the Interstate Natural Gas Association of America said in a statement. The trade group for the industry said "companies that made purchasing agreements months or years ago, before the announcement of Section 232 tariffs, are now being unfairly punished for participating in international trade." A Kinder Morgan spokeswoman, Sara Hughes, declined to say whether Trump's latest decision involving tariffs on steel imports from Turkey would delay or imperil Gulf Coast Express. She noted that the company has a pending request to the US Commerce Department for an exclusion from Trump's previous 25% tariffs on steel imports from Turkey. Gulf Coast Express is currently first in queue among a handful of pipeline expansions designed to alleviate Permian transportation constraints.
Energy Executives Lament Trump Tariffs As Costs Rise On Pipeline Projects - U.S. President Donald Trump’s proposal to double tariffs on steel and aluminum from Turkey could push up costs even further for domestic oil and gas pipeline projects, as energy executives said they were already struggling from earlier tariff rises. There are more than a dozen U.S. energy pipelines on the drawing board, some of which are still seeking financing. The projects would pave the way for greater U.S. oil and gas exports and relieve a bottleneck in West Texas shale fields that is starting to pinch output in the region. Turkey delivers just 4 percent of steel mill imports, valued about $1.18 billion last year, according to the U.S. Department of Commerce. But doubling tariffs on a supplier could force buyers to turn to other steel makers and, in turn, lift steel prices that have already ballooned in recent months. On Friday, Trump authorized a doubling of tariffs on Turkish steel and aluminum imports - to 50 percent and 20 percent, respectively - ratcheting up a diplomatic dispute with the NATO-member country. The Trump administration’s original move in March to raise tariffs on most steel and aluminum imports was proposed to safeguard U.S. jobs against overseas rivals. That had already added $40 million to the cost of a Plains All American (PAA.N) crude oil pipeline that will use steel supplied by a Greek company, Plains executives said. “We are moving forward with the project, but believe that imposing a tax on pre-existing orders is unjust, especially considering the specific materials we purchased abroad were not readily available in the U.S.,” Willie Chiang, Plains’ chief operating officer, said on Tuesday. The trade actions “threaten important energy infrastructure projects,” said Catherine Landry, a vice president at trade group Interstate Natural Gas Association of America. Companies were “being unfairly punished for participating in international trade,” she said.
Big Oil is racing to pump all the oil out of Texas - The oil industry is shelling out billions of dollars in a series of acquisitions in the Permian Basin, the hottest oilfield in the world.The latest deal came on Tuesday when Diamondback Energy agreed to purchase shale producer Energen for $9.2 billion, forming one of the largest players in the Permian.Late last month, BP inked a $10.5 billion deal to buy oil assets in Texas. It was BP's biggest acquisition in two decades and first major investment in the United States since the Deepwater Horizon disaster in 2010.And Concho Resources recently completed a $9.5 billion purchase of RSP Permian that created the largest shale producer in the Permian.The rush of deals underscores how eager companies are to get a foothold in the region.Rapid technological advances have dramatically slashed the cost to frack in the Permian. Production is spiking so much that Texas is on track to surpass Iran and Iraq, both OPEC members. That would make Texas No. 3 in the world if it were a country."It's the most desired region in the United States, if not globally," said Michael Tran, director of global energy strategy at RBC Capital Markets. RBC estimates that Permian production will more than double over the next seven to 10 years, to about 6.5 million barrels per day. That's more than the entire United States produced in early 2012. "From a price perspective, the Permian Basin is extremely attractive," Tran said. "Nobody doubts the rock."
Crude-By-Rail Could Save The Permian Boom - Crude-by-Rail (CBR) has been a savior for North American producers seeking higher returns for heavily discounted crudes caused by a lack of pipeline take-away capacity. And CBR, once again, is on the rise. North American shipments of petroleum and petroleum products are up over 10% year-to-date compared to 2017. In May 2018, nearly 200,000 barrels per day were shipped by rail from Canada to the U.S., nearly five times that of June 2016. But, the story of CBR is really about how price differentials became so large in certain regions.For Western Canadian producers, intense anti-pipeline opposition, regulatory changes, legal limbo, political tensions and foreign interference from well funded U.S. environmental lobbies have muddled new projects. In Western Canada, new export capacity has been politically denied (Northern Gateway), cancelled (Energy East), or is still in the process of getting the darn shovels in the ground (Trans Mountain Expansion, Keystone XL, and Enbridge Line 3 Expansion).For U.S. producers, the story is quite a bit different. While anti-pipeline opposition has been present, at Standing Rock for example, U.S. midstreamers largely could not keep up with blistering pace of production set off by the “shale revolution.” The US Energy Information Administration (EIA) estimates that 2018 US crude production will more than double that of 2008 and sit around 10.7 million barrels per day. Often pipelines were needed where there was no previous or oil or natural gas infrastructure. In addition, pipelines can’t be built overnight: Years of planning, permitting, and construction are required.With global crude prices now stabilized from the price crash in 2015/2016, all is not well in Western Canada and West Texas/Southwest Mexico. Massive price differentials are preventing some producers from enjoying the current price recovery. A large Western Canadian Select-West Texas Intermediate (WCS-WTI) differential is back, sitting at a painful $27 US per barrel (August 13, 2018). And Morgan Stanley suggests that with increasing Permian production and lack of take away capacity, the Midland-WTI differential of $15.50 per barrel (July 2018) could blowout to $25-$30 per barrel in 2019. However, there are some signs that CBR may not be the savior it is hoped to be. To start, lease rates for DOT 117 cars have jumped from $400 to $1000 per month. The size of the U.S. crude oil fleet sits at about 15,500 cars, compared to nearly 51,000 in 2014. And tariffs affecting new pipeline construction could also impact the rail industry.
Opponents of Enbridge Line 3 pipeline project file appeal -— Opponents of Enbridge Energy’s planned Line 3 replacement are asking the Minnesota Court of Appeals to declare that the environmental review for the controversial project fails to meet the legal requirements and needs to be redone. The Minnesota Public Utilities Commission approved the project in June, giving Enbridge a green light to replace its aging Line 3 crude oil pipeline across Minnesota. The PUC declined to reconsider its approval of the review. But the indigenous environmental group Honor the Earth says its filing Wednesday could throw that approval into question, since an adequate environmental review is required for approval and construction. The appeal argues that the Line 3 review failed to adequately analyze the potential impacts of oil spills along the route or the potential harm to tribal resources. Friends of the Headwaters filed a similar appeal. Print Article
Judge Orders Full Environmental Review of Keystone XL in Nebraska - TransCanada's long-gestating Keystone XL (KXL) tar sands pipeline was dealt another setback after a federal judge in Montana ruled Wednesday that the Trump State Department must conduct a robust environmental review of the alternative pipeline route through Nebraska. U.S. District Court Judge Brian Morris sided with environmentalists, landowners and tribal plaintiffs in their challenge to the Trump administration. Pipeline opponents argued that the State Department's approval of the KXL was based on an outdated Environmental Impact Statement from 2014 of the original route, and accused the administration of trying to short-cut the permitting process. Morris ordered the State Department to conduct a thorough Environmental Impact Statement for the "Mainline Alternative" route, approved by Nebraska officials in November, to supplement the 2014 review. In his decision, Morris said the State Department has the "obligation to analyze new information relevant to the environmental impacts of its decision," according to Courthouse News Service. If built, the $8 billion 1,180-mile pipeline will transport heavy crude from Alberta's tar sands to U.S. Gulf Coast refineries. The controversial project has been at the center of an environmental fight for a decade. President Obama rejected the KXL in 2015 partly due to concerns about its contribution to climate change, but President Trump reversed the decision shortly after taking office. Plaintiffs in the case celebrated the decision. "This decision rejects the Trump administration's shameful attempt to ram through Keystone XL without bothering to take a hard look at its effect on wildlife and the environment," said Jared Margolis, senior attorney with the Center for Biological Diversity, in a statement. "It's always been painfully obvious what a disaster this pipeline will be—not just for our climate and local communities but for endangered species like the whooping crane. There's just no excuse for approving this terrible project."
Colorado’s oil and gas industry goes after reporters and signature gatherers in new fracking fight - As Colorado gears up for another fight over oil and gas drilling near homes and schools, this time the fossil fuel industry is reportedly doing whatever it takes to win. In the latest flare-up, the oil and gas industry used a website to single out individual journalists for criticism. At the same time, pro-industry protesters were reportedly shadowing canvassers who were gathering signatures to get a measure — Initiative 97 — on the November ballot that would increase the distance between drilling sites and homes. Colorado Rising, the anti-fracking group behind the ballot initiative, issued a statement last week claiming “harassers were paid to intimidate petition circulators and discourage voters from signing” the petition to get the initiative on the ballot. Anne Lee Foster, a Colorado Rising volunteer, told Colorado Public Radio that an anonymous employee at Anadarko Petroleum shared an internal document that appeared to ask employees to report when they see Initiative 97 canvassers. The letter includes an email address and a text message hotline, Foster said. Anadarko had not returned a request for comment from ThinkProgress at the time this article was published. With huge reserves of oil and gas and an active environmental and clean energy movement, the state often finds itself at the center of the nation’s fossil fuel wars. Oil and gas companies have increasingly been moving into suburban and urban areas of Colorado in search of new drilling opportunities; at the same time, suburban sprawl is colliding with oil and gas fields as housing developers build new communities north of Denver.
Frackers Burn Cash to Sustain U.S. Oil Boom - WSJ --American oil companies—primed to reap the benefits of rising prices after years of wringing more from wells for less—are seeing profits erode in the face of rising costs. Those operational challenges make balancing lofty growth objectives and demands for fiscal restraint increasingly difficult. If the companies continue to stumble, the result could be a higher cost of capital to finance the ongoing U.S. energy boom or a slower pace of growth.Two-thirds of U.S. oil producers failed to live within their means in the second quarter, even as oil rose above $70 a barrel. Collectively, 50 major U.S. oil companies reported in their second-quarter results that they have spent $2 billion more than they took in, according to an analysis of free cash flow by FactSet.As oil prices have risen, profits “have improved, but they’re not there yet in terms of making money,” said Todd Heltman, a senior energy analyst at investment firm Neuberger Berman Group LLC. “The realization is setting in that it’s going to take longer than investors thought for them to generate free cash flow and deliver more powerful earnings.”Pioneer Natural Resources, one of the biggest operators in the Permian Basin of West Texas and New Mexico, told investors a year ago it expected to largely make up for rising operating costs with “efficiency gains” such as producing more from each well. Last week, Pioneer reversed course and raised its annual spending forecast to $3.3 to $3.4 billion, from $2.9 billion, to produce roughly the same amount of oil.“We’ve had a more significant increase in cost issue than we would have assumed,” Pioneer Chief Executive Tim Dove told investors. Some of the new spending will push up output next year, he said.The drilling frenzy has increased demand for materials like sand and water that are used in hydraulic fracturing, driving up prices.In recently reported second-quarter earnings, more than a dozen shale companies either lowered this year’s production targets, said t hey would have to spend more to extract roughly the same amount of oil and gas or missed analyst expectations for growth. To be sure, many continue to expect their production to increase compared to last year, but they are having to spend more to meet those goals.
The Fracking Industry Is Cannibalizing Its Own Production, Increasing Spill Risks -- The first thing to understand is that this is simply a problem of the industry being greedy. The oil producers are drilling too many wells in close proximity to one another, and when they frack the newer wells — known as child wells — those “bash” or “hit” the older wells and cause problems.In a typical frack site, the production begins with a first test well, which is known as the parent well. The wells drilled in proximity to the parent well are called child wells.What is happening is that not only are the child wells cannibalizing the production of the existing parent well, but when the child wells are fracked they can create “frac hits” that damage the parent well. These frac hits can reduce the pressure in the parent well leading to lower production, they can damage the parent well to the point of it being a “dead” well and, of course, they can lead to spills and environmental contamination.Claudio Virues, a senior reservoir engineer with the oil and gas company Nexen, explained the basic problem of frac hits in the Journal of Petroleum Technology.“You usually have two scenarios,” Virues said. “One may be that you have a temporary loss of production, but you will recover to the trend that you had before. The other will be really bad for your production and reserves.”Bob Barree, who runs the Petroleum engineering consulting firm Barree Associates, explains the “really bad” scenario.“You put the well back on production and you’ve lost your pressure, the velocity, the inflow capacity, and the well is just dead,” Barree said.And that means the fracking industry loses even more money.
Fracking Wastewater Spikes 1,440% in Half Decade --Between 2011 and 2016, fracked oil and gas wells in the U.S. pumped out record-breaking amounts of wastewater, which is laced with toxic and radioactive materials, a new Duke University study concludes. The amount of wastewater from fracking rose 1,440 percent during that period. Over the same time, the total amount of water used for fracking rose roughly half as much, 770 percent, according to the paper published Wednesday in the journal Science Advances."Previous studies suggested hydraulic fracturing does not use significantly more water than other energy sources, but those findings were based only on aggregated data from the early years of fracking," "After more than a decade of fracking operation, we now have more years of data to draw upon from multiple verifiable sources."The researchers predict that spike in water use will continue to climb.And over the next dozen years, they say the amount of water used could grow up to 50 times higher when fracking for shale gas and 20 times higher when fracking for oil—should prices rise. The paper, titled "The Intensification of the Water Footprint of Hydraulic Fracturing," was based on a study conducted with funding from the National Science Foundation. "Even if prices and drilling rates remain at current levels, our models still predict a large increase by 2030 in both water use and wastewater production," The shale industry has been heavily focused on amping up the amount of fossil fuels it can pump per well by drilling longer horizontal well bores and using more sand, water and chemicals when fracking (which raises the costs per well and, as DeSmog recently reported, raises risks of water pollution). But the water use and wastewater production per well have been growing even faster than the per-well fossil fuel production, the researchers found, labeling the water demand and wastewater growth "much higher" than the oil or gas increases.
