Sunday, April 5, 2020

refinery utilization lowest since Harvey; gasoline production lowest in 22 years; gasoline demand lowest since Feb 1992 after record drop in demand..

oil ​prices ​see largest one-day and one-week percentage ​​gains on record​ after hitting 18 year low​​;​ natural gas prices hit 24 year lows; end of winter natural gas supplies up 77% from a year ago; oil supplies jump most since Oct 2016; refinery utilization lowest since Sept 2017; gasoline production lowest in 22 years; gasoline demand lowest since Feb 1992​​; the biggest one week ​gasoline ​demand drop ever​; ​biggest rig drop in 5 years, and not one shale driller is profitable at today's prices..

this week's oil prices finished higher for the first time in 6 weeks on hopes that the Saudis and Russians would end their price war and cut oil production...after falling 5% to $21.51 a barrel last week after the selling due to the Saudi-Russia price war which had driven oil prices 30% lower the prior week subsided, the contract price of US light sweet crude for May delivery opened 3% lower on Monday ​and ​tumbled to an 18 year low of $19.27 a barrel after extended coronavirus lockdowns had cascaded through the world’s largest economies over the weekend, before recovering some of the earlier losses and closing down $1.42 at $20.09 a barrel, also an 18 year closing low...oil prices clawed back Monday's losses on Tuesday, rising to as high as $21.89 on end of quarter trading strategies, before slipping back to finish just 39 cents, or 1.9%, higher at $20.48 a barrel, thus ending March with the largest quarterly percentage drop on record...crude prices fell on Wednesday as a bigger-than-expected rise in U.S. inventories and a widening rift within OPEC heightened oversupply fears, with US oil prices again slipping below $20 a barrel on the largest jump in gasoline supplies since the 1st week of the year, before finishing down less than 1% at $20.31 a barrel...oil prices then surged as much as 13% on Thursday morning, following a report that China is planning to start buying cheap crude for its strategic reserves, and then soared to a 35% gain at $27.39, after Trump tweeted that he had talked to Russian and Saudi leaders and that they would soon cut production by 10 to 15 million barrels per day, before prices fell back below $25 after the Kremlin said that Putin had not spoken to his Saudi counterpart and hasn’t agreed to reduce production, but still managed to finish the session $5.01 higher at $25.32 a barrel, the largest one-day percentage gain on record, edging out a similar ​record ​gain two weeks earlier...Oil prices surged again on Friday after OPEC and its allies announced they would hold a virtual meeting on Monday, and rose to as high as $29.13 before finishing the session with a gain of $3.02, or nearly 12% at $28.34 a barrel...hence, US crude prices ended the week 31.7% higher, with May's crude oil logging its best week on records going back to the contract’s inception in 1983...

meanwhile, without Trump tweeting on their behalf, natural gas prices closed at 24 year lows on Wednesday and Thursday before bouncing off an even lower 24 year​ ​low to rally​ to a gain​ on Friday, ​while ​still finishing the week 3% lower...after trading in the April natural gas contract expired 1.9% higher at $1.634 per mmBTU last week, the contract price for natural gas for May delivery opened this week at $1.630 per mmBTU, 4.1 cents lower than its $1.671 Friday close, but clawed back to finish 1.9 cents higher at $1.690 per mmBTU, as the prospect of potential production cuts outweighed coronavirus related demand destruction...but gas prices fell 5 cents or 3% to $1.640 per mmBTU on Tuesday on an increase in natural gas output and on forecasts for milder weather and lower heating demand next week....natural gas ​prices then tumbled to their lowest close since August 1995 on Wednesday, ending down 5.3 cents at $1.587 per mmBTU, as the coronavirus ​pandemic ​was seen to cut global demand for energy in the wake of Trump’s comments that we'd see a very painful two weeks ahead...prices fell another 3.5 cents to another 24 year low of $1.552 per mmBTU on Thursday, on a bearish natural gas storage report, and were heading for a 3rd straight 24 year low at $1.530 per mmBTU on Friday, before rallying to close 6.9 cents higher at $1.621 per mmBTU on forecasts for cooler weather and higher heating demand in mid April than had been expected...

the natural gas storage report from the EIA on the week ending March 27th indicated that the quantity of natural gas held in underground storage in the US fell by ​19 billion cubic feet to 1,986 billion cubic feet by the end of the week, which left our gas supplies 863 billion cubic feet, or 76.8% higher than the 1,123 billion cubic feet that remained in storage on March 27th of last year, and 292 billion cubic feet, or 17.2% above the five-year average of 1,694 billion cubic feet of natural gas that has been in storage as of the 27th of March in recent years....the 19 billion cubic feet that were withdrawn from US natural gas storage this week was somewhat below the consensus estimate for a 27 billion cubic feet withdrawal from a survey of analysts by S&P Global Platts, but matched the average 19 billion cubic feet of natural gas that have been pulled from natural gas storage during the fourth week of March over the past 5 years, while the corresponding week of 2019 had an unusual 6 billion cubic feet March addition of natural gas to storage..

Dallas Fed Energy Survey

with oil prices hitting 18 year lows again this week, many have probably been wondering what oil prices oil producing companies need to cover their operating expenses, and what levels of oil prices the exploitation companies need to profitably drill a new well...while many analysts have been making educated guesses on those "break-even" points, perhaps the most accurate figures come from a survey of oil company executives themselves, in the Fed district that accounts for the lion's share of US oil companies...

every quarter the Dallas Fed conducts a survey of more than 200 oil and gas companies headquartered in or operating in their district, which includes western Louisiana and eastern New Mexico in addition to Texas, and which forms the basis of the Fed's economic research on the oil & gas industry....in addition to the usual quarterly survey, each survey also includes a set of different questions each quarter, and this year's First Quarter Dallas Fed Energy Survey included a set of special questions to update to their data on break-even oil prices by basin....157 oil and gas firms responded to the special questions survey, and in an overview, they present the results of that survey graphically, and that's what we'll look at today...

as the heading on this first graphic from that survey indicates, the first special question the Dallas Fed asked the oil executives was what WTI oil price they needed to cover their expenses on existing wells, and the range of their responses are indicated in a bar graph format below...

March 29 2020 breakeven oil operating costs

in the above graph, the blue, brick, yellow, orange, green, purple, and turquoise colored bars represent the range of oil price responses to that operating expenses question given by oil company executives with operations in the Eagle Ford of south Texas, in the Permian Delaware of far west Texas and New Mexico, in the Permian Midland shale of central western Texas, in the Bakken Shale of North Dakota, in other US oil producing shale basins outside of those graphed, from executives with operations in other Permian shale regions, and​ from those execs with wells in non-shale oil producing areas, as the headings above the colored bars indicate...in addition, underneath each of those bars, they've indicated the number of oil executives that responded to that headline question for each of those basins or collectives...thus, what the first blue bar tells us is that ​according to 8 oil company executives with wells in the Eagle Ford shale, at least one company needs oil priced at $45 a barrel to cover its operating expenses, at least one oil company can cover their Midland basin expenses at $12 a barrel oil, and the average price needed to cover operating expenses for all oil companies producing oil in that basin is $23 a barrel...similarly, in the brick colored bar, we can see that at least one oil company of the 18 with wells in the Permian Delaware can cover it's expenses with oil at $5 a barrel, while another company needs as much as $54 a barrel to cover their operating expenses in the same basin, while the average oil price the 18 companies with wells in the Permian Delaware needs is $28 a barrel...meanwhile, on the far right, the turquoise bar indicates responses from 44 companies operating in non shale basins around the country and appears to indicate some of those non-shale wells could continue to be operated profitably even if oil fell to $3 a barrel, while others need prices as high $59 to continue pumping oil without losing money...the Dallas Fed advises that 35% of the responses they received to this survey were at or below the average WTI spot price ​of ​$24 per barrel​ ​for the week ending March 20th, which means many oil companies can’t even cover their operating expenses at current prices, and hence are losing money with every barrel of oil they produce...

next we have a similar graphic showing what oil price each of the survey respondents said they needed to profitably drill a new well:

March 29 2020 breakeven cost for new well

like the first graphic, the colored bars in this 2nd graphic outline the range of responses to the Dallas Fed question as to what oil price each of the executives says they need to profitably drill a new well, with the basin bars arranged left to right from the lowest average oil price to the highest, ie, in a slightly different order than for the operating expenses question...hence, we can see from the yellow bar ​on the left ​that among the 22 oil executives with operations in the Permian Midland shale who answered this question, at least one can drill a new well and make a profit with $30 oil, while at least one other company needs $60 oil to cover his costs of drilling a new well, while the average oil price needed to turn a profit drilling a new well for all those operating in the Permian Midland taking part in the survey was $46 a barrel...similarly, for the 7 oil execs who might be drilling new wells in the Eagle Ford (​as indicated by the ​blue bar), the responses ranged from those who could profit with oil price of $40 a barrel to those who need a price of $55 a barrel, with the average response for those drilling in that basin also at $46 a barrel...on the far right, we can see that the 16 drillers in the Permian Delaware have the highest average break-even price in the US at $52 a barrel, with some needing prices as high as $70 a barrel to profitably drill a new well, while others could break-even at $35 a barrel oil...but the obvious point we need to make is that with even with oil prices up 31​.7​% this wee​k​ at $28.34 a barrel, there is no oil company horizontally drilling into shale in the US who can contract to drill a new well and expect to make a profit, unless they've contracted for that drilling at a much higher price months ago....in fact, the only companies that can profitably drill today are a handful of the conventional non-shale drillers​ shown in ​turquoise​ ​who are presumably drilling vertical wells, as at least one of them can ​drill & ​break even with oil at $15 a barrel....but even among them, the average breakeven price is $50 a barrel, and some need $70 oil, so oil prices would have to nearly double from today's level just to make half of any new drilling in the US profitable...

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending March 27th indicated that a drop in our oil exports and big pullback in our oil refining meant we were left with a big surplus of oil to add to our stored commercial supplies, the twenty-first addition of oil to storage in the past twenty-nine weeks....our imports of crude oil fell by an average of 70,000 barrels per day to an average of 6,047,000 barrels per day, after falling by an average of 422,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 695,000 barrels per day to 3,155,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,892,000 barrels of per day during the week ending March 27th, 625,000 more barrels per day than the net of our imports minus our exports during the prior week...over the same period, the production of crude oil from US wells was unchanged at 13,000,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production totaled an average of 15,892,000 barrels per day during this reporting week..

meanwhile, US oil refineries reported they were processing 14,898,000 barrels of crude per day during the week ending March 27th, 940,000 fewer barrels per day than the amount of oil they used during the prior week, while over the same period the EIA's surveys indicated that an average of 1,976,000 barrels of oil per day were being added to to the supplies of oil stored in the US....so looking at all that data, this week's crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports and from oilfield production was 982,000 barrels per day less than what what was added to storage plus what our oil refineries reported they used during the week....to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just plugged a (+982,000) 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 they label in their footnotes as "unaccounted for crude oil", thus suggesting an error or errors of that magnitude in the oil supply & demand figures we have just transcribed...however, since the media treats these figures as gospel and since they drive oil pricing and hence decisions to drill for oil, we'll continue to report them, just as they're watched & believed as accurate by most everyone else...(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) indicate that the 4 week average of our oil imports fell to an average of 6,279,000 barrels per day last week, now 6.9% less than the 6,745,000 barrel per day average that we were importing over the same four-week period last year....the 1,976,000 barrel per day addition to our total crude inventories was all added to our commercially available stocks of crude oil, while the quantity of oil stored in our Strategic Petroleum Reserve remained unchanged....this week's crude oil production was reported to be unchanged at 13,000,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was unchanged at 12,500,000 barrels per day, while a 16,000 barrel per day increase in Alaska's oil production to 475,000 barrels per day had no impact on the rounded national total....last year's US crude oil production for the week ending March 29th was rounded to 12,200,000 barrels per day, so this reporting week's rounded oil production figure was 6.6% above that of a year ago, and 54.2% 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 82.3% of their capacity in using 14,898,000 barrels of crude per day during the week ending March 27th, down from 87.3% of capacity during the prior week, and the lowest capacity utilization rate since September 8, 2017, when the aftermath of Hurricane Harvey shut down Texas Gulf Coast refining....hence, the 14,898,000 barrels per day of oil that were refined this week were 6.0% fewer barrels than the 15,849,000 barrels of crude that were being processed daily during the week ending March 29th, 2019, when US refineries were operating at 86.4% of capacity, and also the fewe​st barrels refined in any week since Hurricane Harvey....

with the big drop in the amount of oil being refined, gasoline output from our refineries was much lower, decreasing by 1,502,000 barrels per day to a 22 year low of 7,456,000 barrels per day during the week ending March 27th, after our refineries' gasoline output had decreased by 1,016,000 barrels per day over the prior week...that drop in gasoline o​ tput was probably because wholesale gasoline has selling at less than 50 cents per gallon, and refineries have been losing up to $17 per barrel on every barrel they process...after this week's drop in gasoline output, our gasoline production was 24.0% lower than the 9,813,000 barrels of gasoline that were being produced daily over the same week of last year....on the other hand, our refineries' production of distillate fuels (diesel fuel and heat oil) increased by 128,000 barrels per day to 4,966,000 barrels per day, after our distillates output had increased by 150,000 barrels per day over the prior week...so after this week's increase in distillates output, our distillates' production for the week was 2.0% more than the 4,870,000 barrels of distillates per day that were being produced during the week ending March 29th, 2019....

with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week rose for the 1st time in 9 weeks but for the 13th time in 21 weeks, rising by 7,524,000 barrels to 246,806,000 barrels during the week ending March 27th, after our gasoline supplies had decreased by 1,537,000 barrels over the prior week...our gasoline supplies increased this week because the amount of gasoline supplied to US markets decreased by a record 2,178,000 barrels per day to 6,659,000 barrels per day, indicating the lowest gasoline demand since February 14th 1992, and because our exports of gasoline fell by 162,000 barrels per day to 673,000 barrels per day, while our imports of gasoline fell by 98,000 barrels per day to 736,000 barrels per day...after this week's big inventory increase, our gasoline supplies were 4.2 higher than last March 29th's gasoline inventories of 236,839,000 barrels, and roughly 4% above the five year average of our gasoline supplies for the same time of the year...

even with the increase in our distillates production, our supplies of distillate fuels decreased for the 11th week in a row and for the 20th time in 26 weeks, falling by 2,194,000 barrels to 122,248,000 barrels during the week ending March 27th, after our distillates supplies had decreased by 678,000 barrels over the prior week....our distillates supplies fell by more this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 112,000 barrels per day to 3,907,000 barrels per day, and because our exports of distillates rose by 243,000 barrels per day to 1,499,000 barrels per day while our imports of distillates rose by 12,000 barrels per day to 127,000 barrels per day....after this week's inventory decrease, our distillate supplies at the end of the week were 4.6% below the 128,169,000 barrels of distillates that we had stored on March 29th, 2019, and fell to about about 13% below the five year average of distillates stocks for this time of the year...

finally, with ​the pullback in refining and ​​the big drop in exports​, our commercial supplies of crude oil in storage rose for the twenty-third time in forty weeks and for the thirty-third time in the past 52 weeks, increasing by 13,833,000 barrels, from 455,360,000 barrels on March 20th to 469,193,000 barrels on March 27th, the largest increase since October 2016....but even after 10 straight increases, our crude oil inventories are still near the five-year average of crude oil supplies for this time of year, but about 30% higher than the prior 5 year (2010 - 2014) average of crude oil stocks after the fourth week of March, with the disparity between those comparisons arising because it wasn't until early 2015 that our oil inventories first rose above 400 million barrels and continued rising....since our crude oil inventories had generally been rising over the past year and a half, except for during this past summer, after generally falling until then through most of the prior year and a half, our crude oil supplies as of March 27th were 4.4% above the 449,521,000 barrels of oil we had in commercial storage on March 29th of 2019, and 10.3% above the 425,332,000 barrels of oil that we had in storage on March 30th of 2018, while at the same time remaining 12.4% below the 535,543,000 barrels of oil we had in commercial storage on March 31st of 2017...      

This Week's Rig Count

the US rig count decreased for the 24th time in the past 29 weeks during the week ending April 3rd, but this time they fell by the most since mid-March of 2015... Baker Hughes reported that the total count of rotary rigs running in the US decreased by 64 rigs to 664 rigs this past week, which was the smallest number of rigs deployed since December 30, 2016, and hence a 39 month low for the rig count...that total was also down by 361 rigs from the 1025 rigs that were in use as of the April 5th report of 2019, and 1,265 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began to flood the global oil market in an attempt to put US shale out of business...

the number of rigs drilling for oil decreased by 62 rigs to 562 oil rigs this week, which was the least oil rig activity in 38 months, 269 fewer oil rigs than were running a year ago, and more than a thousand less​ rigs​ than the recent high of 1609 rigs that were drilling for oil on October 10th, 2014....at the same time, the number of drilling rigs targeting natural gas bearing formations decreased by 2 to 100 natural gas rigs, which was the least number of natural gas rigs active since October 7th of 2016, and hence was a new 41 month low for natural gas drilling, down by 94 gas rigs from the 194 natural gas rigs that were drilling a year ago, and way down from the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008...in addition to those rigs drilling for oil & gas, two rigs classified as 'miscellaneous' continued to drill this week; one on the big island of Hawaii, and one in Lake County, California... a year ago, there were no such "miscellaneous" rigs deployed..

the Gulf of Mexico rig count was unchanged at 18 rigs this week, with all 18 of those rigs drilling for oil in Louisiana's offshore waters...that's four less than the rig count in the Gulf a year ago, when 19 rigs were drilling offshore from Louisiana and three rigs were operating in Texas waters...there are no rigs operating offshore elsewhere at this time, nor were there a year ago, so the Gulf rig count is equivalent to the national rig count, as it has been all winter...

the count of active horizontal drilling rigs decreased by 60 rigs to 593 horizontal rigs this week, which was the fewest horizontal rigs active since January 27th 2017, and hence is a 38 month low for horizontal drilling...it was also 308 fewer horizontal rigs than the 901 horizontal rigs that were in use in the US on April 5th of last year, and also well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...in addition, the directional rig count was down by six to 41 directional rigs this week, and those were also down by 29 from the 70 directional rigs that were operating during the same week of last year....on the other hand, the vertical rig count was up by 2 to 30 vertical rigs this week, but those were still down by 24 from the 54 vertical rigs that were in use on April 5th of 2019...

the details on this week's changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes...the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that 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 April 3rd, the second column shows the change in the number of working rigs between last week's count (March 27th) and this week's (April 3rd) count, the third column shows last week's March 27th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running before the same 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 the 5th of April, 2019...    

April 3 2020 rig count summary

the basin totals above are missing a lot of specifics, since they show a loss of just 48 rigs, while we know the horizontal rig count was down by 60 nationally...let's again start with the rig losses in the Texas part of Permian basin, where 17 rigs were pulled out of Texas Oil District 8, or the core Permian Delaware, 3 more rig were shut down in Texas Oil District 8A, which corresponds to the northern Permian Midland, and two more rigs were stacked in Texas Oil District 7C, or the southern Permian Midland...that means that the Permian in Texas saw a total reduction of 22 rigs, which therefore means that the 9 rigs that were shut down in New Mexico had been drilling in the western Permian Delaware...elsewhere in Texas, 3 rigs were pulled out of Texas Oil District 1, 3 rigs were pulled from Texas Oil District 2, and another ​rig ​was removed from Texas Oil District 3, any 6 of which would account for the Eagle Ford shale rig reduction...Texas Oil District 6 was also down a rig, thus accounting for the Haynesville shale loss, while the 25 Haynesville shale rigs ​deployed ​in northwest Louisiana remained unchanged...elsewhere, the six Williston shale rig loss was from North Dakota, while the 2 rigs pulled out of the Cana Woodford are the only named basin rigs that came out of Oklahoma, so we'd have to figure a number of those missing horizontal rigs had been deployed elsewhere in the Anandarko basin in that state...Wyoming also has a few shale basins that Baker Hughes does not track separately, so some or all of the 5 rigs pulled out of that state could have also been "other" horizontal rigs...the two natural gas rigs that were shut down this week were from the Haynesville and from the Eagle Ford, which now has 55 oil rigs and 2 natural gas rigs remaining...

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Stark County schools fight NEXUS, Rover tax appeals - Lake Local, Northwest Local and Green Local passed resolutions to join the Ohio School Pipeline Coalition. Local school districts have joined a coalition that is fighting attempts by two pipelines to reduce their tax bills. Rover Pipeline and NEXUS Gas Transmission have asked the Ohio Department of Taxation to reduce the taxable value of their respective natural gas pipelines by almost half. The precise terms of each tax appeal are confidential under state law. County auditors use the value set by the Department of Taxation to determine collections for school districts, townships, library districts and other entities. Last year, the Rover and NEXUS pipelines were projected to generate $20 million in extra revenue in Stark County and lower the rates on levies that raise a set amount of money. The pipelines carry natural gas from the Utica and Marcellus shales to markets in the Midwest and Canada. Energy Transfer owns Rover and Enbridge owns NEXUS. The companies previously said they are seeking fair and accurate tax valuations of their property. Lake Local, Northwest Local and Green Local— three districts crossed by the NEXUS pipeline — passed resolutions in March to join the Ohio School Pipeline Coalition. Other districts, such as Marlington Local and Fairless Local, have discussed joining the coalition, but their boards haven’t yet taken action. Marlington was projected to get $3.7 million from NEXUS and the board wants to upgrade the district’s three elementary schools. Fairless, which has been planning to build a new high school, was set to get $3.9 million from Rover. “It really impacts us right now as schools, and I’m glad we’re getting together and we’re going to consolidate and fight this thing as one,” said Northwest Treasurer Dan Levengood, whose district was projected to get an additional $700,000 from NEXUS, which crosses the northern most part of the district in Summit County. “Hopefully, if we all come together, we’ll be able to have a stronger voice in it.”

Chesapeake, Total Prevail in Ohio Royalties Lawsuit - Affiliates of Chesapeake Energy Corp. and Total SA again have defeated a class action lawsuit in federal court that sought to recover millions of dollars for landowners who alleged the companies underpaid royalties on oil and gas produced from properties in Eastern Ohio.The U.S. District Court for the Northern District of Ohio agreed with the defendants’ interpretation of how royalty payments should be calculated and paid to the plaintiffs under the terms of their leases.The court found that the language of the leases was not ambiguous, and a result was “the beginning and the end of this case.” Judge Benita Y. Pearson also rejected the plaintiffs’ claim that they should receive royalties based on proceeds of sales at downstream locations, which carry a higher value.Pearson found that the netback method of determining royalties at the wellhead was appropriate given the companies’ contracts with landowners. The netback method calculates the wellhead price by determining the downstream value of oil, gas and natural gas liquids less post-production costs to market and process the products.The case pitted producers against three named plaintiffs, Zehentbauer Family Land LP, Hanover Farms LP and Robert Milton Young Revocable Trust. A broader class of landowners was certified in July 2018 that identified 224 members with interests in 295 leases with the producers that sought a minimum of $30 million.Chesapeake exited Ohio in 2018 with the $2 billion sale of its Utica Shale assets to Houston-based Encino Acquisition Partners. The company and other producers have battled similar claims over how royalties are calculated across the country, in some instances settling class action cases for millions of dollars.

Region receives some good news  - Area residents were minded last week that there will be life — and, in all probability, prosperity for many — after the coronavirus pandemic has passed. First, it was revealed that three local government entities will be receiving enormous amounts of revenue from PTT Global Chemical America and Daelim Chemical USA. The companies are partners in the proposed ethane cracker plant that has been in the works for several years. Creation of an Ohio Enterprise Zone covering the area where the plant is to be built, near the Ohio River in southeastern Belmont County, exempts the companies from paying property taxes for 15 years. In exchange, the firms have pledged to make big payments to Mead Township, the Belmont County Commissioners and the Shadyside Board of Education. How big? Thirty-eight million dollars to the school district, spread across 15 years. Between $20 million and $24 million in sales tax revenue for the county. Another $9.5 million to Mead Township, also spread across a 15-year period. As county Auditor Anthony Rocchio noted, had property taxes been levied, the amount would have been “not nearly as high as what people think it is. It appears the amounts to be paid out are significantly higher than what the three local government entities would have received in property taxes. Neither company has formally committed to build the plant. It certainly seems that all is missing is signatures on the dotted line, however. That is wonderful news, especially when coupled with the recently announced plans of Orin Holdings LLC. The locally owned company is preparing to build a gas-to-liquids plant on property it has purchased in Saline Township in Northern Jefferson County. It could not have come at a better time — with hundreds, perhaps thousands, of area residents wondering about the region’s economic future. 

Downturn Increases Risk of Fossil Fuel Fraud – and Need for Whistleblowers  -  With the balance sheets of oil and gas companies in increasingly bad shape, the incentives for top managers to engage in fraud to keep up appearances for investors appear to be growing.  . One example is Gulfport Energy Corp., a fracking company with wells concentrated in Ohio and Oklahoma.The company disclosed in February that its previous statement, released in November 2019, failed to include leasehold costs in its depreciation, depletion, and amortization (DD&A) calculations. The omission of leasehold costs resulted in an overstatement of the company’s net income by half a billion dollars.  Fracking companies are increasingly coming under examination for tinkering with their accounting books. The U.S. Securities and Exchange Commission (SEC) is investigating Oklahoma explorer Alta Mesa Resources Inc. for faulty financial reporting. The company also faces several lawsuits by shareholders for lying about the company’s value and by landowners who claim the company violated lease agreements. Antero Resources Corp., a Colorado-based company that announced a $3 billion-dollar loss on its Utica shale production last year, failed to pay landowners in West Virginia landowners their full royalties, a federal court ruled. Aside from legal woes, what all these companies have in common are balance sheets showing a massive loss of value. That wasn’t part of their business plan: When new technologies emerged around 2008 that allowed companies to extract oil and gas from shale via hydraulic fracturing, or “fracking,” the fossil fuel industry hailed the development as a “revolution.” The fact that natural gas produces less of the greenhouse gases that cause climate change also led industry boosters to bill it as a “bridge fuel” from oil or coal. But in recent years, depressed prices resulting from overproduction of natural gas meant companies spent more than they earned, leading to huge losses for shareholders. The oversupply of natural gas has led to increased carbon dioxide emissions: Increased natural gas consumption accounted for 60 percent of emission growth in recent years, according to a report by Stanford University’s Global Carbon Project.

