oil prices continued to rally for a second week on concerns over global supply this past week, stalling only after Trump tweeted threats towards OPEC producers on Thursday...after rising 1.6% to $68.99 a barrel in volatile trading last week, contract prices for US crude for October delivery slipped 8 cents to $68.91 a barrel on deepening US-China trade-tensions on Monday, as Trump telegraphed his intention to impose a fourth round of tariffs on Chinese imports, and the Chinese vowed to retaliate...nonetheless, oil prices still rose 94 cents to $69.85 a barrel on Tuesday on signs that OPEC was not prepared to raise oil output to cover shrinking exports from Iran, and as the Saudis signaled they'd be comfortable with prices above $80 per barrel...oil prices then surged $1.27 to $71.12 a barrel on Wednesday after the EIA reported the fifth consecutive weekly decline in U.S. crude oil inventories amid ongoing global supply concerns over U.S. sanctions on Iran...however, oil prices fell back from early gains to close 32 cents lower as the October oil contract expired at $70.80 a barrel on Thursday, after Trump accused Mideast producers of pushing oil price higher, warning that they need to keep crude prices lower because of the military protection the U.S. provides for the region...now quoting oil contract prices for November delivery, which had closed Thursday 45 cents lower at $70.32 a barrel, oil prices reversed their Trump tweet losses and rose to as high as $71.80 a barrel on Friday, but then pared that gain by more than a dollar to close just 46 cents higher at 70.78 a barrel on a report that oil producers planned to increase production by another 500,000 barrels a day in a joint ministerial committee meeting in Algeria this weekend...hence the widely quoted price of oil ended the week with an increase of $1.79 a barrel, or 2.6%, while the November oil contract, which had closed last week at $68.77 a barrel, ended $2.01 a barrel higher, an increase of nearly 3%...
in the wake of Trump's tweets about the military protection the U.S. provides for the Mideast oil producers, Securing America's Future Energy, a think tank that advocates reduced U.S. dependence on oil, released a study showing that the US military spends about $81 billion a year to protect oil supplies around the globe...since that $81 billion a year is probably an incomprehensible number to most readers, we figured some context as it relates to oil was appropriate...as we saw in OPEC's report last week, global oil production averaged around 96 million barrels of oil per day through 2017, and that has increased to around 98 million barrels of oil per day so far this year...,since that's a daily output amount, we multiply 98 million times 365 to find that global oil production has been running at about 35.77 billion barrels annually...that means that the $81 billion a year we spend on military to protect oil works out to $2.26 a barrel for every barrel of oil produced worldwide...however, since that overseas military spending isn't really to protect oil being produced stateside, another way of looking at that military expenditure would be to look at just our oil imports, which have been averaging around 8 million barrels per day...using the same math, that means we're spending $27.74 a barrel to protect our oil imports... however, since the majority of our oil imports come from Canada and other allies, we can assume that the military expenditures to protect that portion of our imports are negligible...so if we look at just our oil imports from OPEC countries, which have been averaging 3.1 million barrels of oil per day over recent years, we could say that our military outlays to protect those oil imports are running roughly $71.50 a barrel, or more than the price of the oil itself...
natural gas prices were also higher this week, to a degree that surprised some analysts, as the news was relatively bearish, with widespread power outages and cooler weather in the wake of Hurricane Florence reducing demand...natural gas prices for October delivery rose 11.9 cents on Tuesday as the storm was downgraded to a tropical depression, and then rose another 6.8 cents with the storage report on Thursday in rising 21 cents to $2.977 per mmBTU over the week, an increase of nearly 7.6%.....the week's natural gas storage report from the EIA for week ending September 14th indicated that natural gas in storage in the US rose by 86 billion cubic feet to 2,722 billion cubic feet during that week, which left our gas supplies 672 billion cubic feet, or 19.8% below the 3,394 billion cubic feet that were in storage on September 15th of last year, and 586 billion cubic feet, or 17.7% below the five-year average of 3,308 billion cubic feet of natural gas that are typically in storage after the second week of September....this week's 86 billion cubic feet increase in natural gas supplies was a bit more than the 83 billion cubic feet increase that a S&P Global Platts' analysts survey had expected, and it was also above the 76 billion cubic foot average of natural gas that have typically been added to storage during the second week of September in recent years, in just the second above average inventory increase in the past eleven weeks...natural gas storage facilities in the Midwest saw a 36 billion cubic feet increase this week, while supplies in the East increased by 30 billion cubic feet and are now just 11.5% below normal for this time of year...on the other hand, the South Central region saw a 12 billion cubic foot injection as their natural gas storage deficit increased to 23.6% below their five-year average, while just 5 billion cubic feet cubic feet of gas were added to storage in the Pacific region, where natural gas supplies are 22.3% below normal for this time of year....analysts from Platts are now forecasting that natural gas in storage will peak at 3.26 trillion cubic feet before withdrawals begin in early November, which would be the lowest level to start the heating season since 2003, when pre-winter natural gas supplies peaked at 3.18 trillion cubic feet...
The Latest US Oil Data from the EIA
this week's US oil data from the US Energy Information Administration, covering the week ending September 14th, showed that despite higher oil imports and a sharp pullback in oil refining, we again had to withdraw more oil from our commercial crude supplies for the fifth week in a row, because our oil exports jumped at the same time... our imports of crude oil rose by an average of 433,000 barrels per day to an average of 8,024,000 barrels per day, after falling by an average of 123,000 barrels per day the prior week, while our exports of crude oil rose by an average of 539,000 barrels per day to an average of 2,367,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 5,657,000 barrels of per day during the week ending September 14th, 106,000 fewer 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 reportedly up by 100,000 barrels per day to 11,000,000 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 16,657,000 barrels per day during the reporting week...
meanwhile, US oil refineries were using 17,415,000 barrels of crude per day during the week ending September 14th, 443,000 barrels per day less than the amount of oil they used during the prior week, while over the same period 294,000 barrels of oil per day were reportedly being pulled out of the oil that's in storage in the US....hence, this week's crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 464,000 fewer barrels per day than what refineries reported they used during the week....to account for that disparity between the supply of oil and the consumption of it, the EIA needed to insert a (+464,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that is labeled in their footnotes as "unaccounted for crude oil"...(for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer)....
further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports rose to an average of 7,704,000 barrels per day, now 6.9% more than the 7,209,000 barrel per day average that we were importing over the same four-week period last year....the 294,000 barrel per day decrease in our total crude inventories was again all withdrawn from our commercially available stocks of crude oil, as the amount of oil in our Strategic Petroleum Reserve still remained unchanged, even as a sale of 11 million barrels from those reserves to Exxon et al was closed two weeks ago....this week's crude oil production was reported as being up by 100,000 barrels per day to 11,000,000 barrels per day because a rounded 100,000 barrels per day increase to 10,500,000 barrels per day in the output from wells in the lower 48 states combined with a 18,000 barrels per day increase in oil output from Alaska was only enough to raise the national total, which is now being rounded to the nearest 100,000 barrels per day, by 100,000 barrels per day to 11,000,000 barrels per day....US crude oil production for the week ending September 15th 2017 had recovered to 9,510,000 barrels per day after Hurricane Harvey, so this week's rounded oil production figure was 15.7% above that of a year ago, and 30.5% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...
meanwhile, US oil refineries were operating at 95.4% of their capacity in using 17,415,000 barrels of crude per day during the week ending September 14th, down from 97.6% the prior week, but still a refinery utilization rate higher than any in September over the prior 14 years....the 17,415,000 barrels per day of oil that were refined this week were again at a seasonal high, for the 15th out of the past 16 weeks, but not directly comparable to the 15,172,000 barrels of crude per day that were processed during the week ending September 15th 2017, when US refineries were still operating at a reduced 83.2% of capacity in the aftermath of Hurricane Harvey..
with the decrease in the amount of oil being refined this week, gasoline output from our refineries was likewise lower, decreasing by 114,000 barrels per day to 10,270,000 barrels per day during the week ending September 14th, after our refineries' gasoline output had increased by 169,000 barrels per day during the week ending September 7th...due to Hurricane Harvey's impact on refining, our gasoline production during the week is not comparable to that of a year ago, but this week's gasoline output was still 3.1% lower than what had been a record 10,602,000 barrels of gasoline that were produced daily during the pre-hurricane week ending August 25th of last year...meanwhile, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 79,000 barrels per day to a still high 5,457,000 barrels per day, after they had risen by 357,000 barrels per day over the prior two weeks...for a rough year over year comparison absent hurricane impacts, we'd note this week's distillates production was nearly 8% higher than the 5,055,000 barrels of distillates per day that were being produced during the week ending August 25th, 2017, so you can see that refineries have been producing more distillates vis a vis gasoline to catch up with the distillates shortfall....
with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week fell by 1,719,000 barrels to 234,150,000 barrels by September 14th, the 17th decrease in 30 weeks, but just the 18th decrease in 45 weeks, as gasoline inventories, as usual, were being built up over the winter months....our supplies of gasoline fell this week even as the amount of gasoline supplied to US markets fell by 115,000 barrels per day to 9,534,000 barrels per day, after falling by 85,000 barrels per day the prior week, because our imports of gasoline fell by 492,000 barrels per day to 561,000 barrels per day, while our exports of gasoline rose by 16,000 barrels per day to 696,000 barrels per day...but even after this week's decrease, our gasoline inventories were still at a seasonal high, 8.3% higher than last September 15th's level of 216,185,000 barrels, and roughly 9.3% above the 10 year average of our gasoline supplies for this time of the year...
meanwhile, even with the decrease in our distillates production, our supplies of distillate fuels were nonetheless higher, increasing by 839,000 barrels to 140,122,000 barrels during the week ending September 14th, the 13th increase in 17 weeks...our distillates supplies increased even though the amount of distillates supplied to US markets, a proxy for our domestic demand, rose by 864,000 barrels per day to 4,152,000 barrels per day, after falling by 1,002,000 barrels per day last week in a post Labor Day adjustment....in addition, our exports of distillates fell by 91,000 barrels per day to 1,326,000 barrels per day, while our imports of distillates rose by 91,000 barrels per day to 141,000 barrels per day, thus adding to supplies....moreover, this week's increase means that our distillate supplies have recovered from the 14 year seasonal low that they hit 7 weeks ago, as they are now fractionally higher than the 138,859,000 barrels that we had stored on September 15th, 2017, even as they remain roughly 4.5% lower than the 10 year average of distillates stocks for this time of the year...
finally, because of the ongoing elevated level of our oil exports, our commercial supplies of crude oil decreased for the 21st time in 2018 and for the 32nd time over the past year, falling by 2,057,000 barrels during the week, from 396,194,000 barrels on September 7th to 394,137,000 barrels on September 14th, our lowest supplies of crude oil since February 13, 2015...however, even though our crude oil inventories are now about 3.5% below the five-year average of crude oil supplies for this time of year, they are still roughly 18% above the 10 year average of crude oil stocks for the second week of September, because it wasn't early 2015 that our oil inventories first rose above 400 million barrels...but since our crude oil inventories have now been falling through most of the past year and a half, our oil supplies as of September 14th were 16.6% below the 472,832,000 barrels of oil we had stored on September 15th of 2017, 16.8% below the 473,966,000 barrels of oil that we had in storage on September 16th of 2016, and 6.6% below the 422,033,000 barrels of oil we had in storage on September 18th of 2015...
This Week's Rig Count
US drilling activity decreased for the first time in 4 weeks but for the seventh time in fifteen weeks during the week ending September 21st, as the steady increases in drilling for oil we saw with higher oil prices during the first part of this year have stalled since May, with oil futures' prices remaining in backwardation and the backlog of uncompleted wells increasing....Baker Hughes reported that the total count of rotary rigs running in the US decreased by 2 rigs to 1053 rigs over the week ending on Friday, which was still 118 more rigs than the 935 rigs that were in use as of the September 22nd report of 2017, but was down from the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began their attempt to flood the global oil market...
the count of rigs drilling for oil was down by one rig to 866 rigs this week, which was still 122 more oil rigs than were running a year ago, while it was 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 unchanged at 186 rigs for the third week in row, which was now down by 4 rigs from the 190 natural gas rigs that were drilling a year ago, and way down from the modern high of 1,606 natural gas rigs that were deployed on August 29th, 2008...in addition, one of the two rigs that had been drilling exploratory wells in central Ohio categorized as "miscellaneous" was shut down this week, thus equaling the count of one such "miscellaneous" rig that was deployed a year ago...
offshore drilling in the Gulf of Mexico was unchanged from last week at 18 rigs, which was down from the 19 Gulf of Mexico rigs active a year ago...however, two rigs continued to drill offshore from Alaska this week, so the total national offshore count is now at 20 rigs, which is thus up by a rig from last year's total of 19 offshore rigs, since a year ago there was no offshore drilling other than in the Gulf.....
the count of active horizontal drilling rigs was down by 2 rigs to 919 horizontal rigs this week, which was still 129 more horizontal rigs than the 795 horizontal rigs that were in use in the US on September 22nd of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...in addition, the directional rig count also decreased by 2 rigs to 69 directional rigs this week, which was also down from the 77 directional rigs that were in use during the same week of last year...on the other hand, the vertical rig count was up by 2 rigs to 65 vertical rigs this week, which was still down from the 68 vertical rigs that were operating on September 22nd 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 September 21st, the second column shows the change in the number of working rigs between last week's count (September 14th) and this week's (September 21st) count, the third column shows last week's September 14th active rig count, the 4th column shows the change between the number of rigs running on Friday and those on the equivalent weekend 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 15th of September, 2017...
it's pretty clear that this week's rig variance story can be summed up as 'Texas drilling is up and everywhere else is unchanged or down', although it does appear likely that the Granite Wash rig addition was on the Oklahoma side of the Texas panhandle border...we can note from the 4th column that 102 of the 122 rigs that were added in the past year were in the Permian basin of western Texas and southeast New Mexico, but it's also worth noting that the lion's share of that new drilling has been in the core Permian Texas Oil District 8, indicated as the Delaware basin, where 326 of the active Permian basin rigs are now located...that's an increase of 10 rigs from a week ago, as 5 Midland basin rigs, 4 in Texas District 7C and 1 in District 7B, were shut down at the same time...another oddity this week that's not apparent in the tables above is hidden in the two rig decrease in shown in Ohio's Utica shale; one of those idled rigs had been targeting oil, while the other was a miscellaneous rig that had been drilling an exploratory well into the Knox formation in Ashland county, not even a Utica shale well at all...the Utica shale natural gas rig count actually remained unchanged at 19 rigs, as the only natural gas rig addition was in Oklahoma's Arkoma Woodford, where an oil rig was shut down at the same time, resulting in the net no change you see above... also note that last week i missed noticing that a new rig had started drilling in South Dakota, in the first drilling that state had seen since November 2014...
DUC well report for August
Monday of this past week saw the release of the EIA's Drilling Productivity Report for September, which includes the EIA's August data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions...for the 23rd consecutive month, this report again showed an increase in uncompleted wells nationally in August, as both drilling of new wells and completions of those drilled increased....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 modest increases of uncompleted wells in the Anadarko basin of Oklahoma and 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 238, from 8,031 wells in July to 8,269 wells in August, again the highest number of such unfracked wells in the history of this report, and up 33% from the 6,227 drilled but uncompleted wells in August a year ago...that was as 1,520 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during August, up from 1,509 in July, while 1,282 wells were completed and brought into production by fracking, a increase of 24 well completions over the 1258 completions seen in July...at the August completion rate, the 8,269 drilled but uncompleted wells left at the end of the month represent a 6.5 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 August DUC well increases were predominantly oil wells, with most of those in the Permian basin...the Permian basin saw its total count of uncompleted wells rise by 211, from 3,419 DUC wells in July to 3,630 DUCs in August, as 636 new wells were drilled into the Permian but only 425 wells in the region were fracked...at the same time, DUC wells in the Anadarko basin region centered in & around Oklahoma rose by 34, from 992 DUC wells in July to 1026 DUCs in August, as 196 wells were drilled in the Anadarko basin during August, while 162 Anadarko wells were completed...over the same period, the number of DUC wells in the Eagle Ford of south Texas increased by 28 to 1,545, as 204 wells were drilled into the Eagle Ford while 176 Eagle Ford wells were fracked....in addition, the natural gas producing Haynesville shale of the northern Louisiana-Texas border region saw their uncompleted well inventory increase by 8 wells to 191, as 60 wells were drilled into the Haynesville during August, while 52 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 20 to 427, as 180 Niobrara wells were drilled while 200 Niobrara wells were being fracked...similarly, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 19 wells, from 718 DUCs in July to 699 DUCs in August, as 118 wells were drilled into the Marcellus and Utica shales, while 137 of the already drilled wells in the region were fracked....lastly, DUC wells in the Bakken of North Dakota fell by 4, from 755 DUC wells in July to 751 DUCs in August, as 126 wells were drilled into the Bakken in August while 130 drilled wells in that basin were completed....thus, for the month of August, DUCs in the 5 oil basins tracked by in this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) increased by 249 wells to 7,379 wells, while the uncompleted well count in the natural gas regions (the Marcellus, Utica, and the Haynesville) decreased by a net of 11 wells to 890 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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Six Permits Issued in Ohio's Utica – The Ohio Department of Natural Resources issued six permits to energy companies exploring oil and gas reserves in the Utica shale play for the week ended Sept. 15, the agency reported.Four permits were issued to Ascent Resources LLC to drill horizontal wells in Jefferson County, while Utica Resources Operating LLC received two permits for wells in Guernsey County.There were 18 rigs operating in the Utica as of Sept. 15, according to ODNR.As of that date, ODNR had issued 2,890 permits for wells in the shale play, which encompasses most of eastern Ohio. Of that number, 2,414 wells have been drilled and 2,022 of those wells are in production. There were no new permits issued in the northern Utica, which encompasses Mahoning, Columbiana and Trumbull counties. Nor were there new permits issued to companies exploring the Utica in neighboring Lawrence and Mercer counties in western Pennsylvania, according to the Pennsylvania Department of Environmental Protection.
Academy focuses on shale jobs — Rich Wright has been named director of the Utica Shale Academy. Wright replaces Eric Sampson, who was director of the community school since its inception in 2014. The school has locations at Southern Local and Columbiana high schools in Columbiana County. It offers welding in conjunction with the New Castle School of Trades and courses involved with the gas and oil industry, and Wright has been working with the USA board of directors and sponsor Jefferson County Educational Service Center to expand the program. “We’d like to expand by increasing our student options and one of those areas includes a stronger connection with NCST,” he said. They’re also looking at a technology-based partnership with Youngstown State University.” Current student enrollment is 45 participants between the main location at Southern Local and the Columbiana branch. About 50 students have graduated from USA since it began, with the largest class in 2018 at 22 people. USA provides curricula required by the Ohio Department of Education and includes a customizable digital curriculum allowing for acceleration or remediation, along with flexible scheduling. It also offers certification courses in SafeLand, OSHA10, First Aid and CPR, hydrogen sulfide (H2S) awareness and confined space certifications.
Pro- and anti-fracking groups clash at Ashland County Commissioners meeting - Anti-fracking activists and pro-oil and gas industry representatives converged Thursday at an Ashland County Commissioners meeting. George Stark, director of internal affairs for Cabot Oil and Gas's north region, gave a brief update on the status of his company's exploratory drilling in the southern part of the county. "You may already know, we have put three pads together in the county that are in various phases of development," Stark said. The company is looking for fossil fuels-- either oil or natural gas-- below the Utica Shale formation. Cabot plans to drill at least five exploratory wells by the end of the year. After drilling about a mile below the ground vertically and then about two miles horizontally, Cabot uses a process called hyraulic fracturing to extract the fuels. Stark said his company put together a pamphlet of information, which Cabot mailed to 5,000 landowners in the areas of the drilling sites. The pamphlet information also was placed as an advertisement in the local newspaper. Working with county Emergency Management Agency director Mark Rafeld, Cabot set up meetings and rig tours for 10 volunteer fire departments in the area to explain operations and prepare for any possible rig fires. "We believe we've hit all the fire departments that would either be primary or secondary," Stark said. Later in the meeting, Elaine Tanner, an organizer with Hayesville Community on Fracked Gas, questioned the county commissioners about the county's readiness to respond to any water contamination that could result from Cabot's activity. "I think we need to have somebody talk to people to say what happens when there's an emergency with our water. How do we find out? Who's going to be the one to come knocking on our door?" Tanner said. Tanner cited incidents of water contamination at other oil and gas drilling sites and presented a letter from an anti-fracking organizer in Susquehanna County, PA who wrote about contamination from Cabot's activities in that county. "If our auquifer is contaminated and all these residental wells out in the county are drawing from this auquifer and there's a breech, we need to know," Tanner said.
The Private Intelligence Firm Keeping Tabs on Environmentalists -- The flyer shows a mob of balaclava-clad activists dressed in black, lobbing bottles at an undefined target. They could be protesting anything, but for attendees at a petroleum industry conference in Houston earlier this year, it was pretty clear what the violent demonstrators were targeting: the fossil fuel industry. The scary image of protesters was distributed by Welund North America, a private intelligence firm that promises to help oil and gas operators mitigate the threat posed by an increasingly sophisticated activist movement. On the back of the flyer an anonymous testimonial reads, “Since subscribing to Welund we’ve dramatically increased our ability to pre-empt and better manage activist engagements and minimize reputational damage.” Logos—presumably of Welund’s clients—listed on the flyer include a who’s who of Big Oil and Gas: Royal Dutch Shell, Kinder Morgan, Duke Energy, Dominion, and Chevron. Welund has even secured contracts with the Canadian government. Welund is part of a deeply controversial cottage industry of private intelligence firms that has flourished in recent years. According to one estimate, the global industry is now worth about $20 billion, and the agencies—sometimes with just a handful of employees—are popping up everywhere from Israel to Africa to the United States. Recent revelations have shown that Black Cube, an Israeli firm, gathered intelligence on Obama administration officials in an effort to undermine the Iran nuclear deal. Christopher Steele, the co-founder of Orbis Business Intelligence, another private firm, was responsible for the famous Trump-Russia dossier.
Marcellus Shale Research Expanding to Include Second Well Site - The Marcellus Shale Engineering and Environmental Laboratory (MSEEL) plans to conduct more extensive testing to improve unconventional natural gas recovery at a new drilling site in Monongalia County, WV, to the west of its first site where research began three years ago.MSEEL is a partnership between the U.S. Dept. of Energy (DOE), West Virginia University, Ohio State University and Northeast Natural Energy. It is considered a cornerstone of the National Energy Technology Laboratory’s unconventional oil and gas program. DOE said the new research will primarily be aimed at improving gas recovery from horizontal drilling and hydraulic fracturing throughout the Appalachian Basin.Physical Scientist Robert Vagnetti, of the NETL, said the new wells, which will be drilled near Blacksville, WV, to the west of MSEEL’s first site at an industrial park in Morgantown, WV, will advance hydraulic fracture stimulation techniques that were pioneered by the partnership years ago. WVU and Northeast Natural were able to design stimulation zones or stages that optimized perforations around natural fractures in the shale at the Morgantown site. Some of the techniques, however, were deemed cost-prohibitive and researchers plan to use and compare new ones at the Blacksville site.
How slick water and black shale in fracking combine to produce radioactive waste --Radioactivity in fracking wastewater comes from the interaction between a chemical slurry and ancient shale during the hydraulic fracturing process, according to Dartmouth College research. The study, detailed in twin papers appearing in Chemical Geology, is the first research that characterizes the phenomenon of radium transfer in the widely-used method to extract oil and gas. "The stuff that comes out when you frack is extremely salty and full of nasties," said Mukul Sharma, a professor of earth sciences at Dartmouth and head of the research project. "The question is how did the waste become radioactive? This study gives a detailed description of that process." During fracking, a large proportion of the so-called "slick water" that is injected into the ground returns to the surface as highly toxic waste. In seeking to discover how radium is released at fracking sites, the research team combined sequential and serial extraction experiments to leach radium isotopes from shale drill core samples. For the study, the research team focused on rocks taken from Pennsylvania and New York locations of the Marcellus Shale. The geological feature is one of the major rock formations in the U.S. where fracking is being carried out to extract natural gas. The first research paper found that radium present in the Marcellus Shale is leached into saline water in just hours to days after contact between rock and water are made. The leachable radium within the rock comes from two distinct sources, clay minerals that transfer highly radioactive radium-228, and an organic phase that serves as the source of the more abundant isotope radium-226.
Frackers are Blundering thru WV, OH, & PA, Unrestrained in Bleeding Fossil Fuels -- George Ahern’s Op-Ed of August 29 has been the source of many guffaws here in Appalachia, where it is passed around among people far from Naples, Florida. It is written as though there was no negative side on the balance sheet of fracking.The industry uses technology developed at the Morgantown Energy Center (West Virginia) for the DOE and first tried by George Mitchell with government financial assistance. It is so financially insecure both Bloomberg and the New York Times carried articles about difficulty getting funding for new projects. One of those articles says, “Some of fracking’s biggest skeptics are on Wall Street. They argue that the industry’s financial foundation is unstable: Frackers haven’t proven that they can make money.” Fracking companies are going broke on a regular basis. Another quote from the same article, “The 60 biggest exploration and production firms are not generating enough cash from their operations to cover their operating and capital expenses. In aggregate, from mid-2012 to mid-2017, they had negative free cash flow of $9 billion per quarter. This article was published in the same month as Dr. Ahern’s. Only five of the top 20 fracking companies made more money than they spent in the first quarter of 2018! Some of the reasons are quite simple. Fracking expense is tremendous and the wells decline rapidly. Conventional wells produce for decades, fracked wells don’t pay to pump beyond 6 or 7 years, and production has gone down by half in a couple of years. All the production in the first year makes a selling point to investors, and the rest, conveniently, isn’t mentioned. Several times as much water is used as oil produced in oil wells, and several times as much water returns to the surface. Five thousand tanker truckloads of water must be taken from a source and then much of it pumped back underground. This causes earthquakes. Local Chamber of Commerce people benefit from the investment, and they love it. Rural people hate it when it arrives, and anyone concerned with it’s effect on the biosphere see mostly harm. Energy Return on Energy Invested (EROEI) is quite poor.
Construction resumes for Duke Energy-backed Atlantic Coast Pipeline - Federal regulators issued a letter Monday allowing construction to resume on the $6.5 billion Atlantic Coast Pipeline, a month after halting all work due to a federal court ruling vacating two required permits.ACP spokesman Aaron Ruby welcomed the news from the Federal Energy Regulatory Commission. “With FERC’s approval today, we are mobilizing our crews immediately to resume construction as authorized,” he says. “We are closely monitoring weather conditions across the project footprint and will of course only resume work in areas where it is safe to do so and where weather conditions permit,” he added, recognizing continued flooding and other issues in the wake of Florence, which made landfall as a Category 1 hurricane and is now a tropical depression. The Southern Environmental Law Center, which brought forth the court cases that led the 4th Circuit Court of Appeals to invalidate environmental permits from the U.S. Fish and Wildlife Service and the National Parks Service, has raised questions now about how quickly those problems were supposedly resolved. “These two agencies (Fish and Wildlife and National Parks) got into trouble once for making rushed decisions on a political timetable,” says SELC lawyerD.J. Gerken. “The agencies turned very fast and, as far as we can tell, without much concern for whether they were done correctly.” He would not disclose if SELC plans a legal challenge to the FERC order, saying his organization is still reviewing it. But Gerken says he expects a decision to be made quickly. The FERC initially approved pipeline construction for sections in West Virginia to start in May. Construction for segments in North Carolina was approved later in the summer. The appeals court ruled this spring that environmental permits issued by the Fish and Wildlife Service — for protection of endangered species — and the National Parks Service — for construction crossing the Blue Ridge Parkway — were invalid. In August, the court ruled that construction could not continue without the permits. . On Aug. 10, the FERC ordered all construction to halt. It said allowing construction to go ahead without the permits “poses the risk of expending substantial resources and substantially disturbing the environment by constructing facilities that ultimately might have to be relocated or abandoned.”