Fracking Water Use Skyrockets, Creating 1,440 Percent More Toxic Wastewater -- Fracking companies used 770 percent more water per well in 2016 than in 2011 across all the United States’ major gas- and oil-producing regions, according to a new study. The number of new fracking wells decreased as gas prices fell, but the amount of water used per well skyrocketed, with up to 1,440 percent more toxic wastewater generated in the first year of each new well’s production period by 2016. The research, published Wednesday afternoon in the peer-reviewed journal Science Advances, raises new concerns that hydraulic fracturing, the controversial drilling technique used to extract oil and gas trapped deep in bedrock, imperils vital drinking water reserves. In regions where the warming climate is drying sources of fresh water, fracking intensifies pressure on an already-strained system while increasing the availability of fuels that cause emissions, speeding up the rise in temperatures. Fracking also produces huge volumes of wastewater laced with cancer-causing chemicals, salts and naturally-occurring radioactive material that can cause earthquakes and contaminate aquifers when pumped underground. The study found that if gas and oil prices rise and production increases to the levels of the early 2010s, when fracking first took off, water use and wastewater production could multiply 50-fold for gas drilling and 20-fold for oil extraction by 2030. Even if future drilling rates stay at 2016 levels, the study predicts “a large increase of the total water use for both unconventional oil and shale gas basins,” with a surge in wastewater creation to match.
Pale Blue Dot: University must protect community from oil industry -- There over 1,071 active oil wells in the city of Los Angeles, 759 of which are within 1,500 feet of residential areas. Due to a history of discriminatory zoning, the majority of these dangerous neighborhood wells are functioning in South L.A., in close proximity to USC. But even though these low-profile processing sites are not as visually striking as their old-fashioned counterparts, they continue to impose themselves in the lives of Angelenos.Oil extraction sites are extremely dangerous to the people who live near them, leaking gases and pollutants into homes, schools, hospitals and public spaces. Living near a development site can increase cancer risk and lead to conditions such as headaches, nausea and upper respiratory illness. There is also a constant risk of deadly accidents due to the use of harmful acids, toxic gases and explosive materials at these facilities. Noise pollution from gas compressors, drills and other heavy equipment can cause sleep issues and raise blood pressure, while long-term exposure to noise pollution can contribute to endocrine issues, diabetes and learning disabilities in children. Now that much of the easily accessible oil has been drawn out of the area, companies are turning to experimental, generally unregulated methods like acid stimulation and hydraulic fracturing, or “fracking.” These methods involve shooting a slurry of water and corrosive chemicals into the earth in order to drill into hard-to-reach areas, and can trigger frequent, violent earthquakes. They are so new that their health effects have yet to be formally studied, but anecdotal evidence indicates that residents living near fracked wells can develop chronic cases of coughing and wheezing, and that pregnant women living near fracked wells are more than 30 percent more likely to give birth to a premature or high-risk baby. As oil extraction methods become more extreme and secretive, the surrounding neighborhoods — mostly low-income communities of color — become more at-risk.
The Dakota Access Pipeline wants to ship even more oil across tribal lands - As if the original Dakota Access Pipeline didn’t cause enough drama, its developer now wants to expand the crude oil pipeline, which is still pending a new federal environmental review.Energy Transfer Partners CEO Kelcy Warren spoke at an event Monday where he mentioned he’d be announcing an expansion of the 1,172-mile long pipeline soon, according to the Bismarck Tribune. The energy company had tried to gauge interest back in March, and, apparently, the interest is there. Energy Transfer Partners hinted at this expansion last week, too.Since 2017, the pipeline has moved 500,000 barrels of oil a day through four states, from the Bakken Formation in North Dakota to Illinois. A company spokesperson told the Bismarck Tribune the company is considering increasing that amount to 570,000 barrels of oil a day. In North Dakota, at least, the pipeline is permitted to carry up to 600,000 barrels.What’s most confusing, perhaps, is how this expansion will happen when the Army Corps has yet to issue a final court-mandated environmental review for the project. That review was supposed to be completed in April, but the federal agency now expects to complete it later this month.The Standing Rock and Cheyenne River Sioux tribes remain in litigation with the company and the Army Corps of Engineers over the unfinished environmental review. While the Army Corps blames their lack of cooperation for the delay, the court is also keeping the relevant tribes from getting too involved. The whole situation is a heated mess with more opponents on the offense down in Louisiana where they’re challenging the company’s Bayou Bridge Pipeline, which would ultimately connect to Dakota Access. This expansion may just exacerbate the already-testy situation.
ND oil production drops as operators 'tap the brakes' | Grand Forks Herald: — North Dakota oil production dropped nearly 2 percent in June as producers scaled back activity, primarily to keep natural gas flaring from exceeding state limits, the state's top oil regulator said Thursday, Aug. 16. The state produced an average of nearly 1.23 million barrels of oil per day, a drop of more than 20,000 barrels per day from the May record of nearly 1.25 million barrels. "Industry's tapping the brakes a little bit," said Lynn Helms, director of the Department of Mineral Resources. Operators flared 388 million cubic feet of natural gas per day in June, falling short of the gas capture target set by the North Dakota Industrial Commission for the second month in a row. Helms said operators voluntarily restricted oil production in June in order to stay in compliance with the gas capture policy, which calls for companies to capture 85 percent of Bakken natural gas. Natural gas production decreased about 1 percent in June to an average of 2.3 billion cubic feet per day, according to the preliminary figures. Operators captured 83 percent of natural gas statewide in June and 84 percent of Bakken natural gas, Helms said.It continues to be rare for regulators to restrict oil production for companies that fall below the gas capture target. Eleven operators captured less than 85 percent of Bakken natural gas in April and nine fell below the target in May, according to the Department of Mineral Resources. No oil production restrictions were imposed for April or May, said department spokeswoman Katie Haarsager. June flaring figures are still being analyzed. The gas capture target is set to increase to 88 percent in November. Helms said operators are concerned about reaching that goal, but they'll get some relief with two gas plants scheduled to come online later this year. Currently, natural gas production exceeds processing capacity, but six new plants or expansion projects are under construction or in development.
DUCs in the Lower 48 still growing - The number of DUCs, drilled but uncompleted wells, in the Lower 48 U.S. states seven most prolific plays/basins rose by 165 from June to July, the Energy Information Administration reported. With the added 165 DUCs, a total of 8,033 drilled, but uncompleted wells were on the books as of July 31, up from 7,868 in June. The Permian Basin by far added the most DUCs from June to July, 167, more than five times the number added by the Eagle Ford Shale play, which added the second-most DUCs. The Permian’s total DUC count rose to 3,470 in July, from 3,303 in June, Kallanish Energy reports. The Eagle Ford added 32 DUCS from June to July, bring its total to 1,512, from 1,480, EIA reported. The Anadarko and Bakken were the other two plays/basins that added DUCS, seven and four, respectively, bringing their total DUC count to 923 and 760, respectively. The Niobrara saw the most DUCs converted to producing wells, as 40 wells were turned, bringing its DUC count to 432, from 472. Appalachia, which includes the Marcellus and Utica Shale plays, turned five DUCs to production, bring down its total remaining DUC number to 754. The Haynesville Shale was the lone play/basin that saw no change in DUCs from June to July, staying steady at 182.
US shale growth will offset global production problems over the coming months, analysts say -- A sustained upswing in U.S. shale growth is likely to offset global production problems over the coming months, energy analysts told CNBC on Wednesday.The mood music in the energy market has been heavily influenced by a flurry of demand-side developments of late, with investors continuing to monitor an escalating trade war between the U.S. and China, the financial crisis in Turkey and a resurgent U.S. dollar.Yet, industry analysts point out the U.S. shale boom is perhaps the most notable supply consideration not currently receiving the attention it deserves."The explosion in U.S. tight oil production has long been the dominant supply catalyst within the energy complex but now finds itself at the tail end of concerns. Even so, its ascent continues apace," Stephen Brennock, oil analyst at PVM Oil Associates, said in a research note published Wednesday. On Tuesday, the American Petroleum Institute (API) reported U.S. crude stocks rose by almost 4 million barrels per day in the week to August 10 — climbing to levels of 410.8 million barrels.Alongside a weakening global economic outlook, the API report appeared to weigh on oil prices on Wednesday afternoon, with international benchmark Brent crude trading at around $71.97 — down almost 0.7 percent. Meanwhile, U.S. West Texas Intermediate (WTI) stood at $66.38, off nearly 1 percent."U.S. shale doom-mongers should not get ahead of themselves. They ought to remember that the U.S. shale patch is in better financial shape than ever … When it comes to U.S. shale, it is still very much a case of the only way is up," Brennock said.
Rule Change Cuts Demand for Canadian Oil | Rigzone -- As if pipeline bottlenecks weren’t enough, Canadian heavy oil producers are facing a new barrier to marketing their crude. New rules limiting the amount of sulfur allowed in shipping fuel is expected to cut demand for both high-sulfur fuel oil and the sour crude that yields it. In Canada, that could extend -- or worsen -- the biggest price slump in nearly five years. As surging production runs up against limited pipeline space, Western Canada Select’s discount to West Texas Intermediate widened to more than $31 a barrel this month from an average of about $13 a barrel last year, data compiled by Bloomberg show. The bigger discount is needed to incentivize shipping by rail, which costs more, Kevin Birn, a director on the North American crude oil markets team at IHS Markit, said in a phone interview. While the pipeline bottleneck is expected to ease up next year, a new International Maritime Organization rule that goes into effect in 2020 will keep heavy crude at a discount of $31-$33 a barrel against WTI, according to a July report by the Canadian Energy Research Institute, or CERI. “We think you get a double whammy effect” in 2020, he said. “You have prices set by rail and, compounding that, is the IMO” rule. Under the new rules, ocean-going ships worldwide will either have to install expensive, sulfur-removing scrubbers or use a fuel that has 86 percent less sulfur. The resulting increase in demand for lighter crude will push more crude toward the complex North American refineries that currently turn heavy Canadian oil into higher-value fuels such as gasoline and diesel, putting downward pressure on heavy crude prices, according to CERI. The rule change will come just as Canadian producers should be getting some relief in the form of greater pipeline access to U.S. and international markets. Enbridge Inc.’s expanded Line 3, is schedule to start operating in late 2019, delivering heavy oil from Alberta to Wisconsin. The C$9.3 billion ($7.1 billion) expansion of the Trans Mountain oil pipeline from Alberta to the British Columbia coast is scheduled to start about a year later and TransCanada Corp.’s Keystone XL pipeline awaits a final investment decision but could start operating early in the next decade.
Global Oilfield Service Sector to Hit Pre-Downturn Market Levels by 2024 - Rystad Energy announced Friday that it expects the global oilfield service sector to be back at pre-downturn market levels by 2024.The independent energy research and business intelligence company said shale will make up 23 percent of the total service market in 2024, compared to 19 percent in 2014.“Offshore is losing market share due to the sanctioning draught in 2015-2017, which is keeping greenfield spending at lower levels going forward,” Rystad said in a statement published on its website. “In terms of service markets, well services and commodities, subsea and MMO will surpass 2014 levels in 2024, but drilling contractors and EPCI will not due to continued pressure on service prices, downsizing and efficiency gains in the value chain,” the statement added.Earlier this year, a report from BMI Research outlined that oilfield services companies around the globe would face stronger demand for their services this year.“As some of the industry's most vulnerable companies to the fall in crude prices, rising commodity prices and strengthening demand for onshore services is reviving this sector after a three-year contraction,” BMI analysts said in a statement sent to Rigzone back in February.“Having retired or pulled back from a number of segments since 2014, we expect OFS [oilfield services] firms will redeploy assets into the field this year as investment activity begins to recover,” the analysts added.In the report, BMI highlighted that a rise in crude prices had boosted revenues at the top global OFS companies.“At Schlumberger and Halliburton, Q4 17 revenue rose by 15.1 percent year-on-year, 47.7 percent year-on-year, respectively,” the analysts stated. Last month, Rystad revealed that oil majors are “on pace” to approve over $37 billion in projects during the calendar year. The company said over 30 percent ($12 billion) of these had already been approved during the second quarter.
The One Oil Industry That Isn't Under Threat -- Peak oil demand might be near, but the consumption of oil for plastics will keep demand elevated for decades. Indeed, the IEA has said that plastics and other petrochemicals are the only sector in which oil consumption could continue to grow well into the 2030s. Rising plastic consumption is driven by population growth, higher median incomes and urbanization. Plastic production and consumption has absolutely skyrocketed over the last two decades and the growth in emerging economies such as China and India will ensure that consumption continues on its steep upward trajectory.While there are multiple feedstocks for plastics, solvents and other derivatives, the two main feedstocks are ethane and naptha, which come from natural gas and crude oil.Oil demand in the transportation sector is expected to peak, and while there is a great deal of disagreement over when we might arrive at that date, many forecasts converge at around the 2030s as the most likely period. But long before then, oil demand for transportation will begin to slow as more and more electric vehicles cut into the market share of the internal combustion engine.With oil demand in transit slowing, petrochemicals take on a larger role. Over the next two decades, petrochemicals could account for the largest portion of oil demand growth, and by 2035, petrochemicals will “account for almost all growth” by 2035, according to a new report from Wood Mackenzie. Surging petrochemical production and consumption largely comes down to plastics. To be sure, the ghastly levels of plastic in the world’s oceans and waterways have sparked a nascent movement to ban plastic, at least in some form. Starbucks made headlines when it recently announced plans to phase out plastic straws by 2020. In their place, Starbucks will use a recyclable strawless lid and alternative materials for straws. The company also said it would spend $10 million to develop compostable cups.