Utica and Marcellus Shale condensate prices plunge - Prices for Marcellus and Utica shale condensate fell below zero this week as collapsing demand for oil and gasoline pushed specialty grades out of the market.Ergon Oil Purchasing’s price for Marcellus and Utica condensate was a penny per barrel on Monday and Tuesday before dropping to -$0.69 on Wednesday. The price rebounded Thursday to $4.32, but it was still down 91% from the start of the year.Condensate is an ultra-light liquid hydrocarbon produced along with natural gas from some shale wells. It is not as valuable as oil, but prices for the two commodities tend to rise and fall together.Between 2012 and 2014 — when oil prices were high and gas prices were low — condensate and natural gas liquids buoyed producers focused on the liquids-rich areas of the Marcellus and Utica shales in Western Pennsylvania and Ohio, said Tony Scott, managing director of analytics at BTU Analytics.Condensate at $50 a barrel, as it was before the recent collapse, “goes a long way to making those wells economic at the type of gas prices we are seeing today,” he said.  Now, regional natural gas prices are still “very weak” and the condensate premium has evaporated.Jesse Mercer, senior director of crude oil markets at Enverus, said it “makes sense that Utica condensate is pricing at next to nothing right now.”The condensate is mostly used in making gasoline. Demand for transportation fuels is down dramatically amid the global economic shutdown associated with COVID-19, as cars and airplanes sit parked.“Refiners are concerned about running out of storage capacity for all the unwanted gasoline, so they are shunning grades that make a lot of gasoline,” he said.“In this crisis, nobody wants a grade that makes none of the stuff you want and only the stuff you don’t have room to store.”  In December 2019, the most recent month available, Pennsylvania, Ohio and West Virginia produced 150,000 barrels of oil and condensate per day, according to the U.S. Energy Information Administration.  All oil and condensate produced in the three states is light, but Ergon defines Marcellus and Utica condensate as the lightest in that range.   Condensate pricing is not as transparent as oil benchmarks like West Texas Intermediate, but “Ergon’s pricing tends to be a pretty good indicator of what producers will report as their condensate pricing,” Mr. Scott said.  Analysts say it is possible that natural gas-focused producers in Appalachia will benefit as oil producers in Texas begin to cut back. That is because oil wells in Texas are producing a significant amount of associated natural gas. When that supply is diminished, gas prices should rise.In that case, Appalachian operators may begin to move rigs out of “wet gas” areas into drier gas regions, such as northern Pennsylvania.

Why some financial analysts are questioning viability of the Appalachian plastics hub -- Two years ago, market analysts at IHS Markit were among those forecasting as many as five ethane crackers in the region, and the Trump administration, along with the chemical industry, were promoting the development of a new plastics manufacturing industry in the Ohio, Pennsylvania, West Virginia and Kentucky region. This would include cracker plants and places to store the ethane underground. All of those projects jointly are sometimes referred to as the Appalachian petrochemical hub. The Shell plant outside of Pittsburgh has started construction, but it’s been reported that plans for an ethane cracker in West Virginia fell through last year.  In Ohio, a state permit for Mountaineer NGL Storage (also called the Powhatan Salt Company in permit application materials), expired recently. That permit is for an underground ethane storage facility and is related to another ethane cracker, a multi-billion dollar plant proposed five years ago along the Ohio River by PTT Global Chemical of Thailand. The company is now partnering with Daelim Chemical, of South Korea.  The PTTGC and Daelim have not made a final investment decision on whether to build the plant in Ohio. According to Tom Sanzillo, director of finance at the Institute for Energy Economics and Financial Analysis, a nonprofit think tank that works toward a sustainable energy economy, without the commitment from PTTGC, there’s no need for a storage facility yet.“They typically need an anchor tenant. Otherwise, you’re just building it for with no customer base And so there is no anchor tenant right now,” Sanzillo said. “There is a promise of PTTGC being the anchor tenant, but the company has delayed their decisions since 2016. And those delays now seem to be causing some problems.” Dan Williamson, spokesperson for PTTGC, said in an email that it is still the company’s goal to make a final investment decision this summer. According to an email sent by Matt Englehart, spokesperson for JobsOhio, a private economic development corporation that’s in discussions with the company, this is “very much an active project.”Local officials where the facility would be built just approved tax incentives to offer PTTGC and Daelim on March 26. The Times Leader newspaper reports that Belmont County Commissioners, Mead Township trustees and the Shadyside Board of Education all approved new tax agreements, which according to Williamson, were requested by the companies.The local government entities created an Ohio Enterprise Zone agreement, giving the project a 15-year property tax exemption. They’re expecting PTTGC and Daelim to pay $38 million to the school district, and $9.5 million to Mead Township, over the 15-year life of the agreement.

Nature Scores a Big Win Against Fracking in a Small Pennsylvania Town -An unlikely crew of environmentalists who took on the powerful Pennsylvania fracking industry in a David vs. Goliath battle to keep an injection well out of their community have notched an important victory in their fight. Using a novel strategy — seeking legal rights for nature itself — the rural western Pennsylvania community of Grant Township has been battling for seven years to stop the permit for the injection well, which would have brought a 24/7 parade of trucks carrying brine, a toxic byproduct of oil-and-gas drilling that would be shot down the well and into a rock layer deep beneath the farms and woods in the area.Earlier this month, in a stunning reversal, the Pennsylvania Department of Environmental Protection (DEP), which in 2017 sued Grant Township for interfering with the agency’s authority to administer state oil-and-gas policy, revoked the permit for the injection well.“This decision is soooooo delicious,” says Stacy Long, a graphic designer and township supervisor who together with her mother, Judy Wanchisn, a retired elementary-school teacher, helped lead the charge to stop the well. “I am hopeful that the haters and naysayers will take note, and that communities will be inspired with what’s just happened and run with it. Fights like ours should mushroom all around Pennsylvania.” Grant Township’s story, first covered by Rolling Stone in 2017, will also be featured in Invisible Hand, a documentary on “rights of nature” produced by Oscar-nominated actor Mark Ruffalo, slated to premiere at the 2020 Columbus International Film Festival in Ohio. “Grant Township has proven against all odds that a community is capable of stronger protections for the environment than state or federal governments,” says the film’s co-director Joshua Pribanic. “By taking a stand and winning, they’ve set a new precedent worldwide on what the rights of nature can accomplish.”

State environmental regulator cancels public hearings due to COVID-19   — The state Department of Environmental Protection canceled seven public hearings — some that were scheduled for earlier in March, and some set for the next few weeks — to help limit the spread of the new coronavirus. The hearings were to address construction on the Mariner East 2 pipeline in southeastern Pennsylvania, proposed standards for cleaning up harmful chemicals known as PFAS, and two draft Air Quality Plan Approvals to Sunoco Partners for the Marcus Hook Industrial Complex in Delaware County. Neil Shader, DEP communications director, said they decided to cancel and not postpone because it’s unclear when the COVID-19 pandemic will be brought under control. On Wednesday, he said the department hadn’t looked into what would be needed to hold virtual public hearings, but said public comment periods are still open, and people can submit their comments online or through the mail. “Comments that we receive in public hearings are treated just the same as comments that are received through other means,” Shader said. While public comment is generally required by law for DEP procedures, public hearings are only required in certain cases, such as air quality regulations. On Friday, DEP announced a virtual hearing for a change to the state’s implementation plan under the federal Clean Air Act — an example of a required hearing. The revision certifies that enforceable measures in DEP permits address EPA requirements. That hearing is scheduled for April 28 at 1 p.m. DEP said if no one has signed up to testify by 12 p.m. on April 24, the hearing will be canceled. 

Democracy on hold: States are canceling public meetings amid coronavirus crisis - On April 14, Rosemary Fuller had planned to speak at a public hearing held by Pennsylvania’s Department of Environmental Protection (DEP) about a natural gas pipeline that will run 150 feet from her home in the suburbs west of Philadelphia. It would be the first of three upcoming hearings to discuss new permits that Sunoco, the company that owns the pipeline, had applied for to modify its drilling technique and route in certain areas. Construction of the pipeline, which is called Mariner East II, has been riddled with problems since it began in 2017. Fuller hasn’t been able to drink water from her tap since July 2019, when she discovered the drilling had contaminated her well. She can no longer walk her dogs around the loop at a nearby park — part of it was closed off after drilling opened up four sinkholes there. To date, Sunoco has paidmore than $13 million in penalties for Mariner East–related construction violations, and the pipeline is the subject of three criminal investigations. Fuller and six others who live near the pipeline are involved in a lawsuit against Sunocoto try and halt the project entirely because of its threat to public safety. Some of these problems led Sunoco to request modifications to its permits. At the upcoming public hearings, Fuller and other residents whose lives have been upended by the construction hoped to ask about the risks associated with the new plan and get a clearer sense of Sunoco’s timeline. But now, because of COVID-19 safety measures, all three hearings have been canceled. “We all had questions that were never addressed or answered. In a public hearing, we would get up and raise those issues and concerns, and the DEP would be sitting there and have to respond,” Fuller told Grist. “It’s vitally important.” The DEP has not announced plans to reschedule the meetings or to prolong the permitting process. Meanwhile, even after Governor Tom Wolf ordered work on the pipeline to stop during the crisis because it’s not an essential business, Sunoco sought and won a waiver to continue construction. The same pattern is unfolding all over the country for state and federal decisions that impact public health and the environment as the coronavirus crisis shuts down public life. While the majority of Americans are obeying stay-at-home orders and worrying about their families, health, and jobs, the gears of government are grinding along, adhering to timelines that were laid out before the virus began to spread. In Pennsylvania, in addition to the Mariner East hearings, public meetings to discuss air pollution permits for a major expansion to a natural gas liquids facility were also canceled. So were three meetings about new statewide cleanup standards for industrial and commercial sites.

Wolf vetoes natural gas tax-break bill - Gov. Tom Wolf has vetoed a bill that would offer tax breaks to companies that use Pennsylvania natural gas to produce fertilizers and other chemicals. The bill passed the legislature with a bipartisan majority and is based on a measure passed several years ago to lure Shell to build an ethane cracker in Beaver County. Both business and the building trades support the effort. He invoked the coronavirus pandemic, saying Pennsylvania needs “to promote job creation and to enact financial stimulus packages for the benefit of Pennsylvanians who are hurting as they struggle with the substantial economic fallout of COVID-19.” He also cited what he says are flaws in the bill, HB 1100, and indicated it is not a “responsible use of the Commonwealth’s limited resources.” He says the investment dollars and numbers of jobs required by the measure are not high enough to warrant the tax breaks. And given the economic impact of the new coronavirus pandemic, Wolf says more analysis is needed to enact any economic incentives right now. Environmentalists opposed the bill and praised Wolf’s veto. Mark Szybist, an attorney with the Natural Resources Defense Council, said the state should be moving away from fossil fuel incentives, and push for renewable energy jobs. Like Wolf, Szybist criticized the bill’s labor standards, which he says leaves loopholes. “Under HB 1100, companies must make ‘good faith efforts’ to employ local workers, and show that ‘individuals employed… have been paid the prevailing minimum wage rate for each craft or classification as determined by the Department of Labor and Industry under the … Pennsylvania Prevailing Wage Act,'” he wrote. Supporters of the bill say they will attempt to override Wolf’s veto.

Opinion: Wolf correct on gas veto -  Pocono Record - With the state government certain to take a huge revenue hit from the COVID-19 coronavirus pandemic, it is extraordinary that many state legislators continue to demand that Pennsylvania taxpayers give up more money to the petrochemical industry. Gov. Tom Wolf on Friday properly vetoed a bill that would have created massive subsidies for petrochemical companies to build refineries in the state that would use Pennsylvania-produced fracked gas. The bill is inspired by an earlier giveaway to one of the world’s richest companies, Royal Dutch Shell. The company is nearing completion of a multi-billion-dollar refinery in Beaver County for which it will receive a record state tax subsidy of $1.7 billion. Shell had revenues of about $372 billion for the fiscal year that ended Sept. 30, more than nine times the total Pennsylvania government budget. Under the vetoed bill, any company building a refinery worth $450 million and creating 800 jobs would be eligible for a new tax subsidy. According to the state Department of Revenue, a plant of that size would receive a state tax subsidy of $22 million a year for 10 years — $220 million or nearly 49% of the development cost. The original version of the bill pegged eligibility at a much higher level — a $1 billion plant with 1,000 employees — but lawmakers scaled it back to accommodate the industry. Connecticut-based Elis Energy reportedly is interested in building a plant in southern Luzerne County to produce methanol, a solvent that is used in antifreeze and to help break down other chemicals.

Energy Transfer Gets Partial Win in Pipeline Protest Lawsuit - Energy Transfer Partners LP won its bid to dismiss malicious prosecution, false arrest, and First Amendment claims in a lawsuit filed by protesters who were arrested at its Mariner East 2 pipeline in Pennsylvania, according to a federal court ruling. Ellen and Elise Gerhart, Alex Lotorto, and Elizabeth Glunt alleged that the Pennsylvania State Police and Huntingdon County Sheriff’s Office had agreed with Energy Transfer and Sunoco Pipeline LP to “act as a private security force” and arrest anyone who approached the pipeline easement. All four were arrested during protests in March and April 2016 and charged with disorderly conduct.

NJ, Delaware and EPA Call on FERC for New Environmental Review of PennEast  -In the past week, a trio of regulatory agencies have raised new concerns about the latest iteration of the PennEast pipeline project, which the company now wants to build in two separate phases — first in Pennsylvania and then in New Jersey. In a series of letters to the Federal Energy Regulatory Commission dated March 30, the New Jersey Department of Environmental Protection, Delaware River Basin Commission and U.S. Environmental Protection Agency all suggested the $1 billion project should be subject to rigorous environmental review. Earlier this year, PennEast Pipeline LLC filed amendments to what had been a 120-mile natural-gas pipeline to ship fuel from Pennsylvania into New Jersey. Its latest proposal called for initially building 68 miles where it has won most of the construction approval, targeting completion by November of next year. PennEast Phase 2 The other portion in New Jersey would be set to deliver gas in 2023, pending more complicated permit approvals in the state. Thus far, the DEP has refused to review needed permits for the project because of missing field surveys for threatened and endangered species, historical resources, drinking water and freshwater wetlands. The state agency asked FERC to order a new environmental impact statement for both phases of the project, as well as scrutinize the need for the new pipeline. Opponents of the pipeline have repeatedly argued there is no need to build new capacity, a stance taken by the New Jersey Division of Rate Counsel and others. “FERC should therefore undertake a fresh analysis as to whether Phase 1 is a ‘stand-alone’ project and, should PennEast pursue a Phase 2 in the future, also undertake a new analysis as to whether Phase 2 is needed,’’ according to the DEP letter to the federal agency.

Supreme Court rules Citgo responsible for 2004 oil spill - Citgo is liable for a 2004 oil spill and must pay back cleanup costs, the Supreme Court ruled on Monday. In 2004, an oil tanker chartered by Citgo Asphalt Refining Company and others hit an anchor in the Delaware River, leading to the release of 264,000 gallons of heavy crude oil, according to court documents. At the time, Frescati Shipping Company, which owned the vessel, and the U.S. together paid a total of $133 million to clean up the spill. The court ruled 7-2 on Monday that Citgo and others are responsible for cleanup costs. The majority opinion, authored by Justice Sonia Sotomayor, said a “safe-berth” clause in the charter contract should be interpreted as a safety warranty, meaning it was up to Citgo and others to make sure the tanker docked safely. Disagreeing with the majority were conservative Justices Clarence Thomas and Samuel Alito. Thomas argued in the dissenting opinion that the text of the contract’s safe-berth clause does not include a safety guarantee. He wrote that there is a need for more information on whether industry standard establishes such a warranty. Citgo President and CEO Carlos Jordá expressed disappointment with the ruling, but said the company would abide by the court's decision. "While we obviously have different views regarding the merits of our case, we respect the Court’s interpretation and can finally close this chapter on the Athos case,” Jordá said in a statement, referring to the Athos I vessel

Citgo Must Pay $143M for a Delaware River Oil Spill, Supreme Court Orders - A case that has bounced around the lower courts for 13 years was finally settled yesterday when the U.S. Supreme Court upheld a lower court decision, finding oil giant Citgo liable for a clean up of a 2004 oil spill in the Delaware River, according to Reuters. The spill stemmed from a collision that the Athos I tanker had with an abandoned and submerged anchor as the ship was approaching a Philadelphia-area refinery in New Jersey. The collision pierced the hull, leading to the release of 264,000 gallons of heavy crude oil, according to court documents, as The Hill reported.When the spill happened, the owner of the boat Frescati Shipping Company, along with the U.S. government paid $133 million for the cleanup, but the Oil Pollution Act of 1990 allows the government to recoup funds from liable parties after the fact. That spurred a lawsuit over the language in the contract when Frescati and the government sued Citgo to recover what they spent, according to Courthouse News.The court ruled 7-2 yesterday that Citgo and others are responsible for cleanup costs. The majority opinion, authored by Justice Sonia Sotomayor, said a "safe-berth" clause in the charter contract should be interpreted as a safety warranty, meaning Citgo and the others who commissioned the ship had to make sure the tanker docked safely, according to The Hill.The port in Paulsboro, New Jersey was controlled by three Citgo companies — Citgo Asphalt Refining Company, Citgo Petroleum Corporation, and Citgo East Coast Oil Corporation. The three companies chartered the oil tanker, according to Courthouse News.Citgo argued before the Supreme Court that it had done its due diligence by selecting a known safe harbor for the ship to dock. That became a sticking point during oral arguments as Justice Elena Kagan said the case should not be decided what CITGO thinks would be "sensible," according to Bloomberg Environment.Justice Ruth Bader Ginsburg pointed out that many contracts between shipping companies and companies that charter their boats have very loose and vague language. However, this contract had much stricter language written into it, requiring CITGO to "designate and procure" a safe berth., "You either did or you didn't," Chief Justice John Roberts said in oral arguments, as Bloomberg Environment reported.

Pipeline opponents raise coronavirus concerns - Construction of the Mountain Valley Pipeline could resume this spring, but opponents of the project say crews from other states should not be coming to Virginia and West Virginia during a health emergency. Mountain Valley Pipeline suspended construction last year, and it still lacks key federal permits that would allow the work to resume, but the company says it still intends to complete the project by the end of this year. At a time when Virginians have been ordered to stay home, and many businesses have shut down to prevent the spread of the coronavirus, opponents of the project are saying, not so fast. 'They're coming from states in many cases that have higher COVID-19 rates than we do, like Louisiana where a lot of pipeline workers come from," said pipeline opponent Diana Christopulos. In West Virginia, the group Preserve Monroe is asking Governor Jim Justice to issue a stay that would prevent transient pipeline construction crews from entering the state. In a news release, the group described the workers' return as a "recipe for disaster." "This issue is not about whether the pipeline should be finished or should not be finished," said activist and landowner Maury Johnson. "This issue is what risk are they bringing to our rural communities." A spokesperson for MVP said the project team is focusing on environmental activities, including erosion and sediment controls that are essential requirements. Natalie Cox said the company can balance the need for environmental protection while operating under COVID-19 restrictions and guidelines. Diana Christopulos says it's not the work that concerns her the most. "They would be living here. They would be eating here. They would be grocery shopping here. They would be getting their healthcare here," she said. "Why can't they fall under the same kind of rules that the rest of us do?" she asked.

Federal reviews delay Mountain Valley Pipeline yet again - A winter hiatus in construction of the Mountain Valley Pipeline will last well into the spring. The latest delay came this week, with word that two federal agencies will take another month to review one of several approvals — set aside by legal challenges from environmental groups — that must be restored before work can ramp up on the highly disputed natural gas pipeline. Thursday had been the deadline for the Federal Energy Regulatory Commission and the U.S. Fish and Wildlife Service to finish their reconsideration of the project’s impact on endangered or threatened species of fish and bats. But in a letter Wednesday to FERC, the Fish and Wildlife Service said the agencies and Mountain Valley had agreed to take another 32 days, pushing the completion date to April 27. It was the third such delay since December, when the review was originally set to be completed. Despite the slow process with that and two other sets of suspended permits, the joint venture of five energy companies says it still plans to finish the 303-mile pipeline by the end of this year. “Mountain Valley will continue to work diligently to obtain all necessary permits to complete construction of this vital infrastructure,” company attorney Matthew Eggerding wrote this week in a letter to FERC. Since work began two years ago on the $5.5 billion project, regulatory agencies in Virginia and West Virginia have cited Mountain Valley for repeatedly violating erosion and sediment control regulations along the pipeline’s 303-mile path. Other environmental problems, raised in legal challenges by the Sierra Club and other groups, have led to the suspension of three sets of permits: for the buried pipe to pass through the Jefferson National Forest, under more than 1,000 streams and wetlands in the two Virginias, and into the habitat of endangered species without causing them undue harm. Last October, FERC ordered that all active construction be halted pending a review of a biological opinion, issued by the Fish and Wildlife Service in 2017, that found the pipeline would not significantly jeopardize protected fish and bats. In asking for another delay this week, the Fish and Wildlife Service said that while “considerable progress” has been made, more time is needed for Mountain Valley to analyze the impact of construction sediment washed by rainfall into steams populated by the Roanoke logperch and the candy darter.

Price plunge, coronavirus pandemic affect all sectors of US natural gas industry — High natural gas storage volumes combined with effects of the coronavirus outbreak could suppress demand and prices through at least the end of the summer and likely into winter, according to the president of a top US gas marketing company. What's more, widespread cuts in capital expenditures and production outlooks by operators could exacerbate deliverability issues later this year. David Whitt, president of Tenaska Marketing Ventures, said these issues create challenges across the board, but the industry has always remained resilient. Tenaska ranked as the No. 3 North American gas marketer at 10.6 Bcf/d during the fourth quarter of 2019, according to a survey by Platts Analytics. Much of the volume marketed by Tenaska finds an end use in gas-fired power plants and residential and commercial demand. Steep declines in US natural gas demand have not yet materialized across all sectors from the stay-at-home orders issued throughout much of the nation. However, the pandemic continues to apply downside risks, worsened by elevated volumes of gas in storage. "As we look at this day to day, we've only seen a little impact to demand so far," Whitt said. "However, we expect a drop in demand this summer and even into the winter. It's been made worse by the mild winter, which led to high storage levels." "The industrial sector is one area you have to look at for demand destruction," he added. "Residential and commercial could also see a drop."

U.S. natgas edges up with big drop in rig count, forecasts for less output - Reuters(Reuters) - U.S. natural gas futures edged up on Monday on expectations production will decline in coming weeks and months after the rig count dropped last week. The small increase came despite a near 9% drop in oil prices and forecasts for milder weather and lower heating demand over the next two weeks than earlier expected. On its first day as the front-month, gas futures for May delivery on the New York Mercantile Exchange rose 1.9 cents, or 1.1%, to settle at $1.690 per million British thermal units. That is still less than a dime over its $1.602 close on March 23, which was its lowest settle since September 1995. Global oil benchmark Brent crude plunged to its cheapest in almost 18 years on Monday, while U.S. crude briefly tumbled below $20 per barrel, on growing fears the global coronavirus shutdown could last months and demand for fuel will decline further. Looking ahead, gas prices in late 2020 and 2021 rose even more than the front-month on expectations demand will rise later in 2020 with the return of economic growth after governments loosen travel restrictions once the coronavirus spread slows. The premium of futures for November over October NGV20-X20, which traders use to bet on demand next winter, rose to its highest since August 2010 for a second day in a row. Analysts project gas stockpiles will hit an all-time high in 2020 as drillers keep producing record amounts of fuel even though demand is expected to slump. U.S. gas production is expected to decline through the rest of 2020, however, as energy firms cut rigs. Last week, drillers cut oil rigs by the most in a week since April 2015 due to the coronavirus-related slump in economic activity. A lot of gas comes out of oil rigs in shale basins.

U.S. natgas futures fall 3% as output rises, weather turns milder - (Reuters) - U.S. natural gas futures fell on Tuesday with an increase in output and on forecasts for milder weather and lower heating demand next week. Front-month gas futures for May delivery on the New York Mercantile Exchange fell 5.0 cents, or 3.0%, to settle at $1.640 per million British thermal units. That keeps the contract within a nickel of its $1.602 close on March 23, its lowest settle since September 1995. For the month, prices slipped about 2% in March, putting the contract down for a fifth month in a row for the first time since July 2019. During that time the contract has lost about 37%. For the quarter, prices were down about 25% in the first quarter of 2020 after falling about 6% last quarter. That was the contract's biggest quarterly loss since the fourth quarter of 2014. Looking ahead, gas prices in late 2020 and 2021 were trading at much higher levels than the front-month on expectations demand will rise later this year when economic growth is expected to return once governments loosen travel and work restrictions. Calendar 2021 has traded at a premium over calendar 2022 for 14 days and over 2025 for four days. Even before the coronavirus started to cut global economic growth and demand for energy, gas was trading near its lowest in years as record production and months of mild winter weather enabled utilities to leave more gas in storage, making fuel shortages and price spikes unlikely. With the coming of spring-like weather, data provider Refinitiv projected gas demand in the U.S. Lower 48 states, including exports, would slide from an average of 98.1 billion cubic feet per day (bcfd) this week to 92.9 bcfd next week. That compares with Refinitiv's forecast on Monday of 97.9 bcfd this week and 94.9 bcfd next week. The amount of gas flowing to U.S. LNG export plants eased to 9.1 bcfd on Monday from 9.3 bcfd on Sunday, according to Refinitiv.

U.S. natgas futures tumble to lowest since August 1995 (Reuters) - U.S. natural gas futures tumbled on Wednesday to their lowest close since August 1995 along with a drop in oil prices as the coronavirus has cut global demand for energy. Traders noted gas futures fell despite forecasts for slightly cooler U.S. weather boosting heating demand next week, as well as a decline in output. U.S. President Donald Trump warned Americans on Tuesday of a "painful" two weeks ahead in fighting the coronavirus, with a mounting U.S. death toll that could stretch into the hundreds of thousands even with strict social distancing measures. Front-month gas futures for May delivery on the New York Mercantile Exchange fell 5.3 cents, or 3.2%, to settle at $1.587 per million British thermal units, their lowest since August 1995. Oil prices fell on Wednesday after data showed U.S. crude inventories rose last week by the most since 2016 while gasoline demand notched its biggest weekly drop ever due to the pandemic. With the coming of spring-like weather, data provider Refinitiv projected gas demand in the U.S. Lower 48 states, including exports, would slide from an average of 98.1 billion cubic feet per day (bcfd) this week to 93.1 bcfd next week. Still, next week's forecast was slightly higher than the 92.9 bcfd Refinitiv forecast on Tuesday. On a daily basis, gas production in the Lower 48 states slipped to 93.3 bcfd on Tuesday from 93.5 bcfd on Monday, according to Refinitiv. That compares with an average of 92.9 bcfd last week and an all-time daily high of 96.5 bcfd on Nov. 30..