Atlantic Coast Pipeline Work Restarts as Opponents Decry 'Rushed Decisions' - The Federal Energy Regulatory Commission (FERC) ruled Monday that work could resume on the Atlantic Coast Pipeline, which opponents call "unnecessary and a boondoggle," the Charlotte Business Journal reported.Work on the controversial pipeline halted last month after a federal appeals court vacated two permitsrequired for the project to complete its 600 mile route from West Virginia, through Virginia, to North Carolina.The pipeline is a project backed by Duke Energy, Dominion Energy and Southern Co. to carry fracked natural gas.The permits in question, from the Fish and Wildlife Service (FWS) and the National Park Service (NPS) were redone Sept. 11 and 14 respectively, the FERC said in its letter authorizing construction. "We fixed those issues and FERC lifted our stay. So our folks are back to work, starting today," Dominion Resources State Policy Manager Bob Orndorff told the West Virginia state legislature Tuesday, MetroNews reported. But pipeline opponents were skeptical of the new permits. "These two agencies got into trouble once for making rushed decisions on a political timetable," Southern Environmental Law Center (SELC) lawyer D.J. Gerken told the Charlotte Business Journal. "The agencies turned very fast and, as far as we can tell, without much concern for whether they were done correctly." SELC brought the court case that led the Fourth Circuit Court of Appeals to vacate the permits.The court found that the original NPS permit was invalid because it did not explain how the tree-cutting necessary for the pipeline's passage through the Blue Ridge Parkway would not contradict its scenic purpose. The original FWS permit, meanwhile, did not adequately address the pipeline's impact on endangered species, the court ruled.
Legislators updated on two, billion-dollar pipelines underway - — Legislators learned the latest on natural gas pipeline projects underway in the state, including the nearly $6 billion Atlantic Coast Pipeline that put its 3,100 West Virginia employees back to work Tuesday.“We had fantastic news from FERC (the Federal Energy Regulatory Commission),” Robert Orndorff, state policy manager for Dominion Resources, told lawmakers during a presentation on the Atlantic Coast Pipeline project. “We had a stay on the project that lasted about three weeks that had permitting issues. We fixed those issues.” FERC ordered a halt to construction Aug. 10 after a U.S. Fourth Circuit Court of Appeals ruling that nixed Dominion’s proposed right-of-way crossing of the Blue Ridge Parkway and vacated an Incidental Take Statement by the U.S. Fish and Wildlife Service. The pipeline developers later were granted permission to continue work on two “critical road bores” — one at Mount Carmel Road in Upshur County and one at U.S. 50 near Bridgeport — as well as certain activities at the Mockingbird Hill Compressor Station in Wetzel County.Atlantic Coast Pipeline LLC is comprised of four major U.S. energy companies: Dominion Energy, Duke Energy, Piedmont Natural Gas and Southern Company Gas. The joint-venture partners are working to construct a 600-mile underground transmission pipeline to move natural gas from West Virginia to markets in southeastern Virginia and North Carolina, according to Orndorff.He told members of the Joint Committee on Natural Gas Development the construction effort will create 17,000 jobs.
Work on pipeline in W.Va. county halted by judge — Work on the Mountain Valley Pipeline where it crosses a river in West Virginia will be halted as a judge has ordered a temporary stay. The Register-Herald reports Summers and Monroe counties circuit court Judge Robert Irons issued the stay Tuesday over construction in Summers County. It will specifically stop work on property where the pipeline will enter the Greenbrier River in Pence Springs. Ashby Berkley, the Greenbrier River Watershed Association and other petitioners brought the motion after neighbors told Berkley workers started removing trees on his land last week. Their attorney Kevin Thompson argued that a permit issued by the West Virginia Department of Environmental Protection isn’t in compliance with the Natural Streams Preservation Act. Attorney Robert McLusky represented pipeline interests arguing a stay would create a lengthy delay in construction. A hearing in the case is scheduled for October. The stay will not impact the more than 1,000 other rivers, streams and wetlands to be crossed by the pipeline in West Virginia and Virginia; the Natural Streams Preservation Act applies only to undammed waterways. The Greenbrier is the longest continuously flowing river in the Eastern United States, according to the watershed association.
East Coast refiners receiving more domestic crude oil from Gulf Coast by tanker and barge - Since mid-2017, the East Coast has been receiving as much crude oil by tanker and barge from the Gulf Coast as it has by rail from the Midwest. In April, the volume of crude oil transported by tanker and barge from the Gulf Coast to the East Coast reached the highest level since mid-2014. At the same time, crude oil shipped to the East Coast by rail from the Midwest has fallen 77% from its peak in late 2014. These changes in crude oil shipments, as well as the mix between foreign and domestic crude oil inputs to East Coast refineries, have followed price movements in crude oil markets. Changes to U.S. crude oil transportation infrastructure in the past three years, such as expanded pipeline capacity out of the Midwest (defined as Petroleum Administration for Defense District 2) and increased availability of coastwise-compliant shipping in the Gulf Coast (PADD 3), have altered the costs of transporting crude oil domestically. Because very limited pipeline infrastructure exists to transport domestic crude oil to the East Coast (PADD 1), East Coast refiners historically have imported crude oil from international sources. For East Coast refineries, the price difference between the international benchmark Brent and the domestic benchmark West Texas Intermediate (WTI) helps determine when the additional costs of acquiring and transporting domestic crude oil to the East Coast can be overcome. Between 2011 and 2015, when the difference in price between domestic crude oil and foreign crude oil was significantly greater than it had been in previous years, refineries on the U.S. East Coast increased receipts of domestic crude oil, particularly by rail and domestic marine shipping. As the Brent-WTI price spread began widening to average $5 per barrel (b) in the first six months of 2018, East Coast refineries again increased their receipts of domestic crude oil, but this time in far lower quantities than in 2015. Domestic crude oil accounted for 19% of total East Coast crude inputs for the first six months of 2018, compared with 48% in the first six months of 2015, when the Brent-WTI price spread also averaged $5/b. Going forward, the Brent-WTI price spread is expected to remain the primary factor affecting East Coast domestic crude oil receipts. In the September Short-Term Energy Outlook, EIA forecasts Brent will average about $6/b more than WTI in 2018 and in 2019.
U.S. refiners face emerging glut of fuel: Kemp (Reuters) - U.S. refiners have processed a record volume of crude in the last three months, reversing the previous shortage of distillate but leaving the country with record gasoline stocks at the end of the summer driving season. Fuel availability has been helped by the absence of a direct hurricane hit on the major refining centres located on the coasts of Texas and Louisiana, in stark contrast to the refinery closures caused by Hurricane Harvey in 2017. Refiners have carried on processing at elevated rates well after the end of the normal summer driving season and into September in order to rebuild previously depleted distillate stocks (https://tmsnrt.rs/2MKZGBz ). But the now-plentiful supply of gasoline and to a lesser extent distillate implies refiners will have to cut processing more sharply than usual over the next couple of months to avoid creating a glut of refined products. U.S. refiners processed 17.4 million barrels per day (bpd) of oil in the week to Sept. 14, up from 15.0 million bpd in 2017 (impacted by Hurricane Harvey) and 16.6 million bpd in 2016. Refiners produced a seasonal record 5.5 million bpd of distillate last week, up from 4.5 million bpd in 2017 and 5.0 million bpd in 2016, according to the U.S. Energy Information Administration. Distillate stocks have risen to 140 million barrels up from a recent low of just 114 million barrels in mid-May (“Weekly Petroleum Status Report”, EIA, Sept. 19). Distillate inventories are now just 6 million barrels below the 10-year average compared with a deficit of 25 million barrels as recently as July 20. But the consequence of heavy refining activity to produce distillate has been the emergence of a potential over-supply of gasoline. Gasoline stocks remained plentiful throughout the peak summer driving season and are now at a record for the time of year. Gasoline inventories stood at 234 million barrels at the end of last week, up from 216 million at the same point in 2017, 227 million in 2016 and a 10-year average of 215 million.
Tougher laws on pipeline protests face test in Louisiana - After a high-profile campaign to oppose the Dakota Access Pipeline in 2016, a number of states moved to make it harder to protest oil and gas projects. Now in Louisiana, the first felony arrests of protesters could be a test case of these tougher laws as opponents vow a legal challenge. The controversy here is over the Bayou Bridge Pipeline, the last leg of the Dakota Access. If completed, it will bring crude oil from the Bakken oil fields of North Dakota, through Louisiana, where it will be exported abroad. On a recent day, deep in the Atchafalaya swamp of South Louisiana, twigs snap under the rubber boots of about 40 protesters as they march through shaded woods. Many have tied bandannas around their faces, leaving only their eyes exposed. In the distance, backhoes fling mud as construction workers clear a path for the new Bayou Bridge Pipeline. "Y'all are trespassing!" a construction worker shouts. “Go home!" a protester yells back. After a few minutes, the construction workers shut off their equipment and the protesters celebrate. But later, things get heated after the sheriff's department shows up. A deputy pins one woman to the ground, and the two sides engage in a muddy tug of war until she tumbles free. It's incidents like this that have helped push lawmakers to take action. Earlier this year, Louisiana state Rep. Major Thibaut proposed a bill with stricter penalties for pipeline protesters. "You know that there's a right way to do things and a wrong way," Thibaut told a state legislative committee. "And if you want to protest against something ... get your permit and you go do it in a legal fashion." Trespassing in Louisiana is normally a misdemeanor offense. But the new law deems oil and gas pipelines to be "critical infrastructure," a classification that includes places like nuclear plants, oil refineries and water treatment facilities. As of Aug. 1, trespassing near oil and gas pipelines in the state is now a felony offense, with a possible sentence of up to five years in prison.
US Atlantic Coast imports of WAF crude oil made difficult on wide Brent/WTI spread, FOB — US Atlantic Coast imports of West African crude oil are expected to decline due to harsh arbitrage conditions made difficult by the large premium of ICE Brent futures over WTI, as well as strong premiums for WAF grades. Traders tracking these grades exported in the US expect WAF imports to the USAC to fall to virtually zero. The USAC from May to August imported an average of roughly 24 million barrels a month, of which 8.7 million were from West Africa, data from the Energy Information Agency compiled by S&P Global Platts showed. "The arbitrage of WAF grades into the US is fully closed," a trader said. Although negligible in outright terms, WAF arrivals in the region in the four months sampled compared to all foreign imports reached as high as 45.4% in June and as low as 19.8% in July. Nigerian grades tend to make up 40% of WAF imports and Angolan 20%, the rest coming from smaller more regional grades. Traders lose money in buying basis Dated Brent and selling basis WTI, implying the arbitrage only becomes possible when local buyers are able to cover the cost of conversion by bidding above, something which prompts them to look at alternatives when the spread is high. The Brent/WTI spread closed at minus $10/b Monday last week, its highest level since mid-June, data from the InterContinental Exchange showed. Cargo premiums basis FOB have also made the arbitrage difficult. Healthy refinery margins in Europe and Chinese demand for Angola helped premiums reach fresh highs towards the end of the summer. An increased cost of crude at loading will also push the overall price higher for delivery into the US. Lastly, at a time when everything is becoming more expensive, US refiners are scheduled to enter seasonal maintenance throughout October, taking away the demand for foreign crudes.
Industry group says hurricanes bolster case for expanding offshore drilling - Hurricane season is in full swing — and it's throwing into the spotlight an ongoing debate between industry and environmental groups over expanding offshore drilling.The National Ocean Industries Association is pointing to hurricanes as a reason the United States should allow offshore drilling in areas beyond the Gulf of Mexico. Because most of the nation’s offshore drilling is concentrated in such a hurricane-prone region, the lobbying group that represents offshore energy companies warns the country is “rolling the dice” with natural disasters, which can jeopardize the country's oil supply if bad weather forces companies to shut down oil production and evacuate oil platforms. The group wants the Interior Department to expand oil production into the southeast Atlantic, the eastern Gulf of Mexico, and off the coast of California and Alaska as part of the Trump administration's controversial proposal to open most of the nation's outer continental shelf to potential drilling. Yet environmental groups are pointing to Florence as the latest evidence this hurricane season that offshore drilling shouldn’t happen anywhere. “As this hurricane is proving, there’s no area off the coast of the U.S. that is immune to hurricanes or storms,” said Athan Manuel, director of the lands protection program for the Sierra Club. Florence was downgraded on Sunday to a tropical depression. Yet Manuel said the risk of oil spills and the fact that there’s no real way to move oil facilities “out of harm’s way” shows “there’s no safe place to drill.” For its part, NOIA says that dispersing drilling across a broader geographical area will better ensure the country's energy security in the event of a natural disaster. By concentrating drilling in the Gulf of Mexico, “what we’ve done is put all of our oil and natural gas eggs into one basket,” NOIA President Randall Luthi said in an interview. NOIA in part blames energy policy, which makes about 94 percent of the U.S. continental shelf off limits to drilling. In January, the Trump administration announced its proposed five-year plan to widely expand drilling in U.S. continental waters. But in April, Interior Secretary Ryan Zinke told Congress he would scale back that plan, responding to opposition from both Democratic and Republican governors and lawmakers in coastal states.
Offshore Investments to Outpace Shale in 2019 - Offshore investments levels are set to rise in 2019 after decreasing each year during the industry downturn. Recent analysis by Rystad Energy shows that a recent surge in offshore oil and gas FIDs has set the stage for a significant increase in offshore investments next year. This will be the first time shale investments will not overtake offshore. The number of offshore projects sanctioned in 2017 rose 50 percent year-on-year and close to 100 offshore projects will be sanctioned this year. The industry is committed to spending $100 billion over the next few years, Audun Martinsen, Rystad’s head of oilfield service research, said during Rystad Energy’s Annual Summit Sept. 18. “Our offshore activity index is pointing to annual growth rates of about 6 percent towards 2022, thereby returning to the high activity levels seen in 2014,” said Martinsen. “Coupled with annual service price inflation of 5 percent, offshore oilfield service purchases are projected to grow by 11 percent per year towards 2022.” While offshore spending is on the rise, growth levels are slowing in the shale sector. Martinsen noted logistical challenges, takeaway capacity bottlenecks and a growing oversupply in the proppant and fracking market. Since April 2018, U.S. well fracturing activity has flattened to just above 50 wells per day. And frac sand demand in the U.S. is forecast to grow at 21 percent CAGR from 2018 to 2021, however, this will be overshadowed by an even greater jump in supply, which will have a negative impact on prices, Rystad reports.
Gulf of Mexico oil spill much worse than thought, federal lawyers say Federal government lawyers say a 14-year-old leak is releasing much more oil each day into the Gulf of Mexico than officials previously claimed, and it may be getting worse.A Friday court filing in a case involving Taylor Energy Co. says 10,000 to 30,000 gallons daily is leaking from multiple wells around a drilling platform toppled by 2004's Hurricane Ivan.That estimate is far above the 16,000 gallons of oil that the U.S. Coast Guard estimated in 2015 had been spotted in slicks over seven months.The government cites a report it commissioned from a scientist who has studied satellite images of persistent oil slicks and sampled floating oil at the site about 10 miles offshore. That report also suggests that while the amount of leaking oil decreased after some wells were plugged in 2011, the leak may be getting bigger again. "There has been an uptrend of the areas of the slick during the last two years," wrote Oscar Pineda-Garcia, who runs a company that maps oil spills and is an adjunct professor at Florida State University. New Orleans-based Taylor said only 2 to 3 gallons was leaking daily out of mud on the seafloor. Spokesman Todd Ragusa said the company disputes the government's new estimate and will respond in court.
Cheniere Signs 15-Year LNG Deal With Commodity Trader Vitol -- Cheniere Energy has signed a 15-year sales and purchase agreement with major oil trader Vitol to sell around 0.7 million tons of liquefied natural gas (LNG) annually beginning this year, the U.S. company said on Monday, announcing its second major long-term LNG deal with one of the biggest oil and commodity trading houses.Under the deal, Vitol will buy LNG from Cheniere Energy’s subsidiary Cheniere Marketing on a free on board (FOB) basis, with the purchase price for LNG indexed to the monthly Henry Hub price, plus a fee.“This agreement continues Cheniere’s commercial momentum and supports our growth plans, while demonstrating the value LNG buyers place on Cheniere’s unique ability to offer flexible solutions tailored to the needs of LNG customers worldwide,” said Jack Fusco, Cheniere’s President and CEO.“We believe that LNG has an important role to play in the future energy mix and that its evolution will require a more flexible and tradeable LNG market,” said Russell Hardy, Group CEO at Vitol.Houston-based Cheniere Energy owns and operates the Sabine Pass LNG terminal in Louisiana and is developing and building liquefaction projects near Corpus Christi, Texas.“Cheniere is also exploring a limited number of opportunities d irectly related to its existing LNG business,” the company said today.
Leave oil and gas out of US-China trade dispute, energy execs warn - Oil and gas should be left out of the escalating trade dispute between the U.S. and China, global energy executives told CNBC on Tuesday. "One of the things that could be damaging for the LNG (liquefied natural gas) industry in the U.S. is the taxes that could be levied on them by China and others," Saad Sherida Al-Kaabi, the chief executive of Qatar Petroleum, the biggest LNG exporter in the world, said. Al-Kaabi told CNBC's Steve Sedgwick at the Gastech conference in Barcelona that the oil and gas sector should be "left out of this trade discussion." "I think it needs to be looked at carefully because I don't think it's to the benefit of the oil and gas industry to have politics and taxation enter into this (trade dispute)," he said. LNG exports matter to the U.S., particularly in its quest to become a dominant energy exporter. The International Energy Agency (IEA) said in its 2018 annual Gas report, released in June, that global LNG exports will increase 30 percent by 2023 with the U.S. expected to become the second largest supplier in the world. Qatar Petroleum's Al-Kaabi recognized that while tariffs on U.S. LNG exports to China might help his company, in terms of making its LNG exports more attractive, the measures would have a negative impact on the industry. "It could serve Qatar to be more competitive, in comparison with the U.S., when some of the countries put taxes on U.S. LNG — but I don't think long-term that it's good for the market to have politics and to have taxation on a very important basic requirement for humanity, which is energy." Like it or not, global energy supplies are a politicized issue with mounting competition between major energy exporting economies. The Nord Stream 2 gas pipeline is just one disputed energy project. Designed to bring Russian gas to Germany under the Baltic Sea, the pipeline has been repeatedly criticized by Trump and the U.S. Energy Department, who both say Moscow is weaponizing energy and trying to make Europe reliant on Russian gas. Russia supplies around a third of the region's gas.Nonetheless, the U.S. wants to boost its own LNG exports to Europe and the continent has promised to build a handful of terminals to store the gas.
Trump's latest tariffs are a 'new tax' on US businesses, oil industry says - The oil industry's largest trade group lashed back at President Trump's Monday night announcement imposing a 10-percent tariff on an additional $200 billion worth of Chinese goods. "We understand the need to address discriminatory trade practices, but this policy will essentially impose a new tax on $200 billion worth of products on which American families and businesses rely,” said Kyle Isakower, economic policy vice president for the American Petroleum Institute. He explained that the oil and natural gas boom the country is experiencing has supplied U.S. consumers and businesses with low cost energy, which strengthens the U.S. economy. The tariffs will not only harm drillers, but they will also harm the success of Trump's pro-growth agenda, which relies on oil and natural gas production and exports, said Isakower.The escalation of the trade war with China "works against" the American energy industry to "counter to the Administration’s stated goal of ‘energy dominance,'” Isakower added. The U.S. became the largest oil producer in the world last week, pushing out Russia and Saudi Arabia from the top spots, according to the Energy Information Administration. A substantial chunk of U.S. oil production is going to China in the form of exports. The oil industry has criticized the Trump trade agenda for ramping up tariffs on steel and other products, which limits the industry's ability to build pipelines and related infrastructure, which makes the nation less competitive. Much of the specialized steel products that industry relies upon are imported from overseas suppliers. Many U.S. foundries are not capable of producing many of the products the industry requires to continue its growth. The new round of tariffs announced Monday targets an additional $200 billion worth of Chinese products, adding to the $50 billion in tariffs previously enacted. The massive escalation of the trade dispute may only be beginning, as Trump also threatened tariffs on $267 billion of goods on top of Monday's announcements.
China says to impose 10% tariff on US LNG from Sep 24; keeps US crude oil off list — China announced Tuesday retaliatory tariffs on an additional $60 billion worth of US imports that included a 10% tariff on LNG, effective September 24, but Beijing kept crude oil off its latest list of products incurring charges. The Chinese Ministry of Commerce's list imposed a 10% additional tariff on 3,571 US items, including LNG, and a 5% additional tariff on 1,636 US products -- all effective September 24. LNG does not attract a tariff currently. The latest tit-for-tat escalation in the trade war between the two countries came after the US said Monday it would implement a 10% tariff on an additional $200 billion worth of Chinese imports from September 24, and will further lift the duty to 25% January 1.
US Gas Exports Hit by China Tariffs as Trade War Escalates -- China plans to slap tariffs on U.S. natural gas exports as trade tensions escalate, a likely setback for the burgeoning energy relationship between the world’s two largest economies. The Asian nation said in a statement Tuesday it would levy a 10 percent duty on liquefied natural gas starting Sept. 24, retaliation for a fresh round of tariffs announced the day before by the U.S. While China’s levy is less than the 25 percent it proposed last month, the tariff still brings additional pressure to bear on the U.S. gas industry, which is competing with Russia, Australia and Qatar for market share in China, the world’s biggest buyer. Just last year, American officials were courting Chinese companies to invest in new export projects. China’s move signals how much pain Presidents Xi Jinping and Donald Trump are willing to endure not to back down from a trade fight. Trump risks stifling the U.S. gas export industry, which is seeking about $130 billion to fund more than a dozen projects, while Xi threatens to raise the cost of his drive to eliminate smog by burning less coal. “Chinese companies will have an aversion to investing in U.S. LNG projects in the short term” if tariffs are imposed, Saul Kavonic, Credit Suisse Group AG’s director of Asia energy research, said before China’s announcement. “Australia and Qatar’s LNG sectors will benefit from being seen as a lower-risk source of supply by customers in the world’s fastest growing LNG market, at least over the near term.”
China LNG tariff casts shadow over new U.S. export terminals (Reuters) - China set a 10 percent tariff on U.S. liquefied natural gas (LNG) imports, extending a trade dispute into energy and casting a shadow over U.S. export terminals that would propel the United States into the world’s second-largest LNG seller. Beijing on Tuesday said it would tax U.S. products worth $60 billion effective Sept. 24 in retaliation for tariffs imposed by U.S. President Donald Trump in an escalating trade war. The rate was smaller than the 25 percent tariff China had touted earlier, which offered some relief and helped shares in listed U.S. LNG companies climb. The tariffs undermine Trump’s drive to use U.S. shale oil and natural gas to turn the United States into a global energy leader. The U.S. is on track to export over 1,000 billion cubic feet (bcf) of gas as LNG in 2018. One billion cubic feet is enough to fuel about 5 million U.S. homes for a day. But China, which purchased about 15 percent of all U.S. LNG shipped in 2017, is now on track to buy less than 100 bcf of U.S. LNG in 2018, less than last year, according to Thomson Reuters vessel tracking and U.S. Department of Energy data. The country has taken delivery from just four vessels since June versus 17 during the first five months of the year.
New US LNG Projects May Feel Pinch from Latest Salvos in US-China Trade War - In response to the Trump administration’s latest round of tariffs on approximately $200 billion of Chinese imports, the Chinese government has retaliated with plans to impose new tariffs on roughly $60 billion worth of imports from the United States. The Chinese government’s action includes a 10-percent tariff on U.S. liquefied natural gas (LNG), effective September 24. “The impact on the short-term market is likely to be less than we previously indicated,” Giles Farrer, research director with Wood Mackenzie, stated in a commentary Wednesday. “This is partly because the level of the tariff is lower than initially proposed, 10 percent now versus 25 percent in August, but also because we think China has already completed the majority of its procurement for winter. Possibly because of this, we have recently seen spot and futures prices for winter come down despite strengthening oil prices.”Farrer noted that China purchased approximately 3 million tons per annum of U.S. LNG in the 12 months up to June 2018, making it the second-largest buyer of U.S. LNG in that period. As the U.S.-China trade dispute escalated, however, Chinese buyers gradually reduced their purchases of U.S. LNG, he added. “If China still needs to procure spot cargoes, we think that this is likely to result in a premium of up to 10 percent on supply from non-U.S., lean sources like the Australia East Coast projects, Tangguh, Gorgon or the Qatari Mega-trains,” Farrer continued. “Chinese buyers’ appetite to pay significantly higher prices for LNG from other sources may be limited by the price they can sell gas domestically.” In the longer term, developers of new LNG export projects may feel the pinch from China’s retaliatory tariff. “It restricts the target market for developers of new U.S. LNG projects trying to sign new long-term contracts,” Farrer explained. “However there is still plenty of appetite for second-wave U.S. LNG projects from other buyers in Asia and Europe, as evidenced by recent contracting momentum at Freeport, Calcasieu Pass and Sabine Pass Train 6. The first wave of U.S. LNG projects were successful despite not signing contracts with Chinese buyers.” The tariff on U.S. LNG could also support development of Russian pipeline projects and other non-U.S. investments catering to the Chinese market by potentially allowing them to push for higher long-term contract prices, added Farrer.
Contractors express caution on bidding for new US LNG export projects — The leading global contractors that are bidding to build the second wave of US LNG export terminals gave developers Thursday a simple message to think about on their flights home from Spain: "You get what you pay for." As Gastech wrapped up in Barcelona, executives at Bechtel, Fluor, KBR, McDermott International and Spain's Tecnicas Reunidas sought to inject a sense of realism about the costs that are necessary to ensure projects are completed when the market expects to see them.The concerted effort comes in the face of delays at several of the first wave export terminals under construction along the Gulf and Atlantic coasts, including at Freeport LNG's facility in Texas, Sempra's Cameron LNG site in Louisiana and Kinder Morgan's Elba Liquefaction Project in Georgia. Startup of Cheniere Energy's second export terminal, being built by Bechtel in Texas, is expected ahead of schedule. "Enthusiasm is not a strategy," Fluor CEO David Seaton said during a panel discussion at the conference. "That's a lot of what we see with the new customers who are more the developer type. All they are doing is looking at their spreadsheet rather than the real cost of building one of these things." With more than a dozen terminals being proposed as part of the second wave of US projects that are targeted to go online in the early- to mid-2020s, there is intense competition for long-term contracts with buyers of the capacity.With that comes pressure to sign engineering, procurement and construction deals for the lowest possible amount. Cameron LNG's experience is an example of what can happen when insufficient attention is paid on the front end to properly bidding for the realistic cost of construction. It took a writedown in the second quarter because of extra costs related to construction. "A lot of it went wrong at the time of the estimation," . "Early engagement, technology, where we feel we can get closer to the customer in the early stages. In the US, particularly, where there is a lot of excitement about a new wave of LNG contracts, there are also challenges, especially on the construction side." With so many projects, skilled workers could be harder to come by for the second wave of US projects. Tighter restrictions on immigration in the US under the Trump administration are also affecting the situation, the executives said. Invariably, that could drive up costs.