UK government drops fracking question from public attitudes tracker -- The government has stopped asking the British public whether they are for or against fracking for shale gas just weeks before the first fracking operation in seven years is due to start. The number of people against extracting shale gas has outweighed those in favour since 2015, and the latest polling by officials found 32% opposed with just 18% in support. Now the government, which backs fracking and recently relaxed planning rules to help the shale industry, has temporarily suspended that line of questioning. “This is scandalous as the government knows full well that there is overwhelming public opposition to fracking,” said Rebecca Long-Bailey, Labour’s shadow business secretary. Fracking, or hydraulic fracturing, is a way of extracting natural gas from shale rock formations that are often deep underground. The technology has transformed the US energy landscape in the last decade, owing to the combination of high-volume fracking – 1.5m gallons of water per well, on average – and the relatively modern ability to drill horizontally into shale after a vertical well has been drilled. Tony Bosworth, a campaigner at Friends of the Earth, said: “Perhaps having recently tried to change planning rules so that fracking companies could drill more easily, they were just scared of a record bad survey result for them this time, so have stopped even asking anymore.” The question was dropped from the latest update of the four-year-old public attitudes tracker run by the Department of Business, Energy and Industrial Strategy.
Russia loses bulk of WTO challenge to EU gas pipeline rules - (Reuters) - Russia largely failed in its bid to overturn the European Union’s gas market rules in a World Trade Organization ruling published on Friday. Russia launched the dispute in 2014, claiming that the EU’s “Third Energy Package” and the EU’s energy policy overall unfairly restricted and discriminated against Russia’s gas export monopoly Gazprom (GAZP.MM). Russia argued that the EU broke WTO rules by requiring the “unbundling” of gas transmission assets and production and supply assets, which effectively stopped Gazprom - long the major supplier of gas to Europe - from owning the pipelines through which it sent gas to the European market. Russia said the EU had unfairly discriminated in favor of liquefied natural gas and upstream pipeline operators by exempting them from those unbundling requirements. The panel of three WTO adjudicators ruled against Russia on those points. However, they upheld Russia’s complaint about an unbundling exemption for Germany’s OPAL pipeline, granted on condition that Gazprom supplied no more than 50 percent of the gas in the pipeline. The 50 percent cap could only be exceeded if 3 billion cubic meters of gas was released annually at a fixed price to competing suppliers on the Czech market. The WTO panel also agreed that Croatia, Hungary and Lithuania had discriminated against Russia by requiring a security of energy supply assessment for foreign, but not domestic, pipeline operators. The European Commission called the ruling an important positive outcome that secured the core elements of the Third Energy Package, a 2009 reform that sought to integrate the EU’s energy market while increasing competition. Russia’s Economy Ministry said the parts of the ruling that went in its favor would help to improve access for Russian gas on the European market, and to level the playing field for pipeline service providers.
Russian oil industry would weather U.S. 'bill from hell - (Reuters) - Stiff new U.S. sanctions against Russia would only have a limited impact on its oil industry because it has drastically reduced its reliance on Western funding and foreign partnerships and is lessening its dependence on imported technology. Western sanctions imposed in 2014 over Russia’s annexation of Crimea have already made it extremely hard for many state oil firms such as Rosneft to borrow abroad or use Western technology to develop shale, offshore and Arctic deposits. While those measures have slowed down a number of challenging oil projects, they have done little to halt the Russian industry’s growth with production near a record high of 11.2 million barrels per day in July - and set to climb further. Since 2014, the Russian oil industry has effectively halted borrowing from Western institutions, instead relying on its own cash flow and lending from state-owned banks while developing technology to replace services once supplied by Western firms. Analysts say this is partly why Russian oil stocks have been relatively unscathed since U.S. senators introduced legislation to impose new sanctions on Russia over its interference in U.S. elections and its activities in Syria and Ukraine. The measures introduced on Aug. 2, dubbed by the senators as the “bill from hell”, include potential curbs on the operations of state-owned Russian banks, restrictions on holding Russian sovereign debt as well as measures against Western involvement in Russian oil and gas projects. While the ruble has fallen more than 10 percent and Russian banking stocks have slumped 20 percent since the legislation was introduced, shares in Russian oil firms have climbed 2 percent, leaving them 27 percent higher so far in 2018 The prospects for the latest U.S. sanctions bill are not immediately clear. It would have to pass both the Senate and House of Representatives and then be signed into law by President Donald Trump.
Landmark Caspian Sea oil and gas agreement signed by five nations -- Iran and four ex-Soviet states, including Russia, agreed in principle on Sunday how to divide up the potentially huge oil and gas resources of the Caspian Sea, paving way for more energy exploration and pipeline projects. However, the delimitation of the seabed – which has caused most disputes – will require additional agreements between the nations bordering the sea, Iranian president Hassan Rouhani said. For almost three decades, the five coastal states – Russia, Iran, Kazakhstan, Turkmenistan and Azerbaijan – have argued over how to divide the world’s biggest enclosed body of water. And while some countries have pressed ahead with large offshore projects such as the Kashagan oil field off Kazakhstan’s coast, disagreement over the sea’s legal status has prevented some other ideas from being implemented. One of those is a pipeline across the Caspian which could ship natural gas from Turkmenistan to Azerbaijan and then further to Europe, allowing it to compete with Russia in the Western markets. Some littoral states have also disputed the ownership of several oil and gas fields, which delayed their development. “We have established 15-mile-wide (24km) territorial waters whose borders become state borders,” Kazakhstan president Nursultan Nazarbayev told a briefing after signing the Caspian convention. “Adjacent to the territorial waters are 10 miles of fishing water where each state has exclusive fishing rights,” he said.
Venezuela's PDVSA To Start Using 'El Petro' Next Week - Venezuela’s state-owned oil company PDVSA will start using the local cryptocurrency El Petro for all its transactions on August 20, President Nicolas Maduro said, as quoted by Sputnik. The president did not mention whether PDVSA’s business partners agreed with the change.Yet the shift to a cryptocurrency in all of PDVSA’s business dealings is only part of a much bigger monetary overhaul. From August 20, the petro will begin to be used in parallel with the national currency the bolivar, and its prices will be pegged to that of the bolivar. Maduro said that the central bank will start issuing daily exchange rates for the two as well. Last December, Maduro shocked analysts who follow both the country’s flirtations with default and the cryptocurrency community by announcing that Venezuela would launch the petro cryptocurrency, backed by oil, diamonds, and gold reserves, to help the country to “advance in issues of monetary sovereignty, to make financial transactions and overcome the financial blockade.”The cryptocurrency was launched in February this year despite opposition from parliament. The digital currency will be backed by Venezuela’s oil and gold reserves. During the presale period alone, according to Maduro, the petro, which has already been sanctioned by Washington, generated US$6 billion in proceeds.The Venezuelan economy, however, has continued to deteriorate with thousands of people leaving for neighboring Colombia and Ecuador every day, prompting the Ecuadorian authorities to declare a state of emergency in several provinces. Meanwhile, Caracas has decided to knock off five zeroes from the bolivar as hyperinflation races ahead. How this will help matters remains unclear, but there is precious little else the government could do. Maduro, however, said during the presentation of the monetary reform that thanks to the addition of the petro to the national currency and the other changes this will entail, Venezuela will recover by 2020 as “a new economic model” is developed.
Marked for demolition? Ugandans on pipeline route fear land loss - Ugandan farmer James Mubona, 73, looked pensive as he sat in a blue plastic chair under a mango tree next to three of his four wives, one breastfeeding a five-month-old baby, contemplating the imminent loss of his 22-acre farm to an oil pipeline. The government is set to take about half of the land, which feeds Mubona’s 20 children and numerous grandchildren, to build the world’s longest electrically heated oil pipeline from northwest Uganda to Tanzania’s Tanga port on the Indian Ocean. “I am worried because I don’t know where to go when this land is taken,” Mubona told the Thomson Reuters Foundation from Kyakatemba village in Hoima District, a poor region along Uganda’s western border with the Democratic Republic of Congo. “When the pipeline takes a bigger portion of your land and you remain with a small portion, what do you do with that small portion?” Uganda discovered crude reserves estimated by government geologists at 6.5 billion barrels in the Albertine rift basin more than 10 years ago. The east African country aims to refine crude oil domestically and export some via a 1,445-km (900-mile) pipeline through neighboring Tanzania by 2020. An energy ministry official told Mubona that a chunk of his land will be used to run a 30-metre wide pipeline, road and power line from the refinery to the sea. Uganda signed an agreement in April with a consortium, including a subsidiary of General Electric, to build and operate a 60,000-barrel-a-day refinery that will cost up to $4 billion, the president’s office said. Yusuf Masaba, a spokesman for Uganda’s energy ministry, said the entire pipeline route had been mapped out and plans to compensate and resettle people were at an advanced stage. “Once the government valuer is done with valuation, then compensation will be done. I cannot say when they will be compensated,” Masaba told the Thomson Reuters Foundation.
BP offloads last two stranded oil cargoes to Shandong refiner - sources (Reuters) - Oil major BP (BP.L) on Tuesday offloaded about 1 million barrels of Angolan crude from supertanker ‘Olympic Light’ to an independent Chinese refiner after holding the oil at sea for about three months, people with knowledge of the discharge said on Wednesday. The oil had been aboard one of four supertankers held up or delayed off China’s east coast near Shandong since as long ago as April, unable to discharge BP’s oil due to slowing buying from private refiners in the world’s second-biggest economy. All four have delayed cargoes, totalling about 4 million barrels, have now been offloaded to Shandong Qingyuan Group, one of China’s largest independently run lubricant producers, according to sources.. Shippers and oil traders said it was not unusual for producers like BP to ship cargoes before finding a buyer, but having cargoes orphaned for several months was uncommon. It wasn’t immediately clear who will pay the bill for the months’ demurrage - charges paid by a vessel’s charter to its owners for delayed operations - which shipping agents have estimated costs roughly $30,000 a day for a supertanker. The ‘Olympic Light’ discharged its cargo at Qingdao port, the people said. Last Sunday, BP discharged a similar-sized cargo at Rizhao port from another supertanker, ‘Olympic Luck’, to the same refiner, the people said, after holding the oil at sea for about one and half months. Qingyuan, which operates a 104,000 barrels per day refinery, is a regular customer of BP, which has expanded its crude oil marketing to Chinese independent refiners since 2015 after China opened crude oil imports to nearly 40 local plants.
UAE oil giant making ‘good progress’ with expansion plans in Saudi Arabia, executive says --The United Arab Emirates' biggest fuel retailer promised investors on Monday that there is "a lot more to come" regarding the firm's expansion plans in Saudi Arabia.John Carey, ADNOC Distribution's deputy chief executive told CNBC's "Capital Connection" that the company is making good progress on its plans to expand in the region."Our expansion plans: Firstly, across the UAE … we have made very, very good progress on that. We have got sites that we will be opening in the coming months across Dubai which gives us a stronger platform for our customers.""And, as you said, in Saudi Arabia, we have gained our license and we are in talks with a number of partners and people in Saudi Arabia to ensure we develop that market in a strong, responsible way as well. So good progress but a lot more to come," he added.
Eni Plans More Offshore, Onshore Egypt Drilling --Eni has further strengthened its position in Egypt by securing the “Nour” offshore exploration license in the East Nile Delta Basin of the Mediterranean Sea, the Italy-based company reported Tuesday. Eni said that it will drill an exploration well in the concession, located approximately 50 kilometers offshore in water depths ranging from 50 to 400 meters, during the second half of this year. The company also noted that it will operate Nour through its IEOC subsidiary and in conjunction with Egyptian Natural Gas Holding Co. (EGAS). Eni and Tharwa Petroleum Co. hold 85-percent and 15-percent interests, respectively, in the 739-square-kilometer Nour license. In a separate announcement Tuesday, Eni also stated that Egyptian authorities have granted lease extensions for additional offshore and onshore assets. Offshore, the company reported that it has secured a new Nile Delta Concession Agreement that allows a 10-year extension of the Abu Madi West Development Lease, which includes the prolific “Great Nooros Area.” Eni noted that its Nooros field is located in Great Nooros and added that the lease extension will enable it to conduct further exploration activities in another asset in the lease: the onshore El Qar’a gas discovery. “The Great Nooros Area’s asset lease extension strengthens Eni’s gas portfolio while confirming the success of Eni’s strategy of near field exploration that has revitalized production in the Nile Delta area, where the Nooros field is currently producing 32 million cubic meters of gas per day,” stated Eni, which holds a 75-percent stake in the concession. BP owns the remaining 25 percent stake, and Petrobel – a joint venture of IEOC and Egyptian General Petroleum Corp. (EGPC) – operate “Nile Delta.” Egyptian authorities have also granted a five-year extension of the onshore Ras Qattara Concession Agreement and a development lease in the country’s Western Desert basin, Eni reported. The company stated that the extension will facilitate a new drilling campaign in the Zarif and Faras fields.