US working natural gas in underground storage decreases by 19 Bcf: EIA -- US working gas volumes in storage fell by less than expected last week as prices continue to plummet and storage fields start to switch back to injections. Storage inventories fell by 19 Bcf to 1.986 Tcf for the week ended March 27, the US Energy Information Administration reported Thursday morning. The pull was less than an S&P Global Platts' survey of analysts calling for a 25 Bcf withdrawal. The EIA reported a 6 Bcf injection during the corresponding week in 2019 while the five-year average comes to a draw of 19 Bcf. Demand remained firm last week amid widespread closures of non-essential businesses and increased social distancing measures in response to the ongoing coronavirus pandemic. Power burn, and residential and commercial demand saw localized declines in the southwestern US, but they were offset by LNG feedgasramping up week over week, according to S&P Global Platts Analytics. While the initial effects of coronavirus on supply and demand are mild so far, the risks to the already over-supplied gas market could linger well into the summer. Even without high heating load, this week's withdrawal matched the five-year average as a result of the strong exports. LNG feedgas deliveries picked up 1.3 Bcf/d week over week, averaging the highest levels since February at 9.2 Bcf/d. Storage volumes now stand 863 Bcf, or 77%, more than the year-ago level of 1.123 Tcf and 292 Bcf, or 17%, more than the five-year average of 1.694 Tcf. The NYMEX Henry Hub April contract slipped 5 cents to $1.53/MMBtu in trading following the release of the weekly storage report. The entire NYMEX Henry Hub balance of summer contract strip was trading lower Thursday. The market is gearing up for next week's likely start to the injection season. May through October have traded down 3 cents/MMBtu to an average $1.84, with the nearest $2 mark not showing up until October. Still, there remain wide intra-seasonal spreads this summer, particularly as the cooling season begins in July, which is priced roughly 17 cents higher than the month before in June. Next winter is also priced lower at $2.58, nearly 75 cents higher than the summer, creating a strong economic incentive to inject.

U.S. natgas falls to 24-yr low on small storage draw, rising oil output worries – (Reuters) - U.S. natural gas futures fell over 2% on Thursday to their lowest in 24 years for the second straight day on a smaller-than-expected weekly storage draw and concerns higher crude prices could boost gas production from U.S. shale oil fields. Crude prices soared on Thursday after U.S. President Donald Trump said he expected Russia and Saudi Arabia to announce a major oil production cut. "This market’s negative response to today’s Trump tweet appeared related to the possibility that higher oil prices could boost U.S. oil production sustainably in the process of spitting out more associated gas output than had previously been expected," said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois. Front-month gas futures for May delivery on the New York Mercantile Exchange fell 3.5 cents, or 2.2%, to settle at $1.552 per million British thermal units, their lowest since August 1995. The contract also closed at its lowest since August 1995 on Wednesday. That move lower came despite forecasts for more U.S. heating demand next week than previously expected. "Despite a move in weather forecasts to include some early spring chill in the eastern United States next week, the market remains unfazed," said Daniel Myers, market analyst at Gelber & Associates in Houston. The U.S. Energy Information Administration (EIA) said utilities pulled 19 billion cubic feet (bcf) of gas from storage during the week ended March 27. That was less than the 24-bcf draw analysts forecast in a Reuters poll and compares with an increase of 6 bcf during the same week last year and a five-year (2015-19) average reduction of 19 bcf for the period. The decrease for the week ended March 27 cut stockpiles to 1.986 trillion cubic feet (tcf), 17.2% above the five-year average of 1.694 tcf for this time of year.

U.S. natgas futures jump from 24-year low on cooler forecasts - (Reuters) - U.S. natural gas futures on Friday rose over 4% from a 24-year low in the prior session on forecasts for cooler weather and higher heating demand in mid April than earlier expected. That move higher came despite concerns that higher crude prices could boost gas production from U.S. shale oil fields. Front-month gas futures for May delivery on the New York Mercantile Exchange rose 6.9 cents, or 4.4%, to settle at $1.621 per million British thermal units (mmBtu). On Thursday, the contract closed at its lowest since August 1995 for a second straight day. For the week, the gas front-month was down about 1% after rising about 2% last week. Crude futures, meanwhile, surged for a second day on Friday, with benchmark Brent up 10% on hopes that a global deal to cut crude supply worldwide will emerge early next week. Even before the coronavirus started to cut global economic growth and energy demand, gas was already trading near its lowest in years as record production and months of mild winter weather enabled utilities to leave more fuel in storage, making shortages and price spikes unlikely. Gas prices, however, are trading much higher for the balance of 2020 and calendar 2021 on expectations demand will rise in coming months after governments loosen travel and work restrictions after slowing the spread of coronavirus. Calendar 2021 has traded at a premium over 2022 for 17 days and over 2025 for seven days. Data provider Refinitiv projected gas demand in the U.S. Lower 48 states, including exports, will slide from an average of 97.4 billion cubic feet per day (bcfd) this week to 94.6 bcfd next week as the weather moderates before rising to 97.9 bcfd when temperatures are expected to drop again. That compares with Refinitiv's forecasts on Thursday of 97.8 bcfd this week and 94.6 bcfd next week. The amount of gas flowing to U.S. LNG export plants eased to 9.0 bcfd on Thursday from 9.1 bcfd on Wednesday, according to Refinitiv. That compares with an average of 9.1 bcfd last week and an all-time daily high of 9.5 bcfd on Jan. 31. Gas production in the Lower 48 states eased to 92.8 bcfd on Thursday from 93.0 bcfd on Wednesday, according to Refinitiv. That compares with an average of 92.9 bcfd last week and an all-time daily high of 96.5 bcfd on Nov. 30.

Pipeline construction plows ahead as daily life is disrupted by coronavirus outbreak - A spokesperson for the pipeline company says construction is currently ongoing as scheduled. The new pipeline, called the Manassas Loop, is an expansion of Transcontinental Gas Pipe Line’s mainline that transports natural gas from the gulf coast to New York City and other mid-Atlantic markets. The new pipeline will expand the amount of natural gas that flows along the Transco pipeline. The pipeline’s construction can be seen taking place in the Town of Catlett in Fauquier County along Route 28, where dirt is being moved to install the new 42-inch pipe. The Virginia Department of Environmental Quality has temporarily suspended all routine field activities during the coronavirus outbreak but is continuing to investigate significant pipeline concerns. The agency said daily monitoring, inspections and field activities of pipelines will continue through the agency's contract staff during this time. DEQ Communications Manager Ann Regn said the DEQ has performed routine erosion and sediment inspections on land-disturbing activities associated with the Manassas Loop pipeline project. “There have been no incidents or releases of sediment or other pollutants from the project. The project self-reports in accordance to their approved standards and specifications and these reports are submitted to DEQ weekly for review and verification,” Regn said.

3 States Pass Anti-Pipeline Protest Bills in Two Weeks - In just two weeks, three states have passed laws criminalizing protests against fossil fuel infrastructure.Between March 16 and March 25, the governors of Kentucky, South Dakota and West Virginia all signed laws designating oil and gas pipelines and facilities "critical" or "key" infrastructure and imposing new penalties for anyone caught tampering with them, HuffPost reported Friday. The laws came as much of the nation was absorbed by the spread of the new coronavirus, which has killed more than 2,000 people in the U.S. so far."While we are all paying attention to COVID-19 and the congressional stimulus packages, state legislatures are quietly passing fossil-fuel-backed anti-protest laws," Greenpeace USA researcher Connor Gibson, who alerted HuffPost to the laws' passage, told the news site. "These laws do nothing new to protect communities. Instead they seek to crack down on the sort of nonviolent civil disobedience that has shaped much of our nation's greatest political and social victories."The push to criminalize anti-fossil fuel protests predates the coronavirus pandemic, however, and is part of a broader conservative movement to pass legislation that makes civil disobedience more difficult, asGreenpeace pointed out last year. Since 2015, bills have been introduced that target particular movement tactics like boycotts, strikes and traffic blockage and increase the penalties for already-illegal activities. In the case of anti-pipeline protests, the laws have sold themselves as protecting "critical infrastructure" but follow a very specific playbook, as Greenpeace explained: Generally, critical infrastructure bills share several common elements. (1) They create new criminal penalties for already illegal conduct — for example, turning misdemeanor trespass (a common charge for civil disobedience) into a felony. (2) They broadly redefine the term "critical infrastructure" to include everything from cell phone towers to trucking terminals; far greater than the fossil fuel pipelines the bills purport to protect. (3) The bills also seek to create liability for organizations that support protesters by treating such support as a criminal conspiracy. To date, 11 states have enacted similar "critical infrastructure" legislation, according to the International Center for Not-for-Profit Law's U.S. Protest Law Tracker.

American Petroleum Institute to close 15 state offices in shift to regional fight against anti-fossil fuel policy - The American Petroleum Institute is pursuing a restructuring that will result in the closure of 15 state lobbying offices in favor of a regional approach, as policy fights fought by the largest U.S. oil and gas trade group have become nationalized across state lines.American Petroleum Institute CEO Mike Sommers announced the changes in an email to staff obtained Tuesday by the Washington Examiner. “The regional approach will extend API’s advocacy capabilities in a changing landscape using data targeting, campaign communications, and coalition building, and build on our partnerships with state oil and natural gas associations in key production states,” Sommers said. The changes, which had been considered and planned for over a year, will result in 25 employees in state offices losing their jobs. API intends to hire a lesser number of new employees for the eight new regional offices, including in coalition building, digital targeting, and communications. The regional offices will be based in Denver, Colorado; Springfield, Illinois; St. Paul, Minnesota; Columbus, Ohio; Harrisburg, Pennsylvania; Boston, Massachusetts; Raleigh, North Carolina; and Tallahassee, Florida. State offices will close in Alabama, Arkansas, Connecticut, Georgia, Indiana, Kansas, Michigan, New Jersey, New York, South Carolina, Tennessee, and Virginia. API's transition to the regional office structure will occur over several months, from the end of July through the end of September. The changes come as API has become more active in opposing policies to limit fossil fuel use promoted by climate activists across an increasing number of states and localities, such as proposals to ban fracking for oil and gas, cities banning natural gas hookups in new homes, subsidies for renewable energy and nuclear plants, and laws encouraging electric vehicles purchases. API is also fighting to support pipelines, frequently opposed by climate activists, which often cross state lines.

How Fossil Fuel Might Use the COVID-19 Pandemic to Criminalize Pipeline Protests -  Last week we mentioned the pandemic wish list the American Petroleum Institute sent to President Trump as Congress negotiated the $2 trillion emergency stimulus bill. The first item on that list, critical infrastructure designations for the entire fossil fuel supply chain, may sound like standard Washington bureaucratese. The wording is significant, though, because it could set up oil and gas companies to tap into a $17 billion pot of COVID-19 relief money targeted at industries deemed essential to national security. But that’s just the beginning. If the Trump administration grants API, and the industry it represents, this favored designation, it may speed up the criminalization of protest against fossil fuel projects, a trend that’s been underway since long before the coronavirus pandemic. In 2017, following the previous year’s multi-month standoff between Indigenous and other opponents of the Dakota Access Pipeline and a combination of North Dakota law enforcement and private security forces, an influential conservative activist group saw an opportunity to advance its pro-industry agenda. That group, the American Legislative Exchange Council (ALEC), specializes in drafting model legislation that advances conservative political priorities, and then distributing these mock bills to state lawmakers to adapt and introduce to state legislatures. In the wake of the Dakota Access Pipeline protests, ALEC created a piece of model legislation entitled the “Critical Infrastructure Protection Act” targeted at protestors against anything designated “critical infrastructure,” and began circulating it among sympathetic state legislators. The draft bill did two main things. First, it established criminal penalties for any person convicted of “willfully trespassing or entering property containing a critical infrastructure facility without permission by the owner.” Additionally, and importantly, ALEC’s proposed legislation also set “criminal penalties for organizations conspiring with persons who willfully trespass and/or damage critical infrastructure sites, holding such organizations responsible for any damages to personal or real property.”

Governor signs bill requiring owners to clean up closed oil storage tank sites - Gov. Janet Mills has signed two bills into law that will affect the operation and potential closure of petroleum terminals and storage facilities in Maine. L.D. 2033 requires the owners of petroleum terminals to remove tanks that are no longer in use and clean up the sites, which lawmakers hope will ensure that taxpayers are not left to foot costs associated with such cleanups. It was introduced by Rep. Anne Carney (D-Cape Elizabeth). A spokeswoman for the Maine House Democrats said Mills signed the bill on March 26. Mills also signed L.D. 1915, which directs the Maine Department of Environmental Protection to study methods to measure and estimate air emissions from above-ground petroleum storage tanks. She signed that bill on March 18. L.D. 2033 will provide an environmentally safe and fiscally sound process for closing oil terminal facilities, Carney said in a statement on the House Democrats’ website. “An oil terminal facility can stand vacant and unused forever,” Carney said in her statement. “This bill will help make our environment clean and safe. It also protects the fiscal well being of our state, our municipalities and our residents.” The law will ensure the safe cleanup and removal of the state’s 10 petroleum terminals and their tank farms that stretch from South Portland to Searsport, should any of them shut down operations. At the terminal in South Portland, Citgo operates 10 massive fuel storage tanks and Global Partners LP, a Massachusetts company, operates 10 tanks at the other end of the terminal property. Carney, a member of the Labor and Housing Committee, said L.D. 2033 sets guidelines for how a storage facility should be closed based on Maine Department of Environmental Protection standards. The law requires owners to demonstrate fiscal responsibility and an ability to pay for closures. Carney said in her statement that without having the structure in place to make companies accountable for closure and remediation, the state is denying growth opportunities to communities affected by an oil terminal facility closure. She said such sites could potentially be converted into sites for housing, working waterfront, commercial development and other types of energy production.

Enbridge to move forward with tunnel permitting amid pandemic - Enbridge Energy will not delay submitting permits for its controversial Great Lakes Tunnel Project because of the COVID-19 pandemic. Tribal governments that oppose the project want Gov. Gretchen Whitmer to slow the process down. They say it’s impossible to prepare for public comment and official tribal consultations when most tribal staff are sheltering in place. “We continue to work on preparing our joint permit application,” said Enbridge spokesman Ryan Duffy in an email statement. “We are looking at submitting that this month. As part of our agreements with the state of Michigan we are working under a set timeline that has required deadlines for moving the tunnel project forward.” The planned tunnel would house a replacement for the twin 67-year-old pipelines that sit on the lakebed under the Straits of Mackinac. The pipelines are part of Enbridge’s Line 5, which carries light crude and natural gas liquids from Superior, Wisconsin to Sarnia, Ontario. EGLE must review and approve or deny Enbridge’s applications within a time frame that ranges from two to five months. The Michigan Public Service Commission must authorize the siting of the tunnel in a separate process that lasts about a year. Tribal governments in the region are opposed to the tunnel and the continued operation of Line 5. EGLE, the governor’s office, and the MPSC held a call with tribes on Wednesday afternoon, informing them of Enbridge’s plans. Kathleen Brosemer, the Environmental Director for the Sault Ste. Marie Tribe of Chippewa Indians, was on the call. She said being asked to prepare for public comment and tribal consultation on a normal timeline right now is unbelievable. “To think about all of this clock starts ticking .... in the middle of a global pandemic, when most of us are working from home if we're working at all, when all the governments are in disarray, the state government as well as the tribal governments,” said Brosemer. “It's appalling.” She lives on the Canadian side of Sault Ste. Marie and says she can’t cross the border to her office at the moment. “I couldn't get to my desk if I wanted to. I can't get my files,” said Brosemer.

Louisiana COVID-19 outbreak 'perfect storm' to hurt oil, gas industry - The oil and gas industry is facing one of its worst crises in the last 100 years, which adds to the economic uncertainty in oil-dependent areas like Acadiana that already are reeling from the financial impact of the novel coronavirus, or COVID-19. "Quite frankly, this is a very distressing situation for them and, as a result, for our state," Gov. John Bel Edwards said Wednesday. Crude oil prices went below $20 a barrel on Sunday, as the industry faces a heavy decrease in demand due to COVID-19 social distancing measures and massive increases in supply, largely due to a pricing battle between Russia and Saudi Arabia. The cheap oil, while great for consumers, can have devastating impacts for the industry. As of Wednesday morning, the price was just over $20. "We've got a global pandemic that is essentially shutting down the global economy," said Gifford Briggs, the president of the Louisiana Oil and Gas Association. "We've seen maybe as much as 10 million barrel per day decrease in demand in March, and depending on who you listen to, they have 18 to 20 million (barrel) demand going down in April. "There's no indication that won't continue into May." Though the local industry is now a shadow of its former self, the Lafayette Metropolitan Statistical Area — which includes much of Acadiana — is still heavily reliant on oil and gas. The Lafayette area had 13,300 workers in mining and logging related fields in 2019, according to the Federal Reserve Bank of St. Louis. While that number is 43% lower than the 23,500 jobs from 2014, it still represents a pretty heavy reliance on oil and gas.

Louisiana gets $155.7 million in offshore oil and gas money for coastal projects -- Louisiana is getting get a big boost this year in offshore oil revenue that is used to fund coastal restoration projects. The U.S. Department of the Interior announced Monday that the state would receive $155.7 million for the current fiscal year, about $58 million more than the previous year. The state Coastal Protection and Restoration Authority will get $124.6 million of the money for fiscal year 2019, which can be used for flood protection and coastal restoration projects. The state’s 19 coastal parishes will distribute about $31 million. The four oil-producing Gulf Coast states have been lobbying for a bigger cut of the royalties the federal government gets from drilling on the Outer Continental Shelf. This year, the Interior Department disbursed a total of $353 million in energy revenues via the Gulf of Mexico Energy Security Act, or GOMESA, to Alabama, Louisiana, Mississippi and Texas. Louisiana gets the largest share, followed by Texas ($95.3 million), Mississippi ($51.9 million) and Alabama ($50 million). The fiscal year’s total is a jump of more than 64% ($138 million) from the prior year. A state's allotment is determined its proximity to leased oil or gas tracts. Louisiana receives the greatest share because it is closest to the most lucrative extraction areas. 

Shell Pulls Out of Louisiana LNG Project  - Citing current market conditions, Shell reported Monday that it will not proceed with an equity interest – and thus exit – the proposed Lake Charles LNG project. Prior to Monday’s announcement, Shell and Energy Transfer had anticipated developing the project via a 50/50 joint venture. The proposal entails converting Energy Transfer’s existing import and regasification terminal in Lake Charles, La., into an LNG export facility with a liquefaction capacity of 16.45 million tonnes per annum (mtpa). Energy Transfer will now take over as the project’s developer, Shell stated. “This decision is consistent with the initiatives we announced last week to preserve cash and reinforce the resilience of our business,” commented Maarten Wetselaar, Shell’s director for Integrated Gas and New Energies, in a written statement emailed to Rigzone. On March 23, Shell unveiled plans to cut its operating and capital expenses by $8-9 billion. “Whilst we continue to believe in the long-term viability and advantages of the project, the time is not right for Shell to invest,” continued Wetselaar. “Through the transition, we will work closely with Energy Transfer.” Shell stated that it will continue to support Energy Transfer with the ongoing bidding process for the engineering, procurement and construction (EPC) contract and then plan a phased handover of remaining project-related activities. In a separate written statement, Energy Transfer noted that Shell has committed to support the process through the receipt of commercial EPC bids in the second quarter of this year. Given Shell’s exit from Lake Charles LNG, Energy Transfer stated that it will consider “various alternatives to advance the project.” Possibilities include bringing in one or more equity partners and scaling down the project’s size from three liquefaction trains (16.45 mtpa) to two (11 mtpa), Energy Transfer explained.

US LNG Giant Signaling It May Curb Production-- One of the world’s biggest liquefied natural gas exporters is signaling it may throttle back production. Cheniere Energy Inc. has tendered to buy six shipments for delivery to Europe later this year, a rare step for a company that’s fundamentally a seller of the fuel. The company could be testing the size of the current glut as it weighs output cuts, or even seeking cargoes for its customers that could be cheaper than producing and shipping its own from the U.S. Gulf Coast, according to a Bloomberg survey of traders. Traders are closely watching any indication that U.S. exporters will curb production as the coronavirus restrains demand and exacerbates an oversupply. Houston-based Cheniere declined to comment on the plan, and it isn’t clear if the tender has been awarded. “They may be trying to figure out how long the market really is and to make a judgment on whether they should shut down some production,” said Jason Feer, global head of business intelligence at Poten & Partners Inc. in Houston. The tender may just be “an indication of length in the market. It does not mean that they will award the tender or buy the cargoes.” Shipping LNG from the U.S. to Europe or Asia this summer will be unprofitable, BloombergNEF said in a Feb. 27 note. Spot prices have since declined further, while vessel rates have jumped, in a further indication that it may be cheaper to buy cargoes already available in the market than produce and ship it. Gas flows to Cheniere’s export terminals dropped 13% this month from February’s average as output was partly reduced because of fog-related shipping delays and plant maintenance. The facilities in Sabine Pass, Louisiana, and Corpus Christi, Texas, are taking in 18% more gas than last March. With the coronavirus pandemic expected to exacerbate the seasonal lull for gas around the world, “it’s reasonable” to expect customers won’t lift some cargoes while still paying tolling fees under their contracts, Anatol Feygin, chief commercial officer for Cheniere, said last week during the Scotia Howard Weil investor webcast. The firm also closed a separate deal last week offering to sell a prompt cargo from its Sabine Pass facility, which traders said was likely one of its first ever tenders. The company boosted capacity at each of its seven liquefaction units to about 5 million tons a year from their planned nameplate of 4.5 million thanks to operational efficiencies. Cheniere has declined to comment on operations and whether any cargoes were canceled beyond two for April reported last month. Aside from a buyer with a 20-year contract opting to not lift a cargo, Cheniere had already cut the amount of cargoes that its marketing arm makes available, Feer said. “They had been producing additional cargoes for Cheniere Marketing, but they stopped that a while back,” he said.

We Ain't Seen Nothin' Yet - Outlook For Oil/Gas/NGL Supply, Demand And Prices: Completely Blown Away --Like everything else in the world, energy markets are undergoing totally unprecedented convulsions. It seems as if everything that was working before COVID-19 is now broken, and an entirely new rulebook has been thrust upon us. Of course, it is impossible to know how crude oil, natural gas and NGL markets will play out over the next few weeks, much less in the coming years. But if we make a few reasonable assumptions, extrapolate from what we know so far, and crunch through a bit of fundamental analysis, it is possible to imagine what energy markets will look like after the worst of the coronavirus pandemic is behind us. One thing is for sure: things will not be anything like they were before. Where energy markets may be headed next is what we will conjure up in today’s blog.From New Year’s Day to March 5, the price of Cushing WTI dropped by about $15/bbl, which was a wakeup call for the industry. But it didn’t really prepare folks for what happened next. Following the spectacular collapse of the OPEC-Plus coalition on March 6, WTI started free-falling: within a week (on March 13), it was down by another~$15/bbl, to $31.73/bbl, and only five days after that (on March 18), it was off by another third, to $20.37/bbl. By then, the double-whammy demand hit from COVID and supply hit from increased Saudi and Russian production had really sunk in. Either the coronavirus pandemic or the OPEC-Plus breakdown on its own would have been enough to bring energy markets to their knees. The combination of the two at exactly the same time may be as close to a knock-out blow as the energy industry has ever seen. Therefore, we are going to set March 6, the date of the OPEC-Plus failure, as the demarcation point between what the market was BEFORE and what it is becoming AFTER. The market’s perception of reality has changed radically in the past three weeks, and events have been unfolding at lightning speed: capital expenditure cuts, infrastructure project cancellations, a collapse in gasoline prices, refinery run cuts. And we’re only at the very start of the new energy world. We Ain’t Seen Nothin’ Yet.

Keep your LNG feedstock supply clean in natural gas pipelines - The transmission of natural gas through high-pressure pipelines is not a new idea, but as the country's LNG exports grow to a world-leading level, the destination of the pipeline product and its associated requirements have changed dramatically. Traditionally, natural gas has been used to provide heat when burned, either in homes and businesses or as fuel to produce electrical power. The requirements were fairly simple, and if the gas fell within an acceptable energy range, it was considered a suitable pipeline product. Analysis of the gas for custody transfer was normally performed by an online gas chromatograph, with moisture and oxygen measurements when required. Today, the situation is different, as natural gas is destined for liquefaction facilities designed to produce LNG for export rather than for burning. LNG liquefaction facilities cost hundreds of millions of dollars to build, and operational downtime is extremely expensive to the operators, making the acceptability of the feedstock critical. Contaminants within the natural gas that can either damage the equipment or render the liquefaction process less efficient are unacceptable. Of importance are mercury, sulfur compounds, aromatic compounds and all particulates. This article will highlight a few key differences from the perspective of gas quality and will use Freeport LNG as an example of the changing requirements within the natural gas pipeline industry.

U.S. EPA waives fuel requirements, extends biofuels deadline to help refineries - (Reuters) - The U.S. Environmental Protection Agency on Friday unveiled measures to help oil refineries cope with fallout from the coronavirus outbreak, including waiving anti-smog requirements for gasoline and extending the deadline for small facilities to show compliance with the nation’s biofuels law. The outbreak has touched off a massive global decline in demand for motor fuels and forced companies to reduce staffing levels to slow infection rates. Typically U.S. fuel dealers are required to stop selling winter-grade gasoline on May 1 as summer anti-smog standards come into play. But marketers will now be allowed to sell the fuel until at least May 20, and possibly beyond. “The reason we have to do this is because people are driving fewer miles and the winter blends are stockpiled in all the tanks,” EPA chief Andrew Wheeler told Reuters in an interview. “There’s no place to put the summer blend.” The EPA, he said, will also extend the deadline for small oil refineries to prove their compliance with the Renewable Fuel Standard (RFS), the law that requires refineries to blend billions of gallons of biofuels like ethanol into their fuel or buy credits from those that do. Refiners are typically required to prove their compliance by March 31, but facilities with less than 75,000 barrels of daily processing capacity will be given extensions.