Fayetteville Shale Assets Sold Off, Fracking Still On Hold - -- Confronted with mounting debt and falling prices, the company that first developed one of the country's ten largest fields of natural gas is selling off its assets. The Houston-area Southwestern Energy first began activity in the Fayetteville Shale play, a 50-to-500 foot thick sediment layer about a mile underground located across a wide swath of northern Arkansas, in 2002. But, though estimates say gas reserves within the Fayetteville Shale can last until 2050, all drilling has stopped since 2016. Now, Southwestern Energy is selling its assets in the region to Oklahoma City-based Flywheel Energy for nearly $2.4 billion. Most of the play's wells used for hydraulic fracturing, or "fracking", were concentrated in the mostly rural counties of Conway, Faulkner, Cleburne, Van Buren and White. "So we tried to warn our clients, you know, 'This isn't going to be here forever,'" Hayes said. "Let's save, let's do this, let's do that, but with any newfound money... it tends to go out as quick as it comes in." But with those newfound mineral leases and royalty payments came numerous complaints of earthquakes, noise and air and water pollution. Studies have found carcinogens like benzene and formaldehyde near gas wells in Arkansas. In response, the Arkansas Department of Environmental Quality banned new disposal wells in areas that felt the most frequent earthquakes. The total amount of gas produced in Fayetteville Shale counties fell from over 900 billion cubic feet in 2011 to a little over two-thirds of that last year, according to the Arkansas Oil & Gas Commission. Natural gas prices reached a peak of $12 per million British thermal unit in 2008. But, for the past year, that price has struggled to get over $3 per million Btu. Other companies that followed Southwestern Energy's lead in developing the Fayetteville Shale have sold their assets to smaller companies. The play's second-largest producer, Chesapkeake Energy, sold off its stake in the region in 2011.
Permian NatGas Prices Plunge to New Lows as Pipes ‘Jam-Packed Like Southern California Traffic’ - Constraints to the north and to the west have combined to clobber West Texas spot prices this week, including a new all-time low at the Waha hub, and analysts see more volatility on the way as Permian Basin producers wait on additional takeaway capacity.Day-ahead prices plummeted in West Texas Wednesday, as Waha collapsed $1.06 to average just 61 cents/MMBtu on the day. Other regional points also got crushed but not to the same extent, with El Paso Permian tumbling 56 cents to $1.17.The West Texas spot price doldrums continued Thursday. Waha bounced back from Wednesday’s all-time low, but on average trades couldn’t climb above the $1.00 mark, ending the day 35 cents higher at 95 cents. El Paso Permian, meanwhile, fell another 21 cents to average just 96 cents on the day.Wednesday’s average price at Waha easily undercuts the lowest trade on record at the point going back to 1995, a low of 95 cents reported in December 1998, NGI historical data show.Waha finished a whopping $2.45 cents back of Henry Hub on Wednesday. That’s not the widest negative basis differential on record for Waha because of higher price levels at Henry Hub in the 1990s and early 2000s. However, since 2015 after the collapse in oil prices and the massive focus on the Permian Basin because of its best-in-class breakevens, the region’s basis differentials have seen a sharp downward trend.The takeaway constraints driving depressed pricing for the Permian have been well documented, and on a good day these constraints have seen West Texas points routinely trade more than $1 back of Henry Hub. It’s against this backdrop that news of additional downstream restrictions this week compounded the problems for Permian producers.“It’s no secret by now that” that gas takeaway pipelines out of the Permian “have been running near full the last few months, jam-packed like Southern California traffic while trying to whisk away copious volumes of mostly associated natural gas to markets north, south, west and east of the basin,” RBN Energy LLC analyst Jason Ferguson told clients Thursday.
Energy Department warns that oil drillers are leaving Texas amid pipeline woes - The Energy Department says a lack of pipelines is beginning to drive oil companies out of the big shale region known as the Permian Basin, as they focus investment in regions where the oil is easier to get to market.The Energy Information Administration released its latest weekly oil analysis on Wednesday, focused on the lack of pipeline "takeaway capacity," which translates to there being plenty of oil, but not enough ways to move it to refiners or export terminals. The report highlights the case for more spending on pipes and for easing or expediting permitting decisions.The federal agency said it is tracking 45 publicly-traded oil companies' investment strategies, and spotted a trend. "As a result of these constraints, some producers with a geographically diverse portfolio of upstream assets announced plans in their second-quarter earnings releases to redirect capital expenditures from the Permian Basin to other regions," read EIA's Week in Petroleum report. The oil firm Baker Hughes is cutting the number of drilling rigs in the Permian, and the Houston-based Noble Energy announced "the reallocation of capital expenditures from the Permian to other U.S. onshore basins because of the transportation constraints," EIA said."Outside of the Permian, Noble Energy has U.S. onshore operations in the Denver-Julesburg Basin in Colorado and in the Eagle Ford region in Texas," the new report read.The Permian Basin, which covers Texas and New Mexico, is one of the richest shale oil deposits in the United States. But the lack of pipelines to move the oil to market is dropping the price, and making it economically unattractive for some companies to continue production there
Permian Highways Desperate for Traffic Relief - U.S. Highway 285 is a major north-south route within the Permian Basin of West Texas and southeastern New Mexico, and it’s seen better days.Thanks to the oil boom in the region, the vital highway – particularly between Carlsbad, N.M., and Pecos, Texas – is much busier than it was a decade ago. More flatbed trucks rely on the road to haul equipment and supplies. In addition, the region’s constrained pipeline capacity translates into an abundance of tanker trucks hauling crude oil on 285 and other highways in the region. All of the extra traffic, a sign of the Permian’s enviable economic prosperity, has accelerated wear and tear on the roadway. “This surge has boosted the need for more trucks on the road,” Ronnie Witherspoon, CEO and president of Aveda Transportation and Energy Services, told Rigzone. “We now have tractor trailer combinations of all sorts hauling anything from water, proppants, chemicals, tubulars, large pieces of iron, etc. This increase in needs for oilfield services has caused intense congestion and, unfortunately has led to an increase in incidents.”The Texas Department of Transportation (TxDOT) appreciates the limitations of U.S. 285 and other key routes in the region and is addressing them through a series of improvements, an agency spokesman told Rigzone. “We have five projects worth about $100 million planned over the next few years in Reeves County between Pecos and the New Mexico state line,” Gene Powell, public information officer with the Odessa District of TxDOT, said. “In addition to rehabilitating the road, passing lanes will be added throughout the majority of the corridor. Intersection improvements will also be made in key places.” Although TxDOT is working to improve the safety and condition of U.S. 285 and other routes vital to the Permian’s oil and gas sector, Powell points out that individual driver behavior goes a long way in promoting safety. “Speeding, distracted driving and a lack of seat belt use are all key concerns,” said Powell. “Other crash causes are passing in no-passing lanes, driving on the shoulder, driving under the influence and failure to yield.”
Oil Giants Use Size to Overcome Fracking Challenges —Fracking is entering a new expansion phase in this Canadian town more than 2,000 miles from the center of the U.S. oil boom—one that heavily favors the world’s energy giants.Chevron Corpis laying the groundwork here for what it calls a “factory model” for shale drilling, master planning an entire region of small shale wells by locking up labor, building infrastructure and securing sand and other needed materials, all at once.Shale drilling, once the province of small, scrappy operators, has run into growing pains in places such as the Permian Basin in Texas and New Mexico, as producers struggle with pipeline bottlenecks and rising labor and material costs.Big oil companies seeking to re-create the U.S. shale boom in countries such as Canada and Argentina are trying to avoid these problems by managing shale sites in concert to prevent logistical difficulties and streamline operations, similar to the way they run traditional oil megaprojects.Already in Texas, there is evidence that larger companies such as Chevron and Exxon Mobil Corp. are weathering the bottlenecks and rising costs there better than smaller rivals—and continuing to ramp up production—because they have the economies of scale and wherewithal to develop their own solutions to these problems. The big international oil companies were initially slow to recognize the potential of fracking and found themselves behind the competition in the first phase of the shale boom as smaller operators locked up land and stepped up production in places such as North Dakota and Texas. But they have since become major players in the Permian Basin, and are in the process of trying to leverage large footprints in the region into tangible shale profits—something that to date has eluded many of their smaller rivals.
How long can the fracking spending spree last? - For the past decade Wall Street has lavished U.S. oil companies with cash, eager to get a piece of the fracking boom that turned what were thought to be undrillable shale fields in West Texas and North Dakota into the hottest oil prospects in the world. If companies spent billions more than they were taking in, to buy up more acreage and their competitors, not a problem — the money was funding a once in a generation opportunity. But after a decade of U.S. oil and gas companies spending beyond their means, a debate is underway in the energy and investment sectors on whether to keep pumping money into oil fields to keep the boom going full-speed. Or with interest rates rising and investors demanding better returns, are fracking firms going to have to live within their cash flows? “The history of the industry is companies spend every nickel they have and a bunch they didn’t have,” said Nick Cacchione, owner of Oil and Gas Financial Analytics, a Florida research firm. “The question is, has the industry changed and have the become more conservative or are they going back to their old ways of doings things?” Signs point to U.S. oil companies changing their habits, shrinking their capital budgets even as oil prices improve. After running a cash flow deficit totaling more more than $40 billion in 2015 - meaning their operating costs and capital expenditures exceeded the money they were paid - the 60 largest U.S. exploration and production companies shrunk that deficit to $17.7 billion last year. That followed intense pressure from hedge fund managers who questioned the fundamental economics of the fracking boom. After the first 12 months, the output of shale wells starts declining at a fast clip, requiring companies to drill more and more wells if they are going to keep up production. At an investment conference in 2015, billionaire investor David Einhorn dubbed the oil executives in Houston and Oklahoma City “frack addicts,” proclaiming “a business that burns cash and doesn’t grow isn’t worth anything.”
The Fracking Industry's Water Nightmare - The U.S. Environmental Protection Agency (EPA) has clearly documented the multiple risks — despite repeated dismissals from the oil and gas industry — that hydraulic fracturing (fracking) poses to drinking water supplies. However, the tables may be turning: Water itself now poses a risk to the already failing financial model of the American fracking industry, and that is something the industry won’t be able to ignore.The U.S. is setting new oil production records as horizontal drilling and fracking open up shale deposits in places like North Dakota and Texas.Fracking is based on the “hydraulic” process of using pressurized liquid to shatter shale rock to let the oil and gas inside escape. And while that liquid is a mixture of many hazardous chemicals, it is mostly water. And acquiring that water and then properly disposing of the toxic wastewater produced by fracking is becoming a big and expensive problem for the industry. Gabriel Collins is a fellow in energy and the environment at Rice University, and in August he gave a presentation at the Produced Water Society Permian Basin 2018 event in Midland, Texas. There, Collins presented a business case for starting a large water processing company to service the fracking industry. One sign that the fracking industry is becoming concerned about water is that there are now societies and conferences dedicated to the topic of “produced water.” Produced water is the term for the toxic water that is “produced” over the life of a fracked oil or gas well.In a story by Bloomberg News, Collins said he didn’t believe investors were aware of the risks that water poses to the fracking industry in the Permian Basin.“[Investors] aren't as well apprised of some of the other risks and challenges that could be just as material, if not more so,” he told Bloomberg News. “I'd put water right at the top of that list.”Why should water top the list of potential financial challenges facing the fracking industry? According to a study by Wood MacKenzie and reported by the Wall Street Journal, the costs of water disposal for the fracking industry could add another $6 per barrel of oil produced. For the U.S. shale oil and gas industry, which has consistently lost money over the past decade, adding another $6 per barrel in costs represents a grim outlook.
Trump Lets Fracking Companies Release More Climate-Warming Methane -- As expected, the U.S. Department of the Interior on Tuesday released a final rule that reverses Obama-era restrictions on methane emissions from oil and gas operations. President Obama's 2016 methane waste rule, which never went into effect, required fossil fuel companies on tribal and public lands to reduce emissions of methane, a potent greenhouse gas that's about 86 times more powerful than carbon dioxide. It called on drilling operators to capture leaking and vented methane and to update their leak-detection equipment.Had it been finalized, as The New York Times noted, it would have cut methane from the oil and gas sector by as much as 35 percent and helped the U.S. reach emissions-reduction targets under the Paris agreement.But the Trump administration said Tuesday that many parts of the 2016 rule were "unnecessarily burdensome" on the private sector, and found that it overlapped with existing state, tribal and federal regulations.The fossil fuel industry cautioned that the Obama rule could cost as much as $279 million to implement and would hinder production, according to The New York Times.The Obama administration estimated their "common-sense" rule would avoid nearly 170,000 tons of methane emissions annually and save the U.S. between $115 to $188 million per year by allowing oil and gas operators to sell recovered natural gas, in addition to the environmental benefits of reducing methane emissions. However, the Obama administration's figures could be outdated, as the rate of methane leaks in the U.S. is likely much higher than previously thought. A recent study published in Science found that U.S. oil and natural gas operations release 60 percent more methane than currently estimated by the U.S. Environmental Protection Agency. Yearly methane emissions from the oil and gas industry total 13 million metric tons (approximately 14.3 million U.S. tons), mostly from leaks—an amount of natural gas that could heat 10 million homes.
How energy companies set off earthquakes miles away from their waste dumps - Each day across the United States, 2 billion gallons of fossil-fuel-industry wastewater flies through thousands of underground tubes. The injection wells descend into porous rock, filling gaps with brine and chemicals that are the result of extracting oil and gas from the ground. The goal of the wells is for the wastewater to be out of sight, out of drinking water and out of harm’s way. Except the wells can cause earthquakes. In some cases, the quakes begin as far as 15 miles from the wells. In a study in the journal Science, scientists describe for the first time how earthquakes can be triggered so far away from the wells. An efficient practice by the oil and gas industry is creating a ripple effect far beyond its drilling locations. Geologists have linked injection wells to quakes, with findings based on years of observation. Human-made earthquakes, though most are moderate in size, put 1 in 50 people in the United States at risk, according to a recent U.S. Geological Survey analysis. Wastewater injection wells are concentrated in Oklahoma, Texas, California and Kansas, according to the Environmental Protection Agency. “Induced earthquakes are becoming more and more of an issue in central and the eastern U.S.,” said University of California at Santa Cruz seismologist Thomas Goebel. In 2011, an injection well in Oklahoma was responsible for a magnitude-5.6 earthquake that damaged a highway, shook buildings and generated a dozen aftershocks. Most induced earthquakes are not a result of fracking itself but wastewater generated at the oil and gas wells. Earthquakes occur when a crack underground — a fault — pulls apart. A few decades ago, when scientists were beginning to understand that humans could generate earthquakes, the idea was “you put water directly into the fault,” Brodsky said. It was assumed water would pry apart the fault, like a hydraulic jack lifting a car, triggering a quake. But that theory could not explain the quakes that happen miles from the wells. The study authors were able to identify two types of earthquakes triggered by wastewater wells, having everything to do with what kind of rock the water is being injected into. One kind of earthquake formed close to the injection well but stopped abruptly at about a half-mile from the site, Goebel said. The other kind had a “very long-distance tail” — the quakes could appear far from the well, with the triggers petering out only after several miles. This occurred if a well dumped its wastewater into softer sedimentary rock. This was a result of what the researchers called "poro-elasticity."
Line 3 pipeline protesters block bridge near Bemidji - Protesters conducted a water ceremony and blocked a bridge near Enbridge Energy's planned Line 3 replacement pipeline in northern Minnesota on Tuesday An American Indian woman conducted the ceremony on the banks of the Mississippi River. Demonstrators also raised a tepee on the bridge south of Bemidji. There were no arrests, and the tepee is now down. Clearwater County Engineer Dan Sauve says the protest delayed a contractor for a couple of hours, and that the road project is unrelated to Line 3. In June, the Minnesota Public Utilities Commission gave Enbridge the green light to replace its aging Line 3 crude oil pipeline across Minnesota. A PUC meeting to discuss whether Enbridge met conditions was postponed after being disrupted by protesters last week. Native American and environmental activists contend the new line risks spills in fragile areas. But Republican state Rep. Matt Grossell of Clearbrook calls the replacement pipeline "the safest and most efficient way to move oil to market."
Colorado's economy vs. residents' health- Sides battle over what's at stake with oil and gas well setbacks — A statewide ballot measure that would dramatically increase the distance new oil and gas wells would have to be from homes, schools and waterways will be a job-gutting attack on Colorado’s economy, opponents say. It will deprive cities and towns of millions of dollars in tax revenues and rob thousands of mineral rights owners access to their underground property.Or Proposition 112, known during the petition process as Initiative 97, will bring long-sought sanity to neighborhoods throughout the state, bolstering the health and safety of thousands living above or on the edge of Colorado’s increasingly industrialized energy landscape.Those are the competing messages voters will have to sort out Nov. 6, when they will be asked whether additional controls should be placed on drilling in a state experiencing an ongoing population boom alongside an intensifying hunt for the resources that power modern life. Specifically, the measure would increase setbacks for new wells to 2,500 feet instead of current setbacks of 500 feet from homes and 1,000 feet from schools.The question has already brought out the big guns in what is quickly becoming a high-stakes battle over the future of a multibillion-dollar industry in Colorado.“For some sectors of the economy, (Proposition 112) is a Category 5 threat,” said independent political analyst Eric Sondermann. “I do believe the oil and gas industry, which is a huge player in this state, sees this not just as a nuisance or hassle. They see it in existential terms.”Proposition 112 has already insinuated itself into Colorado’s race for governor as a front-burner issue. Several weeks ago, during a speech at an oil and gas conference in Denver, Democrat Jared Polis was heckled by a trio of protesters intent on pressuring the gubernatorial hopeful to take a harder line on the energy extraction industry. Both Polis and Republican opponent Walker Stapleton have come out against the measure. Dan Haley, president and CEO of the Colorado Oil and Gas Association, told the crowd after Polis left the stage that the industry would fight Proposition 112 with everything it has. Already this year, oil and gas operators have given $21 million to Protect Colorado, the committee opposing the measure. By contrast, the committee backing the measure, Colorado Rising, has received $615,000 in contributions in 2018.
Current fracking laws are dangerous to health - Tom Stumpf: Initiative 97 has been accepted onto the fall election ballot as Proposition 112, requiring all new Colorado oil and gas development not on federal land to be located at least 2,500 feet from an occupied structure or vulnerable area. Currently, state law allows fracking operations to be within 500 feet of homes.Already, the industry is spending hundreds of thousands of dollars on promoting a no vote on the ballot in November. Citizens need to realize that existing laws regarding fracking are dangerous to the health, safety and welfare of every man, woman and child. We need to support this common sense regulation, providing safer setbacks.We have experienced several recent and local incidents: the Firestone deadly methane explosion, the Windsor well fire, the Boulder study of air pollutants near the reservoir. Each of these, as well as many others, palpably demonstrate the deadly threats to society. Living in such close proximity to oil and gas development is clearly a death sentence, if not immediately, then certainly in the future.Fracking is an inherently dangerous industrial process, because there is an unacceptable risk of explosions and fires. Since the Firestone explosion, for example, Colorado has experienced at least 14 fires and explosions at oil and gas sites alone. There are already nearly 129,000 oil and gas flow lines within 1,000 feet of occupied buildings, so to add thousands more is even more foolhardy, given that there have been 832 serious pipeline incidents in the U.S. in the past 20 years, causing 310 deaths and 1,229 serious injuries. In addition, pipelines can rupture, leading to fatal explosions, like the one in Mead, which killed one worker and seriously injured three others in 2014.
Colorado's Fracking Fright - WSJ- California normally gets all the attention on the front lines of environmental activism. But in real-world implications for the rest of the country, Colorado also deserves attention. A measure heading for the fall ballot would shut down nearly all oil and gas production in one of the top energy-producing states. Colorado’s current rules on energy production prohibit oil and gas operations within 500 feet of a home or 1,000 feet of a school or hospital. But an environmental group called Colorado Rising has collected enough signatures for a proposal on the November ballot to expand these buffer zones and effectively create bans in nearly all of the state. Proposition 112 would restrict new energy development within a 2,500-foot radius of any building, playground, amphitheater, park, body of water or “any other additional vulnerable areas designated by the state or local government.” The restrictions rule out 85% of all non-federal land in the state, according to the Colorado Oil & Gas Conservation Commission. In the five counties that produce 90% to 95% of Colorado’s oil and gas, 94% of non-federal land would be off-limits. The implications of such a ban would be national. Colorado ranks fifth among the states in production of natural gas and seventh for oil. In the first year the restrictions would take $201 million to $258 million out of state and local tax revenue. As energy production dwindled, that loss could rise to $1.1 billion annually by 2030, according to a Common Sense Policy Roundtable analysis reviewed by faculty from the Colorado School of Mines. The ban could kill up to 147,800 jobs and reduce state GDP by perhaps $218 billion between 2018 and 2030. It’s no surprise that GOP gubernatorial candidate Walker Stapleton opposes the ballot measure. More interesting is that his Democratic rival, left-wing Congressman Jared Polis, does too. Prop. 112 “would all but ban fracking in Colorado—a position I have never supported,” Mr. Polis said last month. . If this proposition passes in Colorado, the same de facto bans on energy production will migrate to other states.
BLM Okays Huge Wyoming Gas Well Project -- The U.S. Bureau of Land Management has given final approval of the environmental impact statement on a 3,500-gas well project proposed by Jonah Energy in Wyoming’s Powder River Basin. Jonah’s Normally Pressured Lance Project would generate 950 jobs and produce $17.85 billion in total revenues, with federal royalties totaling $2.2 billion over a ten-year period.The proposed well program covers 140,859 acres in Converse County, and would include 205 miles of new pipelines and roads.“We are very pleased to have concluded the regulatory process, and look forward to investing in the development of the energy resources beneath these lands,” said Jonah CEO Tom Hart. The company worked with several groups including the Wyoming Outdoor Council, The Nature Conservancy, National Audubon Society, and the Governor’s Sage Grouse Implementation Team.
Trump Relaxes Obama Curbs on Flaring Gas From Wells on US Land -- The Trump administration finalized a rollback of Obama-era limits on methane that is leaked, vented or flared from oil and gas wells on federal lands, part of a one-two punch on regulations designed to curb release of the potent greenhouse gas. The Interior Department’s Bureau of Land Management on Tuesday issued a final rule taking aim at regulations mandating that oil and gas companies drilling on public and tribal lands reduce methane pollution. It follows a proposal last week from the Environmental Protection Agency to push back on similar rules on private lands. “The Trump Administration is committed to innovative regulatory improvement and environmental stewardship,” said Deputy Secretary David Bernhardt. The move scraps a requirement that energy companies seek out and repair leaks and rescinds requirements for well completion, storage vessels and pneumatic controllers, as well as mandates requiring companies prepare plans for minimizing waste before getting drilling approvals. Erik Milito, the American Petroleum Institute’s, director of upstream and industry operations, praised the move and said the oil and gas industry has been moving on its own to reduce methane emissions. Even as natural gas production has risen 50 percent since 1990, methane emissions have dropped by 14 percent, he said. “We want to make sure we have rules that aren’t shutting in production,” Milito said in a phone interview. Environmentalists took a dim view of the change, calling the now revised Obama-era standards a “common sense” regulation that was good for public health and the environment. “The Trump administration is relentless in its push to give the oil and gas industry multimillion-dollar handouts at the expense of Americans’ health and environment,” David Doniger, senior strategic director of the Natural Resources Defense Council’s climate program. Congress unsuccessfully tried to repeal the venting and flaring rule using the Congressional Review Act last year after falling short by one vote last year.
Interior Moves to Rescind Most of Venting/Flaring Rule; Two States Sue -- The Department of Interior (DOI) moved Tuesday to rescind most of an Obama-era rule governing associated natural gas flaring and venting on public and tribal lands while revising the remaining provisions, calling the parts of the rule marked for rescission "unnecessarily burdensome" for the oil and gas industry. By day's end, attorneys general (AG) for California and New Mexico asked a federal district court in San Francisco to block DOI from rescinding and revising its Waste Prevention, Production Subject to Royalties, and Resource Conservation Rule, aka the venting and flaring rule. Under the final rule, DOI's Bureau of Land Management (BLM) plans to rescind provisions of the Obama-era rule pertaining to waste minimization plans, gas-capture percentages, well drilling, well completion and related operations, pneumatic controllers, pneumatic diaphragm pumps, storage vessels, and leak detection and repair. For the remaining provisions, BLM said it plans to return to the regulatory environment that preceded the Obama-era rule when it came out in 2016. "With respect to the flaring of associated gas from oil wells, the BLM will defer to appropriate state or tribal regulations in determining when such flaring will be royalty-free," DOI said in the final rule. The department will accept public comments on the rule for 60 days, following its publication in the Federal Register. "Sadly, the flawed 2016 rule was a radical assertion of legal authority that stood in stark contrast to the longstanding understanding of Interior's own lawyers," said DOI Deputy Secretary David Bernhardt. DOI Deputy Chief of Staff Kate MacGregor said the waste minimization plan "in some cases would have required operators to report information from other midstream companies that they are not privy to because it is proprietary." MacGregor added that the final rule announced Tuesday "understands and recognizes marginal well production in this country," which BLM has generally defined as wells that produce 10 b/d or less of oil or 60 Mcf/d or less of natural gas. She said BLM estimates that about 73% of wells on leases it administers, about 69,000 wells in total, are considered marginal.
Prices Little Changed As Cooling Demand Fades But Absolute Storage Levels Remain Low - Highlights of the Natural Gas Summary and Outlook for the week ending September 14, 2018 follow. The full report is available at the link below.
- Price Action: The October contract fell 0.9 cents (0.3%) to $2.767 on an 11.7 cent range ($2.869/$2.752).
- Price Outlook: Weather forecasts continue to moderate as cooling demand, even the South, begin to fade. Below normal temperature in Northern cities will soon be considered bullish and winter forecasts from leading vendors will likely begin to influence the market. While moderating temperatures and increasing storage injections may limit price upside, still massive storage deficits and solid demand may also provide support.. The current weather forecast is now warmer than 6 of the last 10 years. Pipeline data indicates total flows to Cheniere’s export facility were at 2.8 bcf. Cove Point is net exporting 0.3 bcf.
- Weekly Storage: US working gas storage for the week ending September 7 indicated an injection of +69 bcf. Working gas inventories rose to 2,636 bcf. Current inventories fall (675) bcf (-20.4%) below last year and fall (589) bcf (-18.3%) below the 5-year average.
- Storage Outlook: The EIA weekly implied flow was 5 bcf from our EIA storage estimate. Although our weekly storage error has been somewhat disappointing, over the last 5 weeks the EIA has reported total injections of 232 bcf compared to our 233 bcf estimate and that is more than acceptable.
- Supply Trends: Total supply fell (0.4)bcf/d to 80.1 bcf/d. US production rose. Canadian imports fell. LNG imports rose. LNG exports fell. Mexican exports rose. The US Baker Hughes rig count rose +7. Oil activity increased +7. Natural gas activity was unchanged +0. The total US rig count now stands at 1,055 .The Canadian rig count rose +22 to 226. Thus, the total North American rig count rose +29 to 1,281 and now exceeds last year by +133. The higher efficiency US horizontal rig count rose +3 to 921 and rises +126 above last year.
- Demand Trends: Total demand fell (0.3) bcf/d to +72.1 bcf/d. Power demand fell. Industrial demand fell. Res/Comm demand rose. Electricity demand fell (3,140) gigawatt-hrs to 86,716 which exceeds last year by +11,311 (15.0%) and exceeds the 5-year average by 3,842 (4.6%%).
The cooling season is now entering its final stretch. With a forecast through September 28 the 2018 total cooling index is at 5,420 compared to 4,779 for 2017, 5,483 for 2016, 4,294 for 2015, 3,370 for 2014, 4,804 for 2013, 7,146 for 2012 and 6,677 for 2011.