Sanctions closing in, Iran to attend September OPEC monitoring committee to protest oil quota reallocation — Iran will send its oil minister, Bijan Zanganeh, to a September meeting of the monitoring committee overseeing OPEC's supply accord with Russia and other allies, in another bid to preserve the sanctions-hit country's crude market share. The Joint Ministerial Monitoring Committee is scheduled to meet September 23 in Algeria, just six weeks before US sanctions that could shut in 1 million b/d or more of Iran's crude sales are scheduled to take effect November 5. Chaired by Iran's chief geopolitical rival Saudi Arabia, the JMMC is tasked with assessing member compliance with production quotas in force since January 2017. But with OPEC and its partners agreeing in late June to a 1 million b/d output rise, Saudi energy minister Khalid al-Falih has said the committee will be responsible for reallocating those quotas, given some countries' inability to pump more. That has drawn fierce opposition from Zanganeh, who maintains that the deal does not allow countries to produce beyond their individual quotas. Besides Falih, the committee comprises ministers from Russia, Kuwait, Venezuela, Algeria and Oman. Zanganeh is not a member, though ministers from the 24 participating countries in the OPEC/non-OPEC deal are welcome to observe its proceedings. His attendance at the September meeting was confirmed to S&P Global Platts by an Iranian oil ministry official who declined to comment further. Since the output increase was announced, the minister has written several strongly worded letters to his OPEC counterparts denouncing their production boosts and accusing them of violating OPEC statutes, which require the organization to act in the collective interest of all members.
Who Profits From Iran’s Oil Major Exodus? --Donald Trump’s decision to leave the Iran nuclear deal and slap sanctions on Teheran is the most significant energy development of 2018. The first round of Iran sanctions, in place since August 4th, targeting Iran’s automotive and metal sectors, has only added fuel to the increasingly dangerous geopolitical fire, as Teheran’s blocking the Hormuz Strait has become a fully imaginable prospect for the first time since the Iran-Iraq war ended in 1988. Understandably, media are buzzing with expert analysis regarding trade implications – spreads narrowing, crude flows changing and third-party actors using the Iran-U.S. conflict to their advantage – yet it would be also of interest to look at the upstream ramifications of the impending sanctions. By looking closely at five unfolding scenarios, one can get a fairly clear understanding of where things are headed if the implementation of sanctions goes ahead as currently expected – meaning no softening of bellicose rhetoric, no top-level meeting like the Trump-Kim Summit in Singapore and no significant pressure from European countries that had alleged to stick to their commitments under the JCPOA. Following the Iran Petroleum Contract (IPC) Summit in November 2015, 18 exploration blocks were appraised by international majors, ranging from Total to Russian companies like Gazprom Neft and Lukoil. Despite their apparent intention to keep Iranian projects intact, European companies seem to be on the retreat from Iran, however, since nature abhors a vacuum, as it seems their place will be quickly replaced by Russian and Chinese national oil companies.
U.S.-Iran Sanctions Give China Lead in Globe's Top Gas Field -- China National Petroleum Corp. is expected to take the lead on a $5 billion project to develop Iran’s share of the world’s biggest gas deposit, taking over from France’s Total SA, which halted operations after U.S. President Donald Trump reimposed sanctions on the Islamic Republic. State-owned CNPC, which joined a consortium with Total and Iran’s Petropars Ltd. in 2016 to develop Phase 11 of the South Pars Gas field, is set to increase its stake in the project from the current 30 percent. Total had originally agreed to take a 50.1 percent interest. CNPC will become the lead operating partner, the state-run Islamic Republic News Agency reported, citing Mohammad Mostafavi, National Iranian Oil Co.’s investments and business head. Terms of the contract haven’t yet officially changed, according to Shana, the Oil Ministry’s news service. Calls to CNPC went unanswered on Sunday. Total declined to comment. Total, which finalized its agreement with Iran in July 2017, had already spent some 40 million euros ($45.7 million) on the project when Trump announced in May that the U.S. would exit the 2015 international nuclear deal with Iran and reimpose sanctions on Tehran. The first round of U.S. sanctions was put back into place this week, with more to come in November, greatly complicating efforts by companies that rushed into the Islamic Republic after the nuclear accord was signed by Iran, the U.S. and five other countries plus the European Union. Scores of European companies, including Total, have withdrawn from the oil-rich Persian Gulf country since the U.S. reversal. Trump marked the return of sanctions with a tweet on Aug. 7: “Anyone doing business with Iran will NOT be doing business with the United States.” Iran, which holds the world’s largest natural-gas reserves, shares South Pars, also known as the North Dome field, with neighboring Qatar. Total had previously withdrawn from the field in 2009 because of sanctions. It planned initial investment of $1 billion for Phase 11, with the aim of eventually producing 2 billion cubic feet a day, or 400,000 barrels of oil equivalent including condensate, it said in July 2017. At the time, Total said the contract was for 20 years.
Iran Sanctions Fallout: China Takes Over French Share In Giant Iran Gas Project - When it comes to the Middle East, China has not been shy about its recent ambitions to expand its geopolitical influence in the Gulf region: Just last week we reported that the Chinese Ambassador to Syria, Qi Qianjin, shocked Middle East pundits and observers by indicating the Chinese military may fill the void left in the wake of the collapse of ISIS - and most regional armies - and directly assist the Syrian Army in an upcoming major offensive on jihadist-held Idlib province. And having staked a military claim in Syria, China was next set to expand its national interest in that other key regional nation which has been the source of so much consternation to its neighbors and world powers in recent months and which has emerged as a key source of crude oil exports to Beijing: Iran. It did so today when China’s state-owned energy giant, CNPC - the world's third largest oil and gas company by revenue behind Saudi Aramco and the National Iranian Oil Company - finally took over the share in Iran’s multi-billion dollar South Pars gas project held by France’s Total, Iran's official news agency Shana reported on Saturday. To many the move had been expected, with only the details set to be ironed out. Recall that back in May we wrote that CNPC - the world's third largest oil and gas company by revenue behind Saudi Aramco and the National Iranian Oil Company - was set to take over a leading role held by Total in a huge gas project in Iran should the French energy giant decide to quit amid US sanctions against the Islamic Republic.That finally happened when the Chinese energy giant took advantage of Trump's sanctions to step in the void left by the French major. As a reminder, Total signed a contract in 2017 to develop Phase II of South Pars field with an initial investment of $1 billion, marking the first major Western energy investment in the country after sanctions were lifted in 2016. South Pars has the world’s biggest natural gas reserves ever found in one place. And after then the French company said it would pull out unless it secured a U.S. sanctions waiver - which it was unable to do - in June, the deputy head of the National Iranian Oil Company, Gholamreza Manouchehri, said that CNPC would take over if Total were to walk away.
Will Myanmar Become A Conduit For Iranian Crude Into China? - On June 1, sometime between the US withdrawal from the JCPOA in early May, and its demand in late June that Asian buyers fully halt Iranian oil purchases, PetroChina snuck in a shipment of Iranian crude through Myanmar to its Yunnan Petrochemical refinery in southern China. On any other route, this would have been just another Iranian oil shipment. But using the Myanmar-China oil and gas pipeline brings new complications. That’s because the pipeline has a new avatar - it is now a part of China’s Belt and Road Initiative, along with other large infrastructure projects that were not originally a part of BRI, but were included later to boost the profile of the program. Sending Iranian crude through an oil pipeline with the “Belt and Road” label removes any doubts of whether BRI’s projects have political motives or not. For critics of BRI, it adds fodder to the narrative that the infrastructure plan is a tool for China to undercut the influence of the US. BRI already has a serious public relations problem and is viewed with suspicion, sometimes for good reason. Earlier this week, the renewal of US secondary sanctions on Iran faced strong opposition from the remaining JCPOA signatories. China has made it clear it will continue to import Iranian barrels, and using a BRI project to do so will give the US ammunition to criticize BRI openly, potentially leaving the host country open to US reprisals. BRI has not been particularly polarizing so far, and its participants have included US allies. Oil and gas pipelines are magnets for controversy, however. From the Sumed pipeline in the Middle East to Nordstream 2 in Europe, there hasn’t been an international oil or gas pipeline that was devoid of geopolitics. Myanmar will be no different. The Panama-flagged Dore delivered its cargo of Iranian crudes at Maday Island on June 1, the only vessel to have shipped oil from Iran to Myanmar since the 13 million mt/year (260,000 b/d) Yunnan Petrochemical refinery in southern China started operations in August last year. . This was the first batch of Iranian Heavy crude processed by a PetroChina refinery, and is unlikely to be the last.
Slowdowns in China and India eat away at Asian oil demand (Reuters) - Oil demand from Asia’s biggest importers, China and India, is growing more slowly than expected, exposing weakness in two of the world’s largest economies and eroding a key pillar of global petroleum prices amid trade tensions. The two countries buy a combined 12 percent of the world’s oil, and their growth has helped drive the recovery in oil prices since 2016. Yet their shipped imports in July were about half a million barrels per day (bpd) below their Jaunary-June average of 12.4 million bpd, shipping data shows. That has dragged down demand growth in Asia, despite inflated purchases ahead of U.S. sanctions on Iran and increased imports from Japan and South Korea as they struggle with record-setting heat waves. Shipping data shows annualized growth in demand from Asia’s five largest oil importers - China, India, Japan, South Korea and Taiwan - fell from more than 3.5 percent in 2016 to around 2 percent so far this year. “Everything is weakening, but from a pretty elevated level,” said Jeff Brown, president of energy consultancy FGE. Traders expect growth to slow further as the Iran sanctions take hold, the trade spat between the United States and China escalates, and as Asia’s emerging markets show signs of cooling. “Any further escalation in the trade conflict between them is clearly an important downside risk and could lead to a further slowdown in oil demand growth for 2019, leading to a downward pressure on oil prices,” said Sushant Gupta, research director at energy consultancy Wood Mackenzie. Renewed U.S. sanctions against major oil exporter Iran, which from November will target the petroleum sector, are expected to disrupt the market. Iran’s oil exports peaked at almost 3 million bpd in May this year, but they have since fallen to around 2 million bpd as Asian buyers, including Japan, South Korea and India, began to shun its crude ahead of the sanctions.
OPEC Monthly Oil Market Report: Lowers 2019 oil demand growth forecast - According to OPEC's Monthly Oil Market Report, released this Monday, Saudi Arabia lowered its oil production in July even as the kingdom has pledged to raise output significantly to make up for an expected drop in Iranian exports. Key highlights:
• Saudi Arabia pumped 10.288 mil bpd in July, down 200k bpd from June.
• 2019 oil demand growth lowered by 20k bpd to 1.4 million bpd.
• 2019 non-OPEC oil supply estimate revised up by 30k bpd to 2.13 million bpd.
• July output rose 41,000 bpd m/m to 32.32 million bpd.
• Sees further tightness in the diesel market, partly due to lack of refining investments.
Saudi Arabia cuts oil production in July despite OPEC agreement to hike output --OPEC's oil production ticked higher in July, but cuts by top exporter Saudi Arabia weighed on the 15-member group's output just one month after it agreed to start pumping more crude.The Saudis throttled back drilling last month after agreeing with OPEC, Russia and several other producers toput more barrels on the market in June. The kingdom is facing pressure from big oil consuming nations like China and India, as well as the Trump administration, to tamp down fuel costs ahead of the renewal of U.S. sanctions on Iran, OPEC's third biggest producer.President Donald Trump is aiming to cut Iran's oil exports to zero by November, a policy that threatens to leave the world short of oil and boost prices at the pump if OPEC and Russia cannot fill the gap. A group of two dozen oil-producing nations has been limiting its production since January 2017 in order to drain oversupply, but has scaled back that policy in light of the Iranian sanctions and output declines in places like Venezuela and Angola."Compared to a year earlier, there has been an overall improvement in crude oil prices in 2018," OPEC said in its monthly report. "At the same time, product prices have generally followed the upward trajectory of crude oil prices."In another twist for the market, OPEC's latest report shows a significant discrepancy between July production figures provided by Saudi Arabia and data compiled by independent sources. While the kingdom says it cut output by about 200,000 barrels per day, an average of estimates from several outside sources puts the drop at nearly 53,000 bpd. Saudi Arabia had telegraphed the drop prior to the release of the report. However, S&P Global Platts and the U.S. Energy Information Administration estimated the Saudis actually hiked output to 10.6 million bpd in July, The Wall Street Journal reported last week. According to the Journal, the Saudis asked several sources whose estimates underpin the independent figure to make an adjustment for July, but Platts stuck by its analysis.
OPEC sees 33.40 mil b/d demand for its crude oil in H2 2018, but July output at 32.32 mil b/d — Platts - OPEC still has to show the market more crude oil barrels if it wants to avoid a supply squeeze later this year, the producer group's own analysis shows. In its closely watched monthly oil market report, OPEC's analysis arm forecast global demand for OPEC's crude at 33.40 million b/d for both the third and fourth quarters of 2018. That is 1.08 million b/d more than the bloc's July production level, as assessed by the independent secondary sources used by OPEC to track member output. But any market tightness will ease in 2019, OPEC forecast, as growth in non-OPEC supplies will far outpace the projected increase in global demand, dropping the so-called call on OPEC crude back down to 32.05 million b/d for the year. The report warned, however, that "if any unexpected supply outages should occur due to natural disasters/technical shortcomings and these coincide with any geopolitical supply disruption, it could bring the market into an imbalanced situation," adding that industry investment had yet to recover to levels seen before the 2014 price crash. As for the US-China trade dispute, OPEC said its analysis of probable outcomes indicates that "tariffs under the most likely case will not have a significant impact on global GDP or oil demand growth in 2018 and 2019." Still, OPEC nudged downward its forecasts of year-on-year oil demand growth for both 2018 and 2019, while raising its projections of year-on-year non-OPEC supply growth. World demand will average 98.83 million b/d in 2018, rising to 100.26 million b/d in 2019, OPEC said. Non-OPEC supply will average 59.62 million b/d in 2018 and 61.75 million b/d in 2019, with the US, Brazil and Canada contributing most of the growth. OECD commercial oil inventories stood at 2.822 billion barrels as of June, 33 million barrels below the five-year average but 251 million barrels above the January 2014 level, OPEC said. OPEC and 10 non-OPEC partners agreed on June 23 to boost output by 1 million b/d by reducing overcompliance with cuts that had been in place since January 2017. The move is intended to alleviate any shortages caused by the reimposition of US sanctions on Iran in November and Venezuela's continuing collapse. OPEC produced 32.32 million b/d in July, according to secondary sources, up 40,000 b/d from June. Saudi Arabia, OPEC's largest producer, has declared it would take on the bulk of the increase, but instead cut production by 50,000 b/d from June to 10.39 million b/d, secondary sources estimated. The kingdom self-reported an even larger drop of 200,000 b/d to 10.29 million b/d. Second-largest producer Iraq boosted its output 20,000 b/d to 4.56 million b/d, according to secondary sources, though it self-reported production of 4.46 million b/d, a 100,000 b/d increase from June.