How the oil price collapse could reduce methane emissions — or make them much worse | Grist - Last year, oil and gas companies in the country’s two largest shale fields either burned off or directly released almost 500 billion cubic feet of natural gas into the air. That figure is more than the total natural gas released nationwide the year prior — and it would be sufficient to heat about 6 million homes for a year, if it hadn’t been wasted.“Flaring” is the industry term for burning natural gas, and “venting” refers to simply letting the substance escape. Both are wasteful, bad for business, and dangerous for the climate and public health. Methane, a greenhouse gas that is 84 times more potent than carbon dioxide over a 20-year period, is the main component of natural gas. When natural gas is flared, methane is converted to carbon dioxide. But if the flares are unlit or companies vent the natural gas instead, the methane escapes directly into the air. “What is coming out of these flares is toxic: It’s harmful to people, it’s harmful to local air quality, and it’s harmful to the climate,” said Sharon Wilson, a senior organizer at the environmental nonprofit Earthworks. Companies either flare or vent natural gas when there aren’t enough pipelines to carry gas to refineries, or when it is prohibitively expensive to do so. When companies drill for oil, they often find natural gas along with crude. Of the two, oil is a more lucrative product, and when pipeline space for natural gas is limited, it’s cheaper for companies to flare or vent the gas than it is to find alternative ways to capture and sell it.With oil prices hitting 18-year lows, industry-wide layoffs, and projections that operators are likely to halt new infrastructure investments and drastically scale back production, both opportunities and pitfalls await companies trying to reduce emissions from oilfields. On the one hand, low prices and the oil glut are expected to push companies to slash production, simultaneously driving down flaring.But those gains may be short lived. When oil prices eventually rise and operators rush to drill new wells, energy experts expect that flaring will likely spike again. Additionally, if low prices are sustained for long periods of time, more companies are expected to either go bankrupt or begin tightening their belts, which could mean fewer resources to monitor flares and fix faulty equipment that may be leaking natural gas into the atmosphere.Due to the current downturn, companies may delay pipeline projects. . If pipeline projects are put on hold, it may worsen the bottleneck in oil and gas fields when prices eventually rise and operators begin ramping up production — meaning that natural gas may ultimately be more likely to be flared or vented rather than diverted to a pipeline.If operators delay pipeline projects, “you get behind the curve again,” said Lynn Helms, director of the North Dakota Department of Mineral Resources, in a monthly update in March. “In the long term, it creates even bigger problems as you come out of low oil prices.”Availability of pipeline capacity also doesn’t guarantee a decrease in flaring. In some cases, companies may choose to flare natural gas because it’s more costly to pay to transport it to market. Last year, Williams, a pipeline operator, sued Texas regulators after they allowed a natural gas company to flare gas even though existing pipelines would’ve allowed the company to move it to market. “Connecting to Williams’ pipeline would be uneconomic,” Exco Resources, the natural gas company, said in a court filing. Without a permit to flare, the company would have to stop operating 138 wells, which would result “in a waste” of oil and gas, the company stated.

New state coalition to examine flaring, methane emissions - Seven state oil and gas industry associations and approximately 40 Texas-based producing companies announced Tuesday the formation of a new coalition to address flaring and methane emissions. “The industry is always innovating,” said Todd Staples, president of the Texas Oil and Gas Association, in a telephone call with the media to discuss the new Texas Methane and Flaring Coalition. “The best way to advance is to invest in innovation and technology.” Staples said it is always important for the energy industry to demonstrate its commitment to improving the environment, even amid today’s economic woes. “This issue has been developing even before the downturn, and energy companies and our members want to demonstrate, even in a down cycle, a strong commitment to environmental progress and that they’re not backing away from seeking solutions to flaring and methane emissions,” he said. The Permian Basin Petroleum Association is among those that joined TXOGA in the coalition. “While we know these are unprecedented times in the Permian Basin, the PBPA continues to work on a broad range of issues important to industry,” Ben Shepperd, president of the PBPA, told the Reporter-Telegram by email. “While we are all working through conference calls at the moment like everyone else, PBPA remains committed to addressing all important issues and supporting our industry however we can.” Staples said that the approximately 40 producers that are part of the new coalition are responsible for some 80 percent of the state’s oil production.

U.S. oil industry pumps near record volumes even as demand and prices collapse - The U.S. continues to pump near record amounts of oil, but U.S gasoline demand continues to drop as the whole world sees less need for fuel. The latest weekly data from the Energy Information Administration showed the U.S. oil industry was still pumping 13 million barrels of crude oil per day, just under record production highs. At the same time, demand for gasoline fell to 6.7 million barrels a day from 8.8 million the week earlier. This time last year, drivers were using about 9.2 million barrels a day of gasoline. U.S. gasoline demand translates to the equivalent of 10% of global oil demand. “Right now, we have a supply problem and a demand problem. That is unprecedented,” said Helima Croft, head of global commodities strategy at RBC. RBC expects that U.S. gasoline demand could ultimately fall by 6.2 million barrels a day as more states require citizens to shelter in place and many U.S. drivers remain off the road through at least the end of April to fight the spread of coronavirus. In the past week, the U.S. also added another 13.8 million barrels of oil to inventories, a record amount, which only exacerbates the global struggle with a lack of storage space. U.S. gasoline inventories rose by 7.5 million barrels last week. West Texas Intermediate was down 1.3% Wednesday, at just over $20 per barrel.

Pipelines Ask U.S. Oil Drillers to Curb Output as Tanks Fill Up - - American pipeline operators have begun asking oil producers to voluntarily ratchet back their output in the clearest sign yet that a growing glut of crude is overwhelming storage capacity. Plains All American Pipeline LP, one of the biggest shippers of crude in the U.S., sent a letter this week asking its suppliers to scale back production. The notice came from the company’s marketing unit that buys and sells oil to customers. A Texas oil regulator said Saturday that drillers were getting similar notices from pipeline operators. The messages signal the oil market is fast approaching the moment traders have been warning about -- when crude supplies overflow storage tanks and pipelines as the coronavirus pandemic drags down oil demand by the most in history. “We are sending this proactive request to our suppliers to ask that you take steps to reduce oil production in response to the pandemic,” Houston-based Plains said in the letter obtained by Bloomberg. Plains didn’t immediately have comment on its request. The company sent a separate letter requiring customers to prove they have a buyer or place to offload the crude they’re shipping, according to people familiar with the matter. Enterprise Products Partners LP put out a similar call, one person said. The firm didn’t immediately have comment. The idea is to prevent anyone from parking oil in pipelines. On Saturday, Ryan Sitton, a member of the Texas Railroad Commission that regulates the state’s oil industry, said he’d heard that “some Texas producers are starting to get letters from shippers (pipelines) asking for oil production cuts because they are out of storage.” There were already signs that North America’s storage system was nearing its limit. On Friday, prices for physical delivery of several key crude grades in North America plunged to the lowest levels in decades. West Texas Intermediate crude in the heart of the Permian shale region plunged to $13.01 a barrel, the lowest since 1999. West Canada oil crude neared $5 a barrel. Trading house Mercuria Energy Group Ltd. bid just 95 cents for Wyoming Asphalt Sour, a dense oil used mostly to produce paving bitumen, and said the same barrel was bid at below zero earlier this month. U.S. oil refiners have been cutting back on the amount of crude they buy and process as lockdowns across the nation keep cars off the road, sending gasoline demand plummeting. Retail pump prices have, in some places, fallen below $1 a gallon.

Will Capping Oil Production Help Texas Companies? Experts Say No. –   Texas oil and gas companies are trying to figure out how to stay financially afloat as the Coronavirus crisis and international price disputes are keeping oil prices low. Many have already cut spending, some have furloughed workers, and most told the Dallas Fed Survey they wouldn’t be able to make a profit if they started new drilling activity. Some companies have even suggested to the state’s oil and gas regulators they should put a cap on production, arguing it would make prices go up and save jobs. But experts and industry trade groups don’t agree. “They’ve gone to the referee to ask for some sort of assistance in enforcing something that really is just nonsense on the rest of the Texas market,” said University of Houston Energy Fellow Ed Hirs. “Even if they were able to reduce production in Texas, it would not have the desired impact of raising prices.” “These companies could themselves shut down production and reduce production, to —in their view— help alleviate the supply overhang in the market,” Hirs said. “But they’re unwilling to do this alone.” The suggestion to regulators to cap oil production came from exploration companies Pioneer Natural Resources and Parsley Energy, according to a Reuters report. Parsley Energy told Reuters it wants a comprehensive solution that might also include tariffs on foreign oil in an effort to help domestic producers. It’s that foreign oil that Hirs said is hurting the Texas market the most. Saudi Arabia and Russia are in a price dispute, and it’s unknown when or if they will come to an agreement—and that’s something Texas state regulators have no control over. So far there’s no formal request to the Texas Railroad Commission, the state’s oil and gas regulator, to limit production — just informal suggestions. And most commissioners have publicly indicated they don’t like the idea. Major trade groups like the American Petroleum Institute and the Texas Oil and Gas Association also said they favor free market solutions over a mandatory limit on production. “The challenges we face today are unprecedented, but they are not an excuse to walk away from the free market principles that have guided this industry for more than a century,” API’s Frank Macchiarola said in a statement. “Make no mistake, production quotas would be a shortsighted, knee-jerk reaction with disastrous consequences for the future of U.S. energy leadership.” Hirs, from UH, agreed, and said limiting production would just put small producers at a greater risk. “There’s no question we were going to see bankruptcies over this season as the 2019 results came in and as banks pulled their lines of credit,” Hirs said. “Now, of course, everything’s going to be accelerated, and then if they were to limit production, it would just happen a heck of a lot faster.” There may be more to the request than just a hope to steady prices, Hirs added. “The two producers who have asked for this are well suited to go around and pick up some of the pieces,” Hirs says. “In many respects, you could look at this as a crass competitive play on their part to consolidate and expand their positions in the Permian Basin.”

Some American Oil Selling at Under $10 a Barrel- Oil is selling for less than $10 across key North American hubs as the global demand shock from coronavirus leaves crude with nowhere to go. The coronavirus pandemic has hit demand so hard that as benchmark futures plunge to lowest in 18 years, oil is backing up throughout the distribution system, raising the prospect that producers will need to shut in wells. Some of the hardest-hit areas have been those thousands of miles from export terminals, which would provide the possibility of escape, either to foreign markets or onto tankers as floating storage. Refiners across the U.S., including PBF Energy Inc., Valero Energy Corp. and Phillips 66, are slowing fuel production as restrictions on travel and work has reduced gasoline and jet fuel demand to a trickle. North Atlantic Refining Ltd will be idling its 130,000-barrel-a-day refinery in Newfoundland, Canada, for two to five months due to the outbreak. The market is groaning under the weight of this oversupply so much so that U.S. midstream operators such as Plains All American Pipelines have asked their suppliers to reduce oil production because storage capacity is reaching its limits. Bakken crude in Guernsey, Wyoming, sank to a record-low $3.18 a barrel Monday, according to data compiled by Bloomberg, while Western Canadian Select in Hardisty, Alberta, was worth just $4.18. Even oil in West Texas is as cheap as it’s ever been. West Texas Intermediate in Midland was $10.68, just above its all-time low from 1998. And it’s lower-quality counterpart, West Texas Sour, slid to a record $7.18, the lowest in data going back to 1988. West Texas Intermediate Light, also known as WTL, traded at around $7.50 a barrel below the WTI Midland benchmark on Monday, traders said, the equivalent of about $3 a barrel outright. Including transportation costs from the wellhead, that would mean the very light crude is worth near-zero, if not negative, when it comes out of the ground.

This Is The Largest Economic Shock Of Our Lifetimes - Goldman Sees Negative Prices Amid Oil Devastation  - Over the weekend, we reported that with the oil industry oversupplied by a mindblowing 20 million barrels daily as roughly 20% of total global output ends up unused in a world economy that has ground to a halt, and instead has to be parked in storage either on land or sea, the unthinkable is about to happen: oil storage space is about to run out, and as that happens the price of oil will continue sliding ever lower and lower until it finally goes negative as some such as Mizuho's Paul Sankey predict it will, over the next few months, leading to an unprecedented shockwave across the global energy market. Then overnight, more eulogies for the oil market emerged, with Bank of America writing that oil has now slumped "into the abyss" and it expects to see the "steepest decline in global oil consumption ever recorded, with our base case reflecting a 12mn b/d drop in 2Q20 and a 4.5mn b/d contraction on average for the year" and on a net basis, BofA now expects global oil demand to contract by almost 17mn b/d in April with consumption recovering modestly into 3Q20 and beyond. The bank also adjusted its oil price forecasts for 2020 and 2021 down to $37 and $45/bbl for Brent and to $32 and $42/bbl for WTI respectively, but in the near-term, it sees both benchmarks temporarily trading in the teens in the coming weeks.However, by going all "there will be blood" on oil, BofA has only caught up where Goldman has been for the past two weeks, ever since it predicted that the "physical end was near." Meanwhile, in a note of unprecedented gloom, Goldman now says that "the physical end is here" as the coronacrisis goes global.As Goldman's Jeffrey Currie calculates, the oil surplus generated by an unprecedented demand shock has begun to hit physical constraints at refineries, pipelines and storage facilities, "leading to at least 0.9 million b/d of announced shut-ins at the wellhead, with the true number likely higher and growing by the hour." With social distancing measures now impacting 92% of global GDP, the ultimate magnitude of these shut-ins which is still unknown will likely permanently alter the energy industry and its geopolitics, restrict demand as economic activity normalizes and shift the debate around climate change. In other words, what is taking place now is "not only is this the largest economic shock of our lifetimes" but from a practical perspective, "carbon-based industries like oil sit in the cross-hairs as they have historically served as the cornerstone of social interactions and globalization, the prevention of which are the main defense against the virus."

US may test its crude storage limits in the weeks ahead -— The United States could face a dire crude oil storage crunch in the coming weeks and months with more than half of the nation's commercial crude capacity currently filled and volumes rapidly rising. The combination of a global crude demand crunch coupled with the continued flow of surplus supplies means that storage reserves should begin to fill up more quickly, possibly testing the limits of US crude storage capacity as early as this summer, according to industry observers. Almost 300 million barrels of commercial crude oil storage remain in this country, according to the latest estimates from federal data. But the US is still churning out close to 13 million b/d of crude oil. Those volumes are expected to decline, but not fast enough to prevent storage volumes from rapidly rising. The rest of the world is facing potential storage shortfalls as well, so it may be increasingly harder to ship excess crude barrels oversees in the weeks ahead. Some pipelines and regional storage hubs already are feeling constrained, and more oil is going into storage in supertankers around the world. The worst-case scenario is if global demand falls by about 20 million b/d or more from the coronavirus pandemic, and Saudi Arabia and Russia continue their pricing war after the implosion of the so-called OPEC+ group early in March. That could result in a supply-demand gap of 24 million b/d, said Ethan Bellamy, an energy analyst with Robert W. Baird & Co. "My view is that it's much worse than people are expecting," Bellamy said. "With no changes to the status quo, we will fill storage in June or July depending on the rate of overall economic slowdown and OPEC+ positioning. If that happens, oil producers will be shutting in wells or giving oil away." NYMEX WTI pricing could then further crater from about $20/b now down to the single digits, Bellamy said. Some spot markets already are pricing much lower. In the Permian Basin, Midland WTI was assessed by S&P Global Platts at just $13.51/b Friday, as price discounts have widened because of reduced storage space, and lower refinery demand. Those spot price discounts also reflect the widening contango structure for crude. NYMEX front-month May crude futures settled at a roughly $15/b discount to the 12th-month contract Monday.

Traders Eyeing Rail Cars for Oil Storage - Oil companies are turning to rail cars to stash the crude they can’t sell, as the world runs out of places to store a growing glut of cheap barrels. North American producers, refiners and traders are now looking to store excess oil in rail yards in Texas, Saskatchewan and Manitoba amid the crude market’s historic plunge and collapsing demand, according to people familiar with the matter. With oil for May delivery trading at a steep discount to future months -- a structure known as contango -- more firms are hoarding barrels rather than sell at a loss. But crude tanks and supertankers are filling up fast, with the world projected to run out of storage space by the middle of the year, according to IHS Markit. In Canada, tank-tops could be breached within two to three weeks, Goldman Sachs Group said, while U.S. stockpiles last week rose for the 10th week, increasing by the most in three years. “Rail certainly is an economic option to store crude while the contango is at historic levels,” said Sandy Fielden, director of research for Morningstar Inc. “A trader has to mitigate risks associated with quality and location because rail yards may not be located in major oil trading hubs.” A decade ago, transporting crude by rail was rare, while stowing oil in a tank car was virtually unheard of. But as the shale boom unleashed record volumes of crude, overwhelming pipeline capacity, producers have increasingly come to rely on rail to move barrels from one point to another. Now, crude-by-rail service providers and terminal operators are fielding inquiries about leasing cars for storage. The situation is particularly dire in the land-locked Canadian province of Alberta, where local heavy crude is trading at less than $10 a barrel, according to NE2 Group. In some parts of the U.S., prices for physical barrels have gone negative. Although no contracts are finalized, some companies have inquired about using the cars for 3 months to a year, said the people, who asked to remain anonymous because the talks are private.

El Dorado-based Murphy Oil makes cost-cutting moves - El Dorado-based Murphy Oil Corp. said Wednesday that because of ongoing weakness in the oil sector it is cutting executive pay, reducing its yearly capital spending guidance and reducing its quarterly cash dividend by 50%."Murphy recognizes the reality of the current situation in the commodity markets, and we believe the reduction in dividends, capital expenditures, salaries and retainers are prudent steps to sustain the company for the long term," Claiborne Deming, chairman of the board for Murphy Oil Corp., said in a statement.Coronavirus Updates Stay up to date with the latest news regarding the coronavirus pandemic.Shares of Murphy Oil Corp. fell nearly 9% in trading Wednesday on the New York Stock Exchange. Oil prices have plummeted from about $54 a barrel in mid-February to about $20 a barrel.In a news release, the company said the president and chief executive officer's annual salary will be cut 35%. Other executives will have their salaries reduced by up to 30% with an average reduction of 22%, effective Wednesday.The company declared a quarterly cash dividend of $1.25 a share or 50 cents a share annually, according to the release. Murphy also reduced its 2020 capital spending plan to $780 million.

Texas Oil Company to pay $115,000 Civil Penalty to resolve violations of Oil Pollution Prevention Regulations - The U.S. Environmental Protection Agency (EPA) recently announced a proposed settlement with Citation Oil & Gas Corp. (Citation) of Houston, Texas, to resolve alleged violations of federal regulations intended to prevent oil pollution. The Clean Water Act violations pertain to oil spill prevention requirements and Spill Prevention, Control, and Countermeasure (SPCC) regulations at Citation’s Park County, Wyoming, oil production facilities. Citation will pay a civil penalty of $115,000 to resolve the alleged violations. This proposed settlement resulted from EPA’s investigation of two spills at Citation facilities. The first spill occurred on February 9, 2016, when Citation released approximately 300 barrels of crude oil from its Embar 3 Facility into Buffalo Creek, a tributary of the Big Horn River. The second spill occurred on August 21, 2019, when Citation released approximately 1000 barrels of produced water from its North Waterflood Station into the same tributary. “Companies that store oil have a responsibility to follow laws that protect the public and the environment,” said Suzanne Bohan, director of EPA Region 8’s Enforcement and Compliance Assurance Division. “Due to the harm oil can cause when released to water resources and the environment, every effort must be made to prevent spills and to clean them up promptly once they occur.” In investigating Citation’s spills, EPA discovered deficiencies in Citation’s SPCC plans for the North Waterflood Station and Middle Waterflood Station. The company corrected these deficiencies and submitted corrected plans to EPA, helping ensure that water resources and communities where Citation operates are better protected from damaging oil spills.

NGPL expansion in Texas that will serve LNG exports can begin construction: FERC - — Kinder Morgan's Natural Gas Pipeline Company of America can start construction of its Gulf Coast Southbound project in Texas, the Federal Energy Regulatory Commission said Tuesday. The approval was the latest sign that regulators are allowing gas infrastructure to move forward over fierce objections of local opponents as the coronavirus pandemic threatens worker safety. During a teleconference with reporters March 19, the commission's chairman said FERC's work would not be slowed by efforts to control the spread of the coronavirus. Several projects, including Gulf Coast Southbound, are being designed to feed gas to LNG export facilities. Even as the health scare shifts trade flows, disrupting some construction efforts and depressing commercial activity, US liquefaction facilities have recently been seeing robust utilization. Low input and shipping costs continue to make deliveries to some regions economic. The compression-based expansion of NGPL's Gulf Coast Mainline natural gas system will boost supplies to Cheniere Energy's LNG terminal near Corpus Christi. It will enable the system to provide 300,000 Dt/d of firm southbound transportation capacity to Corpus Christi Liquefaction. It would also allow NGPL to make 28,000 Dt/d available to the market. The project, which received certificate authorization February 21, will include a new 10,000-horsepower compressor unit and related facilities at a compressor station in Victoria County, Texas; a new 15,900-hp turbine at a station in Wharton County, Texas; and two new 23,470-hp turbines at a station in Harrison County, Texas. NGPL also plans to abandon in place some existing compressor units at two of those stations. The same pipeline system also provides a backbone of feedgas to Cheniere's Sabine Pass LNG export terminal in Louisiana. Cheniere operates two trains at Corpus Christi and is building a third there; It operators five trains at Sabine Pass and is building a sixth there. The approval of construction on the NGPL expansion is affirmation that FERC is keeping pipeline construction going. The agency is also addressing ratemaking issues in a way that will give operators some breathing room.

Accident prompts Kinder Morgan to suspend Hill Country pipeline construction - Houston pipeline operator Kinder Morgan has suspended construction on one segment of a controversial pipeline being built through the Texas Hill Country after an drilling accident allegedly sent a mixture of clay and water into nearby wells.The accident happened along the Permian Highway Pipeline route in Blanco County where construction crews experienced an underground drilling fluid loss on Saturday, the company reported. Further investigation revealed that the drilling fluid, a mixture of water and non-toxic bentonite clay, seeped into freshwater drinking wells used by nearby landowners."At this time, drilling operations have been suspended while the team evaluates the cause of the loss and determines the best path forward," Company officials said. "We are working with affected landowners to address their needs. We are also consulting with our Karst expert and the local water district manager to determine the best way to mitigate any current and future impacts. All of the appropriate regulatory agencies have been notified."Midstream: Federal judge sides with Kinder Morgan in Hill Country pipeline fight. Landowners claim they were not notified about the accident by Kinder Morgan and only learned about the contamination when muddy water came out of their faucets Sunday. Blanco County officials are inspecting water drinking wells to determine how widespread the contamination from the spill has been and how many residents have been affected, the Sierra Club reported.Worth an estimated $2 billion, the 430-mile pipeline was designed to move 2 billion cubic feet of natural gas per day from the Permian Basin of West Texas to a facility owned by Kinder Morgan at the Katy natural gas hub near Houston. The project faced stiff opposition from Hill Country landowners on environmental and safety concerns.“This spill has validated those concerns," Sierra Club Senior Campaign Representative said. "The fact that this spill was not made public until residents spoke out about contamination in their drinking water makes it clear that Kinder Morgan can’t be trusted to build this pipeline safely."

Cheniere seeks U.S. permission to put Oklahoma Midship natgas pipe in service - (Reuters) - Cheniere Energy Inc has completed the Midship natural gas pipeline in Oklahoma at a cost of around $1 billion and is seeking federal regulators’ permission to put it into service, according to a filing made available on Wednesday. Cheniere has asked the U.S. Federal Energy Regulatory Commission (FERC) for permission to put the project into service “at the earliest time possible, but no later than April 17, 2020, in order to meet the needs of its shippers,” the filing says. Cheniere, the nation’s biggest liquefied natural gas (LNG) exporter and biggest consumer of gas, started work on the project around February 2019. Midship includes nearly 200 miles (322 kilometers) of 36-inch (91-centimeter) pipe. The pipe is designed to deliver about 1.44 billion cubic feet per day (bcfd) of gas from the Anadarko basin to existing pipelines near Bennington, Oklahoma, for transport to U.S. Gulf Coast and Southeast markets, where demand for the fuel for domestic consumption and LNG export is growing. One billion cubic feet of gas is enough to fuel about 5 million U.S. homes a day. Total U.S. LNG export capacity is expected to rise to 10.0 bcfd by the end of 2020 and 10.7 bcfd by the end of 2021 from the current 8.5 bcfd. That keeps the United States on track to become the world’s biggest LNG exporter in the mid 2020s, up from the third biggest now behind Australia and Qatar.

Iowa regulators agree to doubling volume for Dakota Access pipeline  Iowa regulators announced Friday they have agreed to help clear the way for the multistate Dakota Access pipeline to double its crude oil capacity. The underground pipeline, which crosses 18 counties in Iowa diagonally from northwest to southeast, began operating nearly three years ago after vehement protests against it brought worldwide attention. In Iowa, the owners of the pipeline — a Texas-based consortium of companies and investors called Energy Transfer Partners — sought regulatory approval to bolster its pumping station in Cambridge, south of Ames, to help move the increased volume. Friday, the three-member Iowa Utilities Board announced it had waived a hearing requirement and granted the request over the objections of the Northwest Iowa Landowners Association, the Sierra Club, the Office of Consumer Advocate and others. “The IUB found that the increase in oil will not significantly increase the risk of a spill, or the amount of oil that would be spilled if an incident occurred,” the board said in a news release. The regulators did require Dakota Access to file updates on the approval process in the three other states that also must sign off, as well as any damage claims by landowners and any safety violations. The pipeline also runs through parts of North and South Dakota before ending at a hub in Illinois. From there, the Bakken crude is pumped to the Gulf of Mexico in a different pipeline.

Minnesota, Wisconsin frac sand mines crushed by oil industry shifts - The frac sand mining industry in Minnesota and Wisconsin was already struggling before the coronavirus-related downturn made matters worse. Frac sand miner Jordan Sands in North Mankato was pushed into receivership recently after its banker declared a loan default. A few months earlier, Minnesota’s largest frac sand producer by far, the Kasota mine near St. Peter, was idled. In western Wisconsin, 10 frac sand processing plants have closed over the past 18 months. That’s one-third of the industry’s dry sand milling capacity, said Kent Syverson, a geology professor at the University of Wisconsin-Eau Claire and a sand-industry consultant. Many other Wisconsin frac sand operations were operating well below capacity at the beginning of March, he added. And all of this was before oil collapsed as the economic disruption caused by the coronavirus pandemic cratered global demand at the same time Russia and Saudi Arabia decided to flood the market with crude supply. “Now we have an oil-price crash, and some [oil producers] are cutting back their fracking and drilling budgets.” Announced cuts already total billions of dollars. The Upper Midwest’s frac sand industry has been shellacked since 2018, first by a southward migration of sand mining, then by a supply glut. The industry’s sand surplus is “approximately double the current demand,” Jordan Sands CEO Scott Sustacek said in a court affidavit filed March 2, just before oil prices plummeted.

Crude oil spill reported in McKenzie County - A crude oil spill from a pipeline operated by True Oil, LLC was reported on March 27. The spill impacted Red Wing Creek, affecting roughly 1.5 miles of the creek. The North Dakota Department of Environmental Quality (NDDEQ) says the spill has not yet been contained, and the amount of crude spilled has not yet been released. The spill was reported on the same day. The incident occurred about 17 miles southwest of Watford City, and the cause is still under investigation. NDDEQ says it is inspecting the site and will continue to monitor the investigation and remediation.