September 20 Natural Gas Storage Report: Nuclear Outages Remain Elevated - Last week, the number of total degree-days (TDDs) plunged by around 25% w-o-w, as cooling demand went down – particularly, in the Northeast and Southwest parts of the country – while heating demand was still too feeble across the country. However, we estimate that total energy demand (as measured in total degree-days – TDDs) was no less than 15% above last year’s level. Please note that during this time of the year, heating degree-days (HDDs) are only starting to have an effect on natural gas consumption. Cooling degree-days (CDDs) are still more important, but their weight is diminishing. Seasonal trend calls for high, but declining number of CDDs, and for a rising, but low number of HDDs. This week, the weather conditions heated up again. We estimate that the number of CDDs will rise by a whopping 32% w-o-w in the week ending September 21. Total energy demand (measured in TDDs) should be some 10% above last year’s level. Next week, however, the weather conditions are expected to cool down again, but only slightly. The number of CDDs is currently projected to drop by 5% w-o-w for the week ending September 28. At the same time, HDDs should jump by no less than 40% w-o-w. On balance, however, total energy demand is projected to weaken (see the chart below). The latest numerical weather prediction models are still showing above normal CDDs and TDDs over the next 15 days (September 19-October 3), but projected CDDs are falling fast, while projected HDDs are rising only slowly. Consumption-wise, however, the weather is bringing bearish changes as rising number of HDDs cannot compensate for the declining number of CDDs. However, as we said in our previous article, natural gas consumption is supported by a number of non-degree-day factors such as higher nuclear outages and low ng/coal spreads. Specifically, nuclear outages remain elevated. As of today, they were up some 700 MW to 14,300 MW, 56% above 5-year average (see the chart below). Our subscribers receive daily (early morning) update on all the market variables, including nuclear outages.
EIA introduces interactive dashboard detailing natural gas storage activity - EIA has developed an interactive dashboard that provides daily and weekly contextual information to the Weekly Natural Gas Storage Report (WNGSR). The new dashboard shows Lower 48 and regional storage activity and key market fundamentals that affect underground natural gas storage activity. The WNGSR is one of the U.S. government's Principal Federal Economic Indicators (PFEI). Most of these indicators, which include metrics such as employment, international trade, housing construction, and crop production, are released monthly or quarterly. EIA will post updates to the dashboard in the mid-afternoon on the same days EIA releases its latest weekly natural gas storage estimates, which is usually on Thursdays. The dashboard will follow the WNGSR holiday reporting schedule. The dashboard includes the Lower 48 and regional natural gas storage inventories, net inventory changes, and utilization indicators. Other metrics include temperature visualizations, estimated natural gas consumption by sector, net exports, and futures prices. Information sources reflect a combination of EIA data and third-party data. Key sources of non-EIA data include temperature data from the National Oceanic and Atmospheric Administration (NOAA), natural gas demand and import/export data from OPIS PointLogic, and natural gas futures prices from CME Group and Bloomberg. EIA has incorporated many interactive features into the dashboard, such as the ability to select national or regional information, choose specific years or ranges, animate trends, and download selected data series or images. In addition to the data visualizations, the commentary section will provide analysis of recent natural gas storage-related market conditions. These entries will focus on many aspects of the natural gas storage market, such as potential drivers of changes in storage inventories, occasional details on EIA-derived storage statistics, and trends in natural gas storage infrastructure.
Natural Gas Production From Key U.S. Plays to Surpass 73 Bcf/d in October, Says EIA -- Production from the seven most prolific U.S. onshore unconventional plays -- the Anadarko, Appalachian and Permian basins, and the Bakken, Eagle Ford, Haynesville and Niobrara formations -- in October will continue an upward swing that began 22 months ago, with natural gas output forecast to reach 73.01 Bcf/d and oil an estimated 7.59 million b/d, according to the U.S. Energy Information Administration (EIA). Both numbers are higher compared to estimated September production. In its latest Drilling Productivity Report (DPR), which was released Monday, EIA said it expects total gas production from the the seven key regions this month to be 72.13 Bcf/d, and oil production to be 7.52 million b/d. Steady increases out of the plays began in January 2017, when total gas production out of the seven regions was estimated at 47.51 Bcf/d, and total oil production was an estimated 4.54 million b/d. Once again all seven plays are expected to see increased natural gas production in October compared to the previous month, with the Appalachian Basin, home to the mighty Marcellus and Utica shales, continuing to lead the way with an estimated 29.44 Bcf/d, up from 29.14 Bcf/d in September, EIA said. Increases are also expected in the Anadarko (7.32 Bcf/d from 7.22 Bcf/d), Bakken (2.52 Bcf/d from 2.50 Bcf/d), Eagle Ford (7.13 Bcf/d from 7.01 Bcf/d), Haynesville (9.70 Bcf/d from 9.56 Bcf/d), Niobrara (5.18 Bcf/d from 5.13 Bcf/d) and Permian (11.80 Bcf/d from 11.57 Bcf/d). Production increases are expected to be almost universal on the oil side of the ledger as well, according to the DPR. Nearly a third of the total oil production increase will come from the Permian, which is forecast to reach 3.46 million b/d, compared to 3.43 million b/d in September. Oil output increases are expected in five other plays, with the Anadarko estimated at 562,000 b/d, Appalachia at 130,000 b/d, Bakken at 1.33 million b/d, Eagle Ford at 1.45 million b/d and Niobrara at 620,000 b/d. The Haynesville (43,000 b/d) is forecast to see oil production remain unchanged month/month.
KBR, ConocoPhillips to Develop Off-the-Shelf LNG Tech - KBR, Inc. and ConocoPhillips will jointly develop a standardized liquefied natural gas (LNG) train to provide mid-scale LNG capacity for both greenfield and brownfield expansions seeking off-the-shelf technology to reduce costs and shorten project schedules, KBR reported Tuesday. “KBR and ConocoPhillips both have a well-established and respected history in LNG,” Farhan Mujib, president of KBR’s Hydrocarbons Services Americas unit, said in a written statement announcing the joint program. “This unique opportunity leverages that experience to combine KBR’s plant configuration and project execution experience with the reliable and well-proven ConocoPhillips’ LNG technology and operating experience.” The companies will complete a front-end engineering and design (FEED) quality reference design for a mid-scale capacity (1.5 to 3.0 million tonnes per annum) LNG train suitable for a wide range of feed gas and ambient temperature conditions, KBR stated. The integrated design approach will use ConocoPhillips’ “Optimized Cascade” process technology and will apply integrated modularized construction, the company added. ConocoPhillips and KBR launched the collaboration in 2017, with KBR applying its “SmartSPEND” methodology to achieve cost reductions for LNG facilities using the ConocoPhillips process technology, KBR continued. “Building on this experience and responding to demand in the marketplace, the parties decided to focus on developing a mid-scale LNG solution that achieves low unit costs and fast deployment while maintaining high efficiency and operability,” KBR stated, adding that the partners will apply a similar methodology and technology to large-scale LNG trains. KBR noted the technology should be available for new LNG projects starting next year.
Natural gas says it's no longer a transition fuel. It may be wrong - Russell (Reuters) - Natural gas is no longer merely a transition fuel between the past of dirty coal and crude oil and the future of renewables, according to an increasingly confident cross-section of the industry. A procession of senior executives of major companies, including Royal Dutch Shell and Exxon Mobil Corp, espoused this view while speaking at this week’s GasTech event, the industry’s biggest annual gathering. While the industry has plenty to be buoyant about, including rapid and sustained Chinese demand for liquefied natural gas (LNG) and the shale gas revolution in the United States, it is running the risk of getting ahead of itself, while ignoring the threats it faces. The idea of natural gas as a transition fuel was largely cemented by the International Energy Agency in 2011, when it published a report on what it termed the “golden age of gas,” which would see demand for the fuel jump by 50 percent to become 25 percent of global energy consumption by 2035. Natural gas was seen as a cleaner alternative to coal, a factor the industry was happy to seize upon as it allowed them to boost output while being seen as part of the solution to climate change, rather than part of the problem. The rapid expansion of shale gas production in the United States was largely behind the demise of many coal-fired power stations, while in China coal used in industries and for residential heating is being replaced by natural gas as part of the government’s efforts to reduce air pollution. These dynamics are part of the reason why many players in the natural gas industry expect the market for LNG to rise from around 300 million tonnes a year currently to at least 450 million by 2025, and possibly even higher. But for this to happen, almost everything has to work in LNG’s favor, and the risks must remain only possibilities.
Without much-needed investment, the US gas industry is facing a 'waste of capital,' IEA says - On the production side, U.S. shale gas is performing strongly — but a trade war with China and a lack of investment projects in the sector could be "economically disruptive", according to the International Energy Agency (IEA). "Without additional investments into American liquified natural gas (LNG) projects, the American gas industry will have to keep gas on the ground, which would be a waste of capital, economically quite disruptive," Laszlo Varro, chief economist at the IEA, told CNBC's Steve Sedgwick at the GasTech conference in Barcelona on Tuesday.U.S. natural gas is being produced at record levels thanks to the shale revolution, brought about by the extraction technique known as fracking. And the booming demand for LNG in Asian markets, China in particular, should mean massive business for U.S. gas exporters.But major bottlenecks in export capacity lie ahead due to global trade tensions and a lack of sufficient investment into projects for export infrastructure, the IAE has warned."If there is no export infrastructure development, then a large amount of American gas will simply stay on the ground," Varro explained. "Because given that the domestic energy system is not going to be able to absorb that much gas domestically, if there are no export projects, then American gas prices will have to go down to a very low level to shut production down."Energy industry forecasters predict a global demand for 500 million tons of LNG by 2030. That demand will be coming from Asia's emerging economies, in particular, with gas as a major part of China's growth plan in terms of energy consumption. Forty-five percent of China's natural gas will need to be imported, and the U.S. is expected to supply a vast amount of that need.But this week's announcement that the White House is raising tariffs on an additional $200 billion worth of Chinese goods does not bode well for prospects for trade, consequently stunting support for export infrastructure investments. Chinese authorities already promised to retaliate against the new tariffs, and have signaled their readiness to slap 25 percent tariffs on U.S. LNG imports, among other things. For competitor countries like Qatar or Canada this may be a good thing, but energy executives still maintain it won't be positive for the larger market.
U.S. natural gas prices remain on defensive despite low stocks: Kemp (Reuters) - Benchmark U.S. natural gas prices have remained stuck below $3 per million British thermal units for most of this year even as consumption has soared and gas stocks have slipped to their lowest seasonal levels since 2003.Working stocks in underground storage amounted to just 2,636 billion cubic feet at the end of the first week in September, down from 3,298 bcf at the same point last year and a five-year average of 3,232 bcf.Gas consumption by power producers has risen strongly as a result of high air-conditioning demand during a long, hot summer and the commissioning of another wave of combined-cycle generating units. Cooling demand has been more than 13 percent higher than in 2017 and 14 percent above the long-term average so far in 2018 (https://tmsnrt.rs/2pmzdBb). Cumulative demand has been similar to the heatwave of 2016, according to degree-day statistics from the U.S. Climate Prediction Center. Power producers’ gas consumption is also being boosted by the large number of new gas-fired generating units that have started up. Power producers had 464 gigawatts of gas-fired generating capacity available at the end of June, up 3 percent compared with 2017.And low gas prices have encouraged power producers to run them for more hours, with capacity utilisation rates several percentage points higher every month so far in 2018 compared with 2017. Much of the increase in gas-fired generation has come at the expense of coal, where capacity has declined by more than 6 percent from year-ago levels and utilisation rates have been down in most months so far in 2018. Power producers generated almost 16 percent more electricity from gas in the first six months of the year while coal-fired generation was down almost 6 percent.
The Unexpected Jump In US Natural Gas Prices - Holy smokes. October prompt month natural gas price is up 21 cents to $2.98 per MMBtu this week (8%), despite the fact that Hurricane Florence was supposed to be a somewhat bearish event by wiping out electricity demand. Gas this year has accounted for 15% of electricity in South Carolina and 30% in North Carolina. Nearly 1 million people lost power.Generally, we have been stuck in this $2.77 to $2.98 range for months now. Prices have not hit the $3.00 mark since June 15, which is the only daily close at that level since the end of January. It's a price that has had massive technical resistance surrounding it, with gas being unable to get over that hump.We have had about a 3 Bcf/d of surplus in the gas market, with rapidly rising production keeping prices low, up 5% in the past two months alone. And the tremendous rain/flooding that was supposed to significantly lower output in Appalachia - an area that now produces 37% of all U.S. gas - wasn't exactly realized. Overall U.S. production is still in that record 82 to 84 Bcf/d range. Demand has been remarkably consistent in recent months, at ~78 Bcf/d.But very low gas inventory levels are the key looming bullish factor in the market, now 18% below the five-year average. Despite a pretty hefty 86 Bcf injection reported today, which was on target with expectations and 10% above the five-year average, prices jumped 7 cents.Now with 2,722 Bcf in gas stocks, we've continually been playing catch-up for storage. To start the year, during the first three weeks of January we had the two largest pulls from gas inventory ever to meet record heating demand during the "Bomb Cyclone." April was the coldest it has been in over 20 years, and gas storage at the end of that month was nearly 30% below the five-year average. We also had the hottest May in recorded U.S. history.
US natural gas in storage increases 86 Bcf to 2.722 Tcf: EIA — US natural gas in storage increased by 86 Bcf to 2.722 Tcf for the week ended September 14, Energy Information Administration data showed Thursday. The build was slightly more than an S&P Global Platts' survey of analysts calling for an 83-Bcf addition.The injection was just below the 87-Bcf build reported during the corresponding week in 2017 but more than the five-year average addition of 76 Bcf, according to EIA data. It is only the second time in the last month the injection was more than average.As a result, stocks were 672 Bcf, or 20%, less than the year-ago level of 3.394 Tcf and 586 Bcf, or 18%, less than the five-year average of 3.308 Tcf.The injection was more than the 69-Bcf build reported the week before as population-weighted temperatures across the Lower 48 dropped by 6 degrees and significantly dampened demand for gas-fired power generations, particularly across the Midwest and Northeast.The East region added 30 Bcf to 709 Bcf, which was 92 Bcf less than the five-year average. The Midwest gained 3 Bcf to 770 Bcf and is now 140 Bcf below average. A 4-Bcf injection in the Mountain region brought stocks up to 170 Bcf or 29 Bcf less than average, while the Pacific added 5 Bcf to 255 Bcf, compared the five-year average of 328 Bcf. South Central posted a 12 Bcf injection bringing volumes to 818, which is a staggering 253 Bcf below average.At 2.722 Tcf, total working gas is below the five-year historical range and sits 196 Bcf lower than the five-year minimum.The NYMEX October Henry Hub natural gas futures added 0.8 cent to $2.916/MMBtu following the 10:30 am EDT storage announcement.Over the past five years, storage levels have peaked on the week ending November 9 at 3.8 Tcf. That would allow for eight more injections before the flip to net withdrawals begin. An early forecast for at least the next three weeks show no significant reduction in the deficit, according to S&P Global Platts Analytics. Storage is now expected to peak at 3.26 Tcf before the switch to withdrawals in early November, according to the latest forecast by Platts Analytics. If so, it would be the lowest level to start the heating season since 2003, when stocks peaked at 3.18 Tcf. However, high gas production has kept prices from rising despite the large storage deficit. Platts Analytics expects a build of 52 Bcf for the week in progress, which would expand the storage deficit to the five-year average by 29.
Strong Natural Gas Production Growth Continuing Not a Given, Says BP Analyst Innovation in the exploration and production (E&P) sector has helped drive rapid natural gas supply growth since last year, but the market shouldn’t assume this pace of growth will continue, according to BP North America Gas & Power’s Josh McCall, who directs fundamental analytics.A surge in Lower 48 dry gas production since January 2017 has pressured gas prices even as demand has proved sturdy enough to keep storage inventories well below recent averages. However, while the prospect of continued production growth has taken a some risk premium out of the forward curve, that outlook could change, McCall said during a presentation at the recent LDC Gas Forums conference in Chicago.“One thing to keep in mind, the market does respond to prices” as it did during the commodities downturn a few years ago, so “don’t necessarily take it for granted that production will grow forever,” McCall said. And “there’s not really a consensus on what growth is going to look like going forward.”One risk factor driving uncertainty in the production outlook is infrastructure. To sustain the kind of growth rates seen recently from Northeast producers requires more infrastructure buildout, he said.“It’s not just the Northeast,” McCall said. “The Permian, in particular, has a lot of infrastructure that’s needed, and it’s not just natural gas,” but also oil and natural gas liquids (NGL). “So if I’m going to get that associated gas to market, I need all that infrastructure in place,” including processing, NGL fractionation, and pipeline takeaway capacity.McCall delivered his remarks prior to Wednesday’s record-low Waha spot prices, which have coincided with a number of downstream restrictions to provide one the clearest signals to date of the Permian region’s takeaway constraints.With the U.S. gas-directed rig count showing relatively flat growth over the last 18 months or so, oil prices are likely to be “much more important going forward” for the gas market. “As different associated basins go, it’s not just a gas pipeline story, it’s really an oil pipeline story as well,” McCall said. “So oil prices really matter in terms of what the production now looks like.”
SoCalGas storage constraints sideswipe Permian gas prices -- It’s no secret by now that Permian natural gas pipelines have been running near full the last few months, jam-packed like Southern California traffic while trying to whisk away copious volumes of mostly associated natural gas to markets north, south, west and east of the basin. Despite every major artery running near capacity this summer, Permian prices had so far managed to avoid falling below the dreaded $1.00/MMBtu threshold, a precipice that historically defines a gas producing basin as definitively oversupplied. That all changed yesterday, as word came in that Southern California Gas Company, one of the largest recipients of Permian gas, has nearly filled its gas storage caverns and will soon need far less gas hitting its borders. That’s particularly bad news for the Permian, which has few other options if it needs to reduce the supply that is currently flowing west out of the basin to California. A large unplanned outage for maintenance was also announced on one of the pipelines leaving the Permian and heading north to the Midcontinent. As a result, the SoCalGas news and maintenance combined to put a huge dent in Permian gas prices, some of which plunged as low as 50 cents in Wednesday’s trading. Today, we detail this most recent development and the implications for Permian gas takeaway. We’ve written extensively on Permian Basin natural gas the last few months, most recently detailing the proposed Whistler Pipeline in Whatever It Takes. We also looked at Kinder Morgan’s Permian Highway Pipeline, which recently became the second new Permian pipeline to reach a final investment decision (FID) to proceed, in our blog titled P.H.P., Dynamite!. Our last blog focusing specifically on Waha gas prices was in July, when Rollercoasteranalyzed the price swings this summer. Earlier in the summer, in Trouble Every Day, we outlined potential options for Permian natural gas should pipeline capacity out of the basin fill up before the first new pipeline — Kinder Morgan’s Gulf Coast Express (GCX) — starts up in late 2019. We also recently discussed GCX and other potential competing projects as part of our Blame It On Texas series. Today, we dive into the drivers behind yesterday’s news that has likely turned the Permian gas pipeline traffic jam into a pileup.
North Dakota Sets All-Time Crude Output Record; Natural Gas a Record, Too - North Dakota set production records for crude oil and natural gas in July, but gas storage programs are on the to-do list to curb flaring and increase gas captured at the wellhead.Overall oil production hit an all-time record 39.3 million bbl (1.269 million b/d) in July, compared to 36.8 million bbl (1.227 million b/d) in June. For natural gas, total July production was 74.4 Bcf (2.4 Bcf/d), compared to 69 Bcf (2.3 Bcf/d) in June. Natural gas continues to outpace oil with a month-over-month increase of 4.3%, compared to 3.5% for oil."We lost another one percent on gas capture, as it fell to 82% in July," said Department of Mineral Resources Director Lynn Helms on Friday. Helms again expressed concern that some operators will be hit with production restrictions when capture goals increase to 88% on Nov. 1.Due to the gas capture struggle, Helms said the state Industrial Commission (IC) recently approved a $140,000 project by the state Energy and Environmental Research Center (EERC) to investigate the feasibility of sponsoring produced gas storage in the Bakken Shale."We've done some relatively simple modeling of that concept in the Oil and Gas Division, and it looks like it is geologically feasible," Helms said. "The EERC will look at what the best technology would be and where the most suitable formations are, along with what are the regulatory implications, if any." A report is due to the IC in December. "We're looking forward to being the first state in the nation to capture produced gas and geologically store it to help the industry with the gathering and processing of natural gas. It would be gas in its pre-processed state, being pumped into a geological formation temporarily [and] stored for two to five years, to help smooth out the disconnect we have between production and infrastructure."
North Dakota Is Producing As Much Oil As The Entire Country Of Venezuela -- The single state of North Dakota is now producing as much oil as Venezuela, a member of the Organization of the Petroleum Exporting Countries. While Venezuela continues to falter under its socialist regime, North Dakota continues its historic rise in crude oil production. The sparsely populated midwestern state churned out 1.27 million barrels a day in July, according to data reported by Bloomberg. This is approximately the same level of production seen in Venezuela during the same month. The numbers provide a snapshot of how much the industry landscape has evolved in the two places. Much like other regions in the United States, North Dakota has experienced a shale oil boom in recent years. The advent of hydraulic fracturing has allowed North Dakota — home of the Bakken shale play — to produce oil at rates four times greater than its previous peak set in the 1980s. The state is now second only to Texas in oil production and enjoys the lowest unemployment rate in the country.
Pipeline Leaks 63,840 Gallons of Produced Water in North Dakota -- A pipeline released 63,840 gallons (1,520 barrels) of produced water that contaminated rangeland in Dunn County, North Dakota, the Bismarck Tribune reported, citing officials with the North Dakota Department of Health. Produced water is a byproduct of oil and gas extraction, and can contain drilling chemicals if fracking was used.The pipeline is part of a gathering system owned by Dallas-based oil and gas producer Petro-Hunt LLC, which discovered the leak on Wednesday. Bill Suess with the North Dakota Department of Health told Grand Forks Herald they were able to stop the produced water from reaching a nearby dry creek bed. Fossil fuel explorations and operations produce an incredible amount of wastewater. Oil and gas reservoirs often contain water, which is brought to the surface along with the hydrocarbons. The fracking process itself also involves large quantities of chemically laden water being shot at high pressures into shale. Once fracking is done, much of the fracking fluid comes back up the well as "flowback" wastewater. Dunn County, located in western North Dakota and part of the prolific Bakken Shale oilfield, is "known for its oil activity," according to the county website.The cause of the leak is now under investigation. The North Dakota health department has investigated the site and will continue monitoring the investigation and remediation. Walter Roach, vice president of Petro-Hunt, told the Bismark Tribune that its workers responded quickly to the spill and the company is committed to the clean up.
Massive 2013 oil spill in North Dakota finally cleaned up (AP) — Cleanup of more than 840,000 gallons (699,450 imperial gallons) of oil is complete nearly five years after a pipeline leak in a farmer's field in North Dakota.A Tioga farmer discovered the spill by Tesoro, now known as Andeavor, in September 2013. It has been called one of the largest onshore spills in U.S. history.The San Antonio-based company and the state of North Dakota announced completion of the cleanup on Wednesday.The company has blamed a lightning strike for the pipeline break.A state regulator says about 1.4 million tons (1.3 million metric tons) of dirt was excavated from the site and treated. Crews had been working round-the-clock to clean up the site after the spill was discovered. The company has estimated the cost of the cleanup at $93 million. The state fined the company $454,000 for the spill.
Trump’s Friends Get Rich Off Oil Boom as Industry Limits Info on Pipeline Worker Injuries & Deaths (video & transcript) This is Democracy Now!, democracynow.org, The War and Peace Report. I’m Amy Goodman, with Part 2 of our conversation on “Death on the Dakota Access: An investigation into the deadly business of building oil and gas pipelines,” the headline of a new investigation by Antonia Juhasz, a longtime oil and energy journalist. Published today in the Pacific Standard magazine, the piece looks at the deaths of two men who worked on the DAPL—Dakota Access pipeline—and the massive oil and natural gas boom that’s generated some of the deadliest jobs in the country. So we continue with Antonia Juhasz.
DUCs still flying high in Lower 48 - Despite three of seven drilling regions reporting a drop, the number of DUCs, drilled, but uncompleted wells, in the seven most active unconventional basins and plays in the Lower 48 U.S. states rose 3% from July to August.The U.S. Energy Information Administration’s Drilling Productivity Report (DPR) for September reported 238 new DUCs were added across the U.S. from July to August. The total number of DUCs at Aug. 31, was 8,269, up from 8,031 in July, Kallanish Energy reports. The biggest increase in DUCs was reported in the Permian Basin, up 211, to 3,630, from 3,419. The second-highest increase in DUCs was in the Anadarko, up just 34 drilled, but uncompleted wells, bringing the play’s total to 1,026 for August, from 992 in July.The three regions reporting a drop in DUCs included the Niobrara, down 20, to 427 in August, Appalachia (the Marcellus and Utica Shale plays combined), down 19 DUCs, to 699 from 718, and the Bakken, down four DUCs in August, to 751, from 755 in July. The other basins or plays in the DUC survey included the Eagle Ford, up 28 to 1,545 in August; and the Haynesville Shale, up eight DUCs, to 191 drilled, but uncompleted wells at Aug. 31.
Oil Companies Slash Debt To Pre-Crash Levels -- Global energy companies reduced their debt for seven quarters running in the second quarter of 2018, cutting their long-term debt-to-equity ratio to the lowest since the third quarter of 2014, when oil prices started crumbling, the EIA said in its Q2 2018 financial review of 107 oil and gas companies worldwide, including 76 U.S. companies.Based on data from the companies’ filings with the SEC, the EIA found that the free cash flow—the difference between cash from operations and capital expenditure—came in at US$119 billion for the four quarters ending June 30, 2018, the largest four-quarter sum in the period 2013 to 2018. In addition, cash from operations in Q2 2018 was US$118 billion, up by 27 percent compared to the second quarter of 2017.Capital expenditures also increased year on year in Q2—by 2 percent to US$70 billion, the EIA review of 76 U.S. energy companies, 13 Canadian firms, 9 European, and 9 other companies showed.About two-fifths of companies reported positive free cash flow, and 78 percent reported positive upstream earnings in Q2 2018. That was mostly due to the higher oil prices. Brent Crude oil prices were 48 percent higher in Q2 2018 than in Q2 2017 and averaged $75 per barrel, the highest since the fourth quarter of 2014, EIA data showed.
As administration pursues ANWR drilling, Trump official accuses federal employees of creating ‘road bumps’ - Late last year, Congress ordered the federal government to hold oil lease sales in a portion of the Arctic National Wildlife Refuge. Defying opponents who say the land is too ecologically fragile to drill, the Trump administration has prioritized carrying out the new law. Now, without offering many details, a top Trump administration official is accusing federal employees of making that job more difficult, saying they seem unhappy about the prospect of oil development happening on land they’ve managed as a refuge for decades. Joe Balash is Assistant Secretary for Land and Minerals Management at the U.S. Department of Interior and a former natural resources commissioner for Alaska. He’s one of the top political appointees at the Interior Department, and he’s overseeing the process to begin oil development in the Arctic National Wildlife refuge. In an interview last month, Balash described what he called a “really difficult management challenge” with U.S. Fish and Wildlife Service employees. He said during a recent meeting with the agency in Alaska, he felt employees weren’t eager to carry out the new law. “You could just tell from all of the nonverbal communication going on in the room that they were not happy to see us, they were not happy to talk about this, they still weren’t necessarily prepared to accept this new reality,” Balash said.