Watch: All eyes on China's 'blue skies' announcement; Chinese LPG buyers seen to keep reselling US-origin cargoes – (Platts video) As the US-China trade war continues, Chinese LPG buyers are expected to continue reselling their US-origin cargoes, while taking in barrels from elsewhere. This move is seen to push up prices for non-US LPG for prompt delivery in the coming weeks.The LNG industry also continues to assess the impact of a potential 25% Chinese tariff on US LNG imports. If imposed, the tariff could affect future Atlantic-Pacific trade flows, and provide a lift to near-term Asian LNG prices.Meanwhile, the steel and metals markets are waiting for an official announcement on whether China will suspend more steel capacity in the coming winter heating season. An analysis jointly published by S&P Global Platts and S&P Global Market Intelligenceoutlines the "2+42" cities that are likely to be affected. In petrochemicals, margins for paraxylene producers from CFR Japan naphtha hit a near two-year early this month and market participants expect the bull run to continue for another two weeks, until the September futures contract expires.
Frothy oil market turns increasingly flat: Kemp (Reuters) - Persistent hedge fund liquidation over the last four months has weighed heavily on the oil market, both spot prices and calendar spreads, ending the previous rally and putting the cyclical upswing into a prolonged pause.Hedge funds resumed their liquidation of bullish long positions in petroleum last week, after a two-week hiatus, according to the most recent regulatory and exchange data.Hedge funds and other money managers cut their net long position in the six most important petroleum futures and options contracts by another 30 million barrels in the week to Aug. 7.Bullish long positions were reduced by 32 million barrels to 1.021 billion, while bearish short ones were also trimmed by 2 million barrels to 108 million (https://tmsnrt.rs/2MGLCd9).Net long positions have been cut in 11 of the last 16 weeks, with a total reduction of 380 million barrels, or 27 percent, since April 24.As in previous weeks, liquidation was concentrated in crude, with net positions in Brent cut by 18 million barrels and in ICE and NYMEX WTI by 9 million barrels. Portfolio managers made only very minor changes to net length in U.S. gasoline (-1 million barrels), U.S. heating oil (-2 million barrels) and European gasoil (essentially unchanged). price
US dollar strength could soon become an 'unbearable burden' on the oil market, analyst says - The prospect of continued strength in the U.S. dollar over the coming months should constitute an even greater concern to bullish oil traders than an escalating trade war between the world's two largest economies, an analyst told CNBC on Monday.Investors are currently seen weighing bullish factors that include potential supply disruptions to Iranian crude exports against more bearish indicators, such as broad greenback strength and a ramp-up in production byOPEC and its allied partners."There are lots of variables in the oil market, the most important of which is Iran. If 1 million barrels per day or more of Iranian exports go AWOL, the current fragile supply-demand balance will be upended — potentially sending oil prices above the May peak," Tamas Varga, senior analyst at PVM oil associates, said in a research note published Monday."The most obvious thing that could change this bullish view is not the U.S.-China trade war, but the strong dollar that, if (it) lasts, will put (an) almost unbearable burden on consuming countries," he added.International benchmark Brent crude traded at around $72.80 on Friday morning, little changed from the previous session, while U.S. West Texas Intermediate (WTI) stood at $67.43, down around 0.3 percent.Meanwhile, the U.S. dollar climbed to a 13-month high against a basket of six major currencies on Monday, amid renewed financial turmoil in Turkey. The greenback edged around 0.1 percent higher during early afternoon deals, trading at 96.460 against major peers. Typically, crude futures trade inversely to the greenback. A stronger dollar makes oil more expensive to much of the world, so oil prices tend to fall as the dollar rises.
Fuel markets confirm global growth slowdown: Kemp - (Reuters) - If the global economy starts to grow more slowly, the impact will show up first in the price of refined fuels such as road diesel, marine gasoil and jet fuel that play a central role in the freight transport system. Middle distillate fuels are principally burned in the high-powered engines used in trucks, railroads, ships, barges and aircraft to move freight around the world, as well as in factories, on farms and at mines and oilfields. Mid-distillates account for more than a third of the oil used around the world every day, and are the single-largest category of refined products, (“Statistical review of world energy”, BP, 2018).Distillate fuels are closely correlated with the global economic and trade cycle, and at the moment they confirm other indications the rate of growth is slowing.U.S. distillate stocks, which had been drawing down faster than usual during the first four months of 2018, have now been building faster than normal since late May (https://tmsnrt.rs/2vPGI7d).European gasoil futures prices, which had been in substantial backwardation, have shifted towards flat or even contango since the end of May, reflecting improved availability.Gasoil futures still command a hefty premium over crude for deliveries in 2019, but the premium has been eroding over the same time frame.In line with these trends, hedge funds and other money managers have become markedly less bullish on the outlook for distillate prices over the last three months. Hedge fund managers have cut their bullish positioning in U.S. heating oil by 29 million barrels (33 percent) and in European gasoil by 53 million barrels (33 percent) since late May.Over the same period, bullish positions in U.S. gasoline have been cut by 14 million barrels (12 percent), according to regulatory and exchange data. Distillate markets are sending the same signal as a range of other indicators: the rate of global output growth has decelerated in recent months after a very strong expansion in 2017.
Crude Oil Prices Settle Lower as OPEC Lowers Oil Demand Growth Outlook -- WTI crude oil prices settled lower on Monday after OPEC revised lower its estimate for oil-demand growth next year and revealed Saudi Arabia had cut production last month. On the New York Mercantile Exchange crude futures for September delivery fell 43 cents settle at $67.20 a barrel, while on London's Intercontinental Exchange, Brent fell 0.47% to trade at $72.47 barrel. In its monthly report, OPEC lowered its estimate for global oil demand growth for 2019 by 20,000 barrels per day (bpd) to 1.4 million bpd, while non-OPEC oil supply in 2019 was revised higher by 30,000 bpd to 2.13 million bpd. OPEC production for July (from secondary sources) rose 41,000 bpd to 32.32 million bpd, led by increases in Nigeria, Kuwait, Iraq and UAE. This was partially offset, however, by decreases in Saudi Arabia, Iran, Libya and Venezuela. The rise in OPEC production comes just a few months after the oil cartel agreed to ease curbs on output restrictions, which had been put in place by the production-cut pact in November 2016 to rid excess crude supplies from the market. OPEC agreed in June to raise output at a nominal increase of 1 million barrels a day (bpd) in an effort to stabilize oil prices and ease the threat of a global supply deficit amid expectations for a drop in Iranian exports. The somewhat bearish OPEC monthly report on global oil demand growth paled in comparison to the International Energy Agency's report. The International Energy Agency (IEA) on Friday raised its estimate for world oil demand growth next year to 1.5 million barrels a day (bpd) from 1.4 million bpd. The bearish turn in U.S. oil prices, which posted their second-straight loss in a week last week, showed no sign of abating as traders increased their bearish bets on oil prices, data showed. CFTC COT data showed money managers reduced their net long positions in WTI crude futures to 378,578 lots from 386,764 lots for the week ended Aug. 7.
Oil Drops on Strong Dollar, Turbulence in Turkey -- Oil dropped as economic turbulence in Turkey and the strengthening greenback heightened concerns about global oil demand. Futures dipped 0.6 percent in New York on Monday, paring some of its losses as the commodity tracked choppy movements in the dollar during the session. Yet, the U.S. currency maintained its advance, reducing the appeal of raw materials as an investment. In Turkey, an economy that’s larger than the Netherlands or Taiwan, bonds and stocks dropped along with the lira as investor confidence plunged. Meanwhile, OPEC raised production in July and stockpiles at the key Cushing, Oklahoma supply hub in the U.S. are seen rising. “It’s a strong dollar situation. That reverse correlation is putting pressure on the barrel for starters,” said Bob Yawger, director of futures division at Mizuho Securities USA LLC. “Perceptions about emerging-market demand are also going to be negative for the energy complex.” The U.S. benchmark crude has declined more than 2 percent this month as international trade disputes threatened to deflate energy demand growth. Turkey’s central bank pledged to “take all necessary measures” to bolster the financial system, lowering the amount commercial lenders must park at the regulator and easing rules governing lira and foreign-currency liquidity. West Texas Intermediate crude for September delivery slid 43 cents to settle at $67.20 a barrel on the New York Mercantile Exchange. Total volume traded was about 14 percent below the 100-day average. Brent for October settlement declined 20 cents to end the session at $72.61 a barrel on the London-based ICE Futures Europe exchange, and traded at a $6.04 premium to WTI for the same month. The Bloomberg Dollar Spot Index rose for a third straight session, advancing as much as 0.3 percent on Monday. OPEC’s output averaged 32.32 million barrels a day in July, up 41,000 barrels a day from June, the cartel said in a report citing secondary source figures. The group also lifted forecasts for supply from rivals for the rest of the year. At the same time, in the U.S., the Energy Information Administration sees output at major shale plays rising to 7.52 million barrels a day in September. Meanwhile, Cushing crude stockpiles are seen increasing 500,000 barrels last week, according to a Bloomberg forecast.
Oil prices edge up as Saudi cuts output, but looming demand slowdown drags - Oil prices jumped on Tuesday after Saudi Arabia said it cut production, adding to concerns over global supply as U.S. sanctions against Iran curb its exports.However, the prospect of a slowdown in global economic growth kept a lid on markets.Global benchmark Brent crude was up 94 cents, or 1.3 percent, at $73.55 by 8:57 a.m. (1257 GMT), after hitting a high of $73.75. U.S. light crude was up 91 cents, or 1.4 percent, at $68.11."Oil prices are on the rebound as bulls take heart from an unexpected dip in Saudi oil output and the lingering Iranian wildcard," said Stephen Brennock, analyst at London brokerage PVM Oil Associates.Saudi Arabia told the Organization of the Petroleum Exporting Countries that it had reduced crude output by 200,000 barrels per day (bpd) to 10.29 million bpd in July.OPEC itself, using secondary sources, estimated in a report published on Monday that Saudi production was at a slightly higher level of 10.39 million bpd last month.But both figures suggest the kingdom, de facto leader of OPEC, is keen to avoid a repeat of a global glut that has depressed prices over the past few years."We do not think that Saudi Arabia is interested in seeing Brent crude below $70 a barrel," said SEB commodities analyst Bjarne Schieldrop.Saudi Arabia is OPEC's biggest producer and the only major exporter that can easily adjust output to balance global supply.The lower Saudi output comes at a time of expected export declines from Iran as the United States re-imposes sanctions on Tehran's oil industry.But output from non-OPEC countries, particularly the United States, is rising quickly, limiting demand for OPEC oil.OPEC expects oil supply by countries outside the cartel to increase by 2.13 million bpd next year, 30,000 bpd more than forecast last month, with much of the increase coming from new U.S. shale production. U.S. oil output from seven major shale basins is expected to rise 93,000 bpd in September to 7.52 million bpd, the U.S. Energy Information Administration (EIA) said in a monthly report on Monday.
Oil Prices Fall Despite Supply Fears -- Oil prices rebounded in early trading on Tuesday before falling in the afternoon as economic uncertainty stemming from Turkey's currency crisis dampened bullishness. Saudi Arabia's oil production reduction in July and rising fears of Iranian outages weren't enough to keep oil prices in the green . Oil prices fell on Monday after Turkey’s currency crashed, raising fears of emerging market financial contagion. Turkey’s lira has declined 30 percent in the past week alone. China’s yuan dipped again. Argentina’s central bank just hiked interest rates by 5 percentage points. India’s rupee fell to a historic low against the dollar. Analysts don’t see an emerging market crisis as necessarily likely, but it isn’t impossible either. An emerging market slowdown raises the risk of much slower-than-expected oil demand. The first wave of megaprojects since the oil market downturn in 2014 is on the verge of receiving a greenlight. According to Wood Mackenzie, the oil and gas industry is set to move forward with $300 billion of new spending in 2019 and 2020, more than the combined total of the three-year period between 2015 and 2017. The aggressive spend seems to run in contrast to the promise from industry executives to maintain capital discipline. Oil executives seem to think that they can return to megaprojects while avoiding the cost blowouts of the past, but that remains to be seen. “Oil companies have improved their delivery in small projects, but can they do it with bigger ones?” Angus Rodger, a WoodMac analyst, told Bloomberg. “There’s massive upside on the table if they can show sustained success with capital discipline as oil prices rise. They could deliver the best returns in a decade.” Shell says that the economics of drilling have “flipped” back in favor of deepwater drilling after several years of low investment. Shell says that dramatic cost declines mean that deepwater drilling can breakeven at $30 per barrel, and offshore offers a better return than onshore shale. “It’s great to have both in the portfolio and we are growing our shales business... but in terms of sheer cash flow delivery, our deepwater has significantly more cash flow potential,” Shell’s head of exploration and production Andy Brown told the FT.