Spill in McKenzie County reaches Red Wing Creek (AP) — A state regulator estimates about 420 gallons (1,590 liters) of crude oil has spilled from a pipeline in McKenzie County and reached a creek there. The North Dakota Department of Environmental Quality said Monday the spill happened Friday on a line about 17 miles southwest of Watford City. The pipeline is operated by True Oil LLC. State environmental scientist Bill Suess said the oil reached Red Wing Creek and affected about 1.5 miles of the creek, which is a tributary to the Little Missouri River. He said the spill has been contained and the oil is being cleaned up.

Brine spills at McKenzie County saltwater disposal well | Bakken News – A saltwater disposal well in McKenzie County leaked brine on Sunday due to an equipment failure, according to the North Dakota Oil and Gas Division. The well, owned by Missouri Basin Well Service, spilled 608 barrels or 25,536 gallons of fluid. All the saltwater was contained on the well site about 11 miles north of Watford City, according to the state. Brine is highly concentrated saltwater that comes up alongside oil and gas at well sites. It can render farmland infertile when it spills off-site. The state said its inspectors will continue to monitor additional cleanup.

Disputed Canada-US oil pipeline work to start in April (AP) — A Canadian company said Tuesday it plans to start construction of the disputed Keystone XL oil sands pipeline through the U.S. Midwest in April, after lining up customers and money for a proposal that is bitterly opposed by environmentalists and some American Indian tribes. Construction would begin at the pipeline’s border crossing in Montana, said TC Energy spokesman Terry Cunha. That would be a milestone for a project first proposed in 2008. The announcement came after the company secured $1.1 billion in financing from the Canadian provincial government of Alberta to cover construction through 2020 and agreements for the transport of 575,000 barrels of oil daily. Despite plunging oil prices in recent weeks, Alberta Premier Jason Kenney said the province’s resource-dependent economy could not afford for Keystone XL to be delayed until after the coronavirus pandemic and a global economic downturn have passed. “This investment in Keystone XL is a bold move to retake control of our province’s economic destiny and put it firmly back in the hands of the owners of our natural resources, the people of Alberta,” Kenney said. A spokeswoman for Montana Gov. Steve Bullock said he had been in contact with Kenney to raise concerns over an estimated 100 workers coming into the state for the line’s construction. Bullock said that could further strain rural health systems facing the coronavirus. “TC Energy holds a tremendous responsibility to appropriately manage or eliminate this risk and we will continue to monitor the plans for that response,”

Keystone XL Pipeline Construction to Forge Ahead During Coronavirus Pandemic --The company behind the controversial and long-delayed Keystone XL pipeline announced it would proceed with the project Tuesday, despite concerns about the climate impacts of the pipeline and the dangers of transporting construction crews during a pandemic. Pipeline owner TC Energy Corp. also announced that Alberta's government had invested around $1.1 billion to cover most construction costs through the end of 2020, CBC News reported. The completed 1,210 mile pipeline will have the capacity to transport 830,000 barrels of oil a day from Hardisty, Alberta to Steele City, Nebraska, where it will connect to pipelines traveling to Gulf Coast refineries, TC Energy said. Construction along the pipeline route in Alberta, at the U.S. and Canadian border and in the states of Montana, South Dakota and Nebraska will begin immediately, CBC News reported. "This is a shameful new low," Sierra Club's Beyond Dirty Fuels campaign associate director Catherine Collentine said in a statement reported by The Hill. "By barreling forward with construction during a global pandemic, TC Energy is putting already vulnerable communities at even greater risk." The pipeline has long faced opposition from environmentalists who say it promotes the use of especially dirtytar sands oil in a time of climate crisis, and indigenous and local communities who oppose its construction on their land. The timing of TC Energy's announcement has spawned a new line of opposition, however — communities along the pipeline route who are concerned that construction crews could spread the new coronavirus. Even before TC Energy's announcement, the group Bold Nebraska launched an online petition calling on the company to cancel all construction in Montana, South Dakota and Nebraska while the outbreak lasts. "Our rural communities are strained as it is for medical supplies and hospital beds amid a global pandemic. TC energy must put an end to any construction in our small towns as the pandemic grows across our country," the group's founder Jane Kleeb told NPR.

PIPELINES: Lawsuits loom as KXL backers march toward construction -- Tuesday, March 31, 2020  - As a Canadian oil firm prepares to build its embattled Keystone XL pipeline across the U.S. border, legal experts say the company could use the project's construction status to protect it against an onslaught of ongoing litigation.

In the Midst of the Coronavirus Pandemic, Construction Is Set to Resume on the Keystone Pipeline - Bill McKibben -  Over the past few weeks, the oil industryhas been working to push through construction of the Keystone XL pipeline. The effort began in earnest in mid-March, when several states—including, crucially, South Dakota, which is on the KXL route—passed laws designating pipelines as “critical infrastructure.” South Dakota’s governor went further last week, signing a law that could charge anyone who, with three or more others, acts to cause “damage to property” as a rioter, and made it a felony to “incite” such behavior. On Monday, Jason Kenney, the premier of Alberta, where the pipeline originates, announced that his government would hand over $1.1 billion dollars to TC Energy, the company building the pipeline. That is enough to cover construction costs for the rest of the year. In addition, Kenney put forward $4.2 billion in credit guarantees, and that was enough for the company, which had been unwilling to commit to the project, to go forward. Now, the company says, construction will begin immediately, both in Canada and across the border. Indeed, it appears that construction workers began arriving in Montana before the state announced a fourteen-day quarantine on travellers arriving from out of state. So here’s the situation: in the middle of a pandemic, construction workers will move into isolated rural communities with already strained hospital resources. The “man camps” where many such workers in the industry live are associated with violence against women and other crimes, even in the best of times. Now, with the pandemic, many of the Native communities that live along the pipeline route fear for the worst. “This causes eerie memories for us with the infected smallpox blankets that were distributed to tribes intentionally,” Faith Spotted Eagle, a leader of the Yankton Sioux Tribe, said. (The coronavirus is already wreaking havoc on isolated reservations in other parts of the country, and the chronically underfunded Indian Health Service is struggling to meet the crisis.) TC Energy insists that it is building the pipeline now because it will “strengthen the continent’s energy security,” but that’s obvious nonsense—at the moment, a record glut of oil is so overwhelming the market that there’s literally no place left to store it, and Texas (where the Keystone pipeline will terminate) is consideringlimiting oil production for the first time in fifty years. It’s impossible to think of a less critical thing to be building right now, when we’ve theoretically stopped every business that isn’t “essential.”

Could COVID-19 Spell the End of the Fracking Industry as We Know It? – It has always been known that the oil and gas industry only survives by way of debt financing. Fracking is capital intensive, and very few companies involved ever actually even turn a profit in excess of the cost of capital. Instead, they have always operated by dependency on cheap money from Wall Street banks to finance their drilling and operations.Attorney, author and CPA Greg Rogers wrote the seminal book, Financial Reporting of Environmental Liabilities and Risks, as well as being a fellow and adviser to the Master of Accounting Program at the University of Cambridge in the U.K. “If the golden goose is going to die, it’s really important that you know that so you can anticipate it,” Rogers warned. “When do you get out of that game? You’d better be close to the exit door.” Oil companies owe billions of dollars in asset retirement obligations (AROs) to the state, which are the oil and gas companies’ financial obligations to clean up and close their wells. But it is looking increasingly likely that, instead of the oil companies paying for the AROs, these are what states will be stuck with as companies file for bankruptcy. Hence, states like New Mexico that tied so much of their budget to the fracking boom look like they are going to be without that money, plus needing hundreds of millions of dollars, possibly even billions, to close the wells if they are not successful in obtaining that money from the oil companies before they go bankrupt. Which raises questions such as: Will social programs have to be sacrificed to fund these cleanup operations? And would states even have the money without the fracking generated revenue? Rogers, who also worked as an adviser to oil giant BP and its auditors on liability estimates and disclosures arising from the Deepwater Horizon disaster, describes fracking as being “like a Ponzi scheme, it only works as long as you continue to get new suckers to sustain growth.” The global spread of the COVID-19 virus has caused both supply and demand for global goods to plummet as factories are shuttered, workers stay home, and businesses are ordered to close or cut their hours drastically by states across the U.S. Jets are grounded as people cease traveling, and talk of an ongoing global recession, or even depression, is now commonplace. The Financial Times recently ran a story which posited, “Oil crash only a foretaste of what awaits energy industry: The end of hydrocarbons as a lucrative business is a real possibility. We are seeing that in dramatic form in the current oil price crash.” Oil companies are already announcing major cuts in spending in response to the rapid devaluation of stock prices. American oil companies are now frantically racing to restructure their massive debt, as the price war appears poised to cause numerous bankruptcies across the entire shale patch. Seven of the most active companies involved in fracking in Texas have already cut $7.6 billion from their budgets as a response to the oil price collapse.

Court OKs Trump repeal of Obama public lands fracking rule  A federal judge on Friday upheld the Trump administration’s decision to repeal an Obama-era rule that established standards for hydraulic fracking on federal land. California and several environmental groups sued over the repeal, claiming it was unlawful. California particularly claimed that the federal government was in violation of the Administrative Procedure Act and the National Environmental Policy Act. However, Judge Haywood S. Gilliam Jr., an Obama appointee, sided with the Trump administration, writing: "The record does not compel the conclusion that [the Bureau of Land Management] arbitrarily ignored foregone benefits or arbitrarily overvalued the costs associated with the 2015 Rule, as California Plaintiffs urge." "Although BLM could have provided more detail, it did enough to clear the low bar of arbitrary and capricious review, and that is all the law requires,” he added. The 2015 Obama administration rule would have required companies to say what chemicals they use in fracking, make them cover surface ponds that contain fracking fluids and also set well construction standards. But it never went into effect because it was temporarily halted by federal Judge Scott Skavdahl in 2015. The judge later overturned the rule in 2016. The Interior Department celebrated the court’s decision on Friday, saying in a statement that it will “allow the Department to continue to implement the President’s direction to repeal overly burdensome regulations and ensure America’s energy independence, while protecting the safety of our workers and the health of our environment.” “We are grateful the Court has affirmed that the Department’s actions were fully compliant with all legal requirements,” it added. An adviser to California Attorney General Xavier Becerra (D) told The Hill that they are reviewing the decision. The Sierra Club, one of the groups that sued over the repeal, is also reviewing the decision and will consider its options. "Fracking on public and tribal lands puts our air, water, and communities at risk," Sierra Club senior attorney Nathan Matthews said in a statement. "The Trump administration was wrong to rescind this commonsense protection, and it's disappointing that the court is allowing this dangerous rollback to stand."

Coronavirus has oil industry near 'massive collapse,' Rick Perry says - Former Energy Secretary Rick Perry believes that the oil industry could collapse because of the dramatic decrease in demand worldwide caused by the coronavirus outbreak and a steep decline in prices. "Our capacity is full. The Saudis are flooding this market with cheap oil," Perry told Fox News host Tucker Carlson on Tuesday night. "I'm telling you, we are on the verge of a massive collapse of an industry that we worked awfully hard, over the course of the last three or four years, to build up to the number one oil and gas producing country in the world, giving Americans some affordable energy resources." Many U.S. states and countries around the world have ordered their citizens to stay home in order to contain the spread of the virus. And airlines have dramatically cut back on flights as the number of passengers has fallen off. Fewer cars on the road and planes in the sky means far less demand for oil. Coupled with a dispute between Saudi Arabia and Russia that has resulted in an oil surplus, the price for crude as well as gasoline has plunged. The national average for gas in the U.S. is now below $2 a gallon. Perry, a former governor of oil-producing Texas, said that could destroy smaller, independent companies and hurt the people who depend on them for jobs. "There's this host of Americans who their entire future – taking care of their family paying their mortgages – is tied directly to the energy industry," Perry said. "It's a driver of a massive amount of our American economy." And he said the loss of those smaller companies would have long term consequences for the American consumer. "If we woke up a year from now, and there were five big companies because all of these independents were gone out of business ... I would suggest that would make a lot of Americans really nervous," he said.  Perry's concerns appeared prescient Wednesday after the Whiting Petroleum Corporation announced it was filing for Chapter 11 bankruptcy. In announcing the decision, CEO Bradley Holly cited "the severe downturn in oil and gas prices driven by uncertainty around the duration of the Saudi / Russia oil price war and the COVID-19 pandemic."

Mnuchin suggests oil companies could receive Fed aid –   Treasury Secretary Steven Mnuchin said Thursday that oil companies are eligible for aid from new lending programs the Federal Reserve is setting up, but not direct loans from his department. U.S. producers are facing financial distress from the price collapse that stems from COVID-19 causing an unprecedented drop in oil demand, and the Saudi-Russia price war. GOP Sen. Lisa Murkowski of Alaska, who heads the Energy Committee, on Wednesday sent Mnuchin a letter urging him to consider the industry for loans under the recently signed $2.2 trillion economic rescue bill.   Mnuchin, when asked about her request at a White House briefing, said he has "very limited ability to do direct loans out of the Treasury," and that he can provide only for specific sectors including airlines and national security companies. "Outside of that, we work with the Federal Reserve to create broad-based lending facilities, which we will do." "Our expectation is the energy companies, like all our other companies, will be able to participate in broad-based facilities, whether it's the corporate facility or whether it's the Main Street facility."— Treasury Secretary Steven Mnuchin

Five Days Before It Filed For Bankruptcy, Whiting Execs Got $15 Million In Bonuses - Just days Whiting Petroleum it became the first shale casualty of the current oil price crash, when it filed for prepackaged Chapter 11 bankruptcy on Wednesday morning after the plunge in oil prices left it unable to pay its debts, the company's board - supposedly with the approval of the company's creditors - approved $14.6 million in cash bonuses for top executives.As part of this KERP, or Key Employee Retention Plan, CEO Brad Holly would collect $6.4 million of the total, which will be “paid immediately,” the company said in a filing Wednesday according to Bloomberg. Four other executives including Chief Financial Officer Correne Loeffler will get the rest.The board said employees eligible for variable compensation can receive payouts that amount to no more than their target levels. The payouts will be made quarterly. As part of the deal, the senior executives agreed to forfeit equity awards they were in line to receive this year.The bonus plan which was signed off by the board on March 26, or 5 days before the Chapter 11 filing, is "part of an overhaul of the company’s variable compensation program" with the filing noting that the coronavirus pandemic, coupled with a price war between Russia and Saudi Arabia, has dealt a crushing blow to the oil and gas industry, making it “virtually impossible” to set short-term performance goals.To be sure, the board knew just how bad the optics of this deal would be, so why do it? The stated reason: the program "is intended to ensure the stability and continuity of the company’s workforce and eliminate any potential misalignment of interests that would likely arise if existing performance metrics were retained."CEO Holly, who was executive vice president at Anadarko before he was named Whiting CEO in 2017, has collected $4 million in salary and bonuses since then; he’s also received payouts of stock that have plunged in value. CFO Loeffler, who joined the company just eight months ago, will receive $2.2 million from the bonus plan. In other words, only the people who pushed Whiting into Chapter 11 can deliver it from bankruptcy, or so the thinking goes.

Exxon May Crush Bailout Hopes for Suffering Fracking Companies - The Washington Post reported March 10 that the Trump administration was considering some type of financial help for the failing U.S. shale oil and gas industry, “as industry officials close to the administration clamor for help.” Those officials — billionaire shale CEO Harold Hamm was likely among them — seemed desperate for government assistance because, as DeSmog has documented, their deeply indebted businesses have lost billions of dollars during the fracking boom. Even before the recent oil price war and COVID-19 pandemic, these companies could hardly stay afloat, making cries for some type of corporate welfare likely unavoidable.  But that's not the same message across the entire oil and gas industry. At the same time, the head of the American Petroleum Institute — the oil and gas industry's most powerful lobbying group — said the industry was not interested in seeking a bailout, which didn't exactly sound like the desperation reported by The Post. It seemed like an odd mix of messaging from the industry.  The idea of bailing out the shale companies was not well received by many politicians, environmental groups, and conservatives. Efforts to directly bail out the shale industry in the federal stimulus package were apparently abandoned.  The next proposed oil industry bailout came March 19 when the Department of Energy (DOE) formalized its intent to buy 77 million gallons of oil to fill the Strategic Petroleum Reserve (SPR), an emergency stockpile of oil. That idea lasted a bit longer than the first bailout proposal, but the DOE killed the idea late on March 25.   That marks two failed efforts to bail out shale companies while the oil and gas industry's top trade group continued saying the industry didn't want a bailout. What's going on here? In a remarkable interview on March 26, CEO Scott Sheffield of shale firm Pioneer Natural Resources added great clarity to why shale companies are unlikely to get bailed out and why the American Petroleum Institute has been touting free markets and opposing bailouts. Exxon has a huge stake in the Permian shale play in Texas, and Sheffield appears to admit that Exxon holds all the cards right now when it comes to any type of shale bailouts.  Sheffiled explained why these efforts weren't going well.  “We’ve had opposition from Exxon who controls API and TXOGA,” Sheffield said. “They prefer all the independents to go bankrupt and pick up the scraps.”

US set to lose spot as world's top oil producer — and doesn't have the tools to do anything about it -- The U.S. is all but guaranteed to lose its hard-earned spot as the world’s number one oil producer this year amid the recent price crash, vanishing demand and a plunge in capital investment, energy experts say. That could mean potentially enormous implications for U.S. foreign policy, as administrations have for decades viewed energy security and national security as being inexorably tied. “If we continue where we are with these low prices, we’ll see a big decline in U.S. oil production. It will no longer be number one,” Dan Yergin, energy expert and vice chairman of IHS Markit, told CNBC’s “Capital Connection” on Monday. The U.S. became the top oil producer globally, surpassing the output of Saudi Arabia and Russia, in 2018 thanks to the shale oil boom. A world increasingly in lockdown over the coronavirus crisis and the oil price war set off between Saudi Arabia and Russia in early March have brought crude prices down more than 65% year-to-date, with global benchmark Brent crude trading at just $22.78 per barrel and West Texas Intermediate at $20.39 per barrel on Monday morning London time, their lowest levels in nearly two decades. Saudi Arabia earlier this month slashed its crude prices, reversing course from boosting prices via production cuts to what some analysts call a “scorched earth” strategy, flooding the market with cheap oil in pursuit of greater global market share. Russia has announced it will in turn increase its own production, leading other OPEC allies of Saudi Arabia like the United Arab Emirates to open their taps once the previously-agreed OPEC+ output cut deal expires on April 1. But the impact of the price war still pales in comparison to the sheer evisceration of demand brought on by a forced economic shutdown in most of the world in an effort to slow the spread of the coronavirus, which has now killed more than 34,000 people and infected more than 730,000. “We see in this coming month of April what could be a 20 million barrel a day decline in oil demand. It’s unprecedented,” Yergin said. “That’s six times larger than the biggest downturn during the financial crisis period.”

Exclusive: Trump does not plan to ask U.S. oil producers for coordinated cuts - official - (Reuters) - The United States will not ask U.S. domestic oil companies for a coordinated cut in production to counter a historic meltdown in global prices and is still awaiting the details of planned cuts in Saudi Arabia and Russia, a senior administration official told Reuters on Thursday. Earlier, President Donald Trump said in a tweet that he expected Saudi Arabia and Russia to cut approximately 10 million barrels from daily production in a newly reached deal, a comment that sparked a jump in oil prices following weeks of steep declines that have threatened U.S. drillers. The official said details of planned reductions remained unclear, but a big cut was expected. Trump was set to meet with leaders of U.S. oil companies on Friday to discuss the state of the oil market. But he will not ask them to agree on a coordinated drop in supplies, said the official, who spoke on condition of anonymity. The official said the United States cannot orchestrate a mandated cut in domestic production and noted that U.S. companies had already cut production in response to a collapse in market demand. They did not have to be asked to cut, the official said. Both Moscow and Riyadh have said they cannot shoulder the responsibility of balancing the global oil market without the help of other major producer nations, as the coronavirus pandemic brings global economies to a standstill. Russian Energy Minister Alexander Novak said on Thursday that Moscow was no longer planning to raise output and said it was ready to cooperate with the Organization of the Petroleum Exporting Countries and other producers to stabilize the market. Saudi Arabia, the de facto head of OPEC, called on Thursday for an emergency meeting of OPEC and non-OPEC oil producers, an informal grouping known as OPEC+, state media reported, saying it aimed to reach a fair agreement to stabilize oil markets. The senior administration official described Trump as a broker between Saudi Arabia and Russia, calling their leaders multiple times to help resolve the price war. The president was in a good mood about the developments, he said. Trump hinted on Wednesday that he had measures in mind if the two countries did not reach a deal.

Sinking Fuel Demand Shuts North American Refinery -- Newfoundland’s only refinery is shutting down, the first North American fuel maker to be idled as the coronavirus outbreak crushes demand worldwide. North Atlantic Refining Ltd. will idle the Come by Chance refinery, VOCM radio reported on its website, citing Glenn Nolan, the president of United Steelworkers Local 9316. The plant could be shut for two to five months, Nolan said, according to the report. North Atlantic, the union and Nolan didn’t respond to emails seeking comment outside of normal working hours. The 130,000 barrel-a-day refinery supplies fuel to eastern Canadian markets and the U.S. East Coast. While this is the first plant in the region to shut, refineries across the U.S. and Canada are cutting back as the gasoline and jet fuel markets seize up. Measures to slow the spread of coronavirus may result in an unprecedented plunge in fuel demand, with estimates that global consumption is shrinking by 20% or more. U.S. government data show that the amount of refined products supplied to the market fell by more than 2 million barrels a day in the week ended March 20. With coronavirus cases in the U.S. on the rise since then, and more parts of the country shutting down businesses and limiting travel, consumption has likely slid further. Valero Energy Corp. has reduced processing rates across about half of its refineries, and Phillips 66 said many of its refineries are near minimum rates. Suncor Energy Inc. said it’s adjusting its refinery utilization. With refineries using less crude, the oil market is starting to seize up, with at least one pipeline asking producers to reduce output.

Oil Refineries Face Shutdowns as Demand Collapses - A growing number of refineries around the world are either curtailing operations or shutting down entirely as the oil market collapses. Oil prices have fallen precipitously to their lowest levels in nearly two decades. Typically, falling oil prices are a good thing for refiners because they buy crude oil on the cheap and process it into gasoline, jet fuel, and diesel, selling those products at higher prices. The end consumer also tends to consume more when fuel is less expensive. As a result, the profit margin for refiners tends to widen when crude oil becomes oversupplied.But the world is in the midst of dual supply and demand shock — too much drilling has produced a substantial surplus, and the global coronavirus pandemic has led to a historic drop in consumption. Oil demand could fall by as much as 20 percent, according to the International Energy Agency, by far the largest decline in consumption ever recorded.Consumption of jet fuel around the world has plunged by 75 percent. Average retail gasoline prices in the U.S. are dropping below $2 per gallon nationwide and have already fallen below $1 per gallon in some places. They will fall further still.In fact, margins even fell into negative territory, meaning that the average refiner was losing money on every gallon of gasoline produced. Refiners now find themselves facing a painful financial squeeze. "We're seeing gasoline cracks at negative margins. We're seeing jet cracks even worse," Brian Mandell, an executive with Phillips 66, said on a March 24 phone call with investors. "Cracks" refer to the difference between the cost of buying crude oil and selling the refined product, and it stands in as a reference point for a refiner's profit margin.  One of the main strategies that refiners use when a particular product is oversupplied is to alter their processing mix. Facing a glut of gasoline, refiners could switch their operations away from gasoline to a focus on diesel, where margins have not declined by nearly as much. However, some refiners already switched over to diesel following tighter international sulfur regulations on maritime fuels that took effect at the start of this year, which placed a premium on low-sulfur diesel. Having already tapped that strategy, the ability to adjust away from gasoline production is "likely limited," RBN concluded. There are around 3 billion people on some form of a lockdown around the world. In those circumstances, refiners have seen buyers vanish overnight.  With no buyers, gasoline is set to pile up in storage. Refiners are looking at no other choice but to curtail or shut down operations. Valero Energy, for instance, recently announced that it would limit output at six of its 12 U.S. refineries. ExxonMobil announced significant cuts to its refineries in Texas and Louisiana, citing the lack of sufficient storage capacity. Notably, Exxon said it would shut down its gasoline unit at its Baytown, Texas, complex, the company's largest such unit in the United States. "The poor refining margins will push companies to reduce operating rates further." The danger for some refineries is that they cannot simply throttle back and operate at really low levels. "In our experience, crude throughput in the 60 percent to 70 percent range is approaching the minimum rates that a refinery can operate without completely shutting down units," RBN said.

Some Refiners Benefiting From Crude-Price Drop -- America’s biggest fuel makers are taking advantage of plunging oil prices to capture profits while slowing fuel production. Marathon Petroleum Corp., Phillips 66 and Valero Energy Corp. are some of the U.S. refiners that cash in when crude costs fall faster than fuel prices. Some grades of American crude are trading at record discounts to Brent, the international benchmark, opening up huge opportunities for refiners to profit. “As refiners cut runs to offset weaker demand and global storage starts to fill up, we are witnessing a material widening in differentials for inland and coastal grades,” Manav Gupta, an analyst at Credit Suisse Securities (USA) LLC, wrote in a note to investors on Monday. Widening differentials “have historically favored refiners relative to other energy sub-sectors.” Refiners in the S&P 500 Index rose as much as 5% on Monday. PBF Energy Inc., which is not a member of the refiners’ index, climbed 18% after telling investors it would suspend dividends, cut capital spending, and put more than half a billion dollars in assets up for sale. Despite Monday’s advance, the refining sector is still down more than 50% since the end of 2019 as the Covid-19 outbreak isolated millions of people and shut down massive swaths of the global economy. “We are now turning more positive” after staying neutral or negative on refiners for nearly two years, Brad Heffern, an analyst at RBC Capital Markets LLC, wrote in a note to clients. “Benefits from lower crude prices and oversupply are likely underappreciated.”

Equinor says Sverdrup oilfield output to beat expectations -  (Reuters) - Norway’s Equinor said on Monday its Johan Sverdrup oilfield is ramping up output at a faster pace and will produce more barrels per day than initially expected. Western Europe’s biggest producing oilfield is now expected to hit a daily output rate of 470,000 barrels in early May, above the 440,000 bpd peak that had initially been pencilled in for mid-year, it said. The news comes as the price of North Sea crude has dropped to its lowest in 18 years amid a glut of output and falling global demand. But the cost of operating the field amounts to less than $2 per barrel, making it resilient to weak prices, Equinor said. “With low operating costs Johan Sverdrup provides revenue and cashflow to the companies and Norwegian society at large in a period affected by the coronavirus and a major drop in the oil price,” Equinor executive Arne Sigve Nylund said in a statement. The field, which holds an estimated 2.7 billion barrels of oil equivalents, began production last October, two months ahead of schedule. It now produces more than 430,000 bpd from nine wells and a 10th well will soon be completed, the operator said. “Field production has been very good and stable from day one, and the wells have produced even better than expected,” said Rune Nedregaard, vice president for Johan Sverdrup operations.