Canadian oilfield companies see light on the horizon with prospects for LNG Canada --After years of suffering through plunging energy prices and declining spending by oilsands players, Canada’s oilfield service industry is finally seeing a light on the horizon. Companies that do everything from drilling wells to building work camps are pinning their hopes on a potential C$40 billion liquefied natural gas facility on British Columbia’s Pacific Coast. LNG Canada, the Royal Dutch Shell Plc-led group behind the plant, may decide whether to build the project in the coming weeks. The export complex would be a boon for an industry that was hit hardest by the 2014-2016 downturn in oil and gas prices, and one that still hasn’t recovered. The project would need new pipelines built and fresh gas wells drilled, bringing scores of workers and tons of equipment off the sidelines. The LNG Canada facility would provide work similar to big oilsands projects before the crash. Horizon North owns 57 acres of land near the site in the coastal town of Kitimat. The land can be used for residential development, hotels and restaurants, as well as for a work camp with up to 1,000 beds. The company declined to provide financial forecasts of what the LNG project could mean. Another opportunity for service firms is that once the facility is built, the project partners -- which also include Malaysia’s Petroliam Nasional Bhd, PetroChina Co., Mitsubishi Corp. and Korea Gas Corp. -- will need to increase natural gas production to fill it.Precision Drilling Corp. expects to win some of that work, which would call for putting up to six more drilling rigs into operation, There were about 74 active rigs targeting gas in Alberta and British Columbia at the end of August, less than half of the 180 running at the start of 2015, according to data compiled by RS Energy Group. By comparison, the number of rigs running in the U.S.’s Marcellus and Utica shale plays has dropped only about 30 percent from the start of 2015 through June.
Aboriginal Concerns Trigger Regulatory Pause for Atlantic Coast Goldboro LNG Proposal --- A Canadian sore spot -- aboriginal affairs -- on Wednesday triggered a regulatory pause liable to impose project changes on the plan to launch liquefied natural gas (LNG) shipments overseas from Goldboro LNG on the Atlantic coast.Over objections by export terminal sponsor Pieridae Energy, the Nova Scotia Utility and Review Board (UARB) scheduled a hearing for Oct. 15 in Halifax on a demand for attention by a branch of the Mi'kmaq community, the Sipekne'katik First Nation.Issues up for scrutiny at the UARB’s special session include defining the agency’s native affairs jurisdiction and the extent of tribal consultation required before the provincial government grants final project approvals.The board is reviewing a construction application by Goldboro LNG. The UARB called the special native hearing after the Sipekne’tik prodded the Nova Scotia Office of Aboriginal Affairs into requesting a response to a claim that the Canadian constitution requires “deep” consultation on Goldboro LNG.
Utility owes citizens an update on Tufts Cove spill cleanup... Nearly a month and a half after thousands of litres of sticky bunker C fuel spilled into Halifax harbour, it remains unclear when the painstaking job of cleaning it up will be finished. A leaking pipe at the Tufts Cove Nova Scotia Power generating station spilled about 5,000 litres into Halifax harbour Aug. 2. Nearly two weeks later, the utility announced an additional 9,900 litres had leaked into a containment trench and another 9,400 litres entered the cooling water system of one of its generators. On Aug. 14, Nova Scotia Power's chief operating officer said the cleanup would be finished by mid-September. A month later, that work continues. "I'm curious as to what they've been doing for the last three weeks or so," said Mark Butler, the policy director at the Ecology Action Centre. "Are they finding more oil than they anticipated? Is it turning up on the sea floor? Is there more of it in the rocks or shoreline that they anticipated?" In an email to CBC News, utility spokesperson Tiffany Chase would only say that "steady progress" is being made on the cleanup.
Kinder Morgan to Divest Canadian Assets, Hires TD Securities -- Kinder Morgan Inc KMI has reportedly hired investment bank, TD Securities, for the scheduled sale of its Canadian business. The sale, which will indicate the U.S. pipeline giant’s exit from Canada, is expected to raise about C$2.4 billion ($1.8 billion). At a conference in September, Kinder Morgan’s chief executive expressed intent in divesting the remaining Canadian business, which was initially purchased to support the Trans Mountain project. However, no details were disclosed by either of the parties. The company divested Trans Mountain pipeline to the Canadian government for about C$4.5 billion at the end of August. In the same month, a Canadian court reversed its consent of the Trans Mountain expansion on grounds that Ottawa did not pay attention to native concerns. Recently, pipeline companies in Canada have faced face high resistance from environmental groups and First Nations groups for the consent of new projects. Due to such constraints, the existing pipelines are highly-valued assets in the country. In 2005, Kinder Morgan had purchased Terasen Inc, wherein it obtained the Trans Mountain pipeline and considerably expanded footprint in Canada. The remaining Canadian business of Kinder Morgan includes the Edmonton, Alberta and Vancouver Wharves terminal businesses as well as the Canadian portion of the Cochin pipeline.
Shell targets lower methane emissions from oil and gas operations (Reuters) - Royal Dutch Shell announced on Monday plans to limit leaks of methane, a potent greenhouse gas, across its oil and gas operations as it tries to sharply curb carbon emissions. Shell aims to maintain methane emissions below 0.2 percent of its total oil and gas production by 2025, it said in a statement, joining British rival BP, which last year set a similar goal. Larger rival Exxon Mobil announced in May plans to reduce methane emissions by 15 percent by 2020. Methane is released into the atmosphere mostly from the burning of excess gas, known as flaring, as well as through leaks in gas infrastructure such as wells, pumps and pipelines. The gas has a bigger greenhouse impact than carbon dioxide, even though the oil and gas industry produces less methane and the gas also has a shorter lifetime. The methane target will be measured against a baseline leak rate, which is currently estimated at range from 0.01 percent to 0.8 percent across the company’s oil and gas assets, it said. The Anglo-Dutch company set out last year an ambitious plan to halve its carbon emissions by 2050, far exceeding rivals. Investors have called on the company to set binding targets to reach those goals. Climate change and emissions, caused by burning fossil fuels, have moved to the forefront of discussions between energy companies and investors since the signing of the 2015 U.N.-backed Paris climate agreement that seeks to curb emissions to zero by the end of the century in order to limit global warming.
Ecopetrol: Fracking Likely In Colombia, Business Prospects Are Positive -- Ecopetrol is a Colombian oil and gas company with headquarters in Bogotá, Colombia. The company is the second largest oil company in South America behind Petrobras from Brazil. Fracking in Colombia has been a big debate since the recently inaugurated president Ivan Duque was proposing the possibility during his election campaign. Upon securing the presidency, his fracking project is moving forward with a majority of the senators in the Colombian Congress who are collaborating with him for the proposal. The fracking issue has long been debated and now with the government reaching a consensus and backing the fracking industry, the approval for the controversial extraction method is likely. Fracking could provide the Colombian economy enough economic output to push their GDP towards ~3% and fuel a new era of economic expansion. (Source) Fracking is possible in Colombia because of the “Luna” geologic formation in the Middle Magdalena of Colombia. This large fossil fuel reserve is highly debated among energy industry experts because it is difficult to extract and has the potential to produce more than 5 billion barrels of oil. If these estimates are accurate, the oil reserves are three times greater than the current reserves Colombia has through traditional extraction methods. This reserve could easily get over the 350 million barrels of oil and has the potential to push production to break the 1 billion goal that the company has stated will be achieved in the coming years. Fracking in Colombia has a large probability of being approved because of the coalition in the new government and support of the legislators. There is still a chance that non-governmental organizations could impede the legislative process to approve fracking extraction.
Chevron Arbitration Ruling Against Ecuador ‘Completely Off Base’ - Real News Network, video and transcript - As the Real News has previously reported, in 2011, the courts of Ecuador rendered a nine point five-billion-dollar judgment against Chevron, one of the world’s largest fossil fuel companies. The Ecuadorian plaintiffs persuaded the Ecuadorian courts that from 1964 to 1992, Texaco, which was later purchased by Chevron, dumped polluted wastewater into open pits across vast swaths of Lago Agrio in the Ecuadorian jungle, contaminating the water used by locals. Locals call the area the Amazon Chernobyl. Indigenous tribes have seen their cultures decimated by the pollution. Ecuador’s environmental judgment against Chevron is thought to be the highest ever to emerge from a court, but Chevron is doing everything it can possibly do to block collection. After Chevron sold off its assets in Ecuador during the trial there, the Ecuadorian plaintiffs sought to enforce the judgment and jurisdictions in which Chevron owns, directly or indirectly, substantial assets. Chevron has threatened the villagers with a “lifetime of litigation” and has vowed never to pay the judgment. So far, it has been true to its word. The plaintiffs’ attempts to enforce the judgement in The United States failed. Early this year, the Ontario Court of Appeal rejected the plaintiffs’ attempt to enforce their massive judgment in Canada, another country in which Chevron indirectly owns substantial assets. Then, on September 7, an international tribunal found that Ecuador violated a treaty with the United States by allowing its court system to issue a nine point five-billion-dollar judgment against Chevron in this case. Now here to discuss this with us is Steven Donziger, a human rights attorney based in New York who has been representing these indigenous and farmer communities in Ecuador’s rainforest for more than two decades. He joins us today from New York.
Cuadrilla to start fracking in England in weeks - (Reuters) - Shale gas developer Cuadrilla will start fracking at its Preston New Road site in northwest England in the next few weeks, it said on Wednesday as it announced government approval for a second well. Hydraulically fracturing, or fracking, involves extracting gas from rocks by breaking them up with water and chemicals at high pressure and was halted in Britain seven years ago after causing earth tremors. But the British government, keen to cut its reliance on imports as North Sea supplies dry up, has tightened regulation of the industry and gave consent in July for Cuadrilla to start fracking a first well at Preston New Road. After approval for a second well at the site, Cuadrilla said on Wednesday that it would begin work “in readiness to start hydraulically fracturing both wells in the next few weeks”. Cuadrilla said it would run an initial flow test of the gas produced from both wells for approximately six months. The British Geological Survey estimates shale gas resources in northern England alone could amount to 1,300 trillion cubic feet (tcf) of gas, 10 percent of which could meet the country’s demand for almost 40 years. However, attempts to extract the gas have come under fire from local communities and campaigners concerned about the potential effect on the environment and ground water, and arguing that extracting more fossil fuel is at odds with the country’s commitment to reducing greenhouse gas emissions. British energy and clean growth minister Claire Perry said consent for the second well had been granted after the company had met a number of criteria, including showing it had the necessary funds to carry out work at the site until at least June 30, 2019.
Fracking campaigners not 'extremists' – Sturgeon - Nicola Sturgeon has said fracking protesters should not be considered “domestic extremists” after police labelling them as such was raised at First Minister’s Questions.Scottish Green co-convener Patrick Harvie referred to news reports the campaigners against fracking were among those Police Scotland termed “domestic extremists”.He said: “We’ve known for years that environmental campaigners, along with peace activists and others, have, in the past, been spied on or infiltrated by police forces in the UK, including in Scotland, but this statement of current practice is shocking. “Anti-fracking protesters who exercised their democratic right to protest are heroes, yet Police Scotland are labeling them as domestic extremists.” He asked the First Minister to give an assurance that campaigners, including MSPs, planning to attend a protest against nuclear weapons at Faslane on Saturday will not be subject to the same treatment. She said: “I do not consider people who protest against nuclear weapons, or fracking, or anything else in a peaceful and democratic way to be extremists in any sense and I would not expect anyone to consider them to be extremist.
North Sea oil and gas drilling falls to lowest level since 1965 - The number of new oil and gas wells being drilled in the North Sea has crashed to levels not seen since the basin was first tapped more than half a century ago. The UK’s oil and gas industry warned that the record low was a cause for “serious concern” and left the sector at a crossroads. Just four exploratory wells have been drilled in the first eight months of the year, with the most optimistic projections pointing to a total of 12 expected by the year end. That would put 2018 on a par with 1965, the second year that the modern era of exploratory work got under way in the North Sea.
Norway's Offshore Oil Boom Is Back On - The rise in oil prices brought about the recovery of Norway’s oil industry, with companies lining up plans to invest in boosting oil production on the Norwegian Continental Shelf (NCS)—surely most welcome news for Western Europe’s biggest oil and gas producer, which faces a decline from the mid-2020s onwards if new large discoveries are not made soon.Smaller oil firms, some of which are a result of recent mergers, plan to invest billions of dollars in Norway’s offshore oil and gas over the next five years, launching an unofficial race to see who will become the third-largest oil producer in Norway behind state-participated companies Equinor and Petoro, and the largest independent non-state-held company operating on the shelf.The three most likely candidates to become Norway’s top independent producer could be investing a combined US$20 billion offshore Norway by 2022, according to Bloomberg calculations.These companies are Aker BP, the result of a 2016 merger between Aker and BP’s Norwegian unit; Vår Energi AS, the company that will emerge from the merger of Point Resources AS into Eni’s local unit; and Wintershall DEA, the company expected to emerge from the proposed merger between Germany’s Wintershall and DEA. Over the past year, Aker BP has been actively pursuing acquisitions offshore Norway—it bought Hess Norge last year for US$2 billion, and two months ago it agreed with Total to acquire its interests in a portfolio of 11 licenses on the NCS for US$205 million.
Germany doesn’t need Trump’s gas - The US government is trying to push Germany into buying US liquefied natural gas rather than keeping its Russian pipelines open. But there’s little logic in Germany doing so. In their opinion piece, US Ambassador to Germany Richard Grenell and his colleague in the US Department of Energy, Dan Brouillette offer up a shameless diplomatic sales pitch to convince Germany to import more liquefied natural gas (LNG) from the US. Germany can become “more energy secure,” they say, and support “energy diversification efforts” at the same time as strengthening the transatlantic alliance. But of course it isn’t really about selling more US shale gas, energy security or the transatlantic alliance; it’s a veiled warning that Germany should reject Russian gas. Donald Trump believes Germany is “captive” to Russian energy supplies and wants the country to wean itself off Siberian taps.Angela Merkel disagrees, but as a sop in the ongoing trade dispute between the EU and US, she has shown a sudden interest in US LNG. The chancellor sees it as a relatively cheap and easy way to placate the erratic US president while bigger issues are hammered out. There’s just one problem: Germany doesn’t want or need US LNG. First, as the American pair acknowledge, Germany has no LNG infrastructure. Its imported natural gas arrives entirely by pipeline, from Russia, Norway and the Netherlands. Under pressure from the US, Berlin is currently considering building an LNG terminal on its North Sea coast, but critics have labeled the project a white elephant. Private investment has failed to match government subsidies, and no one thinks a German terminal will ever make a profit.Second, Germany plans to be “almost completely decarbonized” by 2050. Everyone agrees this is ambitious, and that natural gas is a good intermediary source on the way to zero emissions. But even so, what’s the point of investing in an entirely new energy supply network if it could be redundant in just 32 years? Especially as a cheaper alternative already exists.
Russian oil firm seeks dollar alternative amid U.S. sanctions threat - traders (Reuters) - Russian oil producer Surgutneftegaz is pushing buyers to agree to pay for oil in euros instead of dollars if the need arises, apparently as insurance against possible tougher U.S. sanctions, traders who deal with the firm told Reuters. Russia has been subject to Western sanctions since its 2014 annexation of Ukraine’s Crimea region, but Washington has threatened to impose extra sanctions, citing what it has called Moscow’s “malign” activities abroad. The prospect that causes most alarm for Russian firms is inclusion on a Treasury Department blacklist that effectively cuts them off from conducting transactions in dollars, the lifeblood of the global oil industry. Surgutneftegaz, whose chief executive Vladimir Bogdanov is already on a U.S. blacklist in a personal capacity, declined to respond to Reuters questions. “We do not comment on our commercial activity,” said the company, Russia’s fourth largest by output. To date, Russia’s oil industry has been able to weather Western sanctions. In response to restricted access to Western finance and technology, firms have switched to borrowing from Russian state banks and developed their own technology. Most Russian oil majors, including Rosneft and Lukoil, also sell the lion’s share of output via long-term contracts with clients, giving them more time to work out alternative forms of payment when the contracts expire. But most of Surgutneftegaz’s exports — around 2 million tonnes per month — is sold through monthly tenders on the spot market, the largest volumes by far among its Russian peers. So it would have only around 30 days to find alternative payment methods.
IEA says near-term natural gas export growth to be fueled by US, Australia and Russia — The International Energy Agency expects the US to account for 75% of the global growth in natural gas exports over the next five years, a bullish outlook for LNG developers facing challenges at home getting projects off the ground and abroad with tariffs affecting trade flows. During a presentation at Gastech in Spain on Wednesday, IEA senior natural gas analyst Jean-Baptiste Dubreuil said other countries contributing to the exports growth during that period will be Australia and Russia. Australia is a major LNG exporter, while Russia supplies significant amounts of pipeline gas to Europe. Besides its growing LNG exports efforts, the US is also a major exporter of pipeline gas to Mexico, which is heavily reliant on the supplies for power generation. "We do anticipate natural gas will have a positive contribution to the energy mix and, therefore, the volumes for natural gas consumption are expected to rise in all our long-term scenarios, even in the most restrictive with GHG emissions," Dubreuil said. The conference, in its third day at Fira Barcelona Gran Via, has provided an opportunity for leaders and emerging players in the natural gas and LNG sectors to put their best foot forward, in an effort to gain new customers and remain relevant in the market conversation. China's decision Tuesday to impose a 10% tariff on imports of US LNG starting September 24 rattled the conference, but exhibitors were looking to move beyond the noise with an eye toward the future. IEA forecasts natural gas growth to persist in the medium and long term, driven by China entering the global gas scene as a major importer, and thus a major source of consumption growth, Dubreuil said. Other drivers include LNG development and the shift in consumption from demand growth fueled by power generation to demand growth fueled by industry, especially in emerging markets. "In the near future, we do expect that emerging Asia will be the main driver for natural gas demand growth," Dubreuil said. "We also expect some growth from other regions, resource rich regions such as the Middle East but also North America, not just for domestic uses but also for exports.This growth will be met with additional production."
LNG industry is super bullish, but in no rush to benefit: Russell (Reuters) - Bullish, as a word, doesn’t quite capture the stampede of optimism that was gushing out from the natural gas industry at its biggest annual event this week in Barcelona. “The demand is there,” stated Saad Sherida Al-Kaabi, the chief executive of Qatar Petroleum, the world’s largest producer of liquefied natural gas (LNG), in confirming that his country was on track to lift its output to 100 million tonnes of the super-chilled fuel by 2023. Al-Kaabi’s remarks were among the more measured at the GasTech conference, with some executives making predictions that the market for LNG, currently around 300 million tonnes a year, will more than double by 2025. Speaker after speaker on the top-level panels offered up various versions of the view that natural gas is no longer merely a transition fuel from dirtier and coal and crude oil to renewables, but is now a major part of world’s energy mix for the long term. But in stark contrast to the swathes of optimism, there was very little talk of when the next round of major LNG projects will reach the stage of final investment decisions (FID). If the denizens of the natural gas industry truly believe in the forecasts of rapid and strong growth in LNG demand, led by emerging buyers in Asia and China’s ongoing embrace of the cleaner-burning fuel, it would be logical to expect a new round of project approvals. Instead, progress toward FIDs for many of the planned projects around the world appears glacial. The exception to this slow process are those developers who have access to capital and can take higher investment risks than more cautious energy companies, who have to satisfy not only a board of directors, but also bankers and shareholders. Qatar’s planned additional 23 million tonnes of LNG capacity is a case in point. The small Middle Eastern country has the capital to underpin such a decision, and its low-cost structure means it can still prosper even if the extra capacity turns out to be surplus to market needs, thereby lowering prices. Another exception appears to be Russia’s Novatek, the developer of the Yamal LNG facility. Novatek Chairman Leonid Mikhelson told a media briefing at GasTech that the company’s planned Arctic-2 project would add 20 million tonnes of LNG, taking his company’s total output to about 37.5 million tonnes by 2025.
OPEC Warns of Threats to Oil Supply from Iran and Other Producers - -- The Organization of Petroleum Exporting Countries is concerned by threats to crude supply from large producers such as Iran, the group’s top official said. Unilateral U.S. sanctions on oil sales by Iran, OPEC’s third-biggest supplier, take effect on Nov. 4. Iran’s crude exports are already falling as the U.S. prepares to curb Tehran’s ability to sell oil and participate in global financial markets. Iran is a “very important producer and exporter” of oil, the group’s Secretary-General Mohammad Barkindo said at an event in the United Arab Emirates city of Fujairah. “When you have major producers facing supply challenges, it’s of concern” for OPEC and consumers alike, he said. Crude is averaging about $72 a barrel this year, and the International Energy Agency warned last week that prices could rise above $80 unless producers compensate for lost supply from OPEC members Iran and Venezuela. While trade disputes and financial woes in some countries may affect crude demand, the IEA said supply risks are the more important issue. Venezuela is pumping half as much oil as in 2016 and faces further declines amid economic upheaval. Algiers Meeting Barkindo made his comments two days after noting unspecified threats to global demand for crude. Oil consumption is “robust,” but crude use “is beginning to face some headwinds,” he said Sunday in an interview in Dubai, without elaborating. Saudi Arabia and Russia led OPEC and allied producers in agreeing to limit output starting in January 2017 to curb a glut. They changed course in June and have pledged to ensure that supplies are adequate to meet demand. A committee of OPEC members and other producers is to meet on Sept. 23 in Algiers to review compliance with their output targets. Most of the 25 producers in the alliance will attend, according to an OPEC delegate. OPEC plans to decide by December on a framework for permanent cooperation with allied producers, Barkindo said in Fujairah. The organization is to hold its next full ministerial meeting on Dec. 3 in Vienna.
Big Three oil states can offset fall in Iran supplies: Perry (Reuters) - Saudi Arabia, the United States and Russia can between them raise global output in the next 18 months to compensate for falling oil supplies from Iran and elsewhere, U.S. Energy Secretary Rick Perry said on a visit to Moscow on Friday. U.S. sanctions on Iran’s oil exports, which come into force in November, have already cut supply back to two-year lows, while falling Venezuelan output and unplanned outages elsewhere could push up crude prices, hurting consumers. But Perry, in an interview with Reuters, said he felt comfortable about the outlook for global crude output, and for oil prices. “I don’t foresee spikes,” Perry said, although he added there was always the potential for unforeseen events. Some analysts have expressed concerns about Saudi Arabia’s long-term ability to significantly boost output. But Perry said: “There’s a number of things going on in the kingdom that continue to give me a very positive feeling about their ability to maintain their level and even increase their level” of crude production. He cited the prospect that Kuwait and Saudi Arabia would soon resolve a border dispute, unlocking access to an oil field in a contested area. “They are working toward a solution in the not too distant future,” he said. On U.S. production, which has already been growing over the past few years, Perry said: “You look out 18 months, and I think you’ll see even a more substantial increase in the United States because of pipeline capacity being built out.” Russia, meanwhile, was “working diligently” to deliver its oil output to the world market, Perry said.
Iran Says Oil Market Is Too Tight For US Zero Exports Target (Reuters) - The U.S. will find it difficult to cut Iran's oil exports completely as the oil market is already tight and rival producers cannot make up the shortfall, a top Iranian official said on Friday. Washington is seeking to cut Iranian oil exports to zero by November as it reimposes sanctions, and is encouraging other producers such as Saudi Arabia, other OPEC members and Russia to pump more to meet the shortfall. Even so, the expected loss of Iranian oil, declining supply from another OPEC member Venezuela and other outages are boosting crude prices, which this week hit $80 a barrel, the highest since May. Iran's OPEC governor Hossein Kazempour Ardebili, said in comments to Reuters that a "supply shortage" meant that the United States would not be able to meet its zero export target. "There is no spare capacity anywhere," he said. A long-time adviser at Saudi Arabia's Energy Ministry also said last month that current U.S. sanctions on Iran were unlikely to stop Iranian oil exports completely. Under pressure from U.S. President Donald Trump to lower oil prices, the Organization of the Petroleum Exporting Countries and allies agreed in June to boost production, having participated in a supply-cutting deal in place since 2017. While OPEC production has increased since then, Saudi Arabia has added less crude than it initially indicated. Kazempour has voiced scepticism that other producers can add much more oil.
US sanctions on Iran are 'unproductive' and 'wrong', Russia's energy minister says - U.S. sanctions on Iran's oil industry are unproductive and there will be consequences to such a move, Russian Energy Minister Alexander Novak told CNBC."Our position remains that this is unproductive, this is wrong," Novak said when asked about the possible impact U.S. sanctions on Iran's oil industry could have."It is better to continue working in the market, Iran being just another exporter that provides stable supplies to the market," Novak said, speaking to CNBC's Geoff Cutmore at the Eastern Economic Forum (EEF) last week in Vladivostok, Russia."It is one of the richest in resources and has a solid standing in terms of its energy capability both in the OPEC, and in the energy markets as a whole. So, I think there will be consequences, I am sure, but we could only comment once they are in place," he said.Sanctions are due to be re-imposed on Iran's oil industry on November 4. The move comes after President Donald Trump decided to withdraw the U.S. from an international nuclear deal in May. The U.S. has said that any countries or companies that conduct transactions with Iran are liable to face secondary sanctions.Needless to say, the move is expected to severely impact Iran's oil industry and exports, with a production decline of over a million barrels a day -- and likely upward pressures on oil prices -- a distinct possibility, according to analysts. Novak told CNBC that it was difficult to comment on the consequences of Iranian sanctions as he was still waiting to "learn the legal particulars" and effects of the sanctions.
Just How Low Can Iran's Oil Exports Go? - Iran’s oil exports started to fall noticeably in August as key customers in Asia began to curtail oil purchases to either comply with the U.S. efforts to bring Iranian exports to zero, or to win waivers with the U.S. Administration. Iran’s crude oil and condensate sales fell in August to below 2 million bpd - the lowest level in more than a year, according to tanker tracking data compiled by Bloomberg.In September, the trend of reduced Iranian oil exports has continued, and analysts expect further cuts from some of Iran’s oil customers. Going forward, there are two major factors for estimating how low Iranian oil exports could sink. One is how much of Iran’s oil China, India, and Europe will buy in October and then in November, when the sanctions kick in. The other is the concern that tanker tracking data may become less reliable, as Iran may try to use some ‘unconventional’ methods of keeping its oil sales on track, like switching off tracking devices on tankers—a ‘solution’ that Tehran is said to have used in the previous round of sanctions in 2012-2015.Between September 1 and 15, however, Iran’s crude oil and condensate exports surprisingly increased by around 200,000 bpd compared to the August 1-15 period, preliminary trade flow data by S&P Global Platts showed this week.Iran’s crude and condensate exports averaged 1.69 million bpd in the first half of September, up from 1.48 million bpd for the August 1-15 period. Yet, if the trend this month continues, Iran’s oil exports would still be around 200,000 bpd lower than in August, when exports had averaged 1.92 million bpd, down from 2.32 million bpd in July, according to Platts estimates. In the first two weeks of September, Iran’s crude oil exports made up 1.5 million bpd of the 1.69 million bpd total, while the rest was condensate, the ultra-light oil that Iran produces from its natural gas fields, Platts data showed. According to Bloomberg tanker tracking data, Iran’s crude exports from September 1 through to September 15 were 1.6 million bpd, with condensate exports at another 190,500 bpd, for a total of around 1.8 million bpd. Crude exports at 1.6 million bpd are down by around 35 percent compared to Iran’s peak 2.5 million bpd exports in April, just before the U.S. announced it was slapping sanctions back on Tehran. Iran’s key customers—no.1 China and no.2 India—are not expected to cut off their imports of Iranian oil, although India may reduce some of its Iranian intake as it tries to maneuver between cheap Iranian crude and U.S. pressure to curtail imports. Iran’s sales to Europe in the first half of September also jumped, with purchases from Italy, Spain, and Turkey steady. While Turkey may keep Iranian oil flowing, analysts widely expect EU companies in Italy, Spain, and France to cut off oil trade with Iran for fear of being cut off from the U.S. financial system.