Oil prices inch up on Saudi output cut, but slowing economic growth drags (Reuters) - Oil prices edged lower on Tuesday, weighed down by a strengthening U.S. dollar as investors remained concerned about the financial crisis in Turkey. Brent crude LCOc1 dipped 15 cents to settle at $72.46 a barrel, while U.S. West Texas Intermediate (WTI) crude CLc1 futures fell 16 cents to close at $67.04 a barrel. Futures extended losses in post-settlement trade after data from industry group the American Petroleum Institute showed that U.S. crude stocks unexpectedly rose by 3.7 million barrels last week, compared with analysts’ expectations for a decrease of 2.5 million barrels. Earlier in the session, oil prices rose, supported by gains in equity markets, but pared gains at mid-day as the U.S. dollar index touched its highest since late June 2017. A stronger dollar makes greenback-denominated oil more expensive for holders of other currencies. “Usually when the dollar starts making highs, it’s probably a sign that we’re still concerned about the Turkish situation,” said Phil Flynn, analyst at Price Futures Group in Chicago. “There’s still a bit of nervousness on the global stage.” U.S. stock indexes broadly gained and Turkey's lira recovered, a day after crashing to an all-time low against the dollar, feeding worries that the country's crisis might spread to other emerging markets. TRYTOM=D3. “The equities and the U.S. dollar are keying primarily off of the unfolding saga in Turkey and although the lira has posted a significant rebound today, the standoff between Turkey and the U.S. is showing no sign of progress,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note. “Consequently, worries over contagion are apt to increase in the process of reducing risk appetite and renewing downside pressures on oil pricing.” Oil’s losses were capped by concerns over lower global crude supply from top producers. The Organization of the Petroleum Exporting Countries said on Monday that Saudi Arabia had cut production. Export declines from Iran also are expected as Washington re-imposes sanctions.
WTI Dives Back Below $67 After Surprise Crude Build - WTI continued in its rangebound mode (slightly weaker into tonight's print) but slumped back below $67 tonight after API reported a surprise crude build. API
- Crude +3.66mm (-2.5mm exp)
- Cushing +1.64mm (+500k exp)
- Gasoline _1/56mm
- Distillates +1.94mm
The last few weeks have seen crude inventories flip-flopping between draws and builds with a big surprise gasoline build last week. And API continued the trend with a surprise crude build (and surprise Cushing build)... “Nobody wants to go home long” when forecasts are pointing to a bearish inventory report, said Bob Yawger, director of futures division at Mizuho Securities USA LLC. WTI ended the day unchanged, fading into the print, but spiked lower as API reported the surprise crude build...
Weekly Petroleum Report -- EIA; WTI Plunges -- August 15, 2018 -- Link here.
- US crude oil inventories: increased by a whopping 6.8 million bbls
- WTI after the report: wow, down about 3.4%; falls $2.30; falls below the $66 support level; trading at $64.76;
- bad news for US shale operators: it is interesting to note that rig count has fallen steadily in the Bakken for the past couple of weeks; indicator that terminals/refineries were "full"?
- really, really bad news for Saudi; needs $70 oil is what they say; in fact, they probably need $80 oil
- US refinery operating capacity: 98.1% -- wow
- think about that: refineries are working at 98.1% capacity and yet, inventories rose by a whopping 6.8 million bbls
- there seems to be a disconnect between what the EIA is telling us about US production (EIA says US production is falling) and what the producers are seeing
- imports? up a huge amount -- up by over one million bbls -- total imports right at 9.0 million bbls -- I haven't seen an increase this big in quite some time; what gives?
- I tracked inventories for about a year when producers / Saudi Arabia said they were going to cut back on supply -- at that time, they started at 450 million bbls in US crude oil inventory and reduced it towards 400 million bbls; today it stands at 414.2 million bbls
- the old threshold was 350 million bbls (below that, bullish for oil traders; above that, bearish for oil traders
- I set the new number at 400 million bbls (below that, bullish for oil traders; above that, bearish for oil traders
- clearly, very, very bearish right now -- and it's the height of the driving season in the US
- if gasoline prices are not falling in your neighborhood, the refineries are making out like bandits
- production: magic numbers are about 10.5 and 5.0 respectively; this week, 10.2 million bbls for gasoline; 5.3 million bbls for distillate fuel
WTI Tumbles To 2-Mo Lows After Huge Surprise Crude Build - While last night's API-reported crude build may have been a sign, DOE just reported a crude build twice as large (and massively larger than the expected draw). This sent WTI back below $65, near 2-month lows. DOE:
- Crude +6.805mm (-2.5mm exp) - biggest build since March 2017
- Cushing +1.64mm (+500k exp)
- Gasoline -740k
- Distillates +3.566mm
Record-high refinery runs couldn't keep crude stockpiles from surging - The 6.88mm crude build is the biggest since March 2017 (and Cushing stocks surged after 12 weeks of draws) as Distillates inventories rose for the 3rd week in a row... US Crude production ticked up (remember that new formulations mean that production jumps in 100k intervals now). The increase in production looks to be due to higher production from Alaska, driven by an increase at Prudhoe Bay, which had been lower for the past several weeks. All of which sent WTI back below $65... To 2-month lows... As Bloomberg notes, August is a bad month for WTI to be suffering from a bouncing dollar and worries about demand destruction from trade wars and EM currency weakness causing economic slowdowns. That's because crucial late-summer oil-product demand data has been damaging, and might again damage, the bullish case through stockpile builds. Last week's EIA data showing the largest gasoline build for early August in the last 20-plus years is colliding with this week's EIA-reported biggest crude build in 17 months is not supportive of the 'no brainer' crude narrative.
Oil prices sink after big, unexpected jump in US crude stockpiles -- Oil prices plunged on Wednesday after government data showed a big, unexpected jump in stockpiles of U.S. crude, compounding pressure as the outlook for global economic growth darkened and the stock market slumped. U.S. light crude ended Wednesday's session down $2.03 a barrel, or 3 percent, at $65.01, it's lowest closing prices since June 6. The contract hit an eight-week intraday low at $64.51. Global benchmark Brent crude oil fell $1.68, or 2.3 percent, at $70.78 by 2:26 p.m. ET, after hitting a four-month low at $70.30. U.S. commercial crude inventories rose by 6.8 million barrels in the week through Aug. 10, the Energy Information Administration reported. Analysts in a Reuters poll had forecast stockpiles would fall by 2.5 million barrels. The jump in stocks occurred as the nation's crude imports surged by 1 million barrels a day, while its exports fell by more than 250,000 bpd. That offset record activity at American refineries, which ran at 98 percent capacity. "The imports of crude oil are just remarkable," said John Kilduff, founding partner at energy hedge fund Again Capital. "That we were able to build that much crude oil in inventory in the face of a 98 percent refinery run rate speaks volumes about the burst of supply that hit the market last week." Stocks at the closely watched U.S. delivery hub at Cushing, Oklahoma rose by 1.6 million barrels. The East and West coasts both saw inventory levels jump by more than 2 million barrels. Stockpiles of gasoline were down slightly more than expected, while inventories of distillate fuels, including diesel and home heating fuel, rose by 3.6 million barrels, more than three times the increase projected in the Reuters poll.
Oil prices fall on rising US crude inventories, darkening economic outlook - Oil prices fell on Wednesday, weighed down by a gloomier global economic outlook and a report of rising U.S. crude inventories, even as U.S. sanctions on Tehran threatened to curb Iranian crude oil supplies.Global benchmark Brent crude oil was down 50 cents a barrel at $71.96 by 0830 GMT. U.S. light crude was 55 cents lower at $66.49."Sentiment is sandwiched between a darkening global economic outlook and looming Iranian supply shortages," said Stephen Brennock, analyst at London brokerage PVM Oil Associates.U.S. crude stocks rose by 3.7 million barrels in the week to Aug. 10, to 410.8 million barrels, private industry group the American Petroleum Institute (API) said on Tuesday. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 1.6 million barrels, the API said.Official U.S. oil inventory data was due to be published later on Wednesday by the Energy Information Administration.Investors are concerned by the health of the world economy at a time of escalating trade disputes between the United States and its major trading partners.The OECD's composite leading indicator, which covers the western advanced economies plus China, India, Russia, Brazil, Indonesia and South Africa, peaked in January but has since fallen and slipped below trend in May and June.World trade volume growth also peaked in January at almost 5.7 percent year-on-year, but nearly halved to less than 3 percent by May, according to the Netherlands Bureau for Economic Policy Analysis.The United States and China have been locked in a tit-for-tat trade spat for a few months, gradually adding tariffs to each others' products in a dispute that threatens to curb economic activity in both countries.Chinese oil importers now appear to be shying away from buying U.S. crude oil as they fear Beijing may decide to add the commodity to its tariff list.Not a single tanker has loaded crude oil from the United States bound for China since the start of August, Thomson Reuters Eikon ship tracking data showed, compared with about 300,000 barrels per day (bpd) in June and July. Meanwhile, investors are watching the impact of U.S. sanctions on Tehran, which analysts say could remove as much as 1 million bpd of Iranian crude from the market by next year.
Oil falls sharply, ends at 10-week low after unexpected rise in U.S. crude inventories - Oil futures fell sharply Wednesday, leaving the U.S. benchmark with its lowest close in 10 weeks after data showed an unexpected and surge in U.S. crude inventories. West Texas Intermediate crude for September delivery on the New York Mercantile Exchange fell $2.03, or 3%, to settle at $65.01 a barrel, its lowest finish since June 6. The global benchmark, October Brent crude dropped $1.70, or 2.4%, to $70.76 a barrel, the lowest close since April 9.The Energy Information Administration said crude inventories rose 6.8 million barrels in the week ended Aug. 10. Analysts surveyed by The Wall Street Journal had forecast a fall of 2.4 million barrels. Futures had been nursing losses ahead of the EIA data after the American Petroleum Institute late Tuesday said stocks had risen by 3.7 million barrels. Oil stored in Cushing, Okla., the delivery hub for Nymex futures, rose by 1.6 million barrels, the EIA said. “Prices have been on a downward trend after the release of the API data on Tuesday afternoon. The confirmation by the Energy Information Administration drove prices lower as traders continue to monitor the situation between the United States and Turkey,” . Indeed, concerns about Turkey and the possibility that spillover effects from the country’s currency crisis could affect global growth and demand for crude have been cited as a weight on overall commodity prices. A stronger dollar has also contributed to pressure.
Oil edges up as China, US set for talks to resolve trade disputes - Oil prices on Thursday clawed back some of the previous day's losses after Beijing said it would send a delegation to Washington to try to resolve a trade dispute between the United States and China that has roiled global markets.Market sentiment, though, remains bearish amid the dispute and concerns of an economic slowdown in emerging markets.Brent crude oil futures were at $71.11 per barrel at 0712 GMT, up 35 cents, or 0.5 percent, from their last close.U.S. West Texas Intermediate (WTI) crude futures were up 15 cents, or 0.2 percent, at $65.17 a barrel, held back somewhat by rising U.S. crude production and storage levels.Both benchmarks lost more than 2 percent during the previous day's trading.Traders said Thursday's markets were pushed up by news that a Chinese delegation led by Vice Minister of Commerce Wang Shouwen will hold talks with U.S. representatives led by Under Secretary of Treasury for International Affairs David Malpass later in August.China and the United States have implemented several rounds of tit-for-tat tariffs on each others goods and threatened further duties on exports worth hundreds of billions of dollars.Sentiment in oil markets was also cautious due to the rise in U.S. crude production and storage levels, as well as weakness in emerging market economies, particularly in Asia, that could limit demand growth.Output of U.S. crude rose by 100,000 barrels per day (bpd) in the week ending Aug. 10, to 10.9 million bpd, according to the U.S. Energy Information Administration (EIA) weekly production and storage report.At the same time, U.S. crude inventories climbed by 6.8 million barrels, to 414.19 million barrels, the EIA said."This build certainly hasn't helped market sentiment," Dutch bank ING said after the release of the EIA report. While supply rose in the United States, Asia's markets were showing signs of economic slowdown due to trade disputes with the United States and currency weakness, dragging on oil market sentiment.
Oil steadies but outlook for demand grows gloomy (Reuters) - Oil rose slightly as global markets steadied on Thursday, recovering some of the previous day’s 2 percent slide, though a weakening outlook for crude demand kept prices in check. The oil market slid on Wednesday as data showing a large build in U.S. inventories fed concern about the fuel demand outlook, while crude was also pressured by broader selling of industrial commodities such as copper. China and the United States have implemented several rounds of tariffs and threatened further duties on exports worth hundreds of billions of dollars, which could knock global economic growth. The crisis gripping the Turkish lira has rattled emerging markets and reverberated across equities, bonds and raw materials. Brent crude oil futures settled 67 cents higher at $71.43 a barrel, while U.S. crude futures rose 45 cents to $65.46 a barrel. Earlier, U.S. crude had hovered around its 200-day moving average of $65.18 a barrel, an important technical benchmark. Moving below that level could trigger a further surge downward. “The growth story is now more or less a U.S. growth story. The rest of the world isn’t playing along any longer,” “It also really reflects how the theme in the commodities market has so quickly changed from being one where the worry was about supply, with Iran sanctions for oil or Chilean (miner) strikes for copper, and now the focus is on demand.” Brent crude futures are resting on the 200-day moving average, a key technical level, for the first time in a year. Analysts say a break below this point could trigger another swift sell-off. “In Brent, we trace a first support at $71.00 followed by the 200-day moving average at $70.23 and $70.00,” On the supply front, U.S. data on Wednesday showed crude output rose by 100,000 barrels per day (bpd) to 10.9 million bpd in the week ending Aug. 10. Crude inventories increased by 6.8 million barrels, representing the largest weekly rise since March last year.