Apache Makes Significant Oil Find - Apache Corporation announced Thursday a “significant” oil discovery at the Sapakara West-1 well, which was drilled offshore Suriname in Block 58. Sapakara West-1 was drilled to a depth of approximately 20,700 feet and successfully tested for the presence of hydrocarbons in multiple stacked targets, Apache revealed. Preliminary fluid samples and test results indicate at least 259 feet of net oil and gas condensate pay in two intervals, Apache noted. “Our second discovery offshore Suriname this year further proves our geologic model and confirms a large hydrocarbon system in two play types on Block 58,” Apache CEO and President John J. Christmann said in a company statement. “Based on a conservative estimate of net pay across multiple fan systems, we have discovered another very substantial oil resource with the Sapakara West-1 well,” he added. “Importantly, our data indicates that the Sapakara West-1 well encountered a distinct fan system that is separate from the Maka Central-1 discovery we announced in January this year,” Christmann continued. Block 58 comprises 1.4 million acres and offers significant potential beyond the discoveries at Sapakara West and Maka Central, according to Apache, which said it has identified “at least” seven distinct play types and more than 50 prospects within the thermally mature play fairway.

India Subsea Project Achieves First Gas - India’s Oil and Natural Gas Corp. (ONGC) has achieved early first gas on its 98/2 Block Project in the Krishna Godavari Basin offshore India, McDermott International, Inc. reported Wednesday.“McDermott is a leader in the subsea space and we have worked incredibly hard to fast-track the production to early first gas,” commented Ian Prescott, Asia Pacific senior vice president with McDermott, which supplied equipment and services for India’s largest subsea project.Citing ONGC’s website, an October 2018 Rigzone article notes the operator had pointed out the 98/2 Block Project could cut by 10 percent India’s reliance on imported hydrocarbons.“To deliver this accelerated schedule is an exceptional achievement and testament to the benefits of the collaborative commercial model put forward to ONGC,” Prescott stated Wednesday. “Production from a deepwater well in less than 14 months is an outstanding achievement for the deepwater exploration and production industry.”In a written statement emailed to Rigzone, McDermott noted that its integrated subsea package for the project included:

  • supplying all subsea production systems (SPS), including 26 deepwater trees
  • installing subsea umbilicals, risers and flowlines (SURF) at a water depth ranging from zero to 4,265 feet (1,300 meters).

McDermott stated that early first gas involved tying back a single well to the existing Vashishta facility. In addition, it pointed out the first well – at a 4,265-foot (1,300-meter) water depth – is the deepest that ONGC has opened.

Oil spill at Sulphur Point in Tauranga - Bay of Plenty Regional Council oil spill response staff have been working to contain an oil spill at Sulphur Point in Tauranga. An estimated 2000 litres of oily sludge is believed to have been discharged from a tanker truck at around 5pm on Monday, as it was removing the sludge from a vessel. Some of this sludge has entered the water. Regional Council staff deployed booms and other spill equipment to contain the spill as much as possible. For safety reasons, clean-up activities were halted overnight but will recommence at first light. Regional On Scene Commander Adrian Heays says while it appears most of the oil has been contained underneath the wharf, staff won’t know until first light whether any has managed to get past the booms and further into the harbour. Staff had been at the scene earlier in the day when a smaller spill had occurred involving the same vessel and tanker truck. It’s believed around 60 litres was spilled as part of this earlier event, with around 10 - 20 litres having entered the water. The cause of the incidents is not thought to be related. A full investigation has commenced for both incidents. "We expect to provide an update before 10am tomorrow morning once staff have had an opportunity to assess the situation and plan their action for the day. "Staff have full PPE gear to use and are working with appropriate distancing due to COVID-19. "While the public should not be out and about due to COVID-19, they are especially being asked to stay away from the area to avoid inadvertently causing any extra complications."

Oil demand could decline by 20 million barrels a day in April, says oil expert Dan Yergin - The oil market is facing a “double crisis” with a collapse in the OPEC+ alliance affecting supply and the slowdown in the global economy crushing demand, oil guru Dan Yergin said this week. “The breakdown of OPEC+ is only part of the picture,” the vice chairman of IHS Markit told CNBC’s “Capital Connection” on Monday. “The big thing is the coronavirus and the showdown of much of the world economy.” Infections around the world have now crossed 700,000, according to data compiled by the Johns Hopkins University. Nearly 34,000 people have died from COVID-19. Countries have implemented travel bans and instituted lockdowns to stem the spread of the virus. “Cars not on the road, airplanes not in the air, factories not working, people not going to work,” Yergin said. “We see, in this month of April that’s coming, what could be a 20 million barrel a day decline in oil demand.” “It’s unprecedented. That’s six times larger than the biggest downturn during the financial crisis period (in 2008),” he added. While demand is set to fall, major producers such as Saudi Arabia and Russia have announced they will increase supply in April after the OPEC+ agreement expires at the end of March. “This is what people are now looking at ... where are you going to put all of the oil?” he asked. When oil storage runs out, prices could fall further, he added. “I think the prices that we’re seeing, that you’re talking about today are really precursors ... April is going to be a very difficult month.”

Saudi Arabia says will raise oil exports further in May, in face of coronavirus hit to demand - Saudi Arabia's energy ministry on Monday said it will boost its oil exports in May to 10.6 million b/d, further flooding an oil market in which prices have cratered due to the coronavirus pandemic's hit to demand. In a statement, the ministry said an increase in the amount of natural gas used to generate electricity, along with a decrease in domestic demand for refined products due to the coronavirus outbreak would free up 600,000 b/d additional barrels of crude oil for export in May. That would bring "the total of Saudi petroleum exports to 10.6 million b/d." The ministry had said two weeks ago it would "increase its crude exports during the coming few months to exceed 10 million b/d." The shift in wording in Monday's statement to "petroleum exports" suggests that now some of the volumes could include refined products, condensates or NGLs. Saudi ministry officials have not responded to questions on how much of the exports would be solely crude. The kingdom exported 7.29 million b/d of crude oil and 748,000 b/d of refined products in January, according to the latest figures reported by the Joint Organizations Data Initiative. There were no NGL exports from Saudi Arabia, the JODI data shows. Saudi Arabia has said its state oil giant Aramco will raise crude production to its maximum 12 million b/d capacity once its OPEC quota of 10.14 million b/d expires at the end of March, as well as draw 300,000 b/d from its vast storage inventories, to supply the market with 12.3 million b/d of crude, including its domestic consumption. Saudi refineries have been running about 2.2 million b/d of crude the last few months, according to JODI. If runs remain at the same levels and the kingdom eliminates the crude it uses for electricity generation, that would imply about 10.1 million b/d of crude for export. "It is not clear if the kingdom's production after April 1 is 12 million b/d of crude oil or if it includes condensate and NGLs," said Sara Vakhshouri, who heads the consultancy SVB Energy and closely follows the Saudi oil sector. "Also it's unclear for how long Saudi Aramco intends to produce 12 million b/d."M

5 charts that explain the Saudi Arabia-Russia oil price war so far Two of the world’s largest oil producers — Saudi Arabia and Russia — are set to increase production dramatically this month, after an agreement between OPEC and its allies to lower output expired at the end of March. OPEC+ countries have teamed up to reduce their supply to the market since 2017, but failed to reach a deal last month. Riyadh and Moscow then separately announced that they would flood the market with oil in April. That, against the backdrop of demand destruction due to the global coronavirus pandemic, has crushed oil prices. Crude oil benchmarks plunged to 18-year lows on Tuesday and have fallen more than 60% since the beginning of the year. Here’s how the oil price war unfolded. As early as mid-January, the future of oil demand came into question as the coronavirus spread, prompting factory closures and trip cancellations in China. These concerns have now intensified — many countries have gone into lockdowns and air travel has largely been halted in a bid to prevent infections. Chart: Oil consumption 200401 Asia Both OPEC and the U.S. Energy Information Administration (EIA) slashed their oil demand outlooks in March reports. The Middle-East dominated alliance now sees demand growing by 60,000 barrels per day, while the EIA expects a rise of 400,000 bpd. They had initially expected growth of more than 1 million bpd in January. As coronavirus fears arose, there was talk of an emergency meeting between OPEC and its allies to stabilize the market, but only the Joint Technical Committee met in February. While it officially recommended extending voluntary production cuts to the end of the year, reports said OPEC kingpin Saudi Arabia was considering cuts by 1 million bpd.Prices plummeted after Russia declined to approve OPEC’s proposal to cut production by an additional 1.5 million bpd, on top of the 1.7 million bpd agreed upon in December, excluding voluntary reductions. Saudi Arabia responded by offering discounts on its oil and announcing that it would increase production, leading both WTI and Brent to their worst days since 1991 on March 9, which in turn caused a sell-off in global markets.Analysts said Russia may have taken the action in order to target the U.S. “It’s Saudi Arabia against Russia, and Russia against the United States. I think that’s what it is,” vice-chairman of IHS Markit Dan Yergin said at the time.

The First Victims of the Oil Price War - As the oil price war and coronavirus pandemic rage on, it’s becoming increasingly clear that the energy market can remain choppy and irrational longer than entire nations can stay solvent.  Everybody is watching to see which of the leading protagonists between Saudi Arabia and Russia is going to be the first to blink as high supply and low demand threaten to overwhelm available storage facilities. Scores of oil-producing countries have adopted a raft of austerity measures and spending cuts as they attempt to outlive the biggest oil bust in living memory. Unfortunately, it’s the riskier corners of the global financial markets that will emerge as collateral damage in the ongoing oil price war. American credit rating agency Moody’s has warned the dramatic plunge in oil prices is likely to cut fiscal revenue and exports for most exposed oil-exporting sovereigns by more than 10 percent of GDP and, consequently, weaken their credit profiles. According to Moody’s, the sovereigns most vulnerable to low oil prices in the 2020-21 period are those with the highest reliance on hydrocarbons for fiscal exports and revenues coupled with a limited capacity to adjust. The credit agency says the most vulnerable sovereigns are Oman, Iraq, Bahrain, and Angola due to their limited capacity to adjust to external shocks. These nations could see a decline in fiscal revenue in the range of 4-8 percent of GDP if low oil prices persist.The vast majority of Gulf Arab states are unable to balance their budgets with oil prices of $40 per barrel, let alone the current $20/barrel level. These developing economies are especially vulnerable due to ongoing massive cash outflows, with investors continuing to liquidate emerging-market assets. In contrast, Russia, Saudi Arabia, Qatar, Azerbaijan, and Kazakhstan are seen as being less vulnerable, with expected declines in fiscal revenue and exports of less than 3% of GDP. Interestingly, Moody’s analysts concur with a previous OilPrice.com opinion piece, which argues that Russia has the upper hand in the oil price war. Moody’s sees Russia as being less vulnerable to external shocks and turbulence in energy markets than most oil-exporting nations due to its massive forex reserves as well as a flexible exchange rate. Indeed, the lifting cost per barrel of oil equivalent for Russia’s largest oil producer, Rosneft, is now lower than the same metric for Saudi Arabia’s oil giant, Aramco – thanks mainly to a weaker ruble. The ruble has weakened about 15 percent against the U.S. dollar over the past 30 days, recently hitting a four-year low against the greenback after the oil markets imploded. Russia, though, says it’s quite happy with oil prices in the range of $25 to $30 per barrel and can hold out at these levels for 6-10 years. In fact, Russia’s Energy Minister Alexander Novak recently declared that Russian oil companies would remain competitive “at any forecast price level.”

Oil prices fall to 17-year low as Saudi Arabia-Russia standoff continues, coronavirus hits demand - Oil prices fell to the lowest in more than 17 years as demand plunged as a result of the pandemic and an unrelenting price war between Saudi Arabia and Russia showed no signs of easing. Brent crude prices hit $23.03 a barrel on Monday morning during Asia hours – the lowest level since Nov. 15, 2002. It has since clawed back some losses following that record decline, but was last still 5.86% lower at $23.47 a barrel. U.S. West Texas Intermediate (WTI) crude futures briefly dipped below $20 per barrel to $19.90 – their lowest level since March 20, when they fell as low as $19.50. WTI was last 4.51% lower at $20.54 per barrel. Those declines come as Saudi Arabia signaled no breakthrough in the oil price war with Russia. On Friday, the two countries were still at a stalemate, with Saudi Arabia saying it was not in talks with Russia to stabilize oil markets despite Washington stepping in to pressure both sides to end the price war. “Russia and Saudi Arabia show no signs of compromising in their standoff over oil supply,” National Australia Bank’s Rodrigo Catril wrote in a Monday note. In early March, OPEC and non-OPEC allies, sometimes referred to as OPEC+, failed to agree on the terms of deeper supply cuts. The fallout between OPEC kingpin Saudi Arabia and non-OPEC leader Russia has kickstarted an oil price war. OPEC recommended additional production cuts of 1.5 million bpd starting in April and extending until the end of the year, but OPEC-ally Russia rejected the additional cuts. Saudi Arabia has signaled its intent to flood the market with crude, announcing massive discounts to its official selling prices for April, Reuters reported. Such a move could prompt a wave of bankruptcies and investment cuts in the U.S. which, in turn, would have a noticeable impact on shale production. “We think oil supply from the US, Canada and China are the most likely to be curtailed at low oil prices. US oil production cuts are expected to be the most significant,” Vivek Dhar of the Commonwealth Bank of Australia said in a note on Monday. “The plunge in US oil rigs last week signals the pressure facing the US shale oil sector.” Countries have gone into lockdown due to the coronavirus pandemic, with flights all over the world canceled as airlines ground their planes, hitting economic activity and fuel demand. That has led to excess supply flooding the market as well.

US crude dips below $20 as lockdowns hit demand - Oil prices fell sharply on Monday, with U.S. crude briefly dropping below $20 and Brent hitting its lowest level in 18 years, on heightened fears that the global coronavirus shutdown could last months and demand for fuel could decline further. Brent crude, the international benchmark for oil prices, was down $2.19, or 8.78%, at $22.74, after earlier dropping to $22.58, the lowest since November 2002. U.S. West Texas Intermediate crude fell $1.41, or 6.5%, to $20.10. Earlier in the session, WTI fell as low as $19.92. The price of oil is now so low that it is becoming unprofitable for many oil firms to remain active, analysts said, and higher cost producers will have no choice but to shut production, especially since storage capacities are almost full. “Global oil demand is evaporating on the back of COVID-19-related travel restrictions and social distancing measures,” said UBS oil analyst Giovanni Staunovo. “In the near term, oil prices may need to trade lower into the cash cost curve to trigger production shut-ins to start to prevent tank tops to be reached,” he added. Rystad Energy’s head of oil markets, Bjornar Tonhaugen said: “The oil market supply chains are broken due to the unbelievably large losses in oil demand, forcing all available alternatives of supply chain adjustments to take place during April and May,” including cutting refineries runs and increasing storage. Besides demand destruction, oil markets have also been slammed by the Saudi Arabia-Russia price war that is flooding markets with extra supply. An official from Saudi Arabia’s energy ministry said on Friday the kingdom was not in talks with Russia to balance oil markets despite rising pressure from Washington to stop the rout that has cut prices by more than 60% this year. With world demand now forecast to plunge 15 million or 20 million barrels per day, a 20% drop from last year, analysts say massive production cuts will be needed beyond just the Organization of the Petroleum Exporting Countries. “OPEC, Saudi Arabia and Russia could mend their differences, but there’s not that much OPEC could do .... The demand shock from COVID-19 is just too big,”

Oil market volatility is at an all-time high - Crude oil prices have fallen significantly since the beginning of 2020, largely driven by the economic contraction caused by the 2019 novel coronavirus disease (COVID-19) and a sudden increase in crude oil supply following the suspension of agreed production cuts among the Organization of the Petroleum Exporting Countries (OPEC) and partner countries. With falling demand and increasing supply, daily price changes for the U.S. benchmark crude oil West Texas Intermediate (WTI) have been extremely volatile. Implied volatility measures an asset’s expected range of near-term price changes. OVX measures the implied volatility of oil prices and is calculated using movements in the prices of financial options for WTI, the light, sweet crude oil priced at Cushing, Oklahoma. VIX measures the implied volatility of the Standard and Poor’s (S&P) 500—a stock market index of 500 large companies listed in the United States. Crude oil volatility is typically higher than the S&P 500’s volatility, generally because OVX represents changes in one commodity and VIX represents changes across a diverse group of 500 companies.Both volatility measures have been relatively high this month: on March 16, the VIX index measured 82.7, a level higher than any point during the financial crisis of 2008–09, the last time the global economy experienced a significant recession. Crude oil market volatility has been even higher. On March 20, OVX reached 190, the highest value since its inception in May 2007. Since 1999, daily WTI crude oil futures prices have settled within 2% of the previous trading day’s price about 70% of the time. Nearly all (99.5%) of the daily WTI price changes since 1999 have settled within 10% of the previous day’s price; larger price changes are relatively rare. March 2020 has had four days where WTI prices decreased by more than 10% and two days where WTI prices increased by more than 10%. The 25% decline on March 9 and the 24% decline on March 18 were the two largest percentage declines in the WTI futures price since at least 1999. On the days following those declines, WTI prices rose by 10% (March 10) and 24% (March 19), likely in response to announced plans from various countries’ governments that emergency fiscal and monetary policy would be forthcoming.

The Global Oil Market Is Broken, Drowning in Crude Nobody Needs -  The global oil market is broken, overwhelmed by an unmanageable surplus as virus lockdowns cascade through the world’s largest economies.Onshore tanks in many markets are full, forcing traders to store excess oil in idle supertankers. Refineries are starting to shut down because nobody needs the fuels they produce. In physical oil markets, barrels are already changing hands for less than $10, and in a few landlocked markets producers are paying consumers to take away their crude. “The physical oil market has seized up,” said Gary Ross, an influential oil watcher and chief investment officer of Black Gold Investors LLC. “The logistics are struggling to cope because we are facing a catastrophic loss of demand.”Oil traders say it’s likely to get worse this week. The root cause is an accelerating plunge in consumption that’s without precedent since a steady flow of oil became essential to the global economy more than a century ago. The great crash of 1929, the twin oil shocks of the 1970s and the global financial crisis don’t come close. The world normally uses 100 million barrels of oil day, and traders and analysts reckon as much as a quarter of that has disappeared in just a few weeks.  The global airline industry is grounded, countless businesses and factories are shuttered and billions of people have been forced to stay home. The immediate problem is a lack of storage in the right places. With demand running 20 million barrels a day below supply, the world won’t have enough tanks to store the surplus in two or three months. But the issue is even more pressing because global tank capacity, mostly concentrated in a few hubs like Rotterdam, the Caribbean and Singapore, isn’t available to every producer. For those without access to pipelines and ports, local storage will run out in days, traders and consultants say.For those with access to the coast, one solution is to use the supertanker fleet as floating storage tanks, and that’s happening at an unprecedented rate. The CEO of the world’s largest tanker owner, Frontline Ltd., said on Friday that he’d never known such demand to hire ships for long-term storage. Traders could book ships to put 100 million barrels at sea this week alone, he estimated, but even that could accounts forless than a week’s oversupply. In the U.S., one of the largest pipeline companies, Plains All American Pipeline LP, has asked oil producers to voluntarily cut output to avoid overwhelming the network that connects well heads to refineries through thousands of miles of pipelines.

Welcome to a Truly Free Oil Market - At the point we’re now at, postponing the oil-price war won’t make a lot of difference for an industry that’s already breaking down under the weight of demand destruction. With prices hitting a 17-year low on Monday, it’s too late to use diplomacy and artful negotiations to share the burden of output cuts that are now inevitable. The pumping free-for-all unleashed by Saudi Arabia and Russia is important for the long-term shape of the oil industry, but, as my colleague Javier Blas pointed out here, it’s a sideshow to the havoc being wrought by the lockdowns crippling economies worldwide in response to the coronavirus pandemic. Forecasts of a catastrophic drop in oil demand abound, with estimates of a whopping 20% year-on-year reduction in global consumption in April becoming more common. That’s 20 million barrels a day, equivalent to the entire consumption of the United States. And even those gloomy views may be too optimistic, according to Goldman Sachs. It would be impossible for any small group of producers to mitigate that kind of impact by reducing output, unless Saudi Arabia and Russia were both to slash their production to almost zero. And that’s not going to happen. On Wednesday, U.S. Secretary of State Mike Pompeo called on Saudi Arabia’s Crown Prince Mohammed bin Salman to take the lead as his country prepared to host a meeting of the Group of 20 nations. Pompeo urged the kingdom “to rise to the occasion and reassure global energy and financial markets.” That’s a reasonable request. Somebody has to show leadership and it doesn’t look like it’s going to be President Donald Trump. The trouble is that I suspect what Pompeo meant is for Saudi Arabia to cut its production unilaterally, rather than trying to bring together a short-term “coalition of the willing,” including the U.S., to work together to confront a global problem. After all, that’s always what’s happened in the past.. In February 1999, the Organization of Petroleum Exporting Countries agreed to its third successive output cut and by the end of the year Brent crude had recovered.. Those were the days when oil was regarded as a depleting asset whose value would only rise in the future, as demand outstripped available supply. That view no longer holds sway — battered both by the tsunami of crude extracted from shale rocks and the growing awareness of the need to reduce carbon dioxide emissions that has seen concerns about peak oil production replaced with worries (for producers) of peak oil demand. Oil left in the ground now is at risk of never being produced at all.

Oil Tumbles to 18-Year Low - Oil tumbled to an 18-year low as coronavirus lockdowns cascaded through the world’s largest economies, leaving the market overwhelmed by cratering demand and a ballooning surplus. Futures in London plunged by 9% to the lowest level since March 2002, while New York crude dipped below $20 a barrel before settling just above that level. While U.S. President Donald Trump spoke with Russian counterpart Vladimir Putin Monday to discuss the importance of stable energy markets, that did little to stanch the decline. A huge oversupply is further collapsing the oil market’s structure, and there may be more weakness to come as the world quickly runs out of storage capacity. The slump in demand has shut refineries from South Africa to Canada, leading to excess barrels in the market. At the key storage hub of Cushing, Oklahoma, inventories are said to have ballooned by more than 4 million barrels last week, according to traders with knowledge of Genscape data, raising fears about storage capacity limits being reached. “We’re grinding lower here and we’ll continue to get lower as runs get cut globally,” said John Kilduff, a partner at Again Capital LLC, a New York hedge fund focused on energy. “As we see specific points like Cushing near its limits, it’s just going to put greater and greater pressure on the price till we get to a clearing point.” Prices are on track for the worst quarter on record. Goldman Sachs Group Inc. estimates consumption will drop by 26 million barrels a day this week as measures to contain the coronavirus hurt global GDP. Consultant FGE estimated that refinery operating rates have been cut by over 5 million barrels a day worldwide, and could bottom out at between 15 million and 20 million lower. Meanwhile, Riyadh and Moscow are showing no signs of a detente in their supply battle as Saudi Arabia announced plans to increase its oil exports in the coming months.  Prices:

  • Brent declined $2.17 to settle at $22.76 a barrel.
  • Front-month futures are poised for a plunge of over 65% this quarter, their worst ever.
  • West Texas Intermediate slid $1.42 to $20.09, after falling to as low as $19.27.

In the market for physical barrels of crude, prices are already far below those of futures benchmarks. Oil from Canada touched a record low of $3.82, while many other key grades are trading below $10 a barrel, with some as low as just $3. It’s a similar picture in Europe, where Kazakh crude was offered at a 10-year low. The six-month contango on the global Brent benchmark has grown bigger than in the financial crisis, at more than $13 a barrel. The equivalent six-month contango for WTI is about $12.

Oil Prices Rebound After Falling to 18-Year Low - Oil prices ended March by clawing back some losses after prices fell to 18-year lows in the last session. International Brent Oil Futures gained 1.82% to $26.88 by 9:57 PM ET, whilst U.S. Crude Oil WTI Futures jumped 4.43% to $20.98. WTI slumped almost 7% to $20.09 a barrel on Monday, its lowest level since February 2002 as oil markets continued to search for a solution to its' dilemma of oversupply. Saudi Arabia and Russia will be able to pump-at-will from tomorrow as the OPEC+ alliance failed to mediate a truce in the price war between the two producers. Meanwhile, most countries are extending lockdown deadlines as well as slashing transport numbers to deal with the COVID-19 pandemic. A conversation between U.S. President Donald Trump and his Russian counterpart Vladimir Putin on Monday to discuss the importance of stable energy markets, failed to make an impact. “Any little bit of optimism is welcome even if it is little more than a false dawn,” Stephen Innes, global chief market strategist at AxiCorp, told Bloomberg. “The demand devastation is the most aggravating factor these days, while the supply issues are exacerbating that pressure,” he added.

Crude-oil prices post the largest quarterly percentage drop on record - May West Texas Intermediate crude tacked on 39 cents, or 1.9%, to settle at $20.48 a barrel on the New York Mercantile Exchange. Prices based on front-month WTI crude fell by 54.2% this month, or $24.28—the largest one-month net decline since October 2008, according to Dow Jones Market Data. For the quarter, prices lost 66.5% to post the largest quarter percentage loss based on records dating back to March 1983. Meanwhile, the global benchmark on ICE Futures Europe, May Brent crude BRNK20, -0.22% fell 2 cents, or 0.09%, at $22.74 a barrel on the contract’s expiration day. For the month, prices fell 55%, tallying a loss of 65.6% for the quarter—the largest quarterly decline based on records dating to June 1988. The new front month June Brent shed 7 cents, or 0.3%, to $26.35 for Tuesday’s session.  WTI marked its lowest finish since February 2002, while Brent saw its lowest settlement since November of that year. The slight rebound Tuesday came even as U.S. benchmark stock indexes moved lower.

Oil prices just had their worst ever quarter as coronavirus slashes demand - Oil prices registered their worst quarterly performance on record over the first three months of the year, as the coronavirus pandemic continues to crush global demand for crude. Brent futures dipped 0.09% lower on the final trading day of the first quarter, settling at $22.74, while WTI gained almost 2% to settle at $20.48 in the previous session. It means Brent futures have collapsed more than 65% over the first three months of the year, registering their worst-ever quarter through our history to 1990, according to data compiled by CNBC. Brent also recorded its worst-ever monthly performance in March, falling over 54%. Meanwhile, WTI futures slumped more than 66% in the first quarter, recording their worst-ever quarterly performance back to when the contract began trading in 1983. WTI futures fell over 54% last month, registering its worst-ever monthly performance, too. A public health crisis has meant countries around the world have effectively had to shut down, with many governments imposing draconian measures on the daily lives of hundreds of millions of people. The restrictions have created an unprecedented demand shock in energy markets, ramping up the pressure on companies and governments reliant on crude sales. To date, more than 860,000 people have contracted COVID-19 worldwide, with 42,345 deaths, according to data compiled by Johns Hopkins University. International benchmark Brent crude traded at $25.34 a barrel Wednesday morning, down more than 3.8%, while U.S. West Texas Intermediate (WTI) stood at $20.18, more than 1.4% lower.