Venezuela to significantly increase oil exports to China-- Venezuela will increase its oil exports to China to one million barrels a day, President Nicolas Maduro has said, following a visit to Beijing.Already a strong economic partner, China had agreed to invest an additional $5bn in Venezuela, Maduro said on Tuesday, adding that the investment would help it boost production and nearly double its oil exports to China."We are taking the first steps into a new economic era," he said, as cited by AP news agency. "We are on track to have a new economy, and the agreements with China will strengthen it."Maduro spent two days in China last week, welcomed by counterpart Xi Jinping, and attended meetings at the China Development Bank and the China National Petroleum Corporation (CNPC). Venezuela has already received more than $60bn in credit from Beijing over the last decade but still owes about $20bn and has been repaying the debt with oil shipments.
OPEC net oil export revenues increased in 2017, will likely continue to increase in 2018 - Members of the Organization of the Petroleum Exporting Countries (OPEC) received about $567 billion in net oil export revenues in 2017, up 29% from revenues in 2016. Increases in both crude oil prices and in net OPEC oil exports drove revenues higher in 2017, and EIA expects that revenues will continue to increase in 2018, based on EIA’s August Short-Term Energy Outlook. EIA projects that OPEC net oil export revenues will increase to $736 billion in 2018, up 30% from 2017. This expected increase follows higher forecast annual crude oil prices in 2018 and more than offsets slightly lower crude oil production from OPEC members in 2018. OPEC revenues will decline to $719 billion in 2019, according to EIA projections, driven mainly by lower crude oil prices, as well as slightly lower OPEC production and exports. Saudi Arabia receives more oil export revenue than any other member of OPEC. Saudi Arabia’s share of total OPEC net oil export revenues was nearly 30% in 2017, and it has remained relatively consistent since at least 1996, ranging between 28% and 34%. Iran’s share of OPEC revenues increased to 10% in 2017 to its highest level since 1999, recovering from declines from 2012 through 2015 that resulted from sanctions targeting Iran’s oil exports. Iraq’s share of total OPEC revenues also increased, reaching more than 12% in 2017, as the country’s crude oil production and exports continued to rise. Iraq’s exports averaged about 3.8 million barrels per day in 2017, despite the shut-in of northern Iraqi production and exports following the Kurdish Region’s independence referendum in September 2017 and the ensuing takeover of Kirkuk area fields by Iraqi forces. Iraq’s crude oil production from the southern fields largely offset the northern Iraqi output losses in 2017. Libya’s share of total OPEC oil export revenues has fluctuated since 2010 as the country’s oil sector was disrupted during the civil war that overthrew the Gadhafi regime. Since 2010, warring factions in the country have repeatedly targeted oil sector installations, particularly Libya’s oil export facilities. Venezuela’s share of OPEC revenues also declined in 2017, as the country experienced significant declines in production amid severe economic instability.
Saudi Arabia July crude oil stock draw surges to 5.51 million barrels as output slides— Saudi Arabia drew 5.51 million barrels of crude oil from storage in July -- its most in eight months -- supporting robust exports as production slumped, the latest figures from the Joint Organizations Data Initiative show. The stock draw averaged 178,000 b/d in July, a significant rise from the 15,000 b/d draw in June and the 30,000 b/d build in May, according to JODI data released Tuesday. Crude exports from Saudi Arabia, OPEC's largest producer, were 7.12 million b/d in July, down from 7.24 million b/d in June. The country's refinery runs averaged 2.77 million b/d in July, down slightly from 2.79 million b/d in June. Direct burn of crude for power generation rose to 580,000 b/d in July, from 468,000 b/d in June. Combining the exports, refinery runs and direct burn figures results in a supplied to market figure of 10.47 million b/d for July, compared to the kingdom's reported production of 10.29 million b/d, thus necessitating the stock draw. Saudi production has since risen to 10.42 million b/d in August, the country reported to OPEC in the organization's most recent monthly oil market report. A source familiar with the kingdom's operations told S&P Global Platts earlier this month that July production had been lower partly because of an attack on state oil company Saudi Aramco's oil vessels in the Red Sea by Yemeni Houthi rebels that cause some shipments to be halted. Saudi Arabia's crude oil stocks, which have been declining steadily over the last three years, fell to 229.41 million barrels in July, down 11.4% since May 2017, the JODI data showed. OPEC on June 23 agreed with 10 non-OPEC partners to end overcompliance with production cuts in force since January 2017 and boost output by a collective 1 million b/d to replace barrels expected to be shut in by US sanctions on Iran and Venezuela's economic freefall. Saudi Arabia, under pressure from key ally the US to loosen the taps to moderate prices, has said it intends to use its spare capacity as needed to keep the market balanced. It has increased production by almost 400,000 b/d since May.
Russia Oil Production Jumps to a New Post-Soviet Record - The country’s oil output is currently fluctuating between 1.54 million and 1.55 million tons a day — driven mainly by state-run giant Rosneft PJSC — the official said, asking not to be named as the information isn’t public yet. That equates to 11.29 million to 11.36 million barrels a day, beating the previous record of 11.25 million barrels a day set in October 2016 before Russia agreed with the Organization of Petroleum Exporting Countries to cut production. Russia’s output increase comes just days before it meets in Algeria with other members of the group known as OPEC+. The producers agreed in June to start rolling back their output cuts to offset losses from countries including Venezuela and Iran while also responding to calls from U.S. President Donald Trump to ease pressure on prices.
Iraq's southern oil exports approach record high in Sept-sources (Reuters) - Oil exports from southern Iraq are heading for a record high this month, two industry sources said, adding to signs that OPEC’s second-largest producer is following through on a deal to raise supply and local unrest is not affecting shipments. Southern Iraqi exports in the first 19 days of September averaged 3.6 million barrels per day, according to ship-tracking data compiled by an industry source, up 20,000 bpd from August’s 3.58 million bpd - the existing monthly record. The increase follows June’s pact among OPEC and allied producers to boost supply after they had curbed output since 2017 to remove a glut. Iraq in August provided OPEC’s second-largest increase as shipments drop from Iran, which is facing renewed U.S. sanctions. A second industry source who tracks shipments also said exports this month had averaged 3.6 million bpd, reflecting smooth operations at export terminals and no sign that unrest in Basra, Iraq’s second city, was disrupting flows. “There were fears that the protests would get to the terminal,” this source said. “But so far, there is no impact.” Protests in Basra against Iraq’s political elite erupted in July. In early September, Basra airport was attacked with rockets a6nd protesters briefly took oilfield workers hostage. Before the June OPEC deal, Iraq had been boosting exports from southern terminals to offset a halt in shipments from the northern Kirkuk region last October after Iraqi forces seized control of oilfields there from Kurdish fighters. Northern exports have held steady in September, averaging around 400,000 bpd so far, according to shipping data and one of the industry sources. This is up from about 300,000 bpd in July but short of levels above 500,000 bpd in some months of 2017.
Hedge funds stay bullish on Brent while trimming WTI: Kemp (Reuters) - Hedge fund managers have remained bullish towards Brent even as the approach of Hurricane Florence turned them against WTI and refined fuels were hit by liquidation.Hedge funds and other money managers cut their combined net long position in the six most important petroleum futures and options contracts by 29 million barrels in the week to Sept. 11. The reduction in net length was a notable reversal after portfolio managers had boosted their bullish position by a total of 172 million barrels over the two previous weeks (https://tmsnrt.rs/2pfLG9I).For the third week running, fund managers added to their net long position in Brent, raising it by another 23 million barrels last week and by a total of 116 million since Aug. 21.But that was more than offset by reductions in NYMEX and ICE WTI (-28 million barrels), U.S. gasoline (-8 million), U.S. heating oil (-6 million) and European gasoil (-11 million).The liquidation of WTI positions is likely to have been encouraged by the approach Hurricane Florence and more generally by the peaking of the tropical cyclone season in the North Atlantic and the Gulf of Mexico.Florence was already clearly tracking towards the Atlantic coast, an area of net petroleum consumption, where it ultimately made landfall, rather than the production and refining centres on the Gulf Coast. (Full Story) However, concerns about the risk of other storms, coupled with memories of last year's Hurricane Harvey, which put multiple refineries out of action for several weeks in 2017, appear to have encouraged caution.
Oil prices ease as trade row clouds demand outlook --Global oil prices edged up from early losses on Monday despite assurances from Washington that Saudi Arabia, Russia and the United States can raise output fast enough to offset falling supplies from Iran and elsewhere.U.S. Energy Secretary Rick Perry said in an interview with Reuters on Friday that he does not foresee any price spikes and that the countries, the world's top three oil producers, can between them raise global output in the next 18 months.Brent crude oil futures gained 59 cents to $78.68 per barrel, reversing a 0.2 percent loss earlier in the session.U.S. West Texas Intermediate (WTI) futures rose 54 cents to $69.53 a barrel after posting a drop of 20 cents earlier in the trading session.Iran's oil exports are falling as more buyers, including its second-largest buyer India, cut imports ahead of U.S. sanctions that will be re-imposed in November. Washington aims to cut Iran oil exports down to zero to force Tehran to re-negotiate a nuclear deal.Iran's OPEC governor said on Saturday that Saudi Arabia and Russia have taken the oil market "hostage" and accused other producers of turning OPEC into a U.S. tool.Iran is the third-largest producer among the members of the Organization of the Petroleum Exporting Countries (OPEC).Trading remained choppy amid an unresolved trade war between the United States and China. U.S. President Donald Trump is likely to announce new tariffs on about $200 billion on Chinese imports as early as Monday, a senior administration official told Reuters on Saturday.The escalating trade row is raising concerns about the potential for slower growth in oil consumption, offsetting supply concerns stemming from the upcoming U.S. sanctions on Iran over its nuclear program.
Oil near flat as market weighs U.S.-China trade tensions, Iran sanctions (Reuters) - Oil prices were little changed on Monday as the market weighed deepening trade tension between the U.S. and China that is expected to dent global crude demand and potential supply tightening due to Iran sanctions. Brent crude futures dipped 4 cents to settle at $78.05 a barrel, while U.S. West Texas Intermediate (WTI) crude futures fell 8 cents to settle at $68.91 a barrel. Top White House economic adviser Larry Kudlow said on Monday that he expected the United States would soon announce tariffs on an additional $200 billion worth of Chinese goods. Administration officials said on Saturday that President Donald Trump was likely to announce the new tariffs as early as Monday. “That has the potential to be a demand-killer and that is why the market is trading into the red,” said Bob Yawger, director of energy futures at Mizuho in New York. U.S. stock indexes broadly fell on Monday, weighing on oil futures, on expectations that the Trump administration would go ahead with the new tariffs and that Beijing would retaliate. Supporting crude futures were potential supply cuts from U.S. sanctions on Iran. Sanctions affecting Iran’s petroleum sector will come into force from Nov. 4. Iranian crude oil export loadings have declined by 580,000 barrels per day in the past three months, Bank of America Merrill Lynch analysts said in a note to clients. “We believe that the full effect of the Iranian oil sanctions has yet to be seen and we feel that the next 5-6 week anticipatory phase of the official sanctions will associate with steady speculative buying interest,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note. Iran’s oil exports have been falling in recent months as more buyers, including its second-largest buyer India, cut imports ahead of U.S. sanctions that take effect in November. Washington aims to cut Iran’s oil exports down to zero to force Tehran to re-negotiate a nuclear deal.
Oil rises on signs OPEC not prepared to boost output - Oil firmed on Tuesday on signs that OPEC would not be prepared to raise output to address shrinking supplies from Iran and as Saudi Arabia signaled it was in no rush to bring prices down. Brent crude futures were up $1.14 a barrel to $79.19 a barrel, after hitting a high of $79.37.U.S. West Texas Intermediate (WTI) crude was up 95 cents at $69.86 per barrel, after rising over $1 to $69.95. Ministers from OPEC and non-OPEC producers meet on Sunday to discuss compliance with output policies. OPEC sources have told Reuters no immediate action was planned and producers would discuss how to share a previously agreed output increase. Bloomberg reported on Tuesday, citing unnamed Saudi sources, the kingdom was currently comfortable with prices above $80 per barrel, at least for the short-term.The news agency reported that while the kingdom had no desire to push prices higher than $80 a barrel, it may no longer be possible to avoid it because of tightening supplies amid U.S. sanctions against Iran.OPEC and industry sources have previously told Reuters the kingdom was keen to keep the lid on prices at $80 per barrel until U.S. congressional elections to avoid coming under any additional pressure from U.S. President Donald Trump."It casts doubts on whether Saudi Arabia will increase output to compensate for the loss of Iranian crude once sanctions come into effect," said Carsten Fritsch, an analyst at Commerzbank in Frankfurt.U.S. sanctions affecting Iran's petroleum sector will come into force from Nov. 4.Russian Energy Minister Alexander Novak said an oil price between $70 and $80 was temporary and sanctions-driven, adding that the long-term price would stand around $50.U.S. Energy Secretary Rick Perry said last week in Moscow that he did not foresee any price spikes once sanctions came into effect and was positive about Saudi output.
Oil Markets Unfazed By $200 Billion Trade War Escalation - Oil prices rose on news that Saudi Arabia is comfortable with Brent above $80 per barrel, offsetting the concerns that have been building over the U.S.-China trade war. Bloomberg reported that Saudi Arabia is not afraid of oil heading north of $80 per barrel, a bullish sign that suggests that Riyadh might not ramp up production to offset declines from Iran. “It casts doubts on whether Saudi Arabia will increase output to compensate for the loss of Iranian crude once sanctions come into effect,” said Carsten Fritsch, an analyst at Commerzbank. Meanwhile, U.S. Secretary of Energy Rick Perry dismissed concerns about a supply crunch, arguing that Saudi Arabia, Russia and the U.S. could add enough supply to the market to compensate for Iran. “I don’t foresee spikes,” Perry said. U.S. sanctions on Iran are set to go into effect in November, but countries have already been slashing purchases. Iran has lost an estimated 900,000 bpd of crude oil exports since April, with shipments down to 1.6 million barrels per day this month. “Iranian oil exports are coming down pretty hard,” Roger Diwan, a veteran oil analyst at consultant IHS Markit Ltd., told Bloomberg. The Trump administration moved forward on a highly-anticipated plan to escalate the trade war with China, announcing $200 billion in tariffs on Chinese goods. The tariffs will start at 10 percent and go into effect on September 24, but will rise to 25 percent by January 1. He also suggested that an additional $267 billion in tariffs are in the works. The effects of a trade war have lingered as a downside threat to the U.S. and global economy, but unlike earlier rounds of tariffs, this tranche will affect consumer goods. Moreover, China is expected to retaliate, with the potential for tariffs on U.S. oil and gas exports. That could put a dent in crude oil exports while also threatening the economics of future LNG export terminals. Hedge funds and other money managers have remained bullish on Brent futures, but cut their net length on WTI last week, likely because of fears about the impact of Hurricane Florence.
Oil Prices Rally Despite New US Tariff Threat: Oil prices rallied on Tuesday after Saudi Arabia said it was comfortable with Brent oil above $80 a barrel. Ahead of a meeting between major producing countries in Algeria, the Bloomberg reported citing people familiar with the kingdom's view that the country is comfortable with higher oil prices, at least in the short term. Benchmark Brent crude was up 1.56 percent at $79.27 per barrel while U.S. West Texas Intermediate (WTI) crude futures were up 1.49 percent at $68.70. Investors also took in their stride the U.S. announcement of a 10 percent tariff on about $200 billion in imports from China, staring next week. The tariffs will be set at 10 percent until the year-end, but would increase to 25 percent from January 1. U.S. President Donald Trump also warned that he would pursue tariffs on approximately USD 267 billion of additional imports if China takes retaliatory action. China said that the United States has not been "sincere" and it has no choice but to retaliate. The statement, however, gave no timeline or details of the proposed action.
Oil gains 1 percent on signs OPEC not prepared to boost output - (Reuters) - Oil futures rose more than 1 percent on Tuesday on signs that OPEC would not be prepared to raise output to address shrinking supplies from Iran, and as Saudi Arabia signaled an informal target near current levels. Brent crude LCOc1 futures rose 98 cents, or 1.3 percent, to settle at $79.03 a barrel. U.S. West Texas Intermediate (WTI) crude CLc1 gained 94 cents to settle at $69.85 a barrel, a 1.4 percent increase. Prices pared gains in post-settlement trade after data from industry group the American Petroleum Institute showed U.S. crude inventories rose by 1.2 million barrels in the week to Sept. 14 to 397.1 million, compared with analysts’ expectations for a decrease of 2.7 million barrels. Official U.S. government data is due to be released on Wednesday. Ministers from the Organization of the Petroleum Exporting Countries and non-OPEC producers meet on Sunday to discuss compliance with output policies. OPEC sources have told Reuters no immediate action was planned and producers would discuss how to share a previously agreed output increase. Bloomberg reported on Tuesday, citing unnamed Saudi sources, that the kingdom was currently comfortable with prices above $80 per barrel, at least for the short term. Reuters previously reported that Saudi Arabia wants oil to stay between $70 and $80 a barrel for now, as the world’s biggest crude exporter strikes a balance between maximizing revenue and keeping a lid on prices until U.S. congressional elections. Russian Energy Minister Alexander Novak said an oil price between $70 and $80 was temporary and sanctions-driven, adding the long-term price would stand around $50 a barrel. U.S. Energy Secretary Rick Perry said last week in Moscow that he did not foresee any price spikes once sanctions came into effect, and was positive about Saudi output.
Oil Prices Up Despite Crude Build - - The American Petroleum Institute (API) reported a build of 1.25 million barrels of United States crude oil inventories for the week ending September 14, compared to analyst expectations that this week would see a draw in crude oil inventories of 2.741 million barrels. Last week, the American Petroleum Institute (API) reported a hefty draw of 8.636 million barrels of crude oil.The API reported a draw in gasoline inventories for week ending September 14 in the amount of 1.485 million barrels. Analysts predicted a small draw of 104,000 barrels in gasoline inventories for the week. Oil prices were trading up in afternoon trade prior to the release of the API data on inventories. At 1:56pm EDT, WTI was trading up 0.80% (+$0.55) at $69.54 per barrel—almost $1.00 above last week’s prices. Brent crude was also trading up, by 0.79% (+$0.62) at $78.71—up slightly from last week’s figures.Tuesday’s rising prices are largely a reflection of persistent supply deficits in Iran and Venezuela and the market’s opinion that Saudi Arabia’s newfound love for $80 Brent will translate into KSA’s reluctance to make up for any real or imagined supply deficits.In fact, S&P Platts cited JODI data today that showed The Kingdom saw in July its highest crude oil inventory drawdown in eight months.US crude oil production as estimated by the Energy Information Administration was down slightly for week ending September 7 at 10.9 million bpd. Distillate inventories were up this week—by 1.536 million barrels, compared to an expected build of 651,000 barrels. Inventories at the Cushing, Oklahoma, site decreased this week by 1.57 million barrels.
Oil prices fall amid surprise growth in US crude stocks - Oil steadied on Wednesday, as concerns that producers may fail to cover a shortfall in supply once U.S. sanctions on Iran come into force outweighed an increase in U.S. inventories. Brent crude futures were up 2 cents at $79.05 a barrel by 0854 GMT, having gained 1.3 percent on Tuesday following media reports that Saudi Arabia, the world's largest oil exporter, was comfortable with prices above $80.U.S. crude futures were up 15 cents at $70.00, after gaining 1.4 percent the day before."Whether or not this (price) development was justified, it is a supply-side development and the market has reacted to it," PVM Oil Associates strategist Tamas Varga said."Trade wars, if anything, should impact oil demand, but that's being completely ignored, which goes to tell me that the market is much more sensitive to supply-side developments ... I think that is going to remain the theme for the next six weeks until the next round of U.S. sanctions against Iran kick off."The focus on oil supply has been reflected in the options market this week, where investors have scooped up large amounts of bullish buy, or call, options.Data from the InterContinental Exchange shows open interest in calls that give the owner the right to buy Brent futures at $80 and $85 by next week grew by nearly 45 percent on Monday and Tuesday to an equivalent of 54 million barrels of oil.Reuters reported on Sept. 5 that Saudi Arabia wants oil to stay between $70 and $80 a barrel to keep a balance between maximizing revenue and keeping a lid on prices until U.S. congressional elections.The Organization of the Petroleum Exporting Countries and other producers including Russia meet on Sept. 23 in Algeria to discuss how to allocate supply increases within their quota framework to offset the loss of Iranian supply. U.S. sanctions affecting Iran's oil exports come into force on Nov. 4. Although many buyers have scaled back purchases, it is unclear how easily other producers can compensate for any lost supply.
Why WTI Could Crash In The Coming Weeks -West Texas Intermediate could drop to US$65 a barrel later this year on the back of extra maintenance work at U.S. refineries, Tom Kloza from the Oil Price Information Service has warned. Speaking on CNBC, Kloza said this maintenance season was the last chance for many refineries to hop on the new bunker fuel train by boosting their capacity for low-sulfur diesel and fuel oil."The next six to seven weeks we're going to see demand for crude drop by about 1 to 1.5 million barrels a day. It's refinery maintenance season," Kloza said.The new bunker fuel emission rules, effective from 2020, stipulate that only vessels using fuels with sulfur content of 0.5 percent or less will be allowed to roam the oceans. The change is part of the International Maritime Organization’s strategy to cut carbon emissions from maritime transport by half by 2050.The change has been touted as beneficial for refiners that are equipped to produce low-sulfur fuel oil and diesel, as well as LNG producers. Yet the adjustment will take time, and during this time demand for crude will be lower. How serious the effect on WTI prices will be remains to be seen, however.For starters, many of those following WTI must have already factored in maintenance season and winter as weakening demand press down on prices. True, Kloza’s comment that this maintenance season will have a more severe impact on prices makes sense, but this additional maintenance should not come as a surprise to market watchers: there has been a lot of coverage about the IMO fuel rules and there’s likely to be even more in the run-up to its entry into effect.Another thing that could curb the downside effect on maintenance season is hurricane season: Florence has hit demand for oil products but, one analyst told Market Watch, “there will be demand destruction in the short term, but a surge in demand in a few weeks when [the region] starts to rebuild.” In other words, amid refinery season, rebuilding what Florence has damaged will apply counter pressure on prices, possibly curbing the decline.
WTI Surges Above $70 After Crude, Gasoline Draw - WTI traders shrugged off API's surprise crude build overnight, breaking back above $70 ahead of DoE data, and extending gains as crude and gasoline inventories drewdown and Cushing stocks dropped again.Despite expectations for a draw, a crude build is more seasonally normal as we enter refinery maintenance season, yet we are still seeing high utilization rates, according to James Williams, president of energy researcher WTRG Economics.Bloomberg Intelligence Senior Energy Analyst Vince Piazza warns that while oil inventories are expected to show a decline in the latest week, concerns about oversupply are mounting. Our immediate focus is weaker global demand growth in 2H, following a softer 2Q in Europe and Asia, along with fears of tepid growth in non-OECD economies next year because of currency depreciation and trade bickering. Global supply of more than 100.2 million a day adds a layer of worry. DOE:
- Crude -2.06mm (-2.5mm exp, -1.77 WHIS)
- Cushing -1.25mm (-800k exp)
- Gasoline -1.72mm (+100k exp)
- Distillates +839k (+1.5mm exp)
We're coming into a tricky time of year when refinery maintenance is starting, which should be bearish for crude inventories. At the same time, throughput has been high for weeks and it's hard to judge when the maintenance will translate into a build. This is the 5th weekly drawdown in crude in a row... even as refinery runs slowed (-2.2 ppt vs est. -0.8 ppt)
U.S. oil ends at 2-month high after EIA reports 5th stockpile drop in a row - Oil futures climbed Wednesday, with the U.S. benchmark settling at its highest since July after a government report revealed a fifth-straight weekly decline in U.S. crude inventories. The decrease in supplies was smaller than the market expected, but it contradicted the increase reported by a trade group on Tuesday. Traders also weighed expectations for lower global output due to impending U.S. sanctions on Iran, as well as the prospects for energy demand on the heels of a worsening trade dispute between the U.S. and China. The U.S. benchmark, October West Texas Intermediate crude CLV8, +0.72% rose $1.27, or 1.8%, to settle at $71.12 a barrel on the New York Mercantile Exchange—the highest for a front-month contract since July 10, according to FactSet data. The October contract expires at Thursday’s settlement. November Brent LCOX8, +0.34% the global benchmark, added a more modest 37 cents, or 0.5%, to finish at $79.40 a barrel on ICE Futures Europe, a day after posting a climb of 1.3%. The Energy Information Administration reported Wednesday that U.S. crude supplies fell by 2.1 million barrels for the week ended Sept. 14. The EIA had reported declines in each of the previous four weeks. Analysts surveyed by S&P Global Platts had forecast a fall of 3 million barrels, but the American Petroleum Institute on Tuesday reported an increase of 1.25 million barrels.
Factbox: Escalating US-China trade war shakes up energy, commodities markets — US-China trade hostilities continued to escalate this week as each side announced new tariffs with a number of potential market impacts, including slowing long-term US LNG export growth. Late Monday, the White House announced new tariffs on $200 billion worth of Chinese goods beginning September 24, including various aluminum and steel items that had been left out of tariffs imposed in March. Hours later, China announced retaliatory tariffs on $60 billion worth of US imports including a 10% tariff on LNG effective the same day. The duty comes as a second wave of US LNG export projects works to secure financing to reach final investment decisions. This new impediment to tapping China's demand, which S&P Global Platts Analytics expects to reach 10 Bcf/d within 10 years, may hurt some some projects' chances of moving forward. "A number of export projects vying for long-term offtake contracts are now effectively barred from the Chinese market, which is expected to account for a third of global LNG demand growth over the next five years," said Ross Wyeno of Platts Analytics. "This could give an advantage to non-US suppliers such as Canada, the Middle East and Russia." Meanwhile, US crude oil exports to China, which reached record levels in June, are safe for now with oil's exclusion in this announcement. The White House statement promised a phase three set of tariffs if China retaliated. That next phase would include an additional $267 billion worth of goods. Here are the key takeaways across commodities:
- LNG - US LNG exports are unlikely to be affected in the near term as cargoes can go to other destinations, freeing up supply to go to China. But a shift in trade flows could affect flexibility in the spot LNG market. **China accounted for 15% of US LNG exports in 2017, according to the US Energy Information Administration. **The US accounted for about 5% of China's LNG imports in 2017, according to Platts Analytics.
- PRICES - Tariffs will likely price US LNG out of the Chinese market, but there is no expected impact on near-term prices. **Platts November JKM was assessed at $11.764/MMBtu Tuesday, with the prompt-month contract falling about 30 cents after rolling to November because of declining autumnal demand.
- INFRASTRUCTURE - In the US, there are at least 25 prospective LNG export projects, accounting for roughly 27.7 Bcf/d of capacity, that are in various stages of pre-development and actively courting buyers.
- METALS -The US Trade Representative said Monday that more aluminum and steel items from China, including aluminum scrap and stranded wire plus stainless steel and alloy steel products, will be subject to a 10% tariff starting September 24. The tariff rate will increase to 25% on January 1, 2019. Copper, zinc, molybdenum, lead, cobalt, tin and titanium will also be subject to a tariff.