Oil prices fall amid fears over global economic growth - Oil prices rose on Friday but were heading for yet another weekly decline as concerns intensified that trade disputes and slowing global economic growth could hit demand for petroleum products. Brent crude oil futures were up 98 cents, or 1.4 percent, at $72.41 a barrel by 9:11 a.m. ET (1311 GMT). U.S. West Texas Intermediate (WTI) crude futures rose 74 cents, or 1.1 percent, to $66.20 a barrel.Brent is heading for a decline of less than 1 percent this week, a third consecutive weekly drop. WTI is on track for a seventh week of losses, with a fall of more than 2 percent.Traders said the main drags on prices were the darkening economic outlook due to trade tensions between the United States and China, and weakening currencies in emerging economies that are weighing on growth and fuel consumption.U.S. investment bank Jefferies said on Friday there was an emerging "lack of demand" for crude oil and refined products. Singaporean bank DBS said on Friday that Chinese data showed a "steady decline in activities" and that "the economy is facing added headwinds due to rising trade tensions with the U.S."
Crude oil is getting crushed, but one expert sees year-end rally - Crude oil just posted its worst week since July as a surging dollar, slowing emerging markets and supply concerns have all weighed on the commodity. But despite the price declines, one commodities trader sees a rally in the cards.Bill Baruch, president of Blue Line Futures, told CNBC's "Trading Nation" on Thursday what investors can expect next. Here's what he said.
- · A bearish inventory report earlier in the week pushed oil down to its lowest level since June, but crude bulls still have reasons to feel good. For instance, it's easy to forget crude oil is still trading near multiyear highs, with a gain of 9 percent year to date and 40 percent in the last 12 months.
- · One of the biggest stories weighing on crude may be set to dissipate and take some pressure off the commodity: trade tension between the U.S. and China. We may see meaningful headway on trade over the coming weeks, and fears of slowing growth in China may be alleviated.
- · My biggest concern, however, is spare capacity. Saudi Arabia promised to ramp up crude production in July, but it actually fell 200,000 barrels per day. Still, the U.S. estimated that production in the lower 48 states has stalled over the last three weeks, and tighter spare capacity can be extremely bullish.
- · During this seasonally weak time for crude, investors should look to buy pullbacks; the technical picture should support this strategy. There is tremendous support from $62.50 to $64.50 per barrel, and oil should be positioned to rally back up to between $70 and $80 per barrel later this year. The key level to the downside would be $62.
Bottom line: Despite a 3 percent decline in crude oil this week, Baruch sees the commodity surging into year-end.
‘More volatility’ expected as Iran sanctions set to prompt wild swings in oil prices, CEO says --A shipping revolution and a U.S. plan to impose targeted crude sanctions against Iran is likely to prompt wild swings in the oil price over the coming months, Vopak's chief executive told CNBC on Friday.Energy market participants are currently seen weighing bullish factors that include potential supply disruptionsto Iranian crude exports against more bearish indicators, such as the darkening global economic outlook and a resurgent U.S. dollar.International benchmark Brent crude traded at around $72.07 on Friday afternoon, up almost 1 percent, while U.S. West Texas Intermediate (WTI) stood at $65.77, up more than 0.5 percent."With new sanctions coming into play and also the IMO 2020, we see there is more volatility and therefore more opportunities to trade. So, we see our customers taking, slowly but surely, positions for that to happen," Eelco Hoekstra, CEO of Vopak, told CNBC's "Squawk Box Europe" on Friday.On January 1, 2020, the International Maritime Organization (IMO) will enforce new emissions standards designed to significantly curb pollution produced by the world's ships.The rule changes — which one leading energy analyst recently described as the "biggest in the history of the market" — are seen as a source of great concern for some of the world's largest oil producers. That's because global energy and shipping industries are thought to be ill-prepared for the new measures.Further to the IMO's changes, external observers are particularly concerned about the supply disruptions caused by Washington's plan to impose further sanctions against Iran in November. Tehran is OPEC's third-largest oil producer — behind Saudi Arabia and Iraq — and currently pumps around 3.65 million barrels per day, according to Reuters data.
U.S. Drillers Turn On The Brakes—Rig Count Remains Unchanged - Baker Hughes reported no change to the number of active oil and gas rigs in the United States on Friday. Oil and gas rigs stayed at 1,057, according to the report, with the number of active oil rigs and the number of gas rigs staying the same. The oil and gas rig count is now 111 up from this time last year. Oil prices had been trading up earlier on Friday, but prices were still on track to end the week in the red. In fact, this week marks the seventh weekly loss as trade wars, unrest in Turkey, and anticipated Iranian production loss sparked fears of waning global demand growth. Contrary to those fears, the International Energy Agency (IEA) reported last week that it foresaw a boost to global oil demand growth by 110,000 barrels per day to 1.5 million barrels per day for 2019.By 12:35am EDT, WTI was trading up $0.31 (+0.47%) at $65.77 per barrel, with Brent trading up $0.31 (+0.43%) at $71.74—both down week on week. Canada’s oil and gas rigs for the week rose by 3, bringing its total oil and gas rig count to 212, which is 2 fewer than this time last year, with a 1-rig gain for oil and a 2-rig gain for gas. The price of Western Canada Select (WCS) continued to fall this week, trading at $36.16 as of 12:52pm. EIA estimates for US production were up 100,000 barrels per day for the week ending Augusts 10, averaging 10.9 million bpd. By 1:08pm EDT, WTI and Brent were still trading up. WTI was trading up 0.26% (+$0.17) at $65.63. Brent crude was trading up 0.22% (+$0.16) at $71.59 per barrel.
Crude Oil Prices Settle Higher as US, China Mull Plans to Resolve Trade War - WTI crude oil prices ended lower for a third-straight week, despite settling higher Friday amid reports the U.S. and China are mapping out plans to resolve their trade war later this year. On the New York Mercantile Exchange crude futures for September delivery rose 45 cents settle at $65.91 a barrel, while on London's Intercontinental Exchange, Brent rose 0.63% to trade at $71.88 barrel. Chinese and U.S. negotiators are drawing up plans for talks between President Donald Trump and Chinese counterpart Xi Jinping in November to end their trade war, according to the Wall Street Journal. Oil prices were also lifted by signs of a slowdown in domestic output, despite data this week showing domestic producers increased production for the first time in three weeks. Oilfield services firm Baker Hughes reported on Friday that the number of U.S. oil drilling rigs in operation was unchanged at 869. Yet the rise in oil prices proved to be too little, too late amid heavy losses during the week on the back of rising U.S. inventories and concerns slowing growth in emerging markets and China would dent oil demand. Inventories of U.S. crude rose by 6.805 million barrels for the week ended Aug. 10, confounding expectations for a draw of 2.449 million barrels, according to data from the Energy Information Administration (EIA). The unexpected build in crude supplies emerged as imports rose by about 1.341 million barrels a day (bpd), while exports fell by 2.58 million bpd, data from EIA showed.
A Tough Week For Oil Markets - Oil posted steep losses mid-week on sudden concerns about global economic stability. Turkey’s currency crisis has raised fears of destabilization in emerging markets. With higher financial risks in mind, traders sold off oil. The EIA reported a 6.8-million-barrel increase in crude stocks this week, sending prices down on Wednesday. The abnormally large build sent a shudder through the oil market, raising the prospect of a slowdown. The Turkish lira crisis has put concerns about the health of the global economy front and center. Bloomberg says that if the economy falters, it will show up in timespreads for oil futures. “Crude oil prices and the crude curve structure are typically the indicator which picks up all the demand side factors and all the supply side factors into one number,” said Bjarne Schieldrop of SEB. For much of 2018, Brent futures were in a state of backwardation. The recent flip into contango – in which front month contracts trade at a discount to longer-dated futures – is a bearish sign. The plunge in the lira has infected several other emerging market currencies, most notably, Argentina’s peso and India’s rupee. That makes oil vastly more expensive in those countries, which ultimately could undercut demand. “Higher oil prices paired with a weakening domestic currency spells trouble for major emerging market oil demand growth countries like India, where consumers are already paying near record levels for retail petrol,” said Michael Tran, global energy strategist at RBC Capital Markets LLC. A new round of protests by workers at Libya’s key Zawiya oil export terminal threaten to disrupt production at the Sharara oil field, according to S&P Global Platts. Libya has succeeded in restoring production after previous events, pushing output back above 1 mb/d. But the latest protests could shut in the 340,000-bpd Sharara field this weekend. “We are expecting a complete shutdown [at Sharara] because of some problems at Zawiya refinery. Tomorrow a tanker is due but maybe loading will be stopped by the guys causing the problems,” a source at the Sharara field said, according to S&P Global Platts.
Analysts: Oil Price Rise to Drive Up Drilling Globally - The rise in oil prices will continue to drive up drilling activity globally over the second half of the year and 2019, according to oil and gas analysts at Fitch Solutions Macro Research. The rise in oil prices is feeding through into higher spending in the oil and gas sector and will continue to drive up drilling activity globally over the second half of the year and 2019, according to oil and gas analysts at Fitch Solutions Macro Research. “Globally, rotary rig counts have averaged 183 rigs higher in the year to date, compared to the same period last year,” the analysts said in a report sent to Rigzone on Tuesday. “The majority of additions have been made in North America, as shale developments continue to pick up pace. Internationally, the rig count has averaged 23 rigs higher, but performance has been widely varied between the different regions,” the analysts added. Fitch Macro Solutions Research analysts said they expect “continued strong growth in US shale, with producers set to add around 1.25 million barrels per day of crude and condensates over 2018 on an annual average basis”. In the report, the Fitch Macro Solutions Research representatives also stated that “there is a shift underway away from gas and towards oil-directed drilling”. “When oil prices decline, both oil-and gas-directed rig counts tend [to] fall, due to the outsize impact of oil revenue on capex [capital expenditure]. However, due to a number of factors, including differences in cost and contracting structures, gas-directed drilling tends to face less downside pressure overall,” the analysts said. “As oil prices continue to recover, and investor confidence with them, we expect the focus to swing back towards oil over the coming years. However, we view the shift as a cyclical and not a structural one, with secular trends in policy, pricing and technology strongly favoring gas over a longer-term (multi-decade) horizon,” the analysts added.
Saudi Arabia Weighs Larger Tesla Stake as Part of Plan to Make Electric Cars --Saudi Arabia’s desire to take a big stake in Tesla Inc. reflects its ambitious plan to build a base in the kingdom for electric-car production and diversify away from oil. Its sovereign-wealth fund is considering raising its nearly 5% holding in Tesla, people familiar with the matter said. Discussions among Saudi officials about increasing the Public Investment Fund’s stake accelerated after Tesla Chief Executive Elon Musk last week proposed to take the car company private in a tweet, the people said.On Monday, Mr. Musk said in a blog post that he had been in discussions with the fund since early last year about a major investment that would help Tesla go private. In recent months, executives from PIF have approached Tesla multiple times about investing in the company, the people said. It’s unclear whether the Saudi fund is actively in talks with Mr. Musk about a plan to take the auto maker private, and whether it would have the financing available to do so. Two people familiar with PIF’s finances said they doubt there are any serious discussions under way about the fund taking a significantly larger stake in Tesla. Indeed, the fund is struggling to find ways to finance its existing commitments. Still, a deal with Tesla would represent an extraordinary wager on technologies that compete with Saudi Arabia’s biggest generator of income: oil. Tesla’s electric vehicles, if manufactured inside the kingdom, would complement other technology investments and create a base of industry that some Saudi officials are calling the “Grand Vision” of the future, said one person familiar with the matter. Mr. Musk’s company also encompasses SolarCity, a supplier of solar panels and batteries. Saudi Arabia has said it will build a massive solar-power generation project that would replace oil-and-gas-generated electricity and create a solar-panel and battery manufacturing hub in the Middle East. The country’s plans go beyond the solar project and electric cars. It also wants to build a city in the desert called Neom, which would be powered by renewable energy and showcase robots and driverless cars. Officials hope the plan will draw global technology investment and innovation.
Saudi Crackdown On Canada Could Backfire -- Like many spats these days, the Saudi Arabia/Canada one started with a tweet. Canada’s Foreign Minister Chrystia Freeland called for the release of Samar Badawi, a women’s rights activist who is the sister of jailed blogger Raif Badawi, whose wife is a Canadian citizen. The arrests had taken place in OPEC’s largest producer and leading exporter Saudi Arabia, which has amassed its wealth from oil and now looks to attract foreign investors as it seeks to diversify its economy away from too much reliance of crude oil sales.Canada’s foreign ministry’s global affairs office urged “the Saudi authorities to immediately release” civil society and women’s rights activists.Saudi Arabia - often criticized for its far from perfect human rights and women’s rights record - didn’t take the Canadian urge lightly. Saudi Arabia expelled the Canadian ambassador, stopped direct Saudi flights to Canada, stopped buying Canadian wheat, ordered Saudi students and patients to leave Canada, froze all new trade and investment transactions, and ordered its wealth funds to sell their Canadian stock and bond holdings in a sweeping move that surprised with its harshness many analysts, Canada itself, and reportedly, even the U.S.The Saudi reaction shows, on the one hand, the sensitivity of the Kingdom to criticism for its human rights record. On the other hand, it sent a message to Canada and to everyone else that Saudi Arabia won’t stand any country meddling in its domestic affairs, or as its foreign ministry put it “an overt and blatant interference in the internal affairs of the Kingdom.”The Saudi reaction is also evidence of Crown Prince Mohammed Bin Salman’s harsher international diplomacy compared to the previous, ‘softer’ diplomacy, analysts say. Saudi Arabia is also emboldened by its very good relations with the current U.S. Administration, and picking a fight with Canada wouldn’t have happened if “Trump wasn’t at the White House,” Haizam Amirah-Fernández, an analyst at Madrid-based think tank Elcano Royal Institute, told Bloomberg.The United States hadn’t been warned in advance of the Saudi reaction to Canada and is now trying to persuade Riyadh not to escalate the row further, a senior official involved in talks to mediate the dispute told Bloomberg. The row, however, will not affect crude oil exports from the Kingdom, Saudi Energy Minister Khalid al-Falih has said, adding that Riyadh’s policy has always been to keep politics and energy exports separate.