Oil falls on oversupply fears and US inventory growth - Global crude prices fell on Wednesday as a bigger-than-expected rise in U.S. inventories and a widening rift within OPEC heightened oversupply fears. Oil prices are near their lowest since 2002 amid the global coronavirus crisis that has brought a worldwide economic slowdown and slashed oil demand. Crude futures ended the quarter down nearly 70% after record losses in March. Brent crude was down $1.17, or 4.44%, to trade at $25.18 per barrel. U.S. West Texas Intermediate crude fell 19 cents, or 0.9%, to trade at $20.28 per barrel. U.S. crude inventories rose by 10.5 million barrels last week, far exceeding forecasts for a 4 million barrel build-up, data from industry group the American Petroleum Institute showed. “The market sentiment remains bleak as there is no clarity on how long the pandemic will continue,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities. Asian shares and Wall Street futures also fell on Wednesday as the coronavirus pandemic and the prospect of a global recession tore through investor confidence. Nearly 800,000 people have been infected across the world and more than 38,800 have died, according to a Reuters tally. The bearish mood in the market was also fuelled by a rift within the Organization of the Petroleum Exporting Countries (OPEC). Saudi Arabia and other members of OPEC were unable to come to an agreement on Tuesday to meet in April to discuss sliding prices. “It is very unlikely that OPEC, with or without Russia or the United States, will agree a sufficient volumetric solution to offset oil demand losses,” BNP Paribas analyst Harry Tchilinguirian said in a report issued on Tuesday. Adding to the downward pressure, sources told Reuters that top U.S. officials have for now put aside a proposal for an alliance with Saudi Arabia to manage the global oil market.

Oil prices could soon turn negative as the world runs out of places to store crude, analysts warn - Global oil storage could reach maximum capacity within weeks, energy analysts have told CNBC, as the coronavirus crisis dramatically reduces consumption and some of the world’s most powerful crude producers start to ramp up their output. The coronavirus pandemic has meant countries have effectively had to shut down, with many governments imposing draconian measures on the daily lives of billions of people. It has created an unprecedented demand shock in energy markets, with storage space – both onshore and offshore – quickly running out. At the same time, a three-year pact between OPEC and non-OPEC partners to curb oil output ended on Wednesday, paving the way for oil producers to ramp up production. OPEC kingpin Saudi Arabia has pledged to hike output to a record high. “Refineries in many places are now losing money for every barrel they process, or they have no place to store their output of oil products,” Bjarne Schieldrop, chief commodities analyst at SEB, told CNBC via email this week. He pointed out that when refineries shut down, many oil producers have nowhere to send their crude if the refinery is also part of the logistical chain to the market. “For land-based or land-locked oil producers, this means only one thing,” Schieldrop continued. “The local oil price or well-head price they receive very quickly goes to zero or even negative, because if they have too much oil, they must pay someone to transport it away until they have managed to shut down their production.” International benchmark Brent crude traded at $25.33 Wednesday afternoon, down more than 3.8%, while U.S. West Texas Intermediate (WTI) stood at $20.54, around 0.3% higher. Both benchmarks recorded their worst-ever quarter through the first three months of the year, according to data compiled by CNBC. Brent futures collapsed over 65% in the first quarter, while WTI slumped more than 66% over the same period.

The oil price war could persist until year-end, analyst says - The oil price war could last until the end of the year, an analyst said Wednesday. Prices have plummeted more than 60% since the beginning of year after OPEC+ failed to reach an agreement, leading Saudi Arabia and Russia to enter a price war amid the global coronavirus crisis. Riyadh said it will boost output to 12.3 million barrels per day in April, while Moscow said it can increase production by 500,000 bpd in the long term. Chart: Saudi oil production 200401 Asia “This was always going to be an inevitability of the production-cut strategy that OPEC+ had been adopting,” said Edward Bell, senior director of market economics at Dubai-based bank Emirates NBD. “Saudi Arabia was not going to restrain production infinitely and allow for other producers in the rest of the world to take away its market share.” Brent crude fell 5.01% to $25.03 on Wednesday evening in Asia, while U.S. crude futures were down 1.03% at $20.27. Higher production levels can help Saudi Arabia maintain its oil revenues while prices are low, Bell told CNBC’s “Capital Connection.” “That suggests to us that the oil price war strategy remains in place for quite a long time, until the end of this year, if there is no real diplomatic breakthrough,” he said. If Russia, a non-OPEC member, or countries in the cartel decide to call for some kind of production restraint, the oil market could go back to behaving the way it has for the past few years, Bell said. “You could see prices rallying on the back of ... 5, 10 million bpd being cut, and those are the kind of scales of cuts that could be required, given the severity of the demand destruction that we’re seeing,” he said. That, in turn, would also allow the U.S. shale patch to increase production again. However, Riyadh doesn’t seem prepared to back down from its price-war strategy, he said. “We don’t really see any change in the oil market diplomacy.” If the kingdom wants to carve out its place as the global dominant oil supplier, it’s going to mean “a lot of pain” for marginal producers, he added. “It’s going to have to try and squeeze them out of the oil market as permanently as it can.”

WTI Tumbles To $19 Handle After Biggest Crude Build Since 2016 -  After its worst quarter ever, as COVID-19 lockdowns crushed demand, raising fears about overflowing storage tanks amid a price war that has flooded the market with extra supply, all eyes are glued to today's official inventory data (after API reported a major surprise build in crude and gasoline stocks) as Standard Chartered analysts, including Emily Ashford warned in a report, oil tanks around the world could fill in six weeks, a move that will likely force significant production shut-downs, “Huge inventory builds, potentially exhausting spare storage capacity, will mean that market balance requires an unprecedented output shutdown by producers,” they wrote. So, eyes down... "There is the very real possibility that this week's storage reports could be the energy patch version of last Thursday's Weekly Jobless Claims," Robert Yawger, Mizuho Securities USA's director of energy said in a note. "I would expect the numbers to be supersized and challenge multi-year highs/lows on multiple data points. Of course, I have been expecting big numbers for the past couple week, but the fireworks have not happened. That leads me to believe that the data explosion will likely happen this week ... Exports will likely be down big, and refinery utilization will likely pull back dramatically. That will leave a lot of crude oil on the sidelines ... EIA crude oil storage has been higher for nine weeks in a row. Storage will likely double up and increase at the rate of around 10 million for another nine weeks...at least." DOE:

  • Crude +13.833mm (+4.6mm exp) - biggest since Oct 2016
  • Cushing +3.521mm - biggest build since Mar 2018
  • Gasoline +7.524mm (+3.6mm exp) - biggest build since Jan 2020
  • Distillates -2.194mm (-600k exp)

API reported a massive crude build (and gasoline build) overnight but the official data showed an even bigger 13.8mm barrel crude build - the biggest since Oct 2016 and a huge increase in stocks at Cushing...

Oil ends lower after U.S. crude stockpiles jump (Reuters) - Oil prices fell on Wednesday after U.S. crude inventories rose last week by the most since 2016, while gasoline demand suffered its biggest weekly drop ever due to the coronavirus pandemic. Crude inventories rose by 13.8 million barrels last week, the U.S. Energy Information Administration said. That was the biggest one-week rise since 2016, and analysts expect similar data in coming weeks, as refineries curb output further and gasoline demand continues to decline. West Texas Intermediate (WTI) crude fell 17 cents to settle at $20.31 a barrel, after hitting a low at $19.90. June Brent crude fell $1.61 , or 6.1%, to $24.74 a barrel. The global benchmark fell to $21.65 on Monday, its lowest since 2002, when the now-expired May contract was the front month. The market has slumped on the sharp fall in demand because of the coronavirus pandemic and rising output from Saudi Arabia and Russia after a supply pact collapsed last month. Brent crude fell 66% in the first three months of 2020, its biggest ever quarterly loss. Saudi Arabia's production rose to more than 12 million bpd in the most recent months, according to sources. "The likelihood of distressed cargoes, increased freight rates, force majeures, strains on storage capacity, VLCC availability will be combining in placing additional downside pressures on petroleum prices," Russian President Vladimir Putin called on Wednesday for global oil producers and consumers to address "challenging" oil markets while U.S. President Donald Trump complained that oil cheaper "than water" was hurting the industry. Trump invited several energy industry executives, including the chief executives of Exxon Mobil and Chevron Corp, to a meeting on Friday to discuss aid for the industry, including possible tariffs on oil imports from Saudi Arabia, an administration source confirmed. News of those efforts has intermittently bolstered futures prices, but physical grades of crude are deteriorating, as refiners and shippers confront the coming wave of supply and freeze-up in demand. Gasoline demand fell by the most ever in one week, with products supplied, a proxy for demand, dropping by 2.2 million barrels per day to 6.7 million bpd. That augurs for more refining cutbacks down the road. "Demand is a disaster," said Bob Yawger, director of energy futures at Mizuho in New York. "That's the whole problem here. It's horrible."

Oil prices could soon turn negative as the world runs out of places to store crude, analysts warn -  Global oil storage could reach maximum capacity within weeks, energy analysts have told CNBC, as the coronavirus crisis dramatically reduces consumption and some of the world’s most powerful crude producers start to ramp up their output.The coronavirus pandemic has meant countries have effectively had to shut down, with many governments imposing draconian measures on the daily lives of billions of people. It has created an unprecedented demand shock in energy markets, with storage space – both onshore and offshore – quickly running out. At the same time, a three-year pact between OPEC and non-OPEC partners to curb oil output ended on Wednesday, paving the way for oil producers to ramp up production.OPEC kingpin Saudi Arabia has pledged to hike output to a record high.“Refineries in many places are now losing money for every barrel they process, or they have no place to store their output of oil products,” Bjarne Schieldrop, chief commodities analyst at SEB, told CNBC via email this week.He pointed out that when refineries shut down, many oil producers have nowhere to send their crude if the refinery is also part of the logistical chain to the market.“For land-based or land-locked oil producers, this means only one thing,” Schieldrop continued. “The local oil price or well-head price they receive very quickly goes to zero or even negative, because if they have too much oil, they must pay someone to transport it away until they have managed to shut down their production.”

Unprecedented Demand Destruction Marks The Return Of Crude's Super-Contango -  These days, every corner of the oil market is “unprecedented”—from the demand destruction to the supply surge and the resulting glut. The oil futures curve is no exception and is also in a state never seen before.   This is the super contango, the market situation in which front-month prices are much lower than prices in future months, pointing to a crude oil oversupply and making storing oil for future sales profitable.  The last time a super contango appeared on the market was during the previous glut of 2015. During the peak of the 2008-2009 financial crisis, the super contango hit a record—the discount at which front-month futures traded compared to longer-dated futures was at its highest ever.The double supply-demand shock of the past month threw the oil futures market into another super contango. And this super contango is already beating previous records.The super contango is representative of the state of the oil market right now: the growing glut with shrinking storage capacity as oil demand craters, OPEC’s leader and the world’s top exporter, Saudi Arabia, intent on further cratering the market with a supply surge beginning this month. Storage costs are surging, and so are costs for chartering tankers to store oil at sea for future sales when traders expect demand to recover from the pandemic-hit plunge.The market structure flipped into contango in early February, when the Chinese oil demand slump in the coronavirus outbreak led to lower estimates for oil consumption. A month and a half later, oil consumption is set to plunge by 20 million bpd, or 20 percent, this month. Add to this the Saudi supply surge, and here we have what analysts expect to be the largest glut the oil market has ever seen.Earlier this week, the oversupply and fast-filling storage capacity sent the discount of the May futures of Brent to the November futures contract to the widest contango spread ever—$13.95 a barrel, higher than even the super contango at the peak of the 2008-2009 financial crisis.  With the rollover of the front-month futures contract in April, the June Brent futures traded early on Wednesday at a discount of $10.30 a barrel to the November futures, while the June 2020 futures spread to the June 2021 futures was $13.59.One of the hottest ‘commodities’ in the market right now is storage—be it onshore or offshore—as commodity traders and oil majors are increasingly looking to profit from the super contango in several months’ time.   Apart from the traders who manage to secure storage for stashing crude for sale in a few months, the other big winners of the super contango market structure are set to be tanker owners and operators, as rates for chartering tankers for storage are soaring.Over the next few months, the tanker companies will be the biggest winners from the double market shock as traders rush to secure what’s left of available crude carriers for storage in the super contango structure.The inventory buildup around the world will be so high that it will force up to 10 million bpd of global oil production to be “cut or shut-in from April to June 2020 as oil storage fills up and output from financially strapped companies begins to fall,” IHS Markit said on Tuesday.“Under current conditions second-quarter global demand for oil is expected to be 16.4 million barrels per day less than a year ago. That is more than six times the record drop experienced during first quarter 2009 during the Great Recession. In April the drop will be even bigger,” said Aaron Brady, vice president, IHS Markit.  

Oil Companies on Tumbling Prices: ‘Disastrous, Devastating’ - The New York Times The once mighty oil industry is shrinking quickly around the world, hunkering down in survival mode.With the coronavirus pandemic all but eliminating travel and commutes, demand for energy is tumbling, and oil companies from Algeria to West Texas are slashing budgets. Refineries are cutting production of gasoline, diesel and jet fuel. Pipeline operators are telling producers that they can ship crude only if there is a buyer willing to take the fuel because storage tanks are filling up fast. And American oil companies are dropping rigs, dismissing fracking crews and beginning to shut down wells.As much as 20 percent, or 20 million barrels a day, of oil demand may be lost as the global economy slows, according to the International Energy Agency. That is roughly equivalent to eliminating all U.S. consumption. To make matters worse, Saudi Arabia and Russia are increasing oil production to regain market share from American oil companies that increased production and exports in recent years.The Trump administration has been trying to convince Saudi Arabia and Russia that they should cut production to help stabilize the oil market; President Trump and President Vladimir V. Putin of Russia discussed energy markets in a call on Monday. But the energy demand destroyed by the virus now overshadows anything that Saudi Arabia or Russia could do to reduce exports. Global oil benchmark prices hover around $20 a barrel — levels not seen in a generation — and regional prices in West Texas and North Dakota have fallen even further, to around $10 a barrel. That is about a quarter of the price that shale operators typically need to cover the costs of pulling oil out of the ground. If these prices persist, a big wave of bankruptcies is inevitable by the end of the year, experts say. “The picture looks bleak,” said Trent Latshaw, president of Latshaw Drilling, an oil service company active in Texas and Oklahoma with only 10 of its 41 rigs currently deployed. “We have never had this situation where you have a huge increase in supply and a huge decrease in demand at the same time. Oil prices are down to $20 a barrel, and we don’t know where the bottom is.”All told, global investments in exploration and production are expected to fall in 2020 by $100 billion, or 17 percent below last year, according to Rystad Energy, a research and consulting firm based in Oslo. That drop is only the latest jolt to an industry that has been tightening budgets for years. The $446 billion that the industry is expected to invest is just over half the $880 billion it spent on exploration and production in 2014.The share prices of large companies like Exxon Mobil, ConocoPhillips and Chevron have nearly halved in recent months, while the stocks of smaller firms with less healthy balance sheets have fallen even more.

GOP senator calls on Saudis to end its oil price war, says 'Americans died' protecting the kingdom - America’s strategic relationship with Saudi Arabia may permanently change if Riyadh does not end its latest oil price war, Sen. Dan Sullivan told CNBC on Wednesday. “The Saudis have really brought in a supply shock at exactly the wrong time,” the Alaska Republican said on “Squawk Box.” “These kind of crises really make it clear … who your friends are and who aren’t your friends.” Sullivan said that a group of U.S. senators has been applying pressure on Saudi Arabia, writing a letter to Crown Prince Mohammed bin Salman that was followed up by call with the Saudi ambassador to the U.S. in Washington. “All of the senators who were on that letter, on that conference call with the ambassador, have been strong supporters of the U.S.-Saudi relationship,” said Sullivan. “That is going to change if the Saudis don’t start playing a more constructive role with regard to energy markets.” Sullivan, who represents the oil-rich state of Alaska, said he reminded the Saudi ambassador of the past U.S. defense of the kingdom. “We’ve been there for you,” Sullivan said he told her. “First Gulf War, Saddam Hussein is getting ready to roll through your country. It wasn’t the Saudi military that stopped him. ... It was the First Marine Division, 82nd Airborne. Americans died in that war.” The Saudi Embassy was not immediately available to respond to CNBC’s request for comment.

Saudi Arabia's big oil gamble will hurt the kingdom — but it'll likely pay off - April is going to be a hellish month for the oil industry. Already down more than 65% year-to-date, crushed by the coronavirus crisis and the Saudi-Russia oil price war, crude prices are set to tank even further when Saudi Arabia and others turn on the taps following the expiration of the OPEC+ output cut deal on April 1 that had reined in production to boost the market. Oil at $20 per barrel was unimaginable a few months ago; now some forecasters are calling prices as low as $10 or even single digits as the world runs out of storage space and the global economy grinds to a halt. But when the dust settles, many analysts believe it’ll be Saudi Arabia — even with its overwhelming reliance on oil revenue — that comes out on top. The kingdom is willingly inflicting pain upon itself by slashing its selling prices and committing to increase production to more than 12 million barrels per day — a record amount — after a bid to cut output together with Russia failed. Its strategy now is going after maximum market share. Its revenue is taking a massive blow and its budget deficit could rise by 40%, prompting plans for spending cuts and borrowing. The IMF estimates the kingdom needs oil at $80 a barrel to balance its budget; Brent crude closed at $22.74 per barrel on Tuesday, ending its worst quarter ever, with the second quarter expected to be even worse. Despite the dire numbers, however, enduring months of fiscal pain while it pursues greater exports may ultimately pay off. “Saudi will definitely be one of the winners on the other side,” Abhi Rajendran, director of research at Energy Intelligence, told CNBC. His call is based on the assumption that oil prices will rebound in 2021 post-coronavirus; his firm sees oil back up to $80 per barrel within three years. Rajendran predicts Saudi Arabia’s market share will “definitely grow,” adding that “in a year or two they will have to increase production because the market will need it… and it will be ahead of the U.S. again in terms of volume.”

Oil Surges On Report China Buying For Strategic Reserve, Hopes For Saudi-Russia Truce - Oil surged as much as 13% this morning following a report that China is planning to start buying cheap crude for its strategic reserves, as well as speculation that President Trump said he thought Saudi Arabia and Russia would resolve their differences in the oil price war that has sent supply soaring even as global oil demand tumbles. Following massive builds in crude in the US as reported by the DOE and API, and amid sporadic reports that various storage facilities are starting to fill up: ... overnight, Bloomberg reported that Beijing instructed government agencies to start filling state stockpiles after oil plunged 66% over the first three months of the year, while the global benchmark’s nearest timespread also rallied strongly. Beijing has asked government agencies to quickly coordinate filling tanks, Bloomberg source said. In addition to state-owned reserves, it may use commercial space for storage as well, while also encouraging companies to fill their own tanks. The initial target is to hold government stockpiles equivalent to 90 days of net imports, which could eventually be expanded to as much as 180 days when including commercial reserves. According to Bloomberg calculations, 90 days of net crude imports translated to about 900 million barrels. By comparison, the U.S. currently holds about 635 million barrels in its Strategic Petroleum Reserve, according to government data. And while the current size of China’s state reserves is unknown, and Beijing could use a different method for calculating net imports, oil traders and analysts at SIA Energy and Wood Mackenzie estimated it could amount to China buying an additional 80 million to 100 million barrels over the course of the year before it ran into logistical and operational constraints.  In September, the head of development and planning at the National Energy Administration said the country had total oil reserves, including strategic stockpiles, for about 80 days. In December, state-owned China National Petroleum Corp. said on its website that the government intends to boost the capacity of its strategic petroleum reserves to 503 million barrels by the end of this year, an indicator of the maximum amount the government can store. While the purchases could help soak up some excess supply, traders said it will fall well short of offsetting the overall glut created by the virus lockdowns and the price war between Saudi Arabia and Russia. As Bloomberg adds, China’s move comes as the physical crude market shows deepening signs of strain as supply explodes and demand collapses due to the coronavirus. Dated Brent, the benchmark for two-thirds of the world’s physical supply, was assessed at $15.135 on Wednesday, the lowest since at least 1999. Crude has slipped below $10 in some areas including Canada and shale regions in the U.S., Belarus wants to buy Russian oil for $4, while some grades have posted negative prices.

Trump Eyes 10MMbpd Global Oil Cut - President Donald Trump is trying to get the world to cut oil production by 10 million barrels a day in an effort to end a market-share war that sent crude prices plunging to the lowest levels in two decades. Trump shocked markets on Thursday by tweeting that he expected Russia and Saudi Arabia alone to cut about 10 million barrels -- or roughly a 10th of global petroleum, sending oil prices soaring. A person familiar with the discussion later said that Trump, after a call with Saudi Arabia Crown Prince Mohammed bin Salman, was hoping to get other oil market participants to contribute to that cut, too. A second person familiar with the situation said Trump’s goal is purely aspirational and will ultimately hinge on whether Saudi Arabia and Russia can reach a deal. Any across-the-board reduction of this size will face serious challenges. Saudi Arabia hasn’t voiced outright support for the move and instead called for an “urgent meeting” of the world’s oil producers to discuss a “fair agreement.” The response signals the country will only cut output if others do so and raises the question of whether the Trump administration is willing to cap America’s own production to reach a global accord. Russia’s response was arguably harsher. In his tweet, Trump said he had spoken to MBS, who had in turn spoken with Russian President Vladimir Putin. But a Kremlin spokesman, Dmitry Peskov, said the conversation hadn’t happened and confirmed that no production cut had been agreed to with the Saudis. Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry! — Donald J. Trump (@realDonaldTrump) April 2, 2020 An OPEC+ delegate familiar with the conversations similarly said Saudi Arabia and Russia had yet to agree to production cuts -- let alone their size. Any proposed curbs would be conditioned upon every other major oil producer also agreeing to reduce production, the person said, asking not to be named discussing diplomatic conversations. Meanwhile, Trump told reporters on Thursday that he expected a deal to be reached soon.

Oil surges as Trump talks up hopes for truce in Saudi-Russia price war - Crude oil futures jumped 10% on Thursday after U.S. President Donald Trump said he expected Saudi Arabia and Russia to reach a deal soon to end their oil price war and Russian President Vladimir Putin called for a solution to “challenging” oil markets. Brent crude futures rose 11.36%, or $2.81, to $27.55 as of 0701 GMT, while U.S. West Texas Intermediate (WTI) crude futures increased 10.0% or $2.03, at $22.34. Trump said he had talked recently with the leaders of both Russia and Saudi Arabia and believed the two countries would make a deal to end their price war within a “few days” - lowering production and bringing prices back up. Trump also said he has invited U.S. oil executives to the White House to discuss ways to help the industry “ravaged” by slumping energy demand during the coronavirus outbreak and a price war between Saudi Arabia and Russia. “The market is hoping that this U.S. intervention will bring us closer to an agreement between Saudi and Russia in cutting production,” said CMC Markets analyst Margaret Yang, adding that bargain hunting is also lifting oil prices. Speaking at a government meeting on Wednesday, Putin said that both oil producers and consumers should find a solution that would improve the “challenging” situation of global oil markets. Saudi Arabia supports co-operation between oil producers to stabilize the market but Russia’s opposition to a proposal last month to deepen supply cuts has caused market turmoil, a senior Gulf source familiar with Saudi thinking told Reuters. Some analysts cautioned there is still a long way to go before any output cut agreement is struck.

Oil Soars on Trump's Saudi-Russia Output Cuts Claim -- Oil soared after U.S. President Donald Trump said Saudi Arabia and Russia would make major output cuts, though uncertainty swirled over the volume of curbs and whether reductions would be made at all. While Trump tweeted that cuts of 10 million to 15 million barrels were possible, he didn’t specify if that reduction would be per day. He also said he spoke to Saudi Crown Prince Mohammed Bin Salman about the market. His comments immediately triggered skepticism, even within the U.S. government. One person familiar with the administration’s discussions with the Saudis said there was widespread internal confusion about what the president was referring to and the numbers he mentioned may not be reliable. The prospect of the U.S. joining in on any output cuts was raised after Ryan Sitton of the Texas Railroad Commission, in a rare move for the state’s oil regulator, spoke with Russian Energy Minister Alexander Novak on reducing global supplies by 10 million barrels a day. He said he would also talk to the Saudi oil minister soon. Meanwhile, Kremlin spokesman Dmitry Peskov said Russian President Vladimir Putin hasn’t spoken to the Saudi crown prince and hasn’t agreed to cut oil production to boost prices. The Middle East kingdom also didn’t confirm the cuts, but called for an urgent meeting of the OPEC+ producer alliance to reach a “fair deal” that would restore balance in oil markets, state-run Saudi Press Agency reported. Any curbs by the group would be conditional on other countries joining, according to a delegate. U.S. West Texas Intermediate futures jumped as much as 35%, before closing up almost 25% -- their biggest single-day advance ever. Brent crude increased as much as 47%, the global benchmark’s largest surge in intraday trading. “The 10, 15 million barrel a day cut is just not going to happen. On top of that, Russia has older oil wells, so they can’t restart in the same way that Saudi Arabia can,” said Tariq Zahir, a fund manager at Tyche Capital Advisors. If Trump meant 10 million barrels per day, that would equal both Moscow and Riyadh curbing nearly 45% of their production in what would prove an unprecedented move. If collective action does remove that much from the market, that would be the equivalent of about 10% of world demand prior to the impact of coronavirus crisis. Still, that may not be enough to stop the pain that’s rippled across the energy industry as demand craters with the coronavirus outbreak shutting down economies around the world.