- OIL - Following months of concern about the risk of Chinese duties on US crude, the commodity was excluded from this round of tariffs. **The risk of tariffs contributed to US crude exports to China falling in recent months following a record-high 510,000 b/d in June that accounted for 23% of the country's crude exports, EIA data show. **US crude exports to China could be hindered by a less lucrative spot arbitrage. Platts calculations show WTI is roughly at parity with North Sea Forties crude on a delivered basis into China. But back in July -- when exports were higher -- WTI held a more than $2.50/b discount to North Sea Forties. Economics between WTI and ADNOC's Murban show a similar pattern.
The Biggest Risk In Today’s Oil Markets - -The oil market is “tightening up,” but the Trump administration could still spoil oil prices if its aggressive trade war against China drags down economic growth.The U.S. stepped up the trade conflict with China on Monday when the Trump administration announced $200 billion in tariffs on Chinese imports. The move had been expected for weeks but trade proponents had hoped that the administration would ultimately shelve the idea when push came to shove. Not only did Trump move forward with punitive tariffs on China, but he also hinted that another $267 billion in tariffs are under consideration.The trade war could hit the oil and gas markets in several ways. First, the back-and-forth escalation of tariffs could drag down economic growth. The first round of tariffs, which hit $50 billion in Chinese goods, targeted a relatively narrow set of products. But the latest $200 billion in tariffs will raise the cost for a wide array of consumer goods in the U.S., which could slow the economy. Specific industries that are affected by the tariffs will see more concentrated damage. Second, oil and gas are likely to be specifically affected by the trade war, which wasn’t the case in the previous rounds of tariffs. China announced $60 billion in retaliatory measures on Tuesday, which included a 10 percent tariff on imported LNG from the United States.The problem with the trade fight is that once the tariffs are in place, there is pressure on both sides not to back down. Over the longer-term, the tariff upends the economics of building new LNG export terminals in the United States. According to S&P Global Platts Analytics, China is expected to make up a third of global demand growth through 2023, with consumption rising by 154 percent over 2017 levels.
Trump accuses Mideast producers of pushing oil price higher -- US President Donald Trump called on Thursday for OPEC to take action reducing oil prices as many of the group's key members prepare to meet with their Russian allies in Algeria this weekend. We protect the countries of the Middle East, they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices! We will remember," wrote Trump in a tweet. "The OPEC monopoly must get prices down now!"His remarks come as Brent crude trades just under $80/b in London ahead of OPEC's monitoring committee meeting with its allies led by Russia scheduled for Sunday. Saudi Arabia's oil ministers Khalid al-Falih and his Russian counterpart Alexander Novak will both attend the summit, which isn't scheduled as a policy-setting gathering.OPEC, Russia and nine other producers outside the grouping on June 23 agreed to raise their collective output by 1 million b/d but have left open how these allocations will be distributed.Trump has previously used Twitter as a platform to accuse OPEC of inflating oil prices. However, US sanctions due to come into force on Iran in November are expected to reduce supplies of crude by up to 1.4 million b/d, according to S&P Global Platts Analytics. Iran's oil minister Bijan Zanganeh told Platts this week that he would veto any OPEC deal which would threaten the country's market share. He has also pulled out of attending the meeting in Algeria.
Oil prices climb amid fall in US stockpiles, supply worries - Oil prices were mixed on Thursday after U.S. President Donald Trump called on OPEC to "get prices down now!" ahead of a meeting of major oil exporters.Global benchmark Brent crude was down by 46 cents at $78.94 by 9:44 a.m. ET (1344 GMT), after gaining half-a-percent on Wednesday.U.S. West Texas Intermediate crude rose 47 cents to $71.59 a barrel, after briefly dipping following Trump's tweet. The contract rose nearly 2 percent the previous session.The North Sea benchmark has been trading close to $80 a barrel, near its highest for almost four years, on expectations that U.S. sanctions against Iran, OPEC's third biggest producer, will reduce supply in world markets.The U.S. sanctions were imposed by Trump in response to Iran's nuclear program, which the White House says is designed to produce weapons, an allegation Tehran denies.The Organization of the Petroleum Exporting Countries and other producers, including Russia, meet on Sunday in Algeria to discuss how to allocate supply increases to offset the loss of Iranian barrels.The meeting is unlikely to agree an official rise in crude output, although pressure is mounting on top producers to prevent a spike in prices.U.S. President Donald Trump weighed into the debate via Twitter on Thursday, urging OPEC to cut prices."The OPEC monopoly must get prices down now!," Trump said."We protect the countries of the Middle East, they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices! We will remember."
Trump blasts OPEC, sending oil prices lower: 'Monopoly must get prices down now' - President Donald Trump tweeted on Thursday the Organization of the Petroleum Exporting Countries needs to keep crude prices lower because of the military protection the U.S. provides for the region."The OPEC monopoly must get prices down now," Trump said in the message. Tweet. Futures prices for West Texas Intermediate crude, the U.S. benchmark, dipped slightly following the tweet before recovering and then retreating once again to trade roughly flat. On Wednesday, WTI climbed back above $70 a barrel. The price of oil is up 7 percent in the last month and nearly 18 percent for 2018. The cartel, which includes Saudi Arabia and Iran, will meet this weekend with non-OPEC producers such as Russia to discuss production levels. That will be the last meeting before the November U.S. midterm elections. Trump has called on OPEC to take action to lower oil prices several times this year. The 15-member cartel, along with the Russia-led producers, has capped output since January 2017 in order to end a prolonged and punishing oil price downturn that bankrupted hundreds of U.S. energy companies and heaped financial pressure on crude exporters. The rebound gained steam earlier this year after production problems in countries like Venezuela and Libya caused the group to cut more deeply than they intended. The Trump administration also boosted prices by restoring sanctions on Iran, OPEC's third biggest producer, and saying it aims to cut the nation's exports to zero by November.OPEC and Russia's alliance of roughly two dozen producers agreed in June to slightly raise output and restore some of the barrels they took off the market, in part to compensate for the loss of the Iranian supplies. Despite that, oil prices have moved back towards four-year highs near $80 a barrel for international benchmark Brent crude and above $70 for WTI. The average cost of gasoline has also remained stuck at multi-year highs at roughly $2.85 a gallon and shows few signs of falling before Americans go to the polls in November. The Trump administration set a deadline for oil buyers to cut imports from Iran for Nov. 4, just two days before the midterm elections.
Crude Oil and Gasoline Tumble in Twitterverse Tizzy -- Just one of the four commodity benchmarks Rigzone tracks was unfazed by a tizzy in the Twitterverse on Thursday. “WTI and Brent were up this morning on continued supply concerns after yesterday’s Energy Information Administration (EIA) Weekly Petroleum Status Report showed another withdrawal,” said Tom Seng, Assistant Professor of Energy Business in the University of Tulsa’s Collins College of Business. “But, Trump’s demand for lower prices from OPEC tumbled prices this afternoon.” Seng was referring to a tweet from President Trump this morning accusing members of the Organization for the Petroleum Exporting Countries of continuing to “push for higher and higher oil prices!” The President also urged the “OPEC monopoly” to “get prices down now!” The October WTI futures price lost 32 cents to settle at $70.80 a barrel. Thursday’s settlement price was seven cents higher than the intraday low. The WTI peaked at $71.81. The Brent futures price for November delivery also declined, falling 70 cents to settle at $78.70. Also declining was the front-month price of a gallon of reformulated gasoline, which lost just under a penny to settle at $2.01. Holding the distinct honor Thursday of exhibiting positive momentum was the Henry Hub futures price. The benchmark for October added seven cents to settle at $2.98. Seng noted that the Henry Hub ended trading higher as the market digested EIA’s latest Weekly Natural Storage Report, which indicated a 20-percent year-on-year decrease in total gas in storage. In addition, the report showed that gas in storage is 18 percent lower than the five-year average for this time of year, he said.
Oil futures end lower as Trump demands that OPEC 'get prices down’ - Oil futures ended with a loss on Thursday after President Donald Trump in a tweet called for the Organization of the Petroleum Exporting Countries to maintain lower crude-oil prices.“We protect the countries of the Middle East, they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices! We will remember. The OPEC monopoly must get prices down now!” Trump tweeted on Thursday.October West Texas Intermediate crude CLV8, -0.49% lost 32 cents, or nearly 0.5%, to settle at $70.80 a barrel on the New York Mercantile Exchange. The U.S. benchmark contract on Wednesday closed at the highest for a front-month contract since July 10, according to FactSet data. The October contract expired at the end of session. November WTI crude, which became the front month, shed 45 cents, or 0.6%, to settle at $70.32. Global benchmark November Brent meanwhile, fell 70 cents, or 0.9%, to finish at $78.70 a barrel on ICE Futures Europe, pulling back from an intraday high of $79.83.Trump’s comments came ahead of a closely watched meeting in Algiers of a committee made up of representatives of OPEC members and its outside allies on Sept. 23. The producers had agreed in June to boost production in an effort to get output nearer a previously agreed ceiling. The June agreement was seen, in part, as a response to U.S. pressure.Oil prices have been on the rise, boosted in part by Trump’s decision to pull out of the Tehran nuclear accord and renew sanctions on Iran aimed at sharply curtailing the major producer’s exports. Trump’s latest tweet also came after a news report earlier this week said officials from Saudi Arabia, OPEC’s de facto leader and the crucial swing producer, were growing comfortable with the possibility of crude prices above $80 a barrel.
US spends $81 billion a year to protect global oil supplies, report estimates - The United States military spends about $81 billion a year to protect oil supplies around the world and keep fossil fuels flowing into American gas stations, according to new analysis.Securing America's Future Energy, a think tank that advocates for reducing U.S. dependence on oil, released the study the same day President Donald Trump claimed that some Middle Eastern countries are pushing up crude prices while benefiting from U.S. military protection.The $81 billion price tag is likely "very conservative" and doesn't include the full cost of the 15-year war in Iraq, according to SAFE, whose CEO Robbie Diamond also leads the pro-electric car group the Electrification Coalition.The estimate pencils out to 16-20 percent of the Defense Department's annual base budget, showing the nation's oil habit has a direct military cost, SAFE said. It also means the government subsidizes the cost of oil to the tune of $11.25 per barrel and the price of transportation fuels like gasoline and diesel by 28 cents a gallon.U.S. crude oil production is poised to reach 11 million barrels a day and eclipse output from top producer Russia, but the United States still imports roughly 8 million barrels a day.On Thursday, Trump renewed his call for the 15-nation oil producer group OPEC to tamp down crude prices, which are near four-year highs. Trump suggested that OPEC members like Saudi Arabia, Iraq and Kuwait owe the United States, saying "We protect the countries of the Middle East, they would not be safe for very long without us. "To be sure, government agencies like the Environmental Protection Agency and the National Highway Traffic Safety Administration don't factor in the cost of protecting oil supplies when they set fuel policy. The agencies say the cost is actually zero because the Pentagon wouldn't save any money if it stopped defending foreign crude flows. It would simply reallocate those funds elsewhere. A 1992 Congressional Research Service assessment came to a similar conclusion, SAFE notes. However, SAFE says this approach doesn't account for opportunity cost. In other words, the military could devote budget dollars to other priorities if it wasn't focused on protecting the parts of the world that supply the nation with oil, particularly the Persian Gulf. Americans "spend somewhere around $3 per gallon, but we're really paying a lot more because of all the operations in the Middle East," said retired General Charles Wald, vice chairman and senior adviser at consulting firm Deloitte and a member of SAFE's Energy Security Leadership Council.
Oil stable, OPEC in focus after Trump call for lower prices --Oil prices were mixed on Friday after falling in the previous session as U.S. President Donald Trump urged OPEC to lower crude prices ahead of its meeting in Algeria this weekend.International benchmark Brent crude for November delivery was up 5 cents at $78.75 a barrel by 0424 GMT.U.S. West Texas Intermediate crude for October delivery fell 8 cents to $70.24 a barrel.Trump called on the Organization of the Petroleum Exporting Countries (OPEC) to lower prices, saying on Twitter "they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices."OPEC and its allies are scheduled to meet on Sunday in Algeria to discuss how to allocate supply increases to offset a shortage of Iran supplies due to U.S. sanctions. Trump's remarks just days before the OPEC meeting put "a focus on the likely supply impacts of U.S.-led Iran sanctions.""The market had until that point been trading fluidly with the assumption that Saudi Arabia is now comfortable with Brent at $80 or even higher, which is challenging the market's long-held supposition that prompt Brent between $70 and $80 was OPEC's sweet spot," Innes added.Brent has been trading just below $80 a barrel, backed by concerns of supply shortages from looming U.S. sanctions against Iran, which are set to take effect in November. "Iranian crude exports are coming earlier and bigger-than-expected, at a time seasonal demand is strong. With spare capacity also falling sharply, the market remains exposed to supply-induced price shocks," according to a report by ANZ Bank.
Trump sets implied oil price target below $80: Kemp- (Reuters) - The United States has sent mixed messages to OPEC and its allies over the last week about whether they need to do more to raise oil production and hold down prices."The OPEC monopoly must get prices down now" President Donald Trump demanded on Twitter on Sept. 20."We protect the countries of the Middle East, they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices," he complained."We will remember," the president added, implying that U.S. security support might be reassessed if OPEC members fail to cut crude prices.But just seven days earlier, the president's own energy secretary had told reporters that Saudi Arabia, OPEC and Russia "are to be admired and appreciated" for raising their production to avoid a spike in oil prices.The mixed messages illustrate the narrow and difficult path the administration is trying to take imposing tough sanctions on Iran's oil exports without sending prices sharply higher.The United States is coordinating policy on sanctions and production closely with both Saudi Arabia and Russia; the U.S. energy secretary has met both his Saudi and Russian counterparts in the last fortnight.At the same time, the White House is anxious to avoid being blamed by U.S. motorists for any further escalation in the cost of oil and gasoline, especially in the run-up to a tough congressional election on Nov. 6, but perhaps afterwards too.In effect, there are two separate policies, or at least two different messages, one run by the president, and the other by his administration. It is not unusual for governments to try to run multiple policies and messages, addressed to different audiences and intended to achieve different objectives, though it risks creating confusion and disappointment.The president has criticised OPEC for rising oil prices four times on Twitter this year as well as in an interview with Fox News (https://tmsnrt.rs/2MUmIWZ).The president's tweets have generally been prompted when Brent crude prices have recently risen sharply and are in the $75-80 range.From the president's behaviour, it is possible to infer that he doesn't want prices to rise above $80 per barrel and would prefer them closer to $70 or even below.The president's tweets are creating an implicit price target, even if officials have been careful not to specify an explicit one. So far, the president has been careful to blame "OPEC" and unspecified countries in the "Middle East" for rising oil prices, eschewing identifying individual countries by name.As a practical matter, Saudi Arabia, the United Arab Emirates and Kuwait are the only OPEC members that have significant volumes of spare capacity and could raise output.
Is Oil On Its Way To $80? - Oil prices gained this week on outages in Iran and data showing demand from the United States in August was the highest since 2007. “Exports are already down quite a bit and will probably continue to fall,” from both Iran and Venezuela, UBS Group AG analyst Giovanni Staunovo told Bloomberg. Meanwhile, strong U.S. demand is “helping the market to stay in a deficit.” In early trading on Friday, Brent was flirting with $80 per barrel. OPEC+ is set to meet in Algiers this weekend to discuss some of the details stemming from the June decision to increase collective output by 1 million barrels per day. Iran’s oil minister has vowed not to attend in protest of what Iran views as a Saudi attempt to take over market share from Iran, in collusion with the United States. Ultimately, the meeting might not amount to much, and Saudi Arabia could increase production anyway, offsetting declines in Iran. “It’s likely to be a meeting high on politics and low on decisions,” said Ole Sloth Hansen, head of commodity strategy at Saxo Bank A/S, according to Bloomberg. “The producers that count are producing at will.” India’s government may ask its state-owned oil companies to lock in oil at hedged prices, both to avoid the possibility of a price spike as Iran sanctions bite, but also because of the uncertain value of the rupee. India imports about 80 percent of its oil, and the sharp depreciation of the rupee this year has magnified the cost of imports. Meanwhile, India will use rupees to pay for oil from Iran beginning in November after U.S. sanctions take effect. Russia’s oil companies are enjoying a bonanza due to higher oil prices but also a weaker ruble. With costs in rubles but earnings in U.S. dollars, the cash is pouring in, pushing an index of Russian oil companies to a record high. The danger is that American sanctions related to the chemical poisoning attack in the UK or election interference in the U.S. could target Russian companies. "All investors are asking themselves -- OK, the Russian companies look attractive right now, but what about the next six months, what about the next 12 months?" Alexandre Dimitrov, head of Emerging Europe EQ Funds at Erste Sparinvest Kap Mbh, told Bloomberg.
Oil Prices Rise As Rig Count Sees Minor Dip - Baker Hughes reported a loss of two rigs in the United States this week, bringing the total number of active oil and gas rigs to 1,053 according to the report, with the number of active oil rigs decreasing by one to reach 866 and the number of gas rigs holding steady for the second week in a row at 186. The miscellaneous rig count fell by one rig.The oil and gas rig count is now 118 up from this time last year.At 12:03pm. EDT on Friday, WTI Crude was trading down 0.13 percent at $70.23—but over $1 per barrel up from this time last week, while Brent Crude was trading down 0.35 percent at $77.95—a few pennies down from this time last week.The lower prices are partially attributed to President Donald Trump’s Twitter Chastisement on Thursday that berated OPEC for manipulating prices upwards as Brent neared the scary $80 per barrel mark. Limited the price decline is reports that Japan and South Korea both have ceased all crude oil trading with Iran, and India has significantly reduced its purchases of Iranian oil this month and next. Speculation that Libya may be forced to close its Wafaa oilfield completely if a current blockade of an airport there continues.Canada’s oil and gas rigs for the week lost 29 rigs this week after adding 22 rigs last week, bringing its total oil and gas rig count to 197, which is 23 fewer than this time last year, with an 13-rig decrease for oil and a 16-rig decrease for gas for the week.On the production side, the EIA’s estimates for US production for the week ending September 14 were for an average of 11.0 million bpd. By 1:09pm EDT, WTI was trading up 1.02% (+$0.72) at $71.04. Brent crude was trading up 0.08% (+$0.06) at $78.28 per barrel.
Permian Up, Cana Woodford Down as US Rig Count Pulls Back - The U.S. rig count pulled back slightly to 1,053 for the week ended Friday (Sept. 21) as gains in the Permian Basin countered a drop in activity in the Cana Woodford, according to data from Baker Hughes, a GE Company (BHGE).The United States saw one oil-directed rig and one miscellaneous rig exit the patch, while natural gas rigs finished flat at 186. The domestic count for the week outpaced its year-ago tally by 118 rigs.Two directional units and two horizontal units packed up shop, while two vertical units returned to action. Offshore drilling activity held steady as the Gulf of Mexico rig count finished flat at 18, according to BHGE.Canada, meanwhile, dropped 29 rigs for the week -- 13 oil-directed and 16 gas-directed -- to finish at 197, down from 220 a year ago. The combined North American rig count stood at 1,250, versus 1,155 active units at this time last year.Collapsed natural gas basis differentials didn’t stop the oil-focused Permian Basin from adding five rigs to finish at 488, up more than 100 rigs year/year. The Cana Woodford, meanwhile, saw its tally drop by six units. According to a more detailed breakout of BHGE data by NGI’s Shale Daily, two rigs exited the SCOOP (aka, South Central Oklahoma Oil Province) as four packed up in the STACK (aka, the Sooner Trend of the Anadarko Basin, mostly in Canadian and Kingfisher counties).In other changes, the Utica Shale dropped two rigs to fall to 20 active units, 10 behind its year-ago count. The Eagle Ford Shale and Granite Wash each added onr rig, while one rig packed up in the Williston Basin.Among states, Texas, host to a sizeable chunk of the Permian, unsurprisingly proved the biggest mover for the week, adding six units to grow its tally to 531 from 453 a year ago. Oklahoma on net dropped three rigs for the week. Ohio and Alaska each saw two rigs exit the patch, while one rig departed in North Dakota. Constraints to the north and to the west combined to clobber West Texas spot prices during the week, including a new all-time low at the Waha hub, and analysts see more volatility on the way as Permian producers wait on additional takeaway capacity.
Brent crude close to four year highs as US demand increases - The oil price remained strong this week as American oil demand increased and the country’s President upped his demands on OPEC to lower prices. In Friday trading, Brent crude was priced above US$79 with WTI close to US$71 a barrel. American oil demand is on the increase and stockpiles declined to a three-year low last week, as refiners and exporters produce at record levels. This is usually the time of year when refineries should be undergoing maintenance, but demand remains high. The US Energy Information Administration said that inventories were down more than 2mln barrels last week. US crude exports rose to 2.37mln barrels as international buyers are attracted by the WTI discount to Brent. Many oil buyers have begun to cut back on Iranian crude orders and this is causing tightness in the market. The American president, Donald Trump is laying the blame for the price increase firmly with the OPEC producers, demanding “the OPEC monopoly must get prices down now,” and threatening that countries in the Middle East “would not be safe for very long” without American support. Many analysts believe that President Trump needs to understand the fundamentals of demand and supply to see that robust American demand is also fueling prices.
OPEC/non-OPEC coalition talks intensify ahead of key Algiers summit- With a critical meeting in Algiers fast approaching, a fractured OPEC and its allies are still searching for consensus on how members with spare output capacity can equitably distribute the extra barrels they intend to pump without upsetting those unable to produce more. The Saudi and Russian energy ministers met over the weekend to align their positions, while delegates on a six-country technical committee are scheduled to hold a conference call Monday to mull various proposals. Meanwhile, Iran's OPEC governor accused Saudi Arabia and Russia of being in cahoots with the US to undermine other OPEC members and destabilize the oil market. The posturing comes ahead of Sunday's summit of the OPEC/non-OPEC monitoring committee in the Algerian capital, which reportedly will be attended by ministers from almost the entire the 24-country producer coalition. There, the group aims to reveal a production policy that can calm market fears of tight supplies in the months ahead, while remaining nimble enough to prevent a glut if global demand proves softer than expected. The coalition on June 23 agreed to raise output by 1 million b/d, but left unsettled how that will be allocated, with Iran insisting that members stick to individual quotas and Saudi Arabia saying the deal involves a collective production ceiling. "As things stand, the overriding theme across the oil market is one of uncertainty," said Stephen Brannock, an analyst with brokerage PVM Oil Associates. "Market players are bracing for the full impact of US sanctions on Iran's export capabilities and the full extent of Venezuela's downward spiral. Add in a sprinkling of downside risks on the demand side of the oil equation and you have all the ingredients for price fireworks." S&P Global Platts Analytics expects 1.4 million b/d of Iranian oil supplies to leave the market by November, when the US sanctions go into force. Venezuela, which pumped 1.22 million b/d in August, according to the latest Platts survey of OPEC production, could see output fall to 1 million b/d in 2019, Platts Analytics forecasts. Politically unstable Libya also presents a supply risk. Meanwhile, on the demand side, Platts Analytics sees a negligible impact from the US-China trade dispute, though OPEC's own analysis arm has projected a contraction of some 350,000 b/d in global consumption in a worst-case scenario of ratcheting tariffs.
Saudi Arabia faces a tightrope walk between Trump and fellow oil producers at OPEC meeting - Analysts don't expect Saudi Arabia and its allies to make a major policy decision at this weekend's meeting of oil- producing nations, but the Saudis face another challenge: appeasing President Donald Trump while keeping the kingdom's vision for a grand alliance of crude producers on track. Trump wants the Saudis to boost output to prevent oil prices from spiking as his administration restores sanctions on Iran, OPEC's third biggest producer and Riyadh's chief regional rival. If Saudi Arabia had any doubts about Trump's expectations, the president reminded OPEC in an early morning tweet on Thursday. @realDonaldTrump: We protect the countries of the Middle East, they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices! We will remember. The OPEC monopoly must get prices down now!But Saudi Arabia faces threats to its leadership among roughly two dozen oil-producing nations if those countries perceive the kingdom is doing Washington's bidding at their expense.This weekend at a meeting in Algeria, the Saudis hope to advance their goal of making the ad hoc alliance — formed two years ago to end a devastating oil price downturn — more permanent ahead of its next major meeting in December. The 15-nation OPEC cartel and a group of other producers led by Russia have voluntarily throttled back their output since 2017 to boost oil prices. Now, the Saudis and OPEC want to institutionalize the alliance."The Saudis do want to have as amicable a discussion as possible, and they want to prepare for the launch of this organization in December. That argues against rubbing new supply in Iran's face. They have a balancing act to strike," said Robert McNally, president and founder of Rapidan Energy Group.While kowtowing to Trump could raise questions about Saudi leadership, failing to send a clear signal to the mercurial U.S. president could put OPEC in Trump's crosshairs. This comes as Congress has revived legislation aimed at preventing OPEC from manipulating oil prices. Analysts say the Saudis are likely worried Trump will back the bipartisan legislation if OPEC crosses him, something presidents George W. Bush and Barack Obama refused to do.
Exclusive: OPEC and allies consider oil output boost as Iranian supply falls - source (Reuters) - OPEC and other oil producers are discussing the possibility of raising output by 500,000 barrels per day (bpd) to counter falling supply from Iran because of U.S. sanctions, a source familiar with the discussions told Reuters. The development comes as oil reached $80 a barrel this month, prompting U.S. President Donald Trump to call again on the Organization of the Petroleum Exporting Countries (OPEC) to help to bring down prices. OPEC, Russia and other allies agreed a deal in late 2016 to cut supply, but after months of cutting by more than the pact had called for, they agreed in June to boost output by returning to 100 percent compliance. That equates to an increase of about 1 million bpd. The current discussions are not finalised, but it would mean that oil producers would need to lower compliance to less than 100 percent, the source said on Friday. Benchmark Brent oil prices LCOc1 fell by more than $1 on the news of a potential output boost, slipping to below $79 a barrel. OPEC and its non-OPEC allies will gather in Algeria over the weekend to review compliance with existing cuts. Three OPEC and non-OPEC sources told Reuters on Friday that latest data has shown that OPEC and its allies supplied less oil in August to world markets than they did in July, mainly because of a drop in Iranian production. In July OPEC and non-OPEC producers reduced output by 9 percent more than called for in their pact. The cut in August was even higher, the three sources said without providing exact figures, which will be discussed in Algiers this weekend. OPEC sources said that any official action to raise output would require OPEC to hold what it calls an extraordinary meeting - a proposal that is not on the table yet. But the joint OPEC and non-OPEC ministerial committee known as the JMMC, which meets on Sunday, can still recommend a further increase in output if needed, the sources said. “There are discussions to increase production by another 500,000 bpd. They (OPEC and non-OPEC) can increase output when they meet in December,” the source said, referring to the next formal OPEC meeting, scheduled for Dec. 3.
In Saudi Arabia, black gold is still king - Saudi Arabia’s young crown prince may be looking to the post-oil future, but state oil monopoly Aramco is setting itself up for another two decades of growing demand.The much-touted Aramco IPO so coveted by Donald Trump has been cast to the wayside, making way for more elegant plans by the OPEC kingpin. “All the research looking at crude oil shows there is no way we see peak oil demand until 2040,” said Peter Volkmar, a graduate fellow with Rice University’s Center for Energy Studies in Houston, Texas.“Everyone in the developing world is reaching that level of income where they can buy private vehicles, and they’re doing it at a rate similar to the rate Americans did and developed countries did,” he said.“If we’re moving to a world where car ownership in China is anything like America, oil demand is going to go through the roof.” Volkmar, whose PhD focuses on the behavior of oligopolies in the crude oil and natural gas markets, says Riyadh is indeed looking to diversify its economy — but not away from oil.Instead, he anticipates a drive to slash domestic consumption, thus freeing up the kingdom’s cheaply-extracted oil for lucrative export.