Thousands attend funerals of children killed in Yemen bus attack --Thousands of people gathered in Yemen's war-ravaged city of Saada on Monday for the funerals of 51 people, including 40 children, who were killed in air strikes by a Saudi-UAE military alliance, backed by the US. Scores of cars covered in green, which is a hugely symbolic colour in Islam, transported the victims' coffins from a hospital morgue to a large square for funeral prayers, in a ceremony which was attended by several high-ranking Houthi officials. Mohammed Ali al-Houthi, who has a $20 million bounty on his head, slammed the killings as a "crime by America and its allies against the children of Yemen". The funerals were supposed to take place on Saturday - in Islam, the dead should be buried as soon as possible. However, the Houthis, who control Saada province and large parts of north Yemen, said such gatherings could be targeted by further raids. Mourners carried pictures of the 40 children killed, while Al-Masirah, a pro-Houthi TV network, broadcast images of small graves being dug at a cemetery where the children were to be buried. "My son went to the market to run house errands and then the enemy air strike happened and he was hit by shrapnel and died," said Fares al-Razhi, mourning his 14-year-old son."For my son, I will take revenge on Salman and Mohammed Bin Zayed," he said, referring to the leaders of Saudi Arabia and the United Arab Emirates. With logistical support from the US, Saudi Arabia and the UAE have carried out attacks in Yemen since March 2015 in an attempt to reinstate the internationally recognised government of President Abu-Rabbu Mansour Hadi. The strikes have failed to reverse thei Houthis' gains, and instead, made Yemen the worst humanitarian crisis in more than 50 years.
Guided Bomb Fragments At Site Of Yemen Bus Airstrike Trace Back To Lockheed Martin - A prominent Yemeni journalist who throughout the war has been instrumental in getting images and information out of the country ahead of Western journalists has photographed and examined fragments from one of the exploded missiles found at the site of the US-Saudi coalition airstrike on a school bus in Yemen, which left as many as 50 people dead and 63 injured — the vast majority of which were children. The image of the missile fragment, believed to be among those that scored a direct hit on the bus full of children traveling through Dahyan market in Saada province last Thursday, appears to be a US-made MK-82 guided bomb produced by Lockheed Martin.Ben Norton, an American journalist among the first to track down publicly available government contract information showing the MK-82's likely origins, said of the bomb fragment imagery: "Yemeni journalists found this fragment of the bomb Saudi Arabia dropped on a school bus full of children in Yemen. It's a US-made MK-82 guided bomb, which has been used in previous attacks on Yemeni civilians. The cage code on the bomb is Lockheed Martin's." The MK-82 is a 500-pound air dropped guided bomb which US Air Force and military publications previously touted as "causing the least amount of collateral damage" — US defense contractors have over the past few years sold the MK-82 to Saudi Arabia under contracts worth tens of millions of dollars. The CAGE Code, or Commercial and Government Entity Code, is a number assigned to suppliers of various government or defense agencies which provides a standardize method to track military items to a given facility at a specific location. According to one defense contracting consultation site, The Department of Defense’s Defense Logistics Agency, (DLA) assigns the five-character ID and uses alpha numeric identifier is assigned to entities located in the United States and its’ territories.Ben Norton says the Cage Code on the fragment reportedly found at the site traces to US government contractor Lockheed Martin.The code on the panel fragment in the photograph reads: 94271. Ben Norton further tracked down specific contracts through 2016 and 2017 showing that Lockheed Martin/General Dynamics is the key supplier of the MK-82 500-pound bombs to the Saudi military (in 1997 General Dynamics acquired Lockheed's Armament Systems and Defense Systems productions divisions).
Saudi Arabia and Israel are killing civilians – and Britain is complicit - Will not even the massacre of children in Yemen end the silence over the murderous complicity of the British government? They were little kids on a bus on the way back from a picnic, no doubt laughing and raucous as large groups of children tend to be, and then they were burned to death. At least 29 children were among the 43 slaughtered, an atrocity perpetrated by the aircraft of Saudi Arabia and its Gulf allies. According to the Campaign Against Arms Trade, our government has supplied the grotesque Saudi dictatorship with £4.7bn worth of arms since the war in Yemen began. Aircraft, helicopters, drones, bombs, missiles: all supplied by UK plc to be quite possibly dropped on the heads of children laughing on the way back from a picnic. Just months ago, the British government feted the Saudi dictator Mohammed bin Salman: unveiling a joint £100m aid deal, granting this tyranny humanitarian PR, while BAE Systems announced the sale of another 48 Typhoon jets. It gets worse: British military personnel are directly involved in helping the Saudi war effort – to what extent remains intentionally murky. Thousands have died, mostly at the hands of the Saudi-led forces we are arming; millions have been displaced; and the country has been left on the verge of famine. Yet where is the national outrage? Where is the wall-to-wall news coverage about these horrors committed in our name? The unforgivable failure of the media to hold the British government to account has left most of the population unaware that this war is even happening. If the culpable nation were deemed a western enemy – such as Iran – there would have been calls for US-led military intervention to stop the slaughter long ago. But it’s our good friends and allies, the head-chopping extremism-exporting Saudi dictatorship, and so both the silence and the killing continues.
Explosion at makeshift arms depot kills at least 69 people in Syria - At least 69 people, including 12 children, have been killed after an explosion at what is thought to be a makeshift arms depot inSyria.Dozens more are still missing with the death toll expected to rise following the blast in the town of Sarmada in Idlib province.“Buildings full of civilians were reduced to rubble,” one White Helmets rescuer Hatem Abu Marwan was quoted as telling the AFP news agency. It is thought the munitions depot may have been created by an arms trafficker within a five-storey residential building. Idlib is the last major rebel stronghold in war-torn Syria and is widely expected to be the next target which the country’s armed forces attempt to retake.In recent months, the government, led by president Bashar al-Assad and backed by Russia and Iran, has made major advances in its offensive against a number of rebel groups.After Sunday’s explosion, rescuers used bulldozers to remove the rubble and pull out trapped people.Many of the dead and the injured are believed to have been Syrians already displaced by the civil war from the central Homs province. But the UK-based Syrian Observatory for Human Rights said that there were dozens more people missing. The cause of the explosion was not immediately known.
Syria – Pentagon Plants High ISIS Numbers To Justify Occupation -- The U.S. aim in Syria is still 'regime change'. The Pentagon has made it clear that it wants to stay in the country even after the Islamic State vanished. A little propaganda trick is now used to create a justification for its continuing occupation.The report by the UN Security Council's Sanctions Monitoring Team on ISIS, in parts discussed here, includes a number that smells of bullshit and manipulation: 3. Some Member States estimate the total current ISIL membership in Iraq and the Syrian Arab Republic to be between 20,000 and 30,000 individuals, roughly equally distributed between the two countries. Among these is still a significant component of the many thousands of active foreign terrorist fighters.2 Footnote 2 gives as source: 2 Member State information. The high number given by a "Member State" exceed all prior assessments. The original strength of ISIS was estimated as a few thousand and it swelled as it took more land and incorporated local auxiliary forces and newly arriving foreign fighters. In September 2014, when ISIS was near its peak, the CIA estimated a total of 31,000 ISIS fighters in Syria and Iraq. The number shrank as ISIS was kicked out of more places it earlier occupied while it lost ten thousands of its fighters to Russian, Syrian, Iraqi and U.S. bombs, artillery and other military means. In July 2017 the commanding general of U.S. Special Forces said that 60 to 70,000 ISIS fighters had been killed. The numbers in the UN Sanctions Monitor report simply make no logical sense. It is also contradicted by earlier estimates that put the number of current ISIS fighters in the low thousands. In December 2017 President Trump claimed that only "1,000 or so" fighters remained in Iraq and Syria. The U.S. is justifying its occupation of north-east Syria by claiming to fight ISIS under the legal cover of two UN Security Council resolutions. Now, as ISIS in Syria has shrunk to a few dozens of fighters, that justification is wearing thin. It is immensely important for the Pentagon to present a high number, as ISIS is its only legal justification to stay in Syria. It is doubtful that Congress would agree to a prolonged occupation if ISIS vanished.
The next drone assassination - There is no doubt that a little-known, modestly funded group could launch a drone assassination. Governments, of course, have for years developed military drones, more formally called unmanned aerial vehicles or UAVs. (The United States deploys lethal drones, and Iran’s drone program has been decades in the making, to cite just a couple of examples.)But while governments pour their millions into deadly UAVs, it is relatively cheap and easy for anyone to adapt a commercially available drone into a weapon. Beginning around 2016, militant groups in Iraq, Syria, and Ukraine began to use modified commercial drones for offensive strikes. Last year, writing in the Bulletin, Michael Horowitz and Itai Barsade of Perry World House explored what militant groups do with drones:In addition to dropping munitions on unsuspecting soldiers, they can strap explosives to drones to generate devastating effects. For example, militants can crash an explosive-laden drone into a target, creating a sort of MacGyvered cruise missile. Alternatively, militants can booby-trap drones. In one case, Kurdish fighters trying to examine a grounded drone died when it exploded. In Ukraine, Russian-backed separatists use drones to target military infrastructure and cause immense damage. For instance, they used a commercial drone to drop a Russian-made thermite hand grenade on an ammunition depot in Eastern Ukraine, causing an inferno and close to $1 billion in damage. Put simply, commercial drones are enabling militant groups to engage in a more diverse array of missions to advance their goals against militarily superior forces. While drones have not yet changed the outcome of a war, they are more than a serious annoyance for conventional armies, which must strategize ways to fend them off. “Stopping drone proliferation is not an option because of the ubiquity of the technology,” Horowitz and Barsade note. And as Wired reporter Brian Barrett writes, “most good drone defenses come with drawbacks and caveats.” Which means we won’t wait long for news of another drone attack by soldiers who are part of no army.
Iran test-fired anti-ship missile during drills last week: U.S. source (Reuters) - Iran test-fired a short-range anti-ship missile in the Strait of Hormuz during naval drills last week that Washington believes were aimed at sending a message as the United States reimposes sanctions on Tehran, a U.S. official said on Friday. The official, however, did not suggest that such a missile test was unusual during naval exercises or that it was carried out unsafely, noting it occurred in what could be described as Iranian territorial waters in the Strait. Iran’s Revolutionary Guards confirmed on Sunday it had held war games in the Gulf over the past several days, saying they were aimed at “confronting possible threats” by enemies. U.S. Army General Joseph Votel, head of the U.S. military’s Central Command, said earlier this week the scope and scale of the exercises were similar to ones Iran had carried out in the past. But the timing of this particular set of exercises was designed to get Washington’s attention. “It’s pretty clear to us that they were trying to use that exercise to send a message to us that as we approach this period of the sanctions here, that they had some capabilities,” Votel told reporters at the Pentagon. Iran has been furious over U.S. President Donald Trump’s decision to pull out of an international agreement on Iran’s nuclear program and re-impose sanctions on Tehran. Senior Iranian officials have warned the country would not easily yield to a renewed U.S. campaign to strangle Iran’s vital oil exports. Last month, Iran’s Supreme Leader Ayatollah Ali Khamenei backed President Hassan Rouhani’s suggestion that Iran may block Gulf oil exports if its own exports are stopped. Votel said the U.S. military was keenly aware of Iran’s military activities. “We are aware of what’s going on, and we remain ready to protect ourselves as we pursue our objectives of freedom of navigation and the freedom of commerce in international waters,” Votel said.
China says business ties with Iran no harm to any other country (Reuters) - China’s business and energy ties with Iran do not harm the interests of any other country, the country’s Foreign Ministry said, after U.S. President Donald Trump said companies doing business with Iran would be barred from the United States. China has already defended its commercial relations with Iran as open and transparent as U.S. sanctions on Iran took effect despite pleas from Washington’s allies. In a statement released late on Friday, China’s foreign ministry reiterated its opposition to unilateral sanctions and “long-armed jurisdiction”. “For a long time, China and Iran have had open, transparent and normal commercial cooperation in the fields of business, trade and energy, which is reasonable, fair and lawful,” it said. “This does not violate United Nations Security Council resolutions or China’s promised international obligations, nor does it harm the interests of any other country, and should be respected and protected,” the ministry added. Using sanctions at the slightest pretext or to threaten anyone won’t resolve the problem, it said. “Only dialogue and negotiations are the true path to resolving the issue,” the ministry added. China, Iran’s top oil customer, buys roughly 650,000 barrels a day of crude oil from Tehran, or 7 percent of China’s total crude oil imports. At current market rates, the imports are worth some $15 billion a year. State energy firms CNPC and Sinopec have invested billions of dollars in key Iranian oil fields such as Yadavaran and North Azadegan and have been sending oil to China. European countries, hoping to persuade Tehran to continue to respect the nuclear deal, have promised to try to lessen the blow of sanctions and to urge their firms not to pull out. But that has proven difficult, and European companies have quit Iran, arguing that they cannot risk their U.S. business.
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