@novakav1. While we normally compete, we agreed that #COVID19 requires unprecedented level of int'l cooperation. Discussed 10mbpd out of global supply. Look forward to speaking with Saudi Prince Abdulaziz bin Salman soon.— Ryan Sitton (@RyanSitton) April 2, 2020 '>@novakav1. While we normally compete, we agreed that #COVID19 requires unprecedented level of int'l cooperation. Discussed 10mbpd out of global supply. Look forward to speaking with Saudi Prince Abdulaziz bin Salman soon.— Ryan Sitton (@RyanSitton) April 2, 2020 '>@novakav1. While we normally compete, we agreed that #COVID19 requires unprecedented level of int'l cooperation. Discussed 10mbpd out of global supply. Look forward to speaking with Saudi Prince Abdulaziz bin Salman soon.— Ryan Sitton (@RyanSitton) April 2, 2020 '>What Really Caused Oil To Rally By 25%?  -  Oil prices spiked 25 percent on Thursday after President Trump tweeted that Saudi Arabia and Russia would cut production by 10 to 15 million barrels per day (mb/d), but there are a variety of reasons why a cut of this size faces steep odds. Incidentally it was the biggest one day percentage surge in the price of oil in history. This should be prefaced with the fact that nobody knows what will happen and that the onset of a global pandemic means that all of the old rules are thrown out the window. Anything can happen in the context of the greatest public health and economic crisis in a century.  But Trump’s tweets raise a ton of questions. Right off the bat, a 10-15 mb/d cut is incredibly massive. How could that be divided up? Russia and Saudi Arabia are both at around 11 mb/d; would they both cut their output in half? That’s an absurd notion.   Indeed, immediately, Russia shot down the idea that there was some agreement. That was followed by a clarification from Saudi Arabia, which called for an emergency OPEC+ meeting that could lead to cuts with “another group of countries” in an attempt to arrive at a “fair solution.”   That statement means that Saudi Arabia has not signed onto anything, and would only cut if a lot of other countries did the same. The Saudi statement hints that it wants more than just the OPEC+ coalition, which presumably would include the U.S., Canada, Brazil and/or some other non-OPEC producers.   Then, news surfaced that Saudi Arabia was willing to cut output below 9 mb/d if others joined them. That means that Saudi will chip in around 2 mb/d of cuts, which is incredibly modest compared to what Trump’s tweet suggests. It would also bring Saudi output roughly back to where it was a month ago, prior to the breakdown of the OPEC+ negotiations.  Meanwhile, an even larger question is what the U.S. would need to give in order to achieve anything close to what Trump claimed. Reuters reported that the Trump administration does not actually plan on asking domestic drillers to cut production. Trump is set to meet with a group of oil CEOs on Friday, but he apparently won’t ask them to cut output, Reuters says.  Bloomberg reported that there was widespread confusion even within the U.S. government about what Trump’s tweet meant.  If the U.S. is not going to cut, what, then, is Trump talking about? One thing to consider is that Saudi Arabia can earn some goodwill in Washington by agreeing to call for an emergency OPEC+ meeting. The Saudis could be nodding along with Trump, commiserating about low oil prices, while also suggesting that they could take strong action…if others go along. Riyadh does not have to agree to anything immediately, but by putting the ball in the court of the U.S. and Russia, they may entice production cuts from elsewhere.

Why A 15 Million Barrel Per Day Cut Will Never Happen - Oil prices exploded on Thursday morning after US President Trump tweeted that he spoke with Saudi Crown Prince Mohammed bin Salman about a potentially ‘huge’ output cut.  According to Trump, the production cut from Saudi Arabia and Russia could be as high as 15 million bpd. For anyone wondering why oil prices just spiked by over 25%... https://t.co/xjkfxOAaoS  — OilPrice.com (@OilandEnergy) April 2, 2020The reality, however, is very different. Earlier this morning, Dmitry Peskov, spokesman of Russian President Vladimir Putin told reporters that ‘’No one has launched any talks about a potential new oil-production deal to replace the OPEC+ format’’ Peskov assured reporters that no one is happy with current oil prices, but that there are no high-level talks scheduled for either Thursday or Friday.  It seems then that US pressure on Riyadh has convinced Saudi Arabia to reopen negotiations once again, but as I wrote before, neither of the parties will be willing to hand an easy victory to the others.  While both Russia and Saudi Arabia have started to hint that they are willing to talk about new cooperation, neither of them have proposed any specific new deal. The situation changed this morning after Saudi Arabia’s official news agency reported that the Kingdom is calling for an urgent OPEC+ meeting with the aim of ‘’seeking a fair agreement’’. In other words, Saudi Arabia is willing to return to the negotiating table if every other nation is willing to cut production. According to Dow Jones, Riyadh is willing to reduce output to 9 million bpd, roughly what it produced in February before the OPEC+ deal fell apart. It also seems that the Kingdom will only be happy to cut production back to 9 million bpd if Moscow agrees with the 500,000 bpd production reduction it rejected at the previous OPEC+ meeting in Vienna. Even if Saudi Arabia gets Russia to agree to the 500,000 bpd cut (which remains unlikely), this means that the markets will see a production reduction of only 3.5 million bpd – a far cry from the 10-15 million bpd that President Trump claimed in his tweet this morning.

Oil's Trump Bump Fades as Doubts Rise-- Oil slid back below $25 a barrel after a record surge as doubts crept in about a deal touted on Twitter by U.S. President Donald Trump that would see deep supply cuts from producers including Saudi Arabia and Russia. Futures dropped as much as 7.1% after surging almost 25% in New York on Thursday following Trump’s tweet that he expected global producers to slash output by 10 million barrels or more. However, the Kremlin later said that President Vladimir Putin had not spoken to his Saudi counterpart and hasn’t agreed to reduce production. Citigroup Inc. and Goldman Sachs Group Inc. said any supply deal would be too little, too late as demand craters. While futures spiked, the outlook for the physical market remains bleak as discounts for some grades of physically delivered oil across the U.S. and Canada widened. Heavy Louisiana Sweet crude lost $1.75 a barrel relative to West Texas Intermediate to a record $10.50 discount. Oil has whipsawed this week after plunging to an 18-year low on Monday. While Trump tweeted that he had spoken to Saudi Crown Prince Mohammed bin Salman, who had in turn spoken with Russian president, a person familiar with the situation said the U.S. president’s goal is purely aspirational and will ultimately hinge on whether Riyadh and Moscow can reach a deal. After Trump’s request, Saudi Arabia said it had called a meeting of the OPEC+ alliance that includes Russia to discuss a “fair agreement,” signaling it would only cut output if others do so. Producers are facing an unprecedented collapse in demand as nations try to stem the spreading coronavirus. “Even if there is an agreement to curtail 10 million barrels a day of output, the fundamentals show demand destruction and inventory builds,” said John Driscoll, chief strategist for JTD Energy Services Pte in Singapore. The “anxiety and mayhem out there is reminiscent of the financial crisis,” he added. West Texas Intermediate for May delivery fell $1.26, or 5%, to $24.06 a barrel on the New York Mercantile Exchange as of 1:53 p.m. Singapore time. The contract is still up about 12% this week, set for the first weekly gain since February. Brent for June settlement lost 4.9% to $28.48 on London’s ICE Futures Europe exchange. Prices are up 14% this week. Texas Railroad Commission Ryan Sitton, in a rare move for the state’s oil regulator, tweeted on Thursday that he spoke with Russian Energy Minister Alexander Novak and discussed a 10-million barrel a day global output cut and would talk to the Saudi oil minister soon. Trump is scheduled to meet with U.S. oil company executives Friday as the administration seeks ways to help the beleaguered industry.

Russia, Saudis Deny Trump "Expectation" Of 10 Million bpd Oil Production Cut - Whether it's just more desperate jawboning or resembles reality, CNBC's Joe Kernan reports that he just spoike to President Trump who claims his conversations with Putin and MbS suggest an oil production cut of up to 15mm barrels/day is imminent.President Trump tells CNBC that he spoke to President Putin yesterday and Saudi Crown Prince today and expects them to announce an oil production cut of 10 million barrels and could be up to 15 million.  President Trumptold reporters in Washington this morning that..."Worldwide, the oil industry has been ravaged. Its very bad for Russia, its very bad for Saudi Arabia. I mean, its very bad for both. I think they're going to make a deal."..and has just tweeted his confirmation:Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!— Donald J. Trump (@realDonaldTrump) April 2, 2020   The result is not surprisingly a massive 35% surge in crude... Shortly after the market exploded higher on Trump's tweet which also sent oil soaring by a mindblowing 35%, Kremlin spokesman Dmitry Peskov said in a text message that: Russian President Vladimir Putin has not spoken to Saudi Crown Prince Mohammed Bin Salman and hasn’t agreed to cut oil production to boost prices, “No. There was no conversation,” Peskov said when asked about tweet by U.S. President Donald Trump saying that Russian, Saudi leaders had agreed to cut oil output to boost prices. Caught between a rock (not pissing off Trump), and a hard - or rather soft - place, (hoping to flood the world with millions of barrels in excess oil), moments ago Dow Jones reported that the Saudis are mulling a production cut to 9mmb/d but only if others join. Again, this means Crown Prince MbS is only willing to go back to where the March Vienna OPEC summt was...  just before Russia refused to cut by 500kb/d and all hell broke loose. In other words, this is not a negotiation, this is an offer to return to the bargaining table at the point where Russia balked. Oh, and there is another problem: even if Saudis cut from 12mmb/d to 9mmb/d and Russia cuts by 500k, that's 3.5mmb/d less in supply. Meanwhile, global demand is down by over 15mm barrels! In other words, the only way the oil market will rebalance is if both Saudi Arabia and Russia both stop pumping, even as shale continues to flood the world with US oil (because as Whiting showed yesterday, the company will continue business as usual even under Chapter 11).

OPEC+ debates biggest-ever oil cut as virus destroys demand - - OPEC and its allies are working on a deal for an unprecedented oil production cut equivalent to around 10% of global supply, an OPEC source said, after the U.S. president called on producers to stop the market rout caused by the coronavirus pandemic. The meeting of OPEC and allies such as Russia has been scheduled for Monday, April 6, the Azeri energy ministry said, but details were still thin on the exact distribution of production cuts. No time has yet been set for the meeting, OPEC sources said. Oil prices have fallen to around $20 per barrel from $65 at the start of the year as more than 3 billion people went into a lockdown because of the virus, reducing global oil demand by as much as a third or 30 million barrels per day. U.S. President Donald Trump said on Thursday he had spoken with both Russian leader Vladimir Putin and Saudi Crown Prince Mohammed bin Salman and they agreed to reduce supplies by 10-15 million bpd out of a total global supply of around 100 million bpd. But the International Energy Agency warned on Friday that a cut of 10 million bpd would not be enough to counter the huge fall in oil demand. Such an output cut would still result in a 15 million bpd stock-build in the second quarter, said Fatih Birol, the head of the agency. Trump said he did not make any concessions to Saudi Arabia and Russia, such as agreeing to a U.S. domestic production cut - a move forbidden by U.S. antitrust legislation. White House economic adviser Larry Kudlow said Trump will fight any international collusion in energy markets that would hurt U.S. producers, but that the administration cannot dictate to oil producers. “I think... oil companies, seeing a decline in price are going to pull back on production. That’s just common sense,” he said, adding that he sees no reason why Trump’s talks with Saudi Arabia and Russia on oil will not “bear fruit”. Some U.S. officials have suggested U.S. production was set for a steep decline anyway because of low prices. “The U.S. needs to contribute from shale oil,” an OPEC source said. Russia has long expressed frustration that its joint cuts with OPEC were only lending support to higher-cost U.S. shale producers.

Putin Responds To Trump Oil Gambit- 10MM Production Cut Possible But US Needs To Join -Earlier today we said that ahead of Monday's (virtual) R-OPEC conference, a new ask had emerged from within the oil producing nations - any production cut would have to include the US, which alongside with Russia, Saudi Arabia and others R-OPEC nations, would to around 10 million b/d. Then moments ago, Vladimir Putin confirmed just that. The Russian president said that he had spoken with US President Trump saying "we are all worried about the situation" and that he is "ready to act with the US on oil markets" with 10mmb/d in oil production needed to be cut, adding that cuts must be taken from Q1 2020 levels which was a jab at Saudi Arabia which is hoping to "cut" by 3 million b/d to go back to where it was in February. And by we, he meant the "we" that includes the US, because as he explained "joint actions" are required on oil markets, i.e., shale too. Observing that the situation on global energy markets remains difficult and that demand is falling (by 26mmb/d according to Goldman), Putin said that he wants "long-term stability" of the oil market, and that he is comfortable with $42 oil. The Russian president was also kind enough to summarize the reasons for the oil price collapse which he blamed on the coronavirus, the lack of oil demand and, drumroll, the Saudi withdrawal from the OPEC+ deal. At this point Russia's energy minister Novak chimed in and explained what it would take to get such a cut: speaking to Putin, the Russian energy minister said it is necessary to cut oil production for everybody, including Saudi Arabia and the US, and that output should be cut for the next few months and gradually recovered thereafter. Novak also said that Saudis are still negatively influencing oil market, and that oil storage could be filled for next 1.5 to 2 months only. Finally, there was some speculation that Russia would not be present at next week's R-OPEC conference, so Novak defused any confusion, by confirming that the meeting is set for April 6th. There was no reaction in the price of oil which now awaits to see how Trump will respond to the Saudi/Russian demand that shale join equally in any upcoming production cut.

Oil rises on hope of output deal - Oil rose on Friday as traders eyed a possible deal on production cuts after President Donald Trump said he expected a deal of at least a 10 million barrel production cut to soon be announced, and after Saudi Arabia called an “urgent” meeting for OPEC. Brent crude futures were up 9%, or $2.75, at $32.69 per barrel. Brent soared as much as 47% during Thursday’s session, its highest intraday percentage gain ever, before closing 21% higher, but still at less than half the $66 it was trading at at the end of 2019. U.S. West Texas Intermediate crude also moved back into positive territory, rising 4.5%, or $1.13, to $26.45 per barrel, after surging 24.7% on Thursday. U.S. President Donald Trump said on Thursday he had brokered a deal which could see Russia and Saudi Arabia cutting output by 10 to 15 million barrels per day (bpd) - an unprecedented amount representing 10% to 15% of global supply. Trump said he had made no offer to cut U.S. output. Saudi Arabia called on Thursday for an emergency meeting of OPEC and non-OPEC oil producers, saying it aimed to reach a fair agreement to stabilize oil markets. Kuwait’s oil minister Khaled al-Fadhel said on Friday he supported Saudi Arabia’s invitation for a meeting between OPEC and non-OPEC oil producers. The energy ministry of non-OPEC producer Azerbaijan, meanwhile, said the OPEC+ meeting is planned for April 6 and will be held as a video conference, Russia’s RIA news agency reported. “There does appear to finally be collective acceptance that the market is in such an extraordinary state of oversupply that coordinated action is needed,” said Callum Macpherson, Investec’s Head of Commodities. “For now, the possibility of ‘something’ happening could make short sellers more wary and help to limit downward pressure on oil prices, but there may need to be more tangible signs of progress fairly soon if a retest of recent lows is to be avoided before long.”

Oil jumps as much as 12% a day after its best day on record as traders expect big production cuts - Oil prices surged again on Friday on the hope that a production cut deal will soon be reached after OPEC and its allies announced they will hold a virtual meeting on Monday, and after Russian President Vladimir Putin reportedly said that the county wanted to see global action on cuts of around 10 million barrels per day. U.S. West Texas Intermediate crude jumped 11.93%, or $3.02, to settle at $28.34 per barrel. At the session high, WTI gained more than 12% to trade at $28.56. For the week WTI rose 31.7% in its best week on record back to the contract’s inception in 1983. International benchmark Brent crude rose 13.9% to settle at $34.11 per barrel. Russia initially rejected additional cuts proposed by OPEC in early March, but Reuters reported on Friday that Putin said production needs to be cut by around 10 million barrels per day, but that the U.S. must also take action. “In our view there is no OPEC+ choice involved, the rhetoric is window-dressing, the market will deliver cuts, and they will be deeper than any OPEC+ agreements,” Mizuho managing director Paul Sankey said in a note to clients Friday. On Thursday WTI and Brent posted their best day on record after President Donald Trump told CNBC that he expected Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman to announce a deal to cut oil production by 10 million to 15 million barrels, although the exact details of the cut remained unclear. WTI gained 24.67% to settle at $25.32, while Brent rose 21% to settle at $29.94. But some have questioned whether a cut of the magnitude Trump is suggesting is possible, especially if the U.S. doesn’t participate. According to a report from Reuters, the administration does not intend to ask U.S. companies to scale back production. “President Trump might have been shooting from the hip when he Tweeted about oil yesterday, promoting the idea of a deal too early on negotiations of high complexity that need more time to blossom,” Rystad Energy’s head of oil markets Bjornar Tonhaugen said in an email. Texas Railroad Commissioner Ryan Sitton said that the state would potentially agree to curb production in an effort to prop up prices. “This will be part of a singular deal. We’re following the President’s lead on this … If this is part of that international agreement, in light of the fact that we are in arguably the worst economic pandemic in mankind’s history, then we will participate in extraordinary measures due to those extraordinary circumstances,” Sitton said Friday on CNBC’s “The Exchange.”

OPEC and allies reportedly set for video meeting as analysts pour skepticism on Trump's intervention - Oil producer group OPEC and its partners will reportedly hold an emergency virtual meeting on Monday, with all members of the energy alliance expected to take part in an effort to stabilize markets. It comes less than 24 hours after President Donald Trump told CNBC that he expected OPEC kingpin Saudi Arabia and non-OPEC leader Russia to take up to 15 million barrels of crude off the market. International benchmark Brent crude traded at $32.78 a barrel Friday morning, up over 9%, while U.S. West Texas Intermediate (WTI) stood at $26.59, more than 5% higher. Brent settled up more than 21% on Thursday, registering its best day since contract inception in 1989, while WTI closed up over 24%, also marking its best-ever daily rally. It leaves both benchmarks on pace for their best week since January 2009, although, year-to-date, Brent and WTI are still down more than 54%. On Friday, Azerbaijan’s energy ministry said a virtual meeting between OPEC producers and non-OPEC partners, an alliance sometimes referred to as OPEC+, had been scheduled for April 6, according to the RIA news agency. OPEC was not immediately available to comment when contacted by CNBC Friday morning. Trump said via Twitter on Thursday that he expected OPEC+ to cut approximately 10 million barrels of oil, “which, if it happens, will be GREAT for the oil & gas industry!” Around 30 minutes after his first tweet, Trump then suggested the deal “could be as high” as 15 million barrels. This would be “great news for everyone!” he added. Oil production is typically discussed in terms of barrels per day, but Trump made no reference to the time frame of the cuts. Additionally, it was not clear how the cuts would be distributed across oil-producing countries. “Donald Trump’s tweet … It’s nonsense, really,” Patrick Armstrong, chief investment officer at Plurimi Investment Managers, told CNBC’s “Squawk Box Europe” on Friday. “There is no way that Russia and Saudi Arabia are going to cut production by 50%, which is the midpoint of the 10 to 15 million barrels per day he was talking about,” he added.

Opec March output at three-month high as deal expired - Opec output rose to a three-month high in March, the final month of the Opec+ production restraint agreement. Opec and its partners will meet on 6 April to discuss how to proceed, after the expiry of the deal weighed on global crude prices. Opec output increased by 1.02mn b/d to 28.76mn b/d last month, with Mideast Gulf members notably increasing production. The deal that expired on 31 March obliged participating Opec and non-Opec countries — collectively known as Opec+ — to curtail combined production by 1.7mn b/d in the first quarter of this year, with Saudi Arabia voluntarily cutting a further 400,000 b/d. The Opec participants' target for the quarter was 25.15mn b/d. They were collectively just 27pc compliant with that in the deal's final month. Saudi Arabia's production exceeded 10mn b/d for the first time since October. It has a stated target to supply 12.3mn b/d for foreign and domestic consumption this month. The UAE raised output by more than 500,000 b/d to 3.53mn b/d. It said that it will supply 4mn b/d of crude in April. Kuwait's 180,000 b/d increase was supplemented by the recent ramp-up of crude output from the Neutral Zone that it shares with Saudi Arabia. Production continued to decline from deal-exempt members Iran and Venezuela, as demand from key buyer China fell because of the coronavirus pandemic that has since led to country-wide lockdowns and caused run cuts at European refineries. Libyan production dwindled further as blockades continued at oil infrastructure, some of which have been in place since the middle of January. Opec+ members and other oil producing countries will hold an extraordinary video conference to discuss oil output strategy next week. Russian president Vladimir Putin — whose country opposed deepening cuts in March — has advocated a 10mn b/d decline from first-quarter levels, and said that Russia is willing to co-operate with the US on this. Washington has signaled it is unlikely to send a delegate, but it has held talks with Russia and Saudi Arabia in recent days.

Brent crude could still drop to $10 a barrel and stay there in Q2: IHS Markit - Oil prices on Thursday rallied more than 20% following reports of a possible deal to cut production by an enormous 10 million barrels per day, but one analyst is still predicting that Brent crude will sink to $10 a barrel. The benchmark Brent crude was trading up 9.92% trading at $32.91 on Friday afternoon in Asia, while West Texas Intermediate gained up 4.82% at $26.54. “We are projecting that Brent is going to drop to around $10 a barrel in April and will likely stay at that level in the second quarter,” said Victor Shum, vice president of energy consulting at IHS Markit. “There is little chance of any OPEC+ deal that’s going to save the crude oil market from the attack of the COVID-19,” he told CNBC’s “Capital Connection” on Friday. “I think any talk of big cuts is probably too little, too late.” Oil futures have fallen more than 50% since the beginning of the year amid a Saudi-Russia price war and demand destruction because of the coronavirus pandemic. CH 20200402_oil_volatility_since_march_6.png U.S. President Donald Trump attempted to play “moderator” between Saudi Arabia and Russia, and said on Thursday that he was expecting a cut of 10 million bpd to 15 million bpd. Riyadh called for an emergency meeting of OPEC and its allies, which was supported by Iraq, according to Reuters reports. Still, Shum said, given that both sides produce around 10 million bpd to 11 million bpd, he considers it “highly unlikely that Saudi Arabia will agree to a unilateral massive cut or even a bilateral cut with Russia.” “Are we talking about asking Saudi Arabia and Russia to cut 50% or more of their production? That seems incredible,” he said. Trump told reporters that he has not offered to lower American oil output.

OPEC+ meeting delayed as Saudi Arabia and Russia row over price collapse -  (Reuters) - OPEC and Russia have postponed a meeting planned for Monday until later next week, OPEC sources said on Saturday, as a row intensified between Moscow and Saudi Arabia over who is to blame for plunging oil prices. The meeting’s delay came despite pressure from U.S. President Donald Trump for the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, to urgently stabilize global oil markets. OPEC+ is working on an unprecedented oil output curb equal to about 10% of world supply, or 10 million barrels per day, in what member states expect to be a global effort that will include the United States. Oil prices hit an 18-year low on March 30 due to sliding demand caused by government lockdowns to contain the coronavirus outbreak, and the failure of OPEC and other producers led by Russia to extend an earlier deal on output curbs that expired on March 31. Washington, however, has yet to make a commitment to join the effort and Russian President Vladimir Putin on Friday put the blame for the collapse in prices on Saudi Arabia — prompting a firm response from Riyadh on Saturday. “The Russian Minister of Energy was the first to declare to the media that all the participating countries are absolved of their commitments starting from the first of April, leading to the decision that the countries have taken to raise their production,” Saudi Energy Minister Prince Abdulaziz bin Salman said in a statement carried by state news agency SPA. Putin, speaking during a video conference with government officials and heads of Russian major oil producers on Friday, said the first reason for the fall in prices was the impact of the coronavirus on demand. “The second reason behind the collapse of prices is the withdrawal of our partners from Saudi Arabia from the OPEC+ deal, their production increase and information, which came out at the same time, about the readiness of our partners to even provide a discount for oil,” Putin said. Three OPEC sources, who asked not be identified, said the emergency virtual meeting planned for Monday would likely be postponed until April 8 or 9 to allow more time for negotiations.

Risk of environmental disaster as safer tanker decays in Yemen - Six Arab countries have filed a request to the UN to access the Safer oil tanker — filled with 138 million liters of Yemeni oil — to prevent an environmental disaster of drastic proportions. The tanker’s decay in Hodeidah would cause an environmental disaster with dire economic and humanitarian consequences, threatening millions of residents in the Hodeidah governorate and the Red Sea riparian countries. “It’s a great danger,” political analyst Dr. Hamdan Al-Shehri told Arab News. The tanker has been lying in the port of Ras Isa for five years without any maintenance. UN ambassadors from Djibouti, Egypt, Jordan, Saudi Arabia, Sudan and Yemen said in the letter that an explosion or leak from the Safer would close the port of Hodeidah for several months. This would halt critical imports and “could increase fuel prices by 800 percent and double the price of goods and food, resulting in more economic challenges for the people of Yemen,” they said. A leak or explosion would also affect 1.7 million people working in the fishing industry and their families, the six countries said. Al-Shehri said: “The tanker is used as a strong-arm point by the Houthis. Using it from time to time and reaping its goods but denying access to the UN.” He added that one of the main reasons the Houthis have kept the international community and the UN at bay is “if the tanker was maintained and fixed it would affect their revenue. But the Houthis do not keep their word and have lied over and over again to their benefit.” On July 18, 2019, Mark Lowcock, the UN’s undersecretary-general for humanitarian affairs, told the UN Security Council that its assessment team had been denied the necessary permits by Houthi rebels who control the area. The tanker could face two potential hazardous scenarios.There could be an explosion or leak, which could lead to one of the worst environmental disasters the world has seen. The spill would be four times worse than the oil spill of the Exxon Valdez off the coast of Alaska in 1989, where the region still has not fully recovered. The aftermath of a fire or explosion would prevent the recovery of nearshore species in nearly 25 years, 1.7 million people would need food aid as the closure of the port can create shortages.

Saudis Claim US Patriot Missiles Activated In Major Yemeni Houthi Attack On Riyadh - Houthi rebels in Yemen over the weekend launched what's being described as among the largest assaults on Saudi Arabia since the start of the war five years ago.  Starting on Saturday the Saudi military said it intercepted at least two ballistic missiles over the capital of Riyadh, as well as over the southern city of Jizan, in the first such major attack in more than a year. Saudi military spokesman Turki al-Malki confirmed there were injuries among residents on the ground from "debris scattering on some residential areas" in Riyadh and Jizan.    Saudi press agency SPA later said "two civilians were slightly injured due to the falling of the intercepted missile's debris as it exploded in mid-air over residential districts".At least three blasts were heard in Riyadh during the attack, followed by the blare of emergency sirens. Saudi-owned Al-Arabiya television also indicated significantly that US-supplied Patriot missiles were activated during the attack.On Sunday a military spokesman for Yemen's Houthi movement confirmed responsibility for the major attack, saying, “the joint military operation of the missile force and the Air Force managed to target a number of sensitive targets in the capital of the Saudi enemy, Riyadh, with Zulfiqar missiles, and a number of Samad-3 aircraft.” “The major military operation also targeted a number of economic and military targets in Jizan, Najran and Asir, with a large number of Badr missiles and 2K bombers,” he added.The Houthi military spokesman warned: “The Saudi regime will suffer from these painful operations if it continues its aggression and siege on Yemen,” and promised to keep up the pressure, noting “the armed forces will reveal the details of the wide and qualitative military operation in the coming days.”

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