Push to Execute Saudi Clerics Rattles Kingdom’s Power Structure —Saudi authorities are seeking the death penalty for three prominent clerics, rights activists and a government official said, testing the unwritten code that has kept the kingdom’s rulers in power. Crown Prince Mohammed bin Salman and his father, King Salman, have jailed activists, businessmen and government officials as part of their efforts to reshape Saudi society and economics. But Saudi clerics have long been a power unto themselves, with fame and influence beyond that of others caught up in recent crackdowns. The jailed clerics are among Saudi Arabia’s best-known and most popular Sunni Muslim religious figures: Salman Al-Odah, who has more than 14 million Twitter followers; Awad al-Qarni, a popular and outspoken cleric; and Ali Alomari, a TV preacher.They were arrested a year ago in a roundup of imams with large followings for not openly supporting the government’s pressure campaign against Qatar, The Wall Street Journal reported, citing rights activists. They are now facing trials in a national-security court on charges that include conspiring against the monarchy and supporting terrorism, and prosecutors are seeking the death penalty, said relatives, activists and the government official. A senior Saudi official said the clerics are “under investigation for constituting a danger to society because they belong to terrorist organizations.” The senior official said Saudi prosecutors and judges were independent and that the crown prince would play no role in a verdict or punishment, if any. “Nobody in Saudi Arabia is being investigated because of their political views,” the senior official said. “The arrests of these individuals and others is in line with the kingdom’s keenness with the international community to exert efforts to combat the extremism that the world suffers from and to combat terrorism in all its forms,” the official said.
Made in America: Shrapnel in Yemen ties US bombs to civilian deaths - Last month, a CNN investigation found remnants of a US-made bomb at the scene of an airstrike that left dozens of schoolboys dead. Now, an independent Yemen-based human rights group called Mwatana has given CNN exclusive access to a trove of documents that show fragments of US-manufactured bombs at the scene of a string of other incidents since 2015, when the civil war began. In each of those cases, civilians were either killed or put at risk.Mwatana, which documents violations by all parties in Yemen’s conflict, used its network of trained field researchers to photograph evidence at the scene of strikes. The group consulted weapons experts to identify the weapons used from serial numbers found on the fragments. Mwatana was recognized last month with an award by US body Human Rights First.While CNN was not on the ground, we have made our own checks using image metadata and publicly available government websites linking each of these incidents to a US manufacturer. An internationally renowned weapons expert also analyzed each image for CNN. The incidents give a snapshot of US involvement in Yemen’s conflict through its support for the Saudi-led coalition that is battling a Houthi-led rebel insurgency. The United States says it does not make targeting decisions for the coalition. But it does support its operations through billions of dollars in arms sales, the refueling of Saudi combat aircraft and some sharing of intelligence.
Over 5 million children face starvation as US-backed forces attack Yemeni aid port -- Soaring food and fuel prices and dwindling supplies have driven another million Yemeni children to the brink of famine, bringing the total number of children facing starvation to 5.2 million, the UK-based aid group Save the Children warned in a report issued Wednesday.The report appeared as the US-backed coalition led by Saudi Arabia and its fellow Persian Gulf oil monarchies announced an escalation of their offensive against the Yemeni port city of Hodeidah, which constitutes the sole lifeline for food, medicine and fuel for some 80 percent of the country’s population.Save the Children warned that any disruption in the supplies flowing through Hodeidah could “cause starvation on an unprecedented scale” and risk killing “an entire generation of Yemeni children.” The United Nations food agency, meanwhile, reported that it anticipates its current estimate of 8.4 million Yemenis confronting famine will rise by another 3.5 million, given rising food prices—35 percent over the past year alone—and the collapse in the value of the country’s currency. “Time is running out for aid agencies in Yemen to prevent this country from slipping into a devastating famine,” David Beasley, the executive director of the World Food Program (WFP), warned in a statement Wednesday. The country is already facing what the UN has termed the worst humanitarian crisis on the planet and the threat of the worst famine in modern history, with the WFP reporting that 18 million Yemenis, almost two thirds of the population, do not know where their next meal will come from. Conditions have descended to the point that in some areas of the country families are trying to stay alive by eating leaves. In the capital of Sana’a, fuel shortages have led to streets being emptied of vehicles, leaving people unable to transport the wounded and sick to hospitals. New deaths have also been reported as a result of a cholera epidemic—the worst in modern history—that has affected over a million Yemenis and claimed the lives of well over 2,000. UN officials have warned that the siege of the city could claim as many as a quarter of a million lives, while the blocking of aid through the port could kill millions more.
America’s Death Trail in Yemen, and the Importance of Showing Graphic Images of War - Admittedly, it’s not an easy photograph to look at. Children—or at least what’s left of them after American bombs ripped through their school bus in Saada, Yemen, on Aug. 9—lie in a heap in the back of a pickup truck. It’s a veritable mosaic of human destruction. Vibrant hues of red, pink, blue, and yellow are punctuated by blacks, greys, and skin tones. Muscle tissue erupts from shredded flesh, mouths hang slightly agape, and charred, mutilated limbs protrude like gaunt twigs, their sources indistinguishable amidst the carnage. The video footage is even worse. A minute-long tape shows a father sobbing and wailing hysterically, shaking the pickup carrying his son’s corpse. He desperately kisses the dead boy’s hand, and for moment lifts him by the arm in an apparent effort to wake him. As he lays the body back down, his face betrays mournful resignation to his new reality. Another clip. Children’s screams and frantic shouts sound in the background as the camera pans across bodies—some dead, looking like debris, others attempting to crawl from the blast zone, bloodied and twisted. One child sits in the mud, shell-shocked, his leg shredded by the blast. These searing images document a masterwork of unbounded cruelty for which American tax dollars supplied the medium, and which American apathy has enabled. For the last three years, the United States has been providing military and logistical support to a Saudi-led coalition of Sunni Muslim countries trying to restore Yemen’s internationally recognized Hadi government which was deposed by Shia Houthi rebels in 2015. Claiming to be fighting against Iranian influence in the region (a connection the rebels deny), the coalition has been targeting civilians and civilian infrastructure. The Saada attack killed over 50 people, 44 of whom were children between the ages of six and 11. Despite their propensity to offend viewer sensibilities, these scenes are necessary for American audiences. Images have a unique power to humanize brutality—to connect terms like “civilian casualties” and “collateral” to faces across the globe belonging to people who, as it turns out, look an awful lot like us. Footage can sway public opinion and catalyze policy change by delivering us from our detachment and laying bare our egocentrism.
Russian aircraft shot down during Israeli missile attack on main Syrian government port - Latakia, Syria’s major port city and a stronghold of President Bashar al-Assad’s government, came under a missile attack on Monday, apparently downing a Russian military plane with 14 military personnel aboard. The strikes came within hours of Russia and Turkey announcing a joint agreement to forestall a Russian-backed government offensive in the northwestern province of Idlib that had threatened to trigger a major Western intervention and a potential confrontation between the world’s two major nuclear powers, the US and Russia. The state-owned Syrian news agency SANA said that the missile attacks were aimed at the Technical Industries Corporation, which is connected to the Syrian defense ministry and is reportedly involved in the production of missiles.Syrian government sources said that the attacks came from the Mediterranean Sea, where both the US and Russia have built up naval forces in recent weeks amid rising tensions in Syria.The missile strikes apparently took place near a major Russian airbase at Hmeymim.Syrian sources claimed that the country’s air defense systems brought down a number of the missiles, which they said had been fired by Israel. Russian sources attributed the attacks to four F-16 fighter jets that had apparently flown over Lebanon and the Mediterranean to attack the port city. Israel’s Jerusalem Post speculated that “Russian-Israeli coordination may have been involved.” The Russian and Israeli military commands have established close “deconfliction” ties, and it is widely believed that Israeli strikes on Iranian assets in Syria have been cleared in advance with Moscow.But there were reports that Russian air defense systems were involved in shooting down the missiles fired at Latakia. The Russian Defense Ministry also reported that one of its Il-20 aircraft with 14 people aboard had gone off the radar screens during the attack, raising the prospect that it had been shot down by the Israeli warplanes.
Russia blames Israel after military plane shot down off Syria - Russia has said Syria shot down one of its military planes - but laid the blame for the deaths of the 15 personnel on board with Israel.The defence ministry said Israeli jets put the Il-20 plane into the path of Syrian air defence systems on Monday after failing to give Moscow enough warning of a strike on Syrian targets.The Il-20 disappeared off the radar at about 23:00 local time (20:00 GMT).The Israel Defence Force (IDF) has expressed "sorrow" over the deaths. However, in a statement released on Twitter, it added: "Israel holds the [Syrian President Bashar al-]Assad regime, whose military shot down the Russian plane, fully responsible for this incident."It went on to say its jets were back in Israeli airspace by the time the missiles were launched. Israel - which also blamed Iran and Hezbollah - rarely acknowledges carrying out strikes on Syria, but an Israeli military official recently said it had hit more than 200 Iranian targets in Syria over the past 18 months.
Syria – Israel’s Provocation Kills Russian Soldiers – Moscow Will Take Political Revenge -Yesterday Turkey and Russia agreed on a further de-escalation in Idelb province in Syria (see the update here). This agreement takes away the chance of an imminent wider war in which the U.S. and some of its allies would use a fake 'chemical attack' as a pretext to launch missiles against a large number of Syrian government targets and military positions.A peaceful solution of the Idleb situation is unsatisfying for Israel. The successful Syrian defeat of the Jihadi enemy inside the country would allow Syria and its allies to concentrate their forces against Israel. Israel wants the Syrian government destroyed and the country in chaos.On Sunday September 16 Israel tried to hit an Iranian Boeing 747 freight plane at Damascus airport. The plane allegedly carried an Iranian copy of the Russian S-300 long range air defense System for the Syrian army.On Monday around 10:00pm local time 4 F-16 jets of the Israeli airforce, coming from the sea, launched missiles against at least three targets on Syria's coast. The strike came only hours after Israel released satellite images of what it called "strategic targets" in Syria. The integrated Syrian and Russian air-defenses responded.The Israeli air force had warned the Russian forces in Syria only one minute before the strike. A Russian IL-20 electronic warfare airplane (red line) was preparing to land at the Russian airport near Latakia just as the Israeli attack (blue) happened.
The Major Attack On Syria Followed Putin-Erdogan Agreement For Demilitarized Zone In Idlib - The world once again was taken to the brink of World War 3 Monday night, and the situation is still extremely dangerous. A massive wide-ranging assault on multiple Syrian provinces, including the coastal cities of Latakia and Tartus, occurred Monday evening reportedly by Israel and possibly with the help of France or the US, though the Pentagon is denying any US assistance during the assault. With Syrian and Russian air defenses responding during the over hour-long attack which targeted among other things an alleged chemical weapons research center, and in the confusion of missiles cross the sky, a Russian maritime patrol plane was shot down with 14 personnel on board. The Pentagon is claiming it was Syrian defense which "accidentally" downed the plane, while Russia is pointing out its radar observed a French frigate firing in the area just before the plane went down. Regardless, this is an incredibly dangerous situation which puts world powers closer to major war. And crucially, the whole event came immediately after Russia and Turkey announced they've agreed to establish a "demilitarized zone" around Idlib. The Russian Ministry of Defense (MoD) announced just hours before the reported Israeli attack was initiated that Russia and Turkey have agreed to establish a 15-20km demilitarized zone along Syrian government positions.This means the widely reported Syrian-Russian offensive is off for the time being, according to the Russian MoD.But this raises the following questions given the timing of Monday's night's escalation: with Putin negotiating for a 'world power deescalation' over Idlib after the US threatened attack, was Monday's attack part of an Israeli (and Western allies) strategy for keeping regime change in Damascus on the table? Why escalate now? This at the very least appears a conscious effort to keep the fires burning in Syria, to prevent Putin from being in the driver's seat, and to continue to provoke hostilities with the Tehran-Damascus axis, and to further keep alive the possibility of the eventual military ouster of Assad.
Here's How Turkey Stalled The Syrian-Russian Offensive On Idlib -Turkey is pushing further reinforcements of troops, commando units and tanks into the northern Syrian city of Idlib and around it, for a specific objective: to disrupt the attack against the city by the Syrian forces and their allies supported by Russia.Ankara is indeed taking advantage of the Russian slowing down of its strategy to liberate the city from jihadists (including al-Qaeda) due to the US threat to bomb the Syrian Army and government forces under that excuse of “using chemical weapons”. This “chemical weapon” has become part of the battle of Idlib, used as a tool to wage war on Syria just as the war is coming to an end.Russia considers the Turkish reinforcements as a breach of the Astana Turkish-Russian-Iranian deal, which limited the number of observation points and the military presence around the city and rural areas of Idlib. Moreover, Russia effectively considers Turkey to be unable to fulfil its commitment to totally end the presence of jihadists, especially including the group of al-Qaeda, stationed in the city and around it. In fact, the Turkish president Erdogan has asked for an extended delay to meet the Russian and the Iranian demands related to Idlib. This delay has been rejected by the government of Damascus whose leaders believe it is counterproductive to the interests of the country (to liberate the whole of Syria) and, further, would confirm Russian President Putin's hesitancy which is apparently due to the US threat. Decision makers in Damascus said the following: Turkey has offered Russia the protection of its military base in Hmaymeem by preventing any further drone attack against it. The Russian base has been subject to over 55 armed drone attacks, all shot down by the Russian defence system around the base which is on the Syrian coast. Russia has rejected the Turkish offer, asking Ankara to abide by its agreement and eliminate the Jihadists from the city using Turkish influence to avoid the attack. Damascus believes Turkey would like to annex Idlib and is, therefore, rejecting any deal with Turkey beyond the one already signed in Astana which consisted of a commitment to finish off all jihadists. Furthermore, according to the sources, Turkey “promised to include Jabhat al-Nusra, aka Hay’at Tahrir al-Sham, within one single army in Idlib to satisfy the Russian demands and show its control over the jihadists. Ankara’s troops are bringing in more military personnel – as Turkey presents it – to support all Turkish proxies in their battle against jihadists who refuse to surrender or merge with the other groups.
An Unending U.S. War in Syria? -- Amid a week of attention-grabbing drama about the dysfunction of Donald Trump’s presidency, it almost escaped notice that his administration is putting U.S. troops in harm’s way in a foreign war for a new purpose—a purpose that does not entail countering a threat to the United States. Newly appointed special envoy for Syria James Jeffrey stated that under a “new policy” on Syria, the United States is “no longer pulling out by the end of the year.” This policy goes against what Trump had been saying not only in the presidential campaign about wanting less U.S. involvement in Middle Eastern wars but also, more recently and more specifically, about wanting to withdraw the twenty-two thousand U.S. soldiers now in Syria. Those troops have been in the northeastern part of the country, hitherto focused on aiding the fight against the so-called Islamic State or ISIS. But now, according to Jeffrey, besides mopping up the remnants of ISIS’s former mini-state in eastern Syria, U.S. troops are to stay in Syria indefinitely with the objective of ejecting from the country all troops of Syria’s ally Iran. Administration officials say that a motivation for the new policy is growing doubt that Russia will be either able or willing to assist in such an ejection. The new policy is an entirely new war aim, not an extension or corollary of the prior declared purpose of combating ISIS. In fact, Iran’s presence in Syria, aimed at supporting the Assad regime, has been on the opposite side of the Syrian civil war from ISIS, which has aimed to overthrow that regime. Hawks in the administration have been talking for some time, of course, about confronting and opposing Iran any way and anywhere they can, but Jeffrey’s statement marks an official departure from what had been a U.S. war objective in Syria exclusively focused on ISIS.
Assad Has Won and America Must Go - Syrian government forces and their allies stand ready to roll into the province of Idlib and extinguish the last major rebel stronghold in the country. Russian air attacks pummeled Idlib in early September. Today’s announcement of a Russo-Turkish agreement for a buffer zone in Idlib appears to have postponed a full-scale attack on the province, but it is likely to be only a temporary reprieve . The Syrian civil war is in its endgame. Yet at this late hour, holding few cards, the United States has doubled down on its Syrian intervention. Why? America’s Syria policy is now in dire straits. On September 3 President Trump made a typical Twitter threat, warning Bashar al-Assad not to “recklessly attack Idlib Province.” This bluster was paired with a far more serious announcement. The administration’s newly-appointed “representative for Syria engagement,” retired diplomat James Jeffrey, told reporters that the United States had redefined its Syria goals to include the withdrawal of all Iranians and Iranian proxy forces from Syria and the “establishment of a stable, non-threatening government acceptable to all Syrians and the international community.” Jeffrey added: “That means we are not in a hurry .”In March, President Donald Trump proclaimed, “We’re coming out of Syria, like, very soon.” So much for that. There is little use in fully discussing the illegality of further American involvement in Syria. The post–9/11 Authorization for the Use of Military Force was stretched to provide a legal fig leaf for the counter-ISIS campaign in 2014. Employing it to justify an anti-Assad and anti-Iran intervention is untenable. A reassertion of congressional prerogatives is not something the Trump administration has to worry about, however. With a few notable exceptions , most American legislators are too timorous take a firm stand against any war. Some don’t even know where our troops are .
Iran puts on 'show of strength' military exercise in Gulf (Reuters) - The Iranian Revolutionary Guards and army carried out a joint aerial military drill in the Gulf on Friday in what official media said indicated the “pounding reply” that awaited the country’s enemies. Tehran has suggested in recent weeks that it could take military action in the Gulf to block other countries’ oil exports in retaliation for U.S. sanctions intended to halt its sales of crude. Washington maintains a fleet in the Gulf that protects oil shipping routes. “In addition to a show of strength, this ceremony is a message of peace and friendship for friendly and neighboring countries,” Colonel Yousef Safipour, the deputy commander of the army for public relations said, according to the Islamic Republic News Agency (IRNA). “And if the enemies and arrogant powers have an eye on the borders and land of Islamic Iran they will receive a pounding reply in the fraction of a second.” Mirage, F-4 and Sukhoi-22 jets took part in the exercise on Friday, according to IRNA. The Islamic Republic has a large naval military drill, including approximately 600 naval vessels, planned on Saturday, IRNA reported. Separately, a prominent Iranian cleric said Friday that the time had come for Israel to say goodbye. He did not give any further information on what that could mean. “Mr. Netanyahu, you and your intelligence services know well that the time to say goodbye has arrived and what position of strength the resistance of Hezbollah and the people of Gaza are in,” Hassan Abu-Torabi Fard, the temporary Friday prayers leader in Tehran, said, according to Fars News.
Iran military parade attacked by gunmen in Ahvaz- Gunmen have opened fire on an Iranian military parade in the south-western city of Ahvaz, killing at least 25 people, including civilians, and injuring 60, state media say. The attackers shot from a park near the parade and were wearing military uniforms, reports say. An anti-government Arab group, Ahvaz National Resistance, and Islamic State (IS) have both claimed the attack. President Hassan Rouhani has vowed a "harsh response". "The response of the Islamic Republic of Iran to the smallest threat will be harsh, but those who sponsor the terrorists must be held accountable," he said in a statement. Foreign Minister Javad Zarif blamed "terrorists paid by a foreign regime", adding that "Iran holds regional terror sponsors and their US masters accountable". Iran has previously accused its regional rival, Saudi Arabia, of supporting separatist activity amongst Iran's Arab minority. Meanwhile, an Iranian military spokesman claimed the attackers were not from IS but "were trained and organised by two Gulf countries", and had ties to the US and Israel. Fars news agency said the attack started at 09:00 local time (06:30 BST), lasted about 10 minutes, and appeared to involve four gunmen. The attackers fired at civilians and attempted to attack military officials on the podium, Fars reports. Nearly half of those killed were members of Iran's Revolutionary Guard, reports say. A number of civilians, including women and children, who were watching the military parade, were also among those killed, Irna news agency said.
Norway Officials Admit They Knew Nothing About Libya But Joined Regime Change Efforts Anyway - A new official report produced by the Norwegian government illustrates the continuing absurdity of NATO expansion and foreign adventurism in places very far away from the "North Atlantic" explicit in the name North Atlantic Treaty Organization — places like Afghanistan, Libya, Ukraine or Syria. Top Norwegian officials have now admitted they "had very limited knowledge" of events unfolding in Libya during 2010 and 2011, prior to NATO's military intervention on behalf of anti-Gaddafi rebels — a war that resulted in regime change and a failed state ruled by competing governments and extremist militias to this day. Norway enthusiastically joined the US, UK, and French led bombing of the country initiated in March 2011 even knowing full well its military knew next to nothing of what was unfolding on the ground. But what did decision-makers have to go on? Consider this absurd admission from the official report: “In such situations, decision-makers often rely on information from media and other countries,” the report reads.
China To Take Over Israel's Largest Port, Could Threaten US Naval Operations - A top Israeli military and energy official has questioned Israel and China's growing economic ties just as a Chinese company is set to begin operating Haifa Port as part of a major 25-year contract previously struck in 2015. “When China acquires ports,” Israeli Brigadier General Shaul Horev began in an interview this week with national news source, Arutz Sheva, “it does so under the guise of maintaining a trade route from the Indian Ocean via the Suez Canal to Europe, such as the port of Piraeus in Greece. Does an economic horizon like this have a security impact?" Gen. Horev, who has also served as navy chief of staff and chairman of the Atomic Energy Commission, continued to sound the alarm over a Chinese takeover, "We are not weighing that possibility sufficiently. One of the senior American figures at the conference raised the question of whether the U.S. Sixth Fleet can see Haifa as a home port. In light of the Chinese takeover, the question is no longer on the agenda.” He is calling for an Israeli security mechanism that that will review and scrutinize Chinese investments in Israel and the Mediterranean to ensure they don't harm the security interests of Israel or its partners, like the United States. Chinese military ship at Haifa port in 2012. The Shanghai International Port Group (SIPG) will manage Israel's largest port at Haifa as part of a contract to be inagurated in 2021, which will run for 25 years. Meanwhile a separate Chinese firm was recently awarded a contract to construct a new port in the southern Israeli city of Ashdod. According to various reports China has been spending roughly $150bn a year in the countries involved in its massive Belt and Road Initiative (BRI) which seeks to link Asia, Europe, and Africa in a vast Chinese-underwritten free trade infrastructure. Mediterranean outposts like Haifa are a key link in this corridor, a corridor which China hopes will be fully established as a "21st century Silk Road" by 2049. But as we've noted recently, major multi-billion dollar infrastructural projects in host counties could come at a cost, namely it could open the door to Chinese spying and expanding influence of its security services.
China, the Port of Haifa and Mideast Peace - It has been reported recently in Newsweek and Haaretz regarding a deal that has been struck for the management of Haifa’s port to be handled by a Chinese company, the Shanghai International Port Group. This is due to begin in 2021 and to run for 25 years. While most of the coverage on this topic has been around the effect this may have on US naval interests in Israel, there is another issue at stake, which is that Haifa’s strategic value is such that it could well be the single largest prize of any regional peace settlement, and handing its control to the Chinese could backfire on Israel’s interests should there be a regional agreement in the next 28 years. Israel’s unique geographic location on the east of the Mediterranean gives it a strategic advantage as a conduit of trade between the East and West. Although most of this trade currently goes through the Suez Canal, the port at Haifa allows countries of the Middle East to bypass the canal and to access the Mediterranean directly.There are three significant benefits of this, particularly for the export of oil from the Persian Gulf to Europe and the US.The first is that it is a more secure route than the current route around the Arabian Peninsula, where there are threats of the closure of the straits of Hurmuz near Iran, instability near Yemen and complete control of the Suez Canal by Egypt, which has only stabilised in recent years and is still fighting an insurgency in Sinai. The whole region is often embroiled in conflict, including Sudan and Eritrea which also line the Red Sea route. A pipeline from the major exporters through Jordan to Israel, can actually be a more stable and reliable route.The second, is cost. Transit fees through the Suez Canal are steep, at around US$400,000 per ship depending on size. This provides Egypt with $5b in revenues last year alone. This fee is so steep that some struggling carriers are considering taking the long route around Africa to get to Europe when fuel costs are low, despite the additional 7000 miles of transit.The third reason is speed. There is an additional thousand miles of transit when shipping along the Arabian Peninsula route, than if the oil was piped and loaded onto tankers in Haifa. Haifa’s port also has a natural deep harbour, making it ideal for the loading up of oil tankers, and is one of the largest in the western Mediterranean in terms of volume. This is part of a larger strategy of insuring the Maritime Belt of the new Silk Roads.
Pakistan invites Saudi Arabia to join China-led project - After Pakistani Prime Minister Imran Khan’s visit this week to Saudi Arabia, his government announced on Thursday that the Gulf state had been invited to be the third investor in a key segment of the China-led Belt and Road Initiative. Information Minister Fawad Chaudhry made the announcement but did not detail whether Saudi Arabia had agreed to lend money to the Pakistani government, which is struggling to cope with an accumulating debt burden. Pakistan has invited Saudi Arabia to join CPEC as the 3rd strategic partner – Minister Information Fawad Chaudhry (20.09.18)#PTI @fawadchaudhry pic.twitter.com/vETts8eyhK — PTI (@PTIofficial) September 20, 2018 Also on Thursday, the deputy secretary general of the ruling Pakistan Tehreek-e-Insaf party said on Twitter that “Pakistan and Saudi Arabia struck an agreement worth US$10 billion,” as translated by The News. Dunya News also reported the US$10 billion deal. Chinese investments in the China-Pakistan Economic Corridor have come under fire recently, as Pakistan copes with an economic crisis that has seen its foreign-exchange reserves fall to near-record lows. CPEC is an important part of Beijing’s Belt and Road Initiative, but lack of transparency and due diligence has prompted criticism, including from the recently elected Prime Minister Khan. Earlier this month, during a visit to Pakistan by China’s top diplomat, Wang Yi, the two countries reaffirmed their cooperation and also proposed inviting a third-party investor to assuage concerns about Beijing burdening Islamabad with debt.
A ‘massive’ spike in oil smuggling has eased the economic pressure on North Korea -- Last spring, as the Trump administration was preparing for the historic U.S.-North Korea summit, a flotilla of strange-looking tanker ships steamed out of North Korea’s Nampo harbor on a series of clandestine missions off the Chinese coast. Many of the vessels bore crude disguises, from fictitious names painted on their bows to fake hatches built of canvas and wood to give them the look of a cargo ship. Once at sea, they would rendezvous at night with a foreign tanker, toss hoses over the rail and fill their hulls with illicit oil before sailing home again. Such fuel-smuggling runs are not uncommon in the Yellow Sea, yet the scale of activity over the spring and summer startled U.S. and East Asian intelligence officials who tracked the ships’ movements by satellite. By late August, spy agencies had counted 148 of these secret maritime transfers — for a total of between 800,000 and 1.4 million barrels of oil, gasoline and diesel — with the volume increasing in recent months as diplomacy with North Korea picked up steam. A confidential U.N. report last month identified 40 vessels and 130 companies, many with Chinese or Russian ties, as contributing to a “massive” spike in smuggling that analysts say has helped stabilize North Korea’s economy just as U.S. diplomats are attempting to compel leader Kim Jong Un to give up his nuclear arsenal. The flurry of activity is coinciding with what intelligence officials described as a steady erosion in sanctions enforcement in the region: With tensions on the Korean Peninsula cooling — and with a U.S.-China economic cold war looming — Russia and China have shown little enthusiasm for cracking down on the profiteers who are helping supply crucial fuel for Pyongyang’s vehicles and factories, U.S. officials and independent analysts said in interviews. “Neither China nor Russia are doing what they should to stop this,” said a Trump administration official, who, like others, spoke on the condition of anonymity to discuss sensitive diplomacy. “The Russians are even trying to block our efforts to do something about” the spike in oil deliveries to North Korea.
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